Cho, Esther --- "A brave new world of client incapacity: a solicitors' guide" [2014] PrecedentAULA 31; (2014) 123 Precedent 8

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A BRAVE NEW WORLD OF CLIENT INCAPACITY: A SOLICITORS’ GUIDE

By Esther Cho

As the percentage of older people in our community reaches unprecedented highs, Baby Boomers morph into Oldie Boomers, and the dementia ‘tsunami’ looms over Australia, it is time that solicitors acquired the skills, knowledge and expertise to deal with issues of client capacity.

Our society faces a future with a new demographic landscape, and the practice of law also needs to explore this uncharted territory.

The Law Society of NSW has produced a number of publications to assist practitioners in this area. This article is based on the 2009 publication, When a client’s capacity is in doubt: A practical guide for solicitors^[1] (The Guide), which brings together information and resources from a range of areas. Currently being updated by the Law Society, it is intended to assist solicitors to do their own research, read the available resources and find out for themselves what works best for them, their practice and their clients.

FAMILIAR GROUND: THE PRESUMPTION OF CAPACITY AND CLEAR CASES OF INCAPACITY

Many principles and legal concepts about capacity are familiar to solicitors. All solicitors understand there is a basic common law presumption that every adult has the legal capacity to make their own decisions. In some states, this is enshrined in legislation.

Undergraduate law courses teach students about the different levels of capacity required to execute documents or create legally binding relationships; for example, the tests for testamentary capacity and the capacity to enter contracts or to consent to marriage. Solicitors are skilled in understanding and pursuing the available legal remedies if it is asserted that capacity was lacking in relation to a particular transaction or decision.

Solicitors are also familiar with those situations in which it is abundantly clear the client lacks capacity to make a decision or enter a transaction. In some cases, the person’s behaviour is an unequivocal indication of their lack of capacity; they may be severely disoriented and confused about where they are and completely unable to comprehend what is being said to them or to communicate in a rational way. Solicitors know how to respond to these situations; for example, by arranging a tutor for litigation, or taking steps to ensure that a substitute decision-maker is in place.

UNFAMILIAR GROUND: WHERE THE MAP ENDS...

Increasingly, solicitors face the challenge of negotiating more complex terrain when their client’s lack of capacity is not clear.

This area is fraught with competing interests, unanswered questions and novel doubts and concerns.

Conditions and illnesses which may impair a person’s decision-making capacity include intellectual disability, an acquired brain injury or a mental illness. These can arise at any stage of a person’s life and can affect anyone in the community. Age-related conditions such as Alzheimer’s disease can also affect any client or their family irrespective of their social standing, socio-economic background or professional or educational achievements.

The predicted increase in prevalence of dementia means that all solicitors should be prepared for the prospect that their clients or their families may be affected and experience a loss or impairment of their capacity.

NAVIGATING NEW TERRITORY: THE SOLICITOR’S ETHICAL COMPASS

Solicitors use a variety of tools, resources and approaches to find their way through this new area of client capacity. For instance, the Capacity Toolkit,^[2] released by the NSW Department of Police and Justice, is a valuable guide to capacity assessment and the key issues involved.

However, it is important to remember that solicitors always have an overriding ‘ethical compass’ to navigate these often difficult and uncharted areas. This can be invaluable to solicitors in finding their bearings if they find themselves lost in a labyrinth of capacity assessments, family conflict and outraged or distressed clients.

This ethical compass is the overarching ethical duty which all solicitors owe to the court, their clients and the administration of justice to ensure that the interests of their clients are promoted and protected at all times. This duty means that a solicitor should do everything which is reasonable in the circumstances to satisfy themselves that a client has the requisite legal capacity before either taking instructions, or assisting the client to make a legal decision that will affect their interests. Solicitors need to be vigilant about this, as people whose cognitive capacity is impaired are vulnerable to exploitation by others and may not be able to protect their own legal interests. In such circumstances, it is a solicitor’s ethical duty to protect and promote their clients’ best interests, especially if they are vulnerable by virtue of a decision-making disability.

Maintaining focus on this ethical ‘true north’ can be challenging. The meaning of ‘best interests’ can become blurred – for instance, where the decision or transaction being proposed is clearly beneficial to the client (such as selling the family home and buying more suitable accommodation) but the client appears to lack capacity to understand and implement this decision. Is it in their best interests to question their capacity to make decisions which are clearly to their benefit?

Where a practice has served the client for many years, it can be extremely difficult for a solicitor to reconcile their sense of duty towards their client to follow and uphold the client’s instructions with the countervailing sense that these instructions are being given by a person whose capacity to give them is lacking or impaired. Added to this, there may be a sense of duty to the person’s spouse or family member who supports the particular decision and urges the solicitor to enable it to be implemented, especially where the solicitor is confident the spouse or family member has the client’s best interests at heart.

Difficult as it may be, a solicitor’s duties to their client must be their touchstone when dealing with any challenges or difficulties in this new territory. Solicitors should not hesitate to discuss such concerns or difficulties with the Ethics Unit of the Law Society in their state to obtain ethical guidance and advice in this complex new area.

THE START OF THE JOURNEY: WHAT IS CAPACITY?

There is no single legal definition of capacity in NSW. Rather, the legal definition of capacity depends in each case on the type of decision being made or the type of transaction involved.

This means there are a variety of legal tests of capacity. Some are contained in legislation such as the Guardianship Act 1987 (NSW) and others have been developed in common law, such as the test for testamentary capacity.

The different legal tests for capacity mean that a client may have the capacity to make some decisions, such as deciding whether to make small purchases like groceries, but may lack capacity to make other decisions, such as deciding whether to enter into more complicated financial arrangements. A finding of incapacity in one area does not automatically mean that capacity is lacking in another area; for example, the NSW Supreme Court found that a person who was incapable of managing their financial affairs may still be capable of making a will.^[3]

The Guide lists some of the more common tests for capacity in different legal areas, but solicitors must ensure they keep up to date with the most recent statutory or common law capacity tests in the particular area involved.

Despite the many different legal tests for capacity, a useful starting point is to consider whether a client is able to:

• understand the facts involved in the decision-making and the main choices;

• weigh up the consequences of those choices and understand how the consequences affect them; and

• communicate their decision.

Ongoing difficulty in being able to do these three things may indicate that the client has a lack of capacity which warrants further exploration by the solicitor.

There are several cases in which the NSW Supreme Court has considered the role of a solicitor when taking instructions from an older client where their capacity to understand a specific legal task is questionable.^[4]

NOT THE RIGHT TRAIL GUIDE... I’M A LAWYER NOT A DOCTOR! HOW CAN I BE EXPECTED TO ASSESS CAPACITY?

It is not the role of a solicitor to be an expert in assessing the capacity of their client. However, a useful approach to the solicitor’s role is described in an excellent guide published by the American Bar Association Commission on Law and Aging and the American Psychological Association – Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers^[5] (the Lawyers’ Handbook).

The Lawyers’ Handbook suggests that a solicitor can be involved in carrying out a ‘legal’ assessment of their client’s capacity^[6] which involves:

• making an initial, preliminary assessment of capacity – looking for warning signs or ‘red flags’ using basic questioning and observation of the client;

• where doubts arise, seeking a clinical consultation or formal evaluation of the client’s capacity by a clinician with expertise in cognitive capacity assessment; and

• making a final legal judgment about capacity for the particular decision or transaction.

Preliminary capacity assessment

A good start to making a preliminary capacity assessment is to use the Capacity Toolkit which sets out some key principles to follow when considering a person’s capacity:

• Always presume a person has capacity

Under common law, you must presume that a person has the capacity to make all their own decisions, unless it is established that they don’t have the capacity to make a particular decision.

• Capacity is decision-specific

Apply the presumption of capacity for every decision a person makes. If a client can make some but not all decisions, then they have a right to make as many decisions as possible.

• Capacity is fluid

A person’s capacity can fluctuate over time or in different situations, so you will need to assess their capacity for each decision whenever there is doubt about capacity. Even where a client lacked the ability to make a specific decision in the past, they might be able to make that decision later on. Clients might also regain, or increase their capacity – for example, by learning new skills or taking medication. Other factors such as stress, grief, depression, reversible medical conditions or hearing or visual impairments may also affect a person’s decision-making capacity.

• Don’t make assumptions that a person lacks capacity because of their age, appearance, disability or behaviour

A person’s capacity should not be assessed solely on the basis of:

– the way a person looks;

– the way a person presents;

– the way a person communicates;

– the way a person acts or behaves;

– any impairment.

• Assess a person’s decision-making ability, not the decision they make

A client cannot be assessed as lacking capacity merely because they make a decision you think is unwise, reckless or wrong. Individuals have their own values, beliefs, likes and dislikes, and the majority of people take chances or make ‘bad’ decisions occasionally.

• Respect a person’s privacy

Assessing a person’s capacity means dealing with their personal information, which involves a variety of legislative and ethically based privacy principles. In most cases, clients must consent to their personal information being provided to others.

• Substitute decision-making is a last resort

A client may be able to make a particular decision at a certain time because they have support during the decision-making process (assisted decision-making). Before concluding lack of capacity, ensure that everything possible has been done to support the client to make a decision. Only seek the appointment of a substitute decision-maker such as a tutor, guardian or financial manager as a last resort. ^[7]

Hidden traps for young players – where impaired capacity is not obvious

In some cases, it will not be obvious that a person may lack capacity. Many people with age-related cognitive disabilities may present extremely well to people who do not know them well and can appear capable. A person with dementia may have excellent long-term memory and be oriented in time and space but have poor short-term memory with deficits in their judgment or ability to plan. They may be able to hold intelligent, lucid and entertaining conversations but not remember any details of that conversation a short period later.

It might only become apparent on closer, sometimes expert and even retrospective, examination that their capacity is impaired.

The NSW Supreme Court in Szozda v Szozda^[8] dealt with a situation where a 93-year-old lady’s capacity to execute a series of powers of attorney was in question. In the course of the decision, the Court deals with the approach taken by the solicitors who witnessed these instruments in exploring whether their client had the requisite capacity. The judgment highlights the contrast between the solicitors’ understanding of capacity and the expert medical evidence about the complexity of capacity assessment where a person may present as being capable.

Warning signs and red flags

It is important for a solicitor communicating with a client to be on the alert for certain indicators of a lack of capacity. These indicators should cause ‘alarm bells to go off’.

The Lawyers’ Handbook includes some general warning signs or ‘red flags’ that point to the need for further investigation and exploration of a client’s capacity.^[9] This list is not exhaustive and should not be used as grounds for a definite diagnosis.

Examples of ‘warning signs’ that capacity may be an issue include:

• A client demonstrates difficulty with recall or has memory loss.

• A client has ongoing difficulty with communications.

• A client demonstrates a lack of mental flexibility.

• A client has problems with simple calculations which they did not have previously.

• A client is disoriented.

• There is a sense that ‘something about the client has changed’, including deterioration in personal presentation, mood or social withdrawal.

• A client is in hospital or a residential aged care facility when instructions are taken.

• A client has changed solicitors several times over a short period, particularly if there has been a change from a solicitor who has advised the client for many years.

• A client is accompanied by many other friends, family or carers to interviews with the solicitor but is not given the chance to speak for themselves.

• A client shows a limited ability to interact with the solicitor.

• A client shows a limited ability to repeat advice to the solicitor and ask key questions about the issues. ^[10]

A SHARED JOURNEY – COMMUNICATION WITH CLIENTS

Where issues of impaired capacity arise for a client, it is vital that the solicitor attempts to work collaboratively with the client to work through the issues and explore this new dimension to their relationship. This journey through capacity is likely to be new for both the solicitor and the client. It may be the first time the client has been made aware that their capacity to make decisions could be impaired so great sensitivity, tact and diplomacy is required from the solicitor in guiding the client through this new territory.

Where the client is a longstanding client of the practice, it is only natural that a solicitor may feel awkward and unsure about raising this issue with the client for fear of offending them and damaging a cordial long-term relationship of trust. This discussion can also be confronting for clients and their families who are faced with a potential loss of control over decision-making where they may have managed complex business and legal affairs for many years.

The solicitor should approach a consultation with the client in a manner that will help the solicitor gain as much useful information as possible about whether the client has the capacity to instruct a solicitor or make a legal decision.

There are a number of techniques that solicitors can use to provide a comfortable environment for clients, which maximises their ability to understand the discussion and to accommodate any disabilities or impairments they may have.^[11]

The Lawyers’ Handbook includes a chapter on these techniques including:

• giving clients more time to read documents;

• putting a client at ease; and

• providing aids where the client has hearing or vision impairments.^[12]

The way in which questions are put to the client and their responses, both verbal and non-verbal, will also give a crucial indication of their ability to understand what is being discussed and how it affects them and their interests.

When asking questions, it is important to remember:

• Ask open-ended questions rather than questions which can be answered by ‘Yes’ or ‘No’.

For example: ‘What sort of decisions will your attorney be able to make for you?’

• Do not ask leading questions which suggest the answer.

For example, rather than ‘You probably would rather have someone in your family look after your money than a public official wouldn’t you?’, ask ‘Who would you like to have look after your money, someone in your family or a public official?’

• Frame your questions to quickly identify any areas of concern for which a person may need support or help, or require a substitute decision-maker.

For example: ‘Will anyone else be affected by the contract or benefit from the contract? Who? Tell me about some of the important parts of the contract.’

• Ensure that it is the person being assessed who answers the questions.

In some circumstances the person may need support from a neutral person such as an advocate or an interpreter. It is crucial that the client is interviewed alone without the assistance of a family member who may prompt the person or answer on their behalf. ^[13]

It will be a sensitive, and perhaps unpleasant, task to suggest to a client that there are concerns they might not have capacity to make their own decisions. The loss of capacity is frightening and stigmatising to most people, and many clients will be offended, angry and defensive when this issue is raised.

However, this task might be easier if it can be explained to the client in terms of the legal need to make sure that their capacity is adequate for the task at hand. The formal assessment could be suggested as a kind of ‘insurance’ to protect against possible future legal challenges to the validity of the legal transaction involved. The solicitor needs to build a relationship of trust with the client so that they will permit the solicitor to lead them through the capacity assessment process, even if this means arriving at a final destination that is foreign and unwelcome.

KEEP A RECORD OF YOUR JOURNEY

It is fundamental that solicitors take thorough, comprehensive and contemporaneous file notes of any consultation with clients where capacity is in issue or where the solicitor is exploring this issue through questioning and by observing the client.

These notes will be invaluable if the issue of capacity is subsequently raised in legal proceedings where the question of the client’s mental capacity is challenged. These challenges might not be made for some years after a solicitor has taken instructions, as is often the case when wills are disputed many years after they have been made.

A solicitor’s notes might also be of assistance to any professional clinician who is engaged to undertake a professional assessment of the client’s capacity.

SENDING OUT AN SOS – WHEN TO REFER AND TO WHOM?

If there are still doubts about a client’s capacity after the solicitor’s ‘initial assessment’, there may be a need to request a formal capacity assessment from a medical professional with experience in assessment of cognitive capacity.

A range of medical professionals undertake capacity assessments, using a variety of methods or tools. A solicitor needs to consider the client’s particular circumstances and possible disability before making a referral to an appropriate professional.

The crucial issue to consider when making a referral is the experience of the medical professional in the relevant area; for example, capacity assessment of older people, people with a possible mental illness, people with an intellectual disability, people with an acquired brain injury.

The following types of professionals carry out capacity assessments:

• Psychiatrist

A medical doctor who specialises in the study, treatment of mental disorders.

• Psychologist

A person engaged in the scientific study of the mind, mental processes and behaviour.

• Neuropsychologist

A psychologist skilled in conducting assessments that determine the presence or nature of brain dysfunction; for example, after a head injury or where dementia is suspected. The assessment is conducted through interview, observation and psychological testing and generally involves the administration of tests of memory, concentration, other thinking skills and language.

• Psychogeriatrician

A psychiatrist who specialises in the diagnosis, treatment and prevention of mental disorders occurring in the aged.

• Geriatrician

A medical doctor specialising in aged care and the diagnosis and treatment of disorders that occur in old age.

• ACAT (Aged Care Assessment Team)

A multi-disciplinary team of healthcare workers who assess people in their own home to determine the level of assistance the aged person needs to remain living there independently. The team is also responsible for assessing people for admission into nursing homes. The team is comprised of a nurse, social worker, occupational therapist and physiotherapist and may also include a geriatrician or psychogeriatrician. ACATs are attached to major hospitals.

The referral letter

A solicitor needs to take great care in drafting the referral letter for a capacity assessment. Many medical professionals will have a different approach to the task of capacity assessment than the legal approach and will not necessarily understand the specific legal tests that must be satisfied.

A general request to provide a report about a client’s ‘capacity’ might elicit a report which addresses whether a person is able to remain at home and attend to their personal care needs without addressing the issue of the client’s capacity to make a particular legal decision.

It is therefore crucial that the referral letter sets out:

• the client’s background;

• the reason the client contacted the solicitor;

• the purpose of the referral – the specific legal task or decision being considered;

• the relevant legal standard of capacity to perform the task at hand;

• any known medical information about the client;

• information about the client’s social or living circumstances; and

• the client’s values and preferences, if known.

A sample referral letter is included in the Guide.^[14]

It may also be useful to invite the medical professional to telephone the solicitor for clarification if needed.

THE FORK IN THE ROAD: MAKING THE FINAL LEGAL JUDGMENT FOLLOWING THE CLINICAL CAPACITY ASSESSMENT

A capacity assessment report sent to a solicitor may conclude that the client is or is not capable of the particular legal task in issue; for example, that they have testamentary capacity. However, it is important to remember that these findings are only clinical opinions which are distinct from a legal determination about capacity. They are simply one source of evidence about the issue which the solicitor must consider before finally advising the client.

The solicitor must take time to thoroughly read and understand the report and to clarify any technical terms or language with the report’s writer if necessary.^[15]

The clinical report could also be used to discuss clinical intervention or treatment options with the client or their family.^[16] It may be possible that these interventions could improve the client’s functioning and/or their capacity; for example, the client could be given antipsychotic medication to address psychiatric symptoms impairing their understanding.^[17]

GETTING HELP ON THE TRAIL – WHEN TO SEEK THE APPOINTMENT OF A SUBSTITUTE DECISION-MAKER

If a client is incapable of providing instructions or making a legal decision, it may be appropriate for a substitute decision-maker to be appointed who can make decisions on the client’s behalf and ensure that their best interests are protected.

In NSW, both the Supreme Court and the Guardianship Division of the NSW Civil and Administrative Tribunal can appoint a guardian and/or a financial manager to make substitute decisions for people with a decision-making disability.^[18] However, this should be pursued as a last resort when all other options have been explored.

A financial manager has the authority to give instructions to a solicitor and to initiate, continue or defend legal proceedings on behalf of an incapable person. However, it may not be necessary to seek the appointment of a financial manager if a tutor or guardian ad litem can be appointed under the rules of the particular court or tribunal involved.

There may be ethical issues involved when a solicitor makes an application for a financial manager or a guardian to be appointed for their client. The NSW Supreme Court has commented that it is extremely undesirable for a solicitor to make such an application in relation to their client as the making of a financial management order effectively deprives a person of authority to make decisions about their finances, property and legal rights.^[19] Therefore it is preferable, if possible, for a family member or healthcare professional to make the application.

THE END OF THE JOURNEY OR JUST THE BEGINNING?

The journey through the brave new world of client incapacity is daunting and challenging. There are guides, resources and tools to assist solicitors to explore this new territory and work with their clients to reach their common destination.

The NSW Law Society’s Guide aims to assist solicitors to take a principled approach to this area which is thorough, thoughtful and respectful of each client’s particular circumstances. Solicitors who inform themselves of the issues surrounding client capacity and who are aware of the available resources in the area will be better equipped to navigate the challenges that often arise in this area of practice, while still providing a high standard of legal service to their client. While it is fundamental to the solicitor/client relationship that a solicitor relies and acts on instructions from their client, it is also essential that where a solicitor has doubts about their client’s capacity they fulfil their ethical responsibility to explore this issue further.

If guided by their ‘ethical compass’– their duty to the Court, the law and their client – the solicitor’s journey may be long but it will always be headed ‘true north’.

The journey of a thousand miles begins with one step. – Lao Tzu

Esther Cho is Divisional Deputy Registrar, Guardianship Division, NSW Civil and Administrative Tribunal. She is a solicitor who has worked in the guardianship and mental health field for more than 20 years. She was the former legal officer of the Mental Health Review Board of Victoria and the Guardianship Tribunal of NSW. Ms Cho has served on the Elder Law and Succession Committee of the Law Society of NSW and is currently the Divisional Deputy Registrar of the Guardianship Division of the NSW Civil and Administrative Tribunal.

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^[1]When a client’s capacity is in doubt: A Practical Guide for Solicitors, Law Society of NSW, 2009

at: http://www.lawsociety.com.au/cs/groups/public/documents/internetcontent/023880.pdf

^[2] New South Wales Department of Police and Justice, Capacity Toolkit: Information for

government and community workers, professionals, families and carers in New South Wales, (Sydney, 2008) at: http://www.diversityservices.lawlink.nsw.gov.au/divserv/ds_capacity_tool.html.

^[3] Re Estate of Margaret Bellew [1992] NSW Supreme Court, Probate Division (Unreported) McLelland J, 13 August 1992.

^[4] See Anastasia Pates v Diane Craig and the Public Trustee: Estate of the Late Joyce Jean Cole.

No. 106306/94 Wills- Solicitors [1995] NSWSC 87 (19 October 1995) and Winefield v Clarke [2008] NSWSC 882.

^[5] The American Bar Association, Commission on Law and Aging and the American Psychological Association, Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (Washington, 2005) at: http://www.apa.org/pi/aging/resources/guides/diminished-capacity.pdf.

^[6] Ibid at 3 and 13-23.

^[7] Capacity Toolkit, above n2 at 68-70.

^[8] Szozda v Szozda [2010] NSWSC 804 (23 July 2010)

^[9] Handbook for Lawyers, above n5 at 13-16.

^[10] Ibid.

^[11] Handbook for Lawyers, above n5 at 27-30.

^[12] Ibid.

^[13] Capacity Toolkit, above n2at 110-137.

^[14] A Practical Guide for Solicitors, above n1, at 23.

^[15] Handbook for Lawyers, above n5 at 39-40.

^[16] Ibid.

^[17] Ibid.

^[18] See the NSW Civil and Administrative Tribunal website for information on how to make an application to the Guardianship Division <http://www.ncat.nsw.gov.au/ncat/guardianship.html> .

^[19] P v R [2003] NSWSC 819 (9 September 2003); McD v McD [1983] 3 NSWLR 1.