Receivership: The Final Option

Receivership: The Final Option

If you should become incapacitated without an Enduring Power of Attorney, an application to the Supreme Court for the appointment of a receiver may be the only option for your loved ones to manage your affairs.

The baby boomers are growing older and those of us who fall into this category need to be prepared for what may lie ahead. Do you know what will happen to you and your property in the event that you become incapacitated? Those who have planned ahead will have signed an Enduring Power of Attorney, giving someone authority to manage their property and affairs in such circumstances, and an Advance Treatment Directive, giving someone the power to make medical treatment decisions on their behalf. This option will still be available to you if your incapacity should be physical, but it will be altogether too late if you should become mentally incapacitated.

In that case, the only recourse is an application to the Supreme Court for the appointment of a Receiver to manage the property and affairs of the “Patient”. Usually the Receiver will be a relative or close friend of the Patient. However, where there is no suitable candidate to act as Receiver, the court may direct that an application be made by an officer of the court and a professional person appointed. It is important to remember that the jurisdiction of the court is limited to the “property and affairs” of the Patient, and does not extend to the physical care of the Patient. Consequently, neither the court nor the Receiver may make medical treatment decisions on the Patient’s behalf.

Application for an Order of Receivership is made to the Supreme Court. Notice is generally served on the Patient, although it may be dispensed with if the Patient is incapable of understanding the Notice, it would be injurious to his health to receive a Notice, or there is some other compelling reason why it ought to be dispensed with. Where a Notice is served, the Patient will have the opportunity to object to the proceedings. The application is supported by an “Affidavit of Kindred and Fortune”, which is an affidavit giving particulars of the Patient’s relatives, property and affairs and of the circumstances giving rise to the application. It is also supported by a Medical Affidavit, sworn by the Patient’s doctor, confirming that the Patient is incapable, by reason of mental disorder (within the meaning of the Mental Health Act 1968), of managing his property and affairs.

Proceedings are generally heard in chambers, so the Patient’s privacy is respected. The court takes an inquisitorial approach, looking to establish all the facts and use this information to make the best possible decision for the Patient. Where the facts of the case are in dispute, the court may not be able to make an informed decision without cross-examination of the parties and witnesses, but this is relatively uncommon. After consideration of the matter, the court will make an Order setting out the Receiver’s powers and duties and with Order in hand, the Receiver will be entitled to collect all the income of the Patient and apply if for his maintenance.

Once appointed the Receiver must act at all times in the Patient’s best interests, applying income wisely, having careful regard to the Patient’s resources and his present and prospective financial needs. The Receiver must open a receivership bank account, protect and secure the Patient’s property, pay his bills, visit the Patient with a view to ensuring his well-being, and comply with any directions of the court. The Receiver must account annually to the court for all income and assets of the Patient, all disbursements made on his behalf and will be held accountable for any misconduct relating to the Patient’s property.

Without question, the role of Receiver can be an onerous one, with all transactions having to be accounted for and the welfare of the Patient having to be monitored. In addition, the court application can be both time-consuming and costly. This is an instance where it pays to be prepared. Just as you should make a Will to ensure your family is taken care of in the event of your death, you should execute an Enduring Power of Attorney and Advance Directive to ensure that you are taken care of should the need ever arise.