Agency

Agency

An MIP who is incapable of managing his/her own property and affairs is generally, by definition, unable to enter into any agency arrangements. 

Where the authority is an ordinary agency, the principal’s supervening mental incapacity would generally determine the agent’s authority at common law. In other words, if a principal had capacity when he appointed an agent, but later becomes mentally incapable, the agent’s authority is automatically revoked: Yonge v Toynbee [1910] 1 KB 215.

However, if the authority is given under a power of attorney that falls within the Powers of Attorney Ordinance (Cap. 31), a different rule applies. This is so where the power of attorney expressly states that it is irrevocable and is given either to protect the donee’s proprietary interest or to secure the performance of an obligation owed to the donee. In that case, the power does not end merely because the donor later becomes mentally incapacitated. It will continue for as long as the donee’s interest still exists or the secured obligation remains unpaid or otherwise undischarged. During that period, the power cannot be revoked by the donor and will not automatically come to an end because of the donor’s mental incapacity.

Even if the agency’s authority has been revoked due to the principal’s incapacity, the principal—or their estate—may still be bound to third parties by the agent if the principal had previously held out the agent as having authority, and that the third party was unaware of the principal’s incapacity: Drew v Nunn (1879) 4 QBD 661.

If an MIP falls into incapacity after entering into an agency arrangement, the committee appointed under Part II of the Mental Health Ordinance (Cap. 136) can deal with the agency arrangement for him. Terminating an agency falls under the scope of powers of the committee: Mental Health Ordinance (Cap. 136), section 11(2). 

Statute now allows for “enduring powers of attorney”, which are special types of power of attorney that remain valid even after the person who granted them later becomes mentally incapacitated: see “Enduring Powers of Attorney”.