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The Singapore Law Gazette

Foreign LPAs: Recognition, Enforceability and Practical Issues

Lasting Powers of Attorney are not unique creations of Singapore. This article discusses how equivalent foreign instruments are treated under Singapore law, and practical issues that may arise once the relevant court orders are issued. Some emphasis will be placed on the asset vesting provision in  paragraph 7(1)(b) of the Second Schedule of the MCA.

Lasting Powers of Attorney (each an LPA) are not unique creations of Singapore. They exist in, for example, the United Kingdom, and are known in Australia and New Zealand as enduring powers of attorney. In the situation where, for example, a foreign national (P) has drawn up an instrument similar to an LPA in his or her home country (an Equivalent Instrument), has assets in Singapore and later loses mental capacity, what can his or her donee do in order to manage and operate his or her assets in Singapore?

While Equivalent Instruments are not directly enforceable under Singapore law, they can be taken into account by the Singapore court when considering whether to vest such Singapore assets in the donee. Paragraph 7 of the Second Schedule to the Mental Capacity Act 2008 (the MCA) states as follows: “(1) Sub-paragraph (2) applies if the court is satisfied — (a) that under the law prevailing in a place outside Singapore a person (“M”) has been appointed to exercise powers in respect of the property or affairs of P on the ground (however formulated) that P lacks capacity to make decisions with respect to the management and administration of P’s property and affairs; and (b) that, having regard to the nature of the appointment and to the circumstances of the case, it is expedient that the court should exercise its powers under this paragraph. (2)The court may direct — (a) any property situated in Singapore standing in the name of P; or (b) any stocks standing in the name of P or the right to receive dividends from such stocks, to be transferred into M’s name or otherwise dealt with as required by M, and may give such directions as the court thinks fit for dealing with accrued dividends from the stocks” (emphasis added). It is argued that paragraph 7 of the Second Schedule to the MCA is also wide enough to encompass application made by deputies or their equivalents appointed by a foreign court.

If an application under paragraph 7 of the Second Schedule to the MCA (termed as an asset vesting application as a convenient shorthand) is successful, the applicant-donee is not appointed as a deputy for P over his or her assets in Singapore; rather, P’s assets in Singapore are vested in the applicant-donee. This would mean that the applicant-donee would not be under the supervision of the Singapore Public Guardian (see section 31(1)(c) of the MCA). Instead, the applicant-donee would remain subject to the laws of the jurisdiction where the Equivalent Instrument was drawn up. This would assist the applicant-donee, since he or she would not be subject to additional supervisory oversight and in turn additional regulatory costs.

Since such applicant-donees would not be under the supervision of the Singapore Public Guardian, this makes the requirement under paragraph 7(1)(b) of the Second Schedule of the MCA, i.e., the requirement that the Court finds that it is expedient to allow P’s assets to be vested in the applicant-donee, the critical test for such asset vesting applications. In this regard, it would be important for lawyers acting for such applicant-donees to obtain a firm understanding of the relevant laws and regulatory frameworks in respect of the Equivalent Instrument, in order to convince the Singapore Court that it would be expedient to grant the asset vesting application. It is suggested that the more robust the relevant laws and frameworks, the stronger the chances of success in such asset vesting applications.

If the asset vesting application is granted and an asset vesting order is issued, in what manner does the applicant-donee hold P’s assets? Does the applicant-donee hold a legal or beneficial title? This question has not been subject to treatment by any reported decision from the Singapore Court. However, it is argued that based on English authorities, the asset vesting order does not contemplate an outright transfer of legal or beneficial title. Instead, it transfers the right to obtain and deal with the property, subject to the applicant-donee’s right to require that the property be transferred to him (despite not being the holder of the legal or beneficial title to the same).

It is first noted that the language is similar to that in section 134 of the English Lunacy Act 1890 (ELA), which states as follows: “Where any stock is standing in the name of or vested in a person residing out of the jurisdiction of the High Court, the judge in Lunacy, upon proof to his satisfaction that the person has been declared lunatic, and that his personal estate has been vested in a person appointed for the management thereof, according to the law of the place where he is residing, may order some fit person to make such transfer of the stock or any part thereof to or into the name of the person so appointed or otherwise, and also to receive and pay over the dividends thereof, as the judge thinks fit” (emphasis added).

Section 134 of the ELA was discussed in the English Court of Appeal decision in In re Brown (A Lunatic) [1895] 2 Ch 666 (Brown). The Court stated as follows (at 670-671): “What is usually done in the colonies and in foreign countries is very much the same as we do ourselves. We appoint a committee with power to obtain possession of the lunatic’s property, and, if necessary, to sue for and recover it by proper process, and with large powers of disposition and management for the benefit of the lunatic. But we do not vest the lunatic’s property in the committee in the strict sense of the word “vest.” Neither do colonial or foreign courts. Unless, therefore, the word “vested” in s. 134 is construed in a wide sense so as to include the right to obtain and deal with, without becoming actual legal owner of, the lunatic’s property, the section will be practically useless. The object, however, of the section is obviously to enable the judge in Lunacy to hand over to committees, curators and other persons properly appointed by foreign tribunals, the personal property of persons declared lunatics and subject to their jurisdiction; and the section ought to be construed so as to effectuate and not so as to defeat this object. If now we turn to previous decisions, we find that orders have been made transferring stocks, funds and securities to curators of lunatics resident out of England, namely, in France, Holland and Scotland, although the property of such lunatics was not vested in their curators in the strict technical sense of that expression” (emphasis added).

The last sentence of the above extract from Brown was discussed by the English Chancery Division in the subsequent case of In re Linden [1897] 1 Ch 453. Justice Stirling stated as follows (at 457): “But the importance of the case is, that it contains a discussion by Lindley L.J. of the previous cases, including In re Barlow’s Will. He there says: “If now we turn to previous decisions, we find that orders have been made transferring stocks, funds and securities to curators of lunatics resident out of England, namely, in France, Holland and Scotland, although the property of such lunatics was not vested in their curators in the strict technical sense of that expression”; so that he recognises that a transfer may be made, although the property is not technically vested in the person to whom it will be transferred” (emphasis added).

Subsequently, both cases, together with other decisions, were discussed in the decision of the English Chancery Division in Thiery v Chalmers, Guthrie & Co [1900] 1 Ch 80. Justice Kekewich stated as follows (at 82): “After carefully considering them, I think that there may be extracted a general rule that where there has been a judicial declaration of the status of lunacy, and the applicant on the lunatic’s behalf has the latter’s property vested in him in the sense mentioned by the present Master of the Rolls in In re Brown, namely, that he has the right to retain and deal with without becoming the actual legal owner of the lunatic’s property, the application for the transfer or payment of that property may be and generally ought to be granted” (emphasis added).

Since asset vesting orders are likely to be rarer in comparison with LPAs and deputyship orders, it is understandable that some practical issues may be faced with applicant-donees armed with a asset vesting order. Based on personal experience in assisting clients in such a situation, some practical issues that should be highlighted to the clients are as follows. First, CPF monies cannot be subject to an asset vesting order (see Regulation 2 of the Central Provident Fund (Mental Capacity) Regulations 2010; a limited deputyship order would thus have to be in place in order to transfer monies out of and thereafter close the CPF account. Second, there is (as expected) a relative lack of familiarity with an asset vesting order, and hence it is best if the applicant-donee is, when speaking to the relevant institutions to take control of P’s assets, accompanied by a lawyer to explain the asset vesting order. Third, different financial institutions have different requirements to be met before an applicant-donee is allowed to take control of P’s assets, and such requirements may require the applicant-donee to travel to Singapore. For example, some require personal attendance by the applicant-donee at a branch in Singapore, while others are willing to proceed upon provision of relevant written and/or notarised documents.

As the uptake of LPAs and/or Equivalent Instruments increases around the world, it is expected that asset vesting applications would be more common. It is hoped that this article will provide some background information about the nature of asset vesting applications and the practical issues one may face after receiving an asset vesting order.

Selvam LLC
Member, Probate Practice Committee
E-mail: [email protected]