Concerns about capacity of a person to enter into legal transactions is not new, nor is the acceptance that capacity is issue-specific and that incapacity is not static and can change. The Law Institute of Victoria (LIV) will be launching its “ Revised Capacity Guidelines” as a guidance for lawyers to assess the client’s capacity to give proper instructions or to participate in a court or similar process. Below are some of the important points as recently published by the LIV president that will be argued and taken into account in addressing this important issue.
Currently, the law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.
Taking an overview of the many different situations in which courts have been called on to consider questions of capacity – the validity and fairness of transactions, fitness to plead, testamentary capacity, litigation guardians, guardianship and administration statutes, and consent to medical treatment are examples – demonstrates the test of capacity is specific to the issues for which capacity is required. It is hardly surprising, given the complexity of human cognitive and intellectual function, that capacity is related to the nature and complexity of the transaction or decision or the ongoing continuum of transactions that are in issue.
Questions about capacity arise in many areas – much beyond, the elderly, the very young – in the making of powers of attorney or wills and in criminal cases.
Capacity is fluid and can fluctuate in a year, a week or even in the same day. Some welcome legislative guidance can be found in the Powers of Attorney Act 2014 (Vic), such as section 5 of that Act, which requires a person assessing capacity to do so at a time and in an environment most conducive to promoting a person’s capacity.
A person’s capacity may be affected by a number of factors, including: taking certain medications, mental illness, an intellectual disability or an age-related cognitive disability, such as Alzheimer’s, grief, depression, reversible medical conditions or hearing or visual impairments. However, one or more of these factors doesn’t mean that person lacks decision making capacity. Some people may be more capable of making decisions at different times of the day or with practicable and appropriate supports in place.
Clients may have capacity for some decisions, but not for others; capacity is always decision-specific.