Power of Attorney Act 2003 – Objectives & Issues

• Introduction
• What is a Power of Attorney?
• Objectives of the Power of Attorney Act 2003
• Issues
1. Protection measures- financial abuse by the attorney
2. Compulsory registration and enduring powers of attorney
3. Revocation
4. Redesigning the prescribed form
5. Guardianship Tribunal

Introduction

The responsible body for the administration of the Powers of Attorney Act 2003 is the Department of Lands (Lands). The act also has a working group with other bodies for the purposes of review and these bodies are:

• The Attorney General’s Department
• The Law Society of NSW
• The Guardianship Tribunal
• The Public Trustee of NSW (now known as the NSW Trustee and Guardian)

What is a Power of Attorney?

A Power of Attorney is a document where one party (called the principal) authorises another to act on his or her behalf. It can authorise very specific actions or it can be quite general. The power of attorney can be limited to a certain period of time for example while the principle is away overseas or it can operate until the principle has died.

The state of New South Wales has two types of power of attorneys; one is a general power of attorney and the other is an enduring power of attorney. Both documents can be used to manage a person’s financial affairs. The big difference between the two is that a general power of attorney ceases to operate after the principal loses mental capacity while an enduring power of attorney will continue to be effective after the principal has lost mental capacity. The two documents are similar in the regard that they both cease to have effect once the principal has passed away. An enduring power of attorney can be made using the same form as a general power of attorney, but an enduring power of attorney must have an additional statement to the effect that the power of attorney is to continue after the principal has lost his mental capacity. It is also to be accompanied with a certificate by an authorised witness and it is to state that he or she has explained to the principal the effect of making the document.

An enduring power of attorney is a useful tool for planning ahead as it allows people to choose who they want to make their financial decisions when they can no longer do it themselves. The document gives people greater control over their future welfare.

Objectives of the Power of Attorney Act 2003

The Power of Attorney Act 2003 removed the statutory provisions of the Conveyancing Act Part 16 with regards to power of attorneys. The following changes took place:

Replaced the short power of attorney form into a more comprehensive one titled a “Prescribed Power of Attorney” The form contains more information and can be used to create both a general power of attorney and an enduring power of attorney.

A new requirement was introduced for an enduring power of attorney. The new requirement ensures that the enduring power of attorney will not commence to operate until the attorney has accepted his or her appointment by signing the document.

Enduring Power of Attorney – Certificate by prescribed witnesses stating that the witness explained the effect of making the document. This certificate changes a general power of attorney into an enduring power of attorney thereby allowing it to continue to be effective after the principal has lost mental capacity.

The definition of “prescribed witness” was expanded from solicitors, barristers, and registrars of a local court to now also include licensed conveyancers, public trustee employees and employees of trustee companies who have completed a course of study approved by the minister.

The Act also recognises enduring power of attorneys from other states or territories of Australia even if they do not meet the formal requirements of the state of New South Wales.

The Act introduced provisions clarifying what an attorney can and cannot do, an example of that are gifts. A gift from the principal’s property cannot be given to any other person unless the instrument creating the power of attorney expressly authorises the giving of that gift.

Similar rules apply to an attorney signing any documents or doing anything that would see the attorney gain a benefit at the expense of the principal or conferring a benefit on third parties.

Schedule 3 of the prescribed form for a power of attorney states the things an attorney can do. However if the principal wishes he or she may give the attorney more powers within the prescribed form.

Issues

1. Protection measures- financial abuse by the attorney

As a result of many and varying financial abuse claims against an attorney the Act was enacted to tackle its prevention..

The relationship between an attorney and a principal is known as a “fiduciary relationship” which means that it’s a relationship of trust and confidence. The obligation of an attorney has consistently been placed as a high obligation by the courts in order to protect and promote the interests of the principal. A part of this obligation is that an attorney must always act in the best interest of the principal.

There are two purposes of this obligation: one is to prevent an attorney “from being swayed by considerations of personal interest” and two to prevent the attorney from misusing their position for a personal gain. Those attorneys who do not act in their fiduciary duty are breaching a legal rule and can be personally liable to reimburse the estate of the principal and to pay any damages the principal may have suffered.

There have been some cases identified by the Protective Commissioner, the Guardianship Tribunal and the Public Trustee which saw the attorney involved take a benefit from a principal who had lost mental capacity and therefore the principal was unable to monitor the attorney’s actions. In some of the cases the acts were done without the full regard of the principal but in most of the cases the attorneys were misguided regarding their duties and they also believed that their actions somehow benefited the principal.

Even though it is important to stop financial abuse by attorneys any changes must be well thought-out in order to ensure that they do not negatively impact the benefits initially intended for a power of attorney.

2. Compulsory registration and enduring powers of attorney

Registration of a power of attorney is not a requirement for all those who have one. However a power of attorney must be registered if the attorney is going to sell, mortgage, lease or otherwise deal with principal’s real estate. Other than these examples a principal can choose not to register the power of attorney.

However there are advantages to registering your power of attorney such as:

The power of attorney will be on record as a public document which allows anyone to search and view a copy of the document either online or at the Department of Lands office.

The document is safe from loss or destruction because it is permanently recorded on the registrar.

The main disadvantages relate to the cost associated with registering and any issues of privacy. The current fee charged by the Department of Lands is a $98 registration fee and there may be additional costs incurred in order to get the power of attorney to the Department of Lands office.

3. Revocation

The principal’s ability to revoke a power of attorney is an important ability. It can be as simple the principal telling the attorney that the power of attorney is revoked. It is preferable for the revocation to occur through a written notice to the attorney advising him or her of the revocation and advising third parties that are known to have dealt with the attorney. Once an attorney is aware of the revocation he or she cannot continue to act as the principal’s attorney and if they do, penalties of up to five years imprisonment can apply.

4. Redesigning the prescribed form

Concerns have been raised regarding the complexity and confusion raised by the current forms and so there have been calls to simplify the prescribed form. The main concern is that the form is headed General Power of Attorney even though it can be used a both a general power of attorney and an enduring power of attorney. This heading can and has caused confusion where people assume that the power is only a general one and not an enduring one, solely because of the name on the form.

It has been suggested that the heading is to be removed and replaced with Power of Attorney and have a notification such as a tick to indicate if it is to be a General Power of Attorney or an Enduring Power of Attorney. Another suggestion was to make two separate forms, one for a General Power of Attorney and another for an Enduring Power of Attorney.

5. Guardianship Tribunal

In its dealings the Guardianship Tribunal has raised the issue of revocation by a principal who may or may not have capacity. The tribunal has raised the fact that the Act makes no reference to the capacity of the principal when a power of attorney is revoked. The act also does not enable the Tribunal to make orders regarding a person’s capacity to revoke an enduring guardian. The current law sees attorneys or others involved in the dispute going to the Supreme Court in order to resolve the issue. The tribunal has suggested an amendment to the Act so that it can review the revocation.

If you would like more information or advice on establishing a Power of Attorney or if you have another Wills & Estate enquiry, please complete and submit the Express Enquiry form or on +61 2 9223 9166 to arrange an appointment.