Enduring powers of attorney: with limited remedies--it's time to face the facts!

• Jurisdiction: Australia
• Author: Wuth, Natalia
• Date: 01 January 2013

I INTRODUCTION

Financial exploitation of the elderly carried out by persons appointed as enduring attorneys has emerged as a national and international issue. (10) The purpose of this paper is to discuss Australia's legal framework regulating the appointment of EPAs and the formalities required to create a valid and effective power. An analysis of the extent to which a donee of an enduring power may be authorised to perform acts on behalf of the donor and the conferred statutory and fiduciary obligations that apply will also be carried out. The recent decision of the Court of Appeal in Brennan v The State of Western Australia (11) will be considered as a recent example of a donee taking financial advantage of the unregulated enduring appointment. This paper will critically examine the application of the equitable doctrines of undue influence and unconscionable conduct along with the possible breach of a fiduciary duty as separate remedies to recover assets, which may have been misappropriated. The criminal and civil options of redress will also be discussed in this context. It follows that practical recommendations will be made to improve the current legislative framework to ensure that older people are better protected and the risk of exploitation is reduced.

II INCREASING NEED FOR ENDURING POWERS OF ATTORNEY

The increasing ageing population in Western societies and increased demand for family care giving are likely to contribute to a rise in financial abuse of older people. (12) An examination of recent statistics confirms that between 30 June 1991 and 30 June 2011, the number of people aged 65 years and over in Australia increased by 97 600 people to 13.7%. (13) In fact, the Australian Bureau of Statistics predicated that by 2056 there will be over 6 million people over 65 years of age in Australia. (14) Further, over the past two decades the number of people aged 85 years increased by 169% compared with a total population growth of 31% over the same period. (15) These statistics demonstrate that Australia's population is ageing and that it is likely that a significant proportion of older Australians will lose their decision making capacity. (16) Accordingly, the reliance on EPAs will inevitably increase. (17)

III ENDURING POWERS OF ATTORNEY IN AUSTRALIA

Statutory provision has been made in all jurisdictions to allow the appointment of an EPA to survive the donor's incapacity. (18) The policy motivating the extension of the power of attorney in this way resulted from a 'recognition of the concern experienced by donors and their families, where the donor had appointed a donee as a power of attorney a person whom he or she presumably trusted with his or her affairs, only for the power to terminate as a matter of law upon the loss of mental capacity by the donor'. (19) The current regime allows an individual to informally appoint a person that they trust to act as their enduring attorney.

A Formal Requirements for Appointment

The formal requirements of an enduring document are set out in the relevant state and territory legislation. A family member or friend who is an adult, (20) the public trustee, or (in two states) a trustee company, may be appointed as enduring attorneys. (21)

In all jurisdictions, an EPA for financial matters must be in writing, (22) signed by the principal (23) and in the approved form. (24) In order for an EPA to be validly executed the principal must be mentally capable of doing so. (25) There is no streamlined approach to the EPA form as each jurisdiction operates independently from the other in this respect. (26) In New South Wales (NSW), South Australia (SA), Northern Territory (NT) and Tasmania (Tas), the 'approved form' is contained in the relevant schedules to the governing statutes. (27) Whereas, in Queensland (Qld), Victoria (Vic), and the Australian Capital Territory (ACT) the 'approved form' is publicly available through, for example, the Qld Department of Justice, (28) Vic and WA Office of the Public Advocate (29) and the ACT Public Trustee. (30) In all cases, for the power to be enduring, however, the principal must sign to an additional provision that the power will continue to have effect even after loss of capacity. (31)

An enduring document must be signed and dated by an eligible witness. (32) The obligations imposed on the witness of an enduring document are more onerous than those generally imposed on witnesses in other circumstances. (33) In all jurisdictions witnesses are required to certify that the document was signed by the principal in the witness's presence. (34) In addition, in Qld, (35) NSW, (36) Vic, (37) and the ACT, (38) the document must be accompanied by a witness's certificate, which certifies that the principal appeared to have understood the nature and effect of making the power of attorney. (39)

An enduring power of attorney only becomes effective once the attorney has signed and dated a statement of acceptance. (40) If more than one attorney is appointed, each attorney may only carry out their role under the enduring document once they have signed and accepted it. (41) However, where there are joint attorneys with the same functions, 'the safer position is that the power of attorney is not capable of being operated until all joint enduring attorneys have accepted it'. (42)

The commencement and revocation of the appointment are particularly important issues that donors should carefully consider. Consideration should be given as to how the donee will ascertain that the donor has lost capacity and whether active monitoring of the donor's capacity is required. (43) This is largely considered a grey area particularly if the donor decides to conceal their decline or are not aware of their diminishing capacity. (44) Unless the enduring document is revoked by the donor or by a state or territory tribunal, (45) the effect of the creation of an enduring document is that it allows the attorney to enter into transactions as though the principal would have understood and consented to the nature of the act at the time. (46)

B Scope of Authority

An enduring power of attorney, in the prescribed form, confers on the attorney the authority to do on behalf of the principal anything that the principal may lawfully do. (47) The extent of this appointment is immense (48) as the concept of autonomy sits ill-at-ease with the requirement that third persons may make financial decisions. (49) The scope of authority by the person to whom the authority is given is limited to acting in an agency capacity, subject to the constraints of a fiduciary position. (50) An enduring appointment for financial matters allows an attorney to, for example, operate bank accounts, manage and pay bills and lease or sell property. (51) The terms of the instrument may, however, limit the scope of authority to specific matters. (52) This is particularly if the principal does not require the EPA to be invoked or to be used in the short term until the principal lacks capacity. (53)

The extent of an enduring attorney's authority was considered by White J in In the Will of Bob Wild Deceased, (54) The court was required to consider whether an enduring attorney who was appointed by the sole executrix of the Will had the authority to apply for a grant of probate on behalf of the executrix. The donor of the EPA (who was also the executrix of the Will) suffered, at the time of the application, dementia and was considered incapable of managing his own affairs. Her Honour concluded that the legislation under which the enduring attorney was appointed is comprehensive in its description and so long as the instrument does not state to the contrary, 'an attorney is taken to have the maximum power that could be given to the attorney by the enduring document'. (55)

C Statutory Obligations

The relevant states and territories maintain legislation which details the statutory duties that enduring attorneys must comply with. These duties are imposed on the donee of the enduring power to protect the interests of the donor. (56) In managing a person's financial affairs, a donee of an enduring document is obliged to exercise their powers honestly and with reasonable diligence to protect the interests of the donor. (57) An attorney for a financial matter may only enter into a conflict transaction if the principal authorises the transactions. (58) For example, in NSW and Qld, enduring attorneys must not use the principal's funds to give gifts or benefits to themselves or third parties, unless the principal expressly authorises the attorney to do so. (59)

D Fiduciary Obligations

At the heart of an enduring appointment is the central fiduciary obligation of loyalty to the principal. (60) This obligation arises from general law but is also implied in the relevant state and territory legislation. (61) It arises as 'there is inherent in the nature of the relationship itself a position of disadvantage or vulnerability on the part of one of the parties which causes him or her to place reliance upon the other and requires the protection of the conscience of that other party'. (62) It is for these reasons that the fiduciary obligation is proscriptive (63) so as not to allow the attorney to promote their personal interests ahead of their principal's. (64) One of the fiduciary principles prohibits the making or pursuit of a gain where there is a conflict between their personal interests and that of the principal's without the principal's informed consent. An attorney who has accepted the enduring appointment must act in good faith and must only deal with the principal's assets in the interests of the principal. (65) Any benefit obtained without full disclosure to the principal and their informed consent contravenes the fundamental nature of the fiduciary relationship. (66)

IV FINANCIAL EXPLOITATION THROUGH EPAS

The financial abuse by enduring attorneys has become a pervasive social concern. (67) The abuse stems from the...