What are your obligations when the appointor of a family trust loses capacity?

Transcription

1 AUGUST 2015 What are your obligations when the appointor of a family trust loses capacity? PRESENTED AT TEN WEBINAR Contact details Laura Hanrahan Senior Associate P E l.hanrahan@hopgoodganim.com.au Paper last updated October 2017

2 Capacity of an appointor Introduction The appointor of a family trust is a pivotal role in any estate planning strategy. When an appointor loses capacity, things can get murky especially if they have appointed an attorney who is also a beneficiary. If you consider the aging population it is not surprising that we are seeing an increase in files assisting attorneys and other substitute decision makers in the exercise of their duties. That is assisting them not only as personal attorneys, but also replacing the incapacitated adult as a director in companies, as trustee in both family trusts and self managed superannuation funds and also as appointors, guardians or principals in family trusts. In some cases the attorneys are in those roles for lengthy periods of time. The Australian Institute of Health and Welfare, Dementia in Australian (2012) reported that almost 1 in 10 Australian s over the age of 65 were suffering dementia and that over the age of 85 this number climbed to 3 in 10 people. Given these statistics, it is impossible to overstate the importance of planning for incapacity. In most cases, the appointor is the ultimate controller of a family trust, and naturally there are many opinions regarding the best strategy. But, as with every estate planning strategy, there is not a one size fits all solution. This presentation examines the consequences of an appointor losing capacity and how to appropriately plan for the incapacity of an appointor, including: What is the test for capacity with respect to an appointor? The importance of an appointors Enduring Power of Attorney (EPA). What should be included in the EPA of an appointor? The role of the trust deed The consequences of getting it wrong. 2 What happens if the appointor has no EPA or a badly or inappropriately drafted EPA? The position of appointor Appointor is the term used in modern discretionary trust deeds to describe the person who has the power to appoint and remove the trustee. The appointor is also commonly referred to as a guardian, protector or principal. It is important to point out that the position of appointor is not an essential element in the creation of a trust. The essential elements of a trust under ordinary principles of law are: 1. The three certainties: (a) there must be a trustee; (b) there must be trust property; and (c) there must be a beneficiary or beneficiaries. and; HOPGOODGANIM LAWYERS

3 2. The trustee must have rights and obligations to deal with the trust property for the benefit of the beneficiaries. The position of appointor is entirely a creation of the trust deed or governing document. Andrew Holden, Barrister in Trust Protectors (Oct 2011) defines the term protector at 1.6 Protector means a person occupying an office created by a trust instrument distinct from that of a trustee. Whether or not referred to as a protector, upon which has been conferred power(s) or right(s) enabling the office-holder to participate in the administration of the trust or the disposition of trust assets. Whilst the position of appointor is commonly associated with the power to remove and replace the trustee, the trust deed can give the appointor other powers. For example, an appointor or guardian may have reserve powers which requires the trustee to obtain their consent before exercising certain express powers, say, adding beneficiaries or distributing income or capital to certain specified beneficiaries. For all of these reasons it is essential in any estate plan to determine, by review of the trust deed, who holds what position and what powers that position confers. The position of appointor is also recognised in legislation. Section 12 of the Trusts Act 1973 (Qld) states: Power of appointing new trustees (1) Where a trustee, whether original or substituted, and whether appointed by the court or otherwise - a. is dead; or b. remains out of the State for more than 1 year without having properly delegated the execution of the trust; or c. seeks to be discharged from all or any of the trusts or powers reposed in or conferred on the trustee; or d. refuses to act therein; or e. is unfit to act therein; or f. is incapable of acting therein; or g. is an infant; or h. being a corporation, has ceased to carry on business, is under official management, is in liquidation or has been dissolved; then the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustee or trustees for the time being, or the personal representative of the last surviving or continuing trustee, may by writing appoint a person or persons (whether or not being the person or persons exercising the power) to be a trustee or trustees in the place of the trustee first in this subsection mentioned. Similar provisions exist at section 6 of the Trustee Act 1925 (NSW), section 6 of the Trustee Act 1925 (ACT), section 41 of the Trustee Act 1958 (VIC), section 7 of the Trustee Act 1936 (SA), section 7 of the Trustees Act 1962 (WA), section 11 of The Trustee Act (NT) and section 13 of the Trustee Act 1898 (TAS). In all States and Territories it is the case that if a trust deed specifies a method of appointing trustees then, notwithstanding the methods set out in the relevant Trustee Act for appointing new trustees, the method provided for in the trust deed must be complied with. ARE APPOINTORS FIDUCIARIES? Trustees are certainly fiduciaries as they act for, or in the interests of, the beneficiaries. One of the essential elements of the creation of a trust is that the trustee must have rights and obligations to deal with the trust property for the benefit of the beneficiaries; that is, a fiduciary relationship. Is the appointor a fiduciary? Yes but with varying degrees of fiduciary duty. The degree of fiduciary duty will depend upon the powers given to the appointor in the trust deed or governing documents, the identity of the appointor and their relationship to the trustee and beneficiaries of the trust. Ford & Lee (Principles of the Law of Trusts), 3rd Ed, 1996 at [22-40] tells us A fiduciary relationship exists where: (a) one person, the fiduciary, has undertaken to act in the interests of another persons, the principal, or in the interests of the fiduciary and another person; (b) as part of the arrangement between the fiduciary and the principal, the fiduciary has a power or a discretion capable of being used to affect the interests of the principal in a legal or practical sense; (c) the principal is vulnerable to abuse by the fiduciary or of his or her position; and (d) the principal has not agreed, as a person of full capacity who is fully informed, to allow the fiduciary to use a power to a discretion otherwise in the principal s interests. An appointor has certain powers to be exercised consistently with the terms of the trust which is in the best interests of the beneficiaries and therefore an appointor is a fiduciary. Underhill and Hayton in Law of Trusts and Trustees (18th Ed) (Underhill and Hayton) discuss in more detail the fiduciary nature of the power of a protector/appointor at [1.79]: The particular powers conferred upon a protector are normally fiduciary powers intended to enable him to play a fiduciary role (unless expressly or necessarily implied otherwise in the trust instrument or from the circumstances, as where the settler or beneficiary is a protector with power to protect his own selfish interests). The fiduciary powers are to enable the protector to safeguard the trust from various hazards, whether relating to the trustee (e.g. exorbitant charges, inadequate investment performance, unsatisfactory exercise of distributive functions visà-vis discretionary beneficiaries) or to beneficiaries (e.g. disputing what the trustee might do on their own if not protected by having the consent of a reliable trust protector) or to the trust arrangements (e.g. tax or other problems relating to the trust jurisdiction or to a corporate trustee s change of residence or ownership or opening of offices in a jurisdiction where pressure could be exerted). Underhill and Hayton continues on at [1.83] to discuss the personal power of a guardian/appointor of a trust: However, normally where the settler or 3 HOPGOODGANIM LAWYERS

4 a beneficiary is a protector the powers of such protector that affect the investment and managerial role of the trustee will be presumed fiduciary so far as concerns the exercise of a power to direct investments to be made by the trustees, because those powers will be presumed to be exercisable to promote the interest of the beneficiaries as a whole. In respect of the trustees role as discretionary distributors of income or capital to beneficiaries, it seems that there is good scope for argument that a protector s power to withhold consent to proposed distributions or to direct distributions is a personal power, especially in the case with a settler who is a protector. So an appointor is a fiduciary and typically has powers to join in the administration of the trust. Where the appointor has additional reserved powers, those powers are typically personal in nature. VALID EXERCISE OF A FIDUCIARY DISCRETION This background is important to understand when it comes to looking at the practical problems of attorneys stepping into the shoes of appointors. I must acknowledge The Hon Justice Paul Brereton AM RFD and his address to the National Family Law Conference 19 October 2010 for this succinct quote which I believe quite clearly makes the point necessary in relation to the exercise of fiduciary discretions. The High Court in Attorney General (Cth) v Breckler (1999) 197 CLR 83 (at[7]), approving a statement of Northrop J at first instance and subsequently adopted by Heerey J in Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd (1998) 79 FCR 469 (at 480): Where a trustee exercises a discretion, it may be impugned on a number of different bases such as that it was exercised in bad faith, arbitrarily, capriciously [In re Pauling s Settlement Trust [1964] Ch 303 at 333}, wantonly, irresponsibly [Lutheran Church of Australia South Australia District Inc v Farmers Co-operative Executives and Trustees Limited (1970) 121 CLR 628 at 639], mischievously or irrelevantly to any sensible expectation of the settler [In re Manisty s Settlement [1974] Ch 17], or without giving a real or genuine consideration to the exercise of the discretion [Karger v Paul [1984] VR 161, which includes a survey of the authorities]. The exercise of a discretion by trustees cannot of course be impugned upon the basis that their decision was unfair or unreasonable [see Dundee General Hospital s Board of Management v Walker [1952] 1 All ER 869] or unwise [Gisborne v Gisborne (1877) 2 App Cas 300 at 307]. Appointors, as fiduciaries, do not have to give reasons for their decisions in relation to the administration of the trust and therefore, provided appointors give real and genuine consideration to the exercise of their discretions, act in good faith and take into account relevant matters, it will be difficult to dispute the exercise of the appointor s discretion. AN APPOINTOR HAS POWERS, NOT TRUSTS Going back again to the essential elements of a trust we see the trustee has duties to deal with the trust property for the benefit of the beneficiaries i.e., the basis of the fiduciary relationship between trustee and beneficiaries. So a trust imposes obligations or creates a duty and the Court will compel the execution of a trust. This is distinct from a power which is an option and is discretionary. A Court cannot compel the execution of a power. (McPhail v Doulton [1971] AC 424 at 440-1,444 and 449) Therefore a Court cannot compel the appointor, who has a power to remove and appoint a trustee, to execute its power. However be aware that the Court has the power to remove a trustee if there is good reason. (Section 80 of the Trusts Act 1973 (Qld); section 70 of the Trustee Act 1925 (NSW); section 70 of the Trustee Act 1925 (ACT); section 48 of the Trustee Act 1958 (VIC); section 36 of the Trustee Act 1936 (SA); section 77 of the Trustees Act 1962 (WA); section 27 of The Trustee Act (NT) and section 32 of the Trustee Act 1898 (TAS)). Assessing capacity I do not intend to deal with capacity in any great detail as it is certainly a topic worthy of its own presentation. It is, however, a matter which is raised regularly by my clients. In discussing estate planning I am frequently asked, who decides if I m incapable? The determination of a persons capacity is ultimately a matter for the courts. However in our practice of law we need to ensure that we are aware of the various tests for assessing capacity and that we gather evidence to be presented to a court should a determination of capacity be necessary at any point. There are some great resources on capacity, and if you wish to do any further reading, have a look at the following capacity guidelines: Queensland Law Society, Queensland Handbook for Practitioners on Legal Capacity (2015). The Bar Council (UK), Client Incapacity (February 2014) 5, professional-practice-and-6/clientincapacity/. Client Capacity Committee of the Law Society of South Australia, Statement of Principles with Guidelines (2012), clientcapacityguidelines.pdf. Client Capacity Subcommittee, Client Capacity Guidelines: Civil and Family Law Matters (2009) Law Society of New South Wales, forsolicitors/professionalstandards/ affix/protocolsguidelines/ clientcapacityguidelines/index.htm. Law Society of New South Wales, When a client s capacity is in doubt: A practical guide for solicitors (2009), au/cs/groups/public/documents/ internetcontent/ pdf. Office of the Public Guardian, Guidelines for witnessing enduring documents (2014) Department of Justice and Attorney General, publicguardian.qld.gov.au/_data/assets/ pdf_file/0009/269307/opg-fact-sheet_ guidelines-for-witnessing-enduringdocuments.pdf. Queensland Law Society, I have doubts about my client s capacity What should I do? (2013) Queensland Law Society Ethics Centre, content/faq/doubts-client-capacity. Capacity is the ability of an adult to understand the nature and effect of a 4 HOPGOODGANIM LAWYERS

5 decision, make decisions freely and voluntarily and be able to communicate their decision. Guardianship and Administration Act 2000 (Qld) schedule 4 (dictionary) and Power of Attorney Act 1998 (Qld) schedule 3 (dictionary). Capacity is fluid and as such, an adult can have capacity in the morning but lack capacity by the afternoon or may have capacity for some decisions and not others. Capacity is an infinitely complex issue, however the basic principles are as follows: 1. Presumption of capacity All adults are presumed to have capacity to make all decisions unless and until there is evidence to rebut this presumption. Founded in common law, it has now been given statutory force. The most relevant for our purposes include the Guardianship and Administration Act 2000 (Qld) sections 7(a), 11, 34(1), Schedule 1, General Principle and Powers of Attorney Act 1998 (Qld) section 76 and Schedule 1 General Principle Capacity is time specific Capacity is fluid and changes over time. An adult may lack capacity temporarily, or on a short term or long term basis and regain capacity due to passing illness, changes in medication, assistance of new technology or learning new skills such as where an adult has been rehabilitated from an injury. [23] [24]. There is not a specific test for capacity for every decision in life. In the context of this paper the test relevant to an appointor is probably most akin to entry into a contract. The High Court in Gibbons v Wright said 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. It appears to us to be that mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained. As Hodson LJ remarked in [estate of Park], one cannot consider soundness of mind in the air, so to speak, but only in relation to the facts and the subject matter of the particular case [(1954) P112, 136]. Meaning, in order to determine the capacity of an appointor you would need to assess whether the appointor in question was capable of understanding the nature and effect of the exercise of the appointor s powers as set out in the trust deed. adult s benefit. Young J in Re C(TH) and the Protected Estates Act [1999] NSW SC 456 (3 May 1999) [10] [17] stated: One cannot be too paternalist. People have the right to manage their affairs, unless they fall below the level that is described by the Act. there is no room in the legislation for benign paternalism. A person is allowed to make whatever decisions she likes about her property, good or bad, with happy or disastrous effect, so long as she is capable. If you have concerns about an appointor s capacity, it is not our role as lawyers to determine capacity, but rather to gather the evidence; including obtaining a medical assessment at the time the decision is made. Ultimately, courts will determine capacity. Importantly, we as solicitors are not responsible for determining capacity. If we see signs that capacity may be in question, it is not our role to move to stop the decision being made, but rather to focus on collecting evidence which may be required by the court if a determination of capacity is necessary. The importance of the appointor s EPA We see from Belfield v Belfield [2012] NSWCA 416 that an attorney appointed under the relevant prescribed form has authority to act in the principal s place as appointor. As a result it is important to assess capacity each time a decision is made (see RE Griffith; Easter v Griffith (1995) 217 ALR (Kirby P)). 3. Capacity is domain specific There is no one test for capacity. The test for capacity varies depending on content or subject matter of the decision (Gibbons v Wright (1954) 91 CLR ). For example the test for capacity required to make a testamentary disposition sets the highest standard. The test is set out in Banks v Goodfellow (1870) LR 5QB and the modern adaptation of the test accepted in Queensland in Frizzo v Frizzo [2011] QSC 109 (12 May 2011) 4. Capacity is decision specific Within a domain or category there are a number of decisions required, some more complex than others. An appointor may have capacity to make simple decisions (e.g. consenting to additional beneficiaries) but not the capacity to make more complex decisions; for example, power to veto trustee discretion to distribute capital and income. 5. Capacity to decide must be distinguished from the decision itself Simply because a decision is perceived as unfair, irresponsible or wrong is not a relevant consideration in an assessment of capacity. Having capacity does not equate to making correct decisions or decisions for the This case has complex matrix of facts set out below: Madge Clarendon Belfield (the Deceased) died 16 July The Deceased had two sons, Richard born 1937 and Charles born The Deceased left a will, made in 1990 appointing Charles as her sole executor and beneficiary. No probate was granted as the Deceased had no assets at her date of death. Some 4.5 years out of time, Richard began proceedings on the basis that there was an asset that should be considered notional estate from which provision should be made for him. Richard obtained a limited grant to enable the proceedings to continue. 5 HOPGOODGANIM LAWYERS

6 Macready Associate Judge ultimately dismissed the application, however, allowed the out of time application and confirmed Richard was an eligible person. The primary judge dismissed the application because he was not satisfied there had been a prescribed transaction within the meaning of section 22 of the Family Provision Act 1982 (NSW). Despite having found there was no prescribed transaction, the primary judge considered whether an order for provision should be made and the quantum. The primary judge went on to say if there had been a finding of notational estate then it would be appropriate for an award of $300, provision for Richard. Richard appealed on the basis that the primary judge erred in his finding that there was no prescribed transaction. THE NOTIONAL ESTATE The property Kialami (Kialami) Armidale, New South Wales was owned as one-fifth by the Deceased, two fifths by Richard and two fifths by Charles, and the three carried on a partnership for many years until a dispute arose and the partnership was dissolved 30 June The partnership assets were divided such that Richard received a cash payment and Kialami was thereafter held three fifths by Charles and two fifths by the Deceased. On 20 November 1979, the following occurred: Sandon Nominees Pty Ltd as trustee for the CH Belfield Family Trust No 1 was established by deed; Sandon Nominees Pty Ltd as trustee for the CH Belfield Family Trust No 2 was established by deed; and Sandon Nominees Pty Ltd and Deceased executed a deed of appointment. The two trusts were in identical terms, save for their names. They were common family discretionary trusts, the beneficiaries being Charles and his family. The deed of appointment was an agreement that Sandon Nominees would act in accordance with the directions of the Deceased in regards to certain matters connected with the operation of the CH Belfield Family Trust No 1. In March 1979, the Deceased and Charles transferred Kialami to Kialami Pty Ltd. There were 52 shares in Kialami Pty Ltd issued as follows: 20 shares to Sandon Nominees Pty Ltd as trustee for the CH Belfield Family Trust No 1; 30 shares to Sandon Nominees Pty Ltd as trustee for the CH Belfield Family Trust No 2; 1 share to the Deceased beneficially; and 1 share to Charles beneficially. On 1 May 2007, Sandon Nominees Pty Ltd was removed and trustee and replaced by Taloye Holdings Pty Ltd as trustee for the CH Belfield Family Trust No 1. The asset that Richard sought as notional estate was the 20 shares at the time of the hearing held by Taloye Holdings Pty Ltd as trustee for CH Belfield Family Trust No 1. Richard argued that the Deceased, pursuant to the deed of appointment, had the power to deal with the shares, including a transfer of the beneficial interest to herself or Richard, and that her failure to give any such direction fell within the definition of a prescribed transaction. At the time of the initial trial, the 40% interest in Kialami Pty Ltd which Richard contended the Deceased had power to deal with, was valued at an estimated $1,660,400. The operative part of the deed of appointment was as follows: 1. The trustee shall and does hereby irrevocably covenant and agree with the Appointor and the legal personal representative of the Appointor that it shall act in relation to any one or more of the matters set forth in the following paragraphs at this Clause and that it shall execute and deliver such deed, documents and/ or notices relating to any such one or more of the said matters in accordance with any written notice(s) (given by the Appointor or which the Trustee may require the Appointor to give) and which may be served or posted by prepaid post upon or to the Trustee at its registered office signed by Madge Clarendon Belfield, viz: a. that the Trustee shall retire as a trustee from the CH Belfield Family Trust No 1; b. that the Trustee prior to its retirement shall appointment such person or persons and/or corporation or corporations to be the Trustee or Trustees for the time being of the said CH Belfield Family Trust No 1 as Madge Clarendon Belfield shall nominate; c. that the Trustee shall exercise the rights conferred upon it in relation to the appointment of new Trustees under the provisions of the Trustee Act 1925 as amended in such manner as Madge Clarendon Belfield shall direct; and d. that the Trustee shall exercise any discretions and powers conferred upon it under the said Settlement in such manner as Madge Clarendon Belfield shall direct. It was found that from the end of 2000, the Deceased suffered from severe dementia and consequently from that time lacked the capacity to exercise her powers under the deed of appointment. On 20 April 1995, the Deceased had executed an enduring power of attorney appointing Charles as her sole attorney. The enduring power of attorney was in the form prescribed by schedule 7 of the Conveyancing Act (NSW). Section 163B of that Act set out the power conferred as follows (note: this section was repealed by the Powers of Attorney Act 2003): 163B Power conferred by prescribed form of instrument 1. Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. 2. The authority confirmed by an instrument referred to in subsection (1) does not include: a. authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument; or b. unless it is expressly conferred by the instrument authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument. PRIMARY JUDGE S FINDINGS Charles advanced three submissions, 6 HOPGOODGANIM LAWYERS

7 and the following two were accepted by the trial judge: 1. the Deceased became incapable by reason of her dementia more than three years before her death and therefore she ceased to be entitled to exercise the power of appointment; 2. it is no answer to the Deceased s incapacity to rely on the existence of the enduring power of attorney to Charles as any use of the power of attorney would be exercising the power of a trustee contrary to section 163B(2)(a) of the Conveyancing Act 1919 (NSW). Charles second submission was accepted by the trial judge because he found that In effect, the Deceased had the power to exercise the functions in the trust deed. (at [102]) and that any exercise of those powers by Charles would have been contrary to section 163B(2)(a) of the Conveyancing Act COURT OF APPEAL Campbell JA, with whom Sackville AJA agreed, stated: At [50] paragraph The question for decision in the appeal is whether the legal right of the Deceased under the deed of appointment to require the trustee to deal with the trust assets in a particular way counts as authority to act as a trustee within the meaning of section 163B(2)(a). In my view it does not. Campbell JA then went on to set out a detailed history of section 163B in an attempt to find the meaning of the words as a trustee and ultimately set out four reasons for his view: The first reason is that the Deed of Appointment was not a deed of trust capable of conferring power as a trustee on the Deceased, for several reasons: (a) it was entitled deed of appointment ; (b) it did not purport to create a trust; (c) it did not appoint a trustee; (d) there was no trust property; (e) while it conferred powers on the Deceased, it did not impose any duties; (f) in clause 1, it referred to the CH Belfield Family Trust No 1 as the settlement, recognised that Sandon Nominees Pty Ltd was the trustee of that trust. and stated in clause 1 that the trustee would act in accordance with the directions of Mrs Belfield the Deed of Appointment trust was not capable of conferring or imposing on Mrs Belfield any power, authority, duty or function as a trustee. The second reason that the Deed of Appointment did not confer or impose on the Deceased any power, authority, duty or function as a trustee is that the powers given to the Deceased by the deed of appointment were discretionary, not mandatory. In the case of a trust, the trustee must act; a trust in this sense is imperative. By contrast, Mrs Belfield could choose whether or not to exercise the powers given to her by the Deed of Appointment. This indicates that the Deed of Appointment did not confer or impose on the Deceased any power, authority, duty or function as a trustee; The third reason that the Deed of Appointment did not confer or impose on the Deceased any power, authority, duty or function as a trustee was that, under clause 5 of the Deed of Appointment, Mrs Belfield could release all her powers. Had she been a trustee, that would have left the trust without a trustee. This was a strong indication that the Deed of Appointment did not impose any power, authority, duty or function on the Deceased as a trustee. The fourth reason is that the Deed of Appointment by clause 1(d) conferred on Mrs Belfield the power to direct the trustee to: exercise any discretions or powers conferred upon it under the said settlement in such manner as Madge Clarendon Belfield shall direct. The Deed of Appointment thus on its face distinguished between, on the one hand, the powers conferred on the trustee by the trust deed and, on the other hand, the powers conferred on Mrs Belfield by the Deed of Appointment. YOUNG AJA Interestingly, he made mention of his feeling that the deed of appointment may be invalid, however, this could not be considered as neither party raised this in argument either in the initial trial or in the appeal. Young AJA agreed with the conclusion reached by Campbell JA, however, set out his own reasons. Young AJA approached his reasons by posing the following questions: 1. what materials should I consider when construing section 163B? 2. what do the words as a trustee mean in that section? 3. does the failure to exercise the testator s authority conferred by the deed of appointment result in a prescribed transaction? He felt it did not help to examine a detailed history and extrinsic material which Campbell JA had considered in his reasons. After a short analysis of the words as a trustee Young AJA came to the conclusion that [115, 116] In the long run, this analysis does not seem to matter as whatever the meaning of the expression power as a trustee means what the Deceased omitted to do had virtually no connection with the powers or functions of a trustee. Thus empowering an attorney to give or omit to give direction to a trustee could not in any sense of the phrase be referring to a power or function as a trustee. The powers in the deed of appointment in this case were found not to contravene section 163B and therefore the powers of appointor are within the authority of an attorney conferred under a prescribed enduring power of attorney document and powers therefore capable of being exercised by an attorney. What should be included in the EPA of an appointor? In order to avoid the issues argued in the above case, it is important that the appointor not only has an EPA but that it includes express provisions dealing with: 1. the authority of the attorney to act as appointor; 2. authority to confer benefits on the attorney; and 3. authority to enter conflict transactions. 7 HOPGOODGANIM LAWYERS

8 EXPRESS AUTHORITY TO ACT AS APPOINTOR Although, generally speaking, an EPA in the prescribed form provides without any express provision authority for an attorney to act as appointor in place of the principal (see re Bellfield v Bellfield) it will ultimately depend upon the facts of each case. Surely there can be no argument that it is far better to deal with this authority as an express provision. It focuses the principal s mind on this issue and requires the principal to give due consideration to how their EPA may be used at some point in the future. It is important at the time of preparing the EPA to give due consideration to how the EPA might be used as the starting point in a search to determine the principal s intention in the delegation of authority to the attorney is the EPA document itself. This is the reason for the statutory requirement for an EPA to be in writing. Despite the bland forms prescribed by the various State and Territory statutes, which do not and have not historically inspired the users to add any tailored or individualised provisions (preferring instead the tick a box method of completion), the importance of tailoring and including additional express provisions in these documents cannot be overstated for all of the reasons set out in this paper. Hopefully, this paper will give you some inspiration and ideas on how to make the otherwise boring prescribed forms a little more colourful and, most importantly, a little more useful when they are required to be acted upon. An express authority provision in an EPA need not be complicated, however, should be consistent with the power as it is given in the trust deed. An example of an express authority provision is To remove any doubt, the powers of my attorney extend to exercising all and any rights, powers, privileges and discretions held, exercisable and enjoyed by me in relation to XYZ family trust. It is best, in my opinion, to keep it simple, remembering that it is these words which will be scrutinised to determine the principal s intention if there is a dispute. The case of Taheri v Vitek [2014] NSWCA 209 is an example of the intersection of the doctrines of actual authority, apparent (ostensible) authority and fiduciary duties and a great reminder of the importance of the enduring power of attorney document. The facts are set out below: There were two appeals heard together. It is the guarantee appeal which is of interest to us in the context of this paper. Peter and Shonhana Vitek were vendors and Estate Homes Pty Ltd was the purchaser under a contract of sale of land of a property in Redfern, New South Wales. The contract was dated 15 September Mrs Veeda Taheri and her husband, Mr Siamac Taheri, were named in the contract as guarantors of the purchaser, Estate Homes Pty Ltd. Mrs Taheri was not at any time a director or shareholder of Estate Homes Pty Ltd. The company is owned and run solely by Mr Taheri. Mrs Taheri executed a prescribed form of Enduring Power of Attorney (EPA) pursuant to the Conveyancing Act 1919 (NSW) dated 24 July 2001 appointing Mr Taheri as her sole attorney. That EPA was subsequently registered on 16 August Clause 2 of the relevant prescribed form was capable of being removed however Mrs Taheri had left the clause in. The clause reads: 2. In the exercise of the authority conferred on him by section 163B of the Conveyancing Act 1919 my Attorney is authorized to execute an assurance or other document, or do any other act, whereby a benefit is conferred on him. The relevant clauses in the contract of sale are special condition 51 and, in particular, subclauses 51.3 and These subclauses provide that the guarantors guaranteed the obligations of the purchaser under the contract and indemnified the vendor against any claim, damage, cost etc. incurred by the vendor arising from the purchaser s breach or default under the contract. At the conclusion of special condition 51 there was an attestation clause which provided space for signatures by each Mr and Mrs Taheri and each signature to be witnessed. It appeared from the face of the contract that: Mr Taheri had signed as guarantor and Mrs Taheri had witnessed his signature; and Mrs Taheri had signed a guarantor and it was witnessed by the signature of the witness of indecipherable. Mr Taheri had signed Mrs Taheri s name on the guarantee attestation clause in both places where Mrs Taheri s signature appeared. There was an initial hearing before Barrett J during which Mrs Taheri reached a settlement with the vendors and consent orders were made. That hearing continued and orders were made by Barrett J against Estate Homes Pty Ltd and Mr Taheri. As a result, Estate Homes Pty Ltd was deregistered and Mr Taheri became a bankrupt. Consequently the vendors did not recover any damages. The vendors commenced further proceedings against Mrs Taheri, Mr Taheri, Estate Homes Pty Ltd and Mr O Donnell. However, Mr Taheri, Estate Homes Pty Ltd and Mr O Donnell had no part in the further hearing. The Chief Judge in equity ordered that the consent orders made by Barrett J between the vendors and Mrs Taheri be set aside and directions were given for a further hearing. At [8] the principal issue in the further hearing of the vendor/purchaser proceedings was whether the form of guarantee contained in the contract, in which Mrs Taheri was named as a guarantor, was binding on Mrs Taheri. It was accepted that Mrs Taheri had not in fact signed her name in the formal guarantee and that her husband had signed her name. The question was whether that signature was authorized by a power of attorney that had previously been granted by Mrs Taheri to her husband. In the further hearing Rein J concluded that Mrs Taheri was bound by the guarantee and ordered that she pay the vendor s damages in the sum of $1,191, (including interest). Mrs Taheri appealed the decision of Rein J and the Judges on appeal were Emmett JA, Lemming JA and Bathurst CJ. Emmett JA The issue to be determined was whether Rein J erred at [12] in concluding that the signature of Mrs Taheri s name 8 HOPGOODGANIM LAWYERS

9 on the guarantee by Mr Taheri was authorized by the Power of Attorney; He made the following comments which, whilst interesting, did not go towards determining the case and Emmett JA ultimately agreed with the reasons of Lemming JA in both of the appeals. At [33] an argument had been foreshadowed on behalf of Mr Taheri that Mr Taheri had not used the power of attorney when he purported to sign the guarantee for and in the name of Mrs Taheri. That must be construed as an argument that, when we wrote Mrs Taheri s name as the purported signature on her behalf of the guarantee, Mr Taheri was not intending to act under the Power of Attorney. If that were the case, it may have been arguable that the guarantee was not binding on Mrs Taheri. However, that contention was not apparently advanced before Rein J and it was not advanced in this Court. At [35] in considering the scope of the authority granted by a power of attorney, it is important to distinguish between the authority as between the attorney and the principal and the authority as between the Attorney and third party. That is to say, while the purported exercise of the power may be beyond the authority granted, as between the attorney and principal, the exercise may nevertheless be binding on the principal. Where a purported exercise of the power is beyond authority, the attorney will have a liability to the principal to indemnify the principal for any obligation incurred in the name of the principal by the attorney that is outside of the scope of the authority. Nevertheless, the third party will be entitled to enforce the obligation against the principal. LEMMING JA (WITH WHOM BATHURST CJ AGREED) Similar to Emmett JA he noted at [107] neither at trial nor on appeal was an argument made on the basis that Mr Taheri did not place his signature on the guarantee but instead wrote his wife s name as if it were her signature. At [108] the only question which arose was whether the instrument conferred power upon the attorney to execute a guarantee, securing the performance of its obligations of Estate Homes, a company of which Mrs Taheri was neither a director nor member. There is authority adopting a narrow interpretation of section 163B of the Conveyancing Act 1919 (NSW). The narrow approach was espoused in reasons by White J in Perochinsky v Kirschner [2013] NSWSC 400;16 BPR 31, 481. This narrow approach departed from previous authority of Hammerschlag J in Spina v Permanent Custodians Ltd [2008] NSWSC 561;13 BPR 25, 463. Lemming JA sets out a detailed review of the Perochinsky v Kirschner approach and his reasons for preferring a broader construction from paragraphs 118 to 131. At [130] Accordingly, I respectfully agree with the views expressed by Hammerschlag J and Rein J on the construction of section 163B. The words on behalf of are not words of restriction which cut down the ordinary meaning of anything. An instrument complying with section 163B may as a matter of law (and very often will) empower an attorney to do anything the principal may lawfully authorize an attorney to do, even if there is a benefit to the attorney and no benefit to the principal. By the registered EPA, Mr Taheri had given her husband actual authority to enter into the guarantee, even where the guarantee was for the benefit of Mr Taheri and a company of which he was the sole director and member. Although an attorney is a fiduciary and consequentially is prohibited from obtaining a profit or benefit from actions taken as an attorney, in this case the principal had, inadvertently or not, given express power for the attorney to confer benefits on himself simply by not ruling through and deleting clause 2 of the relevant prescribed form. Finally, the doctrine of apparent authority provides security for third parties, such as the vendors in this case, in entering transactions with agents the doctrine of apparent authority means that a principal will be bound by the actions of an agent if the action is within the agent s apparent authority, even if it is later found that the action is outside of the agents actual authority. For example, if it had been found in this case that Mr Taheri had acted without actual authority in signing Mrs Taheri s name on the guarantee, Mrs Taheri would nevertheless be bound by the guarantee, but would instead have had an action against Mr Taheri to indemnify her for the damages she was ordered to pay the vendors. In Day v Day [2013] EWCA CIiv280; [2014] CA 114 at [26], Sir Terrence Etherton C said so far as a third party is concerned, a general power of attorney may well close the solicitor with apparent authority to effect a transaction and so make the transaction binding on the principal even though the transaction was outside of the solicitor s actual authority.. Apparent or ostensible authority of the agent may make the transaction binding on the principal even where it does not coincide with the actual intention of the principal and the express instructions given to the agent. AUTHORITY TO CONFER BENEFITS ON ATTORNEYS OR THIRD PARTIES We have discussed the fiduciary relationship between a principal and attorney. It is this fiduciary relationship that has led the Courts to find that an attorney has no authority to personally benefit from use of a power of attorney except where the power of attorney expressly authorises such a benefit. This general rule extends to the attorney providing the benefits to associates or family members. Chow v Cheung [2008] NSWSC 843; BC at [28]. This Common Law position has been replicated in statue in New South Wales and the ACT in substantially the same terms. Section 12(1) of the Powers of Attorney Act 2003 (NSW) states the prescribed power of attorney does not authorities an attorney to execute an assurance or other document or to do any other act as a result of which a benefit would be conferred on the attorney unless the instrument creating the power expressly authorizes the conferral of the benefit. That section goes on to include a note as follows: This subsection restates a rule of the general rule. Accordingly, whether the referral of a benefit on a attorney is expressly authorized by a prescribed power of attorney is to be determined by reference to the general principals 9 HOPGOODGANIM LAWYERS

10 and rules of the common law and equity concerning the interpretation of powers of attorney. Given the note which appears immediately after the subsection, it begs the question why it was necessary to restate the general law rule in the Act but perhaps it was restated to avoid any doubt. The current form prescribed under the Powers of Attorney Act (2003) (NSW) requires the principal to add express powers, which is the complete reverse approach from the previously prescribed form under the Conveyancing Act 1919 (NSW) which included the express power to benefit the attorney at clause 2 and instead required the principal to delete or rule through that clause. It was this previous prescribed form which tripped up Mrs Taheri. If you need a broad express power allowing an attorney to benefit, look no further than the prescribed form in the Taheri v Vitek in the exercise of the authority conferred on him my attorney is authorised to execute an assurance or other document, or do any other act whereby a benefit is conferred on him. The rational and logical part of me believes that if you chose your attorneys wisely, then at least theoretically there is no issue with the inclusion of the express power to benefit the attorney. However, the cynical lawyer in me warns against the generic inclusion of an express power to benefit the attorney, and that a great deal more consideration is needed before giving an attorney such power. It comes back again to the principal giving consideration to how their EPA may be used in the future and tailoring appropriate provisions. The problem proposed in the outline is: Appointors EPA; Attorney as beneficiary; Attorney has not traditionally benefited from distribution. There may be perfectly sound reasons why this scenario arises and conversely this scenario may arise where there is an attorney behaving badly. For this reason, if the principal considers that this scenario may genuinely arise then perhaps rather than a generic authority to benefit the attorney you could draft an authority to benefit the attorney in certain prescribed situations and express that in the EPA document by way of providing examples of the situations. AUTHORITY TO ENTER CONFLICT TRANSACTIONS Legislation in Queensland (s73 Powers of Attorney Act 1998), ACT (s42 Powers of Attorney Act 2006), Tasmania (s32ac Powers of Attorney Act 2000) and Victoria (s64 Powers of Attorney Act 2014) include a duty on the attorney not to enter conflict transactions except if authorised. (a) the duty of an attorney towards the principal; and (b) A conflict transaction is a transaction in which there may be conflict, or which results in conflict, between- eitheri. the interests of the attorney, or a relation, business associate or close friend of the attorney; or ii. another duty of the attorney. 73(2) Powers of Attorney Act 1998 (Qld) Clearly this statutory duty arises and is consistent with the general law on fiduciary duties of a principal and agent relationship. It is interesting to note the subtle differences in the drafting of the legislation around the country. The new Victorian legislation due to come into effect on 1 September 2015 is a duty not to enter a conflict transaction, and carves out certain exceptions which are not to be considered conflict transactions. The Victorian legislation does not include an exception where the principal has authorised the transaction. The Tasmanian and ACT Acts include exceptions to the duty to avoid conflict transactions where the power of attorney document specifically authorises the attorney to enter the transaction, or the type of transaction, despite any conflict of interest. The Queensland Act allows conflict transaction to be entered only if the principal has authorised the specific transaction, conflict transaction or the type of transaction, but unlike the Tasmanian and ACT Acts, it does not specific that the authorisation be contained in the power of attorney document. Well meaning attorneys can and will get caught out by the duty to avoid conflict transactions. This will typically be once the principal has lost their capacity and can no longer authorise or ratify a conflict transaction which has been entered by an attorney and the remedy for a breach of this duty is compensation (s106 Powers of Attorney Act 1998 (Qld); s50 Powers of Attorney Act 2006 (ACT). There are increasing numbers of compensation cases be brought in Queensland and not all because attorneys have intentionally breached their duty. See Ede v Ede [2006] QSC 378 where the attorney (being the son of the principal) sold a property of the principal s to his daughter, ultimately the Court found, under value and ordered the attorney to pay compensation. But in this case the attorney has it appeared gone to some lengths to ensure he was not breaching his duties as attorney and had obtained a market valuation of the property and obtained legal advice. Again the cynical lawyer in me warns against the blanket authorisation of conflict transactions and suggests that it may be better to have the principal give consideration to how the EPA might need to be used and if there are situations which maybe conflict transaction then give express authorisation for a type of transaction or give an example. Remember that the relevant court or tribunal of the State or Territory can authorise the transaction if the EPA does not authorise the transaction. A common example is where a principal appoints a professional attorney and authorises the attorney to be paid their normal professional fees then it will best for the avoidance of doubt to include an express authority to allow the attorney to employ themselves or their firm to act on behalf of the principal and to allow the attorney to pay the invoices for such work from the principal s funds. Again coming back to the problem proposed in the outline, if the principal considers it necessary or wise that the attorney have the power to start distributing income or capital to beneficiaries who haven t historically benefited then include such an authorisation and conversely if the 10 HOPGOODGANIM LAWYERS

11 principal cannot think of one scenario where the attorney would need to have that power then set that out in the EPA document. Role of the trust deed The trust deed (or other governing document) is the most important document, it should always be the starting point and you need to review it, review it and review it again. It does not matter how fantastic the appointors EPA is, if the trust deed has not been reviewed and the EPA drafted is not consistent with the terms of the appointors power the EPA may well be of little to no effect or worse could cause confusion and dispute. Remember that the appointor is a creation of the trust deed and therefore every trust needs to be reviewed to discover who the appointor is and what powers they have. Some trust deeds might also provide for succession of appointor within the terms of the deed, so it may not be necessary to restate them in the appointors EPA. In fact there may be reasons why the succession of appointor has been dealt with in the trust deed. It may be important in these situations to include a limitation on the attorneys power so the attorney cannot act on behalf of the principal in respect of their powers as appointor. If the deed does not deal with succession of the appointor on incapacity adequately or in reviewing the trust deed you pick up an inconsistency you should (provided the trust deeds gives power) amend the deed. By inconsistency I mean for example dad was the original appointor of the trust, there was no formal estate administration on dad s death and the shares in the trustee company were transferred to the son, who since dad s death (some 28 years ago now!) has operated the trust which owns the family business successfully. Problem for son is that Dad is still named as appointor and therefore son cannot appoint his attorney as replacement appointor in his EPA. A common problem with many old trust deeds is they deal with succession of appointor upon death but do not contemplate succession on incapacity. In these cases it s best to update the trust deed for the avoidance of any doubt. In deciding whether or not to hardwire successor appointors in the trust deed or whether to leave it to the attorney of the appointor it is important to make one distinction. Typically when you hardwire successor appointor provisions in the trust deed you are appointing a replacement, that is the alternate appointor becomes the appointor in place of the original appointor should they lose their capacity. This is not a principal/attorney relationship and if the original appointor was incapacitated immediately before their death they will have already been replaced and therefore no further action is required on their death. This is to be distinguished from an attorney who does not replace the appointor, is only acting on behalf of the incapacitated appointor during periods of incapacity, ultimately when the appointor dies the attorney can no longer act and you will need to look to the trust deed to see how an appointor is replaced upon death. WHAT IF THERE IS NO APPOINTOR? As discussed at the outset of this paper the appointor is not an essential element of a trust and you will come across deeds which do not have an appointor. Without an appointor no one has the power to sack the trustee and appointor a new trustee, however the court will always have the power (in certain circumstances) to remove a trustee and appoint a new trustee. In the absence of an appointor the trust deed may give the power to the trustee to nominate a replacement in the event that the trustee resigned, became incapacitated or died. The last resort if the trust deed does not prescribe a method for the appointment of a new trustee you look to the legislation in the relevant jurisdiction (the relevant sections for each State and Territory Act are set out on pages 3 and 4) to appoint a new trustee. An example where a trust deed may not have appointor is where a family trust owns and operates a family business. Rather than having an appointor who has ultimate control, the family members have shares in the trustee company and by a shareholders agreement the succession of control of the family trust is determined. MULTIPLE APPOINTORS Some will consider that having multiple appointors is a better approach, perhaps because the idea of leaving ultimate control of the trust in the hands of one is too risky and certainly where it is family trust commonly you will see husband and wife as joint appointors. The main issue which arises in the context of incapacity where there are multiple appointors is: does the trust deed dictate the decision making process and delegation of power? Are they truly joint appointors in that the power must only be exercised by unanimous consent and they cannot separately delegate their power, or can the power be exercised by a decision of the majority and each can delegate their power? Rather than hard wiring the decision making process and delegation of power in the trust deed particular where you might, post mum and dad s deaths, be left with 4 adult children as appointors there are many in the industry that have moved away from individual/multiple appointors and now recommend a corporate appointor. CORPORATE APPOINTORS At common law there is no prohibition against a company holding the position of appointor, however the trust deed should be reviewed to ensure it does not contain either a requirement that the appointor be a natural person or a prohibition against a company holding the position. It is the perpetual nature of a company which makes a company more appealing than individuals in the position of appointor. Having a company as appointor removes all the issues regarding succession of individual appointors as they lose capacity and die. Or does it? The answer is no, it does not remove all those issues, it simply moves them. Instead of dealing with succession of individual appointors on incapacity and death you will need to deal with directorship and succession of shares in the corporate appointor. To illustrate this point from a practical perspective you are in no better position if you have a corporate appointor with a sole director/ shareholder who loses their capacity than if you have an individual sole appointor who loses their capacity. Having a corporate appointor does however remove the necessity for a trust deed to dictate the decision making process and delegation of power which is required if you have multiple 11 HOPGOODGANIM LAWYERS

12 appointors. The decision making process and succession of shareholding will be dictated by the company s constitution and possibly a shareholders agreement. A corporate appointor with a tailored constitution and shareholders agreement is one way of dealing with family trusts where you have multiple members of the family controlling and operating the trust. It then frees the individual family members from having to deal with their position as appointor in their EPA. In these situations there may already be a corporate trustee with a tailored constitution and shareholders agreement and perhaps it will unnecessarily complicate the situation to add a corporate appointor and a further tailored constitution and shareholders agreement. Perhaps a more streamlined approach is to do away with the appointor position altogether and deal with all the control and succession issues in the trustee company constitution and shareholders agreement. Denis Barlin, Barrister in his paper Asset Protection, Trusts and the use of Corporate Appointors (presented at the Second Annual Asset Protection Conference for Television Education Network, October 2013) warns of the complications with could arise from a shareholders agreement of a corporate appointor. Denis raises the issue of enforcement and at paragraph 8.8 gives the following example if a shareholder of a corporate appointor breaches a shareholders agreement, the only parties that may have standing are the other parties to such an agreement (e.g. the other shareholders) and (prima facie) not the beneficiaries of the trust estate. This can be a problem because the fiduciary position held by the appointor requires the appointor to exercise its powers in the best interests of the beneficiaries whereas the shareholders agreement will govern the relationship between the shareholders of the corporate appointor. At paragraphs 8.10 and 8.12 Denis makes the following further comments about the complications of shareholders agreements of corporate appointors: Further, an agreement pursuant to which (for example) the shareholders of a corporate appointor agrees (i.e. fetters its discretions) may be considered improper in the eyes of equity. It may be that an equity may consider that if a settler of a trust estate intended that certain powers be fettered, the settler would have intended for that in the trust instrument. Further, there is a question as to whether the fettering of a corporate appointor s decision making powers (and indeed, in the event that there are reasons for decisions which may therefore be challenged) may be challenged as the best interest of the trust estate are not being pursued. Consequences of getting it wrong If the appointor has not planned for their incapacity i.e., does not have an EPA, or has an EPA which does not provide the necessary express powers or guidance as to their intentions with respect to the position of appointor, what are the consequences? Any number of scenario s all are going to be costly, time consuming and probably end some relationships along the way. If the appointor has no EPA and no longer has the capacity to make one then it may be that for the time being there is no one with the power to act as appointor, which does not of itself effect the day to day operation of the trust. It is only problematic when the incapacitated appointor is also the sole trustee or the sole director of the trustee company. If the appointor has an EPA but it does not contain the express powers discussed above then you need only look at the cases discussed above to see it gets murky. On one hand you will have attorneys who act as appointor on behalf of the principal, enter conflict transactions, make decisions which provide benefits to the attorney or their family members blissfully unaware that they are acting without power and could be personally liable. The attorney may be a well-meaning family member who simply does not understand and has not educated themselves on the duties and obligations of an attorney. This approach will of course continue unchecked until a beneficiary becomes disgruntled. 12 HOPGOODGANIM LAWYERS

13 On the other hand you may have attorneys who are aware of their duties and obligations as attorney and understanding perhaps that they do not have the express powers necessary to benefit themselves or enter conflict transactions so simply do nothing. The end result of both of these scenarios is the trust becomes dysfunctional and the parties turn to lawyers and ultimately a Court or Tribunal to resolve the matter. An attorney need not wait until the parties are entrenched in dispute to apply to the Court or Tribunal, an attorney may apply to the Court or Tribunal for directions or to approve certain transactions which are not otherwise expressly authorised in the EPA. Here is a table of some statutory powers of the Courts and Tribunals in each State and Territory (this list is by no means exhaustive). Queensland New South Wales Australian Capital Territory Victoria Compensation for failure to comply s106 Powers of Attorney Act 1998 Order removing attorney or changing and revoking document s116 Powers of Attorney Act 1998 Advice, directions and recommendations s118 Powers of Attorney Act 1998 Board to make orders in respect of enduring power of attorney includes power to remove attorney and revoke enduring power document and any others the Board thinks fit. s33 Powers of Attorney Act Advice or directions as to enduring power of attorney s35 Powers of Attorney Act 2000 Interested persons may apply for review includes power to remove attorney and such orders as the Court or Tribunal thinks fit s36 Powers of Attorney Act 2003 Powers of the Supreme Court in respect of enduring powers; revoking or varying enduring power of attorney and appointing substitute donee s11(1)(c)powers of Attorney and Agency Act 1984 Powers of Supreme Court in respect of enduring powers; advice or directions as to the exercise of power s11(2)(b) Powers of Attorney and Agency Act 1984 Compensation for failure to comply with Act s50 Powers of Attorney Act 2006 Protection if Court or ACAT gives an order or direction for exercise of power s71 Powers of Attorney Act 2006 Fails to act with reasonable diligence liable for loss occasioned by the failure s107 Guardianship and Administration Act 1990 State Administrative Tribunal may intervene on application and revoke vary or appoint substitute done s109(1)(c) Guardianship and Administration Act 1990 State Administrative Tribunal may intervene on application and give directions as to the exercise of the power or construction s109(2)(b) Guardianship and Administration Act 1990 Compensation for acts of attorney s77 Powers of Attorney Act 2014 Nature of VCAT orders includes power to remove attorney and revoke or alter enduring power of attorney s120 Powers of Attorney Act 2014 Advisory opinions s121 Powers of Attorney Act 2014 Protection if acting on advice, direction or order of Court or VCAT s76 Powers of Attorney Act 2014 Enduring powers powers of the court; revoking or varying the terms of the instrument creating the enduring power in such manner as the Court thinks fit s15(2)(c) Powers of Attorney Act Enduring powers powers of the court; The Court has jurisdiction to make an order sought in an application under this section. s15(3) Powers of Attorney Act 13 HOPGOODGANIM LAWYERS

14 Ultimately if an attorney enters a transaction which they do not have power to enter the Court or Tribunal has power to order compensation be paid personally by the attorney to the principal or their deceased estate. There is no shortage of cases in the Queensland Civil and Administrative Tribunal for breach of duties by an attorney resulting in the Tribunal ordering compensation is paid personally by the attorney to the principal or their estate. If we don t start planning for incapacity this number is only going to increase. You cannot always avoid the problem because people will create structures after estate planning documents are in place and will not update estate planning documents. But at the point in time you are involved do everything in your power to avoid the problem in the beginning, through a well documented estate plan which takes into account a review of the trust deeds in existence and preparation of an exciting and inspired enduring power of attorney document. The contents of this paper are not intended to be a complete statement of the law on any subject and should not be used as a substitute for legal advice in specific fact situations. HopgoodGanim cannot accept any liability or responsibility for loss occurring as a result of anyone acting or refraining from acting in reliance on any material contained in this paper. 14 HOPGOODGANIM LAWYERS

15 Contact Laura Hanrahan Senior Associate P E l.hanrahan@hopgoodganim.com.au About HopgoodGanim Lawyers HopgoodGanim Lawyers is a full service commercial law firm. Our firm has 42 partners and more than 270 staff. We operate nationally and internationally with a focus on Asia from our two key locations of Brisbane and Perth. We offer highly skilled and agile legal teams across key sectors and areas of practice. In all of our areas of speciality, our lawyers are recognised by legal publications as leaders in their fields. The service we provide to our clients is second to none. We deliver a consistently high level of client service and our commitment to this was recognised when HopgoodGanim was named the Best Law Firm in Australia ($50m - $200m revenue category) at the 2015 Financial Review Client Choice Awards. We were also named the Best Professional Services Firm in Australia ($50m - $200m revenue) in the same year and the Best Queensland Professional Services Firm in Legal Areas of Practice CORPORATE AND COMMERCIAL LAW Banking and Finance Capital Markets and M&A Commercial Property Corporate and Commercial Advisory Competition and Trade Practices Construction Employment Health and Safety Information Technology and Data Protection Insurance Insolvency Intellectual Property Litigation and Dispute Resolution Manufactured Homes Native Title Planning and Environment Resources and Energy Taxation PERSONAL AND FAMILY LAW Estate Planning Estate Litigation Family and Relationship Law Taxation Industry Sector Focus Agribusiness and Food Banking and Financial Services Government Hospitality, Entertainment, Sport Private Enterprise Real Estate Resources, Energy, Projects Technology, Media, Communications They re prompt, have real expertise, offer practical advice and are cost conscious. (an anonymous Client Choice Awards survey respondent, 2015) 15 HOPGOODGANIM LAWYERS