POWERS BY DEED

In general, a person cannot execute a deed on behalf of another unless authorised by deed. ^1. For this reason, powers of attorney are typically made by deed.^2.

Common law requirements for creation of a deed by an individual are affected by legislation in all jurisdictions in Australia:

• Conveyancing Act 1919 (NSW) s 38 (the operation of which is unaffected by the Powers of Attorney Act 2003 (NSW): s 7(2) )
• Conveyancing Act 1919 (ACT) s 38
• Property Law Act 1958 (Vic) ss 73 , 73A and 73B
• Law of Property Act 2000 (NT) ss 46 , 47 and 49
• Property Law Act 1974 (Qld) ss 44 , 45 and 47
• Law of Property Act 1936 (SA) ss 34(2) , 41 and 41AA
• Property Law Act 1969 (WA) ss 9 and 12
• Conveyancing and Law of Property Act 1884 (Tas) s 63 . ^3.
  
  

A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subs (1) (without using a common seal) or subs (2) (using a common seal) of s 127 of the Corporations Act 2001 (Cth): see s 127(3) . This section does not limit the ways in which a company may execute a document (including a deed): s 127(4).

1. Powell v London and Provincial Bank [1893] 2 Ch 555 at 563 ; Butler v Duckett (1891) 17 VLR 439 . This rule has been abrogated by statute in Victoria, so far as it relates to authority to deliver a deed on behalf of another: see Property Law Act 1958 (Vic) s 73B . In Queensland an attorney acting under a power of attorney given under hand may execute a document for which sealing is required or used, with the attorney's own seal: see Powers of Attorney Act 1998 (Qld) s 69(1)(a) .

2. In some jurisdictions legislation expressly provides that a power of attorney made in accordance with a statutory provision or in a statutory form is as effectual as if made by deed: Powers of Attorney Act 1956 (ACT) s 3AD (Forms 1 and 2 and see Prr 30.43 and 30.62 ); Powers of Attorney Act 2000 (Tas) s 49 (Forms 1 , 2 , 3 and 4 and see Prr 30.42A , 30.42B , 30.61 and 30.61A ). In other jurisdictions the legislation or the statutory form itself provides that the power confers on the attorney authority to do anything that the donor could lawfully authorise an attorney to do, which would include executing a deed: Conveyancing Act 1919 (NSW) s 163B(1) (repealed) (Sch 7 in so far as it continues to operate in powers of attorney created before the commencement of s 6 of the Powers of Attorney Act 2003 (NSW) and see Prr 30.30 and 30.50 ); Powers of Attorney Act 2003 (NSW) s 8 (Sch 2 and see Prr 30.31 and 30.51 ); Powers of Attorney Act 1998 (Qld) ss 8(a) and 32(1)(a) (see Prr 30.40 , 30.58 and 30.58A ); Instruments Act 1958 (Vic) ss 107(1) and 115(1)(a) ; Guardian and Administration Act 1990 (WA) s 104(1)(a) (Form 1 in Sch 3 and see Pr 30.60 ). In South Australia the statutory general power and enduring power must be created by deed: Powers of Attorney and Agency Act 1984 ss 5(1) and 6(1)(a) (first schedule and see Prr 30.42 and 30.59A ).

3. See further Dean R Corkery, Halsbury's Laws of Australia , Vol 10, Deeds and Other Instruments .

POWERS OF ATTORNEY

A power of attorney is essentially an authority conferred on an agent, the attorney, to act for or manage the financial affairs of another person, who is the principal (or as referred to in my paper, the Donor). Accordingly, a power of attorney refers to the ‘unilateral grant of authority by a Donor for someone else to act on their behalf’.[1]

The two main types of power of attorney are ‘general’ and ‘enduring’. A general power of attorney is used where the Donor grants authority to the Donee to act on the Donor’s behalf for a particular period of time or for a particular purpose. At common law, a general power of attorney lapses when the agreement expires, or the Donor revokes the instrument, or the Donor no longer has legal capacity to make decisions.

An enduring power of attorney is broadly similar in operation to a general power of attorney, but is authorized by the various laws of the states and territories to endure or survive the otherwise terminating event of mental incapacity. In that way, the common law outcome of lapsing has been avoided, and a useful and increasingly popular means for dealing with financial responsibilities, in anticipation of what many experience as increasing disability and morbidity as they enter the last stages of their lives, has been adopted with the exception that an enduring power of attorney continues “to endure” even after the Donor has lost mental capacity. However, once Donors have lost capacity, they cannot revoke the enduring power of attorney. State and Territory legislation provides for guardianship tribunals to review, revoke or reinstate enduring powers of attorney and appoint guardians and administrators.

What may be included in an enduring power of attorney is covered by State or Territory legislation. Enduring powers of attorney were traditionally used by principals to delegate their authority to act in relation to financial matters. Increasingly, enduring powers of attorney are being used to cover personal and lifestyle matters where provided for in State and Territory legislation.[2]

A further complexity is that not only does the legislation of each jurisdiction vary in terms of the tests of capacity required for the Donor to execute the power of attorney, there are also different requirements for witnesses.

This lack of consistency across the jurisdictions unfortunately means that the assistance that can be derived from decided cases is somewhat diminished. It also creates a greater level of complexity in determining exactly what the law is on the question of capacity. From a practical perspective, it means that assessment processes need to be tailored in accordance with the requirements of each particular jurisdiction. Otherwise, applying a test based on the standard in one jurisdiction could well mean that a person in the early stages of dementia, wishing to make an enduring power of attorney in another State or Territory, could be denied the opportunity of doing so. The risk is that if the level of the statutory test for capacity is too low, the likelihood of enduring documents being misused will be greater and the vulnerability of people with a decision-making disability will increase.[3] Alternatively, setting the standard too high could exclude many who are most in need from the intended benefits.

WHO CAN EXECUTE AN ENDURING POWER OF ATTORNEY?

As a general rule, a person of legal capacity may execute a power of attorney.[4] This is the same position as under the general law of agency, and generally this has meant an adult[5] of full mental capacity,[6] who is not insolvent,[7] nor an alien enemy.[8]

While general powers of attorney could be executed both by natural persons and bodies corporate, enduring powers of attorney were specifically developed to benefit natural persons. The mischief enduring powers of attorney are designed to overcome is the termination of an agency arrangement with the loss of mental capacity of the Donor,[9] not a problem that afflicts a body corporate. In Queensland the legislation specifies that enduring powers of attorney may be given by “adults”[10] (therefore excluding Donors that are corporations).

CAPACITY TO EXECUTE AN ENDURING POWER OF ATTORNEY: GENERAL PRINCIPLES

The term ‘legal capacity’ broadly refers to ‘the competence of a person to act as Donor or Agent’ to make decisions that will be upheld by the legal system.[11] Under law, all adults are presumed to be ‘of sound mind’ and have the capacity to make decisions about important areas of their lives including managing personal finances, medical treatment, buying and selling and making contracts.[12] Mental capacity therefore constitutes the necessary element in determining legal capacity. In this context, the references to “legal capacity”, “mental capacity” or “capacity” are interchangeable.

Because the subject of powers of attorney forms a branch of the law relating to principal and agent, every person, being sui juris, may delegate authority to perform all lawful acts by means of a power of attorney unless specific statutory¹ or common law provision excludes the right. At the time the power is given, the principal must have the mental capacity to understand both the act of appointment and also the nature of the transactions the attorney is to carry out under the power.²

1. See for example Opal Mining Act 1995 (SA) s 98 .

2. See Powers of Attorney Act 2003 (NSW) s 17 . Subject to that Act, a power of attorney is not invalid only because an act within the scope of the power is beyond the understanding of the donor when the power is given: s 17(1) . The power does not authorise the attorney to do such an act unless it is authorised by or under the Act, but is effective to the extent of any act within its scope that is of such a nature that it is not beyond the understanding of the principal at the time of the act: ss 17(2) , 18 . For the equivalent provisions applying to powers of attorney executed before the commencement of s 6 of the Act, see Conveyancing Act 1919 (NSW) ss 163E , 163F(1) . Division 3 of Part 5 of the Act contains provisions under which the Supreme Court may make an order confirming a power in whole or in part -- see ss 29-33 . Part 5 extends to any power created (or purporting to have been created) by an instrument executed before the commencement of s 6 of that Act: s 6(5) . See also Powers of Attorney Act 1956 (ACT) s 3A whereby a power of attorney is not invalid on the ground of the donor's incapacity when the power was created if, at the time, the donor was able to understand the nature and effect of the power.

Footnotes

[1] See House of Representatives Standing Committee on Legal and Constitutional Affairs. (2007) Older people and the law. Commonwealth of Australia above Attorney-General’s Department, Submission No. 100, p. 1.

[2] Enduring powers of attorney were first introduced into State legislation in Australia in the early 1980s: for example, in Victoria the relevant legislation was the Instruments (Enduring Powers of Attorney) Act 1981 (Vic) which commenced 3 March 1982. The last State to introduce enduring powers of attorney was Western Australia in the Guardianship and Administration Act 1990 (WA). Statutes permitting the appointment of an agent to make medical decisions on behalf of a principal were a later phenomenon, for example, in Victoria the relevant legislation was the Medical Treatment Act 1988 (Vic).

[3] See Berna Collier, Chris Coyne and Karen Sullivan (eds). (2005) Mental Capacity: Powers of Attorney and Advance Health Directives. The Federation Press, Leichhardt, NSW, page 33

[4] See Berna Collier, Chris Coyne and Karen Sullivan (eds). (2005) Mental Capacity: Powers of Attorney and Advance Health Directives. The Federation Press, Leichhardt, NSW, above page 12

[5] In some instances, a minor can execute a valid power of attorney, eg. in New South Wales (Minors (Property and Contracts) Act 1970 (NSW) s 46(1)); and members of the Defence Forces under 21 years. The position that a Donor must be at least 18 years to execute a valid enduring power of attorney is clarified in Powers of Attorney Act 1998 (Qld) s 32(1). As a general rule, an attorney must be an adult of full mental capacity (see, for example, Powers of Attorney Act 1998 (Qld) s 29; Powers of Attorney Act 1956 (ACT) s 12(d).

[6] McLAughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 243; Gibbons v Wright (1954) 91 CLR 423.

[7] Mackwick v Hardingham (1880) 15 Ch D 339.

[8] For discussion of this issue, see B Collier and S Lindsay Powers of Attorney in Australia and New Zealand (Federation Press, Sydney, 1992)74-76.

[9] See, for example, Re T (Adult – Refusal of Treatment)[1993] Fam 95 and In re F (Mental Patient: Sterilisation)[1990] 2 AC 1. In Caldwell v McClelland [1999} QSC 182, where the mental capacity of the donor at the time of execution of an enduring power of attorney was challenged, Mckenzie J noted that, in light of the general principles set out in Powers of Attorney Act 1998 (Qld) Sch 1 s 1, the onus lay on the applicants to prove positively that the donor lacked capacity at the time of execution of the instrument (at [13]). The court also emphasised that the task of doing so was substantial (at [14]). See also In re W (Enduring Power of Attorney)[2001] 1 All ER 175 in this regard.

[10] Powers of Attorney Act 1998 (Qld) s 32(1)S

[11] Lexis Nexis, ‘Capacity’, Encyclopaedic Australian Legal Dictionary, Butterworths; Alzheimer’s Australia, Legal Planning and Dementia, Position Paper No. 5, 2005, p. 5.

[12] See House of Representatives Standing Committee on Legal and Constitutional Affairs. (2007) Older people and the law. Commonwealth of Australia above page 88 and also see Young J in Re C (TH) and the Protected Estates Act [1999] NSWSC 456 at [17]: “There is no room in the legislation for benign paternalism. A person is allowed to make whatever decision she likes about her property, good or bad, with happy or disastrous effect so long as she is capable”.

Please note this article is for information purposes only and does not constitute legal advice. Should you have any queries or require more information, please contact the team at Topdocs on 1300 659 242.

Download the Understanding Powers of Attorney article