Powers Of Attorney – Must Act InThe Interests Of The Principal

Power Of Attorney
Power Of Attorney
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Powers of Attorney continue to generate difficulties for the community generally, and for lawyers in particular. The Australian Law Reform Commission (in its discussion paper on elder abuse) said that Powers of Attorney were being used by some as a licence to steal.

Many transactions undertaken pursuant to a Power of Attorney are relatively straightforward. However, particular issues and difficulties arise with ‘hazardous’ or improvident transactions; and with transactions involving a gift, transfer of property without full consideration, or a transaction under which the attorney receives a benefit or in which the attorney has an interest.

The form prescribed pursuant to the Powers of Attorney Act 2003 (and its regulations), and the predecessor form under the Conveyancing Act, confer upon an attorney a power which is stated in wide and general terms: My attorney may exercise the authority… to do anything on my behalf that I may lawfully authorise my attorney to do.

The Power of Attorney may contain some express conditions or limitations. The general law also imposes restraints and limitations on the ambit of Powers of Attorney.

This arises in two particular dimensions:

  • First, the courts have traditionally construed Powers of Attorney strictly and narrowly.
  • Second, an attorney holds his/her power and authority as a fiduciary, and owes fiduciary obligations to a principal in exercising the power.

In the case of Reilly v Reilly [2017] NSWSC 1419 (‘Reilly’) the Reilly family operated farming properties. The husband granted an enduring Power of Attorney to his wife. The husband then lost capacity through Alzheimer’s. Prior to the husband’s death, the wife transferred one of the farming properties to the daughters for nominal consideration. The Court concluded that the wife had committed a ‘fraud on the power’. The transfer of the property to the daughters was contrary to, or inconsistent with, the husband’s prior wishes. To continue reading visit

The transfer had been made for the purposes of giving effect to the wife’s own personal views of what was fair as between siblings, and not for the purposes of advancing the interests (or for the benefit) of the husband. The transfer was ‘for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power’ (at [127]).

The court stated that the primary object of a Power of Attorney is to enable the attorney to act in the management of his or her principal’s affairs; an attorney cannot, in the absence of a clear power so to do, make presents to himself or herself or to others of his or her principal’s property. The Court of Appeal agreed with the Supreme Court.

If you are an attorney it is strongly suggested that you consult with your solicitor before using the Power of Attorney to benefit yourself or a third party.

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