Do you know how much power you are placing in the hands of your power of attorney?

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The importance of selecting an appropriate and trustworthy attorney (appointed by power of attorney especially an enduring power of attorney) cannot be overstated. Such individuals can be vested with significant power/discretion to act on your behalf and when appointed by an enduring power of attorney manage your affairs in situations where you are unable to do so, hence it is essential that an attorney only be selected after much consideration.

Conflict transactions

The NSW courts have recently considered conflict transactions.

In Taheri v Vitek[1], a power of attorney granted by Mrs Taheri contained a benefit clause (conflict clause) that expressly conferred authority to act so as to confer a benefit upon the attorney, who was her husband, Mr Taheri.  After Mr Taheri named his wife (arguably against her interest) as a guarantor in a contract for a sale of land it was questioned whether an attorney is bound to act in the best interests of the principal when acting on their behalf. Whilst the fiduciary nature of the relationship generally prevents an attorney from obtaining a benefit as a result of their position, such obligations are subject to any contractual arrangement between the parties (namely the conflict clause in the power of attorney). Subsequently, it was held that the benefit clause did in fact authorise an attorney to act other than in the interests or for the benefit of the giver of the power.

Powers as Principal or Appointor/Appointer under a trust deed

The importance of attorney selection was also highlighted in the New South Wales case of Belfield v Belfield.[2] In this case a deed of appointment named Ms Belfield as the appointer of a family trust, and gave her significant powers to direct the trustees of the trust. However, after developing a severe case of dementia, it was questioned whether it was open for Ms Belfield’s attorney (her son Charles) to exercise her powers of appointment on her behalf.

Relying on s 163B(2) of the Conveyancing Act 1919,[3] the trial judge found that Charles was prevented from exercising those powers because s 163B(2) expressly removed ‘the authority to exercise or perform any power, authority, duty or function as a trustee’ from the ambit of powers conferred upon an attorney.

On appeal it was differently viewed that Ms Belfield’s power under the deed of appointment (which allowed her to require the trustee to deal with the trust assets in a particular way) did not amount to authority to act “as a trustee” within the meaning of s 163B(2)(a).  As a result, Charles was permitted to exercise Ms Belfield’s powers as an appointer on her behalf.

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[1] [2014] NSWCA 209.

[2] [2012] NSWCA 416.

[3] Section 163B was repealed by the Powers of Attorney Act 2003 (NSW). See Section 10 of the Powers of Attorney Act 2003 (NSW) for the s 163B equivalent.

This article was written by Andrew Lind.