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    Can an Enduring Power of Attorney act in their family's best interests?

    Apr 24, 2019 1:29:47 PM

    This article uses the matter of Reilly v Reilly [2018] NSW CA 322 to outline what an Enduring Power of Attorney is able to do without express power.

    The Reilly v Reilly matter is summarized as:

    • The Reilly family had a who passed away, a mother who was the Attorney, a son and four daughters.
    • They operated adjacent farming properties.
    • The mother was appointed he father’s Enduring Power of Attorney
    • The father lost capacity due to Alzheimer’s disease
    • After the father had lost capacity, the mother transferred one of the farming properties to the daughters for $1
    • If the mother had not transferred that property to the daughters, the son would have received that property pursuant to the terms of his father’s will
    • After considering the background factual circumstances, the Supreme Court found that this transfer to the daughters was not in accordance with the wishes of the father nor was it in the interest of the father
    • The son as the Plaintiff asked the court for orders to undo the actions of his mother

    Mr Justice Lindsay made several helpful statements of general principle concerning Enduring Powers of Attorney regarding the matter:

    • The relationship between.... the principal and attorney [is] a fiduciary one, a consequence of which [is] that the [attorney] is obliged not to place herself in a position of conflict, nor to obtain a benefit or benefit from her fiduciary position, without first obtaining the fully informed consent of the [principal]
    • The primary object of a Power of Attorney is to enable the attorney to act in the management in his or her principle’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 the principal’s property
    • It is a breach of duty for an attorney to exercise authority, for the purpose of conferring a benefit on himself or herself or upon some other person to the detriment of the principal
    • A power is “qualified by the fiduciary obligation of loyalty”. This includes “an obligation to exercise the Power of Attorney bona fide and not for any improper, foreign purpose (that is, an obligation not to commit a “fraud on the power”

    The Court concluded that the mother had committed a “fraud on the power” as transferring the property to the daughters was contrary to, or inconsistent with, the father’s prior wishes.

    The transfer had been made for the purposes of giving effect to the mother’s own personal view of what was fair between siblings, and not for the purposes of advancing the interests or for the benefit of her husband.

    This matter was considered by the Court of Appeal. The Judgment of Mr Justice Lindsay was confirmed. 

    The Court of Appeal also concluded that the mother “was in her capacity as the father’s attorney seeking to do what she thought was in the best interests of the family, rather than what was in [her husband’s] interest. That did not permit her to cause [her husband] to enter into an improvident transaction giving away his most substantial asset”.

    It is fundamental that the attorney act in accordance with the authority conferred upon them.  Accordingly, in the absence of a clear power to do so expressed in the appointment document, an attorney cannot give to himself or herself or to others any part of the principal’s property.

    If you have further questions about the rights and obligations of an Enduring Power of Attorney please contact Andrew Frank at afrank@franklaw.com.au

    This is not legal advice. 

    Photo by Tom Fisk from Pexels
    Andrew Frank

    Written by Andrew Frank