January 2004

Important new powers of attorney law for NSW

A power of attorney is a legal document that allows a person (known as the "principal") to appoint another trusted person(s) (known as the "attorney") to attend to important financial and property matters on the principal's behalf should the need arise (for example, being away from home for a long period or being physically unable to attend to one's affairs). An enduring power of attorney is one that is signed by the principal with the intention that it will continue to operate even if the principal should suffer a loss of mental capacity after the document has been signed. Enduring powers of attorney have provided an inexpensive alternative to the Supreme Court and Guardianship Tribunal for dealing with the financial and property affairs of incapacitated people.

Background

The increase in use of powers of attorney, some shortcomings of the present law and Australia's ageing population prompted a review of the present law on powers of attorney.

The experience with the present law has generally been that enduring powers of attorney (the present law refers to them as protected powers of attorney) have worked well, served the needs of the community and their use has been increasing. However, some shortcomings of the present law have caused confusion, errors and sometimes financial loss.

"People may wish to consider their existing power of attorney in light of the changes".

A committee comprising representatives of the Attorney General's Department, Protective Commissioner, Guardianship Tribunal, Public Trustee and Land Titles Office, was specifically constituted to identify and examine the shortcomings of the present law.

The catalyst for the new Act was the 1999 Land Titles Office Green Paper on Powers of Attorney. It identified some key areas of concern with the present law. Further consultation on the Green Paper between interested groups led to the introduction of the Powers of Attorney Bill 2003.

The Powers of Attorney Act 2003 was assented to on 23 October 2003. The operation of the Act is expected to commence on Monday 16 February 2004. It will result in a prescribed new form of power of attorney being introduced on the commencement of the Act.

The position of existing powers of attorney signed under the old law

Existing powers of attorney signed under the old legislation (the relevant Conveyancing Act 1919 provisions) will continue to be effective and the old law will continue to apply to them. Also, some provisions of the new Act will apply to existing powers of attorney.

The Powers of Attorney Act 2003 will apply to powers of attorney signed on or after the commencement of the Act (expected to be 16 February 2004).

Prescribed new form of power of attorney

The Act prescribes a new form of power of attorney. The Act also allows regulations to be made that may replace or amend the new prescribed power of attorney form. The new prescribed power of attorney form is more detailed than the existing power of attorney form. It will require specific instructions on:-

  • when the power of attorney is to commence (for example, immediately, for a specified period, when the attorney accepts the appointment, etc);
  • if the power of attorney is to operate if the principal suffers a loss of mental capacity after it is signed (is it to be an enduring power of attorney?);
  • whether the principal wants to elect to authorise an attorney to make gifts and to provide benefits either to the attorney or third parties (such as family members);
  • whether the principal wants to include any other conditions and limitations.

When signing an enduring power of attorney, the principal's signature must be witnessed by a prescribed witness who is not an attorney under the document. The prescribed witness must explain the effect of the power of attorney to the principal and confirm that the principal appeared to understand the effect of the power of attorney. Prescribed witnesses include solicitors, barristers or a registrar of a Local Court. Prescribed witnesses can also be a licensed conveyancer or employee of the Public Trustee or an employee of a trustee company who has successfully completed an approved course of study. If an enduring power of attorney is being signed, the attorney must sign the form before it can be used by the attorney.

The new prescribed power of attorney form will also contain some standard important information for principals and attorneys to assist them to better understand the legal implications of a power of attorney.

Review tribunal

The Act introduces the new concept of review tribunal. For purposes of the Act a review tribunal is either the NSW Supreme Court or the Guardianship Tribunal.

A review tribunal will have powers to make wide ranging orders in relation to powers of attorney. If the review tribunal is satisfied that orders should be made in the best interests of the principal or to better reflect the wishes of the principal, they can make such orders as varying the terms of a power, removing an attorney, appointing a substitute attorney or revoking a power of attorney. A review tribunal can also order an attorney to render accounting records relating to the attorney's management of the principal's affairs.

A major change introduced by the Act will be the wide powers given to the Guardianship Tribunal. Applications to the Guardianship Tribunal can be made in less time and at less cost than similar applications to the Supreme Court. However, the Guardianship Tribunal does have the discretion to refer appropriate matters to the Supreme Court.

The Guardianship Tribunal can refer questions of law to the Supreme Court. Appeals can also be made to the Supreme Court from any decision made by the Guardianship Tribunal on a question of law or with the approval of the Court on any other question. An appeal may also be made to the Administrative Decisions Tribunal against a decision of the Guardianship Tribunal in relation to joining another party to any proceedings.

Other important provisions

The Act contains other important provisions including provisions relating to proof of powers of attorney, delegation of power of attorney, termination and suspension of powers of attorney, registration of powers of attorney and recognition in NSW of enduring powers of attorney made in other States or Territories of Australia.

What action needs to be taken?

You need to be aware of the changes to the law and practice that stem from the Act. People should review their existing power of attorney to determine whether they want to rely on it or whether they want to sign the new form of power of attorney on or after the commencement of the Act because it may offer them more legal protection. There may also be scope to apply to a review tribunal to remedy a problem with a power of attorney signed under the old law where the principal no longer has mental capacity. As always, people who have not signed a power of attorney should give consideration to signing one to ensure important financial and property matters can be attended to by a trusted person at an appropriate time.