The Tribunal ordered that the enduring power of attorney made by Mr LNN on 6 May 2010 is reinstated with effect from the time the enduring power of attorney lapsed, being the date of death of Mrs KMQ (7 January 2014).
The Tribunal ordered that Mr HUN be appointed as substitute attorney for Mrs KMQ.
Pursuant to s 36(4)(g) of the Powers of Attorney Act 2003 (NSW), a further clause is inserted after Clause 3 of Part 1 of the enduring power of attorney as follows:
"3A. If the office of one or more of the attorneys becomes vacant, this power of attorney shall not be terminated, provided at least three of the joint attorneys remain in office."
[2]
Background
Mr LNN is 96 years old and resides in his own home in West Sydney with his wife, Mrs ZLN. They have ten surviving children: Mr QMN, Mr EBN, Mrs KCL, Mr HUN, Ms LDN, Mr KNK, Mrs NPX, Mr HDN, Mr BVN and Ms FLN.
On 5 August 2014 the Tribunal received an application from Mrs ZLN, Mr QMN, Mr EBN and Mrs KCL to review an enduring power of attorney that had been executed on 6 May 2010 by Mr LNN. The power of attorney appointed each of the applicants as attorneys, as well as Mrs KMQ. A death certificate provided by the applicants confirmed that Mrs KMQ had died on 7 January 2014.
The application stated that there was a need to review the enduring power of attorney due to the vacancy in the office that had resulted from Mrs KMQ's death. The applicants' submitted that this could not be remedied by Mr LNN himself because he no longer has the requisite cognitive capacity to make another enduring power of attorney. Mr LNN's estate is considerable and there were pending financial transactions that required substitute authority.
There was no conflict amongst the applicants about the application. Statutory declarations in support of the application were provided to the Tribunal from each of Mr LNN's children who were not appointed under the power of attorney.
All references to sections in these reasons are references to the Powers of Attorney Act 2003 (NSW), unless otherwise specified.
[3]
The hearing
At the end of these Reasons for Decision are lists of the parties to the application and the witnesses who attended the hearing [Appendix removed from publication].
The applicants were assisted in their submissions by Mr HXC, Solicitor. Mr HXC did not seek leave to legally represent the applicants and participated in the Tribunal's proceedings in the role of a McKenzie friend.
On 2 October 2014 the proceedings were adjourned for six weeks to provide the parties an opportunity to seek legal advice and to make submissions on the specific question of the Tribunal's jurisdiction to review the enduring power of attorney and, if jurisdiction were established, to indicate what orders were sought from the Tribunal.
[4]
The details of the enduring power of attorney
The enduring power of attorney was executed by Mr LNN on 6 May 2010. The certificate under section 19 of the Act was witnessed by Mr Z, Solicitor at a law firm.
Clause 1 of the power of attorney provides that Mrs ZLN, Mrs KCL, Mr QMN, Mr EBN and Mrs KMQ (deceased) are appointed 'with any three to act jointly as my attorneys'. Each of the attorneys accepted his or her appointment.
There is no provision in the instrument to stipulate the effect of vacation of office. Section 46 of the Act provides:
46 Effect of vacation of office of joint and several attorneys
(1) If a power of attorney appoints 2 or more persons as joint attorneys, the power of attorney is terminated if the office of one or more of the attorneys becomes vacant.
(1A) However, such a power of attorney is not terminated if:
(a) the power of attorney provides otherwise, and
(b) at least one of the attorneys or a substitute attorney remains in office.
(2) If a power of attorney appoints 2 or more persons as attorneys either severally or jointly and severally, a vacancy in the office of one or more attorneys does not operate to terminate the power of attorney in relation to the other attorneys.
Sub-section 46(1A) was inserted into the Act by the Powers of Attorney Amendment Act 2013 (NSW) and does not apply to instruments executed before 13 September 2013 (cl 10, sch 5).
The Tribunal's jurisdiction to review an enduring power of attorney identified in s 33(2) of the Act.
(2) Both the Civil and Administrative Tribunal and the Supreme Court have jurisdiction to deal with an application under this Division in respect of an enduring power of attorney (including a revocation of an enduring power of attorney).
The Tribunal's powers to review the operation and effect of a power of attorney are provided for in s 36(4):
(4) Orders relating to operation and effect of power
A review tribunal may, if satisfied that it would be in the best interests of the principal to do so or that it would better reflect the wishes of the principal, make any one or more of the following orders relating to the operation and effect of a power of attorney:
(a) an order varying a term of, or a power conferred by, the power of attorney,
(b) an order removing a person from office as an attorney,
(c) an order appointing a substitute attorney to replace an attorney who has been removed from office by a review tribunal or who otherwise vacates the office,
(d) an order reinstating a power of attorney that has lapsed by reason of any vacancy in the office of an attorney and appointing a substitute attorney to replace the attorney who vacated office,
(e) an order directing or requiring any one or more of the following:
(i) that an attorney furnish accounts and other information to the tribunal or to a person nominated by the tribunal,
(ii) that an attorney lodge with the tribunal a copy of all records and accounts kept by the attorney of dealings and transactions made by the attorney under the power,
(iii) that those records and accounts be audited by an auditor appointed by the tribunal and that a copy of the report of the auditor be furnished to the tribunal,
(iv) that the attorney submit a plan of financial management to the tribunal for approval,
(f) an order revoking all or part of the power of attorney,
(g) such other orders as the review tribunal thinks fit.
[5]
What did the Tribunal have to decide?
In the original application the applicants requested the Tribunal to reinstate the power of attorney and to vary it by including the following clause:
"This power of attorney will not be terminated if the office of one or more of the attorneys becomes vacant provided at least two of the joint attorneys remain in office."
At the hearing on 2 October 2014 the Tribunal raised the following issues:
1. Whether the wording of 'any three to act jointly as attorneys' means that all attorneys are appointed on a joint basis or on a joint and several basis?
2. Whether, as a result of the vacation of the office of one of the attorneys, sub-section 46(1) applied to result in the power being terminated?
3. If the power of attorney was terminated, does the Tribunal have jurisdiction to hear the application?
4. If the Tribunal does have jurisdiction to hear the application, does it have power to make any orders and, if so, what orders should be made?
Of particular interest in relation to question (4) above was whether the use of the word 'lapse' in s 36(4)(d) was intended to cover circumstances where a power of attorney had terminated and whether the Tribunal could reinstate a power of attorney in accordance with this sub-section without also being required to appoint a substitute attorney. Section 36(4)(d) provides:
(d) an order reinstating a power of attorney that has lapsed by reason of any vacancy in the office of an attorney and appointing a substitute attorney to replace the attorney who vacated office,
In submissions received on 23 October 2014, Mr HXC submitted that the applicants now sought the following orders:
1. An order reinstating a lapsed power of attorney and an order to appoint a substitute attorney for an attorney who has been removed or where the office has become vacant. The proposed substitute attorney is Mr HUN in substitution for Mrs KMQ. Mr HXC identified sections 36(4)(c), (d) and (g) as providing the Tribunal the authority to make the orders sought.
2. An order under s 36(9) to reinstate the power of attorney that lapsed from the time of Mrs KMQ's death on 7 January 2014.
3. An order under s 36(4)(g) to insert an additional clause 5 under Part 2 of the instrument to read:
1. '5. This power of attorney shall not be terminated if the offices of one or more of the attorneys become vacant provided at least three of the joint attorneys remain in office.'
[6]
Jurisdiction
The applicants have standing to make the application due to their appointment as attorneys under the power of attorney (s 35(1)(a)).
The power of attorney is a reviewable power of attorney pursuant to s 33(2) as it complies with the requirements of s 19 of the Act for the creation of an enduring power of attorney.
There is a vacancy in the office of one of the attorneys as a result of Mrs KMQ's death, pursuant to s 5(c).
In relation to the characterisation of the appointment of the attorneys as joint or joint and several and whether the enduring power of attorney had been terminated as a result of the vacancy in the office, Mr HXC put forward two submissions:
1. That the attorneys were appointed jointly and so the enduring power of attorney has been terminated due to the operation of s 46(1). However, this did not preclude the Tribunal's jurisdiction to review the instrument nor did it prevent orders being made under s 36.
2. In the alternative, that the requirement in the power of attorney that any three of the five appointed attorneys to act jointly is a 'composite authority', and that the power of attorney has not in fact been terminated by the vacancy in the office. In these circumstances, the orders sought were limited to a declaration that the power of attorney remains on foot.
In relation to the argument in the alternative, the Tribunal was directed to the text Powers of Attorney in Australia and New Zealand by Berna Collier and Shannon Lindsay (The Federation Press, 1992), which states at page 213:
It is also possible to have a composite type of authority, where "any two" of a number (greater than two) of attorneys are authorised to act. It is accepted that such an appointment is in effect both joint and several, as it requires the joint action of any two of the attorneys. Aldridge warns, however, that a power specifying that any two of a greater number of attorneys should act would not comply with a statutory requirement (applicable, for example, to enduring powers of attorney) that the appointment of the attorneys be specified to be joint or joint and several.
The power of attorney specifies that the attorneys may only act where three attorneys agree and act jointly. There is no provision for any of the attorneys to act severally or act jointly in numbers less than three. In the Tribunal's view, the attorney's authority is correctly characterised as a joint authority. As there was no provision for continuation where the office of one of the attorneys becomes vacant, the Tribunal determined that the enduring power of attorney had been terminated by operation of s 46(1).
The next question to be determined was whether the Tribunal has jurisdiction to review an enduring power of attorney that has been terminated. There is no definition of 'termination' of a power of attorney in the Act and nothing express to indicate that the Tribunal's powers to make orders in s 36(4)(d) in relation to a 'lapsed' power of attorney is intended to apply where a power of attorney has been terminated.
In FDT [2010] NSWGT 4 the Tribunal considered an enduring power of attorney that had terminated as a result of the death of one of two joint attorneys. At paragraph [10] the Tribunal noted that the wording of s 36(4)(d), despite using 'lapsed' rather than 'terminated', appeared to specifically apply to a situation where there is a vacancy in the office of the attorney.
In BDN [2014] NSWCATGD 15 at [125] the Tribunal considered the following submissions:
…that the reference to 'lapsed' in sub-sections 36(4) and 36(9) of the POA Act was analogous to a power of attorney being terminated by operation of law and it was clearly the intention of the legislature to invest the Tribunal with a broad power to review a power of attorney where it was in the best interests of the principal for the Tribunal to do so. Mrs BDN's lawyer submitted that there was little difference between termination and lapse. He referred to the Oxford Concise Dictionary, which defines 'lapse' as 'the termination of a right or privilege through disuse of or failure to follow the applicable procedures'…
At paragraph [127] the Tribunal accepted these submissions and stated:
Sub-section 36(4) has been drafted in very broad terms. It states that the Tribunal may make an order reinstating a power of attorney that has lapsed by reason of any vacancy in the office of the attorney. The fact there is different terminology used in s 46(1) does not diminish or restrict the broad power, nor is there anything in the POA Act to suggest the power is intended to be so restricted. Furthermore, there is nothing in the Explanatory Memorandum or the second reading speech that supports such a narrow interpretation of the provision. Whilst the reference to "lapse" may connote the termination of an instrument because of the effluxion of time or the happening of an event, the Tribunal was not satisfied that the different terminology was intended to displace the beneficial jurisdiction of the Tribunal to review and reinstate a power of attorney that is no longer in existence, for whatever reason, in the best interests of the principal…
The Tribunal adopts the reasoning in FDT [2010] NSWGT 4 and BDN [2014] NSWCATGD 15 to find that it does have jurisdiction to review an enduring power of attorney that has been terminated due to the operation of s 46(1).
[7]
Should the Tribunal make the orders sought?
The applicants requested that the Tribunal make the following orders:
1. That the lapsed power of attorney be reinstated (s 36(4)(d)) and that such reinstatement be ordered to have taken effect as at the date the instrument lapsed (s 36(9));
2. That a substitute attorney be appointed to replace the deceased attorney (s 36(4)(d)); and
3. That an additional clause be inserted into the power of attorney to prevent any further termination of the instrument whereby an attorney vacates their office but at least attorneys remain in office (s 36(4)(g))
In order to proceed to make any of the orders sought pursuant to s 36 the Tribunal is required to consider to consider two discretions. Section 36(1) provides the Tribunal with the discretion not to undertake the review of an enduring power of attorney. Section 36(2) provides that as a consequence of conducting a review under s 36(1), the Tribunal may decide not to make any further orders under the section. If the Tribunal determines to exercise the discretions such that it proceeds to make orders under s 36(4), the Tribunal must then be satisfied that any orders made are either in the best interests of Mr LNN or would affect an outcome that better reflect the wishes of Mr LNN. It is useful to summarise the evidence and the Tribunal conclusions as to Mr LNN's cognitive capacity and the nature of his estate before outlining the conclusions reached on these matters.
[8]
Mr LNN's capacity
The Tribunal was provided with two Health Professional Report Forms, completed by Mr HUN and Mr KNK, both of whom are Mr LNN's sons. Both reports stated that Mr LNN has vascular dementia, with a steady deterioration over three years. Mr HUN stated that his father has moderate dementia and is not able to consider financial issues or to make reasons decisions. Mr KNK reported that his father is not able to comprehend the significance or intricacies of any financial transactions.
The applicants had provided the Tribunal with an Aged Care Client Record, completed by Ms Y, a public hospital's Aged Care Assessment Team on 22 May 2014. Ms Y records that Mr LNN has a diagnosis of dementia, ischaemic heart disease and other physical illness. Ms Y notes that Mr LNN requires help or supervision in activities of self-care, movement, health care, transport and activities involving social and community participation. Ms Y reports that Mr LNN is unable to manage shopping and preparing meals, and needs assistance for eating, drinking, oral hygiene and continence. She notes that Mr LNN has regular short term and long term memory problems, as well as confusion and disorientation to time. Ms Y recommended a Home and Community Care Package and high level residential respite care, as well as planning for high level residential care in the future.
The Tribunal accepted that Mr LNN lacks the requisite cognitive capacity to rectify the current situation by making another enduring power of attorney.
[9]
Mr LNN's estate
The application stated that Mr LNN owns his own home in West Sydney, valued at $8million and a rental investment property in Regional NSW of a similar value. Mr LNN also owns a one third share in a rural property valued at $15million. The application reported that Mr LNN has shares in both publicly and privately owned companies valued at over $15million and a loan of $4million to Company A. Mr LNN's income includes rental income of $60,000 per month, dividends earned from shares and an annual partnership distribution. The application states that Mr LNN has no debts.
The Tribunal was satisfied on the information available to it that Mr LNN's estate was by its nature and value an estate that was not capable of being managed informally. The evidence as to Mr LNN's capacity supported the conclusion that Mr LNN no longer possesses sufficient cognitive capacity to manage his estate. Accordingly, in those circumstances, he requires his estate to be managed by a substitute decision maker, be that joint attorneys, or an appointed financial manager.
[10]
The Tribunal's orders
The Tribunal had first to determine whether it should exercise the discretion to review the power of attorney. The evidence had led the Tribunal to conclude: that the power of attorney had been terminated by operation of s 46(1), that Mr LNN currently lacked the cognitive capacity to manage his estate; and that his estate was such that it could not be managed informally. In these circumstances it was appropriate that the Tribunal conduct a review of the instrument.
The second discretion requiring determination was whether the Tribunal should make any orders under s 36 or not. If the Tribunal decided not to make any order under s 36, it would then be permitted to treat the application before it as an application for the appointment of a financial manager to manage Mr LNN 's estate pursuant to s 37(1). There was no application before the Tribunal seeking the appointment of a financial manager. To the contrary, there was agreement amongst the Mr LNN's family that continuation of the power of attorney was the most appropriate means of managing Mr LNN's estate and the mechanism that best accorded with his wishes. There was no evidence before the Tribunal which suggested the appointment of a financial manger should be contemplated. Accordingly the Tribunal proceeded to determine what orders it should make under s 36.
The first order sought by the applicants was the reinstatement of the power of attorney. The same reasoning that the Tribunal adopted to decide to exercise the discretion to review the instrument and to then proceed to make orders ([40] and[42] above) supports the conclusion that the Tribunal should grant the order sought to reinstate the lapsed power of attorney. The terms of the instrument itself illustrate that it was Mr LNN's wish at the time of execution that at least three of his family members at any one time should be able to act jointly to manage his affairs. There was no evidence to suggest any circumstances had arisen since the time of execution that Mr LNN would had sought to change this substitute decision making regime if he was capable of doing so. To order reinstatement is in Mr LNN's' best interests and reflects his known wishes. An order to reinstate with effect from the time of lapse, being the date of death of Mrs KMQ, is in Mr LNN's best interest to ensure the validity of any activities conducted by the attorneys since that time.
The Tribunal was requested to make an order appointing Mr HUN as an attorney in substitution of Mrs KMQ. Again, the terms of the instrument itself supported a conclusion that it was Mr LNN's wish that a combination of family members make substitute decisions for him if required. Mr LNN's second eldest son, Mr HUN sought to be the family member to be so appointed. This was supported by Mrs ZLN and all of Mr LNN and Mrs ZLN's surviving children. Mrs ZLN told the Tribunal that in a number of recent conversations her husband had indicated that it was his wish that Mr HUN be appointed as the substitute attorney. Subject to an assessment of Mr HUN's capacity to perform the role as an attorney to ensure a substitution order would be in Mr LNN's best interests, the Tribunal determined that it would best reflect Mr LNN's wishes if Mr HUN be appointed.
Mr HUN informed the Tribunal that he was medical practitioner who had been practicing for over 40 years. Up until just over six years ago when Mr LNN retired, he had worked with his father in private practice and indicated they had a close relationship. He has been his father's treating medical practitioner for his entire career. Mr HUN was candid with the Tribunal and advised that he was declared bankrupt in the 1990's due to financial difficulties associated with the recession of 1991. He was discharged from bankruptcy in 1999 or 2000 and was supported by his entire family at that time to ensure his financial security. The Tribunal was satisfied that it was in Mr LNN's best interests that Mr HUN be appointed as one of his father's joint attorneys. He is a professional operating in private practice. There was no information before the Tribunal suggesting any inappropriate conduct on Mr HUN's part in relation to his admission of bankruptcy. In any event, given the terms of the instrument, any decision cannot be made by Mr HUN alone, but jointly with at least two of his family members.
The final order made by the Tribunal was to grant the applicants' request to insert a clause into the instrument which would prevent the power of attorney being terminated once more if another attorney were to vacate office, providing at least three of the attorneys remained in office. The Tribunal concluded that an order in such terms was a sensible amendment to the instrument, particularly given the number of attorneys appointed. The amendment would result in retention of Mr LNN's wish at the time of execution that at least three of his family members must make decisions, whilst likely preventing the need for a further review of the instrument in the event that one of the five possible attorneys vacates office.
[11]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
[12]
Amendments
03 July 2015 - changed "Malcolm S, Deputy President" to "Schyvens M, Deputy President" in coversheet.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 03 July 2015