Re An Incapacitated Principal [2025] NSWSC 89

THE COURT'S PROTECTIVE JURISDICTION

1. The Court's "inherent" protective jurisdiction is derived from Imperial British legislation which, first, constituted the Court ("the New South Wales Act" of 1823, 4 Geo IV C 96, section 9 and clause 18 of "the Third Charter of Justice", Letters Patent, dated 13 October 1823, promulgated pursuant to that Act), and, secondly, clarified the timing, terms and content of NSW's inheritance of English law (the Australian Courts Act 1828, 9 Geo IV C 83, sections 11 and 24): JM Bennett, A History of the Supreme Court of New South Wales (Law Book Co, Sydney, 1974), Chapter 7, especially pages 125-127; In Re WM (1903) 3 SR (NSW) 552 at 565; PB v BB [2013] NSWSC 1223.
2. Section 23 of the Supreme Court Act 1970 NSW (which provides that the Court "shall have all jurisdiction which may be necessary for the administration of justice in New South Wales") provides an independent grant of power which supplements, but does not limit, the inherent jurisdiction preserved by section 22 of that Act: Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [73]-[82]; Re AAA; Report on a Protected Person's Attainment of the Age of Majority [2016] NSWSC 805 at [21]-[27]. It has sometimes been specifically recognised as a source of the Court's protective jurisdiction: eg, Fountain v Alexander (1982) 150 CLR 615 at 633.
3. The limits, and scope, of the Court's protective jurisdiction have not been, and cannot be, defined. It is available to do whatever may be for the benefit of an incapable person unable to care for himself or herself, and it is commonly invoked where there is a need of a protective order uncontemplated by legislation: Re Eve (1986) 31 DLR (4th) 1 at 16-17 and 28-29; [1986] 2 SCR 388 at 410-411 and 426-427, approved by the High Court of Australia in Secretary, Department of Health and Community Services v JWB and SMB (Marion's Case) (1992) 175 CLR 218 at 258-259.

STANDING

1. Upon an exercise of Court's protective jurisdiction, the NSW Trustee has standing to apply for a rectification order because "standing" is governed by the purposive character of the jurisdiction.
2. Informed by the High Court of Australia's treatment of the topic of standing to make an application for a writ of habeas corpus in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Limited (2000) 200 CLR 591 at [2], [94], [162] and [211], in Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [93]-[94] I made the following observations, to which I adhere: "[93] The question of standing ultimately returns to the rationale for the protective jurisdiction itself: the need for an accessible remedy for the protection of a person who, unable to manage his or her own affairs, is in need of protection. [94] A practical safeguard on the availability of curial relief without any formal requirement for locus standii (independent of a proper case for orders serving the interests, and for the benefit, of a protected person) is the availability to the Court of assistance from the NSW Trustee and, in the case of an application by the NSW Trustee itself, the ability of the Court to invite assistance from a protected person's family, carers, friends and others. The Court's proceedings are essentially inquisitional rather than merely adversarial."
3. The jurisprudence underlying consultation with an incapable person's "significant others" is reflected in a classic statement made by Lord Eldon in Ex parte Whitbread in the matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878 (approved by the Court of Appeal in Protective Commissioner v D (2004) 60 NSWLR 513 at [152] and considered in W v H [2014] NSWSC 1696).
4. In the particular context of approving ex gratia payments out of an incapable person's estate but of more general significance, Eldon LC made a statement to the effect that the Court should manage an incapable person's estate for the benefit of the incapable person, not lightly refusing to do that which the incapable person would himself or herself have done if capable.
5. Upon an application by a "stranger" (such as the NSW Trustee is in the present proceedings vis-a-vis the incapacitated principal) for rectification of a defective form of what ostensibly appears to be an enduring power of attorney, the Court may be guided, with the benefit of consultations with an incapacitated principal's "significant others", by reflection upon the question of what the principal would have done if called upon to determine whether an order for rectification should be made.
6. That question is not the same question specifically addressed upon an exercise of the Court's equity jurisdiction, which focusses upon the intention of the principal at the time of execution of the document in respect of which a rectification order is sought.
7. Any difference in the perspectives of the protective and equity jurisdictions of the Court is reconciled in an appreciation that disposition of an application for rectification of an enduring power of attorney after the principal has lost mental capacity requires an exercise of discretion affording paramount consideration to the principal's best interests (in the present and prospectively, having regard to past experience) as well as his or her intention at the time an instrument was executed.
8. The NSW Trustee has standing to make an application for a rectification order in these proceedings notwithstanding that it is not a party to the defective instrument and bears responsibility for the clerical error requiring rectification. In the circumstances of this case, its application to the Court is justified by the importance of serving the interests of the now incapacitated principal upon an exercise of protective jurisdiction (to quote HS Theobald, The Law Relating to Lunacy (London, 1924) at page 382) "directed to administration without strife in the simplest and least expensive way".

THE AVAILABILITY OF A RECTIFICATION ORDER

1. The availability of an order that an enduring power of attorney be rectified after a principal has lost mental capacity is confirmed, if confirmation be required, by the judgment of Gzell J in Re Gouder [2005] NSWSC 1116 where his Honour granted an ex parte application for rectification of the statutory equivalent of an enduring power of attorney on the application of the attorney named in the instrument.
2. In the course of his judgment his Honour made the following observations: "[6] . . . An order for rectification will be made if the instrument, by error, does not record the agreement of the parties. In MacKenzie v Coulson (1869) LR 8 Eq 368 at 375, Sir William James VC said: "Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts." [7] It used to be said that in order to obtain rectification, a party had to prove a valid and enforceable antecedent agreement. In Meagher, Gummow and Lehane's Equity Doctrines and Remedies, 4th ed, Butterworths Lexis Nexis, Australia, 2002 at 26-030, the learned authors analyse the authorities and state that it is no longer tenable to suggest that the plaintiff in a rectification case must prove an antecedent contract. The underlying principle is simply to see that the document executed by the parties accords with their true intentions. Here the power of attorney was executed as a deed poll but if an antecedent contract is unnecessary, there is no reason, in my view, that the underlying principle should not be invoked. . . . ."
3. My attention has also been drawn by the NSW Trustee to the following observations made by Young J in JH & KM Knox Pty Ltd v Morton Investments Pty Ltd [1990] ANZ Conv R 214; BC 890 1295 at 6: "It must be remembered that "rectification is available not only in a case where particular words have been added, omitted or wrongly written as a result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction. In such a case ... the Court will rectify the wording of the document so that it expresses the true intention." Re Butlin's Settlement [1976] Ch 251, 260, applied in NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740, 747 and see also Halsbury's Laws of England 4th Ed Vol 32 para 51."
4. These observations are consistent with those of the Court of Appeal in Zhong v Guan [2024] NSWCA 300, which confirmed that the equitable principles governing the rectification of a document are distinct from general principles governing the construction of a document.

SERVICE OF NOTICE OF PROCEEDINGS

1. At the Court's direction the incapacitated person was formally named as a defendant in the proceedings and notice of the proceedings was given to the principal's children, her closest living relatives and the persons chosen by her as her attorneys. Personal service on the defendant was dispensed with, as was any requirement for a tutor. No useful purpose would have been served by proceeding otherwise. There is no other person who, on the evidence before the Court, should have been given notice of the proceedings or called upon to serve as a contradictor.

THE FACTUAL MATRIX

1. The instrument the subject of the proceedings was explicitly executed with the intent that it operate (as it is entitled) as an "Enduring Power of Attorney" governed by the Powers of Attorney Act 2003 NSW.
2. At the time the instrument was executed, the Act prescribed a form that included a statement in the following terms: "I give this power of attorney with the intention that it will continue to be effective if I lack the capacity through loss of mental capacity after its execution".
3. By reason of a clerical error (thought to have originated in a computer glitch not noticed by the draftsman or any of the parties who executed the instrument or certified its execution) that statement was omitted from the instrument.
4. The error was only recently discovered when one of the two attorneys appointed (jointly and severally) by the instrument endeavoured to deploy it in circumstances in which the principal (in the common assessment of the attorneys and a third party dealing with the attorneys) was mentally incapable of transacting the business the subject of a transaction then, and still, proposed to be effected for the benefit, and in the interests, of the principal.
5. In the absence of an order for rectification, the Registrar General declined to register the instrument as an enduring power of attorney.
6. That the principal intended the instrument to operate as an "enduring" power of attorney is readily to be inferred from the form of the instrument itself. Amongst other indicators of this is the fact that the missing statutory formula, had it appeared as intended, would have followed under a heading, "Enduring Power of Attorney". Another indicator of the principal's intent (and that of the attorneys in accepting appointment) is that the instrument is endorsed with a certificate required by the Act and the acceptance of the attorneys in conformity with the Act.
7. The instrument was executed along with an enduring guardianship appointment of the same date in favour of the attorneys, who are also the main beneficiaries of a will of the principal (retained in the custody of the NSW Trustee) earlier executed by her.

THE PROBLEM

1. The omission of the statutory formula from the defective instrument cannot, in my opinion, be discounted by reference to s 80 of the Interpretation Act 1987, which, so far as material, reads as follows: "80 Compliance with forms (1) If a form is prescribed by, or approved under, an Act or statutory rule, strict compliance with the form is not necessary but substantial compliance is sufficient. (2) If a form prescribed by, or approved under, an Act or instrument requires the form to be completed in a specified manner, or requires specified information to be included in, attached to or furnished with the form, the form is not duly completed unless it is completed in that manner and unless it includes, or has attached to or furnished with it, that information."
2. The omitted statement, although formal, was required by a prescribed form and its omission stands in the way of a finding that there was substantial compliance with the prescribed form.
3. If the instrument were intended to operate only as between the principal and her attorneys, the clerical error might be thought to have been overcome by a determination that, upon the proper construction of the instrument, it reads as an enduring power of attorney. Objectively, and subjectively, that was the intention of all parties.
4. However, the essence of any power of attorney instrument is that it must be able to be relied upon generally, not merely by people who are in one sense or another privy to it. An enduring power of attorney, in particular, is a document which, if deployed, may be relied upon not only by the principal and an attorney but by third parties unable to rely upon a confirmation of authority by a direct dealing with an (incapacitated) principal. It is, in that sense, in the nature of an instrument of title, and there is accordingly utility, if not necessity, in ensuring that it correctly records the intention of the principal.

THE SOLUTION

1. In my opinion, the problem presented in these proceedings can be solved upon an exercise of equitable jurisdiction (in conjunction with an exercise of protective jurisdiction) by an order for rectification.
2. The fact that the instrument may be thought to be in the nature of a deed poll is no impediment to the making of an order for rectification: Nicholas Seddon, Seddon on Deeds (Federation Press, Sydney, 2nd ed, 2022), paras [5.10] and [6.26]; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 331A-E, 340E-F and 345C. If it is material that the defendant's power of attorney could only come into effect, according to its terms, if accepted by his nominated attorneys, the fact is that all three parties shared the same intention that the principal's grant of a power of attorney would operate after a loss of mental capacity on the part of the principal. That was a shared intention.
3. In a case such as the present, the Court's inherent protective jurisdiction is available not only to authorise a rectification order, if necessary, to serve its protective purpose.
4. Upon an exercise of protective jurisdiction the Court could address problems underlying a defective instrument by a scheme of orders designed to implement a regime for management of the principal's affairs similar to that contemplated by the principal at the time she executed the defective instrument.
5. The Court's jurisdiction routinely runs to the appointment of a committee of the estate, the equivalent of a protected estate manager appointed by the Court under the NSW Trustee and Guardian Act 2009, without engaging the administrative regime for which the NSW Trustee and Guardian Act provides. As relied upon by NSW courts, the classic exposition of the nature of a committee of the estate (and a committee of the person) is Theobald's The Law Relating to Lunacy (London, 1924).
6. In the present case, the simple solution (which I adopt) is to order that the document be rectified. I am satisfied that the true intention of the defendant at the time she executed the subject instrument was that it operate as an enduring power of attorney, and that when her nominated attorneys formally accepted appointment to the office of attorney by their execution of the instrument they too intended that it operate as an enduring power of attorney.
7. I am also satisfied that, viewed in the present and prospectively, it is in the best interests of the defendant that, by an order for rectification, her attorneys be confirmed in the office of an enduring attorney. The different perspectives of the Court's protective and equity jurisdictions coalesce in an order for rectification
8. The original instrument, as executed, has been presented to the court. I have returned it to the care and custody of the attorneys, together with a sealed copy of the Court's orders, to which a sealed copy of the instrument has been attached.

COSTS

1. The NSW Trustee has accepted that its costs should be borne by it but paid out of the Reserve Fund pursuant to s 109 of the NSW Trustee and Guardian Act.
2. I have also, without objection, ordered that NSW Trustee pay the reasonable legal costs (if any) of the defendants' attorneys incurred in connection with these proceedings, such costs also to be paid out of the Reserve Fund.

ORDERS

1. The operative orders made by the Court were to the following effect: 1. ORDER that the document entitled "Power of Attorney of [the Incapacitated Principal]" dated 11 December 2017 be rectified by inserting the words "I give this power of attorney with the intention that it will continue to be effective if I lack the capacity through loss of mental capacity after its execution" immediately after the heading "2 Powers". 2. ORDER that there be no order as to the costs of [the NSW Trustee] to the intent that it bear its own costs of the summons, such costs to be paid out of the Reserve Fund pursuant to section 109 of the NSW Trustee and Guardian Act 2009 NSW. 3. ORDER, subject to further order, that the NSW Trustee pay the reasonable legal costs (if any) of [the Principal's two nominated Attorneys] incurred in connection with these proceedings, such costs to be paid out of the Reserve Fund. 4. RESERVE to [the NSW Trustee] and any interested person liberty to apply for further or consequential orders in the working out of these orders.

Amendments 25 February 2025 - At [20] and [28] "/" was removed 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: 25 February 2025