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Naomi de Costa, Special Counsel 24 July 2014 Miller Harris in Business.

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Presentation on theme: "Naomi de Costa, Special Counsel 24 July 2014 Miller Harris in Business."— Presentation transcript:

1 Naomi de Costa, Special Counsel 24 July 2014 Miller Harris in Business

2 We are all getting older Almost 280,000 Australians currently live with dementia Each week, there are 1,600 new cases of dementia in Australia. That is expected to grow to 7,400 new diagnoses each week by 2050 Dementia is only one reason why a person may have impaired capacity From Alzheimers Australia dementia/statistics.aspx Miller Harris in Business

3 The advice is always the same Going to see the solicitor about estate planning has the same attraction as going to the dentist However, all prudent financial planners, accountants and other professional advisors agree that everyone should have an up to date will and power of attorney (at least) Consequences of not having an EPOA are bad: RT (unreported)15 July 2014, Supreme Court of Queensland at Cairns Miller Harris in Business

4 But – what about the attorney? In most instances, the attorney is not asked about whether they would be appointed until they are presented with the completed document, and asked to sign to accept the role. Sometimes, they are not even asked to sign, and may not be aware of the appointment. This is still a valid appointment on acceptance: Whitney v National Australia Bank Ltd [2007] QSC 397 The standard Queensland government short form EPOA is 14 pages long. The long form EPOA is 20 pages long. I am not convinced attorneys (or principals) read any or all of the material included. However, I have never had an attorney refuse to sign the EPOA document. Miller Harris in Business

5 What are you getting yourself in for? Powers of Attorney Act 1998 is designed to benefit the principal Imposes very high standards of conduct on the attorney (including lay attorneys), which may commence from the time the EPOA is signed by the principal Includes a series of evidentiary burdens for the attorney to overcome Attorneys are personally liable for decisions made and not usually entitled to an indemnity Attorneys can only be paid for their work in limited circumstances No time limit under the Act, other than six months from the date of death of the Principal Miller Harris in Business

6 Conflict transactions Section 73, Powers of Attorney Act 1998 An attorney for a financial matter may enter into a conflict transaction only if the principal authorises the transaction, conflict transactions of that type, or conflict transactions generally A conflict transaction is a transaction in which there may be conflict, or which results in conflict, between: a) the duty of the attorney toward the principal; and b) either: the interests of the attorney, or a relation, business associate or close friend of the attorney; or another duty of the attorney Miller Harris in Business

7 Presumption of undue influence Section 87, Powers of Attorney Act 1998 The fact that a transaction is between a principal and 1 or more of the following – a) an attorney under an EPOA or AHD; b) a relation, business associate or close friend of the attorney; gives rise to a presumption in the principal’s favour that the principal was induced to enter the transaction by the attorney’s undue influence. Miller Harris in Business

8 Smith v Glegg [2004] QSC 443 Conflict transaction does not need to be a transaction which is entered in to by the attorney: principal signed the contract herself Presumption of undue influence: applies even where there is no concern regarding the principal’s capacity to enter in to transactions and; possibly (arguably) even before the attorney is able to exercise power under the document e.g. EPOA conditional on a future date/condition being reached Miller Harris in Business

9 Summary so far… The attorney can be appointed without being advised in advance Conflict transactions, and the presumption of undue influence may apply from that time Reversal of the onus – up to the attorney to prove any transaction is authorised, appropriate etc. Miller Harris in Business

10 Some problematic examples Accountant is appointed as an attorney – every invoice issued is a conflict transaction Family business – where principal is primary shareholder and attorney is employee/director: wages paid, cars bought from company are also conflict transactions (even if the principal signed for those transactions) Husbands and wives: transfers between separately held and joint property Fish and chips with no receipt? Miller Harris in Business

11 Nobody seems to know… By these steps, Ted and Bill did what they could both to carry out Ted’s wish to disinherit his children and to protect his estate against any claim they may make after Ted’s death. Surprisingly, given the involvement of lawyers, no one appears to have taken account of the effect of s 87 of the Powers of Attorney Act 1998 (Qld). Jackson J at [73], Baker & Ors v Affoo & Ors [2014] QSC 46 Miller Harris in Business

12 Some solutions – at the time of drafting Conflict authority clauses – especially for spouses, accountants, business partners – but ensure these are properly understood Think through the types of decisions an attorney may need to make – in the short or long term Never include a several appointment, and avoid majority appointments – even if you aren’t acting, you are still supposed to be exercising the power for the benefit of the principal and supervising your co- attorneys Miller Harris in Business

13 The solutions once the EPOA is in effect (and principal still has capacity) Where any significant transaction is contemplated, the principal and the attorney should receive independent legal advice: cases indicate this is possibly the only way to ensure the transaction is not set aside Ensure accurate records are kept at the time of the transaction, and until 6 months after the date of death – currently I am trying to find the records of a transfer that took place in 2004 and it’s really, really difficult… Miller Harris in Business

14 Baker v Affoo [2014] QSC 046 Elderly gentleman transfers the farm inter vivos to his neighbours (instead of his children) Clear evidence over many years of his intention to exclude children from will Saw a solicitor (but it was the neighbours’ solicitor) Saw a doctor who clearly certified capacity and confirmed the gentleman’s wish to disinherit his children Transfers held to be conflict transactions – could not rebut presumption, and the transfers were set aside Miller Harris in Business

15 If principal has lost capacity to make decisions: QCAT authority/release What about if the principal has lost capacity to make decisions? If a conflict transaction is contemplated, the attorney must seek approval from Queensland Civil and Administrative Tribunal (QCAT) Must show the transactions is in the best interests of the principal Can be retrospective, but must be before death Miller Harris in Business

16 Role of professional advisors Most professional advisors have fiduciary duties to the principal, but limited duties to the attorney – general obligation to always act in their best interest. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. Millett LJ held in Bristol and West Building Society v Mothew Miller Harris in Business

17 Role of professional advisors If you are instructed to act on the direction of an attorney, and the transaction may be a conflict transaction, or otherwise be in breach of the Powers of Attorney Act the attorney should be directed to seek legal advice, and as professional advisor, you should seek your own advice Under the Land Titles Practice Manual [1-2040], the Titles Office is entitled to refuse a transfer of land that amounts to a breach of the Powers of Attorney Act – if there is such a right, then professional advisors should be doing the same, especially where the original retainer derives from the principal Identify – who is our client? Who do we owe duties to? Usually will be the principal. Miller Harris in Business

18 Thank you! Naomi de Costa Special Counsel Queensland Law Society Accredited Specialist, Succession Law Member, Society of Trust & Estate Practitioners Miller Harris in Business

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