Joint powers of attorney - The problem with joint appointments and how to overcome it

When a person signs an enduring power of attorney (one that survives a loss of capacity of that person) that appoints two or more people to act jointly for them, problems can arise if proper consideration has not been given as to what should happen in the event that one of the joint attorneys cannot act because of death or legal incapacity.  Our firm recently assisted the family of a medical practitioner (doctor) who were referred to us to assist them with such a problem.

Facts

The doctor appointed his wife and four of his children to be his joint attorneys to manage his financial affairs by way of an enduring power of attorney signed by him in 2010.  The doctor has an age related illness and has lost legal capacity.  After losing his capacity, his daughter who was one of the joint attorneys, died.  The issue was whether the death of the daughter joint attorney terminated the 2010 power and what could be done to rectify the problem.  The issue was urgent as property transactions needed to be undertaken for the doctor.

The relevant law

The relevant law is contained in the general law and in New South Wales statutory law.  The Powers of Attorney Act 2003 (Act) is the applicable statutory law.  Section 46(1) of the Act provides that where a power attorney appoints two or more persons as joint attorneys, the power of attorney is terminated if the office of one the attorneys becomes vacant (which by definition includes the death of a joint attorney).  Section 46(1A) of the Act further provides that such a power of attorney is not terminated if the power of attorney document provides otherwise and at least one of the attorneys (or a substitute attorney) continues to act as attorney.

Unfortunately for the doctor and his family, s46(1A) was only introduced into the Act by the Powers of Attorney Amendment Act 2013 (NSW) and was not in existence when the doctor signed his power of attorney in 2010.  The surviving joint attorneys were advised to apply to the Guardianship Division of the NSW Civil and Administrative Tribunal (NCAT) to deal with the issue that had arisen.

NCAT application

The application to NCAT was to reinstate the enduring power of attorney and vary it by including a clause that provided the power of attorney would not be terminated if the office of one or more of the attorneys became vacant, provided at least two of the joint attorneys remained in office.  This additional clause was to overcome the same problem occurring again.  The application also asked that another child of the doctor be appointed as substitute attorney for the deceased joint attorney.

There was an issue as to whether NCAT had the jurisdiction to review an enduring power of attorney that had been terminated due to the operation of s46(1) of the Act.  Submissions put forward on behalf of the doctor indicated that there were two prior similar cases where jurisdiction was established.  The cases were FDT [2010] NSWGT4 and BDN [2014] NSWCATGD.  The reasoning in those cases was adopted by NCAT to determine that it did have jurisdiction to review the doctor’s power of attorney that had been terminated by the death of his daughter joint attorney.

Orders were successfully obtained that reinstated the doctor’s power of attorney from the date that it lapsed, being the date of the death of the daughter.  A substitute attorney was appointed and the further clause referred to above was inserted in the power of attorney document.  The orders were made pursuant to s36 of the Act.

Overcoming the problem

The obvious first step is to raise the possibility of what should happen on the death or incapacity of a joint attorney with clients at the time the power of attorney is being prepared.  A clause can be included in the power of attorney document to specifically provide that it will not be terminated on the death or incapacity of one of the joint attorneys and it could also go on to make provision for a substitute attorney.  Alternatively, appropriate dormant powers of attorney with letters addressed to the attorneys in those documents can be signed on the basis that they will only come into operation on the incapacity of the person signing the documents and the death or incapacity of a named joint attorney.  A further option is cascading powers of attorney with appropriate clauses about when they are to commence operation.

Author: Gerard Basha