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Powers of Attorney and what the Court can do to police an attorney's actions

22 November 2016

The Court of Appeal considered the nature of the duties owed by an Enduring Power of Attorney (EPOA) in the recent case of Vernon v Public Trust [2016] NZCA 388.

This was an unfortunate case where, between 2006 and 2011, Kenneth Vernon’s son, Ashley, used the EPOA his father had given him to misappropriate his father’s money. As EPOA, Ashley had control over Kenneth’s property and bank accounts. He spent the majority of Kenneth’s funds on meeting his own family’s needs and living expenses. Ashley paid for a motor vehicle, a trip to Australia, two cruises, wedding expenses and alcohol for himself and his family out of Kenneth’s bank accounts.

The Court found that Ashley owed a fiduciary duty to his father, and he had systematically abused power entrusted to him by his father.  Ashley’s wife was also held liable as she benefited fully and equally with Ashley from the misappropriated funds and was aware of her husband’s behaviour.

The Court set some clear guidelines about the level of care required to be exercised by an EPOA, and the nature of the fiduciary duties owed by an EPOA.

The Court will act to protect the donor if an EPOA is acting against the donor’s interests. In Vernon v Public Trust, the Vernons were liable to restore all misapplied funds to the estate. Judgment was entered against them jointly for $280,354 plus interest and costs.

Our top tips if you want to appoint an EPOA:

·             Appoint someone you absolutely trust. It doesn’t have to be a family member.

·             You can appoint two EPOAS for property with joint responsibility.

·             You can also name other people who have to be consulted with or provided with information by the EPOA, which is a good safety check on the EPOA’S exercise of power.

·             Your signature on the EPOA document must be witnessed by a lawyer, qualified legal executive, or representative from a trustee corporation, otherwise it will not be valid.

Important points for those who are attorneys:

·             The attorney must promote and protect the welfare and best interests of the donor only.

·             The attorney must act in the best interests of the donor at all times – they should carry out the role and make decisions as though they were the donor themselves, as far as possible.

·             The attorney has a duty to consult with the donor, as much as possible, even once the donor loses capacity to manage for themselves.

·             The attorney must keep records of decisions they make for the donor, and in particular, ensure they have a solid paper trail of all financial transactions.

 

Rebekah Revell is an Associate in the Family Disputes Team at Norris Ward McKinnon.  Email Rebekah at:  rebekah.revell@nwm.co.nz

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