Traps with Powers of Attorney

Posted on September 20th, 2016

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Traps with Powers of Attorney Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

The NSW Supreme Court recently dealt with a case about the transfer of a property under a Power of Attorney (PoA). Briefly, a Mrs Cohen, an elderly and infirm lady, granted a PoA to her son. The son was also the sole beneficiary of the only known Will of his mother.

The son used the PoA to transfer a home unit from her name to his. This particular PoA expressly permitted the son to confer a benefit on himself.

By the time of the hearing Mrs Cohen was in aged care; the cost of her care exceeded her pension; and the NSW Trustee & Guardian had been appointed to manage her financial affairs. It wanted to sell the unit, to release funds to be used for Mrs Cohen’s care. It argued the transfer was improper, despite the PoA allowing the son to benefit himself.

The Court set aside the transfer. Importantly it noted that although the PoA specifically permitted the son to convey a benefit upon himself; the son was also in a “fiduciary” relationship to his mother. The particular circumstances in which the transfer was made, amounted to a breach of his fiduciary obligations to have done so.

The use of PoAs can sometimes be tricky in practice. Mostly, they do not permit an attorney to confer a benefit on themselves (and, from time to time, attorneys who do benefit themselves are called to account). However, as this case shows, even when a PoA does specifically permit the conferring of a benefit on an attorney, the circumstances that exist at the time the benefit is conferred can be very important. A failure to act “fairly” can still result in the benefit being set aside: Cohen v Cohen [2016] NSWSC 336.

Tony Cavanagh is a Director at Mullane & Lindsay, and practises extensively in Commercial and other Litigation and Employment Law. If you require any assistance in these areas please contact Tony Cavanagh or contact our Newcastle office. 

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