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POA and Undue Influence

Written by Karen-Anne Cornell

Power of Attorney and Undue Influence – The Risks

Enduring Powers of Attorney is a vital document which allows a person (“the principal”) to appoint an attorney to make decisions for them in respect of their financial affairs, management of their finances, health and a range of other personal matters. The Enduring Power of Attorney becomes effective when the principal has lost capacity to make important decisions for themselves.

Once appointed, an attorney owes a serious legal duty to act in the principal’s best interests at all material times. They need to be aware that a great deal of caution is required if they intend to make any transactions with the principal, such as the principal giving them, or their associates or relatives any form of benefit. In such situations, there is a presumption of undue influence. This means that a court or tribunal will assume the attorney used their position to take advantage of the principal and unduly influenced them to gain the benefit, unless they can prove otherwise.

The case of Baker & Ors v Affoo & Ors [2014] QSC 46, which was heard in the Supreme Court of Queensland is a prime example of this risk. In that case the facts were as follows:

• Before Edward Blair’s death, he had appointed his best friend and neighbour William Afoo as his attorney by way of an Enduring Power of Attorney.
• Edward also transferred his property to William’s two sons. At about the same time, Edward prepared a will leaving each of his three children only $200 and the residue of his estate to William. Upon Edward’s death, William and his wife Rhonda were appointed as executors of the will.
• Edward’s children, (“the Bakers”), commenced court proceedings against William and his wife, claiming that William must have unduly influenced Edward while he was the acting attorney for William pursuant to the Enduring Power of Attorney.
• Given that property had been transferred from a principal of an Enduring Power of Attorney to an attorney, the Court was asked to decide whether William could (in the Court’s view0 successfully rebut the presumption of undue influence, which is set out in section 87 of the Power of Attorney Act 1998 (Qld).
• William provided evidence of Edward’s capacity and intentions at the time of making his new will, but ultimately the Hon Justice Jackson decided that the evidence was not enough to rebut the presumption that William must have unduly influenced Edward. As such the Court ordered:
  
  1. a constructive trust over the property;
  2. the Baker sons become executors of their late father’s estate;
  3. the respondents pay the applicants’ legal costs; and
  4. the matter be adjourned to hear the Bakers’ Family Provision claim about the will.

Conclusion

Despite William thought he was acting in his friend’s best interests and effecting his wishes; and despite there was some evidence before the Court that Edward had wanted for some time to disinherit his children, William was unable to rebut the presumption of undue influence. There were several ways this unfortunate situation could have been avoided and for Edward to have achieved his wishes regarding his estate.

Attorneys under an Enduring Power of Attorney should always consider their duties carefully. It is recommended that they seek independent legal advice about how best to protect themselves and / or their associates and relatives from unnecessary litigation and the associated costs.

For more information regarding Enduring Powers of Attorney, an attorney’s duties, making an Enduring Power of Attorney, a will or obtaining advice if you suspect someone you know has been unduly influenced, please contact our experienced team at the Summit Law Group Australia on TEL NO to arrange an appointment.