Powers of attorney and enduring documents in New South Wales 

This article states the law of New South Wales. The Powers of Attorney Act 2003 (NSW) governs both ordinary and enduring powers, and the difference that matters is what happens when the principal loses capacity¹. The prior question in any problem is whether the instrument satisfied s 19, because an instrument that does not is simply not an enduring power and the authority ends at the loss of capacity.

Creating an enduring power

Section 19(1) imposes three cumulative requirements. The instrument must be expressed to be given with the intention that it will continue to be effective even if the principal lacks capacity through loss of mental capacity after execution. Execution by the principal must be witnessed by a prescribed witness who is not an attorney under the power. And there must be endorsed on, or annexed to, the instrument a certificate by that witness stating five things: that the witness explained the effect of the instrument to the principal before it was signed; that the principal appeared to understand the effect of the power; that the witness is a prescribed witness; that the witness is not an attorney under it; and that the witness witnessed the principal's signing.

The certificate is the distinctive feature of the scheme and is substantive, not formal: the witness must actually explain and attest to apparent understanding, carrying a capacity check into the execution of every enduring power.

Section 19(2) defines prescribed witness to include a registrar of the Local Court, an Australian legal practitioner, an approved-course licensee under the Conveyancers Licensing Act 2003 (NSW) or employee of the NSW Trustee and Guardian or a trustee company, an independently instructed overseas practitioner, and anyone prescribed by the regulations.

The contrast with South Australia is instructive. There, s 6(2) of the Powers of Attorney and Agency Act 1984 (SA) requires only an attesting witness authorised to take affidavits plus a statement of acceptance by the donee. Both jurisdictions require acceptance; only New South Wales requires the witness to vouch for understanding.

No authority until acceptance

Section 20(1) provides that an enduring power "does not operate to confer any authority on an attorney until the attorney has accepted the appointment by signing the instrument creating the power". Where more than one attorney is appointed, the power confers authority only in relation to those who have accepted (s 20(2)). Acceptance may occur at execution or at any time afterwards (s 20(3)), and the section extends to substitute attorneys (s 20(4)).

An answer must therefore ask, for each attorney separately, whether that attorney had accepted at the time of the act in question.

The effect once the principal loses capacity

Section 21(1) is the operative provision: an act done by an attorney within the scope of the power, and of such a nature that it is beyond the principal's understanding through mental incapacity at the time, is as effective as it would have been had the principal understood the nature of the act.

Two limits follow. Section 21(2) does not save the power from becoming ineffective for any reason other than supervening mental incapacity, and s 21(3) applies only where the instrument expresses no contrary intention, so the instrument itself may narrow the effect.

Gifts and benefits: the financial abuse provisions

Three sections restrict what an attorney may do without express authorisation, and together they are where most financial abuse problems are resolved.

A prescribed power of attorney does not authorise an attorney to give a gift of the principal's property unless the instrument expressly authorises it (s 11(1)); to do anything as a result of which a benefit would be conferred on the attorney, unless expressly authorised (s 12(1)); or to do anything conferring a benefit on a third party, unless expressly authorised (s 13(1)). Each section carries a note recording that it restates a rule of the general law, so whether authorisation is express is determined by ordinary principles of construction at common law and in equity.

Each also has a second limb: an instrument including the prescribed expression set out in Schedule 3 authorises the kinds of gift or benefit that Schedule specifies for that expression. Section 10 separately provides that a prescribed power does not confer authority to act as trustee.

Ademption, and the named beneficiary

Section 22 addresses a problem arising after the principal dies. Where an attorney has sold, mortgaged, charged, disposed of or otherwise dealt with property, a person named as a beneficiary under the deceased principal's will has the same interest in the surplus arising from the dealing as they would have had in the original property (s 22(1)), and that surplus is taken to be of the same nature as the property dealt with (s 22(2)).

A beneficiary is "named" if referred to by name, or if they answer a description or belong to a specified class (s 22(6)). The section is subject to any Supreme Court order under s 23. Its practical effect is that an attorney cannot, deliberately or otherwise, defeat a testamentary gift by dealing with the subject property.

Interstate enduring powers

Section 25 applies the same double limit South Australia does: an interstate enduring power has effect as if made under this Act, but only to the extent its powers could validly have been given here (s 25(1)), and subject to any limitations under its home law (s 25(2)). Section 25(4) adds an evidentiary route — a certificate by an Australian legal practitioner that the instrument met its home jurisdiction's formal requirements is prima facie evidence of that fact.

Applying this in a problem question

1. Test the instrument against all three limbs of s 19, and check the certificate contains each of the five statements.
2. Ask, for each attorney and any substitute, whether they accepted by signing under s 20 before the act in question.
3. For an act done after loss of capacity, apply s 21(1), then check the instrument for a contrary intention under s 21(3).
4. For any gift or benefit, identify which of ss 11, 12 and 13 applies and ask whether the instrument expressly authorises it or uses a Schedule 3 expression.
5. Where the principal has died and property was dealt with, consider s 22 for a named beneficiary.
6. For an interstate instrument, apply both limbs of s 25 and consider a s 25(4) certificate.

Self-check

• Have I checked the s 19 certificate, not merely that a witness signed?
• Have I asked whether each attorney had accepted at the time of the act?
• Have I identified which of ss 11, 12 and 13 governs the transaction?
• Have I named this as New South Wales law?