In an important decision for people considering their estate
plan, the Supreme Court of New South Wales has recently reiterated
the limits on an attorney's ability to use a power to benefit
themself. But even with this protection, the case highlights the
need for people to carefully consider who they appoint as their
attorney and to understand what powers they will be granting to
that person and when those powers can be exercised.
Aviva Cohen by her tutor the New South Wales Trustee and
Guardian v Shalom Cohen  NSWSC 336
In late 2000, Mrs Cohen, the plaintiff, granted to her son, Mr
Cohen, the defendant, an Enduring Power of Attorney (POA). To
recap, an enduring power of attorney is a document whereby a person
(the principal) grants to another person (the attorney), the power
to manage the principal's legal and financial affairs when the
principal loses capacity to do so for themself.
The POA granted to Mr Cohen contained the usual power to do
anything that Mrs Cohen may lawfully authorise an attorney to do.
However, the POA also permitted the attorney to "execute
any assurance or other document, or do any other act, whereby a
benefit is conferred on him". As a result, the POA gave
Mr Cohen wide powers to do any act on behalf of his mother which
would confer a benefit on himself. There was no evidence to suggest
that Mrs Cohen did not have capacity when the POA was executed and,
because the POA was an enduring power of attorney, it would
continue in effect if she subsequently lost capacity.
In late 2001, Mrs Cohen purchased a property at Lane Cove in her
sole name. The Lane Cove property was her main asset and she lived
there until about mid 2012 when she moved into a nursing home. Mrs
Cohen received a government pension and did not have any other
A year after Mrs Cohen had moved into the nursing home, Mr
Cohen, using the POA, transferred the Lane Cove property to himself
for $1.00, leaving Mrs Cohen without any assets. A couple of months
later, Mr Cohen resigned as attorney for his mother, leaving her
without anyone to manage her legal and financial affairs.
As nursing home costs mounted and remained unpaid, the manager
of the nursing home applied to the NSW Civil and Administrative
Tribunal to have a financial manager appointed to manage Mrs
Cohen's affairs. The application was successful and the NSW
Trustee and Guardian was appointed as the financial manager of Mrs
In the course of reviewing Mrs Cohen's affairs, the NSW
Trustee and Guardian looked into the transfer of the Lane Cove
property. Mr Cohen asserted that "the property was
purchased with his funds and put into his mother's name to be
held in Trust for him." Mr Cohen made an offer to resolve
the matter but this was not accepted by the NSW Trustee and
Guardian on behalf of Mrs Cohen. As a result, the NSW Trustee and
Guardian started proceedings to set aside the transfer of the Lane
At the hearing (at which Mr Cohen did not appear), the NSW
Trustee and Guardian submitted that although the Mr Cohen had the
power to transfer title of the Lane Cove property to himself, he
should not have done so because the transfer was not for Mrs
Cohen's benefit and in fact it seriously disadvantaged her by
depriving her of her only substantial asset.
The judge agreed that Mr Cohen's act of transferring the
property to himself was an abuse of the power given to him under
the POA and ordered him to transfer the property back to his
In the course of his judgment, the judge reiterated that the
relationship between a principal and the attorney is a fiduciary
one and as a result:
the attorney must act in good faith towards and for the benefit
of the principal; and
the attorney must refrain from putting himself in a position
where his own personal interests conflict with the interests of his
The judge also confirmed that, whilst the terms of a power of
attorney set out the extent of the powers, the fiduciary duty that
the attorney owes to the principal regulates how the powers can be
properly exercised. In short, there is an important difference
between lacking power, having power and abusing power.
WHAT DOES THIS MEAN FOR ME?
Drafted properly, a power of attorney is a very helpful legal
document which should form part of everyone's estate plan. If
you have appointed someone as your attorney under a power of
attorney, you should carefully review its terms to see whether they
can use the power to benefit themselves or any other people and, if
so, whether this is desirable. You should also review the document
to find out whether the attorney can use the power while you have
capacity or only after you lose capacity.
Sect.117 can deal with false statements and knowingly making false allegations of violence could justify a costs order.
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