Australia: Is It Enough If Legal Advice Is Given To An Attorney?

A recent unanimous decision of the New South Wales Court of Appeal in Spina v Permanent Custodians Limited (2009) NSWCA 206 highlights the risks faced by lenders who consider that independent legal advice with respect to loan and security documents given to the appointed attorney under a power of attorney, rather than to the donor personally, is acceptable.


Angelina Spina was an elderly widow of Italian heritage with limited ability to speak, read or write English. She owned her home at Cherrybrook, which was her only significant asset. However, due to failing health, she lived in a nursing home for some years, during which her home was rented out.

In 2003, Angelina granted an enduring power of attorney to her son, Michael. This was made in accordance with the then applicable section 163B of the Conveyancing Act 1919. Under it, Michael was authorised to execute an assurance or other document, or do any other act, whereby a benefit was conferred on him. The powers given to him were not subject to any other limitations and the document was registered at the Department of Lands.

Michael owned a company which carried on business as a wholesaler of tropical fruits, trading as Action Fruit Supply. He had arranged various loans for that business over a number of years, including a loan from NAB for $152,000 made to Michael and Angelina as co-borrowers, which was secured by a mortgage over Angelina's Cherrybrook home.

Michael's broker arranged the relevant loan from Permanent Custodians for $400,000 to Michael and Angelina as co-borrowers for the apparent purposes of refinancing the NAB loan, acquisition of future investment and costs. However, while part of the loan funds were to be applied towards the discharge of the NAB mortgage, the majority of the funds were actually applied for Michael's business purposes.

The loan agreement and mortgage over Angelina's property were signed by Michael both in his own right and also on Angelina's behalf under the enduring power of attorney. He received independent legal advice both in his own right and also, separately, in his capacity as attorney from solicitors purporting to act for Angelina and he made two distinct statutory declarations acknowledging the legal advice respectively given in those capacities.

What had the Supreme Court decided?

At first instance, Hammerschlag J found for Permanent Custodians, with the greater part of his judgment relating to the effect of the Power of Attorney Act 2003 which, in his view, operated to permit Michael to properly bind Angelina by signing as her attorney in the circumstances (despite clearly receiving a substantial personal benefit from the transaction).

In relation to Angelina's alternative claims for relief under the Contracts Review Act and on the ground of unconscionable conduct, he held that the facts did not justify the granting of relief. This was largely based on his Honour's acceptance that the advice given to Michael in his capacity as Angelina's attorney was sufficient to prevent her from establishing that she was in a position of special disadvantage in respect of her dealings with Permanent Custodians.

What did the Court of Appeal decide?

In a unanimous decision, forcefully delivered by Young JA, the Court of Appeal overturned Hammerschlag J's judgment and found for Angelina's estate (Angelina having since passed away) in respect of the claim for relief under the Contracts Review Act 1990. The court held that the mortgage signed on behalf of Angelina by Michael was partially void – to the extent that it related to more than one half of the amount needed to discharge the NAB loan. The mortgage was accordingly to be varied to the effect that Permanent Custodians could only enforce it in respect of 76/400ths of the moneys secured by it.

The power of attorney issue was not the subject of appeal and the unconscionable conduct issue didn't need to be determined, given the Contracts Review Act finding.

Interesting points to note

While the primary judge appeared to accept that independent legal advice given to an attorney was to be treated on the same footing as independent legal advice given direct to a donor (Angelina) and that this accordingly represented a significant obstacle to the success of Angelina's Contracts Review Act and unconscionability arguments, the Court of Appeal firmly rejected this. The court said that, in the present set of circumstances, if a lender is to rely on independent legal advice being given to the borrower, the latter herself must receive the independent legal advice.

Young JA did, however, concede that the position might be different if:

  • Angelina was clearly lacking mental capacity, or
  • the transaction were clearly for her benefit, or
  • the transaction was a purely commercial one with no flavour of possible influence from or benefit to some relative or friend.

His Honour was also uncompromising in his view of the primary judge's findings on the facts. Hammerschlag J had said that, even leaving aside the fact that there had been legal advice, he did not consider it would be reasonable for him to find on the facts before him that the lender had knowledge of any special disability or knowledge of facts that would have raised that possibility in the mind of a reasonable person in its position. In stark contrast to this, Young JA said: "it is difficult for me to agree that a reasonable person would not see a 'red light' when considering the scenario that the application for finance was being made:

  1. by an 86 year retired lady;
  2. by her son as her attorney;
  3. in circumstances where the son took a benefit;
  4. over the 86 year old's major asset;
  5. where there was no material to show the lady personally had been given legal advice;
  6. where, if the son died or was unable to repay the loan out of his income, the lady's home was at risk".

It is arguable that, at least in part, Angelina's role in this transaction could be viewed as being closer to a conventional guarantor than a borrower, and that the Court of Appeal's ultimate decision partially reflects this.

What lessons can be taken from this case?

In light of this decision, it is suggested that lenders who are content to rely on legal advice being given to an attorney, rather than the donor, personally, where the attorney has signed loan and mortgage documents for the donor, will be accepting the risk that a court will not consider that advice sufficient to successfully repel attacks of the type made in the facts of Spina, on its security documents.

At one end of the scale, the risk will be particularly significant where the facts include considerations similar to those summarised by Young JA as "red light" activators. However, at the other end, it will be considerably less - for example, where the donor lacks mental capacity at the time the mortgage is signed (assuming the power of attorney is an enduring power of attorney) or where the transaction is clearly for the donor's benefit, to the exclusion of the attorney's.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.