When can an attorney enter into a conflict transaction?

When can an attorney enter into a conflict transaction?

02 December 2019 Topics: Estate planning, Professional advisers, Estate administration and disputes

Generally, an attorney appointed under a general or enduring power of attorney cannot enter into a conflict of interest transaction. However, conflict transactions can be allowed by:

  • the terms of the power of attorney
  • the person granting the power of attorney authorising the transaction (if they still have capacity)
  • seeking authorisation from the relevant court or tribunal before the transaction takes place.

The requirement for attorneys to seek approval for a conflict transaction prior to the transaction taking place1 sometimes means that attorneys are unintentionally breaching their duties.

To rectify this, the Queensland Government passed the Guardianship and Administration and Other Legislation Amendment Act 2019 (Amendment Act) earlier in 2019 which, among other things, will amend the Powers of Attorney Act 1998 (Qld) to allow attorneys to seek retrospective approval for conflict of interest transactions.

While the Amendment Act has been passed, it is not yet in force.

Why the changes are important

Under an enduring power of attorney, attorneys are given power to make decisions about personal, health and financial matters on behalf of the principal once the principal loses capacity. As a result, attorneys are often faced with making decisions where their interests may conflict with the interests of the principal.

Preventing an attorney from entering into a transaction that benefits the attorney is a fundamental duty required to protect the principal’s assets and well-being, and the integrity of the enduring power of attorney scheme. However, it is a strict duty, and this means that, at times, transactions that need to, or should, take place are caught within the blanket no conflict rule.

The ability to authorise conflict transactions provides the practical means by which the attorney can perform their role without unnecessarily breaching their duties. The Amendment Act now broadens the attorney’s ability to have the conflict transaction approved.

While authorisation for conflict transactions will now be more accessible, the Amendment Act does not absolve attorneys from acting in the best interests of the principal.

Power of attorney planning

The terms of all general and enduring powers of attorney must be considered carefully to ensure:

  • foreseeable conflict of interest transactions that the principal wishes to authorise are properly covered in the terms of the document to save the attorney from needing to seek authorisation from a court or tribunal
  • attorneys are not given inappropriately broad powers that allow them to enter into all conflict of interest transactions (we see many enduring powers of attorney where all conflicts are authorised).

Power of attorney disputes

We have advised a number of clients dealing with disputes that have arisen because an attorney has mismanaged the principal’s assets, for example:

  • mixing the principal’s pension income with the attorney’s pension income
  • utilising the principal’s income or superannuation entitlements benefits for the attorney’s own benefit
  • dealing with the principal’s assets in a way that will defeat the principal’s estate plan after their death.

These disputes don’t always arise because the attorney is acting with malice, but because they simply do not understand how to manage the principal’s assets after the loss of capacity.

To avoid or reduce these types of dispute, it is important for the enduring power of attorney document to be carefully considered, the attorney to seek advice about their role, and those interested in the principal’s well-being to make enquiries of the attorney’s actions.

Contact us

Please contact a member of our team if you would like to discuss your estate planning or a power of attorney dispute.

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  1. The Public Trustee of Queensland (as Litigation Guardian for ADF) v Ban [2011] QSC 380 adopted in Re SMJ [2014] QCAT 272

 

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.