New powers of attorney laws take effect in Victoria

On 1 September 2015, the Powers of Attorney Act 2014 (Vic) will commence. The Act is intended to simplify and consolidate certain aspects of Victoria's powers of attorney laws and to improve the protections against abuse of enduring powers of attorney.
 

Overview

The Powers of Attorney Act 2014 (Vic) (New Act) consolidates the current law concerning certain enduring powers of attorney in an attempt to achieve a more simplified legal framework in Victoria.

The New Act also provides increased safeguards for people making enduring powers of attorney and sets out clear duties for an attorney acting under an enduring power of attorney.

For your ease of reference, where this article refers to:

  • the principal — it is referring to the person who is giving the decision making power via the power of attorney;
  • the attorney — it is referring to person to whom the power is given to make decisions.

Clarifying and consolidating Victoria's enduring powers of attorney laws


Current legislative provisions

There are currently three types of enduring power of attorney:

  • Enduring Power of Attorney (Financial) which is governed by the Instruments Act 1958 and allows an appointed attorney to make decisions in relation to financial matters on the principal's behalf;
  • Enduring Power of Guardianship which is governed by the Guardianship and Administration Act 1986 and allows an appointed attorney to make non-financial decisions for a principal, including lifestyle and some health care decisions; and
  • Enduring Power of Attorney (Medical Treatment) which is governed by the Medical Treatment Act 1988 and allows an appointed attorney to make medical decisions including the decision to accept or refuse treatment.

Under the New Act

The New Act will repeal the provisions relating to the Enduring Power of Attorney (Financial) and the Enduring Power of Guardianship and replace them with a single enduring power of attorney.

The New Act does not deal with the Enduring Power of Attorney (Medical Treatment) which will continue to be governed by the Medical Treatment Act 1988.

How does the New Act protect principals against abuse of enduring powers of attorney?


1. It clarifies when a principal will have decision making capacity

It is important to know when a principal has decision-making capacity because under some enduring powers of attorney, an attorney's decision-making duties only commence when the principal becomes incapacitated.

The New Act makes it clear that a principal has capacity to make a decision if that person is able to:

  • understand the information relevant to the decision and the effect of the decision;
  • retain that information to the extent necessary to make the decision;
  • use or weigh that information as part of the process of making the decision; and
  • communicate the decision and the person's views and needs as to the decision in some way, including by speech, gestures or other means.

For the purposes of the New Act, a principal is presumed to have decision making capacity unless there is evidence to the contrary.

It is important to note that a person may not make an enduring power of attorney under the New Act unless the person has decision making capacity in relation to making the enduring power of attorney. Therefore, caution must be exercised in assessing a person's decision-making capacity at the time of making the appointment, otherwise any decision made by the attorney may be challenged or invalidated.

2. The New Act includes principles to guide decision-making of an attorney

The New Act also provides guidance to persons acting on behalf of a principal who lacks decision-making capacity. This ensures that the principal is given practicable and appropriate support to still participate in the decision-making process as much as possible in the circumstances.

The New Act requires an attorney who is acting on behalf of a principal who does not have decision-making capacity to:

  • give effect (where practicable and appropriate) to the principal's wishes;
  • encourage the principal to participate in the decision-making process; and
  • act in a way that promotes the personal and social wellbeing of the principal, taking into account considerations such as religious beliefs, values and confidentiality of the principal.

3. The New Act clearly sets out the duties of enduring attorneys

The New Act prescribes the following duties of an attorney appointed under an enduring power of attorney:

  • to act honestly, diligently and in good faith;
  • to exercise reasonable skill and care;
  • to not use the position for profit (unless remuneration is permitted under the New Act[1]);
  • to avoid acting where there is or may be a conflict of interest unless the power so authorises;
  • to not disclose confidential information gained as the attorney under the power unless authorised by the power or by law; and
  • to keep accurate records and accounts.

The penalties for attorneys under the New Act who use their powers under an enduring power of attorney dishonestly to obtain a financial advantage, or cause loss to the principal, are significant, and include a $90,000 fine or up to 5 years imprisonment, or both.

How will the New Act affect existing Cleardocs products?

The New Act expressly provides that any Enduring Powers of Attorney (Financial) or Enduring Powers of Guardianship which were in force before 1 September 2015 are not affected by the New Act and continue to be valid.

Therefore, any Cleardocs enduring power of attorney product which is purchased and correctly executed, witnessed and certified in accordance with the relevant current law by the end of 31 August 2015 should remain valid under the New Act.

The current Cleardocs enduring power of attorney documents will not be available for purchase from 29 August 2015 in order to minimise the risk of a customer executing their enduring power of attorney after 1 September 2015.

The New Act provides that an enduring power of attorney must be in the prescribed form. The prescribed form under the New Act has not yet been published. Once the prescribed form has been published, Cleardocs will provide an enduring power of attorney product that complies with the New Act.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of topics.

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[1] Section 70 of the Powers of Attorney Act 2014 (Vic).