Powers of (or not of) an Enduring Attorney

Mr Bloggs recently requested advice as to his capacity, as an enduring attorney for his mother, to make decisions on her behalf. Mr Bloggs’ mother has two children – Mr Bloggs and his sibling. Mr Bloggs’ mother is the sole shareholder, sole director and secretary of the corporate trustee of the Family Trust. She recently lost full legal capacity to deal with her financial matters. Mr Bloggs queried the extent to which he can deal with his mother’s assets and her position as director of the corporate trustee.

What is an enduring power of attorney?

A person has full legal capacity when he understands the nature and effect of any document that he/she is executing. An enduring power of attorney is a legal agreement that enables a person (referred to as “Donor”) to appoint a trusted person(s) to make financial and/or property decisions on his behalf in relation to his individual assets.

Appointment of an enduring attorney

A Donor can appoint:

1. a sole enduring attorney – who acts individually; or

2. more than one enduring attorney as joint attorneys – both of whom have to act in agreement at all times; or

3. more than one enduring attorney as joint and several attorneys – any one of them can act on behalf of the Donor.

Scope of an enduring attorney’s powers:

An enduring attorney can make decisions on behalf of the Donor:

1. whilst the person still has capacity, but may be physically unable to attend to financial matters or real property matters; OR

2. when the Donor has lost full legal capacity.

An enduring attorney has authority, depending on the terms of the enduring power of attorney, to deal with the Donor's individual assets in the Donor's best interests. For example, an enduring attorney can make decisions in relation to Donor’s individual assets like bank accounts, shares, cars, jewellery and real properties held in his individual capacity.

Limits of an enduring attorney’s powers

An enduring power of attorney does not bestow any position(s) held by the Donor on the enduring attorney. For example, an enduring attorney will not be bestowed with the position of a trustee of a family trust or a director of a corporate entity in place of the Donor should he lose his full legal capacity.

The above scenario could lead to a spectrum of possibilities, a few of which are outlined below.

Scenario 1: If Mr Bloggs was appointed as a sole enduring attorney, he may appoint another person to act as a director, including himself, as Mr Bloggs’ mother will be deemed to have vacated her position as director due to her incapacity. Whilst exercising his powers as an attorney, Mr Bloggs’ decisions have to be in the best financial interest of the Donor, and he cannot give any considerations to the best interest of the family as a whole. Depending upon the family relations between Mr Bloggs, his sibling and other family members, Mr Bloggs’ decisions may or may not be satisfactory to them.

Scenario 2: If Mr Bloggs and his sibling were in agreement as to Mr Bloggs exercising his powers as a sole enduring attorney, the appointment of a director to the company and the associated matters can be dealt with in a frictionless manner.

Scenario 3: If both Mr Bloggs and his sibling were both appointed as joint enduring attorneys, they could both agree to vote on the mother’s share and appoint two persons as directors of the company, including themselves, to facilitate a smooth transition of the company’s affairs into the hands of the newly appointed directors.

Scenario 4: If there was any disagreement between Mr Bloggs and his sibling as to exercising powers as an enduring attorney, Mr Bloggs will need to initiate appropriate judicial proceedings to seek orders to deal with the matters relating to the company and the family trust.

Positive revelations

On a review of the enduring power of attorney it was revealed that Mr Bloggs and his sibling were both appointed as joint attorneys by their mother. Mr Bloggs and his sibling (fortunately) shared a cordial relationship, which assisted them in coming to a consensus to deal with the mother’s shareholding in the company and the mother’s position as a director of the trustee company of the family trust.

Takeaway message(s)

If you run a business and act as the sole director and secretary of a company, it is important that your estate plan must addresses the issue of who should act as director in your place in the event of your physical or mental incapacity or death.

If you intend appointing more than one attorney (joint or joint and several attorneys), you need to think about whether they will be able to work together to manage your personal property and financial affairs.

We have the necessary expertise and would be glad to provide legal services relating to preparing an Enduring Power of Attorney or advice as to an existing Enduring Power of Attorney.

Archana Luktuke3 August 2019

Mr and Mrs Joe Bloggs contacted me to seek legal advice on a proposed commercial lease provided by the real estate agent for their upcoming coffee shop in suburban Perth.

Mr and Mrs Bloggs were being rushed into signing the proposed lease, which they were not comfortable with. They started by explaining how their friend, who runs a hair dressing salon, was provided with extensive written information and a proposed lease to review before executing it. This was in stark contrast to a small seven-page template that they received by way of a proposed lease from their letting agency. I explained to Mr and Mrs Bloggs that their friend and they are subject to separate leasing legislation, however their due diligence before signing the proposed lease will assist them in the long run. In Western Australia, leases for commercial premises can be categorised as retail leases and commercial leases. It is important to note that all commercial leases in Western Australia are not governed by the same legislation.

A summary of the safeguards that a potential lessee of a commercial lease must consider is discussed below.

Retail Leases

Retail leases are governed by Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the “Retail Shops Act”) and are limited to premises:

(a) with a lettable area of 1,000 m2 or less;

(b) used for carrying on a business and that are in a retail shopping centre (a group of premises, 5 or more) or otherwise; and

As at 1 January 2013, 'specified businesses' are limited to:

(a) dry cleaning;

(b) hairdressing;

(d) shoe repair (which includes key cutting and engraving); and

(e) sale or rental of videos tapes, DVDs, electronic games and other similar amusements.

Any landlord, whose commercial premises is governed by the Retail Shops Act, is bound by significant number of obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease. In comparison landlords, whose premises is governed by the Transfer of Land Act 1893 (WA) and the Property Law Act 1969 (WA), are not bound by any specific obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease.

The Retail Shops Act did not apply to Mr and Mrs Bloggs proposed lease. Therefore, began Mr and Mrs Bloggs’ due diligence journey before executing their commercial lease.

Commercial Leases

The real estate agent provided Mr and Mrs Bloggs with two documents – the Commercial Lease with Annexures and General Terms and Conditions of the Lease. Mr and Mrs Bloggs were seeking advice as to whether both these documents captured the terms and conditions of the agreement between the landlord and them.

Typically, most real estate agents would fill in the details in a Commercial Lease template published by Real Estate Institute of Western Australia (REIWA) and provide it along with the General Terms and Conditions of Lease, also published by REIWA, to any potential lessee.

The General Terms and Conditions of Lease document sets out the obligations and liabilities of the landlord and the potential lessee, however any potential lessee must review whether the following key details have been included in Commercial Lease document provided to him/her:

(a) whether the potential lessee and the landlord have been accurately identified (is the potential lessee and/or the landlord an individual or a company);

(b) whether any guarantors have been included in the lease;

(d) whether any other items (such as equipment) owned by the landlord are being included with the lease;

(e) the term of the lease;

(f) whether the potential lessee has an option or multiple options to renew the lease;

(g) the amount of rent and the frequency of payment of rent;

(h) the mechanism and frequency of rent review;

(i) what are the types of outgoings that the potential lessee is to pay and an estimated amount per month;

(j) whether a security deposit or bank guarantee will be held and for what amount;

(k) permitted use of the premises;

(l) whether the landlord has obtained approvals for the intended use and signage from the local council and the strata management (if applicable);

(m) whether the potential lessee has been provided with copies of approvals for intended use;

(n) insurance requirements to be complied with by the potential lessee; and

(o) how the agreement can be terminated and what is the notice period.

Mr and Mrs Bloggs proposed lease document had the following inadequacies:

(a) incorrect details of the proposed lessee – Mrs Bloggs was named as a lessee in place of the potential lessee company;

(b) the landlord had not obtained any approvals from the local council and the strata management for the intended use and signage although the terms stated otherwise;

If Mr and Mrs Bloggs would have signed up a lease with the inadequacies mentioned above, they would have put themselves in a financial predicament as the incorrect person would have been bound to comply with terms of the lease without any approvals to run the business at the premises and with no estimate of the costs towards outgoings.

Takeaway Message

Caveat emptor – buyers (in this case potential lessees) beware:

The clear message for any individual or entity considering a commercial (non-retail) lease is to undertake adequate due diligence and seek independent legal advice before executing any commercial (non-retail) lease.

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.