Development of enduring powers

Historical origins

5.5        Powers of attorney have been used for centuries. The power of attorney gives legal power to one person—the attorney—to deal with financial and property matters on behalf of the person granting the power—the principal (or donor).^[2] The relationship created by the power of attorney is one of agency, with the attorney having power as agent for the principal.^[3] Agency attracts fiduciary duties in equity.^[4] Under the common law, a power of attorney terminates automatically when a principal loses legal capacity.^[5] This is because the principal-agent relationship is a personal one and the agent has no authority to do anything the principal could not lawfully do for themselves. When the principal has lost capacity and is unable to make legal decisions, those same decisions can no longer be made by the attorney.

5.6        This created concern for many people who wished to make a power of attorney specifically to allow an appropriate person to manage their affairs for them if their decision-making ability became impaired in their later years. In response, the states and territories enacted legislation in the 1970s and 1980s to establish ‘enduring’ powers of attorney—powers of attorney that continue (or endure) notwithstanding that a principal has lost decision-making ability.^[6]

5.7        An enduring power of attorney allows a person to appoint a trusted person (or persons) to act on their behalf should they lose legal capacity, upholding important principles of choice and control.^[7] Having an enduring attorney can avoid the need for a tribunal appointed substitute decision maker. An enduring attorney may also protect against abuse in circumstances where an older person with diminished decision-making ability is unable to protect themselves against fraud and abuse.

5.8        In relation to non-financial matters, the common law did not provide an equivalent to the power of attorney or enduring power of attorney. For example, it was not possible at common law for a person with legal capacity to appoint another person to make personal or lifestyle decisions for them—such as consenting to medical treatment or deciding that they should live in a secure environment—when that person lost the ability to make such decisions for themselves. To address this, the concept of ‘enduring guardianship’ was first introduced in Australia by the Guardianship and Administration Act 1993 (SA).^[8] Similar arrangements were subsequently enacted in all other states and territories.^[9]

5.9        While not the specific focus of this chapter, advance care directives are often prepared at the same time as enduring documents as an important part of planning for a potential loss or impairment of decision-making ability. Advance care directives enable an individual to specifically document the types of medical treatment or intervention they do wish to receive (and do not wish to receive), in the event that they are unable to consent to such medical treatment or its refusal. Advance care directives are written directions regarding future medical treatment recognised under the common law and in most state and territory legislation and which are binding in certain circumstances.^[10]

Current law

5.10     The legislation in each state and territory that provides for enduring documents is set out in Table 1.

Table 1: State and Territory legislation covering enduring documents

5.11     The legislation in each jurisdiction is consistent in that it enables a person to appoint another person to make decisions in relation to financial matters and/or personal/lifestyle/health matters on their behalf now and/or in circumstances where the first person has lost decision-making ability. In each state and territory there is a process for mutual recognition of interstate enduring documents.^[12]

5.12     There are, however, significant differences in the way that the legislation prescribes the form of enduring documents. The Australian Capital Territory, Northern Territory, Queensland, and Victoria, provide for a combined financial and personal enduring document.^[13] New South Wales, South Australia, Tasmania and Western Australia have separate documents for enduring powers of attorney and enduring guardianship.^[14] South Australia has adopted advance care directives legislation which allows a person to appoint a substitute decision maker (equivalent to an enduring guardian),^[15] while maintaining a separate process of enduring powers of attorney for financial matters.^[16] The Northern Territory has adopted a similar approach to South Australia, but with a combined enduring power of attorney and substitute decision maker for guardianship type matters.^[17]

5.13     Beyond questions of form, there are important differences in the legal test of capacity or decision-making ability and differences concerning who has the authority to assess and certify capacity or decision-making ability.^[18] Historically, the obligations on the attorney, and the standard by which they were to act, were not set out in legislation. Instead the obligations were defined by common law and equitable fiduciary duties—particularly duties of loyalty and duties of due care and diligence.^[19] Guardians are typically required to act in the ‘best interests’ of the principal.^[20] More recently, states such as Queensland and Victoria have passed legislation that sets out principles to guide decision making by attorneys.^[21] Those principles seek to uphold the fundamental rights of the principal.^[22] This approach is not applied consistently across the states and territories.

5.14     The ALRC Report, Equality, Capacity and Disability in Commonwealth Laws (Equality, Capacity and Disability Report),recommended a shift from the ‘best interests’ standard to one based on the ‘will, preferences and rights’ of the person, reflecting the paradigm shift towards supported decision making in the Convention on the Rights of Persons with Disabilities (CRPD).^[23] The implementation of this approach in state and territory guardianship laws will lead to a change in the way in which individuals with diminished decision-making ability are supported to make decisions.

5.15     Tasmania is the only jurisdiction in which it is compulsory to register enduring documents—both powers of attorney and enduring guardianship.^[24] When conducting transactions in land, there is a requirement in all states, except Victoria, to register an enduring power of attorney document with the respective state and territory body responsible for land titles.^[25] In certain jurisdictions there is also an option to register an enduring power of attorney.^[26] Accordingly, outside of Tasmania, there is no general requirement for registration of enduring documents.