Recommendation 5–1               Safeguards against the misuse of an enduring document in state and territory legislation should:

(a)         recognise the ability of the principal to create enduring documents that give full powers, powers that are limited or restricted, and powers that are subject to conditions or circumstances;

(b)         require the appointed decision maker to support and represent the will, preferences and rights of the principal;

(c)         enhance witnessing requirements;

(d)         restrict conflict transactions;

(e)         restrict who may be an attorney;

(f)          set out in simple terms the types of decisions that are outside the power of a person acting under an enduring document; and

(g)         mandate basic requirements for record keeping.

5.16     In the Equality, Capacity and Disability Report, the ALRC recommended that the appointment and conduct of substitute decision makers be subject to appropriate and effective safeguards.[27] Recommendation 5–1 builds on the excellent work that has been occurring across states and territories to improve protections from abuse for those older persons who have granted enduring powers to an attorney or guardian. Recommendation 5–1 is formulated in an effort to ensure that such safeguards are appropriately calibrated and do not unnecessarily burden principals or their attorney/guardian in making or acting under an enduring document.

5.17     Recommendation 5–1 seeks to achieve national consistency in safeguards supporting the national approach to enduring documents explored later in this chapter.

Giving principals choice

5.18     Recognising the ability of the principal to create enduring documents that give full powers, powers that are limited or restricted, and powers that are subject to conditions or circumstances, gives principals choice as to who they want to be their attorney/guardian, for what decisions, and gives the principal the option to exclude certain matters and powers. Choice as to when the enduring power comes into force and how that is determined is particularly important when the older person is concerned that the enduring powers should only be exercised when they have genuinely lost decision-making ability in relation to a specific matter (eg, finances). Choice is an important ingredient in giving the principal control over the nature and extent of their relationship with the attorney/guardian. It reflects the active role of the older person in crafting the enduring document to meet their needs, rather than handing over a ‘blank cheque’.

5.19     This choice can protect an older person from financial abuse, for instance by prohibiting the enduring attorney from selling the older person’s home or other valued assets.

5.20     State and territory legislation typically provides this choice and as such this element of the recommendation may not appear new. However, the formalities of registering an enduring power of attorney for the purposes of a land transaction may require, as a matter of practice, that the power of attorney document gives plenary powers to the attorney. While the issue of registration is discussed below, irrespective of changes to registration the ALRC recommends that, at all times and in all circumstances, the principal should be able to determine the scope and extent of their enduring document. Principals should not be required to give broader or unlimited powers in order to be able to effect certain transactions.

Will, preferences and rights

5.21     In the Equality, Capacity and Disability Report, the ALRC recommended a new model for decision making to encourage the adoption of supported decision making at a Commonwealth level (the Commonwealth Decision-Making Model).[28] The model represents a significant shift in approaches to decision making. Its application to enduring documents would require that the basis for all decisions made by those acting under an enduring document be the will, preferences and rights of the principal.[29]

5.22     Traditionally this would be considered a description of the decision-making standard required of the enduring attorney/guardian rather than a safeguard. However, the ALRC considers that ensuring that the principal’s will and preferences are at the centre of all decisions made by the substitute decision maker, rather than being subjugated to an objective ‘best interests’ assessment, is an important protection against abuse. As set out in the Equality, Capacity and Disability Report,the model addresses what should happen when the current will and preferences of a person cannot be determined. The focus should be on what the person’s will and preferences would likely be. In the absence of a means to determine this, the decision maker must act to promote and uphold the person’s human rights and act in a way that is least restrictive of those rights.[30]

5.23     State and territory laws are already moving away from the ‘best interests’ test that typically applied in relation to enduring appointments (particularly guardianship).[31] Recommendation 5–1 recognises the incremental changes at the state and territory level and suggests that the National Decision-Making Principles and Guidelines be adopted nationally as the standard for substitute decision makers under enduring documents.[32]

Enhanced witnessing

5.24     Witnessing has important evidentiary functions: confirming that the principal did in fact sign the document; and depending on the type of document, providing confirmation that the principal understood the nature of the document they were signing and did so voluntarily.[33]

5.25     Tightening or ‘enhancing’ witnessing requirements for enduring documents has been an important reform in state and territory legislation in recent years. Key features of enhanced witnessing include limiting the professionals who are authorised to witness enduring documents, and requiring witnesses to certify certain matters as to the nature of the principal’s understanding of the document (‘legal capacity’) and the fact that the document was signed voluntarily.[34]

5.26     Enhanced witnessing assists in ensuring that enduring documents are made and operative only in circumstances genuinely authorised by an older person, thereby upholding choice and control. These stricter witnessing requirements have sought to respond to an identified problem raised by community legal centres, elder abuse hotlines and other welfare groups.[35] Stakeholders have highlighted cases of older people being pressured into signing these instruments.[36] In other cases, the instruments may have been signed by older people with reduced decision-making ability.[37] Enhanced witnessing has also had an educative function, ensuring that the principal understands the nature and extent of the document which is then confirmed by the witnesses.[38]

5.27     Nevertheless, the ALRC considers that witnessing requirements should not be so onerous that people are dissuaded from putting in place enduring documents.[39] Accordingly, the ALRC’s approach to witnessing seeks to provide appropriate protection against abuse, while ensuring that Australians can access enduring documents as an important planning tool for later life and the potential loss or impairment of decision-making ability.

5.28     There is a wide range of approaches to witnessing enduring documents across the states and territories, represented in Appendixes 1 and 2 of this Report. Appendix 1 covers the four jurisdictions where there is one enduring document to cover both financial matters and personal and lifestyle matters. Appendix 2 covers the four jurisdictions where there are separate documents to appoint enduring attorneys and enduring guardians (or equivalent). The appendixes explain how many witnesses are required, the prescribed qualifications of witnesses and what, if any, certificates they are required to provide at the time of witnessing the documents in relation to matters such as legal capacity, understanding and the absence of duress.

5.29     In response to concerns about the adequacy of witnessing requirements and the differences across states and territories, the ALRC proposed in the Discussion Paper a specific model of enhanced witnessing:

Enduring documents should be witnessed by two independent witnesses, one of whom must be either a:

(a)     legal practitioner;

(b)     medical practitioner;

(c)     justice of the peace;

(d)     registrar of the Local/Magistrates Court; or

(e)     police officer holding the rank of sergeant or above.

Each witness should certify that:

(a)     the principal appeared to freely and voluntarily sign in their presence;

(b)     the principal appeared to understand the nature of the document; and

(c)     the enduring attorney or enduring guardian appeared to freely and voluntarily sign in their presence.[40]

5.30     When compared to the witnessing requirements set out in Appendixes 1 and 2, there were four key aspects of the ALRC’s recommendation regarding witnessing:

  • that there be two witnesses;
  • one witness must have prescribed qualifications (which were defined narrowly);
  • the witnesses must certify certain matters; and
  • that the attorney/guardian’s acceptance of the role must also be witnessed and their understanding confirmed by the witnesses.

Two witnesses

5.31     In relation to the number of witnesses required, the ALRC received a number of submissions, particularly from those states and territories where only one witness is currently required, expressing concern that an additional witness would provide little benefit and make it harder to make an enduring document.

5.32     For example, Legal Aid NSW was opposed to the requirement for two witnesses, noting that the prescribed witness in NSW (set out in Appendix 2) must be appropriately qualified to explain the document and confirm that the principal has understood it. Legal Aid NSW explained that the ‘proposed requirement for two witnesses would create significant inconvenience for principals and discourage the making of these important documents’.[41]

5.33     In addition, the Office of the Public Advocate (Qld) submitted:

In our view, a person who is prepared to engage in this type of behaviour and forge a signature of the principal or breach their commitment to the principal, will also not be discouraged from such a course because they may now need to forge a second signature or enlist another person in their abusive or fraudulent conduct.[42]

5.34     The ALRC agrees that, where someone decides to undertake deliberate fraud and/or forgery, a requirement for two witnesses is unlikely to be a deterrent. However, having a second witness provides an opportunity to confirm both the principal’s and attorney’s apparent understanding of the document and an opportunity to pick up on any behaviours in the principal that may suggest duress or coercion. Another benefit of two witnesses was described by Relationships Australia Victoria: ‘this gives more assurance that an older person is not being coerced into the agreement, and secondly provides reassurance for other family members who may be concerned about the legitimacy of the document’.[43]

5.35     The important qualification for the second witness is that they are independent, with no family connection to the principal or attorney. While requiring a second witness, in those states and territories where there is currently no requirement for one, may impose an additional administrative burden on the making of an enduring document, in seeking to harmonise witnessing requirements across the states and territories, the ALRC considers it appropriate to adopt the more rigorous approach of two witnesses.

One witness must have prescribed qualifications

5.36     In response to the ALRC’s proposal that one witness must be either a legal practitioner, medical practitioner, justice of the peace, registrar of the Local/Magistrates Court, or a police officer holding the rank of sergeant or above, two key issues were raised in submissions. The first was whether the list was too narrow; and the second was whether these individuals had sufficient training to assess the ‘legal capacity’ of the principal.

5.37     A number of stakeholders supported the ALRC’s proposed list of professions.[44] COTA, however, submitted that

[i]t is possible that the list of classes of witness … is too narrow and should be expanded. There will be many places in Australia where the witnesses referred to in the Proposal will simply not be available, or where people will not feel comfortable having such a document witnessed by, say, a local police officer, even if one were available.[45]

5.38     A similar view was submitted by Holman Webb Lawyers:

We are concerned that the proposed witnessing requirements may not be practical for many elderly people with mobility and complex health issues and suggest that the list of authorised witnesses be expanded, for example, to include registered nurses and pharmacists.[46]

5.39     The Law Council of Australia also considered the list ‘too restrictive’, which

may have the effect of discouraging people from making an enduring power of attorney, or result in powers of attorney that are invalid on the basis that the witnessing requirements are not met. Further, there may also be difficulties for people in regional or remote areas in relation to finding appropriate witnesses. The Law Council suggests that an enduring power of attorney should be able to be witnessed by two independent persons, at least one of whom is on the list of authorised witnesses in the Statutory Declarations Regulations 1993 (Cth). This will mean that the document is required to be witnessed by an independent person of a certain standing and responsibility within the community, while not placing a barrier in the path of an individual wishing to put one of these documents in place.[47]

5.40     In addition, a number of professional bodies suggested that their members be authorised to witness enduring documents.[48]

5.41     The second issue raised in submissions was whether these individuals had sufficient training to assess the ‘legal capacity’ of the principal. The Australian Research Network on Law and Ageing (ARNLA) submitted that

[i]t is important that the witnesses are provided with appropriate information and training in this regard and are instructed on factors that may adversely affect optimal capacity in older persons such as the nature of their cognitive impairment, the time of day, the administration of medication etc, and the presence of family members who can both facilitate and obstruct the assessment process. Witnesses also need mandatory education and training on the impact of language and education levels upon capacity, and the use of interpreters where necessary.[49]

5.42     Similarly, a submission led by Dr Kelly Purser said that ‘people witnessing must be appropriately trained/qualified to spot a potential lack of capacity and to know how to make an assessment. National capacity assessment guidelines building on an interdisciplinary approach must be developed’.[50]

5.43     The National Older Persons Legal Services Network suggested that

[a]nyone witnessing documents should have to do training on issues such as legislative requirements, capacity, responsibilities and duties, elder abuse, correct witnessing procedures (eg not in the presence of the attorney) and the consequences of any failure to comply with statutory obligations.[51]

5.44     The ALRC agrees that the list of professionals proposed to witness enduring documents set out in the Discussion Paper was too narrow and that, if implemented, would have imposed impediments to the use of enduring documents. Accordingly, the ALRC suggests that one of the two witnesses to an enduring document should be required to be a professional whose licence to practise is dependent on their ongoing integrity and honesty and who is required to regularly undertake a course of continuing professional education that covers the skills and expertise necessary to witness an enduring document. Given that legal tests of decision-making ability underpin such witnessing requirements, the Law Council of Australia should be involved in reviewing the content of training courses on witnessing enduring documents. The training should be sufficient to enable the witness to do the following, as submitted by the Law Council of Australia:

The prescribed witness should be required to explain to the principal the:

  • nature of a power of attorney;

  • different features of the various types of powers of attorney, with particular attention to the distinguishing feature of an enduring power of attorney;

  • attributes most desired in an attorney;

  • fiduciary obligations that an attorney owes the principal;

  • different ways that multiple attorneys may be appointed (being joint, several and consecutive) and the pros and cons with each approach;

  • limit on an attorney’s authority imposed by law;

  • additional powers that may be conferred on an attorney, and the pros and cons of those powers in the principal’s circumstances;

  • conditions and limitations that may be imposed on the attorney’s authority, and the pros and cons thereof; and

  • prescribed and other options concerning the operation of the power of attorney.[52]

5.45     The ALRC considers that this strikes an appropriate balance between access to enduring documents and ensuring appropriate protections against such documents being executed when the principal lacks decision-making ability or is suffering some form of coercion or duress.

Witnesses must certify certain matters

5.46     A key aspect of enhanced witnessing implemented in a number of states and territories has been to require witnesses not just to sign the enduring document but positively certify certain matters, including the ‘legal capacity’ of the principal to make an enduring document. This approach was suggested in the Discussion Paper. This had broad support in submissions. However, the Law Council of Australia raised particular concerns regarding the proposed form of certification, where the witness was not legally trained. The Law Council of Australia submitted that

a more workable attestation would be that the witness is not aware of anything that causes them to believe that:

  • the principal did not freely and voluntarily sign the document;

  • the principal did not understand the nature of the document; or

  • the enduring attorney did not freely and voluntarily sign the document.[53]

5.47     The ALRC endorses this approach to certification by witnesses to an enduring document in relation to the principal. The ALRC considers that this appropriately balances the need to confirm that the principal understood the nature of the document and was signing voluntarily, with the need to ensure that witnesses are not being asked to make too onerous certifications with respect to the state of mind of the principal or their decision-making ability.

Witnessing the attorney’s/guardian’s acceptance of the enduring document

5.48     The last, and arguably most important, aspect of the ALRC’s proposal regarding enhanced witnessing in the Discussion Paper was that the attorney’s/guardian’s signature should also be witnessed, and that the witnesses should certify that the attorney/guardian was signing voluntarily and understood the nature of the document. This was designed to address a key concern with respect to the misuse of enduring documents, which appears to be caused by the attorney not understanding the nature of their role or the limits on their authority.[54]

5.49     Currently, as set out in Appendixes 1 and 2, in most jurisdictions there is rarely a requirement for the attorney’s signature to be witnessed and, accordingly, there is a missed opportunity for a formal discussion with the attorney as to the nature of the obligations they are accepting.

5.50     Most submissions supported the proposed witnessing of the attorney’s/guardian’s signature.[55] Some raised concerns that this would mean that the attorney and principal had to sign at the same place and same time and this would be problematic where the attorney and principal live in different cities.[56] However, the ALRC suggests that it is in fact beneficial for the principal and attorney to sign the document separately and potentially gives time for independent discussions as to the implications of signing the enduring document.

Restrictions on conflict transactions

5.51     Transactions where there is, or there is perceived to be, a conflict between the personal interests of an attorney and the interests of the principal have been identified as a key source of financial abuse.[57] Moreover, as a matter of law, the fiduciary relationship between the attorney and the principal means that the attorney must not enter such transactions, unless authorised in the instrument of appointment or by the court.

5.52     These arrangements may occur in situations where the principal and attorney were formerly in a family business together and a number of assets of the business are owned by the principal and leased by the attorney. They can also involve the use of ‘family assets’ such as holiday homes.

5.53     Accordingly, in the Discussion Paper, the ALRC proposed:

Laws governing enduring powers of attorney should provide that an attorney must not enter into a transaction where there is, or may be, a conflict between the attorney’s duty to the principal and the interests of the attorney (or a relative, business associate or close friend of the attorney), unless:

  • the principal foresaw the particular type of conflict and gave express authorisation in the enduring power of attorney document; or

  • a tribunal has authorised the transaction before it is entered into.[58]

5.54     The proposal specifically built on the approach to conflict transactions in legislation in Victoria and Queensland.[59] Starting with an express prohibition on conflict transactions means that, when making an enduring document, a principal must consider, having regard to their finances and their relationship with the attorney, whether conflicts are likely and in what areas. Having identified potential conflicts, the principal has the choice whether to authorise the attorney to act in those areas. This ensures that the principal retains choice and control. When appointing a spouse as an enduring attorney it may be appropriate and necessary to permit all conflict transactions in the enduring document.

5.55     Once an enduring power of attorney is in effect, an explicit statutory prohibition on conflict transactions requires an attorney to identify potential conflicts of interest and sends a powerful signal that they must either avoid such transactions or seek approval for those transactions. The statutory prohibition also builds on, and is consistent with, fiduciary duties in equity.

5.56     Prior authorisation by a principal or tribunal can also protect the attorney from subsequent accusations that a particular transaction turned out to be particularly advantageous to the attorney at the expense of the principal.

5.57     The specific drafting of the conflict prohibition would need to take into account gifts and donations made by an attorney on behalf of the principal. Preferably decisions regarding the type and nature of gifts and donations would be guided by the principal’s wishes as expressed in the enduring document.

5.58     The proposal had broad support in submissions.[60] For example, Legal Aid ACT submitted that

[i]t is vital to implement laws regulating transactions where there is, or may be, conflict of attorney/principal interests. Laws of this kind provide additional protections against financial abuses perpetrated by enduring power of attorneys (EPOA), ensuring that the interests of vulnerable older Australians retain primacy.[61]

5.59     However, a number of stakeholders raised concerns that what is a conflict transaction is not well understood.[62] For example, the Assets, Ageing and Intergenerational Transfers Research Program, of the University of Queensland suggests that ‘more is needed to ensure that conflicts of interest are well understood’.[63]

5.60     A similar view was expressed by the Australian Research Network on Law and Ageing (ARNLA), who suggested that attorneys ‘should be provided with information that includes examples of conflict transactions and prompts them to consider whether a conflict exists’.[64]

5.61     The ALRC agrees that education and understanding is important in respect of conflict transactions and that the model enduring document, discussed below, should include appropriate guidance on what conflicts are and how they may be managed by the principal in designing their enduring documents.

5.62     Stakeholders also suggested that, consistent with the approach in Queensland and Victoria, where the enduring document comes into effect prior to a loss of decision-making ability, the principal should be able to approve conflict transactions rather than necessarily seeking tribunal approval.[65] The ALRC agrees with this approach.

Ineligible person

5.63     In the Discussion Paper the ALRC proposed that:

A person should be ineligible to be an enduring attorney if the person:

(a)     is an undischarged bankrupt;

(b)     is prohibited from acting as a director under the Corporations Act 2001 (Cth);

(c)     has been convicted of an offence involving fraud or dishonesty; or

(d)     is, or has been, a care worker, a health provider or an accommodation provider for the principal.[66]

5.64     Excluding inappropriate persons from acting as enduring attorneys is an important protection against abuse. Where individuals who have a history of dishonesty and fraud offences are appointed under an enduring document, there may be a greater risk of abuse.[67]

5.65     Most submissions who commented on this proposal supported it.[68] Two issues were raised in a number of submissions. The first relates to paragraph (d) of the proposal and the need to distinguish between family members providing informal support and paid care workers, health providers and accommodation providers.[69] The ALRC agrees with this clarification. Family and friends providing an older person with care, accommodation and health services should be able to act as an enduring attorney.

5.66     The second issue relates to paragraph (c) of the proposal. Stakeholders noted that in Victoria there is an exception to the prohibition on an individual with such convictions acting as an enduring attorney where the offences have been disclosed to the principal and the principal has chosen to appoint the individual knowing of the convictions.[70] Stakeholders have suggested that this exception retains the older person’s choice and control.[71] It also ensures that the older person is able to put in place an enduring document when the only person they wish (or is available) to be an enduring attorney has convictions.

5.67     The Eastern Community Legal Centre (ECLC) raised a separate issue in relation to these convictions, noting in particular that enduring documents are often executed many decades before they are used. They note that there is no mechanism for requiring disclosure of convictions recorded after the document is signed. They suggested that

persons who are acting under an enduring power of attorney document should be required to report any of the ineligibility criteria listed therein which arise after the document has been signed. Where the power has not yet been activated, the report should be made to the donor who may then amend or revoke the document. Where the power has been activated and the donor no longer has capacity to make or revoke an enduring power of attorney, the report should be made to the tribunal with appropriate jurisdiction.[72]

5.68     The ALRC notes that restrictions on individuals with convictions for fraud and dishonesty are designed to address the identified greater risk of financial elder abuse.[73] In this context, the process of disclosure and approval by the principal may not be the most appropriate response. The typically close personal relationship between the proposed attorney and the principal may mean that the principal is unable to objectively assess the risk of future financial abuse.

5.69     Nevertheless, the ALRC considers that a blanket prohibition may be too restrictive. The ALRC considers that state and territory tribunals should have the power to assess and determine the suitability of individuals, with convictions for fraud and dishonesty, to act as enduring attorney in each individual case. The ALRC also supports the suggestion from the ECLC that persons who have been appointed under an enduring power of attorney document should be required to report any subsequent events that may make them ineligible.

5.70     The ALRC considers that, while not allowing a principal to appoint a person who has convictions for fraud and dishonesty offences necessarily reduces choice, the appropriate balance between choice and protection requires the exclusion of those people from being an attorney unless authorised by a tribunal.

Prohibited decisions

5.71     In the Discussion Paper, the ALRC proposed:

Legislation governing enduring documents should explicitly list transactions that cannot be completed by an enduring attorney or enduring guardian including:

(a)       making or revoking the principal’s will;

(b)      making or revoking an enduring document on behalf of the principal;

(c)       voting in elections on behalf of the principal;

(d)      consenting to adoption of a child by the principal;

(e)       consenting to marriage or divorce of the principal; or

(f)       consenting to the principal entering into a sexual relationship.[74]

5.72     The purpose of the proposal was to set out in legislation those decisions which cannot be exercised by a representative because those decisions can only be exercised personally and cannot be delegated to an attorney/guardian. In the Discussion Paper, the ALRC also suggested that an attorney not act in relation to the principal’s superannuation unless specifically authorised in the enduring document.[75]

5.73     The list built on extensive case law regarding powers of attorney and agents. Lists of this type have been introduced in many states and territories.[76] Stakeholders have stated that having a straightforward statutory list of prohibited decisions can assist in understanding the limits of the roles of an attorney/guardian.[77] A list that can only be distilled from the common law or individual pieces of legislation does not provide a simple and straightforward explanation. It is also useful to set out in statute the specific powers of an attorney/guardian where there is some ambiguity under the common law. Clarity improves understanding which may mitigate against the risk of abuse.

5.74     This proposal was largely non-controversial and received few substantive comments in submissions. A few stakeholders suggested that the list be included together with the enduring document form so that the information was readily disseminated to potential principals and attorneys.[78] Relationships Australia Victoria (RAV) supported the proposal, noting that ‘the parameters of a Power of Attorney’s responsibilities are one of the main issues raised in Elder Mediation. RAV also hears concerns from the older person’s family members that a will may have been altered unlawfully’.[79]

5.75     The Law Council of Australia suggested that the list of prohibited decisions should be expressed as non-exhaustive.[80] Given the general law obligations on attorneys, the ALRC supports this suggestion.

Record keeping

5.76     In the Discussion Paper, the ALRC proposed that enduring attorneys and enduring guardians should be required to keep records. Enduring attorneys should keep their own property separate from the property of the principal.[81]

5.77     An explicit requirement to keep records and keep property separate is designed to protect the principal and the attorney. By keeping good records and not co-mingling property, the representative is upholding the distinction between their personal affairs and their fiduciary role as an enduring attorney of the principal.

5.78     Good record keeping demonstrates the way in which the attorney has fulfilled their duties and can protect the representative in circumstances where accusations are made that the representative has failed in their duties.

5.79     The explicit requirement to keep records and to keep property separate is also educative, as it reinforces the nature of the fiduciary role of the representative as the manager of the principal’s affairs and the importance of doing so diligently and effectively.

5.80     Record keeping requirements are typically included in state and territory legislation.[82] This proposal was non-controversial and received few substantive comments from stakeholders. Cairns Community Legal Centre submitted that proper record keeping:

allows for greater transparency with respect to an attorney’s conduct. It also makes tracing any abuse a simpler task.

We also believe that an attorney’s property should be kept separate from the principal’s, as again, it allows for greater transparency and ensures that tracing any abuse is a simpler task.[83]

Towards a balanced approach

5.81     The ALRC recommends that the suite of safeguards in Recommendation 5–1 be provided in each state and territory to ensure the appropriate protection for principals making enduring documents, while maintaining the accessibility and practicality of enduring documents as important planning tools for a potential loss or impairment of decision-making ability. These safeguards should be accompanied with increased awareness raising and education to improve the utilisation of enduring documents.