01/01/2013

The situation of ageing parents granting their children enduring powers of attorney occurs in many households.  Where one child lives in the UK, and each parent grants both children the power jointly and severally, the prospect for dispute increases. 

In the case of Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012], Susan was a daughter living in the UK and Margaret a daughter living in Australia.  Their parents downsized by selling their family home to Margaret and buying a small apartment to live in. 

After a while the parents needed to move to an aged care facility and the power of attorney was exercised by Margaret who, being close at hand, took on the duties of managing the parents day-to-day financial obligations.

The family bonds fell apart as Susan and Margaret started to doubt each other. More specifically, Susan started to demand records and accounts of the financial transactions undertaken by Margaret on behalf of their parents. 

The parents, George and Gwenda, while preferring to take their own course about managing the problem of potential disagreement between their daughters as co-attorneys, did not object to the way Margaret had handled their financial affairs and so seemingly by default and some anguish, were obliged to support Margaret. 

In this case there was no issue about the capacity of the principals to grant the powers and the validity of powers so granted, only the operation of them.

Susan had demanded that Margaret produce a raft of financial documents including journals, ledgers, bank reconciliations and other records typical of trustee’s accounts relating to George and Gwenda’s financial affairs.  Amongst these, she also wanted to see documents relating to the purchase by Margaret of the family home and records relating to any loans by them to Margaret. 

What obligation did Margaret have to keep such records and accounts of the financial transactions she undertook for her parents? And, if Margaret was required to do so to a trustee accounting standard, who was to pay for this work?

The Judge reasoned that both Susan and Margaret have joint and several powers of attorney to act in relation to the property of their parents, and while they have fiduciary duties, they do not act as trustees and do not have the account keeping obligations of trustees. 

The case confirmed that there is no statutory obligation in NSW on attorneys to keep trustee standard accounts. In other States the actual account keeping obligations have been formalised by statute. For example, Section 85 of the Powers of Attorney Act 2006 (QLD) states that an attorney for a financial matter “must keep and preserve accurate records and accounts of all dealings and transactions made under the power”. However, this Queensland statute does not set any account keeping standards, and neither does the respective law in any other State. 

The case mentions that  trustee’s duty to keep ‘proper’ accounts to the required trustee account keeping standard includes keeping an information file, a schedule of trust property, capital and income accounts, a cash account, vouchers and receipts for transactions and the maintenance of a separate bank account for trust payments and receipts. 

In comparison, the Judge stated that an attorney’s obligation is to keep accurate primary accounting records which the principal can call upon for examination if necessary. This includes maintenance of records of transactions, with sufficient particulars in readily accessible form that afford the principal or a third party, the ability to ascertain with clarity the dealings in which the attorney has engaged. 

Amongst the financial records that Margaret had produced were a record of transactions on George and Gwenda’s bank accounts showing where the funds had gone and the amount of each transaction. The Judge confirmed that this material “shows the account keeping that she has done so far is not untypical of that to be expected from reasonably careful individuals, in the position of George and Gwenda ordering their own personal financial affairs, with the competent assistance of another family member”. 

And while Margaret had produced some records relating to the parent’s personal financial transactions before Susan and Margaret were appointed as attorneys, the Judge said that neither child had to account to the parents or to the other attorney for transactions made before the powers of attorney were created. 

Accordingly, as the transactions relating to Margaret’s purchase of the family home and the parents purchase of the home unit occurred before the powers were created, Margaret had no obligation under the power of attorney to account to Susan for these transactions.

Finally, the Judge stated that it was a matter for the principal, not the attorney, to determine if full financial accounts were necessary and if so, to pay for them. 

If you need assistance or have any questions in relation to this article, please contactTOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.