Following on from my earlier posts on powers of attorneys, it seems a little poetic, shall we say, that a further case involving attorneys became known to me! Big thanks to my friend and co-host of The Heir Waves podcast Caite Brewer who brought this case to my attention.

The case of Lambourne and Ors v Marrable and Ors [2023] QSC 219 involved a lengthy and robust consideration of issues of the presumption of capacity and the making and revocation of enduring powers of attorney (EPA). This case also considered the new s6C capacity principles and s111A set out in the fairly recent amendments of the Power of Attorney Act 1998 (Qld) (that I had written about here).

The case is quite factually dense and fairly lengthy but I will do my best to articulate the matrix and principles as succinctly and carefully as I can!

Harvey Marrable, and his late wife Dulcie (who passed in 2006), established an enterprise in 1956 which ultimately became known as Gold Coast Bakeries. Harvey had always maintained careful control of his enterprise and had harboured concerns of disharmony among his family that may eventuate following his death. Harvey had invested time into his estate planning, which included the creation of enduring powers of attorney

On 9 December 2020 (when Harvey was approximately 88 years of age), Harvey executed an EPA appointing his daughter Helen, and his two grandchildren Kate and Luke, as his personal attorneys and his grandchildren Kate and Luke as his financial attorneys. The EPA (for both financial and personal/health matters) was to commence when/if Harvey did not have capacity (the 9 December 2020 EPA).

On 27 and 28 June 2022, Harvey executed revocations of the 9 December 2020 EPAs (the first revocations).

On 12 August 2022, Harvey executed two further revocations in respect of the 9 December 2020 (the second revocations) EPAs and a new EPA for personal matters in favour of his spouse Judy and Brooke McGifford and an EPA for financial matters in favour of Judy, Jason McGifford and Erin Falvey (the 12 August 2022 EPA).

On 15 August 2022, Harvey then executed a new EPA where he appointed Philip and Brooke as his perosnal attorneys and Philip and Jason as his financial attorneys (the 15 August 2022 EPA).

The attorneys appointed under the 9 December 2020 EPA, Helen, Kate and Luke applied to the Court challenge the validity of the revocations, the 12 August 2022 EPA and the 15 August 2022 EPA on the basis that Harvey had lost capacity for personal and financial matters on 8 June 2022 and had not regained capacity.

The attorneys under the 15 August 2022 EPA, Philip, Jason and Brooke (along with Harvey) were the respondents in the matter and argued that Harvey did not lose capacity at any time and that the revocations stand, along with the 15 August 2022 EPA.

Consideration of s6C of the Powers of Attorney Act 1998 (Qld) (‘the POA Act’)

The Court considered the application of the principles in s6C not to apply to the Court, but rather are directed to those who are acting as attorneys for a principal (para 32). The Court noted that s111A of the POA Act states that ‘the court or tribunal is to presume the adult has capacity for the matter until the contrary is proven‘. The Court noted that the onus then moved to the applicants to rebut the presumption the Court was entitled to make, that Harvey had capacity, and that it was not for Harvey to justify his actions.

The Court took the opportunity to clarify that the principles are to guide the attorneys actions and are “aspirational”, however they are not principles the Courts would be capable of taking into account in all matters. An example where the Court considered those principles would be relevant would be an application under s118 of the POA where an attorney was seeking advice, directions or recommendations (para 36).

The Court did, however, note the importance of these principles in the context of understanding the ‘nature and effect‘ of the EPA and drew an important distinction in that these principles are unique to Queensland (and with that an important distinction between new Queensland cases and those of other jurisdictions that do not have these principles or indeed any presumption of capacity). The Court said, at para 112:

Section 6C must be taken into account when considering whether a donor has been shown not to have understood the “nature and effect of the enduring power of attorney” because the “nature and effect” must be considered within the legal environment created by s 6C. It imposes upon an attorney a positive duty to enable participation of the principal and to give “the support and access to information necessary to enable the adult to make or participate in decisions”. A principal may confer a power of attorney in the knowledge that the attorney is required to provide the principal with the relevant information in a way which enables the principal to make the decision.

The discussion regarding “nature and effect” is dealt with further below.

Capacity to make and revoke EPAs

The Court noted that the onus was on the applicants to rebut the statutory presumption of capacity afford to Harvey and that the burden of that onus was substantial (para 44).

The POA Act states that the principal must have the necessary capacity to make an EPA at section 41(2) and that it requires an understanding of the nature and effect of the EPA which includes an understanding of:

• that the principal can specify or limit the power and instruct the attorney about the use of the power
• when the power begins
• that the attorney will have full control over the matter, once that power begins, subject to the terms of the power
• that the EPA may be revoked at any time so long as the principal is capable of making an EPA giving the same power;
• the power given by the principal continues even if the principal loses capacity;
• where the principal is not capable, the principal cannot oversee the exercise of that power.

The Court noted that section 41 must be considered alongside the presumption of capacity set out in s111A of the POA Act.

Section 47 of the POA Act states that an EPA can be evoked by either notice in writing by the principal to the attorney that their power is revoked OR the principal making a new EPA overriding the old EPA.

Understanding the “nature and effect” of making an EPA

The Court rejected the applicants’ submissions that the ‘complexity of the matters which the principal must understand increases proportionately to the complexity of those contextual matters‘ (para 67). The applicants further asserted that the words “nature and effect” (discussed in Aziz v Prestige Property Services Pty Ltd and Anor [2007] QSC 265) were “one concept with two parts” and with the support of the principles in Adamson v Enever (2021) 9 QR 33, that the following matters relevant to the second part of the test (at para 71):

(a)          the principal needs to be able to understand the information that is relevant to the decision, including the options and their consequences. A “basic understanding of the key features” of that information is sufficient, but more complex decisions require greater understanding;

(b)          the principal must also be able to retain the relevant information for a period which is long enough to make a decision; and

(c)          the principal must be able to identify the advantages and disadvantages and consequences of the available options and to weigh the consequences to make a decision.

The Court rejected this construction and agreed with the respondent’s construction of the phrase “nature and effect” and that it was a ‘compound expression’. The Court gave three reasons for this construction:

1. it is a general rule of statutory construction that a compound phrase is not to be severed into parts and construed together by the separate meanings of the words within the phrase;
2. the phrase is not split in the legislation and goes to list the matters relevant to that compound expression;
3. it is consistent with the approach taken by the Courts when interpreting the POA Act since it’s commencement.

Having regard to the historical context, the Court made mention of important precedents in this regard.

With regard to the principles enunciated in Gibbons v Wright, the Court noted, at para 83:

Gibbons v Wright is not a case about powers of attorney but more generally about the nature of the capacity which must be present in order that persons may enter into contracts and conveyances.[27] On that point, the High Court did not require that there be a level of understanding commensurate with the complexity of the contract under consideration. What was required was that the relevant party be capable of “understanding the general nature of what he is doing by his participation.”

With regard to the principles enunciated in Re K (Enduring Power of Attorney, the Court noted, at para 84:

In Re K (Enduring Power of Attorney),[29] Hoffman J considered what was needed to show that the donor of a power of attorney understood the nature and effect of the juristic act by which the power was conferred. Miss K had executed an enduring power of attorney and sought to have it registered pursuant to s 6(5)(a) Powers of Attorney Act 1985 (UK). Some of her relatives objected to registration on a ground made available under that legislation, namely, “that the power purported to have been created by the instrument was not valid as an enduring power of attorney.” The alleged cause of invalidity was that Miss K did not have the necessary mental capacity at the time of execution. In a hearing in the Court of Protection the application for registration was dismissed. The Master found that on the day in question:

“Miss K. enjoyed a period during which she was able to understand that Mr. K. was to be her attorney under an enduring power of attorney and that she understood what an enduring power was; but that she was incapable by reason of mental disorder of managing her property and affairs.

Para 84

The legislation considered by Hoffman J did not specify the mental capacity needed to execute an enduring power and so the answer had to be found in the common law. His Lordship considered the common law rules relating to the power able to be exercised if a donor has lost the mental capacity to be a principal and, in so doing, referred to Gibbons v Wright. He went on to pose the following question:

“… whether, as a matter of construction, a power is ‘valid’ for the purposes of section 6(5)(a) of the Act only if the donor had the mental capacity which would have made it exercisable. This must be decided by having regard to the purpose of the Act as a whole, which is to enable powers to be exercised notwithstanding that the donor does not have the mental capacity required by the common law.”[31]

Para 85

He went on to consider that, in one sense, Miss K did have the powers to manage her property because she owned it. But she could not exercise those powers on a regular basis because she lacked mental capacity. Hoffman J said:

Para 86

“… there is no logical reason why, though unable to exercise her powers, she could not confer them upon someone else by an appropriate juristic act. The validity of that act depends on whether she understood its nature and effect and not on whether she would hypothetically have been able to perform all the acts which it authorised.”[32] (emphasis added)

Hoffman J went on to acknowledge that the power of attorney does not amount to an outright disposition of assets like a gift, settlement or will. He made particular reference to the fact that the exercise of the power is hedged about on all sides with statutory protection for the donor. In these circumstances, he said, it did not seem to be necessary to impose too high a standard of capacity for its valid execution. While those statements must be read in the light of the UK legislation (which did not include a presumption of capacity) the reference to powers being “hedged about on all sides” is reflected in the usual duties of attorneys and the provisions of s 6C of the Act.

Para 87

For the purposes of this case, Hoffman J’s reasoning[33] about the meaning of “understanding the nature and effect” is of importance. His analysis was referred to by the Queensland Law Reform Commission in its recommendations which found final form in s 41(2) of the Act. He said:“Finally, I should say something about what is meant by understanding the nature and effect of the power. What degree of understanding is involved? Plainly one cannot expect that the donor should have been able to pass an examination on the provisions of the Act. At the other extreme, I do not think that it would be sufficient if he realised only that it gave Cousin William power to look after his property. Mr. Rawson helpfully summarised the matters which the donor should have understood in order that he can be said to have understood the nature and effect of the power. First, (if such be the terms of the power) that the attorney will be able to assume complete authority over the donor’s affairs. Secondly, (if such be the terms of the power) that the attorney will in general be able to do anything with the donor’s property which he himself could have done. Thirdly, that the authority will continue if the donor should be or become mentally incapable. Fourthly, that if he should be or become mentally incapable, the power will be irrevocable without confirmation by the court.”[34]

Para 88

Finally, in bringing these principles together, the Court said:

This case (and Gibbons v Wright) directs attention to the nature and effect of the decision and, at common law, the task is to properly characterise the decision. It is, as Hoffman J said, the decision to appoint and its ramifications, rather than a detailed understanding of the property or undertakings of the donor:

“I think that my conclusions are in accordance with what appears to be the general policy of the Act. In practice it is likely that many enduring powers will be executed when symptoms of mental incapacity have begun to manifest themselves. These symptoms may result in the donor being mentally incapable in the statutory sense that she is unable on a regular basis to manage her property and affairs. But, as in the case of Mrs. F., she may execute the power with full understanding and with the intention of taking advantage of the Act to have her affairs managed by an attorney of her choice rather than having them put in the hands of the Court of Protection. I can think of no reason of policy why this intention should be frustrated.”[35] (emphasis added)

Para 89

Importantly, the Court noted that the understanding of the nature and effect was extended to the EPA and not to the assets or interests of the principal. The applicants further submitted that the ‘threshold for capacity’ requires the principal to actually understand the matters contained in s41(2). The Court stated that it was ‘not correct’ to refer to a ‘threshold for capacity’ in this instance as capacity is presumed and it is for the applicants to demonstrate that Harvey did not have the capacity in order to rebut the presumption that he did (para 93).

Presumption of capacity

Principal decisions that assisted the Court in considering the presumption of capacity included Gibbons v Wright, Re K (both mentioned above), and Ranclaud v Cabban (1988) NSW ConvR 55. Further the Court referred to the decision in Ghosn v Principle Focus Pty Ltd & Ors [2008] VSC 574 at para 98:

Ranclaud was considered in Ghosn v Principle Focus Pty Ltd & Ors.[38] In that case, Forrest J dealt with an application for orders that certain Powers of Attorney were valid. Those instruments were all executed in Lebanon by Mr Moussi but, in the absence of any evidence as to Lebanese law concerning either the formal validity of the Power of Attorney or as to requirements relevant to the capacity of a donor of such a power, the Court assumed that the foreign law was the same as the law of the forum. The central issue was that of the capacity of the donor to execute the respective powers. At that time in Victoria there was no statutory presumption of capacity and, if doubt was thrown on the capacity of a donor, then the burden rested on the donor of establishing possession of the requisite capacity to execute a Power of Attorney.

Forrest J referred to Gibbons v Wright, Re K and Ranclaud v Cabban. He said:“

[78]        In my view, the Ranclaud test should be accepted. It is consistent with Re K in requiring more than just an appreciation of the purport of a Power of Attorney and is not inconsistent with what was said in Gibbons particularly in the light of the reference to In the Estate of Park. Each instrument and its execution is to be examined in accordance with the accompanying circumstances. Indeed, the facts of this case demonstrate amply why the Ranclaud test should be applied in relation to complex matters. The two properties which have been sold are the property of two trustee companies which owe fiduciary obligations to the beneficiaries. As Mr Moussi was the sole director of the companies, he in a practical sense was the trustee. Application of the Ranclaud test means, I think, that it must be proved that Mr Moussi knew that when he executed the Powers of Attorney, he was giving Mr Abi Ghosn control over trust properties in a real, if not legal, sense. He did not, in my view, need to understand all the intricate parts of the transactions that Mr Abi Ghosn was about to enter into. But given that there were significant assets, it was necessary that he understood at the time of the execution of the Powers of Attorney that Mr Abi Ghosn would have the ability to transfer the shareholdings and the directorship of the trust companies to others (including himself) and to effect the sale of the properties which were the subject of the trust deed at a price determined by Mr Abi Ghosn.” (emphasis added)

The applicants argued that the matters referred to in s41(2) was a minimum standard of understanding, and that the complexity of the matters requires a proportionate increase in understanding, which the Court rejected (at para 101) for two reasons:

• such an approach encourages a reversal of the onus of establishing incapacity – suggesting that the principal would need to lead evidence to demonstrate their level of understanding;
• it ignores the duties imposed on attorneys and is based on decisions made under a different regime – the Court then referring to the principles enunciated by Szozda v Szozda [2010] NSWSC 804 that the “only matter that can sensible become the subject of assessment is the creation of the power of attorney itself‘ (quoted at para 105).

Having regard to the principles set out in section 6C (mentioned above) and how they impact the question of understanding the ‘nature and effect’, the Court said:

It follows then that the task of the applicants is to demonstrate that Harvey did not understand the nature and effect of making an enduring power of attorney. It is not directly relevant to that inquiry to closely examine his recollection and understanding of the corporate restructure. There was no evidence which tied the two areas of understanding together so that an inability to recall the details of the many transactions which constituted the restructure meant that incapacity to create a power of attorney followed.

Para 113

It would be contrary to the obvious intention of the Act if a principal, who recognised that he or she was no longer able to engage in complicated business affairs but who knew that his or her wishes or preferences could be acknowledged and fulfilled by the appointment of an attorney, could be denied that because the principal was not able to engage in those complicated business affairs. The construction advanced by the applicants would have this effect.

Para 114

The evidence of capacity

The applicants submitted that Harvey had lost capacity with reference to a number of incidences of Harvey’s decline in ability to handle simple and complex financial transactions, instances of forgetfulness, confusion, aggression, increased suspicion and paranoia as early as October 2021. They further submitted that Harvey did not understand the restructuring that was taking place in relation to the business enterprise and their position supported by evidence from Harvey’s accountant, Mr Holmes, Harvey’s inability to provide information to his solicitors regarding the extent of his assets and interests and Harvey’s evidence at trial regarding various aspects of the business restructure.

The Court did not accept the applicants’ evidence because:

• in relation to Harvey’s evidence at trial, the Court noted that the time for assessing capacity is the time in which the particular actions that are the subject of the dispute take place; Harvey’s evidence at trial was given four and six months after the revocations and 15 August 2022 EPA were made respectively;
• the nature of the process of giving evidence at trial is problematic as a result of the rules of evidence and procedure and does not foster a real opportunity for meaningful exchange of information. In addition to the somewhat ‘natural’ challenges of the witness box, there was advice given that a standard of assessing in a clinical practice for a neuropsychologist is to provide an optimal environment that is ‘free, private and calm’ to which the Court noted a trial would not satisfy such a criteria;
• an assessment of capacity to understand a complex financial transaction should be done where the complex transaction is explained in the ‘most accessible way possible (using, for example, flow charts, illustration, components).

In May 2022, Harvey was injured at a cattle yard and hospitalized for care. During his admission, he was seen by a geriatrician and it was notes made by the geriatrician which were submitted by the applicants to support their challenge to Harvey’s capacity.

The geriatrician noted that Harvey “was most condescending, was dismissive of my involvement, questioned by training and qualifications and seemed discriminatory to my person” and Harvey thought was “rude and demeaning”. Indeed, the Court noted that Harvey and the geriatrician did not have a good relationship.

The notes made by the geriatrician noted the words “in keeping with Alzheimer’s” and “I will need some details into his financials before I check his capacity“…”when explained to Dementia likely… Alzheimer’s” and “to this point he is not able to complete any meaningful conversation to address his mental capacity“. Further, the geriatrician noted that the family should be involved in lifestyle and heathcare decisions. The Court considered the geriatrician’s evidence, noted that it appears restricted to personal matters and expressly excluded financial capacity assessment and, in its own right, stated that the doctor was not able to address his mental capacity.

Separately, Dr Jones, an infectious diseases expert who attended on Harvey, noted in his hospital notes that Harvey did not have capacity and that the doctor supported the activation of the EPA for ‘medical, lifestyle and financial decision making’. This was the subject of much distress to Harvey who did not agree with the diagnosis and was the subject of disharmony among the family (and Harvey’s attorneys) as they attempted to have Harvey move to aged care (and not return home) and attempted to force him to remain in hospital against his Will. It is gleaned that it was this event that lead to the revocations and Harvey’s dissatisfaction of how the whole matter was handled.

There was evidence offered to the Court by 5 separate practitioners on the topic of capacity; the two mentioned above and Ms Anderson (a neuropsychologist) and two geriatricians, Dr Morris and Dr Rosenfeld.

The Court did not place much wait on the hospital geriatrician’s opinion and found that Dr Jones’ assessment was based on the geriatrician’s opinion. Dr Rosenfeld gave evidence that it would have been ‘completely inappropriate’ to place Harvey in a dementia unit and that he did not have dementia. Dr Morris similarly stated that Harvey did not have dementia and diagnosed him “mild cognitive impairment amnestic type”” rather than dementia. The Court preferred the evidence of Dr Rosenfeld and Dr Morris.

To the temporary incapacity experienced by Harvey, the Court, at para 325, said:

I am satisfied that the condition which required Harvey to be hospitalised also caused him to be temporarily unable to engage in the decision making necessary to revoke an EPOA. I am also satisfied that that temporary condition had resolved by the time Harvey consulted [his solicitor].

In conclusion, the Court held:

• Harvey experienced a temporary lack of capacity to make decisions for personal and financial matters on or about 8 June 2022;
• Harvey regained the capacity to make decisions for personal and financial matters on or shortly before 27 June 2022;
• the 9 December 2020 EPAs were validly revoked on 27 and 28 June 2022.

You can read the case here.

This is such an interesting case from a legal point of view. What is most notable is the consideration of our new s6C principles and s111A presumption of capacity of the POA Act that has been discussed, along with the varying insights and evidence of capacity given by varying practitioners and parties. The case itself has a lot of detail of the relevant parties in the matter, so I do offer the above as the briefest of summary of a very detailed case. I very highly recommend you read the entirety of the case to appreciate all the nuances that are within this judgement, particularly as they relate to complexity of the transactions taking place throughout the duration of the matter (i.e. the restructure of the business enterprise and the like).

I must confess that this matter would have been incredibly difficult for those involved, Harvey especially. We can all sit here, from our computers, and consider all the possibilities from a legal standpoint, but I do consider this case is a healthy reminder of the very real ‘people’ behind these matters; they are living and breathing, and in Harvey’s case, seeking to exercise their rights as an individual participant in life and society. It is a further reminder that capacity may be lost, but it also may be regained. Conversely, it is likely to have been incredibly difficult for those of the attorneys to know what to do and when to do it in light of such challenging circumstances. Capacity is such a challenging legal conundrum, and this case is an incredibly humbling example of that conundrum both from a legal and human perspective.

I encourage you all to read it – it is absolutely worth the time.

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