Thankfully, more people are becoming aware and talking more openly about Elder Abuse and its prevalence among the Australian community. The most common type of elder abuse is the financial exploitation of a close elderly family member (followed by psychological and physical abuse).

Unfortunately, much of the financial exploitation stems from misuse by an attorney appointed pursuant to a Power of Attorney document.

This article presents a brief summary on how financial exploitation through a Power of Attorney can take place, and the remedies available against a “rogue” attorney.

How does Financial Exploitation Take Place

Putting in place a Power of Attorney has practical advantages – it is a relatively low cost, informal and private appointment by a donor allowing the appointment of a person or persons (the “attorney”) to make decisions on the donor’s behalf with regard to their financial and property matters.

Unfortunately, it is the informal, private and unregulated nature of a Power of Attorney that makes it susceptible to misuse.

A Financial Management Order by contrast requires a formal application to the relevant State or Territory Guardianship or Financial Management Board or Tribunal (in the ACT, this would be the ACT Civil and Administrative Tribunal or simply, “ACAT”). The Board or Tribunal is then responsible for ensuring a decision is arrived at having regard to all the evidence, including medical evidence, arguments and submissions by interested persons and that a decision is ultimately made in the best interests of the interested person.

Perhaps one of the most notable cases of financial exploitation was highlighted in the case of Brennan v State of Western Australia[1]. Mr Kopec was a polish migrant living in Western Australia with very few relatives in Australia. He lived by himself on a farm and was suffering from deteriorating physical and mental health. Mr Kopec appointed Damien Brennan, a legal practitioner as his attorney pursuant to an Enduring Power of Attorney. Over the span of the next 8 years, Mr Brennan continued to misappropriate close to $900,000 of Mr Kopec’s estate including continuing to operate the Enduring Power of Attorney well after Mr Brennan had died.

A more recent case involving the misappropriation of funds by an attorney is the case of Mezzapica v Mezzapica[2] which was handed down in November 2017. This case involved an elderly Italian mother who had appointed her two sons as her attorneys. After the mother’s death, one of the sons (Robert, the Plaintiff) questioned a number of transactions which were entered into by the other son (Renato, the Defendant) including a number of cheques which Renato had drawn from his mother’s Commonwealth Bank account in favour of himself.

The Court held that the cheques were not actually drawn in the exercise of Renato’s power as his mother’s attorney. The Court did however find that Renato had misappropriated other funds (totalling over $62,000) from a trust account which held in his mother’s name for the benefit of her grandchildren. This misappropriation by Renato constituted a breach of trust by his mother such that the mother’s estate had to account for the loss.

Fortunately in this case, it was held that the mother did not suffer a loss. At the date of this article it is not clear whether further action will be taken against Renato for his acts as his mother’s attorney.

Available remedies

The range of remedies available in circumstances of financial exploitation and misappropriation can be broadly classified into three categories:

  • statutory remedies;
  • common law remedies; and
  • criminal remedies

A brief overview of each of these is discussed further below:

Statutory remedies

Victoria, Queensland, South Australia, the ACT and Tasmania have specifically legislated to impose substantial penalties or allow for compensation for the donor (or their estate) caused by the failure of an attorney to comply with their statutory duties in the exercise of their powers[3]

The remaining States and Territory (Western Australia, Northern Territory and New South Wales) do not provide any legislative right to seek compensation or damages from an attorney where the donors assets have been misappropriated if there has been proof of financial exploitation. The only statutory remedy in Western Australia, Northern Territory and New South Wales is that an application can be made to the relevant State and Territory Court or Tribunal (or, the Court or Tribunal can make a decision on their own initiative) to revoke a Power of Attorney if they are satisfied it is in the best interests of the Donor.

Common Law Remedies

There are three fundamental equitable grounds upon which a Court can set aside a transaction involving financial exploitation by an attorney:

  • Breach of Fiduciary Duty – an attorney is a fiduciary and where the attorney obtains a profit as a result of a transaction that conflicts with the interests of the donor, the Court has the ability to set aside the transaction
  • Unconscionable conduct – the High Court’s decision in the case of Amadio[4] established the principles with respect to Unconscionability can be established where three elements have been satisfied:
  1. That one party has a “special advantage” (the stronger party);
  2. That the disability is sufficiently evident that the stronger party knew or ought to have known of the weaker party’s special disadvantage; and
  3. the stronger party took unfair advantage of the weaker party’s special disadvantage to obtain a benefit for him/herself.
  • Undue influence – where an attorney has procured a transaction by undue influence, again the transaction can be set aside.

Criminal Remedies

At the present time, there is no specific criminal offence in any Australian jurisdiction that deals with financial exploitation of an elderly person, through a Power of Attorney or otherwise. Financial abuse and exploitation can be prosecuted through a variety of property offensive including misappropriation of property, theft or fraud and in some cases, domestic violence or abuse. In the ACT, there is a separate offence for dishonestly obtaining a financial advantage by deception [5]

In reality however, there has been a noted failure by police to investigate and subsequently prosecute for criminal offences in cases where there has been financial exploitation of an older person generally. There is also typically a strong desire by older persons to maintain family privacy and as a result, financial exploitation is often unreported.