Attorneys’ duties under enduring powers of attorney
Kevin Callinicos • 14 December 2016

A recent judgment issued by the Court of Appeal has clarified the duties of an attorney under an Enduring Power of Attorney (“EPOA”) in relation to Property, particularly in circumstances when the donor (i.e. the person giving the power to the attorney), is mentally capable.
The case is ­Vernon v Public Trust [2016] NZCA 388. The essential facts are these:

  1. Kenneth Vernon appointed his son Ashley Vernon his attorney under an EPOA in relation to Property.
  2. Kenneth was aged 86 in March 2006, when his wife Naomi died. Following his wife’s death, Kenneth lived with Ashley and his wife, Beverley (“the Vernons”) until 2008, when he went into a rest home.
  3. When Kenneth went to live with the Vernons, his assets amounted to about $329,000.00.When Kenneth moved into the rest home, his assets had been reduced to $11,000.00. During that time, Ashley had controlled Kenneth’s bank accounts using the EPOA.
  4. Kenneth’s Will divided the balance of his Estate equally between Ashley and Kenneth’s grandson, Dante (being the only child of Kenneth’s other son, Chris, who had already died).
  5. Following Kenneth’s death in 2011, the Public Trust was appointed as replacement administrator of his Will. In 2014, the Public Trust issued proceedings in the High Court against the Vernons to recover the funds withdrawn from Kenneth’s account, alleging that Ashley had misapplied them for the joint benefit of him and Beverley. The Vernons denied liability and the claim went to trial.
  6. In the High Court, Justice Kós found that Ashley had exercised undue influence over Kenneth in obtaining Kenneth’s consent to the majority of the bank transactions, and found in the alternative that the transactions constituted a breach of Ashley’s fiduciary duty owed to Kenneth and on the grounds on unconscionability.
  7. The Vernons appealed to the Court of Appeal.
  8. The Court of Appeal decided that:
  9. The High Court decision could not be sustained on the grounds of “undue influence” because, once the Judge found that the transactions did not occur with Kenneth’s consent, it could not be said that the consent was obtained by “undue influence”.
  10. However, the Court of Appeal sustained Justice Kós’ alternative finding that Ashley’s actions constituted a breach of fiduciary duty and were unconscionable. The Court rejected the Vernon’s argument that the Protection of Personal and Property Rights Act 1988 was a code and that the fiduciary duties could not be implied.
  11. However, the Court of Appeal rejected that submission where the donor is not mentally incapable.Under an EPOA the donor appoints the donee to be the donor’s agent or attorney. Although, an EPOA is created by the Act which prescribes certain powers, that does not exclude the imposition of equitable obligations.Equity imposes enforceable duties on an agent. Fiduciary obligations are a necessary incident of the relationship of principal and agent.
  12. As a result, the Court of Appeal found that Ashley owed Kenneth fiduciary duties whenever he exercising his powers under the EPOA, and that in these circumstances, Ashley had used his powers for improper purposes (to financially benefit himself and his wife), and this was directly contrary to Kenneth’s property interests.
  13. As a result of this decision, it is clear that the duties owed by attorneys to donors under an EPOA are more than those expressly stated in the Act and/or the power itself, but are, much like trustees, fiduciary duties which include the duty to act openly and fairly, to exercise reasonable care in managing the financial affairs, to keep personal and fiduciary property separate and to avoid conflicts of interest.

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Common Legal Myths

3 August 2026
1. Myth: “The Property Relationships Act applies after 2 years!” - Wrong Generally, the time period for a relationship to become what is known as a qualifying relationship under the Property (Relationships) Act 1976 is 3 years from the commencement of the relationship. This time period can be shorter if there is a child in the relationship or the applicant has made a substantial contribution to the relationship. The 2 year period is the period a married couple must be separated before the marriage can be dissolved (i.e. divorced). 2. Myth: “It’s my property – I can leave it to whomever I want!” Wrong (sort of) This statement highlights the tension between what lawyers refer to as “testamentary freedom” that a Will-maker has and rights certain persons have under various statutes and law. While it is true that a Will-maker can do what they want with their property, this is not absolute. A Court can order a different distribution where a Will-maker fails in what is known as their “moral duty” to make “proper maintenance and support” for family members. In addition partners have rights under the Property (Relationships) Act 1976, and the Law Reform (Testamentary Promises) Act 1949 can assist persons to whom the Will-maker has made promises to provide for them in return for work or services done in the Will-maker’s lifetime. The rules of equity may also affect the Will-maker’s testamentary freedom. 3. Myth: “I’ve been in a relationship for 30 years so surely I can make decisions for my partner who has lost mental capacity!” – Wrong Despite the length of a relationship (marriage/de facto/civil union) if one of the partners loses mental capacity the other partner has no right to make decisions for their incapacitated partner in relation to their property and/or their personal care and welfare, unless the incapacitated partner has completed Enduring Powers of Attorney. If the incapacitated partner has not completed Enduring Powers of Attorney applications to the Family Court will need to be made for the appointment of a Property Manager (or Administrator if there are not significant assets) and a Welfare Guardian. 4. Myth: “I can buy/sell a house without a lawyer involved” – Wrong (sort of) In theory, a layperson can buy or sell a home without the involvement of a lawyer but (and it is a big but) it would be very difficult to do so (not to mention the risk of doing so). If bank lending is involved, the bank will insist on the involvement of a lawyer to act on its behalf and may even decline to lend if a buyer is not legally represented. Even if the bank was prepared to lend it is likely it and its lawyers would impose so many conditions and requirements (in order to protect the bank’s position) that it may be practically too difficult for a buyer act for themselves. Furthermore, with the land register now being predominantly electronic, relying on lawyers with the requisite certifications, it will be difficult for a non-licenced person to transact the registrations. Again, in theory, these can be done manually in paper form but the formalities involved in doing so is likely to make it practically difficult (if not impossible) for a buyer or seller to do so. This is general information about the current law, not advice on a specific matter. Article by: Kevin Callinicos

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