Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 28 October 2017.
Fred and Mary have operated a farming business for many years.
The farm is based on two large properties that are owned by Fred.
Mary owns a residential property in her sole name and has other substantial assets.
Fred and Mary have a son and four daughters.
Fred makes a will, with the intention of leaving one of the properties, known as “Cow Creek”, to his son and his other property to his daughters.
At the time of making his will, Fred executes a power of attorney in favour of Mary.
Ten years later, Fred has lost the mental ability to manage his affairs.
Mary decides that her daughters should become the owners of Cow Creek and using the power of attorney, enters into a contract whereby the $1 million property is transferred to her daughters for one dollar.
When Fred dies, his son becomes aware of the transfer and commences proceedings against his mother and his sisters.
The court rules that Mary had no authority to enter into the contract and that she was in breach of her obligations to Fred, as it was not for his benefit.
The court also rules that Mary had a personal liability to “restore” Fred’s estate and that the fact that the property was transferred to her daughters, and not to her personally, did not “circumvent her personal liability”.
In circumstances where the daughters should have appreciated that Mary had no authority, the court ultimately orders that they hold the property on trust for Fred’s estate.
Finally, in circumstances where Mary’s lawyer was retained by Mary in a “representative capacity” to transfer the property, the court also finds that the lawyer was required to personally protect Fred’s interests and that the lawyer was negligent because he had breached his duty of care to Fred, as well as Fred’s son.
If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
