NX[2015] QCAT 534

APPEARANCES:

REPRESENTATIVES:

REASONS FOR DECISION

1. [1]
   NX is an eighty-two year old woman. She was widowed some years ago. She has one surviving child, QCF, and two grandchildren. She is currently living with her daughter, son-in-law and her family, in what was the family home. This matter has come to the Tribunal as there is conflict between NX’s daughter and NX’s brother regarding documents that were made in February, March and October 2013.
2. [2]
   An adult is presumed to have capacity for a matter. Capacity is specific to the matters in question. The application by QCF filed on 11 September 2014 seeks a determination of the capacity of NX to sign the following documents:

   2. a)
      Enduring Power of Attorney dated 18 October 2011. This document appointed QCF for financial and personal/health matters;

   2. b)
      The No. 1 and No. 2 X Family Trust Deeds dated 26 February 2013; DGU (NX’s brother), EGK (retired financial planner) and NX were appointed as trustees of both trusts. EGK passed away on 8 April, 2015;

   2. c)
      Enduring Power of Attorney dated 8 March 2013 appointing QCF and DGU for personal/health matters, and appointing EGK, DGU, and LIN for financial matters;

   2. d)
      Revocation dated 4 October 2013 of Enduring Power of Attorney made on 8 March 2013; and

   2. e)
      Enduring Power of Attorney dated 9 October 2013 appointing QCF as attorney for personal/health matters and QCF and NIR for financial matters.
3. [3]
   The applicant also seeks a declaration that NX did not have capacity to make gifts of $278,000 to each of the No. 1 and No. 2 X Family Trusts.
4. [4]
   The Tribunal may make a declaration about the capacity of an adult for a matter in accordance with s 146 of the Guardianship and Administration Act 2000 (Qld) (GAA Act). NX is presumed to have for each matter capacity in accordance with s 7 of the GAA Act and General Principle 1 of Schedule 1.
5. [5]
   The Tribunal in making its decision considers the definition of capacity as defined in the GAA Act to mean the person is capable of:

   2. a)
      Understanding the nature and effect of the matter; and

   2. b)
      Freely and voluntarily making decisions about the matter; and

   2. c)
      Communicating them in some way.

Medical evidence regarding capacity

6. [6]
   The Tribunal considered a number of medical reports regarding NX’s capacity.
7. [7]
   There are a number of letters from Dr CL, Consultant Geriatrician at the Memory Clinic in the Royal Women’s and Brisbane Hospital dated 16 February 2005, 6 July 2005, 1 February 2006, 29 March 2006, 27 September 2006, 29 March 2006, and 7 March 2007. She was seen in the Memory clinic in the context of difficulties with memory and cognitive functioning, and the trial of medications to improve her memory.
8. [8]
   As early as 2006 there was a decline in NX’s memory, and some teariness and depressive symptoms. In September 2006 she was considered to have capacity to make financial and lifestyle decisions. In March 2007 she was continuing to experience memory problems, and her Mini-Mental State Examination (MMSE) was 24/30. She was discharged from the clinic.
9. [9]
   A report from Dr P dated 21 March 2006 reported NX’s diagnoses as hypertension, osteopenia, polymyalgia rheumatica, hemi colectomy, and early Alzheimer’s disease since 2004. He considered that she had decision-making capacity for simple and complex health, lifestyle/accommodation and financial affairs. He discussed concerns in June 2004 regarding her short-term memory and treatment and review in the Memory Clinic.
10. [10]
    Dr P’s report dated 21 March 2013 reports her diagnoses as hypertension, osteopenia and Alzheimer’s disease. Cognitive assessment on the Mini Mental State Examination was 28/30 on 30 September 2010. She had significant impairment of short-term memory but was considered capable of attending to personal health care with appropriate prompts e.g. would need reminders. She was considered able to make decisions about lifestyle and accommodation choice but would be easily confused by competitive choices, especially if under any duress. He was of the view that she was not fully capable of coping with her own financial affairs and was easily confused, especially if choices need to be made that involve any conflict of interest. Dr P considered NX capable of understanding the elements required for an enduring power of attorney, but could not make complex health, lifestyle/accommodation or financial decisions. She was considered able to make simple health, lifestyle/accommodation and financial decisions.
11. [11]
    NX was seen by OM, Occupational Therapist for a Driving Assessment. Her report is dated 8 February 2013. NX had had a series of blackouts and reported avoiding night driving, peak conditions, and reversing. At this assessment NX showed:

    2. a)
       good concentration and sustained attention;

    2. b)
       significant short term memory loss;

    2. c)
       reduced ability to comprehend written and verbal instructions, recall instructions and learn new tasks;

    2. d)
       prompting and repetition was required for more complex tasks;

    2. e)
       difficulties with divided attention and organisation;

    2. f)
       short term visual memory problems;

    2. g)
       impaired scanning, hazard perception, planning and judgement;

    2. h)
       difficulty interpreting simple and complex traffic situations and identifying obvious hazards with impaired driving skills;

    2. i)
       reduced insight into errors and not able to incorporate suggestions.
12. [12]
    OM noted overall significant short term memory loss and cognitive impairment in the areas of information processing, planning, divided attention, and judgement and she did not meet the required competencies for driving.
13. [13]
    Professor DI, Consultant Psychiatrist saw NX for an assessment of capacity and his report dated 5 May 2014 was available to the Tribunal. He assessed her on the Mini-Mental State Examination (MMSE) with a score of 22/30. Scores of less than 24 are generally indicative of cognitive impairment consistent with the clinical syndrome of dementia, of at least mild severity. She has had signs of cognitive impairment since at least 2005, and although it has fluctuated over time, ultimately it has slowly deteriorated.
14. [14]
    In regard to testamentary capacity NX understands the nature and effect of a Will and the identity of heirs and beneficiaries. She is suffering from dementia of mild severity and this is likely to interfere with her ability to distinguish the relative merits of potential claims on her estate. Her dementia makes her vulnerable to the influence of others, including undue influence. She has limited appreciation of her asset classes, their contents, and approximate value.
15. [15]
    In regard to NX’s capacity to make or revoke and Enduring Power of Attorney, she does not appear to understand the nature and effect of an Enduring Power of Attorney and appears unable to learn from instruction, due to her dementia.
16. [16]
    In regard to Trust deeds, she has only a superficial appreciation of the nature and effect of a family trust, and does not understand the meaning of a settlement of a trust deed, or the effect of transfers or gifts to a trust. She is unable to learn from instruction due to her dementia.
17. [17]
    In regard to specific questions from Mitchell Lawyers Professor DI offered the following conclusions:

    2. a)
       She had the capacity to revoke an Enduring Power of Attorney on 8 September 2006.

    2. b)
       She had the capacity to make a will on 13 September 2006.

    2. c)
       She had the capacity to make a Codicil on 18 October 2011.

    2. d)
       She had the capacity to make and Enduring Power of Attorney on 18 October 2011.

    2. e)
       She did not have capacity to execute trust deeds on 26 February 2013 or to make transfers and/or gifts to the trust after it was settled.

    2. f)
       She did not have the capacity to make and Enduring Power of Attorney 8 March 2013.

    2. g)
       She did not have the capacity to make a Will on 15 March 2013.

    2. h)
       She did not have capacity to make a Will on 20 June 2013.

    2. i)
       She did not have the capacity to revoke an Enduring Power of Attorney on 4 October 2013.

    2. j)
       She did not have the capacity to make and Enduring Power of Attorney on 9 October 2013.

    2. k)
       She did not have the capacity to make a Will or Codicil ton 6 March 2013.

    2. l)
       She did not have capacity to make or revoke and Enduring Power of Attorney on 6 March 2014.
18. [18]
    Professor DI was also available at the hearing by teleconference. Professor DI was specifically asked to comment on NX capacity over time. He had carefully considered the chronological history and there had been deterioration over time, but he was confident she did not capacity in 2013 and 2014.
19. [19]
    In respect of the documents made in 2013 she would not have been able to retain information for more than a minute or two. She would have had significant memory difficulties and his impression was that she had little interest in documents, was reluctant to engage in discussions, and had problems with executive functioning, and with planning for the future. She may superficially have looked fine, and was otherwise a polite and cooperative person. She remained poised and pleasant. She would not be vigilant or questioning, and would rely on others around her and be vulnerable to undue influence. Professor DI also confirmed that the cognitive impairments noted by Occupational Therapist OM in her report of 8 February 2013 were consistent with the impairments on his more recent assessment in 2014.
20. [20]
    DGU, NX’s brother provided his views on her capacity. He indicated that NX had never handled finances during her married life, and had never worked. She has never needed to handle legal matters and has relied on himself and his brother for guidance and advice. She suffers from slight senility or some short-term memory loss and would be expected to have small lapses of memory, given her age.

Evidence regarding capacity for enduring powers of attorney

21. [21]
    There is no evidence that NX did not have capacity to make an enduring power of attorney on 18 October 2011. According to Dr P she had an MMSE score of 28/30 on 28 September 2010 and Professor DI’s opinion was that she would have had capacity to make an enduring power of attorney at that time. The statement from the witness to that enduring power of attorney confirms that he had no concerns in regard to NX capacity at that time, Although NX had been diagnosed with mild early dementia, she had been receiving appropriate medical treatment and medication and her difficulties had stabilised. It is not possible to be confident the presumption of capacity is rebutted at this earlier point in time. The Tribunal is satisfied NX had capacity to execute the enduring power of attorney dated 18 October 2011
22. [22]
    In late 2012 NX had an amount of $603,000 in term deposits that were producing interest income and had she not lodged a tax return for some years. She sought the help of her brother DGU. He asked her if she had an accountant to which she replied that her late husband had always said that if she was in financial trouble she should contact EGK. EGK was a retired financial planner. EGK had assisted NX with superannuation issues following the death of NX’s husband in 2001. EGK in the material he filed in the Tribunal indicated that he had last had contact with NX in 2004.
23. [23]
    EGK was contacted and arranged a meeting for 18 December 2012 at the premises of another financial planner, NW. In attendance were NX, her solicitor, NIR, EGK, NW and an accountant, LIN. NW prepared notes from that meeting. They state that EGK did most of the talking. There was discussion in regard to NX’s will with EGK mentioning a will of 2006 and NIR stating that it had been amended by a codicil made in October 2011.
24. [24]
    Discussion at the meeting was said to be centred around trusts and whether they should be discretionary or testamentary and that the maturity of the $603,000, held in term deposit, was on April Fool’s day. Taxation was said to be the main worry at present and that LIN would be dealing with the tax issues. It was agreed that further discussions should take place regarding trusts once the tax situation had been clarified.
25. [25]
    Following that meeting another meeting was arranged for 18 February 2013. Present at that meeting were NX, EGK, NW, LIN and YT. YT is a solicitor and she was invited to the meeting by NW and had not met NX previously. NIR was not informed of this meeting apparently because he had not shown much interest at the previous meeting and would not cooperate by providing a copy of NX’s will to NW or EGK. YT later recorded in a telephone conversation with NIR on 3 May 2013 that NIR had provided NX with a copy of her will following the meeting of 12 December 2012 but did not consider that he was under any obligation to give one to EGK.
26. [26]
    A meeting was then arranged for 8 March 2013 and at that meeting the trust deeds, enduring power of attorney and a temporary will were executed. NW prepared extensive notes in respect of both of these meetings and they were filed in the Tribunal by YT.
27. [27]
    A person may make an enduring power of attorney only if they understand the nature and effect of the enduring power of attorney^[1] and that includes understanding the matters set out in s 41(2) of the Powers of Attorney Act 1998 (POA Act). The witness to an enduring power of attorney must sign a certificate stating that at the time the principal signed the enduring document they appeared to the witness to have the capacity necessary to make the enduring document.^[2] The test of capacity at common law allows for someone to understand the nature of that transaction when it is explained.^[3]
28. [28]
    An enduring power of attorney is a very important and complex legal document as is apparent from consideration of the matters that a principal is required to understand in accordance with s 41 of the POA Act. Once a person loses capacity they are reliant on their attorneys to act appropriately and they must understand the broadness of the powers that are granted at the time they execute the document.
29. [29]
    To assist with the witnessing of enduring powers of attorney guidelines were prepared by the then Adult Guardian and endorsed by the Queensland Law Society.
30. [30]
    YT was the witness to NX’s enduring power of attorney made on 8 March 2013 and indicated at the hearing that she was familiar with the guidelines. She also confirmed that the notes prepared by NW were true and correct in regard to the circumstances of the talking of instructions for and witnessing of NX’s enduring power of attorney.
31. [31]
    The guidelines state that:

    2. a)
       All witnesses of enduring powers of attorney must be aware that from the first contact with the principal information will be available to them that are relevant to the principal’s capacity to make an enduring power of attorney.

    2. b)
       It is recommended that witnesses make an opportunity to meet with the principal alone. This gives an opportunity to develop rapport with the principal and to establish the context within which the principal has decided to make an enduring power of attorney such as the death of their spouse or a serious illness. It also provides an opportunity to determine if the person is being subject to any influence in making the enduring power of attorney.

    2. c)
       During this initial contact it is reasonable for the witness to enter into discussions with the principal to establish their clients background, family, health problems or related issues such as medication that may affect cognitive function and broadly their financial circumstances including their assets, source of income, payment of household and other accounts.

    2. d)
       The guidelines set out a list of indicators of impaired capacity including more forgetful of recent events, more likely to repeat themselves, less able to grasp new ideas, easily influenced by others about their decision making.

    2. e)
       The primary tool for witnesses to determine if the principal has capacity for making the enduring document is through an interview. The witness should always seek an opportunity to meet with the principal alone, record the questions asked during the interview and the principal’s responses. When interviewing the principal questions should be open ended and not closed with an example of a closed question being given.

    2. f)
       Questions that require only a yes/no answer may be inadequate in determining capacity. There is a list of suggested questions. This list is in accordance with the matters set out in s 41(1) of the Act.

    2. g)
       Having regard to the decision in Gibbons v Wright it stated that if the principal is unable to give a response of their own knowledge, it is appropriate to give them an explanation e.g. tell them what an enduring power of attorney is. Later in the conversation ask the question again. Suggested explanations are also provided.

    2. h)
       If the principal has problems responding to the question after explanation, it would be advisable to suggest that a professional opinion be sought about principal’s capacity to make an enduring power of attorney.

    2. i)
       When assessing competence, a witness needs to be prepared for any challenges to his/her assessment of the principal. It is good practice for witnesses to make a written record of all steps taken in assessing competence, including all questions and answers.
32. [32]
    The Tribunal notes that the failure of a solicitor who acts as witness to an enduring power of attorney to do so in accordance with the Adult Guardian guidelines falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.^[4] That is the guidelines are not optional or recommended they are required to be used by a legal practitioner to be able to satisfy themselves that the principal in this case, NX had the capacity to execute an enduring power of attorney.
33. [33]
    It is clear that at no stage did YT meet with NX on her own for the purpose of taking instructions in regard to her enduring power of attorney. The record of interview and file notes for the meeting of 18 February state that there was confusion about whether there was a current enduring power of attorney and that it was decided to make a new one. The notes indicate that there was agreement by everyone as to who should be appointed as attorneys. Two of the attorneys for financial matters, LIN and EGK were present at the meeting. It is stated that “[NX] raised no objection to those parties acting for her”. The evidence is that information was written on a whiteboard and ideas were contributed by all parties at the meeting. Ms Wellaur took minimal details.
34. [34]
    The Tribunal notes that NX had only met LIN once before and knew EGK from many years ago as a financial advisor. NX’s daughter, QCF and her brother, DGU had previously acted as her attorneys and were to be attorneys for personal and health matters. DGU was also an attorney for financial matters. YT stated that “[NX] raised no objection to those parties acting for her”.
35. [35]
    In regard to capacity, at the meeting of 18 February 2013 EGK stated “she in sound mind and good health as she did her road test recently and came through with flying colours. Two weeks ago”. In her statement YT noted that at the first meeting NX presented as a slim, neatly dressed, well groomed and attractive woman for her stated age of 80. She was well spoken and contributed to the meeting as required, as well as the general chit chat and some discussion after the meeting. Her assumption was that NX was not too financially savvy but she did not consider that unusual given her age, and knowing it is not unusual for clients to rely on their accountants or financial advisors to sort out how their affairs should be structured. This appraisal accords with DGU’s statement at the hearing that NX would require more detailed information in regard to anything more complex than a term deposit.
36. [36]
    At the meeting of 8 March 2013 NX announced that her doctor had advised her to give up her licence. EGK commented that “at 80 one has to front up each year for a medical report to the department of transport”. YT is not recorded as having queried NX in regard to her not being able to drive at the meeting of 8 March 2013. One would expect that this should have alerted YT that there may be underlying capacity issues when NX had had a driving assessment that she thought she had done well at prior to the meeting of 18 February 2013 and within a couple of weeks is told by her doctor that she will no longer be able to drive.
37. [37]
    The Tribunal notes that while there was an understanding that NIR held NX’s will. NX was not able to provide a copy of that document or provide details of whether and where NIR was currently in practice. YT was unable to locate NIR's firm or his safe custody items.
38. [38]
    As mentioned above NX had recently been given a copy of her will by NIR but clearly she could not recall this a matter of three months later. NIR’s name was raised at the meeting of 8 March 2013 after a new will was signed and NX said that he had come to her yesterday. EGK jumped in and explained that it was in regard to NX moving back to live with her daughter and NIR was explaining the ramifications in regard to her retirement unit. There was again no follow up from YT in regard to NX not being able to assist with details about NIR and yet she clearly was still in contact with him. YT allowed herself to be diverted by EGK instead of allowing her client to clarify matters.
39. [39]
    NW notes for the meeting of 8 March 2013 set out the details of the discussion in regard to NX’s enduring power of attorney.  YT outlined to NX who her attorneys were and stated that having totally independent professional attorneys was a lot safer. NX made it clear that she was very concerned that her daughter was not an attorney for financial matters. Especially when it was confirmed that QCF would get a copy of the document. NX stated “I just feel so guilty about this. When she finds out she’s going to be very unkind to me about it, you don’t even trust me do you, that’s what she’ll say”. LIN who had never met NX’s daughter and only met NX once, stated that NX should respond with an explanation in regard to how her estate is to be divided.
40. [40]
    A lot of time was then spent discussing why QCF should not be a financial attorney and bringing issues about the wills and trusts into the discussion. In the end after a long discussion NX signs the enduring power of attorney after YT provides a short explanation of the terms. YT indicated that some changes may be able to be made as to how the attorneys for financial matters may make their decisions. EGK states “no leave it there” and NX signs.
41. [41]
    NX then comments “how many times have I signed my name today now it is getting worse”. The last comment in regard to the enduring power of attorney is from YT saying that “now you’ll have to take it to [QCF] and get [NW] to sign that”. NX makes no reply to this which is extraordinary considering her concern a few minutes before that when her daughter finds out about the failure to have her appointed as a financial attorney she would be very upset.
42. [42]
    NX is not noted to have said a great deal at any of the meetings. Her major contributions were in regard to her concerns about her son-in-law Tony and her daughter not being an attorney for financial matters. A file note prepared by YT of a conversation she had with EGK on 22 March 2013 states that he advised that “[NX]’s daughter had phoned and was furious say she should be sole POA for her mother”. YT then contacted NW and advised him that a new power of attorney had been drafted with QCF as an attorney as a result of the concerns she had raised with EGK. On 27 March 2013 YT contacted NX and her file note states “I also advised her that I had appointed [QCF] as a financial attorney as [QCF] had requested this. Her brother [DGU] looks after financial matters and 2 are to sign. [NX] said this was ok”.
43. [43]
    YT did not provide any file note of her attendance upon NX in regard to the execution of the enduring power of attorney and the other documents of 8 March 2013, relying on the record prepared by NW. While YT confirmed at the hearing that she was aware of the capacity guidelines for witnesses of enduring power of attorney, she admitted that in the case of NX she had not followed the guidelines. She confirmed that she did not ask questions about whether NX had capacity and the first indication she had in regard to capacity issues was on 1 May 2013 when QCF advised her of her mother’s diagnosis of dementia.
44. [44]
    The primary evidence in regard to a person’s capacity to make an enduring power of attorney is that of the witness to the document itself in accordance with s 44(4) of the Act. To satisfy themselves as to that capacity a legal practitioner must ensure that they follow the guidelines set out by the Adult Guardian.
45. [45]
    In this case, NX was 80 years old and so consideration should have been given to discussing her health with her. This would have elicited that she was taking medication to improve her memory and that should have alerted the witness that further questioning was required or a medical assessment. There is no indication of any questions being asked by YT to determine if NX had any memory issues. YT saw that NX presented well and was well spoken and did not make any further attempt to determine if NX had any underlying capacity issues.
46. [46]
    The facts spoke for themselves as for example NX could not recall details in regard to whether she had a current enduring power of attorney. Despite the fact that EGK said her capacity was fine at the first interview by the time of the second a mere three weeks later NX was told by her doctor that she would no longer be able to drive. The fact that NX’s tax problem was that she had not lodged her return for four years shows she was not attending to her financial affairs. It is also of note that NX had her own solicitor attend the first meeting but was happy to deal with a new solicitor who was brought in by the financial planner without any explanation to her. These things should have alerted YT that NX might have capacity issues.
47. [47]
    At the second interview NX was unable to recall her instructions from the first interview as to who her attorneys were to be and was distressed that her daughter was not a financial attorney. Yet she forgot about this after an unrelated discussion in regard to her will and the trust and executed the enduring power of attorney anyway.
48. [48]
    It would be expected that where a client is so conflicted about their instructions that the solicitor would have at least ensured that any further discussion in regard to the enduring power of attorney be in private. At no stage did YT speak to NX privately and she allowed those who were to become NX’s attorneys to virtually decide that they would be appointed. It was then YT and the soon to be attorneys who talked about other matters to convince NX to sign the enduring document. When QCF raised the issues that NX said she would, the enduring power of attorney was amended without NX’s instructions and she was expected to sign the new one.
49. [49]
    One of the purposes of the private meeting is to ensure that there is no influence being brought to bear. It is clear from the notes provided to the Tribunal that the accountant, LIN and EGK at least were trying to influence NX as to who she should appoint as her attorney’s. YT by her actions in amending the enduring power of attorney had no qualms in influencing NX herself. A solicitor’s job is to act on instructions and to advise and prepare documents. This shows that YT did not consider that it was improper to influence a client to execute a document in a particular way. If she had she would have ensured that instructions were taken in private.
50. [50]
    While it is noted that YT explained some of the aspects of the enduring of the enduring power of attorney the explanation did not cover all of the matters that a principal is required to understand in accordance with s 41 of the POA Act. There was no attempt to ascertain what NX’s understanding was of those complex matters. The fact that YT considered NX not to be financially savvy should have meant that she took particular care to explain all documents and in the case of the enduring power of attorney ensured that by asking open ended questions she was able to satisfy herself that NX had the appropriate understanding.
51. [51]
    YT did not follow the guidelines for the witnessing of enduring powers of attorney in any aspect, she did not observe NX to assess her capacity, she did not take instructions in private, she did nothing to ensure that NX had the appropriate understanding of the enduring power of attorney. No medical information was sought, and if it had, it should have alerted YT to concerns regarding NX’s capacity.
52. [52]
    As a result of not following the guidelines the evidence of the witness to NX’s enduring power of attorney cannot be relied on. The witness did not perform their job appropriately. YT conduct afterwards in amending the enduring power of attorney without instructions from the principal shows that she has a very poor understanding that she is to act on her client’s instructions. The record of the meeting of 18 February 2013 indicate that a committee of the participants determined who should be NX’s attorneys and it was only at the next meeting that NX understood what was being dealt with and raised concerns which were placated against her interests. The people she was appointing as her attorneys were people who she either hardly knew, EGK or had met only once, LIN.
53. [53]
    The medical evidence from Professor DI and Dr P and the Occupational Therapy report from OM clearly show that NX had a longstanding diagnosis of dementia with cognitive and memory impairments, and that these difficulties were observable in early 20913. At the hearing Professor DI stated that NX did not understand the basic concepts of an enduring power of attorney, even with explanation.
54. [54]
    Professor DI also stated at the hearing that he worked backwards from the time he saw her and read material from the earlier tests to understand progress and there was a deteriorating trend over time. He said the report of OM for the driving assessment performed on 7 February 2013 was helpful and it is particularly relevant as it is close in time to the making of the enduring power of attorney, trust and other documents. Professor DI thought it unlikely NX had capacity in 2013 and that she would certainly need step-by-step assistance and reminding. He gained the impression that she had little involvement or interest in these documents.
55. [55]
    Dr P’s report of 21 March 2013 also raises concerns about her being easily confused by competitive choices if anxious or under duress, and having significant impairment of short-term memory.
56. [56]
    Given all of the above information it is unlikely that NX would have had capacity to understand the complex information presented to her, to retain information to assist her with understanding and weighing up the pros and cons of options and choices, to form her own independent views, to seek independent and private advice, or to freely and voluntarily make decisions without the views and pressure from others. She was not afforded with any opportunity for appropriate provision of information at a level suited to her needs, in an environment appropriate to someone with her cognitive impairments, because none of the parties considered her capacity or followed processes which would have allowed them to have considered her individual needs.
57. [57]
    The Tribunal is satisfied that NX did not have capacity to make an enduring power of attorney on 8 March 2013 as a result of the effects of dementia.
58. [58]
    NX executed a revocation of the enduring power of attorney made on 8 March 2013 on 4 October 2013. The witness to the revocation was NIR, solicitor. In his statement, NIR indicated that the revocation arose as a result of NX’s concerns about EGK. He stated in regard to the execution and witnessing of the revocation that “I gave [NX] the revocation to read it and so far as I was concerned she understood it. She signed it and I witnessed her signature. He said the meeting lasted from 3.40 to 4.55 pm”. He did not produce a copy of any record of his attendance with NX.
59. [59]
    A principal may revoke an enduring power of attorney in writing only if they have the capacity to make an enduring power of attorney.^[5] NIR clearly did not test whether NX had the appropriate understanding to revoke an enduring power of attorney and the Tribunal has found that she did not have capacity to make an enduring power of attorney on 8 March 2013.
60. [60]
    Her loss of capacity was attributed to dementia which is progressive and Professor DI’s opinion was that NX would not have had capacity to revoke an enduring power of attorney on 4 October 2013.
61. [61]
    The Tribunal is satisfied that NX would not have had capacity to execute a revocation of the enduring power of attorney dated 8 March 2013 on 4 October 2013 as the result of her dementia.
62. [62]
    NX made a further enduring power of attorney on 9 October 2013. The witness to that document was EH, a commissioner for declarations. She provided a statement to the tribunal and said that she had known NX for 8 years through her daughter. She stated that “she read each section of the power of attorney provided to me by [NX] and asked if she understood what she was signing. Marion indicated to me that she wanted her daughter to be her attorney and understood what she was signing”.
63. [63]
    Clearly EH has not made a proper attempt to assess whether NX had capacity as at that date to make an enduring power of attorney. Having regard to the previous findings of the Tribunal in regard to NX’s capacity to make an enduring power of attorney the Tribunal is satisfied that NX did not have capacity to make the enduring power of attorney of 9 October 2013.
64. [64]
    Where the Tribunal is satisfied that the principal for an enduring power of attorney did not have capacity to make it the Tribunal may declare the enduring power of attorney invalid.^[6] The effect of a declaration that an enduring power of attorney is invalid is that it is void from the start^[7].The Tribunal raised the issue at the hearing and the representative for QCF confirmed that she wished to make an application in regard to the validity of the enduring powers of attorney made in 2011 and 2013. The Tribunal was satisfied that the application should proceed and that verbal notice to the adult and the other active parties at the time of the hearing was sufficient for compliance with the notice requirements of s 118 of the Guardianship and Administration Act 2000.
65. [65]
    The Tribunal being satisfied that NX did not have capacity to make the enduring powers of attorney of 8 March 2013 and 9 October 2013 declared those documents invalid in accordance with s 113 of the Powers of Attorney 1998. The Tribunal being satisfied that NX had capacity to make the enduring power of attorney of 18 October 2011 declared this enduring power of attorney valid.

Capacity for the X Family Trust No. 1 and the X Family Trust No. 2 and the gifting of funds to those trusts.

66. [66]
    NX’s capacity in regard to the X Family Trust No.1 and the X Family Trust No. 2 and the gifting of funds to those trusts is also in question. Capacity as defined in the Guardianship and Administration Act 2000 requires an adult to be able to understand the nature and effect of decisions about particular matters and Gibbons v Wright is authority that this may be with an explanation of those matters.
67. [67]
    A trust is a complicated legal concept involving the ownership of assets by a trustee to be held for the benefit of beneficiaries without those beneficiaries having any particular rights in regard to the trust property and only a right to be considered for distributions and to call for an account from the trustees. Any gift results in the original owner losing their rights in relation to the subject matter of the gift, that is it is no longer their property.
68. [68]
    In the case of the creation of a trust and the gifting of property to that trust the person who originally held the property may obtain the rights as a beneficiary of the trust but those rights are not the same as the rights they had when they owned the property. Discretionary trusts are not taxed unless there is no beneficiary presently entitled in which case they are tax at the highest marginal tax rate. It is the beneficiary who receives a distribution from a trust who is taxed on the distribution.
69. [69]
    NX’s original problem was that she had not lodged tax returns for some years and she needed to find an accountant to prepare those returns. She contacted EGK, which led to NW, LIN and YT, and the creation of the two trusts. Concerns were raised by NX about her son-in-law getting access to funds that she had apparently hoped to be enjoyed by her granddaughters. Originally some further discussion was to occur about whether trusts should be testamentary, that is contained in NX’s will or discretionary and to take effect now.
70. [70]
    At the meeting of 12 December 2012, NIR indicated that following a codicil of 2011 NX’s estate was to be distributed in a particular way. At the meeting of 18 February 2013 EGK asked for LIN to advise on how to structure the investment of the term deposit funds based on NX’s original will of 2006 and NX confirmed that this was how her husband Ray had wanted it. This though was not how she had distributed her estate in terms of the codicil. The verbal advice was that two trusts should be created with a granddaughter and NX being the primary beneficiary of each trust. Clearly despite EGK having been made aware of NX’s change in testamentary intention at the meeting of 12 December 2012 he was prepared to ignore that and it is probable that NX could not recall her codicil made in 2011.
71. [71]
    NX was also repeatedly told that the trusts would solve her tax problems, which was primarily that she had not lodged tax returns for some years. On this basis the very reasons for the trusts are called into question. It is clear that they would not reduce the incidence of taxation on NX and they also do not reflect her last testamentary intention. What NX is recorded as saying in the notes to the meeting of 18 February 2013 is that she just wants to tie it up so that Tony, her son-in-law did not get his hands on it. This in itself could have been dealt with by the use of testamentary trusts with the granddaughters as beneficiaries.
72. [72]
    YT’s file note of the meeting of 18 February 2013 state the main concern and the reason for the meeting was to re-arrange NXs finances such that on her death the bulk of her estate would not go back to her daughter where it might be attacked by her daughter’s husband. NX did not trust her daughter’s husband and felt that although she wanted to leave a substantial amount to her two granddaughters who are 18 and 16 respectively this would not happen if all of the funds went via the will to her daughter. NW note of the meeting of 18 February 2013 state that LIN explained what a family trust is and what it could do for NX and YT also explained about the beneficiaries and how things could be structured. There is no detail given of what was explained to NX and there was no letter of advice provided to NX between the meeting of 18 February and 8 March to confirm the reasons for the trusts and how they would benefit NX and help her achieve her goals.
73. [73]
    There is no evidence during these discussions that any of the parties, including YT confirmed NX’s understanding of the arrangements in regards to these complex matters.
74. [74]
    The arrangements put in place would took effect immediately to deprive NXs of her assets once they were gifted into the trust and she would effectively lose individual control of them. Upon her death it would be her trustees and the principal of the trusts who would be making decisions as to the distribution of funds. The trusts also allowed for new beneficiaries to be added to them so there was no guarantee that distributions would be made to NX’s granddaughters.
75. [75]
    In the notes of the meeting of 8 March 2013 EGK said that the trusts will solve NX’s future tax problems and there would be two trusts so that each of her granddaughters inheritances would be in their individual trusts. Again there is no evidence of how it was explained to NXs that the trusts would solve her future tax problem noting that the problem was that she simply failed to file tax returns or that the trust would create compliance costs and tax would still have to be paid. Using language such as inheritance also fails to clarify that the gifting to the trust operates immediately.
76. [76]
    There is little indication of NX participating in the discussion about the trusts. There is no evidence that she understood the nature and effect of the trusts and gifts. In particular there is no record of showing any understanding of the arrangements by asking appropriate questions. The only issue she raised was that she did not want her brother John as a trustee.
77. [77]
    Two trusts were created and it was spoken as if the trusts would become the property of the granddaughter who was a primary beneficiary either when they reached a specific age or on NX’s death. This is not the case as trusts are controlled by the trustees of which and NX was only one. It is only when the trustees determine to make distributions that the beneficiaries receive any benefit. The principals of the trusts were EGK, DGU and LIN. LIN, the youngest of the principals, was a person who had only met NX once and had no real knowledge of the beneficiaries. He was though the person who prepared the trusts tax returns at substantial cost. Just as NW was the financial advisor who would receive commission for investments and advice.
78. [78]
    There was a significant error in the name of the “default beneficiary” specified in the trust deeds prepared by Ms Wellaur, and this was not identified by Ms Wellaur, or by NX or other parties at either meeting or when the documents were signed on 8 March, 2013.
79. [79]
    The money that was to be gifted to the trusts was in a term deposit and soon to mature. EGK was insistent that the term deposit be broken prior to its maturity. The question of whether there would be a break cost was raised at one of the meetings and it was decided that it would be small as the term deposit was very close to maturity. The break cost was in fact in excess of $20,000.00. The amount ultimately paid into the trusts was $579,829.77 with that amount being deposited to the X Family Trust No 2 on 15 March 2015 and transfer of an amount of $289,914.88 to the Jonson Family Trust No 1 on the same day.
80. [80]
    One of the justifications for the trusts was that there would be a tax saving and YT mentioned at the hearing that NX may also be entitled to a pension in the years to come as she had gifted a large sum to the trust. There was no evidence provided as to how the tax saving was to occur. The income earnt by the trust would still need to be taxed and it was anticipated that it would be distributed to NX so it would be taxed to her.  There was also no evidence that a  person who has gifted assets to a trust of which they are a trustee and a beneficiary would later be able to receive a pension.
81. [81]
    While NXs tax affairs would be monitored due to the involvement of the accountant and other trustees this would be at great costs in terms of accountancy fees and advisor commission. It was estimated at the hearing that the cost would be $10,764.00 for both trusts in advisor and accountants fees. This is nearly more than NX’s tax bill for the four years of tax returns that were outstanding.
82. [82]
    There is no evidence that any of these costs including the break costs on the term deposit were explained to NX nor that she would by gifting the funds to the trust and lose her rights in regard to that asset to be substituted for only the right to be considered a beneficiary.
83. [83]
    YT had noted that NX was not financially savvy. When advising NX on entering transactions as complicated as an arrangement to set up two trusts with a gift of $600,000.00 a full explanation should have been provided in writing. None of this occurred. There was no deed of gift in respect of the $600,000 to show that NX understand that by depositing funds into the trust account she was actually gifting those funds to the trust and would then only have the rights of a beneficiary in regard to those funds and that the gift was not to take place in her will. There is no evidence that NX understood the effect of the transactions.
84. [84]
    Professor DI’s opinion was that NX would not have capacity in regard to the trusts and the gift. When he asked her about the trust she said, “its complicated for my daughter and grandchildren”. Following an explanation given by Professor DI in regard to the trusts she said, “I can’t really say I don’t know the details”. The Tribunal notes that Mrs Johnston’s daughter was not a beneficiary of the trusts and they were set up to exclude her from access to the funds held by the trusts.
85. [85]
    The Tribunal is satisfied having regard to the medical evidence and the complete lack of any proof that these transactions were properly explained and understood by NX that she did not have capacity in regard to the trusts and the gifting of funds to the trusts.
86. [86]
    The consequence of this in regard to the funds held by the trusts is that NX could not have formed the intention to permanently deprive herself of those funds.

Conclusion

87. [87]
    An adult is presumed to have capacity for a matter. Capacity is specific to the matters in question. The medical evidence indicates that NX has a diagnosis of dementia that has been progressive over time. She has cognitive and memory impairments which have significantly limited her capacity to understand the nature and effect of decisions in regard to her financial matters. As the result of her cognitive impairments, she is easily confused and she is vulnerable to the influence and direction of others in respect of financial decision-making to the extent that she is unable to freely and voluntarily make decisions. She has limited ability at the current time to communicate her decisions. The Tribunal is satisfied that NX did not have capacity in 2013 and subsequently. The Tribunal’s findings are as follows:

    2. a)
       NX did have capacity to make the Enduring Power of Attorney dated 18 October 2011;

    2. b)
       NX did not have capacity to make No. 1 and No. 2 X Family Trust Deeds dated 26 February 2013;

    2. c)
       NX did not have capacity to make the Enduring Power of Attorney dated 8 March 2013;

    2. d)
       NX did not have capacity for the revocation dated 4 October 2013 of Enduring Power of Attorney made on 8 March 2013;

    2. e)
       NX did not have capacity to make the Enduring Power of Attorney dated 9 October 2013;

    2. f)
       NX did not have capacity to make gifts of $289,914.88 to each of the X Family Trust No. 1 and No. 2 X Family Trusts;

    2. g)
       The following enduring powers of attorney are declared invalid pursuant to s 113(2) of the Powers of Attorney Act 1998:

    2. i)
       The enduing power of attorney dated 8 March 2013 appointing QCF and DGU as attorneys for personal and health matters and EGK, DGU and LIN as attorneys for financial matters; and

    2. ii)
       The enduring power of attorney dated 9 October 2013 appointing QCF as attorney for personal and health matters and QCF and NIR as attorneys for financial matters.
88. [88]
    The Tribunal considered what arrangements should be in place to ensure NX’s financial matters and interests were protected. In view of the tribunal declaring the 2013 enduring powers of attorney invalid this leaves the enduring power of attorney of 18 October 2011 appointing QCF for financial and personal/health matters in place.
89. [89]
    Concerns were raised at the hearing regarding QCF’s actions and lack of actions as attorney. Despite her financial powers beginning immediately in 2011, she did not take responsibility for ensuring that NX’s financial affairs were managed appropriately. Taxation returns were not completed over a number of years. This is despite her being aware that her mother had difficulties with cognitive functioning and memory. NX required prompting and assistance and there was a gradual deterioration and she was vulnerable. Despite QCF raising concerns about her mother’s capacity with YT and others in 2013, she was involved in the making of a further enduring power of attorney dated 9 October 2013 appointing her as attorney for financial and personal/health matters. She claimed that she was acting on the advice of NIR but she must have been aware at that time that NX did not have capacity for decision-making.
90. [90]
    The Tribunal determined that there may be the need for consideration of the need for the appointment of an administrator who is able to independently consider the financial interests of NX, and ensure her needs are met and interests are protected. The Tribunal will therefore initiate an application for appointment of an administrator for NX.