Nielsen v Capital Finance Australia Ltd & Ors

In this interesting matter the Court of Appeal held that the donee of a Power of Attorney was able to bind the Principal to an agreement even though the donee executed the document in their own name and without designating that they were exercising the power as an Attorney.

The donor of the power had, some years before the relevant agreement was signed, granted a general Power of Attorney to a Mr Shane Heal.  A few years after the granting of the power and unbeknownst to the appellant, Mr Heal signed an agreement which made the appellant a guarantor to a chattel lease which was entered into by a company controlled by Mr Heal.  Mr Heal signed his name against the printed name of the appellant and did not execute the document in a manner which showed that he did so as an attorney.  Section 69 of the Powers of Attorney Act provides that an attorney may execute an instrument with the attorney’s own signature but that “an instrument executed by an attorney must be executed in a way showing that the attorney executes it as attorney for the principal”.  An instrument so executed was held to have effect as if it were done by the Principal.  A number of Queensland authorities had held that the failure to exercise the power of attorney in the manner prescribed by s 69 rendered the purported exercise ineffective – Caltabiano v Electoral Commission of Queensland (No 4) [2010] 2 Qd R 1; Wright Enterprises Pty Ltd v Port Ballidu Pty Ltd [2008] QSC 78; and J Wright Enterprises Pty Ltd (in liq) v Port Ballidu Pty Ltd [2010] QSC 213 – although in none of those cases was the point in question before the Court of Appeal argued.

The appellant claimed that he was not bound by the guarantee so executed.  The respondent claimed that at common law a donee of the power of attorney was able to bind the Principal with a signature under their own hand and without showing that they executed as an attorney.

The President undertook an extensive consideration of the common law relating to the power of attorneys to bind a principal by executing a document in their own name.  Her Honour concluded that, at common law, an attorney was required to execute a document in the name of the Principal.   However, it was held that because Mr Heal had executed the document in his own name by placing his signature against the printed name of the appellant he had actually executed the document in the name of the appellant.  Muir JA also conducted a detailed analysis of the common law but reached the same conclusion by a different method; namely that regardless of whether or not the Attorney executed the agreement as attorney, as the Attorney was the agent at common law the signature bound the Principal in any event.  It seems that all members of the bench considered that non-compliance with the provisions of the Powers of Attorney Act did not invalidate the signature.