Information Note for the
LegCo Panel on Administration of Justice and Legal Services
Enduring Powers of Attorney Bill 1996

INTRODUCTION

This paper aims to brief members of the Panel on the contents of the Enduring Powers of Attorney Bill 1996. Subject to the approval of the Executive Council, it is envisaged that this Bill will be introduced into the Legislative Council in January next year. This Bill is proposed by the Attorney General, and is intended to address the problems explained below.

BACKGROUND

2. Under the present law, a power of attorney is revoked automatically when the donor of the power becomes mentally incapable. But, paradoxically, it is precisely at that time that the donor is in need of someone who can manage his or her affairs.

3. This state of the law is causing problems particularly in relation to elderly people who, having given a power of attorney, subsequently become mentally incapacitated. A further problem arises because, if the attorney continues to act pursuant to the power of attorney once the donor becomes incapacitated, he will be personally liable for any acts so done.

4. In response to these problems, it is proposed to introduce legislation for the creation of a new type of power of attorney - the enduring power of attorney (EPA) - which, subject to conditions and safeguards, would continue in force notwithstanding the donor's subsequent mental incapacity.

POWER OF ATTORNEY

5. A power of attorney is a formal arrangement whereby one person (the donor) gives another person (the attorney or donee) authority to act on his behalf and in his name. A power of attorney is, therefore, a type of agency and is governed by the general law of agency deriving from the common law (which in Hong Kong has been modified slightly by the Powers of Attorney Ordinance (Cap. 31)).

6. The donor's loss of mental capacity has, as a general rule, the effect of automatically revoking a power of attorney, so that the attorney no longer has actual authority. This rule arises because, upon becoming mentally incapacitated, a person loses his ability to enter into contracts or otherwise to exercise his legal rights. As a person's agent is treated as having capacity only to do those legal acts which that person can do, an agent who has been appointed by a person who subsequently becomes mentally incapacitated will thereby lose his powers to undertake legal acts. An attorney who seeks to undertake acts pursuant to a power of attorney after he becomes aware of the donor's mental incapacity will become personally liable for such acts.

7. In Hong Kong, once a person becomes incapacitated, the only way another person can lawfully act on his or her behalf is by being appointed by the High Court as a receiver to manage the incapacitated person's property and affairs under the Court's direction. In most cases, the Court will appoint a relative or close friend as the receiver. If an incapacitated person had previously appointed an attorney, that attorney might well be the most appropriate person for appointment because regard will, as far as possible, be had to the wishes of the incapacitated person himself. However, the cost, formalities and time involved in making an application for the appointment of a receiver and subsequent applications for the Court's approval of specific transactions often deter the donor's relatives from approaching the Court for legal assistance.

8. In response to similar problems, many jurisdictions have enacted legislation allowing the creation of a new device called an enduring power of attorney, which is not revoked by the mental incapacity of its donor.

9. The relevant legislation in England is the Enduring Powers of Attorney Act 1985. A key aspect of this Act is that the donee of an EPA must, on the donor's actual or impending incapacity, register the power with the Court of Protection which then has certain investigatory and other powers. As a preliminary to registration the attorney must serve notice on the donor, and on the donor's relatives. The relatives are thus given an opportunity to consider the attorneyship and, if they wish, to object to the operation of the power. In the result, the operation of the English legislation is rather complicated.

The Proposed EPA Scheme for HK

10. In December 1993, a consultation paper outlining a proposed EPA scheme for Hong Kong was issued. This scheme incorporates provisions from a variety of EPA models in other jurisdictions, including the Australia Capital Territory, Queensland, Tasmania, Victoria, British Columbia, Newfoundland, Ontario and Scotland.

11. The proposed EPA scheme for Hong Kong would provide that:-

  1. the EPA should be in a prescribed form and contain obligatory statements by the donor and the attorney as well as explanatory notes which set out the nature and effects of EPA and the attorney's obligations;
  2. the donor must sign the EPA before a lawyer, who has to certify that the donor appears competent to grant the EPA and understands the explanatory notes of the EPA;
  3. the donor should be able to specify a particular future date or contingency upon which the EPA will commence;
  4. a person who is bankrupt, under age or mentally incapable cannot be appointed as the attorney;
  5. the attorney's obligations and liabilities shall be those of a fiduciary and he may be liable to compensate the donor for loss caused by his mismanagement;
  6. an interested party may apply to the High Court-
    1. requiring the attorney to produce accounts;
    2. for the EPA to be revoked or varied; or
    3. for the attorney to be removed;
  7. the EPA can be terminated-
    1. by the donor, by revocation at any time before his mental incapacity or after his recovery;
    2. by the attorney renouncing with notice;
    3. by order of the Court; or
    4. by death of the donor or the attorney.

12. The proposed EPA scheme is relatively simple, effective and inexpensive as compared with the present English scheme. It differs from the English scheme in that:-

  1. the emphasis is placed on the provision of safeguards at the time the EPA is signed;
  2. the attorney takes the obligations of a fiduciary;
  3. there is no obligation on the Court Registry to scrutinise the form of the EPA;
  4. there is no requirement to notify relatives; and
  5. interested parties can apply to the Court for redress.

CONSULTATION

13. The consultation paper outlining the proposed EPA scheme has been circulated to the legal profession, relevant departments, and other interested organisations for comments. The responses from the consultees were broadly in favour of the proposed scheme.

14. Regarding safeguards at the time the EPA is executed, a number of consultees expressed the view that a certification by both a solicitor and a registered medical practitioner of the donor's capacity to execute the EPA would provide a better safeguard than a certification by a solicitor alone. The English Law Commission also took the same view. It is proposed that the legislation should so provide.

15. The Bar Association suggested that a "limited registration system" should be adopted at the Supreme Court Registry, under which there would be an official record available for public inspection, but the Registry would have no obligation to scrutinise the form of the EPA or to ensure that it meets the legal requirements prior to registration. This approach was also supported by the Hong Kong Council of Social Service. The advantage of having a limited form of registration is the ease of public access to EPAs and the contents thereof, while the system would remain simple and relatively inexpensive to administer. The setting up of such a limited registration system is recommended.

16. The Bar Association also suggested that the EPA scheme should provide for notification of, and acknowledgement from, the donor's relatives of the execution of the EPA. However, such a requirement could lead to difficulties in the event of the attorney failing to receive acknowledgements from those notified. Moreover, in view of the additional safeguards proposed in paragraphs 14 and 15 above, the procedural requirement of notification and acknowledgement appears unnecessary. It is not therefore recommended.

17. Some consultees were in favour of limiting the scope of the EPA scheme to property and financial affairs, while others suggested that it should also apply to the personal care and welfare of the donor. It is considered that in Hong Kong there is a high appreciation of the responsibilities of family members. Apart from the traditional support from family members, decisions on personal care and welfare will inevitably import ethical dimensions manifestly not suited to the relatively simple structure of the proposed EPA scheme. It is proposed that the EPA scheme should be limited to property and financial affairs.

FINANCIAL IMPLICATIONS

18. Additional resources will be required for providing a limited registration system at the Supreme Court as outlined in paragraph 15 above. The Judiciary has indicated that an additional Registration Clerk at the Clerical Officer II rank needs to be created.

Attorney General's Chambers
October 1996

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