The Prudent Solicitor and Power of Attorney

11 Apr 2017

In the case of Yaktine v Perpetual Trustees Victoria Ltd [2004] NSWSC 1078, the NSW Supreme Court considered the duties of solicitors when dealing with power of attorneys. Receiving instructions from a client who is an attorney for another is a common practise, so it is important for the prudent solicitor to consider Yaktine and take from it the professional expectations the judgement holds them to.

The court considered the question, when should a solicitor make further enquiries to establish the validity of an attorney's instructions? Chief Justice Young analogised the answer to this question is when red lights flash. As an example of when red lights should flash, the facts in Yaktine can provide insight.

The facts of the case involved a solicitor acting on a large mortgage to be granted by Mr and Mrs Yaktine under instructions from their son as power of attorney. The son produced what later was proved to be a forged power of attorney, claiming his parents were overseas but that he was acting under their instruction. In carrying out these instructions the solicitor witnessed the execution of mortgage documents and statutory declarations signed by the son as power of attorney.

Additionally and notably, the solicitor provided a letter to the son which was addressed to the mortgagee. It was a request for the certificate of title to be handed over to the son as attorney. The letter was signed off by the solicitor and under the parent's name, leaving an area for them to sign. The son later forged his parent's signature, relying on the letter to obtain the certificate of title. By providing this letter, the certificate of title was released to the son which in effect induced the loan.

The purpose of these transactions was to fund the son's purchase of a property, which the solicitor was also acting on. This purpose provides the answer to the question considered by the court.

The reasoning of the Court reveals that the solicitor should have investigated the true nature of instructions given by son. It was clear he would receive a substantial benefit from the effect of the instructions, yet his parents would not receive any benefit. Professional standards require that if these situations present themselves, red lights should flash for the solicitor so to prompt them to act in order to confirm the validity of an attorney's directions.

The court also discussed the requirement for solicitors to take considerable care when putting their signature and professional reputation to documents - care which was not exercised in this case.

In their findings the Court held the solicitor was guilty of making false and misleading representations to the lender's solicitor by submitting the mortgage documentation and, was liable to compensate the mortgagee for its loss without indemnity from his insurer. 

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