Powers of attorney are regularly granted so that one person can act on another person’s behalf. The granting of power to an attorney can facilitate transactions and represent a practical solution in many personal and business situations. However, the granting of unfettered power can be abused. The recent decison in Lines v Pikia provides a useful consideration of trust based remedies available when the fiduciary obligations that are owed under a power of attorney are breached. The case also provides assistance in making sense of the issue of limitations by analogy, a dry subject at the best of times, but which can be essential to understand when determing whether a trust related remedy is time-barred from the passage of time. Completing the trifecta of dry subject matter are considerations of whether estoppel or the equitable doctine of laches might have application.
The defendant, Mr Pikia was the attorney for his grandmother, now deceased, pursuant to an enduring power of attorney. Mr Pikia was also a residuary beneficiary of his grandmother’s estate under a will (made at the same time of the power of attorney) in favour of Mr Pikia, one of his aunts (Molly) who was granted a life interest and another grandchild who had a residuary interest.
Mr Pikia negotiated a grazing lease under the power of attorney. He later transferred his grandmother’s house and grazing blocks to himself for consideration of $200,000, which was not paid. When Mr Pikia’s grandmother was made aware of the transfer of her property she revoked her power of attorney and made a new will that did not favour Mr Pikia. At the same time a caveat was lodged on the titles to the properties transferred to Mr Pikia. This caveat was later withdrawn (ostensibly to allow Mr Pikia to re-finance borrowings against the properties due to his dire financial situation at the time) and the properties were transferred to a trustee of a Mr Pikia’s family trust. Following the death of Mr Pikia’s grandmother, the exectrix of the estate caveated the titles of the property formerly owned by Mr Pikia’s grandmother and commenced proceedings against Mr Pikia.
In addition to arguing that he was entitled to the property as he would eventually receive it under his grandmother’s will, Mr Pikia also argued that even if that defence failed:
- the Limitation Act applied preventing action against him due to the time that elapsed since the deceased was aware of the transfer of her property
- the equitable doctrine of laches applied
- the executrix was estopped from bring action against him.
All defences were unsucessful and Mr Pikia was ordered to return the property unencumbered to the estate and to account for the grazing rental.
While this seems an appropriate outcome it is useful to condsider why the defences raised were not succesful as they provide guidance as to when delay in bringing proceedings can alter the outcome, regardless of whether there has been a breach of fiduciary duty (as was the case here).
As a starting point, it is important to establish the basis for attaching any claim against the property transferred by Mr Pikia by virtue of the power vested in him by the power of attorney. When acting under a power of attorney, while the attorney can have all of the powers of the donor, the attorney cannot act in the attorney’s own interests unless the donor of the power has given “informed and effective” consent. Where this is not the case any person who takes the property with knowledge of the breach holds the property not for themselves but as trustee under a constructive trust for the donor of the power.
Note that this case is decided in accordance with the Limitation Act 1950, not the Limitation Act 2010. However, as the Limitation Act 2010 also permits equitable claims by analogy the comments made still have relevance. The Limitation Acts (1950 and 2010) provide periods of time after which claims cannot be brought. For matters of equity that are not expressly dealty with in either Limitation Act it is possible to apply the Act by analogy. To paraphrase where an equitable claim is sufficiently analogous to a claim to which a Limitation Act applies, the equitable claim can be time-barred by analogy. However, in this case there was no need to consider whether the matter was time-barred by analogy as other provisions of the Act allowed the claim to proceed.
Mr Pikia also claimed that as the deceased withdrew her caveat to allow the properties to be transferred by him to trustees, that the plaintiff was now estopped (prevented) from revisiting the matter. While it was accepted that the delay was considerable, the court found that Mr Pikia had not acted in reliance of the delay. Further, the withdrawal of the caveat by itself did not mean that the matter was conceded by the deceased. In this regards the details around the withdrawal should be considered by any reader with an interest in this regard as they highlight the inferences drawn where independent advice for vulnerable parties is circumvented – see paragraphs 81 – 99 of the judgment.
Laches is a equitable defence, that can be applied where a party (the plaintiff) has delayed so long in enforcing rights that the [defendant] obtains an equity that outweigh’s the plaintiff’s rights. As stated in Lines v Pikia “The issue is whether it can be said that the deceased’s failure to take positive steps to assert her position thereafter could amount to an acquiescence on her part so that …[the plaintiff ought not be to able to recover the land transferred in breach of trust]. It is noted in the judgment that equity does not readily accept the propostion that an equitable interest in land can be lost only by inaction.
It is useful to remember that whether laches is made out in each case will depend on the particular facts (and in this case the advanced age of the deceased did promote a certain tolerance as to her failure to take action to recover her property) . However, as a general proposition equity does not readily accept the propostion that an equitable interest in land can be lost only by inaction.