Case shows client must be identified

In Legal Services and Complaints Committee v Hardie,¹ the practitioner was found to have engaged in two counts of professional misconduct which arose directly from his failure to identify who his client was in the preparation of an Enduring Power of Attorney (EPOA) and his failure to appreciate a conflict of interest.

The practitioner prepared an EPOA at the request of a third party, in circumstances where the practitioner did not know the donor and had never met or spoken with her about the terms of the EPOA which he prepared.

According to the terms of the EPOA, the donor was to appoint her brother as attorney, and the EPOA was to come into effect upon its execution. The practitioner emailed the draft EPOA to the third party and to a settlement agent who was to arrange a survivorship application and a lost title application relying on the EPOA.

The practitioner did not open a file for the matter, nor did he bill the third party or the donor. The third party instructed that two hard copies be printed after receiving the draft. Following the preparation of the EPOA, the practitioner then acted for a mortgagee in a transaction that relied on the EPOA to bind the donor as mortgagor.

The tribunal found that the EPOA had been fraudulently executed and used, without the donor’s knowledge or consent, to mortgage a property she had inherited from her late mother’s estate. She received no value from the transaction under which her property was mortgaged to secure a loan of approximately $400,000 plus interest.

The practitioner was found to have engaged in professional misconduct by preparing the EPOA in circumstances where he:

• did not meet, or communicate in any way, with the proposed donor;
• did not take any steps to ascertain or assess the donor’s capacity to make the EPOA;
• did not take any steps to ascertain whether the donor understood and freely assented to the EPOA;
• knew the EPOA would be, or may be, used in connection with a property transaction;
• provided a copy of the EPOA, in executable form, to a third party who had no legitimate or lawful interest in connection with the EPOA, with knowledge that the EPOA would be, or was likely to be, executed,

which contributed to a fraud being perpetrated against [the donor], whereby she became liable for a mortgage she had no knowledge of.²

The tribunal acknowledged that a practitioner preparing an EPOA owes a duty to the donor to ensure capacity and voluntariness of the EPOA irrespective of who asks them to prepare the document or who else might be involved in any associated transactions.³

Practitioners who are taking instructions from third parties such as accountants and mortgage brokers on behalf of another must consider who they are acting for and verify who is their client. If it is not the third party, then they should ensure that they meet with the client to obtain instructions directly, appropriately scope their retainer, perhaps ascertain why the third party is necessary and obtain clear written authority from the client if they wish the practitioner to deal with that third party.⁴ The preference is usually to obtain instructions directly unless there are clear reasons why this is not possible.  

In this case, the practitioner had a professional obligation to ensure the donor had capacity to execute the EPOA and that the draft prepared by him accorded with her wishes.⁵ The practitioner’s failure to consider who his client was and to whom he owed professional obligations when preparing the EPOA was conduct which fell substantially below that expected of a competent legal practitioner.⁶

Additionally, the practitioner acted in a position of conflict by agreeing to act for the lender in the loan transaction before his professional obligations to the donor had been discharged. His conduct in doing so amounted to professional misconduct.⁷ The tribunal noted that he should not have acted for the lender, who was relying on the execution of contractual documents by the donee of the EPOA, until such time as he had taken the necessary steps to ensure the donor had the capacity to enter into the EPOA and that doing so was in accordance with her wishes. If he had done so, it would have almost certainly brought the fraud to light.⁸

The practitioner’s failure to identify the conflict was a basic failure which flowed directly from his first failure to recognise that the donor was his client in respect of the EPOA he prepared. The tribunal ordered for the parties to provide a minute of agreed proposed orders to be made as a consequence of the tribunal’s findings.

Footnotes
¹ [2025] WASAT 50.
² Ibid [36], [108].
³ Ibid [100]. See also Legal Services Commissioner v Ronald Aubrey Lawson [2019] QCAT 10.
⁴ ‘Can I act for the client on instructions from a third party?’, Queensland Law Society (Web Page) <https://www.qls.com.au/Practising-law-in-Qld/Ethics-Centre/Rules-Resources/Can-I-act-for-the-client-on-instructions-from-a-th>.
⁵ Ibid [104].
⁶ Ibid [142].
⁷ Ibid [12].
⁸ Ibid [163].