Spring 2008 Newsletter

Enduring Powers of Attorney – Significant Changes

Enduring Powers of Attorney involve an individual, (‘the donor’) placing trust in a person (‘the attorney’) to act competently in the donor’s best interests. The donor who becomes mentally incapable is dependent on the attorney to make decisions for him or her. Sadly, this trust is sometimes abused, particularly by family members.

A new law amending the existing legislation comes into force on 26 September 2008 and makes the interests of the donor paramount. Where the donor has lost capacity, and decision making is taken over by an attorney, the donor still has the right to be consulted about their views. The Act places an obligation on the attorney to encourage the donor to develop the donor’s competence to manage his or her own affairs in relation to his or her property.

New Witnessing Requirements
The Act introduces new witnessing requirements for all new enduring powers of attorney. A lawyer, legal executive, or an officer of a trustee corporation must act as the witness. Legal executives are able to witness if they have at least 12 months experience, hold a current annual registration certificate issued by the New Zealand Institute of Legal Executives, and are employed by and under the direction and supervision of a lawyer.

The witness must explain to the donor the effects and implications of the enduring power of attorney and his or her rights, and certify in the prescribed form that this has been done. At the time of signing, the witness must certify that he or she has no reason to believe that the donor lacks mental capacity and that the witness is independent of the attorney.

New Definition of Mental Capacity
A donor is deemed mentally incapable if he or she lacks the capacity to:

A prescribed form has been issued for health practitioners to certify as to incapacity. The form must be used on all occasions when the donor’s capacity is in question.

Proper Records to be Kept
The attorney must keep proper records of each financial transaction entered into by the attorney while the donor is mentally incapable.

The Act allows the donor who has been, but is no longer, mentally incapable to suspend the attorney’s authority to act by giving written notice to the attorney. The suspension does not revoke the enduring power of attorney and can be reviewed by a Court. However, an attorney whose authority is suspended cannot act unless a health practitioner has certified, or the Court has determined, that the donor is mentally incapable.

Easier Access to Courts
Any of the following people may apply to the Court to review an attorney’s actions:

In Conclusion
It is hoped the Act goes some way to limiting situations in which it might be possible for enduring powers of attorney to be misused or abused. Although compliance costs will inevitably be increased this is considered a small price to pay to increase protection for a vulnerable donor.

If you would like more information on enduring powers of attorney or would like to review existing documents (whether you are a donor or an attorney) contact Graeme McLelland 09 407 0179 or Sue Wooldridge 09 407 0174.

Protect Your Business from Bad Debtors

Owners or managers of small to medium sized businesses will be increasingly aware of how the global credit squeeze is affecting New Zealand. As finance companies collapse, fuel costs escalate and interest rates rise (amongst other things) the pressure grows for everyone to cut costs and make savings. One common response from debtors to these pressures is to delay paying creditors – including you. Effectively they are using you as a low cost source of extended funding.

Planning how to protect your business from bad debtors involves both practical and legal issues.

Take time at the outset to ensure the customer can and will pay. Sometimes the promise of a new order for work overrides commonsense enquiries at the time about the customer’s circumstances and their ability and willingness to pay the price you require.

Ensure you have full details of your customers before you commit to the work. This includes all their contact details but also the legal name and type of entity. All too often creditors go to take enforcement action only to find they are missing details which compromise debt recovery. For example, you might assume your customer is John Brown trading as John’s Timber Supplies only to find out that he was representing John Brown Limited trading as John’s Timber Supplies. This can result in you having no action against John Brown personally, only his limited liability company, which might be insolvent.

If your customer is a small company, obtain a guarantee from the directors. It is often more effective to pursue a director personally, rather than a company.

Have written terms of trade which the customer must sign before you supply the product or service. This makes it very difficult for the customer to dispute your terms at a later stage, which often happens if the terms are posted with an invoice, after supply, or not recorded in writing at all. Include terms that:

If appropriate, include specific reference to creating a security interest pursuant to the Personal Properties Securities Act 1999. This will enable you to become a secured creditor. If you do this, you will also need to be aware of the process for registering a financing statement on the Personal Properties Securities Register at www.ppsr.govt.nz/cms, otherwise your security will not be complete and may be ineffective.

Take steps as soon as a customer is late. Speak with them if possible. If not, write to them. Too often debtors are not contacted early enough and a problem which could have been a minor one becomes a major one.

The overall key is to take care with your procedures and documentation at the outset of the transactions. It may require time and money to put everything in place but it will more than pay for itself over time.

Lawyers often deal with creditors who fail to recover some or all of their debt, despite having provided an excellent product or service, because they haven’t taken enough care or obtained adequate advice when setting up their paperwork and procedures.

If it is time you revised your credit procedures, contact Sarah Jury 09 407 0176. For help with registering finance statements and Personal Properties Securities Register advice generally, Irma Egenes 09 407 0170 can help you.


Staff News

But wait, there’s more!

In recognition of her quality work and standing in the firm, Sarah has been made an associate of McLeods Lawyers. Sarah will be with us until the end of the year. We look forward to welcoming her back after parental leave in the late summer.

Future newsletters

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All information in this newsletter is to the best of the authors’ knowledge true and accurate.No liability is assumed by the authors, or publishers, for any losses suffered by any person relying directly or indirectly upon this newsletter. It is recommended that clients should consult a senior representative of the firm before acting upon this information.

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