Power of Attorney and Decision-Making Capacity
A Power of Attorney (https://www.nextgenlegal.com.au/powers-of-attorney-in-victoria/) is said to be valid when the person giving the power (called the Principal) is over the age of 18 years and has decision making capacity.
In this issue, we will discuss decision making capacity.
As a general rule, a person is presumed to have decision-making capacity unless there is evidence to the contrary.
The meaning of decision-making capacity is explained in detail under the Powers of Attorney Act 2014 (Vic) (the Act). Under the Act, a person has decision-making capacity if the person is able to satisfy each of the following:
- understand the information relevant to the decision and the effect of the decision; and
- retain that information to the extent necessary to make the decision; and
- use or weigh that information to process the decision making; and
- communicate the decision, views and needs as to the decision in some way, including by speech, gestures or other means.
At common law, it was held in the High Court case of Gibbons v Wright (1954) 91 CLR 423 that “the mental capacity required by law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained.” To date, the court’s view in this case remains as authority.
In simple words, the principal must have an understanding of the nature and effect of the document they are signing, remember the personal or financial matters relevant to the decision, be able to deliberate and consider the decision being made and must be able to explain in their own words the information relevant to the decision.
The fluidity of mental capacity means that the assessment of mental capacity must be time-specific to the decision to be made at a particular situation. A principal who may not have had the capacity to make a specific decision in the past, may on the other hand, have the capacity to make the same decision at a later point in time. Reasonable steps must be taken when conducting mental capacity assessment at a time and in an environment in which the principal’s decision-making capacity can be assessed more accurately. However, if still in doubt, the best way forward is to have a trained medical professional to undertake the mental capacity assessment.
If you have any queries regarding any of the matters discussed above, please do not hesitate to contact NextGen Legal on (03) 9039 2142.
