Know Your Rights - Issues related to power of attorney

A POWER of attorney (PA) is a document which expressly appoints another either a natural person or persons or a corporation or corporations who have the capacity to act on behalf of the person or party. The person or party who grants the PA is known as the donor and the person or party who acts under the PA is known as the donee. The donor is the principal whereas the donee is the agent of the donor. PA is extensively used as a convenient instrument for many purposes. This article looks at the various purposes why a PA is granted by a person or party to another and the risks and safeguards that may be necessary to prevent abuse.

In most instances, the donor appoints the donee to act on his or her behalf. The extent of the powers granted by the donor to the donee depends on the purpose of the grant of the PA. For instance, financial institutions grant PA to their senior executives either singly or jointly with the power to execute security documents on their behalf. The PA may contain powers of what the donee can do on behalf of the donor and prohibitions which the donee cannot do on behalf of the donor.

A PA has to be registered at the High Court where you can attend at your own accord but preferably engage the services of a law firm.

Many property transactions are transacted by way of a PA under the belief that this instrument is sufficient to protect the interests of the donor. Many are under the impression that a PA can be used or is sufficient for the purpose of dealings relating to the land in question like having a PA executed by an elderly person appointing a younger person to act on his or her behalf even after his or her demise adding a clause in the PA that it was granted for valuable consideration and irrevocable.

In view of the extensive powers that may be granted by the donor to the donee by way of a PA, there is fertile avenue to use it for fraudulent purposes. Any party who wants to rely on the PA to transact shall first make sure the PA is genuine and this can be done by making a search at the relevant High Court where the PA was registered.

There is a difference between a PA executed and granted for valuable consideration as against full consideration. In the case of the former some consideration flows between the parties like love and affection. A nominal consideration like RM1 is stated. In the case of the latter, the donee may be entitled to full rights as the donor whose name still appears in the title as owner in fact holds the property as trustee for the donee as beneficiary.

Not all rights may be delegated to another. Certain rights which are personal to the person cannot be delegated to another by way of a PA like the execution of court documents for court proceedings relating to estate matters or matrimonial proceedings.

So the next time someone suggests the execution of a PA as a "solve all solution", one has to consider carefully the potential issues that may arise and whether it is valid under the law.

At one time, there were a lot of property transactions where Malaysian citizens transacted the property sale by granting a PA to the foreign buyer or the foreign company. The National Land Code 1965 was amended with a new Section 433F which renders any PA granted to a non-citizen or a foreign company as void and any document executed using such PA is also void and incapable of registration.

One should seek proper legal advice with regard to the creation of a PA and the specific powers under the PA so that it serves its intended purpose.

The writer, formerly a banker, is a lawyer. Comments: