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Debt recovery, attorneys and impaired capacity

06 Apr 2018

Recovering debts in the aged care context can be complex, particularly where a resident has appointed an attorney or there are issues of capacity.

In this article we explore a case study that identifies some of the risks faced by providers seeking to recover a debt in circumstances where an attorney is appointed and the resident has lost capacity.

Case study

A resident in an aged care facility has recently appointed their son as Enduring Power of Attorney for financial matters. The resident retains full capacity but asks the provider to deal directly with their son to arrange the payment of fees etc.

The resident’s son fails to pay the accounts and any attempts to communicate with him to negotiate payment are futile. The facility approaches the resident to let them know that their fees are not being paid but the resident does not want to believe that their son would be mismanaging their finances. The resident says it must be an oversight and asks the provider to request payment from the son again.

Despite attempts to negotiate payment from the son, the fees continue to go unpaid and the outstanding amount now exceeds $40,000.00.

Issue 1: Who should the provider deal with?

If the resident has lawfully appointed the attorney to act for financial matters with their power to commence immediately, then the resident can ask the provider to deal directly with the attorney, even if the resident has capacity.

This arrangement is usually effective when things are running smoothly. However, disputes can arise such as in our case study where the son is representing to the resident that they are “taking care of the bills” but in fact the provider is not receiving any payment and the resident does not wish to believe that the son would be mismanaging their finances.  

From the resident’s perspective, merely appointing an attorney does not absolve the resident of their financial responsibilities. This means that while the resident has capacity, the resident remains responsible for ensuring that all fees and charges are paid. Although the resident’s attorney can help to arrange these payments, it is not the attorney’s responsibility to ensure the debts are paid.

If the resident has capacity but has asked you to deal with their attorney, it is prudent to continue to send accounts and other financial information to both the attorney and the resident themselves.

Issue 2: Who do you issue proceedings against?

Where the resident has capacity, they remain responsible for their debts. Accordingly, any action should be brought against the resident personally.

Issue 3: What if the resident has impaired capacity or loses capacity during the proceedings?

Where a resident loses capacity or is considered by someone (the provider, their attorney etc) to have lost capacity then it will be necessary to resolve this issue before proceeding any further.

The appropriate action to take will depend on a range of factors including the amount of the debt (which will determine the jurisdiction eg QCAT or Magistrates Court) and the timing of when the issue of capacity arises. For example:

  • If the issue of impaired capacity arises before filing proceedings
    • It may be appropriate for the provider to file an application in QCAT to appoint an administrator.
    • The provider can then negotiate payment with the administrator without issuing proceedings.
    • However if the negotiations with the administrator are not successful and the provider wants to issue proceedings, a litigation guardian will need to be appointed.
  • If the issue of impaired capacity arises after proceedings have already been commenced
    • a litigation guardian will need to be appointed
    • only the Supreme Court has the power to do this which means that if the application is before QCAT or the magistrates court then it will need to be stayed while a separate application is made to the Supreme Court to appoint a litigation guardian.

The appointment of a litigation guardian is usually by consent and although the Court can appoint someone without their consent, it is very unlikely to do so. Additionally, it is rare for the Court to appoint the Public Trustee as litigation guardian even where there is no other person who is prepared to accept the position.

Unfortunately, this means that where no-one is prepared to become the litigation guardian (including the Public Trustee), the only outcome is likely to be to stay the proceedings indefinitely.

We can help!

Navigating the debt recovery process is something we can help you with. With external assistance in many instances the process can be quite straightforward and can result in prompt payment. In the event issues like those canvassed in this case study arise, we can assist you so that the issues do not deter you from acting to recover a debt.