Advise fully

Give full and independent advice so the client can make an informed decision

Any legal advice we give to older clients about exchanges of assets for care must be completely independent, fully informed and comprehensive, so that the older person is able to fully appreciate the nature of the transaction and enter into it freely.

Lawyers have been found to be negligent in cases where they have not properly advised clients, and dispositions have been set aside in cases of undue influence or unconscionability because the advice of the lawyer was found to be lacking.

See Davis (2008, p. 46) citing Riz & Anor v Perpetual Trustees Australia & Ors [2007] NSWSC 1153; and see Dominic v Riz [2009] NSWCA 216; and Cavenham Pty Ltd v Robert Bax & Associates [2011] QSC 348 regarding the retainer to act generally in a client’s interests and to give appropriate advice.

A standard for proper legal advice in situations like these was set by Barrett J in Winefield v Clarke [2008] NSWSC 882:

  • Obtain full instructions.
  • Identify the client’s level of capacity and their understanding of nature of the transaction. (See Capacity.)
  • Conduct a full discussion of arrangements and consequences.
  • Ensure the client is entering into the transaction freely.

You must be fully informed of all the material facts when giving advice, such as whether the property constituted your client’s only asset.

Try to identify your client’s motivations and intentions. Do they wish to support their children or to avoid institutional care? To stay in their home? Do they understand the consequences?

If an arrangement appears to be unwise or improvident, you may need to suggest other ways to achieve a desired outcome, for instance by structuring a proposed transaction differently or by discussing options with other service providers such as social workers or financial advisers.

You need to ensure that the older person has understood the precise effect of what they want to do, the alternatives which are available to them in law, and the comparative advantages of all alternatives. (See also Interviewing the client.) Your client has the right to make improvident transactions or not to act in their own best interests, and they may still prefer to dispose of the assets. (See Stivactas v Michelatos (no 2) [1993] Australian Contract Reports 90-031.)

Lawyers need to ensure they fully document the advice they give. Five percent of the total costs of claims against Victorian practitioners in 2007–2009 were Amadio claims (LPLC 2009 and 2010). This case underlines the need for security providers (including guarantors and direct borrowers) to receive independent legal advice and for solicitors to sign a certificate attesting to advice being given, particularly where the guarantors are under some special disability. (In Amadio the disability was the guarantor’s age and limited English.)

For more information on managing risk

see the Legal Practitioners Liability Committee’s Risk Booklets.