NCLM- CORPORATE LAW - POWERS OF ATTORNEY - CAPACITY

1. (LAW 592)
POWER OF ATTORNEY
LWH2H, FIRM 4
MUZHAFFAR & PARTNERS
Khairul Muzhaffar B. Khairul Anuar 2014633056
Nor Assalinah Bt. Noor Azman 2014863096
Nor Nazifah Bt. Ahmad Nordin 2014282588
Nur Alwani Bt. Mohd Zulhaini 201426038
Ahmad Farouq B. Amir 2013112221
Noraini Bt. Abdul Hamid 2013408636

2. QUESTION (D)
Discuss the capacity of the following donors and donees of
Power of Attorney :
(i) Minors
(ii) Bankrupts
(iii) Corporations
(iv) Persons with mental disorder and/or unsound mind

3. THE MEANING OF CAPACITY:
:: Lexis Nexis, Encyclopaedic Australian Legal Dictionary, Butterworths,
the term ‘legal capacity’ broadly refers to ‘the competence of a person to
act as Donor or Donee’ to make decisions that will be upheld by the legal
system. Under law, all adults are presumed to be ‘of sound mind’ and
have the capacity to make decisions about important areas of their lives
including managing personal finances, medical treatment, buying and
selling and making contracts.
:: As a general rule, a person of legal capacity may execute a power of
attorney. This is the same position as under the general law of contracts
and also the law of agency , and generally this has meant a person who
is of the age of majority and who is of sound mind.

4. WHAT IS THE NEXUS BETWEEN POWERS
OF ATTORNEY AND LAW OF CONTRACTS?
:: Under Section 10 of the Contracts Act 1950:
“All agreements are contracted if they are made by the free consent of
parties competent to contract, for a lawful consideration and with a
lawful object, and are not hereby expressly declared to be void.”
:: In the case of Wan Salimah bte Wan Jaffar v Mahmood bin
Omar [1998] 5 MLJ 162, it was held that the validity of a power of
attorney is dependent on its execution before certain named personalities
and must be authenticated in the appropriate forms set down in the First
Schedule of the Powers of Attorney Act 1949.

5. :: Under Section 135 of the Contracts Act 1950:
An “agent” is a person employed to do any act for another or to
represent another in dealings with third persons. The person for
whom such act is done, or who is so represented, is called the
“principal”.
PRINCIPAL = DONOR
AGENT = DONEE
:: Under Section 137 of the Contracts Act 1950:
As between the principal and third persons, any person may become
an agent; but no person who is not of the age of majority and of
sound mind can become an agent, so as to be responsible to his
principal according to the provisions in that behalf herein contained.
NEXUS

6. WHAT IS POWER OF ATTORNEY?
According to Osborn's
Concise Law Dictionary 7th Edition
Power of Attorney is "a formal instrument by
which one person empowers another to
represent him, or act in his stead, for
certain purposes; usually in the form of a
deed poll, and attested by two witnesses."

7. Section 2 Stamp Act 1949 (Act 378)
Power of Attorney means any instrument except a warrant to act as a
solicitor in any judicial proceeding empowering a specified person to act in
the stead of the person executing it.
Judith E. Sihombing in
“The National Land Code - A Commentary“
“A power of attorney is an instrument where one person (the donor of the
power) formally authorizes another (the donee of the power ) to act as his
agent; the donor effects an instrument (the power of attorney) to appoint the
donee his attorney under power”, and "The result of appointing the donee
as attorney is to enable the donee to act for the donor generally or in a
specified transaction or series of transactions".

8. Trevor Aldridge in
“Powers of Attorney“ 10th Edition
“A power of attorney is a document by which
one person (“donor”) gives another person
(“attorney”) the power to act on his behalf and
in his name. It may be completely general,
entitling the attorney to do - almost -
everything the donor could himself do, or it
may be limited to certain defined objects.”

9. CAPACITY
OF
MINORS

10. MINORS:
•Section 10 (1) of the Contract Act 1950
“All agreements are contracted if they are made by the free consent
of parties competent to contact, for a lawful consideration and with
a lawful object, and are not hereby expressly declared to be void.”
•Section 11 of the Contract Act 1950
“Every person is competent to contract who is of the age of majority
according to the law to which he is subject, and who is of sound
mind, and is not disqualified from contracting by any law to which
he is subject”.
•Age of Majority Act 1971:
“The minority of all males and females at the age of eighteen years
and every such male and female attaining that age shall be of the
age of majority.”

11. :: Tan Hee Juan v Teh Boon Kiat [1934]MLJ 96
A child entered into a contract of transferring land. The court held
that the transaction was void.
:: Zouch d Abbot and Hallet v Parsons (1765) 3 Burr. 1794
“ The correct proposition is that an infant cannot appoint an agent
to make a disposition of his property so as to bind him irrevocably. A
disposition by an agent for an infant is voidable just as a disposition
by the infant himself would be so long as it is avoided within a
reasonable time after attaining full age”

12. CAPACITY
OF
BANKRUPTS

13. BANKRUPTS:
•Bankruptcy is a process where a
debtor is declared a bankrupt
pursuant to an Adjudication Order
made by the High Court against the
debtor if he is unable to pay his debts
of at least RM30,000.00.
•A debtor is a person subject to the
bankruptcy within the definition of
Section 3 of the Bankruptcy Act
1967.

14. •Section 5 of the Power of Attorney Act 1949 states that every
instrument purporting to create a power of attorney of which a
true copy or an office copy has been deposited in the office of the
Registrar or a senior Assistant Registrar in accordance with this Act
or any law repealed by this Act whether before or after the
commencement of this Act, shall, so far as the said instrument is
valid and so far as may be compatible with the terms of the
instrument, continue in force until a receiving order has been
made against him in bankruptcy.
•Markwick v Hardingham (1880) 15 Ch. 339
On the Plaintiff's bankruptcy, the Defendant ceased to be the
agent and attorney of the Plaintiff, and did not become the agent
of the assignee. Upon the donor becoming bankrupt, the power is
automatically revoked.

15. CAPACITY
OF
CORPORATION

16. COORPORATION:
Director as an Agent of Company
Ferguson v Wilson (1866) 2 Ch App 77
“the director are merely an agent of the company for the company cannot act on
its own person and can only act through directors”
•A body corporate can create a power of attorney.
•Under the separate legal entity concept, a corporation can enter into contracts in
its own name.
•The directors of a company may appoint an agent to execute any agreement or
instrument which is not a deed in relation to any matters within its powers.
•This appointment need not be by a formal power of attorney but can also be by
way of resolution.

17. The Articles of Association will delegate the general
powers of management of the business of the company
to the directors.
Article 73 of Table A declares that the business of the
company shall be managed by the directors and the said
provision empowers the directors to exercise all the
powers of the company which are not by the
Companies Act or the Article themselves reserved to be
exercised by the company in general meeting.

18. Powers to Appoint Attorney of the Company
:: Section 35(6) of the Companies Act 1965 - a company may by
writing under its common seal empower any person either generally or
in respect of any specified matters, as its agent to execute deeds on
behalf of the company. A deed signed by the said agent under his seal
shall bind the company and have the same effect as if it were signed
under the common seal of the Company.
:: Article 76 of Table A of the Companies Act 1965 - provides
that one of the power of the directors is to appoint attorney of the
company by way of power of attorney and to determine the extent of
the of the power, authority, term of office and the discretion of the
attorney.

19. :: Section 147(3) of the Companies Act 1965 – Corporation
by its director’s resolution may authorise such person as the
directors think fit to act as its representative.
•A corporate representative is the authorized representative
appointed by a corporate member by a resolution of the board of
the corporation in accordance with the above section. The effect
of the appointment is that the representative can attend all
meetings or a particular meeting.
•The representative is entitled to exercise the same power on
behalf of the corporation as if the corporation could exercise if it
were an individual member of the company.

20. Section 3 of the Powers of Attorney Act (PA) - a
power of attorney will be valid if it is executed and
authenticated if:
1. In West Malaysia, before a person as listed in section 3(1)(a)(i)
until (vii).
2. Outside West Malaysia, before a person as listed in section
3(1)(b)(i) until (ix).
3. Use appropriate form set out in the First Schedule.

21. Lim Eng Chuan Sdn Bhd v United Malayan Banking Corp &
Anor [2013] 3 MLJ 161
Facts:
The first respondent (UMBC) had granted the appellant an overdraft
facility secured by a debenture which included a fixed charge over
seven pieces of land and a charge under the National Land Code
(NLC) over the lands. The debenture contained an irrevocable power
of attorney (PA) granted by the appellant in favour of UMBC.
However, the appellant defaulted the facility and was wound up.
UMBC gave notice that it would exercise its power under the PA to
sell the lands
Issue: - Can a PA for valuable consideration and expressed to be
irrevocable, be granted by a company as donor (as opposed to a
natural person) pursuant to s 6(1)(a) of the Powers of the Attorney
1949

22. Held:
1. In view of the construction of s 3(1)(a) of the PA and s
35(6) of the CA, a company or corporation is competent
to create a power of attorney.
2. Form II in the First Schedule to the PA Act 1949 is the
appropriate form referred to in s 3(1)(a). This form sets out
the form of authentication in the case of a power of
attorney executed by a company or corporation.
3. When both s 3(1)(a) and Form II are read and construed
simultaneously, it is clear that a company is competent to
create a power of attorney, provided that there is
scrupulous compliance with the form of authentication, as
has been done in the PA.
4. Power of attorney can be granted by a company as donor.

23. PARTNERS:
Partner as an agent of a partnership
•As a normal partnership is unincorporated, a firm which wishes to appoint an
attorney to act on its behalf must do so by means of a joint appointment by all
the partners.
•Their capacity to appoint an attorney jointly is the same as their capacity as
individuals.
•As an agent to a partnership, a partner may create a power of attorney.
Section 7 of the Partnership Act 1961
Every partner is an agent of the firm and his other partners for the purpose of the
business of the partnership and the acts of every partner who does any act for
carrying on in the usual way business of the kind carried on by the firm of which he
is a member bind the firm and his partners

24. :: Section 8 of the Partnership Act 1961
An act or instrument relating to the business of the firm and done or
executed in the firm-name, or in any other manner showing an
intention to bind the firm, by any person thereto authorized,
whether a partner or not, is binding on the firm and all the partners.
:: Section 7 and section 8 of the Partnership Act 1961 authorized
the partners of the firm to create a Power of Attorney in the name of
partnership. The acts of a partner in this situation will bind the firm
based on the Principal-Agent rules.
:: Section 3 of the Powers of Attorney Act 1949 – create PA by using
appropriate form as set out in the First Schedule - Form I

25. PERSONS WITH
MENTAL
DISORDER
AND/OR
UNSOUND MIND

26. MENTALLY UNSOUND/INCAPABLE:
AND DRUNKARDS
The donor must have mental capacity and can only grant the power of
attorney to do things that they have the right and capacity to .
There is no prescribed definition for the exact nature of the lack of
mental capacity.
Drew v Nunn (1879) 4 Q.B.D. 661
“A person who lacks the mental capacity to grant a power of attorney
cannot grant a valid power. A donor must understand the attorney’s role.”
However, a power granted by someone who lacks capacity can later be
validated, if he regains capacity and then ratifies it.
For instances when the donor is intoxicated/drunk when he gives the
power.

27.  The legal capacity to grant a power of attorney generally
coincides with the donor’s ability to enter into a binding contract.
Boughton v Knight [1873] L.R. 3 P. & D. 64 at 72
 One must ask, “Was he or she capable of understanding the
nature of the contract which he or she entered into?”
 The donor must have the mental capacity to understand the
nature and effect of the transaction
The decision about whether a donor is mentally incapable is made
by a relevant health practitioner, who is qualified to assess mental
capacity, or by the court.
A person is not presumed to be mentally incapable simply because
someone has arranged for their mental capacity to be assessed.

28. In judging a donor’s mental capacity, British Medical Association
and the Law Society (Assessment of Mental Capacity: Guidance for
Doctors and Lawyers, 1995):
Suggests that questions to test understanding which can be
answered “Yes” or “No” may not be adequate.
An assessment of mental capacity will include looking at:
• medical evidence concerning memory, comprehension, the
ability to focus on issues and to exercise and express judgment
and opinions
• the statements of family, friends and health professionals who
have been in a position to observe the donor.

29. :: Under Section 5 of the Powers of Attorney Act (PA) :
A power of attorney is a powerful document, its validity
will continue in force indefinitely unless either:
(i) revoked or renounced (revocation will take place by
way of a notice in writing of the donor's revocation or of
the donee's renunciation and these have been deposited
in every office in which the appointment was required to
be deposited); or
(ii) extinguished by the death of the donor or the donee,
the bankruptcy of the donor, or the donee has become
inflicted with unsoundness of mind or the donor has been
adjudged to be of unsound mind.

30. Q UESTION
&
A NSWER