Court Determines Rights Between Two Competing Powers of Attorney Spouse vs Daughter

Powers of Attorney Spouse vs Daughter

 

Sommerville v Sommerville 2014 BCSC 1848 involved a court application wherein the deceased gave both his surviving widow and his daughter separate powers of attorney that could be used individually.

The facts are somewhat complicated given that the husband and wife entered into a marriage agreement whereby they would each maintain separate bank account investments and property, together with separate liabilities.

The problem arose later in life when the male deceased, who had always had a substantially higher income, begin to develop dementia with increasing concurrent monthly expenses.

Legal issues  before the court included should his personal health care expenses be paid firstly from his monthly pensions, .and  which attorney should be the sole attorney responsible for managing his financial affairs and insuring his bills are paid in a timely fashion, along with other family type issues and dynamics.

The court examined the provisions primarily of sections 18, 19 and 20 of the new Power of Attorney act, starting with the duties of attorney as set out in section 19.

 

The duties of an attorney

[32]     An attorney acting under a power of attorney is bound by the duties set out in the instrument. In this case, the Power of Attorney allows both attorneys to act separately to do on Craig’s behalf anything that he can lawfully do by an attorney and to transact business with any financial institution or investment dealer. The Power of Attorney is enduring, as it remains exercisable during periods of mental infirmity, and it is not subject to any conditions.

[33]   A power of attorney is a type of agency and the relationship between the attorney and the donor is a fiduciary one. This stems not only from the agent-principal relationship but also from the indicators of a fiduciary relationship described in cases such as Frame v Smith, [1987] 2 SCR 99; Egli v Egli, 2004 BCSC 529, aff d 2005 BCCA 627; McMullen v Webber, 2006 BCSC 1656; Houston v Houston, 2012 BCCA 300.

[34]     In Egli, Garson J (as she then was) discussed the attorney’s duty to use the powers granted only for the benefit of the donor:

[82] It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage {Chapman). The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor (Robertson, Mental Disability and the Law in Canada at 183). I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.

[37]     While the duties of a committee and an attorney may be similar, I do not agree that the jurisprudence regarding a committee’s duties under the Patients Property Act are applicable to an attorney’s duties under a power of attorney.

[38]     Prior to the enactment of the Power of Attorney Act in 2011, the duties of an attorney were founded at common law and equity. As stated in Egli, an attorney’s duty is to use the power only for the benefit of the donor, which is consistent with the characterization of the relationship as a fiduciary one.

[39]   An attorney’s duties are now enunciated in s. 19 of the Power of Attorney Act. Section 19 (1) essentially codifies the duties of a fiduciary to act honestly and in good faith, to exercise reasonable care, and to account to the donor, within the authority granted in the power of attorney.

Section 19(2) specifies that an attorney making decisions about the donor’s financial affairs must act in the donor’s best interests, taking into account the donor’s “current wishes, known beliefs and values” and any directions contained in the instrument, and s. 19(3) requires an attorney to give priority “to the extent reasonable” to meeting the personal care and health needs of the donor.

[40]     I would not equate the power of an attorney under s. 20 to make or receive gifts with s. 18 of the Patients Property Act. Section 20 is quite specific. If permitted in the power of attorney, the attorney may only make a gift if all three conditions in subsection (1) are met:

  1. the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult’s dependants, and to satisfy the adult’s other legal obligations, if any,
  2. the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and
  3. the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value ( currently $5000), and is prepared to use funds from his cash investment account for special expenses such as capital improvements

Section 19(4) of the Power of Attorney Act requires an attorney to keep the donor’s property separate from his or her own property. Under s. 19(5), this does not apply to property that is jointly owned by the donor and the attorney as joint tenants, unless the power of attorney states otherwise. While Craig’s pensions, as assets, are his own property, it is not clear to me that the monthly income from those pensions that he directed to be paid into the joint bank account retains the same character. However, whether those funds are deposited into the joint account or into a separate account for Craig is not the primary issue here.

 

Accordingly the court held  that the pension income of the deceased be deposited in joint account with the stepmother/ widow  him  him him him and used for the husband’s expenses, and any surplus could be used by the stepmother for her own expenses, based on their the evidence that this was an arrangement that the husband had in place both pursuant to the marriage contract, and their marital behavior, before he became mentally incapable.

The court further gave directions as to what roles competing  powers of attorney can do in relation to spouses assets.

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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