In British Columbia, attorneys under a Power of Attorney have a fiduciary duty to act in the best interests of the donor.
As a fiduciary, the attorney may not exercise the power of attorney for personal benefit unless the donor consents to the proposed transaction with full knowledge of it or the power of attorney expressly authorizes the attorney to do so. The British Columbia Court in Egli v Egli 2004 28 BCLR (4th) 375 at paragraph 76 noted that ” in most cases involving alleged breach of a fiduciary duty by an attorney, the courts have assumed that where there is a power of attorney, there exists a fiduciary relationship between the attorney and the donor.
See also MacGrotty v Anderson (1995) 9ETR (d) 179 BCSC
In Hodgkinson v. Simms, (1994) 3 SCR 377 at 408-09 La Forest J. for the majority of the Supreme Court of Canada set out the test for establishing the existence of a fiduciary duty. Specifically, it requires that:
(i) the fiduciary has scope for the exercise of some discretion or power;
(ii) the fiduciary can unilaterally exercise that power or discretion so as to affect the legal or practical interests of the beneficiary; and
(iii) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
The Court also observed that relationships characterized by a unilateral discretion, such as the trustee-beneficiary relationship, are a species of a broader family of relationships termed “power-dependency” relationships, a concept which describes any situation where one party, by statute, agreement, a particular course of conduct, or unilateral undertaking, gains a position of overriding power or influence over another party.
The Supreme Court of Canada in Gladstone v. Canada (Attorney General) (2005 )1 SCR 325noted that while discretion, power and vulnerability are common characteristics of a fiduciary relationship, they are not necessarily determinative. At the core of any fiduciary duty is the obligation of one party to act for the benefit of another. The attorney is, by the nature of the instrument, given a discretion or power by the donor, and the ability to exercise that discretion in a manner that can effect a the donor’s legal or personal interests. Additionally, where there is subsequent mental deterioration of the donor, the donor becomes more and more reliant upon and vulnerable to the actions of the attorney. It is an attorney’s duty, absent a specific provision which allows self-dealing, to use the power granted by the donor solely for the benefit of the donor, and not for the attorney’s own profit, benefit or advantage.
Consequently, the vast majority of attorney/donor relationships would also be fiduciary.
For Further Articles on Powers of Attorney and Fiduciary Relationships see also:
1. July 31,2012 – What is a Power of Attorney and How do They Work?
2. October 31. 2011- The BC Power of Attorney Act
3. October 30,2011- The New Power of Attorney Act and Capacity
4. July 16,2011 – Second Power of Attorney Doesn’t Revoke Prior Power of Attorney
5. December 14, 2011 – Enduring Powers of Attorney now have Teeth
6. July 23, 2013- Administration with an Attorney