Wang v Wang 20120 BCCA 15 followed the appeal court’s previous decision in Houston v. Houston, 2012 BCCA 300 finding that the grant of power from the donor to the attorney created a fiduciary duty and is a type of agency.
The court referred to the three conditions of the fiduciary duty, as determined by the Supreme Court of Canada in Frame v Smith (1987)2 SCR 99, namely:
1) that the person, here, the attorney, has scope to exercise some discretion of power; 2) the person can unilaterally exercise this discretion or power to affect the legal or personal interests of the beneficiary , here the donor; 3) and the beneficiary is peculiarly vulnerable or at the mercy of the person.
The appeal court stated that with respect to a power of attorney, the three Frame characteristics will always exist, even if the discretionary power is narrowly circumscribed by the instrument.
The court stated that the correct question to ask in considering whether fiduciary duty was created by the power of attorney, in the narrow scope of activity authorized by the instrument, the court is not concerned with the foundation of the parties relationship, which assuredly was contractual, but rather, the question is whether, in respect to authorizing the attorney to create a mortgage over the donor’s interest, the attorney was bound by a fiduciary duty not to prefer himself over the donor. If it is a question of law, the attorney was bound, through the power of attorney, to a fiduciary duty to the donor.
The court then asked what is the content of that fiduciary duty?
The standard content of the fiduciary duty was stated in Strotyher v 3464920 Canada Inc 2007 SCC 24:
“the other (the beneficiary) is entitled to expect that the fiduciary will be concerned solely for the beneficiaries interests, never the fiduciary’s own”
In Egli v Egli 2004 BCSC 529 the court stated it is the attorneys duty to use the power only for the benefit of the donor or and not for the attorney’s own profit, benefit or advantage. 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.
Meng Estate v Liem 2019 BCCA 127 confirmed that a person acting under a power of attorney is an agent held to the standard of conduct to which equity holds a fiduciary.
Those obligations involved, at least, that even where the attorney asked gratuitously, he or she has a duty to account, to exercise reasonable care, as would a typically prudent person managing his or her own affairs, and not to act contrary to the interests of the donor McMullen v Webber 2006 BCSC 1656 at para.52.
A claim for breach of fiduciary duty carries with it the staunch of dishonesty, if not of deceit, then of constructive fraud. Nocton v Lord Ashburton (1914) AC 932(HL)
The appeal court overturned a finding of a breach of fiduciary duty by the acting attorney and stated that even though Mr.Liem was in a fiduciary relationship with the opposing party, not every potential breach of duty is a breach of fiduciary duty. The court found
A fiduciary may breach duties owed in contract or negligence without those breaches being transformed into breaches of fiduciary duty. Girardet v Crease & Co. (1987) 11 BCLR (2d) 361 .
At paragraph 35 the appeal court stated “typically, a breach of fiduciary duty captures circumstances in which there is a breach of the duty of loyalty owed by the fiduciary and include circumstances involving acting in the face of a conflict, preferring a personal interest, taking a secret profit, acting dishonestly or in bad faith, or a variety of similar or related circumstances. This is not an exhaustive list.” But there are criteria for distinguishing a breach of fiduciary duty from negligence by the attorney . The court found that there was no basis in evidence to find that the appellant acted dishonestly or in the face of a conflict of interest, forwarded the wishes of the opposing party, preferred his interest to theirs, or in any way benefited from signing the contract. The court found that he attempted to fulfill his duty of loyalty.
The court determined that the real complaint was that the attorney failed to exercise the care, diligence and skill of a reasonably prudent person by negligently failing to ascertain and thereby take into account the opposing parties current wishes, resulting in the sale that was not in their best interest because they changed their minds and then disagreed with the price.
The claim was really one of negligence, not of breach of fiduciary duty.
The duties of an attorney are codified in section 19 of the Power of Attorney act:
1) an attorney must: a) act honestly and in good faith b) exercise the care, diligence and skill of a reasonably prudent person, c) act within the authority given in the enduring power of attorney and under any an enactment, and d) keep prescribed records and produce the prescribed records for inspection and copying at the request of the adult.
2) When managing and making decisions about the adults financial affairs, an attorney must act in the adult’s best interests, taking into account the adults current wishes, no one beliefs and values, and any directions to the attorney said out in the enduring power of attorney.
This article is about forcing a power of attorney who subsequently becomes the executor and trustee of an estate to account to the estate for monies handled during the course of acting as power of attorney.
The problem arises in a common scenario when the power of attorney is the same person as the executor trustee.
The courts have held that there cannot be a true accounting as between the attorney and the estate trustee, as they are one and the same person.
In Brown v. Brown , 2011 BCSC 649 at paragraphs 114 – 116 sets out the following:
114) . In Harris v. Rudolph 2004 OJ No.2754 at paragraph 33 summarize the attorney’s duty to account as follows:
Following the grant of a power of attorney, the attorney has a duty to account for all transactions which he or she undertakes for the grantor. The attorney is the one who has the information. An estate trustee stands in the shoes of the grantor for the enforcement of the duty owed by the attorney as agent to the deceased as principal. There is a duty on the attorney to keep accounts and be ready upon request to produce those accounts. It is an ongoing obligation and should not be considered an imposition on the attorney if he or she has failed in that duty over a long period of time.
Also see Roger Estate v . Leung 2001 0J No. 2171 at paragraph 10.
In Ontario, there is a line of jurisprudence, holding that following the death of the grantor, and were the attorney in the estate trustee are one of the same person, there can be no true accounting as between the attorney in the estate trustee. As a result, courts in Ontario have permitted beneficiaries and others in the circumstances to seek leave as any other person under their rules, to apply to the court for a passing of the attorneys accounts for the period the attorney acted prior to the grantor’s death. De Zorzi Estate v Read 2008 ETR (3d) 318 Ont. S.C.
An Ontario case Crane v Metzger 2018 ONSC 5382 refused an application to revoke a power of attorney of the applicant’s mother who had vascular dementia and had been determined to be incompetent.
The court followed the Ontario decision of Teffer v Schaefers (2008) 93 OR (3d) 447:
“The courts of generally taken the view that a written power of attorney executed by the donor at a time when he or she was apparently of sound mind is simpler to deal with and gives the duly more flexibility in dealing on behalf of the donor. Also favoring a continuation of the appointment respects the wishes of the person who made the grant.
A preference expressed by a person in anticipation of becoming mentally incompetent is particularly important and should be respected unless this would clearly not be in the person’s best interests. The expression of such a preference might take the form of statements to friends and relatives, and arguably is implicit in the grant of a general power of attorney prior to becoming incompetent.
The court outlined two considerations in determining whether to terminate a power of attorney:
1) There must be strong and compelling evidence of misconduct or neglect on the part of the attorney before court should ignore the clear wishes of the donor; and
2) The court must be of the opinion that the best interest of an incapable person are not being served by the attorney.
The applicant had brought an application for an order declaring her mother incapable of managing her property, appointing herself as the sole permanent guardian, and removing a sibling as attorney.
The court dismissed the application stating that the onus was on the applicant to establish that the order was warranted, and her conduct made her position untenable, particularly by reason of the fact that she withdrew $10,000 from her mother’s bank account despite knowing that her mother was incompetent, and provided no explanation for why she did this are why she thought that she had the authority to do so.
The attorney had also secured a passport for her mother under false pretenses, namely that she was mentally competent, when she was in fact not,thus causing Passport Canada to revoke the passport.
Goyal v. Estate of Maisie Meng 2017 BCSC 2474 involved an abuse of a power of attorney who were sued by the estate representatives for breach of fiduciary duty.
Mr. Liem and Mr. Tuan acted as powers of attorney for Mr. and Mrs. Meng prior to their deaths.
In 2012 the Mengs entered into a listing agreement for the sale of their home. The wife signed the listing agreement, but the powers of attorney never communicated with the husband to determine his wishes.
The attorneys were also directly involved in signing the necessary documents to reduce the listing price without contacting either the husband or the wife to discuss their wishes.
Both attorneys, then committed the Mengs to selling their property for $1.4 million, which was below even the reduced listing price. They did so without consulting the wife, who disagreed with the sale price when she learned about it.
Mr. and Mrs. Meng revoked the powers of attorney and refused to complete the sale.
The prospective purchaser then sued the Mengs for specific performance and the Mengs defended on the basis that the powers of attorney were void and the contract of purchase and sale was void due to lack of capacity.
The court action was settled after the Mengs had both died, and the property was ultimately transferred to the purchaser for $1.65 million
The estate representative of the Mengs then sued the attorneys for breach of fiduciary duty, and the action was allowed.
The court held that an acting as he did in the sale of the property, the attorney Liem failed to act in their best interest, and breached the duty that he owed to them as their attorney.
As a result , the attorney breached his fiduciary duty, the husband and wife were sued ,and incurred legal expenses to defend themselves.
The court concluded that the Meng’s estates were entitled to be indemnified for the legal expenses and costs that were incurred.
The court followed the decision Egli v Egli 2004 BC SC 529, at paragraph 76 – 79.
The evidence established in respect of the powers of attorney, the three indicators of a fiduciary relationship or present, namely:
a) the fiduciary has scope for the exercise of some discretion or power;
b) the fiduciary can unilaterally exercise this discretion or power to affect the beneficiaries legal or personal interest; and
c) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary.
The court held that given the age and circumstances of Mengs they were particularly vulnerable to their attorneys.
The court ordered that the legal fees incurred by the legal counsel in relation to the action be submitted to the registrar for review, for an assessment of costs and review the bills incurred on behalf of counsel for the Mengs.
As a fiduciary, an attorney for property is “ obliged to act only for the benefit of the donor, putting his/her own interests aside”. An attorney is prohibited from using the power of their own benefit, unless “ it is done with the full knowledge and consent of the donor” Richardson Estate v. Mew 2009 ONCA paragraphs 49 – 50.
Duties of an Attorney as a Fiduciary
In Zimmerman V. McMichael estate 2010 Onsc 2947 the various duties of an attorney as fiduciary are discussed, and include:
A fiduciary is under a duty to account,
A fiduciary has a duty not to co-mingle trust funds with the attorneys property, and to provide an accounting if they are co-mingled
A fiduciary must not make a profit or to put him/ herself in a position where his/her interests and his/her duty conflict unless the trust instrument expressly so provides;
As a fiduciary, an attorney for property is not entitled to exercise that power for his or her own benefit unless expressly authorized to do so, and;
The fiduciary bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the power of attorney
An attorney under a power of attorney in British Columbia cannot be compensated for services provided unless the document expressly provides for same.
The attorney may however be reimbursed from the adult’s property for reasonable expenses incurred.
The Act states:
Payment and Expenses of Attorney
24 (1) An attorney must not be compensated for acting as an adult’s attorney unless the enduring power of attorney expressly authorizes the compensation and sets the amount or rate.
(2) An attorney may be reimbursed from an adult’s property for reasonable expenses properly incurred in acting as the adult’s attorney.
Many other provinces in Canada have similar legislation.
The Manitoba Supreme Court in Krawchuk v Krawchuk 2017 MBQB 47 outlined the legal obligations of a power of attorney.
Manitoba’s laws for powers of attorneys are essentially the same as for British Columbia.
The Court stated inter alia as follows:
18 The applicable law with respect to the obligation of an attorney in his or fiduciary relationship with the donor was not at issue. Some of the applicable principles can be summarized as follows:
(a) as a fiduciary, an attorney has an obligation to act in the best interests of the settler or donor and cannot permit his or her personal interests to conflict with that obligation (see Brown v. Lefebvre, 2007 ABQB 195, 419 A.R. 347 (Alta. Q.B.) at para. 20);
(b) the obligations of an attorney include keeping proper accounts of the trust estate, distinct from other accounts and preserving receipts for cancelled cheques (see Re Lefebvre at para. 21);
(c) the obligations of an attorney include producing accounts to the donor, court and any beneficiary and insuring the accounts clearly show all monies and assets received or accounted for;
(e) breach of a fiduciary relationship gives rise to the widest array of equitable remedies (see Todosichuk at para. 21; Wewaykum Indian Band v. R., [2002] 4 S.C.R. 245, 2002 SCC 79 (S.C.C.));
(f) equitable remedies are always in the discretion of the court which is concerned not only in compensating a wronged plaintiff but also in upholding the obligations of good faith and loyalty (see Todosichuk at para. 22; Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 (S.C.C.));
(g) the fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged (see Todosichuk at para. 22; Canson Enterprises at p. 543 per McLachlin J. (as she then was)); and
(h) in considering whether to grant a remedy, and if so, the nature of the remedy, the question of deterrence is often most relevant (see Todosichuk at para. 25).
Re Silkstrom 2017 BCSC 206 involved a contested application under the Patient’s Property Act to be appointed the committee of the person of an elderly mental incompetency patient.
A Trust company had earlier been appointed to manage the elderly woman’s financial affairs pursuant to a Power of Attorney that she signed when she was still mentally competent.
The applicants were a close friend who had cared for the patient for several years, and the opposing applicant was a niece and her husband.
The patient had no close family.
The Court reviewed the various factors to be considered , found there was potential for conflict of interest with the niece and granted committee-ship of the person to the good friend.
Committeeship of the person would allow the friend to make health care decisions for the patient, while the trust company would continue to mange her financial affairs.
The Applicable Law
17 The test for determining who is appropriate to act as a committee invokes the parens patriae jurisdiction of the court and is governed by the assessment of who will serve the patient’s best interests, including a consideration of who can best deal with the patient’s financial affairs, nurture her estate, and see that her income and estate are applied for her greatest benefit.
18 Although each case must be decided on its particular facts, in Re Bowman, 2009 BCSC 523 at para. 33, the court set out a number of considerations which guide the court’s decision-making:
(a) the proposed committee’s previous involvement with the patient or her family;
(b) the proposed committee’s knowledge and understanding of the patient’s situation and needs;
(c) the proposed committee’s level of experience and capability in performing the duties of committee;
(d) the plan of the proposed committee for the management of the patient; and
(e) any potential conflict of interest between the proposed committee and the patient.
19 More recently, in Stewart (Re), 2014 BCSC 2321 at para. 29, Justice Masuhara summarized additional criteria from a number of decided cases. I set out only those criteria relevant to this decision which relates only to appointing a committee of the person. They are:
(a) whether the appointment reflects the patient’s wishes, obviously when he or she was capable of forming such a wish;
(b) whether immediate family members are in agreement with the appointment;
(c) whether there is any conflict between family members or between the family and the patient, and whether the proposed committee would be likely to consult with immediate family members about the appropriate care of the patient;
(d) the level of previous involvement of the proposed committee with the patient, usually family members are preferred;
(e) the level of understanding of the proposed committee with the patient’s current situation, and will that person be able to cope with future changes of the patient;
(f) whether the proposed committee will provide love and support to the patient;
. . .
(i) who is best to advocate for the patient’s medical needs;
(j) whether the proposed committee has an appropriate plan of care and management for the patient and his or her affairs and is best able to carry it out; …
Re Haston 2016 BCSC 1962 is a good review of the law relating to the appointment of a committee under the Patients Property Act, as well as the criteria for choosing the best party to be the committee. Once appointed the committeeship voids any Powers of Attorney or Representation agreements that existed prior to the court order for committeeship.
21 The applicable statutory provisions for the judicial determination of whether a person is incapable of managing herself or her affairs are found in s. 3 of the Patient Property Act
Hearing of application
3(1) If, on
(a) hearing an application, and
(b) reading the affidavits of 2 medical practitioners setting out their opinion that the person who is the subject of the application is, because of
(i) mental infirmity arising from disease, age or otherwise, or
(ii) disorder or disability of mind arising from the use of drugs,
incapable of managing his or her affairs or incapable of managing himself or herself, or incapable of managing himself or herself or his or her affairs,
incapable of managing his or her affairs or incapable of managing himself or herself, or incapable of managing himself or herself or his or her affairs, it must, by order, declare the person
(2) The court may, on hearing an application under this section and reading the affidavits described in subsection (1), direct an issue to be tried, and in that event the following provisions apply:
(a) the question in issue is whether the person who is the subject of the application is, because of
(i) mental infirmity arising from disease, age or otherwise, or
(ii) disorder or disability of mind arising from the use of drugs,
(b) this Act applies to the issue and the trial of it;
(c) the Supreme Court Civil Rules apply;
(d) the court must
(i) dismiss the application, or
(ii) by order, declare that the person who is the subject of the application
(A) is incapable of managing his or her affairs,
(B) is incapable of managing himself or herself, or
(C) is incapable of managing himself or herself or his or her affairs.
the court is satisfied that the person is, because of
(c) mental infirmity arising from disease, age or otherwise, or
(d) disorder or disability of mind arising from the use of drugs,
(e) incapable of managing his or her affairs,
(f) incapable of managing himself or herself, or
(g) incapable of managing himself or herself or his or her affairs.
Law
24 Section 6 of the PPA provides that “on application . . . the court may appoint any person to be the committee of a patient.” The powers of a committee are set out in ss. 15 and 17.
25 In circumstances where a patient has been declared incapable of managing herself or her affairs, these include “all the rights, privileges and powers with regard to the estate of the patient as the patient would have if of full age and of sound and disposing mind”, and as well “the custody of the person of the patient”: PPA s. 15(1)(a) and (b)(ii).
26 A committee is also vested with all “the rights, powers and privileges that would be exercisable by the patient as a trustee, as the guardian of a person, as the holder of a power of appointment and as the personal representative of a person, if the person were of full age and of sound and disposing mind”: PPA s. 17.
27 Section 16 allows the court to “attach conditions or restrictions” on the powers of a committee in the same order by which the committee is appointed. Committeeship may be divided between multiple joint or co-committees.
28 The PPA does not prescribe any criteria for the selection of an appropriate committee. Section 18(1) provides as follows:
18(1) A committee must exercise the committee’s powers for the benefit of the patient and the patient’s family, having regard to the nature and value of the property of the patient and the circumstances and needs of the patient and the patient’s family.
29 Counsel provided two main authorities that discuss the relevant factors the court should consider when determining who is best suited to act as a committee under the PPA: Baker-MacGrotty v. Baker, 2016 BCSC 699[Baker-MacGrotty] and Bowman (Re), 2009 BCSC 523 [Bowman].
30 In Bowman, at paras. 32-34, Dardi J. held that “the test for determining who is an appropriate committee . . . is governed by the patient’s best interests”; the choice between two proposed committees involves an inquiry into who will best serve those interests: see also Re Pineo [1985] B.C.J. No. 1171 (S.C.) at para. 6.
31 In Baker-MacGrotty at para. 37, Bernard J. quoted Masuhara J.’s helpful summary from Stewart (Re), 2014 BCSC 2321, of the applicable law on this question. Masuhara J. listed the following considerations:
(a) whether the appointment reflects the patient’s wishes, obviously when he or she was capable of forming such a wish;
(b) whether immediate family members are in agreement with the appointment;
(c) whether there is any conflict between family members or between the family and the patient, and whether the proposed Committee would be likely to consult with immediate family members about the appropriate care of the patient;
(d) the level of previous involvement of the proposed Committee with the patient, usually family members are preferred;
(e) the level of understanding of the proposed Committee with the patient’s current situation, and will that person be able to cope with future changes of the patient;
(f) whether the proposed Committee will provide love and support to the patient;
(g) whether the proposed Committee is the best person to deal with the financial affairs and ensure the income and estate are used for the patient’s benefit;
(h) whether a proposed Committee has breached a fiduciary duty owed to the patient, or engaged in activity which diminishes confidence in that person’s abilities to properly handle the patient’s affairs;
(i) who is best to advocate for the patient’s medical needs;
(j) whether the proposed Committee has an appropriate plan of care and management for the patient and his or her affairs and is best able to carry it out; and
(k) whether a division of responsibilities such as between the patient’s estate and the patient’s person to different persons would serve the best interests of the patient, or would such a division be less than optimal for the patient.
32 I would add to this non-exhaustive list the following considerations: whether the proposed Committee’s resides near the patient; whether the proposed Committee is able to provide transportation for the patient, if necessary; whether outside demands on the proposed Committee’s time and availability will detract from his or her ability to perform his or her obligations; and whether the proposed Committee is able and willing to facilitate any recreation or religious practice in which the patient wishes to participate.
