Written by Jan Goddard^{1, 2}, Kimberly A. Whaley³ Helena Likwornik⁴

Introduction

Included in the Substitute Decisions Act (SDA)⁵, proclaimed in 1995, are statutory definitions of incapacity to grant a continuing power of attorney for property and a power of attorney for personal care. Prior to the SDA, capacity to grant a power of attorney for property had been addressed at common-law.⁶ Powers of attorney for personal care did not exist prior to the SDA.

In either case, we must look to the statute to ascertain the capacity to grant the particular kind of power of attorney.

This paper will examine the relevant statutory provisions and a significant case that delves into what it means to be capable of granting a power of attorney for property. In the final section of this paper there will be a discussion of some of the practice points raised by the law as it currently stands.

A person is capable of giving continuing power of attorney for property if he or she,

(a) Knows what kind of property he or she has and its approximate value;
(b) Is aware of obligations owed to his or her dependents;
(c) Knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in the power of attorney;
(d) Knows that the attorney must account for his or her dealings with the person’s property;
(e) Knows that he or she may, if capable, revoke the continuing power of attorney;
(f) Appreciates that unless the attorney manages the property prudently its value may decline;
(g) Appreciates the possibility that the attorney could misuse the authority given to him or her.⁷

The criteria for capacity to grant or revoke a power of attorney for personal care are simple. They reflect a deliberate policy decision by the legislature of the day to promote the accessibility of powers of attorney for personal care as advance planning documents. It seems apparent that the capacity to grant a power of attorney for property requires a greater ability to understand and appreciate than does the capacity to grant a power of attorney for personal care.

A person is capable of giving a power of attorney for personal care if the person,
(a) Has the ability to understand that the proposed attorney has a genuine concern for the person’s welfare; and
(b) Appreciates that the person may need to have the proposed attorney make decisions for the person.⁸

If a person has the capacity to grant a continuing power of attorney for property or a power of attorney for personal care, that person also has the capacity to revoke one.⁹

A continuing power of attorney for property is valid if the grantor, at the time of executing it, is capable of giving it, even if he or she is incapable of managing property.¹⁰

In the recent Ontario Superior Court decision of Covello v. Sturino¹¹, Justice Boyko considered the question of whether granting a Power of Attorney requires a lesser level of capacity than that required to manage property. Her Honour stated that the test of competence for signing a Power of Attorney is less stringent than the test for managing one’s property, but also referred to decisions where the requisite capacity for each was judged not to be‘higher’ or ‘lower’, but simply different.¹² Specifically, in Godelie v. Ontario (Public Trustee)¹³, where the question was whether, at the time of execution the donor understood the nature and effect of the Power of Attorney, Meisner J. held that, “It can never be a question of one level being less than another. If it is a question at all, it must be whether one level is different than the other. I have of course, made it clear that in my view the levels must be different”.

The case law is not always consistent with respect to where capacity thresholds lie, or the relationship between capacities for different purposes. As a solicitor, it is important to keep in mind that capacity is task, time and situation specific.

A power of attorney for personal care is valid if, at the time it was executed, the grantor was capable of giving it even if the grantor is incapable of personal care.¹⁴

The capacity to grant or revoke either kind of power of attorney involves a legal definition of capacity. At first instance, it will always be the lawyer’s job to assess the client’s capacity to grant either kind of power of attorney.¹⁵

Case Law: Knox v. Burton

Sometimes the lawyer will feel that his or her own opinion of the client’s ability to grant or revoke a power of attorney is not enough. The client’s capacity may seem uncertain or the situation may seem highly contentious. An expert opinion may be sought as to capacity to grant the power of attorney.

In Knox v. Burton¹⁶, three such expert opinions were sought with respect to the grantor’s capacity to grant a power of attorney for property. Three capacity assessors, all designated as such by the Ministry of the Attorney general, examined the grantor, Ms. Knox. One found her to be incapable and the other two found her to be capable. The court’s analyses of these opinions are helpful to lawyers, both in their own assessments of client capacity and in evaluating capacity assessments.

In 2004, when the case was decided, Mrs. Knox was 80 years old. She granted a continuing power of attorney for property to her son on May 12, 1999. By December 2002 she was described by a geriatric psychiatrist “as having progressive cognitive decline suggestive of a dementing process that mildly interfered with her occupational and social functioning”.

In early 2003, there was conflict in Mrs. Knox’s family, the exact details of which are not described in the decision. The first assessor met with Mrs. Knox on February 7, 2003 and found her to be incapable of granting or revoking a continuing power of attorney.

The second assessor met with Mrs. Knox on February 24, 2003 and found her to be capable of granting or revoking continuing power of attorney. A new continuing power of attorney for property was then made by Mrs. Knox in favour of her nephew on February 26, 2003.

A third capacity assessor examined Mrs. Knox on April 24, 2003 and again found her to be capable of granting or revoking a continuing power of attorney. A further continuing power of attorney for property was granted by Mrs. Knox in favour of her nephew in May 2, 2003.

At trial, the first assessor explained the fact that his conclusion was different from the others’ by saying that it could happen (a) if a person’s functioning was different on the two occasions; (b) if questions were asked in a certain way and (c) if an assessors weighed criteria differently. It was also noted by the court that Mrs. Knox did not have any notes with her as to her finances during the first assessor’s interview (which are permitted and which she had with her in the subsequent assessments) and the that assessor collected “one-sided” background information about her circumstances after the assessment.

The second assessor testified that:

. . . in performing different capacity assessments she was duty-bound to abide by the statutory criteria in the Act. In applying these criteria, she understood the direction of the Act was similar to the change in direction of health care generally and that was to be left paternalistic and to value and foster as much as possible persons’ involvement in their own decision-making. In line with that approach was the statutorily mandated presumption of capacity in the Act.

She was aware of Dr. Pencer’s opinion at the time she assessed Mrs. Knox, however, she hadn’t read it. She was also aware of Mrs. Knox’s cognitive impairment. She commented that background information on Mrs. Knox wouldn’t necessarily have been useful as the capacity issue was a relatively stand-alone issue and she assumed for the cognitively impaired person is normally subject to conflicting pressures from family members.

She commented on the difference of opinion between her assessment and Dr. Pencer’s as being quite expected because fluctuations can occur particularly in response to stress. She understood Mrs. Knox had recently moved at the time of Dr. Pencer’s assessment and a move is a well-known stressor.

The third assessor testified that she was aware of the dispute and that she was the “tie-breaker”. She had read both of the previous assessment reports prior to assessing Mrs. Knox. She testified:

A person could be incapable of managing property and still retain the capacity to grant or revoke a continuing power of attorney for property.

Like the second assessor, she saw the person’s “right to choose” as a “guiding principle” when applying the criteria to conduct the assessment. It was not the job of the assessor to judge the suitability of the chosen attorney or investigate motives or allegations of abuse or exploitation. The job of the assessor was to evaluate the person’s reasoning process and ability to understand to see if she met the criteria set out in section 8 of the SDA.

The trial judge had some concerns about the first assessor’s methodology but in light of his testimony at trial gave his opinion the same weight as the others. The trial judge wrote:

I accept each of the assessors’ opinions as valid regarding Mrs. Knox’s capacity to make and revoke a power of attorney for property on the dates she was assessed
. . .
I do not find that Dr. Pencer’s evidence, when considered together with all of the other evidence, has proved on a balance of probabilities that after February 7, 2003, Mrs. Knox was permanently incapable of making a power of attorney. I am satisfied on the balance of probabilities that Mrs. Knox was capable of making and revoking a power of attorney for property on February 26 and May 2, 2003. I base this conclusion on the presumption of capacity that has not been rebutted by any compelling evidence and the opinions of Drs. Bush and Munson.

It must be noted that the applicant son had a second arrow in his quiver and argued that there were suspicious circumstances of undue influence surrounding Mrs. Knox’s execution of the second and third powers of attorney and that therefore the presumption of capacity did not operate and the burden of proof with respect to capacity shifted the respondents, who were Mrs. Knox and her nephew. In doing so, the applicant relied upon jurisprudence dealing with testamentary capacity and drew analogies from cases involving suspicious circumstances surrounding the preparation and execution of a will. The judge declined to entertain this argument, given that it had not been raised as an issue to be tried and there was no evidentiary foundation for it.

The decision in Knox v. Burton was affirmed by the Court of Appeal on March 9, 2005.¹⁷ The court held:

The trial judge relied on the evidence of the two experts who testified that Mrs. Knox had the necessary capacity. Those experts tested capacity against the criteria set out in section 8 of the Act. We do not agree that the experts erred in quantifying the needed capacity. I see no value in describing the level of capacity as high or low, or in comparing the requisite degree of capacity required by section 8 with capacity as required in other contexts. The experts were probably
guided by the express language of the statute.

We also do not agree that the evidence that Mrs. Knox’s capacity could fluctuate necessitated any shifting of the onus of proof. The appellant had the legal onus. The potential variability of Mrs. Knox’s condition was one feature of the evidence. It was specifically addressed by Dr. Munson in his [sic] evidence. The trial judge accepted Dr. Munson’s evidence as she was entitled to do.

Discussion¹⁸

To summarize the situation as it stands after Knox v. Burton, a cognitively impaired person can fluctuate between being capable and incapable of granting a power of attorney.¹⁹ External stressors or factors such as the time of day, the medications the person is taking or having notes available as memory aides can effect the assessment of capacity. The person assessing capacity needs to focus on the person’s ability to understand and reasoning process, and not on family disputes or allegations of impropriety.

Since the question of capacity is a finding of fact, the Court of Appeal has demonstrated its reluctance to interfere with a trial judge’s determination on any issue of capacity.²⁰

Lawyers are most commonly asked to prepare powers of attorney for clients in two situations. The first is when the client is advised by the lawyer or instructs the lawyer to prepare powers of attorney as part of a package with a will. The second is when the client has a problem and the need for a power of attorney or new power of attorney has been identified. Sometimes this latter situation can be a crisis or near-crisis.

In either case, the lawyer needs to pay attention to the question of whether the client has capacity to grant or revoke the power of attorney. The client’s ability to understand the document can only be confirmed if the issue is addressed, and conversely a lack of ability may only come to light if the lawyer probes a bit. A lawyer will never know in advance when the issue of capacity may arise. The situations where a client has a problem or is in crisis or near-crisis most commonly fall into these categories:

• The client or another person has recognized that the client’s capacity is diminishing and no powers of attorney are in place.
• The client has previously granted a power of attorney to someone with whom he or she is no longer happy and wants to make a change.

In either of these scenarios, the lawyer needs to proceed with caution. A client with diminishing capacity may or may not retain the capacity to grant a power of attorney. There also may be a difference between the client’s capacity to grant a continuing power of attorney for property and a power of attorney for personal care and these must be separately examined.

As noted above, the capacity to grant or revoke a power of attorney is primarily a legal test. The criteria to be applied are very clearly articulated in the SDA. It is up to the lawyer, at first instance, to interview the client for the purpose of determining capacity. If the lawyer is satisfied that there is capacity or there is not and the substance of the lawyer’s discussions with the client has been well documented, there may not be a need in many cases for an assessment by an expert. If the lawyer has doubts, an expert opinion can be considered.

However, it has to be remembered, following Knox v. Burton, that an expert opinion may not be definitive of the issue of capacity.

For example, in Re Grav²¹, where the validity of two Powers of Attorney were in question, Justice Metzger found that medical evidence before the court was not sufficient to establish whether the grantor was incapable of revoking a Power of Attorney from the date of evaluation forward, or if at certain points in time, he was incapable. With respect to evidence of capacity of the individual in question to manage ‘himself and his affairs’, Justice Metzger commented upon the fact that the examining doctor did not explain the significance of the grantor’s fluctuating MMSE scores. That the examining doctor failed to explain the nature and source of the information used in arriving at a determination was also noted. Nonetheless, Justice Metzger accepted the doctors’ findings that the individual was incapable of managing himself and his affairs, since both doctors met the requirements of the PPA, and their opinions were not contested.

If the client’s capacity fluctuates, the lawyer may have seen the client when the client was capable and the assessor may see the client when he or she is not. Focusing too much on expert opinion rather than the client’s capacity in the lawyer’s office may result in denial of the client’s right to determine his or her own future by granting power of attorney.

Palahnuk v. Palahnuk Estate22 lends further support to the idea that expert opinion need not be definitive. In that case, Justice Stach referred to the proposition from Knox v. Burton that the capacity of a testator may be variable over time, underlining the ultimate importance of discerning capacity at the date of execution. In this case, it was suggested that the long-time caregiver of the testatrix was probably in the best position to offer testimony bearing directly on the issue of capacity.

Therefore if a client is in a “grey area” the lawyer should consider employing techniques to assist the client in understanding the nature of a power of attorney before simply referring to an expert. For example, as in Knox v. Burton, the client can be provided with memory aids about his or her finances. The client may need more time to be taught and to learn about powers of attorney.

Multiple interviews may be necessary to see if there are times when the client is more capable. As much as the lawyer can enhance the client’s ability to understand powers of attorney, it is also the lawyer’s duty to probe in order to ensure the client understands the nature of the document.

Probing questions should not only be asked, but the questions and their replies should be recorded in detail. The lawyer should also consider whether there may be a need to corroborate the answers provided by the client. It is the lawyer’s duty to ask about the individual’s assets and ensure that the individual is aware of both the nature and extent of their assets. Ask the individual client to provide financial statements and details verifying the assets and property.

Client information precedents are useful in this regard. If the client claims to own a house, in some cases it might be appropriate to get instructions from the client to do a title search and confirm that this is so.

Many individuals with diminished capacity retain social skills that do not accurately reflect their level of cognitive functioning. Many can repeat back information and appear most agreeable with suggestions, but this does not demonstrate understanding. The lawyer needs to ask openended questions and ask the client to explain their understanding in their own words.

Susceptibility to influence should not be conflated with incapacity. The lawyer should be probing of the client and make some investigation into the possibility of influence, undue or otherwise, particularly where there is physical dependence or vulnerability.

It is important that the lawyer avoid a conflict of interest. It is often the case, especially in problem scenarios, that the prospective client is brought to the lawyer to make a power of attorney by a family member a friend who is a pre-existing client of the lawyer and the proposed attorney. Unlike in soap operas, where there always appears to be only one lawyer in town who practices in every area of law, in most places the lawyer has the option of referring the person elsewhere and should do so. Removing the conflict seems to correlate with reducing the margin of error in determining the client’s capacity.

Many people whose cognitive skills are compromised probably retain the ability to grant a power of attorney for personal care, given the relatively simple statutory capacity test. This means that we sometimes see situations where there is conflict among an incapable person’s loved ones concerning the person’s personal care and everyone’s answer is to keep taking the incapable person to lawyers to make new powers of attorney for personal care. This can lead to an ongoing “dueling powers of attorney” situation that is unhelpful if the goal is to assist the parties in resolving the underlying conflict. Even though the prospective client may have the capacity to grant a power of attorney for personal care, this may be a situation where the lawyer would be more helpful by recommending mediation or even that the issues of the individual’s personal care be put before the court for resolution.

Conclusion

In summary, as easy as they can be to draft and sign, powers of attorney are not simple documents. It is incumbent as the lawyer to ensure that the client is capable of granting either kind of power of attorney before facilitating the signing of the documents. This requires a thorough knowledge of the relevant criteria, careful interviewing and using good judgment given the facts of the situation at hand.

Unlike the issue of testamentary capacity which can be reviewed by a court to make sure the lawyer got it right before assets are distributed, a power of attorney may be used in the grantor’s

References:
1 This paper was originally written and presented by Jan Goddard in 2005. It was updated by Whaley Estate Litigation in 2008 to reflect recent case law and trends.
2 Principal at Jan Goddard & Associates.
3 Partner, Whaley Estate Litigation.
4 Associate, Whaley Estate Litigation.
5 S.O.1992, c. 30, as amended
6 See Godelie v. Public Trustee (1990), 39 E.T.R. 40
7 SDA, sub-section 8(1)
8 SDA, sub-section 47(1). It should be noted that if the power of attorney for personal care contains instructions, the grantor must also have the capacity to make the decision from which the instruction flows at the time the power of attorney was granted, Further, section 50 of the SDA provides for the making of a power of attorney for personal care containing special provisions, and the capacity to grant such a power of attorney is different, as it requires an understanding of the provisions.
9 SDA, sub-sections 8(2) and 47(3)
10 SDA, sub-section9(1)
11 2007 WL 1697372, 2007 CarswellOnt 3726.
12 See Godelie v. Ontario (Public Trustee) [1990 CarswellOnt 497 (Ont. Dist. Ct.) and H.(E.), Re, 2001 CarswellOnt
8209 (Ont. Cons. & Capacity Bd.).
13 [1990] CarswellOnt 497 (Ont. Dist. Ct.)
14 SDA, sub-section 47(2)
15 In Egli (Committee of) v. Egli, (2004), 28 B.C.L.R. (4th) 375, affirmed by the CA in Egli (Committee of) v. Egli, 2005 BCCA 627, the trial judge placed greater reliance upon the evidence of the solicitor than she did upon the evidence of the physician in concluding that Mr. Egli had sufficient capacity to execute the power of attorney in question.
16 (2004), 6 ETR (3d) 285
17 (2005), 14 ETR (3d)27
18 The opinions and advice in this section of the paper are the author’s alone and do not reflect any official opinion or advice of the Ontario Bar Association.
19 The proposition from Knox v. Burton that capacity can fluctuate has subsequently been relied upon in Palahnuk v. Palahnuk Estate, 2006 WL 1135614 (Ont. S.C.J.), 2006 CarswellOnt 2639, and Brillinger v. Brillinger-Cain 2007 WL 1810585 (Ont. S.C.J.), 2007 CarswellOnt 4011.
20 See, e.g. Egli, supra note 14 and Bridger v. Bridger Estate, 2006 BCCA 230.
21 2007 BCSC 123.
22 2006 WL 1135614 (Ont. S.C.J.), 2006 CarswellOnt 2639.

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.