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POA Weekly – Week 12: Is a Drafting Lawyer Obligated to Assess Mental Capacity?

The Substitute Decisions Act (“SDA) sets out stringent guidelines regarding the requirements for capacity to grant POA’s.  “Capacity” is defined or determined upon factors of mixed law, fact and medicine and by applying the evidence available to the applicable factors for determining requisite capacity. Notably, when colloquially referring to “ a capacity test,” it is important to understand that there is no “test” so to speak, as much as there is a standard to be applied, or factors to be considered in an assessment of requisite mental capacity to make a certain decision at a particular time.

There is no single legal definition for capacity. Each task, or decision undertaken has its own corresponding capacity characteristics and determining criteria.

It is important to remember that, in general, all persons are presumed or deemed capable of making decisions at law.

Notably, a person is not globally “capable,” or “incapable”.  Rather, capacity is determined on a case-by-case basis in relation to a specific task/decision and at a moment in time. Capacity is decision, time and situation-specific and can fluctuate.

There are different standards and requirements for capacity depending on the required task. For example, a different analysis is required for determining the requisite capacity to grant a continuing POA for Property, or determining the capacity to grant a POA for Personal Care, or the requisite capacity to execute a Will, all of which is different still from the determination of requisite capacity to marry, or make an inter vivos gift.

Section 8 of the SDA sets out the factors used to assess capacity to grant a CPOAP:

8(1)     Capacity to give continuing power of attorney. – A person is capable of giving a continuing power of attorney if he or she,

    1. knows what kind of property he or she has and its approximate value;
    2. is aware of obligations owed to his or her dependants;
    3. 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;
    4. knows that the attorney must account for his or her dealings with the person’s property;
    5. knows that he or she may, if capable, revoke the continuing power of attorney;
    6. appreciates that unless the attorney manages the property prudently its value may decline; and,
    7. appreciates the possibility that the attorney could misuse the authority given to him or her.”[1]

Similarly, a person is capable of revoking a CPOAP if capable of giving one.[2]

Section 47 of the SDA sets out the criteria to be applied to determine whether the grantor has the requisite capacity to grant or revoke a POA for Personal Care. A person is capable of giving a POA for Personal Care, if the person has:

  1. The ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and,
  2. The appreciation that the person may need to have the proposed attorney make decisions or the person.[3]

The factors to be applied to determine requisite capacity to grant or revoke a POA for Personal Care are noticeably different than those for granting or revoking a CPOAP. While the criteria to be applied for assessing capacity to grant a CPOAP incorporates a significant amount of information that the grantor must be able to comprehend, for a POA for Personal Care, the grantor is only required to be able to understand whether the proposed attorney for personal care has the grantor’s best interests in mind, and that the POA for Personal Care means the proposed attorney may be authorized to make such personal care decisions for the grantor.

Notably, there is a distinction between the capacity to grant or revoke a POA (either for property or personal care) and determining the requisite capacity to manage property or to manage personal care.

The lawyer drafting a POA document (or Will or testamentary document), has a legal obligation to assess the client’s mental capacity to make the decision to execute the document. Lawyers, however, for the most part are not trained to undertake such assessment, and this is particularly so in cases where incapacity is not obvious.  The case of Hall v. Bennett Estate,[4] is one where Justice Manton found the defendant lawyer negligent in not drafting a Will where the lawyer felt capacity was lacking, for reasons that are reflected in the following passage:

…if the defendant was not sure or had a doubt with respect to Bennett’s capacity, he should then have prepared the Will and signed it in accordance with s. 4(1) of the Succession Law Reform Act and let the court decide on capacity if necessary to do so at a later time.  I, therefore, conclude that the defendant was negligent in failing to prepare a Will thereby depriving the plaintiff of a property Bennett intended him to have upon his death.

However, note that Hall v. Bennett[5] went to the Ontario Court of Appeal. The Court of Appeal, on the issue of liability concluded that the approach of the trial Judge was flawed:

…that the relevant question with respect to testamentary capacity was not whether Bennett (the deceased) in fact was capable of making a Will, but whether a reasonable and prudent solicitor in Frederick’s (solicitor) position could have concluded that he did not…this question was never addressed by the trial Judge…which led him into error.[6]

The Appellant submitted that the lawyer on preparation of a Will in death bed circumstances places a lawyer in an untenable situation:

To impose a duty of care in favour of third party prospective beneficiaries in death bed circumstances where there is a risk that the testator lacks capacity makes solicitors in these circumstances the guarantors of third party beneficiary inheritances. If the solicitor determines that the testator lacks capacity and declines to draw the will, the solicitor exposed to a suit by third party prospective beneficiaries. If, on the other hand, the solicitor in the same situation draws the will and attends to its execution, the solicitor is exposed to a suit by the personal representatives of the estate for the costs incurred by the estate in determining that the testator lack capacity. The result is a no-win situation for solicitors.[7]

Insofar as the question of duty of care, the Court of Appeal agreed with the Appellant:

…that the existence of a retainer is fundamental to the question of duty of care…insofar as the client is concerned, the absence of a retainer will usually be determinative, and no duty of care will arise in respect to the preparation of a Will…there can be no liability in contract for the negligent performance of services that a solicitor never undertook to perform…insofar as [tortious liability] is concerned, in the absence of a retainer there would have to be other circumstances that gave rise to a duty of care…there is no suggestion of the reliance [being] foreseeable and reasonable…insofar as potential liability and negligence to a third party is concerned, the existence of a duty of care, will depend on the presence of both foreseeability and proximity…absent exceptional circumstances, it is my view that there would be insufficient proximity between the parties to give rise to a duty of care…it is my view that the evidence in support of Frederick’s opinion that he did not have sufficient instructions to prepare a will and that Bennett lacked testamentary capacity was overwhelming.  Indeed, in the circumstances, it is my view that his duty was to decline the retainer…hence, on all circumstances, I conclude that Frederick fulfilled any obligation that owed to Bennett and in the absence of any retainer to prepare a will he owed no duty of care to Hall.[8]

Note that the Court of Appeal briefly addressed the question of whether it was even open to the court to found liability of Frederick’s decision to decline the retainer to prepare a Will. The appeal was allowed, and the trial judgment set aside.

There are many cases which deal with decisional capacity in the estates context which set out the applicable principles, and too, set out the considerations for the potential of undue influence which applies equally to POA situations as well as Will drafting preparation and execution.[9]

There have also been many cases dealing with the relevant criteria set out in the SDA regarding requisite capacity to grant a POA, including a Continuing POA for Property.

For example, in Nguyen-Crawford v. Nguyen,[10] the Ontario Superior Court of Justice found that as the grantor did not speak English and there was an absence of evidence that the POA and legal advice relating to it were translated for the grantor by someone other than the person being granted the power, there was no basis for concluding that the grantor had the specific capacity, that being the understanding of the nature of the document and the authority conferred, to execute it.[11]

In Abrams v. Abrams,[12] an application was brought for an order that the applicant’s mother and father be assessed regarding capacity to grant a POA. Several affidavits and medical reports were field on behalf of the mother alleging she had capacity as well as opposing affidavits and testimony that she did not. Justice Brown, with respect to the issue of capacity to grant a POA, clarified that while the person may be incapable with respect to some decisions, they still may have capacity to grant or revoke a POA.[13]

Often when a POA document is attacked on grounds of incapacity, an alternative allegation is made that the grantor was unduly influenced to execute the POA, and therefore, the POA should be set aside. In general, to establish undue influence, the burden of proof rests with the party alleging it. Simple influence is not enough; the grantor’s free will must be overborne. Notably however, where a relationship is not one of equals and there is an abuse of power undue influence may be established.[14]

A drafting lawyer should take extensive and detailed notes on the assessment of a client’s capacity and document any potential for undue influence. Where a drafting lawyer has any doubts as to whether the client possesses requisite capacity to grant a POA, a formal capacity assessment may be considered under the SDA. A formal assessment, done by a designated capacity assessor may give the drafting lawyer and client, better certainty, and may also form persuasive evidence if needed by a court in the event of litigation.[15]

[1] Substitute Decisions Act, supra note 9, at s. 8(1).

[2] Ibid at s. 8(2).

[3]Ibid at s. 47.

[4] Hall v. Bennett Estate, 40 E.T.R. (2d) 65.

[5] Hall v. Bennett Estate, 2003 CanLII 7157 (ONCA)

[6] Ibid at para. 12.

[7] Ibid at para. 54.

[8] Ibid at paras. 56-59.

[9] See Banks v. Goodfellow, (1870), L.R. 5 Q.B. 549; Scott v. Cousins, [2001] 37 E.T.R. (2d) 113, [2001] O.J. No. 19 (SCJ); Ostrander v. Black [1996] O.J.; Vout v. Hay [1995] 2 SCR; Banton v. Banton (1998), 164 DLR, Murphy v. Lamphier (1914) 31 OLR 287 at 318; Schwartz v. Schwartz, 10 DLR (3d) 15. 1970 CarswellOnt 243 [1970] 2 O.R. 61 (Ont.) C.A.; Hall v. Bennett Estate (2003) 64 O.R. (3d) 191 (C.A.) 277 D.L.R. (4th) 263; Bourne v. Bourne Estate (2003) 32 E.T.R. (2d) 164 Ont. S.C.J.); Key v. Key [2010] EWHC 408 (ch.) (BailII); Laszlo v. Lawton, 2013 BCSC 305, Dmyterko Estate v. Kulikovsky (1992), CarswellOnt 543, Wingrove v. Wingrove (1885) 11 PD 81 at 82; Shrader v. Shrader, [2013] EWHC 466 (ch); Gironda v. Gironda, 2013 CarswellOnt 8612; Tate v. Gueguegirre 2015 ONSC 844 (Div. Ct.).

[10] Nguyen-Crawford v. Nguyen 2010 ONSC 6836.

[11] Ibid at paras. 73-74.

[12] 2009 CanLII 12798 (ON SCDC).

[13] Abrams v. Abrams 2009 CanLII 12798 (ON SCDC) at para. 34.

[14] Seguin v. Pearson, 2018 CanLII 355 (ONCA) at para. 11. For more information on undue influence see “Undue Influence Checklist: Estates and Related Matters” online at: http://welpartners.com/resources/WEL_Undue_Influence_Checklist.pdf

[15] For more on capacity in an estates practice see “Capacity Checklist: The Estate Planning Context” and “Summary of Capacity Criteria” online at: http://www.welpartners.com/resources/WEL_CapacityChecklist_EstatePlanningContext.pdf and http://www.welpartners.com/resources/WEL_SummaryofCapacityCriteria.pdf

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.

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