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POA Weekly – Week 14: What are Some of the Common Power of Attorney Disasters?

The POA inherently creates suspicion, which frequently and inevitably brings the attorney’s actions, motives and conduct into question.

There is an ever-increasing number of POA disputes concerning misuses and abuses of the document, powers and the office of attorney.

An overview of the sorts of issues arising in practice include:

  • Disputes and accounting discrepancies concerning the specific dates upon which the Power of Attorney document became effective; the date of incapacity of the grantor; and, the extent of the attorney’s involvement;
  • Disputes regarding whether it was the grantor, or the attorney, who was acting at any given stage;
  • Whether the attorney has made unauthorized, questionable or even speculative investment decisions, or decisions lacking in diversity;
  • Whether the attorney has taken into consideration the tax effects of the attorney’s action or inaction;
  • Whether the attorney has acted in a timely fashion in attending to financial matters which may have attributed to unnecessary expenses, or damages from inaction;
  • Whether the attorney has sought professional advice where deemed necessary, or appropriate;
  • The attorney’s treatment of, and dealings under jointly held assets or accounts;[1]
  • Attorney disputes between siblings regarding the capacity\incapacity, action\inactions, of a parent\grantor;[2]
  • Attorney disputes amongst blended families,’ including children, step-children, children of prior and/or subsequent relationships, and later-life spouse\partner relationships;
  • Attorney misappropriation of grantor’s assets,[3] including fraud or theft in the criminal context;[4]
  • Forged Power of Attorney documents;[5]
  • Incapacity of a grantor to grant a Power of Attorney;[6]
  • Power of Attorney obtained from incapable or vulnerable grantor by an individual with improper motives, seeking personal gain, as a result of the exerting of undue influences, or suspicious circumstances;[7] and,
  • Disputes where one or several attorneys have acted without the knowledge or approval of the others either under a joint, or joint and several, power of attorney.[8]

An attorney’s inattention to the sorts of duties and responsibilities expected can cause a multitude of problems later on, particularly since family emotions often run high.

Where POA litigation arises, often, litigants assume that the associated costs of the disputes are paid out of the funds of the grantor.  This is not the case.  Costs may not be awarded in a party’s favor, regardless of how or why the dispute arises, and costs may be awarded against any party in the discretion of the court.

The indemnification of legal costs in contested POA, and similarly, guardianship litigation, in the overview, is governed by the following principles enunciated by Brown J. in Fiacco v. Lombardi:[9]

The exercise of the court’s decision in respect of cost claims in capacity litigation should reflect the basic purpose of the SDA – to protect the property of a person found to be incapable and to ensure that such property is managed wisely so that it provides a stream of income to support the needs of the incapable person: SDA, sections 32(1) and 37. To that end, when faced with a cost claim against the estate of an incapable person, a court must examine what, if any, benefit the incapable person derived from the legal work which generated those costs.

. . .

Contested guardianship applications are more problematic. While bona fide disputes may exist amongst those interested in the well-being of the incapable person as to who should be appointed her guardian, a significant risk exists that a contested guardianship application may lose sight of its purpose – to benefit the incapable person – and degenerate into a battle amongst siblings or other family members, some of whom may have only their own interests at heart. In such circumstances courts must scrutinize rigorously claims of costs made against the estate of the incapable person to ensure that they are justified by reference to the best interests of the incapable person.

Additionally, Spies J., noted in Ziskos v. Miksche,[10] that: “The court has a responsibility to ensure that legal costs incurred on behalf of a vulnerable person are necessary and reasonable and for that person’s benefit, before ordering that such cost be paid by the assets or estates of the vulnerable person.”[11]

In Wercholoz v. Tonelloto,[12] Glithero J., was asked to determine costs in a POA dispute in which the litigants eventually settled all of the substantive issues. A son and daughter were joint attorneys for property for their mother; however, the daughter took the mom to execute a new POA appointing she, and her son (grandson of the grantor) as joint attorneys. A capacity assessment revealed that the mother did not have requisite capacity to grant the second POA. The parties settled the litigation by agreeing to continue to act as joint attorneys pursuant to the original POA. They also agreed on arrangements for her care. The only outstanding issue was costs. The son sought his own costs on a full indemnity and proposed that his costs, as well as those of his sister and her son, be paid from the mother’s assets. The daughter and grandson asked that the son pay their costs and his own. The total costs represented 1/3 of the mother’s entire estate. Glithero J. found that only 25 hours of the time spent in the litigation had actually benefitted the mother and on that basis he made a “blended cost order” for approximately $8,000 to be paid to each of the parties out of the mother’s assets. Glithero J., stated:

In my opinion, this case represents a sad example of the hefty amounts that can be spent by siblings who choose to litigate rather than negotiate their differences in respect of a parent’s wellbeing.  In terms of an appropriate costs order, I must be concerned not only with the usual considerations as between the combatants, but also, most importantly, with what is fair from [the mother’s] perspective.

In my opinion the factor of the amount claimed compared to the amount recovered is relevant here.  The respondent, [mother], has the right to enjoy her capital, and to distribute as she wishes the portion thereof not required to maintaining her standard of living while she is alive.  Squabbling between two of her children which puts at risk approximately one-third of her capital is simply unreasonable.

In terms of the complexity of the proceeding, in my opinion it is not very complex.  These kinds of disputes are not unique as amongst families.  There is no family business or family trust or such complicating features here.  It was simply a battle of wills between siblings.  Any level of reasonable compromise ought to have sorted these issues out quite quickly.

While much of the costs here were incurred as a result of the litigious stance adopted by both sides, some of the time spent by both sides was legitimately in [the mother’s] best interests.  Obtaining and considering the capacity assessments was a worthwhile step.  So too were the development and consideration of the management plan in respect of property and the terms of the personal care plan as developed and incorporated into the minutes of settlement.[13]

[1] See Covello v. Sturino 2007 CarswellOnt 3726 (SC); Burke Estate v. Burke Estate 1994 CarswellOnt 442 (SC).

[2] See Johnson v. Huchkewich 2010 ONSC 6002; Chu v. Chang 2009 CanLII 68182 (ON SC), 2010 ONSC 294, 2010 ONSC 1816, 2010 ONSC 3550, 2011 ONCA 223, 2011 ONCA 389; Fiacco v. Lombardi 2009 CarswellOnt 5188 (SCJ).

[3] See Fareed v. Wood 2005 CarswellOnt 2572 (SC); Zimmerman v. McMichael Estate, 2010 ONSC 2947; Valente v. Valente 2014 ONSC 2438.

[4] See s 331 of the Criminal Code of Canada “Theft by a Person Holding a Power of Attorney”; see also R v. Hooyer 2016 ONCA 44, R v. Kaziuk 2013 ONCA 217, aff’d 2011 ONCJ 851 (conviction), rev’g 2012 ONCJ 34 (sentencing), leave to appeal to SCC refused 2013 CanLII64666 (SCC).

[5] Dhillon v. Dhillon 2006 BCCA 524.

[6] See Covello v. Sturino 2007 CarswellOnt 3726 (SC); Teffer v. Schaefers 2008 CarswellOnt 5447, additional reasons 2009 CarswellOnt 2283 (SCJ).

[7] See Abrams v. Abrams 2008 CanLII 67882 (ONSC); Nguyen-Crawford v. Nguyen 2010 ONSC 6836 at para. 85; Gironda v. Gironda 2013 ONSC 4133; Johnson v. Huchkewich 2010 ONSC 6002.

[8] See Barberi v. Triassi 2010 ONSC 3734, McMaster v. McMaster 2013 ONSC 1115.

[9] Fiacco v. Lombardi, 2009 CanLII 46170 (ON SC).

[10] Ziskos v. Miksche, 2007 CanLII 46711.

[11] Ibid at para. 75.

[12] Wercholoz v. Tonelloto, 2013 ONSC 1106.

[13] Wercholoz v. Tonelloto, 2013 ONSC 110637 at paras. 50-51, & 55. See also Lisowick v. Alvestad, 2015 ONSC 257.

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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