The 2023 Ontario Superior Court of Justice decision in McKenzie v Morgan concerned an Application regarding whether the Attorney for Property could sell one of the grantor’s three properties, located in Barrie, Ontario (the “Springdale Property”). The Attorney stated that the sale was necessary to support the grantor, her father.
While this would normally be within the Attorney’s power under the Substitute Decisions Act, 1992, the grantor gave a life leasehold interest in the property in question, in favour of the Respondent, in his Last Will and Testament.
The grantor is 85 years old and diagnosed with dementia. He has been found incapable with respect to placement in a long-term care facility. The Attorney is one of his five children. At one point she held a power of attorney for personal care and property jointly with her twin sister, however, they became embroiled in a rancorous, protracted, and expensive legal dispute which ultimately settled. Pursuant to the settlement, the twin sister resigned as co-Attorney.
The Respondent is 82 years old and was previously married to the grantor’s brother. After her husband died, she became romantic partners with the grantor. She claims to be the grantor’s common law spouse, stating that she has shared 18 years together with the grantor. She also claims to have a tenancy agreement in addition to the life interest in the property. The Attorney is critical of the Respondent, stating that she is “sadly, entirely opportunistic, callous and a downright liar.” The Respondent, however, in her sworn affidavit, described the Attorney as suffering from “alcoholism, extreme violence, aggression and abusive behaviour towards others.”
In February of 2022, a Court Order approved a settlement which arranged how the grantor’s affairs were to be managed. The Applicant and her husband were entitled to live rent-free with the grantor at his Bracebridge home. Pursuant to the settlement, the Applicant was to be paid $5,500.00 monthly out of the grantor’s Estate to be his caregiver.
The Attorney, however, brought her application seeking the Court’s direction because she claims the grantor is not sufficiently liquid to pay her caregiving fees or sustain his needs. The court, however, carefully noted that the caregiving expenses paid to the Attorney and the legal costs connected to the February 2022 Order have significantly contributed to the liquidity problem.
In late May of 2022, the Attorney arranged for the property to be listed for sale. She provided no notice to the Respondent and did not consult any other family members. The Respondent refused to allow the realtor to show the property or cooperate with the sale. On June 2, 2022, the Attorney commenced the within Application. As a result, the Attorney sought an order permitting her to sell the Springdale Property and evict the Respondent.
The court in McKenzie looked at ss. 36 and 35.1 of the SDA which prohibits of a guardian of property and an attorney for property from disposing of property that is the subject of a specific testamentary gift in the person’s will unless it is necessary to comply with the guardian’s duties or unless it is a gift of the property to the person entitled to receive it under the will and the gift is permitted under s. 37 of the SDA.
The court found that the grantor’s Will contemplates a specific testamentary gift in the form of a life leasehold interest to the Respondent. In order to determine whether an attorney for property can dispose of property that is the subject of a testamentary gift, the court had to first look to the duties generally and then examine the anti-ademption provisions of the SDA:
 Section 38 of the SDA provides that s. 32 (except subsections (10) and (11), and sections 33, 33.1, 33.2, 34, 35.1, 36 and 37 also apply, with necessary modifications, to an attorney acting under a continuing power of attorney if the grantor is incapable of managing property or the attorney has reasonable grounds to believe that the grantor is incapable of managing property. This provision is disjunctive. These provisions apply where there is actual incapacity or reasonable grounds to believe that the grantor is incapable with respect to property (see McDougald Estate v. Gooderham, 2005 CanLII 21091 (ONCA), at para. 49).
 Where a Will contains a bequest that is not among the testator’s assets when he dies, the gift is said to have adeemed and it fails (McDougald Estate v. Gooderham, supra, at para. 1).
 Section 36 of the SDA changes that rule. It sets out consequences if a guardian of property disposes of property that is subject to a specific testamentary gift. It provides:
36 (1) The doctrine of ademption does not apply to property that is subject to a specific testamentary gift and that a guardian of property disposes of under this Act, and anyone who would have acquired a right to the property on the death of the incapable person is entitled to receive from the residue of the estate the equivalent of a corresponding right in the proceeds of the disposition of the property, without interest.
(2) If the residue of the incapable person’s estate is not sufficient to pay all entitlements under subsection (1) in full, the persons entitled under subsection (1) shall share the residue in amounts proportional to the amounts to which they would otherwise have been entitled.
(3) Subsections (1) and (2) are subject to a contrary intention in the incapable person’s will.
 Section 35.1 permits the disposable of when it is necessary to comply with the duties of the guardian. It provides:
35.1 (1) A guardian of property shall not dispose of property that the guardian knows is subject to a specific testamentary gift in the incapable person’s will.
(2) Subsection (1) does not apply in respect of a specific testamentary gift of money.
(3) Despite subsection (1),
(a) the guardian may dispose of the property if the disposition of that property is necessary to comply with the guardian’s duties; or
(b) the guardian may make a gift of the property to the person who would be entitled to it under the will, if the gift is authorized by section 37.
The court in McKenzie determined that the sale of the Springdale Property was not necessary to support the grantor. This determination was based on the fact that the Attorney provided information relating to the grantor’s expenses which were nothing more than estimates and appear inflated or exaggerated, and not support by the documentation. The court therefore concluded that her figures regarding the grantor’s assets were not reliable. What’s more, the court found that the Attorney refused to discuss with her sibling’s other means by which to free up funds from the grantor’s assets. To that end, the court concluded that she had a duty to consult the family pursuant to ss. 32(4) and (5) of the SDA.
The Attorney also refused to waive solicitor-client privilege on the grantor’s behalf, depriving the court of the opportunity to see if his solicitor made any notes about his intentions regarding the Respondent. What’s more, the court held that the Attorney had failed to explore other reasonable options for the care of the grantor. As a result, the court could not conclude that the sale of the Springdale Property was necessary for the Attorney to fulfill her duties.
The court ordered that should this matter return, it may be necessary for the grantor to be represented by a litigation guardian, however, that given the nature of his impairment, section 3 counsel would be unnecessary.
The Application to sell the property was dismissed without prejudice to the Applicant to renew it with further and better evidence. The Applicant was also required to serve this decision upon the PGT.
This is an important decision for lawyers advising clients and individuals acting under a Power of Attorney for Property.
Pursuant to section 36 of the SDA, there are consequences if a guardian of property disposes of property that is subject to a specific testamentary gift. Anyone who would have acquired a right to the property on the death of the incapable person is entitled to receive from the residue of the estate the equivalent of a corresponding right in the proceeds of the disposition of the property, without interest. Where the residue is insufficient, the entitled persons shall share the residue in amounts proportional to the amounts they would have otherwise been entitled.
There is also an important lesson in this decision about substitute decision making: an Attorney for Property or Personal Care has a statutory duty to consult family members pursuant to ss. 32(4) and (5) of the SDA. Where an important decision is to be made which impacts the life of the grantor, it is best practice to consult supportive family members.
 2023 ONSC 1457 [McKenzie].
 S.O. 1992, c. 30 [SDA].
 Ibid., para. 10.
 Ibid., para. 11.
 Ibid., paras. 12-13.
 Ibid., para. 23.
 While the Attorney felt the grantor required 24/7 care at home, the court concluded that if he required 24-hour care, he would be eligible for placement in a long-term care home where he could be visited by all his family members, friends, and neighbours without there being a conflict. The Attorney could also sell one of the other properties.