In the recent decision of McArthur v. McArthur, 2024 ONSC 5806, the Honourable Justice Faieta: 1) granted leave for a residual beneficiary of a deceased’s estate to apply for a passing of accounts from the deceased’s prior attorney who subsequently became their estate trustee; and 2) further required the attorney to prepare an informal accounting of their conduct despite the grantor having never been found to be incapable.
Background
The deceased (“the “Deceased”) executed continuing powers of attorney for property and personal care in favour of one their children (the “Attorney”). The continuing power of attorney for property could only be used in the event of the Deceased’s incapacity.
The Deceased’s remaining child was a residual beneficiary to their will (the “Beneficiary”).
There was no evidence that the Deceased had undergone a capacity assessment, and despite some health issues and periods of confusion, a finding of incapacity to manage property was not supported.
As further detailed below, the Attorney nevertheless represented themselves as the Deceased’s attorney to institutions, including care facilities and financial institutions, and was involved in, amongst other things, the sale of the Deceased’s home.
On consent, the parties obtained an order requiring the Attorney to pass their accounts in their capacity as the Deceased’s estate trustee (the “Accounts”), which Accounts were provided.
Position of the Parties
The Beneficiary filed a Notice of Objection to the Accounts, and further sought that the Attorney pass their accounts for the period they acted as the Deceased’s attorney for property.
The Attorney refused to account for any conduct prior to the Deceased’s death for reasons including that she never acted under the powers of attorney; the Deceased was always capable; she was not involved in the sale of the Deceased’s home; she had “little to do with property management; and she carried out tasks under the Deceased’s capable instructions.
Analysis
Under s.42(1 The Basis for Compelling a Passing of Accounts) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”), the court may, on application, order that an attorney or guardian for property pass their accounts. Under s.42(3) and (4) of the SDA, the persons who may bring such an application include “Any other person, with leave of the court.”
As set out in Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296, jurisprudence in Ontario interpreting the SDA has found that “following the grantor’s death and where the attorney and estate trustee are one and the same person, there can be no true accounting as between the attorney and estate trustee. As a result, courts have permitted beneficiaries and others in this circumstance to seek leave, as “any other person” under s. 42(4) of the SDA, to apply to the court for a passing of the attorney’s accounts for the period the attorney acted prior to the grantor’s death.”[1]
Granting Leave to the Beneficiary to Apply for a Passing of Accounts
In granting leave to the beneficiary under s. 42(4) of the SDA as “any other person”, Justice Faieta considered the necessary requirements set out by the Ontario Court of Appeal in Lewis v. Lewis, 2020 ONCA 56 (“Lewis”) that:
(1) the applicant has a genuine interest in the grantor’s welfare; and
(2) it is reasonable to believe that a court hearing the matter may, under s. 42(1), order the attorney to pass his or her accounts[2].
Given the Attorney’s status as both attorney and estate trustee, Justice Faieta found that the first prong of the test had been met.
Given the reasons subsequently provided for determining that an accounting be ordered, Justice Faieta further found that the second test of the prong had been met such that the beneficiary was entitled to obtain leave to apply for a passing of accounts.
Ordering of the Passing of Accounts
In determining that the Attorney ought to pass their accounts, Justice Faieta applied the necessary considerations set out in Lewis and Dzelme v. Dzelme, 2018 ONCA 1018, being:
(a) The extent of the attorney’s involvement in the grantor’s financial affairs; and
(b) Is there a significant concern in respect of the management of the grantor’s affairs that warrants an accounting?[3]
a) The Attorney’s Involvement in the Deceased’s Financial Affairs
The Attorney was found to have been sufficiently involved in the Deceased’s affairs and to have acted under the power of attorney document appointing them, despite claims to the contrary, because they, amongst other things, executed agreements in their capacity as attorney for “Property/Guardian/Trustee”; provided copies of the attorney document to relevant institutions; signed numerous cheques from the Deceased’s account, including a blank cheque provided to a care facility; were involved in the management of the Deceased’s investments and had the statements mailed to their own home; and arranged for the sale of the Deceased’s condominium and disposed of the contents.
b) The Significant Concerns Regarding the Attorneys Management of the Deceased’s Affairs that Warranted an Accounting:
Sufficiently significant concerns were found in the Attorney’s management of the Deceased’s affairs because, amongst other things, portions of the funds obtained from the sale of the Deceased’s home were claimed to have been used for uncorroborated repayments; a significant cheque, that also raised concerns with the authenticity of the Deceased’s alleged signature, was written to the Attorney for repayment for alleged contributions towards renovations for the deceased’s home as part of an alleged agreement; the Deceased’s credit card was used for expenses that could not have been for her benefit; and there were uncharacteristic and unexplained withdrawals and transfers from the Deceased’s bank accounts.
Concluding Comments
This decision speaks to the necessary requirements for, and increasing willingness of the courts in Ontario to:
- Empower beneficiaries to compel a passing of accounts, whether formal or informal, from an attorney who subsequently acts as Estate Trustee; and
- Require attorneys for capable grantors to account for their conduct where they were sufficiently involved in the grantor’s financial affairs and there are sufficient concerns regarding their management of same.
—
[1] McArthur v. McArthur, 2024 ONSC 5806, at para 18, citing Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296 at para 52; De Zorzi Estate v. Read (2008), 38 E.T.R. (3d) 318 (Ont. S.C.J.), at paras. 11-13; McAllister Estate v. Hudgin (2008), 42 E.T.R. (3d) 313 (Ont. S.C.J.), at para. 9; Carfagnini v. White Estate, 2014 ONSC 3575 (Ont. S.C.J.[Estates List]), at paras. 17-18; Testa v. Testa, 2015 ONSC 2381, 10 E.T.R. (4th) 192 (Ont. S.C.J.), at para. 39; and Lacroix v. Kalman, 2015 ONSC 19 (Ont. S.C.J.), at para. 40
[2] Lewis v. Lewis, 2020 ONCA 56, at para. 5
[3] Lewis, para. 15; Dzelme v. Dzelme, 2018 ONCA 1018, at para. 7
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Written by: Evan Pernica
Posted on: November 1, 2024
Categories: Capacity, Commentary, Passing of Accounts, WEL Newsletter
In the recent decision of McArthur v. McArthur, 2024 ONSC 5806, the Honourable Justice Faieta: 1) granted leave for a residual beneficiary of a deceased’s estate to apply for a passing of accounts from the deceased’s prior attorney who subsequently became their estate trustee; and 2) further required the attorney to prepare an informal accounting of their conduct despite the grantor having never been found to be incapable.
Background
The deceased (“the “Deceased”) executed continuing powers of attorney for property and personal care in favour of one their children (the “Attorney”). The continuing power of attorney for property could only be used in the event of the Deceased’s incapacity.
The Deceased’s remaining child was a residual beneficiary to their will (the “Beneficiary”).
There was no evidence that the Deceased had undergone a capacity assessment, and despite some health issues and periods of confusion, a finding of incapacity to manage property was not supported.
As further detailed below, the Attorney nevertheless represented themselves as the Deceased’s attorney to institutions, including care facilities and financial institutions, and was involved in, amongst other things, the sale of the Deceased’s home.
On consent, the parties obtained an order requiring the Attorney to pass their accounts in their capacity as the Deceased’s estate trustee (the “Accounts”), which Accounts were provided.
Position of the Parties
The Beneficiary filed a Notice of Objection to the Accounts, and further sought that the Attorney pass their accounts for the period they acted as the Deceased’s attorney for property.
The Attorney refused to account for any conduct prior to the Deceased’s death for reasons including that she never acted under the powers of attorney; the Deceased was always capable; she was not involved in the sale of the Deceased’s home; she had “little to do with property management; and she carried out tasks under the Deceased’s capable instructions.
Analysis
Under s.42(1 The Basis for Compelling a Passing of Accounts) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”), the court may, on application, order that an attorney or guardian for property pass their accounts. Under s.42(3) and (4) of the SDA, the persons who may bring such an application include “Any other person, with leave of the court.”
As set out in Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296, jurisprudence in Ontario interpreting the SDA has found that “following the grantor’s death and where the attorney and estate trustee are one and the same person, there can be no true accounting as between the attorney and estate trustee. As a result, courts have permitted beneficiaries and others in this circumstance to seek leave, as “any other person” under s. 42(4) of the SDA, to apply to the court for a passing of the attorney’s accounts for the period the attorney acted prior to the grantor’s death.”[1]
Granting Leave to the Beneficiary to Apply for a Passing of Accounts
In granting leave to the beneficiary under s. 42(4) of the SDA as “any other person”, Justice Faieta considered the necessary requirements set out by the Ontario Court of Appeal in Lewis v. Lewis, 2020 ONCA 56 (“Lewis”) that:
(1) the applicant has a genuine interest in the grantor’s welfare; and
(2) it is reasonable to believe that a court hearing the matter may, under s. 42(1), order the attorney to pass his or her accounts[2].
Given the Attorney’s status as both attorney and estate trustee, Justice Faieta found that the first prong of the test had been met.
Given the reasons subsequently provided for determining that an accounting be ordered, Justice Faieta further found that the second test of the prong had been met such that the beneficiary was entitled to obtain leave to apply for a passing of accounts.
Ordering of the Passing of Accounts
In determining that the Attorney ought to pass their accounts, Justice Faieta applied the necessary considerations set out in Lewis and Dzelme v. Dzelme, 2018 ONCA 1018, being:
(a) The extent of the attorney’s involvement in the grantor’s financial affairs; and
(b) Is there a significant concern in respect of the management of the grantor’s affairs that warrants an accounting?[3]
a) The Attorney’s Involvement in the Deceased’s Financial Affairs
The Attorney was found to have been sufficiently involved in the Deceased’s affairs and to have acted under the power of attorney document appointing them, despite claims to the contrary, because they, amongst other things, executed agreements in their capacity as attorney for “Property/Guardian/Trustee”; provided copies of the attorney document to relevant institutions; signed numerous cheques from the Deceased’s account, including a blank cheque provided to a care facility; were involved in the management of the Deceased’s investments and had the statements mailed to their own home; and arranged for the sale of the Deceased’s condominium and disposed of the contents.
b) The Significant Concerns Regarding the Attorneys Management of the Deceased’s Affairs that Warranted an Accounting:
Sufficiently significant concerns were found in the Attorney’s management of the Deceased’s affairs because, amongst other things, portions of the funds obtained from the sale of the Deceased’s home were claimed to have been used for uncorroborated repayments; a significant cheque, that also raised concerns with the authenticity of the Deceased’s alleged signature, was written to the Attorney for repayment for alleged contributions towards renovations for the deceased’s home as part of an alleged agreement; the Deceased’s credit card was used for expenses that could not have been for her benefit; and there were uncharacteristic and unexplained withdrawals and transfers from the Deceased’s bank accounts.
Concluding Comments
This decision speaks to the necessary requirements for, and increasing willingness of the courts in Ontario to:
—
[1] McArthur v. McArthur, 2024 ONSC 5806, at para 18, citing Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296 at para 52; De Zorzi Estate v. Read (2008), 38 E.T.R. (3d) 318 (Ont. S.C.J.), at paras. 11-13; McAllister Estate v. Hudgin (2008), 42 E.T.R. (3d) 313 (Ont. S.C.J.), at para. 9; Carfagnini v. White Estate, 2014 ONSC 3575 (Ont. S.C.J.[Estates List]), at paras. 17-18; Testa v. Testa, 2015 ONSC 2381, 10 E.T.R. (4th) 192 (Ont. S.C.J.), at para. 39; and Lacroix v. Kalman, 2015 ONSC 19 (Ont. S.C.J.), at para. 40
[2] Lewis v. Lewis, 2020 ONCA 56, at para. 5
[3] Lewis, para. 15; Dzelme v. Dzelme, 2018 ONCA 1018, at para. 7
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