Complaints, Problems, Litigation and the Power of Attorney

We often hear and read about the importance of planning our estate, but what about planning for incapacity, such as having powers of attorney’s?  A power of attorney is a written document that is given by one person (referred to as the “donor”), which authorizes another person or person(s) or entity (referred to as the “attorney”) to act on behalf of the donor.  The law relating to the delegation of decision making power in Ontario is governed by the Substitute Decisions Act, 1992, S.O. 1992.

Given the broad authority of a power of attorney, it’s often the subject of various complaints, problems and litigation, such as in the case of Macivor Estate.

In Macivor Estate, the donor had five children and gave a power of attorney for property to one of her daughter’s (the “attorney”).  The attorney and the donor decided to list the donor’s house for sale after the donor had moved into a retirement home.  It was generally understood that the attorney was selling the property so that there would be sufficient funds to support the donor; however the donor died shortly after moving into the retirement home.

After meeting with numerous real estate agents, the donor concluded that the interior of the property was dated and needed renovations.  While acting under the power of attorney, the attorney undertook and spent approximately $36,000 for renovations on the donor’s house to ready the house for sale.  The house was subsequently listed for sale for $585,000 in June 2009 and sold for $434,500 and the sale closed January 14, 2011.  

The attorney applied to have her accounts passed and a beneficiary of the Estate objected to the attorney’s accounts alleging that the attorney improperly spent more than $30,000 on the donor’s house as well as challenging her compensation.  In his evidence at the passing of accounts, the objector argued that, because the house sold for a disappointing price, the renovations were a waste of money and unnecessary as they had not improved the value or marketability of the house. The principal objection related to the fact that the beneficiary was not consulted about work that the attorney had authorized to be done on the house; however, the Honourable Justice van Rensburg held that the attorney was not required to do so.

The court approved the attorney’s accounts holding that it was satisfied that the attorney had acted reasonably and diligently and in particular the court stated that she “exercised proper judgment in deciding to undertake work on R.R.2 in an effort to increase the value and marketability of the property.”  The court rationalized its decision on the grounds that the attorney made “a judgment call, based on the feedback she had received from real estate agents, to update the house with a view to enhancing its value and marketability… But for a downturn in the market this was what they could have expected to receive on a sale of the house.”

Given the inherent nature of the Power of Attorney document, it often creates suspicion, which brings the attorney’s actions, and conduct into question.  It’s an area, which we will continue to see an increase in complaints, problems and litigation, as our society continues to age.

Thank you for reading,

Rick Bickhram