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Generally, a Power of Attorney confers significant authority and power to the appointed individual. In the recent case of McKenzie v Morgan, the Ontario Superior Court of Justice (the “Court”) considered whether the Applicant, who was the power of attorney for property and personal care for “RM”, could sell one of RM’s properties. The property in question, referred to as the “Springdale Property,” was subject to a life leasehold interest in favour of the Respondent set out in RM’s Last Will and Testament.

Power of attorney for property seeks to sell father’s property

RM, at the time of the decision, was 85 years old and was diagnosed with dementia. The Applicant, “DM”, is one of RM’s five children. The Respondent (“WM”) is RM’s sister-in-law (and the Applicant’s aunt) and was romantically involved with RM after their respective partners passed away. While the Applicant contests that they are common law spouses, there was evidence that RM and the Respondent were a couple and represented themselves as a couple.

In regard to the property in question, the Court noted that the sale of a property would normally be within the Applicant’s power as RM’s attorney for property under the Substitute Decisions Act.

Property subject to a life leasehold interest

RM executed a Last Will and Testament a few years before the litigation, which contained the following provisions regarding the Springdale Property:

“I GIVE all my property wheresoever situate, including any property over which I may have a general Power of Appointment, to my trustees upon the following trusts, namely,

(b) to permit [WM] to continue to reside at my home at … Barrie, Ontario, for the rest of her life, or until she chooses to move out, pursuant to the terms of a Residential Rental Agreement dated April 2, 2018. Upon [WM] moving out of the property, or dying, the house will form part of the reside (sic) of my estate and be dealt with as part thereof.”

The Court noted that this effectively gave WM a life leasehold interest in the Springdale Property.

Respondent sought to reside at the property; refuses to cooperate with sale

The Applicant listed the Springdale Property for sale without notice to or consultation with the Respondent. However, the Respondent refused to cooperate with the sale of the home, which resulted in the Applicant commencing this Application. The Applicant ultimately sought an order permitting her to sell the Springdale Property and evict the Respondent.

Sections 36 and 35.1 of the Substitute Decisions Act prohibit a power of attorney, or guardian, for property from disposing of property that is the subject of a specific testamentary gift unless:

  1. “it is necessary to comply with the guardian’s duties, or
  2. it is a gift of property to the person entitled to receive it under the Will, and the gift is permitted under section 37 of that same legislation.”

In determining whether the Applicant could dispose of property that is the subject of a testamentary gift – which the Court found that the Springdale Property was – the Court first looked at the duties of powers of attorneys generally, and the anti-ademption provisions of the Substitute Decisions Act.

Duties of power of attorney for property

The primary duty of a power of attorney is to act as a fiduciary, as detailed in section 32 of the Substitute Decisions Act. This duty encompasses acting diligently and honestly, with integrity and good faith, for the incapable person’s benefit. This also includes managing property in a manner that is consistent with other decisions concerning the incapable person’s personal care, as well as encouraging the incapable person to participate in decisions about property, as they are able.

If a power of attorney is not receiving compensation for managing the incapable person’s property, then they shall still exercise the degree of care, diligence, and skill that a person of ordinary prudence would exercise in their own affairs. On the other hand, if the power of attorney is receiving compensation, then they shall exercise the care, diligence, and skill that a person in the business of managing others’ property would exercise.

Anti-ademption provisions of the Substitute Decisions Act

Under ordinary circumstances, when a Last Will and Testament contains a bequest that is not among the testator’s assets when the testator dies, then the gift has “adeemed” which means that it has failed and it cannot be bequeathed. Section 36 of the Substitute Decisions Act, however, outlines various consequences that may arise if a power of attorney disposes of property that is subject to a specific testamentary gift. Specifically, the provision states that:

“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.”

Court finds sale of property is not necessary

The Applicant claimed that she needed to sell the Springdale Property in order to support RM, describing details of RM’s assets, debts, expenses, and income. She highlighted that he currently had a shortfall of about $150,000 per year.

However, the Court did not accept the Applicant’s evidence in this regard, having “no confidence in [the Applicant’s] financial assessment and forecasting.” One concern cited by the Court was the Applicant’s attempt to sell the Springdale Property without consulting with other family members, despite knowing that it was the subject of a specific testamentary gift, and incurring legal fees that she expected RM to pay, while knowing that he cannot do so without selling an asset. The Court also found that information related to RM’s expenses was estimated, appeared “inflated or exaggerated,” and was “not supported by the documentation.”

Ultimately, the Court questioned and doubted the Applicant’s credibility and her reliability, while also noting the Applicant’s clear dislike for the Respondent. It was due to these evidentiary and credibility issues that the Court determined that it could not conclude that the sale of the Springdale Property was necessary for the Applicant to fulfill her duties as power of attorney. Her claim was dismissed without prejudice and with the right to renew it with further and better evidence.

Contact the Lawyers at Bader Law in Mississauga & Oakville for Trusted Advice on Will and Estate Matters

The knowledgeable wills and estates lawyers at Bader Law help individuals, families and business owners plan for the future by providing comprehensive estate planning solutions in Mississauga, Oakville, and throughout the Greater Toronto Area. From drafting a will, preparing a power of attorney, or selling assets, our lawyers will work closely with you to ensure your needs are met. We also represent estate trustees and beneficiaries in a variety of probate matters. To discuss your estate concerns with a member of our team, contact us online or by phone at (289) 652-9092 to learn how we can help you.