Robertson v Harding, 2018 MBCA 67

Citation: Robertson v Harding, 2018 MBCA 67 Date: 20180615 Docket: AI17-30-08924 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Diana M. Cameron Mr. Justice William J. Burnett Madam Justice Janice L. leMaistre BETWEEN : ) W. C. Kushneryk, Q.C. and GLENN WILLIAM ROBERTSON ) C. S. Poapst ) for the Appellant ) (Applicant) Appellant ) W. M. Onchulenko ) for the Respondent - and - ) ) Appeal heard: GORDON BRUCE HARDING ) February 16, 2018 ) ) Judgment delivered: (Respondent) Respondent ) June 15, 2018 On appeal from 2017 MBQB 142 BURNETT JA [ 1 ] The applicant appeals a judgment dismissing his application for an accounting pursuant to section 24(1) (

e) of The Powers of Attorney Act , CCSM c P97 (the Act ). [ 2 ] The application judge dismissed the application because there was no evidence that the donor of the power of attorney was mentally incompetent. [ 3 ] Mental incompetence is not a prerequisite to an accounting under section 24(1) (e). In the particular circumstances of this case, an accounting is required.

Background [ 4 ] The facts are not disputed and can be briefly summarized. [ 5 ] The applicant is the oldest son and the respondent is the stepson of William Robertson (the donor). [ 6 ] On June 29, 2005, the donor executed a general power of attorney appointing his wife or, if she predeceased him or was unwilling or unable to act, the respondent to act as his attorney.

The donor’s wife died on May 3, 2009. [ 7 ] The respondent acted as attorney for the donor between May 3, 2009 and May 18, 2016. [ 8 ] The power of attorney specifically provides that it is to remain in full force and effect, notwithstanding any future or periodic mental infirmity or incompetency of the donor, until expressly revoked by him. It also provides that the donor’s stepdaughter is entitled to demand an accounting during any period in which the donor is mentally incompetent. [ 9 ] The donor was born on October 8, 1926 and he is 91 years old. At all material times, he was apparently competent.

He is not a party to these proceedings and has provided no evidence. [ 10 ] On May 18, 2016, a new power of attorney was executed by the donor terminating the original power of attorney and

naming George Edward Chapman, Q.C. (Chapman) as his new attorney. [ 11 ] On May 25, 2016, Chapman, in his capacity as solicitor and attorney for the donor, wrote to the respondent’s solicitor and advised that: We also require an accounting from [the respondent] of all of the funds that he has taken from [the donor] and which he has so far refused to do despite our repeated verbal requests. [ 12 ] On July 7, 2016, the respondent’s solicitor confirmed that the respondent was “prepared to provide an accounting, and is in fact preparing that accounting now.” [ 13 ] On December 30, 2016, the applicant applied for an order requiring the respondent to provide the court with an accounting for funds in excess of $160,000 (subsequently reduced to $145,000) withdrawn from the donor’s bank accounts between January 2010 and May 2016.

The application was made pursuant to sections 24(1) (

e) and 24(2). (Unless otherwise indicated, all references in this decision to sections are references to sections of the Act .) The applicant also sought an order requiring the respondent to repay to the donor all funds which were unaccounted for. [ 14 ] The respondent has failed to provide an accounting. [ 15 ] The respondent filed a motion for an order to examine the donor at the hearing of the application. The applicant opposed the motion, and prior to the hearing of the application, the motion was dismissed without reasons by the application judge.

In the circumstances of this application, it is unfortunate that no reasons were provided. Legislative Provisions [ 16 ] Sections 24(1), 24(2) and 24(3) provide: Jurisdiction of the court 24(1) Upon an application made in respect of an enduring power of attorney, the court may, having regard to the power of attorney and the donor’s intentions, make any order the court considers appropriate, which may include the following: (

a) an order providing advice or directions on any matter respecting the management of the donor’s estate; (

b) a declaration that the donor is mentally incompetent; (

c) a declaration that a power of attorney is invalid or terminated; (

d) an order removing the attorney appointed under the power of attorney; (

e) an order requiring the attorney to provide the court with an accounting; (

f) subject to the provisions of the enduring power of attorney, an order varying the powers of the attorney; (

g) subject to the provisions of the enduring power of attorney, an order appointing a person as an attorney in place of the attorney appointed under the enduring power of attorney. Who may apply and when 24(2) An application under subsection (1) may be made by an attorney, the Public Guardian and Trustee, the nearest relative of the

donor , a recipient of an accounting under

section 22 or, with the approval of the court, an interested person, at any time after the execution of the enduring power of attorney . Notice 24(3) The applicant shall give notice of the application to (

a) the donor, unless the court orders otherwise; (

b) the attorney; (

c) the Public Guardian and Trustee; and (

d) any other person, as the court may order. [emphasis added] Application Judge’s Decision [ 17 ] The application judge provided brief reasons for her decision to dismiss the application. She identified the so-called “essential issue” in the following terms (at para 6): The essential issue in this case is whether this court should follow the line of decisions ( Ranville v. Campbell , 2011 MBQB 315 ; Penniston v. Vandekerckhove et al. (25 September 2015), Winnipeg PR 14-01-99419 (MBQB); and The Estate of Rudi Terhoch , 2013 MBQB 181 , 295 Man.R. (2d) 142 ( sub nom Zatser v.

Boroditsky ) ) to the effect that, in the face of an enduring power of attorney, s. 24(1) of The Powers of Attorney Act , C.C.S.M., c. P97, is only applicable where there is evidence of mental incompetency or, alternatively, whether the court should exercise its broad powers to order an accounting. [ 18 ] The application judge concluded (at paras 9-11): The evidence before the court, on its face, is troubling.

It appears that the respondent was the joint owner of [the donor’s] Scotiabank accounts and that for some reason it was determined that the money from the Scotiabank accounts should be gradually withdrawn and deposited in an account at the Royal Bank of Canada. The manner in which this appears to have been accomplished was that the respondent would drive [the donor] to the Scotiabank where he would withdraw several thousand dollars at a time.

The respondent would then take him to the Royal Bank where [the donor] would remain in the car while the respondent deposited only some of the withdrawn monies into a Royal Bank account without the knowledge of [the donor]. The applicant says that, of the approximately $193,000 withdrawn in this manner, about $145,000 remains unaccounted for. In the face of these suspicious circumstances , which seem to fly in the face of any reasonable

interpretation of the fiduciary duties owed by an attorney to a donor, it is tempting to attempt to justify the kind of court intervention sought by the applicant. However, and without dealing with some of the collateral issues raised (for example whether [the donor] had notice, and whether the applicant has standing), it is well established that evidence of mental incompetence on the part of a donor is a prerequisite to a third party applying for an accounting . The obvious underlying principle is that the donor can request and obtain an accounting while he or she is competent to do so.

There is no evidence before this court that the donor is mentally incompetent. Accordingly, the application is dismissed. [emphasis added]

Issues and Standard of Review [ 19 ] The applicant lists three grounds of appeal in his notice of appeal, namely that the application judge erred in finding that evidence of the donor’s mental incompetence is a prerequisite to a third party applying for an accounting; in following Ranville v Campbell , 2011 MBQB 315 ; The Estate of Rudi Terhoch , 2013 MBQB 181 ; and Penniston v Vandekerckhove et al (25 September 2015), Winnipeg, PR14-01-99419 (Man QB) (the line of decisions); and in failing to exercise the broad equitable powers of the court to order an accounting. [ 20 ] The core issue is clearly whether a finding of mental incompetence is a prerequisite to an application by a third party for an accounting pursuant to section 24(1)(e). [ 21 ] The parties agree, as do I, that this issue is a question of statutory

interpretation and that the standard of review is correctness (see Klippenstein v Manitoba (Attorney General) et al , 2012 MBCA 77 at para 10 ; and Mega International Commercial Bank (Canada) v Yung , 2018 ONCA 429 at para 60 ). The Parties’ Positions [ 22 ] The applicant submits that there is no requirement that the donor be mentally incompetent before his nearest relative can bring an application for any of the orders listed in section 24(1). Section 24(2) clearly allows the nearest relative to apply to the court for an order requiring the attorney to account to the court.

The applicant says that the Act should be interpreted in a manner that protects vulnerable donors of powers of attorney. [ 23 ] The applicant further submits that the line of decisions was not binding on the application judge, that each case is factually distinguishable or was decided incorrectly, or that the comments made in those decisions were simply obiter dicta . [ 24 ] The applicant argues that the court should exercise its broad jurisdiction under section 24(1) because the respondent was involved in the donor’s financial affairs to a substantial degree and the applicant has raised a significant concern with respect to the management of those affairs. [ 25 ] Finally, the applicant says that the court should order that the respondent, as the donor’s fiduciary, be required to make payment to the donor in the amount of $145,000, being the funds for which the respondent has failed to account. [ 26 ] The respondent’s position is that it would be completely inappropriate to order an accounting where: 1. the donor was, at all material times, competent; 2. at no time did the donor appoint the applicant as power of attorney or a recipient of any accounting; 3. the donor specifically put his mind to the issue of an accounting and determined that an accounting should be made to a specific named person, who is not the applicant; 4. the donor was not served with the application and is not a party to the litigation; 5. the applicant opposed the respondent’s request for the donor to be examined in court as to his intentions; and 6. the donor has executed a new power of attorney and that attorney is not the applicant herein. [ 27 ] The respondent says that, on a plain reading of the Act , the mental incompetence of the donor is a prerequisite to the jurisdiction conferred pursuant to

section 24 . Further, he asserts that it is irrelevant that the applicant is one of the enumerated persons in section 24(2). [ 28 ] The respondent submits that the application judge made no error in following the line of decisions and that section 24(1) is only applicable where there is evidence of mental incompetency. [ 29 ] The respondent does not take issue that an attorney has a fiduciary obligation to a donor. According to the respondent, the real issue is simply the authority of this applicant to bring the application.

He argues that none of the decisions referred to by the applicant allow the court to make the order being sought without the involvement or acquiescence of a competent donor. [ 30 ] Finally, the respondent says that if this Court determines that the respondent should be required to provide an accounting, a determination of what funds, if any, should be repaid, ought to be made after that accounting has taken place. Statutory Provisions in Other Jurisdictions [ 31 ] Power of attorney legislation is not uniform across Canada.

In fact, in most other jurisdictions, the legislation is quite clear that an accounting to a third party may only be ordered by the court when a donor lacks capacity. See the Powers of Attorney Act , RSA 2000, c P-20,

section 10; The Powers of Attorney Act, 2002 , SS 2002, c P-20.3,

section 18; the Powers of Attorney Act , RSNS 1989, c 352,

section 5; the Powers of Attorney Act , RSPEI 1988, c P-16,

section 9; the Enduring Powers of Attorney Act , RSNL 1990, c E-11,

section 10; and the Enduring Power of Attorney Act , RSY 2002, c 73,

section 11. [ 32 ] It would appear that the only other jurisdictions to adopt legislation similar to section 24(1) are the Northwest Territories ( Powers of Attorney Act , SNWT 2001, c 15,

section 26) and Nunavut ( Powers of Attorney Act , SNu 2005, c 9,

section 27). Unfortunately, there has been no reported judicial consideration of the legislation in those jurisdictions.

Legislative History [ 33 ] The Act came into force in April 1997.

It repealed The Powers of Attorney Act , RSM 1987, c P97. [ 34 ] When the Act was tabled in the Legislature, the government made it clear that it intended to implement the recommendations in the Manitoba Law Reform Commission, Enduring and Springing Powers of Attorney , Report #83 (Winnipeg: Queen’s Printer, 1994), online: www.manitobalawreform.ca/pubs/pdf/archives/83-full_report.pdf (the report). (See Manitoba, Legislative Assembly, Debates and Proceedings (Hansard) , 36th Leg, 2nd Sess, Vol XLVI No 45 (4 June 1996) at 3201 (Hon Rosemary Vodrey); and Manitoba, Legislative Assembly, Debates and Proceedings (Hansard) , 36th Leg, 2nd Sess, Vol XLVI No 69 (23 October 1996) at 4460 (Gord Mackintosh).) [ 35 ] The key portions of the report read as follows (pp 18, 31-34): Some jurisdictions have concluded that the courts should be empowered, upon the application of any interested party, to direct the attorney to provide an account of the transactions entered into on behalf of the donor.

We agree that the court should have this authority as part of its supervisory powers. There may be other powers relevant to enduring powers of attorney which the superior court already possesses by reason of its inherent jurisdiction. However, we believe that certain powers ought to be made explicit in the legislation for the benefit of the public generally. . . . In several jurisdictions, an application may be made only after the donor is mentally incompetent. Other jurisdictions are silent, implying that an application may be made at any appropriate time.

While we recognize that there will be little need to involve the court so long as the donor is competent, we also recognize that there may be occasions prior to the donor’s mental incompetence when the court’s assistance will be required. We are therefore of the view that an application ought to be permitted whenever the need arises .

We are confident that the leave required of interested persons and the possibility that costs will be ordered will deter unwarranted court proceedings. [emphasis added and footnotes omitted] Analysis and Decision [ 36 ] I begin with the observation that the line of decisions provides no assistance in resolving the central issue before this Court. [ 37 ] In Ranville , the Master conducted a passing of accounts pursuant to a consent order.

He questioned whether the applicant in that case had a right to an accounting and stated that “it appears that the obligation is to account only during the donor’s mental incompetency” (at para 14). There is no reference in the decision to

section 24 and the Master focusses on sections 19 and 22, which are specifically concerned with situations involving mentally incompetent donors. [ 38 ] In Terhoch , the attorney agreed to provide an accounting, and while mentioned, there is no discussion of

section 24. [ 39 ] The more recent decision in Penniston is reminiscent of Ranville . In a brief endorsement, Suche J noted that the applicant therein was seeking an accounting pursuant to

section 24, but she concluded that “the only circumstance where a third party would have this right is under s. 22 of the Act ” (at para 3) and “the circumstances before me do not fall within s.22 ” ( ibid ). There is no further discussion of

section 24 or any other case law in the endorsement. [ 40 ] In my view, mental incompetence is not a requirement for an order under section 24(1)(

e) and, to the extent that the Ranville and Penniston decisions treated mental incompetence as a prerequisite to applications under

section 24, I am satisfied that they were wrongly decided. It is clear that the Legislature intended to implement the report. In the report, the Commission recognized that “an application ought to be permitted whenever the need arises” (at p 34), even on “occasions prior to the donor’s mental incompetence” ( ibid ). Indeed, if the Legislature intended that the donor’s mental incompetence should be a prerequisite for an application under

section 24, it could have easily included such language in the legislation, as it did in

section 19. [ 41 ] Leaving aside section 24(1), the court also has an inherent equitable jurisdiction to order an accounting in situations of equitable fraud or exploitation. See, for example, Professor CD Freedman’s article, “Misfeasance, Nonfeasance, and the Self-Interested Attorney” (2010) 48 Osgoode Hall LJ 457. [ 42 ] The decision to order an accounting where a donor is competent is a discretionary decision and requires careful consideration of all of the circumstances. Generally speaking, an accounting should not be ordered in the absence of compelling evidence giving rise to serious concerns.

[ 43 ] In Tinline v Larente , 2013 SKQB 167 , Barrington-Foote J observed (at paras 21-22): The fact that the court has the authority to grant an order for an accounting does not mean I must grant that order. . . . The learned authors of Waters’ [DWM Waters, Mark R Gillen and Lionel D Smith, Waters’ Law of Trusts in Canada , 3rd ed (Toronto: Thomson Carswell 2005)], supra , make the point in the following terms (at pps. 1065-66): ... As far as asking the court for an accounting is concerned, none of these persons has an absolute right.

As we have seen, harassing the trustee is vexatious litigation, and whether the court will order an accounting depends entirely upon the court’s discretion and the circumstances of the case. Only where the trustee can be shown to be in default of his duties will this normally be given.... . . . . Although it is my view that it is not always necessary to prove that there has been a default by the trustee before an accounting is ordered, an accounting should not be ordered if no cause is shown. In this case, the applicant has failed to meet that burden.

He has asked for an order that the respondent account despite the fact that there is no evidence she exercised her authority except to carry out very limited and specific instructions from the grantor. There is no evidence she exercised her authority after he became incompetent.

A property attorney should not be required to provide an accounting for a period when her power was neither effective nor exercised, and in the absence of evidence that she had exercised her authority other than as instructed and in what was essentially an agency capacity. [ 44 ] A competent donor has the ability to appoint and replace his or her attorney and to obtain an accounting at any time. Such a donor may have any number of reasons for not wanting an accounting, and his or her privacy interests should be respected.

To be clear, an accounting should not be ordered simply to satisfy the curiosity of other family members. [ 45 ] However, there will certainly be cases where an accounting is appropriate. It is not difficult to imagine circumstances where a competent donor fails to require his or her attorney to account even though it would be prudent to do so.

Obvious examples would include situations involving fraud, coercion or undue influence; less obvious examples might arise where the donor is physically or mentally dependent or otherwise vulnerable, fears loss of affection, or where there is evidence of abuse or exploitation. [ 46 ] Section 24(1) makes it clear that the court must have regard to the terms of the power of attorney and the donor’s intentions ( Potasky v Potasky , 2002 MBQB 146 at para 13 ). Other circumstances that the court should consider include:

a) the donor’s health and vulnerability and whether there is evidence that the donor has been physically or mentally abused;

b) the extent of the attorney’s involvement in the donor’s financial affairs ( McAllister Estate v Hudgin , 2008 CarswellOnt 4991 (Sup Ct J) ;

c) whether the applicant has raised a significant concern in respect of the management of the donor’s affairs (see McAllister ); and

d) whether there are or may be limitations of actions concerns (see Taubner Estate (Re) , 2010 ABQB 60 at para 217 ). [ 47 ] In the circumstances of this case, it is my view that an accounting must be ordered.

It is not disputed that the requirements in section 24(2) have been met: the applicant falls within the definition of “nearest relative”, the power of attorney is in fact an enduring power of attorney as described in section 10(1) and the application was filed after the power of attorney was executed. [ 48 ] I agree with the application judge that the evidence before the court is troubling and that the circumstances are suspicious.

In addition, and perhaps most significantly, Chapman’s letter dated May 25, 2016 provides clear evidence that the donor himself (through his solicitor and attorney) is seeking an accounting. [ 49 ] In his factum, the respondent says that the donor was not served with notice of the application. Section 24(3)(

a) requires an applicant to give notice “unless the court orders otherwise”. Such notice is essential where the donor is competent. Having said that, I am persuaded that, in the present case, the donor had notice as his solicitor and attorney (Chapman) swore an affidavit in relation to the application on March 6, 2017. [ 50 ] Having considered all of the circumstances, I conclude that there is compelling evidence giving rise to serious concerns and that the respondent must account for his management of the donor’s affairs.

An accounting shall therefore be provided within 90 days, in accordance with Manitoba, Court of Queen’s Bench Rules , Man Reg 553/88, r 74.12. Whether any funds must be repaid and on what basis shall be determined after that accounting has been completed. [ 51 ] The appeal is allowed. The applicant shall have his costs in this Court and in the Court below.

JA I agree: JA I agree: JA