Accounting Under the Powers of Attorney – Hull on Estates #113
Listen to Accounting Under the Powers of Attorney
This week on Hull on Estates, Diane and Paul discuss accounting under the powers or attorney, the duty to account after the guarantor has passed away and the De Zorzi Estate v. Read case (2008, O.J. No. 944).
Accounting Under the Powers of Attorney – Hull on Estates Podcast #113
Posted on June 3rd, 2008 by Hull & Hull LLP
Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode #113 on Tuesday, June 3, 2008.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Diane Vieira: Hi Paul, how are you?
Paul Trudelle: Oh hi, Diane, very good, how are you today?
Diane Vieira: I’m good.
Paul Trudelle: We are podcasting together again and today we thought we’d talk about the issue of accounting under Powers of Attorney and the duty to account after the grantor of the Power of Attorney passed away.
Diane Vieira: So we’re going to discuss a 2008 Ontario decision, De Zorzi Estate v. Read.
Paul Trudelle: And we’ll have a link to that on our website. This is an interesting case that just came to our attention. It was released just recently, in March of 2008. Megan Connolly blogged on it earlier last week and we thought we’d go into a little more detail in our podcast today.
Diane Vieira: So this is a case which discusses the duty of an attorney to disclose financial records for the grantor of a Power of Attorney.
Paul Trudelle: Right, and it’s an interesting case because there, there was a Power of Attorney that was granted. The grantor passed away and the beneficiaries sought to get an accounting from the attorney after the death of the grantor.
Diane Vieira: Why don’t I just give a bit of the background to the case and the different parties?
Paul Trudelle: Sure, that’d be great.
Diane Vieira: The respondents in this case were the residual beneficiaries of the estate. And the other side was a person who was both attorney and estate trustee.
Paul Trudelle: I think that’s pretty important and we’ll talk a bit about how important that is down the road.
Diane Vieira: And the beneficiaries had the question with respect to what happened to some bank accounts, prior to the death of the grantor.
Paul Trudelle: Right, and that would be relevant because the question was, what assets fell within the estate at the time of death? So the actions of the Power of Attorney prior to that would be very relevant to the size and nature of the estate.
Diane Vieira: And in this case, the grantor, there was no question that she was competent and that she never became incapable and actually there was evidence before the Court that she was the one making the financial decisions prior to her death.
Paul Trudelle: Right, and I think that’s an important factor as well. This was not the case where there was an incapable grantor who wasn’t able to look after her affairs. I think that would be a much easier case for getting disclosure in accounting down the road. But here she was capable throughout and was able to consent and in fact, directed the transactions and that was something that the attorney appears to have relied upon in trying to avoid an accounting.
Diane Vieira: Yeah, the attorney had argued that she doesn’t have to disclose this financial information. The only person she had to account to would have been the grantor who was capable.
Paul Trudelle: Right.
Diane Vieira: So the beneficiaries had a few questions with respect to the administration of the estate but the sticking point was these bank accounts as we discussed, which would require the attorney to provide disclosure of financial information predating the death of the grantor.
Paul Trudelle: That’s right. So the application was before the Court. The question was whether the attorney had to account to these beneficiaries. The attorney took the position that they didn’t have to account and the Court then considered whether the beneficiaries would have a right to compel an accounting.
I think the important sections of the legislation which is the Substitute Decisions Act in Ontario, is Section 42. Section 42 provides for an attorney to pass their accounts and sets out or enumerates who can apply to have accounts passed. Clearly, the grantor, if alive and capable, can request that the accounts be passed. There’s a number of other parties that are listed as being able to compel an accounting: the grantor, the attorney themselves, the Public Guardian and Trustee and the Children’s Lawyer have an automatic right to apply for an accounting, a judgment creditor of the grantor or the incapable person. And at the end of Section 42(4) there is a catch-all: any other person with leave of the Court, and that’s the key there. If you’re falling into that ‘any other person’ category, you have to apply to the Court to get leave to get permission from the Court to compel the passing. And the question here was whether beneficiaries of an estate fell within the ‘any other person’ category who could then apply to the Court to compel a passing.
Diane Vieira: That’s right. Justice Herman looked at case law but with reference to this Section. She did find the beneficiaries within the Court were allowed to ask for an accounting.
Paul Trudelle: Right, and I think the cases, the Court identified the unusual or probably it’s usual, it happens a lot, the factor is that here, the attorney under the Power of Attorney was the same person as the estate trustee. So whereas normally an estate trustee would step into the shoes of the grantor and be entitled to compel an accounting from an attorney, here that estate trustee was one and the same as the attorney. And the Court felt that it wasn’t likely that that person would compel an accounting from themselves and, therefore, opened the door to allow the beneficiaries of the estate to ask for this accounting.
So, having qualified as a person or other person entitled to apply for leave to pass the accounts, the Court then turned their mind to whether the beneficiaries should be granted leave in this case. And the Court considered a number of factors and looked at the issue of whether the fact that the grantor was capable throughout had an impact on whether leave should be granted.
Diane Vieira: Well in the Stickles Estate v. Fuller, the Justice based her decision on Section 42(1) of the Act which provides that the Court can order the accounts of the attorney to be passed and it doesn’t depend on whether the grantor became incapable or not.
Paul Trudelle: Right, and I think there’s a very broad and clear requirement that attorneys keep their accounts and pass them or produce them when asked for. And the fact that the person was capable is not going to be seen as something that negates the requirement to pass accounts. The Stickles case was one where the grantor was capable and yet the Court still required the passing.
Another factor is, another issue that the Court looked at in this decision is, how far back you have to go when passing your accounts. In this case, there was a Power of Attorney granted in September of ‘04 before death, and the person died in December ‘04. The beneficiaries sought an accounting that went back well before that, back to January ’04. And the Court found that the duty or requirement to pass accounts will only go back as far as the Power of Attorney itself. And in fact, the Court looked at other cases and those cases dealt with attorneyships that predated the Substitute Decisions Act and in those other cases, the obligation to account only went back as far as the passing or the effective date of the Substitute Decisions Act. So in most cases then, the duty to account will start from when the Power of Attorney is actually granted.
So just to wrap up then on this topic, first of all I’d like to refer you to a very helpful article by Kim Whaley in the 2008 issue of Deadbeat that discusses this case and a number of the cases that are referred to in the De Zorzi Estate decision. And it summarizes the applicable law and concludes by saying that the case is very helpful in clarifying the law with respect to the duty to account. Generally speaking, there is a heavy onus on an attorney to keep records and to pass those accounts when required and it clarifies who can request the passing of accounts after the death of the grantor. And you may be required to account to beneficiaries of the estate, even though the grantor was capable while you were acting as attorney and even though you are the estate trustee for that person’s estate as well.
Diane Vieira: Thanks, Paul.
Paul Trudelle: Well thanks, Diane. And before we leave, we’d just like to refer you to our contact information.
Diane Vieira: You can reach us by e-mail at firstname.lastname@example.org or you can call us on our telephone line which is 206-350-6636.
Paul Trudelle: We also invite you to visit our webpage where we have daily blogs and links to our podcasts on Hull and Estates and also our podcasts on Hull and Estate and Succession Planning. That can be found at estatelaw.hullandhull.com.
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