Marriage is often thought of as a partnership. While this analogy tends to be apt, the nature of the relationship may change if one spouse loses capacity and is no longer able to handle their own affairs. If the capable spouse is appointed to act as attorney for property for the incapable spouse, the attorney will owe a fiduciary duty to their partner, meaning the attorney must act with absolute loyalty when managing their spouse’s affairs, including their finances. In other words, the attorney is not free to spend their partner’s money as if it were their own, even though they remain spouses. In fact, should the attorney spend their spouse’s money in a manner that is inconsistent with that spouse’s best interests, the court may intervene, as demonstrated by Justice Callaghan’s decision in The Estate of William Robert Waters v. Gillian Henry et al., 2024 ONSC 4190.
In this case, the deceased acted as attorney for property for his wife, Phyliss, for many years. Phyliss had been diagnosed with a chronic pain condition after a fall in the 1990s, and required ongoing care. In 2009, the deceased hired a personal support worker for Phyliss named Gillian, and then began an intimate relationship with Gillian that lasted until his death in 2021.
Over the years, the deceased gave Gillian over $30 million. He had received most of the money he gave to Gillian when he was in his 70s, following the sale of two companies. However, the evidence also established that the deceased gave Gillian at least $2.85 million from Phyliss’ accounts. By the time of trial, Phyliss only had approximately $500,000 left, whereas before Gillian was hired, Phyliss had approximately $5.4 million of her own.
The deceased’s estate was in a similar situation financially at the time of trial, with only $580,000 left. Not surprisingly, the focus of the litigation was whether Gillian was required to return the money given to her by the deceased. While much of the court’s decision focuses on whether Gillian could keep the deceased’s money, Justice Callaghan also addressed whether the deceased could give Phyliss’ money to Gillian while acting as Phyliss’ attorney for property. This was a very salient issue, since Phyliss was still alive at the time of the trial, but on the brink of being destitute. The cost of her care alone at that time was approximately $32,000 per month.
Recognizing that the deceased gave Gillian at least $2.85 million that belonged to Phyliss, Justice Callaghan held that Gillian was not entitled to keep Phyliss’ money on three bases:
- First, the deceased “had no right or power to gift Phyliss’s money” and therefore could not form a “legitimate donative intent”. As a result, Gillian could not overcome the presumption of resulting trust, meaning that Gillian simply held the $2.85 million in trust for Phyliss.
- Second, Gillian was not entitled to keep the money due to the doctrine of equitable fraud, since the conduct of both the deceased and Gillian related to Phyliss was unconscionable. This doctrine applies to “transactions falling short of deceit … where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained”: see Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19. Again, because the deceased had no right to gift Phyliss’ money for Gillian’s benefit, and breached his responsibility to Phyliss, Justice Callaghan found it would be unconscionable for Gillian to rely on the advantage gained and keep Phyliss’ money.
- Third, the court found that this was a case of unjust enrichment, and that Gillian could have no expectation that the deceased would provide her with Phyliss’ money. Justice Callaghan explained:
- There is no juristic reason for Gillian to have received money from Phyliss. William had no right to provide Phyliss’s funds. In such circumstances, equity steps in where “good conscience so requires”…
- Even if there was a juristic reason for Gillian to keep the money, such as a donative intent (which I find was not the case), the court may still consider the legitimate expectations of the parties, and moral and policy-based reasons why the money ought not to be retained: Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 43-44.
Accordingly, Gillian was ordered to repay $2.85 million to the estate, representing the money taken from Phyliss, so that the estate could return it to her. In total, the estate was required to pay $5.4 million to Phyliss.
A unique aspect of this case is that both the deceased and Gillian owed fiduciary duties to Phyliss. The deceased owed a fiduciary duty to Phyliss as her attorney for power, whereas Gillian owed a fiduciary duty to her as a caregiver. As an “incapacitated recluse”, Phyliss was “completely vulnerable and exposed”, and dependant on both her husband and Gillian. It would be interesting to know whether the outcome would have been different had Gillian not owed a fiduciary duty to Phyliss. However, Justice Callaghan did not address this point in his decision.
Thank you for reading, and have a great day!