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Misuse and Abuse of Powers of Attorney – Why Law Reform is Necessary

Having a power of attorney for property is a document we continually recommend to clients who are in the process of updating their estate plans. The purpose of a power of attorney for property is to give a named individual (the “attorney”) the authority to act on behalf of the person executing the document (the “grantor”) and make decisions with respect to their financial affairs. Under Ontario law, a continuing power of attorney can be used after the donor is incapable of managing their financial affairs and can be revoked at any time as long as the grantor is mentally capable.

A grantor typically appoints family members or those they believe are best suited to deal with their finances. Having a power of attorney in place prevents family members from having to make a guardianship application to the court for the incapable person. Not only is a power of attorney more cost-efficient, it allows the grantor to choose who they wish to appoint and avoid an intrusive court process.

Under the Substitute Decisions Act, the legislation in Ontario that governs powers of attorney, an attorney has a wide-range of responsibilities to the grantor, including maintaining a proper accounting of the attorney’s assets and liabilities, and identifying any financial obligations the grantor may have. The attorney must act with honesty and integrity, in good faith and in the best interest of the grantor.

However, with this responsibility comes risk of misuse and abuse. Increasingly in our society, and all too frequently, we see vulnerable parties taken advantage of by someone they trusted. Common areas of abuse include obtaining the power of attorney without the grantor’s knowledge, borrowing or stealing money from the grantor, transferring the attorney’s assets and property into their own name, psychological and physical abuse of the grantor, and failing to fulfil their duty as attorney under the legislation.

There are several ways concerned parties can deal with suspected abuse, including making a court application or commencing litigation. Criminal charges may also be made under the Criminal Code, including theft, misappropriation of funds, breach of trust, and specifically, section 331 (theft by person holding power of attorney) of the Code. However, these avenues could result in lengthy and costly disputes, and requires significant proof of the alleged abuse, particularly when holding an attorney criminally liable. As well, such abuse commonly goes unreported by the vulnerable parties, making it even more difficult to take action against rogue attorneys.

On the other hand, breaches involving powers of attorney can be unintentional on behalf of the attorney, if they are unaware of their responsibilities under the legislation, such as failing to keep a detailed record of receipts and accounting, or co-mingling their assets with the grantor’s. A lack of awareness of the role and responsibilities of an attorney has prompted initiatives for law reform.

In order to determine the best way to overhaul the system, the Law Commission of Ontario (the “Commission”), conducted nearly two years of research and released a report in March 2017 outlining their proposals for law reform.

The Commission looked at the current system in place for powers of attorney and recommended the creation of a specialized tribunal to deal with attorneys and guardians, a mandatory statement of commitment to be signed by an attorney when accepting an appointment, notice to the grantor and relevant parties when an attorney begins acting, mandatory annual reporting by the attorney, the ability to appoint a monitor for the acting attorney, as well as an increase in education for attorneys. Providing education for attorneys on their legal responsibilities would assist attorneys in understanding what is expected of them, whether accomplished by a government implemented process or courses provided by educational or legal institutions.

The common thread throughout the Commission’s Report is a lack of understanding of the responsibility required of an attorney, both from the perspective of an attorney and the grantor. In order to ensure vulnerable parties are protected, steps must be taken to achieve law reform. We will keep watching with interest over the next while whether Ontario will move forward to create an educational process and adopt an improved system of accountability and monitoring of the legal process to deal with misuses and abuses by attorneys.

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.