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Duelling siblings, a heartbroken mother and undue influence

By Matthias Duensing

Money, power and suspicion. In a recent case, the Ontario Court of Appeal has hopefully put an end to a sibling rivalry that, in the words of the court, lost sight of the fact that it’s the “best interests of their mother,” and “not their own pride, suspicions, authority or desire” that must be served.

Background

In 2011, the patriarch of the family passed away, leaving his entire estate, including a successful business, to his wife.  

The widow, who was in her 80s, made her daughter her Continuing Power of Attorney for Property (the 2011 CPOAP). The daughter was later accused of diverting hundreds of thousands of dollars from her mother’s estate. That matter was the subject of a separate litigation, which settled with the daughter agreeing to pay back $300,000 to her mother.

But the mother’s woes did not end there.

Due to the acrimony with her daughter, she made her twin sons her new attorneys and executed a 2013 CPOAP making both sons attorneys, “jointly and severally.”

The brothers, as attorneys, paid their mother’s bills and themselves from a corporate account, but they eventually became suspicious of each other’s actions.  

In February 2015, one brother demanded an accounting of the other’s transactions on the account. The second brother provided the documents, but the first brother was still not satisfied and demanded that the 2013 CPOAP be changed to just “jointly” and that all cheques from the account require two signatures.

Further, the first brother refused to sign documents that would unfreeze the primary bank account, which would provide their mother with access to approximately $600,000 for her needs. He also unilaterally directed his mother’s lawyer to not release the settlement money to her.

By May 2015, the mother was left without sufficient funds to pay for her basic needs, including her monthly rent at her retirement home.  

To resolve these issues, the second brother advised his mother to sign a new 2015 CPOAP, making him the sole attorney. She also agreed to remove the other brother as a director.

The brother who had been removed demanded to have his mother’s capacity to consent assessed by a designated capacity assessor under the Substitute Decisions Act, 1992. The assessor made comments in her report that she believed the mother may be under undue influence, that she was vulnerable and may not have made these decisions if properly informed of the full context. Nevertheless, the capacity assessor determined that she had capacity.

At Trial

The brother who had been removed made an application under the Substitute Decisions Act, 1992, questioning the validity of the 2015 CPOAP.

He argued that there were suspicious circumstances, such as his brother drafting the 2015 CPOAP on his own, his mother not having independent legal advice, and his brother telling his mother that if she did not sign off she would have no access to her money, and could be evicted.

When there are suspicious circumstances, the presumption of capacity in the Substitute Decisions Act, 1992 is not valid, and the burden of proof shifts to the grantee of the Power of Attorney.

Justice Michael A. Penny held that there was no evidence of suspicious circumstances, the assessor’s finding was that the mother had capacity, the brother receives no actual benefit by being the sole Power of Attorney, and that the assessor’s comments regarding undue influence were improper and beyond her scope.  

Justice Penny did find that the brother, acting as a fiduciary for his mother, should pass accounts annually.  

The brother who had brought the claim was ordered to pay costs of $55,000 to his mother.

Appeal

The losing brother appealed the trial decision, arguing that the trial judge applied the wrong test for determining whether there was undue influence

He argued that the “testamentary undue influence” test used by Justice Penny was inappropriate and that an “inter vivos equitable undue influence” test was appropriate, as that test would shift the onus to the other brother.

Counsel for the brother who filed the appeal referred to a case from the House of Lords in the United Kingdom, providing that there are two forms of unacceptable, inequitable conduct in inter vivos transactions — (1) actual undue influence (an overt act of pressure or coercion), and (2) presumed under influence (when the relationship between two individuals causes one to have a position of influence over the other, and the person in the position of authority takes an unfair advantage in the relationship).

Court of Appeal Justice Gloria Epstein determined that since the applicant had not argued the possible application of an inter vivos equitable undue influence at trial, it cannot be considered on appeal.  

She further commented that even if it could be considered, it would not apply to the facts of this case.  

The inter vivos equitable undue influence requires two components: (1) a complainant in a position of trust and confidence to the other party; and (2) the transaction is not readily explicable by the relationship of the parties. The Court of Appeal found that the respondent brother’s relationship with his mother satisfies the first prong of the test, but there is no evidence to support a finding that the transaction was “immodest and irrational.” It was “an emotionally difficult, but totally rational decision.”

The applicant was ordered to pay his mother $30,000 in costs, plus HST and disbursements, and $5,000 to his twin.

Conclusions

If you have been granted a power of attorney, always keep the best interests of the grantor in mind, and act accordingly. Actions that cause harm to the grantor (such as in this case, denying the mother access to her money such that she could not pay her rent) will not be well-regarded by the courts.

Put aside family enmity and do what is best for the grantor.

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