Power of Attorney – the breach of fiduciary duty

An Enduring Power of Attorney is a legal document that allows the chosen Attorney to act on a person’s behalf for their financial and legal affairs.

The Attorney who has been appointed under the Power of Attorney Act has a fiduciary duty to the person who appointed them (the “donor”). This fiduciary duty requires that the Attorney is obliged to act only for the benefit of the donor and not for his or own profit, benefit, or advantage.

It is common for the Courts to be asked to determine whether the actions taken by the Attorney are for the Donor’s benefit or for the benefit of the Attorney and/or an individual that is not the Donor.

Common Mistakes by Attorneys

The caselaw across Canada provide countless examples of when an Attorney was found to be in breach of their fiduciary duty to the Donor. The more common examples include:

• Selling property to friends or family for less than market value;
• Using the Donor’s funds to renovate the Attorney’s home;
• Providing gifts to themselves, friends or family from the Donor’s accounts or personal property;
  and
• Paying personal expenses from the Donor’s accounts.

Liability and Consequences

Once the Court has determined that the Attorney has breached their fiduciary duty to the Donor they must then determine what relief is appropriate.

The Courts have found that fiduciary relief is equitable in nature and that the remedies for breach of a fiduciary duty are discretionary, depending on the facts before the Court, and generally have two goals; Restitution and deterrence: Maddy Development Corp. v Rossetto, 2012 ONCA 31 at para 18.

The first goal of restitution refers to the attempt of the Court to restore the Donor to a similar position they were in before the breach occurred, which means that there actually has to be a loss to the Attorney.

These orders of the Court tend to involve any funds that should not have been transferred to be transferred back into the Donor’s account with interest.

The second goal of deterrence is in reference to the attempt of the Court to deter this type of behaviour from occurring in the future. The Courts have addressed this issue through cost awards that vary depending on the severity of the actions taken by the Attorney.

If you or someone you know have questions regarding Power of Attorneys our team of experts are available to provide legal advice and representation in these matters.