Lessons Learned: When to “proceed with caution” when acting pursuant to a POA

Lessons Learned: When to “proceed with caution” when acting pursuant to a POA

Desiree Smith
Posted February 9, 2021 Category: Individuals/Families

In her blog posted on January 18, 2021 (Powerful Powers of Attorney), Alexandra Manthorpe explained the importance of updating your Powers of Attorney (“POAs”) and then briefly outlined an attorney’s duties while acting pursuant to POAs.

I reflected on the importance of those duties as I read a recent decision of the Ontario Superior Court of Justice cited as Public Guardian and Trustee v. Cherneyko et al., 2021 ONSC 107 (“Cherneyko”) and thought it may be helpful to point out the lessons that can be learned from the misinformed actions of the attorney for property in this particular case.  In the paragraphs that follow, you will notice that my brief synopsis of facts is interspaced with notes and some guidance for attorneys for property (see italicized notes following each subheading below).

The Cherneyko decision rendered by the Honourable Justice F. B. Fitzpatrick of the Ontario Superior Court of Justice in Thunder Bay that concerns a 90-year-old woman named Jean Cherneyko (“Jean”).  In or about 2014, Jean befriended her neighbour, Kristina Munson (“Tina”), who eventually became more involved in Jean’s affairs. 

On August 15, 2019, Tina attended a meeting at Jean’s lawyer’s office. At this meeting, Jean executed a Continuing Power of Attorney for Property (“CPOA for Property”) and Power of Attorney (“POA”) for Personal Care granting authority to Tina to act both as Jean’s attorney for property and attorney for personal care. As an aside, you will notice the use of the term “grantor” from this point forward in this post. For clarity, the term grantor refers to the person who grants a POA (i.e. Jean) to someone else (i.e. Tina).  

At that same meeting, Jean also executed a new Last Will and Testament (her “Will”) naming Tina both as estate trustee (or executor) and a residuary beneficiary of her estate.

Thirteen days after Jean executed her POAs and Will, Tina and Jean went to Jean’s financial institution and Jean transferred $250,000.00 to Tina and $195,329.50 to Jean’s “niece”, Marie McCammon. These two transfers totaled about a quarter of Jean’s assets at that time. Tina later deposed that that Jean spoke with a bank manager about her desire to give these funds as gifts before the funds were transferred. It is worth noting that no direct evidence from this bank manager was before the court.

Towards the end of August 2019, Tina says that Jean told her to pay herself $2,000.00 per month to manage Jean’s assets as her attorney for property. To defend her actions, Tina later deposed that she was following Jean’s instructions to her.

Lesson #1: Read & follow the terms of the POA(s)

Generally, an attorney should act pursuant to the terms of the POA and any specific directions it contains (that are not contrary to public policy). If after reviewing the terms of the CPOA for Property, attorneys have questions they always have the option of meeting with a lawyer to seek specific advice and discuss their options.

Tina may not have realized it at the time, but she took a significant risk when she decided to pay herself $2,000 per month despite the explicit direction in Jean’s CPOA for Property that “no individual acting as one of my attorneys for property shall be entitled to, charge, or be paid any compensation for serving as my attorney”. Justice Fitzpatrick viewed the inclusion of this term in Jean’s CPOA for Property as reflecting Jean’s instructions to her lawyer, so it was not surprising that he determined that the $2,000.00 payments Tina made to herself were “expressly contrary to the terms of [Jean’s CPOA for Property]” and endorsed an order requiring Tina to fully reimburse Jean for these payments.

On August 31, 2019 (four days after the transfer of funds to Tina and Ms. McCammon), Jean was admitted to the hospital. While Tina was at the hospital, she “noted that Jean had become increasingly confused over the last few months” and “had exhibited lethargic behaviour and complained of bodily soreness”. 

Tina later deposed that in late August 2019, Jean was having “moments of delirium and irrationality, her condition fluctuated between lucidity and confusion” and a geriatrics consultation note dated September 1, 2019 indicated that Jean “has established dementia consistent with a neurodegenerative process such as Alzheimer disease”. 

Lesson #2: When you have concerns about the Grantor’s capacity to make decisions on their own, proceed with caution when deciding whether to follow their instructions

Tina’s own evidence suggests that she knew Jean’s ability (or capacity) to make decisions on her own was declining in August 2019, yet she says she took steps at Jean’s direction. At paragraph 42 of his decision, Justice Fitzpatrick identifies his concerns with Tina’s actions and position that she was simply following Jean’s instructions:

“In my view, a person acting in a fiduciary capacity for a person actively demonstrating moments of irrationality should be very cautious about any big financial moves that person claims they want to make in and around such period of demonstrated incapacity. Even if  Jean was clearly acting in a competent manner during the few hours she attended the [financial institution] with Tina on August 27, 2019 … it is no answer to an accusation of a breach of duty to assert that an attorney was simply acting in accordance with the wishes of the grantor of the attorney. Tina should have proceeded with caution at that time. I find that she did not exercise the appropriate degree of caution and good judgment given the circumstances about which she knew.”

To emphasize Justice Fitzpatrick’s point: attorneys should proceed with caution and exercise good judgment when they have concerns about a grantor’s capacity.

On October 1, 2019, Tina helped Jean move into to a long-term care home. Shortly after this, Tina allowed her son to move into Jean’s now empty house (rent-free) and then paid over $6,000.00 in expenses related to the house out of Jean’s assets. After moving Jean into a long-term care home, Tina continued to pay herself $2,000.00 per month for managing Jean’s assets as her attorney for property.  Although she paid herself compensation, she did not investigate whether it would have been possible for Jean to continue to reside in the house she had lived in for decades, nor did she take steps to try to sell that house after she moved Jean into a long-term care home.

Lesson #3: Always act in the best interests of the Grantor

Building on lesson #2, an attorney must always act in the best interests of the Grantor even when the Grantor’s expressed wishes are not in their best interests and likely due to capacity issues. Justice Fitzpatrick noted that Tina did not look into all the options available to Jean (i.e. investigating whether it would be possible for Jean to remain the house she had lived in for decades or selling her house when it was clear Jean would not be able to return to it) and instead Tina made decisions that put her own (or her family members’) interests above Jean’s best interests.

It is worth adding that Justice Fitzpatrick followed Justice Penney’s reasoning in the decision, Ontario (Public Guardian and Trustee) v. Harkins, [2011] O.J. No. 3313 when he concluded that “a fiduciary’s first duty is to see to the best interests of the beneficiary regardless of their stated wishes”. 

From about August 27, 2019 until Jean’s bank froze her account in March 2020, Tina acted as Jean’s attorney for property. During this period, Tina and her family received a further $70,573.06 in “gifts and transfers from Jean”.  The Office of the Public Guardian and Trustee (“PGT”) began investigating this matter at the time Jean’s bank froze her accounts.

Although, Tina’s son eventually made a retroactive payment of rent to Jean in August 2020, Justice Fitzpatrick still noted that Tina had not acted in Jean’s best interests when managing this conflict of interest.

Lesson #4: Try to avoid breaching your fiduciary duties

Any attorney who makes decisions on another person’s behalf has a duty to act in the best interests of that person as they may be held accountable for their actions. While pre-taking compensation often does not amount to a breach, Tina’s decision to pay herself $2,000 per month was contrary to and in breach of the terms of the CPOA for Property.

Justice Fitzpatrick considered the significant amount of funds Tina transferred to herself (or her family members) in a relatively short period of time, Tina’s self-serving actions in the face of Jean’s capacity issues, Tina’s failure to investigate Jean’s options, and Tina’s failure to act in Jean’s best interests both financially and psychologically when faced with a conflict of interest before finding that Tina breached her duty to act in Jean’s best interests.

­­­­­Lesson #5: There may consequences for breaching your fiduciary duties

Any consequences will depend on the legal remedies available in the circumstances.

Justice Fitzpatrick followed Justice Gunsolus’ reasoning in Hooper (Estate) v. Hooper, 2011 ONSC 4140 at paragraph 20, when he determined “that a breach of fiduciary relationship can give rise to a wide range of equitable remedies designed to address not only the fairness between the parties but also the public concern about the maintenance of the integrity of fiduciary relationship. In my view this equity requires Tina to pay back most of the funds she received from Jean.”  

Accordingly, Justice Fitzpatrick ordered Tina to repay Jean over $330,000.00 as a result of Tina’s breach of fiduciary duty, specifically “her failure to prove amounts given to her and her family by Jean were gifts, and her failure to demonstrate skill, diligence and good judgment with respect to the management of a vulnerable person’s assets which were under her care”. It is also likely that Tina would have had to pay not only her own legal fees and costs but also a portion of the PGT’s legal fees and costs incurred to litigate this matter.

For more information

At this point, you may have noticed that Justice Fitzpatrick relied heavily on the specific facts when determining whether Tina breached her duties to Jean. This is not unusual in matters involving attorneys.

While the standard of care an attorney must exercise when making decisions for another person is not “perfection”, it is important for attorneys for property to understand that they may be held accountable for their decisions and actions.  That said, it is worth noting that attorneys who take the initiative to educate themselves and understand their duties and obligations before they make significant decisions on another person’s behalf are often in a better position to defend their actions (if necessary).   

If you have been named an attorney for property in a Continuing POA for Property and have questions or concerns regarding this role, there are some resources on the Office of Public Guardian and Trustee website (i.e. A Guide to the SDA) that may help you understand the duties and obligations detailed in the Substitute Decisions Act, 1992, S.O. 1992, c. 30  and relevant case law. At any point before or after you begin acting, you also have the option of meeting with a lawyer who regularly advises attorneys for further guidance and advice. Please don’t hesitate to reach out to our team.

Desiree Smith
Posted February 9, 2021 Category: Individuals/Families

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