Originally appeared in Deadbeat, Vol. 27 No. 4 May 2009, published by the Ontario Bar Association
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Removing an attorney for property is notoriously difficult. Great deference is afforded to the incapable person’s choice for attorney provided in a valid power of attorney (POA). On September 12, 2008, Justice Fragomeni issued a landmark decision in Re Schaefers Estate (1) wherein the attorney for property of an incapable person was removed. While “strong and compelling evidence of misconduct or neglect” must be established, this case illustrates that the threshold for removal is lower than Ontario counsel may have previously believed. The attorney for property, a lawyer named Peter Verbeek (“Verbeek”), was removed as attorney even though he did not receive compensation as attorney (2), he did not misappropriate any of the incapable person’s property, and no actual damage to the incapable person’s estate was established. This case demonstrates the court’s willingness to act preemptively in these types of cases without waiting for actual damage to occur.
Facts
Verbeek was the named attorney for property of Johanna Maria Schaefers (“Schaefers”) in POAs for property dated December 4, 1998 and April 27, 2006. Schaefers was an 87 year old woman formally diagnosed with Alzheimer’s disease in September 2006. Verbeek began managing Schaefers property in June 2006, shortly after Schaefers was admitted to hospital in March 2006, due to a fall related to her debilitating illness. The court held that Schaefer did not have the capacity to appoint an attorney for property in April 2006 and that the appointment was not valid (3), The court was also troubled by the circumstances surrounding the 1998 appointment. However, it could not conclude that the 1998 POA was invalid since none of the affidavits filed had been subjected to cross-examination and it was difficult to determine the issue without clear and unequivocal independent evidence.
To add flavor to the facts, on December 17, 2007, the Tribunal of the Law Society of Upper Canada found that Verbeek engaged in professional misconduct in connection with certain purchase, sale and mortgage transactions. His license was suspended for three months as a result. While these events were not directly related to his role as Schaefer’s attorney, they informed the judge’s decision.
A motion to remove Verbeek as attorney was commenced by Schaefers, as represented by counsel pursuant to Section 3 of the Substitute Decisions Act (4). Section 3 counsel had previously obtained preliminary orders effectively freezing Schaefers’ assets and requiring Verbeek to perform general administrative duties, including filing tax returns and providing a monthly accounting.
Verbeek’s Failings and Defence
Verbeek’s failings as outlined by section 3 counsel included: failing to provide a monthly accounting contrary to a court order; failing to voluntarily pass his accounts notwithstanding his agreement to do so; failing to provide information and documentation sought by section 3 counsel (amongst other parties); opening the sealed envelope containing the Will and POA following a delay of approximately one month after discovering it; failing to make the last two quarterly payments for Schaefers’ 2007 taxes; and being tardy in providing the accountant information required to prepare and file Schaefers’ 2006 Income Tax Return.
Once these issues were raised, why did Verbeek not simply resign as attorney? In November 2006, Verbeek stated: “[Schaefers’] relatives in Holland, who are the beneficiaries under the will, have expressed great concern to me about my relinquishing the power of attorney…” Fragomeni, J. pointed out that as attorney, Verbeek was expected to act in the best interests of Schaefers and not necessarily in accordance with the wishes or influence of Schaefers’ relatives.
- Teffer v. Schaefers, [2008] 93 O.R. 3d, 2008 CarswellOnt 5447 (Ont. S.C.J.), also indexed as Re Schaefers Estate
- This case is especially noteworthy given the lower standard of care provided to attorneys who do not receive compensation – see Substitute Decision Act, 1992, S.O. 1992, c. 30, s. 32(7) (SDA).
- Section 9(1) of the Substitute Decision Act provides that a person may be incapable of managing his or her own property – a person may be cognitively impaired – and yet be capable of giving a continuing power of attorney.
- SDA, supra note ii, s. 3.
Law and Analysis
Re Schaefers Estate articulates a two-step test for the removal of an attorney:
1) there must be strong and compelling evidence of misconduct or neglect on the part of the attorney
before a court should ignore the clear wishes of the donor. With respect to this issue, the evidence has to establish that the donor was capable of granting a proper POA; and
2) the Court must determine whether the best interests of an incapable person are being served by the
attorney.
The courts have generally upheld the view that a written POA executed by the grantor at a time when s/he was apparently of sound mind will be jealously guarded and the court will respect the wishes and preference of the person who made the grant.5 In the case at bar, Justice Fragomeni was unable to conclude that Schaefers was mentally incapable when she granted her POA in 1998. Upon finding the 1998 POA valid, the judge stated, “the next issue to be determined is whether there is strong and compelling evidence of misconduct or neglect on the part of Verbeek to such an extent that the wishes of Schaefers in 1998 ought to be ignored and Verbeek’s appointment terminated”.6
Chief Justice Hickman of the Newfoundland Supreme Court Trial Division in Re Hammond Estate7 stated:
“There must be strong and compelling evidence of misconduct or neglect on the part of the donee duly appointed under an enduring power of attorney before a court should ignore the clear wishes of the donor and terminate such power of attorney. ”
Three Ontario cases arrive at the same conclusion as Chief Justice Hickman in emphasizing that where a valid general power of attorney exists in favour of one party, it is not appropriate to replace that party with a property guardian.8
On my reading of the facts in Re Schaefers, Verbeek’s conduct seemed tardy and at worst sloppy. But, the evidence fell far short of establishing mismanagement, misappropriation, breach of trust or dishonesty. Verbeek did not improperly dispose of the assets or omit to pay any of Schaefers’ bills or expenses. His conduct did not result in any loss to Schaefers. The court stated, “To characterize his conduct as tardiness or sloppiness minimized the seriousness of his non-compliance with court orders and disclosure requests and his inaction in proceeding with a passing of accounts despite his expressed intention to do so.”
After considering all of the evidence, Fragomeni, J. concluded that Verbeek ought to be removed as attorney and that there was strong and compelling evidence of neglect on the part of Verbeek such that Schaefers’ wishes as set out in her 1998 POA for property should be terminated. The court held that the evidentiary foundation had been established to conclude that Schaefers’ best interests were not being met.
Conclusion
The lesson for attorneys is surmised in the court’s closing: “An attorney for property is a fiduciary and the duties and responsibilities of an attorney are significant. If Mr. Verbeek is too busy as a sole practitioner to discharge his duties as an attorney for the property of Schaefers then he should be relieved of those responsibilities”. 9
In short: attorneys beware!