Use and Abuse of Powers of Attorney
A Power of Attorney appoints a trusted individual (your “attorney”) to stand in your shoes for legal and financial purposes. Your attorney may enter contracts on your behalf (including contracts to buy and sell real estate), settle lawsuits on your behalf, file your taxes, access your safety deposit box and, in some cases, make gifts, loans and charitable donations on your behalf. Your attorney has a lot of power. It is for this reason that we emphasize how important it is to appoint someone you trust completely.
Every Power of Attorney is bound by the Power of Attorney Act, RSBC 1996, c.370. Section 19 of the Act requires that an attorney act honestly and in good faith, exercise the care, diligence and skill of a reasonable prudent person, act within the authority given in the Power of Attorney, keep prescribed records of any financial transactions and, generally, and follow the rules set out in the Power of Attorney Act. The attorney additionally has the obligation to keep his or her property separate from the attorney’s property being managed. The attorney is required to act in the capacity of a fiduciary – meaning he or she must act in a trust-worthy fashion and make decisions that are only in the best interest of the person who has appointed them.
Despite the strict obligations imposed on attorneys, many people have experienced or heard of circumstances where an attorney has abused his or her power. If a person suspects that their attorney is abusing their power, he or she can revoke the Power of Attorney, assuming he or she still has capacity to do so. If a person no longer has capacity to revoke the Power of Attorney, legal remedies include asking the Court to order an accounting by the attorney setting out how money has been spent, or suing the attorney directly for the return of property or other civil remedies outlined in section 36 of the Act.
Additionally, any person may ask the Public Guardian and Trustee (“PGT”) to become involved if he or she has concerns that an attorney is abusing power, or that the adult appointed the attorney in circumstances of duress or incapacity. The PGT must promptly review the request and conduct an investigation to determine the validity of the request. The PGT may advise the person who made the report to apply to the Court for an order under section 36 of the Act, as set out above, or the PGT itself may apply to the Court for such an order. The PGT may also elect to take steps under the Adult Guardianship Act to become a statutory property guardian of the adult, or the Patients Property Act to become a committee of the adult.
Theft, fraud and financial abuse conducted under the guise of a Power of Attorney can also be reported to the police and prosecuted under the Criminal Code of Canada (the “Code”). Section 331 of the Code specifically states that a person commits theft if that person has been entrusted with a Power of Attorney and fraudulently sells, mortgages, pledges or otherwise disposes of that property or fraudulently uses the sale proceeds in a manner other than that for which he was entrusted by the adult who made the power of attorney.
While there are remedies available for the abuse of a Power of Attorney, your best defense remains a good offence – only appoint an individual who you trust completely.
© Linley Welwood LLP. The contents of this article do not constitute legal advice. Readers should seek legal advice in relation to their own specific circumstances.