The Oxford Dictionary defines a fiduciary as a person in a position of trust, especially when it involves controlling money or property belonging to others. The law places particular emphasis on the trust relationship between a trustee and a third-party beneficiary.
Among other duties, a fiduciary is required to: (1) act in the best interests of the beneficiary, (2) not put their own interests ahead of the beneficiary, and (3) must be able to account for their actions. A fiduciary is held to a higher standard and a professional fiduciary (a trust company for example) is held to a higher standard than a lay fiduciary.
Last week, Alicia Mossington (Godin) blogged on the case of Public Guardian and Trustee v. Cherneyk. Alicia’s blog focused on the “importance of documenting gifts, promises and intentions to ensure that client wishes are carried out”. I intend to focus on the role of a fiduciary and what happens when a fiduciary, in this case an attorney for property, breaches her duties.
At first instance, the court granted the PGT’s application to remove Tina Munson as Jean Cherneyko’s attorney for property. In her place, the court appointed the PGT as Jean’s guardian of property.*
Jean was 90 years old. She was living alone without family nearby, hard of hearing, cognitively impaired, and ultimately diagnosed with dementia. Tina and Jean were neighbours and had grown close over the last several years. The court found that Jean was dependent on Tina and Tina’s family for daily support of her financial and personal affairs. The PGT first got involved when CIBC froze Jean’s bank account.
Once Tina was removed by the court as Jean’s attorney for property and the PGT appointed as Jean’s guardian, the next question the court had to consider was whether Tina had to repay Jean $346,771.84 – the amount that Tina had received by way of gifts, transfers, withdrawals, or expenses during the relatively short period of her attorneyship.
The written evidentiary record consisted of a PGT investigator’s affidavit and three affidavits filed by Tina. However, the court gave little weight to two of Tina’s affidavits which were sworn by Jean’s neighbour and Jean’s niece living in the United States. The court was therefore left with Tina’s own affidavit and the affidavit of the PGT investigator, although the court noted that both affidavits provided a great deal of hearsay evidence.**
According to the court, Jean’s diagnosis of cognitive impaired, which was made by a doctor on September 1, 2019, should have raised alarm bells for Tina. The diagnosis was made only a few days after Jean had given away approximately a quarter of her net worth to Tina and Jean’s niece in the United States. According to the court, “[t]his diagnosis of September 1, 2019 was a plain and obvious signal to Tina to proceed cautiously and put Jean’s needs first” as her attorney for property. The court noted that “[a]n attorney for property is a fiduciary, whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit”.
According to the court, a fiduciary acting for an incapable person should be very cautious about any “big financial moves” that the incapable person claims they want to make. Tina should have therefore proceeded with caution even if Tina believed she was simply acting on Jean’s wishes.
The court went on to hold that Tina, as attorney for property, “did not exercise the appropriate degree of caution and good judgment given the circumstances about which she knew”. Tina was required to look after the best interests of Jean regardless of Jean’s stated wishes.
Moreover, once Jean moved out of her home and into long term care facility, Tina should have listed Jean’s home for sale to maximize its value for Jean, but instead let her adult son move into the home rent free. It was in Tina’s family best interest to let her son live in the home, not Jean’s. Tina therefore breached her fiduciary duties and actively misused Jean’s assets for her own and family’s benefit.
At the outset of the application, Tina had provided an accounting indicating that she had spent almost $50,000 in expenses for Jean’s benefit. However, according to the court, Tina breached her fiduciary duties by failing to keep receipts for such expenses. This omission demonstrated a lack of skill, diligence, and good judgment on Tina’s part. Tina had not acted in Jean’s best interests, benefited from her role as attorney for property, and was in a conflict with Jean as her adult son was living in Jean’s home.
When faced with breaches of fiduciary duties, the court has a wide range of remedies “designed to address not only the fairness between the parties but also the public concern about the maintenance of the integrity of fiduciary relationships”. Accordingly, Tina was ordered to pay back most of the funds she had received from Jean ($334,289.65). Tina was also ordered to pay the PGT’s costs of the application.
Bottom line: An attorney for property is a fiduciary who is held to a higher standard. An attorney for property must act in the best interests of the incapable person, demonstrate a degree of skill and judgment in the management of the incapable person’s affairs, and not prefer their own interests over the incapable person’s. A fiduciary should resist the temptation to accept a gift but if they do, it should be kept in a segregated account and not touched until the incapable person dies so that is available to support the financial needs of the incapable person.
* A guardian of property is appointed by the court while an attorney for property is appointed by way of a signed power of attorney for property. Their duties are almost identical.
** Hearsay evidence is presumptively inadmissible. Black’s Law Dictionary defines hearsay evidence as testimony about out of court statements involving someone other than the person testifying. It is inadmissible because it is less reliable and cannot be tested through cross examination.