Estate Litigation Blog

Costs Award Against Power of Attorney Personally


by Robin Spurr, Published: November 06, 2015

Tags: bad faith,  costs,  estate litigation,  fiduciary duty,  litigation,  power of attorney

Scalia v. Scalia is a Court of Appeal decision, which provides guidance for Power of Attorney disputes, specifically the scope of the attorney for property’s authority with respect to joint assets, as well as the cost consequences for an unreasonable attorney for property.  This was an appeal involving a dispute over the financial affairs of Joe Scalia.  The dispute was between Joe’s son from his first marriage, John Scalia, and Joe’s widow and second wife, Pina Scalia. 

Joe developed Alzheimer’s disease and was moved into a long-term care home in 2012 when John took over many of Joe’s affairs.  John became concerned that Pina was diverting funds that belonged to Joe.  John sought financial information from Pina about the whereabouts of certain monies, and information about Pina’s personal finances.  When that information was not forthcoming, John emptied the joint account held by Pina and Joe and moved the funds into a trust in Joe’s name alone to which Pina did not have access.  These funds were subsequently frozen by the bank as a result of the dispute.  John also stopped depositing Joe’s pension income into the joint account so that despite the fact that they had always shared income and expenses equally, by the end of 2012 Pina was receiving little to no income from Joe.    

In 2013, John, acting as Joe’s litigation guardian, commenced an application seeking, among other things, that Pina deliver information about her personal finances; and that she account for the rental proceeds and other funds from her and Joe’s joint account.  Pina then filed her own application and sought among other things, the removal of John as Joe’s Power of Attorney; an order that the frozen funds be released back into her and Joe’s account, and an order for support from Joe pursuant to the Family Law Act.

The application judge dismissed Joe’s application and granted Pina’s application, in part.  In dealing with costs, the application judge found that John had acted in bad faith and his conduct had led to these adversarial proceedings that split the family.  The judge relied on the Substitute Decisions Act to find that John had a fiduciary duty to act with integrity and in good faith.  By unilaterally withdrawing funds from the joint account and holding back support from Pina, the application judge found John had not acted in Joe’s best interests.  For these reasons, the costs of Pina’s application were ordered to be paid on a substantial indemnity basis by John personally.

John appealed the application judge’s decision and was successful on two of the three substantive grounds of appeal.  However, the Court of Appeal declined to overturn the cost award made against him personally, even though the panel found that John’s conduct was not considered bad faith.

The court set out the test for bad faith in the family law context, which is that the behaviour must be carried out with the intent to inflict financial or emotional harm, or to deceive the parties or the court.  However, the court found that many of the facts the application judge relied on to find bad faith on John’s part could not stand, and as such John’s conduct on the record did not meet the threshold for bad faith.

Regardless, however, John, as a fiduciary, owed a duty to Joe to act in his best interests.  The court found that the litigation was of no benefit to Joe.  Rather, the litigation was the result of John’s ill-advised handling of Joe’s affairs.  The litigation was disproportionately costly and was not a reasonable reaction to John’s concern about his father’s finances.  The court of appeal went further to admonish Joe for his actions.  As the application judge had noted, instead of assisting the family to resolve the issues at stake, John’s conduct turned the matter into an unnecessarily brittle and adversarial proceeding that split the family.

This Court of Appeal decision provides us with several insights regarding what Attorneys for Property can do with joint assets, specifically real property and bank accounts.  Most notably though, the court made it clear that in litigation the Attorney will be held to standard of conduct that must be in line with his role as fiduciary.  Despite the Attorney being successful on two of the three substantive grounds of the appeal and indeed clawed money back into the estate, the court still declined to overturn the cost award.  This is a lesson to Attorneys for Property faced with contentious family disputes – they must remember that their fiduciary obligation in litigation is not solely a question of financial benefit for the incapable person.  Rather, the Attorney must consider what is in the person’s best interests overall, which may include mending family ties and settling at an early stage.  Otherwise, unreasonable conduct could result in the Attorneys finding themselves personally liable for the legal costs.

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