By Daniel Gorelov and Scott Stewart-Lee
To date, British Columbia’s courts have not established a legal test for evaluating undue influence in the creation of an enduring power of attorney.
The Manitoba Court of Appeal recently tackled the issues of undue influence and incapacity during the making of an enduring power of attorney in Drewniak v. Smith, 2024 MBCA 86. The Court of Appeal’s analysis provides valuable insights for a potential way forward in British Columbia.
Background
Drewniak concerned a dispute between two adult sisters over their 92-year-old mother’s enduring power of attorney. In 2003, the mother appointed her daughter, Katherine, as her primary attorney, with her other daughter, Margaret, as the alternate (the “2003 POA”). In 2014, due to disagreements over Katherine’s “excessive control” of her mother’s personal and financial affairs, and a fall out between the sisters, interpersonal difficulties arose between Katherine and her mother. Amidst rising family tension, Margaret helped her mother meet with various lawyers to review the 2003 POA. Ultimately, the mother retained a new lawyer and executed a new enduring power of attorney naming Margaret as her sole attorney (the “2016 POA”).
The evidence established that the mother had experienced cognitive decline and memory issues when she created the 2016 POA. Accordingly, Katherine argued that the 2016 POA was invalid on the grounds that her mother lacked the capacity to understand the implications of the 2016 POA. Katherine also argued that Margaret had exerted undue influence over their mother during the execution of the 2016 POA.
The Court of King’s Bench of Manitoba upheld the validity of the 2016 POA, finding that the mother had the necessary capacity to create it and that she was not subjected to Margaret’s undue influence. Katherine appealed the ruling to the Manitoba Court of Appeal.
Capacity to Make an Enduring Power of Attorney
The Court of Appeal applied the legal test for determining testamentary capacity in the context of an enduring power of attorney. On the facts of this case, the Court of Appeal upheld the lower court’s conclusion because evidence from the mother’s lawyer and neurologist suggested that she was able to understand the nature and effect of the 2016 POA.
We note that the Manitoba Court of Appeal’s approach in determining an adult’s capacity to create an enduring power of attorney document is not applicable in British Columbia. Sections 11 and 12 of British Columbia’s Power of Attorney Act set out the legal test for determining whether an adult has the requisite capacity to make an enduring power of attorney document.
Section 11 of the Power of Attorney Act stipulates that an adult is presumed to have capacity to make an enduring power of attorney:
Adults presumed to be capable
11 (1)Until the contrary is demonstrated, an adult is presumed to be capable of
(a)making decisions about the adult’s financial affairs, and
(b)understanding the nature and consequences of making, changing or revoking an enduring power of attorney.
(2)An adult’s way of communicating with others is not grounds for deciding that the adult is incapable of making the decisions or having the understanding referred to in subsection (1).
Section 12 lists the factors that a court is to consider when determining whether an adult was capable of making an enduring power of attorney:
Adult may make enduring power of attorney unless incapable
12 (1)An adult may make an enduring power of attorney unless the adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney.
(2)An adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney if the adult cannot understand all of the following:
(a)the property the adult has and its approximate value;
(b)the obligations the adult owes to the adult’s dependants;
(c)that the adult’s attorney will be able to do on the adult’s behalf anything in respect of the adult’s financial affairs that the adult could do if capable, except make a will, subject to the conditions and restrictions set out in the enduring power of attorney;
(d)that, unless the attorney manages the adult’s business and property prudently, their value may decline;
(e)that the attorney might misuse the attorney’s authority;
(f)that the adult may, if capable, revoke the enduring power of attorney;
(g)any other prescribed matter.
Sections 11 and 12 of the Power of Attorney Act have not been considered by a court since their introduction in September 2011.
Undue Influence in the Creation of an Enduring Power of Attorney
The Court of Appeal examined whether Margaret had exerted undue influence over her mother in the creation of the 2016 POA. Undue influence occurs when a person uses their position of power over another to pressure the vulnerable party to act in a specific way.
The Court of Appeal recognized that Manitoba law is currently unsettled on how to analyze a claim of undue influence in the creation of an enduring power of attorney. The Court of Appeal suggested two methods of analysing undue influence. In the “probate” analysis, the party alleging undue influence has the burden of proof and has no legal presumption in their favour. In the “equitable” analysis, on the other hand, the court will start with a presumption of undue influence in certain vulnerable relationships such as a parent-child relationship. The “equitable” analysis has previously been used by the Supreme Court of Canada in determining undue influence in the context of inter vivos gifts[1] and, more recently, by the Ontario Court of Appeal in the context of an enduring power of attorney.[2]
The Manitoba Court of Appeal adopted the “equitable” analysis, and summarized the legal test as follows:
- The person seeking to attack an enduring power of attorney on the basis of undue influence has the persuasive legal burden to prove undue influence on a balance of probabilities.
- That person can, if certain facts are established, rely on an evidentiary presumption of undue influence to satisfy their persuasive legal burden, in the absence of evidence to the contrary. The evidentiary presumption of undue influence will arise in respect of the granting of an enduring power of attorney if:
- the relationship between the person alleged to have exercised undue influence and the donor is one with the potential for domination, and
- the granting of the enduring power of attorney was immoderate and irrational.
- If the person seeking to uphold the enduring power of attorney leads evidence tending to refute the existence of undue influence, it will be for the trier of fact to determine if the party attacking the enduring power of attorney has satisfied their persuasive legal burden to prove undue influence on a balance of probabilities.
In this case, the Court of Appeal found that the creation of the 2016 POA did not give rise to a presumption of undue influence. Even though Margaret had a relationship with the potential to pressure her mother, the mother also had a close relationship with Margaret and trusted her. Further, the mother had rational reasons for naming Margaret as her attorney, such as her strained relationship with Katherine. Lastly, both the mother’s lawyer and neurologist confirm that the mother’s decision was made voluntarily.
Drewniak’s Application in British Columbia
British Columbia law lays out clear frameworks for finding undue influence in relation to the creation of a Will[3] and in relation to an attorney using undue influence to take assets after being granted an enduring power of attorney.[4] However, British Columbia’s case law has not clarified the proper analysis for undue influence when an enduring Power of attorney is initially being granted.
Drewniak has opened the door for a new legal test to assess when undue influence arises in the creation of an enduring power of attorney. It remains to be seen which direction the British Columbia’s courts will take in the future.
If you are looking for more information regarding these topics, please contact any member of our Elder Law or Estates & Trusts groups.
[1] Geffen v Goodman Estate, [1991] 2 SCR 353, 1991 CanLII 69 (SCC).
[2] Vanier v Vanier, 2017 ONCA 561.
[3] SBC 2009, c 13, s 52.
[4] Calvert v. Menzies, 2024 BCSC 1302 at para 101.
