Should the Court consider why a donor is making or revoking a Power of Attorney? This was the question before the Court in Pirie v Pirie, 2017 ABQB 104.
The donor had executed a springing Enduring Power of Attorney, appointing his three children and his then-wife as his attorneys. Thereafter, the 88 year-old separated from his wife of 53 years and, with the help of a paid matchmaker, he met a woman with whom he spent three weekends before inviting her to move in with him with a view toward marriage, or a payment of $100,000 if the relationship did not work out.
The attorneys discovered the donor’s arrangement and were concerned about this out of character behaviour. They hired a lawyer to warn off the matchmaker (and, inadvertently, the new woman) and asked the donor to undergo a capacity assessment, which found that he suffered from medium level dementia. The donor disagreed with this assessment and sought his own, which found capacity.
The attorneys activated the Enduring Power of Attorney, without consulting or advising the donor. In response, the donor hired a lawyer and executed a Revocation of the 2008 Enduring Power of Attorney as well as a new Enduring Power of Attorney. He also requested repayment of $7 million in loans admittedly owed to him by his children and ex-wife.
The Court was tasked with determining which Enduring Power of Attorney was valid. The Court accepted the test for capacity to grant a Power of Attorney as whether the donor understands that:
a. the attorney would be able to assume complete authority over the donor’s affairs;
b. the attorney could do anything with the donor’s property that the donor could have done;
c. the authority would continue if the donor became mentally incapable;
d. it would become irrevocable without confirmation by the court.
This test applies to both the grant and revocation of a power of attorney.
The children argued that the test in a case like this where the donor was replacing a Power of Attorney ought to consider not just the “what” of the change, but also the “why”; the change must be rational and reasonable to be valid.
The Court rejected this argument on the basis that attempting to determine whether a grant of a Power of Attorney was rational would start the Court on a slippery slope, eventually robbing the donor of the right to decide who should act as his attorney. The Court also noted that, in this particular case, the donor expressed ample reasons for his decision.
At its core, this case demonstrates the high bar for establishing incapacity, even where well-intentioned children are concerned.