If you have been named as an attorney for property1 pursuant to a continuing power of attorney for property, you may be wondering whether or not you are entitled to receive compensation for acting in this capacity and, if so, how that compensation is calculated.
This is a fair question to ask. After all, acting as an attorney for property is not without its challenges. Being an attorney for property requires a significant amount of responsibility, exposes the attorney for property to liability and, in some cases, requires a tremendous amount of effort and time.
So, is an attorney for property entitled to take compensation? The short answer is “yes”.
Compensation for attorneys and the legislative framework
An attorney for property is statutorily entitled to compensation. The piece of legislation that permits an attorney to take compensation is known as the Substitute Decisions Act, 1992. Pursuant to section 40 of the Substitute Decisions Act, 1992, an attorney who is acting pursuant to a continuing power of attorney for property is entitled to take compensation on a monthly, quarterly, or annual basis. The only scenario where an attorney for property is not permitted to take compensation is if the grantor2 of the power of attorney for property specifically prohibits an attorney from taking compensation in the power of attorney document3.As such, if you have been named as an attorney for property but the continuing power of attorney for property document forbids you from taking compensation, you may want to think twice before assuming this (sometimes thankless) position. You should be aware that it is perfectly within your rights to refuse to act as an attorney for property.
Calculating compensation
If an attorney for property intends to take compensation, such compensation is payable from the property of the grantor and is subject to the prescribed fee scale outlined in Ontario Regulation 26/95, which is a regulation under the Substitute Decisions Act, 1992. An attorney’s compensation is calculated as follows:
- An attorney is entitled to 3% on capital and income receipts. An example of a “capital receipt” would be the sale proceeds arising from the sale of real property. An example of an “income receipt” would be interest earned on an existing asset, such as GIC;
- An attorney is entitled to 3% on capital and income disbursements. An example of a “capital disbursement” would be paying a bill on behalf of the grantor/incapable person. An example of an “income disbursement” would be payment of non-resident taxes or a loss on an investment account;
- An attorney is entitled to three-fifths of 1% of the annual average value of the assets as a “care and management fee”.
By way of example, if an attorney for property:
- sells 123 Main Street resulting in net proceeds of $300,000.00;
- collects $15,000.00 in interest on existing investments in a given year; and,
- pays $10,000.00 worth of bills on behalf of the grantor
Then the attorney would be entitled to receive $9,750.00 in compensation based on the fee scale that is set out in Ontario Regulation 26/95. An attorney is not entitled to compensation on the gross sale price of real property, but instead only on the net proceeds.
It should be noted that not all actions performed by an attorney for property are compensable. For example, if an attorney for property takes $100,000.00 from the grantor’s chequing account, and invests that $100,000.00 into a locked in GIC, the attorney is not entitled to receive compensation for the mere act of moving money from one account to another account as the attorney’s act of moving funds from one account to another account did not cause the grantor’s portfolio to grow. The attorney would, however, be entitled to receive compensation on the interest earned in the grantor’s portfolio.
It should also be noted that there is a distinction to be drawn between an attorney for property’s entitlement to compensation and compensation for an attorney for personal care. Unlike attorneys for property, there is no legislative framework that speaks to what compensation might be payable to an attorney for personal care who is acting pursuant to a power of attorney for personal care, though it is still possible for an attorney for personal care to seek compensation. If you want more information about what type of compensation attorneys acting pursuant to a power of attorney for personal care may seek, I encourage you to read my blog post on this subject, which you can access here.
The Court’s discretion
The legislation and regulations are clear that, despite the fee scale contemplated in Ontario Regulation 26/95, the Superior Court of Justice retains discretion to reduce the amount of compensation payable to an attorney for property.
The amount of compensation that an attorney is entitled to or that an attorney has already taken will only be subjected to scrutiny by the court in the event that the attorney voluntarily chooses to pass their accounts or is ordered to pass their accounts pursuant to s. 42 of the Substitute Decisions Act, 1992. When an attorney “passes their accounts”, what the attorney is doing is providing the Court (and other interested parties) with a formal accounting that is in a prescribed form. An accounting on a passing of accounts shows every single transaction that the attorney performed on the behalf of the grantor/incapable person during a specific period of time. All monies and property leaving the grantor’s estate, and all monies that the grantor’s estate received, must be accounted for. Therefore, a passing of accounts is the perfect theater in which to determine what amount of compensation an attorney ought to receive or whether an attorney’s compensation should be reduced because each receipt and each disbursement is clearly identified.
If an attorney has taken compensation without the court’s permission (which an attorney is entitled to do), but the court determines that the attorney has taken too much compensation, it is within the court’s discretion to order the attorney to repay some or all of the compensation back to the grantor’s estate. If the attorney has acted improperly and cannot account for certain transactions depicted in the grantor’s bank account during the period of time the attorney was acting in such a capacity, it is within the court’s discretion to reduce the amount of compensation the attorney would otherwise be entitled to or to refuse compensation altogether. In Zimmerman v. McMichael Estate, 2010 ONSC 2947 (CanLII), Justice Strathy went to far as to say “[A]n attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out his/her duties and will be held personally liable for the unsubstantiated withdrawals”. Zimmerman stands for the proposition that if an attorney cannot account for specific transactions during the accounting period, it is within the court’s power to reduce the attorney’s compensation proportionate to the unsubstantiated withdrawals, or that compensation be denied entirely. On this basis, attorneys for property are well-advised to retain receipts and to keep diligent records of every dollar received by and spent on behalf of the grantor.
As you might appreciate, there is plenty of caselaw that specifically addresses the subject of attorney compensation: how much is the attorney entitled to? Was a given transaction compensable? Did the attorney take too much? Is the attorney’s conduct so egregious that the attorney should be denied compensation? Below are examples of two cases where the court either reduced the compensation payable to an attorney or ordered an attorney to payback compensation that was improperly taken.
In the decision of Sitko v. Gauthier (Estate), 2014 ONSC 5671 (CanLII), the court ordered the attorney for property to repay the sum of $10,000.00 to the grantor/incapable person’s estate, representing repayment of approximately 40% of the amount that the attorney took as compensation while acting as an attorney. The court determined that the attorney acted improperly by charging an expense to the incapable person that the court characterized as having a “personal component” that did not benefit the incapable person and that would be unfair and unreasonable for the incapable person to have to pay.
In Lanthier v. Cousineau Dufresne Estate, 2002 CanLII 2653 (ON SC), the attorney claimed $14,264.00 as compensation in accordance with Ontario Regulation 26/95. In this case, the attorney failed to keep separate records and receipts and was unable to account for approximately $58,000.00 of cash withdrawals. In exercising its discretion, the court found that the attorney was still entitled to compensation, but in the lesser amount of $8,585.00, representing a $5,679.00 reduction.
The decisions in Sitko and Lanthier serve as an important reminder of the court’s inherent jurisdiction to scrutinize an attorney’s conduct and, where appropriate, reduce the compensation or order the attorney to make restitution for sums improperly taken from the grantor. There are many other cases similar to the decisions in Sitko and Lanthier, though it should be kept in mind that each case is different.
If you are unsure what amount of compensation you might be entitled to in your capacity as an attorney, or if you do not know whether a certain transaction is compensable or you suspect that an attorney has taken too much compensation, please do not hesitate to contact the Siskinds Estate Litigation Group. We would be pleased to discuss your case.
1 An “attorney for property”, commonly referred to as “a power of attorney for property” is a person who has been assigned the task of managing a grantor’s property and making decisions about the grantor’s property
2 A “grantor” is a person who grants the power of attorney. Quite often, an attorney for property only begins to act when the grantor of the power of attorney becomes incapable of making decisions with respect to their property.
3 For example, see Nystrom v. Nystrom, 2007 CanLII 4879 (ON SC), where court found that because the grantor’s continuing power of attorney for property forbid the attorney from taking compensation, it could not ignore this provision having regard to s. 40(4) of the Substitute Decisions Act, 1992. The court refused to allow the attorney to take compensation.