| In what has been called
a startling development, the Supreme Court of British Columbia ruled
in Goodrich
v. British Columbia (Registrar of Land Titles), that a Power of Attorney that could "only be exercised during any
subsequent infirmity" was not an enduring Power of Attorney.
As such, the power expired 3 years after it was signed for purposes of
the Land
Title Act. The power could not be used to transfer ownership of
land. If the decision is not reversed by the appeal court,
arrangements in place for incapacity will have to be reconsidered.
Until the full impact of this recent decision is known, it would be prudent
to not use what is commonly referred to as a "springing Power of
Attorney".
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To understand how this development affects planning for incapacity,
it is important to consider several key concepts. Some of the
essential basics about powers of attorney are outlined in a related
article.
At common law, a Power of Attorney expires and is no longer
effective when the donor loses capacity. It is when the donor
loses capacity that a power of attorney would be most useful. In
recognition of this, s. 8(1) of the Power
of Attorney Act permits what is called an enduring power of
attorney. This can be seen as a continuing power: it comes
into effect immediately upon signing and continues to be effective after
the donor has lost capacity. The enduring Power of Attorney can be
used both before and after the donor loses capacity.
A "springing power of
attorney" is different. The power is signed by the donor but
does not take effect until the happening of some specific event.
The event could be the issuance of a letter by a doctor that the donor
has lost capacity or something similar. The power has been created
but lies dormant. It is brought to life on the happening of the
specified event: it springs into effect at that time.
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In Goodrich, the donor had granted a power of attorney to her
nephew in 1995. The power stipulated that it "may only be exercised"
during any subsequent mental infirmity of the donor. At the
time, the aunt was living in her condominium.
The nephew decided in 2001 to move his
aunt to a long-term care facility because she could no longer live on
her own. It was considered best to sell the condominium
and use the money for the care and maintenance of his aunt.
To transfer title, the power of attorney was submitted to the land
titles office without anything more. The Registrar of Land
Titles took the position that the power of attorney was not an enduring
power of attorney and therefore not valid to transfer ownership of the
condominium.
The Supreme Court was asked to review the decision of the Registrar
and rule the power of attorney to be valid. The Court agreed
with the Registrar noting "… the authority cannot 'continue' in
force following mental infirmity if the authority was not in force
before the mental infirmity occurred". In other words, if the
power of attorney was not in effect before the donor had lost capacity,
then it could not be valid after the loss of capacity. The
"springing" power of attorney had failed.
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Until the court case is overturned, or the law is changed, it would
be best to not use a "springing power of attorney". If
have a power of attorney in place that is to become effective upon the
happening of some future event, then it would be wise to consider making
new arrangements to avoid any problem The danger is that if
you lose capacity, the power of attorney might not be valid. If
that happens, then your representatives might be forced to take more
expensive and lengthy steps in order to obtain the authority required to
manage your affairs. If the sale of property is involved, or
decisions need to be made about investments, delay could prove to be
very costly.
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