SPRINGING POWERS OF ATTORNEY

CASE COMMENT
Parnall (Attorney for) v. British Columbia (Registrar of Land Titles)
(2002), 45 E.T.R. (2d) 140 (S.C.), revd 236 D.L.R. (4th) 433 (C.A.)

In her 2002 Practice Note(1), Margaret Mason reported on the British Columbia Supreme Court decision in Parnall (Attorney for) v. British Columbia (Registrar of Land Titles)(2), which cast doubt on the ability to make a "springing" power of attorney in British Columbia. That decision has been successfully appealed, thereby confirming the general validity of springing powers of attorney in British Columbia.

A "springing" power of attorney is one that takes effect on the occurrence of a specified future event - generally, the incapacity of the donor. At common law, a power of attorney ceased to be valid when the donor became incapable. "Enduring" powers - those that "endure" notwithstanding the incapacity of the donor - are creatures of statute. In British Columbia, s. 8(1) of the Power of Attorney Act(3) provides the statutory basis for an enduring power of attorney, stating (in relevant part) that:

8 (1) The authority of an attorney given by a written power of attorney that
(a) provides that the authority is to continue despite any mental infirmity of the donor…

is not terminated only because of subsequent mental infirmity that would but for this Act terminate the authority.

The facts in Parnall are not unusual. In 1995 an elderly woman, Edith Parnall, made a power of attorney, appointing her nephew, Norman Goodrich, as her attorney. The power of attorney provided that it could "only be exercised during any subsequent infirmity" of Ms. Parnall. In 2001 it was determined that Ms. Parnall could no longer care for herself, and she was moved from her condominium to a long-term care facility. Mr. Goodrich decided that it was in his aunt’s best interests to sell her condominium and use the sale proceeds for her care and maintenance. As her attorney, he entered into an agreement to sell the condominium and subsequently executed a transfer. When the transfer was submitted to the Land Title Office for registration, it was rejected on the basis that Ms. Parnall’s power of attorney was not an enduring power within the meaning of s. 8(1) of the Power of Attorney Act and had therefore expired for land title purposes(4).

Mr. Goodrich applied to the British Columbia Supreme Court for an order to compel the Land Title Office to register the transfer. However, the Supreme Court ruled that the Land Title Office had correctly rejected the transfer executed by Mr. Goodrich, as Ms. Parnall’s power of attorney was not an enduring power under s. 8(1) of the Power of Attorney Act. The court considered the wording of s. 8(1) and concluded that "the authority cannot ‘continue’ in force following mental infirmity if the authority was not in force before the mental infirmity occurred."(5) In other words, as the power did not "spring" until Ms. Parnall became mentally infirm, the authority could not be said to "continue" despite Ms. Parnall’s mental infirmity for the purpose of s. 8(1) of the Power of Attorney Act.

The Court of Appeal allowed Mr. Goodrich’s appeal and determined that the authority granted to Mr. Goodrich in fact arose when Ms. Parnell executed the power of attorney. Mr. Goodrich could not, however, exercise that authority until the necessary condition (his aunt’s infirmity) was met. The authority itself, however, continued despite Ms. Parnall’s infirmity and so the power fell within the scope of s. 8(1) of the Power of Attorney Act and thereby had a statutory basis for existence. Saunders J.A. stated:

While the learned trial judge concluded that the word "continue" in s. 8(1) precluded the power becoming operative upon mental infirmity, in my view s. 8 was intended to address termination of the power of attorney, and does not deal with a power of attorney that springs into effectiveness upon the happening of an event. The issue under s. 8(1) is not the word "continue"; rather it is that which continues - the "authority". The authority, in my view, is created at the moment of execution although on the words of the power of attorney the condition on which it may be exercised may not yet exist.(6)
(Emphasis added.)

The Supreme Court decision in Parnall had cast doubt on the ability to create a valid springing power of attorney in British Columbia. Furthermore, the Supreme Court decision had called into question the validity of springing powers of attorney already in existence. Concerns as to the practice implications of the decision prompted the British Columbia Lawyers Insurance Fund to pay the cost of the Parnall appeal. The Court of Appeal’s conclusion as to the validity of springing powers of attorney no doubt came as a relief to many British Columbia practitioners (and to their insurer).

Validity aside, other issues can arise in respect of springing powers of attorney. One such issue is how to determine when the condition in the power of attorney (e.g. the donor’s mental infirmity) has been met. Saunders J.A. commented aptly that delay and costs may be avoided if the power of attorney prescribes "on its face the evidence which will be sufficient to satisfy the condition there set out."(7) Although, as noted by Saunders J.A., amendments have been recommended to the Power of Attorney Act to adopt a legislative procedure by which to determine whether a donor has become mentally infirm(8), it is unclear whether (or when) such amendments will be made. Accordingly, practitioners should ensure that a springing power of attorney includes clear provisions as to when the power is triggered and the evidence that will be sufficient to demonstrate that the power has "sprung".

Many practitioners recommend against the use of springing powers of attorney. If a donor wants to make a springing power (rather than an enduring power without condition as to its exercise) because the donor is concerned that the proposed attorney might otherwise utilize the power before the donor becomes incapacitated, there is perhaps a more fundamental issue - the appropriateness of the attorney at all. If the donor does not trust the proposed attorney to act appropriately before the donor’s incapacity occurs, why should the donor trust the attorney to act appropriately after the donor’s incapacity?

Such issues aside, the decision of the Court of Appeal in Parnall has confirmed the general validity of springing powers of attorney in British Columbia for those practitioners (and their clients) wishing to utilize them as a planning tool.

Kerry D. Sheppard
Legacy Tax + Trust Lawyers, Vancouver

©Copyright 2004 Estates, Trusts + Pensions Journal. All rights reserved. Reproduced here with the permission of the Estates, Trusts + Pensions Journal.

1. M. Mason, "Springing Powers of Attorney in British Columbia" (2002), 21 E.T.P.J. 276.
2. (2002) 45 E.T.R. (2d) 140, 2002 BCSC 599 (S.C.), revd 236 D.L.R. (4th) 433, 9 E.T.R. (3d) 117 sub nom. Parnall v. British Columbia, 316 W.A.C. 309 sub nom. Goodrich v. British Columbia (C.A.).
3. R.S.B.C. 1996, c. 370.
4. Section 56(1) of the Land Title Act, R.S.B.C. 1996, c. 250, provides that, with certain exceptions, a power of attorney expires for land title purposes three years after it is executed. Section 56(3) provides, however, that an enduring power of attorney under s. 8(1) of the Power of Attorney Act remains valid until an order terminating the power is filed.
5. Parnall, supra, footnote 2, at para. 31 (B.C.S.C).
6. Supra, at para. 25 (C.A.).
7. Supra, at para. 31.
8. A.J. McClean, Review of Representation Agreements and Enduring Powers of Attorney (Victoria: Policy, Planning and Legislation Branch, Ministry of Attorney General, 2002), at pp. 62-4.