Scalia v. Scalia: Court of Appeal Upholds Personal Costs Award against Attorney under a POA based on Litigation Conduct

Recently the Ontario Court of Appeal[1] upheld a finding that an attorney for personal care and property and litigation guardian was personally liable for substantial indemnity costs in a family dispute. While the appellate court disagreed with the application judge's finding of "bad faith", the appellate court upheld the costs award based on the attorney's conduct during the litigation. This case provides a helpful overview of the test of "bad faith" in the family law context and in Substitute Decisions Act litigation when an attorney may be personally liable for costs, among other legal issues.

Facts and Background 

This case began with the unfortunate, but familiar, dispute between an adult child of a first marriage and the spouse of a second marriage. An older adult was diagnosed with Alzheimer's disease and one of his sons was appointed as his power of attorney for property and personal care.  The older adult's wife, and the step-mother of the attorney, cared for him in their home until she was no longer able to do so.  Upon consultation with and recommendation of the Community Care Access Centre ("CCAC") the father was moved to a long term care facility. The father was not happy with this move and initially he blamed his wife and refused to see her.

The son eventually became concerned that his step-mother was improperly diverting funds that belonged to his father. As his father's attorney for property the son removed all funds in two accounts that were held jointly by his father and step-mother. Eventually, acting as his father's litigation guardian, the son commenced an application against his step-mother seeking, among other things, certain financial information about missing monies and an order requiring the sale of a property in Florida jointly owned by his father and step-mother and that the net proceeds be divided in equal shares. It was the son's position that given his father's "condition" his father and his step-mother were "effectively separated" and that the terms of a marriage contract that they had entered into applied. He argued that as his father's attorney, he was duty-bound to take actions informed by the domestic agreement as well as his father's wishes as expressed in his will. With this in mind, he chose to stop income flowing to his step-mother, froze the money removed from the joint bank accounts, and took steps to sell the Florida property.[2]

His step-mother brought a cross-application seeking, among other things, that the Public Guardian and Trustee act as guardian for her husband, that the marriage contract be set aside, an order for spousal support, access to the funds removed by the son from the joint account and an order prohibiting the son from dealing with the Florida property.

The father/husband died after the application was heard but before the application judge had released his decision. The application judge was advised of his death and took it into account in his decision. The son was also the estate trustee of his father's estate.

The Application Decision

The application judge made numerous factual findings that were eventually questioned by the appellate court, including that the father's move into the long term care facility was at the behest of the son. The application judge had questioned the son's motivation behind this move. Also, the application judge found that the wife's income was insufficient over the relevant period to meet her expenses while the husband had excess income. On this basis he awarded support for the wife of $900 per month from October 1, 2012 until the husband's death. The remaining frozen funds from the joint bank account were ordered released to the wife and an order was made that the wife was "free to deal with [the Florida property] as she sees fit in her sole discretion".[3]

With respect to costs, the application judge concluded that the son's conduct led to the adversarial proceeding that split the family and that the wife's reasonable settlement offers were met with increasing hostility by the son.[4] The application judge also made a finding of bad faith based on the son's "reprehensible conduct"[5] and relied on s.32(1) of the Substitute Decisions Act, 1992, S.O. 1992, c.30 analysing the son's actions on the basis that the son had a fiduciary duty to perform his duties diligently, with honesty and integrity, and in good faith.

It was through this lens, that the application judge held that the son had acted in bad faith in unilaterally withdrawing funds form the joint accounts and holding back support for the wife. The application judge also held that various steps the son took were not in his father's best interests.[6]

The application judge awarded substantial indemnity costs against the son personally for $13,500.00. The son appealed.

Appellate Decision

The Ontario Court of Appeal allowed the appeal in part. The Court set aside the order granting the wife authority to deal with the Florida property at her sole discretion. The Court also set aside the spousal support order of $900 per month and substituted an order of $300 instead. The remaining appeal, including the son's appeal of the costs award against him, was dismissed.

However, the Court of Appeal held that the application judge erred in finding that the son's conduct constituted bad faith. First, certain findings of fact on which the application judge based his conclusion that the son acted in bad faith were not supported by the record i.e. that the son forced his father into a long term care facility when really it was the CCAC who was instrumental in the decision. Also,

Justice Epstein, on behalf of the Court noted:

The Court of Appeal however did not let the son off completely. It found that while the application judge may not have come to the correct conclusion on bad faith, he also awarded costs against the son personally based on "litigation conduct".

The application judge found that [the son], a person entrusted with a power of attorney, took steps of no benefit to the person to whom he owed a fiduciary duty - his father. In addition, the application judge held that [the son] refused to accept reasonable offers to settle. Instead of assisting the family resolve the issues at stake, [the son's] conduct, as the application judge noted, turned the matter "into [an] unnecessarily brittle and adversarial proceeding that split the family."[9]

In Justice Epstein's view, the litigation was the result of the son's "ill-advised handling of [the father's] affairs. The litigation was disproportionately costly having regard to [the father's] modest estate. Simply put, from a financial perspective, the litigation was not a responsible reaction to [the son's] concerns about his father's finances."[10] Accordingly, the costs award against the son personally was upheld.

Conclusion

As an attorney it is sometimes hard not to get emotionally and personally involved, especially when a dispute arises between loved ones and family members. It must be remembered that attorneys have a fiduciary duty to act in the best interests of the person who granted the power of attorney. If a reasonable offer to settle is presented and it is in the best interests of, and for the benefit of, the person to whom an attorney owes a fiduciary duty then that offer should be accepted. All decisions regarding the conduct of litigation proceedings should also be made with the incapable person's best interests in mind. Otherwise, as this case shows, taking litigation personally and forgetting about to whom a fiduciary duty is owed will result in an attorney paying costs personally as well.