Have Your Ducks In a Row, If Planning to Challenge Capacity

By Dickson Appell
Have Your Ducks In a Row, If Planning to Challenge Capacity

The case of Palichuk v. Palichuk, 2023 ONCA 116, involved a dispute between a mother, Nina, and one of her daughters, Linda. In September 2020, Nina revoked her will and powers of attorney made in 2016. She executed a new will disinheriting Linda; powers of attorney for property and personal care naming her other daughter Susan as the sole attorney; and a transfer and declaration of trust of her home to Susan. In response, Linda brought an application for a guardianship order, on the basis that Nina was incapable of managing her property or personal care. Linda also claimed that the documents were invalid on the basis of the undue influence exerted by Susan.

As part of her response to the application, Nina retained a geriatric psychiatrist to conduct a capacity assessment. The assessor opined that Nina had the capacity to manage property with some assistance, had the capacity to make her own personal care decisions, and had the capacity to grant and revoke powers of attorney. A subsequent report stated that Nina had testamentary capacity and that, while she displayed mild cognitive impairment, she was not sufficiently impaired to render her incapable or vulnerable to undue influence.

The application judge dismissed Linda’s application, finding that Nina was capable of managing her property and personal care. He also refused to consider the allegations of undue influence on the basis that those allegations were hypothetical. Linda appealed to the Court of Appeal.

The Court of Appeal dismissed the appeal The Court stated that the application judge based his findings on uncontroverted expert evidence (the assessment reports), and that in any event, Linda failed to put forward sufficient evidence to rebut the presumption of capacity set out in s. 2 of the Substitute Decisions Act. Note that the appeal court agreed that once the report was produced, it was evident that Linda would lose. (Linda ended up paying the costs.)

Linda put forward no expert evidence, relying instead on her observations of Nina in a three-week period in 2020 when Nina lived with her. Despite some misapprehensions about her property on Nina’s part, the application Judge found that Linda’s evidence did not satisfy him that Nina was incapable. The Court of Appeal held that there was no basis on which to interfere with those findings.

The Court of Appeal also upheld the application Judge’s refusal to order a trial to determine Linda’s allegations of undue influence, declining to do so on the basis that the allegations were hypothetical and premature, given that Nina could change her will and powers of attorney at any time. The Court of Appeal agreed: “Nina could make the changes to revoke any or all impugned instruments in the middle of that trial, resulting in a waste of judicial time and resources. It would also put the litigants to unnecessary expense.”

The Court of Appeal also held that Linda’s request for the Court’s opinion, advice or direction on the documents was impermissible. Applications pursuant to Rule 14.05(3) of the Rules of Civil Procedure can only be brought on a question “affecting the rights of a person in respect of the administration of the estate of a deceased person or the execution of a trust.” Furthermore, allowing such challenges during a testator’s lifetime would result in an inundation of hypothetical litigation, with the potential for re-litigation following death. The Court restated the case law that has been developing more recently regarding when it might be appropriate to consider the validity of a will while the testator is still living.

Our takeaway: Capacity is a nuanced issue. Due to the presumption of capacity under the law, any challenge requires methodical, detailed evidence gathering. Whether suspicious circumstances or undue influence are appropriate grounds to challenge powers of attorney is fact-specific and has not been adequately dealt with by the courts. As such, anyone with concerns about someone’s capacity should consult with a lawyer specializing in this niche area of law.