This is a more detailed than normal blog article that canvasses the issues of attorney compensation, and reimbursement for the attorney’s legal and professional expenses/fees for preparing attorney accounts. Much of the credit goes to our associate DeAndra Moore.
Appreciate that the word “Attorney” here is not another name for “Lawyer” but rather the title of the person whom the Grantor of the Power of Attorney gives the power to.
Generally speaking, the Attorney may annually receive 3% of all of the income of the Grantor, plus 3% of the money being paid out on behalf of the Grantor PLUS 3/5th of 1% of the assets of the Grantor. See below for the many conditions that attach to that generalization.
a. The starting point is of course Looking at the Power of Attorney (“P of A”/ “POA”) document itself. Many precedents state that “any work done in connection with the POA document by the attorney, as agreed upon between the attorney and the Grantor from time to time, or in the event of the Grantor’s incapacity, will not be compensated out of the Estate”. This is largely a fill in the blanks paragraph that the author does not use. A Power of Attorney especially one for Property is an extremely onerous obligation. It can not only be very time consuming but is a fiduciary obligation. In simple terms, an obligation of the highest legal and moral order.
b. In the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (“SDA”) it states the following:
40 (1) A guardian of property or attorney under a continuing power of attorney may take annual compensation from the property in accordance with the prescribed fee scale. 1992, c. 30, s. 40 (1).
(2) The compensation may be taken monthly, quarterly or annually. 1992, c. 30, s. 40 (2).
(3) The guardian or attorney may take an amount of compensation greater than the prescribed fee scale allows,
(a) in the case where the Public Guardian and Trustee is not the guardian or attorney, if consent in writing is given by the Public Guardian and Trustee and by the incapable person’s guardian of the person or attorney under a power of attorney for personal care, if any; or
(b) in the case where the Public Guardian and Trustee is the guardian or attorney, if the court approves. 1996, c. 2, s. 27.
Effect of power of attorney
(4) Subsections (1) to (3) are subject to provisions respecting compensation contained in a continuing power of attorney executed by the incapable person if,
(a) the compensation is taken by the attorney under the power of attorney; or
(b) the compensation is taken by a guardian of property who was the incapable person’s attorney under the power of attorney. 1992, c. 30, s. 40 (4).
c. The SDA regulations (O. Reg 26/95 General) also state:
1. For the purposes of subsection 40 (1) of the Act, a guardian of property or an attorney under a continuing power of attorney shall be entitled, subject to an increase under subsection 40 (3) of the Act or an adjustment pursuant to a passing of the guardian’s or attorney’s accounts under section 42 of the Act, to compensation of,
(a) 3 per cent on capital and income receipts;
(b) 3 per cent on capital and income disbursements; and
(c) three-fifths of 1 per cent on the annual average value of the assets as a care and management fee. O. Reg. 26/95, s. 1; O. Reg. 159/00, s. 1.
2. The prescribed amount per page to be paid for photocopies under paragraph 5 of subsection 83 (4) of the Act is 50 cents. O. Reg. 26/95, s. 2; O. Reg. 272/15, s. 1
d. Some case law to consider:
Aber Estate, 2013 ONSC 6363
– Justice Brown confirms that the Court, in considering compensation, must be satisfied that compensation based on the prescribed fee schedule would be fair and reasonable. (Same governing principle as Executor’s compensation.)
To determine what is fair and reasonable, Justice Brown referred to the 1905 Ontario case, Toronto General Trust Corp v. Central Ontario Railway, which sets out five factors: 1) size of the trust; 2) care and responsibility involved; 3) time occupied in performing the duties; 4) skill and ability displayed; and 5) success of the administration. In other words keep careful records of your actions and the time and expense incurred in acting as an attorney. You never know when someone at a later time will question what you did as an attorney.
Re Reimbursement of Legal and Professional fees to Prepare Accounts
e. Attorneys are not required to pass their accounts (other than as requested by the living agent, or as outlined in O. Reg. 100/96: ACCOUNTS AND RECORDS OF ATTORNEYS AND GUARDIANS to the SDA, ss 4 – 6). They may otherwise either be compelled to pass them, or elect to do so informally (to save time and reduce costs for the purposes of negotiation and settlement).
f. Attorneys, however, are required to keep accounts as they manage the property, so those accounts should already exist. (O. Reg. 100/96: ACCOUNTS AND RECORDS OF ATTORNEYS AND GUARDIANS to the SDA, s. 6) Based on this, if the attorney now needs someone to prepare informal accounts, that arguably is their own fault and responsibility, and will be their own cost (which they would have otherwise been required to bear to prepare the accounts they were required to keep).
g. Having said that, once COMPELLED to pass accounts, the court-approved format and procedures apply.
h. Per Rule 74.16 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”) R. 74.17 (Form of Accounts) and R. 74.18 (Application to Pass Accounts – Material to be Filed) apply to accounts of estate trustees and, with necessary modifications, to accounts of trustees other than estate trustees, persons acting under a power of attorney, guardians of the property of mentally incapable persons, guardians of the property of a minor and persons having similar duties who are directed by the court to prepare accounts relating to their management of assets or money.
1. Rule 74.17 (1) (i) includes a statement of compensation
2. R.74.18 ss. (10) and (11) address the costs the attorney can claim for preparing and passing the accounts, thereby allowing your client to seek costs accordingly (this includes increased costs that are greater than the prescribed amount, but seeking those comes with its own set of procedures which are also outlined in the Rules).
Based on the above, if an attorney is willing to provide an informal accounting, the attorney may be expected to bear that cost themselves because they were always required to keep an accounting even though not required to pass one. This does not preclude one from making an arrangement with the opposing parties to fund the cost of preparing the accounts or to be reimburses for the Attorney’s costs.
Otherwise, and of course taking costs into consideration, the Attorney may wait to be compelled to pass the accounts in the court approved format since that way, the Attorney has more of a guarantee that at least some of the Attorney’s legal and professional fees may be reimbursed. If the Attorney is already going to put in the effort to prepare accounts that approximate the court-approved format, this option may make the most sense.
Overall, more case law research could reveal any instances where an attorney who was similar situated was able to circumvent the rules outlined above.
Links to the statutes, regulations and case mentioned:
– The SDA: https://www.ontario.ca/laws/statute/92s30
– O.Reg 26/95: https://www.ontario.ca/laws/regulation/950026
– O.Reg 100/96: https://www.ontario.ca/laws/regulation/960100
– The Rules: https://www.ontario.ca/laws/regulation/900194
– Aber Estate: https://canlii.ca/t/g2g19