It’s common for adult children to help manage the bank accounts of elderly parents who can no longer manage their financial affairs on their own, and according to a recent Superior Court ruling, those who have a joint bank account with an elderly individual owe what’s called a fiduciary duty to the elderly person.
Often, being a fiduciary means you cannot benefit from your position, according to David Smith, a wills and estate practitioner. That’s why Smith says it’s “unusual” that in Estate of Annie MacKay v Dawn MacKay (Evans), a judge found the daughter-in-law of a now deceased elderly woman did not breach that duty when she paid herself from their joint bank account.
“Once you say you’re a fiduciary, most times, fiduciaries can’t pay themselves,” Smith says. “The only way you can do that is if the person who is owed the duty consents to the fiduciary getting paid, but usually, fiduciaries can never benefit from their position. That’s hugely the expectation.”
But although that’s the general rule, Superior Court Justice Susan Woodley said this rule is “not an absolute prohibition on activities that present a conflict of interest and duty.”
In Estate of Annie MacKay v Dawn MacKay (Evans), the plaintiff Tom Mackay told the court his ex-wife Dawn paid herself for taking care of his mother, Annie, before Annie’s death. Dawn, who took Annie for walks, driving trips, and shopping, did not deny paying herself, but in contrast to Tom’s evidence, she testified that Annie consented to her payment and Tom, who was Annie’s attorney, knew about the arrangement.
Tom and his brother Harold “left Annie’s stewardship to Dawn,” said Woodley, adding “there were periods when one or both [of the brothers] would not visit Annie for months at a time.”
“In the present case Annie had the right to request that Dawn provide care and companionship to her in exchange for compensation. Annie was entitled to organize her finances and personal services as she saw fit,” Woodley said. “. . . Once the court has found a conflict between personal interest and duty the question arises as to whether there was consent to the activity. In this case the question is whether Annie or her attorney provided consent to the payments for personal services.”
The case, therefore, hinged on whether Annie was capable of consenting to Dawn’s payment for her services. Despite contradicting evidence from the parties, Woodley found Annie was in fact capable of consenting and Tom was aware of the arrangement.
“Dawn’s evidence was that she was a registered nurse with 30 years of experience working with the elderly. She saw Annie regularly and discussed financial matters with her weekly. Although Annie was declining the decline was gradual. Dawn stated that in her opinion, Annie was capable of making financial decisions until 2005 but that after 2005 any further review by Annie of the bank records was meaningless,” Woodley said.
“It was submitted that Dawn’s evidence on this issue was self-serving. I disagree. Dawn did not have to concede incapacity. No medical evidence of incapacity was presented and Dawn paid the bulk of the compensation to herself following 2005,” the judge added.
Smith says the evidence was actually “pretty thin” that Annie consented to the payment. “If you read her decision, there’s not a ton of evidence, like outright evidence, that Annie consented,” he says. “It doesn’t look like there was any written agreement.”
Smith also says it appears in this case that the judge simply found Dawn more credible. “Clearly, the judge believed Dawn and didn’t believe Tom, and basically said, ‘You know what, this woman was well-motivated and didn’t make an obscene amount of money looking after this lady.’ It looked like reasonable compensation,” Smith says.
“I think what happened is the judge basically thought this was just sour grapes between Tom and his wife, and it was just an extension of family law litigation,” Smith says.
Alexander McLeod, who represented Dawn in this matter, agrees. The judge “didn’t buy the fact that [Tom] had gone five years without noticing anything,” McLeod says. “I think he was very aware as to what was happening.”
The case, McLeod says, does not exactly clarify the case law in terms of fiduciary duty and individuals’ authority to act within it. “I think what it does is it clarifies that the difference between an absolute and sort of a mixed fiduciary duty is going to be very case-specific.”
According to the ruling, Dawn provided services to Annie between 1999 and 2008, but she did not start receiving payment until 2003. Between 2003 and 2008, she was paid a total of nearly $38,000. Woodley found that to be a fair amount.
“Dawn’s contributions to Annie’s welfare were deserving of compensation. The continued attendances, consideration, comfort, care, and companionship provided by Dawn to Annie cannot be underrated or undervalued,” Woodley said. “. . . I find . . . the total compensation paid to be reasonable in the circumstances and I find a nexus between the care provided and the cost of the services sufficient to justify the payments.”
The judgement could have been very different had the judge found Annie was incapable of consenting to payment, Smith says, adding that the case is another example of the importance of mental capacity to consent in decisions near the end of life.
“If Annie had been unable to consent, even if Dawn had done all this work, I think a judge wouldn’t say, ‘You know what, you did all that work but you didn’t have the consent of the person you were looking after.’”
He adds: “Here, the biggest problem was that it was a verbal agreement. There was no direct evidence from Annie because she’s deceased.”