Endorsement

Introduction

This is an application by the Public Guardian and Trustee (“PGT”) to be appointed the permanent guardian for property for 91-year-old Fumio Hara (“Fumio”) and to terminate the current continuing power of attorney for property (“PoA”). That PoA names Fumio’s brothers, Gerald Fumio (“Gerald”) and Katsushi Hara (“Katsushi”) as Fumio’s attorneys for property.

The PGT says that there is compelling evidence that Gerald has misappropriated a substantial amount of money from Fumio in his capacity as his attorney and spent it on himself. He has also failed to take care of a number of Fumio’s expenses and has allowed expenditures to be unnecessarily incurred because of a want of care. The PGT argues that Gerald cannot be trusted with control of Fumio’s property or to make financial decisions in Fumio’s best interests.

Katsushi consents to the relief requested by the PGT. Although he is a joint attorney with his brother, Gerald, he lives at too far a distance from his brother and because of his own age and health issues has not carried out his duties under the PoA since 2022, leaving that role exclusively to Gerald.

Gerald is willing to agree to relinquish his role as Fumio’s attorney. But he says that a relative should take on the role. He speaks of nieces and nephews. However, none of them has turned up to seek to take over that role.

Litigation History

This application was commenced on May 14, 2024. On August 31, 2024, Yamashita J. adjourned this application at Gerald’s request, so that he could retain legal counsel. She further suspended the operation of the PoA and appointed the PGT as the temporary guardian of property for Fumio for the maximum 90 days. She found, based on her review of the PGT’s original materials, that “there are reasonable grounds to believe that Fumio is incapable of managing his property, is suffering serious adverse effects through loss of significant funds, and that his current attorneys for property have failed in their duty and need to be suspended.” She further stated that she found “sufficient evidence” before her that the PGT should be appointed as temporary guardian of property for Fumio.

The matter returned to court on November 13, 2024 before Conlan J. Gerald again requested an adjournment, which Conlan J. granted. He extended the PGT’s temporary guardianship for a further 90 days and set this hearing date, peremptory on Gerald.

Gerald has still filed no materials, nor, as set out above, have any other member of Fumio’s extended family come forward to apply to be appointed his guardian for property. Gerald nonetheless requests that I make such an order.

For reasons that follow, I grant the PGT’s application and name it the permanent guardian of property for Fumio.

Fumio’s Incapacity to Manage his Property

There is no dispute that Fumio is incapable of managing his property. He is 91 years old, suffering from dementia and residing permanently at the Maple Villa Long Term Care Centre in Burlington (“Maple Villa”). This finding is supported by the letter of Dr. T. Cuddy, Fumio’s attending physician at Maple View. He has offered the opinion that Fumio is no longer capable of making financial or shelter decisions. The February 2022 mini-mental examination resulted in a score of 5/30, which is indicative of severe cognitive impairment.

Gerald’s Misappropriation and Mismanagement of Fumio’s Property

Based on the evidence before me, provided in three PGT affidavits and Gerald’s own admissions during the argument of this application, he has misappropriated a great deal of money from Fumio while acting in a fiduciary capacity under the PoA. He has also mismanaged Fumio’s funds. Fumio fell into unnecessary debt as a result of Gerald’s conduct.

The PGT has produced a series of cheques, written on Fumio’s Simplii bank account by Gerald, in which he has paid himself amounts as large as $10,000. The total amount of those cheques is $53,179.25. None of those cheques indicate what they are for on their “re” line. Nor has Gerald accounted for the cheques in any way, other than, as set out below, to claim an entitlement to the money as Fumio’s brother and anticipated future estate beneficiary under Fumio’s will.

The PGT has also produced a number of other cheques on Fumio’s TD Bank account. Of these cheques, $115,800 were written to Gerald, and $51,000 to Katsushi, again with no indication of what they are for or why Gerald was entitled to the money that he received.

When I asked Gerald during the course of argument of this application, about the cheques on Fumio’s account that he wrote to himself, he admitted to taking the money. But he expressed that he felt entitled to do so. He explained that he would eventually receive the money under Fumio’s will when his brother died. He felt that the money should stay in the family rather than go to any of the PGT’s fees.

Fumio’s TD Retirement Fund went from $112,706.81 to zero in 2023, all under Gerald’s exclusive control. Again, Gerald has provided no explanation for the withdrawal of the funds or his entitlement to the funds.

Fumio’s TD credit card statements from October 2023 show expenses of $4,436.78 at the Brass Rail Tavern, a notorious Toronto strip bar, $603 at the East York Curling Club and $416.69 at the Sunset Grill Toronto. Clearly none of these expenses were incurred by or on behalf of Fumio.

While taking all of this money from his brother, Gerald was also negligent in paying his brother’s bills and mismanaged those assets that he did not take for himself. By September 19, 2023, the arrears of Fumio’s fees at Maple Villa totalled $9,317.64. The PGT paid this amount and began paying Fumio’s subsequent accounts commencing October 2, 2024.

Fumio owned a condo unit at 216F Plains Road W., Unit 409, Burlington (the “Condo”). For reasons that have not been explained and which may be self-evident in light of the other evidence in this case, Gerald took out a $106,000 mortgage on the Condo. Under the terms of the mortgage, Fumio was required to pay the mortgagee $889.55 per month until December 2025.

On April 11, 2024 the PGT learned that Gerald had already placed the Condo for sale, with a closing date only eight days later. The PGT tracked down the real estate agent and lawyer acting on the transaction. The lawyer agreed to hold all of the sale proceeds save $15,000 in trust. The $15,000 went to Gerald, to cover moving expenses and Maple Villa fees (which do not appear to have been paid). The PGT is now holding $523,238.87, representing the balance of the net proceeds of sale of the Condo.

The PGT also states that Gerald never filed Fumio’s taxes for 2022 and 2023, even though Fumio may be entitled to rebates and benefits if he were to have filed those returns.

Applicable Authorities

As Fumio’s attorney for property, Gerald has fiduciary duties which require him to work for the benefit of the donor alone, setting aside his or her own interests. As attorney, he is not entitled to obtain secret profits, benefits or advantages from his position without the full knowledge and express consent of the donor: see Richardson Estate v. Mew, 2009 ONCA 403, para 49, citing Elgi (Committee of) v. Elgi, 2004 BCSC 529, aff'd 2005 BCCA 627; Carey v. Carey, 2018 ONSC 4564, para 48. Here, it is obvious that Fumio is incapable of offering that consent.

The PGT does not question that Fumio’s PoA was valid when he executed it. But notwithstanding such a power of attorney, the Substitute Decisions Act, 1992 allows the court to appoint a guardian for property upon the following terms:

Court appointment of guardian of property

22 (1) The court may, on any person's application, appoint a guardian of property for a person who is incapable of managing property if, as a result, it is necessary for decisions to be made on his or her behalf by a person who is authorized to do so.

Same

(2) An application may be made under subsection (1) even though there is a statutory guardian.

Prohibition

(3) The court shall not appoint a guardian if it is satisfied that the need for decisions to be made will be met by an alternative course of action that,

(a) does not require the court to find the person to be incapable of managing property; and

(b) is less restrictive of the person's decision-making rights than the appointment of a guardian.

In Re Schaefers Estate, Fragomeni J. of this court reviewed the applicable authorities regarding the removal of an attorney appointed under a valid power of attorney. He concluded that a two-part test must be met before the attorney is removed. He stated:

[24] The jurisprudence establishes that two issues require consideration. First, there must be strong and compelling evidence of misconduct or neglect on the part of the attorney before a court should ignore the clear wishes of the donor. With respect to this issue, the evidence has to establish that the donor was capable of granting a proper power of attorney.

[25] The second issue relates to whether the court is of the opinion that the best interest of an incapable person are being served by the attorney.

The rationale for this reluctance to impose a court appointed guardian in the face of an attorney chosen by the person being protected is explained by Somers J. of this court in a case cited by Fragomeni J., Glen v. Brennan, [2006] O.J. No. 79 (S.C.J.). At para. 9, Somers J. states:

The courts have generally taken the view that a written power of attorney executed by the donor at a time when he was apparently of sound mind (and there is nothing in the material to suggest otherwise) is simpler to deal with and gives the donee more flexibility in dealing on behalf of the donor. Also favouring a continuation of the appointment respects the wishes of the person who made the grant.

In Re Schaefers Estate, Fragomeni J. cited the attorney's failure to provide a monthly accounting, his failure to voluntarily pass accounts, his failure to provide missing information or documentation with respect to missing funds and his inability to follow court orders as reasons to remove and replace him with a court appointed guardian. Those findings were cited with approval by Whitten J. in McMaster v. McMaster, 2013 ONSC 1115 and Leitch J. in Abel v. Abel Estate, [2017] O.J. No. 6729 (S.C.J.).

As the PGT points out, any gratuitous transfer of property raises the presumption of resulting trust. The onus falls on the recipient to rebut the presumption: Pecore v. Pecore, 2007 SCC 17, paras 24-25. That onus has not been rebutted in this case.

Analysis

Based on the uncontested evidence before the court and Gerald’s own admissions, he has more than breached his fiduciary duties to his brother, Fumio. He has shredded them. He has treated Fumio’s property and money as if they were his own. He misappropriated hundreds of thousands of dollars of his brother’s money on what appears to be the brazen assumption that he was entitled to the money. He was not. He has also mismanaged Fumio’s money so that he missed many months of payments to the home at which he resides and is cared for and has failed to even file his tax returns. He has also caused expenses on the Condo to be expended unnecessarily after Fumio went into his care home.

I can think of no more clear case to remove an attorney.

Gerald points to two things in opposition to this application. First, the wording of the PoA clearly directs that the PGT not be appointed should he be incapacitated. It states:

In addition to the exclusion of the Public Guardian and Trustee as set out above, I expressly direct that, in any case that I am found to be incapable of managing property (whether as a result of mental, physical, emotional or other impairment) the Public Guardian and Trustee shall not manage my affairs or act as my attorney or committee, but shall be expressly excluded from doing so.

Gerald argues that this term prohibits me from appointing the PGT as Fumio’s guardian of property.

Second, Gerald argues that the PGT should not be appointed because other family members could step in to become guardians. As set out above, he states that nieces and nephews are available to do so without naming them. Although he has been aware of this application since May 2024, he has not produced a single alternative guardian nor have any alternative guardians offered themselves. For example, Katsushi’s son attended with Katsushi at this hearing but has not volunteered for the role.

The PGT says that it did make efforts to find an alternative guardian but none were willing to take on the role. It accepts that it is the guardian of last resort.

In considering the two arguments above, I believe that they are related. I accept that Fumio strongly preferred that family rather than the government take charge of his financial affairs should he become incapacitated. However, with Gerald’s statement that he is willing to relinquish his PoA role, the fact that his conduct disqualifies him from that role in any event, and the absence of any other family members to assume the role, the PGT must assume the role as guardian of last resort.

I add that Fumio could not have expected that Katsushi would step back and that Gerald would treat his funds as if they were his own in so audacious a manner.

Accordingly, I find as follows:

a. I have been presented with compelling evidence of both misconduct and neglect on the part of Fumio’s remaining, active attorney, Gerald.

b. The best interests of Fumio require that Gerald be removed as his attorney for property on a permanent basis.

c. The SDA grants this court the jurisdiction to name the PGT as Fumio’s guardian of property despite his wish that it not be appointed.

d. No alternative family member has come forward to act as Fumio’s guardian of property.

e. It is in Fumio’s best interests that the PGT be appointed the permanent guardian of property for Fumio.

Thus, I appoint the PGT as Fumio’s guardian of property upon the terms set out in its draft order.

Costs

Regarding costs, I have reviewed the PGT’s bills of costs. I find that Ms. Carbonneau’s hourly rate of $250 per hour for a 2006 call (the rate for most of her services) is more than reasonable. I also agree with her that, in light of Gerald’s conduct, substantial indemnity costs are appropriate.

I find that costs fixed at $11,682.51 all inclusive, are fair, reasonable and proportionate in the circumstances, and so order. While I have no bill of costs from the self-represented Gerald, I find that they should be within his reasonable contemplation and are in fact modest considering the work done. The work includes three attendances. Today’s attendance was a lengthy one.

Frederick L. Kurz

Date: January 7, 2025