How Should A Power Of Attorney Be Granted In The Commercial Context?
ARTICLE  To print this article, all you need is to be registered or login on Mondaq.com. This article briefly explores the use of powers of attorney in the commercial context (such as in a shareholders agreement) in light of Ontario's current common law and statutory framework and provides some considerations to be kept in mind when attempting to institute a power of attorney in a commercial agreement. According to Justice B. R. Warkentin in Daley v. Daley,1 a power of attorney is a legal document granting the person appointed (the "attorney") the fiduciary obligation to utilize the power granted on behalf of the grantor of such power solely for the purpose of benefiting such grantor, as the use of the power to provide a benefit to the attorney without authority being a breach of the fiduciary obligation. A power of attorney in the commercial context may be caught under the SDA provisions and deemed a CPOA where it expresses the intention that the authority given may be exercised during the grantor's incapacity to manage property,9 which results in several drawbacks which may complicate or defeat such a grant in the commercial context, including that:  A grantor of a CPOA is capable of revoking a CPOA at any time they are capable of granting a CPOA, 10 and a CPOA is terminated when the grantor executes a new CPOA (unless the grantor provides that there shall be multiple CPOAs), revokes the CPOA or dies, 11 which may defeat the intent to have the power of attorney be irrevocable in the commercial context;  and a CPOA is terminated when the grantor executes a new CPOA (unless the grantor provides that there shall be multiple CPOAs), revokes the CPOA or dies, which may defeat the intent to have the power of attorney be irrevocable in the commercial context; The attorney must account for his or her dealings with the grantor's property, 12 which often times is not the intent under the commercial context as the power of attorney is granted to be the benefit of the attorney; and  which often times is not the intent under the commercial context as the power of attorney is granted to be the benefit of the attorney; and The attorney must act as "a fiduciary whose powers and duties shall be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person's benefit,"13 which would frustrate the power of attorney granted to the benefit of the attorney in a commercial context. According to the Court in Wilkinson v. Young,14 a power of attorney with respect to the property of a grantor may be exempted from the general limitations respecting termination imposed by the common law on the grantor's mental incapacity or death and which may also be distinguished from the CPOA identified under the SDA:  Where an agency is created, either for valuable consideration or by deed, and the purpose of the agency is to secure an interest of the agent, the authority normally cannot be revoked, i.e., where the authority is coupled with an interest, the authority is generally irrevocable [...] Similarly, where a power of attorney is given to a purchaser for value and is expressed to be irrevocable, the authority is not revocable nor is it revoked by the death or disability of the donor. However, in all cases where the agency is gratuitously created and is created merely for the benefit of the principal, it terminates at law with the latter's death or mental incompetency.15  Therefore, when drafting a power of attorney in the commercial context, it is recommended that it be made clear that the power of attorney granted is (i) for valuable consideration to secure an interest of the attorney (i.e. that the power of attorney is "coupled with an interest") and is irrevocable; (ii) not subject to the SDA, even if the power granted may be exercised during the grantor's incapacity to manage property; and (iii) not subject to the common law requirements that the attorney owes fiduciary obligations to the grantor or that the grant terminates on the death or disability of the grantor. Furthermore, as under the SDA, a CPOA is to be executed by two witnesses (which cannot be the attorney or their partner, or the grantor's partner or child),16 a power of attorney in the commercial context likely need not be witnessed and it is recommended that in such a situation, if witnessed at all, it be by no more than one person (which can be the attorney or their partner, or the grantor's partner or child) to distinguish such grant from a CPOA. However, this factor is not determinative. Footnotes  1 2015 ONSC 6741 at paras 92-93. 2 R.S.O. 1990, c. P.20 [POA Act]. 3 1992, S.O. 1992, c. 30 [SDA]. 4 smallra note 5 at para 51. 5 Spar Roofing & Metal smallplies Limited v. Glynn, 2016 ONCA 296 at para 50 [Spar Roofing]. 6 smallra note 2, s 2. 7 smallra note 5 at para 51. 8 J.B. v. De Souza, 2018 ONSC 4061 at para 15 [De Souza]. 9 smallra note 3, s 7(1). 10 Ibid, s 8(2). 11 smallra note 3, s 12(1). 12 Ibid, s 8(1)(d)  13 Ibid, s 32(1). 14 [1972] 2 O.R. 239. 15 Ibid at p 2. 16 Supra note 3, s 10. About Dentons  Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com  The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.