Estate Planning

The Solicitor's Duty to "Go Behind" a Power of Attorney

By Hull & Hull LLP

In Reviczky v. Meleknia, a house was "sold" (unbeknownst to the true owner) by a person acting under a fictitious power of attorney and posing as the applicant’s relative.  The purchaser, an innocent third party, financed most of the purchase price through a mortgage registered on title.  Although the purchaser conceded that he did not have good title, the bank that financed the transaction nonetheless took the position before the Court that its mortgage was valid.  

The lawyer representing the "vendor" sent a copy of the power of attorney to the lawyer acting for the buyer and the bank.  The power of attorney was dated just one month before the sale closed, the donor was over 88 years old and it was only witnessed by one person.  Both lawyers were unaware the document was forged. 

The solicitor for the buyer and the bank did not take any steps to learn about the form, content or validity of the forged power of attorney.   It was held that because the solicitor took no steps to scrutinize the document the bank’s mortgage was void.

It will be interesting to see how this case is applied.  I wonder if it will impact on a solicitor’s duties to “go behind” a power of attorney i.e. where a power of attorney has been signed recently and/or the donor is elderly, must a solicitor ask about the donor’s whereabouts, mental capacity at the time of signing, mental capacity at the time the power of attorney is being acted on etc.?

Thanks for reading,

Natalia

Full post as published by Toronto Estate Law Blog on January 17, 2008 (boomark / email).