A Mandatary Refuses to Submit the Final Report for His Administration

In Quebec, a person who administers another person’s property under a power of attorney or a protection mandate does not normally have complete freedom to manage that property without explanation. The role of a mandatary is based on confidence, but it also involves important duties of administration, transparency and accountability.

Problems can arise when the mandate ends and the mandatary refuses to provide a final report of his administration. The situation may become particularly important when the person who granted the mandate has died and the liquidator of the Estate needs to determine what happened to the deceased’s property before death.

What is a mandatary?

A mandatary is a person authorized to act for another person, generally referred to as the mandator. The authority may arise from an ordinary power of attorney or, in cases involving incapacity, from a protection mandate that has become effective according to the applicable legal process.

The scope of the mandatary’s authority depends on the document and the circumstances. A mandatary may be authorized to deal with bank accounts, investments, real estate, expenses, contracts and other financial matters.

The fact that a mandatary has authority to administer property does not mean that the property becomes his own. The mandatary is managing property or exercising powers for another person and must generally be able to explain how those powers were exercised.

What happens when the mandate ends?

A mandate can end for different reasons. Depending on the circumstances, it may end because it is revoked, because the mandatary is replaced, because the purpose of the mandate has been completed or because of the death of the person who granted it.

The end of the mandate does not necessarily end the mandatary’s responsibilities concerning the period during which he acted.

A former mandatary may still have to account for his administration, return property and provide documents or information necessary to establish what was done while the mandate was in effect.

This is particularly important when significant financial transactions occurred shortly before the mandate ended.

What is a final report of administration?

The expression “final report” can refer broadly to the accounting that allows the interested persons to understand what the mandatary did with the property placed under his administration.

Depending on the nature and complexity of the administration, an adequate accounting may include information concerning assets administered, income received, expenses paid, transfers made, withdrawals, investments, debts, property sold or acquired and the balance remaining at the end of the administration.

Supporting documentation can be just as important as the accounting itself. Bank statements, invoices, receipts, contracts, tax documents, investment records, notarial documents and proof of transfers may be necessary to verify the transactions.

A simple statement that the money was properly spent may not be sufficient where legitimate questions exist about the administration.

What if the mandatary refuses to provide the final report?

A refusal to account does not necessarily establish that the mandatary committed wrongdoing. Records may be incomplete, the parties may disagree about the extent of the reporting obligation, or there may be uncertainty about who is entitled to receive the information.

Nevertheless, a persistent refusal can create serious difficulties.

A person who administered another person’s assets may be required to justify transactions made during the mandate. If voluntary disclosure cannot be obtained, a formal demand may be made requesting an accounting and the relevant supporting documents.

If the dispute cannot be resolved, court proceedings may become necessary to compel the former mandatary to provide an accounting, deliver documents, return property or address transactions that are challenged.

The precise remedy depends on the type of mandate, the wording of the document, the nature of the administration and whether the mandator is alive, incapable or deceased.

What happens when the mandator has died?

Death can transform what initially appears to be a dispute over a power of attorney or protection mandate into an Estate administration issue.

The liquidator must identify the deceased’s assets and liabilities and administer the Estate. To do so properly, the liquidator may need information about transactions carried out by the mandatary before death.

Suppose, for example, that a mandatary had access to the deceased’s bank accounts during the final years of the deceased’s life. After the death, the liquidator discovers that substantial amounts were withdrawn or transferred, but the available banking records do not explain why.

The liquidator may need an accounting from the former mandatary to determine whether the transactions represented ordinary living expenses, gifts, reimbursement of expenses, payment of debts, transfers authorized by the deceased or transactions that should be questioned.

The existence of a Will does not necessarily answer these questions. A Will generally governs the property forming part of the Estate at death. It does not automatically explain what happened to property transferred before death.

Can the liquidator demand information from the former mandatary?

A liquidator responsible for administering an Estate may have a legitimate need to reconstruct the deceased’s financial situation and investigate transactions that affect the Estate.

The former mandatary’s records may therefore become important to the Estate administration.

The liquidator should distinguish between transactions that are properly documented and those requiring additional explanation. The objective is not necessarily to challenge every withdrawal or payment. It is to establish an accurate financial history and determine whether property belonging to the deceased must be recovered.

What if money was transferred to the mandatary personally?

Transactions benefiting the mandatary personally deserve particular attention.

Such a transaction is not automatically improper. There may be a valid explanation. The deceased may have authorized a gift, owed money to the mandatary, agreed to reimburse expenses or otherwise approved the transaction.

However, when a person controlling another person’s finances transfers substantial property to himself, questions may arise about authorization, consent, conflicts of interest and the purpose of the transaction.

The surrounding circumstances can become especially important if the mandator was elderly, vulnerable or experiencing cognitive decline when the transactions occurred.

Was the money a gift?

Disputes frequently arise because one person describes a transfer as a gift while the Estate considers it unexplained or unauthorized.

The fact that money was transferred does not, by itself, resolve whether a valid gift was intended. Evidence concerning the deceased’s intentions, financial circumstances, communications, banking records and conduct may become relevant.

The absence of documentation does not automatically determine the outcome, but it can make the dispute significantly more difficult.

What if the mandatary no longer has the documents?

The passage of time can create practical problems. A former mandatary may claim that receipts were discarded, records were lost or online banking information is no longer accessible.

The absence of records does not necessarily eliminate the issue.

Depending on the circumstances, information may sometimes be reconstructed through financial institutions, accountants, tax records, notaries, investment firms and other third parties.

A reconstruction may not be perfect, but it can help identify unusual transactions and determine which transactions still require an explanation.

Protection mandate versus ordinary power of attorney

An ordinary power of attorney and a protection mandate do not operate in exactly the same way.

A power of attorney is commonly used while a person remains capable of managing his or her affairs. A protection mandate is intended to address the possibility that the person becomes incapable and generally requires additional legal steps before it operates in that context.

The nature of the instrument can affect the mandatary’s powers, the persons entitled to information and the procedures available when administration is disputed.

For that reason, the document itself should always be examined rather than assuming that every mandatary has identical powers and obligations.

Does a refusal to account mean fraud?

No.

A refusal or failure to provide an accounting should not automatically be characterized as fraud, theft or misappropriation. Those conclusions require evidence.

There are many possible explanations for inadequate reporting, including poor record keeping, misunderstanding of the mandatary’s responsibilities, family conflict or disagreement over the scope of the accounting.

At the same time, the absence of transparency should not simply be ignored where significant assets are unexplained. The financial records and circumstances should be examined objectively.

Possible solutions

The first practical step is usually to identify precisely what information is missing.

A written request can specify the period covered, accounts involved, transactions requiring explanation and supporting documents sought. A defined request is often more effective than a general demand for “all records.”

If the information is not provided, a formal demand may follow.

Where cooperation remains impossible, judicial proceedings may be considered to obtain an accounting, production of documents, return of property or other appropriate remedies.

In an Estate context, the liquidator may also need to obtain records independently from banks and other institutions to reconstruct the deceased’s financial history.

Time can matter. Financial records may become more difficult to obtain as years pass, and legal claims can be subject to time limits. Unexplained transactions should therefore generally be investigated without unnecessary delay.

A mandatary under a power of attorney or protection mandate exercises significant authority over another person’s affairs, but that authority is accompanied by responsibilities.

When the mandate ends, the former mandatary may still have to explain his administration and provide the information necessary to understand what happened to the property he managed.

If the mandator has died, the issue may become directly connected with the administration of the Estate. The liquidator may need the former mandatary’s accounting to establish the deceased’s financial position, identify Estate property and determine whether any assets should be recovered.

A refusal to provide a final report does not automatically prove misconduct. It does, however, create an issue that may require a formal demand, reconstruction of financial records and, where necessary, court intervention.

This text is provided for legal information purposes only. If you have a specific question regarding your personal situation, please contact a lawyer.

Allen Madelin Avocats offer consultations both in person and via videoconference. The first consultation is offered for $125.For more information, please contact us by telephone: 1 514 904 4017 or by e-mail: [email protected].