The Unseen Risk to Personal Injury Victims

The recent Ontario case of Timbers Estate v. Bank of Nova Scotia,¹ illustrates the vulnerability of those who are victims of a catastrophic injury. Jeffrey Timbers was in a car accident in 1993 and remained in a coma until his death in 2005. Who negotiates for someone like him? Who hires the personal injury lawyer or gives the lawyer instructions?  When there is a settlement, who manages the money received? In this case, Jeffrey Timbers’ brother-in-law, Gordon Wood, was appointed his guardian of property² and managed the money received from the insurance company. When Mr. Timbers died, his daughter became the estate trustee of his estate. After reviewing the documents, she came to the conclusion that her uncle Mr. Wood had stolen settlement money from the structured settlement payments.   There seemed to be a lot of missing money and Jeffrey Timbers’ daughter, in her capacity as estate trustee, ended up bringing a claim for damages for breach of trust in the amount of $900,000.  While the case itself is interesting, for the purpose of this blog, I want to address the concern about how the process failed Mr. Timbers.  What steps might have been taken to catch an allegedly dishonest power of attorney or guardian of property and better protect someone like Jeffrey Timbers?

It may help to review the personal injury claims process for parties under disability.  In Ontario, an injured person may be entitled to make a personal injury claim.³  When the injured person is unable to manage his property,⁴ he is considered to be a person under disability.⁵   If the injured party has a power of attorney for property, then the person he appointed as his attorney will hire a lawyer who will file the appropriate affidavit with the court so that the attorney can act as the litigation guardian.⁶  If there is no power of attorney, then someone has to go to court to be appointed guardian of property.  Even though someone can file an affidavit to be a litigation guardian without being an attorney for property or a court appointed guardian of property, it is prudent to make an application to court for the appointment of a guardian of property so that, outside the litigation, someone is able to speak on behalf of the injured person who cannot speak on his own behalf.  For example, once the claim is settled, someone has to be able to manage the settlement money.

The guardian of property has the ability to do everything the incapable person could have done except make a will. The application to appoint a guardian of property is brought under the Substitute Decision Act (the “SDA”).⁷  There is a process to ensure that the incapable person receives a fair deal and is protected.  Rule 7.08⁸ of the Ontario Rules of Civil Procedure provides that every settlement involving a person under disability requires a judge’s approval.  The judge reviews everything from the quantum of the settlement to the reasonableness of the fees charged by the lawyer.  The judge also reviews affidavits of the litigation guardian and the lawyer acting for the litigation guardian.  These affidavits set out the reasons why the litigation guardian and the lawyer believe the settlement is in the best interests of the person under disability.  Notice must also be provided to the Public Guardian and Trustee (the “PGT”) and the judge may ask the PGT for its views.⁹  Up to that point, there is a protocol in place to protect a victim of a catastrophic injury.  The real risk begins once the settlement is finalized and the insurance company has paid the money.  At that point, the court appoints a guardian of property to manage the assets of someone who has suffered a catastrophic injury. The problem is, after the appointment, there is rarely someone checking up on him or her.

One of the problems in these types of cases is that the person who is appointed guardian for property is usually a trusted member of the family.  It may be  the accident victim’s wife, child, parent or sibling who selflessly gives up their rights to compensation to get more for their family member who needs it most.  While the PGT may make spot-checks, there is no one really watching the guardian of property on a regular basis to ensure that the guardian of property is using the money for the benefit of the injured party.  Will the trusted family member act as selflessly as we hope? Unfortunately, as alleged in the Timbers Estate case, there are times when even trusted family members take advantage of the most vulnerable.

Remember that in personal injury cases there is quite often a lot of money involved.  A successful motor vehicle accident claim can provide income replacement benefits, caregiver benefits, medical and rehabilitation benefits, attendant care benefits, and the payment of various other expenses.  In cases of truly catastrophic impairment, this can mean a payout of millions of dollars.¹⁰ After tough negotiation about the cause and consequences of the personal injury, the insurance companies will usually agree to some form of lump-sum payment or structured settlement agreement. A structured settlement is a type of insurance product called an annuity that guarantees the injured person a fixed stream of tax-free payments, usually for life.  One of the key advantages of the structured settlement is, of course, that the injured person is in no danger of outliving his benefits.  What can or should family members do to protect the person under disability and ensure that the guardian of property does not take advantage of the situation?

Here are some options to consider when a member of their family has gone through a catastrophic injury:

1. Obligation of Guardian of Property to Keep Records: It is important to remind the guardian of property that he or she is a fiduciary¹¹ who has both a common law and statutory duty to keep accounts of all transactions involving the disabled person’s property.¹²  If the proposed guardian of property is aware of his or her obligations, and is aware that concerned family members know of that duty, this may make him or her think twice before taking advantage of the situation.   The regulations are quite comprehensive, but in summary, a guardian of property must keep vouchers showing a list of assets at the beginning of the process, a list of what cash and assets were required and what was disposed of, and any investments made.  If the guardian of property is not keeping records or is not prepared to show the records to concerned family members, you may consider this a red flag for concern.

2. Passing  of Accounts.  There are three points where family members should ask that the court make an order that the guardian of  property pass his or her accounts at regular intervals. Making the guardian pass his or her accounts means that the guardian will have to  show all the records of what transpired with the property of the incapable person while the guardian of property was in charge. It will allow those who brought the motion to compel a passing of accounts to verify if the guardian of property has properly managed the incapable person’s money.  If the objections are not answered,  the matter goes to trial. The three points in time where one might ask a court to order that a guardian of property pass his or her accounts are as follows:

•  Application to appoint guardian of property.  When there is a catastrophic personal injury resulting in the accident victim  becoming incapable, a motion to appoint a guardian of property will take place. At that point, family members can ask for the order to provide that the guardian of property pass his or her accounts at regular intervals;
•  Motion for Approval of Settlement.  As indicated above, any settlement negotiated on behalf of an incapable person has to be approved by the court. The guardian of property must bring a Rule 7 motion seeking approval of the settlement by a judge. At that point, family members can also ask the court to include a provision in the judgment that the guardian of property pass his or her accounts at regular intervals;
• Section 42(4) Motion seeking leave to compel an accounting.   As explained above, the guardian of property is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.¹³  Section 32(6) of the SDA requires the guardian of property, in accordance with the regulations, to keep accounts of all transactions involving the property. Now what happens if there is suspicion of foul play and the guardian of property refuses to disclose the bookkeeping?  Arguably, this is contrary to his or her obligations under the SDA, which provides that the guardian of property must consult with supportive family members and friends of the incapable person.¹⁴  Failure to share what’s going on should be a red flag of concern and, arguably, gives reasonable cause for a concerned family member or friend to consider bringing an application under subsection 42(4) of the SDA for leave to compel the guardian of property to pass his or her accounts.¹⁵