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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.
  1. 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
  1.   Timbers Estate v. Bank of Nova Scotia, 2011 ONSC 3639 (CanLII).
  2.   The process for appointing a guardian of property in Ontario is set out in sections 22-30 of Substitute Decisions Act, 1992, S.O. 1992, c. 30.
  3.   Under the statutory accident benefits scheme created by, inter alia, the Insurance Act, R.S.O. 1990, c. I.8, the Statutory Accident Benefits Schedule, O. Reg. 34/10, and the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403/96.
  4.   Please see section 6 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30, which provides that a “person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.”
  5.   Under Rule 1.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the definition of “disability” includes a person who is mentally incapable within the meaning of section 6 or 45 of the Substitute Decisions Act, 1992 in respect of an issue in the proceeding, whether the person has a guardian or not.  Section 6 of the Substitute Decision Act is set out above in endnote iv.
  6.   See Rule 7.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides that, for a party under disability, the lawsuit must be commenced by a litigation guardian.  A court appointment for a plaintiff and applicant is not necessary if the mentally incapable person has a guardian with authority to act as a litigation guardian.  No person except the Office of the Childrens Lawyer or the PGT can act as a litigation guardian for the plaintiff or applicant until that person has filed an affidavit which sets out that the person: (a) consents to act as litigation guardian in the proceeding; (b) confirms that he or she has given written authority to a named lawyer to act in the proceeding; (c) provides evidence concerning the nature and extent of the disability; (d) in the case of a minor, states the minor’s birth date; (e) states whether he or she and the person under disability are ordinarily resident in Ontario; (f) sets out his or her relationship, if any, to the person under disability; (g) states that he or she has no interest in the proceeding adverse to that of the person under disability; and (h) acknowledges that he or she has been informed of his or her liability to pay personally any costs awarded against him or her or against the person under disability.
  7.   See section 22 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30.
  8.   See subrule 7.08(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: “No settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge.”  As well, please see DeMichino (Guardian of property of) v. Musialkiewicz (June 28, 2012, Juriansz, LaForme and Epstein JJ.A., Ontario Court of Appeal) 217 A.C.W.S. (3d) 709.  In this case the lawyers for he plaintiff (who suffered catastophic injuries) sought a premium for legal services rendered.  The motion judge did not approve of the settlement because the judge felt the premium to be excessive.  On appeal the plaintiff’s lawyer suggested a reduced premium which was approved.  Decision reflects the court’s desire to ensure that the settlement is in the best interests of the incapable person. And subrule 7.08(2): “Judgment may not be obtained on consent in favour of or against a party under disability without the approval of a judge.”
  9.   See subrule 7.08(5):“On a motion or application for the approval of a judge under this rule, the judge may direct that the material referred to in subrule (4) be served on the Children’s Lawyer or on the Public Guardian and Trustee as the litigation guardian of the party under disability and may direct the Children’s Lawyer or the Public Guardian and Trustee, as the case may be, to make an oral or written report stating any objections he or she has to the proposed settlement and making recommendations, with reasons, in connection with the proposed settlement.”
  10.   The legislation and case law surrounding the definition of “catastrophic impairment” is complex. For a recent decision of the Ontario Court of Appeal, see Pastore v. Aviva Canada Inc., 2012 ONCA 642 (CanLII).
  11.   A fiduciary is a person with both a legal and ethical duty of trust.  There is both a common law and statutory fiduciary obligation on an attorney for property. The statutory duties are set out in sections 32 and 38 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30. As articulated by Professor Waters in his book Waters’ Law of Trusts: “It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside. In the common law system this duty may be enforceable by way of an action by the principal upon the contract of agency, but the modes in which the rule can be breached are myriad, many of them in situations other than contract and therefore beyond the control of the law of contract. It was, in part, to meet such situations that Equity fashioned the rule that no one may allow his duty to conflict with his interest.”
  12.   Someone who is appointed as an attorney for property has a duty to keep proper records, which includes a duty to obtain and keep receipts. In Ontario, that common law duty has been codified under the Substitute Decisions Act, 1992, S.O. 1992, c. 30, see sections 32(6) Duties of guardian, Accounts; 33(1) Liability of guardian and 42; Passing of Accounts, as well as under Accounts and Records of Attorneys and Guardians, O. Reg. 100/96.
  13.   See subsection 32(1) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 .
  14.   See subsection 32(5) of the SDA, the Substitute Decisions Act, 1992, S.O. 1992, c. 30 .
  15.   Under subsection 42(4) of the SDA the Substitute Decisions Act, 1992, S.O. 1992, c. 30 .  The legislation provides that the following persons may apply to have the guardian of property pass his or her accounts: (1.) the grantor’s or incapable person’s guardian of the person or attorney for personal care; (2.) a dependant of the grantor or incapable person (in our case, Jeffrey Timbers’ daughter, if she was a dependant, could have applied to court to have her uncle pass his accounts);  (3.) the PGT (if there are suspicions and you report them to the PGT, the PGT may commence an application for an accounting); (4.) the Children’s Lawyer; (5.) a judgment creditor of the grantor or incapable person.; or (6.) any other person, with leave of the court.  Normally, “any other person with leave of the court” is the category most concerned family members will fall under.  But “any other person” must first seek leave of the court in order to apply to have the guardian of property pass his or her accounts.

The authors of this blog are Charles Wagner and Brendan Donovan. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP and Brendan was a partner.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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