Settlement Offer Found Void As Insured Lacked Capacity

September 25, 2017, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

T.P. and TD General

Decision Date: August 16, 2017
Adjudicator: Caroline King

INSURED LACKED CAPACITY- insured lacked capcity during the cooling off period; insured likely lacked capacity when signing settlement offer; neither inusrer nor lawyer were aware of metal decline; SABs is not like contract law. SABs are meant to be consumer protection legislation and contract should be disolved.

T.P. was injured in a car accident on June 5, 2008.  He applied for and received SABs from TD, but when a dispute arose about the benefits T.P. applied for arbitration at the FSCO.

Issues:

1. Did the parties enter into a binding settlement on September 2, 2009?

Result:

1. The parties did not enter into a binding settlement on September 2, 2009.

This case is about whether there is a binding settlement between T.P. and T.D..  T.P. seeks a finding that the parties did not enter into a binding settlement on September 2, 2009.  T.P. agrees that he has the burden of proving that the settlement was not binding, and seeks to prove either that: 1) T.P. did not sign the settlement documents; or 2) If T.P. is found to have signed the settlement document, the settlement is not binding as T.P. did not have the requisite capacity to sign the settlement documents and did not have capacity during the cooling-off period.

T.P. was twenty-two years old when he and his parents were involved in a car accident on June 5, 2008.  T.P. and each of his parents were individually represented by counsel Ms. Olivia Akpari, who negotiated settlements for each of them.  The parties agree that on September 2, 2009, the settlement documents for T.P. and for each of his parents, were signed.  In 2011, the tort claims for each of the three were subsequently transferred from the Lawyer to Mr. Ryan Naimark, (the “Current Lawyer”), who is now representing T.P. in this proceeding.

The parties agree that T.P.’s settlement documents complied with the legal requirements. The parties agree that the settlement funds were deposited into T.P.’s bank account on or about September 24, 2009, and that these funds were repaid to T.D. on May 16, 2014.  It was not disputed that T.D. did not know, or could have known, that T.P. may have lacked capacity at the time the settlement documents were signed on September 2, 2009, or in the cooling off period.

The evidence regarding who signed the settlement documents consisted of the conflicting evidence of Andieu Presilus, who is T.P.’s father (“Father”), and T.P.’s former lawyer Ms. Akpari (the “Lawyer”) and of the evidence from the parties’ respective forensic hand-writing expert witnesses.  The father gave his evidence with the assistance of a Creole/English language interpreter.

The Lawyer and the Father each claim that they were present when T.P.’s settlement documents were signed.  The lawyer states T.P. was in her presence alone when he signed, the Father had several versions of the story including that he took the document already signed to the lawyer, and that he himself signed the document in front of the lawyer without his son being present. As the Arbitrator found the Father’s testimony to be evasive and unreliable, he preferred the lawyer’s version that T.P. signed the documents himself in the lawyer’s presence.

Was T.P. Incapacitated?

The evidence on this issue included various medical records, a psychological report dated April 24, 2009 which predates the settlement, T.P.’s mental capacity assessment report dated November 15, 2016, and the evidence and testimony of the Lawyer and T.P.’s Father.

There is a marked difference in the documented medical evidence in the period just before September 2, 2009, and the medical evidence on and after September 2, 2009.

It is agreed that at approximately 8:02 p.m. on September 2, 2009, and in the four weeks that followed, T.P. had a total of five separate psychiatric hospitalizations where he was diagnosed with psychosis, and was involuntarily detained under Form 1 of the Mental Health Act.  In the years that followed, there was an ongoing pattern of further psychiatric hospitalizations with similar diagnoses under Form 1 of the Mental Health Act. On February 28, 2012, the Public Guardian was appointed T.P.’s guardian for property. 

The Arbitrator reviewed the five police reports and medical reports concerning T.P.’s involuntary admissions to hospital between September 2 and September 23, 2009. Clearly, he was ill.

T.P.’s Lawyer testified that she never had concerns about T.P.’s state of mind between September 2, 2009 and September 23, 2016.  The Lawyer stated that the first time she learned that there was a question about T.P.’s state of mind was in an email sent to her from the Current Lawyer dated December 14, 2016.   The Lawyer stated that on September 2, 2009, when T.P. attended her office to sign the settlement documents, T.P. was ‘normal’.   Sometime after September 2, 2009, the Lawyer commenced a tort action related to the accident and filed a statement of claim for T.P. and that at that time he seemed normal to her.  T.P.’s tort action, as well as his parents’ tort action were transferred to the Current Lawyer in 2011.

The Arbitrator accepted the Lawyer’s evidence that T.P. appeared ‘normal’ to her on September 2, 2009.  However, I note that not much evidence was led to indicate whether the interactions on September 1 and 2, 2009 were of a significant duration and nature for the Lawyer to probe T.P.’s thought process and engage in any meaningful assessment about T.P.’s ability to understand and appreciate the settlement documents.

The Substitute Decisions Act is clear that a party entering a contract is entitled to rely that the other person has capacity to contract unless the party has reasonable grounds to assume the person does not have capacity.  It is agreed that T.D. had no knowledge of any reasonable grounds to assume that T.P. did not have capacity.  Rule 10.1 of the Dispute Resolution Practice Code applies the presumption of capacity to statutory accident benefit claims.  However, this presumption can be overridden where there is compelling evidence which must withstand the test of objective scrutiny.

In this case there is compelling objective evidence to override the presumption of capacity.  During T.P.’s first psychiatric hospitalization, the hospital medical personnel gathered information from T.P.’s family and girlfriend that T.P. had been agitated and acting bizarrely not just on September 2, 2009 when he jumped off his parent’s third floor balcony, but also three days before September 2, 2009. 

This information was not given in anticipation of litigation. T.P. was found to be frankly psychotic and hearing voices and it was determined that T.P. should be involuntarily detained in the hospital.  He was not released until September 5, 2009.  The Capacity Assessment report determined that as a result of T.P.’s illness, he was not able to understand and appreciate the information and consequences of entering into a settlement or to instruct counsel. 

This expert opinion, was not contradicted by any other expert report, nor was the doctor required to be cross-examined. I have placed less weight on the Lawyer’s evidence about T.P.’s state of mind as there was no reliable evidence before me that the Lawyer was aware that she should probe and assess T.P.’s capacity and the Arbitrator was not satisfied that she did such a capacity assessment.

The Arbitrator found that T.P. lacked capacity during the two business days cooling off period, which concluded on Friday September 4, 2009.   This flows in part from my finding that T.P. did not have capacity when he signed the settlement documents and the related medical documents that show that he was involuntarily detained in hospital under Form 1 of the Mental Health Act, throughout the period September 2-5, 2009.  But in particular, on September 4, 2009, the medical records indicated that T.P.’s mood was “unstable” and “hostile”, that he had “no insight into his illness”, and that T.P. “has difficulty following directions and does not allow for reasoning”. At 3:04 p.m. that day, the last day of the cooling off period, T.P. had to be medicated and be put in restraints.

Statutory Accident Benefits Settlements are not ordinary contracts:

In the case of ordinary contracts, where a third party has no knowledge or reasonable grounds to believe that a contracting party lacks capacity, the third party is entitled to rely on the presumption of capacity, and the contract would only be voided due to issues such as mistake, misrepresentation, duress, and fraud.  An automobile accident benefit settlement agreement should not be considered to be an ordinary contract.  The Supreme Court of Canada held that a main objective of automobile insurance law is consumer protection

The Arbitrator found that while T.P. signed the settlement forms on September 2, 2009, they are not binding by reason of T.P.’s incapacity when he signed them.  They are also not binding by reason of T.P.’s incapacity in the two-day cooling off period.

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