Chesher et al. v. Monaghan [Indexed as: Chesher v. Monaghan
48 O.R. (3d) 451
[2000] O.J. No. 1731
No. C32618
Court of Appeal for Ontario
Austin, Laskin and Borins JJ.A.
May 19, 2000
*Application for leave to appeal to the Supreme Court of Canada was dismissed with costs March 15, 2001 (McLachlin C.J., Iacobucci and Bastarache JJ.) S.C.C. File No. 28081. S.C.C. Bulletin, 2001, p. 271.
Damages -- Personal injuries -- Structured award -- Periodic payments -- Gross-up -- Best interests -- Plaintiff seeking gross-up of future care costs -- Defendant applying for structured periodic payments -- Onus on plaintiff to show that periodic payments not in his or her best interests -- Trial judge not erring in holding that plaintiff's plan for use of future care costs portion of award not restricted to that head of damages -- Trial judge not erring in holding that absence of guarantee of payments a factor relevant to determination of plaintiff's best interests -- Courts of Justice Act, R.S.O. 1990, c. C.43, s. 116
After C's left leg was amputated below the knee, he successfully sued M for professional negligence as a physician. The trial judgment was for $579,863 of which approximately $188,500 was the present value of future care costs and $92,370 was the "gross-up" to offset income tax payable on the income from the anticipated investment of the future care costs portion of the judgment. At the time of the trial, C was 32 years of age. He was in good health, employed, married and the father of two children.
M moved pursuant to s. 116 of the Courts of Justice Act for an order that the award be paid periodically, rather than as a single lump sum. Under s. 116, if the plaintiff asks for a gross-up, then, at the motion of the defendant, the court is required to order periodic payments unless the court is of the opinion that such an order would not be in the best interests of the plaintiff having regard to all the circumstances of the case. C did not wish periodic payments and he submitted that M's proposal was not in his best interests. C deposed that he planned to use the judgment funds, including the portion for future care costs, to pay his debts with respect to his home mortgage, his credit card, and a business he operated with his brother; to finish his home; and to invest the balance for future income loss and future care costs. Further, he objected to the defendant's proposed structure because (1) although the periodic payment structure was indexed to increase with the consumer price index, medical costs had historically increased at higher rates; (2) the structure was inflexible and he might be without funds to respond in the future to advances in prosthetic technology; (3) the defendant's costs for the structure, which were around $174,000, were less than the lump sum that had been awarded for future care costs; and (4) the proposed structure carried no guaranteed amount and payments ending with his death, with the result that he was deprived of the ability to protect his wife and children. The trial judge dismissed M's motion for periodic payments, and he appealed.
Held, the appeal should be dismissed with costs.
Under the scheme of s. 116, damages are to be paid periodically unless to do so is not in the plaintiff's best interests. The onus of proving that periodic payments are not in the plaintiff's best interests is on the plaintiff. In considering the best interests of the plaintiff, the court must take into account a variety of factors set out in s. 116(3), but the court is not required to rule conclusively on each factor. The scheme permits the court to exercise its discretion and to consider a variety of factors. In the context of the immediate case, the best interests question was whether a lump sum payment or a periodic payment for future care costs was in the plaintiff's best interest. In this regard, the trial judge did not err in holding that C's plan for the use of the future care costs portion of the award was not restricted to that head of damages. The trial judge did not err in holding that C's background negated any significant risk of dissipation so that it was not necessary to critically scrutinize his financial plan to rule on the question of best interests. It was not an error to hold that the proposed structure was not in C's best interests because it offered no guarantee of payments. One of the circumstances affected by the loss of his lower leg was C's ability to provide for his family, during and following his life. That circumstance made relevant the question of whether the proposed structure had a guarantee period. Further, it was not an error to hold that the proposed structure was not in C's best interests because its inflexibility might prevent or impede the acquisition of future prosthetic technology or because medical care costs escalate at a rate higher than the Consumer Price Index. The trial judge did not err in holding that he could not re-craft the defendant's proposed structure. It was not necessary in this case to decide the issue of whether a plan for structured payments must utilize the full amount of the amount awarded for future care costs because the determination of this issu e would not have resulted in a different conclusion about what was in C's best interests.
APPEAL from an order refusing a structured award pursuant to s. 116 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
Cases referred to Lusignan (Litigation guardian of) v. Concordia Hospital (1997), 1998 27822 (MB KB), 130 Man. R. (2d) 73, [1999] 1 W.W.R. 733, 44 C.C.L.T. (2d) 90 (Q.B.); Milina v. Bartsch (1987), 49 B.C.L.R. (2d) 99 (C.A.), affg (1985), 1985 179 (BC SC), 49 B.C.L.R. (2d) 33 (S.C.); Peddle (Litigation guardian of) v. Ontario (Minister of Transportation), [1997] O.J. No. 2830 (Gen. Div.); Roberts v. Morana (1997), 1997 16227 (ON SC), 37 O.R. (3d) 333, 18 C.P.C. (4th) 338 (Gen. Div.); Valliant v. Powell, [1996] O.J. No. 5100 (Gen. Div.); Wilson v. Martinello (1995), 1995 303 (ON CA), 23 O.R. (3d) 417, 125 D.L.R. (4th) 240, 37 C.P.C. (3d) 325 (C.A.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 116 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 39.01(4), 53.09(1) Authorities referred to Finkelstein, "Structured Settlements", Canadian Lawyer Magazine (Nov./Dec. 1995) Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, Coulter A. Osborne J., Vol. 1 (Toronto: Queen's Printer for Ontario, 1988), pp. 422-23 Weir, Structured Settlements (Toronto: Carswell, 1984), p. 18
Marc J. Somerville, Q.C., for appellant. Robert J. Reynolds, for respondents.
The judgment of the court was delivered by
AUSTIN J.A.: --
Nature of Appeal
1Section 116 of the Courts of Justice Act, R.S.O. 1990, c. C.43 authorizes a court in appropriate circumstances to require a successful plaintiff to accept a structured or annuitized award instead of a lump sum. The defendant Monaghan appeals from the trial judge's refusal to make such an order. His concerns are with both the procedure and the merits.
The Facts
2William Chesher, the plaintiff, suffered a knee injury while water skiing on August 14, 1993. He was taken by ambulance to the Trenton Memorial Hospital where he was seen by the defendant Dr. Monaghan. The plaintiff was discharged about an hour and a quarter later. He was seen the next day at Belleville General Hospital and later that day at Kingston General Hospital. In the result, his left leg was amputated below the knee on September 29, 1994.
3This action was brought and, after trial, judgment was given in favour of the plaintiff on April 27, 1999 for $579,863. This figure constitutes 75 per cent of the damages assessed, 25 per cent having been deducted to reflect the possibility that the leg would have been lost even if Dr. Monaghan had not been negligent.
4Of the $579,863, approximately $188,500 represents the present value of future care costs and $92,370 the "gross-up", being the amount required to offset liability for income tax payable on the income from the anticipated investment of the $188,500.
5On June 21, 1999 the defendant brought a motion for an order permitting him to pay the future care costs periodically in the form of a structure, in order to avoid having to pay the gross-up. The motion was heard on June 29, and dismissed on July 2, 1999. The defendant appeals from that dismissal.
Section 116 of the Courts of Justice Act
6Section 116 of the Courts of Justice Act reads as follows:
116(1) In a proceeding where damages are claimed for personal injuries or under Part V of the Family Law Act for loss resulting from the injury to or death of a person, the court,
(a) if all affected parties consent, may order the defendant to pay all or part of the award for damages periodically on such terms as the court considers just; and
(b) if the plaintiff requests that an amount be included in the award to offset any liability for income tax payable on income from the investment of the award, shall order the defendant to pay all or part of the award periodically on such terms as the court considers just.
(2) An order under clause (1)(b) shall not be made if the parties otherwise consent or if the court is of the opinion that the order would not be in the best interests of the plaintiff, having regard to all the circumstances of the case.
(3) In considering the best interests of the plaintiff, the court shall take into account,
(a) whether the defendant has sufficient means to fund an adequate scheme of periodic payments;
(b) whether the plaintiff has a plan or a method of payment that is better able to meet the interests of the plaintiff than periodic payments by the defendant; and
(c) whether a scheme of periodic payments is practicable having regard to all the circumstances of the case.
(4) In an order made under this section, the court may, with the consent of all the affected parties, order that the award be subject to future review and revision in such circumstances and on such terms as the court considers just.
(5) If the court does not make an order for periodic payment under subsection (1), it shall make an award for damages that shall include an amount to offset liability for income tax on income from investment of the award.
7Section 116 makes available to the court a remedy applicable to certain claims for damages for personal injuries. It usually comes into play following the determination of liability and assessment of damages. The triggering event is the request, express or implied, on behalf of the plaintiff, for gross-up, that is for an amount to be included in the judgment to offset the liability which it is anticipated will become payable over the years on the income earned on the lump sum award or part of it. If that request is made, the court must consider the possibility of granting the plaintiff an amount payable on a periodic basis rather than a single lump sum.
8If the parties consent, the court may make the order for periodic payments on such terms as it considers just. Likewise the parties may agree that periodic payments need not be considered. If the parties do not agree, as in the instant case, the court is bound to consider the wisdom of periodic payments in any event, once the request is made for a gross-up. In this event the defendant will frequently move, or otherwise support, the making of a periodic award, rather than a lump sum plus gross-up. The rationale behind the defendant's position is cost. A structured settlement or award is not subject to income tax. A judgment payable in a lump sum is not subject to income tax either, but the income it will earn while invested is subject to income tax, hence the need to "gross-up" that lump sum: Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, Coulter A. Osborne J. (now A.C.J.O.), Vol. 1 (Toronto: Queen's Printer for Ontario, 1988), pp. 422-23.
9If the parties are not in agreement and the plaintiff asks for a gross-up then s. 116 requires the court to order periodic payments in such fashion as it considers just (s. 116(1)(b)), unless the court is of the opinion that such an order would not be in the best interests of the plaintiff (s. 116(2)), having regard to all the circumstances of the case (s. 116(2)). The onus is thus upon the plaintiff to demonstrate that periodic payments are not in his or her best interests. In considering the best interests of the plaintiff, the court must take into account whether the defendant has sufficient means to fund an adequate scheme of period payments (this usually involves one or more insurers), whether the plaintiff has a plan or a method of payment that is better able to meet the interests of the plaintiff than periodic payments by the defendant and whether a scheme of periodic payments is practicable having regard to all the circumstances of the case (s. 116(3)(a), (b), (c)).
10Section 116(4) makes provision for the future review and revision of orders made under s. 116 on consent. No concern was raised in this regard in the instant case.
11Where an order for periodic payment has been asked for and refused, s. 116(5) requires the court to award a gross-up.
12As I read the legislative scheme in s. 116(1), (2) and (3), damages are to be paid periodically unless to do so is not in the plaintiff's best interests. This requires the court to determine what is in the plaintiff's best interests: lump sum or periodic payment. This, perhaps, begs the question somewhat as it presupposes the court knows what is in the plaintiff's best interests. Therefore, a contextual setting is required to determine whether a lump sum payment, or a periodic payment, is in the plaintiff's best interests.
13In this appeal, the contextual setting is determined by the nature of the damages, i.e., what loss or expenses are the damages intended to compensate? In the instant case, as the damages are intended to compensate the plaintiff for his future care costs as assessed by the trial judge, the question that can be restated: what are the plaintiff's best interests in the context of having been awarded $188,500 in damages for his future care costs? Applying this analysis, the overarching issue in the appeal is whether the plaintiff's best interests -- having available, when needed, the money required to pay his future care costs -- can be achieved as well by the payment of a lump sum as by guaranteed periodic payments throughout his lifetime.
14In determining whether a structured award is not in the best interests of the plaintiff, the court need not engage in a conclusive or in depth analysis of each of the factors listed in s. 116(3). The provision merely requires the judge to take these factors into account in the context of all the circumstances of the case as required by s. 116(2).
15In taking into consideration the factors listed in s. 116(3), the court is not required to rule conclusively on each factor. For example, the court is not required to determine whether factors relating to the plaintiff's "plan or . . . method of payment" outweigh factors relating to "periodic payments by the defendant" and vice versa. The scheme created by the legislature in s. 116(2), (3) permits the court to exercise its discretion and to consider a variety of factors for the purpose of determining whether an order for periodic payments would be in the best interests of the plaintiff.
The Motion for a Structured Award
16The motion was argued on the basis of affidavit evidence. The trial judge calculated the annual cost of future care at $8,533.26, 75 per cent of which is $6,399.95. The defendant's affidavit material proposed a structure that would pay this either on an annual basis or on a monthly basis ($533.33). These payments would be tax-exempt in the hands of the plaintiff. They would be adjusted to the Consumer Price Index so that any negative effect of inflation would be made up. They would continue for the duration of the plaintiff's life whether or not he lived longer than the life expectancy used by the trial judge to calculate the present value of the assessment of cost of future care. The funds to purchase the annuity, $173,992.12 if paid monthly or $177,189.42 if paid annually, would be available from the Canadian Medical Protective Association and they would be placed with a federally registered Canadian life insurance company in business for more than 100 years, with minimum assets of $15 billion, high surplus ratios and a minimum AA + credit rating.
17The plaintiff's opposition to the defendant's proposal was set out in the plaintiff's affidavit as follows:
I feel that it would very much not be in my best interests, considering my entire situation and circumstances, that the lump sum Judgment be replaced by the structure proposed by the Defendant.
I feel that the proposed structure would not be in my best interests for, speaking broadly, two reasons:
I have plans for the lump sum award which would be interfered with, if not totally disrupted, by the lump sum award for future care, and the gross-up, being replaced by the proposed structure.
There are specific aspects of the proposed structure which, over and above the fact that it would interfere with my plans for the money, are not in my best interests.
The Structure would Interfere with my Plans for the Lump Sum Award
Having discussed the matter in some detail with [my lawyer] Mr. Reynolds, it is my expectation that, after payment of all legal costs and disbursements not recovered from the Defendant, and after deduction of the amount due to OHIP out of the judgment, I should be able to realize something in the neighbourhood of $400,000 or slightly more.
My plans for that lump sum are as follows:
The roofing business which my brother and I have operated for some years currently carries a debt of approximately $100,000, a lot of which is traceable to the construction of the building out of which we operate. The first thing that I want to do is pay off my share of that debt, $50,000.
The next thing that I want to do is pay off the rest of the mortgage on our home, approximately $30,000.
The next thing that I want to do is pay off some small debts, including a Visa bill, totaling approximately $13,000.
The next thing that I want to do is finish our home. There are a lot of things that we simply haven't been able to afford to do yet, including finishing the basement, putting on a deck, landscaping, etc. I expect this to cost somewhere between $30,000 and $50,000.
Satisfaction of all of these commitments will, in total, take approximately $123,000 to $143,000 of the lump sum award, leaving me with $257,000 to $277,000. That remainder will have to do to cover my future income loss, and my future care costs. I have already discussed potential investments with my bank, and I expect to put the money in a mixture of investments which will give me both some ongoing income and, hopefully, some long-term growth.
The difficulty with the structure proposed by the Defendant is that, effectively, it reduces the amount of money coming to me in cash so drastically -- by a total of ($92,370.00 + $188,510.25 = $280,880.25) to $119,119.75 that it simply does not leave me with enough money to even cover the commitments mentioned above, i.e. paying off debts and finishing our home. It would leave nothing at all to fund investment to generate some future income and, hopefully, capital investment growth for myself and my family.
Specific Aspects of the Defendant's Structure Contrary to my Best Interests
I see four critical problems with the structure proposed by the Defendant.
In the first place, it is indexed to increase with the Consumer Price Index. However, Mr. Reynolds is advised by Mr. Frank McKellar, of McKellar Structured Settlements, that medical costs have historically increased at a rate approximately 10% greater than consumer prices in general. Accordingly, the structure which the Defendant proposes is likely, as years progress, to fall further and further short of my true future care costs.
The second problem with the Defendant's structure is this: it proposes what, by definition, has to be a fixed pattern of future payments which cannot be adjusted once set. I am not yet 30 years of age and, with any luck, I'll be around for another 50 years. It seems very likely to me that, over the next 5 or 10 or 20 or 30 years, there are going to be major changes in the technology available in prosthetic design. Who is to say, for example, that a prosthetic may not become available which is powered and articulated at the ankle, and functions through microelectronics so that the nerves which terminate at the knee can control its functioning? Such a prosthetic might become available, might be very expensive, and probably wouldn't be covered by government or insurance funding. If I am on a fixed structure, I would have no way of buying it. Quite simply, I don't want to be locked for so long into a fixed payment pattern that would give me no flexibility to take advantage of technological innovation, especially when we are looking at such a long time frame. I think it's important to remember that 20 years ago desktop computers didn't even exist. Who is to say what prosthetic devices will be available 20 years from now?
I am advised by Mr. Reynolds and verily believe that, even if a structure were thought, in some general sense, to be appropriate, it would have to be a structure purchased utilizing the full amount of the court's award for future care costs -- $188,510.25. The structure proposed by the Defendant would only cost the Defendant something under $174,000. Thus, the Defendant's structure is not in my best interests because it is less than the structure amount to which I would be entitled on any approach.
My last concern with the proposed structure is this: It carries absolutely no guarantee. In other words, if I die next month, the entire value of the future care award and the gross-up would be lost. My family would completely lose the benefit of that money. In contrast to the situation where I receive the money in a lump sum, and invest it, so that it would be available to them if I die, the value in the structure would simply disappear on my death. I see this as grossly contrary to my "best interests". It may be argued that the only people who would lose in the event of my death would be my family, and not me, but I don't think that my interests can be divorced from that of my family in such a fashion. It seems to me that my interests have to be seen as including my interests as a father and a husband, and it would be completely contrary to those interests to deprive me of the ability to ensure that, should something happen to me, my family will have the benefit of this money.
18The defendant did not cross examine the plaintiff on his affidavit, nor did he file any material in reply. There is a dispute as to whether any of the plaintiff's evidence was challenged during the argument before the trial judge.
19The trial judge dismissed the defendant's motion to structure the award for the cost of future care, giving the following reasons:
The defendant seeks an order under s. 116(1)(b) of the Courts of Justice Act to satisfy the portion of the judgment in this matter which relates to future care costs by periodic payments pursuant to the terms of the structure which is outlined in the Motion Record.
A close reading of the section, as the Court of Appeal has held in Wilson v. Martinello [(1995), 1995 303 (ON CA), 23 O.R. (3d) 417 (C.A.)] makes such a disposition mandatory where the plaintiff has sought and been allowed a gross up for income tax as part of a lump sum award, unless the structure is found not to be in the plaintiffs best interests.
The court is required to take into account the provisions of s-s. 3(a), (b) and (c) in considering the plaintiffs best interests. In the Wilson case, while the court seems to place the onus on the plaintiff regarding the best interests issue, it held the plaintiff was not bound to propose an alternative structure or give assurances as to any particular investment scheme, notwithstanding the language of s-s. 3(b). As well the court confirmed that a plaintiff is entitled to a grossed up lump sum payment in law subject to the section under review and any duty to mitigate. Further, the plaintiffs proposed plan for the use of the money is not necessarily restricted to the head of damage for which the sum was awarded. Indeed if the plaintiffs background negates any significant risk of dissipation no critical scrutiny of his or her plan is required in order to rule on the question of best interests.
William Chesher is a bright, healthy, energetic 32-year-old who has been permanently employed with Proctor & Gamble in Belleville, Ontario since he left High School. He is married and has become the father of two children since the tragic accident which gave rise to the within action. He and a brother operate a roofing business on the side and have been so engaged for many years. Mr. Chesher outlines an overall financial plan which enables elimination of a business debt in the amount of $50,000, retirement of the mortgage on his family home $30,000, payment of accumulated debts in an amount of approximately $13,000 and finishing and refurbishing his home including the basement area, the addition of a deck and other incidental improvements at a cost of somewhere between $30,000 and $50,000. He has already obtained advice as to the investment of the remaining cash so as to supplement his income to meet on-going financial needs and to provide flexibility in this regard, as well as to achieve some long term growth. The scheme is sensible, reasonable, and meets Mr. Chesher's particular financial requirements, both present and future. As acknowledged by counsel for the defendant there is no concern that Mr. Chesher will ever become a public charge in any way.
Obviously, the structure (or structures) proposed by the defendant are very relevant to the determination of the best interests issue. Where the plaintiff criticizes the suggested scheme, it would be inappropriate and unfair to permit the defendant to meet such criticism by suggesting the court re- craft the details because s. 116 provides that any order is to be made "on such terms as the court considers just". In my view the section contemplates that the defendant put its best plan forward to be tested. The following are some other reasons which lead me to conclude that the structure described is not in the best interests of Mr. Chesher:
The inflexibility of a structure might prevent or make difficult the acquisition of future improved prosthetics as technology develops these.
The proposed structure does not utilize the full amount assessed in the judgment for future care costs.
The proposed structure indexes future payments to the Consumer Price Index only. In this case there was evidence that medical care costs escalate at a rate faster than the Consumer Price Index. Thus erosion of the future care funding could result.
There is no guarantee of payments. In the event of Mr. Chesher's premature death the funds which would otherwise be available to meet long term needs of his wife and children would be eliminated.
As such, the defendants' motion is dismissed with costs to the plaintiffs.
The Issues on Appeal
20The issues raised on appeal are conveniently set out in the appellant's factum as follows:
a) Did the trial court err in holding that Mr. Chesher's plan for the use of the award for future care costs is not necessarily restricted to that head of damages?
b) Did the trial court err in holding that as Mr. Chesher's background negated any significant risk of dissipation, no critical scrutiny of his financial plan was required in order to rule on the question of his best interests?
c) Did the trial court err in holding that the proposed structure was not in Mr. Chesher's best interests because it offered no guarantee of payments?
d) Did the trial court err in holding that the proposed structure was not in Mr. Chesher's best interests because it did not utilize the full amount assessed in the Judgment for future care costs?
e) Did the trial court err in holding that it could not re- craft the structure proposed by the defendant in order to meet what, in the court's opinion, is in the best interests of the plaintiff?
f) Did the trial court err in holding that the periodic payment of the award for future care costs was not in Mr. Chesher's best interests as its inflexibility might prevent or impede the acquisition of future prosthetic technology?
g) Did the trial court err in holding that there was evidence that medical care costs escalate at a rate faster than the Consumer Price Index and that therefore the proposed structure was not in Mr. Chesher's best interest.
A. Did the trial court err in holding that Mr. Chesher's plan for the use of the award for future care costs is not necessarily restricted to that head of damages?
21The appellant relies upon the proposition enunciated by McLachlin J., as she then was, in Milina v. Bartsch (1985), 1985 179 (BC SC), 49 B.C.L.R. (2d) 33 at p. 78, affirmed (1987), 49 B.C.L.R. (2d) 99 (C.A.), that:
- The fundamental governing precept is restitutioin integrum. The injured person is to be restored to the position he would have been in had the accident not occurred, insofar as this can be done with money. This is the philosophical justification for damages for loss of earning capacity, cost of future care and special damages.
22The appellant argues that, "[t]hese fundamental principles are to apply equally to subsidiary problems in damages assessments as they are to the main issues in question. One such subsidiary problem is the question of whether the award is to take the form of a lump-sum or a periodic payment."
23It appears to be the appellant's position that because the damages were calculated by the trial judge in a particular way, it follows that they must be paid in the same fashion. Absent a better method of accomplishing the same objective, such better method to be set out in the plaintiff's plan, the court is bound to impose a structured award.
24As I understand the appellant's argument, it is dealt with in Wilson v. Martinello (1995), 1995 303 (ON CA), 23 O.R. (3d) 417 at p. 430, 125 D.L.R. (4th) 240 (C.A.), as follows:
I think that counsel for the defendants is creating his own problems by insisting upon a reconciliation between the structure that he is advocating and the plan or method of payment that the plaintiff proposes. Defendant's counsel emphasizes that the plaintiff must propose a method of payment which is superior to the periodic payments of the defendant, as if this was simply a contest between structured awards. In the case on appeal, the contest is between periodic payments and no periodic payments. The plaintiff is not bound by s. 116 of the Act to propose an alternative structure to that of the defendant. He need give no undertaking that he will invest it in any particular manner. He wants a lump sum payment to invest or spend as he pleases. The only issue facing the trial judge is whether he should be allowed to have it.
25The appellant's approach also appears to be contrary to s. 116(2), which provides that an award is not to be structured if not "in the best interests of the plaintiff, having regard to all the circumstances of the case". This suggests a global rather than an item by item evaluation or comparison. By way of example, the structure proposed by the appellant does not concern itself with the respondent's debts. This is not surprising. The respondent, on the other hand, must concern himself with his debts; and in opposing the structure, he explained how it would interfere with his plans to retire those debts. In my view, the respondent's plan was sound. This is not just a personal view. In an article entitled "Structured Settlements" in the Nov./Dec. 1995 issue of Canadian Lawyer Magazine, Norton Finkelstein of Finkelstein Structured Settlements Inc. of Vancouver and Victoria is quoted, under the subtitle "When Do You Not Structure", as saying:
Normally we would look at [people's situations] and ask, what else they could do with their money. Could they pay off debt? Could they do something useful with the money rather than put it into a structure? And if they can, then we recommend that.
26In my view, the trial judge was clearly right in his approach in this respect.
B. Did the trial court err in holding that as Mr. Chesher's background negated any significant risk of dissipation, no critical scrutiny of his financial plan was required in order to rule on the question of his best interest?
27By way of background, it is helpful first to see what Finlayson J.A. said in Wilson v. Martinello and then to see what the trial judge said in the instant case. At p. 430, Finlayson J.A. stated that, "[h]aving regard to the circumstances of this case and the background of the plaintiff, the court is not required to scrutinize too critically the investment plans of the plaintiff in order to make a ruling as to his best interests."
28In the instant case the trial judge said that, "if the plaintiff's background negates any significant risk of dissipation no critical scrutiny of his or her plan is required in order to rule on the question of best interest" (emphasis added).
29The trial judge was obviously dealing with the procedure to be followed generally, and not just with this particular case. The trial judge then went on to set out the facts of Mr. Chesher's background, education, family circumstances, employment and prospects. Those are set out earlier in these reasons. He noted that Mr. Chesher had already obtained financial advice and concluded as follows:
The scheme is sensible, reasonable, and meets Mr. Chesher's particular financial requirements, both present and future. As acknowledged by counsel for the defendant there is no concern that Mr. Chesher will ever become a public charge in any way.
I should say as well that the trial judge had ample opportunity to study both Mr. and Mrs. Chesher when they gave evidence during the 12-day trial. Amongst other matters, the trial judge found that "both Mr. and Mrs. Chesher [were] forthright, responsive and fair".
30The claims of Mr. Chesher and Mr. Wilson arose under very different circumstances. Wilson's wife and daughter were killed. The survivors were the husband and a 15-year-old daughter. The husband was 44 years old and an experienced teacher. The damage award was for housekeeping costs. There was no ongoing obligation on his part to provide medical or financial care. A structure was not needed to provide for the victims. They were never going to be public charges.
31The instant respondent was 24 years old at the time of the accident, married and without children. At the time of the motion he was six years older and had two young children. His education and employment are set out earlier. The trial judge had ample opportunity to assess him and his prospects.
32In the text Structured Settlements by John P. Weir (Toronto: Carswell, 1984), the author deals with the "nature of the claimant" from a variety of perspectives. At p. 18 under the heading "Investment Sophistication", he says:
There can be no doubt that most injured claimants have neither the ability nor the inclination to handle any investment portfolio, let alone a substantial one. This is particularly evident in situations involving minors, the elderly, mental incompetents, alcoholics and the uneducated.
33The respondent not only does not come within any of these categories, he has expressed his desire to manage his portfolio and, in discussing potential investments with his bank, has demonstrated some ability to do so. No basis has been suggested for believing that any aspect of the trial judge's assessment of the plaintiff was inadequate or inaccurate.
C. Did the trial court err in holding that the proposed structure was not in Mr. Chesher's best interest because it offered no guarantee of payments?
34Putting this issue more accurately, did the trial judge err in considering as one of the reasons for rejecting the proposed structure, the fact that it had no guaranteed period of payments? In my view, the obvious answer to this question is "no".
35The appellant's position is that the objective of the award is restitutio ad integrum, that restitutio in the circumstances is a series of payments, either on an annual or a monthly basis, for medical care and that that requirement will end when the respondent dies. Accordingly, there is neither need nor place for a guarantee. If there were a guarantee period and the plaintiff died before that period ran out, then his family would get a benefit not required or contemplated by the judgment.
36If one considers only the matter of future care costs and nothing more, the appellant's logic is unassailable. Yet, from the respondent's perspective certainly a structure with a guarantee is better than one without. Counsel for the respondent argued that s. 116(2) requires the court to consider "the best interests of the plaintiff, having regard to all the circumstances of the case". This is the same argument as advanced on behalf of the plaintiff with respect to issue A. I agree with that argument. One of the "circumstances" affected by the loss of his lower leg is the plaintiff's ability to provide for his family, during and following his life. That "circumstance" makes relevant the question whether the proposed structure has a guarantee period. Obviously, in all the "circumstances" a structure with a guarantee period is better than one without, assuming all other conditions are equal.
37Under heading E, the appellant argues that the trial judge erred in holding that the court "could not re-craft the structure proposed by the defendant in order to meet what, in the court's opinion, is in the best interests of the plaintiff". Among the examples of such re-crafting given by the appellant are "indexing and guarantees". The appellant appears to reject guarantees in principle, but is prepared to accept them for bargaining purposes.
38The trial judge was clearly correct in regarding a structure with a guarantee as better than one without and in regarding the fact that the appellant did not provide a guarantee as one of the reasons for rejecting the structure proposed.
D. Did the trial court err in holding that the proposed structure was not in Mr. Chesher's best interest because it did not utilize the full amount assessed in the judgment for future care costs?
39This issue arises because of the existence of rule 53.09(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It provides as follows:
53.09(1) The discount rate to be used in determining the amount of an award in respect of future pecuniary damages, to the extent that it reflects the difference between estimated investment and price inflation rates, is 2.5 per cent per year.
40The trial judge used the figure of 2.5 per cent in arriving at $188,500 as the present value of the amount required to pay the plaintiff's anticipated medical care expenses during his life.
41An insurance company designing an annuity for a structured settlement or award is not bound by rule 53.09(1) and would look to the market for an appropriate rate. In the instant case the appellant has determined that an annuity can be provided for $177,189.42 (or $173,992.12 if paid monthly), which would meet the requirements as determined by the trial judge. The appellant refers to the difference between the $188,500 and the actual cost of the annuity as "savings".
42The issue is -- who gets the "savings"? Does the defendant get to keep them -- or must the whole amount be applied to the structure? If the latter, then the plaintiff will be over-compensated. If the former, then the defendant will be paying less than the amount awarded to the plaintiff.
43No Ontario case was cited in which the defendant was allowed to keep the "savings". In three cases the defendant was ordered to pay the whole amount of the conventional award towards the structure: see Valliant v. Powell, [1996] O.J. No. 5100 (Gen. Div.), para. 19; Peddle (Litigation Guardian of) v. Ontario (Minister of Transportation), [1997] O.J. No 2830 (Gen. Div.), paras. 9 and 14; and Roberts v. Morana (1997), 1997 16227 (ON SC), 37 O.R. (3d) 333, 18 C.P.C. (4th) 338 (Gen. Div.).)
44The court did not provide any reasons for the decision that the whole amount of the award should be applied to the structure in either Valliant or Peddle. In Roberts, O'Brien J. concluded that despite the possibility of overcompensation, s. 116 did not permit a defendant to create "savings" by purchasing an annuity at a cost lower than the amount of the damages awarded to the plaintiff. At p. 341 he said:
While the present market rates may result in what appears to be potential gain to a plaintiff when rule 53.09 is used to determine future care costs, I conclude courts should not accept that market difference as a means of reducing damages assessed for those costs. I conclude if there is to be (what is in effect) a change in the discount rate in these cases it must be as a result of clear and specific legislation or a change to rule 53.09. I conclude s. 116 as presently worded does not do so.
He confirmed this ruling in supplementary reasons, which appear at p. 342 as follows:
Following release of my supplementary reasons dated October 28, 1997, there was further argument related to the structured settlement issue. Counsel for the plaintiff stated gross-up was requested. Defence counsel repeated briefly some of the argument previously made as to whether the structure proposed by them could be imposed with the cost saving going to the defendants. I ruled it could not, and the full amount of the future care costs outlined in my judgment would be required to provide a structured settlement.
There was further argument as to which party was obliged to pay the commission costs payable to obtain that structure. My ruling was the benefits to the defendants in avoiding the costs of gross-up justified their paying all commission costs and I so ordered.
On that point, and in requiring the full amount of the future care costs awarded be required to fund the structure, I follow and agree with the reasons of Karam, J. in Valliant v. Powell [citation omitted].
45The appellant argues that following this course will inevitably result in the plaintiff being over-compensated and that that could not possibly have been the intention of the legislature. The appellant's position is that the application of rule 53.09(1) is to be limited to the calculation of an award in respect of future pecuniary damages, but no further. That is, once the amount has been determined, the application of the rule is ended and the payment of the award falls to be governed by other provisions, in this case market forces.
46The appellant relies upon the decision of Jewers J. of the Manitoba Court of Queen's Bench in Lusignan (Litigation Guardian of) v. Concordia Hospital (1997), 1998 27822 (MB KB), 44 C.C.L.T. (2d) 90, 130 Man. R. (2d) 73. This was an action for damages for medical malpractice with respect to brain damage suffered at birth. The claim was allowed, the trial judge found that the plaintiff's needs would best be met by residence in a group home and he assessed her annual costs at $54,750. A structure was imposed and an issue arose as to the disposition of the difference between the actual cost of the structure and the assessment of the damages on a lump sum basis.
47The issue was resolved in favour of the defendant. Jewers J. pointed out in his reasons that the corresponding Manitoba legislation "does not call for an initial conventional award to be made which is then to be satisfied by periodic payments". His reasons read as follows at p. 100:
The scheme of the [Manitoba] legislation is that the court may order that damages be paid in whole or in part by periodic payments. The court must specify and identify each head of damage for which the periodic payments are to be made. (Here I have identified future care costs as the subject for periodic payments.) Unlike the Ontario legislation, the Act does not call for an initial conventional award to be made which is then to be satisfied by periodic payments. Rather it authorizes the court to order that "damages be paid in whole or in part by periodic payments" (s. 88.2). Section 88.3(a) refers to a "periodic award"; s. 88.3(b) refers to a "head of damage" "for which periodic payments are awarded"; and s. 88.4(1) refers to a judgment that orders damages "to be paid by periodic payments". This phraseology implies that where the court desires to make a periodic award, there is to be the one award and that award is to be periodic.
I interpret the Manitoba legislation to mean that what the court should do is stipulate a plan of periodic payments and that all the defendant need do is produce security to meet the payments. The cost of that security (in the form of an annuity) is strictly the defendant's business as are any cost savings.
48Roberts is under appeal to this court; one of the issues raised is the question whether there can be any "savings" -- and if so, who gets them, plaintiff or defendant. In the circumstances, it is neither necessary, nor appropriate, to decide that issue in this appeal. The trial judge ultimately decided against a structured award. His decision was made on a number of bases. I am persuaded that even if he had concluded that the appellant was entitled to the savings, this would not have resulted in his arriving at a different conclusion as to the respondent's best interests.
E. Did the trial court err in holding that it could not re- craft the structure proposed by the defendant in order to meet what, in the court's opinion, is in the best interests of the plaintiff?
49What the trial judge actually said in regard to this issue was as follows:
Obviously, the structure (or structures) proposed by the defendant are very relevant to the determination of the best interest issue. Where the plaintiff criticizes the suggested scheme, it would be inappropriate and unfair to permit the defendant to meet such criticism by suggesting the court re- craft the details because s. 116 provides that any order is to be made "on such terms as the court considers just". In my view the section contemplates that the defendant puts its best plan forward to be tested.
50This issue raises the question of the procedure to be followed in dealing with s. 116. Wilson v. Martinello lays down the procedure in general terms, but there was no need to go into the specifics that are now in issue. In some cases such as the instant one, courts have dealt with s. 116 by way of an after-trial motion based on affidavit evidence. However done, it is clear that the onus remains on the plaintiff.
51In the instant case the motion was launched by the defendant almost two months after judgment, on the basis of a ten-page affidavit of trial counsel, appended to which was a five-page letter from a member of the McKellar Group, well known specialists in structured settlements. The response was in the form of the affidavit of the plaintiff, most of which is set out earlier in these reasons. The plaintiff was not cross- examined, nor was any further material filed.
52I take it from the argument of appellant's counsel in this court that he suggested at least one change in the structure in the course of argument below and that that change was not adopted. No specific change is referred to in the appellant's factum. The oral argument in that court may have suggested that the appellant should have been allowed to add a guarantee to its original offer.
53The appellant argues that the position taken by the trial judge is inconsistent with the wording of s. 116, with the principles of the adversarial system and with the decided cases. In Peddle, supra, paras. 13 and 14, the defendants proposed four different structures and in the end the court imposed a fifth.
54Reliance was placed by the appellant upon statements of a Mr. Polsinelli, speaking on behalf of the Attorney General, Mr. Ian Scott, during the legislative debate on the introduction of s. 116 in 1989 as follows:
Again, what we think this does is provide the court with some guidance in determining what the best interest of the plaintiff is in this particular situation. If they find that a structured settlement or a particular structure is not in the plaintiff's best interest, they may order something else such as a lump sum payment, for example, or a different type of structure.
(Emphasis added)
55With respect, this statement disregards both the responsibility of counsel and the principles of the adversary system without providing any appreciable guidance.
56In order to more adequately review on appeal the kind of order appealed from, it may be preferable to conduct such hearings on a viva voce basis, either in whole or in part, or to make provision for a transcript of the hearing. The appellant argues that the position taken by the trial judge was "inconsistent with the principles of the adversarial process," presumably because the appellant was not permitted to alter its proposal during the hearing of the motion. Without a more specific complaint, it is difficult to know precisely what changes the appellant would have made.
57Here the appellant neither cross-examined the respondent, nor tendered additional material. Presumably it was content to proceed on the basis of the record as it stood. Is an insurer in the position of the appellant entitled to come to court, as to a settlement meeting, with a relatively unlimited purse and to start raising the bidding if and when it detects the wind is blowing against it? What chance has a plaintiff such as Mr. Chesher in such a procedure? What is the role of the judge -- is he or she a judge, a mediator or a bargaining agent?
58The appellant supplied no answers to these questions beyond the bald propositions that it should have been able to amend its proposal on the hearing, and that, in any event, the judge had the power to order whatever was in the plaintiff's best interests. The defendant launched the motion to structure. There would have been time to negotiate both before and after the bringing of that motion. I agree with the judge below that the time to make one's best offer is before the time for decision passes to the court. In the final analysis, what the court can lawfully order falls within a very narrow range. I do not take the position that the trial judge cannot suggest that a guarantee be added or be increased or that applying the full amount of the award to the premium wouldn't be enough to persuade the court to accept the structure. I do suggest, however, that such a course is a very slippery slope for a judge to embark upon. I cannot fault this judge for not doing so.
F. Did the trial court err in holding that the periodic payment of the award for future care costs was not in Mr. Chesher's best interest as its inflexibility might prevent or impede the acquisition of future prosthetic technology?
G. Did the trial court err in holding that there was evidence that medical care costs escalate at a rate faster than the Consumer Price Index and that therefore the proposed structure was not in Mr. Chesher's best interest?
59These two grounds may be dealt with together for convenience. They were given by the trial judge as ". . . some other reasons which lead [him] to conclude that the structure described is not in the best interest of Mr. Chesher".
60The foundation for each is found in the plaintiff's affidavit set out earlier, which refers to the cost of prosthetic devices in para. 12 and a reference to differing rates of increase of medical costs and of the Consumer Price Index in para. 11. Neither foundation is entirely sound. The statement respecting medical costs is double hearsay (McKellar to Reynolds to Chesher) with attribution but without affirmation of belief as required by rule 39.01(4). The statement with respect to the future cost of prosthetic devices describes the possibility of major advances in such devices but at such expense that, locked into a structure, the plaintiff could not afford to buy such a device.
61As noted earlier, there was no cross-examination on either statement, nor was there any responding material filed. As I understood counsel on the appeal, counsel for the respondent said that no complaint was made in argument on either matter. Counsel for the appellant on the other hand said he did complain. Counsel for the respondent stated flatly in his factum that counsel for the appellant did not contest the admissibility at any stage below. This court cannot resolve this issue beyond pointing out that the trial judge relied on both of these points without noting any objection to the evidence by anyone.
62In so far as the statement respecting the future cost of prosthetic devices is concerned, that is not hearsay. It is the opinion of an intelligent lay person who has a very definite reason to be relatively knowledgeable about the subject and who is expressing an entirely reasonable idea as to what might well happen within a period of immediate concern to him. It is clearly not an expert opinion. It is admissible; the only question is the weight to be attached to it.
63Standing behind the appellant is the Canadian Medical Protective Association. It is difficult to imagine anyone being in a better position to provide a response to the statement about prosthetic devices. The structure tendered by the appellant is one prepared by and with the assistance of Frank McKellar Associates. Again, in the circumstances, it is difficult to imagine anyone being in a better or stronger position to provide a response to the statement comparing medical costs with the C.P.I.
64Instead of providing such responses, the appellant devoted 41 out of the 100 paragraphs in his factum to dealing with those two statements in every imaginable way except one -- namely to suggest that they are false. In the circumstances, I am not prepared to find that the trial judge erred in relying on those statements to the extent that he did.
Summary and Conclusion
65In summary, I agree that the trial judge was correct in not considering the proposed structure in isolation and in regarding the non-inclusion of a guarantee, and the inflexibility of a structure as factors. I am not persuaded that the trial judge gave insufficient consideration to the plaintiff's means or inappropriate weight to the evidence respecting the cost of future prosthetic technology or the relative rates of escalation of medical care costs and the C.P.I. Nor am I persuaded that the trial judge improperly denied the defendant the opportunity to alter its proposed structure. Having regard to the amount of the prospective "savings", namely, a maximum of $14,518.01, I am persuaded that the trial judge's conclusion as to the plaintiff's best interests would not have been changed had he taken a different view of the question as to the appellants' entitlement to the "savings".
66Accordingly, I would dismiss the appeal with costs.
Appeal dismissed.
