Newton v. Director of the Ontario Disability Support Program of the Ministry of Community and Social Services

[Indexed as: Newton v. Ontario (Director, Disability Support Program)]

Ontario Reports

Ontario Superior Court of Justice,

Divisional Court,

Marrocco A.C.J., Corbett and Horkins JJ.

October 16, 2014

123 O.R. (3d) 151 | 2014 ONSC 6006

Case Summary

Social assistance — Entitlement — Appellant's personal injury action settled in 1986 and $60,000 of settlement money used to purchase lifetime annuity — Only $60,000 being "damages or compensation for pain and suffering as result of injury" and therefore exempt from inclusion in income under s. 43(1)4 of O. Reg. 222/98 in determining financial eligibility for income support — Amount received in excess of $60,000 being interest income and not exempt — O. Reg. 222/98, s. 43(1)4.

The appellant suffered head injuries in a motor vehicle accident in 1980. His personal injury action was settled in 1986. A structured settlement was set up and $60,000 of the settlement money was used to purchase a lifetime annuity. In 1995, the appellant began receiving social assistance. Section 43(1)4 of O. Reg. 222/98 excludes from "income", for the purpose of determining financial eligibility for income support, an amount received as damages for pain and suffering as a result of injury. The Director of the Ontario Disability Support Program determined that that exemption was not unlimited, but rather was limited to the $60,000 used to fund the annuity. The Social Benefits Tribunal affirmed that decision. The appellant appealed.

Held, the appeal should be dismissed.

"Damages . . . for pain and suffering as a result of injury" in s. 43(1)4 of the Regulation were limited to the $60,000 lump sum used to fund the annuity. The rest of the money received by the appellant was interest income and was not exempt.

Mule v. Ontario (Director, Disability Support Program) (2007), 2007 82788 (ON SCDC), 88 O.R. (3d) 326, [2007] O.J. No. 5322, 233 O.A.C. 321 (Div. Ct.), consd

Other cases referred to

Gray v. Ontario (Director, Disability Support Program) (2002), 2002 7805 (ON CA), 59 O.R. (3d) 364, [2002] O.J. No. 1531, 212 D.L.R. (4th) 353, 158 O.A.C. 244, 44 Admin. L.R. (3d) 88, 113 A.C.W.S. (3d) 355 (C.A.); Peplinski v. Ontario (Director, Disability Support Program), [2012] O.J. No. 3015, 2012 ONSC 2972, 293 O.A.C. 388 (Div. Ct.); Sampson v. Ontario (Director, Disability Support Program), [2002] O.J. No. 838 (Div. Ct.); Wedekind v. Ontario (Ministry of Community & Social Services) (1994), 1994 1659 (ON CA), 21 O.R. (3d) 289, [1994] O.J. No. 2849, 121 D.L.R. (4th) 1, 75 O.A.C. 358, 7 C.C.E.L. (2d) 161, 52 A.C.W.S. (3d) 215 (C.A.)

Statutes referred to

Family Benefits Act, R.S.O. 1990, c. F.2 [rep. by S.O. 1997, c. 25, s. 4(1)]

General Welfare Assistance Act, R.S.O. 1990, c. G.6 [rep. by S.O. 1997, c. 25, s. 4(2)]

Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sch. B [as am.], s. 31(1), (5) [page152]

Rules and regulations referred to

O. Reg. 222/98 (Ontario Disability Support Program Act, 1997), s. 43(1)4 [as am.], (2)

APPEAL from a decision of the Social Benefits Tribunal affirming a decision of the Director of Ontario Disability Support Program.

Edmund Newton, in person.

Mimi N. Singh, for respondent.

The judgment of the court was delivered by

HORKINS J.: —

Introduction

[1] In 1980, Edmund Newton (the "appellant") was struck by a car while riding his bicycle. He suffered head injuries and commenced an action for damages. In 1986, the action settled. A structured settlement was set up and $60,000 of the settlement money was used to purchase an annuity. The annuity guaranteed the appellant a stream of monthly payments for the rest of his life, for a minimum period of 35 years. The monthly payments started at $320.89 per month effective February 6, 1986, and were indexed at 3 per cent per year.

[2] In 1995, the appellant began receiving social assistance, first under the General Welfare Assistance Act, R.S.O. 1990, c. G.6 and then in 1997 from the Family Benefits Act, R.S.O. 1990, c. F.2 and its successor, the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sch. B.

[3] In 2007, the Ministry of Community and Social Services ("ministry") discovered that the appellant was receiving payments from the annuity. The receipt of the annuity payments required the respondent, Director of the Ontario Disability Support Program (the "Director"), to consider whether an amount in excess of $60,000 should be treated as exempt income, for the purpose of determining financial eligibility for income support.

[4] Section 43(1)4 of O. Reg. 222/98 (the "Regulation") states what shall not be included in income when determining financial eligibility for income support. The following part of the Regulation is relevant for this appeal:

43(1) The following shall not be included in income:

4. Subject to subsections (2), (3) and (5), an amount received as damages or compensation for, [page153]

i. pain and suffering as a result of injury to or the death of a member of the benefit unit[.]

[5] The Regulation further states that the exemption shall not exceed $100,000 subject to s. 43(2) that is not relevant on this appeal.

[6] The Director determined that the $60,000 used to fund the annuity would be treated as exempt income pursuant to the Regulation. In the year 1998, the appellant had received a total of $60,139.08 from the annuity. In the year 2007, when the ministry learned about the annuity, $117,587.16 had been paid to the appellant under the annuity. By this point, the appellant had not only exceeded the $60,000 exemption, but as well the $100,000 limit in the Regulation.

[7] The Director decided to start reducing the appellant's benefits as of May 2007, and decided to overlook the fact that the appellant had received "some $57,000 of interest income". The ongoing payments from the annuity were not exempt.

[8] The appellant requested an internal review of the reduction on June 1, 2007. On July 16, 2009, the Director affirmed the decision and the appellant appealed to the Social Benefits Tribunal (the "tribunal") on June 25, 2007. By decision dated March 14, 2008, the tribunal allowed the appeal.

[9] The Director subsequently applied for a reconsideration of the tribunal's decision, which was refused by letter dated June 11, 2008. The Director appealed the tribunal's refusal to the Divisional Court, and the matter was sent back to the tribunal for a new hearing before a different panel by court order dated March 30, 2010.

[10] A new hearing was held before the tribunal on June 21, 2011. On August 18, 2011, the tribunal released its decision (the "decision") affirming the Director's original decision.

[11] The appellant appeals the decision to this court. The issue on this appeal is whether the exemption under the Regulation is limited to the $60,000 used to fund the annuity or should be unlimited, as the appellant urged during his oral argument.

Court's Jurisdiction and Standard of Review

[12] The Divisional Court has jurisdiction to hear an appeal from a decision of the tribunal on a question of law pursuant to s. 31(1) of the Ontario Disability Support Program Act, 1997 ("ODSPA").

[13] An error of law arises when the tribunal interprets the statutory provision incorrectly, applies the wrong legal test or principle, fails to apply a legal principle or applies it incorrectly, ignores relevant factors or relies on irrelevant factors or fails to [page154] appreciate relevant evidence or makes a finding of fact with no evidence.

[14] Under s. 31(5) of the ODSPA, the court has the power to do any of the following:

31(5) . . .

(a) deny the appeal;

(b) grant the appeal;

(c) grant the appeal in part; or

(d) refer the matter back to the Tribunal or the Director for reconsideration in accordance with any directions the Court considers proper.

[15] The parties agree that the decision of the Director is reviewable on a standard of correctness: see Sampson v. Ontario (Director, Disability Support Program), [2002] O.J. No. 838 (Div. Ct.), at para. 3; Mule v. Ontario (Director, Disability Support Program) (2007), 2007 82788 (ON SCDC), 88 O.R. (3d) 326, [2007] O.J. No. 5322 (Div. Ct.), at paras. 11-12 ("Mule"); Peplinski v. Ontario (Director, Disability Support Program), [2012] O.J. No. 3015, 2012 ONSC 2972 (Div. Ct.), at para. 2.

The Tribunal's Decision

[16] The tribunal considered the evidence and found that the appellant received a lump sum for damages of $60,000. The appellant instructed his lawyer to use the lump sum payment to purchase the annuity that generated the monthly stream of income. The tribunal characterized the lump sum as the "capital" or "principal" amount generating investment returns in the form of a stream of monthly payments to be paid to the appellant for a minimum of 35 years. This lump sum gave rise to the monthly payments, since without the lump sum, "there would not be any stream of payments".

[17] With respect to the issue of interest, the tribunal rejected the appellant's argument that the monthly payments could not be broken down into interest and capital components. While the tribunal agreed that it would be "quite complex to calculate the interest component of each monthly payment", it concluded that the interest component of the annuity payments could not be overlooked.

[18] The tribunal characterized the interest component as "interest income" paid to an investor as compensation "for the passage of time". The interest is calculated based on the interest rate in effect at a specific period of time. As a result, all of the money in excess of $60,000 was interest income. [page155]

[19] Since all payments above $60,000 represented interest income, the tribunal concluded that only $60,000 could be exempted under s. 43(1) of the Regulation. The tribunal commented that to allow an exemption of $100,000 would place the appellant in an "unfair advantage over all the other recipients of under the ODSP program", emphasizing that a purpose of the Ontario Disability Support Program is to be "accountable to the taxpayers of Ontario".

[20] The tribunal upheld the Director's decision to reduce the appellant's income support payments as of May 31, 2007. The tribunal agreed with the Director's decision to "overlook the fact that the Appellant has in fact already received some $57,000 in interest income". From that date forward, all moneys that the appellant has received from the annuity have been deducted from the appellant's ODSP income support.

Analysis

[21] The parties agree that s. 43(1)4 of the Regulation sets out what shall not be included in income for the purpose of determining financial eligibility for income support. They do not agree on what constitutes "damages . . . for pain and suffering as a result of injury".

[22] The appellant argues that the tribunal erred in its interpretation of the Regulation for the following reasons.

[23] The appellant says that he was not awarded $60,000 in damages. The amount of $60,000 was the cost of the annuity. He was awarded an income stream of indexed monthly amounts under a structured settlement. Since this income stream generated more than the maximum exemption of $100,000, he says that he should be entitled to the maximum $100,000 exemption. In oral submissions, he stated that all of the money he receives from the annuity should be exempt. Through to the age of 84, the annuity will pay the appellant a total of $650,553.12.

[24] The tribunal examined the evidence and made findings of fact about the characterization of the settlement money. It then applied the Regulation. The tribunal's findings cannot be reviewed on this appeal. At best, this is a mixed question of fact and law. The appellant's right of appeal is restricted to a question of law.

[25] The appellant argues that the Regulation is silent about the issue of interest and structured settlements. He says that any ambiguity in the interpretation of social welfare legislation, such as the ODSPA, should be resolved in favour of the applicant seeking benefits under the legislation: [page156] Gray v. Ontario (Director, Disability Support Program) (2002), 2002 7805 (ON CA), 59 O.R. (3d) 364, [2002] O.J. No. 1531 (C.A.), at para. 10; Wedekind v. Ontario (Ministry of Community & Social Services) (1994), 1994 1659 (ON CA), 21 O.R. (3d) 289, [1994] O.J. No. 2849 (C.A.), at pp. 296-97 O.R.

[26] The fact that the Regulation does not refer to interest and structured settlements does not mean that there is an ambiguity. The tribunal examined the evidence and made the following findings of fact that cannot be challenged on this appeal. These findings identified the structure of the settlement, the use of the annuity and the $60,000 payment in damages that funded the annuity. If the appellant had received the $60,000 directly and invested this money in a bank, it would have earned interest. Like the money that is deposited into the bank, the $60,000 that was paid into the annuity earns interest that is paid to the appellant during his lifetime.

[27] Lastly, the appellant relies on Mule. In essence, he says that the tribunal erred because it did not follow Mule. The issue in Mule was whether prejudgment interest formed part of damages or compensation for pain and suffering under the Regulation (s. 43(1)4). Prejudgment interest was found to be part of the damages or compensation. At para. 33, the court explained the basis for this characterization:

Since the victim must, of necessity, suffer without compensation for a period of time until his or her damages are capable of assessment, the legislature has determined that the victim will be entitled to additional compensation at the rate of 5 per cent of the non-pecuniary damages award per annum.

[28] We would confine the decision in Mule to the question of prejudgment interest. Mule does not assist the appellant on this appeal because Mule addressed prejudgment interest and not interest that accumulates on settlement moneys after the money is received. The tribunal correctly distinguished Mule and rejected the appellant's argument that it should be followed.

[29] During the hearing of the appeal, the appellant stated that he owes the respondent about $34,000. Counsel for the Director advised the court that she is unaware of any outstanding amount that the appellant owes the respondent. Since the Director decided to overlook the interest of about $57,000 that the appellant had received as of May 2007, it is unclear why the appellant has this misunderstanding.

[30] In summary, the appellant has failed to show that the tribunal erred in law. The tribunal correctly identified the governing regulation and applied it to the facts that it found.

[31] The appeal is dismissed. The respondent is not seeking costs.

Appeal dismissed.

End of Document