U.S. Estate Tax – Should You be Concerned?

We have all heard the saying that there are two things in life that are certain: death and taxes. For tax and estate  professionals, both are always concerns but especially so for clients owning U.S. properties or assets. This is due to the U.S. estate tax.

Canada does not impose an estate tax upon the death of an individual. In fact, when Canadians die they are deemed to dispose of all their capital property at fair market value.

The U.S. system works differently: upon the death of a U.S. citizen, a tax is levied on the fair market value of the  deceased’s world-wide property. Furthermore, the U.S. estate tax applies to all property situated in the U.S. including  property owned by non-residents of the U.S. (oft en referred to as “Canadian Snowbirds”).

Consequently, upon death, a Canadian resident who owns U.S. real property or U.S. stocks may be regarded to have a large “deemed” capital gain with respect to such property in addition to a possible U.S. estate tax liability depending on the value of their U.S. properties or assets.

The first $3.5 million USD of a U.S. citizens’ estate is exempt from tax.  However, non-residents, including Canadians, are only entitled to a pro-rated exemption under the Canada-U.S. Tax Treaty. This exemption is equal to $3.5 million USD multiplied by the ratio of U.S. property to your worldwide estate. Essentially, if your worldwide estate is worth less than $3.5 million, you need not worry about paying  U.S. estate tax … at least for now.

In June 2001, the U.S. passed a law that commenced the phasing-out  of the estate tax over the following decade.  Essentially, the estate tax rate has been gradually reduced and the exemption amount increased and, based on the legislation, the estate tax will be repealed  for the 2010 tax year. However, this may not be permanent as the legislation contains a “sunset clause” whereby, unless further steps are taken by Congress, the repeal of the estate tax will only last for one year, being 2010.

In 2011, the estate tax rules will revert back to the rules applied before 2001 resulting in the effective exemption of only $1 million USD (compared to $3.5 USD in 2009) and a maximum estate tax rate of 55% (compared to 45% in 2009). Many U.S. tax experts expect this issue to be addressed by Congress already proposed legislation that would cap the top estate tax rate at 35% and maintain the personal exemption at $3.5 million USD.

Nonetheless, Canadians who own U.S. property or assets should consult their tax professionals until Congress legislates on this issue. Until Congress acts on this issue, Canadian Snowbirds should review the U.S. estate tax with their estate planning advisor.

Canadians who have an estate worth more than $1 million USD may be at risk of having to pay U.S. estate tax.

If you have questions regarding this issue or any other issue pertaining to your estate, please contact Sebastien Desmarais, Associate, Tierney Stauff er LLP at (613) 288-3220 or sdesmarais@tslawyers.ca.

Sébastien Desmarais
LL.B., LL.L., J.D.
Associate, Tierney Stauffer LLP
This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

The Effects of Marriage, Separation and Divorce on your Will

We generally recommended that if you have a Will, you review it periodically to ensure that it remains relevant and continues to reflect your wishes. We also recommend that you consult with a lawyer if there has been a material change in circumstances since your will was executed. It is extremely important to follow this advice if you marry or if you separate or obtain a divorce from your spouse. These “material changes in circumstances” can have a significant impact on your Will and need to be reviewed with a lawyer.

If you Marry, Your Existing Will will be Revoked

Upon your marriage, any Will that was executed prior to your marriage is automatically revoked pursuant to the Succession Law Reform Act. There are 3 exceptions to this rule, the most important being if there is a declaration in the Will that it was made in contemplation of the marriage. If your will does not fit into any of the 3 exceptions, you will have to have a new Will executed after your marriage otherwise upon your death, you will be deemed to die intestate and your estate will be distributed in accordance with the intestacy provisions of the Succession Law Reform Act.

If you Separate, Your Existing Will will not be Affected

If you separate from your spouse, your Will will not be affected. It will remain valid and your estate will be distributed in accordance with its terms even if your former spouse is the beneficiary of your estate.

It is our experience that upon separation, most clients do not want to benefit their former spouse. As such, it is important for an individual who has separated to meet with his/her lawyer to review their will and determine if a new Will needs to be executed.

If you are Divorced, the Interpretation of Your Will will be Affected

If you obtain a divorce from your spouse, your Will remains valid, however, its interpretation will be affected by the terms of the Succession Law Reform Act.

Pursuant to the legislation, any gift to your former spouse or an appointment of your former spouse as executor or trustee will be revoked and your will shall be construed as if your former spouse had pre-deceased you.
As such, it is also important for an individual who has obtained a divorce to meet with his/her lawyer to review their Will and determine if a new will needs to be executed.

If you have any questions regarding any of these issues, we would invite you to contact us in order that we can set up a time to meet and discuss your questions.

David Sinclair
B.Com., B.A., LL.B.
Senior Associate, Tierney Stauffer LLP

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

Different Methods of Resolving Family Law Issues

After the breakdown of a serious relationship or marriage, the individuals involved will often have a number of difficult issues to resolve in order that they may each move on with their lives. Those issues may include: custody of children, child support, spousal support, property division and the disposition of the matrimonial home.

One of the first decisions that the parties will have to make is how are they going to resolve these issues. Although there are numerous ways of resolving any dispute, this article will examine 4 methods that are often used in a family law context:

• Negotiation
• Mediation
• Collaborative Family Law
• Litigation

Negotiation
Negotiation is probably the most common form of dispute resolution in family law. It normally involves each party retaining a lawyer who, acting on the client’s instructions, will negotiate a resolution of the issues on behalf of the party.
Depending upon the issues involved, it may be necessary for the lawyers and parties to meet at a “4-way meeting” to help resolve any outstanding matters. If a settlement is reached, it will be documented in a Separation Agreement which will be signed by both parties.

Mediation
Mediation is a method of dispute resolution in which the parties retain a third party (i.e. the “mediator”) to assist them in resolving the outstanding issues between them.

The mediator does not take sides nor does he/she resolve the issues for the parties. The parties negotiate the settlement themselves. The mediator’s role is simply to facilitate a discussion between the parties that will hopefully lead to a settlement. If a settlement is reached, the mediator will normally draft a Separation Agreement that details the settlement.

Collaborative Family Law
Collaborative family law is a process where the parties agree to resolve the outstanding issues between them in a cooperative rather than adversarial manner. The parties, with the assistance of specially trained family law lawyers, will identify each party’s interests and will then attempt to craft a resolution that will respect and meet those interests. The process is designed to minimize posturing and tactical maneuvering and to focus as much as possible on settlement. If a ettlement is reached, it will be documented in a Separation Agreement that will be signed by both parties

Litigation
Litigation is a process whereby the parties go to court and ask the court to decide the outstanding issues for them. The parties will often have to attend in court on a number of occasions before the matter is either settled or a trial is held. If a trial is held, the judge hearing the matter will impose a decision which is binding on the parties. Notwithstanding that the parties are in court, they may still agree on a settlement. In fact, over 95% of the cases that go to court will settle before a trial is held.

The choice of the method of dispute resolution will be a critical aspect of resolving any family law dispute. Clients will have to consider the nature and scope of the outstanding issues, the reasonableness of the opposing party, the level of cooperation and communication with the opposing party, finances and any history of domestic violence in deciding which method is appropriate for them. It is highly recommended that a full and frank discussion

If you have any questions concerning the termination of an employee or employment law in general, please do not hesitate to contact David Sinclair directly 613.288.3226 or by email at dsinclair@tslawyers.ca.

David Sinclair
B.Com., B.A., LL.B.
Associate, Tierney Stauffer LLP

 

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

Dealing with the Canada Revenue Agency

It is not uncommon for people, often in a dire state, to seek advice after receiving a notice of assessment or reassessment from the Canada Revenue Agency (the “CRA”). When it comes to effectively addressing tax issues and notices of assessment or reassessment, there are several rules and deadlines that we should be aware of in order to avoid the pitfalls The following sets out and discusses some of the key relevant deadlines and rules governing dealings with the CRA.

Role of the CRA

The Canadian tax system is a self-assessing system. As a result, the CRA has broad powers and authority to audit and investigate information provided by taxpayers to ensure compliance with the Income Tax Act (the “ITA”). These powers and authority range from requisitioning documents or other information for their review, conducting audits and inspections, formal searches and seizure of documents under a search warrant and formal inquiries and investigation authorized by the CRA.

The CRA is required to examine the return and make an assessment “with all due dispatch” following receipt of the taxpayer’s return. Although “all due dispatch” is not defined in the ITA and does not refer to a specific period of time, the jurisprudence establishes a criterion of reasonableness depending on the facts of the matter.

Upon reviewing the taxpayer’s income tax return and all other documentation requested, the auditor will issue his final report and, if he believes amendments to the return are required, the CRA will issue a notice of assessment or reassessment setting out the amendments to the taxation year at issue.

Notice of Assessment/Reassessment

The CRA has three years from the date of mailing the notice of assessment to issue a notice of reassessment or a further notice of assessment and this interval is referred to as the “normal reassessment period.”
If the taxpayer disagrees with the Minister’s notice of assessment or reassessment, he is entitled to file a notice of objection within 90 days from the date the notice of assessment or reassessment is mailed.

The notice of objection must be in writing and must set out all relevant material facts, reasons and grounds on which the taxpayer is relying. It is important to understand that the onus is on the taxpayer to rebut all of the Minister’s assumptions and findings within the notice of objection.

Failure to object to all of the Minister’s findings will result in the taxpayer’s objection being “incomplete” and the Minister’s obligation is only to review the arguments raised in the notice of objection. This potentially leaves the taxpayer with the unfortunate result of having to pay taxes because some grounds were not raised in the notice of objection.

The Minister will only review those points of objection that are raised in the notice of objection. Consequently, it is advisable that the person drafting the notice of objection consult with the taxpayer, the taxpayer’s accountant and the taxpayer’s lawyer to ensure all points are covered.

Appealing to the Tax Court of Canada

Once the Minister has issued its final ruling on the taxpayer’s objection, he will issue a confirmation or a reassessment. From the date of the issuance of the confirmation or reassessment, the taxpayer has 90 days to appeal to the Tax Court of Canada (the “TCC”).

There are two sets of Rules governing an appeal before the TCC and, depending on the amount of money at issue, the taxpayer may have to choose whether to appeal under the Informal Procedure or the General Procedure.

If the aggregate amount at issue is equal to or less than $12,000.00 or the amount of the loss is equal to or less than $24,000.00, the taxpayer may elect to file his notice of appeal under the Informal Procedure. If the amount at issue exceeds the two thresholds, the taxpayer must then appeal under the General Procedure.

If the taxpayer appeals under the General Procedure Rules, the notice of appeal must state all material facts, all grounds of appeal, alternative arguments and any specific relief sought. The notice of appeal must also refer to the statutory provisions relied upon.

Final Thoughts

For many, dealings with the CRA represent a period of severe stress and frustration. Seeking proper advice and guidance from experienced professionals (lawyer, accountant and others) is essential to insure that your interests are well protected. If you have any questions concerning tax reassessment, please do not hesitate to contact me directly.

Sébastien Desmarais,
Associate, Tierney Stauffer LLP

 

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

If I’m injured in an accident and unable to work what income replacement benefits are available to me?

If you are employed you may have access to short-term and/or long term disability benefits through your employer.  There are also a number of government benefits available. Employment Insurance offers 15 weeks of disability benefits if you were employed at the time of your injury.

The Canada Pension Plan also offers a disability pension to anyone who has a severe and prolonged injury or illness, that prevents them from regularly pursuing any substantially gainful employment.  In order to qualify for a CPP Disability Pension the injured person must have made contributions to CPP in 4 of the 6 years before they became disabled and have enough medical evidence to prove they have a severe and prolonged injury or illness.

If you qualify for a CPP Disability Pension the amount received will roll over into a retirement pension when you reach the age of 65, so there will be no gap in your contribution history.

The Ontario government also offers benefits through the Ontario Disability Support Program.  ODSP benefits also include coverage for some medical expenses such as prescriptions and special foods.

Please contact my office for further information on how to apply for any of the benefits discussed above.

Teena Belland, Associate

This article is provided as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions.

Changes to Not-for-Profit Legislation: Are you Ready to Transition?

The new Canada Not-for-Profit Corporations Act (“New Act”) is expected to be proclaimed in force this year. Once proclaimed in force, it will replace Part II of the Canada Corporations Act (“CCA”).

For charities and not-for-profit organizations incorporated under the CCA (“CCA Corporations”), it is important to note that the New Act will not automatically apply to CCA Corporations. Instead, CCA Corporations will be required to transition to the New Act. There will be a three-year transition period for CCA Corporations to apply for continuance under the New Act. Failure to transition to the New Act will cause a CCA Corporation to be eventually dissolved.

CCA Corporations wishing to transition will need to undergo the following steps in order to transition to the New Act:
Resolution by the Members: The members of a CCA Corporation will be required to pass a resolution authorizing the Board of Directors to make an application to transition to the New Act.
Filing Articles of Continuance: In order to successfully transition to the New Act, a CCA Corporation must apply for a certificate of continuance. As part of this application, the corporation must file Articles of Continuance, which will replace the corporation’s letters patent. The Articles of Continuance will need to set out the following information:
a. the name of the corporation;
b. the province where the registered office is to be situated;
c. the classes, or regional or other groups, of members that the corporation is authorized to establish and, if there are two or more classes or groups, any voting rights attaching to each of those classes or groups;
d. the number of directors or the minimum and maximum number of directors;
e. any restrictions on the activities that the corporation may carry on;
f. a statement of the purpose of the corporation; and
g. a statement concerning the distribution of property remaining on liquidation after the discharge of any liabilities of the corporation.

Notice of Registered Office: In addition to the Articles of Continuance, a CCA Corporation will be required to file a notice of registered office, as well as a notice of directors, with Industry Canada in the forms to be prescribed by Industry Canada and within the periods to be stipulated in the New Act’s regulations.

Officer’s certificate: A CCA Corporation, as part of its application package, must also include an officer’s certificate certifying that the corporation’s members have adopted by-laws that conform to the New Act’s requirements. Under the New Act, Industry Canada will no longer be required to approve a corporation’s bylaws; however, reference copies of the bylaws must still be filed on record with Industry Canada. While a CCA Corporation can maintain its current bylaws (as long as they meet the minimum requirements set by the New Act), it is advisable that an organization, at the time of transition, review its bylaws to assess whether changes may be appropriate (for example, provisions may need to be added to ensure the bylaws are in conformity with the New Act, or provisions may be deleted where such provisions are not required by the New Act or are not favourable to the organization).

Industry Canada will not charge a fee for the filing of an application to continue under the New Act.
Similarly to the New Federal Act, discussed above, Ontario has also enacted new not-for-profit corporation legislation.

Currently, in Ontario, provincial non-profit corporations are regulated by Part III of the Corporations Act (“OCA”). On October 25, 2010, the Ontario Not-for-Profit Corporations Act (“ONPCA”) received Royal Assent. Once proclaimed in force, the ONPCA will apply to non-share corporations on the day the statute is named into force, including corporations without share capital currently under Part III of the OCA (please note that there are exceptions to this.

For example, the ONPCA does not apply to corporations without share capital that are under the Co-operative Corporations Act or insurance corporations under Part V of OCA). It is anticipated that the ONPCA will be proclaimed in force in 2012.

While the ONPCA will immediately apply to non-share capital corporations, it will not immediately change the governing documents of those companies to comply with the new legislation. Under the ONPCA, previously valid governing provisions that are invalid under the new legislation are only deemed into compliance with the ONPCA three years after the legislation comes into force.

During this transitioning period, it is advisable to review your organization’s governing documents and to assess whether any changes to them are necessary in order to bring them into compliance with the new legislation, or whether any changes are simply desired to get rid of provisions in your governing documents that are no longer necessary or helpful to your organization.

If you have any questions concerning ONPCA or employment law in general, please do not hesitate to contact me directly 613.288.3221 or by email at jbrigandi@tslawyers.ca.

Jennifer Brigandi,
Associate, Tierney Stauffer LLP

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

Trustees Controlling the Corporation – a Challenging Situation

Estate planning intrinsically results in tax planning; one cannot dissociate the two. Indeed, the easiest manner to maximize the value of an estate is by minimizing the tax payable at death. The same approach applies to the successful business owner; maximizing profit by minimizing taxes.

Trusts are oft enused to accomplish eff ective tax/estate planning. However, the use of a trust to control a private  corporation imposes fiduciary obligations on the part of the trustees to administer the corporation for both the shareholders and the beneficiaries of the trust; a challenging balancing act for the trustees at the best of times.

This newsletter will explore the various duties of trustees and some of the conflicts of interest that can arise.

Powers and Authority of Trustees and Directors
Trustees have a duty to carry their powers and authority in accordance with the Deed of Trust whereas Estate Trustees have a duty to act in accordance with the instructions conferred by the Testator’s Will. Trustees have a fiduciary duty to act in the best interest of the beneficiaries; that is a duty of loyalty and a duty of care toward the beneficiaries.

Trustees have three fundamental duties they must always comply with:

• they may not delegate their duties to a third-party;
• they may not profit personally from their dealings with the trust property; and
• they must act honestly, with prudence and reasonableness.

Trustees also have a duty to act personally, with care and in good faith and must avoid conflicts of interest.

Directors, on the other hand, owe a fiduciary duty to the corporation, and only the corporation. Directors are intended to make policy and specific decisions concerning a variety of business risks as long as it is for the best of the corporation.
It is said that the directors are considered to be the alter ego of a corporation.

Trustees Controlling a Corporation
In many tax planning strategies such as an estate freeze, a family trust is introduced as the majority shareholder of the corporation holding the shares that will represent the future growth of the corporation.

The introduction of a family trust as the majority shareholder is usually viewed as providing greater flexibility in tax planning strategies and estate planning but results in different considerations for decision-making: the duties of the
directors versus the duties of the trustees.

Trustees holding the majority of the shares of a company face the possibility of having to make decisions that may impact the viability and value of the corporation and intrinsically affect the beneficiaries’ interest in the trust. It is nearly impossible to avoid some conflict of interest in these circumstances; indeed when acting as both a trustee and a director, the individual has a duality of fiduciary duties which may ultimately conflict. Where trustees hold shares representing voting control of the corporation, it is difficult to imagine how they can exercise their fiduciary duty without being appointed on the board of directors of the company. They may elect to only have one of them appointed but such does not discharge the other trustees of their fiduciary duties; they nonetheless must place themselves in a position to make informed decisions concerning the company in order to protect the assets of the trust.

If the trustees decide that all of them will be elected to the board of directors, they must vote in accordance with their fiduciary duties as trustees. If the Deed of Trust or the Will requires a decision by vote by majority, then the trustees must vote and make decisions as directors in a fashion similar to casting their vote as trustees.

There are significant differences in the operation of trust law and corporate law. The trustees who must act appropriately as directors must also act in the best interest of the beneficiaries which can sometimes conflict with what is in the best
interest of the shareholders; not always an easy juggling act.

Estate Trustees Controlling a Corporation 
Estate trustees are faced with the same challenges stated above and, further, they must as well meet their fiduciary  duties toward the beneficiaries of the estate. The issue is therefore how can you balance the duty of care to the
beneficiaries of the estate and the corporation??

Estate trustees must also deal with estate planning strategies that render their decision-making even more difficult as they are required to consider different beneficiaries who may have different interests. For example, what if the testator
leaves a life interest of the income of the corporation to his spouse but on her death the shares including all income not paid to the spouse, are to be equally divided amongst his children. In whose interest do they manage the corporation,
the spouse or the children?

This is just one example of the complex issues that can arise from the duality of acting as estate trustee and director of a corporation. A well drafted Will should provide clear instructions to the estate trustee for such circumstances but
often it does not, leaving the estate trustee in a thorny situation.

It is noteworthy that if the estate is dependent upon an income stream from a corporation, the estate trustee must serve as a director to ensure that the appropriate business decisions are made on timing and distributions of profit of a business.

However, an estate trustee/director  of a corporation is caught in an impossible situation that can only result in a conflict of interest. The estate trustee/director must then face the possibility of having their decisions reviewed by either the shareholders or the beneficiaries of the estate.

Jurisprudence appears to indicate that the beneficiary of an estate is not entitled to any disclosure of the corporate and financial records of the corporation. However, as long as the beneficiary’s interest is involved, the beneficiary is entitled and may seek from the estate trustee all documents or communications between the trustee and the corporation.

Furthermore, trustees may also see their actions as director questioned by the beneficiaries claiming an “oppression remedy.” Professionals who advise on estate planning ought to consider this remedy when discussing estate planning with the testator.

The decision of the trustee/director may always be subject to review and remediation in accordance with the available remedy under the legislation or equity.

Conclusion
We have seen that it is nearly impossible to avoid a conflict of interest when one is acting as both a trustee and a director.  In those instances, the trustees/directors have a duality of fiduciary duties which may ultimately result in a conflict.

Many professionals view this “conflict” as a novel concept and dismiss it on the basis that in practice, the trustees and directors have the discretion to administer the trust and the corporation “as they see fit.”

I submit that such view fails to properly advise trustees who must carry both the duties of trusteeship and directorship. It is true that trustees may be absolved of any personal liability if the Deed of Trust or the Will so states. However, that is only partially true as they can still be held liable under equitable remedies or under corporate legislation.

If you are acting as both trustee and director, it is essential that you recognize your fiduciary duties and to whom to you owe such duties. Failure to do so could result in untenable positions and potential personal liability. If you have any questions concerning the duties of a director or trustee, please do not hesitate to contact me directly at 613-288-
3220 or by email at sdesmarais@tslawyers.ca

Sebastian Desmarias
Associate, Tierney Stauffer LLP

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

Damages for Psychiatric Damage

We have recently witnessed a change in attitude in our courts whereby they are more willing to acknowledge the impact of psychological injuries on victims of negligent behaviour. As part of this transition, the previously-dominant descriptor for psychological injury – “nervous shock” – has been replaced by the term “psychiatric damage”.

There currently exists a two-part test in Canada which must be satisfied in order to find liability for the negligent infliction of psychiatric damage: (1) the plaintiff must have suffered a “recognizable psychiatric illness”, and (2) it must be reasonably foreseeable that the plaintiff would suffer such damage.

A “recognizable psychiatric illness” may take one of several forms, and includes conditions such as schizophrenia, severe and chronic depression, and post-traumatic stress disorder. Conditions which are described in the Diagnostic and Statistical Manual of Mental Disorders IV-TR will typically be found to meet this criteria.

The courts have reviewed a number of situations in which psychological harm to certain people has been found to be reasonably foreseeable as a consequence of another’s negligence. Such people include those who witness an accident; those who arrive upon the scene of an accident soon afterward and witness its aftermath with their own senses; and those who have a certain relationship with someone injured in an accident, such as a family member or rescue worker. Ultimately, the “reasonable foreseeable” criteria will be determined on a case-by-case basis.

Recently, our courts appear to be more willing to acknowledge the serious effects of psychiatric damage, and there has been a corresponding trend of awarding higher damages for these types of injuries. Many recent cases from British Columbia have resulted in higher damage awards; the hope for Plaintiffs in Ontario is that our local courts will shortly follow suit.

**A more comprehensive analysis of this topic is available. Please contact Cale directly. Coordinates are below.**

Cale Harrison

Cale Harrison, Lawyer
Tierney Stauffer LLP
charrison@tslawyers.ca

This blog entry is provided as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions.

Statutory Accident Benefits – Access to Justice Issues

Ontario’s proposed auto insurance reforms will no doubt cause a lot of discussion – from both a positive and a negative viewpoint. For the most part, the public will not understand what it means to have benefits reduced until such time as they are faced with paying out of their own pocket for medical treatment once the Statutory Accident Benefits are exhausted and treatment is not covered by OHIP.

Those who are injured in a motor vehicle accident through no fault of their own will be able to fund the treatment through private lenders and claim not only the cost of the treatment, but also the interest paid on borrowing the money.

The case of Bourgoin v. Ouellette et al. – New Brunswick Court of Queen’s Bench dealt with this issue. In this case a number of disbursements were being assessed. One in particular was the interest owed on a loan taken out by the Plaintiff from a company called Seahold Investments Inc.

To quote the case: “It remains to determine whether the interest charged by Seahold Investments Inc. constitutes a disbursement which is refundable to the plaintiff by the defendants, and if so, is a monthly compound interest of 2.4 % reasonable.”

Seahold Investments Inc. is a private corporation which provides temporary financing to victims of personal injury who are awaiting insurance claim settlements allowing them, for example, to keep their house, vehicle, and to care for their family.

This type of financing would also apply to legal costs and disbursements in lawsuits pending a settlement. This was the case in this matter. The interest rate charged is 2.4% compounded monthly. This is a very high interest rate compared to regular market rates however it is unlikely that regular financial markets would lend money under these circumstances.

Numerous cases were reviewed in this decision. The Plaintiff’s counsel argued that without the assistance of Seahold Investments Inc., his client would not have had the access to justice to which he was entitled.

Although various arguments were put forward by defense counsel, including that interest charges are not part of the refundable expenses since they come under the costs  of a contingent fee agreement between a lawyer and a client, the judge ruled that this interest was not interest charged by the lawyer to his client, but was in fact interest charged by Seahold.

The final decision was that the interest is claimable. To quote the judge “The only option which seemed to be open to him in order to have access to justice, claim his rights and obtain such a considerable settlement, was to get a loan from a financial institution able to support his allowable disbursements for the duration of the action. Seahold Investments Inc. was the  institution that agreed to do it, at a very high interest rate, but also at an elevated risk to itself.

It must be noted that the Bank of Nova Scotia did not want to take on the risk for a lesser amount.” With the proposed  changes to the Statutory Accident Benefits in Ontario, many plaintiffs will be faced with having to borrow money for  treatment once the $50,000 cap is exhausted. The new proposal reduces the medical and rehabilitation expense from the present $100,000 for noncatastrophic injuries to $50,000; however, the $50,000 now includes the cost of assessments.

Today many serious injury cases exceed the $100,000 cap without including the cost of assessments. In the case of serious  injuries, which do not meet the catastrophic designation, the $50,000 will be exhausted long before settlement is achieved.

The plaintiffs will have to pay for treatment out of their own pockets, which in most cases is not possible. They will therefore have to access private lending institutions in Ontario such as BridgePoint Financial Services and Lexfund who will  fund this treatment. In addition, when obtaining treatment outside the Statutory Accident Benefits legislation the health care providers will not be restricted by the hourly rates of the SABs and can charge full market rate.

So, in applying the Access to Justice reasoning in the Bourgoin case, the cost of the treatment and the interest charged  should be claimable from the defendant.  This will undoubtedly increase the settlements in tort actions.

If you have questions about personal injury or Access to Justice, please contact one of our personal injury lawyers at (613)  728-8057. You can also contact Donna Robinson directly at (613) 288-3215 or by email at drobinson@tslawyers.ca.

Donna Robinson
Paralegal, Insurance Claims Consultant

 

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. 

Personal Injury – Common Questions and Answers

1. If you have been injured in an accident, when should you retain a lawyer?

Motor Vehicle Accidents:
If you have been injured in a motor vehicle accident and your injuries appear to be serious and permanent, you should contact a lawyer immediately.

Other Accidents:
If you have been injured in a fall or by some other means, you should contact a lawyer immediately as a short limitation period or deadline may be applicable to the case depending on how or where the injury occurred. If the law firm that you have contacted specializes in personal injury, there will be no charge for the initial interview. The Personal Injury Group at Tierney Stauffer LLP has over 25 years of experience and would be happy to provide you with an initial free consultation to discuss your case.

2. When should you contact your insurance company?

If you have been injured in a motor vehicle accident, it is very important that you contact your own insurance company as soon as you are able in order to apply for no-fault benefits. In order to contact your insurance company, you should telephone your insurance broker who will direct the claim to the appropriate person at the insurance company.
If it is a serious accident, the adjuster for the at-fault driver of the other vehicle will undoubtedly try to contact you. There is no legal obligation for you to speak with a representative from the at-fault driver’s insurance company.

3. Who can make a claim?

If you have been in a motor vehicle accident or have suffered an injury from any other accident, you can make a claim as can members of your family including spouses, children, grandchildren, parents, grandparents, brothers and sisters.

4. What is the legal process?

The legal process commences with an interview with a lawyer, after which the lawyer will attempt to settle your claim with an adjuster from the insurance company. If the lawyer is unable to settle the claim, he or she will then commence a lawsuit on your behalf. Ninety-nine percent of these claims will settle before trial. The legal stages that you will have to attend will be mediation, examinations for discovery, a judicial settlement conference and, if the matter does not settle, a trial.

5. How long does the process take?

Typically, an experienced personal injury lawyer will not attempt to settle the case until he or she has a final medical report or until he or she is satisfied that the medical experts have ensured that the diagnosis and prognosis is correct and final. It is only at that time that the personal injury lawyer can assess a claim properly. Depending on the nature of the injuries, it may take up to two years before the claim can be asessed. Following that, most cases are settled out of court. However, if the matter has to go through the entire court process to trial it will, in all likelihood, take another two years depending on the backlog of cases in the judicial system and the jurisdiction in which the case is being pursued.

6. How much will you have to pay?

Our personal injury lawyers work on a contingency or percentage basis. In other words, if we don’t win or settle your case, we don’t get paid. In all cases the initial interview is free.

7. If you are in an accident, how does a judge determine how much money you receive?

Compensation for injuries or “damages” arise from many different losses. Some obvious examples are pain and suffering for both physical and psychological injury, loss of income, medical expenses, loss of ability to work in the future, and loss of ability to compete against an uninjured person.
Basically, the approach of the courts is to put the person into the same position they would have been had they not been injured.

8. Between the time of the accident and time you receive compensation, how can you make ends meet?

If you have been injured in a motor vehicle accident, you will, in all likelihood, have an income replacement benefit paid to you by your insurance company. You may also have long-term disability benefits available to you through your employment or you may be able to apply for Workers Compensation benefits if the accident happened while you were working. There are other sources of financial assistance available. This is an area you will discuss with your personal injury lawyer at your initial interview.

9. Should you contact the police?

If you have been involved in an accident and have not contacted the police, it is imperative that you do so immediately.

If you have any questions concerning personal injury, or for your free initial consultation, please contact our Personal Injury Team at 613.728.8057 or by email at info@tslawyers.ca.

 

This article is provided  as an information resource and is not intended to replace advice from a quaified legal professional and should not be relied upon to make decisions. In all cases, contact your legal professional for advice on any matter  referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship.