1. Elkin Injury Law, Barristers, PC Bill Elkin & Roelf Swart

2. RULE 7 – PARTIES UNDER DISABILTY Rule 7.08 APPROVAL OF SETTLEMENT Settlement Requires Judge’s Approval 7.08(1) No settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without he approval of a judge. Rule 7.09 MONEY TO BE PAID INTO COURT 7.09(1) Any money payable to a person under a disability under an order or a settlement shall be paid into court, unless a judge orders otherwise. (emphasis added)

3. What were the reasons behind the Rule in the OLD SYSTEM? a conservative, yet secure rate of return was guaranteed; and upon attaining the age of majority, the minor was guaranteed to receive his or her money plus interest

4. Features of the OLD SYSTEM Up to 1985 – Judge and client had no choice, money automatically paid into Court Money went to the Accountant to manage Accountant was only allowed to invest in fixed income securities After 1985 – Judge granted power to make alternative orders for money management – but the Accountant was still restricted to investing only in fixed income securities

5. In 2000… Important changes to the Public Guardian & Trustee Act RSO 1990 c.P.51 Ushers in a new system of “Money Management” for persons under a disability

6. Features of the NEW SYSTEM Critical changes to the legislation that apply to minors and other parties under a disability: The prior restriction on the Accountant, requiring monies paid into Court to be invested in fixed income securities was completely removed – the Accountant can now invest in the Stock Market. The OPGT was allowed to establish and maintain mutual funds. The OPGT’s funds are unitized and the value of the units rise and fall with the market. The Accountant was allowed to charge fees in respect of management of the monies paid into Court.

7. Accountant of the Superior Court of Justice receives the minor’s money The ASCJ forwards the money onto the OPGT to invest in one of three trust funds Fixed Income Fund AKA “pooled fund” Canadian Income and Dividend Fund (a unitized funds) OPGT Diversified Fund (a unitized fund) Where does the money go?

8. Comprised of high quality fixed income securities The interest rate is determined by the income generated by the securities held in the fund The fund is laddered over a five year period with 10% of the assets maturing every six months The rate of interest is set by the OPGT but is not a guaranteed rate of return – interest varies with the performance of the market Presently the rate of the Fixed Income Fund is 2.75% per annum prior to the deduction of the Accountant’s fees Fixed Income Fund

9. This fund is bought and sold in units Fund is “ for those who may require higher regular income and can tolerate some capital risk over a medium to long term investment time horizon ” Fund’s rate fluctuates monthly in relation to income earned by securities in fund Fund can make capital gain or have capital loss depending on market conditions There is no fixed rate of return on the fund Investment in this fund is more risky than the Fixed Income Fund and investors have to be prepared to tolerate risk to the capital originally paid into Court Canadian Income & Dividend Fund

10. This fund is bought and sold in units Fund’s rate fluctuates monthly in relation to income earned by securities in fund Fund can make capital gain or have capital loss depending on market conditions There is no fixed rate of return on the fund This fund carries the greatest risk and requires a minimum investment of five years OPGT Diversified Fund

11. Questionnaire to parents or guardian regarding investment in either of the two unitized funds Accountant has complete discretion over management of settlement funds No statements provided by Accountant, unless requested Lawyer not involved when funds are paid out to minor at 18 Parents & Guardians have limited input into Money Management

12. Is the capital invested in any of these funds guaranteed? Is the capital invested in any of these funds guaranteed? Is there any risk to the earnings on the principal amount paid into Court? Is there any risk to the earnings on the principal amount paid into Court? Is there any risk to the principal amount? Is there any risk to the principal amount?

13. Risks Under the NEW SYSTEM No guarantee of rate of return (rate fluctuates) No guarantee of capital / principal invested (value of units fluctuate) Unit value could go up Unit value could fall Units are redeemed at current market value

14. Fees on Interest earned 3.0% is charged on investment income credited to the account each month (interest earned) + HST This fees is calculated and charged monthly Fees on disbursement Transactions 3.0% is charged on all payments out of court, incl. interim payments and final distribution + HST This fees is calculated and charged monthly (referred to as disbursement fee) Care & Management Fee 3.5 of 1% or 0.6% annually is charged on a monthly basis + HST Calculated on the monthly balance in the account Fees Charges by the Accountant

15. Balance$100,000 Income Earned – assuming 5% annual rate of return = $100,000 @ 5% for 31 days ($100,000 * 0.05/365*31) $425 Fee on income receipts (interest earned monthly) $425 @ 3% plus 7% GST at the time of the calculation ($425*0.03*1.07) ($14) Care & Management Fee$100,000 @ 0.6% over 12 months plus 7% GST at the time of this calculation ($100,000*0.06/12*1.07) ($54) Balance that can be paid out before disbursement fee is deducted $100,357 Disbursement FeeThe lessor of: 3% of payout plus 7% GST thereon = $100,357 x 0.03 x 1.07 = $3,221 Income for the month of $425 less fees charged in the month of $14 and $54 (as above) = $357 including GST ($357) Payment out of Court$100,000 Example of calculation of Fees:

16. Settlement $$$$ GIC held in Trust RESP investment RDSP Investment Management of Funds by Independent Expert Structured Settlement Alternatives to Payment into Court

17. Advise the litigation guardian of the options available for the settlement funds of the person under a disability DO NOT GIVE FINANCIAL ADVICE or suggest one option over another – it is not the job of counsel to endorse a particular option from a financial perspective Give the litigation guardian the tools to investigate the options themselves, provide them with literature, websites, etc. – have them talk to their financial advisor, bank manager, other friends and family members Once the litigation guardian has thoroughly researched the options, obtain their instructions and confirm those instructions, in writing, by outlining the options available and confirming the investment chosen Practice Points…

18. Prepare a Direction for the litigation guardian to sign confirming their investment instructions, as well Once you receive instructions, prepare your Court approval motion – include in the Affidavit of the litigation guardian, that they were advised of the options available, confirm their efforts to research the potential management plans and outline the criteria the litigation guardian used in selecting the option they did, with the focus being the selection of an option that is in the best interest of the party under a disability In your Affidavit, include your advice to the client that they research all of the various options and confirm that you are not qualified to offer financial advice and did not offer financial advice Practice Points Continued…

19. In your closing letter : confirm again the litigation guardian’s instructions to you; enclose copies of your previous letter outlining the options and the selected investment; confirm, once again, that you did not provide any financial advice; enclose a copy of the Direction signed by the litigation guardian; enclose a copy of the Affidavit they signed in support of Court approval of the chosen management plan; enclose a copy of the Judgment approving the settlement and management plan.