December 10, 2024
What Capacity is Required to Enter into a Settlement Agreement? 

What Capacity is Required to Enter into a Settlement Agreement? 

In Book v. Cociardi1, the Court of Appeal firmly rejected the argument that in any personal injury case where the plaintiff has allegedly sustained a permanent cognitive injury, they should undergo a capacity assessment to manage property and personal care before signing minutes of settlement. The Court of Appeal held that “this is not the law, nor should it be.” It went on to opine that this “proposed regime would discourage settlement and needlessly make it more costly.” 

Background 

On September 15, 2012, Mr. Brandon Book was injured in a motor vehicle accident. His parents were also named as plaintiffs pursuant to the Family Law Act. The Book family was represented by counsel from the outset of the action. They were represented by the same counsel when they agreed to settle Brandon’s personal injury claim for approximately $221,000.00 which left him $150,000.00 after fees and disbursements were deducted while his parents received nothing.   

On September 29, 2015, the action was dismissed on consent. Brandon also subsequently settled his accident benefits claim with his insurance company for a $200,000.00 payment and a structured plan that would pay him $2,250.00 per month until the age of sixty-five. 

In 2019, some four years after the action was dismissed on consent and Brandon spent his settlement and was unable to pay it back, the Book family sought to overturn the dismissal under Rule 7.08(1) of the Rules of Civil Procedure.  The basis for the proposed dismissal was that when Brandon settled the action, he was under a disability, making it unconscionable and improvident.   

Capacity Under Rule 7.08(1) 

Rule 7.08 uses the definition of disability found in Rule 1.03 which refers to a mentally incapable individual as outlined in sections 6 and 45 of the Substitute Decisions Act, 1992.

Incapacity to Manage Property 

Section 6: A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.  

Incapacity for Personal Care 

Section 45: A person is incapable of personal care if the person is not able to understand information that is relevant to making a decision concerning his or her own health care, nutrition, shelter, clothing, hygiene or safety, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.  

Test for Capacity to Enter into Settlement Agreement 

At Trial2, Justice Ramsay held that whether Brandon was a person under disability depended on “whether he was able to understand, or perceive the meaning of, information that is relevant to making the decision to settle the action, and [whether he was] able to appreciate the reasonably foreseeable consequences of a decision to settle or not to settle.” This was upheld by the Court of Appeal. 

Justice Ramsay accepted that Brandon had sustained a mild traumatic brain injury with psychological and behavioral consequences that affected his social and vocational abilities. He further accepted that Brandon had “trouble keeping a job and a girlfriend. He was not good with his money. But he was able to understand the information relevant to the settlement and to appreciate the consequences of accepting it.” Despite the foregoing, Justice Ramsay found that Brandon “was able to understand that by settling he would be getting a certain amount of money sooner and that by not settling he could get more money later but might not.” 

Key Take Aways 

There is no single definition or test to determine capacity that can be universally applied to all situations or types of decision-making. The ability to make decisions regarding one’s property & finances, to make decisions regarding personal care and to enter into a settlement agreement are not the same. Rather, capacity is specific to the decision being made, and it can fluctuate over time. 

In personal injury cases where there are severe brain injuries resulting in cognitive impairments, a plaintiff’s capacity to manage property & finances, their personal care and health decisions and to enter into settlements may be a legitimate concern. 

Mills & Mills LLP has experienced estate litigators who have a background in personal injury who are ready to assist with all types of capacity issues that arise in both estate and personal injury matters. 

If you require assistance with estate and personal injury matter, contact our Trusted Litigation Lawyers and we would be happy to help.


At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business lawreal estate lawestate lawemployment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.

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