What is it?
The law generally looks at mental capacity as the ability of a person to appreciate the legal consequences of their actions. This ability must be there if someone is to be held responsible for such things as signing a contract, getting married, committing a crime, or suing or defending themselves in court.
Thus, a person who has sustained a brain injury and seems to be “loaning” all their money to questionable friends or squandering it so that nothing’s left for essentials might be judged to lack mental capacity and have their money management rights taken away.1
And any person who has not reached the age of majority (in B.C., 19 years old) is deemed an “infant” and therefore lacking, to some degree, in mental capacity. They may not sue or defend a lawsuit on their own behalf or handle any money recovered from a personal injury claim.
Such restrictions and protections were historically governed by the courts’ parens patriae jurisdiction, a parental responsibility towards any person who was mentally incapable. Now legislation has largely taken over.
Ruling someone incapable
In B.C. the Patients Property Act lets certain people bring an application before the court to have a judge decide whether a person is capable of managing his/her affairs (money and possessions) and/or person the day-to-day activities of daily living). Usually the applicants are family and it’s about handling money. The applicant must file affidavits from two doctors who state that, in their opinion, the person is not capable of managing his/her affairs. If an order is made declaring someone incapable of managing their affairs, another person is appointed as “committee” of that person’s affairs. That committee, usually a family member, becomes responsible for making financial decisions for the individual.
Of course, anyone whose capacity is challenged must be notified so they have an opportunity to oppose. And even if they’re declared incapable, that court order can be reversed if they reacquire the ability to manage their affairs.
Suing without mental capacity
If a person lacking mental capacity (including any person under 19) wants to pursue or defend a lawsuit, the B.C. Supreme Court Civil Rules require that:
- they be represented by an adult litigation guardian who will be responsible for decisions relating to the litigation and for any legal fees that become payable to the opposing party;2
- their litigation guardian hire a lawyer for them;
- the lawyer file a certificate stating he/she believes the individual is an infant or mentally incompetent person;
- the court must review and approve settlements over $50,000 (lawsuit started or not) and legal fees charged to the person under disability;
- no one can get default judgment against them without leave of the court.
In addition, the B.C. Public Guardian and Trustee is often required to comment on the reasonableness of a settlement.
Managing the money
When a settlement or trial award totals several hundred thousand dollars, there may be a concern that the plaintiff, legally capable or not, will be unable or unwilling to properly manage it. Yet the money is supposed to last their lifetime. There’s no going back for more.
What’s to be done?
Committee management – If the plaintiff has been declared incapable of managing their affairs, their committee invests and manages the award for them, reporting annually to the Public Trustee, possibly applying for court approval for any large transactions.
Expert management – If the plaintiff or committee will need help investing, an additional sum may be awarded to cover the cost of employing experts.
Annuities – Annuities are financial instruments which pay a monthly amount to the plaintiff for the duration of his life. For personal injury plaintiffs, they take one of two forms:
- Structured settlement – If the plaintiff’s claims are settled before trial, the plaintiff can often negotiate that a portion of the settlement monies be paid by the defendant’s insurance company (usually ICBC) to a large, well-established life insurance company to purchase the annuity. Return on investment is low, but the payments don’t attract taxes when invested or paid out to the plaintiff. The settlement can also include increases (e.g. 3% per year), or be indexed to cost of living increases, and stipulate lumps sums ($5-$50,000) be paid in specific years for anticipated extra expenses.
- Periodic payment – Recent changes in legislation permit a judge, after a trial, to order part or all of the plaintiff’s future care and future income awards be paid as “periodic payments” from an annuity. This order can be made even if the plaintiff is legally competent. After hearing the plaintiff’s views, the judge will be required to decide what is best for the plaintiff.
All of these rules and strategies are made with the intention of protecting people who are young or lacking mental capacity. Yet historically the law has adopted an “all or nothing” approach that doesn’t always fit. While the law says you’re either mentally capable and fully independent or incapable and have no financial control, many individuals have only a partial disability. They need help, but they also want and deserve some autonomy.
Caring family members should consult with the individual and their lawyer to find practical ways for the person to exercise what independence they’re capable of handling. The goal, as with many social issues, is to find the balance between freedom, protection, and responsibility.
1Totally competent individuals may also show poor money skills, but the problems tend to be seriously worse with some brain injuries.
2Often the committee also acts as litigation guardian. If no litigation guardian is otherwise available, the Public Trustee may take the role.
Excerpt from “ACCESS TO JUSTICE: Legal issues for the injured and people with disabilities,” written and produced by Faith Hayman, Barrister and Solicitor.
This is for informational purposes only and its contents are not intended nor should be considered to be legal advice.
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