Law Times

LAW TIMES 26 COVERING ONTARIO'S LEGAL SCENE | APRIL 1, 2019 www.lawtimesnews.com BY JULIUS MELNITZER For Law Times J ust where plaintiffs — espe- cially individuals without financial capacity — should put their personal injury settle- ment money can be a matter of debate. Often, the matter boils down to a choice between taking cash and investing it in a managed portfolio or resorting to a tradi- tional structured settlement. Recently, in Connolly v. Connolly and PGT, Justice Sylvia Corthorn of the Ontario Superior Court of Justice made it quite clear that the courts will look carefully at managed port- folios and will require detailed evidence, including evidence comparing the managed port- folio to a structured settlement, before they approve the disposi- tion of the settlement. "Connolly is one of the few decisions where a court has giv- en reasons and asked some very important questions about the viability of a managed portfo- lio," says John Rousseau, a prin- cipal at Guelph-based McKellar Structured Settlements Inc. The issue arose in the context of Michelle Connolly's applica- tion for an order appointing her as the guardian of property of her adult son, 23-year-old Mi- chael Connolly, and approving a proposed management plan. Michael, injured in a pedes- trian-vehicle accident when he was eight, had about $1.4 million in settlement funds available. Corthorn concluded that he was incapable of managing property within the meaning of the Sub- stitute Decisions Act. At the same time, Corthorn refused to approve the manage- ment plan. "Additional evidence is re- quired in support of the Plan; alternatively, a further revised management plan and evidence in support of it are required," she wrote. The plan submitted pro- posed that BMO Nesbitt Burns would invest the funds in a conservatively managed port- folio. It provided a comparison of the income earned from the portfolio and re-investment of net earnings, as well as Taylor's projected worth over time, and three structured settlement op- tions prepared by Burlington, Ont.-based Henderson Struc- tured Settlements for compara- tive purposes. But Corthorn wasn't im- pressed. As she saw it, the evi- dence fell short because it did not deal with the potential nega- tive impact of a downturn in the stock market, the potential effect of cost increases in the future, particularly those relating to housing and attendant care, and the potential impact of guard- ianship costs on the investment plan. Kyla Baxter, president of Bax- ter Structures in Toronto, said in an emailed statement that when trying to decide between a man- aged portfolio and a structured settlement, it is important to sit down with the injured party and discuss what they will need the money for and how much risk they can tolerate, as well as the fees and taxes associated with managed portfolios. While the low-interest environment can provide a challenge when try- ing to maximize awards, Baxter said, that creative thinking can help adjust a structured settle- ment to a client's needs. "The majority of our clients have a need for protection dur- ing uncertain times. They often cannot afford the lure of higher- risk products," said Baxter. "A managed portfolio will vary with economic f luctuations. The structure provides a guaranteed income stream." Rousseau says the "decision makes it clear that you can't just look at positive scenarios." "Unlucky timing in the form of an early market downturn can mean that the managed portfolio will never recover, even if better returns, in subsequent years, bring the average return back in line with the assump- tions," he says. Despite the fact that neither Taylor nor the Public Guardian and Trustee opposed the plan, Corthorn ruled that more co- gent evidence was required be- fore she could approve the plan. "I find that the management of a seven-figure sum of money for a 23-year old man who may, in the future, have to look to someone other than his mother to act as guardian of property is 'contentious' within the mean- ing [of the Rules of Civil Proce- dure]." The upshot was that first- hand testimony was required not only from BMO but also from Henderson Structured Settlements, whose proposals provided the basis for compari- son. As Rousseau sees it, it is the first-blush attractiveness of managed portfolio projections that can lead to their being inad- equately analyzed. "One would never choose a structured settlement after see- ing only one possible design or option, yet people often choose not to structure any of their set- tlement funds, based on man- aged portfolio proposals that project only consistently positive returns year after year," he says. "These projections are only as- sumptions and, no matter how conservative, do not ref lect the reality of investment portfolios in the real world." Joseph Obagi of Connolly Obagi LLP in Ottawa was coun- sel for Michelle Connolly on her application. He declined to com- ment on the case as it is still be- fore the courts. LT — with files from Anita Balakrishnan STRUCTURED SETTLEMENTS Judgment asks questions about viability Ruling scrutinizes managed portfolio John Rousseau says a recent judgment 'makes it clear that you can't just look at positive scenarios' when it comes to a managed portfolio. What do your clients need? The means to move on. Guaranteed. ™ Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. » Pre- and post- settlement consultation and support » Caring professionalism for over 30 years » No fee to you or your clients Need more information? Contact us at 1 800 387 1686 or baxterstructures.com Kyla A. Baxter, CSSC PRESIDENT, BAXTER STRUCTURES READERS ' CHOICE 2018-19 STRUCTURED SETTLEMENTS Untitled-5 1 2018-11-06 3:05 PM

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