Capacity assessment in Ontario: settlements, incapacities, and limitations

Not every personal injury client who reaches settlement has the mental capacity to sign it. In Ontario, a capacity assessment can be the line between a deal that holds and one that unravels years later. The implications run wider than most lawyers expect: competing expert reports at court approval hearings, and malpractice claims where the limitation clock may never have started. These are the practice risks that surface only after the damage is done.

How do Ontario courts evaluate competing capacity assessments in settlement approval?

When a personal injury plaintiff is alleged to be under a disability, any settlement reached on their behalf requires court approval under Rule 7.08(1) of Ontario’s Rules of Civil Procedure (RPC). More than just simply reviewing a number, the court will be asking whether the settlement is fair, reasonable, and genuinely in the plaintiff’s best interests.

Who is a person with a disability

A plaintiff qualifies as under a “disability” under Rule 1.03 if they are mentally incapable within the meaning of sections 6 or 45 of the Substitute Decisions Act (SDA). The test is whether the person:

• cannot understand the information relevant to the settlement decision, or
• cannot appreciate its reasonably foreseeable consequences

This is a decision-specific standard. For instance, a plaintiff who struggles with finances or day-to-day functioning may still meet the threshold for understanding and appreciating a settlement.

When there are conflicting assessments

In contested matters, courts sometimes receive competing capacity assessments pointing in opposite directions. Under the law, judges do not simply pick one.

In Adler v. Gregor, 2019 ONSC 3037, the court rejected both competing assessments, finding that each had been compromised by the party that retained it. The problems in that case were consistent:

• both assessors relied on one-sided background information provided by the retaining party
• neither of the assessors independently verified what they were told
• both parties had involvement in shaping the final written reports

The court added that using capacity assessments as litigation weapons, rather than as genuine protective measures, is improper and should be discouraged in the strongest terms by both lawyers and courts alike.

As such, when there are competing assessments that reach opposite conclusions, courts will also scrutinize the process that produced them, and not just its individual findings.

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Can an Ontario court set aside a personal injury settlement based on incapacity?

The clearest answer from Ontario’s courts comes from Book v. Cociardi, 2022 ONSC 3125, which drew a firm line for personal injury lawyers.

Brandon Book suffered a mild traumatic brain injury in a motor vehicle accident in September 2012. Represented by counsel throughout, Brandon settled his personal injury claim for approximately $221,000 gross, leaving him with $150,000 after fees and disbursements. In 2019, four years after the action was dismissed on consent, his family sought to have the settlement overturned, arguing that Brandon had lacked the capacity when he signed the settlement.

However, the motion failed. At trial, the court accepted that Brandon had genuine limitations from his injury, acknowledging he “had trouble keeping a job and a girlfriend. He was not good with his money.” But the test, as upheld by the Court of Appeal, is not whether the plaintiff managed his life well. It is whether, at the time of settlement, the plaintiff could understand that settling would bring a certain sum now, and that declining might bring more later, with the attendant risk. Brandon met that threshold.

The Court of Appeal rejected the argument that any plaintiff with a permanent cognitive injury must undergo a capacity assessment before signing settlement documents. The court was explicit: such a requirement is “not the law, nor should it be.”

This cuts in both directions. Cognitive difficulties do not automatically create a disability for litigation purposes. But if those difficulties cross the SDA’s incapacity threshold, and no formal assessment or litigation guardian was in place when the settlement was signed, a closed file can become vulnerable to challenge. The passage of years, as the Book family found, offers no protection once incapacity is established.

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How do capacity findings affect limitation periods in Ontario malpractice claims?

In delayed-diagnosis malpractice, the question of capacity can determine whether a claim is alive at all.

Under s. 7 of the Limitations Act, a limitation period does not run during any period when a person is incapable of commencing a proceeding because of a physical, mental, or psychological condition. The standard two-year clock does not tick if the plaintiff cannot mentally act on it.

Discoverability under s. 5 of the same statute requires four conditions before the clock starts:

• the person knew or ought to have known that the injury or loss occurred
• they knew or ought to have known that the injury was caused or contributed to by an act or omission
• they knew or ought to have known that the act or omission was that of the person against whom the claim is made
• they knew or ought to have known that a proceeding would be an appropriate means to seek a remedy

The fourth condition is where capacity intersects most directly with delayed-diagnosis malpractice. If a plaintiff suffered a cognitive impairment at the same time a diagnosis was negligently missed, their ability to appreciate that a legal wrong had been done to them may itself have been compromised.

The “appreciate” standard from the SDA tests whether a person can apply known information to their actual circumstances in a reality-grounded way. That same standard is effectively imported into the discoverability analysis for a mentally incapable claimant.

Implications for personal injury lawyers

A malpractice claim is not necessarily time-barred simply because years have passed since the alleged negligence. Lawyers should examine whether a cognitive condition affecting the plaintiff at the relevant time also impaired their ability to discover the claim. A carefully documented capacity assessment tied to that period may be what keeps the file open.

What are the grounds for challenging a capacity assessment in Ontario?

Even a completed capacity assessment is not immune to challenge. Ontario courts have identified several grounds on which a report can be attacked, discounted, or set aside entirely.

The leading case is Re: Koch, 1997 CanLII 12138 (ONSC), where core procedural obligations that every assessor must meet were identified. The most serious of them all is the failure to inform the person of their right to refuse the assessment, and the significance of a finding of incapacity, which may render the assessment a nullity.

Under section 78(2) of the SDA, the assessor bears the burden of demonstrating this warning was given, with detailed notes to that effect.

Common law grounds for challenging a capacity assessment

Beyond that foundational requirement, the following grounds have supported successful challenges in Ontario:

• assessor not properly designated: in Forgione v. Forgione, 2007 CarswellOnt 3197, a court ordered a second assessment where the original assessor lacked the required designation and the report did not follow the Ministry of the Attorney General’s Guidelines for Conducting Assessments of Capacity (2005)
• presumption of capacity reversed: the onus is on the party asserting incapacity, not on the person to demonstrate capability; assessments that proceed as though the subject must prove capacity are vulnerable on this ground
• sole reliance on an interested party’s account: Re: Koch confirmed that an assessor must be alert to an informant with improper motives and must not accept that account without independent corroboration
• suboptimal assessment conditions: in Penny v. Bolen, 2008 CarswellOnt 5644, the court considered an assessment conducted after the subject had travelled five hours without eating or resting; a second assessment, done when she was rested, found her capable enough

For personal injury lawyers, these grounds are most relevant when an opposing assessment threatens to define a file. Scrutinize the assessor’s qualifications, the retainer circumstances, the information they were given, and any drafts that circulated before the final report was issued.

Capacity assessment in Ontario: the deal that holds

Capacity sits at the centre of personal injury litigation in ways that are easy to underestimate until they are not. A flawed assessment can compromise a settlement approval hearing, a missed incapacity finding can revive a limitation period everyone assumed had expired, and a settlement signed without proper scrutiny of the plaintiff’s capacity can unravel years after a file was closed. For the personal injury lawyer who takes capacity seriously, the capacity assessment in Ontario is not a procedural box to tick. It is the assessment that decides whether a deal actually holds.

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