Montgomery,
J.:—These
reasons
are
issued
to
advise
the
profession
that,
on
the
basis
of
a
recent
ruling
of
Revenue
Canada,
the
scope
of
structured
settlements
has
been
expanded
to
apply
in
appropriate
cases
to
self-insurers.
For
the
assistance
of
the
Court
on
the
motion
to
approve
the
structured
settlement,
counsel
filed
a
joint
factum
which
clearly
set
forth
the
requirements
to
comply
with
the
tax
ruling.
The
new
method
of
structuring
is
as
follows:
A.
The
plaintiff
and
the
defendant
or
its
insurer
(if
there
is
an
insurer)
enter
into
a
settlement
agreement
requiring
periodic
payments
to
be
made
to
the
plaintiff
for
a
specified
term
in
respect
of
a
claim
for
damages
resulting
from
personal
injury
or
death.
B.
The
defendant
or
its
insurer,
with
the
consent
of
the
plaintiff,
may
make
a
conditional
assignment
to
an
assignee
of
its
rights
and
obligations
in
relation
to
the
settlement
agreement
entered
into
by
it
with
the
plaintiff.
C.
The
plaintiff
must
consent
in
writing
to
the
assignment
by
the
defendant
or
its
insurer
to
the
assignee
in
order
to
ensure
the
enforceability
by
the
plaintiff
of
the
substituted
performance
by
the
assignee.
There
is
a
proviso
that
the
plaintiff's
consent
must
be
expressly
stipulated
not
to
be
or
to
be
deemed
to
be
or
interpreted
as
being
a
novation
of
the
structured
settlement
agreement.
D.
The
assignment,
which
will
be
in
the
form
of
a
contract
of
insurance,
will
specifically
provide
for
the
assignee
to
effect
the
substituted
performance
of
the
settlement
agreement
and
will
be
conditional,
such
that
if
the
assignee
fails
to
perform
the
structured
settlement
agreement
the
liability
of
the
defendant
or
its
insurer
to
perform
the
structured
settlement
agreement
will
cease
to
be
conditional
and
will
become
primary
and
immediate.
E.
The
assignee
is
to
be
either
an
affiliate
of
the
issuer
of
the
annuity
contract
covering
the
structured
settlement
agreement
or
any
other
entity
which
is
an
assignee
permitted
to
accept
assignments
of
and
to
perform
settlement
agreements
as
may
be
established
in
the
discretion
of
the
courts,
under
any
applicable
legislation
or
otherwise.
F.
If
the
entity
which
is
to
be
assignee
is
an
affiliate
of
the
issuer,
it
is
not
necessary
that
it
independently
meet
the
requirements
(financial
or
otherwise)
established
for
it
to
be
an
assignee.
In
that
case,
as
an
inducement
both
to
the
plaintiff
to
consent
to
and
to
the
defendant
or
its
insurer
to
enter
into
the
conditional
assignment,
the
issuer
will
guarantee,
indemnify
or
assure,
contingently
or
otherwise,
to
each
of
the
plaintiff
and
the
defendant
or
its
insurer,
the
substituted
performance
by
the
assignee
of
the
structured
settlement
agreement.
The
liability
of
the
issuer
to
the
plaintiff
and
either
the
defendant
or
its
insurer
pursuant
to
the
guarantee,
indemnity
or
assurance
must
be
expressly
restricted
to
the
substituted
performance
and
neither
of
them
is
to
acquire
any
rights
against
the
issuer
in,
to
or
under
the
annuity
contract
itself.
G.
The
amount
of
the
consideration
to
be
paid
by
the
defendant
or
its
insurer
to
the
assignee
for
its
assumption
of
the
liability
to
perform
the
structured
agreement
pursuant
to
the
conditional
assignment
will
be
the
sum
equal
to
the
amount
of
the
premium
to
be
paid
to
the
issuer
for
the
issuance
of
the
annuity
contract
plus
the
amount
of
the
nominal
fee
paid
to
the
assignee
to
accept
the
conditional
assignment.
H.
Pursuant
to
the
conditional
assignment
the
assignee,
as
owner
and
beneficiary,
will
purchase
a
single
premium
non-assignable,
non-commutable
and
non-transferable
annuity
contract
from
the
issuer
to
fund
its
substituted
performance
of
the
structured
settlement
agreement
and
irrevocably
direct
the
issuer
to
make
the
payments
under
the
annuity
contract
to
the
plaintiff
and
otherwise
comply
with
the
provisions
of
Interpretation
Bulletin
No.
IT-365R2
issued
by
Revenue
Canada,
Taxation
on
May
8th,
1987.
I.
The
issuer
must
be
registered
by
the
Province
of
Ontario
and
the
Government
of
Canada,
as
may
be
necessary,
and
must,
as
shown
on
its
financial
statements,
have
an
unappropriated
surplus
of
$25,000,000.
J.
The
tax
treatment
for
the
defendant
or
its
insurer
is
that,
as
a
result
of
the
assignment,
it
will
not
have
acquired
a
direct
interest
in
a
life
insurance
policy
and
will
not
have
a
direct
future
liability
pursuant
to
the
structured
settlement
agreement.
The
consideration
paid
to
the
assignee
represents
a
payment
in
respect
of
a
current
liability
under
the
assignment
agreement
and
is
a
deductible
expense
in
the
business
of
the
defendant
or
its
insurer
in
the
fiscal
year
in
which
the
consideration
is
paid.
As
the
defendant
or
its
insurer
has
no
direct
interest
in
the
annuity
contract
it
is
not
required
to
include
the
payments
under
the
annuity
contract
in
a
fiscal
year
in
the
calculation
of
its
income
for
the
fiscal
year
and
correspondingly,
by
reason
of
the
assignment
of
the
settlement
agreement,
is
not
entitled
to
deduct
the
payments
made
under
the
settlement
agreement
in
the
calculation
of
its
income
for
the
fiscal
year
in
which
those
payments
are
made.
K.
The
receipt
of
the
annuity
payments
by
the
plaintiff
pursuant
to
the
structured
settlement
agreement
will
remain,
in
the
view
of
Revenue
Canada
Taxation,
non-taxable
as
a
payment
for
damages,
notwithstanding
the
assignment
of
the
performance
of
the
structured
settlement
agreement
by
the
defendant
or
its
insurer.
L.
The
eligibility
to
deduct
a
reserve
and
to
obtain
the
“wash”
effect
for
a
structured
settlement
agreement
pursuant
to
the
provisions
of
Interpretation
Bulletin
No.
IT-365R2
and
the
Income
Tax
Act
must
be
established
by
the
assignee
for
itself.
The
action
arose
out
of
a
collision
which
occurred
on
January
14,
1988
between
an
INCO
Limited
ore
train
and
a
Canadian
Pacific
Limited
train
near
Sudbury.
Richard
Kay,
the
engineer
of
the
ore
train,
was
killed
in
the
crash.
I
gave
judgment
on
December
20,
1990
which
provided
inter
alia,
that
Canadian
Pacific
Limited
purchase
an
annuity
contract
for
the
benefit
of
the
plaintiff
Diane
Kay
in
the
terms
agreed
by
the
parties.
It
further
provided
that
Canadian
Pacific
may
make
a
conditional
assignment
to
an
assignee
of
its
rights
and
obligations
in
relation
to
the
agreed
payments.
It
must
be
understood,
however,
that
the
courts
have
no
present
power
to
order
a
structured
settlement
absent
the
consent
of
the
parties,
and
the
enabling
tax
ruling
on
the
individual
case.
I
am
grateful
to
all
counsel
for
their
considerable
assistance.
Motion
for
approval
granted.
Email this Content