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| Jake Palace |
Procedure for settlement approvals binding incapable persons
The process to seek settlement approval has recently undergone major amendments. The party seeking approval must file, together with a notice of motion or notice of application, a motion or application record containing an affidavit of the litigation guardian setting out the material facts and the reasons supporting the proposed settlement and their position regarding the settlement, an affidavit of the lawyer acting for the litigation guardian setting out the lawyer’s position with respect to the settlement, and a copy of the proposed minutes of settlement, along with a table of contents (Rule 7.08(4)). Where there is no litigation guardian, the
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Settlement approval is protective, not a retrial: the question is whether, on the record, the compromise is in the person’s best interests, having regard to litigation risk, delay, cost and a workable plan to safeguard proceeds (r. 7.08; Wu (Re), 2006 16344 (ON CA), at para. 10). As litigation capacity may exist for routine steps yet be absent for a global compromise, Rule 7 operates in tandem with s. 3 of the Substitute Decisions Act (SDA) to ensure meaningful participation and protection.
Authorities show three key features in successful approvals:
1) a candid risk analysis that identifies the real hazards on liability, causation and damages, rather than generic assertions (r. 7.08);
2) a principled valuation that “shows the math,” tying quantums to evidence and disclosing net-to-client with fee justification. Courts have approved settlements where the record reads like an implementation map, resisting perfunctory materials (Hughes v. Peterborough Regional Health Centre, 2024 ONSC 4957; Mearns v. Sullivan, 2020 ONSC 3229; Teeple v. Thomsen Estate, 2024 ONSC 6360);
3) impenetrable governance under rr. 7.08-7.09: who will hold funds, on what terms, with what safeguards and reporting, and how the plan will adapt to evolving needs, all reflected in the minutes (Wu at paras. 6 and 17).
2) a principled valuation that “shows the math,” tying quantums to evidence and disclosing net-to-client with fee justification. Courts have approved settlements where the record reads like an implementation map, resisting perfunctory materials (Hughes v. Peterborough Regional Health Centre, 2024 ONSC 4957; Mearns v. Sullivan, 2020 ONSC 3229; Teeple v. Thomsen Estate, 2024 ONSC 6360);
3) impenetrable governance under rr. 7.08-7.09: who will hold funds, on what terms, with what safeguards and reporting, and how the plan will adapt to evolving needs, all reflected in the minutes (Wu at paras. 6 and 17).
Death before approval?
Tragically, given the nature of disputes under the Substitute Decisions Act, elderly incapable persons may die after the settlement agreement has been executed, but prior to receiving court approval. In those cases, it is important to remember that the minutes of settlement may remain enforceable if the incapable person dies before the hearing. The Court of Appeal has held that once essential terms are complete, the bargain survives death passing to the estate, and approval may be granted nunc pro tunc where appropriate (Wu, at paras. 6, 14, 17, 24, 28). If the minutes fix the essentials, append the release and state that the deal remains enforceable despite death or restored capacity, the court can give effect to the bargain while honouring Rule 7’s protective purpose (rr. 7.08-7.09). Practically, carriage moves from litigation guardian to estate trustee and payment into court may bridge probate delay.
Uncertain capacity
Another unique consideration for settlement approvals is when a party contests the capacity of the elderly person after the litigation is settled, but no formal declaration of capacity was made by a judge prior to settlement. Section 2 of the Substitute Decisions Act presumes that a person has capacity to manage their property and personal care. Where that capacity is in doubt but not judicially decided before settlement, the court must still determine who is authorized to make settlement decisions pending approval.
Rule 7.04 permits appointment of a litigation guardian for an adult under disability; once appointed, the guardian instructs counsel, decides whether to settle, signs the minutes in a representative capacity, and brings the approval motion, with implementation conditional on judicial approval (rr. 7.04, 7.08-7.09). The approval hearing is the safeguard, not a platform for parallel relitigation by the represented party (e.g., a separate right to appeal an approval supported by the guardian has been rejected (Huang v. Braga, 2020 ONCA 645, at paras. 20-21)).
While the alleged incapable person might already be represented by counsel via s. 3 of the SDA, their counsel serves a different function that is distinct from a litigation guardian. The court may appoint counsel for the alleged incapable person to assist participation of the litigation and advance the person’s wishes before the court. Communications are privileged and s. 3 counsel neither assumes carriage nor signs minutes (SDA, s. 3). If, even with supports, the person cannot understand and appreciate the settlement decision and its consequences, a litigation guardian should be appointed, and any settlement implemented only upon approval (rr. 7.04, 7.08-7.09).
Upcoming seminar
A lunch and learn seminar on settlement approvals involving persons under disability will be hosted by Wagner Sidlofsky LLP on Sept. 30, 2025, starting at 12 p.m. This is an opportunity for practitioners to compare approaches, collaborate and refine tactics for these protective motions. For more information and to register, please follow this link.
Jake Palace is an associate at Wagner Sidlofsky LLP, practising in the estate and commercial litigation groups.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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