BARRIE

COURT FILE NO.: 07-1034

DATE: 20140423

CORRECTED DATE: 20140428

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Donna Downing, Colin Downing, Brenna Downing, Sharlene Downing and Deanna Downing by their Litigation Guardian, Donna Downing, Plaintiffs/Moving Parties

AND:

David M. Reynolds, Defendant/Responding Party

BEFORE: THE HON. MR. JUSTICE G.M. MULLIGAN

COUNSEL: W. Leslie, Counsel for the Plaintiffs/Moving Parties

C. Wall, Counsel for the Defendant/Responding Party

HEARD: April 11, 2014

Corrected Decision: The text of the original Endorsement was

corrected on April 28, 2014 and the description of the correction is appended.

ENDORSEMENT

[1] In 2010, the plaintiff, Donna Downing and the defendant, David Reynolds, entered into a full and final release with respect to a motor vehicle accident which caused injuries to the plaintiff, Donna Downing. Donna Downing also signed a full and final release as litigation guardian for her infant daughter, Sharlene Downing. The defendant then forwarded the $700,000 settlement amount to the plaintiffs’ counsel. Although contemplated, the plaintiffs’ counsel never proceeded with judicial approval for the infant settlement. In the result, no judgment was ever obtained.

[2] The plaintiff, Donna Downing, now has new counsel. She seeks to set aside the 2010 settlement on the basis that her daughter, Sharlene suffered catastrophic impairments as a result of the accident. In support of her position, she obtained an assessment from Ms. Lena Solomon, a licensed psychological associate. In addition, she seeks to sever the infant settlement from the global settlement of $700,000.

[3] The infant plaintiff, Sharlene Downing, was not in the motor vehicle when her mother was injured. As Donna Downing states in her affidavit at para. 7:

Sharlene was not a passenger in the car at the time of the accident. Sharlene came upon the accident shortly after the collision and witnessed me being extricated from the car and put into an ambulance to be taken to the hospital.

[4] As to the injuries suffered by her daughter, she states at para. 17:

It is my view that Sharlene’s case should be severed from the global settlement because her injuries and resulting damages, in my view, had not reached a plateau at the time of the June 2010 settlement, and now with the passage of time, we are in a better position to properly assess the significance of Sharlene’s injuries and damages as opined by the enclosed expert reports.

[5] The defendant opposes the relief sought. As set out in his factum at para. 24:

The respondent-defendant seeks an order that:

(a) the $700,000 all-inclusive settlement be approved;

(b) that if the court deems that the minor plaintiff, Sharlene Downing requires additional funds, that they be provided through a re-apportionment of the $700,000 all-inclusive settlement funds;

(c) in the alternative, if the $700,000 all-inclusive settlement is not approved, that the entire $700,000 settlement be put aside and the funds ordered to return to the defendant.

Factual Background

[6] In order to provide context it is useful to review how the settlement was arrived at by counsel. The plaintiff provided an affidavit from Donna Downing. No affidavit was provided by former counsel who acted for the plaintiffs at the time. The defendant provided an affidavit from the defendant’s counsel, Edward J. Chadderton.

[7] In July of 2010, counsel for the parties had a pre-trial hearing before Justice DiTomaso. Shortly thereafter, the parties arrived at a settlement. Justice DiTomaso’s endorsement at the pre-trial indicated, in part, “Should this matter settle prior to trial, I am agreeable that the materials regarding court approval for minor claims, including Sharlene Downing, be brought before me.” The defendant made an offer of $700,000 all-inclusive. Shortly thereafter, former counsel for the plaintiff accepted the offer, stating in correspondence dated September 10, 2010:

I have met with Donna Downing once again. I am pleased to advise that I have instructions to accept the sum of $700,000 all-inclusive. My client has signed a full and final release in her personal capacity and in her capacity as litigation guardian for the three minor children.

As you are also aware, Justice DiTomaso has agreed to sign a judgment approving the settlement for the three minor plaintiffs. I will begin work on the motion. I am requesting that you requisition funds payable to my office in trust in the amount of $700,000. I am suggesting that you forward those funds to my office to be held in trust. You have my undertaking that those funds will remain in trust until:

(b) You have a judgment approving the settlement for the three minor plaintiffs, which judgment will include a provision dismissing all claims without costs.

[8] There is nothing in the correspondence between counsel, or in the full and final release, as to a breakdown of the allocation of funds between the plaintiff in her personal capacity and in her capacity as litigation guardian for her infant daughter, Sharlene Downing.

[9] In her supporting affidavit, the plaintiff suggests that a breakdown of the funds was discussed before Justice DiTomaso at the pre-trial hearing. As she states in paras. 9 and 10 of her affidavit:

[9] I was further advised by my former lawyer, that Justice DiTomaso recommended that $35,000 gross ($25,000 net) be allocated to Sharlene for her damages suffered.

[10] As a result of the recommendations and advice given to me by (her former counsel), I signed the global release settling the matter for $700,000, which included the sum of $35,000 ($25,000 net) for Sharlene.

[10] Notwithstanding former counsel’s obligation to hold the funds in trust until a judgment was obtained approving the infant settlement, most of the $700,000 was distributed.

[11] Counsel for the defendant has indicated that the defendant has issued a claim against former counsel for the plaintiffs with respect to the breach of undertaking. In addition, the plaintiff may have certain remedies against her former counsel as well. However, I note that he is not a party to these proceedings and those issues will have to be pursued separately.

[12] This motion engages a consideration of Rule 7.08, which requires judicial approval for settlements involving minors. As 7.08 states:

(1) Settlement requires judge’s approval – no settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge.

(2) Judgment may not be obtained on consent in favour of or against a party under disability without the approval of a judge.

[13] Rule 7.08(4) indicates the material that must be filed before the court before an approval can be considered. Among the material required is an affidavit of the litigation guardian supporting the settlement, as well as an affidavit from the lawyer acting for the litigation guardian, setting out the lawyer’s position with respect to the proposed settlement.

[14] Those materials were not put before the court notwithstanding the obligation of plaintiffs’ former counsel to do so. Clearly, the approval of the court is now no longer available. The plaintiff Donna Downing no longer supports the figure she ways was discussed before DiTomaso J. She now takes the position that her daughter suffered serious injuries as a result of witnessing the accident. Her current counsel would not support such an application either. Therefore, the defendant’s request to now approve the settlement must fail.

[15] In Smallman v. Smallman, [1971] 3 All ER 717, Lord Denning provided the following guidance at p.720:

In my opinion, if the parties have reached an agreement on all essential matters, then the clause “subject to the approval of the court” does not mean that there is no agreement at all. There is an agreement, but the operation of it is suspended until the court approves it. It is the duty of one party or the other to bring the agreement before the court for approval. If the court approves, it is binding on the parties. If the court does not approve, it is not binding. But, pending the application to the court, it remains a binding agreement which neither party can disavow.

[16] In Riviere v. LeBlond, 2007 CarswellOnt. 1482, J.A. Thorburn J. underlined the importance of apportioning the settlement funds. As she stated at para. 31:

There should also be disclosure of the apportionment of the settlement funds to persons who are not under disability, so that the court can determine whether the apportionment of funds to the person under disability is appropriate with full knowledge of the circumstances of the negotiation of the proposed settlement.

[17] I am satisfied that there may have been some discussion about apportionment before the pre-trial judge. However, those discussions are not binding. They are simply for the assistance of the parties in moving forward with settlement discussions. There is nothing in the correspondence between the parties or the final release which indicated how the funds were to be apportioned. Absent a proper evidentiary record on this issue, I decline to sever the infant settlement from the global settlement of $700,000.

[18] In my view, the appropriate remedy is to set aside the entire all-inclusive $700,000 settlement. In coming to that conclusion, the following facts inform my decision. Former counsel for the plaintiff received the funds in trust and undertook to obtain an infant settlement, but did not do so. The full and final release did not contain an apportionment of the infant’s proposed share. Most of the funds were disbursed at the direction of, or for the benefit of the plaintiff, Donna Downing. Although the defendant had an undertaking from former counsel, the defendant’s counsel apparently took no steps to follow up on this undertaking to inquire as to the status of the judicial approval of the settlement.

[19] The defendant requests that the entire $700,000 settlement, which was disbursed to former counsel, be ordered returned to the defendant. Because former counsel is not a party to these proceedings, I decline to do so. As noted, the defendant has issued a claim against the plaintiffs’ former counsel addressing that very issue.

Conclusion

[20] The plaintiffs’ motion for an order severing the infant settlement from the global settlement in the sum of $700,000 all-inclusive in favour of the plaintiffs is dismissed.

[21] It is ordered that the global settlement of September 9, 2010 is set aside.

Costs

[22] The plaintiff has achieved a measure of success upon this motion, a motion that was made necessary because of the alleged failure of her previous counsel to obtain a judgment. If the plaintiff seeks costs, I will receive written submissions within twenty days of this endorsement, thereafter the defendant will have ten days to reply. Submissions not to exceed three pages.

MULLIGAN J.

Date: April 28, 2014

April 28, 2014 – Corrections:

1. Para. 10 now reads: Notwithstanding former counsel’s obligation to hold the funds in trust until a judgment was obtained approving the infant settlement, most of the $700,000 was distributed.

2. Para. 18, fifth sentence (beginning on the fifth line) now reads: Most of the funds were disbursed at the direction of, or for the benefit of the plaintiff, Donna Downing.