ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-08-1377-00
DATE: 20140930

B E T W E E N:

CLAUDIA CATANZARO, NICK CATANZARO and ALESSIA CATANZARO as represented by her Litigation Guardian, CLAUDIA CATANZARO

Mark Wiffen, for the Plaintiffs

Plaintiffs

• and -

KELLOGG’S CANADA INC.

Sean Murtha, for the Defendant

Defendant

HEARD: August 29, 2014

ENDORSEMENT

Fragomeni J.

[1] The defendant, Kellogg’s Canada Inc. seeks the following relief:

(1) an order enforcing settlement pursuant to Rule 49.09 of the Rules of Civil Procedure;

(2) an order approving the settlement as against the infant plaintiff, Alessia Catanzaro, pursuant to Rule 7.08 of the Rules of Civil Procedure;

(3) an order dismissing the action against Kellogg’s

Position of the Defendant

[2] The defendant sets out the following chronology of events in support of its position:

• This action relates to an alleged incident dated September 27, 2008, wherein a moldy piece of chicken was found.

• The Plaintiffs Claudia Catanzaro, Nick Catanzaro and Alessia Catanzaro issued a Statement of Claim on April 28, 2008.

• The Defendant served a Notice of Intent to Defend on July 4, 2008, and served a Statement of Defence on August 25, 2008.

• On September 29, 2011, Mr. Michael White, counsel for the Defendant served an offer to settle on the Plaintiffs’ counsel, Ms. Judy Hamilton.

• On September 30, 2011, Ms. Hamilton communicated to Mr. White that the Plaintiffs had accepted the offer to settle.

• On November 24, 2011, Ms. Hamilton provided Mr. White with draft motion materials to have the court approve the settlement in regard to the infant plaintiff, Alessia Catanzaro, and to have the action in its entirety dismissed as against the Defendant.

• On January 9, 2012, Tara Cassidy, then a student-at-law working with Ms. Hamilton, wrote to the Trial Coordinator’s Office and informed that court that the action had been settled.

• Despite repeated written promises from Ms. Hamilton to Mr. White to bring a motion in front of the court to have the settlement in regard to the infant plaintiff approved and the entire action dismissed, this was never done.

• On November 8, 2012, more than one year after the settlement was entered into, Mr. White was served with a Notice of Change of Lawyer from the Plaintiffs’ current counsel, Mr. Wiffen. Mr. Wiffen informed Mr. White by letter dated November 8, 2012 that his clients intended on resiling the settlement agreement they had entered into, and were going to proceed with this action.

Position of the Plaintiffs

[3] The plaintiffs submit the following:

• That the infant settlement should not be approved as there is no evidence that it is in the best interests of the minor;

• the court should exercise its discretion to refuse to enforce the settlement as it would be unjust to do so;

• the matter should be returned to the trial list so that the matter can proceed to trial on the merits.

Nature of the Allegations

[4] This action relates to a claim with respect to a box of Vanilla Rice Krispies cereal which was purchased by the plaintiffs in September 2007. The plaintiffs have claimed that they discovered a moldy piece of chicken in the cereal box.

Trial Record

[5] On February 1, 2011, Justice MacKenzie ordered a timetable to be instituted in the action as follows:

(1) examinations for discovery be completed by May 30, 2011;

(2) motions arising from discoveries to be completed by July 30, 2011;

(3) mediation (if necessary) to be completed by August 30, 2011;

(4) the action was to be set down for trial by September 1, 2011, failing which the action would be dismissed.

[6] The trial record was served on August 25, 2011.

Chronology of Settlement Discussions

July 29, 2011 e-mail from plaintiffs’ counsel to defendant’s counsel, in part:

Given your stance on reasonable foreseeability with respect to Mrs. Catanzaro, would Kelloggs consider an offer with respect to Alessia’s damages for having consumed the contaminated product?

August 16, 2011 email from defendant’s counsel to plaintiffs’ counsel:

I look forward to hearing from you further to the receipt of your client’s instructions.

August 30, 2011 email plaintiffs to defendant:

I am meeting with my clients today and will advise you thereafter.

September 14, 2011 email plaintiffs to defendant:

My client is conducting a further investigation into matters which relate to the proceeding after which she will be able to advise with respect to her instructions going forward. I will try to get firm instructions from her by early next week.

September 21, 2011 email defendant to plaintiffs:

Please confirm your client’s instructions this week.

September 23, 2011 email plaintiffs to defendant:

I have had several conversations with my client this week, but have yet to obtain instructions in writing. Since Mr. works nights, he has not had the opportunity to discuss with Mrs. And so they would like the weekend. She is taking Monday off so that they can come in the morning and give me instructions.

September 29, 2011 email defendant to plaintiffs:

I will need your clients offer to consent to an Order dismissing the action on a without cost basis no later than 5 p.m. tomorrow in order for me to recommend our client’s acceptance.

The reason for this is our trial preparation and expert costs will significantly increase going forwards….

September 30, 2011 email plaintiffs to defendant:

My clients have agreed to settle the action on the basis of a without costs dismissal.

Please advise if this is satisfactory and whether you will be preparing the documentation.

October 3, 2011 email defendant to plaintiffs:

Our client has accepted your clients offer to consent to the dismissal of the action against our client on a without costs basis.

We will forward to you the consent and draft dismissal Order to you shortly.

Notice of Motion for Infant Settlement Approval

[7] The plaintiffs proceeded with a motion to approve Alessia’s settlement. The notice of motion was to be dated in November 2011. In support of that motion and in accordance with the Rules, affidavits were prepared to be signed by plaintiffs’ counsel, Judy Hamilton and Claudia Catanzaro, the mother and litigation guardian for Alessia, born July 13, 1996. Both affidavits were drafted but neither affidavit was signed and sworn to.

Draft Affidavit of Counsel, Judy Hamilton

[8] In her unsworn affidavit Ms. Hamilton sets out the following, in part:

7. A Statement of Claim was issued on April 28, 2008. The nature of the injuries described by the Plaintiffs is as follows:

Following this event, the Plaintiffs became increasingly upset. Alessia has had diarrhea for a week following the incident and was experiencing difficulty with sleeping.

Claudia and Nick also experienced severe anxiety and emotional distress over the incident which caused them untold hardship and grief.

Claudia and Nick also suffered nervous shock on a severe basis. They have been severely and adversely affected by the event and are no long a whole person.

The plaintiffs, since the incident, required ongoing counselling and cognitive behavioural therapy to assist them in overcoming their aversion and avoidance to eating cereal.

10. I have reviewed the Affidavit of Claudia Cantanzaro in support of this motion and participated in the negotiation and conclusion of the settlement of the action as against the Defendant Kellogg.

11. Based on the facts and issues in dispute between the parties, I recommended to the Plaintiffs, Nick and Claudia that their claims and claims of Infant Plaintiff in this action be settled as against the Defendant Kellogg.

12. The settlement was arrived at as a compromise between myself and the solicitor for the Defendant Kellogg. I state and verily believe it to be true, that the aforementioned settlement is reasonable under the circumstances.

13. More specifically, the settlement as against the Defendant Kellogg is appropriate because there is significant risk that the Plaintiffs will not be able to establish liability in this case. As well, the case of Mustapha v. Culligan of Canada Ltd., regarding compensable damages from psychological injury has greatly reduced the quantum and type of damages recoverable from a tainted food incident. The reasonable range of estimates of damage if the Plaintiffs are successful is conservative. Counsel for Kellogg has also stated that if the Plaintiffs are unsuccessful at trial they may pursue them for their costs. Therefore these matters were considered when assessing the risk of proceeding to trial.

14. At this point, it is in the interests of the Plaintiffs that this matter be resolved. Any further steps will increase the Defendant Kellogg’s costs and exposes the Plaintiff to significant risks that are not warranted given the likelihood and quantum of any damages.

15. The Infant Plaintiff’s Litigation Guardian, Claudia Catanzaro, has instructed me to settle the claim against Kellogg on the basis set out herein.

Affidavit of Claudia Catanzaro

[9] In her unsworn affidavit Mrs. Catanzaro states the following, in part:

10. We have agreed to settlement of our action as against the Defendant Kellogg. The decision to settle the claim was made after a thorough consideration of the Defendant’s potential liability and the reasonable range of estimates of damage if we are successful.

11. Based on the facts and issues in dispute between the parties, Ms. Hamilton recommended to me that the action be settled against the Defendant Kellogg on the following terms:

a. Without costs dismissal of the action of Claudia Catanzaro, Nick Cantanzaro and Alessia Catanzaro, as represented by her Litigation Guardian, Claudia Catanzaro against Kellogg Canada Inc.

b. Releases are to be exchanged as between the Parties to this action.

12. I state and verily believe it be to true, that the aforementioned settlement is reasonable under the circumstances.

13. More specifically, the settlement as against the Defendant Kellogg is appropriate because it is unclear if we will be able to establish liability in this case. As well, when this action was first issued, there was a very favorable case regarding compensation damages from psychological injury that has since had its trial damage award overturned. The reasonable range of estimates of damage if we are successful is conservative. Counsel of Kellogg has also stated that if we are unsuccessful at trial they may pursue us for their costs. Therefore these matters were considered when assessing the risk of proceeding to trial.

14. At this point, it is in the interests of myself and the other Plaintiffs that this matter be resolved. Any further steps will increase the Defendant Kellogg’s costs and exposes us to significant risks that are not warranted given the likelihood and quantum of any damages.

15. I verily believe that the action of Alessia as against the Defendant Kellogg, should be dismissed on the basis aforementioned, as it is fair and reasonable under the circumstances.

16. After weighing the advice given to me by my solicitors, and after consideration of the offer made, I believe that it is in the best interests of Alessia, the minor Plaintiff, to settle this action as against the Defendant Kellogg, on the basis set forth in the Affidavit of Judy Hamilton, filed.

[10] By fax dated January 9, 2012 counsel for the plaintiffs advised the trial office that the matter “has now been settled. We are currently in the process of bringing the required motion to have the settlement approved.”

The following e-mails follows:

February 14, 2012 email defendant to plaintiffs:

Please confirm when you will be bringing your motion to have the judgment dismissing the action.

February 21, 2012 email plaintiffs to defendant:

Just waiting for the client to come in to swear the affidavit.

November 8, 2012 email new plaintiffs’ counsel to defendant, in part:

We have been retained by the plaintiffs…

We are in the process of reviewing the file. In the meantime, we understand that the plaintiffs’ previous counsel communicated an acceptance of a previous settlement offer by your client. The plaintiffs advise me that they disclaim any such settlement, and intend to proceed with their action.

Issues and the Law

Issue: Is there a settlement?

[11] Rule 49.09(a) of the Rules of Civil Procedure states:

49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,

(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; or …

[12] In Cellular Rental Systems v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.) at para. 17 (aff’d [1995] O.J. No. 3773 (C.A.) the Court stated:

17 An agreement to settle a claim is a contract. To establish the existence of a contract, the parties' expression of agreement must demonstrate a mutual intention to create a legally binding relationship and contain agreement on all of its essential terms: see Canada Square Corp. v. VS Services Ltd. (1981), 1981 1893 (ON CA), 34 O.R. (2d) 250 (C.A.); and Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.).

[13] There is no evidence that the plaintiffs’ counsel did not have the authority to settle the case. In Davis v. Kalkhoust, [1986] O.J. No. 1464 (Ont. H.C.), the court set out the following at pages 3 and 4:

Counsel for the Plaintiffs urged upon me the decision of Henry J. in Atkins v. Holubeshen 43 C.P.C., 166 upheld by the Divisional Court at 50 C.P.C. 94. In that case, Mr. Justice Henry set aside an exparte order dismissing the action. That case however, can be distinguished from the one with which I am dealing. As Madam Justice Van Camp said in delivering the Judgment of the Divisional Court (at p. 95) "the consent given to the exparte order dismissing the action had been given without authority of the Plaintiff - in circumstances which should have alerted the Defendant to such want of authority" (emphasis mine). That is not the case here. The solicitor had been retained. He had apparent authority to bind his client. No want of authority was indicated to the Defendant Purvis' counsel. Under the circumstances I feel bound by the decision in Scherer v. Paletta (supra) and the motion is disallowed, with costs to the Defendant Purvis.

[14] In the case at bar the parties agreed to settle the action as set out in their email communications. Counsel for the plaintiffs then proceeded to prepare the required motion and affidavits to have the infant settlement approved and the entire action dismissed.

[15] In Homewood v. Ahmed, [2003] O.J. No. 4677 (S.C.J.) the court stated the following at para. 55:

55 The Plaintiff merely "changed his mind", because of "the change in his circumstances", after the settlement had been concluded in accordance with his instructions.

[16] I am satisfied that the parties agreed to settle this action in accordance with the terms set out in the plaintiffs’ motion for infant settlement approval, namely:

An Order for a without costs dismissal of the action of Claudia Catanzaro, Nick Catanzaro and Alessia Catanzaro, as represented by her Litigation Guardian, Claudia Catanzaro, as against the Defendant Kellogg Canada Inc. (“Kellogg”), improperly named in the Statement of Claim as “Kellogg’s Canada Inc.”

Issue: Should the settlement be approved?

[17] Rule 7.08(1) and (4) state:

7.08 (1) 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.

(4) On a motion or application for the approval of a judge under this rule, there shall be served and filed with the notice of motion or notice of application,

(a) an affidavit of the litigation guardian setting out the material facts and the reasons supporting the proposed settlement and the position of the litigation guardian in respect of the settlement;

(b) an affidavit of the lawyer acting for the litigation guardian setting out the lawyer’s position in respect of the proposed settlement;

(c) where the person under disability is a minor who is over the age of sixteen years, the minor’s consent in writing, unless the judge orders otherwise; and

(d) a copy of the proposed minutes of settlement.

[18] Rule 7.08(5) states:

(5) On a motion or application for the approval of a judge under this rule, the judge may direct that the material referred to in subrule (4) be served on the Children’s Lawyer or on the Public Guardian and Trustee as the litigation guardian of the party under disability and may direct the Children’s Lawyer or the Public Guardian and Trustee, as the case may be, to make an oral or written report stating any objections he or she has to the proposed settlement and making recommendations, with reasons, in connection with the proposed settlement.

[19] Although plaintiffs’ previous counsel prepared the necessary motion and affidavits that motion was never filed nor were the affidavits properly sworn. Rule 4.06(1)(e) states:

An Affidavit used in a proceeding shall,

(e) be signed by the deponent and sworn or affirmed before a person authorized to administer oaths or affirmations. R.R.O. 1990, Reg. 194, r. 4.06 (1); O. Reg. 575/07, s. 1.

[20] The test to be applied in determining whether the court should approve a settlement for an infant pursuant to Rule 7.08 is to protect the infant and ensure that the settlement is in the best interests of the party (see Wu Estate v. Zurich Insurance Co., 2006 16344 (ON CA), [2006] O.J. No. 1939.

[21] In Burns Estate v. Fallion 2007 CarswellOnt 5910 Justice Pierce set out the following at para. 12 to 18:

12 Is the order for service unnecessary? The defendant cites Poulin et al. v. Nadon et al., 1950 121 (ON CA), [1950] O.R. 219 (Ont. C.A.) a decision which was codified by Rule 7.08. As the court suggests, the practice of judicial approval of infant settlements is an old one. At page 223 the court observed that a settlement agreed to by the infant's next friend (or litigation guardian as she is now called) is valid and binding on the infant by virtue of the court's approval, and not because of the agreement of the next friend. (See page 223) The court's approval also acts as a protection for the opposing party.

13 The court held that the solicitor for the plaintiff should file an affidavit setting out his opinion that the settlement benefits the infant. A similar affidavit was required by the next friend. (See page 224) The court added that if liability was disputed that would be an important consideration for the court in determining whether to approve the settlement.

14 At page 223 the court concluded:

"... one important duty of the trial judge in these matters is to see that the proceedings before him on the application for approval become part of the record. They are an important part of the judicial proceedings in the action leading up to the judgment of the court, and should be a matter of record. ..."

15 Thus we see that the function of the court in approving infant settlements should be as transparent as the court proceeding itself.

16 The plaintiff relies on Horodynski Farms Inc. v. Zeneca Corp. (c.o.b. Zeneca Agro), 2006 31976 (ON CA), [2006] O.J. No. 3716 (Ont. C.A.). This case is not on point. In Horodynski a case had been dismissed, appealed and there was a motion to admit fresh evidence that was subject to litigation privilege. The court held that Rule 31.06(3) applied to the discovery stage of litigation which was closed. These are not the circumstances in the case at bar.

17 The defendant argues that there is no privilege in a communication to the court mandated by law regarding an infant settlement. He submits that Rule 37.07 has primarily application to ex parte orders. He also submits that the court relies on counsel with respect to infant settlements; that it has a duty not to approve settlements where there is insufficient evidence.

18 I agree with this submission. The policy of the protection of the interests of children and other persons under disability requires full and frank disclosure of the merits of a settlement. Necessarily this calls for a candid opinion by counsel. As well, the litigation guardian must understand the reasons for settlement and accept them.

[22] The procedural difficulty facing the defendant is that there is no motion before me with the required material pursuant to Rule 7.08(4). A notice of motion and draft unsworn affidavits not filed with the court are not in compliance with the Rule and this court cannot rely on that material to approve an infant settlement.

[23] In all of these circumstances I cannot approve the settlement reached by the parties pursuant to Rule 7.08(4). Although I am satisfied that a settlement was reached pursuant to Rule 7.08(4) the court cannot approve it.

[24] As a result of these findings it is not necessary to determine whether the settlement ought to be set aside for any other reasons.

[25] An order shall issue restoring the matter to the trial list.

[26] The parties shall file written submissions on costs within 10 days.

Fragomeni J.

Released: September 30, 2014