Court File and Parties
COURT FILE NO.: CV-12-451341
DATE: 20240926
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Anojan Ratnasingam et al.
AND:
Rukshian Balasubramaniam et al.
BEFORE: J.T. Akbarali J.
COUNSEL: Robert Plate, for the plaintiffs
Sean Dewart, Peter Yaniszewski, and Mathieu Bélanger, for the defendants
HEARD: September 10, 2024
ENDORSEMENT
Overview
[1] The plaintiffs move for an order setting aside the dismissal order of the registrar in this action, setting aside the full and final release executed by the plaintiffs dated January 30, 2014, and appointing a litigation guardian for the plaintiff, Anojan Ratnasingam, and amending the style of cause accordingly.
Brief Background
[2] Anojan Ratnasingam was 21 years old when he was one of two passengers in a vehicle involved in a single car accident on April 17, 2010. He suffered profound injuries, including orthopedic injuries and a significant head injury. The other passenger in the vehicle suffered injuries which appear to have been much more minor, although the evidence in the record on that point is scant.
[3] Mr. Ratnasingam and his family retained a lawyer, Bradley Duby, to bring an action on his behalf, and to advance claims under the Family Law Act on behalf of his family members. Mr. Duby acted on the tort action, to which TD Insurance responded on behalf of its insured, the driver of the vehicle. Mr. Duby also acted on the accident benefits claim, to which TD Insurance also responded. However, TD Insurance raised an ethical screen between the two claims.
[4] As I explain in greater detail below, the evidence in the record indicates that, when the action was commenced, Mr. Ratnasingam required a litigation guardian, and that he continues to require a litigation guardian today, because of the extent of his head injury. However, Mr. Duby commenced the proceedings without naming a litigation guardian for Mr. Ratnasingam.
[5] On November 19, 2013, a settlement meeting was held at which four parties were present: (i) Mr. Duby, representing the plaintiffs in this action and in the accident benefits action; (ii) Jono Schneider, acting for the other injured passenger in the action that passenger brought against the defendants; (iii) Catherine Korte, acting for TD Insurance in the tort actions brought by the two injured passengers; and (iv) Betty Levinson, the adjuster on TD Insurance’s accident benefits file.
[6] A settlement was reached pursuant to which TD Insurance paid out close to the $1,000,000 policy limits on the tort file, plus costs, bringing its total payment to just over $1,000,000. The policy proceeds were shared between the two tort actions on an 80/20 split (more or less), with Mr. Ratnasingam being allocated the greater share. No proceeds were allocated towards the other plaintiffs’ Family Law Act claims. Mr. Ratnasingam’s claim was reduced by 25% for contributory negligence for failing to wear a seatbelt. A release was obtained that released the individual defendants for claims in excess of the policy limits. In accordance with the agreement reached, TD Insurance fulfilled the terms of the settlement which had been agreed.
[7] Unfortunately, the plaintiffs in this action had no knowledge that the settlement meeting took place. They provided no instructions to settle the proceeding on the basis on which it was settled. Under false pretenses, Mr. Duby obtained a signed release from many (but not all) of the plaintiffs. He appears to have forged at least one signature on the release. Moreover, some of the assumptions on which the settlement was based appear to be questionable, including the split between the two actions, the contributory negligence discount, and the failure to pursue the individual defendants for the loss in excess of policy limits.
[8] Because no litigation guardian had ever been appointed for Mr. Ratnasingam, the settlement was completed without court approval under r. 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[9] The plaintiffs were completely unaware of the settlement. For years, up to March 2020, Mr. Duby continued to report that he was pursuing the tort action on their behalf, when he had actually taken the plaintiffs’ funds for his own purposes.
[10] In February 2014, the plaintiffs engaged another lawyer, David Wilson, to provide advice on the prosecution of the plaintiffs’ litigation. Although some early investigation gave Mr. Wilson reason to be concerned about the progress of the action, he was advised by the family in March 2014 that they no longer wished him to be involved.
[11] The plaintiffs re-engaged Mr. Wilson in December 2020. Over the following months, Mr. Wilson uncovered Mr. Duby’s fraud. Unfortunately, in January 2021, shortly after the re-engagement of Mr. Wilson, Mr. Duby died.
Issues
[12] This motion raises the following issues for determination:
a. Should the settlement be set aside because:
i. it was never approved by the court under r. 7.08; or
ii. it is unconscionable and improvident?
b. Should the consent order be set aside under r. 59.06 because it was procured by fraud, and new facts have emerged?
c. If the settlement is set aside, must the plaintiff restore TD Insurance to the position it was in before, that is, by paying TD Insurance the amount of the settlement funds it paid out to Mr. Duby?
Analysis
Should the settlement be set aside for failure to comply with r. 7.08?
Is and was Mr. Ratnasingam under a disability and in need of a litigation guardian?
[13] Under r. 7.08, no settlement of a claim made by or against a person under a disability is binding on the person without the approval of a judge. The first question is whether Mr. Ratnasingam required a litigation guardian, such that the settlement should have been approved by the court.
[14] In this case, the evidence establishes that Mr. Ratnasingam suffered a serious head injury from the car accident which continues to impact his mental capacity today.
[15] The plaintiff offers an expert report from Rena Postoff, a social worker with significant experience as a capacity assessor. The defendant does not object to the admission of her report or to her qualifications.
[16] In my view, Ms. Postoff’s report satisfies the elements of the test to admit expert evidence: R. v. Mohan, 1994 80 (SCC), [1994] 2 S.C.R. 9; White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, [2015] 2 S.C.R. 182. It is relevant and necessary to the question of Mr. Ratnasingam’s capacity, both currently and since the accident. Ms. Postoff is a qualified expert to opine on the question.
[17] Ms. Postoff conducted a capacity assessment of Mr. Ratnasingam. She concluded that he had a limited understanding of the financial and legal issues that impact him. He demonstrated impaired memory, poor recall, disorientation to time, impaired problem-solving abilities, and impaired executive function. He was unable to explain what he wanted his lawyer to do on his behalf and the reasons why. Moreover, he lacked the ability to educate himself about his legal matter, to try to understand and process information available to him, and to understand the benefits and risks of the options available to him. She concluded that he could not understand and appreciate the information needed to make decisions about his legal matter, and requires a litigation guardian.
[18] Ms. Postoff also noted, based on the medical brief provided to her, that Mr. Ratnasingam’s cognitive deficits have persisted since the accident. She concluded it was highly likely that he would not have had the capacity required to understand and appreciate the information needed to make decisions about his case at any time since the accident, and would have required a litigation guardian throughout.
[19] I accept this evidence; it is sufficient to displace the presumption of capacity found in s. 2 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30. I find that Mr. Ratnasingam is, and has been since the accident, a mentally incapable person who requires a litigation guardian. Indeed, this is a conclusion that was not seriously contested by the defendants.
[20] Thus, had the litigation been managed properly, Mr. Ratnasingam would have had a litigation guardian in this action from the outset, and the settlement would have had to have been approved by the court.
What is the effect of the failure to comply with r. 7.08?
[21] The question for me, however, is what the impact is of the failure to have the settlement approved?
[22] Final orders can only be set aside in exceptional circumstances, especially when they are consent orders. The Court of Appeal has held that, in a personal injury case, new evidence demonstrating that a plaintiff was inadequately compensated cannot, alone, meet that onus: Tsaoussis (Litigation Guardian) v. Baetz, 1998 5454 (ON CA) at paras. 15, 44, leave to appeal refused, [1991] 1 S.C.R. xiv.
[23] In Book v. Cociardi, 2022 ONSC 3125, [Book SCJ] at para. 15-16, Ramsay J. considered a situation where the parties agreed to settle an action; the claim was subsequently dismissed on consent. Thereafter, the plaintiffs sought to set aside the settlement on the basis that one of the plaintiffs was under a disability at the time of the settlement.
[24] Justice Ramsay noted that r. 7.08 does not provide that an unapproved settlement is void, but only that it is “not binding” on the person under a disability and that a judgment may not be obtained on consent for or against that person without approval of a judge. However, in that case, as in this one, no one was seeking to enforce the settlement or seeking judgment. The contract had already been executed. The money was paid. The action was dismissed on consent.
[25] Justice Ramsay, at paras. 17-18, had regard to the Court of Appeal’s decision in Scherer v. Paletta, 1966 286 (ON CA), [1966] 2 O.R. 524, and concluded that even if the defendant did not know about the disability, the court can refuse to honour a settlement that involves making a court order if the matter is brought to the court’s attention before it is granted. However, “[i]t does not follow that the court must set aside an order if the matter is brought to its attention after the order has been made.”
[26] Justice Ramsay concluded that an order dismissing the action should be set aside only if the moving party demonstrates circumstances which warrant deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line. He identified the following relevant factors:
a. Whether the party seeking to set aside the order was under a disability;
b. Whether the plaintiffs are prepared to pay the money back;
c. Whether the defendant had knowledge of the disability or whether it settled the action in good faith;
d. Whether the settlement was unfair or unreasonable;
e. How quickly after the settlement the motion was brought.
[27] Book was appealed to the Court of Appeal: Book v. Cociardi, 2024 ONCA 589 [Book OCA]. The Court of Appeal found that Ramsay J. made no error. It concluded, at para. 7, that the implication of the plaintiff’s argument was that, in any personal injury action alleging a permanent cognitive injury, the plaintiff should undergo a capacity assessment before signing minutes of settlement, or else a consent dismissal would be open to challenge for years after the fact. The court held:
This is not the law, nor should it be. The appellants’ proposed regime would discourage settlement and needlessly make it more costly.
[28] The plaintiffs rely on an unreported decision in Korczynski v. Barragan, December 2, 2010, contained in a “draft ruling.” In Korczynski, it appears that the Herold J. set aside a settlement and dismissal of an action because the settlement involved a plaintiff under a disability and was not approved under r. 7.08. In Herold J.’s view, r. 7.08 provided that the settlement was void. Justice Ramsay, after questioning the value of a “draft ruling,” held that if Korczynski was a precedent, it is “plainly wrong.” As I have noted, the Court of Appeal found that Ramsay J. made no error of law. Accordingly, Korcynski is of no utility; to the extent it was decided on that basis, it was wrongly decided.
[29] The question to be answered then, is whether the plaintiffs have demonstrated circumstances exist which warrant deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line. I turn to review those factors now.
Under a Disability
[30] As I have already found, Mr. Ratnasingam was under a disability at the time the settlement was entered into.
Restore the Settling Defendant to its Original Position
[31] The plaintiffs cannot pay the money back from the settlement because they never received it. No one suggests they are in a financial position to pay the money back otherwise. I thus consider this a neutral factor.
The Defendants’ Knowledge
[32] There is the question of whether the defendant was aware that Mr. Ratnasingam was cognitively impaired, and as such, under a disability. This was a factual matter that was hotly contested.
[33] I cannot conclude that TD Insurance qua tort insurer was aware of Mr. Ratnasingam’s disability.
[34] First, while I accept that TD Insurance qua accident benefits insurer had knowledge of Mr. Ratnasingam’s capacity issues, I accept that there was an ethical screen between the accident benefits file and the tort file. The knowledge held on the accident benefits side of the screen cannot be imputed to the tort side of the screen.
[35] Second, there is no evidence to indicate that two key reports relating to Mr. Ratnasingam’s capacity at the time of the settlement had been provided to TD Insurance qua tort insurer. It is most likely that Mr. Duby did not provide them. The more he could hide Mr. Ratnasingam’s capacity issues from the tort insurer, the more likely he could pull of his scheme to appropriate Mr. Ratnasingam’s settlement funds for himself.
[36] Third, to the extent the plaintiffs ask me to infer that TD Insurance qua tort insurer would have understood at the settlement meeting that Mr. Ratnasingam had capacity issues due to the issues discussed at the meeting, the independent evidence from Mr. Schneider indicates that Mr. Ratnasingam’s capacity was not a topic of discussion at the settlement meeting.
[37] Fourth, to the extent the plaintiffs rely on Mr. Duby’s statements to Mr. Wilson about the role Ms. Korte took on in the litigation, allegedly acting on both the tort and accident benefit briefs, I find the evidence is not reliable. Mr. Duby was a fraudster. The record is replete with evidence of his lies and duplicity. There is no principled basis to single out certain statements from Mr. Duby (that are hearsay anyway) and conclude that those statements were true. It is much more likely that Ms. Korte’s evidence is truthful. There was an ethical screen in place between the tort and accident benefit files. It makes no sense that Ms. Korte would be acting on both, and moreover, that if she were, she would dispense with either judicial approval or evidence of capacity in the context of one brief, but not the other.
[38] I add that I do not accept the allegation made against Ms. Korte by Mr. Duby that she offered a tort settlement without judicial approval to secure a lower settlement amount. There would be no reason for her to do so, and I have no reason to conclude that she acted unethically at any time.
[39] Finally, the plaintiffs argue that TD Insurance qua tort insurer would have had the form known as Form P in its file, which would have alerted it to Mr. Ratnasingam’s capacity issues. The Form P was completed as part of Mr. Ratnasingam’s application package for accident benefits. It is dated May 13, 2010.
[40] There is no evidence that TD Insurance qua tort insurer had the Form P in its file, though it is likely that it did at some point. However, the form is dated less than a month after the accident, while Mr. Ratnasingam remained in a coma. Ms. Korte’s evidence is that the Form P would not have alerted her to the possibility that Mr. Ratnasingam was under a disability in November 2013 when the settlement was negotiated. I accept that the Form P could not speak to whether Mr. Ratnasingam would experience chronic or permanent brain injury as a result of the accident, let alone speak proactively to Mr. Ratnasingam’s lack of capacity over three years later.
[41] I conclude that TD Insurance qua tort insurer was not aware of any capacity concerns related to Mr. Ratnasingam when the settlement was negotiated, and that it acted in good faith.
Was the settlement unreasonable or unconscionable?
[42] The plaintiffs raise concerns regarding the settlement, and argue it is unreasonable or unconscionable.
[43] Unconscionability is characterized by an inequality in bargaining power and an improvident bargain. The providence of a bargain is measured at the time the bargain is formed. An improvident bargain unduly disadvantages the vulnerable party, or unduly advantages the stronger party: Uber Technologies Inc. v. Hellier, 2020 SCC 16, at paras. 54, 60, 62-65, 74.
[44] With respect to inequality of bargaining power, I note that the plaintiffs had counsel. Counsel was a fraudster but one cannot say that he did not appreciate the meaning and significance of the settlement terms. The plaintiffs were not in a position of inequality of bargaining power vis-à-vis TD Insurance. Rather, they were vulnerable to the fraudulent actions of their counsel.
[45] Turning to improvidence, first, the plaintiffs argue that Mr. Duby accepted a 25% reduction in Mr. Ratnasingam’s damages due to failure to wear his seatbelt. They argue that the evidence around failure to wear a seatbelt was not conclusive, and that in any event, a 25% discount was too high without expert evidence that a seatbelt would have avoided Mr. Ratnasingam’s injuries.
[46] The record reveals that there was enough evidence to conclude that there was a real risk that Mr. Ratnasingam would be found to not be wearing a seatbelt at the time of the accident. While I agree that a 25% discount was probably too high based on the record that existed at the time of the settlement meeting, in my view, Mr. Ratnasingam’s damages, properly calculated, were likely to be so high that even 75% of his losses were likely to exceed policy limits.
[47] Second, the record raises questions with respect to the allocation of the settlement funds between the two injured plaintiffs. It appears Mr. Duby did not review any medical information of the other injured passenger until the day of the settlement meeting. I do not have evidence before me to evaluate whether an 80/20 split (more or less) of the proceeds was just in the circumstances of the injuries of each passenger, but it is likely that Mr. Duby did not take the time to make a competent assessment of the question. However, the record is clear that Mr. Schneider and Mr. Duby advised the defendants that they would settle on the allocation between themselves.
[48] Third, the plaintiffs raise the fact that the settlement released the insureds when Mr. Ratnasingam should have considered pursuing the defendants for his damages over and above the policy limits. That may well be true, but the record also reflects written instructions from the plaintiffs not to pursue the individual defendants beyond the policy limits, as is not unheard of in a case where the insured and the injured person have a relationship of some kind.
[49] Finally, TD Insurance qua tort insurer paid out the entirety of its policy limits less $50,000 plus costs in addition.
[50] In my view, it cannot be said that the settlement was improvident, or even unreasonable, based on the evidence before me. There may have been a better settlement to be had, but the real problem in this case is not the settlement reached with respect to the policy; it is that Mr. Ratnasingam never received anything from the settlement due to the actions of Mr. Duby. Mr. Duby’s conduct constitutes a separate wrong which does not impugn the reasonableness of the settlement, considered from the point of view of Mr. Ratnasingam’s tort claim. The reasonableness of Mr. Duby’s actions considered from the point of view of his obligations to Mr. Ratnasingam are a wholly separate matter.
How Quickly the Motion was Brought
[51] This motion has been brought years after the settlement was implemented. This is mostly because Mr. Duby successfully hoodwinked the plaintiffs into believing the litigation was continuing. The defendants argue that the plaintiffs had an inkling about the problems with Mr. Duby back in 2014, and that there has been some delay since learning of the settlement in December 2020 and bringing this motion. I consider this to be a neutral factor in the analysis.
Conclusion
[52] I am not satisfied that the plaintiffs have demonstrated that this is one of the rare cases where circumstances warrant deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line. I rely particularly on the good faith of TD Insurance and the absence of unconscionability or unreasonable bargain in reaching this decision.
[53] Mr. Ratnasingam has been wronged, but not by TD Insurance. He must look elsewhere to make good his loss arising out of Mr. Duby’s conduct.
[54] The other issues I identified that are raised in this motion do not need to be addressed. First, I have already determined that the settlement does not meet the test for unconscionability. Second, since I decline to set the settlement aside, I need not consider whether restitution is required.
[55] With respect to the plaintiffs’ argument that the dismissal order ought to be set aside under r. 59.06(2), I note that the rule gives the court the power to set aside an order only. In this case, it does no good to the plaintiffs to set aside only the order. The entire settlement must be set aside for them to pursue TD Insurance. I thus decline to consider the impact of r. 59.06; there is simply no point to setting aside the order while leaving the release and the settlement agreement in place.
[56] Finally, in view of these conclusions, I need not consider the motion for a litigation guardian, as this litigation is not ongoing.
Costs
[57] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: see Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.
[58] Subject to the provisions of an act or the rules of this court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion considering the factors enumerated in r. 57.01 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at para. 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: see Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.), at para. 4.
[59] The defendants are the successful parties. They seek their costs, and argue that the quantum should be impacted by the allegations of moral turpitude made against Ms. Korte. The defendants have filed two costs outlines, one from each of the two firms that acted on the motion. The first supports partial indemnity costs of $21,378.99, or actual costs of $35,631.65. The second supports partial indemnity costs of $15,975.25, or actual costs of $26,708.75. In total, this adds up to $37,354.24 in partial indemnity costs, or $62,340.40 in actual costs.
[60] In contrast, the plaintiffs’ costs outline supports partial indemnity costs, on an all-inclusive basis, of $65,553.63. That the plaintiffs’ fees are higher is not surprising, given the relatively heavier workload they had to undertake to litigate the issues on this motion. However, the relative claims for costs suggests that the defendants’ costs are within the reasonable contemplation of the plaintiffs.
[61] The plaintiffs argue that it was only at the hearing of the motion that the defendants accepted that Mr. Ratnasingam is, and has been, under a disability since the accident. Thus, by failing to admit a fact that should have been admitted, the defendants increased the costs associated with this motion.
[62] The issues raised in this motion were moderately complex, and important to all parties, although none so much as Mr. Ratnasingam.
[63] The plaintiffs had one lawyer present at the hearing, while the defendants had three, and appear to seek a counsel fee for each one. They also have billed time docketed by Ms. Korte who is arguably a witness in this litigation rather than counsel.
[64] In my view, the time spent by all parties was excessive, even considering the importance of the issues. Moreover, in my view, the defendants could have better delegated the tasks associated with the work so as to ensure work was done by the timekeeper with the lowest hourly rate who was capable of performing the work.
[65] Having regard to the factors noted above, including the allegations made against Ms. Korte which were not proven, I conclude that it is fair and reasonable that the plaintiffs pay to the defendants their costs of $30,000. The amount shall be paid within sixty days.
J.T. Akbarali J.
Date: September 26, 2024