In Ratnasingam et al v Balasubramanuam, 2025 ONCA 897 (CanLII) (“Ratnasingam”) the Ontario Court of Appeal addressed the issue surrounding a consent dismissal obtained on behalf of a Plaintiff who lacked capacity at the time of settlement. The 21-year-old Plaintiff, A.R., suffered serious injuries in a 2010 motor vehicle accident. He was never represented by a litigation guardian. His lawyer settled the tort action in 2013, and then absconded with the settlement funds. A full and final release had been executed, and a dismissal order issued, both without the Plaintiff’s knowledge and consent. It was determined that the Plaintiff’s lawyer at the time of the settlement had forged at least one signature, had never informed him of the settlement, and had misrepresented for years that his tort action was ongoing. In 2020, the Plaintiff became aware of the settlement after he had retained new counsel.
In 2024, the Plaintiff brought a motion to set aside the consent dismissal order due to non-compliance with Rule 7.08 of the Rules of Civil Procedure (which protects vulnerable persons by requiring court review and approval on proper affidavit evidence of any settlement involving such persons). The motion judge found that the Plaintiff was a person under disability as a result of the injuries he sustained in the accident. Despite this, the motion judge did not set aside the dismissal order as the Plaintiff did not demonstrate “circumstances which warrant[ed] deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line”: Book v Cociardi, 2022 ONSC 3125, aff’d 2024 ONCA 589 (“Book”). The Court of Appeal agreed with the motion judge’s decision for the following reasons.
With respect to Rule 7.08 (approval of settlements involving persons under disability), the Court reviewed the motion judge’s application of the five factors set out in Book. The motion judge had determined the threshold issue by finding that the Plaintiff lacked capacity as result of his injuries from the accident. Neutral factors were that while he could not repay the settlement monies, he had brought the motion without undue delay after discovering the settlement The motion judge’s decision was based on the application of the two remaining factors in Book that went against the Plaintiff, and were determined to be conclusive: first, the Defendant’s insurer had no knowledge of the disability, and had acted in good faith; second, the settlement was neither unreasonable nor unconscionable. The Court held that the motion judge had correctly found that the set-aside motion based on non-compliance with Rule 7.08 should be assessed using the Book factors, and that there was no reviewable error because it was open to her to find, on the record before her, that the application of these two factors was determinative of the motion.
With respect to Rule 59.06(2)(a) of the Rules (setting aside orders obtained on the ground of fraud or facts afterwards discovered), the Court also endorsed the motion judge’s reasoning: “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 [as the insurer of the Defendant that had paid the settlement monies]. 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.”
Lastly, the Court addressed Rule 7.09 (payment of settlement money into court for persons under disability), as well as the exercise of the court’s parens patriae jurisdiction. Although the motion judge did not explicitly reference this principle of inherent jurisdiction, the Court held that “her decision balances the court’s role in the context of claims by parties lacking capacity and the principle that final orders can be set aside only in exceptional circumstances”. The Court also observed that the motion judge had relied on its decision in Tsaoussis (Litigation Guardian of) v. Baetz (1998), 1998 CanLII 5454 (ON CA), 41 O.R. (3d) 257 (C.A.), leave to appeal refused, [1998] S.C.C.A. No. 518, in conducting her analysis, including the direction that parens patriae jurisdiction “neither creates substantive rights nor changes the means by which claims are determined.” Although the Plaintiff was not a minor, the Court also cited paragraph 13 of Tsaoussis as being applicable to the motion judge’s decision: “[A] judgment approving the settlement of a minor’s personal injury claim that has been signed, entered and not appealed is final, and must be given the same force and effect as any other final judgment. A motion to set aside that judgment should be tested according to the same criteria used on motions to set aside other final judgments.” The Court held that the motion judge’s analysis was consistent with these principles, and that she had made no reviewable error. As such, the appeal was dismissed notwithstanding the Court’s acknowledgement that this was a tragic case in which the Plaintiff had been injured terribly in the car accident, and had then been injured again by his former lawyer who had stolen his compensation for those injuries.
Takeaway
This case acts as a reminder that no matter who counsel represent, there are rules governing the practice of law, ethical obligations that must be complied with, and counsel are required to act diligently, professionally and legally.
Counsel for a plaintiff to an action must obtain proper written instructions for settlement. Closing settlement documentation is to be thoroughly reviewed and explained to a plaintiff. The plaintiff is to execute the full and final release and provide verbal and written consent for a dismissal of the action. Any issues with a litigant’s capacity should be addressed throughout the life of the action, and all counsel must be immediately informed of any changes in health that raise concerns about capacity.
Defence counsel must also approach settlement in a prudent and diligent manner. While the Court in Ratnasingam did not set aside the consent dismissal, it was found that there may be exceptional circumstances where the opposite outcome may apply. As such, if an issue of capacity is suspected, defence counsel should make proper enquiries prior to finalizing any settlement.
As the Court had noted in Book, defendants “will be discouraged from settling in good faith if the settlement can be set aside for reasons of which they have no knowledge and over which they have no control, particularly if they are not entitled to get their money back. The main advantages to settling, finality and limiting exposure, will be gone.” As the Court of Appeal notes in Ratnasingam however, it can also be surmised that due to the conduct of the Plaintiff’s first lawyer who passed away in 2021, the Plaintiff may still be able to recover compensation through his former lawyer’s insurer.
