Ruling found insurer was not responsible for injured client's loss due to counsel’s fraud
The Ontario Court of Appeal upheld the denial of a motion to set aside a consent dismissal and settlement a lawyer had obtained without his clients’ knowledge and absolved the insurer of responsibility for loss due to the fraudulent conduct.
In Ratnasingam v. Balasubramaniam, 2025 ONCA 898, a 2010 car crash seriously injured passenger Mr. Ratnasingam. He and his family – the appellants in this case – retained lawyer Mr. Duby to sue the respondents, the car’s driver and owner.
TD Insurance, the motor vehicle’s insurance company, defended the tort action. In 2013, a settlement was reached in this tort action and a second tort action against the respondents, which had been filed by Mr. Ratnasingam’s fellow passenger. Another lawyer acted for the other passenger.
TD Insurance, Mr. Duby, and the other lawyer negotiated the settlement agreement. Under its terms:
- The insurer paid close to its policy limit of $1,000,000, plus $100,000 in legal costs
- Mr. Ratnasingam would get 80 percent of the settlement proceeds
- His family would receive nothing
- The other passenger would get the remaining 20 percent
- The plaintiffs in both tort actions agreed to dismiss the actions and release the insurer and the respondents from further liability relating to the accident
Forging at least one signature on the documents, Mr. Duby agreed to the settlement without the appellants’ knowledge or consent. He kept the settlement funds for himself when the insurer sent a cheque for Mr. Ratnasingam’s share.
In early 2014, Mr. Duby obtained a consent dismissal of the appellants’ action, again without their knowledge or consent. For years, he lied that the tort proceedings were ongoing.
In 2020, after retaining another lawyer, the appellants learned about the settlement, the dismissal of their tort action, and Mr. Duby’s misappropriation of the settlement funds. The appellants moved to set aside the consent dismissal and settlement.
Mr. Duby passed away in 2021.
On Sept. 26, 2024, Justice Jasmine T. Akbarali of the Ontario Superior Court of Justice dismissed the appellants’ motion, based mainly on the analysis in Book v. Cociardi, 2022 ONSC 3125.
According to the motion judge, as Mr. Ratnasingam was a person under disability due to his injuries in the 2010 accident, a litigation guardian should have represented him in the action, and the settlement should have been subject to the court’s review and approval under r. 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
On appeal, the appellants alleged that the judge failed to account for relevant considerations and made errors of law or mixed fact and law.
Settlement not set aside
The Court of Appeal for Ontario dismissed the appeal and awarded the respondents all-inclusive costs of $15,000.
The appeal court agreed with the motion judge that TD Insurance was not responsible for the loss arising from Mr. Duby’s conduct, and that this was not a case where the circumstances justified a deviation from the fundamental principle that an unappealed final judgment ended the litigation.
The appeal court ruled that the judge made no reviewable errors, applied the proper legal principles, and correctly assessed the motion to set aside the consent dismissal and settlement based on the Book factors.
The appeal court found the judge entitled to determine that:
- The respondents acted in good faith and without knowledge of Mr. Ratnasingam’s incapacity
- The settlement was neither unreasonable nor unconscionable
- Rule 59.06(2), which allowed the court to set aside an order based on fraud, could not meaningfully assist the appellants
The appeal court rejected the appellants’ argument that the judge should have considered whether to set aside the dismissal order and settlement based on:
- Rule 7.09, which required the payment into court of settlement funds payable to a person under disability, unless a judge directed otherwise
- parens patriae jurisdiction, which permitted a court to do whatever was necessary to protect children, those lacking capacity, and others who could not care for themselves
The appeal court accepted that the judge did not expressly mention parens patriae jurisdiction. However, the appeal court noted that the judge was aware of the scope of such jurisdiction and its relationship to the rules.
The appeal court added that the judge balanced the court’s role in the context of claims by incapacitated parties and the principle that the court could set aside final orders only in exceptional circumstances.
Lastly, the appeal court acknowledged that this case involved tragic circumstances.
“Mr. Ratnasingam has been injured twice over: first, by suffering terrible injuries in the 2010 car accident and, second, by having the compensation for his injuries stolen by his lawyer,” wrote Justice Sally Gomery for the appeal court.
