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Fraud - Remedies. Ratnasingam v. Balasubramaniam
In Ratnasingam v. Balasubramaniam (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here brought where a the court "dismissed the appellants’ motion to set aside the order ending this action and the underlying settlement" where they were based on a solicitor's fraud.
Here the court applies conventional 'disability' law (using the term in the sense of 'lacking capacity') in a fraud situation, with the extreme result that fraud was upheld in favour of a third party innocent (insurance company), and the victim sent nebulously "elsewhere" [para 27] to obtain a remedy against the fraudster (since deceased). When I consider this case I cannot but help harken to the real estate fraud doctrine of "deferred indefeasibility", where an immediately-involved innocent party can still be reached to rescind the fraud transaction [see Froom v. Lafontaine (Ont CA, 2023), para 66]:[10] The motion judge dismissed the motion, relying primarily on the analytical framework in Book.
[11] As here, Mr. Book appealed the dismissal of his motion to set aside a settlement and consent dismissal on the basis that he was under disability at the time and that court approval of the settlement had therefore not been obtained as required under r. 7.08. In determining whether the settlement should be set aside, the motion judge in Book considered five factors:(1) Whether the party seeking to set aside the order was under a disability;
(2) Whether the plaintiff was prepared to pay the money back;
(3) Whether the defendant had knowledge of the disability or whether it settled the action in good faith;
(4) Whether the settlement was unfair or unreasonable; and
(5) How quickly after the settlement the motion was brought. [12] This court endorsed the analytical framework used by the motion judge in Book, holding that he had not erred in law nor had he made a palpable and overriding error.
[13] As noted earlier, the motion judge in this case found that Mr. Ratnasingam was a party under disability when the settlement was reached. This was the threshold finding to grant the appellants’ motion. The motion judge found that two of the other Book factors were neutral: the appellants could not repay the settlement funds, and the appellants had not delayed unduly in bringing their motion after discovering the settlement. The remaining two factors weighed against granting the appellants’ motion. TD Insurance had no knowledge of the disability and acted in good faith when reaching the settlement, and the settlement was neither improvident nor unreasonable.
[14] These last two factors were deemed conclusive.
[15] The motion judge concluded that the settlement was neither improvident nor unconscionable. The appellants were represented by counsel; the settlement terms, including the allocation of funds to Mr. Ratnasingam, were supportable on the evidence regarding the accident and his damages; the record included written instructions by the appellants to Mr. Duby not to pursue the vehicle’s owner and driver for any recovery beyond the insurer’s policy limits; and TD Insurance paid out the entirety of its policy limits less $50,000, plus costs.
[16] The motion judge observed that the appellants’ complaint was not truly with the terms of the settlement but with Mr. Duby, who had defrauded them. She concluded, at para. 50, that: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. [17] The motion judge declined to determine whether the order should be set aside on the basis of fraud under r. 59.06(2), because this would leave the settlement agreement intact. She also declined to appoint a litigation guardian for Mr. Ratnasingam as no proceedings were ongoing.
The motion judge committed no reviewable error
[18] The motion judge applied the correct legal principles and committed no reviewable error in deciding the motion. She correctly found that the motion to set aside the consent dismissal and settlement based on non-compliance with r. 7.08 should be assessed based on the Book factors. It was open to her to find, on the record before her, that the respondents acted in good faith and without knowledge of Mr. Ratnasingam’s incapacity, and that the settlement was neither unreasonable nor unconscionable. Given these findings, I endorse the motion judge’s conclusion at para. 52 of her reasons that this was not the rare case “where circumstances warrant deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line”.
[19] Although the appellants concede that it was appropriate for the motion judge to follow the Book analysis, they fault her for dismissing the motion given that the settlement would not have been approved had it been the subject of a r. 7.08 motion. Rule 7.08 imposes evidentiary requirements to protect vulnerable parties. Notably, under r. 7.08(4), the motion record must include an affidavit by the litigation guardian setting out the reasons supporting the proposed settlement, and an affidavit by the lawyer acting for the litigation guardian setting out the lawyer’s position in respect of the proposed settlement.
[20] I do not accept this argument. The procedural requirements for a r. 7.08 motion do not apply on a motion to set aside a final order, even where the basis for the motion is the absence of compliance with r. 7.08. It was however open to the appellants to include, as part of their motion materials, any evidence that the settlement was unconscionable or improvident. On the evidence filed, the motion judge concluded that the settlement was not unreasonable. This was not a reviewable error on the record before this court. There is accordingly no basis for this court to revisit the motion judge’s findings.
[21] The motion judge likewise did not err in finding r. 59.06(2) could not meaningfully assist the appellants. This rule permits an order to be set aside on the basis of fraud. As the motion judge aptly observed, at para. 55: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. [22] Finally, the appellants argued that the motion judge should have considered whether the dismissal order and settlement should be set aside based either on r. 7.09 or the parens patriae jurisdiction. Pursuant to r. 7.09, settlement funds payable to a person under disability other than a minor shall be paid into court, unless a judge orders otherwise. Based on its broad parens patriae jurisdiction, a court may do whatever is necessary “to act for the protection of those who cannot care for themselves”, including children and persons lacking capacity: E. (Mrs.) v. Eve, 1986 CanLII 36 (SCC), [1986] 2 S.C.R. 388, at p. 426.
[23] The motion judge’s reasons show that she was aware of the scope of the court’s parens patriae jurisdiction and its interplay with the Rules. Even though she did not explicitly refer to this jurisdiction, 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.
[24] The motion judge began her analysis of this issue by citing Tsaoussis (Litigation Guardian of) v. Baetz (1998), 1998 CanLII 5454 (ON CA), 41 O.R. (3d) 257 (C.A.), at paras. 15, 44, leave to appeal refused, [1998] S.C.C.A. No. 518. In Tsaoussis, this court emphasized that final orders should be set aside only where a party demonstrates that the circumstances justify making an exception to the principal of finality. New evidence showing that a minor plaintiff was inadequately compensated in a settlement of a personal injury claim does not, in itself, give rise to such exceptional circumstances.
[25] Writing for the court, Doherty J.A. in Tsaoussis, at para. 26 stated that the parens patriae jurisdiction “neither creates substantive rights nor changes the means by which claims are determined.” It must be exercised in the context of the substantive and procedural law governing the proceedings. As a result, this court held at para. 13 that:[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. [26] The motion judge’s analysis was consistent with these principles. She correctly proceeded from the presumption that the dismissal order was final. Her observation that the appellants must demonstrate circumstances which “warrant deviation from the fundamental principle that a final judgment, unless appealed, marks the end of the litigation line” echoes Doherty J.A.’s reasons at para. 20 of Tsaoussis. The motion judge was aware that the procedural safeguards in r. 7, which codify in part the parens patriae jurisdiction, had not been respected. She was aware that Mr. Ratnasingam had received no benefit from the settlement. She nevertheless concluded, in the circumstances of this case, that the parties’ settlement and consent dismissal should not be set aside. Her reasoning again reveals no error. . McKenzie-Barnswell v. Xpert Credit Control Solutions Inc.
In McKenzie-Barnswell v. Xpert Credit Control Solutions Inc. (Ont CA, 2025) the Ontario Court of Appeal considered the trial court's remedial errors in a finding of 'fraudulent misrepresentation':[48] While I would uphold the trial judge’s findings of liability for fraudulent misrepresentation and unconscionability, I find error in the remedy.
(a) Error in the Contractual Remedy
[49] The first error arises in connection with the damages for negligence and breach of the construction contract. The trial judge awarded damages that would cover the cost of completing the construction and bring the property into compliance with the OBC and the Fire Code. As the trial judge put it:Due to the negligence, breach of contract and fraudulent misrepresentation of the [appellants], they are responsible for payment of all damage or loss sustained by the [respondent] as a result of the [appellants’] negligent construction work. All amounts required to complete the work that the [appellants] should have done under the construction contract, as well as all work required to comply with the OBC and Fire Code, are the responsibility of the [appellants], Mr. Joshi, Xpert Credit and Right Choice, jointly and severally. [Emphasis added.] [50] One of the central findings of the trial judge was that the contract was to be set aside due to fraud. The usual remedy for a fraudulently induced contract is recission of the contract. One cannot logically rescind a contract yet, at the same time, order its enforcement. When induced by fraud to enter into a contract, the deceived party is entitled to sue in tort for damages based on the party’s out-of-pocket loss: S.M. Waddams, The Law of Contracts, 8th ed. (Toronto: Thomson Reuters, 2022), at para. 430; 1018429 Ontario Inc. v. FEA Investments Ltd. (1999), 1999 CanLII 1741 (ON CA), 179 D.L.R. (4th) 268 (Ont. C.A.), at paras. 50, 52. However, the deceived party is not entitled to expectation or “loss of bargain” damages: Waddams, at para. 430; FEA Investments, at paras. 50, 52; see also Todd Family Holdings Inc. v. Gardiner, 2017 ONCA 326, 64 B.L.R. (5th) 1, at para. 25.
[51] In other words, the respondent is not entitled to the cost of completing the work of the contract, though she is entitled to be compensated for her out-of-pocket loss, and the repair of damage to her property flowing from the negligent work. She is entitled to be placed in the position she would have been but for the appellants’ wrongdoing, that is, had she not been induced to enter into the construction contract. . Ontario v. Madan
In Ontario v. Madan (Ont CA, 2023) the Court of Appeal states several remedies (one in restitution and constructive trust) sought by the provincial Crown in a notorious fraud case against an IT employee:[7] In the Amended Amended Statement of Claim (the “Statement of Claim”), Ontario alleged fraud, theft and conversion against the appellants. Ontario sought:. damages;
. a constructive trust over all monies obtained from the frauds and any assets acquired with money obtained from the frauds;
. an accounting of, and restitution of, all funds obtained from the frauds;
. a tracing order; and
. a Mareva injunction.
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