The Basics of Court Approval of Settlements
Any settlement of a claim by or against a person under a disability, which includes a minor, requires court approval pursuant to rule 7.08 of the Rules of Civil Procedure.
If the settlement occurs before a lawsuit is commenced, approval of a judge has to be sought by an application in writing. Otherwise, court approval is sought by a motion made in writing.
Court approval is not a “rubber stamp”. Most judges undertake a detailed review of the motion materials.
The onus is on counsel for the party under disability to satisfy the court through the evidence filed on the motion or application that the proposed settlement is reasonable and is in the best interests of the party under a disability.
Checklist
The Ontario Superior Court of Justice has a helpful resource called “Best Practice’s Guidelines and Checklist” for motions for court approval.
The required materials for such motions are:
- sworn affidavit of litigation guardian
- sworn affidavit of solicitor
- if the minor plaintiff is over the age of 16 years, a signed consent
- executed minutes of settlement
- copy of any contingency fee agreement or other fee arrangement
- copies of pleadings
- copies of important damages and liability reports
- if the judgment includes a structure, a printout of the structure proposal must be appended
- draft Judgment with executed consents; a term of the judgment should be service on the Children’s Lawyer for minors or the Public Guardian and Trustee for incapable adults
Regarding solicitors’ affidavits, the Court provides the following guidance on the information to provide:
- the reasons counsel is of the view that the proposed settlement is advantageous as opposed to proceeding to trial
- if there is a serious liability issue, that must be addressed, along with the evidence, expert and otherwise, that bears on this issue
- if there is a limitation on the available insurance monies which impacts counsel’s view of the quantum of settlement, this information must be set out along with relevant evidence concerning the ability of the defendant personally to pay a judgment
- if there is a legal issue or point of law which is relevant to counsel’s assessment of the case, that must be articulated with reference the applicable case law
- on the issue of damages, counsel must include important medical reports, including defence medical examination reports, and must address issues such as causation, pre-existing medical problems, and the credibility of the plaintiff
- if the motion seeks approval of a proposed settlement of a personal injury claim for a minor, there must be a medical opinion which contains a prognosis for the future
- the allocation of settlement funds among multiple plaintiffs
- details of any companion actions
- the proposed legal fees, including a summary of the work done and the hourly rates charged, a list of the solicitor/client disbursements to be paid, and the partial indemnity costs received from the defendant
- the risk undertaken by the solicitor
- the proposed management of funds for the party under disability
Recent Decision
The case of Lim v. Jennings, 2021 ONSC 467 (“Lim”), addresses an application for court approval of a settlement involving a minor, which was refused.
Yebit Lim (the “minor plaintiff”) was 8 years old when a dog bit him on the face in May 2019. He sustained lacerations to his cheek and eyebrow resulting in facial scarring.
Hyun Jin Cho, the minor plaintiff’s mother, acted as his litigation guardian in a personal injury claim against the dog owners, Daniel Jennings and Jennifer Slauenwhite.
The parties reached an agreement to settle the claim for $155,000 all-inclusive, subject to court approval.
Counsel for the minor plaintiff agreed to reduce his contingency fee agreement from 33% to 25%, which would have resulted in the minor plaintiff receiving a lump sum of $107,916.84.
Justice Chalmers refused to approve the minor plaintiff settlement because he was unable to determine whether the settlement was in the best interest of the minor plaintiff, based on the record before him.
Justice Chalmers stated that he required further evidence as to the appearance of the minor plaintiff’s scarring and his prognosis. At minimum, he required current photographs of the minor plaintiff’s face to be submitted.
In reaching his conclusion, he referred to the expert report of plastic surgeon, Dr. Sel Krajden, which had been served by counsel for the minor plaintiff and was included within the application materials. Dr. Krajden provided an opinion that the minor plaintiff’s facial scars were unsightly and that the proposed treatments would not completely ameliorate his scarring.
Justice Chalmers also stated that he required the retainer/contingency fee agreement (the “agreement”), a detailed summary of the legal work carried out, and the time dockets which set out the hours each professional worked on the file and their hourly rates. He stated that the onus is on the solicitor to establish that the agreement is fair and reasonable.
Justice Chalmers ordered an adjournment to allow the lawyer to deliver additional materials in support of the application.
The Takeaway
Lim demonstrates that materials prepared in support of obtaining court approval of a settlement should not be taken lightly. A judge should be able to review the materials and determine whether the proposed settlement is reasonable and in the best interests of the minor plaintiff.
Usually a defendant has limited involvement in the court approval process when the plaintiff is a minor. Rarely does a defendant even receive the materials in support of such a motion or application.
However, insurers and defence counsel can take steps to protect their clients’ interests and encourage finality of a claim.
In a case involving both minor plaintiffs and adult plaintiffs, an agreement can be reached whereby if the court finds the amounts allocated to the minor plaintiffs to be too low, the adult plaintiffs will agree to allocate a greater portion of their settlement amount to the minor plaintiffs.
Further, consideration should be given to proposing a timeline for when the materials in support of a motion or application for court approval must be filed. This will encourage plaintiff’s counsel to address the motion in a timely manner.
When acting for a third party in a claim involving a plaintiff under a disability, defence counsel should keep in mind that court approval of a dismissal of the third party claim is required if the third party defended the main action. This point was recently addressed in Ciarlo et al v. Sesula and Rees, 2020 ONSC 7051.