Dos Santos v. Sun Life Assurance Co. of Canada

2003BCSC1378 IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Dos Santos et al. v. Sun Life Assurance Company of Canada , 2003 BCSC 1378 Date: 20030909 Docket: S026137 Registry: Vancouver Between: Jose Vasco Dos Santos, committee of the person and estate of Rita Maria Baptista Valoma Dos Santos and the said Jose Vasco Dos Santos Plaintiffs (Respondents) And Sun Life Assurance Company of Canada Defendant (Applicant) Before: The Honourable Mr. Justice Powers Reasons for Judgment Counsel for Jose Vasco Dos Santos: Jack Adelaar Counsel for Sun Life Assurance Company of Canada: Oren Samuel Date and Place of Trial: August 20, 2003 Vancouver, B.C. [1] Mrs. Dos Santos was severely injured in a motor vehicle accident June 6, 1999. She has been in a comatose state ever since. Her husband, Mr. Dos Santos was appointed her committee and commenced a personal injury action on her behalf. The issue of liability was tried in December, 2001. The Defendant driver was found liable for the accident and Mrs. Dos Santos not negligent in any way. The issue of quantum was settled at mediation on March 20, 2002 for the global amount of $900,000. [2] Mrs. Dos Santos was employed by the Government of Canada and as such is entitled to long term disability insurance coverage from Sun Life Assurance Company of Canada ("Sun Life"). [3] Sun Life paid benefits under the disability policy until June, 2002. The policy includes a subrogation clause in the event the disability was caused by the negligence of a third party as it was in this case. The subrogation provision provides that 75% of the employee's net recovery from any personal action commenced as a result of the negligence of the third party must be repaid to Sun Life to the extent of the benefits which were paid or will be payable in the future to the employee. In the event of non-payment Sun Life is entitled to withhold future benefits. [4] The Order in the personal injury action which approved the settlement specified that the sum of $39,559.29 be paid to Sun Life for disability payments received by the committee on behalf of Mrs. Dos Santos. [5] There is a dispute between the parties about whether a portion of the $900,000 settlement represents compensation for loss of future income and a dispute about what portion, if any, of the $900,000 settlement over and above the monies already paid to Sun Life, are subject to the subrogation provisions of the agreement. [6] Sun Life has sought information and documents from Mr. Dos Santos to determine this. They are not satisfied that Mr. Dos Santos has complied with his obligations under the policy or an acknowledgment of subrogation that he has signed. Therefore, Sun Life has stopped making payments under the disability policy. [7] Mr. Dos Santos has commenced these proceedings seeking a declaration that Mrs. Dos Santos is entitled to the benefits pursuant to the insurance contract alleging breach of contract and claiming aggravated exemplary damages, damages for mental distress and punitive damages and costs. [8] Sun Life defends on the basis that its subrogated rights under the policy exceeds the amount of long term disability benefits that may otherwise be owing under the policy to Mrs. Dos Santos and therefore she is not entitled to any further payments. The alternative defence is that Sun Life has a common law right of subrogation because the policy is a contract of indemnity. They argue that Mrs. Dos Santos has been compensated fully for her future loss of income for the period when benefits would have been payable. They argue that Sun Life is entitled to set off against the benefits the amount that Mrs. Dos Santos ought reasonably to have recovered being 100% loss of her future income. [9] Demands for discovery of documents have been exchanged and examinations for discovery conducted. Mr. Dos Santos' List of Documents and Supplementary List appears to be simply a proforma response rather than a proper list. [10] Sun Life brought a motion seeking an order that Mr. Dos Santos provide complete answers to the request for documents and information made at the Examination for Discovery on May 5, 2003 and that he attend at his own expense to further Examinations for Discovery to answer questions he refused to answer on the advice of counsel. [11] Sun Life also seeks an order pursuant to Rule 26(10) that Mr. Dos Santos produce: (a) copies of all settlement offers made by any party in the personal injury action; (b) copies of all mediation summaries relating to the mediation held in the personal injury action on March 28, 2002 and any notes made by the Plaintiff at that mediation; and (c) copies of any and all economic or actuarial or other expert reports obtained by Mr. Dos Santos or any other party in the personal injury action for the purposes of quantifying the pecuniary losses suffered by Mrs. Dos Santos as a result of her injuries. [12] The Motion was heard by a Master of the Court on June 26, 2003. The Master ordered the Plaintiffs to provide copies of settlement documents from the Plaintiff's motor vehicle action as it relates to the global amount of settlement and a breakdown of that settlement amongst the various heads of damages, if any. The Master dismissed the balance of Sun Life's application for production of further documentation and further discovery. [13] Sun Life appeals from that decision on two grounds: 1. That the Master accepted that the onus was on Mr. Dos Santos to provide a breakdown of the global settlement amount in the circumstances and that Sun Life is entitled to know how the personal injury settlement was broken down amongst the various heads of damage but erred when he did not order Mr. Dos Santos to produce to Sun Life the documents necessary to determine how the personal injury settlement should be allocated amongst various heads of damage and order a further discovery. 2. That the Master erred in law by holding that the documents in question were shielded from production by privilege and that the privilege extended to prevent Mr. Dos Santos from having to answer questions on discovery relevant to the breakdown of this settlement and how it was reached. [14] The policy specifically deals with information that the employee is to provide to Sun Life. Paragraph 4 provides: The employee shall provide Sun Life, free of charge: (a) prompt notice of the commencement of any legal proceeding against the third party; (b) such reports as Sun Life may reasonably require from time to time concerning the status of legal proceedings and/or settlement negotiations with a third party; (c) copies of such documents in the employee's possession or control that relate to his/her right of action against the third party as Sun Life may reasonably require from time to time; and (d) prompt notice of the conclusion of any settlement or judicial disposition of his/her right of action against the third party. Sun Life may require the employee to sign an acknowledgement that he/she is bound by this provision. Sun Life may withhold or discontinue benefits upon any refusal by the employee to honour any terms of this provision. [15] Mr. Dos Santos did sign a subrogation acknowledgment on October 21, 1999. This acknowledgement was witnessed by his counsel. The acknowledgment simply recognizes that the policy contains the subrogation provisions referred to earlier and quotes from those terms with regard to production of information or documents. The acknowledgement contains a statement that the person understands they are bound by those provisions if they accept or have already accepted payments through benefits under the policy. [16] Mr. Dos Santos argues that he signed that document under duress. He alleges that he relied on his wife's income to support the family and that he needed the benefits that were payable under the policy in order to support his family. [17] I appreciate that he may have found himself in difficult emotional and economic circumstances but the evidence does not support the allegation of legal duress. Especially in light of the fact that the document was witnessed by his own lawyer. [18] As the Master in his decision pointed out: "the Defendant argues that in order to determine whether the Plaintiff has received full indemnity from the loss she has suffered from the date of settlement, it is essential to determine what compensation Mrs. Dos Santos actually received from the personal injury settlement for future loss of income." EXAMINATIONS FOR DISCOVERY [19] On advice of counsel, Mr. Dos Santos refused to answer any and all questions dealing with any settlement discussions involving the motor vehicle action. This included any questions regarding the settlement, how it was broken down, what was pursued, what the responses were, and how those various claims were calculated. [20] Mr. Dos Santos also refused to produce any report from an actuary or economist outlining Mrs. Dos Santos' financial losses both past and future, and refused to produce any settlement proposals that exist, mediation summaries that exist, any documents that support those claims, including reports from economists and actuaries, both prepared on behalf of Mrs. Dos Santos and the Defendant in the personal injury action. STANDARD OF REVIEW [21] The parties agree that on this particular appeal, the standard of review is that of correctness on the basis that the decision made was really one of pure law: The question is whether the information and the documents requested were protected by privilege. Northland Properties Ltd. v. Equitable Trust Co. (1992), 71 B.C.L.R. (2d) 124 (S.C.). [22] The defendant refers to the decision Sun Life Assurance Co. of Canada v. Solypa (2001), 96 B.C.L.R. (3d) 178 (S.C.). In a case similar to ours, Sun Life was attempting to recover benefits paid, the Court stated at para. 11: Where a settlement in respect of a claim for damages under various heads, which include income loss, has been concluded, the onus rests with the employee to prove an allocation of a lump sum amount in order to establish that no proportion of the settlement constitutes the recovery of an income loss in respect of which benefits have been paid under a disability policy: see in particular McNally at 17 C.C.L.I. (3d) 215 at para. 54 where the principle stated in Young is approved and at 12 C.C.L.I. (3d) 261 para. 44 where it is applied. [23] Sun Life has referred to the decision Confederation Life Insurance Co. v. Juginovic (1996), 48 C.P.C. (3d) 60 (B.S.C.C.). In the Confederation Life case, Confederation was seeking reimbursement of disability benefits paid. The recipient of the benefits had been injured in a motor vehicle accident and settled its claim for the sum of $350,000.00. I.C.B.C. represented the defendant in the motor vehicle action and was aware of the reimbursement agreement that had been signed by Juginovic. The representatives of I.C.B.C. refused to provide any information about how the settlement was reached other than the amount. On application under Rule 26(1) the Master required I.C.B.C. to disclose its file with respect to its settlement negotiations with the defendant and granted an order under Rule 28(1) requiring a representative of I.C.B.C. to be examined under oath. I.C.B.C. had resisted the order on the basis that these documents and communications were without prejudice. I.C.B.C. argued that as a matter of public policy the documents should not be produced and should be treated as privileged. The argument was that ordering production would hamper settlement negotiations. [24] The Master found in the particulars of that case that the settlement had been concluded, that there were no outstanding issues and that I.C.B.C. was aware of the obligation on the defendant to reimburse the insurance company. The Master ordered production of documents that would have a bearing on the wage loss claim put forward by the defendant or produced by I.C.B.C. in consideration of the wage loss claim, and those documents having a bearing on how the settlement figure was determined. The Court limited these to documents exchanged between I.C.B.C. and the defendant. The Court did not at that time order production of any internal memoranda that I.C.B.C. have produced for its own purposes and not exchanged. [25] I note that the Court in Confederation Life was not referred to the Court of Appeal decision Middelkamp et al v. Fraser Valley Real Estate Board et al (1992), 96 D.L.R. (4th) 227. [26] The issue of privilege regarding settlement negotiations and documents has been canvassed by our Court of Appeal in the Middelkamp decision and more recently in the decision British Columbia Children's Hospital v. Air Products Canada Ltd./Prodair Canada Ltd. (2003), 11 B.C.L.R. (4th) 28. [27] The plaintiff in British Columbia Children's Hospital sued a number of defendants alleging joint and several liability. The plaintiff settled with some of those defendants and as a term of the settlement agreed that all settlement discussions would remain confidential. They entered into a settlement confidentiality agreement and agreed to keep the settlement discussions and settlement agreement itself confidential unless ordered by a Court of competent jurisdiction. The remaining defendants sought production of the settlement documents and the settlement agreement itself. [28] The Court of Appeal reviewed the law of privilege of settlement negotiations at some length including the Middelkamp decision. [29] The Court of Appeal did order production of any documents that could be construed as a release or covenant not to sue or preservation of rights and any provisions relating to any evidentiary arrangements to be disclosed closer to trial. The Court did not order production of anything that did amount to an admission on the basis that it was not relevant. The Court agreed that the settlement agreement itself was protected by privilege. The Court reviewed at length the history of without prejudice negotiations for settlement and the public policy that favoured encouragement of settlement. The Court confirmed the blanket privilege endorsed in the Middelkamp decision that applied to the negotiations as well as the settlement itself. The Court did recognize that as between the parties these documents may be producible if there is a dispute about whether a settlement has actually been reached. [30] The Court said at para. 26: [26] While Middelkamp did not involve an actual settlement document but concerned pre-settlement negotiations, I am of the view that the reasoning in the case, adopting and approving the reasoning in the case of Rush & Tompkins Ltd., is generally supportive of the proposition that all documentation relating to negotiation and settlement in a situation like the present case, (multi-party litigation), is privileged from production to an applicant in the position of the appellant. [31] The Court quoted from Middelkamp at para. 27 referring to the comments made by Chief Justice McEachern in Middelkamp at pp. 281 ‑ 282: Considering the enormous scope of production which is required by our almost slavish adherence to the Peruvian Guano principle, the questionable relevance and value of documents prepared for the settlement of disputes, and the public interest, I find myself in agreement with the House of Lords that the public interest in the settlement of disputes generally requires "without prejudice" documents or communications created for, or communicated in the course of, settlement negotiations to be privileged. I would classify this as a "'blanket', prima facie, common law, or 'class'" privilege because it arises from settlement negotiations and protects the class of communications exchanged in the course of that worthwhile endeavour. [32] I would point out that the Chief Justice in Middelkamp also said at p. 233 at para. c: I recognize that there must be exceptions to this general rule. An obvious exception would be where the parties to a settlement agree that evidence will be furnished in connection with the litigation in which the application is made. In such cases, the public interest in the proper disposition of litigation assumes paramountcy and opposite parties are entitled to know about any arrangements which are made about evidence. Other exceptions could arise out of such matters as fraud, or where production may be required to meet a defence of laches, want of notice, passage of a limitation period or other similar matters which might displace the privilege. As we did not have argument on these matters I prefer to say nothing further about them. [33] The Chief Justice did not say those were the only exceptions. [34] The defendants have also referred to an English case Gnitrow Ltd. v. Cape plc, [2000] 1 W.L.R. 2327 (Eng) (C.A.). Gnitrow was considered in the British Columbia Children's Hospital case but distinguished. Our Court of Appeal did not indicate a disagreement with the conclusions reached in Gnitrow. In discussing Gnitrow our Court of Appeal said at para. 30: [30] The appellants relied on the case of Gnitrow Ltd. v. Cape Plc, [2000] 1 W.L.R. 2327, a recent judgment of the English Court of Appeal. That case involved asbestos litigation. The shipyard operator was sued by employees for asbestos related personal injury claims. Having settled the claims through its insurers, the shipyard sought contribution from the defendant, an independent contractor which had operated at the shipyards at the material times. This defendant successfully applied for a stay of the claim until the claimant operator disclosed the terms of the agreement reached between the claimant's insurers and a second independent contractor as to the latter's contribution in the shipyard asbestos cases. Rush & Tompkins was referred to in the Gnitrow case. I consider that the Gnitrow case is distinguishable on its facts from the case at bar because a relevant and distinguishing circumstance there was a relationship between what the claimant had paid its employees and the amount it would be permitted to recover from the defendant. The Court of Appeal observed that Rush & Tompkins presented a different situation. Pill L.J. said at p. 2332: I would confine my conclusion upon the application of this procedure to present circumstances, that is where a claimant has settled for a fixed sum a specific claim against him and seeks only an indemnity or contribution with respect to the sum paid by him. Other situations will require separate consideration. The circumstances would be different, for example, if a claimant in an action for damages for personal injuries, where damages were at large, were to settle with one of two defendants. It could be a severe disincentive to negotiations generally if, by declining to negotiate, a party can routinely claim the advantage of knowing what other parties have agreed before condescending to negotiate for himself. [Emphasis added] [35] The Court of Appeal did not consider Gnitrow to be inconsistent with its decision in the British Columbia Children's Hospital case, nor did they disapprove of its reasoning. [36] The circumstances of Gnitrow are not unlike the circumstances of the present case. Here, Mr. Dos Santos is attempting to recover from Sun Life disability benefits related to Mrs. Dos Santos' loss of future income. Sun Life alleges entitlement to be subrogated to the claims made by Mrs. Dos Santos in the personal injury action including claims relating to loss of future income. In order to determine what Mrs. Dos Santos is entitled to from Sun Life we must know what Sun Life is entitled to by way of subrogation as a result of Mrs. Dos Santos' settlement of her claims in the motor vehicle action. There is a very precise relationship between the sums which Mrs. Dos Santos is seeking from Sun Life and the sums they are able to set off by way of subrogation and the sums which Mrs. Dos Santos agreed upon in settlement with the defendants in the motor vehicle action. [37] This is a case where the settlement and the settlement documents should not be protected by the blanket privilege referred to in Middelkamp and British Columbia Children's Hospital. [38] The Master was correct when he found that Middelkamp is still good law in British Columbia. Middelkamp in fact has been confirmed by the British Columbia Children's Hospital case. However, the Master does not appear to have been referred to the British Columbia Children's Hospital case or Gnitrow which is referred to in that case. I suspect the Master's decision would have been different if he had the benefit of those cases. I find in the circumstances that the Master did err and therefore allow the appeal. [39] I should say that the Plaintiff's position that the order in the personal injury action directed a payment of a specific sum to Sun Life is not an answer to the issues raised in this proceeding. Sun Life was not a party to the personal injury action and although they benefited from the order it certainly did not decide any issues between the parties to this proceeding. [40] I should also say that the Plaintiff's suggestion that the settlement may not have included anything for future income loss is also unsupportable. Mrs. Dos Santos was employed full‑time at the time of her injury in the motor vehicle accident. She was not responsible for her injuries in any way. There is nothing before me to indicate that there was any difficulty in proving what her wage loss might have been. There is no reason to believe that any settlement would have been reached without some allotment for future wage loss. [41] The Plaintiff suggested that it is not possible to determine what portion of a global settlement might have related a future loss of income. The global settlement figure was not simply pulled from the air. It is reasonable to assume that it was arrived at after careful consideration and negotiation between the parties. It is also reasonable to assume that the negotiations would have included explanations of each party's position and how the settlement figure was arrived at including what it consisted of. The Solypa case referred to in para. 22 makes it clear that the onus will be on the Plaintiff in this case to demonstrate how the lump sum was established. [42] Mr. Dos Santos referred to the regulations under the Law and Equity Act entitled Notice to Mediate (General) Regulation and Section 36 which provides for confidentiality and compellability. However, it is clear that those regulations do not apply to the present case. [43] Mr. Dos Santos also referred to the Insurance Motor Vehicle Act Regulations entitled Notice to Mediate Regulation. In Section 13 which provides: "confidentiality and compellability": (1) A person must not disclose, or be compelled to disclose, in any civil, criminal, quasi-criminal, administrative or regulatory action or proceeding, oral or written information acquired or an opinion formed, including, without limitation, any offer or admission made, in anticipation of or during a mediation session. (2) Nothing in this section precludes a party from introducing into evidence in any civil, criminal, quasi-criminal, administrative or regulatory action or proceeding any information or records produced in the course of the mediation that are otherwise producible or compellable in those proceedings. [44] The definition section 1 defines "mediation session" as a meeting between two or more parties to a designated action during which they are engaged in mediation ..." [45] A "designated action" means a motor vehicle action in respect of which action a notice to mediate has been delivered under Section 2. A notice to mediate has not been delivered under Section 2. Therefore the notice to mediate regulation does not apply in the present circumstances. [46] Even if it did apply, it is only "... oral or written information acquired or an opinion formed, including without limitation, any offer or admission made, in anticipation of or during a mediation session." This does not cover all of the information or records that would have been produced in the personal injury action. Section 13(2) makes it clear that the fact that mediation has occurred does not mean that all information produced in the course of mediation is protected from production. [47] I order the Plaintiff to produce the economic and actuarial evidence in documents relied to quantify the pecuniary losses suffered by Mrs. Dos Santos, including experts' reports obtained by the Plaintiff and received by the Plaintiff from the Defendant in the motor vehicle action. [48] I further order the Plaintiff to produce all settlement offers made by either party and mediation summaries relating to the mediation and notes made by the Plaintiff or Plaintiff's counsel at the mediation. [49] I further order that Mr. Dos Santos submit at his own expense to further examinations for discovery to answer the questions relating to the claims advanced by the Plaintiff in the motor vehicle action, the settlement negotiations and the settlement itself. [50] The Defendant will have costs in any event to cause. "R.E. Powers, J." The Honourable Mr. Justice R.E. Powers