Court File and Parties

2010 ONSC 4645

Court File No.: DC-10-000159-00 Date: 2010-08-27 Superior Court of Justice - Ontario

Re: Aaron Reid, Plaintiff And: The Manufacturers Life Insurance Company and Brian D. Bulger Insurance Services Ltd., Defendants

Before: Boswell J.

Counsel: Mr. J. Ayotte, for the Plaintiff Mr. G. Jermane for the Defendant, Manulife

Heard: July 15, 2010

Ruling on Motion for Leave to Appeal

The Motion

[1] The plaintiff’s father died more than six years ago. The plaintiff wants $500,000.00 he says is owing to him as the beneficiary of a policy of insurance on his father’s life. The defendant, Manulife, is the insurer and refuses to pay, for reasons explained below. The Plaintiff served a jury notice. Manulife moved to strike it. Corkery J. refused to do so. Manulife seeks leave to appeal the refusal.

General Overview

[2] Joel Reid did not know, on March 13, 2003, that he would be dead in a year. On that date, he completed an application form for a $500,000.00 policy of life insurance with the defendant, Manulife. His answers to standard questions posed in the application left the impression that he was generally in good health. A policy was issued by Manulife on July 22, 2003 and delivered to Mr. Reid on August 13, 2003. At the time of delivery he signed a receipt confirming that there had been no detrimental change to his health since the time his application was made.

[3] In September 2003, Mr. Reid was formally diagnosed with parotid cancer, the disease that would steal his life by March 2004. Manulife refuses to make a payment under the policy, arguing that it was void ab initio or is otherwise voidable. Manulife says Mr. Reid exhibited symptoms of his illness as early as May 2003 and therefore there had, in fact, been a detrimental change in his health between March 13, 2003 and August 13, 2003. Manulife relies on Section 180(1) of the Insurance Act, R.S.O. 1990 c. I.8, which provides that a contract of life insurance does not take effect unless, amongst other things, no change has taken place in the insurability of the life to be insured between the time the application was completed and the time the policy was delivered. Manulife says Mr. Reid’s insurance policy never took effect.

[4] The plaintiff is Joel Reid’s son and the beneficiary of the life insurance policy with Manulife. He sues for the $500,000.00 face value of the policy. The first two subparagraphs of his prayer for relief, in his Amended Statement of Claim, read as follows:

1. The Plaintiff claims against the Defendant, Manulife:

(a) a declaration that the Plaintiff is entitled, pursuant to a life insurance policy number 5084158 on the life of Mr. Joel Reid, to payment of benefits in the amount of $500,000.00;

(b) payment of the sum of $500,000.00 pursuant to life insurance policy number 5084158.

[5] Manulife argues that the plaintiff’s claim is, in pith and substance, for declaratory relief. Section 108 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”), provides that claims for declaratory relief shall be tried without a jury. Manulife brought a motion on May 14, 2010 for an order striking out the plaintiff’s jury notice. The motion was dismissed by Corkery J. who wrote the following brief endorsement:

I am not satisfied that the determination of whether the requirements of s. 180(1) of the Insurance Act have been met in this case, requires “declaratory relief” as set out in s. 108(2) of the Courts of Justice Act. Rather, I am of the view that such determination involves findings or declarations of fact which a jury is qualified to make.

The central issue in the case is a factual question, not a legal question. A jury can make all the necessary findings with respect to s. 180(1) of the Insurance Act.

[6] Manulife seeks leave to appeal from Justice Corkery’s decision. For the reasons that follow, I decline to grant leave and the motion is dismissed.

The Issues

[7] Motions for leave to appeal interlocutory orders to the Divisional Court are governed by Rule 62.02(4) of the Rules of Civil Procedure. Leave to appeal an interlocutory order shall not be granted unless:

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[8] Manulife relies on the provisions of both subparagraphs (a) and (b).

[9] Manulife’s argument focuses on the assertion that the plaintiff’s claim is for a declaration and as such is a matter falling within the exclusive domain of a trial judge. They submit that there is good reason to doubt the correctness of Justice Corkery’s finding that the matter is really a factual dispute and well within the jurisdiction of a jury to determine. The characterization of relief as declaratory or otherwise has been the subject of a certain amount of judicial debate and, the defendant argues, calls out for appellate opinion in order to assist the insurance bar. Manulife also points to one case in particular where it says a result was reached that is directly in conflict with Justice Corkery’s determination.

[10] In my view, the issues raised by this motion are:

(i) What is declaratory relief, as that term is used in s. 108 of the CJA?

(ii) What, in pith and substance, is the nature of the plaintiff’s claim in this instance?

(iii) Is there good reason to doubt the correctness of Justice Corkery’s determination that, in pith and substance, this claim involves a factual dispute and not declaratory relief? If so, does the appeal raise matters of such importance that leave to appeal ought to be granted?

(iv) Is there a conflicting decision in Ontario or elsewhere on the same point and, if so, is it desirable that leave to appeal be granted?

Analysis

(i) What is “declaratory relief”?

[11] Section 108(1) of the CJA provides that a party to an action in the Superior Court of Justice may require issues of fact and/or an assessment of damages be tried by a jury, unless otherwise provided. Subsection (2) provides the exceptions, one of which is “declaratory relief.” Claims for declaratory relief are to be tried without a jury.

[12] Coming to grips with the meaning of “declaratory relief” has been a difficult task for courts for a considerable time. The CJA does not define “declaratory relief.” It is but one form of relief, amongst 11 others, where s.108(2) mandates a trial without a jury. On the surface, no common thread is readily identifiable amongst the 12 forms of relief enumerated in that section. Understanding the connection between the types of relief identified by the section requires a bit of a history lesson.

[13] The predecessor to the CJA was the Judicature Act, R.S.O 1980 c. 223. It provided that jury trials were precluded in matters that had formerly been within the exclusive domain of the Court of Chancery. Those counsel practicing in the 19th century would be most familiar with the types of matters within Chancery’s exclusive domain. The Judicature Act was replaced by the CJA in 1984. At least some attempt was made at that time to assist non-centenarian readers by providing a list of those types of matters formerly within Chancery’s exclusive domain. That list remains in s. 108(2) of the current version of the CJA.

[14] The Courts of Chancery historically had jurisdiction over all matters of equity, including trusts and land law and had the power to issue a wide range of remedies, including specific performance, injunctions and declarations. They were distinct from the courts of law and followed rules that were less rigid and were meant to alleviate the possible harshness and inflexibility of the common law in certain instances.

[15] Courts of law and equity are no longer distinct and have not been since the early 20th century. Section 96(1) of the CJA formally provides that courts in Ontario are to administer concurrently all rules of equity and common law. In modern Ontario, equity and common law appear to be fused both procedurally and substantively. As Professor Jeffery Berryman notes in The Law of Equitable Remedies (Toronto: Irwin Law, 2000),

Canadians have tended to avoid debates about the fusion of law and equity. There is no clarion call against the fusion fallacy, as found in other jurisdictions, and few passionate champions of doctrinal purity. We have been willing to mix equitable and common law remedies, and to review case outcomes informed by the remedial goal being pursued, rather than be tied to a remedy that was historically awarded based on the particular cause of action commenced.

[16] Jurors in Ontario are regularly instructed that there are two judges in every jury trial. They are the judges of the facts and the presiding trial judge is the judge of the law. It is not immediately apparent to me why jurors can not be the judges of the facts in cases that may historically have sounded in equity. A consideration of any historical justification is beyond the scope of this motion. Having said that, the absence of any modern rationale for excluding juries from determining the facts in cases involving the application of equitable principles may explain why courts appear reluctant to strike jury notices unless the circumstances of the action clearly fall within one of the enumerated categories of s. 108(2).

[17] When a prayer for relief is clearly declaratory in nature is a matter courts have struggled with, in no small part because the term “declaratory relief” is not defined in the CJA. The meaning of the term must be discerned elsewhere.

[18] A declaration is described in Black’s Law Dictionary, 8th Edition, (St. Paul, MN: Thomson West, 2004) as “a formal statement, proclamation or announcement.”

[19] Thirty years ago, in Solosky v. The Queen, [1981] S.C.R. 821, Justice Dixon described declaratory relief as follows:

Declaratory relief is a remedy neither constrained by form nor bounded by substantive content, which avails persons sharing a legal relationship, in respect of which a “real issue” concerning the relative interests of each has been raised and falls to be determined.

[20] The language used by Dixon J., with all due respect, was a little cumbersome. The thrust of his comments was perhaps more easily stated by L. Sarna in The Law of Declaratory Judgments, 2d. ed. (Agincourt, Ontario: Carswell, 1988)[^1] where the author described a declaratory judgment as “a judicial statement confirming or denying a legal right of the applicant.” He went on to note that a distinguishing feature of a declaratory judgment is that it merely declares the rights of the parties but goes no further, though it could, of course, be joined with coercive relief as well.

[21] In 2002 Lang J., as she then was, canvassed the concept of declaratory relief in a thorough fashion in Harrison v. Antonopoulos, 2002 28725 (ON SC), [2002] O.J. No. 4890 (S.C.J.). She found that “when the court exercises its original jurisdiction between private parties, a ‘declaration’ usually refers to declarations or findings of fact naturally arising in the course of a fact-finding exercise.” She drew a distinction between declarations of fact and declaratory relief. Citing Zamir & Woolf, The Declaratory Judgment, 3rd ed. (London: Sweet and Maxwell, 2002), she found that a declaratory judgment was one that pronounced upon the existence or non-existence of a legal state of affairs. It is restricted to a pronunciation on the parties’ rights. It may be contrasted with a coercive judgment. In a coercive judgment, the court determines the rights of the parties and then orders the defendant to act in a certain way, for instance by paying damages.

[22] Lang J. concluded that the phrase “declaratory relief” in s. 108 (2) of the CJA contemplates a pronunciation on the parties’ rights in a non-coercive judgment. I accept and adopt Justice Lang’s conclusion. It makes sense from an historical point of view. It also narrows this particular category of cases removed from juries to cases that are restricted to pronunciations on parties’ legal rights. In my view such a narrow interpretation of “declaratory relief” is consistent with the tendency of courts to narrowly construe the category of cases removed from juries.

[23] The plaintiff and the defendant, Manulife, both appear content with Justice Lang’s view of the definition of a declaratory judgment. They disagree about whether the relief claimed by the plaintiff in this case is really a pronunciation of the rights of the parties in a non-coercive judgment. It is important, therefore, to assess what, in pith and substance, the nature of the claim really is.

(ii) What is the pith and substance of the plaintiff’s claim?

[24] As noted, the plaintiff’s first prayer for relief in the Amended Statement of Claim is for a declaration that the plaintiff is entitled to payment in the amount of $500,000.00 being the proceeds of a policy of insurance on the life of Joel Reid. The language used suggests, of course, that what is sought is declaratory relief – something not within the purview of a jury.

[25] The language of the pleading is not, however, determinative. What matters is the pith and substance of the claim – its core nature, or essence: see Constitution Insurance Co. of Canada v. Coombe, 1992 7427 (ON SC), [1992] O.J. No. 2523 (Gen. Div.); MacNeil (Litigation Guardian of) v. Bryan, 2009 28648 (ON SC), [2009] O.J. No. 2344 (S.C.J.); Harrison v. Antonopoulos, supra.

[26] Justice Lang explored the rationale for the pith and substance rule in Harrison. The pith and substance test, as she held, prevents parties from phrasing their claims in such a fashion as to attract or avoid jury trials. For instance, in the example used by Lang J., a party who wants to avoid a jury trial may simply phrase his or her pleading as a claim for declaratory relief. It is well settled in the case law that the court must look beyond the technical wording of a claim to the true nature of the relief sought.

[27] It is also well settled that jury trials are a substantive right that ought not to be lightly interfered with: see Hunt v. Sutton Group (2002), 60 O.R. (3d) 365 (C.A.); Constitution Insurance Co. of Canada v. Coombe, supra. The right is confirmed in the CJA at s. 108(1) which provides that parties may require issues of fact and assessments of damages to be tried by a jury, save for cases identified in s-s (2). In my view, given the importance of the substantive right to trial by a jury, unless the relief sought clearly falls within one of the enumerated categories of cases in s-s (2), a jury trial is as of right. In other words, in relation to this case, unless the relief sought is, in pith and substance, clearly declaratory in nature, then the plaintiff is entitled to a trial by jury.

[28] Manulife argues that what is really in issue in this case is whether a contract of insurance exists at all. Since the contract sets out in undisputed terms what the rights of the parties are, the determination of whether the contract is in effect will determine the rights of the parties. Although the court will naturally have to make findings of fact, what is really called for is a declaration regarding the status of the contract. Everything else will naturally flow from that declaration. Manulife submits that Corkery J. did not seize upon this central issue in his brief reasons and failed to address whether a jury can deal with the existence of a contract, which is a determination of the legal rights of the parties.

[29] The plaintiff argues, on the other hand, that what is at issue is a factual matter – whether Mr. Reid’s insurability changed between the time he applied for life insurance and the time the policy was delivered to him by Manulife. As such, only factual declarations are required.

[30] The parties referred me to numerous cases where claims were found, in pith and substance, to be declaratory or otherwise in nature. Most of those cases related to insurance claims, many of them for disability payments: MacLennan v. National Life Assurance Co. of Canada, [1994] O.J. No. 1242 (Gen. Div.); Constitution Insurance Co. of Canada v. Coombe, supra; MacNeil (Litigation Guardian of) v. Bryan, supra; Nassim v. Perth Insurance Co., 2007 NSSC 391; Totic v. State Farm Insurance Co., [2002] O.J. No. 2597 (S.C.J.); Harrison v. Antonopoulos, supra; Ramm v. Sun Life Insurance Co. of Canada, 1999 14784 (ON SC), [1999] O.J. No. 797 (Gen. Div.).

[31] I do not intend to review or comment on each one of the cases referred to me. For the most part, I believe they turn on their facts. The cases referred to me reflect that courts have regularly reaffirmed the importance of the substantive right to a trial by jury and the significance of determining the pith and substance of the claim in issue.

[32] As I indicated, most of the cases in this area appear to relate to insurance cases. There are probably several reasons for that, one being that it is not uncommon for disputes to arise between insurers and insureds about whether a given peril is covered by a particular policy. The determination of the covered perils under a contract of insurance is a context in which declaratory relief is often sought.

[33] In the case at bar, the issues raised by the pleadings do not require a determination of the legal rights of parties under the contract of insurance. The issue is whether in fact there is a contract of insurance. A policy was applied for and a policy was issued. The parties appear to be agreed on the identification of the policy and its particulars and there is no dispute about the parties’ respective rights and obligations under the contract, should it be found to be effective. As I understand it, Manulife concedes that if there is a finding that the policy in issue is valid and enforceable, the terms are clear: the plaintiff will be entitled to payment in the sum of $500,000.00.

[34] The basis on which Manulife asserts that the policy is not valid is that there was a change in the insurability of Joel Reid between the date the policy was applied for and the date it was delivered. Counsel to Manulife argued, very ably, that on the facts of this case, no insurance contract exists because of the operation of s. 180(1) of the Insurance Act. More specifically, the policy issued by Manulife on Joel Reid’s life never took effect because there was a detrimental change in his health between the time he applied for the policy and the time it was delivered.

[35] Manulife’s argument, of course, assumes that there was, in fact, a detrimental change in Mr. Reid’s health in the relevant time period. But that fact is disputed. In fact it is the very centre of the dispute between the parties. There appears to be no dispute about their legal rights, obligations and entitlements depending on the outcome of that factual finding. The court in this instance is not called upon to make a pronunciation on the legal rights of the parties. They agree that their rights are spelled out in the policy. What they do not agree upon is whether a particular constellation of facts existed that vitiated the policy. The court is called upon to determine what is a relatively narrow factual dispute: whether there was a detrimental change in Joel Reid’s health in the relevant time period.

[36] On careful review, in pith and substance, this case is clearly a factual dispute. The parties seek a determination of that factual dispute and, at least from the plaintiff’s point of view, a coercive order should that factual determination be resolved in his favour.

(iii) Is there good reason to doubt the decision of Corkery J. about the pith and substance of the plaintiff’s claim?

[37] Justice Corkery found that the plaintiff’s claim was, centrally, a factual one which a jury was capable of determining. I take his endorsement to mean that, in pith and substance, the claim was not for declaratory relief, but rather coercive relief which turns on a factual determination. I agree.

[38] I do not consider Justice Corkery’s decision to have been wrongly decided, nor would I have decided it differently. Of course the threshold test, “good reason to doubt the correctness of a decision”, does not require a conclusion that the decision in question was wrong or even probably wrong, or that I would have decided it differently had I been presiding as the motions judge. The test is whether the decision is open to serious debate: Ash v. Lloyd’s Corp., 1992 7652 (ON SC), [1992] O.J. No. 894 (Gen. Div.).

[39] The issue before the court – the striking of a jury notice where declaratory relief is sought – has been before trial courts on numerous occasions, but appears never to have been the subject of appellate consideration. Manulife asserts that there has been some considerable general debate about the approach to be taken to motions of this nature and the particulars of any test to be applied in the circumstances. The case law is said to be “murky”, which is good reason for an elevation of the matter to the Divisional Court.

[40] Some support is found for Manulife’s argument that appellate opinion would be desirable in this area. Ramm v. Sun Life Assurance Co. of Canada, supra, involved a motion to strike a jury notice on the basis that a declaratory judgment was sought. The plaintiff was an employee of Canada Post and was a member of a group policy of long term disability insurance. The plaintiff became disabled and received payments for a little over two years, after which the insurer declined to make further payments. The plaintiff sued for damages. Reilly J. found that, in pith and substance, the plaintiff was not seeking a declaration as to entitlement to future disability benefits. Rather, the plaintiff was seeking damages for breach of contract. Reilly J. went on to comment that this issue was one of considerable importance to future litigants, to counsel and to trial judges. He said, specifically, “I speak as one judge who would very much appreciate clear appellate opinion on the matter.” As I read Reilly J.’s decision, the issue or matter referred to is the method by which to distinguish whether a claim is, in pith and substance, for declaratory relief.

[41] I acknowledge and agree that it can be difficult to make the determination as to the pith and substance of any given claim. That determination is made more difficult because the concept of what exactly constitutes declaratory relief is not clear and of course the term is not defined in the CJA.

[42] I agree that at some point, appellate direction on how to determine whether a claim is, in pith and substance, one for declaratory relief, would be of assistance to the insurance bar and to trial courts. That said, I have to consider the positions of the parties to this particular proceeding. Ultimately it is the correctness of the decision of the motions judge in this particular instance that is the subject of the leave application. Motions in this area reflect a spectrum of cases. At the one end are claims that are clearly not for declaratory relief. At the other end are claims that clearly do seek declaratory relief. In the middle are the more troublesome claims, where it can be difficult to discern whether what is sought is, in pith and substance, a declaration or otherwise. Appellate direction may assist in resolving these more troublesome “grey area” cases. In my view, however, the case at bar falls closer to the end of the spectrum where it is relatively easy to determine that it is not a prayer for declaratory relief. In my view, the motions judge was correct in this instance. As such, it would not be fair, nor appropriate, to use this case to seek out appellate opinion on the matter, even though that opinion may assist in resolving future cases that fall closer to the middle of the spectrum.

(iv) Is there an existing decision in conflict with that of Corkery J.?

[43] Manulife points to one decision as being in conflict with Justice Corkery’s decision in this instance. Adamska v. Aetna Life Insurance, [2006] O.J. No. 5576 (S.C.J.) is a decision of Mr. Justice Smith on a motion to grant a plaintiff leave to deliver a jury notice out of time. Smith J. described the claim as follows:

The essence of the plaintiff’s claim is that she should have been provided disability benefits under a policy of insurance with the defendant, Aetna. The statement of claim seeks, inter alia, a declaration that the plaintiff is totally disabled and is entitled to past and future benefits in addition to damages.

[44] Justice Smith held that the pith and substance of the case required the plaintiff to obtain an order for declaratory relief and accordingly fell within the exception set out in s. 108(2) of the CJA.

[45] For a case to be “conflicting” it must present a difference in principle and not merely in outcome as a result of the exercise of discretion: Holt v. Anderson (2005), 2005 38583 (ON SCDC), 205 O.A.C. 91 (Div. Ct.).

[46] It is not clear from his reasons how Justice Smith came to determine that the pith and substance of the plaintiff’s claim in Adamska was for declaratory relief. The fact that the plaintiff was seeking a declaration regarding the right to a future stream of disability payments may have been a significant factor: see Ramm, supra, at para. 32. It is clear, however, that Smith J. applied what appears to be the generally accepted pith and substance test and came to his conclusion based on the particular facts of the case before him. I can not say that his decision is directly in conflict with Justice Corkey’s decision in any principled way.

Conclusion

[47] While I agree that appellate direction in this area would be of some benefit, such direction will have to wait for another case. On the facts of this case, I am not able to conclude that there is good reason to doubt the correctness of the motion judge’s decision, nor am I able to say that there is another decision in conflict with that of the motions judge. Accordingly, the motion for leave to appeal is dismissed.

[48] If the parties are unable to agree on the issue of costs, they may make written submissions, not to exceed 2 pages in length. The plaintiff’s submissions shall be served and filed by September 10, 2010 and the defendant’s by September 17, 2010.

Boswell J.

Date: August 27, 2010.

[^1]: As cited by Chadwick J. in MacLennon v. National Life Assurance Co. of Canada, [1994] O.J. No. 1242 (Gen. Div.)