Court File and Parties

ONSC 2319 Court File No.: CV-19-80507 Date: 2020-04-17 Ontario Superior Court of Justice

Between: Kossay El-Khodr, Applicant And: Northbridge Commercial Insurance Company and Hughes Amys LLP, Respondents

Before: H.J. Williams, J.

Counsel: Joseph Obagi, Counsel for the Applicant Harvey Klein, Counsel for the Respondent Northbridge Commercial Insurance Company

Heard: February 19, 2020

Reasons for Judgment

Overview

[1] Kossay El-Khodr and Northbridge Commercial Insurance Company disagree about the interpretation of minutes of settlement signed when Mr. El-Khodr settled his claim for statutory accident benefits arising from a January 2007 motor vehicle accident. [1]

[2] The minutes of settlement, dated June 30, 2017, were signed by Mr. El-Khodr, Northbridge and Mr. El-Khodr’s accident benefits insurer, Royal & Sun Alliance Insurance Company of Canada.

[3] Northbridge was the liability insurer for the defendants in Mr. El-Khodr’s tort action. The tort action was tried by a jury in 2015; Mr. El-Khodr was awarded slightly more than $2.85 million.

[4] Mr. El-Khodr is seeking the opinion, advice or direction of the court in respect of the rights of the parties under the minutes of settlement and the distribution of the settlement funds of $385,000.00.

[5] Mr. El-Khodr relies on subrules 14.05(3)(a), (d) and/or (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

The Facts

[6] The jury in Mr. El-Khodr’s 2015 trial made the following damages assessments:

1. Past loss of income: $220,434;
2. General Damages for Pain and Suffering & Loss of Enjoyment of Life: $225,000;
3. Future Loss of Income: $395,593; and
4. Future Care Costs: a) Future Attendant Care Costs/Assisted Living: $1,450,000; b) Future Professional Services (Physio, Psychology etc): $424,550; c) Future Housekeeping & Home Maintenance Services: $133,000; and d) Future Medication & Assistive Devices: $82,429

[7] After the jury released its verdict, Northbridge, which had defended the defendants at the trial, requested an assignment of Mr. El-Khodr’s future statutory accident benefits.

[8] The trial judge ordered an assignment of certain benefits but decided that there should be no assignment of future benefits relating either to medication and assistive devices or professional services.

[9] The defendants appealed the trial judge’s post-verdict decision. The appeal was argued on April 4, 2017; the Court of Appeal reserved its decision.

[10] In late June 2017, before the Court of Appeal released its decision and on the eve of a hearing before the Financial Services Commission of Ontario in respect of Mr. El-Khodr’s claim for statutory accident benefits, Mr. El-Khodr, RSA and Northbridge signed the minutes of settlement that gave rise to this application.

[11] The contentious paragraph in the minutes of settlement is paragraph 4, which reads as follows:

The sum of $385,000.00, payable under paragraph 3 hereof, shall be payable to HUGHES AMYS LLP IN TRUST for the benefit of both Applicants herein, [2] pending release of the decision of the Court of Appeal for Ontario in El-Khodr v. Lackie, court file number C60918, which appeal was argued on April 4, 2017, decision reserved. The following applies upon receipt of the Court of Appeal’s decision:

a) in the event that the appeal with respect to Justice Roccamo’s refusal to grant an assignment of medical and rehabilitation benefits to Northbridge is dismissed by the Court of Appeal, the sum of $385,000.00 held in trust by HUGHES AMYS LLP shall be released forthwith to Kossay El-Khodr, by cheque made payable to CONNOLLY OBAGI LLP IN TRUST;

b) in the event that the said appeal is allowed and an assignment of Kossay El-Khodr’s entitlement to medical and rehabilitation benefits is granted to Northbridge, the sum of $385,000.00 held in trust by HUGHES AMYS LLP shall be released forthwith to the Applicant, Northbridge.

[12] The Court of Appeal released its decision, which allowed Northbridge’s appeal, on September 19, 2017. The Court of Appeal ordered an assignment to Northbridge of RSA’s future payments to Mr. El-Khodr for medication and assistive devices up to a total of $82,429.00, the amount the jury had awarded for these items. The Court of Appeal also ordered an assignment of future payments for specified professional services up to a total of $424,550.00, the amount the jury had awarded for these services.

Mr. El-Khodr’s Position

[13] Mr. El-Khodr argues that the outcome of the appeal did not trigger the payment of the $385,000.00 to either party because neither the event described in paragraph 4(a) nor the events described in paragraph 4(b) of the minutes of settlement occurred.

[14] Mr. El-Khodr concedes that paragraph 4(a) does not apply, because he did not win the appeal.

[15] Mr. El-Khodr argues that paragraph 4(b) does not apply either, because it required two events to occur:

1. Northbridge’s appeal must have been allowed; and
2. Mr. El-Khodr’s entire entitlement to future medical and rehabilitation benefits, in other words, all of Mr. El-Khodr’s future medical and rehabilitation benefits, must have been assigned to Northbridge.

[16] Mr. El-Khodr acknowledges that the first of the two events described in paragraph 4(b) occurred in that Northbridge’s appeal was allowed. He argues that the second event did not occur because the Court of Appeal awarded Northbridge an assignment only of certain enumerated future medical and rehabilitation benefits that matched the jury’s damages award and not an assignment of all future medical and rehabilitation benefits. Mr. El-Khodr’s lawyer described the result at the Court of Appeal as being “at best, a partial victory for Northbridge.”

[17] Mr. El-Khodr says that neither he nor Northbridge correctly anticipated the outcome of the appeal. He says that both parties had expected the Court of Appeal to follow one of two approaches: the Court of Appeal would adopt the so-called “silo” approach from Basandra v. Sforza, 2016 ONCA 251, which would have resulted in all of Mr. El-Khodr’s medical and rehabilitation benefits being assigned to Northbridge; alternatively, the Court of Appeal would uphold the approach from Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.), which was accepted by the trial judge in his case and which required strict matching of common law heads of damages and the specific types of accident benefit received.

[18] Mr. El-Khodr argues that because the Court of Appeal did not overturn Bannon, embrace the silo approach of Basandra and assign all of his future medical and rehabilitation benefits to Northbridge, the second event that was required under paragraph 4(b) of the minutes of settlement in order for Northbridge to claim the $385,000.00 did not happen.

[19] Mr. El-Khodr also argues that because the phrase “medical and rehabilitation benefits” are a term of art, the reference to “medical and rehabilitation benefits” in paragraph 4(b) of the minutes of settlement can only refer to that entire category of benefits, in other words, “all” medical and rehabilitation benefits.

[20] Mr. El-Khodr submits that it was clear from the appeal record that Northbridge was requesting an assignment of that entire category of benefits. Mr. El-Khodr points to the supplementary notice of appeal, in which Northbridge requested “a total assignment of future SABS benefits payable to the Plaintiff by RSA” and the Northbridge appeal factum, in which it sought “an Assignment of all future ‘health care expenses’ including medication, assistive devices, and professional services.”

[21] Mr. El-Khodr argues that his $385,000.00 settlement with RSA included amounts for medical and rehabilitation benefits that were assigned to Northbridge by the Court of Appeal and also amounts for benefits that were not assigned, such as a rent subsidy benefit. He argues that it would be unfair for Northbridge to receive the entire amount of the settlement when the assignment granted by the Court of Appeal was for some but not all medical and rehabilitation benefits.

[22] Finally, Mr. El-Khodr argues that the unanticipated outcome of the appeal resulted in frustration of paragraph 4 of the minutes of settlement. He argues that because neither of the parties expected the result of the appeal, it would be unjust to hold them to the terms of paragraph 4.

Analysis

[23] Contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix. (Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 50). The surrounding circumstances must never be allowed to overwhelm the words of the agreement; the goal of examining evidence of surrounding circumstances is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. (Sattva, at para. 57).

[24] To accept Mr. El-Khodr’s arguments in respect of the interpretation of “medical and rehabilitation benefits” in paragraph 4 of the minutes of settlement, I would be required to ignore the scope of the appeal that is central to the paragraph and also that the parties were aware of the scope of the appeal before the minutes of settlement were signed.

[25] The appeal, as it related to the assignment, was in respect of the trial judge’s decisions that Northbridge was not entitled to an assignment of certain specified medical and rehabilitation benefits: paragraphs 3 and 4 of the trial judge’s August 26, 2015 order. The Court of Appeal allowed the appeal and amended the order to delete these two paragraphs and to substitute new paragraphs that called for assignments. In the case of paragraph 3, the Court of Appeal allowed an assignment to Northbridge of up to the amount of the jury’s award of $82,429.00 for future medication and assistive devices. In the case of paragraph 4, the Court of Appeal allowed an assignment to Northbridge of up to the amount of the jury’s award of $424,550.00 for future professional services.

[26] Northbridge was wholly successful on the appeal. Simply put, it appealed the trial judge’s denial of certain assignments and, on appeal, it was awarded the assignments.

[27] I take Mr. El-Khodr’s point that Northbridge’s supplementary notice of appeal requested “a total assignment of future SABS benefits” and that Northbridge’s appeal factum said that it was seeking “an Assignment of all future ‘health care expenses’…” While more precision might have been applied to both phrases, it is evident from reading the two documents in their entirety that Northbridge was appealing the trial judge’s refusal to grant Northbridge an assignment of Mr. El‑Khodr’s entitlement to future benefits for medication and assistive devices and for professional services, the benefits referred to in paragraphs 3 and 4 of the trial judge’s order.

[28] The scope of the appeal as it related to the assignment issue was simply and clearly articulated by MacFarland J.A. in para. 29 of the Court of Appeal’s decision:

The trial judge’s refusal to make any assignment in relation to future professional services and future medication and assistive devices is the subject of this ground of appeal.

[29] There can be no doubt that the Court of Appeal decided the assignment issue in favour of Northbridge. In para. 80 of its decision, MacFarland J.A. wrote:

In my view, the trial judge erred in not ordering that there be an assignment in relation to the awards for the cost of future medication and assistive devices and future professional services. I would set aside paragraphs 3 and 4 of the trial judge’s order of August 26, 2015 and in their place order that any amounts for future medication and assistive devices payable by RSA Insurance to the respondent [Mr. El-Khodr] be assigned to Northbridge Commercial Insurance Corporation…

[30] At the time of the appeal, Mr. El-Khodr understood the scope of the appeal as it related to the assignment issue. Mr. El-Khodr’s appeal factum, at para. 31, described the appeal as it related to the assignment issue in the following manner:

31. While the trial judge did grant assignments with respect to some aspects of Kossay El-Khodr’s future care, this appeal is limited to the two aspects of Kossay’s future care which were not subject to an assignment namely: a) medications up to age 65 (no assignment was requested for assistive devices); and b) professional services.

[31] When the minutes of settlement were prepared and signed in June 2017, the scope of the appeal as it related to the assignment issue was not a mystery to the parties. The appeal had already been argued. The parties knew that if Northbridge was successful on the appeal, it would be awarded assignments of the future medical and rehabilitation benefits to which the trial judge, in paragraphs 3 and 4 of her August 26, 2015 order, had held it was not entitled.

[32] Mr. El-Khodr made the point that his $385,000.00 settlement of June 30, 2017 included amounts for benefits that were not ultimately assigned to Northbridge by the Court of Appeal, including a rent subsidy. He argued that it would be unfair for Northbridge to receive the entire amount of the settlement when the assignment it was granted by the Court of Appeal was related only to certain specified benefits.

[33] I do not accept this argument because, as I have already observed, Mr. El-Khodr was aware of the scope of the appeal when he signed the minutes of settlement. Mr. El-Khodr also knew, when he signed the minutes of settlement, that the winner of the appeal would receive the entire amount of the settlement. This is evident from the wording of the minutes of settlement and also from an email exchange dated June 30, 2017 between Mr. El-Khodr’s lawyer and the lawyer who was then representing Northbridge. Northbridge’s lawyer suggested that a clause in the proposed minutes requiring Northbridge to release Mr. El-Khodr and RSA had come out of left field. Mr. El-Khodr’s lawyer replied:

I believe everyone needs paragraph 11 as this settlement is intended to resolve all outstanding issues between the parties subject only to the outcome of the appeal. I’m not sure how this comes out of left field for Northbridge. This was the point of the ‘winner take all’ figures that we had agreed upon.

[34] In terms of fairness, as MacFarland J.A. observed at para. 78 of the Court of Appeal’s decision, Mr. El-Khodr was paid the full amount of his judgment in August 2015 and was therefore fully compensated in respect of all of his losses arising from his motor vehicle accident. Further, the amount the jury awarded, and that Northbridge paid to Mr. El-Khodr, for future medication and assistive devices ($82,429.00) and future professional services ($424,550.00) exceeded the amount of the $385,000.00 settlement by $121,979.00.

[35] For these reasons, I also reject Mr. El-Khodr’s argument that paragraph 4 of the minutes of settlement was frustrated by the outcome of the appeal.

Conclusion

[36] I agree with the submission of Northbridge that its victory at the Court of Appeal was not a partial victory; it was a complete victory. Northbridge was entirely successful on the appeal; it was granted the relief it asked for.

[37] I find that the events described in paragraph 4(b) of the minutes of settlement occurred: Northbridge’s appeal was allowed and an assignment of the future medical and rehabilitation benefits that were at issue on the appeal was granted to Northbridge. Consequently, in accordance with paragraph 4(b) of the minutes of settlement signed by the parties, the sum of $385,000.00 held in trust shall be released to Northbridge.

Costs

[38] Both parties delivered costs outlines before this decision was released.

[39] I encourage the parties to settle the issues of costs. If the parties are unable to do so:

1. Within 14 days of the date of this decision, Northbridge shall deliver either: a) a notice stating that it is content to rely on the costs outline it has already filed; or b) written submissions of no more than three pages in length to supplement its costs outline.
2. Within 14 days of receipt of Northbridge’s notice or supplementary submissions, Mr. El-Khodr shall deliver either: a) a notice stating that he is content to rely on the costs outline he has already filed; or b) written submissions of no more than three pages in length in response to Northbridge’s costs outline and, if applicable, Northbridge’s supplementary written submissions.
3. Northbridge may then deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of Mr. El-Khodr’s notice or submissions.

[40] These notices and/or submissions shall be filed by sending them to my attention, by email, to the following email address: SCJ.assistants@ontario.ca.

Date: April 17, 2020

ONSC 2319 COURT FILE NO.: CV-19-80507 DATE: 20200417 ONTARIO SUPERIOR COURT OF JUSTICE RE: KOSSAY EL-KHODR Applicant – and – NORTHBRIDGE COMMERCIAL INSURANCE COMPANY Respondents BEFORE: Madam Justice H.J. Williams COUNSEL: Joseph Obagi, for the Applicant Harvey Klein, for the Respondents REASONS FOR judgment Madam Justice H. J. Williams Released: April 17, 2020

[1] Hughes Amys LLP is a respondent to this application because it was holding the disputed settlement funds in trust.

[2] The “Applicants” were Mr. El-Khodr and Northbridge. Although the dispute over Mr. El-Khodr’s accident benefits was between Mr. El-Khodr and RSA, Northbridge was added to the FSCO proceeding as an interested party.