Sutor v. Workplace Safety and Insurance Board et al. [Indexed as: Sutor v. Workplace Safety and Insurance Board]
63 O.R. (3d) 257
[2003] O.J. No. 311
Docket No. C37909
Court of Appeal for Ontario
Austin, Charron and Armstrong JJ.A.
February 6, 2003
Insurance -- Subrogation -- Removal of Workplace Safety and Insurance Board's right of subrogation in s. 267(5) of Insurance Act not affecting Board's right to require worker to reimburse Board for benefits she received from Board before allowing her to re-elect and pursue civil action against alleged tortfeasor -- Arrangement between Board and worker not amounting to subrogation -- Insurance Act, R.S.O. 1990, c. I.8, s. 267(5).
Workers' compensation -- Actions -- Removal of Workplace Safety and Insurance Board's right of subrogation in s. 267(5) of Insurance Act not affecting Board's right to require worker to reimburse Board for benefits she received from Board before allowing her to re-elect and pursue civil action against alleged tortfeasor -- By cancelling right of subrogation in case of persons injured at work in motor vehicle accidents, legislature not intending to vary fundamental principle that injured worker must choose between claiming benefits and suing -- Insurance Act, R.S.O. 1990, c. I.8, s. 267(5).
S was injured in a motor vehicle accident in the course of her employment in September 1993. She elected to claim workers' compensation benefits under the Workers' Compensation Act, R.S.O. 1990, c. W.11 instead of pursuing a civil action against the alleged tortfeasor. Section 10(4) of that Act provided that, if a worker elected to claim benefits under the Act, the Workers' Compensation Board was subrogated to all rights of the worker and could maintain an action in the worker's name. Section 267(5) of the Insurance Act takes the Board's right of subrogation away where the worker is injured in a motor vehicle accident. S sought to withdraw her claim for benefits in 1995 in order to bring an action against the alleged tortfeasor. She signed a Board form stating that she agreed to reimburse the Board for the benefits paid to that date. She subsequently took the position that s. 267(5) of the Insurance Act prevented the Board from recovering those benefits. An application was brought under rule 14.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for the court's advice and directions. The court was asked whether the Board had the right to compel S to agree to reimburse it for benefits as a precondition of re- election to pursue a civil suit. The application judge held that the Board did not have that right. He held that s. 267(5) of the Insurance Act precluded the Board from obtaining reimbursement directly from a third party and that the Board could not do indirectly, by obtaining reimbursement from its insured, what it could not do directly. The Board appealed.
Held, the appeal should be allowed.
This was not a case of the Board trying to do indirectly what it could not do directly. Rather, it was permitting S to take steps backward in order that she might then move forward on her own against the alleged tortfeasor. The Board's right to reimbursement directly from the worker in the case of re- election was not altered by the taking away in s. 267(5) of the Insurance Act of the Board's right to recovery from a third party. The arrangement between the Board and S did not amount to subrogation. It has been a fundamental principle of worker's compensation in Ontario since 1915 that a worker covered by the legislation who is [page258] injured in circumstances giving rise to a cause of action has a choice between claiming workers' compensation benefits and suing. By cancelling the right of subrogation in the case of persons injured at work in motor vehicle accidents, the legislature did not intend to vary this fundamental principle or to provide a means to secure double recovery in a substantial number of work-related claims. Nor did the legislature, by enacting s. 267 of the Insurance Act, intend to divide injured workers into two classes, namely, those workers injured in motor vehicle accidents, who can re- elect without being required to reimburse, and those injured otherwise than in motor vehicle accidents, who can only re- elect on promising to reimburse the Board.
APPEAL from a judgment on an application for advice and directions.
Lozo v. Parish (1996), 1996 ONCJ 22093, 36 C.C.L.I. (2d) 61, [1996] O.J. No. 1371 (Quicklaw) (Gen. Div.), consd Other cases referred to Cohen v. Smith (1995), 1995 ONSC 10635, 25 O.R. (3d) 264, 127 D.L.R. (4th) 511, 18 M.V.R. (3d) 301 (Div. Ct.), affg (1993), 1993 ONSC 8654, 14 O.R. (3d) 85 (Gen. Div.); London (City) v. Gibbons (1989), 1989 ONSC 4385, 69 O.R. (2d) 389 (Dist. Ct.); MacIntosh v. Gzowski (1979), 1979 ONCA 2119, 27 O.R. (2d) 151, 105 D.L.R. (3d) 721, 15 C.P.C. 14 (C.A.), affg (1979), 11 C.P.C. 46 (Ont. H.C.J.); Meyer v. Bright (1993), 1993 ONCA 3389, 15 O.R. (3d) 129, 48 M.V.R. (2d) 1 (C.A.) [Leave to appeal to S.C.C. refused (1994), 17 O.R. (3d) xvi], affg (1993), 1993 ONSC 8679, 12 O.R. (3d) 40, 100 D.L.R. (4th) 390 (Gen. Div.), (sub nom. Dalgliesh v. Green); Toronto Railway Co. v. Hutton (1919), 1919 SCC 534, 59 S.C.R. 413, 50 D.L.R. 785, [1920] 1 W.W.R. 396 Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 267(5) Insurance Law Amendment Act, 1990, S.O. 1990, c. 2, s. 57 Workers' Compensation Act, S.O. 1914, c. 25, s. 9(1) Workers' Compensation Act, R.S.O. 1980, c. 539, s. 8 Workers' Compensation Act, R.S.O. 1990, c. W.11, s. 10 Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Schedule A, as am.), s. 30.10 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.05 Authorities referred to Ison, T.G., Workers' Compensation in Canada, 2nd ed. (Toronto: Butterworths, 1989)
Owen Thomas, for appellant. William C. Goldstein, for respondent Lynda Sutor. Karol F. Dycha, for respondent Jeffrey Thurlow.
The judgment of the court was delivered by
AUSTIN J.A.: -- [page259]
OVERVIEW
[1] The workers' compensation scheme in Ontario allows a worker, injured in the course of employment, and in circumstances entitling the worker to sue a third party for damages, to elect whether s/he will take the benefits provided under the workers' compensation scheme or sue the party causing the injuries for damages.
[2] If a worker first elects to take the workers' compensation benefits and subsequently wishes to sue the third party, s/he may be allowed to re-elect and pursue a claim in the courts, as long as s/he provides an undertaking to reimburse the Workplace Safety and Insurance Board (the Workers' Compensation Board, until January 1, 1998; hereinafter the "Board") for workers' compensation benefits paid to the date of re-election.
[3] This is an appeal from the decision of Brockenshire J. dated February 15, 2002 in an application for interpretation of s. 10(4) of the Workers' Compensation Act, R.S.O. 1990, c. W.11 (hereinafter "the WCA, 1990"; currently, and since January 1, 1998, s. 30(10) of the Workplace Safety and Insurance Act, S.O. 1997, c. 16, Schedule A, as am.) and s. 267(5) of the Insurance Act, R.S.O. 1990, c. I.8. The need for interpretation of these two apparently conflicting provisions arose in the context of a challenge by an injured worker to the Board's claim for reimbursement of benefits paid to her.
[4] Brockenshire J. held that the Board did not have the right to require the worker to agree to reimburse the Board for benefits she received from the Board, before allowing her to re-elect and pursue a civil suit against the third party, Thurlow. For the reasons which follow, I am of the opinion that the application judge erred in his characterization of the issue and as a result erred in reaching that conclusion.
Facts
[5] Lynda Sutor ("Sutor"), a nurse, was injured in a motor vehicle accident in Ontario on September 3, 1993, while driving in the course of her employment with the Victorian Order of Nurses. Jeffery Thurlow ("Thurlow") is alleged to be the person legally liable for her injuries. On September 27, 1993, Sutor elected to claim workers' compensation benefits under the WCA, 1990. The election form she signed stated that:
(a) she had been in a motor vehicle accident on September 3, 1993 while at work under circumstances that might entitle her to sue a third party; [page260]
(b) she was required to choose between claiming compensation and suing a third party;
(c) the Board was not subrogated to any right of recovery that she might have against a third party and could not commence an action against that third party;
(d) if she elected to receive workers' compensation she could not commence her own action against a third party without first withdrawing her claim for compensation benefits with the approval of the Board and agreeing to reimburse the Board for the full value of all compensation benefits awarded to her or paid on her behalf.
[6] The Board began making payments to her or on her behalf as early as October 8, 1993 and continued until at least July 13, 1995. The payments for wage loss replacement were at the rate of about $918 per week.
[7] On October 21, 1993, the Board wrote Sutor as follows:
Some time ago you signed an Election to Claim form so you could claim workers' compensation benefits.
On June 22, 1990, the Province of Ontario passed a law known as No-Fault Automobile Insurance. This law took away the right of the Workers' Compensation Board to bring an action on your behalf if you were injured in an accident involving a motor vehicle after October 23, 1989.
Even though the Board cannot bring an action on your behalf, you may be able to. You may wish to speak to a lawyer to determine if you can bring an action and claim your damages and losses from the responsible party. If you want to bring your own action you must do the following:
Complete and return the Withdrawal of Election form which is enclosed. A self-addressed envelope is also enclosed.
Agree to repay the Board all benefits paid to you as well as medical care paid on your behalf and administrative expenses.
We strongly suggest you consult a lawyer. Under Ontario law you generally have two (2) years from the date of the accident to bring an action. However, there are situations in which the limitation period is shorter. You must start your law suit within the period allowed or your claim cannot be brought. Your lawyer will be able to tell you which limitation period applies and what action you should take.
It is important to note that the Board does not pay for independent legal advice; this is your responsibility.
Please advise the writer what action you wish to take.
[8] On receipt of this letter Sutor sought legal advice. The record before this court does not indicate what response, if any, she made to this letter from the Board. Payments to Sutor and on [page261] her behalf continued. An award for impairment, i.e. permanent partial disability, was made in July 1995 in the amount of $4,260.05 including interest.
[9] On August 25, 1995, on the advice of her solicitor, Sutor withdrew her claim for compensation. The Board form she signed at that time reads as follows:
Withdrawal of Claim for Workers' Compensation Benefits
I, Lynn Sutor, hereby withdraw my claim for Workers' Compensation Benefits so that I may commence a lawsuit for the injuries I sustained in my accident.
I have read the foregoing and understand its contents and agree to reimburse the Workers' Compensation Board the full value of the Compensation Benefits received by me or paid for by the Board on my behalf.
I further understand and agree to obtain the prior approval of the Board of any settlement of my action in order to preserve my right to further compensation benefits under Section 8(2) of the Workers' Compensation Act.
Sutor's signature was witnessed by her solicitor.
[10] The form refers to s. 8(2) of the Workers' Compensation Act, R.S.O. 1980, c. 539. In 1990 it became s. 10(2), and in 1997 it became s. 30 of the Workplace Safety and Insurance Act, 1997. The relevant parts, as of the date of the accident, are in s. 10 of the WCA, 1990:
10(1) Where an accident arising out of and in the course of a worker's employment happens to the worker under such circumstances as entitle the worker or his or her dependants to an action against some person other than the employer, . . . the worker or his or her dependants, if entitled to benefits under this Part, may claim such benefits or may bring such action.
(2) If less is recovered and collected by a judgment in the action or by settlement than the amount of benefits to which the worker or his or her dependants are entitled under this Part, the difference between the amount recovered and collected and the amount of such benefits is payable to the worker or his or her dependants.
(3) Subsection (2) applies to a settlement only if the approval of the Board to such settlement has been given before the settlement is made.
(4) If the worker or his or her dependants elect to claim benefits under this Act, . . . the Board, . . . [is] subrogated to all rights of the worker or his or her dependants in respect of the injury to the worker and may maintain an action in the name of the worker, . . . against the person against whom the action lies and any amount recovered over and above all amounts expended by the Board . . . shall be paid to the worker or his or her dependants and any such surplus paid to the worker or his or her dependants shall be deducted from the amount of any future compensation or other benefits to which the worker or his or her dependants may become entitled in respect of the accident that gave rise to the injury.
. . . . . [page262]
(6) The election shall be made and notice of it shall be given within the time and in the manner provided by section 9.
(Emphasis added)
[11] On August 31, 1995, as instructed by Sutor, her solicitors commenced an action against Thurlow, to recover damages for the injuries suffered in the motor vehicle accident of September 3, 1993.
[12] On September 25, 1995, the Board advised Sutor's solicitors that the benefits paid and the costs incurred on her behalf totalled $53,203.99. This represented $42,983.32 in benefits, $5,383.94 in medical costs, and $4,836.73 in administrative expenses. The Board also forwarded two forms to Sutor, for her signature. One of the forms, entitled "Assignment", acknowledged the amount of her total debt to the Board and assigned her right to that amount from any judgment or settlement with the third party (Thurlow) to the Board. The form also acknowledged that Sutor had received legal advice with respect to the terms of the assignment. The second form, entitled "Authorization and Direction", directed her solicitors to pay the Board $53,203.99 from the proceeds of any settlement or judgment.
[13] In its covering letter, the Board advised Sutor's solicitors that, in order to preserve Sutor's rights to further compensation benefits, they should get Board approval before any settlement. This was required by s. 10(3) of the WCA, 1990.
[14] Sutor signed the two forms (the "Assignment" and the "Authorization and Direction") on October 12, 1995. Her solicitors returned the forms to the Board on November 25, 1995, with a covering letter which concludes as follows:
We will of course contact your office for the Board's approval prior to any settlement of Ms. Sutor's claim.
[15] The Board inquired of Sutor's solicitors about the status of her action in September 1996, November 1996 and January 1997 and was advised in April 1997 that discoveries had been completed. On July 7, 1997, the Board again wrote to Sutor's solicitors inquiring about the status of her private claim against Thurlow. This went unanswered. Additional letters requesting the courtesy of a reply were sent on November 17, 1997, March 5, 1998 and June 1, 1998. The June 1, 1998 letter referred to the Law Society of Upper Canada in order to prompt a reply.
[16] On June 16, 1998, Sutor's solicitors finally responded by letter. They indicated that the action had been listed for trial and that they were waiting for pre-trial and trial dates. They suggested that the delay was caused by the defendant Thurlow taking the position that the accident had merely aggravated Sutor's [page263] pre-accident work-related injuries. The letter also contained the following:
I am also reviewing the applicable provisions under OMPP [Ontario Motorist Protection Plan] with respect to the Board's right of subrogation. Specifically, subsection (5) of section 267 [Insurance Act] takes away the right of the Board to recovery.
[17] Following another period of non-communication, the Board discovered that settlement funds had been received by Sutor's solicitors. The Board then brought an action against Sutor and her solicitors on November 30, 1999. This produced a letter from Sutor's solicitors stating, amongst other things the following:
We have not settled the Claim of our client, (Lynda Sutor) for damages arising out of a motor vehicle accident in which she was involved;
We have received a settlement offer in the range of $94,000.00 and the Defendant has forwarded settlement funds but same are held in trust. Neither we, nor our client is entitled to these monies because she has not provided us with instructions to accept the offer;
The outstanding issue of the entitlement of WSIB to repayment either by statute or contractually remains unresolved. We are of the opinion that section 267(5) of the Insurance Act would prevent WSIB from recovering this money. Your organization is of the opinion that notwithstanding section 267(5) there is an obligation to repay;
We have not and will not disburse these monies until we are able to obtain settlement instructions and unless there is an agreement with the organization or the matter has been settled by way of court application.
Further, we confirm your agreement to waive the filing of the Defence at this time in order that we can discuss this matter further. It is our intention, however, if this matter cannot be settled through discussions, to bring an Application for the purpose of interpreting section 267(5) and any contractual obligation which you allege requires our client to repay monies to WSIB.
[18] The reference to "contractual obligation" is to the fact that, in its action against Sutor and her solicitors, the Board alleged an agreement between the Board and Sutor whereby she contracted to reimburse the Board.
[19] In the result, the Board's action was not prosecuted. The present proceeding was brought on September 18, 2000 by way of application under rule 14.05 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. The questions asked are:
(i) Did the Respondent, The Workplace Safety and Insurance Board have the right to compel the Applicant to execute the Authorization, Direction and Assignment which was in fact executed on October 12, 1995 as a pre-condition of the Applicant's right to commence a civil action for damages arising out of the motor vehicle accident which took place on September 3, 1993?; [page264]
(ii) If the answer to question (i) is in the affirmative:
a. Does s. 267(5) of the Insurance Act preclude the Workplace Safety and Insurance Board from making a subrogated claim to a right of recovery of the Applicant against the Respondent, Jeffery Thurlow, in respect of a payment of benefit paid by the Workplace Safety and Insurance Board to the Applicant or in respect of a liability to make such payment or benefit?;
b. If so, does the insistence by the Workplace Safety and Insurance Board that the Applicant execute an Authorization and a Direction and Assignment as referred to herein in order to commence a civil action, amount to economic duress?
(iii) If the answer to questions (ii) a. & b. are answered in the negative, does the Respondent, The Workplace Safety and Insurance Board have the right to control or direct the litigation as between the Applicant, Lynda Sutor and the Respondent, Jeffery Thurlow?
LAW
[20] These questions involve the relationship between s. 10 of the WCA, 1990 and s. 267 of the Insurance Act, R.S.O. 1990 c. I.8. Section 10(4) of the WCA, 1990 conferred upon the Board a clear and unambiguous right of subrogation. On the facts of the accident involving Sutor and Thurlow, if the Board paid compensation benefits to Sutor, the Board could have sued Thurlow in Sutor's name to assert her cause of action against him and in so doing recover, or attempt to recover, the funds paid by the Board to Sutor or on her behalf.
[21] In 1990, as part of the Ontario Motorist Protection Plan (O.M.P.P.), the Insurance Law Amendment Act, 1990, S.O. 1990, c. 2, s. 57, amended what became s. 267 of the Insurance Act. Section 267 currently reads as follows:
267(1) The damages awarded to a person in a proceeding for loss or damage arising directly or indirectly from the use or operation of an automobile shall be reduced by,
(a) all payments that the person has received or that were or are available for no-fault benefits and by the present value of any no-fault benefits to which he or she is entitled;
(b) all payments that the person has received under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law and by the present value of such payments to which he or she is entitled;
(c) all payments that the person has received or that were or are available for loss of income under the laws of any jurisdiction or under an income continuation benefit plan and by the present value of any such payments to which he or she is entitled; and
(d) all payments that the person has received under a sick leave plan arising by reason of the person's occupation or employment. [page265]
(2) Payments or benefits received or that were, are or may become available to a person under the Workplace Safety and Insurance Act, 1997, shall not be applied under subsection (1) to reduce the damages awarded.
(3) A reduction made under subsection (1) does not apply for the purpose of determining a person's entitlement to compensation under subsection 30(14) of the Workplace Safety and Insurance Act, 1997.
(4) A person who has made a payment or who has a liability to pay a benefit described in clause (1)(a), (b), (c) or (d) is not subrogated to a right of recovery of the insured against another person in respect of that payment or benefit.
(5) The Workplace Safety and Insurance Board is not subrogated to a right of recovery of the insured against another person in respect of a payment or benefit paid by the Workplace Safety and Insurance Board to the insured or in respect of a liability to make such payment or benefit.
(6) This section applies to damages awarded for loss or damage arising directly or indirectly from the use or operation, after the 23rd day of October, 1989 and before January 1, 1994, of an automobile.
(Emphasis added)
[22] Section 267, as amended, was intended to reduce the cost of motor vehicle insurance by reducing double recovery of collateral benefits by persons injured in motor vehicle accidents. Workers' compensation benefits, however, were not treated as collateral benefits. Instead, the Board's right of subrogation was taken away by s. 267(5).
[23] This regime was enacted in 1990 and made retroactive to October 23, 1989. Sutor's accident occurred after that date and, as a consequence, when the Board paid compensation benefits to her it could not turn around and recover those payments by suing Thurlow in Sutor's name.
[24] There is nothing before the court to indicate that, when the amendments to s. 267 of the Insurance Act were passed, any attempt was made to reconcile this situation with s. 10(4) of the WCA, 1990.
[25] In Cohen v. Smith (1993), 1993 ONSC 8654, 14 O.R. (3d) 85 (Gen. Div.), Borins J. reconciled the conflict between s. 267(5) of the Insurance Act and s. 10(4) of the WCA, 1990 as follows, at pp. 89-90 O.R.:
In my view, it can be resolved by the application of the maxim generalibus specialia derogant -- general words in legislation are intended to give way to the particular.
In other words, the provisions of the special statute, the Insurance Act, provide an exception to the general statute, the WCA, 1990.
[26] An appeal from Borins J. to the Divisional Court was dismissed (1995), 1995 ONSC 10635, 25 O.R. (3d) 264, 127 D.L.R. (4th) 511 (Div. Ct.). Van Camp J., speaking for the court, adopted the reasoning of Borins J., and in the course of doing so she said, at p. 269 O.R.: [page266]
The purpose of the [Insurance] Act was to remove the double recovery when collateral benefits were received and to remove the right of subrogation for the person paying the benefits.
There is no double recovery under the Workers' Compensation Act. If the worker elects to claim benefits under the Act, all his rights in respect of the injury are subrogated. If he elects to sue in tort he receives no benefits under the Act. Counsel agreed that at times when the Board has chosen not to sue, the Board has permitted a worker to re-elect on terms that benefits he has received be repaid. In that case s. 267(2) removes the prejudice to him in his action by reason of benefits having been received or becoming available under the Workers' Compensation Act.
(Emphasis added)
Leave to appeal from the Divisional Court was refused: 60 A.C.W.S. (3d) 833 (C.A.).
[27] In Lozo v. Parish (1996), 1996 ONCJ 22093, 36 C.C.L.I. (2d) 61, [1996] O.J. No. 1371 (Quicklaw) (Gen. Div.), Parish, on February 15, 1990, was driving a tractor trailer and struck and injured Lozo, an employee of the Ministry of Transportation, who was operating a snowplow. The Ministry is a Schedule 2 employer. Schedule 2 employers pay the wage and medical expenses of their employees and in turn are subrogated to the rights of those employees to sue third parties. Lozo elected to take workers' compensation benefits when advised that if he did so, the Ministry, in his name, would sue Parish.
[28] A year later the Ministry wrote to say that the law had been changed and it could no longer sue. Lozo's lawyer then proposed that Lozo repay the Ministry all benefits received. The Board accepted this proposal and Lozo agreed to pay back $93,899.56 in benefits.
[29] Lozo then sued Parish for damages. Parish applied to the Workers' Compensation Appeal Tribunal ("WCAT") seeking a declaration that Lozo's change of election was invalid because it violated the provisions of the amended Insurance Act, among other arguments. On March 24, 1995, the WCAT denied the application brought by the defendant. The reasons of the WCAT are taken from [1995] O.W.C.A.T.D. No. 588; 35 W.C.A.T.R. 195; Decision No. 145 and read in part as follows:
(1) that W.C.A.T. did not have jurisdiction to enforce the provisions of the Insurance Act so as to limit the right of action of the plaintiff;
(2) that the re-election by the plaintiff to pursue a lawsuit rather than to continue to claim benefits was not one that he was precluded from entering into pursuant to s. 18 of the Workers' Compensation Act [s. 18 prohibits a worker from contracting out of or waiving any benefits under the WCA, 1990];
(3) that there were no grounds for setting aside the re- election; [page267]
(4) that the right of action was not barred or limited by the provisions of Part 1 of the Workers' Compensation Act; . . .
[30] Parish then moved before the Ontario Court of Justice (General Division) for rulings as follows:
Is the claim for past loss of income and benefits prohibited by ss. 267(4) and (5) of the Insurance Act and, if so, is the plaintiff's claim limited to claims for damages in excess of what has been paid by the Schedule 2 employer, the Ministry of Transportation?
Is the claim for past loss of income and benefits advanced by the plaintiff pursuant to his agreement with the Ministry a form of subrogation?
Should this Court frustrate the decision of the Workers' Compensation Appeal Tribunal?
[31] McKinnon J. ruled against Parish on the first question stating, at p. 69 C.C.L.I., that:
In my view, the clear wording of Section 267(2) and the observations of Van Camp, J. [in Cohen v. Smith] clearly contemplate the present situation. Section 267(2) specifically provides in mandatory language that payments or benefits received shall not be applied to reduce the damages awarded, which is exactly what the defendant seeks to do in the present motion.
[32] McKinnon J. dealt with the subrogation argument at p. 69 C.C.L.I.:
The defendant argues that the agreement entered into by the plaintiff and the Ministry amounts to a form of subrogation. Black's Law Dictionary defines subrogation as the "substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies or securities." Further, it is "the right of one who has paid an obligation which another should have paid to be indemnified by the other." (6th edition, West Publishing Co., St. Paul, Minnesota, 1990)
Fundamental to the notion of subrogation is the right to receive the benefit of all rights and remedies of the insured as against third parties, which, if satisfied, will extinguish or diminish the ultimate loss sustained: See Castellain v. Preston (1883), 11 Q.B.D. 380.
At p. 70 C.C.L.I., he wrote:
In my view, the agreement between the Ministry and the plaintiff does not amount to subrogation. A mere agreement to re-pay benefits paid in circumstances where the plaintiff individually is suing a third party for damages greatly in excess of amounts which have been paid cannot be regarded as subrogation. The Schedule 2 employer is not standing in the shoes of the plaintiff by virtue of the agreement. The plaintiff brings this action in his own right, and is seeking damages beyond the scope of the agreement. In the present case, there exists a private agreement, specifically contemplated by the provisions of Section 267(2) of the Insurance Act. Even if it could be [page268] categorized as a form of subrogation, then I find that it is a form of subrogation specifically permitted by Section 267(2) of the Act.
The doctrine of subrogation is a creature of equity, not contract: See National Fire Insurance Co. v. McLaren (1886), 12 O.R. 682 (H.C.). Mr. Mair [counsel for Parish] argued that a failure to reduce damages by the amounts already paid would be contrary to the spirit of the Osborne Report and to the spirit of the decision in Ratych v. Bloomer, 1990 SCC 97, [1990] 1 S.C.R. 940. I do not accept this argument. We are not dealing here with double recovery, which was the main source of concern addressed by Osborne, J. and by Madam Justice McLachlin in Ratych v. Bloomer. We are dealing with an agreement to re-pay monies already paid by the Ministry of Transportation upon the assumption that the tortfeasor shall have to pay the plaintiff. I see no objection to this result. Indeed, I view the result to be equitable in all the circumstances. Implicitly, the Divisional Court in Cohen v. Smith came to the same conclusion.
The Decision Below
[33] The application judge began his reasons as follows:
This is an application for the opinion, advice and direction of the Court regarding a difference of opinion between the applicant and the Workplace Safety and Insurance Board (WSIB) over the claim to entitlement by the WSIB to part of the proceeds of a motor vehicle settlement in favour of the applicant.
In my view, that statement mischaracterizes the issue. The issue is between the Board and Sutor and whether Sutor will repay the benefits paid to her by the Board. There is no issue as between the Board and Thurlow.
[34] After dealing with Cohen v. Smith, the application judge ruled as follows:
What does all of this have to do with a private agreement between the WSIB and Ms. Sutor? I am aware of the decision of the Workers' Compensation Appeal Tribunal, [in Lozo v. Parish] referred to with approval in: Lozo v. Parish 1996 ONCJ 22093, [1996] O.J. No. 1371. In that case, the WCB had permitted a re- election, with a similar agreement to reimburse the WCB for benefits paid. However, the attack in that case was brought by the defendant in the lawsuit, rather than the WCB claimant, and was directed against the re-election, rather than against the assignment and direction. Therefore the Tribunal and the Court did not receive, and did not have to consider the issues brought before this Court. Here, the re- election is not in issue. What is squarely before the Court is the authority of the WCB to take the assignment and direction, despite the changes, supra, in the legislation.
In my view, the principle in question in this part of the discussion was put most succinctly and forcefully by Duff C.J. in Lower Mainland Dairy Products Board v. Turner's Dairy Ltd., 1941 SCC 33, [1941] S.C.R. 573 at 577, where he said:
Such an administrative body as the Board in exercising its statutory powers -- powers affecting the rights and interests of private individuals -- is under an obligation not only to observe the limits of its powers and to act conformably to the procedures laid down; it is under a strict duty to use its powers in good faith for the purposes for which they are given. [page269]
See also Communities Economic Development Fund v. Maxwell et al., 1991 SCC 48, [1991] 3 S.C.R. 388, and the cases therein cited.
Here, the WCB officials knew, or certainly ought to have known, that by s. 267(5) of the Insurance Act, the WCB had lost its previous right to claim against third parties for benefits paid out re automobile accidents, as part of the wide-ranging changes brought in by the O.M.P.P. re motor vehicle accident claims. The legislation had put recovery of the benefits paid out to her beyond the reach of the WCB, as a part of the broad policy of the Ontario Government, that had created the WCB. Yet despite the specific legislation, and the policy behind it, the WCB officials used forms that, while still acceptable regarding other types of accidents, no longer were appropriate when, as here, the application to withdraw the claim for WCB benefits was so that a lawsuit for damages arising from a motor vehicle accident could be pursued. Built right in to the withdrawal form was an agreement to reimburse the WCB, which the other documents simply enlarged upon. Attached to the withdrawal form were excerpts from the Workers Compensation Act, without any mention of s. 267(5) of the Insurance Act. The whole impression created was that the WCB was entitled, as of right, to be reimbursed.
In my view, s. 267(5) of the Insurance Act precluded the WCB from obtaining reimbursement directly from a third party. It cannot, on the basis of the doctrine enunciated by Duff C.J., supra, do indirectly what it could not do directly. Once the WCB was barred from suing a third party who had injured its insured, the obligation of good faith, and to act conformably to its powers, which had now been limited, prevents the WCB from suing its own insured. The various documents obtained from Ms. Sutor cannot be relied upon by the WCB to authorize the lawsuit, because the WCB lacked the power and authority to even obtain them, much less compel their execution.
(Emphasis added)
[35] The application judge saw the Board in this case as doing indirectly what it was prohibited from doing directly. I do not agree. The statement that the "legislation had put recovery of the benefits paid to her beyond the reach of the WCB" is incomplete and, as such, erroneous. What was put beyond the reach of the Board was recovery from the third party, Thurlow. Always within the reach of the Board, in the event of a re-election, was reimbursement directly from the worker. This was not altered by the change in the legislation. Subrogation or the taking away of a right to subrogate have nothing to do with what happened here.
[36] I agree with McKinnon J.'s comments in Lozo as to the nature of subrogation and his statement that "the agreement between the Ministry and the plaintiff does not amount to subrogation". The arrangement in issue is between Sutor and the Board. It is designed to put Sutor back into a position where she can re-elect and, instead of receiving the benefits provided for her by the WCA, 1990 through the Board, she will be able to prosecute an action against Thurlow as she sees fit. The Board is not purporting to do indirectly what it is prohibited from doing directly. Rather, it is permitting Sutor to take steps [page270] backward in order that she may then move forward on her own against Thurlow.
[37] I do not understand the findings of the application judge that:
. . . the WCB officials used forms that, while still acceptable re other types of accidents, no longer were appropriate . . .
and
Attached to the withdrawal form were excerpts from the Workers' Compensation Act, without any mention of s. 267(5) of the Insurance Act.
[38] The first document that Sutor saw respecting her rights was the election form referred to in para. 5 of these reasons. This clearly and accurately set out her rights, including the fact that the Board could not sue Thurlow. Before she signed the election, she read the form and obtained legal advice. The second document that she saw respecting her rights was the letter of October 21, 1993 from the Board, the contents of which are set out in para. 7 of these reasons. Again, the document was entirely accurate and, again, she obtained legal advice as suggested in the Board's letter. As such, Sutor could not possibly have been in any doubt as to her rights or the Board's rights.
[39] The only form from the Board which might have been capable of misleading Sutor was the back of the form entitled "Withdrawal Claim for Workers' Compensation Benefits". On the back of that form is the text of s. 8 of the Act, now s. 10 as set out in para. 10 of these reasons. Section 8(4) (s. 10(4) at the relevant time and s. 30(10) today) indicates that the Board, on paying benefits to Sutor, would be subrogated to her right to sue Thurlow. Sutor, of course, had already been advised by the election form, by the Board's letter of October 21, 1993 and doubtless by her own solicitor, that the law had been changed with respect to motor vehicle accidents and that the Board could no longer sue Thurlow.
[40] Sutor did not sign the withdrawal form until August 1995. There is no evidence that she read the back of the form, then or ever, and there is no suggestion in her affidavit, sworn September 14, 2000, that she misunderstood or was misled respecting either her rights or the Board's. Accordingly, I see no evidentiary basis for the findings of the application judge respecting the actions of the Board.
[41] The Board did precisely what was contemplated by s. 10. It advised Sutor that she could sue Thurlow or she could take the benefits offered by the Board exercising the powers and duties given to it by the WCA, 1990. Implicit in the legislative scheme and its administration by the Board is the proposition that she [page271] could not do both. As stated by Van Camp J. in Cohen v. Smith, supra, at p. 269 O.R.:
There is no double recovery under the Workers' Compensation Act. If the worker elects to claim benefits under the Act, all his rights are subrogated. If he elects to sue in tort he receives no benefits under the Act. Counsel agreed that at times when the Board has chosen not to sue, the Board has permitted a worker to re-elect on terms that benefits he has received be repaid.
[42] Likewise in Lozo v. Parish, McKinnon J. dealt with an identical situation saying:
We are not dealing here with double recovery, which was the main source of concern addressed by Osborne, J. and by Madam Justice McLachlin in Bloomer v. Ratych. We are dealing with an agreement to re-pay monies already paid by the Ministry of Transportation upon the assumption that the tortfeasor shall have to pay the plaintiff. I see no objection to this result. Indeed, I view the result to be equitable in all the circumstances. Implicitly, the Divisional Court in Cohen v. Smith came to the same conclusion.
I agree completely with these analyses. If a worker elects to sue in tort he is not entitled to receive benefits under the Act. Accordingly, if a worker, having first elected to take compensation benefits, changes his/her mind, before s/he can sue the tortfeasor, the worker should first put himself or herself back in the condition of having received no benefits from the Board.
[43] It has been a fundamental principle of workers' compensation in Ontario since January 1, 1915 that a worker covered by the legislation who is injured in circumstances giving rise to a cause of action has a choice. The worker can claim the benefits provided by the legislation or s/he can sue. The language of S.O. 1914, c. 25, s. 9(1), "may claim such benefits or may bring such action" is carried forward in s. 10(1) of WCA, 1990. There is no suggestion that an injured worker may do both. Such a suggestion would be entirely at odds with the principle of choice expressed in s. 10(1).
[44] As to re-election, the situation is accurately stated by Ison, Terence G., LL.D. in Workers' Compensation in Canada, 2nd ed. (Toronto: Butterworths, 1989) at p. 172, s. 8.1.21:
Revocation of Election
In jurisdictions in which a worker must elect between compensation benefits or a civil action, the Acts do not provide for the revocation of such an election by a worker, but in practice, revocation is often allowed.
Conversely, if a worker has claimed compensation benefits and then wishes to pursue a civil action without participation by the Board, he might be allowed to revoke the election by repaying the compensation or by making some provision for its repayment. [page272]
[45] I am not persuaded that by cancelling the right of subrogation in the case of persons at work injured in motor vehicle accidents, the legislature intended to vary this fundamental principle of workers' compensation benefits in Ontario or to provide a means to secure double recovery in a substantial number of work related claims. Had that been the intention of the government in 1990, surely it would have so advised the legislature when the amendments to s. 267 were introduced. The impact upon the administration of the workers' compensation scheme would have been very substantial.
[46] According to this court in Meyer v. Bright (1993), 1993 ONCA 3389, 15 O.R. (3d) 129, 48 M.V.R. (2d) 1 (C.A.) at p. 134 O.R.:
The legislation [the amendments to s. 267] appears designed to control the costs of automobile insurance premiums to the consumer by eliminating some tort claims.
If "control" in this context means "hold down" or "reduce", then the result as determined by the application judge would have been counter-productive. What that result leads to is double recovery.
[47] Nor am I persuaded that the legislature, by enacting s. 267 of the Insurance Act, intended to divide injured workers into two classes, namely, those workers injured in motor vehicle cases who can re-elect without being required to reimburse and those injured in non-motor vehicle cases who can only re-elect on promising to reimburse the Board. No rationale for such a distinction has been suggested.
[48] It may be argued that double recovery has been avoided in this case and can be avoided in others by clarification of the precise matters being compensated. For instance, it is suggested that the Board compensated Sutor for her loss of earnings and that there is nothing designated in the $94,000 in her solicitor's trust account that fits that head of damage and that accordingly there is no overlap or double recovery. That argument ignores the fact that workers' compensation benefits do not relate solely to loss of earnings. In any event, that is not what the legislation provides. If the worker elects to take compensation, s. 10(4) of the WCA, 1990 (now s. 30(10) of the Workplace Safety and Insurance Act, 1997) provides that the Board (or the employer in the case of Schedule 2 employers) is subrogated to all the rights of the worker in respect of the injury and the Board may sue and prosecute an action in the name of the worker. The action is in the name of the worker but the Board controls and directs the litigation. The Board is dominus litis. Even if an action is brought by the worker in his own name, judgment should go payable to the [page273] Board: Toronto Railway Co. v. Hutton (1919), 1919 SCC 534, 59 S.C.R. 413, 50 D.L.R. 785; MacIntosh v. Gzowski (1979), 1979 ONCA 2119, 27 O.R. (2d) 151, 105 D.L.R. (3d) 721 (C.A.). The underlying principles of the workers' compensation scheme were not changed by the amendments to the Insurance Act.
[49] Nor, in my view, is this a case of the Board doing indirectly what it cannot do directly. It is rather a case of the Board properly exercising the duties and responsibilities placed upon it by its governing legislation. That legislation gave Sutor, in the circumstances, a choice of suing Thurlow or taking compensation. She chose the latter, with legal advice. She enjoyed the benefits of that choice for several years. Those benefits included payments to her of about $918 per week on account of earnings, as well as rehabilitation services, aptitude testing and medical expenses. A total of $53,203.99 was spent on her behalf, including a lump sum payment for a permanent partial disability.
[50] After several years, and again with legal advice, Sutor decided to reverse her position and to sue Thurlow. To allow her to do so, the Board required her to undertake to reimburse the Board. This was not a requirement unique to Sutor. In Lozo, with the advice of his employer, Lozo volunteered to reimburse the Board. Reimbursement on its face does not strike one as radical or unfair in the circumstances. From the worker's perspective it seems only fair and appropriate. The WCA, 1990 renders it so because if the worker sues and recovers less than the benefits to which the worker would have been entitled under the WCA, 1990, then the Board is bound by s. 10(2) to make up the difference. Likewise, the requirement by the Board for reimbursement by a re-electing worker strikes one as proper and careful administration of funds paid by employers under compulsion of law.
[51] If the application judge's view of the law is correct, it would follow that the Board would be strongly disinclined to accept re-election. The more the Board had paid out, the more disinclined it would be. There are circumstances where re- election is or can be beneficial to an injured worker. Lozo is but one example and the Supreme Court of Canada has recognized the right of the Board (or in the case of a Schedule 2 employer, the right of the employer) to permit re-election: Toronto Railway Co. v. Hutton, supra, per Duff J. at p. 421 S.C.R. These circumstances assist me in arriving at the conclusion that the application judge erred.
[52] The application judge went on to discuss common law subrogation in order to deal with the position taken by the Board in [page274] its action against Sutor and her solicitors that she had entered into a contract with the Board to reimburse it. The application judge dismissed this claim upon the basis that, at common law, no right of subrogation arises until the injured party's loss has been fully satisfied and here, on the evidence, there was nothing in her recovery for loss of earnings. As a consequence, there would at common law be no right to subrogate. As stated above, this in my opinion is not a matter of subrogation and accordingly, the strictures of common law subrogation have no application.
Jurisdiction
[53] It was argued before the application judge that the Board lacked the authority to require Sutor to pay back the benefits paid to her or on her behalf as a condition of allowing her to re-elect and pursue her private claim. It was argued that as there was no express statutory authority to enter into such an arrangement it was ultra vires. Reliance was placed on London (City) v. Gibbons (1989), 1989 ONSC 4385, 69 O.R. (2d) 389 (Dist. Ct.). The application judge found, however, that the Board had the capacity and powers of a natural person and as such was able to enter into the reimbursement arrangement. I agree with this conclusion, failing which the Board would be severely handicapped in circumstances in which it might wish to permit a claimant to re-elect and bring his or her own action. The jurisdiction argument was not pursued in this court and need not be considered further.
DISPOSITION
[54] Accordingly, I would allow the appeal and set aside the order below. In its place I would make an order that question (i),
Did the Respondent, The Workplace Safety and Insurance Board, have the right to compel the Applicant to execute the Authorization, Direction and Assignment which was in fact executed on October 12, 1995 as a pre-condition of the Applicant's right to commence a civil action for damages arising out of the motor vehicle accident which took place on September 3, 1993?;
be answered in the affirmative, and question (ii) a.,
Does s. 267(5) of the Insurance Act preclude the Workplace Safety and Insurance Board from making a subrogated claim to a right of recovery of the Applicant against the Respondent, Jeffrey Thurlow, in respect of a payment of benefit paid by the Workplace Safety and Insurance Board to the Applicant or in respect of a liability to make such payment or benefit?;
be answered in the affirmative, and question (ii) b.,
If so, does the insistence by the Workplace Safety and Insurance Board that the Applicant execute an Authorization and a Direction and Assignment [page275] as referred to herein in order to commence a civil action, amount to economic duress?
be answered in the negative, and question (iii),
If the answer to questions (ii) a. & b. are answered in the negative, does the Respondent, the Workplace Safety and Insurance Board, have the right to control or direct the litigation as between the Applicant, Lynda Sutor and the Respondent, Jeffrey Thurlow?
be answered in the negative.
Costs
[55] The application judge's view was that the legislation plainly disentitled the Board and, as a result, Sutor was entitled to her costs on a "full indemnity scale". He fixed them at $11,635 for fees and GST of $814.45 plus disbursements of $890.41 for a total of $13,339.86.
[56] As to Thurlow, the application judge disagreed with the argument of the Board that Thurlow should not receive costs because he was not directly affected and should not have taken part. The application judge held that the position of the Board in the action which it started was to attack the settlement worked out between Thurlow and Sutor and, in any event, Thurlow took full part in the argument before the application judge and was of assistance to the court. Thurlow was therefore awarded partial indemnity costs of $5,073 for fees and GST of $355.11 for a total of $5,428.11.
[57] Counsel for the Board claims costs on a partial indemnity basis as follows:
Fees: $15,613.00
Disbursements & GST: $3,322.65
Total: $18,935.65
Counsel for Sutor claims:
Fees: $12,867.00
Disbursements & GST: $3,089.27
Total: $15,956.27
Whether this claim is on a substantial or partial indemnity basis is not clear.
Thurlow seeks $7,359 for fees and $584.18 for disbursements on a partial indemnity basis. He does not mention GST.
[58] Having succeeded, the Board is entitled to its costs here and below against Sutor on a partial indemnity basis. I would fix them at $10,000 here and $7,500 below. Thurlow appears to [page276] have been drawn into this proceeding by reason of mischaracterization. He is entitled to his costs against Sutor on a partial indemnity basis. I would fix them at $5,428.11 below and $7,000 here.
Appeal allowed.