Castrillo v. Workplace Safety and Insurance Board

Ontario Reports

Court of Appeal for Ontario

Hoy A.C.J.O., Lauwers and Benotto JJ.A.

February 13, 2017

136 O.R. (3d) 654 | 2017 ONCA 121

Case Summary

Workers' compensation — Actions — Plaintiff bringing proposed class action on behalf of injured workers who were denied full non-economic loss benefits under Workplace Safety and Insurance Act on basis of asymptomatic pre-existing conditions — Plaintiff alleging that denials were pursuant to internal policy which was illegally adopted in order to save money — Action pleaded in misfeasance in public office, bad faith and negligence — Motion judge erring in striking statement of claim as disclosing no cause of action — Bad faith not constituting free-standing cause of action but folding into misfeasance in public office claim — Misfeasance in public office claim and negligence claim properly pleaded — Privative clause in Act not plainly and obviously preventing plaintiff from pursuing claims — Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16.

Factual Background

The plaintiff brought a proposed class action on behalf of injured workers who were denied full non-economic loss benefits on the basis of pre-existing conditions which were asymptomatic. The reductions were the result of the implementation of an internal Workplace Safety and Insurance Board ("WSIB") document in which the WSIB adopted a broader interpretation of the term "pre-existing impairment" to include asymptomatic pre-existing conditions, which had previously been excluded. The plaintiff asserted that the change in interpretation was illegally made in order to save the WSIB money. The action was pleaded in misfeasance in public office, bad faith and negligence. The motion judge struck the statement of claim under rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as disclosing no cause of action. He found that the WSIB's decisions reducing the class members' non-economic loss benefits were legal decisions that fell within the four corners of the privative clause in the Workplace Safety and Insurance Act, 1997, and that were therefore beyond court challenge. The plaintiff appealed.

Held, the appeal should be allowed.

Decision

A. The Factual and Procedural Context

[1] The facts giving rise to the action are set out in the motion judge's short endorsement. The appellant was working as a concrete finisher and a pipe layer when he sustained a shoulder injury in a work-related accident in October 2011. He applied for and received the applicable economic loss benefits to which he was entitled under the WSIA. He also qualified for a NEL award because he was found to have suffered a permanent impairment leaving him with "less than a full range of motion in his shoulder". The respondent determined the appellant was entitled to a 6 per cent NEL lump sum award, but then reduced the award by 50 per cent to $1,229.50 because of a "pre-existing condition", identified as osteoarthritis in the injured shoulder.

[2] The appellant appealed administratively on the basis that the WSIB was wrong to reduce the NEL award. Since his pre-existing osteoarthritis had been asymptomatic before the work-related injury and had never affected his shoulder's functionality, it was not a pre-existing impairment. The appeal resolution officer allowed the appeal and restored the full amount of the NEL award without reduction, and the matter did not go forward to the Workplace Safety and Insurance Appeals Tribunal.

[3] The appellant later learned there were a number of injured workers whose NEL awards were similarly reduced by the WSIB on the basis of so-called pre-existing conditions that were not true impairments, many of which were also reversed on appeal. The appellant discovered the reductions were the result of the implementation of an internal WSIB document, which he calls a "secret policy". Through it, the WSIB adopted a broader interpretation of the term, "pre-existing impairment", to include asymptomatic pre-existing conditions, which had previously been excluded. The appellant asserts this change in interpretation was illegally made in order to save WSIB money by reducing NEL awards.

[4] The appellant commenced proceedings under the Class Proceedings Act, 1992, S.O. 1992, c. 6. The proposed class is defined as:

(a) all workers whose non-economic loss awards for workplace injuries were reduced by the defendant due to pre-existing medical conditions that were not impairments negatively impacting upon their pre-accident functioning; and

(b) who also incurred expenses pursuing administrative appeals of the defendant's decision to reduce their NEL awards.

[5] The appellant seeks declarations that the WSIB "perpetrated a misfeasance in public office" in how it handled the NEL claims of the class, "breached its duty to act in good faith" to the class, and, in the alternative, was negligent. The action seeks damages measured in part by the "legal fees, disbursements and other expenses they incurred in administrative proceedings overturning the Defendant's decisions with respect to their claims for Non-Economic Loss awards", along with punitive, aggravated, exemplary and special damages.

[6] The respondent brought a motion under the Rules of Civil Procedure to strike the statement of claim, without leave to amend, under rule 21.01(1)(b), on the basis "that it discloses no reasonable cause of action", and, under rule 21.01(3)(a), on the basis that "the court has no jurisdiction over the subject matter of the action". The motion was not brought under rule 21.01(1)(a) "for the determination, before trial, of a question of law raised by a pleading".

[7] Based largely on what the motion judge saw as the strength of the privative clause in the WSIA, he concluded it was "plain and obvious that the bad faith, misfeasance and negligence claims on the facts of this case as pleaded are certain to fail and should be struck without leave to amend under Rule 21.01(1)". The motion judge did not mention rule 21.01(1)(b) in his reasons, but his order declares that the pleading "does not disclose any reasonable cause of action".

B. Issues

There are two basic issues in this appeal, which arise with respect to each pleaded cause of action, being misfeasance in public office, bad faith and negligence:

1. Is the cause of action properly pleaded?
2. Does the privative clause in the WSIA prevent the appellant from pursuing the cause of action?

C. Analysis

The Motion Judge's Overarching Error

The motion judge's overarching error is that he dealt with this matter more as a summary judgment motion under Rule 20 than as a motion to strike the amended statement of claim as disclosing no cause of action under rule 21.01(1)(b). He did not interpret the pleading generously, as the cases require, but instead deconstructed it for the purpose of determining whether the privative clause in the WSIA applied to oust the court's jurisdiction. This was an error in principle.

The framework for assessing whether to strike a pleading under rule 21.01(b) of the Rules of Civil Procedure on the ground that it discloses no reasonable cause of action is as follows:

• The material facts pleaded must be deemed to be proven or true, except to the extent that the alleged facts are patently ridiculous or incapable of proof;
• The claim incorporates by reference any document pleaded and the court is entitled to read and rely on the terms of such documents as if they were fully quoted in the pleadings;
• A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses; the facts pleaded are the basis upon which the claim is evaluated;
• The novelty of the cause of action is of no concern at this stage of the proceeding;
• The statement of claim must be read generously to allow for drafting deficiencies; and
• If the claim has some chance of success, it must be permitted to proceed.

The claim will only be struck where it is "plain and obvious" that it has no reasonable prospect of success. While the court must accept as true the material facts as pleaded, this obligation does not extend to bald conclusory statements of fact unsupported by material facts.

(1) Misfeasance in Public Office

(a) Is the cause of action properly pleaded?

The tort of misfeasance in public office is founded on the fundamental rule of law principle that those who hold public office and exercise public functions are subject to the law and must not abuse their powers to the detriment of the ordinary citizen. The rationale of the tort is that in a legal system based on the rule of law, executive or administrative power may be exercised only for the public good and not for ulterior and improper purposes. The underlying purpose of the tort of misfeasance in public office is to protect each citizen's reasonable expectation that a public officer will not intentionally injure a member of the public through deliberate and unlawful conduct in the exercise of public functions.

To pass scrutiny under rule 21.01(1)(b), a pleading of misfeasance in public office must allege facts capable of establishing the ingredients of the tort, in addition to the usual tort requirements of causation and damages. The ingredients are:

1. The defendant must be a public official;
2. The claim must arise from the exercise of power as a public official; and
3. The public official "must have acted with malice or bad faith" so as to satisfy the mental element.

Another way of framing the test is that the plaintiff must show, first, the public official was engaged in unlawful conduct in the exercise of his or her public functions; and, second, the public official was aware that the conduct in question was unlawful and was likely to injure the plaintiff.

(ii) The Amended Statement of Claim

As to the necessary tort elements of damages and causation, the appellant conceded in oral argument that he is not seeking more compensation in terms of an NEL award, because his appeal of the reduced NEL award had already been allowed. However, he argues that to succeed in the internal appeal, he was forced to incur unnecessary legal and other expenses he seeks to recover as damages in this action. Other class members could have claims for both a higher NEL award and similar incidental costs.

The pleading alleges that WSIB "is a public body", and its employees "were at all material times public office holders" for which it is "both directly and vicariously liable for the bad faith acts and omissions of its employees".

The starting point for a detailed discussion of the pleading is the WSIA, which defines "impairment" and "permanent impairment" in s. 2:

"impairment" means a physical or functional abnormality or loss (including disfigurement) which results from an injury and any psychological damage arising from the abnormality or loss;

"permanent impairment" means impairment that continues to exist after the worker reaches maximum medical recovery.

Section 46(1) provides for the NEL benefit:

46(1) If a worker's injury results in permanent impairment, the worker is entitled to compensation under this section for his or her non-economic loss.

Section 47(1) requires the board to "determine the degree of his or her permanent impairment", and s. 47(2) provides that the determination must be made "in accordance with the prescribed rating schedule". Section 18 of O. Reg. 175/98 under the WSIA prescribes the American Medical Association Guides to the Evaluation of Permanent Impairment (third edition revised) as it read on January 14, 1991, as the rating schedule for impairment.

The WSIB had a policy for dealing with pre-existing impairments, Operational Policy 18-05-05 (Effect of a Pre-Existing Impairment), which allowed for reductions in NEL benefits to account for pre-existing impairments. The pleading states that under that policy, WSIB was permitted to "discount NEL awards to injured workers on account of pre-existing 'impairments' that were 'measurable'. This was [previously] done by calculating the clinical impairment before the injury and performing a subtraction from the post-injury impairment."

As to the WSIB's acts or omissions, the pleading alleges that the WSIB's decision to reduce the appellant's NEL award "was the result of a 'secret policy' adopted by the [WSIB] and revealed in an internal 'Orientation' article intended for its staff". This secret policy was to "aggressively reduce legitimate NEL awards by interpreting Operational Policy 18-05-05 (Effect of a Pre-Existing Impairment) to allow for reductions due to pre-existing conditions that had no negative impact or impairment on a worker's pre-accident functioning". The secret policy changed the way in which the WSIB interpreted Operational Policy 18-05-05, by equating the technical term "impairment" with "condition". This change swept in people like the appellant, whose pre-existing condition was asymptomatic and did not interfere with or impair the functionality of his shoulder for work purposes.

The introduction of this new approach in the secret policy was done without "legal authority", and was pleaded to be "illegal as being contrary to the WSIA and its regulations". In particular, the pleading notes that:

From a medical perspective, "condition" is a non-specific term that does not necessarily denote any change in a person's health status. In contrast, an "impairment" is a term that does denote a specific change.

Moreover, the pleading asserts that the approach is inconsistent with that prescribed by the American Medical Association, Guides to the Evaluation of Permanent Impairment, 3rd ed. (American Medical Assn., 1990) ("AMA Guides").

The AMA Guides states, at s. 1.1:

As used in the Guides, "impairment" means an alteration of an individual's health status that is assessed by medical means; "disability," which is assessed by non-medical means, is an alteration of an individual's capacity to meet personal, social or occupational demands.

The AMA Guides states, at s. 2.1:

According to the principles of the Guides, the first step in assessing an impairment is a thorough medical evaluation, with particular attention to the complete clinical and nonclinical history of the medical condition(s).

The second step in assessing the impairment is analyzing the history and the clinical and laboratory findings to determine the nature and extent of the loss, loss of use of, or derangement of the affected body part, system, or function.

The third step is comparing the results of the analysis with the criteria specified in the Guides for the particular body part, system, or function.

Further, the AMA Guides states, at s. 2.2:

Impairment should not be considered "permanent" until the clinical findings determined over a period of time, usually 12 months, indicate that the medical condition is static and well stabilized.

The pleading states that the WSIB "has no authority to expand the definition of 'impairment' to discount for non-measurable pre-existing 'conditions'", because the AMA Guides "does not equate 'impairment' with 'condition'". By defining the term "disability", the AMA Guides specifically does "not intend to import the word 'condition' into 'impairment'".

The pleading adds that effectively expanding the definition of "impairment" was "illegal as being contrary to the WSIA and its regulations". It points out that WSIB implicitly admitted its lack of authority by amending its policies effective November 1, 2014 "in an attempt to give the authority it previously did not have regarding deductions for 'conditions' (WSIB Operational Policy 10-05-03)". The new policy, entitled "Determining the Degree of Permanent Impairment", is a good deal more elaborate than the "secret policy". (The appellant does not challenge the legality of the new policy. This confines the claims in this action to the period in which the "secret policy" was operating.)

In addition to alleging lack of legal authority, the pleading states WSIB's "actions were motivated by a desire to reduce costs", and "the Defendant knew it was acting illegally and that its actions would harm the Plaintiff and Class", which makes its actions, "therefore, malicious in nature".

In effect, the pleading asserts that reducing costs was an improper purpose for WSIB's change in the interpretation of its policy. In doing what it did, the pleading asserts WSIB breached its duty of good faith to the appellant and class, who "as injured workers were in a vulnerable position and dependent upon the Defendant to appropriately exercise its statutory responsibility in good faith".

(iii) The Principles Applied

The WSIB concedes it owes "a general public law duty, to the public and to workers, to act in good faith, and not maliciously or in bad faith". The WSIB does not dispute the allegations in the pleading that it is a public body and its employees are public officials; these are constituent elements of the tort, as is the allegation that the appellant has suffered damages.

With respect to the requirement of a "culpable mental state", the respondent draws on Odhavji, where the Supreme Court said: "In order for the conduct to fall within the scope of the tort, the officer must deliberately engage in conduct that he or she knows to be inconsistent with the obligations of the office."

The law, as set out in Freeman-Maloy, is that the claimant need not allege or prove actual malice in order to make out the mental element of the cause of action of misfeasance, only bad faith. Although the pleading in this case does assert that WSIB's actions were "malicious in nature", it is really focused on WSIB's bad faith. As interpreted, the assertion of bad faith arises from the allegation that WSIB made the policy change for an improper purpose and without due authority.

WSIB challenges the adequacy of the pleading on three bases. First, it asserts that the pleading "fails to plead facts necessary to support a claim for bad faith or misfeasance in public office". WSIB adds: "The appellant makes bald allegations that actions were taken in bad faith, and has not provided any facts in support." In oral argument and in the factum, WSIB asserts that it is not sufficient for the appellant "to baldly claim a law was breached".

In view of this, WSIB's baldness challenge to the pleadings falls short for two reasons. First, many of the specific facts would be in the respondent's knowledge and would become evident once the statement of defence is served, and document production and discovery takes place. As noted in Trillium Power Wind Corp.:

We are alive to the problem pointed out by the Federal Court of Appeal in St. John's Port Authority v. Adventure Tours Inc. that a bald pleading is especially problematic in cases alleging abuse in public office. It is all too easy for a plaintiff who is aggrieved by governmental conduct to assert, perhaps without any evidence at all, that "the government" acted, "knowing" it did not have the authority to do so, "intending" to harm the plaintiff. That said, we do not agree with the motion judge that the pleading is "completely bald". This pleading is detailed and as fact-specific as the appellant can be at this stage of the proceeding. The allegations link to actual events, documents and people.

To quote Moldaver J.A., in Granite Power, on the facts pleaded, including the particulars, "there exists a narrow window of opportunity for [the appellant] to make out its claim in misfeasance." The appellant cannot provide more particulars now because many of the necessary supporting facts would be within Ontario's knowledge and control, and there has been no document production or discovery.

Second, the appellant relies in part on some known facts that are rooted in the legislation, the regulations, the policies and the documents in order to found its allegations about improper purpose and bad faith.

At this stage of the proceeding, before the defendant has pleaded and before document production and discovery, the pleading is adequate. To paraphrase Trillium Power Wind Corporation, the appellant cannot provide more particulars now because many of the necessary supporting facts would be within WSIB's knowledge and control, and will be revealed as the process unfolds.

The second ground on which WSIB disputes the adequacy of the pleading relates to "improper purpose". WSIB takes the position that "the only improper purpose alleged by the Appellant is an 'attempt to cut costs'", which it states is inadequate in pleading terms.

The pleading of an improper purpose is adequate in strictly pleadings terms, since there is a line of authority supporting the proposition that a public authority cannot use its spending power in a manner inconsistent with its mandate. This is a specific application of the more general proposition that a statutory power must only be used for a proper purpose.

However, WSIB responds that s. 1 of the Act obliges the board to accomplish its purposes "in a financially responsible and accountable manner". Section 1 provides:

1 The purpose of this Act is to accomplish the following in a financially responsible and accountable manner:

1. To promote health and safety in workplaces.
2. To facilitate the return to work and recovery of workers who sustain personal injury arising out of and in the course of employment or who suffer from an occupational disease.
3. To facilitate the re-entry into the labour market of workers and spouses of deceased workers.
4. To provide compensation and other benefits to workers and to the survivors of deceased workers.

WSIB asserts that the underlined words in s. 1 of the Act provide a full answer, and permit the board to reduce the payment of benefits to injured workers in order to save money.

This argument is rejected for two reasons. First, this is not a valid argument in a pleadings motion under rule 21.01(1)(b). It is a substantive argument on a question of law that would normally be pursued on a summary judgment motion under Rule 20, if not on a motion under rule 21.01(1)(a) "for the determination, before trial, of a question of law raised by a pleading". That is not, however, the way in which WSIB pursued this motion, nor is it the basis upon which the motion judge decided it.

Second, what the legislature intended to be the reach of the expression, "in a financially responsible and accountable manner", requires a fuller exposition than would be permitted in a pleadings motion. The exercise of statutory power is subject to principles, and any decision to reduce benefits would engage possible limits that have not been laid out in the argument, and on which no more will be said. It would not be possible, on this record, to conclude that the legislature intended to permit the WSIB to arbitrarily, as is alleged, adjust a single category of statutory benefits while leaving all the others untouched.

The third ground, on which the WSIB challenges the pleading, is by characterizing the appellant's complaints as those of a disgruntled claimant who seeks to elevate his complaint beyond the reach of the privative clause by gratuitously adding in allegations of bad faith and misfeasance in public office. This, WSIB asserts, is a collateral attack on its decision regarding his entitlement.

This view of the appellant's claims is not accepted. He is not complaining about a specific decision regarding his personal entitlement, as occurred in, for example, Aird v. Ontario (Workplace Safety and Insurance Appeals Tribunal) and Pagourov v. Science Applications International Corp. Nor are his claims a collateral attack to circumvent the WSIB as an expert tribunal, as described in Garland v. Consumers' Gas Co. and R. v. Consolidated Maybrun Mines Ltd. Nor is this pleading linked to the specific circumstances of the appellant's complaint; it challenges the legality of the WSIB's actions across a category of benefits and a class of persons. This class action is categorically different, not a collateral attack on the WSIB's specific determination of the appellant's entitlement.

The appellant has adequately pleaded the cause of action of misfeasance in public office and has provided adequate particulars of the claim.

(b) Does the Privative Clause in the WSIA Prevent the Appellant from Pursuing Misfeasance in Public Office?

The respondent makes two submissions with respect to the privative clause in the WSIA. First, it asserts that "the Act ousts the jurisdiction of the court in favour of the Board in this case". (This was the original basis for WSIB's challenge of the appellant's pleading under rule 21.01(3)(a) of the Rules of Civil Procedure that "the court has no jurisdiction over the subject matter of the action".) Second, WSIB argues that the Act prevents the court from awarding the appellant incidental costs in relation to proceedings under it.

In respect of the first issue, the privative clause in the WSIA, s. 118, is strongly worded:

118(1) The Board has exclusive jurisdiction to examine, hear and decide all matters and questions arising under this Act, except where this Act provides otherwise.

(2) Without limiting the generality of subsection (1), the Board has exclusive jurisdiction to determine the following matters:

2. Whether personal injury or death has been caused by an accident.
3. Whether an accident arose out of and in the course of an employment by a Schedule 1 or Schedule 2 employer.
4. Whether loss of earnings has resulted from an injury.
5. Whether permanent impairment has resulted from an injury, and the degree of the impairment.

(3) An action or decision of the Board under this Act is final and is not open to question or review in a court.

(4) No proceeding by or before the Board shall be restrained by injunction, prohibition or other process or procedure in a court or be removed by application for judicial review or otherwise into a court.

(i) General Principles

The question of whether legislation can oust the jurisdiction of a Superior Court in a manner consistent with the constitutional principle of the rule of law was addressed by the Supreme Court in *Crévier v. Quebec (Attorney General)*. This is not an antique proposition that has been superseded by the flow of time and jurisprudence. The court reiterated it in *Dunsmuir v. New Brunswick*.

In Crévier, the Supreme Court considered a privative clause in the Professional Code of Quebec that excluded recourse to the supervisory authority of the Quebec Superior Court. Chief Justice Laskin, on behalf of the court, held:

In my opinion, where a provincial Legislature purports to insulate one of its statutory tribunals from any curial review of its adjudicative functions, the insulation encompassing jurisdiction, such provincial legislation must be struck down as unconstitutional by reason of having the effect of constituting the tribunal a s. 96 [of the Constitution Act 1867] court.

The underlying logic was expressed by Martland J. in *Woodward Estate v. British Columbia (Minister of Finance)*, to which Laskin C.J.C. referred to in Crévier:

[I]f such a tribunal has acted beyond its jurisdiction in making a decision, it is not a decision at all within the meaning of the statute which defines its powers because Parliament could not have intended to clothe such [a] tribunal with the power to expand its statutory jurisdiction by an erroneous decision as to the scope of its own powers.

Although Crévier concerned a tribunal exercising an adjudicative function, the logic applies equally to agencies that do more than adjudicate, but also make policy and regulate, like the WSIB.

(ii) The Privative Clause and the Motion Judge's Reasons

The motion judge stated his view that the WSIA "provides a complete and comprehensive code for workplace injury compensation determinations", which clearly reflects "legislative intent". He observed that the WSIB and the Appeal Tribunal are protected by "the toughest privative clause known to Ontario law", citing this court's description of s. 118 in *Rodrigues v. Ontario (Workplace Safety and Insurance Appeals Tribunal)*.

As noted above, the privative clause in the WSIA, s. 118, is strongly worded. The motion judge identified the "gist" of the appellant's claim as this: "the WSIB's interpretation of the applicable Regulation and what constitutes a 'pre-existing impairment' was wrongly decided". This he interpreted to be the true import of the "language in the statement of claim, [which] includes words such as 'illegal' 'had no legal authority' [and] 'contravened the Regulation". In the motion judge's view, "This claim falls squarely within the four corners of the privative clause and cannot be considered or reviewed by this Court." This decision is interpreted as accepting WSIB's argument that the court's jurisdiction was "ousted" by the privative clause, although the motion judge did not use that word.

Further, the motion judge interpreted the allegations of bad faith, misfeasance in public office and negligence as relating "to how the Board 'handled the claims of the plaintiff and Class for non-economic loss awards'", to be "legal decisions that fall within the four corners of the privative clause".

This too, must be read as a finding by the motion judge that the privative clause ousted the court's jurisdiction.

Based on his view of the comprehensive reach of the privative clause, the motion judge concluded, "it is therefore plain and obvious that the bad faith, misfeasance and negligence claims on the facts of this case as pleaded are certain to fail and should be struck without leave to amend under Rule 21.01(1)".

(iii) The Principles Applied

The motion judge's decision is inconsistent with his other findings; first, that "the WSIB's otherwise strong privative clause would not preclude a bad faith or misfeasance in public office claim in appropriate circumstances"; and second, that "[i]f the WSIB 'crosses the line' and abuses its power, it is not immune from claims filed in Court".

As observed at the outset, the motion judge's overarching error was in approaching this motion as though it were a summary judgment motion rather than a motion to strike the amended statement of claim as disclosing no cause of action under rule 21.01(1)(b). His determination amounts to a substantive legal decision that the appellant has no chance of success, based "on the facts of this case as pleaded", even if, as found, the claim of misfeasance in public office has been properly pleaded. With respect, this is not an available determination in a pleadings motion. It is an argument that could be made in the context of a motion for summary judgment, or perhaps in a motion under rule 21.01(1)(a), but that is not what happened here.

The cases make it clear that, as a general principle, the legislature cannot completely oust the jurisdiction of the Superior Court, including, most pertinently, an allegation of misfeasance in public office related to its use of statutory power for an improper purpose.

It is, nonetheless, possible that the specific determinations made by the WSIB in this case could ultimately be found to be a proper use of the board's authority, once the evidence is in about who did what, when and why. One would expect those facts to be revealed through the statement of defence, and through the document production and discovery process. Although the appellant has tendered a "secret policy", consisting of three pages of the board's orientation manual, the board might well be found on the evidence to have taken an even-handed and fully authorized approach to its reduction of NEL benefits. These are not matters that could or should be assessed on a pleadings motion.

WSIB's second argument is that the appellant cannot succeed in its claim for reimbursement of costs thrown away in relation to the pursuit of his appeal rights under the WSIA, because the Act forecloses an award of legal costs.

It is agreed with the board that s. 133 of the Act permits the WSIB to pay "reasonable travel and living expenses of, and other allowances for, (a) a worker and his or her witnesses", among others, and that the board has repeatedly held that "other allowances" do not include legal costs.

However, the claim for the payment of incidental expenses by way of damages in this case is outside the process established by the Act altogether. If the WSIB has conducted itself in a way that takes it outside of the shelter of the privative clause, which is the appellant's allegation in the amended statement of claim, the argument is that the board cannot shield itself under s. 133 of the WSIA in respect of the damages claim. The fact that the damages claim is measured by costs thrown away might not negate the claim.

(2) Bad Faith

(a) Is the Cause of Action Properly Pleaded?

The amended statement of claim tends to lump together the allegation that the WSIB committed a "breach of duty to act in good faith" with the allegation of "misfeasance in public office". The appellant pleads that the board owed a duty of good faith to the appellant and class, who "as injured workers were in a vulnerable position and dependent upon the Defendant to appropriately exercise its statutory responsibility in good faith". The pleading states that the WSIB "and its employees have a duty to act in good faith in exercising their statutory responsibilities", and that the board is "both directly and vicariously liable for the bad faith acts and omissions of its employees".

The appellant proffers two authorities for the proposition that there is a free-standing cause of action for breach of a duty of good faith. The first is *Whiten v. Pilot Insurance Co.* That case concerned the availability of a bad faith claim in the context of an insurance contract, and in view of this has no application here.

The second case is *Gouthro v. Ontario (Workplace Safety and Insurance Appeals Tribunal)*, in which the applicant's claim for judicial review was dismissed on the basis that the age limitation on the benefits set out in s. 43 of the WSIA did not contravene s. 15(1) of the Canadian Charter of Rights and Freedoms. The case did not deal with the issue of good faith.

It is agreed with the WSIB's submission that bad faith is not, in itself, a free-standing cause of action. As stated in *Alberta v. Elder Advocates of Alberta Society*, the Supreme Court said that bad faith, in tort, "is an element of misfeasance in public office". The elements of bad faith are therefore properly pleaded as incidental to the claim in misfeasance in public office, but the free-standing claim for relief, set out at paras. 51-57 of the amended statement of claim, should be struck. Leave to amend is granted, but only for the appellant to better tie the bad faith allegation to the claim of misfeasance in public office, if so advised.

In light of this conclusion, since the bad faith allegation folds into the misfeasance in public office claim, a separate analysis of the reach of the privative clause respecting bad faith is not necessary.

(3) Negligence

(a) Is the Cause of Action Properly Pleaded?

The appellant pleads negligence in the alternative to his claim for misfeasance in public office. The pleading is brief:

62. If it is determined that the Defendant did not commit a misfeasance in public office, which is not admitted, the Plaintiff pleads in the alternative that the Defendant was negligent in how it reduced the NEL awards of the Plaintiff and the Class.

63. The Defendant owed the Plaintiff and the Class a duty of care arising from the relationship created when the Plaintiff and Class became recipients of benefits under the compulsory workers compensation scheme established pursuant to the WSIA and administered by the Defendant.

64. The Defendant breached the duty of care and failed to meet the requisite standard of care it owed the Plaintiff and Class when it negligently decided that Operational Policy 18-05-06 (Effect of a Pre-Existing Impairment) allowed for the reduction of NEL awards due to pre-existing conditions that had no negative impact or impairment on a worker's pre-accident functioning.

The respondent submits that it owes no private duty of care to individual workers: "the Board's role in interpretive and adjudicative, and its role in administering statutory benefits is inconsistent with a finding of a private law duty of care".

In order to establish a duty of care in negligence, three elements are necessary:

1. The harm complained of must have been reasonably foreseeable;
2. There must have been sufficient proximity between the plaintiff and the defendant that it would be fair and just to impose a duty of care; and
3. There must be no residual policy reasons for declining to impose such a duty.

There is no real issue in this case about the first element, foreseeability. The WSIB knew precisely what the effects would be on the class.

As this court noted about the second element of proximity, "the proximity inquiry will focus initially on the applicable legislative scheme and secondly, on the interactions, if any, between the regulator or governmental authority and the putative plaintiff". In terms of this court's language, what must be assessed are the interactions between WSIB and the class members. Does the board's involvement in evaluating the claims of the class members bring the board into relational proximity to them?

The third element considers whether there are residual policy reasons to decline to impose a duty of care on WSIB. These "are not concerned with the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally".

Justice Cromwell explained in *Fullowka v. Pinkerton's of Canada Ltd.* that in order to oust a prima facie duty of care once the first two elements have been established in the plaintiff's favour, the "residual policy considerations must be more than speculative". He stated: "They must be compelling; a real potential for negative consequences of imposing the duty of care must be apparent."

The analysis of the second and third elements is both fact and policy intensive in the context of a statute, as this court noted in *Williams v. Toronto (City)* and as the case law demonstrates. That analysis was not undertaken by the motion judge or by the parties.

The WSIB has not satisfied the court that the appellant has inadequately pleaded the elements of a negligence claim against the WSIB. The pleading refers to the relationships and to the interactions between the board and the class members in the statutory context. The stage is set for the development of evidence relating to the application of the second and third elements.

(b) Does the Privative Clause in the WSIA Prevent the Appellant from Pursuing Negligence?

The court is not persuaded that the application of s. 118 of the WSIA leads to the result that the appellant's negligence claim has no reasonable prospect of success. It is noted that s. 179 supports the argument that the WSIB is open to a negligence suit in the proper circumstances. It provides:

179(1) No action or other proceeding for damages may be commenced against any of the following persons for an act or omission done or omitted by the person in good faith in the execution or intended execution of any power or duty under this Act:

1. Members of the board of directors, officers and employees of the Board.
2. Physicians who conduct an assessment under section 47 (degree of permanent impairment).
3. Persons who are engaged by the Board to conduct an examination, investigation, inquiry, inspection or test or who are authorized to perform any function.

(2) Subsection (1) does not relieve the Board of any liability to which the Board would otherwise be subject in respect of a person described in paragraph 1, 4, 5 or 6 of subsection (1).

(4) No action or other proceeding may be commenced against a health care practitioner, hospital or health facility for providing information under section 37 or 47 unless he or she or it acts maliciously.

Section 179 does shield certain people from personal liability for acts and omissions undertaken in good faith. But it also clearly recognizes that the board may be vicariously liable for any such actionable acts or omissions.

D. Disposition

For these reasons, the appeal is allowed and the motion judge's order striking the amended statement of claim without leave to amend and dismissing the action is set aside. However, paragraphs 51-57 of the amended statement of claim relating to the bad faith claim are struck, with leave to amend, in accordance with these reasons. The parties do not seek costs.

Appeal allowed.

Notes

1 The motion judge did not mention subrule 21.01(3)(a) of the Rules of Civil Procedure in his reasons, and the respondent did not raise it in the factum or in oral argument. It is not addressed further, except to observe that it is usually invoked where an arbitration clause or a forum selection clause is in issue, which is not the case here.

End of Document