Court of Appeal for Ontario
Date: 2019-03-14 Docket: C65717
Judges: Feldman, Roberts and Fairburn JJ.A.
Between
Joe Swampillai Plaintiff (Respondent)
and
Royal & Sun Alliance Insurance Company of Canada and Sun Life Assurance Company of Canada Defendants (Appellant)
Counsel
Thomas A. Stefanik, for the appellant
Naphtali Silverman, for the respondent
Heard: March 4, 2019
On appeal from: the order of Justice Cavanagh of the Superior Court of Justice, dated June 26, 2018.
Reasons for Decision
[1] The appellant employer appeals from the dismissal of its motion for summary judgment to dismiss the respondent's action for long-term disability benefits. The appellant relied on a broad release signed by the respondent employee in conjunction with the financial settlement he received upon his dismissal from employment. One term of the release purported to waive any claim for long-term disability benefits. The motion judge found that, as it related to the respondent's long-term disability claim, the release was unconscionable and unenforceable.
[2] The respondent was employed by the appellant for 14 years in a manual position in the mailroom. After becoming disabled, he received short-term disability benefits for the two-year maximum period from 2013 to 2015, based on his inability to do his job. While the benefit plan was self-funded by the appellant, the plan was administered, adjudicated and paid by Sun Life Assurance Company of Canada. Sun Life advised the respondent on March 31, 2015 that he was not eligible for long-term disability benefits because he did not meet the definition of disabled from "any employment". On June 2, 2015, Sun Life advised him that his appeal from that decision was dismissed and that he had until October 22, 2015 to make any further appeal. On June 19, 2015, he retained a law firm to pursue an appeal.
[3] On June 24, 2015, the appellant advised the respondent that his employment was being terminated effective July 22, 2015, and provided him with a severance offer, which included a release of all claims against the appellant, including for long-term disability benefits. The respondent sought advice on the settlement from the law firm handling his appeal on the denial of his long-term disability benefits. He was informed that the firm did not practice employment law and that he could seek his legal advice on his severance elsewhere. He did not seek employment law advice but instigated further negotiations on his own with the appellant. After some negotiation, which led to the improvement of the severance terms, on July 14, 2015, the respondent accepted the appellant's offer and signed the release. He testified that he never "closely read" the release before signing it because he assumed it was "just a more legalese version of the June 24, 2015 letter".
[4] Despite having signed the release in July 2015, the respondent appears to have continued appealing the denial of his long-term disability claim and Sun Life does not appear to have objected. After unsuccessfully pursuing appeals from the denial of his long-term disability claim, the respondent commenced an action against the appellant and Sun Life for long-term disability benefits. Once the respondent started his claim, though, the appellant and Sun Life brought a motion for summary judgment dismissing the action based on the release signed by the respondent.
[5] The motion judge found that in respect of the release of liability for the long-term disability benefits, the release was unconscionable based on the criteria for unconscionability set out in Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573. Because those criteria were met, summary judgment enforcing the release was denied and the release, as it relates to the long-term disability claim, was set aside and declared unenforceable.
[6] At para. 38 of Titus, this court endorsed four elements necessary for unconscionability:
a grossly unfair and improvident transaction;
the victim's lack of independent legal advice or other suitable advice;
an overwhelming imbalance in bargaining power caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
the other party knowingly taking advantage of this vulnerability.
[7] In our view, the motion judge erred by finding unconscionability based on the record before him on summary judgment. In the circumstances of this case, the issue of whether the release is unconscionable and therefore unenforceable is a genuine issue requiring a trial. We say this for two reasons.
[8] First, the record before the motion judge was insufficient to permit him to determine that the severance transaction in which the release was signed reached the high threshold of "grossly unfair and improvident" because it included the release of the respondent's long-term disability claim. It is not disputed that the amount of severance based on years of service was more than fair. It is also not disputed that there was no specific amount that was designated to compensate for the loss of the potential success of the respondent's long-term disability appeal claim. If successful, that claim to age 65 was estimated at $300,000. The absence of any information in the record about the appeal proceedings or the potential merit of those proceedings left a critical factual void. Without that information, it is difficult to know the respondent's risk in giving up his entitlement to a claim for long-term disability benefits or whether the admittedly enhanced severance adequately compensated for what may have been released. In other words, there was insufficient information against which the fairness of the transaction could be considered.
[9] Further, while the motion judge took into account the fact that the release did not mention Sun Life, he did not consider whether the respondent's failure to closely read the release impacted the analysis when applying the Titus factors. This was a circumstance that the motion judge should have adverted to when determining whether the transaction was grossly unfair and improvident.
[10] We allow the appeal and refer the issues of the unconscionability and enforceability of the release for determination at trial.
[11] As the appellant was successful in setting aside the finding of unconscionability, but not in obtaining summary judgment enforcing the release, costs in the agreed amount of $7,500, inclusive of disbursements and HST, shall be payable in the cause of the trial.
K. Feldman J.A.
L.B. Roberts J.A.
Fairburn J.A.
