Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20210819 DOCKET: C67869

Roberts, Trotter and Thorburn JJ.A.

BETWEEN

Tatiana Nemchin Plaintiff (Appellant)

and

Yvonne Green Defendant (Respondent)

Counsel: Joseph Y. Obagi and Elizabeth A. Quigley, for the appellant Stephen G. Ross, Thomas Macmillan and Meryl Rodrigues, for the respondent

Heard: October 27, 2020 by video conference

Supplementary reasons to the judgment in Nemchin v. Green, 2021 ONCA 238, released on April 16, 2021.

ADDENDUM

[1] In our reasons dated April 16, 2021, reported at 2021 ONCA 238, we allowed the appellant’s appeal from the order requiring her to top up the amount of the long-term disability benefits received from her employer’s group benefits insurer, Sun Life Assurance Company of Canada (“Sun Life”), that she assigned to the respondent’s insurer, Aviva Insurance Company of Canada (“Aviva”), pursuant to s. 267.8(12) of the Insurance Act, R.S.O. 1990, c. I.8. Costs were determined in our May 19, 2021 endorsement, reported at 2021 ONCA 342.

[2] In paragraph 46 of our reasons, we invited the parties to make brief written submissions if they required further direction concerning the treatment of any tax refund they may obtain with respect to the tax remittances that Sun Life has made from the disability payments since the date of the assignment to Aviva and the wording of the amended formal order of the trial judge in accordance with this court’s reasons. We have received and reviewed the parties’ further written submissions on these matters.

[3] The appellant raises the following issues. First, she submits that in the event Aviva chooses not to request that Sun Life cease to deduct taxes from the plan payments, she will be prejudiced because she will continue to receive a T4A document from Sun Life and will have to pay taxes on monies she is not receiving and that should not be taxable. In this event, the appellant submits she should be entitled to independently contest Sun Life’s tax deduction. Second, in the event that Aviva chooses not to apply for a tax refund of the Sun Life tax remittances made during the assignment, she is entitled to apply for any tax refund and Aviva must pay her expenses to do so and pay for any other expenses related to the assignment’s operation. Finally, if she is successful in her independent applications to Sun Life or the Canada Revenue Agency (“CRA”), she submits that Aviva cannot then reassert a claim to any tax differential because it has abandoned its interest.

[4] The respondent submits that this court’s order does not compel Aviva to contest Sun Life’s tax remittances or seek a tax refund with respect to those remittances from the CRA. The respondent does not object to the appellant contesting Sun Life’s tax deductions at source or her seeking a tax refund from the CRA but she must do so at her own expense. Moreover, in the event she receives a tax refund of any Sun Life remittances, she must pay any such tax refund to Aviva in accordance with the assignment of her rights under the plan to avoid double recovery.

[5] While it is certainly consistent with the respondent’s position on appeal that Aviva should request that Sun Life cease deducting taxes at source and seek a refund of tax remittances from the CRA, we agree that our order does not compel it to do so. Neither party raised and accordingly we did not determine the question of whether, if Aviva does not make these applications, the appellant should be permitted to do so and at Aviva’s expense.

[6] In paragraph 29 of our reasons, we clarified that “by virtue and for the term of the assignment, [Aviva] has all the appellant’s rights and is subject to all the provisions under the plan, including, subject to the [Sun Life] plan, the ability to deal directly with Sun Life and to contest the deduction of income taxes from the payments” (footnote omitted). In other words, as we also stated at paragraphs 39-42 and 44, Aviva steps into the appellant’s shoes during the assignment and is entitled to receive the benefits, but for the assignment, the appellant would have received under the plan and make any claim to Sun Life that the appellant would have been entitled to make in relation to her rights under the plan, with the appellant’s cooperation, if required by Sun Life, and at Aviva’s expense. By the same token, as a result and for the duration of the assignment, the appellant is relieved from any further cost in relation to the assignment of her rights under the plan. Accordingly, if Aviva wishes to contest Sun Life’s remittances or pursue any tax refund for the period of the assignment, it must pay the expenses for doing so.

[7] The practical difficulty with the appellant’s request that she be permitted to deal directly with Sun Life concerning the source deduction issue is that we have not been advised nor do we have any evidence whether, given the assignment of the appellant’s rights, Sun Life is content to deal directly with the appellant concerning the source deduction issue or whether that request must come from Aviva, as assignee. As a result, we are not in a position to make an order that may affect a non-party, Sun Life. However, this is something that the parties should be able to work out on consent with Sun Life. In the event that Sun Life will deal directly with the appellant, Aviva has indicated that it has no objection to her doing so. However, as we noted at paragraph 35 of our April 16 reasons, Sun Life previously took the position that absent a CRA ruling or court order, it would continue to make source deductions.

[8] With respect to the reimbursement of the appellant’s expenses, there is no evidence that the appellant has incurred or will incur any additional expense to respond to the T4A slip received from Sun Life. If Sun Life has been deducting and remitting the correct amount of taxes, it is difficult to see why the appellant would have additional taxes to pay; and if the appellant is submitting an annual tax return in any event, it is unlikely that including the T4A slip would add to the cost of the return’s preparation. That said, to the extent that the appellant is actually incurring additional expense to respond to the T4A slip, she is entitled to be reimbursed by Aviva as part of the expenses related to the assignment that we have already determined are Aviva’s responsibility. Again, this is an issue that the parties should be able to resolve upon the appellant providing to Aviva evidence of her expenses.

[9] With respect to the issue of the tax refund, given that Aviva, as assignee of the appellant’s rights, would be entitled to the gross payments under the plan if Sun Life made no source deductions, it follows that it is entitled to receive any tax refund of those source deductions, just as the appellant would but for the assignment. Aviva has not agreed to forego its entitlement to any tax refund and there is no basis to order that it should.

[10] That said, as confirmed by the respondent, if Aviva does not pursue a tax refund, there is no impediment to the appellant seeking from the CRA a refund of the Sun Life remittances. Indeed, any such application to the CRA would likely have to be in the name of the appellant, the taxpayer. The question is whether Aviva should fund the appellant’s costs of such an application as part of the costs of the assignment. We conclude that it should because Aviva would receive the greater benefit of the tax refunds as part of the assignment.

[11] Accordingly, if Aviva does not pursue the application for a tax refund, then it shall reimburse the appellant’s reasonable expenses for bringing such an application.

“L.B. Roberts J.A.”

“Gary Trotter J.A.”

“J.A. Thorburn J.A.”