SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 02-CV-228252CM1
DATE: 20120403

RE: Jacques Andre Thibault, Plaintiff/Responding Party

AND:

The Empire Life Insurance Company, Defendant/Moving Party

BEFORE: Thorburn J.

COUNSEL: Fredrick Schumann and Lucie Gaucher , for the Plaintiff (Responding Party)

David Roebuck and Samuel Robinson , for the Defendant (Moving Party)

HEARD: March 2 and 5, 2012

ENDORSEMENT

A. Relief Sought

[ 1 ] The Defendant, Plaintiff by Counterclaim, Empire Life Insurance Company seeks to strike the jury notice served by the Plaintiff.

[ 2 ] Empire takes the position that,

(a) the provision in section 108 of the Courts of Justice Act prohibits Thibault and Empire’s claims for declaratory relief from being heard by a jury and,

(b) the court should exercise its discretion and strike the jury due to the complexity of the case.

B. The Issues

[ 3 ] The issues to be examined are,

(a) Is this a claim for “declaratory or equitable relief” within the meaning of section 108 of the Courts of Justice Act , R.S.O. 1990, c. C.43 such that the issues of fact and or damages must be assessed by a judge alone? (There is no definition of declaratory relief in section 108 of the Courts of Justice Act . As such, there must be an analysis of the meaning of declaration within the meaning of the Act.)

(b) Can the claim for declaratory or equitable relief be separated from the other claims such that, if the claim for declaratory and or equitable relief must be dealt with by a judge alone, the other claims may nonetheless proceed with a jury?

(c) Is the case sufficiently complex that it is appropriate to strike the jury notice pursuant to Rule 47 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194?

C. The Law

Statutory Limits on the Right to a Jury Trial

[ 4 ] The right to a jury trial is a substantive right. Courts should be reticent to interfere with that substantive right. [1]

[ 5 ] Section 108 (2) of the Courts of Justice Act contains a clear mandatory provision that outlines when a jury must be struck. Section 108 provides as follows:

108. (1) In an action in the Superior Court of Justice that is not in the Small Claims Court, a party may require that the issues of fact be tried or the damages assessed, or both, by a jury, unless otherwise provided.

(2) The issues of fact and the assessment of damages in an action shall be tried without a jury in respect of a claim for any of the following kinds of relief :

10. Declaratory relief.

11. Other equitable relief.

(3) On motion, the court may order that issues of fact be tried or damages assessed, or both, without a jury. (Emphasis added)

[ 6 ] In deciding whether there is a claim for declaratory relief and if so, what should be done, the following steps should be taken:

Step 1: Is there a Claim for Declaratory Relief?

[ 7 ] Declaratory relief is not defined in the Courts of Justice Act . The courts must therefore seek to determine the legislators’ intent as to what was meant by the words “declaratory relief”.

[ 8 ] A declaration is described in the Oxford English Dictionary [2] as, “The action of making clear or clearing up anything obscure or not understood; elucidation, explanation, interpretation.”

[ 9 ] In Black’s Law Dictionary , [3] the word declaration is defined as, “a formal statement, proclamation or announcement.”

[ 10 ] L. Sarna in The Law of Declaratory Judgments , 2d. ed. (Agincourt, Ontario: Carswell, 1988) describes declaratory judgment as “a judicial statement confirming or denying a legal right of the applicant.”

[ 11 ] In deciding whether there is a claim for declaratory relief, two things should be borne in mind:

(a) There is a distinction to be drawn between a declaration of fact and declaratory relief. The factual determination that A agreed with B may be a precursor to but is different from the legal status of the agreement.

(b) The mere fact that the words used in a pleading refer to “declaratory relief” is not sufficient: the relief sought must be declaratory in substance not just in form [4] . Moreover, the words cannot be inserted in a claim for the sole purpose of denying another party a right he would otherwise have to a jury trial. The motions judge must therefore look beyond the technical wording of the claim to the true nature of the relief sought. [5]

Step 2: Determination of the Facts and Damages that Pertain to the Claim for Declaratory Relief

[ 12 ] Where it is determined that the relief sought is declaratory relief in substance, the court must then determine the issues of fact and assessment of damages that pertain to the declaratory relief. Section 108(3) of the Courts of Justice Act requires that those issues of fact and damages must be determined by a judge alone.

Step 3: Are there Other Facts or Damages to be Determined?

[ 13 ] The Court must determine what the remaining issues are after the claims of declaratory relief and facts and damages pertaining thereto have been determined. If so, section 108(3) may be invoked.

Discretion to Strike a Jury

[ 14 ] Section 108(3) of the Courts of Justice Act provides that, “the court may order that issues of fact be tried or damages assessed, or both, without a jury.”

[ 15 ] Rule 47.02 (2) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 provides that,

(2) A motion to strike out a jury notice on the ground that the action ought to be tried without a jury shall be made to a judge.

(3) Where an order striking a jury notice is refused, the refusal does not affect the discretion of the trial judge, in a proper case, to try the action without a jury.

[ 16 ] The moving party has the onus of establishing that there are legal or factual issues that merit the discharge of the jury. The court must be satisfied that justice to the parties will be better served by the discharge of the jury. [6] There must be a careful analysis of the particular facts and issues the jury must decide.

[ 17 ] The decision to discharge a jury is a discretionary one. The decision must be reasonable in the circumstances. [7]

D. The Claims

[ 18 ] There are five parties to this litigation: Andre Thibault, his wife Majella, The Empire Life Insurance Company, Clifford Oliver and Wayne Slimmon.

[ 19 ] Thibault is an insurance agent who sold many Colspol life insurance policies and is the owner of two Colspol insurance policies issued by Colonia.

[ 20 ] Oliver was Vice President and Chief Actuary of Colonia. He was also the chief architect of the Colspol policy. Slimmon assisted Oliver in the administration of Thibault’s policies and took over more administration of Thibault’s policies after Oliver left Colonia.

[ 21 ] Oliver and Slimmon were employed by Colonia. Colonia changed its name to Concordia in December 1998 and Concordia and Empire were amalgamated on January 1, 2002.

[ 22 ] In the Statement of Claim, the Plaintiff Thibault seeks,

“1.(a) a declaration that

i. Life Insurance Policy 106815 as issued by the defendant contained the terms as described in paragraph 6 below;

ii. the cash surrender value of policy 106815 at December 19, 2001 was $15,537,662.66;

iii. Life Insurance Policy 393320 issued by the defendant contained the terms as described in paragraph 17 below; and

iv. the cash surrender value of policy 39320 as at December 19, 2001 was $3,378,818.51.”

(b) damages in the amount of $100,000,000.00 for breach of contracts policies of insurance by the defendant (sic);

(c) exemplary, punitive and aggravated damages in the amount of $1,000,000.00 for the defendant’s breach of its duty of good faith owed to the plaintiff and its high handed contumelious and willfully malicious behaviour.”

[ 23 ] In its counterclaim against Thibault, Empire seeks a declaration that the insurance policies in the names of Thibault and Majella are void. Empire also claims damages for fraud, breach of Thibault’s duty of utmost good faith to Empire and its predecessors, damages for inducing Oliver and Slimmon to breach their fiduciary obligations to Empire’s predecessor, Colonia, an order to trace funds paid to Thibault from the policies, an accounting of all deposits to and withdrawals from the policies, judgment for any amounts owing, and punitive damages.

[ 24 ] Empire also claims damages for fraud and breach of fiduciary duty and a tracing of funds from Oliver and Slimmon.

[ 25 ] Thibault testified that he purchased Colspol insurance policies. These were life insurance policies whereby any increase in the money invested in the policies was accumulated tax-free as long as it remained within the policy. The Colspol policy provided the purchaser with additional interest called “excess premium refunds” based on the prevailing market rates for five year new money investments on each five year anniversary of the policy. The cash surrender value of the policy could be withdrawn at any time but if the cash surrender value was reduced to zero, the policy was considered to be terminated. Colspol policies were sold in the early 1980s before the Income Tax Act was changed to remove their tax-exempt status.

[ 26 ] Thibault testified that he negotiated special terms beyond the standard term Colspol policy with Oliver, who was then Vice President and Chief Actuary for Colonia. Some of those terms included a bonus of 3¼ percent, a market adjustment provision, a provision allowing Thibault to deposit additional sums into the policies, a provision allowing Thibault to vary the guarantee interest rate period, and a change to the cash surrender value table to increase the rate from 4% to 5% after the insured reaches the age of sixty. Oliver testified that although he agreed to make the changes to Thibault’s policies in exchange for the bribes he received, Colonia received no consideration for these additional terms.

[ 27 ] It is agreed that Thibault paid at least $2,762,537.00 into the policies. Thibault testified that a great deal more money was deposited into the accounts than is evidenced from Colonia’s General Ledger account. He said he made approximately 25 deposits from his own account and through his agent, Mr. Kaiser in New York from 1986 to 1991.

[ 28 ] Thibault testified that he has no records of his deposits. He testified that he has no records from Kaiser and Kaiser is now dead.

[ 29 ] It is agreed that Thibault withdrew at least $12,040,507.00 from the policies.

[ 30 ] Thibault testified that each time he made a deposit or withdrawal he got an illustration. An illustration is confirmation of the amount in a particular policy account as of a certain date.

[ 31 ] Thibault testified that he knew nothing of and played no part in any illegal or improper conduct with Oliver. He also noted that several errors were made on other accounts and deposits and withdrawals from the Colspol policies (unlike most others) were entered manually because there were so few of these unique policies sold.

[ 32 ] Thibault testified that he believed some of the money he sent to Oliver to be deposited into his accounts was never in fact deposited by Oliver and therefore did not show up on the General Ledger.

[ 33 ] In 2010, Oliver entered into Minutes of Settlement with Empire. One of those terms was that he would testify as a Defence witness at trial.

[ 34 ] Oliver testified that sometime after 1981 he met with Thibault. Oliver testified that Thibault paid him a $30,000.00 bribe in exchange for inflating the cash surrender value of his policy accounts. Oliver testified that he later received in excess of one million dollars from Thibault.

[ 35 ] Oliver said he falsified company records to inflate the numbers in Thibault’s policies. Oliver testified that he allowed Thibault to withdraw millions of dollars of cash surrender value from the policies such that there was a net loss of funds in Thibault’s policies. Oliver testified that he completed fictitious documents to show funds were being accumulated in Thibault’s policy accounts when in fact funds were not being accumulated.

[ 36 ] Oliver said he also agreed to special terms in addition to the standard terms in the Colspol agreement, without providing any additional consideration to Colonia.

[ 37 ] After Oliver left Colonia, Slimmon dealt primarily with Thibault’s accounts. Slimmon admitted he was given a “gift” of $1000.00 and an additional $5,000.00 loan from Thibault that was never repaid. He was not permitted by Colonia to receive such payments. Slimmon said in 1997, he was asked by Thibault to substitute the 1996 illustration (which gave a much higher value to the policy) for the 1997 illustration. Slimmon did so.

[ 38 ] Thibault testified that the combined cash surrender value of the policies was $18,916,481.17 as at December 19, 2001. Thibault does not seek damages as at December 19, 2001.

[ 39 ] Empire’s position is that Thibault’s valuation of the policy as at December 19, 2001 is based on Oliver (and later Slimmon’s) agreement with Thibault to falsely inflate the value of the policies in breach of their fiduciary obligations to the company and as part of a conspiracy to defraud Empire. Empire claims Thibault has failed to provide any documentation to support his claim for damages.

[ 40 ] Majella Thibault and Wayne Slimmon did not testify at trial. Wayne Slimmon has been noted in default. His evidence was read in at the trial as he is terminally ill.

[ 41 ] The determination of the rights and obligations of the two key parties, Thibault and Empire, involves unwinding complex commercial dealings between Clifford Oliver or those acting under his direction and Wayne Slimmon and those acting on his behalf over a sixteen year period.

[ 42 ] Empire engaged Steger, a forensic accountant, to do a line by line review of the General Ledger for Colonia from 1981 to 1997. He was asked to identify any additional monies over $100,000.00 deposited to Thibault’s accounts. There is no record of any such deposits.

[ 43 ] Schneider, an actuary who was employed by Empire, calculated the value of Thibault’s policies and interest owing thereon. These figures were reviewed by Brian Burnell, an independent actuary. They concluded that the policies have no value and that there were millions of dollars owing under the policies.

[ 44 ] Empire seeks damages, tracing and an accounting of the monies it says Thibault wrongfully withdrew from the account.

[ 45 ] Hundreds of pages of documents were entered as exhibits at trial and the parties agree that approximately 41 questions will be posed to the jury.

[ 46 ] Thibault has now closed his case and most of the Defence evidence has been presented.

E. Motion to Strike the Jury

[ 47 ] Empire brought a motion to strike the jury notice before Empire had amended its claim to add a claim for “knowingly inducing and assisting in breach of fiduciary duty” and before the commencement of trial. The parties did not argue the issue of complexity which they left for submissions to the trial judge. The motions judge refused to strike the jury notice with leave to bring the motion back on after the commencement of trial.

F. Positions of the Parties

Empire’s Position

[ 48 ] Thibault seeks a declaration that his insurance policies contain disputed terms as articulated in paragraphs 6 and 17 of the Statement of Claim and that his policies were worth $18,916,481.17 as at December 19, 2001. Empire submits that the jury should be struck because section 108 of the Courts of Justice Act does not allow claims for declaratory relief or equitable claims to be tried by a jury. Moreover, the claim for declaratory relief is a significant part of Thibault’s case at trial.

[ 49 ] Empire takes the position that the policies are void because of the fraud or, in the alternative, they are worth nothing. There must be an interpretation of the policy agreements and confirmation or denial of a legal right to relief. This is a central part of this action. As such it is declaratory relief within the meaning of section 108 of the Courts of Justice Act and the jury must be struck. In the alternative, Empire claims the court should exercise its discretion and strike the jury given the complex interplay of fact and law in this case.

Thibault’s Position

[ 50 ] Thibault takes the position that the trial must proceed with a jury because:

(a) the declarations do not seek true declaratory relief as they are in essence simply findings of fact that are precursors to the damages sought by each party;

(b) the claim for knowingly assisting and inducing a breach of another person’s fiduciary duty is not in essence equitable relief; and

(c) accounting and tracing are ancillary to the main issues.

[ 51 ] If some issues ought not to be decided by a jury, the best course would be to preserve the jury to the extent possible and have the trial judge decide the excluded issues based on the jury’s findings of fact on the issues deemed to be within the jurisdiction of a jury. Thibault’s counsel was unable to explain how this would be accomplished in this case.

[ 52 ] In the alternative, Thibault claims the court should not exercise its discretion to strike the jury because the legal and factual issues are perfectly appropriate for trial by jury. The limited expert evidence is not so complex as to be beyond the comprehension of a jury. A jury would apply the law to the facts.

G. Application of the Law to the Facts of this Case and Conclusion

Is this an Action in Respect of Declaratory Relief?

[ 53 ] Section 108 of the Courts of Justice Act contains a clear mandatory provision that where declaratory relief is sought, the jury must be struck with respect to such a claim.

[ 54 ] It is apparent from the testimony adduced at trial and from the pleadings in this case that Thibault seeks an interpretation of the agreements between himself and Empire: that the agreement is valid and enforceable, what the terms of the agreement are, and the value of the policies as of a certain date. The key issues to be determined are the determination of the existence or non-existence of a legal state of affairs (the validity of the agreements) which is in substance declaratory relief.

[ 55 ] While findings of fact will have to be made as to whether there was an agreement between Colonia and Thibault, the core of the claim is determination of the legal status of the agreements and damages arising therefrom.

[ 56 ] Secondly, coercive relief in the form of damages is specifically contemplated in section 108(3) of the Courts of Justice Act . Section 108(3) provides that issues of fact and the assessment of damages in a claim for declaratory relief shall be tried without a jury.

[ 57 ] In this case, analysis of the request for declaratory relief requires the following determinations of fact and damages:

• What terms did Oliver agree to add to the standard form Colspol agreement?

• Did Empire or its predecessor receive consideration for any/some/all of the amendments to the agreement?

• Did Oliver have the legal authority to make some or all of the amendments to the terms of the standard form Colspol policy?

• Did Thibault know Oliver did not have the authority to modify these agreements?

• Did Thibault owe a duty of good faith to Empire or its predecessor?

• Did Oliver and or Slimmon have the ostensible authority to negotiate with Thibault on behalf of Colonia?

• Did Thibault and Oliver and/or Slimmon conspire to defraud Colonia (now Empire)?

• What sums did Thibault deposit into his Colspol accounts throughout the term of the Agreements?

• What withdrawals did Thibault make from his policies throughout the term of the Agreements?

• What funds if any, belonging to other policy holders, were deposited into Thibault’s accounts? Were those funds wrongfully or inadvertently deposited into Thibault’s accounts?

• Determination of the cash surrender value of the policies, interest adjustments, cash values, net cash values and guaranteed values.

• What is the value of these policies, if any as at December 19, 2001?

[ 58 ] These issues of fact and the assessment of related damages must therefore also be determined by a judge alone.

[ 59 ] I would distinguish the two key cases referred to by the Plaintiff. In the case of Harrison v. Antonopoulos , Lang J. [8] noted that,

“The injured plaintiff sued the alleged tortfeasor for negligence and the insurance company for accident benefits. The usual order was granted for trial of the actions together. At the beginning of trial, the plaintiff moved to strike the jury notice in the accident benefits action. If the plaintiff succeeds in striking the jury in the accident benefits actions, she asks that the jury also be struck in the companion personal injury tort claim.

In the accident benefits litigation, the plaintiff sues the alleged tortfeasor’s insurer for its denial of ongoing accident benefits. In addition to a determination of entitlement to and assessment of past benefits, the plaintiff asks for a declaration intended to have future application: that her injuries render her continuously disabled within the meaning of the tortfeasor’s insurance policy. The plaintiff submits that it is this request for “declaratory relief that precludes trial by jury.”

[ 60 ] Lang J. refused to strike the jury in the accident benefit claim because “the essence of the relief requested by the plaintiff is a declaration of fact … it is not declaratory relief as that term is used in section 108(2) of the CJA…” By contrast, in the claim before me the essence of the claim is a determination as to whether there is a valid agreement and if so, what the rights and obligations of the parties are.

[ 61 ] In Reid [9] , the central issue in dispute was whether there was a detrimental change in the insured’s health during the relevant period. Manulife asserted that the insurance policy was invalid because there was a detrimental change in the insured’s health between the time he applied for the policy and the time it was delivered. The judge held that the issue was “whether a particular constellation of facts existed that vitiated the policy.” Everything else would flow from that declaration. There was,

“…no dispute about the parties’ respective rights and obligations under the contract, should it be found to be effective. … The court in this instance is not called upon to make a pronunciation on the legal rights of the parties. They agree that their rights are spelled out in the policy. What they do not agree upon is whether a particular constellation of facts existed that vitiated the policy. The court is called upon to determine what is a relatively narrow factual dispute: whether there was a detrimental change in Joel Reid’s health in the relevant time period.”

[ 62 ] Contrary to the situation in the case before me, the court in Reid held that the essence of the claim was not a determination of the “legal rights of the parties”.

Severance

[ 63 ] The Ontario Court of Appeal in Hunt [10] held that it is an error of law not to consider the possibility of severing one claim from the rest in order to preserve the right to a jury trial to the extent possible. Section 108 of the Courts of Justice Act clearly contemplates this.

[ 64 ] In this case, the subject of the declaratory relief, that is, the legal status of the Agreements and determination of the facts and damages pertaining to the claim for declaratory relief is the pith and substance of this action.

[ 65 ] Assuming some minor issues remain to be decided by a jury, it is not in the interests of justice to sever these claims from the claim for declaratory relief.

Discretion to Strike the Jury

[ 66 ] Section 108(3) of the Courts of Justice Act provides that “the court may order that issues of fact be tried or damages assessed, or both, without a jury.” Rule 47.02(3) of the Rules of Civil Procedure provides that the refusal to strike a jury notice does not affect the discretion of the trial judge in a proper case to try the action without a jury. Complexity of the proceeding is one basis for striking a jury notice.

[ 67 ] In Plasczek , [11] the Court of Appeal upheld the trial judge’s decision to strike a jury in view of the respondent’s pre-existing medical condition and the need to determine the impact of that condition on the respondent’s post-accident medical condition, competing expert evidence relating to the respondent’s loss of income and loss of future income claims, several factual variables relevant to the respondent’s lost income claims that complicated the quantification of that claim and competing and somewhat complex medical, engineering and biomedical evidence.

[ 68 ] In Moore v. Wienecke , [12] MacPherson J.A. held that the trial judge acted reasonably in deciding that the jury should be struck for the following reasons:

[T]he trial judge struck the jury for two reasons: first, the complexity of dealing with a person (Moore) who had suffered many injuries from five motor vehicle accidents (four as a driver and one as a passenger), a fall down stairs, a fall off a ladder, a slip-and-fall accident, and back strain from gardening, all over approximately a 20-year period; and, second, the fact that Moore had suffered a serious brain injury in a motorcycle accident several years before the 1998 and 2002 motor vehicle accidents, which would make it very difficult for a jury to assess his credibility, "particularly in the context of his reporting of symptoms to his various physicians, but against the backdrop of the sequelae of his brain injury as that affects his ability to properly report or follow through".

[ 69 ] I believe that the interplay of facts and law in this case is sufficiently complex that the jury should be struck. The jury in this case would have to consider a host of complex legal issues including:

• civil fraud,
• breach of contract,
• breach of fiduciary duty,
• an insurer’s obligation to deal with an insured in good faith and the meaning of such obligation,
• an insured’s obligation to bargain in good faith, and
• the interpretation of Colspol insurance policies.

[ 70 ] The numerous questions of fact to be determined include:

• What terms did Oliver agree to add to the standard form Colspol agreement?
• Did Empire or its predecessor receive consideration for any/some/all of the amendments to the agreement?
• Did Oliver have the legal authority to make some or all of the amendments to the terms of the standard form Colspol policy?
• Did Thibault know Oliver did not have the authority to modify these agreements?
• Did Thibault owe a duty of good faith to Empire or its predecessor?
• Did Oliver and/or Slimmon have the ostensible authority to negotiate with Thibault on behalf of Colonia?
• Did Thibault and Oliver and/or Slimmon conspire to defraud Colonia (now Empire)?
• What sums did Thibault deposit into his Colspol accounts throughout the term of the Agreements?
• What withdrawals did Thibault make from his policies throughout the term of the Agreements?
• What funds if any, belonging to other policy holders, were deposited into Thibault’s accounts? Were those funds wrongfully or inadvertently deposited into Thibault’s accounts?
• Determination of the cash surrender value of the policies, interest adjustments, cash values, net cash values and guaranteed values.
• What is the value of these policies, if any as at December 19, 2001?

[ 71 ] Finally, the jury would have to assess the two actuarial reports and the forensic accounting report involving entries in the General Ledger account over a sixteen year period. Hundreds of pages of exhibits, and over three weeks of testimony would have to be reviewed.

[ 72 ] These are reflected in the 41 proposed questions the parties agree to put before the jury.

[ 73 ] Taken together, these factors lead me to the conclusion that the court should exercise its discretion to strike the jury.

[ 74 ] In summary, two bases were articulated by Empire as justification for its request to strike the jury: (1) the requirement in section 108 of the Courts of Justice Act that declaratory relief and issues of fact and damages pertaining thereto must be heard by a judge alone and (2) the court should exercise its discretion to discharge a jury on the basis of complexity of the proceeding. On the facts of this case, I find that either of these two bases justifies the decision to strike the jury and I therefore conclude that the jury should be struck.

[ 75 ] Costs of this motion will be addressed after issuance of my reasons for judgment.

Thorburn J.

Date: April 03, 2012