SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-CV-385413
MOTION HEARD: June 19, 2012

RE: 09-CV-385413
Saini v. Sun Life

BEFORE: Master Joan Haberman

COUNSEL:
Van Allen, J. for the plaintiff
McDuff, D. for Sun Life

REASONS

Master Haberman:

[ 1 ] This matter came before me on May 1, 2012 at a Status Hearing court, at which time I put it over to allow Sun Life to respond to a newly filed affidavit and to conduct cross-examinations of the deponent. The matter was then heard on June 19, 2012.

[ 2 ] The current Status Hearing regime is a relatively new one, established around the time that automatic assignment to Case Management in Toronto became history. As Wilson J. stated in Clements v. Greenlaw , 2009 33028 (ON SCDC) , [2009] OJ No. 2688 while sitting as part of the Divisional Court:

Status hearings are a management tool to get cases on track , and move a case forward in a reasonable fashion if it has been languishing.

[ 3 ] In my view, this characterization is an important point to keep in mind when applying Rule 48.14(13). Though it is up to the plaintiff to show cause why the action should not be dismissed for delay, it is for the presiding master to decide if they are satisfied that the action should proceed notwithstanding apparent delay. Ultimately, it is a matter for the court’s discretion, subject to application, in a contextual manner, of a two-part test.

[ 4 ] Having reviewed and considered the evidence, the legal test and all relevant factors, and after hearing submissions of counsel, I conclude that this action should be permitted to proceed.

The factual context – what this action is about and what it is not about

[ 5 ] On August 20, 2009, Saini issued a claim seeking a declaration of entitlement to benefits pursuant to her life insurance policy with Sun Life. The claim was based on the following facts:

• Saini was diagnosed with cancer of the thyroid in June 2007;

• As a result, she underwent a total thyroidectomy in September 2007;

• Saini applied to Sun Life for critical illness benefits; and

• her claim was rejected in September 2008, at which time premiums paid were returned.

[ 6 ] The statement of claim is a very bare-boned one, running less than 2 pages in length. It says little more than what I note above – Saini had a policy; she became ill; she made a claim; the insurer refused to pay.

[ 7 ] There is no suggestion by Saini that she misunderstood questions on the application or that she failed to appreciate the significance of ensuring all of her responses were accurate. She does not claim that a language barrier interfered with her understanding of what was asked of her or that the application was in any way misleading.

[ 8 ] As a result, Saini cannot claim non es factum or anything akin to that at this time, as facts of that kind must be pleaded in order for a party to rely on them.

[ 9 ] In their statement of defence, Sun Life explains why they refused coverage. They say that the policy was issued effective November 27, 2005 and that their agreement to provide coverage for Saini flowed from her written representations made on that date and on December 17, 2005.

[ 10 ] While it is not clear from the pleading how representations made after the policy was issued could have a bearing on this claim, Sun Life clarifies some of this in the evidence they filed in response to this motion. Notwithstanding what they assert in their defence, the evidence states that a policy was not actually issued until February 10, 2006. Apparently, there were discussions about the availability of coverage in view of the fact that one of Saini’s siblings had died of a heart attack. Ultimately, coverage was provided, but on the basis of a 25% increase in the premium.

[ 11 ] For the most part, Sun Life relies on representations/misrepresentations regarding Saini’s mental health as the basis for their refusal to pay benefits. They say that she was specifically asked in her application if she had been treated for or prescribed medication for depression and that she failed to indicate that she had been treated and that medication had been prescribed. Sun Life states, however, that it was not until they were assessing this claim that they learned that the Saini had, in fact, been diagnosed with depression “commencing in or about 2005” for which she had been treated with prescription medication. This was the basis for their denial.

[ 12 ] Saini has filed no reply pleading nor sought to amend her claim. As a result, at the present time, this remains a one-issue case: assuming that Sun Life can establish that Saini had, in fact, been diagnosed with depression and that she had been treated for it before she applied for this policy as they allege, can they rely on her failure to disclose this information about her mental health as a basis to deny critical illness benefits following a diagnosis of thyroid cancer?

[ 13 ] Sun Life takes the position that the case may become about the conditions under which the application was made. Their counsel expressed concern that, notwithstanding her current pleading, Saini may, at some future time, claim she didn’t know or understand the significance of responding accurately. He urged the court to consider the possibility that the case could undergo a metamorphosis if the plaintiff seeks to amend her claim and she is successful. If that occurs, the case could end up turning on events that took place in 2005, at the time the alleged misrepresentations were made. On that basis, Sun Life counsel urged me to consider possible prejudice to the insurer if the action were to be reinstated at this time.

[ 14 ] I am required to deal with the case before me as it stands when it comes before me. It is not appropriate for the court to dismiss an action on the basis of an amendment that a party may or may not seek to make down the road, by way of motion that may or may not succeed. That, in my view, would be a wholly improper consideration. The fact that Saini’s counsel refused to respond to questions about his client’s understanding when she signed the policy put to him during his cross-examination does not change this. The position he took was a correct one –as matters stand, those questions were not relevant to any of the matters currently in issue.

[ 15 ] If and when Saini seeks to amend her claim to move in this direction that will be the time for the court to consider whether what she proposes amounts to prejudice that cannot be compensated for by way of costs and that submission could affect the possible success of a motion to amend. Possible prejudice that is contingent on a successful future motion that may never be brought should not, however, be a factor in the mix on this motion,

[ 16 ] Accordingly, this submission has no place here as it is founded on assertions the plaintiff has not made and may never make. This case is not about non es factum so submissions based on that doctrine are not helpful.

Chronology of events: how did we get here

Pre-litigation

[ 17 ] As noted above, Saini’s claim was denied in September 2008. She retained counsel shortly thereafter and he wrote to Sun Life on November 3, 2008, seeking a copy of their complete file. The file was not received until mid-January 2009. Sun Life does not explain in their evidence why it took them over 2 months to get the file together and out to counsel.

[ 18 ] On the undisputed evidence, plaintiff’s counsel then made efforts to resolve the matter without having to resort to litigation between February and June 2009, culminating in Mr. Holland’s letter of June 9, 2009 to Sun Life, inviting Sun Life to discuss settlement with him.

[ 19 ] Sun Life did not respond for a full month. On July 20, 2009, they wrote to say that they stood by their denial. That delay, too, is not explained in Sun Life’s evidence.

[ 20 ] Admittedly, these are very short delays – a little over two months to send out documents and a month to respond to an invitation to discuss settlement. I raise them only because of the very exacting standard which Sun Life has applied to Saini and her counsel and because they rely on the expiry of the limitation period as a basis for presumed prejudice.

[ 21 ] In the context of the position Sun Life takes on this motion, they should be held to account for any aspect of the delay to which they may have contributed, particularly as it pertains to the expiry of the applicable limitation period. On the basis of the foregoing, it appears that Sun Life is in part responsible for this aspect of the delay in getting this action off the ground.

Issuance of the claim in August 2009 – the fall 2010

[ 22 ] The statement of claim was issued soon after this exchange, in August 2009 and served shortly thereafter. Sun Life delivered a notice of intend to defend in early October 2009, served their statement of defence in November and filed it in December 2009.

[ 23 ] It appeared to Sun Life that nothing further was happening with the file at Saini’s end. Mr. Holland, however, explains this apparent gap in part in his evidence. Sun Life served its affidavit of documents and copies of their schedule “A” documents on June 21, 2010. What was received at that time was more extensive than what Sun Life had initially produced, and also included underwriting documents.

[ 24 ] The plaintiff therefore had more material to review and to assess and had to consider whether the action should still go forward in view of the new materials. I note that Sun Life fails to explain why they didn’t provide a complete copy of the entire file when first asked in November 2008. Had they done so, a lot of time could have been saved at this juncture.

[ 25 ] Upon receipt of these new materials, Saini’s counsel turned the documents over to his law student who possessed a medical background, for review and a summary. The review was completed in mid-July and, thereafter, counsel had discussions with others, concluding in the fall 2010, on the basis of all he had reviewed and what he had discussed, that the action should proceed.

[ 26 ] Sun Life made much of this “investigation” time frame when their counsel cross-examined Mr. Holland, Saini’s counsel, suggesting that no decision had been made to actually proceed with the action until the fall of 2010.

[ 27 ] That is not how I read Mr. Holland’s evidence. It seems to me that the decision to proceed was made when the claim was issued, based on the documents that had been provided by Sun Life earlier. When Sun Life produced further documents after the parties exchanged pleadings, a further review and analysis was required to ensure that the new materials did not negatively impact on views already formed about the case.

[ 28 ] Mr. Holland ultimately stated that he undertook an investigation on his own and formed the view that the claim had a reasonable chance of success based on its facts and the law, so that it should therefore proceed. He stated further that he reached this conclusion sometime in the fall of 2010.

The fall of 2010 – issuance of the Status Notice in the fall of 2011

[ 29 ] Mr. Holland explains the delay from the fall of 2010 until January 20, 2011 is as follows:

In the normal course, I would then have given instructions to my assistant, Polly Chow, to schedule examinations and prepare an Affidavit of Documents. Due to inadvertence, I failed to do so until January 20, 2011.

[ 30 ] Mr. Holland therefore attributes this delay to his own inadvertence. No detail as to how or why this matter appears to have fallen through the cracks is provided, however.

[ 31 ] Ms. Pourjhodayar’s evidence is slightly at odds with what Mr. Holland says in terms of the date. She says these instructions were given to Polly Chow on January 11, 2011, not the 20 th as he states, and she attaches Mr. Holland’s memo to Polly on the subject as an exhibit to her affidavit. The memo is dated January 11, 2011. In my view, nothing turns on whether Mr. Holland passed along these instructions to Polly Chow on January 11 or on the 20th, but this discrepancy does raise the issue of a somewhat sloppy preparation of motion materials.

[ 32 ] That leaves one question: what happened between January 2011 and receipt of the status notice in early October 2011? Ms. Pourkhodayar, a lawyer at the firm at which Mr. Holland practices, states that failure to contact defence counsel to schedule discoveries until October 2011 was also the result of inadvertence. Poll Chow says nothing on the subject.

October 2011 forward

[ 33 ] Ms. Pourkhodayar states that in October 2011, Ms. Chow tried to schedule discoveries. From Ms. Chow’s notes, it appears she may have initially contacted James McGowan at Sun Life and she recalls thereafter speaking with an assistant named Diana. A number of potential dates for this event were identified and discussed and, according to Ms. Pourkhodayar, it was ultimately agreed that the examinations would proceed on March 23, 2012.

[ 34 ] Ms. Pourkhodayar provides this evidence on the basis of what she says she was told by Ms. Chow and she notes that she believes what she was told. Ms. Chow, however, does not confirm any of this in an affidavit she delivered later on.

[ 35 ] Later in her affidavit, Ms. Pourkhodayar again states that any delay in moving this matter forward was due to solicitor and administrative inadvertence, noting that the plaintiff had always intended to pursue the claim. There is no direct evidence from the plaintiff, herself, regarding her intentions. In that she attended both the status hearing and the hearing of this motion it appears that she is intent on having the matter proceed, or at least has been since the time of these events.

[ 36 ] As indicated, Ms. Chow also swore an affidavit, and though she does not expressly adopt what Ms. Pourkhodayar states, she confirms that the handwritten notes on Mr. Holland’s memo to her regarding her conversations with Sun Life are, indeed, her own. She adds that the only reason she would have had to contact Mr. McDuff’s office and speak with his assistant, Diane, would have been to schedule these examinations. Again, this is not the clearest way of putting this evidence forward.

[ 37 ] Neither of these deponents was cross-examined. Instead, both Mr. McGowen and Diane Wilmot swore their own affidavits. Ms. Wilmot is legal assistant to Mr. McDuff, Sun Life counsel on this file. She unequivocally denies that she agreed to schedule discoveries, noting that in light of the status notice, Mr. McDuff had not approved that they be schedule. She refers to a letter he wrote in late November that speaks to that. That letter, however, post-dates when Ms. Chow was supposed to have contacted her. It therefore cannot confirm that Ms. Wilmot was aware of Mr. McDuff’s position at the time she is alleged to have agreed to discovery dates if her comments are based on what he told her regarding this action.

[ 38 ] Ms. Wilmot does not state that it is Mr. McDuff’s standard practice to refuse to schedule discoveries once a status notice has been received, however, that must be what she is saying here, as her evidence makes no sense in any other context. I will return to this later.

[ 39 ] Thereafter, Ms. Wilmot’s evidence becomes rather vague and far less certain. Rather than denying that she spoke with Ms., Chow, she states that she has no recollection of having done so, adding that if she had, she would have made a note of it, yet she has no such note in her stenographer’s notebook.

[ 40 ] Ms. Wilmot also says she was surprised to receive a letter confirming a discovery date because she had not agreed to one and there was no notation of the date purportedly agreed to in any of the places she would have put it.

[ 41 ] Mr. McGowen agrees that he did receive a telephone call from Saini’s lawyers on October 13, 2011, but he made no note and has no recollection of what the call was about. If it was about scheduling discoveries, he says he would have referred the call to Diane Wilmot. It is curious that he recalls that he received the call though he made no note of it, and it is surprising that no note was made in that it made enough of an impression on him for him to now recall it. On the whole, his evidence is not terribly helpful.

[ 42 ] At the end of the day I am left, on the one hand, with Mr. Holland’s memo to Ms. Chow on which she has written a bunch of dates, circled one, and then apparently advised all concerned that this was the date that had been agreed to for discoveries. It seems to me that Ms. Chow appears to have believed there had been agreement to discovery dates.

[ 43 ] On the other hand, I have Ms. Wilmot saying she did not agree to any dates for discoveries in view of not having authority due so upon receipt a status notice. She does not deny speaking with Ms. Chow but rather states that she has no recollection of having done so. Mr.McGowen does recall that they spoke but he cannot recall what they spoke about and Ms. Wilmot has no record that any date had been agreed to.

[ 44 ] None of these witnesses were cross-examined so I am left to try to reconcile their evidence. Assuming they are all being truthful, it is conceivable that Mr. McGowen advised Ms. Chow to contact Ms. Wilmot if she wished to arrange discovery dates after she contacted him and that Ms. Chow then did so. The two discussed dates and one date was identified by both as a potentially good one. Ms. Chow may have misunderstood or Ms. Wilmot may not have made it clear that she would have to check with Mr. McDuff before she could finalize the arrangement.

[ 45 ] Short of assuming one set of assistants or the other is being less than honest to protect the position of their employer, the variations in stories can easily be reconciled on the basis of miscommunication. That is the approach I believe is most appropriate here in view of how all witnesses appear to have conducted themselves. In that context, Saini and her counsel would have believed that steps had been taken to move the action forward, albeit after receipt of a status notice.

[ 46 ] In the interim, Saini served her affidavit of documents well after receipt of the status notice, on April 12, 2012.

The Law

[ 47 ] The highest and most recent authority on point is the Court of Appeal’s decision in Bolohan v. Hull 2012 ONCA 121 , where the master’s decision to allow an action to proceed was reinstated.

[ 48 ] The status hearing there arose in the context of a wrongful dismissal case, and involved one lawyer suing another for a termination that occurred in 2006. The action in that case was initiated by notice of action, issued in September 2008 and the status notice was issued in November 2010.

[ 49 ] The Court of Appeal carefully reviewed the basis for the master’s decision as well as that of the judge who overturned it, articulating some general principles, as follows:

At another point in her endorsement, however, the Master stated the proper test: the plaintiff bears the burden of demonstrating that there is an acceptable explanation for litigation delay and that, if the action is allowed to proceed, the defendant will suffer no non-compensable prejudice.

[ 50 ] The court ultimately found that the case represented a “very close call”, noting that the plaintiff’s failure to move the case forward in a timely manner was troubling.

[ 51 ] The court also examined the role of the defendant in the delay and pointed out that in part, the delay was caused by the defendant’s insistence on a non-roster mediator. In that regard, the Court of Appeal held that the conduct of a defendant can have a bearing on the reason for the delay and on how the court should exercise its discretion under the Rule. While acknowledging that the defendant had a right to make this request, the court found that it had not been a wise move in the context of that case. They also made note of the defendant’s failure to serve an affidavit of documents.

[ 52 ] The court found that some steps had, indeed, been taken to move the case forward, but that there had been resistance by the defendant along the way and that this was also a factor to be considered.

[ 53 ] The Court of Appeal spoke in terms of an “acceptable explanation.” That term cannot be defined by the application of rigid criteria. What is acceptable in one case may not be in another – whether or not something is acceptable cannot be decided in a vacuum. The court must assess the situation in the context of all relevant facts and each case will ultimately turn on its own facts. The Court of Appeal spent time in Bolohan examining the particular facts of that case, including the defendant’s role in the delay, in order to determine whether the explanation that had been provided was an “acceptable” one. On the basis of the facts in play, the court concluded that it was.

[ 54 ] It appears that the Court of Appeal has, once again, developed a legal test that ultimately turns on factual context, rather than the rigid application of test made up a series of factors. This approach provides the surest route to a just result in each case.

[ 55 ] I also note that the Court of Appeal looked at prejudice on the basis of certainty that none would result – the defendant will suffer no non-compensable prejudice if the action is allowed to proceed, is the phrase they used . This reinforces my view that the remote possibility of prejudice that might be caused if the plaintiff amends her pleading is not a proper consideration for the court here.

[ 56 ] In Khakshoorian v. Nu Globe Developments , 20122 ONSC 6159, Reid J. noted observations made by J.W. Quinn J. in Sepher Industrial Mineral Exports Co. v. Alternative Marketing Bridge Enterprises Inc. (2007), 2007 23175 (ON SC) , 86 OR (3d) 550, where he explains that there is a reason why Rule 48.14 is silent as to the criteria the court should consider when deciding if cause has been shown. As Reid J. states:

I consider this (the absence of criteria) to be no accident or inadvertent omission on the part of the rules committee. Rather, it is an intentional invitation for judges to make a determination by balancing the competing principles referred to above in the context of the individual circumstances of each case and in the interests of achieving a just result.

[ 57 ] Koepcke v. Webster 2012 ONSC 357 also has a bearing on these issues. There, Master Dash speaks of the need to take a contextual approach to motions of this kind, much as the Court of Appeal has instructed the court to do in regards to motions to set aside administrative dismissals on the basis of delay.

[ 58 ] While I am not certain that it is correct to say that the plaintiff need not meet both parts of the test in view of what the Court of Appeal has stated in Bolohan , (released only a few weeks after Koepcke ) I agree with Master Dash when he states that this test cannot be applied rigidly and without regard to all relevant circumstances. As he noted, if we use a contextual approach when deciding whether an action that has been dismissed for delay should be permitted to proceed, why would we approach the matter on a different and stricter basis when dealing with an action before it has been dismissed? Surely, the court should not place a higher onus on a plaintiff at this stage of the proceeding. That would not be a principled approach.

[ 59 ] Further, despite the two-pronged test, even before Bolohan , the court has tended to look at other factors when dealing with this issue. Outstanding court orders were referred to by Wilson J. in Donskoy v. TTC , 2008 47020 (ON SCDC) , [2008] OJ No. 3634, where she indicated dismissal of an action at a status hearing in the absence of any outstanding order may amount to a reversible error. There, she also took into account the fact that it was the “first time up” for the case as being a relevant factor for consideration.

[ 60 ] Though O’Connell J. rejected the notion that all cases should get one “get out of Status Hearing Court without a dismissal” card on their first time up, he remained of the view that this fact was a relevant though not necessarily determinative factor (see Canadian Champion v. Auto Services Ltd. v. Petro-Canada 2011 ONSC 6794 ).

[ 61 ] It bears noting that O’Connell J. added that the court must be cautious before taking away a party’s right to proceed.

[ 62 ] Before I leave the law, I note that Sun Life filed a 30-page factum along with 23 cases, contained in three separate briefs, none of which was referred to at the hearing, and many aspects of which were completely tangential to the meat of this motion. I will return to this if and when asked to deal with costs. This mountain of material no doubt increased the time and cost of the plaintiff’s preparations for this motion.

(Decision continues exactly as in the source…)

Master Joan M. Haberman

Released: August 15, 2012