SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 13-CV-473179

Heard : December 2, 2014

RE: Aviva Insurance Company of Canada et al. v. Kushnir et al.

BEFORE: Master Joan Haberman

COUNSEL:
Shekter, R.H. for the moving parties, Assessment Direct In., Krinoruk and Smolar

Habas, A. for the moving parties, Osler Rehabilitation Centre Inc. and Estrah

Rachlin, A.I. for the respondent, Aviva

REASONS

Master Haberman:

[1] Two sets of defendants move for particulars of allegations contained in Aviva’s claim, which is based on fraud and collusion to commit fraud.

[2] In their statement of claim, Aviva alleges that the defendant, Dr. Kushnir, a chiropractor who is not involved in these motions, provided services, through both the defendants, Assessment Direct Inc. and Osler Rehabilitation Centre Inc., for Aviva insured’s. In the course of invoicing for his services, it is alleged that both of these entities charged for services that Kushnir did not perform and/or they inflated his hourly rate and the number of hours worked per day beyond the maximum amount allowed under the Superintendent’s Guidelines. Despite this, Aviva paid all or most of these invoices from December 2009 until August 2010.

[3] Aviva claims that this practice persisted for a period of almost 9 months, and that it pertained to both invoices for treatment plans (OCF-18) and with respect to standard invoices for treatments (OCF-21). They became aware of this during what they refer to as a “routine audit” conducted in 2012. I have had an opportunity to review some of the invoices that Aviva relies on in support of their claim, and query why they needed an audit in order to catch the alleged discrepancies, many of which are apparent on the face of these documents. That is an inquiry for another day.

[4] The moving parties rely on the general rules of pleading, as well as Rule 25.06(8), which reads:

Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from it is to be inferred.

[5] Fraud and collusion to defraud both find their way into the original pleading repeatedly. Despite that, the case has been pleaded as somewhat of a mystery: either Kushnir didn’t perform the services or he overcharged. There is no indication as to which sin he committed regarding which invoices so it is difficult to understand how these defendants can explore the circumstances of the claim in a meaningful way in order to deliver a defence to it. Though the level of particularity that must be pleaded where fraud and other torts referred to in the Rule are alleged is higher, there remains a distinct a lack of particularity in the revised version of the pleading regardless of the removal of the terms “fraud” and “collusion”.

[6] The moving defendants served demands for particulars with respect to the original claim. After a certain amount of back and forth on this issue, to be discussed more fully if I am required to fix costs, the plaintiff refused to provide anything beyond an electronic spreadsheet, with the proviso that the information contained in it did not constitute particulars, but rather, was being produced pursuant to the plaintiff’s discovery obligation, so was protected by the implied undertaking rule. The plaintiff added that if this approach was not agreeable, the spreadsheet must not be disclosed, in any form, to the defendants, themselves. This condition was not acceptable, hence, these motions were brought.

[7] These defendants essentially see the statement of claim as a bare bones pleading, without the level of detail that “full particulars” implies. The plaintiff denied that the particulars sought were needed.

[8] Submissions were heard on December 10, 2013. Thereafter, but before I had rendered my decision and unbeknownst to me, Aviva’s counsel tendered a new pleading, which he apparently believed cured the perceived absence of necessary particulars.

[9] On March 7, 2014, after I had completed writing a portion of the decision, Assessment’s counsel wrote to advise me about the new pleading and to advise that, in his view, it did not accomplish what Aviva had set out to do with it. As a result, it appears counsel wanted me to decide which position I agreed with, and in the event that I saw things as they did, they wanted me to release my decision. Dates for a 2-hour motion were sought at that time. My response of that day was that motions of two hours or less are booked through the Scheduling Unit. I therefore left it to counsel to book the time they needed and I awaited the return of the motion on a regular motions list.

[10] Almost 4 months later, on June 23, 2014, I heard from counsel for Osler, who advised that they had been attempting to book the date but were now awaiting the release of dates in October 2014. While an October return date made sense if the motion was only being booked as of June 2014, counsel was to have begun the exercise in early March when they first learned about this development, so I am unclear why it took so long to schedule this date. As a result of all of this intervening lack of activity, I am now reviewing a case I read and heard about a year ago. Further, as a result of this delay, we are about to turn the corner from 2014 to 2015 and pleadings have yet to be completed in this 2013 action.

[11] In response to the defendants’ request to have me now rule on the current version of the claim, Aviva moves to for a finding that the issue is now moot in view of their new pleading, such that my decisions regarding the original motions should not be released. For the reasons that follow, I do not accept Aviva’s position and find for the moving parties.

THE FACTUAL CONTEXT

The Moving Defendants

[12] On January 31, 2013, Aviva issued a notice of action which was served thereafter with a statement of claim. The original version of the claim is permeated throughout with allegations of fraud and collusion committed by all of the defendants.

[13] The focus of this alleged conduct is the defendant, Leon Kushnir, who allegedly submitted unknown claims and/or invoices for unspecified insured services to Aviva though the two providers of chiropractic services, Osler and Assessment. The payment sought pursuant to these invoices was allegedly exaggerated, illegal and/or for services not provided, in whole or in part, to a series of unnamed patients/insureds. Aviva claims $1 million in damages, representing their losses during the period these invoices were provided and paid between December 7, 2009 and August 27, 2010. They involved two different forms of services: treatment plans (OCF-18’s) and charges for services (OCF-21’s).

[14] Aviva explains that they paid the claims, apparently without question, and took no action to recover payments made until this action as they were not aware of these practices. In was only during a routine administrative audit performed in 2012 that these activities with respect to OCF-21’s apparently came to light. The audit apparently suggested that more than 8 hours per day were billed for Kushnir by both service providers on many occasions. The particulars of that part of the claim took the form of a chart, showing “hours billed” and “number of days.” The Chart is not broken down between the two service providers and there is no reference to the actual patients/insureds for whom these services were allegedly provided. For ten of the days, the number of hours billed in a day exceeded 24. No such detail is provided regarding treatment plans (OCF-18’s).

[15] Aviva obviously has the information they are holding back – they conducted an audit which they claim brought the practice to light, and which yielded the information on their Chart – yet, they are not prepared to share the information until the disclosure stage of the action.

[16] On April 26, 2013, Assessment served its Demand for Particulars that runs for 6 pages. The words “fraud” and “collusion” do not appear until the top of page 5 of the Demand, so there was clearly more to this request from the outset than that aspect of the claim. Osler followed a similar path.

[17] On May 2, 2012, Aviva’s counsel advised that no particulars would be provided and that the information and documents should be sought, instead, at examinations for discovery.

[18] Assessment’s evidence is to the effect that they need the particulars in order to respond to the very serious allegations of fraud and collusion, but they then go on to list particulars which pertain to more general information in allegations that do not necessarily mention fraud. Jeremy Dunn, the lawyer who swore Assessment’s affidavit, states that the particulars sought are known to Aviva, as they appear to have performed an in depth analysis of the billings and invoices that form the subject matter of the pleading.

[19] Assessment served its motion record on May 7, 2013, but received no response to it until October 2013, at which time a spreadsheet was provided in electronic form. The plaintiff provided the information, noting that it did not constitute “particulars” and that it could not be disclosed to the defendants, even in redacted form, subject to the defendants’ agreement that the information was protected by the implied undertaking rule. This rule does not normally apply to particulars, as they are intended to be incorporated into a pleading, so a matter of public record once contained in a trial record.

[20] Defence counsel persisted in their efforts to have the spreadsheet considered as a formal response to the demands for particulars. In response, they were advised, on October 17, 2013 that:

• The chart provided adequate particulars for the purpose of pleading;

• The chart represented the entirety of their (Aviva’s) current knowledge of the claims;

• Aviva has no further particulars of collusion/conspiracy; and

• Due to privacy concerns the schedule cannot be produced in the form provided, but if a formal response to the particulars was being sought, Aviva will have to redact the personal information of the individual claimants.

[21] Both defence counsel agreed to the redaction, by letter of October 18, 2013, and it was suggested that initials of the individual claimants should be used instead of their names. This was a workable proposal, or, at the very least, the starting point for a discussion. Though it was Aviva’s counsel who first proposed providing the chart in redacted form, he refused to accede to do so when agreement was reached on this point.

[22] The defendants’ original plan was to bring these motions before a judge together with a motion to strike portions of the statement of claim. Of course, unless the latter was brought under Rule 21, there was no reason the master could not have heard them. In any event, Aviva counsel did not agree with that approach and threatened to note default if they did not deal with the pleadings issue first.

AVIVA

[23] Aviva’s evidence was tendered by Caroline Lutes, a member of the law firm acting for them in this matter. She notes that the Superintendent of Insurance issues bulletins from time to time that set out the maximum hourly rates that various services providers, such as chiropractors, can charge insurers for services provided to insured, as part of their claim for Accident Benefits. The Superintendent also promulgates approved forms for use with respect to the submission and processing of claims for accident benefits, including those for medical and rehabilitation claims.

[24] In this case, both defendants used the approved forms to submit the CF-21 claims but instead of breaking down the claims for Dr. Kushnir by service and hourly rate, a lump sum was used. Ms. Lutes demonstrated her point with reference to one such claim, appended as an exhibit to her affidavit, noting that it was typical of the documentation submitted to Aviva and forming part of this action.

[25] A second affidavit was filed on behalf of Aviva by Diana Romano Reid in October 2014 in connection with their motion to have the issue rendered moot. Romano Reid explains that a fresh as amended statement of claim was served by Aviva after the first hearing, which they say affectively removed the allegations of fraud, collusion and illegal and unlawful conduct. Accordingly, Aviva now claims the defendants’ motion are both moot. They disagree. So does this court.

[26] There is nothing in the evidence to explain why Aviva counsel first proposed but then reneged from redaction of personal information of patients as a way of allowing them to provide the disclosure sought. There is also no discussion about why they felt duty bound to ensure that no personal information was provided. They have not served any of the patients whose records were involved, though they rely on their privacy as the basis for not providing disclosure even in redacted form. Instead, they fall back on their position that further particulars are not required.

THE FRESH as AMENDED STATEMENT of CLAIM

[27] Although the terms “fraud” and “collusion” have been omitted from the current version of the claim, at paragraph 22 therefor, Aviva asserts that they at all times thought that the defendants were invoicing and submitting documents that were “honest”, which implies that that has turned out not to be the case at all.

[28] While the term “negligence” is used, the context in which it has been used suggests that the defendants’ conduct amounted to negligently misrepresenting the true state of affairs, as they submitted invoices and claims for payment that exceed the allowable hourly rate and hours per day that could be billed. Similarly, submitting claims for services not actually performed suggests there was negligent misrepresentation as to the information that was provided in the forms submitted.

[29] That is the current state of affairs, but Aviva’s counsel was candid when asked if consideration had been given to again amending the claim to add back allegations of fraud and collusion. He conceded this could not be ruled out after the discovery process.

THE LAW

[30] It is trite law that a pleading must contain a concise statement of material facts.

[31] While parties are discouraged from pleading actual evidence, as distinct from material facts, the lines are often blurred. The guiding principles to apply when distinguishing between the material fact and evidence must be the multiple purposes that pleadings are intended to serve.

[32] Epstein J. made the point well in Aristocrat Restaurants Ltd. v. Ontario [2003] OJ No. 5331:

The important of pleadings cannot be overemphasized. They define the issues in dispute. They give notice to the other side of the case to be met. They inform the court of the matters in issue. They provide a permanent record of the issues raised in deciding the action so as to prevent further litigation upon matters already judicially determined. They also play a key role in defining the scope of discovery.

[33] Though the words” fraud” and “collusion” have been removed from the claim, it is still open for a court to characterise the conduct complained of as a form of misrepresentation. It is critical to note that Rule 25.06(8) applies to allegations of misrepresentation in the same way it does to fraud, such that:

Where fraud, misrepresentation¸ breach of trust, malice or intent is alleged, the pleading shall contain full particulars….

[34] When dealing with a similar case where fraud was alleged by an insurer against a service provider regarding one insured, Master Dash wrote the following, which, in my view, applies regardless of whether or not fraud is alleged:

In this case, the Plaintiff knows the particulars. The defendants should not have to sift through every service provided by these 4 individuals and billed by the two corporations in order to respond to the propriety of every invoice. I agree with the Defendants that particulars of the alleged services not rendered and invoices fraudulently rendered are necessary for them to plead so that the defence can be narrowed to responding to the matter truly in issue in the action. The Plaintiff is concerned that if they narrow the issues it will restrict their discovering other particulars of fraud. What the Plaintiff wants to do is to examined all records of the Defendant related to Ms. Pokuaa (the patient to whom services were claimed to be rendered), whether or not the services were provided in order to discover more. That is a fishing expedition.

(see Perth Insurance Company v. v. Osler Rehabilitation Centre; Toronto, April 14, 2011, 01-CV-415074).

[35] In Perth, the fact that the Plaintiff had the particulars sought made the defence position even more compelling.

[36] Aviva hides behind the Personal Health Information Protection Act, SO, C. 3, Schedule A. Pursuant to s. 7 of the Act, they say they are a health information custodian. As a result, Aviva claims to be bound by the Schedule.

[37] S. 4(3) defines “identifying information”, as information that identifies an individual; or for which it is reasonably foreseeable in the circumstances that it could be utilized, either alone or with other information, to identify an individual.

[38] Pursuant to s. 18(3), Aviva claims it cannot release identifying information without the express consent of the individual involved, where the information is being shared for reasons other than providing them with health care.

[39] Aviva then claims that as any particulars disclosed would form part of the pleadings, and as pleadings are a matter of public record, proving the particulars sought at the pleadings stage as a response to the demand would make them vulnerable to public exposure.

ANALYSIS and CONCLUSIONS

[40] Having reviewed the law regarding the purposes served by the pleadings, there can be no doubt that this claim fails with respect to most if not all of them. Though the defendants are being told that there are serious problems with the billings they submitted for Dr. Kushnir for a 9-month period (most of which were paid 2-3 years ago), they are not told which invoices are affected and in what respect. They are entitled to know, in each case, whether there was an over-charge in terms of hours or hourly rate billed. They are also entitled to know if the claim is for services for which Aviva was invoiced though they say no service was actually provided.

[41] Absent this essential information, all the defendants can readily plead in response is “no, that never happened or if it did, it did not happen that way” unless they undertake the kind of audit activity that Aviva has already performed. As the Master stated in Perth, the defendants should not have to sift through every service provided to all of their insureds to figure out where they are potentially vulnerable – and even then, not be certain if what they find matches up with what Aviva claims that its audit disclosed. This would not tell them the case they have to meet.

[42] To put it another way, having obtained an audit of the records, Aviva knows precisely which patient records are affected and in what way – where Dr. Kushnir was billed out for more hours than he worked; at an hourly rate in excess of what was permissible; or for services never provided. They have never denied having this information yet they are not prepared to put it in a pleading.

[43] The pleading also falls far short of narrowing the issues, to permit an orderly and efficient disclosure process. Without knowing which invoices are affected, how do the defendants even begin to fulfill their obligations regarding documentary disclosure? Oral discoveries will turn into a fishing expedition of vast dimensions, all the more so now that the pleading has been amended to delete references to fraud. The discovery process is in jeopardy of being high-jacked by Aviva to allow them to investigate and locate possible fraud, which could then be added back to the claim after it has been found to exist, thereby minimizing possible cost exposure if it is not. This will add unnecessary cost and delay to the process.

[44] Whether or not fraud and collusion are pleaded are beside the point – this pleading does not meet the minimal level of disclosure, regardless of how the claim is framed, so the amended version does not obviate the problems I refer to above. In any event, what is pleading now is essentially negligence regarding how various invoices were prepared in regard to work that was or was not performed - in essence, negligent misrepresentation. Misrepresentation would be caught by the same rule as fraud with respect to the higher level of particularity required in the pleading.

[45] I therefore conclude that the particulars sought are required to plead to both the original and the newly amended form of pleading.

[46] Turning to the confidentiality issues raised by Aviva, I start with their basic premise that the particulars sought cannot be provided at this stage as there is a risk they could enter the public domain, thereby potentially putting Aviva in breach of the Act.

[47] The defendants indicated they were content to have the information in a form that identified individual patients by their initials only. In order for the identity of a patient to become public in that context, someone would have to know to go through the court records, to seek this file, to find the documents in issue and to then match up the initials with some unknown other information to learn that certain people were seen by a certain chiropractor at a certain point in time. I admit I am at a loss to see what possible mischief this can lead to.

[48] All of this is even more difficult to accept in the context of the basic premise that the particulars would form part of the pleading and therefore be available to the public for inspection. Most “freedom of information and protection of privacy” legislation has an override provision that makes all restrictions on disclosure subject to court order. Aviva did not provide the court with the entire Act in this case, so I located the provision myself, which reads as follows:

41. (1) A health information custodian may disclose personal health information about an individual,

(a) subject to the requirements and restrictions, if any, that are prescribed, for the purpose of a proceeding or contemplated proceeding in which the custodian or the agent or former agent of the custodian is, or is expected to be, a party or witness, if the information relates to or is a matter in issue in the proceeding or contemplated proceeding;

(b) to a proposed litigation guardian or legal representative of the individual for the purpose of having the person appointed as such;

(c) to a litigation guardian or legal representative who is authorized under the Rules of Civil Procedure, or by a court order, to commence, defend or continue a proceeding on behalf of the individual or to represent the individual in a proceeding; or

(d) for the purpose of complying with,

(i) a summons, order or similar requirement issued in a proceeding by a person having jurisdiction to compel the production of information, or

(ii) a procedural rule that relates to the production of information in a proceeding. 2004, c. 3, Sched. A, s. 41 (1).

[49] There were, therefore, at least three avenues open to Aviva for resolution of this debate, none of which required a full blown court motion nor an amendment of their pleadings:

o It was open to Aviva to advise the defnedants that a court order was required before it could provide the particulars, but advise that they would not resist it;

o Alternatively, they could have sought reached agreement with the defendants regarding the terms of a confidentiality order or asked this court to impose a sealing order on the particulars provided. Aviva counsel conceded that he had not considered that last day;

o Finally, Aviva could have sought and possibly obtained consent from the patients involved. Only they know how many people that concerns so I am unable to say whether this would have been a Herculean or a fairly straightforward task.

[50] In view of all the paths that Aviva could have taken and chose not to, I am of the view that it is appropriate at this time for me to order that Aviva provide the particulars sought within 30 days, as this motion has delayed their own action by a considerable period of time.

[51] If the parties are unable to agree as to costs, I can be spoken to within 30 days.

Master Joan M. Haberman

Released: December 9, 2014