Future Health Inc. et al v State Farm Mutual Automobile Insurance, 2015 ONSC 2250
CITATION: Future Health Inc. et al v State Farm Mutual Automobile Insurance, 2015 ONSC 2250
HAMILTON COURT FILE NO: 00-1278
DATE: 2015/06/17
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
SCOTT, PICHELLI & GRACI LTD., Trustee in Bankruptcy for Future Health Inc., operating as Trauma Services
Plaintiff
-and-
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO.
Defendant
BEFORE: Turnbull, J.
COUNSEL: Jane Poproski, Counsel for the responding party/plaintiff
David S. Steinberg and Paul Lee Q.C., Counsel for the moving party/defendant
HEARD: June 16, 2015
CORRECTED DECISION
Corrected decision: The year 2015 was added to the neutral citation number of the original Endorsement, released June 17, 2015.
ENDORSEMENT
[1] The plaintiff has brought a motion seeking three forms of relief:
a. the production for examination for discovery of 33 former employees of the defendant who were previously named defendants in this action.
b. an order reducing or returning the entirety of $350,000 paid into court as security for costs by the plaintiff pursuant to an earlier order of this court.
c. an order prohibiting the defendant from bringing any other motions in this matter until the examinations for discovery of the 33 former defendants had been completed in its entirety.
Context of the Motion
[2] In this litigation, the plaintiff alleges that the bankrupt (referred to interchangeably as Trauma or Future Health Inc.) provided healthcare services to policy holders in Ontario who were carrying automobile insurance issued by the defendant State Farm under the Statutory Accident Benefits Schedule or it predecessor, the "No Fault Benefits Schedule" including O. Reg. 672/90; O.Reg. 776/93 and O. Reg 430/96 (hereinafter referred to as "SABS"). It is pleaded that during the period January 1, 1991 to December 31, 1998, Trauma was retained by forty two persons injured in motor vehicle accidents to provide each of them medical and rehabilitative services pursuant to the benefits available to them under their respective car insurance policies issued by State Farm.
[3] It is pleaded that each of the forty two persons submitted treatment plans to the defendant and that each of the claims was denied in whole or in part without justification. The plaintiff asserts that as a result of the active opposition of State Farm and its employees to the involvement of Trauma in the care of these patients, the therapeutic relationships of Trauma with 27 of those patients were compromised, negated or destroyed and Trauma thereby lost the value of the Treatment Plans.
[4] It is pleaded in paragraph 32 of the statement of claim that State Farm and its employees used "whatever steps they deemed necessary in forcing Trauma out of the SABS medical and rehabilitative care marketplace."
[5] The plaintiff pleads that the defendant, with other insurance companies, instructed its employees and adjusters to deny all treatment plans submitted by Trauma pursuant to the statutory accident benefits regimes in place from time to time.
[6] The plaintiff alleges in essence that if these treatment plans had been accepted and paid in full, Trauma would have earned revenue as a result of the services provided. The plaintiff argues that the treatment plans were denied, as a starting position. Thereafter many of them negotiated with the insured person personally or in some cases with a representative or the president of Trauma. The plaintiff alleges that a release was signed prior to Trauma knowing that there was such a plan in place to deny all claims submitted by Trauma.
[7] Trauma made an assignment into bankruptcy on December 31, 1998 and the Trustee commenced this action in June 2000.
[8] The action brought against the defendant claims aggravated and punitive damages for inducing breach of contract, intentional interference with economic relations, bad faith and punitive damages.
[9] Needless to say, State Farm has vigorously denied the plaintiff's allegations. There have been many, many motions brought during the duration of this litigation which is now in its fifteenth year.
[10] Due to the number of motions brought and the complexity of the matter, I assigned myself as the "motions judge" pursuant to Rule 37.15.
[11] The parties brought three motions with voluminous materials before me to consider. After listening to submissions of counsel, I agreed to hear the motions as follows:
a. the plaintiff's motion for leave to issue a Fresh, Fresh Statement of Claim. That leave was granted by written reasons dated April 10, 2015.
b. the defendant's motion for Summary Judgment. That motion was argued April 2, 2015. There were two issues on that motion. The first was whether the Trustee lacked the capacity to bring this action. If that question was answered negatively, the action would have been at an end. In written reasons dated May 25, 2015, I ruled that the Trustee did have the capacity to bring the action. The second part of the summary judgment motion was whether the action should be dismissed as the plaintiff had no proof that the defendant had acted improperly in negotiating resolution of the 42 cases involving Trauma's former clients. Trauma and its executive officer had participated in many of the negotiations resulting in the settlement of those cases with State Farm. Counsel for the plaintiff urged the court that without having an opportunity to examine the 33 former defendants, it would be denied the opportunity to provide the court with the evidence required to prove its case. In the circumstances, I reserved my decision on the second part of the summary judgment motion to allow this motion to be argued.
Background Facts Relating to this Motion
[12] In 2005, the parties entered into a consent order before the Honourable Mr. Justice Festeryga. At that time, the parties signed minutes of settlement and agreed that all the personal defendants (employees and adjusters of the defendant, State Farm Mutual Automobile and Insurance Company) would be released from the actions. However the order also provided that the individual named defendants, who were released from the actions, were to be produced for discovery save and except for Edward Rust and Robert Cook. Paragraph 4 of that order provided that the individuals to be discovered were to be presented pursuant to a reasonable schedule for attendance and those discoveries were to be completed by December 31st, 2005. The court further ordered that the court serve and file a fresh statement of claim within 15 days of Justice Festeryga's order which was the 1st day of February 2005.
[13] The fresh statement of claim was not served until September 28, 2005.
[14] After hearing a motion brought by the defendant, on December 1, 2006, Festeryga J. ordered the plaintiff to post security for costs: $250,000 in respect of costs incurred to that date, and a further $100,000 for costs to be incurred in connection with future examination for discovery. The $250,000 for costs incurred to that date had nothing to do with examinations for discovery. The money was paid into court by the plaintiff as ordered.
[15] A series of motions were argued or settled between the parties in 2012, 2013 and 2014. However, the parties were not even able to agree on the terms of some of the orders without the assistance of a judge to settle the orders.
[16] At a meeting to settle the orders before Lococo J. on July 29, 2014, the parties by their counsel signed amended Minutes of Settlement with respect to a motion resolved in 2012. Those Minutes of Settlement, provided that examinations for discovery could proceed, subject to the following conditions and limits:
A) Plaintiff's counsel shall have up to 1.5 hours to examine each deponent to be produced on behalf of the defendant in accordance with Justice Festeryga's order of February 1, 2005, unless a court orders otherwise.
B) Plaintiff's counsel shall be limited to asking questions related to:
Whether any officers, directors, superintendents, agents or employees of State Farm gave the individual adjuster any direction, suggestion or instruction to not approve the treatment plan at first instance or otherwise;
The OCF-9 or similar document expressly incorporated by reference therein denying in whole or in part the treatment plan, having regard to the adjusters exercise and discretion in reviewing said treatment plan; and
Plaintiff's counsel may ask reasonable follow up questions arising out of any answers to the above questions.
C) Examination of the defendant's deponents shall take place at Network North in Toronto unless all parties agree otherwise. Counsel will cooperate and be flexible as appropriate with respect to scheduling. Best efforts will be made to complete all examinations within 180 days.
[17] In the plaintiff's submissions on the summary judgment motion, counsel contended that those examinations for discovery have to take place prior to any summary judgment motion being determined. It was argued that an adjudication of the underlying nature of the claim (i.e. inappropriate conduct on the part of State Farm or its employees) is the foundation of the plaintiff's case and the plaintiff is entitled to have that information prior to facing a motion for summary judgment.
[18] The defendant argued that on a summary judgment motion the responding party must "put its best foot forward". Based on the record before the court, the defendant arguee that there is not a genuine issue for trial and judgment should be granted dismissing this action summarily.
Analysis
[19] The factum of the defendant filed in response to this motion states the following at paragraphs 4 and 5:
"The defendant's summary judgment motion – which has been filed and is ready to be heard at any time – will finally resolve the issue of whether or not the plaintiff has capacity to make the multibillion dollar in personam claims for bad faith and punitive damages that is advanced in the action. If that action is resolved in favour of the defendant – and there is good reason to believe it should be – there will be no need to engage in any discoveries let alone trial – several hundred thousands of dollars and countless hours of time must be saved."
"Conversely if the issue regarding the in personam claims is finally resolved, then there will be no need to duplicate argument at trial. Discoveries may proceed with the firm knowledge that the information sought, and the time and resources expended will not be in vain."
[20] Paragraph 8 of that same factum states that the chore the court faces on this motion is whether to force the parties on to lengthy and expensive discoveries without regard for whether they will actually serve a purpose or to hear the summary judgment motion and resolve one way or the other, the overriding threshold issue without further delay.
[21] As noted above, I have ruled on the "overriding threshold issue" and determined that the Trustee does have the standing to bring the claim.
[22] The parties signed Minutes of Settlement on July 29, 2014. The agreement specified a relatively detailed discovery plan for the 33 former defendants. The parties agreed to make best efforts to complete all examinations within the following 180 days.
[23] Mr. Lee did indicate at the meeting before Justice Lococo that a motion for summary judgment would be brought. Clearly that was done and the "threshold" issue determined.
[24] The defendant is responsible for producing those former defendants to be examined by counsel for the plaintiff. While the defendant had the right to bring a motion for summary judgment, the court must consider the understanding that existed between counsel. If Mr. Lee did not intend to honour the agreement relative to the discovery of the 33 former defendants in the Minutes of Settlement, he ought not to have signed them. In doing so, he bound his client to a course of action which was simply a confirmation of the earlier agreement which had resulted in the consent order of Festeryka J. in 2005.
[25] Mr. Steinberg argued that the plaintiff has not taken steps to obtain the evidence of the 33 witnesses under the Rules of Practice so that their evidence would be available on the second prong of the summary judgment motion. He referred the court to Rule 39.03 which permits a person to be examined as a witness before the hearing of a pending motion. However, this Rule would have required the plaintiff to bring yet another motion in this endless litigation. The plaintiff would bear the costs of booking the examinations, locating the witnesses and possibly hiring an investigator to locate them, serving them with appointments, and examining them in the county or municipality where they presently reside. Those are all obligations which were imposed on the defendant by the consent order of Festeryka J. in 2005 and the Minutes of Settlement signed on July 29, 2014.
[26] I do not find that the plaintiff has acted improperly in relying on the agreement made with defendant's counsel.
[27] Our civil justice system is premised on the idea that the process of judicial determination of litigants' rights must be seen to be just and fair. If this principle is compromised, public confidence in the administration of justice will be diminished. As stated by Karakatsanis J. in Hyrniak v Mauldin [2014] SCC 7 at para 5, , "the summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims."
[28] On a summary judgment motion, the moving party has the onus to show that there is no genuine issue for trial but the responding party must present its best case or risk losing the motion. In the facts of this particular case, the plaintiff is not able to present its best case because the defendant has brought a summary judgment motion before the plaintiff could examine witnesses who may have evidence relevant to the issues before the court.
[29] It would not be just to deny the plaintiff the right to examine the 33 former defendants. Their evidence or the lack of it will then be available to the court in adjudicating the second prong of the defendant's summary judgment motion. It will allow the most just and proportional determination of that issue in the most expeditious manner. It also, not incidentally, will implement and enforce the agreement of the parties reflected in the earlier consent order of this court.
[30] It is ordered that the defendant shall produce the 33 former defendants to be examined in accordance with the Minutes of Settlement signed July 29, 2014.
Issue #2: Reduction or Return of Security Paid into Court
[31] The plaintiff seeks an order that some or all of the funds paid by the Plaintiff into Court as security for costs pursuant to the order of Festeryga J. dated November 29, 2006 be paid out of court to the credit of the plaintiff.
[32] Rule 56.07 grants the court the authority to increase or decrease the amount of security for costs at any time. Counsel for the plaintiff was unable to provide the court with any case law where the security for costs was reduced in mid-litigation.
[33] This court at this stage of proceedings, is not going to go behind the order of Festeryga J. He clearly anticipated that this would be tortuous, expensive and protracted litigation. He knew that the Trustee in Bankruptcy was involved in the litigation. I have been provided with no background information relating to how he determined the amount of security for costs nor do I have sufficient information to satisfy me that the amount ordered was significantly disproportionate to the anticipated legal costs of the defendant.
[34] In the circumstances, the plaintiff's motion for the reduction or remission of the funds paid into court as security for costs is dismissed.
Issue #3: Order Prohibiting Further Motions by the Defendant
[35] As indicated to counsel during the argument of this motion, this motion is dismissed. I have appointed myself as motions judge in these proceedings under Rule 37.15. Hence, any motion will be returnable before me. I am able to assess if a motion is vexatious or an abuse of the process and to deal with it accordingly.
[36] It is an exceptional and rare case where a party should be denied access to the court for an interlocutory ruling. In this case, on review of the entire, voluminous record, I do not find that the defendant or its counsel has acted in an inappropriate or unfairly litigious manner. It has been vigorously contested litigation but not in a manner which would warrant such a severe sanction by the court even if I were not the Rule 37.15 motions judge.
[37] The plaintiff has been successful on the central issues which took almost all the time on this motion. If the parties can not agree on costs, the plaintiff shall serve and file a costs summary and brief written submissions on or before July 1, 2015. The defendant may serve and file brief written reply submissions on or before July 15, 2015.
Turnbull J., R.S.J.
Date: June 17, 2015