COURT FILE NO.: 12-56112 DATE: 2019/10/28

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

TATIANA NEMCHIN Plaintiff

– and –

YVONNE GREEN Defendant

Joseph Obagi and Adam Aldersley, for the Plaintiff

Thomas Ozere and Kim Dullett, for the Defendant

HEARD: August 28 and October 16, 2018, and May 1, 2019

POST-TRIAL RULING

Assignment of Collateral Benefits (Part 2)

CORTHORN J.

Background

[1] Tatiana Nemchin was injured in a motor vehicle collision in December 2010. She commenced this action in November 2012. At the conclusion of trial in April 2017, the jury rendered its verdict.

[2] The damages awarded include $600,000 for loss of future income. The amount payable by the defendant under that head of damages is reduced to $540,000 because Ms. Nemchin was found to be contributorily negligent. The damages awarded for loss of income are not subject to income tax.

[3] As of the date of trial, Ms. Nemchin was receiving long-term disability ("LTD") benefits through her employee benefits package with her former employer, the National Capital Commission. Following the conclusion of the trial, the defendant was successful on a motion for an order requiring the plaintiff to assign to the defendant all of the plaintiff's rights in respect of all payments to which she is entitled under the policy of LTD insurance after the trial of the action: see Nemchin v. Green, 2018 ONSC 2185, 140 O.R. (3d) 668 ("Nemchin (No. 1)").

[4] The LTD insurer is Sun Life. The plaintiff's former employer made a contribution to the premiums paid for the LTD insurance. As a result, the payments of LTD benefits are taxable income to the plaintiff. Sun Life withholds income tax at source, remitting the amount withheld to the proper government authority.

[5] The plaintiff and the defendant disagree as to how, for the purpose of the assignment, to address the fact that (a) the payments of LTD benefits are taxable income to the plaintiff, and (b) the damages awarded for loss of income are not subject to tax. The plaintiff argues that she is to be credited for the gross amount of the payments made to her for LTD benefits. The defendant submits that the credit is for the net amount of those payments (i.e., after tax).

[6] The plaintiff submits that, regardless of whether the credit is for the gross or net amount of the payments of LTD benefits, the court must impose a mechanism to permit the parties to address the potential income tax shortfall to or overpayment by the plaintiff arising from the deduction of income tax at source. The plaintiff requests that the mechanism permit the parties to address the shortfall or overpayment, if any, on an annual basis.

[7] When this motion was heard, the defendant's appeal from the verdict had not yet been heard. Had the defendant been successful on that appeal, the outcome of this motion would have been rendered moot. The parties agreed that the court's decision on this motion would be deferred until the outcome of the appeal was known.

[8] The appeal was argued in December 2018. The Court of Appeal released its decision, dismissing the appeal, on July 31, 2019: see Nemchin v. Green, 2019 ONCA 634 ("Nemchin (ONCA)"). A decision is therefore required to address the impact of the deduction at source of income tax from the payments of LTD benefits to which the plaintiff is entitled after the trial of the action.

[9] In May 2019, counsel appeared before me in this matter and in another action for submissions as to the date on which an assignment of collateral benefits, if ordered, is effective. That issue is also addressed in this ruling.

[10] The collateral benefits in the other action relate to damages awarded for future health care expenses: see Rolley v. MacDonell, 2018 ONSC 6517. The parties in Rolley agree that an assignment is to be ordered. The order has, however, yet to be made. The ruling on the related motion in Rolley is issued separately.

The Issues

[11] The issues determined in this ruling are:

1. Is the defendant entitled to a credit for the gross or net (after-tax) amount of the LTD benefits to which the plaintiff has had the right of payment subsequent to the date of the verdict?

2. What additional terms, if any, are required to address the deduction at source of income tax, by Sun Life, from the payments for LTD benefits to which the plaintiff has the right?

3. On what date is the assignment of the right to payment of the LTD benefits effective— the date of the verdict at trial, or the date on which the defendant pays the full amount of the judgment, including pre-judgment interest and costs?

4. Is the plaintiff required to disclose to Aviva the amount of the LTD benefits to which she has had the right of payment since the date of the verdict?

5. How are costs incurred by the plaintiff to pursue or maintain her right to payment of LTD benefits subsequent to the date of the verdict to be addressed?

Issue No. 1 – Is the plaintiff entitled to a credit for the gross or net (after-tax) amount of the LTD benefits to which the plaintiff has had the right of payment subsequent to the date of the verdict?

a) [Section 267.8](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html) of the [Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)

[12] The defendant's entitlement to an assignment of future collateral benefits is statute-based and found in s. 267.8 of the Insurance Act, R.S.O. 1990, c. I.8 ("the Act"). That section provides a comprehensive system for addressing collateral benefits received by or available to a plaintiff in motor vehicle litigation.

[13] Pursuant to s. 267.8, collateral benefits are applied by way of reduction (past benefits), trust (future benefits), or assignment (future benefits) against damages payable for income loss, loss of earning capacity, health-care expenses, and other pecuniary losses. Future collateral benefits, meaning those to which a plaintiff has the right of payment after trial, are addressed in ss. 267.8(9)-(14).

[14] The first element of the comprehensive system relevant to future collateral benefits is the trust in favour of a defendant. Pursuant to s. 267.8(9), a plaintiff who has recovered damages under one or more of the named headings "shall" hold certain amounts in trust for the defendant.

[15] The parties to this action are dealing with damages for loss of income and payments under an income continuation benefit plan (s. 267.8(9), item 2). The policy of LTD insurance with Sun Life is such a plan.

[16] A plaintiff is exempted from holding amounts in trust for a defendant only if the defendant obtains an order, as the defendant did in this action, requiring the plaintiff to "assign all rights in respect of all payments to which the plaintiff who recovered damages is entitled in respect of the incident after the trial of the action … (ii) for income loss or loss of earning capacity … under an income continuation benefit plan" (s. 267.8(12)(a)(ii)). Given the respective positions of the parties in this action, it is important to remember that the assignment is of "all rights in respect of all payments". The assignment is of more than the payments themselves.

[17] If an assignment order is made, the requirement for the plaintiff to hold amounts in trust no longer applies (s. 267.8(13)). The plaintiff is, instead, required to co-operate with the defendant "in any claim or proceeding brought by the [defendant] in respect of a payment assigned" (s. 267.8(12)(b)).

[18] The order providing for an assignment may be made "subject to any conditions the court considers just" (s. 267.8(12)). The order made to date in this matter (the "Order") is:

2. The plaintiff shall assign to the defendant all of her rights in respect of her claim for LTD benefits.

3. The assignment shall remain in effect until the earlier of when the plaintiff reaches age 65 or the full amount of the damages paid towards loss of future income is exhausted.

4. The plaintiff shall co-operate with the defendant or the defendant's insurer in any claim or proceeding brought by the defendant or the defendant's insurer with respect to a payment assigned pursuant to paragraphs 2 and 3 above (s. 267.8(12) of the Act).

(The first paragraph of the Order addresses pre-judgment interest and is not relevant to this motion.)

[19] When the Order was made, the court recognized that the payments for LTD benefits to which the plaintiff is entitled are taxable. The parties were directed to bring the matter before the court again in the event they were unable to agree upon the impact of the tax treatment of payments of LTD benefits: see Nemchin (No. 1), at para. 80. Pursuant to s. 267.8(12), the parties request that the Order be amended to include additional terms.

b) The LTD Insurer

[20] Included in the plaintiff's written submissions is a copy of an email exchange between plaintiff's counsel and the Assistant Vice-President & Senior Counsel to Sun Life, Ms. Govedaris. The defendant did not object to that document being before the court on the motion.

[21] While not evidence, the points made by Ms. Govedaris in her email are helpful in understanding why the parties are unable to resolve the issue of the impact of the tax treatment of the LTD benefits. Those points include that:

• Absent a court order, Sun Life does not have any protocols in place that permit it to pay the LTD benefits directly to the defendant's insurer ("Aviva");

• If such an order is made, Sun Life may have to rely upon a system override or manual intervention to facilitate payment of the LTD benefits directly to Aviva. Sun Life is required to make adjustments of that kind in response to notices of garnishment; and

• Sun Life's 'position' is that the existence of the assignment does not change the nature of the payment made or Sun Life's legal obligations to withhold tax at source, remit the tax to the proper government authority, and issue a T4A to the plaintiff.

[22] Sun Life was not served with the materials for, and was not represented on, the return of either the motion for an assignment or this motion for additional terms to amend the Order.

c) Analysis

[23] I agree with Ms. Govedaris—the fact that an assignment is ordered of the plaintiff's "rights in respect of all payments to which the plaintiff is entitled" from Sun Life does not change the nature of those payments. The payments continue to be those that Sun Life is contractually obligated to make to the plaintiff so long as she meets the criteria for entitlement to the payment of LTD benefits.

[24] As noted by Ms. Govedaris in her email, Sun Life is "replacing the disabled claimant's lost income". Sun Life is doing so with the full amount of the payments for LTD benefits to which the plaintiff is entitled, meaning the gross—and not the after-tax—amount of those payments.

[25] The withholding of tax at source is a mechanism by which Sun Life meets its obligations to remit tax to the proper government authority. The withholding of tax is irrelevant to the rights that the plaintiff has to the payments to which she is entitled for LTD benefits. She has the right to payment of the full amount of the LTD benefit regardless of whether income tax is deducted at source.

[26] In The Queen v. Jennings, 1966 11 (SCC), [1966] S.C.R. 532, the Supreme Court of Canada discussed the implications of income tax in assessing damages for loss of income. Although the decision relates to the assessment of damages, the discussion about income tax payable is helpful in addressing the implications of the tax withheld at source by Sun Life.

[27] At paragraph 43 of Jennings, Judson J. referred to the finding of a 1958 Report of the Law Reform Committee on the effect of tax liability on damages. He noted that "[t]ax is not a charge on income before it is received". In explaining why damages for loss of income are assessed on a gross basis, ignoring income tax implications, Judson J. further cited the Report's findings:

The net sum representing what the plaintiff would have received after deduction of tax is not adequate compensation for loss of the ability to deal freely with the gross sum. Not only is the plaintiff deprived of his chance of dealing with his income as he thinks fit and so reducing his liability to tax, but third parties who might otherwise have benefited from such arrangements as the plaintiff might be disposed to make are unable to do so.

[28] In Cooper v. Miller, and citing the decision of Judson J. in Jennings, Cory J. said, "[t]he recovering of tax damages for lost wages is a matter between the state and the individual, and does not affect the damages due to the plaintiff from the defendant" (1994 120 (SCC), [1994] 1 S.C.R. 359, at para. 126). By analogy, the taxation of collateral benefits is a matter between the state and Ms. Nemchin and does not affect the credit to which the defendant is entitled with respect to Ms. Nemchin's rights to payments for LTD benefits.

[29] In this action, neither the plaintiff nor the defendant is responsible for the fact that Sun Life deducts income tax at source. The mechanical exercise of withholding of tax does not detract from the plaintiff's right to payment of the full amount of the LTD benefits to which she is entitled. In the absence of the deduction of tax at source, the plaintiff would be entitled to deal with the full amount of the payments for LTD benefits as she thinks fit.

[30] To the extent that the plaintiff is "deprived of the chance to deal with [her] income as [she] thinks fit", that deprivation is the result of a mechanical exercise only. It does not result in the loss of entitlement to payment of the full amount of the LTD benefits. I take judicial notice of the fact that the T4A slip issued to the plaintiff by Sun Life sets out (a) the full amount of the payments made to the plaintiff for LTD benefits, and (b) the amount of the tax deducted at source.

[31] In summary:

• the plaintiff's right is to the payment of the full amount of the LTD benefits to which she is entitled; and

• the mechanical exercise of deduction of tax at source does not detract from the plaintiff's right to payment of the full amount of the LTD benefits to which she is entitled.

[32] I find that the defendant is entitled to a credit for the gross amount of the payments for LTD benefits to which the plaintiff is entitled (i.e., before the deduction for tax is made at source).

[33] There may be circumstances in which the payor of an income continuation plan (an LTD policy or otherwise) does not deduct tax at source. With a defendant entitled to a credit for the full amount of the payments for LTD benefits to which a plaintiff has the right, the parties to an action are in the same position regardless of the tax status of LTD benefits paid. The plaintiff's personal tax liability, if any, arising from entitlement to payment of LTD benefits is irrelevant to the defendant and to the amount of the credit to which the defendant is entitled.

d) Summary

[34] The defendant is entitled to a credit for the gross amount of the payments for LTD benefits to which the plaintiff has the right (i.e., before the deduction for tax is made at source).

[35] The question, then, is what additional terms, if any, are required to ensure that Ms. Nemchin's personal tax liability remains irrelevant to the defendant and to the amount of the credit to which the defendant is entitled pursuant to the assignment ordered?

Issue No. 2 – What additional terms, if any, are required to address the deduction at source of income tax, by Sun Life, from the payments for LTD benefits to which the plaintiff has the right?

a) Duration of the Assignment

[36] The duration of the assignment is an arithmetic exercise and depends on the rate at which a defendant receives the full amount to which they are entitled pursuant to the assignment. The following example demonstrates that there are at least two methods by which a plaintiff may fulfill the terms of an assignment of collateral benefits that are subject to deduction at source of income tax.

[37] Assume that the damages for loss of income awarded to the plaintiff are $100,000. The plaintiff has the right to payment of LTD benefits totalling $10,000 per year. The LTD benefits are not indexed. Income tax of $1,000 per year is deducted from the LTD benefits at source. Based on the outcome under Issue No. 1, the defendant is entitled to receive, and to a credit of, $10,000 per year.

[38] A straightforward method by which to deal with the credit is for the defendant to be paid $9,000 by the LTD insurer and $1,000 by the plaintiff, with the latter amount bringing the total paid each year to the defendant to $10,000. A payment of that kind by a plaintiff is referred to in the balance of this ruling as a "top up".

[39] The T4A slip issued by the insurer reflects the gross amount of the payments for LTD benefits ($10,000) and the tax deducted at source ($1,000). The plaintiff completes their income tax return in the normal course. The plaintiff receives the benefit of any tax refund owed because of any overpayment resulting and is responsible for any shortfall arising from the deduction of tax at source. The plaintiff's personal tax situation is entirely irrelevant to the defendant and to the amount of the credit to which the defendant is entitled. If this method is followed, the duration of the assignment is 10 years.

[40] An alternative method would see $9,000 paid by the LTD insurer to the defendant each year, without any top up from the plaintiff. Once again, the T4A slip issued by the insurer reflects the gross amount of the payments for LTD benefits ($10,000) and the tax deducted at source ($1,000). The plaintiff completes their income tax return in the normal course, receives the benefit of any tax refund owed because of an overpayment resulting, and is responsible for any shortfall arising from the deduction of tax at source. The plaintiff's personal tax situation is entirely irrelevant to the defendant and to the amount of the credit to which the defendant is entitled. Applying this method, the amount of the credit to which the defendant is entitled remains $100,000, but the duration of the assignment is 11.1 years ($100,000 divided by $9,000).

[41] Under either method of crediting the defendant, the plaintiff's personal tax liability is "a matter between the state and the individual" (Cooper, at para. 126).

[42] Under what circumstances is it possible to follow anything other than the first method of crediting the defendant with the gross amount of the payments to which the plaintiff has the right from their LTD insurer after trial?

b) Defendant's Right to Full Credit for Damages Paid Not to be Prejudiced

[43] Extending the duration of the assignment, as with the second method above, may prejudice the ability of the defendant to be credited in full for the amount paid for damages for loss of income. Therefore, unless the defendant agrees and the assignment order provides otherwise, the first method of crediting shall be followed. A plaintiff is not unilaterally entitled to potentially prejudice the defendant's right to be credited for the full amount of the damages awarded for loss of income.

[44] Several factors may affect whether a plaintiff decides to request that the defendant agree to the second method of crediting (i.e., excluding the top up). Those factors include the plaintiff's other sources of income, plans made by the plaintiff for the lump sum award for damages for loss of income, and whether the LTD benefits are indexed.

[45] Factors important to a defendant in responding to such a request include (a) the age of the plaintiff when the assignment takes effect, (b) the maximum number of years during which the plaintiff may have the right to payment of LTD benefits, (c) the potential for the LTD insurer to terminate payment of LTD benefits before the defendant is fully credited for the damages paid for loss of income, (d) fluctuation in the amount of tax deducted at source because of changes in the applicable tax rates from year to year, and (e) the potential for the amount of the tax deducted at source to change if the plaintiff moves from one province to another.

[46] Following the first method of crediting as a general rule of application provides for certainty and efficiency, prevents double recovery, and does not result in under-compensation of a plaintiff:

• All plaintiffs are treated the same, regardless of whether the payments for LTD benefits are taxable or non-taxable. All plaintiffs are entitled to termination of the assignment after the minimum period possible, based on the defendant being credited for the gross amount of the payments for LTD benefits to which the plaintiff has the right subsequent to the date of the decision or verdict at trial;

• A plaintiff's personal income tax liabilities on an annual basis are not relevant to the defendant's entitlement to a credit for the collateral benefits. The parties are not required to deal with one another on an annual basis in that regard; and

• The potential for double recovery by the plaintiff is eliminated.

c) Additional Terms for Assignment

[47] The Order is amended in accordance with the first method of crediting described in paragraphs 38 and 39, above. The additional terms are included in the amended version of the Order set out at the conclusion of this ruling.

[48] I turn next to the effective date of the assignment.

Issue No. 3 – On what date is the assignment of the right to payment of the LTD benefits effective?

[49] The defendant's motion is made pursuant to r. 59.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. That subrule provides that on a motion in the proceeding, "[a]n order that … requires an amendment in any particular on which the court did not adjudicate may be amended". There are two matters which the court did not adjudicate and for which the defendant now seeks relief.

[50] First, the defendant requests that the Order be amended to reflect that the effective date of the assignment is the date of the verdict (April 5, 2017). Second, the defendant requests that the plaintiff be required to disclose to Aviva the amount of the payments for LTD benefits to which she has had the right since that date.

[51] Aviva's intention is to pay the damages awarded for loss of income, minus the amount of the payments for LTD benefits to which the plaintiff has had the right since April 5, 2017. Aviva will thereafter rely on the assignment until the earlier of either the date on which it has received full credit for the $540,000 paid in damages for loss of income or the plaintiff reaches age 65.

a) Positions of the Parties

[52] The defendant's position is that the effective date of the assignment is the date of the verdict. The defendant says that outcome:

a) prevents double recovery to the plaintiff for the period from the date of the verdict to the date on which the judgment is paid;

b) is fair to the plaintiff because she will, when the judgment is paid, receive the full amount of the damages awarded for loss of income;

c) is fair to the defendant because it does not prejudice the potential for the defendant to be fully credited for the damages paid for loss of income; and

d) promotes efficiency and certainty in motor vehicle litigation, including during the post-trial phase.

[53] In support of her position, the defendant relies on the Ontario Court of Appeal decision in Carroll v. McEwen, 2018 ONCA 902, 2018 ONCA 6344, 143 O.R. (3d) 641. The defendant argues that the Court followed a rule of general application, which provides that the effective date of an assignment of collateral benefits is the date of the decision or verdict at trial, unless the court orders otherwise. The defendant submits that this rule addresses the realities of litigation without penalizing any party for exercising their respective rights of appeal.

[54] The plaintiff interprets the decision in Carroll differently. She submits that:

• Carroll makes it clear that the rule of general application is that an assignment does not take effect until the judgment is paid in full;

• in Carroll, the Court of Appeal crafted an exception to that general rule when it concluded that the assignment took effect on the date of the verdict; and

• the departure from the general rule was required because of the unusual factual matrix in the matter.

[55] The plaintiff submits that, if the relief requested by the defendant is granted, then, for the period between the date of the verdict and the date on which the judgment is paid, the assignment is converted to a deduction of collateral benefits. Deductions of that kind are only available for damages awarded for the period prior to the date of trial (i.e., past losses or expenses).

b) Analysis

[56] For the reasons that follow, I agree with the defendant. In Carroll, the Court of Appeal followed the rule of general application: the effective date of an assignment of collateral benefits is the date of the decision or verdict at trial, unless the court orders otherwise.

i) The Decision in Carroll v. McEwen

[57] The plaintiff's appeal in Carroll was from the conditional order made by the trial judge for an assignment of the plaintiff's rights with respect to future statutory accident benefits ("SABS"). The assignment related to SABS under the health care expenses silo to be credited against the damages awarded for the plaintiff's cost of future care. The conditional assignment order provided that "[u]pon payment of the said sum of $2,600,000[^1] plus costs and pre-judgment interest", the two insurers involved would receive an assignment of Ms. Carroll's rights in respect of payment of SABS for health care expenses.

[58] Coincidentally, one of the two insurers involved was Aviva. The other insurer was Pilot Insurance, which had, by the date of the trial in Carroll, been acquired by Aviva.

[59] One of the plaintiff's grounds of the appeal in Carroll was that the conditional assignment order was premature because the judgment had not been paid when the order was made. The Court rejected that ground of appeal. It concluded that the trial judge "properly exercised his discretion in granting the conditional assignment order" (para. 11). In reaching that conclusion, the Court considered the following factors:

• the provisions of s. 267.8 of the Act are intended to promote fair compensation and prevent double recovery (para. 37);

• the trust and assignment provisions do not impose on either party a burden of strict proof of entitlement to future benefits. As a result, the provisions create no risk of under-compensation for a plaintiff (para. 38); and

• requiring that the damages award be paid before an assignment order can be made would be impractical, require post-trial motions to be made, and lead to additional expense for the parties and an inefficient use of judicial resources (para. 49).

[60] The verdict in Carroll was rendered on October 30, 2015. The defendant's motion for an assignment order was heard in March 2016. The decision on the motion was released in May 2016—seven months after the date of the verdict. At para. 52 of Carroll, the Court of Appeal described the conditional assignment order as having been "made" on October 30, 2015.

[61] I note the timing of the post-trial motion in Carroll and highlight that the Court of Appeal does not suggest that no post-trial motion is ever required to address the issue of assignment of collateral benefits.

[62] I interpret the Court's reference to the expense and inefficiencies associated with post-trial motions to be two reasons why the Court followed the rule of general application for the effective date of the assignment. The rule:

a) reduces the number of post-trial motions required to address the issue of assignment of collateral benefits;

b) provides for certainty when an assignment of collateral benefits is requested; and

c) precludes an appeal from the decision or verdict at trial (or from an ancillary order) from frustrating the efficacy of an assignment order proven on appeal to have been properly made (para. 54).

ii) Effective Date of the Assignment

[63] The defendant in this action requests that the Order be amended to include the same condition that was imposed by the Court of Appeal in Carroll: that upon payment by the defendant of the full amount of the damages awarded, plus pre-judgment interest and costs, the assignment shall be made.

[64] At para. 50 of Carroll, the Court of Appeal said that, with such a condition in place, "the assignment would not occur until the [plaintiff] recovered the damages in the action in full." That outcome is said by the Court to be consistent with the language of s. 267.8(12).

[65] The Court emphasized that upon payment of the judgment in full, the assignment is "triggered" because the plaintiff has, at that point, recovered damages in the action. The argument made by Ms. Nemchin fails because it erroneously equates the date on which an assignment is "triggered" with the date on which an assignment is "effective".

[66] A concern expressed by the Court in Carroll was that, because of passage of time pending the outcome of appeal from the conditional assignment order in that case, the order had "been frustrated and devalued" (para. 51). That was so, at least in part, because the damages awarded to the plaintiff exceeded the amount of insurance available to respond to the judgment, and because of the options available to Aviva and Pilot specifically because of that situation.

[67] Ms. Nemchin argues that the ruling in Carroll applies only to that specific factual matrix and is not intended to be a rule of general application. I disagree. The factual matrix in Carroll, although unusual, did not require the Court to apply anything other than the general rule for the effective date of an assignment of collateral benefits.

[68] The plaintiff's argument overlooks the practical realities of judgments awarding damages and the impact on the efficacy of an assignment by reason of the passage of time pending the determination of an appeal. The practical realities are the same whether the appeal is from the decision or verdict at trial or from an ancillary order.

[69] In any number of scenarios, the passage of time pending the outcome of an appeal could frustrate or devalue a conditional assignment. The following is an example of such a scenario:

• The award of damages is made one year before the plaintiff reaches the age at which their right to payment of LTD benefits ends;

• The award includes damages for loss of future income, and an assignment of the plaintiff's rights to payment of future LTD benefits is ordered;

• The decision at trial is appealed and the outcome of the appeal is not known for more than one year after the date of the decision at trial. The decision at trial is ultimately upheld; and

• The full amount of the judgment is paid, but not until after the plaintiff's right to payment of LTD benefits has ended.

[70] If Ms. Nemchin's argument is accepted, then the defendant in this example is not entitled to credit for any right to payment of LTD benefits possessed by the plaintiff subsequent to the date of the verdict (i.e., a year's worth of LTD benefits). The plaintiff in this example receives double recovery for their loss of income for the year immediately following the date of the decision at trial.

[71] This example demonstrates how the purpose of a conditional assignment order could, solely by reason of the exercise of rights of appeal, be frustrated if the effective date of the assignment is something other than the date of the decision or verdict at trial.

iii) Summary

[72] The fact that the assignment is conditional upon payment of the judgment in full only means that the assignment is "triggered" on the date of that payment. The rule of general application provides that the effective date of the assignment is the date of the decision or verdict at trial. Only if specifically ordered, will the effective date of an assignment of collateral benefits be a date other than the date of the decision or verdict at trial.

Issue No. 4 - Is the plaintiff required to disclose to Aviva the LTD benefits payments to which she has had the right since the date of the jury's verdict?

[73] To ensure that the integrity of the assignment ordered in this action is maintained, the disclosure requested by the defendant must be made (Carroll, at para. 55). The Order is amended accordingly.

Issue No. 5 - How are costs incurred by the plaintiff to pursue or maintain her right to payment of LTD benefits subsequent to the date of the verdict to be addressed?

[74] The plaintiff has, since the date of the verdict, taken a number of steps to preserve her rights to payment of LTD benefits. Those steps include an application to the Quebec Pension Plan ("QPP"), an appeal from the decision rejecting that application, ongoing communication with Sun Life, and negotiations with Sun Life with respect to medical examinations the plaintiff was requested by the Insurer to attend. The plaintiff was assisted or represented by counsel for most—if not all—of those steps.

[75] Sun Life required that the plaintiff apply to QPP for disability benefits. Through her counsel, the plaintiff invited Sun Life to take carriage of—and therefore pay—the expenses associated with the appeal on her behalf in the QPP matter. Sun Life declined to do so.

[76] Through communication between counsel for the parties in this action, Aviva was informed (a) of the various steps the plaintiff was taking to preserve her right to payment of LTD benefits, and (b) that the plaintiff would look to Aviva for reimbursement of the costs associated with those steps. Aviva was invited to retain counsel to represent the plaintiff with respect to the QPP appeal process and in her dealings with Sun Life. Aviva chose not to do so.

[77] The plaintiff's position is that, if the defendant is to receive a credit for the payments for LTD benefits to which the plaintiff is entitled subsequent to the date of the verdict, then the defendant must reimburse the plaintiff for the reasonable costs incurred to preserve her rights to those payments. The defendant agrees.

[78] The defendant submits that the arithmetic exercise to be used in determining those reasonable costs is a matter that can be addressed by additional terms in the Order; I agree. The Order is amended accordingly.

Summary

[79] The Order is amended to read as set out below. The italicized portion is from the original wording of the Order:

1. The prejudgment interest to which the plaintiff is entitled on the award of general non-pecuniary damages shall be calculated at the rate of 1.3 per cent per year.

2. Within 30 days of the date of this ruling, the plaintiff shall disclose to the insurer for the defendant, Aviva Insurance Company of Canada ("Aviva"), the gross amount of the payments for long-term disability ("LTD") benefits to which she has had the right since April 5, 2017.

3. Upon (a) receipt, within 30 days of the date of this ruling, by Aviva of the disclosure referred to in paragraph 2, and (b) payment to the plaintiff by Aviva, in its capacity as the insurer of the defendant, of the sum of $691,650, plus pre-judgment interest and costs, and less the amount referred to paragraph 2, the plaintiff shall assign to Aviva all of her rights in respect of all payments to which she is entitled, in respect of the motor vehicle collision of December 1, 2010, for LTD benefits after April 5, 2017 ("the Assignment").

4. Aviva shall pay to the plaintiff the reasonable costs incurred by her to preserve her rights to payments for LTD benefits between April 5, 2017 and the date of payment prescribed in paragraph 3.

5. If the parties are unable to agree on the costs referred to in paragraph 4, the parties shall make arrangements for the costs to be fixed by the trial judge.

6. The Assignment shall remain in effect until the earlier of either when the plaintiff reaches age 65 or the full amount of the damages paid towards loss of future income is exhausted.

7. The plaintiff shall co-operate with Aviva in respect of the Assignment, including participating in any mediation, litigation, or arbitration proceeding commenced by Aviva, in its capacity as assignee of the plaintiff, to recover payments for LTD benefits to which the plaintiff is entitled from April 5, 2017 until the Assignment is exhausted.

[80] The judgment issued in this action addresses the plaintiff's entitlement to post-judgment interest. Nothing in the Order, as amended, detracts from the plaintiff's entitlement in that regard. Post-judgment interest is over and above the monetary amounts addressed in the Order, as amended.

[81] It would be inappropriate to make an order affecting Sun Life without it having been served with the motion materials and given the opportunity to make submissions on the return of the motion: see r. 37.07(1) of the Rules of Civil Procedure. For that reason, the Order, as amended, does not require Sun Life to pay directly to Aviva the after-tax amount of the payments for LTD benefits to which the plaintiff is entitled. Based on the contents of Ms. Govedaris' email, it is anticipated that Sun Life will do its best to find a solution in response to this ruling.

[82] It is incumbent upon the plaintiff to deal with Sun Life in an effort to have the net amount (after tax) of the payments for LTD benefits to which she is entitled made directly to Aviva.

[83] It is also incumbent upon the plaintiff to top up the amounts paid by Sun Life. It remains open to the parties to reach an agreement as to how to facilitate the top up. If the plaintiff wishes to forego the top up, and the defendant accedes in that regard, the parties must agree upon the arithmetic formula to be used to determine the duration of the Assignment. The parties may bring that matter before the court for further amendment of the Order, if necessary.

Costs

[84] There have been a number of post-trial appearances in this matter. Based on her success on the earlier motion pursuant to which the Order was originally made, the defendant seeks her costs of that aspect of the post-trial proceedings. The issues addressed on that motion included the applicable pre-judgment interest rate. The defendant was also successful on that issue. For the first post-trial motion, the defendant seeks costs, on the partial indemnity scale, of $23,032.34.[^2]

[85] The costs of subsequent appearances on post-trial matters remain to be determined. Rather than deal with each post-trial motion or issue on an individual basis, I leave it to the parties to attempt to resolve the issue of costs for all post-trial appearances.

[86] If the parties are unable to agree on the costs associated with those appearances, they shall make written submissions as follows:

a) The submissions shall be limited to a maximum of four pages, exclusive of a bill of costs;

b) Written submissions shall comply with Rule 4 of the Rules of Civil Procedure;

c) Hard copies of any case law or other authorities relied on shall be provided with the submissions and shall comply with Rule 4 of the Rules of Civil Procedure with respect to font size;

d) The submissions, the documents referred to therein, and case law and other authorities shall be on single-sided pages;

e) Written submissions shall be delivered by 5:00 p.m. on the twentieth business day following the date on which this ruling is released; and

f) In the event either party wishes to deliver a reply to the costs submissions of the opposing party, the reply submissions shall be delivered by 5:00 p.m. on the twenty-fifth business day following the date on which this ruling is released. Reply submissions shall comply with paragraphs (a) to (d) above.

Madam Justice Sylvia Corthorn

Released: October 28, 2019

COURT FILE NO.: 12-56112 DATE: 2019/10/28

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

TATIANA NEMCHIN Plaintiff

– and –

YVONNE GREEN Defendant

POST-TRIAL RULING

Assignment of Collateral Benefits (Part 2)

Madam Justice Sylvia Corthorn

Released: October 28, 2019

[^1]: The damages awarded for cost of future care were in excess of that amount. A rounded figure is used for discussion purposes only.

[^2]: The costs of $23,032.34 are broken down into fees of $19,866.08, HST on fees of $2,977.78, and $188.48 for disbursements (including HST).