Bertrand et al. v Academic Medical Organization, 2023 ONSC 3209

Bertrand et al. v Academic Medical Organization

Court File and Parties

Court File No.: CV-21/13 Date: 2023-05-31 Superior Court of Justice - Ontario

Re: Monique Bertrand, Jacob McGee, Michel Prefontaine and Akira Sugimoto, Applicants And: Academic Medical Organization of Southwestern Ontario, Respondent

Before: Justice A.D. Grace

Counsel: J.J. Colangelo, for the Applicants A.J. Stephens and A. Perumal, for the Respondent

Heard: November 14, 2022

Reasons for Decision

A. Introduction

1The applicants are Gynecologic Oncologists who treat patients at one or more London, Ontario hospitals. They are also teachers at Western University’s medical school. In the latter role, they instruct and supervise medical students, residents and clinical fellows.

2This application was initiated because the respondent, the Academic Medical Organization of Southwestern Ontario (“AMOSO”), decided the applicants were no longer eligible to receive funding for their academic services pursuant to a contract known as the AHSC AFP Template Funding Agreement (“Funding Agreement”). ¹

3The applicants seek declaratory relief because they maintain AMOSO’s decision was fatally flawed.

4The relevant background follows.

B. Background

5The Funding Agreement is dated April 1, 2012 and was executed by Her Majesty the Queen in Right of Ontario, represented by the Minister of Health and Long-Term Care (“Ontario”), the Clinical Teachers Association of the University of Western Ontario (the “Physician Organization”), London Health Sciences Centre and St. Joseph’s Health Care, London (the “Hospitals”), the University of Western Ontario (the “University”) and the Ontario Medical Association (the “OMA”).

6AMOSO was the name used to describe the Physician Organization, the Hospital ² and the University, collectively.

7The Funding Agreement was created because the fee-for-service compensation model that is generally used in Ontario does not adequately account for or recognize the time spent by physicians providing academic services.

8Its stated purposes include the provision of funding “that recognizes the unique contributions of academic physicians” and ensuring “that the funding reaches academic physicians in an open and transparent manner.” ³

9AMOSO’s role was explained by its representative, William Sischek. He said the organization is “responsible for the implementation and management” of the Funding Agreement. ⁴

10The applicants described AMOSO as “in substance a payment administrator of funds r eceived from the Ministry.”

11A backgrounder for AMOSO was included in the evidentiary materials. It said that:

AMOSO distributes over 40 million dollars of incremental funding to 17 Academic Physician Practice groups. These groups democratically allocate compensation to participating physicians for their London Clinical Academic deliverables; encompassing research, teaching and related administration.

12According to Dr. Sischek, as of March 31, 2021, the Academic Physician Practice groups represented 859 physicians. Monies received from Ontario pursuant to the Funding Agreement are distributed to those groups who, in turn, allocate their share among their members. The applicants are part of the Obstetrics and Gynecology Practice Plan. ⁵

13This application involves an element of the financial arrangement which is described as “Base Clinical Funds” in the Funding Agreement. ⁶ For several years, the applicants received a share of those monies to compensate them for the teaching and research activities they performed. As of 2019, that component of their compensation totaled $25,200 annually.

14In 2016, AMOSO became aware of an agreement dated April 1, 2015 that had been entered into by several parties including Ontario, various hospitals including the London Health Sciences Centre, the OMA and the Ontario Oncology Association. I will refer to that contract as the “Oncology AFP”. ⁷

15A lengthy review by AMOSO’s Resource Sub-Committee followed. On June 29, 2018, AMOSO’s Governing Committee accepted the sub-committee’s recommendation that the allocation of Base Clinical Funds to the Obstetrics and Gynecology Practice Plan be discontinued insofar as the applicants were concerned. However, the decision would not be effective until March 31, 2019.

16The Obstetrics and Gynecology Practice Plan was informed of the decision by letter dated July 19, 2018. AMOSO offered this explanation:

This decision was based on a review on [ sic ] how funding is allocated to AFP Practice Plans for of [ sic ] all AMOSO Alternate Funding Arrangement physicians. The Cancer Care Ontario Contract funding model with the Gynecology Oncologists is inclusive of Clinical and Academic deliverables, and at this time, the AMOSO Clinical Base Funding [ sic ] is not allocated to AFP Practice Plans for AFP Physicians who participate in these comprehensive AFA plans.

17AMOSO’s conclusion that the applicants were, in essence, double-dipping is disputed. In fact, they say its decision means they:

… no longer receive compensation from the Ministry for supervision and training of medical residents and students and for traditional classroom lectures, small group sessions, and supervision of [Objective Structured Clinical Examinations]. ⁸

18Despite written communications, support from others, an oral presentation and a question-and-answer session, on March 8, 2019 AMOSO’s Governing Committee resolved to:

… stay with the initial decision that was made to stop Clinical Base Funding effective April 1, 2019 allocated to the four Gyn-Onc physicians ⁹ participating in the [Funding Agreement].

19In their notice of application, the applicants maintain AMOSO’s disposition of the issue was “procedurally unfair and substantively incorrect.”

20On May 13, 2019, the applicants were advised by their Practice Plan:

That Executive accepts the decision of the AMOSO Governing Council that ruled to cease Phase 1 funding as the Gynaecologic Oncologists are remunerated in their [Oncology] AFP for academic activities. Executive encourages the Gynaecologic Oncologists to review all other options including legal recourse.

As a result, … there will be no change to the current distribution methodology whereby Phase 1 funding will only be distributed to those physicians for whom the department receives Phase 1 funding for.

21This application was issued on April 1, 2021

C. Analysis

i. Standing/Jurisdictional Issue

22The principal relief sought by the applicants is a declaration they were and continue to be entitled to an allocation of the Base Clinical Funds paid by Ontario to AMOSO pursuant to the Funding Agreement.

23The availability of declaratory relief was addressed in Ewert v. Canada, 2018 SCC 30. Writing for the majority, Wagner J. (as he then was) said, at para. 81.

A court may, in its discretion, grant a declaration where it has jurisdiction to hear the case, where the dispute before the court is real and not theoretical, where the party raising the issue has a genuine interest in its resolution, and where the respondent has an interest in opposing the declaration sought… [Citations omitted]. ¹⁰

24The applicants seek that remedy because their share of the monies allocated and distributed by AMOSO to their Practice Plan has been reduced. They maintain that AMOSO’s actions were wrongful because the Oncology AFP did not compensate the applicants for academic services. ¹¹

25In support of their argument, the applicants observe that:

All parties to the [Oncology AFP] agree that the funding provided pursuant to the [Oncology AFP] does not compensate the Applicants for teaching. ¹²

26Unsurprisingly, AMOSO stands by its decisions on the merits. It also raises a preliminary issue, namely, the applicants’ standing to litigate the issue. Its argument follows this short path.

27The respondent is an unincorporated association comprised of four members: the Physician Organization, the Hospitals ¹³ and the University. Given that fact, AMOSO submits this case is analogous to Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga, 2021 SCC 22 (“Aga”). Aga involved a dispute among members of a voluntary association. Rowe J. authored the Supreme Court of Canada’s unanimous decision. At para. 3, he said in part:

Jurisdiction to intervene in the affairs of a voluntary association depends on the existence of a legal right which the court is asked to vindicate. Here, the only viable candidate for a legal right justifying judicial intervention is contract.

28In Aga, the Court concluded:

… evidence of an objective intention to enter into legal relations is missing. As such, there is no contract, there is no jurisdiction, and there is no genuine issue requiring a trial… ¹⁴

29In this case, AMOSO says:

The Applicants have no private law right to Base Clinical Funding from AMOSO. There is no contract between the parties to this Application and the Applicants have no contractual right to vindicate. Thus, the court has no jurisdiction to grant the relief sought.

30Aga involved a constitution and by-laws. From a factual perspective, this case is, to my mind at least, more complex. To assess AMOSO’s jurisdictional argument, it is important to understand the underlying structure and the documents that apply.

31It starts with the Funding Agreement. As mentioned, there were five parties to that contract: Ontario, the OMA, the Physician Organization, the Hospital and the University. ¹⁵ None of the applicants are parties to it.

32Nor is the respondent. AMOSO is the acronym of the name used to refer, collectively, to the Physician Organization, the Hospital and the University. ¹⁶ AMOSO is not included in the Funding Agreement’s definition of “Parties” or “Signatories”. Instead, AMOSO is described as the “Governance Organization”.

33AMOSO’s role is addressed a little later in the Funding Agreement. In Article 3.2(a), the three “Signatories” – being the Physician Organization, the Hospital and the University:

… represent and warrant that…they have established a governance organization for the purpose of representing their interests and ensure the proper and efficient provision of their respective and mutual obligations under the Agreement…

34Those entities also agreed to enter into a governance agreement that, among other things: (i) established their respective and mutual obligations under the Funding Agreement; and (ii) created a set of policies and processes for the purposes of receiving, managing, allocating and distributing monies paid to AMOSO by Ontario. ¹⁷

35A separate governance agreement was included by AMOSO in its material. ¹⁸ Dated January 1, 2017, that agreement describes AMOSO as an unincorporated association.

36That document outlines a governance structure at length. A Governing Committee is at the apex. Pursuant to the governance agreement, the Governing Committee decides how monies received from Ontario will be allocated among and distributed to the various Practice Plans it mentions. Gynecologic Oncology is one of those listed.

37I pause here to note that the Practice Plans were not named as parties to, nor did they execute, the Funding Agreement or the governance agreement. That observation also applies to the physicians who are members of the various groups.

38However, those medical doctors, including the applicants, meet the definition of a “Group Physician” as set forth in article 1.2 of the Funding Agreement. Article 5.1(d) obligated AMOSO to obtain from them a signed copy of a Declaration and Consent in the form attached to the contract.

39It is unchallenged that the applicants executed that document. ¹⁹ By signing, they: (i) acknowledged having read and understood the Funding Agreement, ²⁰ (ii) authorized the lead physician of the Physician Organization “to sign the Agreement on my behalf” ²¹ ; and (iii) agreed to “be bound by the terms and conditions of the Agreement as a Group Physician”. ²²

40In my view, Aga is not factually similar. Unlike that case, contracts and contractual relationships are in play. The members of AMOSO, an unincorporated association, are parties. However, the applicants are not. They are persons who were but no longer are included in the census AMOSO prepares when allocating and distributing Base Clinical Funds to the Practice Plans generally and to the Obstetrics and Gynecology Practice Plan specifically.

41Unquestionably, financial consequences have resulted from AMOSO’s decision – and the Practice Plan’s acceptance of it. The issue is whether the applicants have the right to seek a remedy, despite the fact they are not parties to the agreement they wish to enforce. I turn to that aspect of the matter.

42Privity of contract is an old concept. In London Drugs Ltd. v. Kuehne & Nagel International, [1992] S.C.R. 299, at pp. 415 – 416, Iacobucci J. offered a concise explanation of the historical approach. At pp. 415 – 416, he said:

The doctrine of privity of contract has been stated by many different authorities, sometimes with varying effect. Broadly speaking, it stands for the proposition that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it…It is now widely recognized that this doctrine has two very distinct components or aspects. On the one hand, it precludes parties to a contract from imposing liabilities or obligations on third parties. On the other, it prevents third parties from obtaining rights or benefits under a contract…This latter aspect has not only applied to deny complete strangers from enforcing contractual provisions but has also applied in cases where the contract attempts, either expressly or impliedly, to confer benefits on a third party. [Citations omitted]

43In that case, the majority of the Supreme Court of Canada concluded the doctrine was too rigid and needed to be relaxed. Moving forward, courts were instructed to adopt a principled approach when asked to consider a new exception to the doctrine of privity of contract. As Iacobucci J. explained when revisiting the topic in Fraser River Pile & Dredge Ltd. v. Can-Drive Services Ltd., [1999] 1 S.C.R. 108, at para. 31:

… a new exception first and foremost must be dependent upon the intention of the contracting parties. Accordingly … the determination in general terms is made on the basis of two critical and cumulative factors: (a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? And (b) Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intention of the parties?

44An affirmative answer to the first question is not confined to situations where the parties extend the benefit of the contract or some term within it, to third parties. In London Drugs Ltd. v. Kuehne & Nagel International, supra, the majority concluded an implicit extension of the employer’s limitation of liability clause to its employees was appropriate because of “the identity of interest … in terms of performing the contractual obligations.” ²³

45In Fraser River Pile & Dredge Ltd. v. Can-Drive Services Ltd., supra, the court said that permitting third-party beneficiaries to rely on a waiver of subrogation clause was a necessary and incremental change to the common law doctrine of privity of contract.

46The issue arose in the context of an agreement of purchase and sale in Coast-to-Coast Industrial Development Co. v. 1657483 Ontario Inc., 2010 ONSC 2011 (S.C.J.). At para. 44, Strathy J. (as he then was) referred to the earlier decisions of the Supreme Court and said:

It was found that the contractual protection or shield negotiated by one contracting party could be enforced, by the third party, against the other contracting party. In this case, Coast is looking for a contractual benefit – it wants to use the contractual term as a sword in its favour. While the principled exception to the privity of contract is not restricted to defensive provisions, it seems to me that it would take very clear language to find that a contracting party had assumed a liability to a third party, particularly where that liability is potentially unlimited. There is no such clear language in this case.

47With that background, I turn to this fact situation.

48An umbrella organization, the Clinical Teachers’ Association of the University of Western Ontario, is a party to and a signatory of the Funding Agreement. It is specifically described as being the “Physician Organization”. It is one of the four members of AMOSO and therefore, was a named party in the governance agreement executed by them. That contract contemplates a representative governance structure. For example, the Governing Committee consists of 9 voting members. Four of them must be “’at-large’ Group Physicians, elected by the Group Physicians”. ²⁴

49There is nothing in any of the contractual documents that suggests the parties intended to extend the benefit of any provision to any individual physician. There is no express statement. Nor can an intention to that effect be implied.

50To the contrary. Clearly, the structure of the agreements was a product of careful thought. As mentioned, AMOSO’s backgrounder mentioned 17 Practice Plans representing well over 800 physicians. A single signatory representing all the qualified medical doctors makes commercial sense. It is more efficient and more economical. By executing the Declaration and Consent, each Group Physician, including the applicants, acknowledged the fact the Physician Organization represents their interest and is entitled to bind them contractually.

51The conclusion advocated by the applicants would not accord with “commercial reality and common sense”. ²⁵ Despite the presence of a named Physician Organization and the fact funds are distributed through various Practice Plans, over 800 individual physicians would have the ability to commence proceedings each time a decision was made by AMOSO with which they did not agree. That just cannot be. A contrary conclusion would severely limit, if not destroy, the effectiveness of the structure the members of AMOSO have carefully constructed.

52For the reasons given, I decline to make a further exception to the doctrine of privity of contract.

53In those circumstances, the court does not have jurisdiction to grant any of the declaratory relief sought. That includes the applicants’ request that the court require AMOSO to participate in the dispute resolution process set forth in article 13.7 of the Funding Agreement.

54That finding is sufficient to dispose of the application. However, in case I am wrong, I turn to AMOSO’s process.

ii. AMOSO’s process

55Even if the applicants are, in substance, third party beneficiaries, the court is not free to ignore what AMOSO has done. In Karahalios v. Conservative Party of Canada, 2020 ONSC 3145 (S.C.J.), at para. 183, Perell J. provided this helpful overview when he said, in part:

… where there is jurisdiction as a matter of contract and a significant fight or interest is engaged, the court may determine: (a) whether the voluntary group or unincorporated association acted in accordance with its rules; (b) whether it acted in accordance with the principles of natural justice; and (c) whether the association’s decision was come to bona fide.

56This analysis does not lead to a favourable result for the applicants either.

57A long internal process preceded the Resource Sub-Committee’s recommendation of June 19, 2018 and the decision of the Governing Committee that followed. ²⁶ Written notice was provided to the Obstetrics and Gynecology Practice Plan by letter dated July 19, 2018. It explained the reasons for AMOSO’s decision. Exclusion of the applicants from the group eligible for a share of the Base Clinical Funds was postponed until March 31, 2019. That date was more than eight months away.

58In an August 3, 2018 e-mail, Dr. McGee asked that AMOSO identify the aspects of the Oncology AFP it relied upon in reaching that decision. AMOSO’s executive director, Patricia Telfer, responded that day. She expressed the view that the Oncology AFP provided “compensation funding [for] both Clinical and Academic deliverables.”

59The applicants asked AMOSO to reverse its decision. They provided a lengthy submission dated January 15, 2019. Expressions of disagreement from the Ontario Oncology Association, ²⁷ the OMA ²⁸ and the University’s Department of Obstetrics and Gynecology ²⁹ were received by AMOSO.

60At AMOSO’s invitation, Dr. McGee made submissions to the Resource Sub-Committee on February 19, 2019. The applicants maintain that the Resource Sub-Committee “failed to listen to and address the concerns of the Applicants.” ³⁰ There is no factual basis for that assertion. In fact, it ignores the detailed record of the key events of that day set forth in a document entitled “Resource Sub-Committee Meeting Aide Memoire”.

61Thereafter, the Sub-Committee recommended that the Governing Committee: (i) not change the decision; or (ii) gradually reduce the funding to the Obstetrics and Gynecology Practice Plan “based on the participation level” of the applicants. The first option was adopted and communicated to the practice plan on March 8, 2019. Evidence from one of the applicants, Monique Bertrand, concerning the failings of AMOSO is of no value, despite the fact she was a member of the Governing Committee for a decade. Her evidence is affected by self-interest and is entitled to no weight.

62I recognize that reasons for AMOSO’s decision were not set forth in its final letter. However, they have never changed. In part, the Final Governing Committee Minutes dated March 8, 2019 said:

The [Oncology AFP] does fund both academic and clinical deliverables … AMOSO needs a system that is equitable.

63That position is no different than the one AMOSO and Patricia Telfer communicated on July 19 and August 3, 2018, respectively. With respect, the applicants knew why the result did not change.

64AMOSO’s process went beyond its own stated procedure. It allowed the applicants to directly initiate and participate in a process of reconsideration. Written and oral submissions were made. The decision was revisited by the Resource Sub-Committee and the Governing Committee. Recommendations were developed by the former and a decision made by the latter after discussion and deliberations by their members. While the applicants sincerely believe AMOSO has erred, there is no basis for saying it acted, at any time or in any way, other than in good faith.

65In that regard, I will mention an earlier observation. After the decision was made for the second time, the Obstetrics and Gynecology Practice Plan advised the applicants that it had been accepted and would be respected.

66I understand and sympathize with the applicants’ disappointment. They fought the good fight. They were unsuccessful despite the support of others. However, AMOSO’s process was not flawed. Consequently, even if the applicants had overcome the first hurdle, there is no basis for intervention by the court in the affairs of the unincorporated association.

67To be clear, given my conclusions, I decline the applicants’ invitation to engage in an interpretive exercise in relation to the Oncology AFP. ³¹

D. Conclusion and Costs

68For the reasons given, the application is dismissed.

69Cost submissions not exceeding five (5) pages each may be served, filed and then uploaded to Caselines by AMOSO and the applicants by the close of business on June 15 and 29, 2023, respectively.

“Justice A.D. Grace” Justice A.D. Grace

Date: May 31, 2023

Footnotes

Footnotes

1. 1The definitions portion of the Funding Agreement (Article 1.2) explains that the acronym AHSC stands for “academic health science centre”.
2. 2As noted in the body of the reasons, the Funding Agreement includes two hospitals. However, they are described collectively as “Hospital”.
3. 3The excerpts are drawn from paras. 1(a) and (e).
4. 4In describing his role, Dr. Sischek said he was the Chair of the Signatories of AMOSO.
5. 5That Practice Plan includes physicians who are not oncologists.
6. 6In their materials, the parties often refer to this component as “Clinical Base Funding”.
7. 7The applicants referred to it as the Provincial Oncology Alternative Funding Plan or “POAFP”. AMOSO used the term Cancer Care Ontario AFP.
8. 8This excerpt is drawn from para. 27 of the Affidavit of Dr. Jacob McGee sworn March 31, 2022.
9. 9Meaning the four applicants in this proceeding.
10. 10See, too, Brown v. Hatley, 2019 ONCA 395, at para. 35.
11. 11See paras. 2(b), 3, 8, 13, 22 and 30(a).
12. 12At para. 13 of their factum.
13. 13London Health Sciences Centre and St. Joseph’s Health Care London are both parties to and signatories of the Governance Agreement.
14. 14This excerpt is also drawn from para. 3.
15. 15See the definition of “Parties” in article 1.2.
16. 16See the front page of the Funding Agreement.
17. 17See Article 3.3(a) and (m)(i) and Appendix “C”.
18. 18It is entitled “Roles and Principles of Governance Agreement”.
19. 19The document is entitled “Declaration and Consent for Natural Persons as Group Physicians”.
20. 20At para. 3.
21. 21At para. 4.
22. 22At para. 5(c).
23. 23Fraser River Pile & Dredge Ltd. v. Can-Drive Services Ltd., [1999] 1 S.C.R. 108, at para. 34.
24. 24Article 4.8a) of the Governance Agreement.
25. 25The quote is drawn from London Drugs Ltd. v. Kuehne & Nagel International, [1992] S.C.R. 299, at p. 415.
26. 26Dr. Sischek deposed that the issue was considered at 7 meetings of the Resource Sub-Committee, 6 meetings of the Governing Committee and 4 meetings of the Signatories Committee.
27. 27Letter dated August 23, 2018.
28. 28An August 24, 2018 e-mail.
29. 29Letter dated January 16, 2019.
30. 30The excerpt is drawn from para. 32 of the applicants’ factum.
31. 31Had I decided otherwise, I would have borne in mind the instructions of the Supreme Court of Canada in Sattva Capital v. Creston Moly Corp., [2014] 2 S.C.R. 53, at paras. 47 – 48 and 56 – 61. I would have approached some of the evidence filed by the applicants with caution. As the Court of Appeal instructed in S & J Gareri Trucking Ltd. v. Onyx Corporation, 2016 ONCA 505, at para. 7, contractual interpretation requires an objective determination. See, too, 6524443 Canada Inc. v. Toronto (City), 2017 ONCA 486, at paras. 12 – 15. Some of the applicants’ material set forth subjective views.