Canadian Underwriter

A Year of Firsts

January 31, 2011   by J. Gregory Clooney and Sheree L. Conlon

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The first Canada pension plan deduction case
McKeough v. Miller1

The first time a Nova Scotia Court deducted Canada Pension Plan (CPP) benefits from an award for loss of past and future income was in McKeough. The case involved a multi-vehicle collision which occurred during white-out conditions. The trial was straightforward with regard to liability. There were claims of contributory negligence and damage issues. Defence counsel argued that CPP benefits should be deducted from any past and future loss of income award.

A reduction in damages paid for loss of income is allowed if the plaintiff receives benefits under an income-continuation plan, provided the plan has no right of subrogation as per amendments to the Insurance Act.2 Prior to the amendments the case law precluded the deductibility of CPP benefits from loss of income claims. Justice N.M. (Nick) Scaravelli held that s. 113A is very similar to provisions in the Ontario Insurance Act3, aside from the “no subrogation” requirement in the Nova Scotia legislation. Scaravelli held, as the Ontario courts have long held, that CPP benefits are deductible from an award for past and future income loss.4

McKeough is a useful precedent in rationalizing Nova Scotia law with the quantification of damages in other jurisdictions and is of immediate importance in cases of loss of income. The deductibility of income replacement or continuation benefits will have to be evaluated in relation to the law applicable to collateral benefits and s. 113A of the Insurance Act.

Scaravelli’s decision on costs is also of interest.5 At trial, Scaravelli determined the $75,000 available Section B no-fault benefits would be split between medical expenses ($25,000) and future weekly indemnity benefits ($50,000). The amount outstanding on the loss of future income claim, after deducting CPP benefits, fell well short of $50,000. Although the $50,000 had been earmarked for the loss of income claim in the trial decision, Scaravelli held that the remaining Section B money could be deducted from the total damages award.6 Therefore, monies payable under Section B can be applied against all heads of damages in order to prevent double recovery.

The first case overturning the certification of a class action
Ring v. Canada (Attorney General) 2010 NLCA 20

The Newfoundland and Labrador Court of Appeal handed down a significant class action decision on Mar. 22, 2010 in Ring v. Canada. This is an Agent Orange case, arising from the spraying of herbicides at CFB Gagetown in New Brunswick from 1956 to date. The allegation was that the spraying of herbicides at the army base during that period of time materially contributed to or caused lymphoma for the plaintiff, and other members of the class. The trial judge held that the criteria for certification of a class action had been met. Three appeals were taken by various parties affected by the certification decision. The Court of Appeal overturned the decision, holding that the criteria for certification of a class action had not been met. In the course of reaching its decision, the Court looked at the standard of review, holding that whether certification of the class action complies with the standards specified in the class actions legislation (in this case, the Class Actions Act) is a question of mixed fact and law, noting that for “certain criteria, a question of law is extricable.”

The Court held that under the Newfoundland legislation, the onus is on the applicant to establish the criteria for certification, with an onus of meeting all criteria (in this case five) prescribed by the legislation. The Appeal Court agreed with the trial division judge that the evidentiary threshold for certification application was “some basis in fact.”

In the course of discussing the cause of action, the Court noted that the plaintiffs proposed to identify the existence of “toxic areas” within which herbicides had been sprayed, and they proposed that members of the class who had not yet been diagnosed with lymphoma would not have to prove they had absorbed toxic chemicals, but simply that they had been in a “toxic area” of the base. As the Court put it in paragraph 57, “the plaintiffs seek to proceed directly from breach of a duty of care to compensation without the necessity of proving either economic or physical injury. (emphasis added)” However, returning to fundamental principles, the Court of Appeal said in paragraph 58 that damage or injury to a plaintiff is an “essential element in a claim in negligence,” and said that element was absent from the pleadings with respect to the asymptomatic subgroup, and further held that the risk of a future disease is not actionable in the absence of a present injury, citing Grieves v. FT Everard & Sons Ltd.

The Court of Appeal then examined whether an identifiable class could be determined and held that it was not possible to do so, finding in paragraph 72 that defining a class as “all individuals who were at CFB Gagetown between 1956 and the present” lacks the required rational connection to the causes of action and common issues identified by the plaintiffs. Those two items alone – existence of a cause of action and lack of identifiable class – were sufficient to dispose of the appeal. The Court then examined the proposed common issues, noting in paragraph 85 that the appellants submitted that there were “at least 12 chemicals sprayed and 40 distinct lymphomas, hundreds of causal relationships would have to be determined, leaving aside the complicating factor of spraying having taken place over a period in excess of 50 years.” The Court adopted the discussion of general versus specific causation in another Agent Orange case, Bryson v. Canada. While the issue was more narrowly framed in Ring than in Bryson, the Court had similar concerns to those outlined in Bryson with respect to the proposed common issue, namely, the association between the spraying and the risk of or causation of lymphoid cancers in humans.

The Court concluded that none of the proposed common issues in the Ring case was truly a common issue for each member of the class. Rather, as the Court put it, “there is a series of issues common to the subclasses” (para. 107). The Court concluded that in light of the timeframe involved, the large number of people, the size of the Base, and the different chemicals used, the proposed common issues would be insignificant when compared to the large number of individual inquiries necessary to resolve the claim. Accordingly, there would be no judicial economy in certifying a class action.

In conclusion, the Appeal Court said the trial division judge erred in certifying a class action as the proposed class definition did not meet the requirements of law, no common issues were identified, and there were serious issues as respects both the existence of cause of action and the common issues.

The first “Pierringer” case 
Sable Offshore Energy Inc. v. Ameron International Corporation7

Sable represented the first time a Court in Nova Scotia had considered the applicability of a Pierringer Agreement. Under the Pierringer Agreement, the settling parties paid a specific amount of money to the plaintiffs and, in return, the plaintiffs discontinued their action against the settling parties. The plaintiffs were still free to continue to pursue the action against the non-settling parties. The settling parties were relieved from any obligation to contribute to damages payable by the non-settling parties in the event of any court-ordered payment.  

In Sable, fifteen defendants and third parties (the settling parties) entered into settlement agreements with the plaintif
fs. While Justice Suzanne M. Hood did not take a new or novel approach to Pierringer agreements, this did represent the first time a Court in Nova Scotia has outlined the approach to be taken:

I conclude that, in evaluating a Pierringer settlement agreement, the Court should consider the following:
(1) there are strong public policy reasons in favour of settlement (Amoco para. 41);
(2) potential prejudice to the non-settling defendants is not a sufficient reason to refute the implementation of a settlement agreement;
(3) the settlement agreement must not directly limit the non-settling defendants’ procedural rights (Amoco, para. 41);
(4) the terms of the agreement must be disclosed to the non-settling defendants and the court (Amoco, para. 41);
(5) the court must balance the potential prejudice to the non-settling defendants against the cost and inconvenience to the settling defendants preventing the loss of evidence which may be relevant at trial to determine the degree of fault of any person;
(6) the order must not be inconsistent with the terms of the settlement agreement; if it is, it is in effect a refusal to approve the settlement;
(7) the non-settling defendants are not entitled to procedural rights they would not have if there were no settlement;
(8) the stage of litigation.8

One of the more contentious issues was whether the settling parties had to make their workers available for discovery in order to provide answers to interrogatories. The settling parties argued that imposing such a duty would have the effect of treating them as non-settling parties, negating some of the benefits of having settled early. Hood agreed and found that the settling parties should not be required to participate as if they had remained parties to the action.9

Another area of contention was the status of expert reports prepared for the settling defendants. The settling defendants argued that any expert reports prepared were, until disclosed, privileged. They submitted the Court should not order waiver of that privilege. Hood agreed. She held that until and unless the expert opinion is disclosed, it remains privileged. Any discovery of the experts would only be on factual matters and not on their opinions.10

Sable, as the first judicial consideration of a Pierringer agreement in Nova Scotia, will be influential in the evaluation of subsequent Nova Scotia cases involving a Pierringer agreement.   

Sheree L. Conlon is a partner and J. Gregory Clooney is an associate at Stewart McKelvey in Halifax, N.S.

1. McKeough v. Miller, 2009 NSSC 394
2. Insurance Act, s. 113A ( R.S.N.S. 1989 c. 231, as amended by 2003 (2nd Sess.), c. 1, s. 12)
3. Insurance Act, R.S.O. 990, c. I-8, s. 267.8(1)
4. McKeough at para. 62
5. McKeough v. Miller, 2010 NSSC 172
6. Ibid at para. 12
7. Sable Offshore Energy Inc. v. Ameron
International Corporation, 2010 NSSC 19
8. Ibid, para. 28
9. Ibid para. 78
10. Ibid para. 100