We recently ran across an interesting decision of Mr. Justice Frank Newbould, dealing with the issue of whether prejudgment interest should be compounded. In Enbridge Gas. v. Michael Marinaccio et al, 2011 ONSC 4962 (CanLII), he held that it should be. What was intriguing though, was his implicit suggestion that compound interest should be the rule, not the exception, where the plaintiff is a business.

Justice Newbould had granted summary judgment to the plaintiff Enbridge Gas for some $6.5 million, which was then reduced by about $1 million to take into account a partial recovery that Enbridge had been able to effect. It sought prejudgment interest of 4.3% on the award, compounded monthly. (In its statement of claim, Enbridge had only claimed interest “pursuant to the Courts of Justice Act”.) Justice Newbould awarded compound prejudgment interest at 4.3% per annum, on $6,542,928.63 from February 1, 2008 to April 14, 2009 and on $5,723,339.60 from April 15, 2009 to April 14, 2011.

For some reason, not explained, he awarded only simple postjudgment interest, at the rate of 3% per annum.

By our reckoning, the compound prejudgment interest totalled $896,022.65, while simple interest on the same amounts for the same periods would have been $829,920.22, a difference of $66,102.44.

As we all know, prejudgment interest is dealt with in s. 128 of the Courts of Justice Act. Subsection 128(1) provides that “A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.”

“Prejudgment interest rate” is defined, in s. 127, to mean, “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point”.

Paragraph 128(4)(b) is the provision that is usually raised in opposition to a claim for compound interest. It says that “interest shall not be awarded under subsection (1) on interest accruing under this section”.

However, s. 130 gives the court a wide discretion to calculate interest differently than the formula set out in subsection 128(1). The discretion applies to the rate, the period and whether to award interest at all. (There is also discretion with respect to postjudgment interest.)

Here, the key factor for Justice Newbould was this:

On general principles it should be presumed that had the business not been deprived of the money, it would have made the most beneficial use of it available to it. Alternatively, it should be presumed that the wrongdoer made the most beneficial use of it.

His Honour cited two Supreme Court of Canada decisions in support of his conclusion: Air Canada v. Ontario (Liquor Control Board), 1997 CanLII 361 (SCC), [1997] 2 S.C.R. 581 at para. 85 per Iacobucci J. and Bank of America Canada v. Mutual Trust, 2002 SCC 43 (CanLII), [2002] 2 S.C.R. 601 at para. 41 per Major J.

The passage cited from Air Canada v. Ontario was actually a quotation from the Ontario Court of Appeal’s ruling in Brock v. Cole (1983), 40 O.R. (2d) 97 (C.A.), at p. 103, which was, itself, quoting from the opinion of Lord Denning in  Wallersteiner v. Moir (No. 2), [1975] Q.B. 373, [1975] 1 All E.R. 849 at 856.

In Brock v. Cole, the plaintiff who was seeking compound interest was suing to recover an amount of money that he had given to the defendants to be invested on his behalf. So, it was clear on the facts of that case, that maximizing the return on the principal was very much within the plaintiff’s contemplation. And even on those facts, the interest ordered by the Court of Appeal was only compounded annually.

In Claiborne Industries Ltd. v. National Bank of Canada, 1989 CarswellOnt 1425 34 O.A.C. 241, 69 O.R. (2d) 65, 59 D.L.R. (4th) 533, [1989] C.L.D. 1073, the Ontario Court of Appeal again had occasion to consider the issue of compound interest. Justice Carthy said that Brock stood for the proposition that there is a “general jurisdiction of the court to award compound interest where there is a wrongful detention of money which ought to have been paid. This is on the theory that it is reasonable to assume that the wrongdoer made the most beneficial use of the money and is accountable for the profits.” The Court went on to award interest, compounded monthly, on monies that it found to have been stolen, but only simple interest on other monies that were found to be owing by the defendant to the plaintiff (legal and accounting expenses) but which did not amount to a “wrongful application of funds”.

Then we come to the second decision of the Supreme Court of Canada that was cited by Justice Newbould: Bank of America Canada v. Mutual Trust Co.  Interestingly, counsel for the winning appellant in that case was…Frank J.C. Newbould, Q.C., now Mr. Justice Newbould.  The Supreme Court accepted the appellant’s argument (which the Court of Appeal had rejected), that it was entitled to compound prejudgment and postjudgment interest.

Bank of America was a breach of contract case (and this fact was significant). The Bank of America had agreed to provide construction financing of $33 million for a condominium development. The defendant, Mutual Trust, had agreed to provide mortgage financing for investors, in the amount of $36.5 million. Both parties had provided for themselves to receive compound interest from those to whom they were lending.

Because of the downturn in the real estate market in the early 1990′s, Mutual Trust ultimately refused to advance the mortgage funds. The condominium was ultimately sold at a significant loss.

The Supreme Court discussed concepts of “time value” of money and looked at the history of interest in Canadian law. It concluded that the common law now countenances awards of compound interest in contract cases: “To keep the common law current with the evolution of society and to resolve the inconsistency between awarding expectation damages and the courts’ past unwillingness to award compound interest, that unwillingness should be discarded in cases requiring that remedy for the plaintiff to realize the benefit of his or her contract.”

In addition, it held that equity also allows courts to award compound interest: “Equity has been recognized as one right by which interest may be awarded other than as specifically stated in ss. 128 and 129 CJA, including an award of compound interest. However, later in the decision, the Court appeared to sound a note of restraint with respect to awarding compound interest:

An award of compound pre- and post-judgment interest will generally be limited to breach of contract cases where there is evidence that the parties agreed, knew, or should have known, that the money which is the subject of the dispute would bear compound interest as damages. It may be awarded as consequential damages in other cases but there would be the usual requirement of proving that damage component.

Here, the Court was satisfied that compound interest was within the contemplation of both parties and upheld that trial judge’s award of compound prejudgment and postjudgment interest.

While there is no doubt that courts can award compound interest, it is much less clear when they will do so. The more recent cases suggest that the courts are moving in a more liberal direction. For example, in Royal Bank of Canada v. Slopen, 2011 ONCA 516 (CanLII), the Court of Appeal said that its own refusal to award compound interest in a lawyer’s negligence case (Confederation Life Insurance Co. v. Shepherd, McKenzie, Plaxton, Little & Jenkins 1996 CanLII 3206 (ON CA), (1996), 88 O.A.C. 398 (C.A.) had been “overtaken” by Bank of America, such that, in another lawyer’s negligence case, decided this year, an award of compound interest was upheld, with the Court saying, “We can see no difference in principle between awarding compound interest in a breach of contract case and in a solicitor’s negligence case where, as here, the negligence is rooted in a mortgage transaction. Different considerations might well apply in other types of negligence cases.”

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In Aherne v. Chang, 2011 ONSC 3846 (CanLII), Mr. Justice Paul Perell decided an appeal from a decision of Master Short. The Master had ordered that if the defendants in a medical malpractice action were to require that the plaintiffs undergo a defence medical examination and were they to provide to the medical examiner any records of surveillance conducted on the plaintiff, those records must be also be given to the plaintiffs at the same time.

Justice Perell dismissed the appeal.

The effect of the decision extends beyond medical malpractice claims, as the same principle would undoubtedly apply in a personal injury action (MVA, occupier’s liability, products liability, etc.)

In this case, the objection made by the defendant was, as summarized by Justice Perell, that “early disclosure of the surveillance records is unsupported by the authorities; that it would enable a plaintiff to deceive the health practitioner; and that no useful purpose is served in disclosing prematurely the surveillance records, which will be disclosed to the Plaintiffs later when the health practitioner’s report is delivered.”

We do not disagree with the order that was made in this case. In our experience though, the usual practice in these situations is to do one of two things:

1. have the IME conducted in the usual way but without providing any surveillance to the medical examiner. Then, once the examination has taken place but before the report has been prepared, provide the surveillance records to the examiner, so that he or she can incorporate that information into the report. The Aherne decision would require that the surveillance be given to the plaintiff at the same time, but by then, the plaintiff would not be in a position to “deceive the health practitioner”; or
2. wait until after a report of the examination has been provided and then send the surveillance to the examiner, who can be asked whether his or her opinion would be affected by that information. If so, a second report can be obtained and served. The surveillance would also have be provided to counsel for the plaintiff in that event.

In the case of the second course of action, an interesting question arises as to whether the surveillance must be disclosed, should the medical examiner not prepare a second report. Justice Perell referred to Rule 33.06(1), which provides that a written report must be delivered following a medical examination conducted under the authority of s. 105 of the Courts of Justice Act. (This is the familiar independent or “defence” medical examination.) Since a report must be provided in relation to that examination, there is not much doubt, in our view, that privilege is waived on any documents or information provided to the medical examiner to assist in the preparation of the report.

However, if the practitioner has prepared his or her report without seeing the surveillance, then Aherne has no application. Once the report contemplated by Rule 33.06(1) has been served, there is no explicit obligation in the Rule, to prepare or serve a supplementary report, even if the practitioner is provided with new information. Of course, failure to obtain and serve a new report would probably preclude the introduction of evidence from the practitioner at trial, commenting on the surveillance.

So, it seems to us that if a defendant is really worried that early disclosure of surveillance will allow a plaintiff to “deceive” a practitioner retained to conduct an IME, that problem is easily addressed in the manner outlined above.

The Court of Appeal has handed down a ruling that is important for auto insurers. The Court has held that an injured plaintiff can still sue his or her own insurer, pursuant to an OPCF-44R underinsured motorist endorsement, even after the plaintiff has settled with the insurer of the at-fault driver for less than that insurer’s policy limits and has released the driver, the vehicle’s owner and the primary insurer. As discussed at the end of this post though, we are left with some questions about the decision.

In Maccaroni v. Kelly, the plaintiff claimed to have been injured when rear-ended by a car driven by Kevin Kelly and owned by his mother, Donna Ainsworth. The Co-operators insured the Kelly/Ainsworth vehicle for third party liability, with limits of $1 million, denied coverage. It claimed that Kelly’s driver’s licence had been suspended and that Ainsworth had allowed him to operate the vehicle while knowing that he was unlicensed. (These would be breaches of the statutory condition in the auto policy, prohibiting anyone from operating a vehicle unless “authorized by law” to do so.)

Co-operators had itself added to the action as a statutory third party and took the position that its liability was confined to the statutory minimum limits ($200,000) as a result of the absolute liability provisions of the Insurance Act. (Those provisions, contained in s. 258(4) of the Act, provide that even when an insured breaches the policy, the insurer remains absolutely liable to an injured claimant, up to a maximum of $200,000.)

The injured plaintiff herself was insured with Intact Insurance and had an OPCF-44R endorsement, providing underinsured motorist coverage, to a maximum of $1 million.

In their statement of claim, the plaintiffs sued Kelly, Ainsworth, Co-operators and Intact.

In due course, the plaintiffs settled with the tortfeasors and Co-operators, for the statutory minimum limits of $200,000. They executed a full and final release in favour of all three parties. That release made it clear that the settlement had been entered into with no admission of liability. The plaintiffs then sought to continue with their claim against Intact for additional compensation to which they thought they were entitled.

Of course, if Co-operators’ full liability limits of $1 million had been available, then there would have been no basis for a claim against Intact. The limits of the two policies do not “stack”. Since both policies had limits of $1 million, there would have been no “underinsured” coverage available, had Co-operators’ full liability limits been payable.

The OPCF-44R endorsement effectively provides that where the limits of the liability policy are reduced to the statutory minimum “by operation of law…because of a breach of the policy”, then the underinsured coverage will respond.

Intact moved for summary judgment, dismissing the action as against it. The motion was based on its argument that just because Co-operators had claimed that its policy had been breached and that it was entitled to deny coverage did not make it so, even if the plaintiffs were prepared to accept Co-operators’ position. This did not reduce Intact’s limits to the statutory minimum “by operation of law”, Intact contended.

Mr. Justice Patrick Flynn heard the motion at first instance. He agreed with Intact and dismissed the action as against it. He said, “I further agree with ING’s [now 'Intact's'] argument that no such legal determination can now be made, since the plaintiff has released the tortfeasors and Co-operators from this action.”

However, while the Court of Appeal agreed that Co-operators’ policy limits had not been reduced to the statutory minimum “by operation of law”, it rejected the conclusion quoted in the previous paragraph. In the opinions of Justices MacFarland, Rouleau and Epstein, the action against Intact could still proceed to a conclusion. Thus, the plaintiffs’ appeal was allowed.

In the Court’s view, it would be up to the trial judge to decide whether Co-operators’ off-coverage position was well-founded. The plaintiffs would have the burden of proving that it was:

The fact that Co-operators and the tortfeasors are not parties to the proceeding is of no moment. The tortfeasors and representatives of Co-operators can be called as witnesses and can be examined under oath as non-parties: see rules 31.10 and 53.04 of the Rules of Civil Procedure. While a factual finding made in respect of the coverage issue will bind neither Co-operators nor the tortfeasors vis-à-vis the appellants in view of the release, such a finding can determine, as between the appellants and ING, whether the appellants are entitled to recover anything from ING. If the appellants are successful and establish that the tortfeasors were in breach of their policy provisions and hence, that the off-coverage position taken by Co-operators is correct, they may be entitled to recover from ING. If they are not successful, their action will be dismissed and they will, absent exceptional circumstances, be liable for the costs of those proceedings.

The Court went on to make the following somewhat surprising statement:

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In Demers v. B.R. Davidson Mining & Development Ltd., Mr. Justice Douglas C. Shaw has held that, for the period November 1, 1996 to September 30, 2003, CPP benefits are not deductible from an award of tort damages in a motor vehicle case. A 2005 decision of the same court, Meloche v. McKenzie, came to the opposite conclusion, so it is quite possible that the defendant in Demers will appeal.

Update: We have been advised that this decision has, in fact, been appealed. (See comment below.)

For motor vehicle accidents occurring after September 30, 2003, s. 5.2 of O.Reg. 461/96 makes it clear that CPP benefits are to be deducted, by providing that such benefits are “deemed” to be payments for income loss or loss of earning capacity (and therefore deductible). However, until that amendment was made, the Insurance Act did not deal specifically with the character of CPP benefits. Earlier jurisprudence had held that CPP benefits were not payments for loss of income (since eligibility for CPP did not depend on the claimant having been employed), but the addition of the phrase, “or loss of earning capacity” to the collateral benefits provisions of s. 267.8(1) of the Insurance Act in Bill 59, left uncertainty as to whether that amendment produced a different result..

It was held by Justice Patterson, in Meloche v. McKenzie, that the benefits were deductible. In coming to this conclusion, His Honour applied what he described as a “broad, inclusive and encompassing” interpretation of s. 267.

In the Demers case, Justice Shaw undertook his own statutory interpretation and it led him in the opposite direction. He was of the view that if s. 267.8(1)2, in its original form, allowed for the deduction of CPP benefits, then there would have been no need to amend O.Reg. 461/96 to provide explicitly for their deductibility.

He also felt that it was significant that Justice Patterson had not been referred to a Court of Appeal decision in Kosanovic v. Wawanesa Mutual Insurance Co., which had principally dealt with the question of whether certain disability benefits to which the plaintiff was entitled reduced the amount available under uninsured motorist coverage. In the course of its reasons, the Court of Appeal said that the disability benefits “do not meet the statutory criteria for a deduction under s. 267.8(1)2 of the Act”.

Counsel for the plaintiff in Demers relied upon that passage and Justice Shaw agreed, saying that the decision was binding on him. Accordingly, he held that CPP benefits that had been paid to the plaintiff were not deductible from tort damages.

His Honour then turned to a consideration of whether disability benefits received from the Hospitals of Ontario Pension Plan (“HOOP”) were deductible. He held that they are not. He relied on the Divisional Court’s 2006 ruling in State Farm v. Scott, in which it was held that HOOP benefits were not deductible from income replacement benefits payable under the Statutory Accident Benefits Schedule. Justice Shaw felt that the same reasoning applied to tort damages. In his view, HOOP benefits are non-indemnity in nature and, absent a statutory provision such as the one that now applies to CPP benefits, should not be treated as deductible from tort damages.

His Honour added that, in the event his conclusion about the deductibility of these benefits were wrong, then he would only allow the benefits to be deducted net of income tax.

Finally, the plaintiff in this case had been paid some $40,405 from her accident benefits insurer by way of interest on overdue payments. (The SABS provides for interest to be paid at the rate of 2 per cent per month, compounded monthly.) The defendant argued that these payments should be deductible from the tort damages. However, Justice Shaw rejected that submission. He held that the interest payments represented only the time value of money on benefits unpaid by the no fault insurer and should not diminish the amount payable by the tort insurer.

(The conclusion about the time value of money seems somewhat debatable. Monthly interest of 2 per cent, compounded monthly is the equivalent of about 26.8% in simple interest. It is hard to imagine that in 2011, the time value of money would be that high.)

Leonard v. Kline, 2011 ONSC 2730 (CanLII) is a personal injury action arising out of a motor vehicle accident. The plaintiff sought leave from Mr. Justice Gregory Ellies to call ten experts. (Section 12 of the Evidence Act requires that a party who wishes to call more than three expert witnesses at trial obtain leave from the court.) The defendant was only planning to call two experts and took the position that the expert testimony sought to be adduced by counsel for the plaintiff was duplicative.

Justice Ellies agreed, in part. He grouped together two rehabilitation consultants who had worked together and ruled that only one of them could testify. He did the same thing with two occupational therapists: only one was permitted to give evidence at trial.

He permitted an orthopaedic surgeon, a psychiatrist, a psychologist and an actuary to testify, reasoning that each had addressed the issue of the plaintiff’s employability from the standpoint of a different field and the testimony of these witnesses was not duplicative.

Interestingly, two of the experts on the list provided by counsel for the plaintiff were treating physicians. With respect to these witnesses, Justice Ellies said, “it is my view that neither of these experts ought to be permitted to express an opinion on whether the plaintiff is now employable….Drs. Shamess and Maione are ‘fact’ witnesses and their evidence ought to be restricted to that. As treating physicians, they are entitled to give evidence with respect to their observations of the plaintiff, both pre- and post-accident, their medical diagnoses, and the treatment prescribed. They ought not to provide opinion evidence with respect to whether the plaintiff is now competitively employable, as that is the purpose for which the plaintiff proposes to call the other experts.”

(Dr. Maione, the family doctor, had not provided a report in compliance with Rule 53.03.)

Whether a professional witness is an expert or a fact witness (or both) is an interesting question. Placing the professional into one category or the other has significant consequences for their testimony. For example, Justice Ellies held in this case that the two treating physicians were testifying only as to questions of fact. This would presumably mean that they would not have to deliver reports under R. 53.03 and would not have to acknowledge a supervening duty of impartiality to the court. (Justice Ellies did seem to have adverted to this, since he specifically mentioned that one of the two witnesses had not delivered a report.)

However, in limiting the scope of the testimony to be given by these witnesses, His Honour said that they could give evidence as to their “medical diagnoses”. Now, it strikes us that if these doctors were to testify as to the fact of their diagnoses having been made, that would be fact evidence. But if their testimony were being relied upon for the accuracy of their diagnoses, it seems to us that that would be opinion evidence, as it is not evidence that a lay person would be entitled to present.

Master Calum MacLeod referred to the sometimes murky separation between expert and fact witnesses in Andersen v. St. Jude Medical Inc., 2007 CanLII 64140 (ON S.C.), where he said:

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In Ontario v. Rothmans Inc., 2011 ONSC 2504 (CanLII), Mr. Justice Paul Perell has analyzed in depth the proper bounds of cross-examinations on affidavits. He allowed an appeal from a ruling by Master Donald Short, in which the Master had ordered the defendants to attempt to retrieve records going back 40 to 50 years, about which the plaintiff had questioned those defendants’ deponents on their cross-examinations.

This lawsuit, which Perell J. described as a “humongous action”, is a claim by the Ontario government against fourteen tobacco companies, both domestic and international. The damages sought total $50 billion, representing health care costs for the treatment of tobacco-related disease. The government had prepared the ground for its lawsuit by passing the Tobacco Damages and Health Care Costs Recovery Act, 2009. The statute was made retroactive.

The lawsuit is still at a procedurally early stage. Several of the foreign defendants brought a motion, challenging the jurisdiction of the Ontario courts to entertain this action against them. In support of that motion, affidavits were sworn on behalf of the moving parties, basically to the effect that those companies had not carried on business in Ontario, were not incorporated here and owned no property in this province. Counsel for the Crown cross-examined. The deponents were asked to look for and produce a number of documents that the Crown alleged were in their possession. Most of the documents evidently dated back to the 1950′s, 1960′s and 1970′s. The defendants refused, arguing that the cost of looking for these documents was disproportionate to their value in the suit and that they were under no obligation to undertake to do so on a jurisdiction motion.

A refusals motion was brought before Master Short and he ordered the defendants to make efforts to retrieve the documents sought by the Crown. It was his view that in light of the wording of the Tobacco Damages and Health Care Costs Recovery Act, 2009, the court hearing the jurisdiction motion should have as much information as possible. The defendants ought to be required, he thought, to look for all documents that might be relevant. He rejected the defence argument, that millions of pages of documents would have to be searched, saying that “[w]hile it perhaps is possible that corporations the size of these defendants may only have un-indexed, paper filing cabinets, it is more likely in my view that modern document management systems may well be available to assist and facilitate the searches directed”.

Justice Perell came to the opposite conclusion and allowed the defendants’ appeal. He felt that in making the ruling he had, the Master had moved from an adversarial to an inquisitorial approach to the lawsuit.

Justice Perell undertook a lengthy and detailed analysis of the nature of cross-examination on an affidavit, in which he compared and contrasted it with examinations for discovery and cross-examination at trial. Although this litigation is quite exceptional, His Honour’s observations regarding the permissible scope of cross-examination on affidavits filed on interlocutory motions will have broad relevance in other cases.

Justice Perell noted that unlike examinations for discovery, cross-examination at trial does not involve the giving of undertakings. He also observed that while undertakings voluntarily given on a cross-examination on an affidavit will be enforced by the court, it was not entirely clear to what extent a deponent can be compelled to give an undertaking on a cross-examination: “If the deponent confines his or her evidence to personal knowledge, there is no apparent basis to compel him or her to obtain information about what others know about the case.”

From his review of the authorities, Justice Perell distilled the following principles governing examinations for discovery and cross-examinations on affidavits:

Examinations for discovery

• The scope of the discovery is defined by the pleadings; discovery questions must be relevant to the issues as defined by the pleadings.
• The examining party may not go beyond the pleadings in an effort to find a claim or defence that has not been pleaded. Overbroad or speculative discovery is known colloquially as a “fishing expedition” and it is not permitted.
• Under the former case law, where the rules provided for questions “relating to any matter in issue,” the scope of discovery was defined with wide latitude and a question would be proper if there is a semblance of relevancy.The recently amended rule changes “relating to any matter in issue” to “relevant to any matter in issue,” which suggests a modest narrowing of the scope of examinations for discovery.

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In Aherne v. Chang, 2011 ONSC 2067 (CanLII), Master Donald E. Short considered the question of whether sending privileged surveillance videos to a defence medical expert in a personal injury action results in the loss of privilege on the surveillance. He concluded that it does. (The Master described this decision as “the third instalment of a trilogy of decisions by me dealing with the duties and responsibilities of expert witnesses appointed by counsel for defendants, with respect to the appropriate manner of conducting what historically have been referred to as ‘defence medicals’ under the ‘new’ Rules.” The other two decisions are Girao v. Cunningham, [2010] O.J. No. 3642; ONSC 4607 and Bakalenikov v. Semkiw, [2010] O.J. No. 3877; 2010 ONSC 4928.

This was a medical malpractice case. At the time of the defendant’s examination for discovery, no surveillance had been undertaken. However, his counsel refused to answer questions about disclosure of surveillance that might be undertaken in the future. A specific question arose as to the effect of providing such surveillance to an expert retained to conduct a defence medical examination.

The Master prefaced his reasons with a discussion of the role of masters in interpreting the Rules and he said that “when opportunities for giving an indication of direction to the bar present themselves, they ought to be taken”.

Interestingly, he began his analysis by saying that “[a]s of January 1, 2010, entirely new obligations are placed upon all experts. [Emphasis added] In particular, it is made explicit that their duty is to the court, rather than to any party or their insurer (or any otherwise financially responsible party).” He referred to the decision of Moore J. in Beasley v. Barrand. In our post yesterday, about the decision of Madam Justice MacLeod-Beliveau in McNeill v. Filthaut, we noted that that judge had come to the opposite conclusion. She held that the new obligations, which are set out in Rule 53.03, do not apply to all experts. (The McNeill case turned largely on the interpretation to be given to the phrase, “expert engaged by or on behalf of a party in preparation for contemplated or pending litigation”.)

The Master went on to discuss, at some length, the obligations of expert witnesses. Although he felt that experts are required to be objective and unbiased, he thought that these qualities were mandatory even apart from the wording of Rule 53.03. (It does appear though, that throughout his reasons, Master Short had in mind only experts who had been retained by a party to the litigation.)

The Master moved from there to a discussion of the amendments to the Rules and said that “[t]he Court now expects and relies upon frank and unbiased opinions from its experts” and that “[t]his is a major sea change which requires practical improvements to past opaque processes”.

After considering some caselaw, Master Short came to the conclusion that an expert retained to conduct a defence medical examination “owes his or her primary duty to the court”. He held that if the defendant were to conduct surveillance on the plaintiff and if that surveillance were to be provided to an expert retained to conduct a defence medical examination under Rule 37, then privilege on the surveillance will have been waived and the surveillance should be sent to counsel for the plaintiff at the same time that it is given to the defence medical examiner.

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Madam Justice Helen MacLeod-Beliveau has released a decision that might have very significant implications for civil litigation. Although the action involved a personal injury claim, its implications extend to expert witnesses in any civil lawsuit.

In McNeill v. Filthaut, 2011 ONSC 2165 (CanLII). Her Honour was considering the scope of Rule 53.03 of the Rules of Civil Procedure, which imposes certain obligations on “every expert engaged by or on behalf of a party to provide evidence in relation to a proceeding under these rules”. Those obligations include providing a written report that summarizes the expert’s opinion and signing a written acknowledgement of the duty to provide objective unbiased evidence. Also under consideration was Rule 4.1, which sets out the duty of an expert.

Specifically, in this case, she had to decide whether the defendant in a personal injury action could call as witnesses at trial several experts who had all been retained by the accident benefits insurer, not by the insurer that was seeking to call them at trial. Readers will recall that this issue arose last year in what Justice MacLeod-Beliveau referred to as “the seminal case of Beasley v. Barrand, [2010] O.J. 1466 (S.C.)”. In that case, to the dismay of the defence bar and their clients, Justice Moore held that experts retained by accident benefits insurers had to first comply with Rule 53.03 before they could give evidence in a tort action and that those requirements had not been met in that case. In practical terms, it would be at least difficult, although perhaps not impossible, to comply with Rule 53.03 in the case of non-retained experts.

Justice MacLeod-Beliveau reviewed the Beasley case, as well as Anand v. State Farm, (23 April 2010, unreported) Court File No. 04-CV-266354CM1, Slaught v. Phillips (18 May 2010, unreported) Court File No. 109/07, Jeffrey v. Baker, [2010] O.J. No. 4415 (S.C.) and Kusnierz v. Economical Mutual Insurance Co., [2010] O.J. No. 4462 (S.C.), most of which had followed Beasley.

After considering the authorities, Her Honour declared that “the requirements outlined in Rule 53.03, as they relate to expert witnesses, do not apply to individuals retained by non-parties to the litigation”. She also found that Rule 4.01 and Form 53 (acknowledgement of expert’s duties) apply only to experts retained by parties. So, in this case,  the defendant was free to call at trial the experts retained by the accident benefits insurer. (The trial is to be held next month, so this will happen quickly.)

Discussion

The implications of this ruling might extend further than is apparent at first blush. Rule 53.03 requires that before a party can call an expert witness, a report, summarizing that expert’s opinion, must be served on the opposing parties not less than 90 days before the pre-trial conference. Rule 53.03(2.1) sets out what the report must contain:

(2.1) A report provided for the purposes of subrule (1) or (2) shall contain the following information:

1. The expert’s name, address and area of expertise.

2. The expert’s qualifications and employment and educational experiences in his or her area of expertise.

3. The instructions provided to the expert in relation to the proceeding.

4. The nature of the opinion being sought and each issue in the proceeding to which the opinion relates.

5. The expert’s opinion respecting each issue and, where there is a range of opinions given, a summary of the range and the reasons for the expert’s own opinion within that range.

6. The expert’s reasons for his or her opinion, including,

i. a description of the factual assumptions on which the opinion is based,

ii. a description of any research conducted by the expert that led him or her to form the opinion, and iii. a list of every document, if any, relied on by the expert in forming the opinion.

7. An acknowledgement of expert’s duty (Form 53) signed by the expert.

And Rule 4.01 provides:

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In a very significant decision, released yesterday, Justice Harrison Arrell has ruled that an automobile insurer that had paid its policy limits plus costs no longer owed any duty to defend its insured. In Dominion of Canada v. Kingsway Insurance, His Honour said, “I conclude that there is nothing in the Ontario Automobile Policy obligating an insured to continue to defend an insured when it has paid its limits and costs in full. The case law, in my view, is clear that if there is no possibility of a duty to indemnify then there is no duty to defend.”

This decision will be of considerable interest to insurers. The ramifications are interesting. Is an insurer free to pay its policy limits to a plaintiff at an early stage without trying to obtain a full and final release of its insured? What if the limits have been paid but no agreement has been reached on costs; is there a mechanism whereby the issue of costs payable by the insurer can be determined, even if the lawsuit is going to continue against the insured?

It is unlikely that this case will be appealed because the insured himself made no submissions on the motion. The argument came instead from Dominion of Canada, the underinsured insurer in this case. But Justice Arrell also ruled that DoC had no status to contest the motion, brought by counsel appointed by Kingsway, seeking to be removed as lawyers of record. So, it seems that this case represents the law, for now at least…

In Lawless v. Anderson, 2010 ONSC 2723 (CanLII), Mr. Justice David M. Brown dealt with a small but potentially significant practice point: the appropriate use to be made of an opposing party’s examination for discovery transcript on a motion for summary judgment. In this medical malpractice case, the defendant physician moved for summary judgment on the basis that the plaintiff had failed to sue within the applicable limitation period. Discoverability was a key issue.

The moving party filed the transcript of the plaintiff’s examination for discovery. When counsel for the plaintiff sought to rely on the same transcript, the defendant’s lawyer objected, arguing that on a motion for summary judgment, a party cannot rely upon the transcript of his or her own examination for discovery. Justice Brown referred to Rule 39.04(2), which provides that “[o]n the hearing of a motion, a party may not use in evidence the party’s own examination for discovery or the examination for discovery of any person examined on behalf or in place of, or in addition to, the party unless the other parties consent.”

However, His Honour noted that in this case, the moving party had filed, in its entirety, the transcript of the plaintiff’s examination and that [a]As a general rule when a party places into evidence answers given by an opposite party on her examination for discovery, such evidence is available to either party in the same manner as any other evidence”.

Counsel for the defendant submitted that although he had filed the whole transcript, he had only intended to refer to certain portions of it. However, Justice Brown said that “I must confess such an intention is not apparent from the face of Dr. Anderson’s motion record” and that as a result, the plaintiff could refer to the evidence that had been filed by the defendant. His Honour summarized the applicable law this way:

Absent a clear statement by the moving party that he only intended to rely on certain portions of Ms. Lawless’ discovery transcript, it reasonably was open to the responding party to operate on the assumption that the entire transcript was in evidence as part of the moving party’s record and to take that into consideration in determining the contents of the responding party’s record. With the entire transcript in evidence, the responding party could use that evidence as she could any other evidence in the record. All of which is to say, if a party on a motion for summary judgment wishes to rely on limited portions of the examination for discovery of an opposite party, it should only include in its record the passages it intends to “read-in”. Otherwise, in the absence of a statement of limited use, the entirety of a filed transcript becomes part of the record available for use in the same manner as any other evidence filed on the motion.

The first and fourth sentences of this passage suggest that a moving party can limit the use to be made of a discovery transcript that he or she is filing, by making a “clear statement” of the intention to rely on only certain portions of that transcript. However, the third sentence appears to take a more restrictive view and suggests that a moving party should file only those parts of the transcript on which he or she plans to rely.

Presumably, it would always be open to the responding party to argue that the parts of the transcript that the moving party has chosen to file are incomplete without other portions of the transcript and to force the moving party to file those portions as well.