WSIB and the Ontario Court of Appeal decision in the Castrillo Class Action

INTRODUCTION

It seems likely that visitors to this site will have heard about, or, indeed, have read, the Court of Appeal’s February 13, 2017, decision in Fink & Bornstein’s class action against the WSIB  – Pietro Castrillo v. Workplace Safety and Insurance Board (Mr. Castrillo being the representative plaintiff) .

It may be found at this link:  https://www.canlii.org/en/on/onca/doc/2017/2017onca121/2017onca121.html?autocompleteStr=castrillo&autocompletePos=1

The class action challenges the WSIB’s conduct in introducing a radically revised policy in the adjudication of non-economic loss benefits (NEL benefits) pursuant to which for the first time in the Board’s history the thin-skull doctrine was negated, and benefits were discounted on the basis of the perceived impact on post-injury permanent impairments, of pre-existing “conditions” that had not been symptomatic prior to the injury.

The revised policy was implemented through the informal adoption by Board management of an entirely new interpretation of its long-standing Operational Policy 18-05-05 (“Effect of a Pre-existing Impairment”).

The class action is based on three claims, viz: (1) that, in implementing the new interpretation, the Board was guilty of misfeasance in public office, (2) that, in implementing the new interpretation, the Board was guilty of bad faith, and (3), in the alternative, that the implementation of the new interpretation was at least negligent.

The central tenet of the class action is that the new interpretation was, to the knowledge of the Board, unauthorized in law and that it was introduced for an improper purpose.

The WSIB applied to the Ontario Superior Court to have the statement of claim struck on the grounds that it disclosed no cause of action.  That application was successful (see the reference to Belobaba J.’s decision under the heading “Legal Challenge” in the author’s “Hijacking” post linked below) and this decision deals with the Plaintiff’s appeal of that decision, allowing the appeal and overturning Justice Belobaba’s decision.

With respect to the second claim – the bad-faith claim – the Court of Appeal finds that “bad faith” is not a stand-alone cause of action, but only an element of the misfeasance-in-public-office claim.  The Court, therefore, strikes those portions of the appellant’s pleadings that assert bad faith to be a separate cause of action.  However, it gives the plaintiff permission to amend his pleadings for the purpose of folding the bad-faith allegations into the misfeasance claim.

Thus, the causes of action the Court of Appeal’s decision leaves standing are misfeasance in public office (characterized in important measure by bad faith), and, in the alternative, negligence.

Of course, in this interlocutory decision the Court of Appeal decides nothing about the substantive merits of these claims other than that it is “not plain and obvious” that they “have no reasonable prospect of success”.  It is thus plain and obvious that there are miles to go and many hurdles to clear before the Board will be called upon to write a cheque.

Nonetheless, the Court of Appeal’s decision is a seminal decision that hauls the class action out of the ditch where the lower court had deposited it, and puts it back on the road headed in the right direction, with the road well-marked and with, in this author’s opinion, good reason to anticipate a successful arrival at the plaintiff’s desired destination, with very serious financial implications for the WISB.

THE DECISION’S HIGHLIGHTS AND IMPLICATIONS

As noted by the Court, the new interpretation of Operational Policy 18-05-05 is referred to in the statement of claim as “the secret policy”.

This so-called secret policy was applied in the adjudication of Mr. Castrillo’s claim for a NEL benefit in which, because of the alleged impact on his permanent impairment of a pre-existing, but asymptomatic, osteoarthritis condition in his injured shoulder, his NEL award was discounted by 50%.

Neither the Court of Appeal decision nor the Plaintiff’s Statement of Claim identifies the time when the secret policy was first implemented other than noting that Mr. Castrillo injured his shoulder in October 2011, so that the application of the new interpretation to his own NEL award would have occurred after that point. (But visitors to this site will know [see the Hijacking post linked below] that evidence from WSIAT decisions dealing with the appeals of NEL decisions in which the new interpretation was challenged seem to show that the secret policy was probably first implemented in or about the first week of January 2012.)

Thus, the application of this radically revised interpretation of the existing 18-05-05 Operational Policy – the so called secret policy – will have continued for nearly three years. It was discontinued, effective November 1, 2014, when the Board published new Operational Policies explicitly authorizing the discounting of NEL awards based on pre-existing, asymptomatic conditions.

Accordingly, if the Board’s change of interpretation is eventually found in this class action to have constituted misfeasance in public office, that misfeasance will be seen to have persisted for about three years and will have impacted thousands of claims. (And, if perchance it were found in some future litigation that the Board’s November 2014 policies were also unauthorized to the Board’s knowledge, that misfeasance will be seen to have persisted to the present time.)

The class action’s claims are based on the actions of the Board in informally implementing the secret policy during the period prior to the Board’s publication of its new explicit policies in November 2014.  Thus, this Court of Appeal decision should have no impact, either way, on any future litigation that may challenge the lawfulness of the post-November policies.  (See paragraph 34 of the decision.)

(However, if this class action eventually leads to a court decision on the substantive question of whether or not the secret policy was improper and unauthorized, that decision could have an impact on any litigation challenging the new policies. If the secret, informal policy were found to be authorized and proper, it would follow, a priori,  that the new, formal policies were also authorized and proper – and, perhaps, though not necessarily, vice versa.)

The decision puts to rest any question about the exposure of the WSIB itself to liability for actionable actions by its employees. The Court notes that while the statutory waiver of liability – Section 179 – protects individual Board officers and employees from being sued personally for actions that were undertaken in good faith, even if they were negligent, the Section leaves the WSIB corporation itself directly and vicariously responsible for what its employees and officers do that is actionable.  (See paragraph 86.)

It also puts to rest any suggestion that the WSIA’s strong privative clause could protect the Board from a claim of misfeasance. (See paragraph 66.)

A central, and, to a casual reader, surprising, feature of this class action is that it does not include a claim for an increase in any NEL award – not for the representative plaintiff and not for any members of the class.

The Statement of Claim defines the “Class” as, effectively, all workers whose NEL awards were reduced as a result of the Board’s new interpretation of its existing policy and who appealed those awards and had them overturned on appeal.  (Mr. Castrillo himself had appealed his discounted NEL award to the Board’s own Appeals Resolution Officer level and that appeal had been successful.)  Most importantly, the defined class does not include any injured worker who received a discounted NEL award but did not appeal.

(One can expect that all injured workers who had their NEL awards discounted because of pre-existing asymptomatic conditions and who appealed those awards would have had the discounting overturned – either at the Appeals Resolution Officer level (which was the case with Mr. Castrillo) or, once the Board had brought the AROs into line on the Board’s new interpretation, then at WSIAT.)

This definition of the class was presumably chosen by the Fink & Bornstein firm to optimize the chances that the action would satisfy the class qualification provision in the Class Proceedings Act – the provision that requires that the claims or defences of the class members “raise common issues”. And by designating a class comprising those whose benefits had already been restored on appeal, Mr. Fink also prevented the Board from challenging the proceedings on the basis that it was a disguised appeal of benefits awards to which the prematurity doctrine would apply.

Given that the class was presumably restricted to workers who had successfully appealed the discounting of their NEL benefit in order to avoid the shoals inherent in the Class Proceedings Act’s requirement of common issues, and, as well, to perhaps avoid the obstacles inherent in the prematurity doctrine, it is difficult to know what to make of the Court of Appeal’s observation in paragraph 21 that “[o]ther class members could have claims for both a higher NEL award and similar incidental costs.”

Previously, one was aware of some criticism within the Ontario community of injured worker advocates of the way in which this class action had been structured.  The criticisms seemed to stem principally from the action’s singular focus on the recovery of legal fees and disbursements, but also from its apparent abandonment of those injured workers who did not have the capacity, knowledge or resources needed to launch appeals of their discounted NEL awards.

However, by avoiding the complications of including claims for benefit increases, and confining the special damages claim to expenses that would be commonly incurred in any appeal, Mr. Fink and his partners laid a simplified foundation for a civil-court class action that might reasonably meet the common-issues requirements of the Class Proceedings Act, that would not get hung up on the prematurity doctrine, that was manageable from an evidence point of view, and yet a foundation which would support the pursuit of other remedies that were indeed of important systemic value.

The damage claims themselves are not insignificant. These include:

$1,000,000 for misfeasance in public office;

$1,000,000 for legal fees, disbursements and other expenses; and

$1,000,000 in punitive, aggravated and exemplary damages;

The Plaintiff also claims in the alternative $1,000,000 in damages for negligence.

But, most importantly, the action includes a request that the Court declare:

That the Board perpetrated a misfeasance in public office with respect to how it handled the NEL claims of the plaintiff and members of the class.

And the systemic implications should a Court ultimately issue such a declaration are significant to say the least.

Where, for instance, would such a declaration leave the Board with respect to the undoubtedly large number of injured workers whose NEL awards were discounted during the nearly three years of that misfeasance but who did not appeal and are, therefore, not beneficiaries of this class action?  The political pressure on the Board to revisit those awards and rebate the discounted amounts plus interest would be immense.  Indeed, as a matter of public policy and public interest it seems unlikely in the extreme that the Board would be permitted to retain the profits from actions found to have constituted misfeasance in public office, or, indeed, even from actions found to have been only negligent.

But the Board’s potential financial exposure in this class action does not end with the damages sought in the class action, or with the risk that the discounted portions of the un-appealed NEL  awards might have to be rebated. Presumably, the discounted percentage of permanent impairment resulting from the injury as determined by the application of the new interpretation in the NEL adjudicative process will also have had a trickle-down effect on the Board’s determination of other benefits, such as, perhaps, the Loss of Earnings benefits.

The Board will know exactly what its financial exposure would be vis-à-vis the NEL discounts themselves should it lose this action and be called upon eventually to rebate those discounts, and presumably it would also be able to calculate the further exposure arising from the trickle-down effect of the discounted NEL awards on other benefits.  And it is reasonable to expect that the amounts would be very large.

Thus, the question arises: would it not be prudent – or even necessary – in terms of responsible accounting principles, for the Board to now set aside some reserve on its books in anticipation of the financial impact of its losing this action?

Whether this would be prudent or necessary and in what amount would presumably depend on the opinion of the Board’s legal counsel concerning the nature of the risk the Board was running that this action would indeed lead to its being found guilty of misfeasance – or of negligence.

So, what does the Court of Appeal decision in Castrillo tell us about the quality of that risk?

In the first place, the Court makes it clear that to be successful, the Plaintiff does not have to “allege or prove actual malice”; in order to make out the mental element in the misfeasance cause of action he need only prove bad faith. (See paragraph 39.)

And the bad faith assertion arises, in the Court’s view, from the allegations in the pleadings that the Board made the change in the interpretation of policy 18-05-05 “for an improper purpose and without due authority”. (Also, paragraph 39.)

In my view, the passages from the Court of Appeal decision which do most to clothe the misfeasance claim with respectability, credibility and promise are these:

[17] … this court succinctly expressed the purpose of the tort of misfeasance in public office in Freeman-Maloy v. Marsden (2006), … (Ont. C.A.) at para. 10:

The tort of misfeasance in a public office is founded on the fundamental rule of law principle that those who hold public office and exercise public functions are subject to the law and must not abuse their powers to the detriment of the ordinary citizen.  As Lord Steyn put it in Three Rivers …. “The rationale of the tort is that in a legal system based on the rule of law executive or administrative power ‘may be exercised only for the public good’ and not for ulterior and improper purposes. The “underlying purpose” of the tort of misfeasance in a public office “is to protect each citizen’s reasonable expectation that a public officer will not intentionally injure a member of the public through deliberate and unlawful conduct in the exercise of public functions”: Odhavji, [2003] 3 S.C.R. 263.

[20] … the plaintiff must show: first, the public official was engaged in unlawful conduct in the exercise of his or her public functions; and, second, the public official was aware that the conduct in question was unlawful and was likely to injure the plaintiff …

[37] WSIB concedes it owes “a general public law duty, to the public and to workers, to act in good faith, and not maliciously or in bad faith”.  I do not take the WSIB as disputing the allegations in the pleadings that it is a public body and its employees are public officials…

[39] … the assertion of bad faith [the essential element of the misfeasance claim] arises from the [plaintiff’s] allegation that WSIB made the policy change for an improper purpose and without due authority.

[44] … WSIB takes the position that “the only improper purpose alleged [by the plaintiff] is an ‘attempt to cut costs”, which it states is inadequate in pleading terms.

[45] I would find the pleading of an improper purpose to be adequate in strictly pleading terms, since there is a line of authority supporting the proposition that a public authority cannot use its spending power in a manner inconsistent with its mandate … [citing 1976 decision of the Ont. Div. Court in Re Doctor’s Hospital] … [which is a] specific application of the more general proposition that a statutory power must only be used for a proper purpose … [citing numerous authorities, perhaps most notably Roncarelli v. Duplessis].

[47] WSIB asserts that … [the WSIA’s section 1 statement of the purpose of the Act being, inter alia, to “provide compensation and other benefits” in a “financially responsible and accountable manner”] … provide[s] a full answer, and permit[s] the Board to reduce the payment of benefits to injured workers in order to save money. (Emphasis added.)

[48] I would reject this argument for two reasons.  First this is not a valid argument in a pleadings motion … It is a substantive argument on a question of law …

[49] Second, what the legislature intended to be the reach of the expression, “in a financially responsible and accountable manner,” requires a fuller exposition than would be permitted in a pleadings motion.  The exercise of statutory power is subject to principles, and any decision to reduce benefits would engage possible limits that have not been laid out in argument, and on which I will say no more. It would not be possible, on this record, to conclude that the legislature intended to permit the WSIB to arbitrarily, as is alleged, adjust a single category of statutory benefits while leaving all the others untouched.   (Emphasis added.)

  1. The nature of the Board’s problem going forward is, perhaps, best defined by the Court in the following two passages.

[66] The cases make it clear that, as a general principle, the legislature cannot completely oust the jurisdiction of the Superior Court, including, most pertinently, an allegation of misfeasance in public office related to its use of statutory power for an improper purpose.

[67] It is, nonetheless, possible that the specific determinations made by the WSIB in this case could ultimately be found to be a proper use of the Board’s authority, once the evidence is in about who did what, when and why.  One would expect those facts to be revealed through the statement of defence, and through the document production and discovery process. Although the [plaintiff] has tendered a “secret policy”, consisting of three pages of the Board’s orientation manual, the Board might well be found on the evidence to have taken an even-handed and fully authorized approach to its reduction of NEL benefits.  These are not matters that could or should be assessed on a pleadings motion.

So, then, what is the already-known “evidence” the Board would have to overcome with new evidence if it were to satisfy a court that, in adopting informally the new interpretation of policy 18-05-05, it had “taken an even-handed and fully authorized approach to its reduction of NEL benefits” – that is, presumably, that it had not adopted the new interpretation for an improper purpose knowing it to be unauthorized?

That evidence consists of a litany of compelling facts which will be the subject of a future post.

RE

 

 

(624)

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One Response to WSIB and the Ontario Court of Appeal decision in the Castrillo Class Action

  1. Pingback: iavgo.org | Can the Board cut NELs because of non-impairing pre existing conditions? Maybe not.

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