Meleshko v Alberta, 2013 ABQB 468

Court of Queen ’ s Bench of Alberta Citation: Meleshko v Alberta, 2013 ABQB 468 Date: 20130816 Docket: 1203 08755 Registry: Edmonton Between: Ronald Meleshko Applicant - and - Her Majesty the Queen in Right of the Province of Alberta and the Great-West Life Assurance Company Respondents _ ________________________________________ ______________ Memorandum of Decision of the Honourable Madam Justice L.D. Acton _________________________________________ ______________ Introduction [ 1 ] Ronald Meleshko successfully sought judicial review of a decision to terminate his long term disability (LTD) benefits.

He now seeks solicitor-client costs on the basis that party-party costs are not sufficient given the nature of the litigation, the conduct of the Respondents, Great West Life (GWL) and Alberta, misconduct by GWL in administering the LTD plan, and because he was forced into

litigation to defend his livelihood and disability benefits. The general rule is that solicitor-client costs are awarded only in exceptional circumstances and generally only for conduct in the course of the litigation. They are not to be confused with punitive damages associated with conduct leading to the litigation.

However, in the case of judicial review, the courts have noted that the history of the prior proceedings may be relevant when determining whether solicitor-client costs are warranted ( Eggertson v Alberta Teachers' Assn, 2003 ABCA 101 at paras 8-9 ; College of Physicians and Surgeons of the Province of Alberta v JH , 2009 ABQB 48 at paras. 30-32 ). Here, I conclude that it would be in the interests of justice to award solicitor-client costs to Mr. Meleshko. Facts [ 2 ] As noted, Mr.

Meleshko was successful in his judicial review application seeking LTD from his employer, the Government of Alberta ( 2012 ABQB 787 ). Because Alberta self-insures its long term disability plan, it assigned the administration of the LTD plan to Great West Life (GWL), as administrator of the Plan. The LTD plan is a statutory plan under unpublished regulations, therefore, Mr.

Meleshko was required to seek judicial review of the decision to suspend his benefits, rather than sue in a civil action. [ 3 ] The LTD Plan has two levels of appeal before judicial review: the first before an adjudicator who was also the claims manager, and the second by the Alberta Public Service Long Term Disability Second Level Appeal Board (the Appeal Board), a Board established by Regulation.

It was that Board’s decision that was the subject of the judicial review. [ 4 ] I concluded that the Appeal Board decision to suspend benefits at a date different from that set by the claims manager was made without jurisdiction. In the alternative, I held that if the decision was within jurisdiction, the Appeal Board breached the duty of fairness by addressing an issue to which Mr. Meleshko had no opportunity to respond. Further, I concluded that were it necessary to so decide, the decision was also unreasonable for a number of reasons, including my finding that it was unreasonable to require Mr.

Meleshko to attend any disability assessment, without consideration of whether the terms of the assessment were reasonable. [ 5 ] Mr. Meleshko seeks solicitor-client costs on the following grounds: 1. misconduct by the Respondents, 2. his success, 3. the importance and complexity of the issues, 4. the seriousness of the allegations raised against Mr. Meleshko by GWL, 5. he was required to defend his livelihood and disability benefits by litigation; 6. the Appeal Board’s lack of jurisdiction to make the decision it did; and 7. equity and public policy. Issues [ 6 ] Is Mr.

Meleshko entitled to solicitor-client costs? Submissions [ 7 ] Mr. Meleshko notes that the Court has broad discretion to award costs, and that in doing so the Court may consider the factors set out in

Part 10 of the Rules of Court and “any other matter related to the question of reasonable and proper costs”. [ 8 ] The Respondent, GWL, chose not to participate to avoid duplication of submissions. The Respondent, Alberta, argues that solicitor-client costs are only available for “reprehensible, scandalous or outrageous conduct” during the course of litigation, and that there is no such conduct here. Moreover, Alberta argues, the decision here was by the Alberta Public Service Long Term Disability Second Level Appeal Board, not Alberta and not GWL. Misconduct [ 9 ] Mr.

Meleshko asserts that the Respondents’ misconduct towards him justifies solicitor-client costs. While conceding that solicitor-client costs are generally not available for pre-suit misconduct and that it is only misconduct in the conduct of the litigation that

is usually the basis for solicitor-client costs, he asserts that in the case of judicial review the history of the prior proceedings may beconsidered: Eggertson and JH. The Court of Appeal in Eggertson declined to award solicitor-client costs, but noted that it couldconsider the underlying history of the judicial review proceedings. In JH, Graesser J concluded that the administrative investigativeprocedure was “akin to the litigation process” and that the Respondent’s conduct of a statutorily-mandated function lead to the litigationand could, therefore, be considered in assessing costs.

He added that solicitor-client costs may have a chilling effect on parties who haveacted in bad faith or alleged misconduct against another, and that is the intended effect of such costs. [10] Mr. Meleshko further asserts that misconduct occurs where the unsuccessful party has used the legal proceedings tointimidate the successful party into concessions: Colborne Capital Corp. v. 542775 Alberta Ltd, 1999 ABCA 14. He points to myfinding that “GWL was attempting to intimidate Mr. Meleshko into doing things he was not required to under his obligations…simply tohave the adjudicator reopen his file” (at para 43).

Further, I commented that insisting on oral communication by telephone without awritten record flew in the face of good faith communication (at para 44). [11] Further, Mr. Meleshko notes that GWL played “hardball” and showed disregard for his contractual rights. Solicitor-clientcosts have sometimes been found to be appropriate in those situations: Coughlin v Mutual of Omaha Insurance Co (1992), (ON SC), 10 OR (3d) 787 (Gen Div) at paras 9-10; St-Laurent v.

Sun Life Assurance Co. of Canada (1989), (NB CA), 101 N.B.R. (2d) 354 (CA). [12] Alberta distinguishes the Colborne case on the basis that the trial judge found that the plaintiffs and third party were deceitfuland dishonest. It distinguishes Coughlin on the basis that the insurer denied that the plaintiff had a disability until the fifth day of trial. InSt. Laurent, the insurer contested entitlement and refused to provide a copy of the relevant policy despite repeated demands. Here,Alberta argues, there were no “hardball tactics” during the course of the judicial review litigation.

Success of application [13] Mr. Meleshko notes he was successful in the application on every issue raised before the Court, include the questions ofjurisdiction, reasonableness, procedural fairness, remedy, and standard of review. [14] Alberta agrees that Mr. Meleshko was successful, but that success entitled him to party- party costs, not solicitor-client costs. Importance of the issues [15] Mr. Meleshko argues that the issues were important to both himself and the Respondents. For himself, the issues were abouthis livelihood when he was completely disabled.

For the Respondents, the decision was the first judicial review of an Appeal Boarddecision and provided useful guidance on a number of topics. [16] Alberta suggests that when important issues are litigated, this often leads to an award of “no-costs”, not to solicitor-clientcosts. Complexity [17] Mr. Meleshko argues that this was a complex matter, involving an unprecedented application regarding a tribunal that had notyet been subject to judicial review. Moreover, the legislative framework was relatively obscure and involved hybrid concepts ofadministrative, employment, and insurance law principles.

He compared the brief prepared to that of an appellate factum. [18] Alberta denies that this was a complex case, asserting that questions of jurisdiction, procedural fairness, and standard ofreview are common. Further, the case took less than a day to argue. Seriousness of the allegations [19] Throughout the judicial review proceedings, the Respondents continued to allege that Mr. Meleshko willfully refused tocooperate with GWL and breached his legal obligations. Mr.

Meleshko concedes that the allegations did not rise to claim of fraud, butargues they had significant moral import. [20] Alberta concedes that unfounded allegations against a party may lead to costs penalties, but the allegations that Mr. Meleshkowas deliberately frustrating rehabilitation assessment was irrelevant to the issues in the judicial review, which was decided on the basisof the Appeal Board’s jurisdiction.

Required to bring the application [21] If a litigant is forced into litigation to defend their livelihood, including their right to disability or other benefits, the Courtshave said that solicitor-client costs may be justified: Hennessy . Horse Racing Alberta, 2007 ABQB 178 (at para 6 and 9); Clarke vNational Life Assurance C. of Canada, [1990] OJ No 515 ((Dist Ct); Nabors Canada. Alberta (Appeals Commission for AlbertaWorkers' Compensation Board), 2005 ABQB 199 (at para 22) aff’d 2006 ABCA 371. In Hennessy solicitor-client costs were found tobe proper when there was a denial of procedural fairness. Mr.

Meleshko argues that because the Appeal Board did not provide him withany opportunity to address the issues upon which it ultimately reached its decision, he was forced to seek judicial review. [22] Alberta says neither of the Respondents was responsible for the Appeal Board’s breach of procedural fairness or its wrongfulusurpation of jurisdiction. The Appeal Board, not the Respondents, determined that his benefits should be terminated on July 15, 2011.

Lack of Jurisdiction [23] Mr. Meleshko notes that when a party unreasonably insists in arguing that a tribunal had jurisdiction, solicitor-client costsmay be appropriate Grochowski v. Alberta Assn. of Architects (1996), 1996 ABCA 138 , 184 A.R. 233 (CA) at paras 7-9;Leisureland Sports Bar Inc. v. Edmonton (City), 2001 ABQB 745 at para 75. Here it was clear that the Appeal Board decided an issuethat was not before it. [24] Alberta argues that Mr. Meleshko cannot assert that the litigation was complex and at the same time assert that the question ofjurisdiction should have been obvious to the Respondents.

Equity and public policy [25] Mr. Meleshko argues that the statutory scheme is similar to that of the Workers Compensation scheme in that the schemedeprives claimants of the remedies that would otherwise be available at common law and there is a public interest in ensuring access toCourt review: Nabors at para 21-25; Nabors (CA) at paras 31-34. In Nabors, the Court of Appeal accepted the chambers justice’sanalysis related to the historic trade-off in workers compensation schemes in which employees gave up a right to sue their employers inreturn for a no-fault system.

The chambers judge in Nabors noted that the Applicant did not receive the benefits of immediate benefits orcertainty and, if only entitled to party and party costs, would have lost the advantage of avoiding litigation costs (QB at para 22). [26] Alberta argues that the historic trade-off in the WCB cases is not relevant here. Remedy [27] Mr. Meleshko, therefore, seeks either solicitor-client costs, an award of lump sum costs, or a multiplier of Column 5 ofSchedule C of the Rules of Court. Alberta asks that each party bear its own costs. Analysis [28] The parties agree on general principles.

Costs are discretionary, and solicitor-client costs are available only in exceptionalcircumstances and are generally related to litigation conduct. I must determine whether I should exercise my discretion here anddetermine that there are exceptional circumstances. [29] In my view, the fact that this legislative scheme requires judicial review to enforce a contractual right to disability benefits is aunique circumstance. Our Court of Appeal in Eggertson has indicated that courts may consider the history of the prior proceedings inassessing the appropriate scale of costs in a judicial review.

Further, I agree with Graesser J in JH that the process leading to the need tocommence a judicial review application is analogous to the litigation process in a civil action. For example, in a judicial review there isno questioning or discovery, but the multi-level process Mr. Meleshko was required to follow to address his rights involved makingsubmissions to the first level adjudicator and producing evidence, making submissions, and answering questions before the AppealBoard. [30] Moreover, if Mr.

Meleshko had the opportunity to sue civilly, he would have been able to seek punitive damages to addressretribution, deterrence and denunciation for misconduct: (Fidler v Sun Life Assurance Co. of Canada, 2006 SCC 30 at para 61).Further, contracts of disability insurance are “peace of mind” contracts and plaintiffs may seek damages for mental distress (Fidler atpara 61). Neither of these is available on judicial review, and only an order for increased costs is available to this Court to deter anddenounce what I considered to be unreasonable behaviour by GWL in administering this LTD plan for Mr.

Meleshko. [31] It is disingenuous for Alberta and GWL to argue that the “wrong” was not their fault, but the fault of the Appeal Board. Wereit not for Alberta putting in place a statutory scheme that gave GWL broad discretion to administer the plan or for GWL’s employeesacting unreasonably in its relationship with Mr. Meleshko, none of this would have happened. It is extraordinary to me that no one everdenied Mr. Meleshko was disabled, but still his benefits were terminated because he would not comply with demands that even theAppeal Board agreed were unreasonable. [32] I agree with Mr.

Meleshko that GWL was using termination of his benefits to intimidate him into doing things not required ofhim. Admittedly in Colborne, solicitor-client costs were awarded because of deceit and dishonesty, and I have not found either here.However, I conclude that the intimidation of someone who is totally disabled (and whose disability was never questioned) by cutting offtheir source of income is reprehensible and unconscionable. Further, I find the decisions in Coughlin and St-Laurent helpful, if notdirectly applicable.

These were situations in which vulnerable persons were denied insurance benefits, and solicitor-client costs were awarded. Alberta says that in Coughlin the insurer waited until the 5th day of trial to concede the plaintiff had a disability. I do not seethe point of this distinction. Alberta and GWL continued to deny Mr. Meleshko his LTD benefits presumably until the date the decisionwas released. While there were no “hardball” tactics used in the course of the judicial review litigation, it is clear from the facts thatGWL was indeed playing “hardball” with Mr.

Meleshko leading up to the decision to terminate his benefits. [33] These issues were important and complex. However, those factors by themselves do not warrant solicitor-client costs. But Ithink the context of how these issues come before the Court is important here.

This is a large employer (Alberta) with many employees.It has established a statutory scheme to provide LTD benefits to its employees under their contract of employment, and the only recoursethose employees have if their LTD benefits are suspended or terminated is through judicial review of a tribunal that is neither theemployer or the administrator of the Plan. How are either of them to be held accountable for unreasonable decisions and actions? [34] I find that GWL’s assertion that Mr.

Meleshko was deliberately frustrating rehabilitation assessments to be a seriousallegation, although not as serious as an allegation of insurance fraud. It is a further factor I will consider in determining the appropriate

measure of costs, but not a major factor. [35] I agree with Mr. Meleshko that he was forced into commencing litigation. His source of income was unreasonably cut-offand the appeal process only made matters worse. As in Hennessy, Mr. Meleshko was denied procedural fairness, and the fact that thisdenial was by the Appeal Board does not mitigate the actions of the Respondents. As in Nabors, Mr. Meleshko had no choice but “torespond or lose the compensation to which [he was] entitled” (para 22). [36] The Respondents cite Jackson v.

Trimac Industries Ltd (1993), (AB KB), 138 AR 161 (QB) as setting outthe rare and exceptional circumstances where Courts grant solicitor-client costs. Hutchinson J noted that these circumstances include“cases in which justice can only be done by a complete indemnification for costs” (para 30). The Court of Appeal (1994 ABCA 199, 155 AR 42) upheld his decision to award solicitor-client costs, noting that the trial judge had found that there was a deliberatedecision to “deprive the plaintiff of the fruits of his bargain for as long as possible” (at para 30). I find the same factors at play here.

Conclusion [37] Here a vulnerable, disabled employee sought the benefits he was entitled to under his contract of employment and was forcedto litigate at great expense. The fact that the litigation concerned a judicial review of a tribunal who was not a Respondent is a “redherring” and ignores the reality that were it not for the actions of Alberta and GWL, there would have been no need to appear before theAppeal Board. The Respondents should not be permitted to insulate their actions from repercussions for abusing authority.

An award ofsolicitor-client costs here will hopefully deter GWL from using its powers to intimidate LTD beneficiaries and spur Alberta to ensurethat GWL administers the LTD Plan fairly. [38] Justice in this case cannot be accomplished unless there is full indemnification for costs. Therefore I award solicitor-clientcosts. Heard on the 18th day of April, 2013. Dated at the City of Edmonton, Alberta this 15th day of August, 2013. L.D. Acton J.C.Q.B.A. Appearances: Jeremy L. Taylor Field LLP for the Applicant Nicole Pfeifer

for the Respondent Her Majesty the Queen in Right of the Province of Alberta Lynne Wilson For the Respondent Great-West Life Assurance Company