Britton v. Manitoba, 2011 MBCA 77

Citation: Britton v. Manitoba, 2011 MBCA 77 Date: 20110909 Docket: AI 10-30-07484 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Barbara M. Hamilton Mr. Justice Richard J. Chartier BETWEEN : ) W. G. McFetridge and DEBRA BRITTON ) B. T. Jones ) for the Appellant (Plaintiff) Respondent ) ) H. I. Pollock, Q.C. and - and - ) D. E.

Labun ) for the Respondent THE GOVERNMENT OF MANITOBA ) ) Appeal heard: (Defendant) Appellant ) April 27, 2011 ) ) Judgment delivered: ) September 9, 2011 HAMILTON J.A. 1 An important question on this appeal is whether an independent actionable wrong required for a claim of punitive damages is, by definition, a separate cause of action.

It arises in the context of the plaintiff’s motion to amend her statement of claim to include a claim for punitive damages for the manner in which the defendant (Manitoba) denied her long-term disability benefits. 2 If the claim for punitive damages is a separate cause of action, further questions arise as to whether the amendments are out of time given the limitation provisions under The Public Officers Act , C.C.S.M., c. P230, and The Limitation of Actions Act , C.C.S.M., c.

L150. 3 The motion judge concluded that the amendments did not constitute a new cause of action and permitted the plaintiff to amend her statement of claim. Manitoba appeals. 4 For the reasons that follow, I agree with the motion judge that the amendments do not introduce a new cause of action and, therefore, there is no limitation issue to address. Background 5 The plaintiff was a civil servant employed by Manitoba. For a period of time commencing in 1997, she received disability income benefits under the disability benefits plan provided to employees of Manitoba (the Plan).

The statutory underpinning of the Plan was described by this court in Desrivieres v. Manitoba , 2002 MBCA 153 , 170 Man.R. (2d) 139 (at paras. 3-5 ): The employment of provincial civil servants is governed by the provisions of the Civil Service Act , R.S.M. 1987, c. C-110 (the Act ). The Act is administered by the Civil Service Commission (the Commission) which is empowered to make regulations governing the conditions of employment of civil servants pursuant to s. 57(1) of the Act , which reads in part as follows:

... [T]he commission may, for the purpose of carrying out the provisions of this Act according to their intent, ... make such regulations as are ancillary thereto and are not inconsistent therewith; ... Section 57(1)(

d) also enumerates certain regulations including those “respecting the administration of pay plans”. Pursuant to the power to regulate, the Commission created A Regulation Respecting Conditions of Employment Under the Civil Service Act, 1991 (the Conditions of Employment Regulation ). Section 47(1) of the Conditions of Employment Regulation requires Manitoba to provide an employer-paid, long-term disability income plan for eligible employees.

The terms and conditions governing the Plan are contained in the Long Term Disability Income Plan Regulations (the Disability Plan Regulations ) issued by the Commission. 6 In 2005, Manitoba terminated the plaintiff’s disability benefits on the basis that she no longer met the definition of total disability under the Plan. The plaintiff filed her statement of claim on August 4, 2006.

Statement of Claim 7 In her statement of claim (the original statement of claim), the plaintiff seeks a declaration that she is totally disabled, an order that Manitoba “pay to the plaintiff total disability income benefits” from the date of termination to judgment and thereafter, as well as general and aggravated damages. 8 Her claim is premised on “the terms of her employment” as set out in her statement of claim (at para. 5): The plaintiff says and alleges that in accordance with the terms of her employment and at all material times, she is insured by a long-term disability income plan provided by the defendant which current plan ... is described as Group Policy of Insurance No. 51044 [“the Insurance Policy”] issued to the plaintiff ....

The plaintiff says that the Long Term Disability Income Plan Regulations ... [“the Regulations”] ... were terms and conditions which formed part of the Insurance Policy. …. 9 Further, she alleges that Manitoba (at para. 11): … [H]as breached the terms of the Insurance Policy by terminating payment to her of her long-term disability income benefits pursuant to the Insurance Policy and the Regulations, without just cause, and by such conduct the defendant has caused the plaintiff mental and psychological distress, for which she claims general and aggravated damages. [emphasis added] Statement of Defence 10 By its statement of defence, Manitoba admits that the plaintiff is covered under the Plan, but denies that after July 2, 2005, the plaintiff “was totally disabled and, accordingly, no benefits were owing to her after that date” (at para. 7).

Plaintiff’s Motion to Amend 11 In her motion to amend, the plaintiff sought more amendments than are at issue on this appeal. It included amendments to add a claim in negligence, which was a new cause of action. The motion judge held that this new claim was not statute-barred because it fell within the six-year time period prescribed by ss. 2(1) (

i) and (

n) of The Limitation of Actions Act , and not the two-year period prescribed by The Public Officers Act , as argued by Manitoba. Prior to the appeal hearing, the plaintiff advised that she was withdrawing her negligence claim and that the appeal would address the amendments related to her claim for breach of an alleged implied duty of good faith and fair dealing. 12 In addition to adding “[p]unitive damages” to the prayer for relief in para. 1 of the original statement of claim, the amendments at issue (the amendments) are found in the amended statement of claim (at paras. 7, 15 (underlined portion), 16):

The plaintiff says and alleges that it is an implied term of the Insurance Policy that the defendant owed a duty of good faith and fair dealing to the plaintiff in the performance of its obligations pursuant to the Insurance Policy and in its administration of the plaintiff’s claim, including:

a) a duty to complete an objective appraisal of all relevant evidence concerning the plaintiff’s claim;

b) a duty to respond to the plaintiff’s claim in a fair and objective manner rather than in a manner which assumed the plaintiff was adverse in interest;

c) a duty to retain competent, appropriately qualified and unbiased medical experts to advise the defendant with respect to the plaintiff’s claim;

d) a duty to provide its medical experts with all relevant information concerning the plaintiff’s claim;

e) a duty to pay the plaintiff the amounts due and owing under the Insurance Policy in a timely manner. The plaintiff says and alleges that the defendant has breached the terms of the Insurance Policy and the duty of good faith and fair dealing, by terminating payment to her of her long-term disability income benefits pursuant to the Insurance Policy and the Regulations, without just cause and by such conduct the defendant has caused the plaintiff mental and psychological distress, for which she claims general and aggravated damages.

The plaintiff says and alleges that the actions and/or omissions of the defendant herein were malicious, high-handed and/or arrogant, particulars of which are as follows:

a) the allegations contained in paragraph 15 above;

b) that the defendant and/or its agents acted unreasonably and unfairly in appraising the plaintiff’s claim, and more particularly: (

i) in determining that the plaintiff’s health condition had improved since she was determined to be disabled from any occupation on or about August 27, 1998 despite reports to the contrary from the plaintiff and her doctors; (ii) in deciding prior to obtaining a medical or other opinion that the plaintiff was able to return to work; (iii) in retaining specific medical experts that it knew or believed were biased in favour of the conclusion that the plaintiff was able to return to work; (iv) in placing undue reliance on a medical opinion aligned with its interests but based on flawed premises, in preference of sound medical opinions which support the plaintiff’s inability to work; (

v) in deliberately declining to send the plaintiff for a functional capacity evaluation (“FCE”) or otherwise similarly investigate the plaintiff’s mental and/or physical capacity for work when it knew that a previous FCE had definitively determined that the plaintiff was unable to return to work; (vi) in failing to provide the report of the plaintiff’s FCE to medical experts retained by it to evaluate the plaintiff’s ability to work;

c) further or in the alternative, that the defendant acted unreasonably and harshly in requiring the plaintiff to return to work without first offering rehabilitative support or work hardening;

d) that the defendant and/or its agents treated the plaintiff as an adversary, and more particularly in: (

i) failing to accept the plaintiff as a credible and truthful person; (ii) failing to consider the medical information and opinions provided by the plaintiff in a fair and objective manner, attacking the credibility of both the plaintiff and the doctor or doctors providing medical opinions;

e) that the defendant continues to refuse to pay the plaintiff benefits under the Policy despite current evidence that she meets the definition of disability, relying on its prior investigations which are not relevant to her present ability to work, while being aware that the plaintiff is financially, mentally and emotionally vulnerable. for all of which conduct the plaintiff claims punitive damages in an amount to be assessed at the trial of this action.

Reasons of the Motion Judge 13 In regard to the amendments, the motion judge concluded that the “plaintiff’s claim is essentially one of breach of contract” (at para. 15), noting her pleadings in para. 5 of the original statement of claim and her entitlement to benefits as an employee of Manitoba. He wrote ( ibid. ): ….

For the purpose of this analysis, it does not matter whether one describes the contract as an employment contract or an Insurance Policy (as the plaintiff describes it in her current statement of claim), since the Long Term Disability Income Plan is an employer funded benefit that forms part of the remuneration package paid to civil service employees for the services which they perform. 14 After noting that this court described a civil servant’s entitlement under the Plan in Desrivieres , he concluded that (at para. 17): Since the Long Term Disability Income Plan is part of the defendant’s remuneration package, and the defendant has chosen to provide the disability protection from its own resources, in my view the defendant thus owes a contractual obligation to the plaintiff to abide by the terms of the Long Term Disability Income Plan, including any implied terms. 15 As for whether the amendments introduced a new cause of action, he concluded that they did not and therefore they did not “trigger the debate on whether she is outside a limitation period, whatever it might be” (at paras. 18-20): By virtue of proposed paragraphs 7, 15 and 16, is the plaintiff introducing a new cause of action so as to trigger the debate on whether she is outside a limitation period, whatever it may be?

I am of the view that she is not. All that she is doing is adding another breach of the same contract under which she has sued in the first place. The pleading of a “duty of good faith and fair dealing” simply identifies a further term, albeit an implied term, in the same contract which she has already pleaded. The facts which she proposes to plead simply flush out the alleged manner in which the defendant came to the decision that she was no longer totally disabled, a decision which is already being challenged in the current statement of claim.

The allegations in the proposed amendments arise generally out of the same fact situation which exists in her current pleading, namely, that under her employment contract, she was entitled to receive disability income benefits, and the defendant has decided not to pay them. Whether or not the defendant has made the decision in a manner that is “ malicious, high-handed and/or arrogant” simply elaborates the defendant’s conduct which is complained about in the current statement of claim.

To say that these amendments raise a new cause of action so as to trigger the limitation debate is too fine a distinction to make. The defendant has known all along what contract has been raised by the plaintiff and that its decision to stop paying the plaintiff her income

benefits was objectionable to the plaintiff. The only difference is that now the plaintiff seeks punitive damages, an additional remedy. As indicated by Binnie, J., in the case of Whiten v. Pilot Insurance Co. et al. (2002), 2002 SCC 18 , 283 N.R. 1; 156 O.A.C.201; 2002 SCC 18, in a contract case, punitive damages may be claimed without the necessity that a new cause of action exists in theform of a tort.

Since the plaintiff was within the limitation period, whether it be the Public Officers Act or the Limitation of Actions Act, when sheissued the statement of claim in the first place, I see no valid objection based upon limitations here. Therefore, I am of the opinion thatthe argument advanced by the defendant under the Public Officers Act has no application to the amendments found in paragraphs 1(f), 7,15, and 16 of the proposed amended statement of claim.

Positions of the Parties Manitoba 16 Firstly, Manitoba asserts that the motion judge erred in law when he concluded that the Plan was a contract, given that thePlan is a statutory scheme, as explained in Desrivieres. 17 Secondly, it asserts that the motion judge erred in law when he concluded that the amendments are not a new cause ofaction.

It says the original statement of claim was simply a claim for benefits and that the amendments were not an extension of theplaintiff’s claim for breach of contract, but rather constitute a new cause of action for an alleged breach of an implied obligation under astatute or regulation pursuant to which she seeks punitive damages. With respect to the amendments that seek punitive damages, it relieson J-Sons Inc. v.

Paterson (N.M.) & Sons Ltd., 2009 MBQB 263, 246 Man.R. (2d) 176, in which Abra J. wrote in regard to Whiten v.Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (at para. 49): I interpret Binnie, J.’s comments in Whiten v. Pilot Insurance Co. (hereinbefore referred to in para. 26) to mean that punitive damagescan be sought and awarded in any case wherein the defendant’s actionable wrong warrants such a remedy, no matter what other causesof action are relied upon by the plaintiff. The seeking and awarding of punitive damages is, in effect, an additional cause of action to thatof the other causes of action.

An award of punitive damages is punishment to the defendant rather than compensation to the plaintiff. 18 Thirdly, it asserts that the motion judge erred in finding that the claim established by the amendments is not governed by thetwo-year limitation period in s. 21(1) of The Public Officers Act and/or s. 2(1)(

e) of The Limitation of Actions Act. The Plaintiff 19 The plaintiff’s position is that the motion judge made none of the errors of law asserted by Manitoba. She points to severaldecisions in which the courts in Manitoba have treated the Plan as a contract. See McCallum v. Manitoba, 2006 MBQB 114, 203 Man.R.(2d) 161, and Lumsden v. Manitoba, 2007 MBQB 227, 219 Man.R. (2d) 97, aff’d 2009 MBCA 18, 236 Man.R. (2d) 130. 20 She asserts that an independent actionable wrong is not necessarily an independent cause of action. She relies on cases suchas Dimartino v.

Gacek, 2010 ONSC 2124, 83 C.C.L.I. (4th) 311, and Atlantic International Trade Inc. (c.o.b. Soltani & Associates) v.Georgian College of Applied Arts and Technology, [2008] O.J. No. 2385 (S.C.J.) (QL), that are contrary to the reasoning of Abra J. in J-Sons Inc.

She also points out that in dismissing the appeal in J-Sons Inc., this court upheld the motion judge’s exercise of discretionpursuant to Queen’s Bench Rule 26.01 and specifically noted that “we wish to make it clear that the question whether a claim forpunitive damages in a proceeding such as this demands an independent cause of action is still an open question” (2010 MBCA 67 at para.6, 255 Man.R. (2d) 149). 21 Finally, she asserts that there is no precedent for a claim for punitive damages to stand on its own and that it is just a remedy,albeit an exceptional one.

Here the plaintiff’s claims, including the amendments, are all related to how Manitoba breached itsobligations and denied the plaintiff benefits. Relying on Maxwell v. Dhalla et al., 2006 MBCA 33, she says that the amendments are nota separate cause of action because, standing on their own, they would not entitle the plaintiff to a remedy. As well, she says that punitivedamages are not awarded unless the original action succeeds. In other words, punitive damages could not be awarded if the plaintiff’sother actions failed as there is no precedent for punitive damages being sought on a stand-alone basis.

Analysis and Decision 22 The plaintiff’s motion to amend the original statement of claim is pursuant to Queen’s Bench Rule 26.01:

26.01 On motion at any stage of an action the court may grant leave to amend a pleading on such terms as are just, unless prejudicewould result that could not be compensated for by costs or an adjournment. 23 If amendments establish a new cause of action, limitation issues often arise. As correctly explained by the motion judge (atpara. 6): Where ... a party wishes to add a new cause of action to a statement of claim after the limitation period referable to that cause of actionhas elapsed, the courts are less receptive to the proposed amendment.

The court recognizes that in such cases, a defendant is beingprejudiced in a way that is not compensable either by way of an adjournment or costs. The court in those instances will only permit suchan amendment where there are “special circumstances” or an order is obtained under

Part II of the Limitation of Actions Act (SeeJaman v. Hussain et al. (2005), 193 Man.R. (2d) 136, 2005 MBQB 37, at para. 12; Basarsky v. Quinlan, (SCC), [1972]S.C.R. 380; Miller v. Jaguar Canada Inc. et al. (1997), (MB CA), 123 Man.R. (2d) 161; 159 W.A.C. 161 (C.A.). 24 There is no issue of special circumstances to be addressed here. 25 A judge’s ruling on a motion to amend a pleading pursuant to Queen’s Bench Rule 26.01 usually calls for the exercise ofdiscretion, which in turn, calls for deference to be given by this court. See Donald J.M.

Brown, Q.C., Civil Appeals, looseleaf (Toronto: Canvasback Publishing Inc., 2009) vol. 2, ch. 12 at para. 12:1330, and Ranjoy Sales and Leasing Ltd. et al. v. Deloitte, Haskins & Sells(1990), (MB CA), 63 Man.R. (2d) 248 (C.A.). When questions of law are at issue, however, the standard of reviewis correctness. See Homestead Properties (Canada) Ltd. v. Sekhri et al., 2007 MBCA 61, 214 Man.R. (2d) 148. 26 The issues that need be addressed to resolve this appeal can be stated as follows: 1.

Did the motion judge err when he characterized the plaintiff’s claim as one in contract with an implied duty of good faith and fairdealing? 2. Did the motion judge err when he concluded that the amendments did not constitute a new cause of action that triggered the need toaddress the limitation period issues? 27 Counsel appropriately agree that these issues raise questions of law for which the standard of review is correctness. Issue 1- Claim in Contract 28 Both parties, as did the motion judge, referred to this court’s description of a civil servant’s entitlement under the Plan inDesrivieres.

The appeal in that case was “about whether ... an employee of the Government of Manitoba … has the right to sue Manitobafor payment of, and a declaration that she is entitled to, long-term disability benefits arising under … (the Plan) for governmentemployees” (at para. 1). At issue was whether the statement of claim should be struck because the Plan contained a dispute resolutionmechanism that ousted the jurisdiction of the court. This court held that the plaintiff’s claim should not be struck. The focus of thedecision was the role of the adjudicator under the Plan.

Other than summarizing the Plan as noted above, no comment was made as tothe fundamental nature of the claim. 29 I disagree with Manitoba that the

summary of the Plan in Desrivieres describes the fundamental character of the Plan and thatbecause it is a statutory scheme it cannot set out contractual terms. Rather, I agree with the motion judge that the Plan is part of theremuneration package provided to its employees and that Manitoba owes a contractual obligation to the plaintiff to abide by the termsand conditions of the Plan. 30 I find support for this conclusion in Lumsden (2009 MBCA 18). That case also concerned a claim against Manitoba underthe Plan.

The principal issues on Manitoba’s appeal were whether the trial judge committed palpable and overriding errors indetermining that the plaintiff in that case had been totally disabled and whether he was entitled to damages for mental distress. TheCourt of Appeal dismissed the appeal. 31 What is important for our purposes is this court’s analysis in Lumsden, relying on Campbell v. Canada Life Assurance Co.(1990), (MB CA), 65 Man.R. (2d) 95 (C.A.), and particularly Fidler v. Sun Life Assurance Co. of Canada, 2006SCC 30, [2006] 2 S.C.R. 3, which are breach of insurance contract cases.

In Lumsden, Scott C.J.M. applied the principles for awardingdamages for mental distress for breach of “peace of mind” contracts to the claim under the Plan (at paras. 63, 67): Concerning damages for mental distress, the parties agree that the trial judge correctly relied upon the leading decision in Fidler. Thereis therefore no suggestion that the trial judge was not entitled as a matter of law to award damages for mental distress when dealing with“peace of mind” contracts, such as disability insurance, where the parties reasonably contemplated at the time of the contract that a

breach in certain circumstances would cause a plaintiff mental distress. ... [I]n Fidler itself, the foundation for the court’s decision was that damages for mental distress in “peace of mind” contracts wereallowable, as a matter of law, because this was consistent with the compensatory rules for breach of contract first established in theseminal decision of Hadley v.

Baxendale (1854 ), 9 Exch. 341; 156 E.R. 145 …. …. 32 Further, as was explained in Fidler, with respect to cases involving the denial of insurance benefits, multiple claims may arisefrom a breach of contract; that is, the claims arising from the denial or termination of benefits and from the breach of the implied duty ofgood faith and fair dealing, the latter being sufficient to ground a request for punitive damages. 33 Given this court’s reliance on Fidler in Lumsden, Manitoba has not persuaded me that the motion judge erred in law when heheld that the plaintiff’s claim here is a claim under an insurance contract.

Therefore, the plaintiff is entitled to assert a claim for breachof an implied duty of good faith and fair dealing and seek punitive damages arising from that alleged breach. Issue 2 – Independent Cause of Action/Limitation 34 The more important issue, in my view, is whether the amendments introduce a new cause of action. If they do, the limitationissue must be addressed. 35 A cause of action is a “set of facts that provides the basis for an action in court” (see Markevich v. Canada, 2003 SCC 9 atpara. 27, [2003] 1 S.C.R. 94). I emphasize that the word “action” is used, not remedy.

This is important as punitive damages are aremedy (albeit a non-compensatory one), not an action. Therefore, a claim for punitive damages does not, in and of itself, determinewhether the claim is an independent cause of action, as was expressed in J-Sons Inc. (2009 MBQB 263 at para. 49) and relied on byManitoba. 36 In Maxwell, this court addressed whether amendments in a medical malpractice lawsuit created a new cause of action. Thestatement of claim raised issues about the doctor’s performance in surgery, the post-operative care and informed consent.

Huband J.A.,writing for the court, explained why some of the amendments created an “entirely different cause of action” (at para. 17): Finally, we come to clause (ii), which, in my view, was properly disallowed by the learned motions judge. In my view, this clause doesset up an entirely different cause of action; namely, negligence in undertaking surgery in an inadequately equipped facility. Thatcontention is unrelated to the pleading as originally drafted, which contains no factual foundation for the proposed amendment. It wouldgive rise to a new cause of action, which is demonstrable in this way – if Dr.

Dhalla succeeded in all respects concerning the surgerywhich he performed, the post-operative care, including the surgery on January 23rd, and the issues relating to informed consent, intheory he might still be held liable for undertaking the surgery in an inadequately equipped facility. It would seem to be a new cause ofaction and thus barred by the limitation period.

I agree with the learned motions judge that no special circumstances exist to justifypermitting this amendment. [emphasis added] 37 Other amendments in Maxwell were held to be “elaboration of the original pleading” and not a “stand-alone” cause of action. See Maxwell at paras. 15-16. 38 The question of whether the amendments constitute a new cause of action can be reframed to ask whether the amendmentsintroduce a new set of facts that provides the basis for an action in court.

In other words, if Manitoba succeeded in defending against theplaintiff’s action as pled in the original statement of claim, might it still be liable for breaching the contract as alleged in theamendments? I have concluded that it would not. 39 As is well known, “[t]he amendments are to be seen in the context of the statement of claim as originally filed” (Maxwell atpara. 5). 40 Here the original statement of claim claimed damages and aggravated damages for terminating the plaintiff’s disabilitybenefits, without just cause, and for causing the plaintiff “mental and psychological distress” (at para. 11).

The amendments elaborateon the manner in which Manitoba terminated these payments.

They do not introduce a new cause of action, sometimes referred to as a“stand-alone” claim or an “independent cause of action.” I agree with the motion judge that “the facts which she proposes to pleadsimply flush out the alleged manner in which the defendant came to the decision that she was no longer totally disabled, a decision whichis already being challenged in the current statement of claim” (at para. 18). 41 Having said that, the amendments are an allegation of an “actionable wrong,” which is required to found a claim for punitivedamages, as explained originally in Vorvis v.

Insurance Corporation of British Columbia, (SCC), [1989] 1 S.C.R. 1085,and subsequently in Whiten, and Fidler. In Whiten, Binnie J. wrote (at paras. 78-79):

.... In Vorvis, supra, this Court held that punitive damages are recoverable in such cases provided the defendant’s conduct said to giverise to the claim is itself “an actionable wrong” (p. 1106). The scope to be given this expression is the threshold question in this case,i.e., is a breach of an insurer’s duty to act in good faith an actionable wrong independent of the loss claim under the fire insurancepolicy? Vorvis itself was a case about the employer’s breach of an employment contract. This is how McIntyre J. framed the rule at pp.1105-6: When then can punitive damages be awarded?

It must never be forgotten that when awarded by a judge or jury, a punishment isimposed upon a person by a Court by the operation of the judicial process. What is it that is punished? It surely cannot be merelyconduct of which the Court disapproves, however strongly the judge may feel. Punishment may not be imposed in a civilizedcommunity without a justification in law. The only basis for the imposition of such punishment must be a finding of the commission ofan actionable wrong which caused the injury complained of by the plaintiff. [Emphasis added.] ….

In the case at bar, Pilot acknowledges that an insurer is under a duty of good faith and fair dealing. Pilot says that this is a contractualduty. Vorvis, it says, requires a tort. However, in my view, a breach of the contractual duty of good faith is independent of and inaddition to the breach of contractual duty to pay the loss.

It constitutes an “actionable wrong” within the Vorvis rule, which does notrequire an independent tort. .... 42 It is true that Binnie J. later used the phrase “independent actionable wrong” several times, including in the context of hisexplanation that an independent tort is not required when claiming punitive damages (at para. 82): Third, the requirement of an independent tort would unnecessarily complicate the pleadings, without in most cases adding anything ofsubstance. Central Trust Co. v.

Rafuse, (SCC), [1986] 2 S.C.R. 147, held that a common law duty of care sufficient tofound an action in tort can arise within a contractual relationship, and in that case proceeded with the analysis in tort instead of contract todeprive an allegedly negligent solicitor of the benefit of a limitation defence. To require a plaintiff to formulate a tort in a case such asthe present is pure formalism.

An independent actionable wrong is required, but it can be found in breach of a distinct and separatecontractual provision or other duty such as a fiduciary obligation. [emphasis added] 43 In Fidler, McLachlin C.J.C. and Abella J., in explaining the principles governing the award of punitive damages in breach ofcontract cases, wrote that a claim for punitive damages must be “independently actionable” (at para. 63): In Whiten, this Court set out the principles that govern the award of punitive damages and affirmed that in breach of contract cases, inaddition to the requirement that the conduct constitute a marked departure from ordinary standards of decency, it must be independentlyactionable.

Where the breach in question is a denial of insurance benefits, a breach by the insurer of the contractual duty to act in goodfaith will meet this requirement.

The threshold issue that arises, therefore, is whether the appellant breached not only its contractualobligation to pay the long-term disability benefit, but also the independent contractual obligation to deal with the respondent’s claim ingood faith. …. [emphasis added] 44 I do not view the references to “independent actionable wrong” in Whiten and “independently actionable” in Fidler to meanthat a new cause of action is required, or for that matter is necessarily created, when punitive damages are sought.

What is requiredwhen claiming punitive damages is an actionable wrong; that is, conduct that is deserving of punishment by punitive damages, asexplained in Whiten and Fidler. Certainly, an actionable wrong can be an independent cause of action, but it need not be. It will dependon whether the actionable wrong can sustain an action on its own. 45 Here the amendments, as stated earlier, elaborate on the manner in which Manitoba is alleged to have terminated theplaintiff’s disability benefits.

While they allege a breach of the independent contractual obligation of good faith and fair dealing, theycannot sustain an action on their own. If the plaintiff is unsuccessful in establishing that Manitoba wrongfully terminated her disabilitybenefits because she was not totally disabled, that will be the end of the plaintiff’s claim. Thus, the manner of the termination of

benefits, as set out in the amendments, will be a non-issue. The plaintiff will not be entitled to any remedy in those circumstances, letalone punitive damages, because, as explained in Hill v. Church of Scientology of Toronto, (SCC), [1995] 2 S.C.R. 1130(at para. 196): …. ... [P]unitive damages should only be awarded in those circumstances where the combined award of general and aggravated damageswould be insufficient to achieve the goal of punishment and deterrence.

Conclusion 46 The plaintiff is entitled to assert a claim for breach of an implied duty of good faith and fair dealing and seek punitivedamages arising from that alleged breach. The alleged breach, as set out in the amendments, is an actionable wrong independent of thealleged wrongful termination of disability benefits, but it is not an independent cause of action in this case. Therefore, the motion judgedid not err in law when he allowed the amendments to the plaintiff’s statement of claim. 47 As a result, the limitation issues need not be addressed. 48 I would dismiss the appeal with costs. J.A. I agree: J.A.

I agree: J.A.