TRUSTEES OF THE NOVA SCOTIA PUBLIC SERVICE LONG TERM DISABILITY TRUST FUND Applicant v. CHRISTOPHER TURNER Respondent DECISION Judge: The Honourable Justice Scott C. Norton, 2022 NSSC 129

SUPREME COURT OF Nova Scotia Citation: Trustees of the Nova Scotia Public Service Long Term Disability Trust Fund v. Turner , 2022 NSSC 129 Date: 20220509 Docket: Hfx No 508152 Registry: Halifax Between: TRUSTEES OF THE NOVA SCOTIA PUBLIC SERVICE LONG TERM DISABILITY TRUST FUND Applicant v. CHRISTOPHER TURNER Respondent DECISION Judge: The Honourable Justice Scott C. Norton Heard: April 21, 2022, in Halifax, Nova Scotia Decision: May 9, 2022 Counsel: Colin Bryson, Q.C., for the Applicant Charles J.

Ford, for the Respondent By the Court: [ 1 ] This Application in Court seeks a determination of the amount of long term disability (“LTD”) benefits the Respondent, Christopher Turner, is required to reimburse to the Nova Scotia Public Service Long Term Disability Plan Trust Fund (“Fund”) from settlement proceeds of a motor vehicle accident claim. Facts [ 2 ] The hearing proceeded based on an Agreed Statement of Facts appended to this decision (Appendix 1). [ 3 ] In brief, because of injuries sustained in a motor vehicle accident on September 15, 2017, Mr.

Turner went off work and commenced receiving LTD benefits from the Fund. Mr. Turner received a total of $93,135.77 in LTD benefits for disability caused by the accident for the period from February 13, 2018, to February 12, 2020, at which time the LTD benefits were discontinued. [ 4 ] Mr. Turner commenced a legal action against the driver of the third-party motor vehicle involved in the accident claiming damages for personal injury. [ 5 ] In his settlement proposal to the insurer of the defendant driver in the accident claim, totalling $300,000, Mr.

Turner set out his claim for past wages and pre-judgment interest (“PJI”) as follows: Past Wage Loss (LTD Plan Subro Claim) - $93,135.77 PJI on LTD Plan Subro Claim @ 5% x 24 months - $9,313.57 Net Past Wage Loss C. Turner - $38,471.81 PJI on C. Turner net past wage @ 5% x (35 months; when his income loss started in Feb 2018) - $5,610.47 [ 6 ] The insurer made a counter proposal of $175,000 plus disbursements of $26,520. Mr. Turner made a counter of $249,495.97 plus costs of $7,989.92 and disbursements of $26,554.50.

Within the offer he specified that he reduced the LTD Subro claim to 90% of the full claim or $83,822.19 plus PJI of $4,191.11; and past wage loss for Mr. Turner at 90% of the full claim or $34,624.63 plus PJI of $2,524.71. [ 7 ] The action was settled, with the consent of the Fund, on February 12, 2021, for the amount of $250,000 plus disbursements of

$26,520. Mr. Turner paid legal fees of 30% (plus HST) on the $250,000 settlement, plus disbursements of $26,520. [ 8 ] While not reflected in the Agreed Statement of Facts due to oversight, the parties agree that total past income recovery should be reduced by $5,000 to $116,520.40 to account for the fact that a small portion of the income loss recovery was for a short time period after LTD benefits were discontinued. [ 9 ] The dispute between the parties is with the

interpretation of Section 12(1) of the Nova Scotia Public Service Long Term Disability Plan (“LTD Plan”) that provides: 12(1) Where a long term disability benefit is payable for an injury or illness for which any third party, including the employee’s motor vehicle insurer under the

Section D or SEF 44 coverage, is, or may be, legally liable, the Trustees will be subrogated to all rights and remedies of the employee, including the Estate of the employee, against the third party, to recover damages in respect of the injury or death, and may maintain an action in the name of such employee, or the Estate of the employee, against any person against whom such action lies, and any amount recovered by the Trustees shall be applied to: (

a) payment of the costs actually incurred in respect of the action, and reimbursement to the Trustees of any disability benefits paid , and the balance, if any shall be paid to the employee whose rights were subrogated; (

b) any settlement or release does not bar the rights of the Trustees under subsection (1) unless the Trustees have concurred therein; (

c) an employee will fully cooperate with the Trustees in order to allow the Trustees to do what is reasonably necessary to assert the Trustees’ rights to subrogation, including but not limited to entering into subrogation agreements prescribed by the Guidelines made pursuant to this Plan. [ 10 ] Mr. Turner does not dispute the Fund’s right of subrogation regarding a portion of his settlement proceeds. The issue is the amount of the reimbursement of past income loss from the settlement of the accident claim. Mr.

Turner says that the Fund is only subrogated to its proportional share of the settlement which was presented to the insurer as $83,822.19. The Fund says that it is subrogated to the total claim for lost past income, as adjusted, of $116,520.40, less the proportional cost of recovering it. [ 11 ] Applying the provisions of

Section 12 of the Plan, the Fund claims it is entitled to a subrogation payment of $79,933.47 whereas Mr. Turner asserts that the amount payable to the Fund is $48,865.17. [ 12 ] To determine this issue requires

interpretation of the contractual language. Nova Scotia case authorities interpreting this provision, or its antecedents are of assistance. Mr. Turner distinguishes his claim from the authorities relied upon by the Fund and says that the facts of this case necessitate modifying the methodology used in calculating the Fund’s net proceeds. [ 13 ] The scope of the Fund’s right of subrogation and offsets is well-settled in Nova Scotia case law. The relevant legal principles are canvassed in Nova Scotia Public Service Long Term Disability Plan Trust Fund v. McNally , 1999 NSCA 129 , Nova Scotia (Public Service) v.

Warner , 2006 NSSC 160 , and Nova Scotia Public Service Long Term Disability Plan Trust Fund v. Kontuk , 2018 NSSC 89 , affirmed 2019 NSCA 33 . [ 14 ] Warner, supra, is not directly applicable because in that case the parties agreed on the amount to be reimbursed for past loss pursuant to the then equivalent provision of

Section 12 of the Plan. [ 15 ] Kontuk, supra, dealt with a true global settlement where the parties had markedly different positions on causation and damages. On the specific facts of that case, the judge determined that Mr. Kontuk’s past and future wage loss claims were the “weakest component” of the claim, resulting in an unduly low quantification of the reimbursement owed to the respondent and the offset against future LTD benefits payable.

The approach taken in Kontuk, supra, is not necessary in this case as we have clear evidence of the amount claimed for past loss of income. [ 16 ] The legal principles are set out in McNally , supra, where Justice David Chipman, for the Court of Appeal, considered the subrogation provision, then in

Section 18 of the Plan, which had the same relevant operative language of

Section 12. He stated, at para. 40: [40] …I am satisfied that on the plain meaning of the words in s.18 of the Plan, the Trustees, overall, have the right of control. Specifically, the wording I have referred to in paragraphs 35 to 38 above support this conclusion. Here, although the appellant commenced the proceedings against the third party, he secured the consent of the Trustees to the settlement. Moreover, even if the appellant in fact exercised full control, this does not, in my opinion, diminish the right of the Trustees to do so.

In view of the unambiguous language respecting the transfer of the rights of subrogation to the Trustees, and the giving of priority in the recovery to the Trustees, any de facto control exercised by the appellant over the recovery proceedings must be regarded as being exercised on behalf of the Trustees. I agree with Stewart, J. when she said: Section 18(1) is unambiguous. The wording is clear. Long term disability is payable for an injury for which a third party tortfeasor is liable.

All of the insured employee’s rights and remedies against a third party are subrogated to the Trustees for damages for the injury. No rights are reserved to the employee. The Trustees may maintain an action in the name of the employee against such third party with any amount recovered being applied to legal costs of the action, reimbursement of paid benefits to the Trustees and the balance, if any, to the employee, in that specific order. The reimbursement provision is not limited to the contractual circumstances of the amount being recovered by the Trustees.

The assignment of rights and remedies is not stated to be conditional. The assignment of rights is absolute. One cannot isolate the provisions in s. 18(1). The

section must be read as a whole. Since rights are subrogated absolutely to the Trustees obviously only Trustees can recover. Settlement payments to any other party by the third party is in effect a payment in trust for the Trustees. The employee has contracted his rights and absent any re-assignment he has no right between himself and the Trustees to sue.

Pursuant to s. 18(2), if an employee attempts to settle or release, this does not bar the rights of the Trustees for the obvious reason that the rights were conclusively assigned to the Trustees, with the only exception being the Trustees’ consent or concurrence to its rights being barred. An employee in pursuing an action is in effect the Trustees’ agent and pursuant to s. 18(3) must

fully cooperate with the Trustees in order to allow the Trustees to do what is reasonably necessary to assert the Trustees’ rights tosubrogation. (Emphasis added) … [43] Thus, I am of the view that the mere fact that the appellant rather than the Trustees actually brought the action against the thirdparty does not make the recovery any less an “amount recovered by the Trustees”. [17] Justice Chipman distinguished Sections 149 (automobile) and 172 (fire) of the Insurance Act, RSNS 1989, c. 231, whichprovide for subrogation on a proportional basis, from the wording of the Plan.

At paras. 46-47, Justice Chipman said: [46] These subrogation provisions contemplate deducting first the costs of recovery and then a division between the insured and theinsurer in the proportion in which the loss has been borne. By contrast, s. 18 of the Plan is less favourable to the insured. The costs ofrecovery are deducted first, but then the Trustee takes priority with respect to the balance, leaving the insured employee to claim what isleft over. [47] It might be said - as the appellant in effect submits - that the subrogation provisions in s. 18 of the Plan are harsh. They are,however, clear.

I do point out that counsel agree, and it is obvious, that it is not necessary on the facts of this case to decide whether theright of subrogation of the Trustee extends to any part of the recovery which is not related to the income loss. Obiter, I would think thatthe true intent of the parties leads to a construction of the language in s. 18 of the Plan that would not permit subrogation respectingrecovery that the insured can show does not relate to his income loss.

The justice of such a result is particularly plain where, forexample, an insured was contributorily negligent and received but a small percentage of his various losses. If, for example, he receivedonly 10% of his total claim fairly assessed, a court should not favour an

interpretation which would require him to pay to the Trusteesmore than what was recovered for loss of earnings. Such a result would take away some or perhaps even all of the other components ofthe settlement such as pain and suffering, loss of amenities, disability, special damages and so forth. See Consolidated-BathurstExport Ltd. v. Mutual Boiler & Machinery Insurance Co. (1979), (SCC), 112 D.L.R. (3d) 49 (S.C.C.) at p. 58 perEstey, J. [Emphasis added] [18] Applying these principles to the Turner settlement, I find

Section 12 expressly and clearly gives the Trustees a priority withregard to any amount recovered for income loss from any person against whom an action lies to recover damages for injury. I need notdetermine in this case if the provision provides for recovery from damages that are not related to income loss but would endorse theobiter comments of Chipman, J.A., in McNally, supra, in that regard. [19]

Section 12 is equally clear that with respect to “any amount” recovered for income loss, the costs of recovery is deducted first,but then the Trustees take priority with regard to reimbursement to the Trustees of any disability benefits paid, leaving the insuredemployee to claim what is left over. [20] Special damages are damages incurred to the date of trial. A claim for special damages may include a claim for income lostfrom the date of the accident to the date of trial.

Whether a claim for loss of income to the date of trial does or does not include a portionthat is subrogated is of no consequence to a defendant in an action for injury damages, except for the application of the collateral benefitsrule. [21] The fact that a plaintiff chooses to present their special damages claim for loss of income to the date of trial as being comprisedof subrogated and non-subrogated portions does not change the nature of the amount recovered. In respect of the

Section 12, an employeecannot unilaterally limit the amount recovered for loss of income from repayment to the Plan. If the claim made is separated intosubrogated and non-subrogated sums, as was the case here, the amount recovered is the combined total of the two. To find otherwisewould require interpreting

Section 12 to permit recovery on a proportional basis. [22] This argument was considered and rejected by the Court of Appeal in McNally at para. 46, supra. Justice Chipman found thatthe provisions of the Plan are less favourable to the employee than those (for example, in the Insurance Act) providing for a prorating ofthe amount recovered. [23] I conclude that the Fund is entitled to be reimbursed from the total past loss of income loss recovered in the accident claim,plus the prejudgment interest recovered, less recovery costs. This entitlement is in priority to Mr.

Turner, who is only entitled to theexcess if any. The costs recovered by the employee in the third party action is to be accounted for in determining the employee’s costs ofrecovering the wage loss. [24] Mr. Turner’s past income loss recovered net of recovery costs is $79,933.47. [25] The Fund is entitled to costs on this Application. I have considered the submissions of counsel with respect to costs. I order thequantum of costs should be $1500 inclusive of disbursements. [26] Order accordingly. Norton, J.

APPENDIX 1 AGREED STATEMENT OF FACTS 1. The Applicant, the Trustees of the Nova Scotia Public Service Long Term Disability Plan Trust Fund, is a board of trustees appointed by the Nova Scotia Government Employees Union (the “NSGEU”) and the Province of Nova Scotia (the “Province”) to administer the Nova Scotia Public Service Long Term Disability Plan Trust Fund (the “LTD Fund”) in accordance with a trust agreement between the NSGEU, the Province and the Trustees and in accordance with the Nova Scotia Public Service Long Term Disability Plan (the “LTD Plan”).

A true copy of the LTD Plan is appended as Exhibit “A”. 2. The Respondent, Christopher Turner, is an individual resident in the Halifax Regional Municipality. 3. The LTD Plan is a long-term disability plan created and authored by the NSGEU and the Province, and forms part of the employment compensation package contained in the various collective agreements between the NSGEU and the Province. By virtue of his collective agreement and his employment as a media production coordinator at the Nova Scotia Department of Education (“NSDOE”) commencing in December 2014, Mr.

Turner was entitled to coverage for long term disability (“LTD”) benefits in accordance with the terms of the LTD Plan. 4. Mr. Turner was injured in a motor vehicle accident (the “MVA”) on September 15, 2017, when his car was struck by another car. Mr. Turner commenced an action in the Supreme Court of Nova Scotia in Hfx. No. 491582 for damages for personal injury, including income loss, caused by the MVA (the “MVA Claim”). A true copy of the Notice of Action is attached hereto as Exhibit “B”. 5. As a result of the injuries sustained in the MVA, Mr.

Turner went off work from his job at the NSDOE and following a period of short term disability paid by the employer, applied for and received LTD benefits from the LTD Fund pursuant to the LTD Plan for disability caused by the MVA. LTD benefits pursuant to the LTD Plan of $93,135.77 were paid to Mr. Turner for the period from February 13, 2018 to February 12, 2020, the change of definition date, at which point payment of LTD benefits were terminated by the LTD Fund as it felt that Mr. Turner was no longer disabled as defined in the LTD Plan. 6. Through his legal counsel, Mr.

Turner entered into settlement negotiations of the MVA Claim on January 26, 2021. Attached hereto as Exhibit “C” is a true copy of emails exchanged from January 26, 2021 to February 12, 2021 between Charles Ford, counsel for Mr. Turner, and Joey Palov, counsel for the Defendant in the MVA Claim. These negotiations led to a settlement of the MVA Claim for $250,000.00, plus disbursements of $26,520.00 and payment of the cancellation fees of a mediator. The $250,000 was arrived at by reducing the claim set out in Mr. Ford’s email of February 1, 2021 to Mr. Palov (other than the claim for disbursements) by 2.91% 7.

Mr. Turner’s legal fees were a contingency fee of 30% of the recovery (net of disbursements), plus HST. 8. The settlement proceeds were paid to Mr. Turner on or about March 25, 2021, net of the $80,320.86 claimed by the LTD Fund in this proceeding, which are held in trust. Dated as of this 29th day of October, 2021.

_(sgd)_______________________________ Colin D. Bryson, Q.C. Blois, Nickerson & Bryson LLP 1100 – 1645 Granville Street PO Box 2147 Halifax, NS B3J 3B7 Solicitor for the NSPS LTD Plan Trust Fund __(sgd)____________________________________ Charles J. Ford Valent Legal 401-1741 Brunswick St Halifax, NS B3J 3X8 Solicitor for Christopher Turner