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67
Alta. L.R. (2d) 349, 37 C.C.L.I. 40, 98 A.R. 203, 60 D.L.R. (4th) 438, [1989]
I.L.R. 1-2525; 1989 CarswellAlta 99 Bigl
Estate v. Alberta In
The Matter of an application pursuant to Rule 410 of the Alberta Rules of Court
for an Order declaring the entitlement, as between the parties, to funds held
in trust Trevor
Roland Bigl and Donna Elaine Joy Bigl, Trustee of the Estate of Trevor Roland
Owen Bigl, Applicants (Respondents) and Her Majesty The Queen in Right of
Alberta, Respondent (Appellant) Alberta
Court of Appeal JUDGES: Laycraft
C.J.A., McClung and Hetherington JJ.A. Judgment: June 28, 1989 Docket: Edmonton No. 8803-0829-AC COUNSEL: A.P.
Hnatiuk, Q.C. and T. Hurlburt, for appellant. B.J. Larbalestier, for respondent. SUBSEQUENT HISTORY: Distinguished
in: Nguyen (Next Friend of) v. Armstrong, 128 A.R. 161, 1 Alta. L.R. (3d)
191, 17 C.C.L.I. (2d) 292, 1991 CarswellAlta 10 (Alta. Q.B. Dec 23, 1991) SUBJECT: Public;
Insurance; Contracts Health Law — Provincial health
insurance programmes — Right of subrogation. Insurance — Contract of indemnity —
Subrogation — Right of insurer. Damages — Personal injuries —
Third party claims — Minister of Hospitals and Medical Care —
Plaintiff accepting structured settlement for damages for personal injuries —
Cost of structured settlement less than agreed value of general and special
damages but total payments over 30 years exceeding amount of damages —
Minister claiming proportionate share of proceeds from settlement —
Right of subrogation only arising when injured party fully indemnified —
Settlement not fully indemnifying plaintiff — Minister not entitled to
portion of proceeds. Public health and welfare —
Legislation — Application — Minister of Hospitals and Medical
Care claiming portion of proceeds from structured settlement for damages for
personal injuries to plaintiff — Cost of settlement less than agreed
amount of special and general damages but total payments over 30 years exceeding
amount of damages — Settlement not full indemnification of plaintiff's
damages — Minister having no right of subrogation. Public health and welfare —
Legislation — Interpretation — “Subrogated”
in s. 58 of Hospitals Act having ordinary meaning — Indemnified party
being entitled to any benefit in respect of indemnified loss over and above
amount of loss. Barristers and solicitors —
Solicitor and client — Conflict of interest — Counsel acting
for Minister of Hospitals and Medical Care and for personal injuries claimant —
Court pointing out potential conflict of interest when settlement not
sufficient to meet both claims. B. was gravely injured when a car struck his
motorcycle. The trustee for B.'s estate sued for damages against the defendant
which included the subrogated claim of Alberta Hospitals and Medical Care as
required by the Hospitals Act. It was agreed that B. suffered general and
special damages of $875,000, but as the insurance coverage was only $500,000
and the defendant was impecunious, B. accepted a structured settlement. The
cost of the structured settlement was $483,000 and would total in excess of $1
million over a minimum of 30 years of payments. On application to the Court of
Queen's Bench, the claim of the Minister of Hospitals and Medical Care for a
proportionate share of the proceeds of the settlement was denied. The minister
appealed. HELD: Appeal
dismissed. The term “subrogated” in s.
58 of the Hospitals Act does not have a meaning different from its ordinary meaning.
“Subrogated” in its usual sense means that when one person
has been bound to indemnify another against a loss, the other is entitled to
any benefit in respect of the indemnified loss received by that person over and
above the full amount of the loss. The right of subrogation does not arise
until there has been full recovery by the person suffering the loss. B. did not
receive full indemnification as he recovered a settlement worth $483,000 which
was $392,000 less than his agreed damages. The argument that B. was fully
indemnified because his estate would ultimately receive more than the $875,000
ignored the time worth of money: some of the money would not be received for at
least 30 years. The minister's right of subrogation would arise only if and when
B's estate recovered the further sum beyond the structured settlement which
had, at the time of the settlement, a worth of $392,000. When counsel appointed under the Hospitals
Act acts for both the minister and the claimant and there is insufficient money
to meet both claims, the resulting conflict of interest necessitates that
counsel advise the minister that he cannot continue to act for both. Cases considered: Ledingham v. Ont. Hosp. Services Comm.,
[1975] 1 S.C.R. 332, 46 D.L.R. (3d) 699, (sub nom. Ledingham v. Min. of Tpt.) 2
N.R. 32, reversing (sub nom. Ledingham v. Di Natale; Amodeo v. Di Natale)
[1973] 1 O.R. 291, 31 D.L.R. (3d) 18, which reversed [1972] 1 O.R. 785, 24
D.L.R. (3d) 257 — followed Statutes considered: Hospitals Act, R.S.A. 1980, c. H-11 s. 1(1)(m) “minister” [renumbered
1983, c. 81, s. 5(2)] s. 53(d) “beneficiary” s. 58 [am 1981, c. 62, s. 22; 1983, c. 32, s.
2(4)] Words and phrases considered: subrogated Appeal from dismissal of claim by Minister of
Hospitals and Medical Care for proportionate share of proceeds from settlement
for damages for personal injuries. The judgment of the court was delivered by
Laycraft C.J.A.: 1 The issue in this case is whether the
Minister of Hospitals and Medical Care is entitled, under s. 58 of the
Hospitals Act, R.S.A. 1980, c. H-11, to receive a portion of the proceeds of a
structured settlement recovered by the estate of Roland Bigl, which was less
than a full recovery of the damages for injuries he suffered in a motorcycle
accident. In Court of Queen's Bench, Madam Justice Picard held, without written
reasons, that the minister is not entitled to a portion of the proceeds. I
respectfully agree with her conclusion. 2 Mr. Bigl was gravely injured on 3rd July
1985 when a car struck the motorcycle on which he was riding. He suffered head
injuries which made necessary, some time later, the appointment of his mother
as trustee of his estate. She commenced an action claiming damages, and as
required by the Hospitals Act, claiming $26,710 as the “subrogated
claim of Alberta Hospitals and Medical Care”. 3 Negotiations then proceeded for the
settlement of Mr. Bigl's claim, which counsel valued at approximately
$1,000,000. The applicable in surance coverage, however, was only $500,000, and
investigation showed little prospect of further recovery from the defendants.
The insurer offered to pay the policy limit, or if the plaintiff preferred, to
arrange a structured settlement. 4 After considerable negotiation, a
structured settlement was arranged and approved in Court of Queen's Bench. This
settlement provided for payment of a lump sum immediately, plus further lump
sums at intervals, and monthly payments to Mr. Bigl for life but guaranteed, in
any event, for 30 years. Mr. Bigl will receive a total of $1.042 million, based
on 30 years of payments, or $1.410 million based upon a normal life expectancy. 5 It was not possible to settle, completely,
the minister's claim for the hospital expenses, but the parties agreed on
several facts to facilitate this application in Queen's Bench chambers. They
agreed that Mr. Bigl suffered actual general and special damages, including
prejudgment interest, of $875,000, and that the cost of the structured
settlement was $483,000. They also agreed that the same proportion of recovery
compared to actual damages, applied to the hospital expenses would be $14,900.
The minister agreed to limit the claim for hospital expenses to this sum, which
is held in trust pending the completion of this appeal. 6 The formal judgment roll incorporates the
agreed facts and the terms of the oral judgment of Madam Justice Picard. She
made a declaration that Mr. Bigl has not been indemnified in full for the
personal injuries which he suffered in the collision. She found that the
minister does not have any right to subrogation for the hospitalization
expenses and directed payment of the sum held in trust to the trustee of Mr.
Bigl's estate. 7 Section 53 of the Hospitals Act defines a
“beneficiary” as a” person who receives insured
services”. “Minister” is defined in s. 1 as
“the Minister of Hospitals and Medical Care”. The term
“subrogated” is not defined in the statute. Section 58 then
provides: 58(1) When as a result of a wrongful act or
omission of another, a person suffers personal injuries and becomes a
beneficiary (a) the beneficiary has the same right to
recover the cost of insured services against the person guilty of the wrongful
act or omission as he would have had if he had been required to pay for the
whole cost of the hospital services which he received, and (b) the Minister is subrogated to the right
of recovery of the beneficiary in respect of the cost of insured services
furnished and the Minister may maintain an action either in his own name or in
the name of the beneficiary to recover the cost of the insured services to
which he is hereby subrogated. (2) A beneficiary, or his agent, shall
promptly inform the Minister when the beneficiary or his agent has consulted a
solicitor in respect of the damages sustained by him by reason of personal
injuries and therewith shall inform the Minister of the name and address of
that solicitor. (3) The Minister may at any time engage a
solicitor to prosecute recovery of the cost of the insured services to a
beneficiary to which the Minister is subrogated and for that purpose may engage
the solicitor of the beneficiary. (4) The solicitor of a beneficiary who has
been engaged by the Minister for the purposes of this section shall, in
addition to proper disbursements, if any, be paid in accordance with a schedule
of fees established by the Lieutenant Governor in Council, and a solicitor
separately engaged for these purposes shall be paid his proper and reasonable
fees and disbursements determined pursuant to the Alberta Rules of Court. (5) A beneficiary may at any time settle his
claim for damages sustained by reason of personal injuries, other than the cost
of insured services to which the Minister is subrogated, but the claim of the
Minister shall not be settled without the prior written consent of the Minister
and any settlement made without his prior written consent is void. (6) The obligation of an insurer to an
insured person against whom a claim by a beneficiary for personal injuries and
the cost of insured services could be made, shall not be discharged until the
subrogated claim of the Minister is paid or settlement of it as aforesaid is
made and the amount of the settlement is paid … 8 The scheme established for recovery of
hospital expenses paid by the minister for the victims of a tort may be readily
seen. Since the beneficiary of the hospital services has not suffered damages
in respect of them, the legislation creates a cause of action enabling the
beneficiary to recover them from the wrongdoer. The minister is “subrogated”
to the beneficiary's right of recovery. The remaining subsections are
procedural, ensuring that the claim is joined with the beneficiary's other
claims if an action is commenced, providing for the beneficiary's solicitor to
act for the minister and to be paid for the services given, and enabling the
minister to sue independently if necessary. A beneficiary may settle all claims
other than the hospital expenses without consultation with the minister. The
claim for hospital expenses may be settled only with the minister's prior
written consent; any other purported settlement of them is void. The obligation
of an insurer to indemnify a person against whom the beneficiary claims is not
discharged until the claim for hospital expenses has been paid or validly
settled. 9 On the argument of this appeal, counsel
were agreed on the ordinary meaning of the word “subrogated”.
In its usual sense, and apart from any special statutory meaning to be applied
in this case, the concept is that when one person has been bound to indemnify
another against a loss, the other is entitled to any benefit in respect of the
indemnified loss received by that person over and above the full amount of the
loss. From this it follows that the right of subrogation does not arise until
there has been recovery in full by the person suffering the loss. This point
has been made in numerous cases over the last century. A plaintiff is not to be
unjustly enriched by an overpayment but he is entitled to full payment before
the subrogation claimant is paid anything. In Ledingham v. Ont. Hosp.
Services Comm., [1975] 1 S.C.R. 332, 46 D.L.R. (3d) 699,
(sub nom. Ledingham v. Min. of Tpt.) 2 N.R. 32 [Ont.], Judson
J., giving the judgment of the court, applied the words used by Chancellor
Boyd in Nat. Fire Ins. Co. v. McLaren (1886), 12 O.R. 682 at
687 [p. 36]: The doctrine of subrogation is a creature of
equity not founded on contract, but arising out of the relations of the
parties. In cases of insurance where a third party is liable to make good the
loss, the right of subrogation depends upon and is regulated by the broad
underlying principle of securing full indemnity to the insured, on the one
hand, and on the other of holding him accountable as trustee for any advantage
he may obtain over and above compensation for his loss. Being an equitable
right, it partakes of all the ordinary incidents of such rights, one of which
is that in administering relief the Court will regard not so much the form as
the substance of the transaction. The primary consideration is to see that the
insured gets full compensation for the property destroyed and the expenses
incurred in making good his loss. The next thing is to see that he hold any
surplus for the benefit of the insurance company. 10 Counsel advanced several arguments on
behalf of the minister. First, he urged that Mr. Bigl has been more than fully
indemnified because he or his estate will ultimately receive much more than his
loss of $875,000. The quick answer to this submission is that it ignores the
time worth of money. Some of the money to be received by Mr. Bigl will not come
to him for at least 30 years. On the facts here, Mr. Bigl could accept either
$500,000 or the structured settlement. I presume that the difference between
the $500,000 and the $483,000 cost of the structured settlement is the
insurer's compensation for administering the complex structured settlement. In
my view, it is clear that Mr. Bigl has not been fully indemnified; he has had
to accept something worth much less than the amount of his loss because that is
all that is available. 11 The main ground urged on the appeal is
that the term” subrogated” in s. 58 of the Hospital Act has a
special meaning different than its or dinary meaning. This special meaning, it
is said, can be seen by relating the rights given the minister to the general
scheme of the section, and particularly to subss. (5) and (6). The result urged
is that the minister has a right to a proportionate share of each dollar
received by the beneficiary as it is received. 12 A similar argument alleging a special
meaning for the term” subrogation” in the similar Ontario
legislation was made in Ledingham v. Ont. Hosp. Services Comm.
In that case, the scheme for recovery of hospital expenses where a third party
was responsible for the injuries was, in substance, the same as that in the
Alberta legislation and the language used was strikingly similar. The
commission was” subrogated” to the rights of the injured
person, and was entitled to join the action of that person or to take action on
its own. The injured person was forbidden to settle the commission's claim
without its approval. Four persons were injured in a motor vehicle collision
and recovered judgments totalling more than $60,000 including some $15,000 in
hospital expenses. As in this case, the defendants were impecunious. The only
source for the payment of the judgments was the fund established under Ontario
motor vehicle legislation from which recovery was limited to $35,000. As in
this case, the commission argued that it was entitled to rank proportionately
with the injured persons for a share of this fund. 13 The judge of first instance, Keith J.,
rejected the commission's claim (Ledingham v. Di Natale; Amodeo v. Di Natale,
[1972] 1 O.R. 785, 24 D.L.R. (3d) 257 (H.C.)). He held that nothing in the
wording of the legislation and regulations before him warranted ascribing a
special meaning to the word “subrogation”. Where the
legislature uses a word having a special technical or legal meaning, it is not,
in general, to be supposed that it is used with some other meaning. He cited
the judgment of Morand J. in Dias v. Ont. Hosp. Services Comm.,
[1969] 2 O.R. 447, [1969] I.L.R. 1-300, 5 D.L.R. (3d) 594 (H.C.), where the
authorities on this point are reviewed. Since the commission's right was a
right of subrogation, its right to payment arose only upon full recovery of
their judgments by the injured persons. The commission was not entitled to
share pro rata in the fund. 14 The Ontario Court of Appeal held that the
commission was entitled to recover its proportionate share of the fund
available ([1973] 1 O.R. 291, 31 D.L.R. (3d) 18). Kelly J.A., for the court,
said at pp. 295-96: In these actions the plaintiffs recovered
judgment on their own behalf and on behalf of the Commission. Had sufficient
funds been available for the pay ment of the full amount of the judgment, no
question would have arisen, but here we are informed that the amount available
will be less than the full face amounts of the judgments. Under these
conditions, in the absence of some basis for according priority to one judgment
credit over another, the long-standing rule of law that all creditors are
entitled to share in the available funds pari passu according to the value of
their respective judgments should prevail. 15 The Supreme Court of Canada restored the
judgment of Keith J. Judson J. referred to the portion of the judgment of Kelly
J.A. quoted above and said at p. 36: Here, I think, is the error. My opinion is
that these regulations do not contain a special meaning for the term “subrogation”.
Consider the position of the insured person. He has paid premiums for the
protection given by the Hospital Services Commission. When he brings action
against the wrongdoer, he is compelled by Reg. 52(4) to include a claim on
behalf of the Commission for the cost of the insured services. The Commission
retains some control over the conduct of the action and its settlement, if any.
He must inform the Commission after issuing the writ and he must act as
solicitor for the Commission for the purposes of the section, unless otherwise
notified. There is provision for an apportionment of costs, but does this
enable the Commission to share proportionately and on an equal footing in a
claim against the fund when there is a deficiency? I think this right would
have to be spelled out in those terms. It would have to be said that the
Commission's claim would rank proportionately and on an equal footing in any
claim out of the fund. Reg. 55(2) does not say any such thing. Therefore, I think Keith, J., was right when
he adopted the ordinary meaning of “subrogation” … 16 In my view this language and conclusion
are also applicable to the present case. Nothing in the Alberta legislation
shows any legislative intention that other than the ordinary meaning of
“subrogated” is to be adopted. 17 For the minister it is said that the
present case may be distinguished from Ledingham because there is no judgment
awarding an amount to Mr. Bigl as in that case, there is no separate fund to
which application must be made for payment, and there is here no deficiency. I
have expressed my view on the question of whether there is a deficiency. I
regard the other two points made as being differences without significance. 18 The minister has accepted for the purposes
of this argument that the actual damages were $875,000 and that the cost of the
settlement was $483,000. Counsel did not argue that the settlement was
improvident, or made in bad faith, or that there was even a remote prospect of
further recovery from the tortfeasors. What is significant is that Mr. Bigl has
not been fully indemnified; his recovery of a settlement worth $483,000 leaves
him $392,000 short of his damages of $875,000. The minister's right of
subrogation will arise only if (and when) Mr. Bigl has recovered the further
sum, beyond the structured settlement, which had, at the time of the
settlement, a present worth of $392,000, the amount of his deficiency. 19 It was also said that Mr. Bigl should not
be able to prevent the minister from recovering by forcing him to wait out the
conclusion of a long delayed structured settlement. But, again, it is not
argued that the settlement was improvident or made in bad faith. Moreover, had
Mr. Bigl accepted the policy limits, in cash, the minister would be in the same
position that he is with the structured settlement, namely that his subrogation
rights do not arise until Mr. Bigl is fully indemnified. 20 A word of caution may be necessary for
counsel appointed under the statute in these cases. There can be no doubt that
counsel acting for both the minister and the claimant will often be in a
difficult position where the money available is not sufficient to meet both
claims. When that becomes evident, a conflict of interest arises between his
two clients. Counsel must be alert, at that point, to advise the minister that
he cannot continue to act for both. I do not, of course, suggest that counsel
did not take the appropriate step in a timely way in this case. 21 I would dismiss the appeal with costs to
the respondents. Appeal dismissed. |