Ledingham v. Ontario Hospital Services Commission, [1975] 1 SCR 332

Supreme Court of Canada

Ledingham v. Ontario Hospital Services Commission, [1975] 1 S.C.R. 332

Date: 1974-04-02

Linda Susan Ledingham and Ralph Wilson Ledingham (Plaintiffs) Appellants;

and

Ontario Hospital Services Commission and Minister of Transport for Ontario (Defendants) Respondents.

1974: February 14; 1974: April 2.

Present: Laskin C.J. and Martland, Judson, Ritchie and Spence JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Motor vehicles—Motor Vehicle Accident Claims Fund—Claim of Hospital Services Commission on a pari passu basis with other claimants—Hospital Services Commission an insurer—Subrogation—The Hospital Services Commission Act, R.S.O. 1970, c. 209—The Motor Vehicle Accident Claims Act, R.S.O. 1970, c. 281, s. 21, (R.R.O. 1970), Reg. 443, s. 45.

Two actions for damages for personal injuries were brought against an uninsured defendant. The total amount of the awards was $63,496.81, which included $15,643.72 for services rendered by the Ontario Hospital Services Commission. The difference was $47,953.09. In view of the fact that the accident occurred on September 18, 1968, the maximum amount available from the fund created under the provision of the Motor Vehicle Accident Claims Act, R.S.O. 1970, c. 281 was $35,000. The Judge of first instance rejected the claim of the Commission to compete with the injured plaintiffs, appellants, “proportionately and on an equal footing” and directed the division of the $35,000 pro rata among the plaintiffs, appellants and excluded the Commission from participation. The Court of Appeal however held that the Commission was entitled to a share pro rata of the amount available.

Held: The appeal should be allowed.

The Hospital Services Commission Act, R.S.O. 1970, c. 209, s. 20(1), provides “that… the Commission may make regulations… subrogating the Commission to any right of recovery of past hospital expenses.” and Regulation 443 made under that Act provides at s. 55(2) that “The Commission is subrogated to any right of an insured person to recover all of part of the cost of insured services…”.

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Subrogation should be given the ordinary meaning assigned to it by equity in the interpretation of these regulations. It is an equitable right and the primary consideration is to see that the insured gets full compensation for his loss. The further aspect is to secure that the insured holds any surplus for the benefit of the insurer, in this case the Commission. The provision for an apportionment of costs in the Regulations does not enable the Commission to share proportionately and on an equal footing against the amount available when there is a deficiency.

APPEAL from a judgment of the Court of Appeal for Ontario[1], allowing an appeal from a judgment of Keith J. Appeal allowed with costs, judgment at first instance restored.

B.L. Eastman, for the appellants.

B.H. Wheatley and J. David Sloan, for the respondents.

The judgment of the Court was delivered by

JUDSON J.—The issue in this appeal is whether the Ontario Hospital Services Commission may compete with an injured person, proportionately and on an equal footing, who makes a claim against the Motor Vehicle Accident Claims Fund and finds that the limits of the fund are insufficient to enable him to recover in full on his judgment for damages. The Judge of first instance, Keith J., rejected the Commission’s claim. This was reversed on appeal. My opinion is that the judgment of first instance should be restored.

Two actions for damages for personal injuries were brought against an uninsured defendant. The awards were as follows:

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Included in the amount awarded to Ralph Wilson Ledingham was the sum of $14,995.12, the value of insured services as defined in R.R.O. 1970, Reg. 443, s. 1(b) rendered to Linda Susan Ledingham, the wife of Ralph Wilson Ledingham; and in the amount awarded to Joseph Amodeo, the sum of $548.60, the value of insured services rendered to Joseph Peter Amodeo, the son of Joseph Amodeo, payment for which insured services had been made by the Commission.

The total amount of these awards is $63,496.81, which includes $15,543.72 for the services rendered by the Commission. The difference is $47,953.09, and there is only $35,000 available to pay this sum.

Keith J. directed the division of the $35,000 pro rata among the plaintiffs and excluded the Commission from participation.

I set out now the legislation and regulations which are pertinent to this problem:

1. The Hospital Services Commission Act, R.S.O., 1970, c. 209, s. 20(1):

20.(1) Subject to the approval of the Lieutenant Governor in Council, the Commission may make regulations,

…

(h) subrogating the Commission to any right of recovery of past hospital expenses and future hospital expenses by an insured person or by a hospital indigent described in the regulations in respect of any injury or disability, and providing the terms and conditions under which an action to enforce such rights may be begun, conducted and settled and the terms and conditions under which the proceeds of the settlement or a judgment to which the Commission is entitled shall be paid to the Commission, and prescribing security therefor.

2. Regulation 443 under The Hospital Services Commission Act., R.S.O. 1970, s. 55(2) and (4):

(2) The Commission is subrogated to any right of an insured person to recover all or part of the cost of insured services from any other person, including future insured services, and the Commission

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may bring action in the name of the insured person to enforce such rights.

(4) An insured person, who commences an action to recover for loss or damages arising out of the negligence or other wrongful act of a third party to which the injury or disability in respect of which insured services have been provided is related, shall include a claim on behalf of the Commission for the cost of the insured services.

The issue is clearly defined by s. 55(2) of Regulation 443. What meaning is to be assigned to “the right of subrogation” given to the Commission? Keith J. held that it had the ordinary meaning assigned to it by equity and that it followed that the Commission had no claim until the insured persons had recovered complete indemnity from the wrongdoer, and that where the wrongdoer had no insurance and where the claims of the injured persons from the fund exceed the limit of $35,000, there is less than an indemnity to them and no unjust enrichment or other equity capable of supporting a claim by the Commission to share pro rata with them.

The Court of Appeal declined to apply this doctrine. It held that the term “subrogation” as used in subsection (2) of s. 55 of Regulation 443 had a special meaning which was to be determined solely by a consideration of the Act. Its ratio is to be found in the following extract from its reasons[2] (pp. 295-296):

Subsections (2) and (4) of ss.5 of Reg. 443 clearly spell out the obligation of the insured person, in his action, brought to recover damages for negligence, to include a claim on behalf of the Commission for the costs of the insured services and the requirement that the solicitor for the insured person act as solicitor for the Commission unless notified by the Commission that another solicitor is to represent the Commission.

On this account the actions maintained by these plaintiffs against the defendants were carried on by one solicitor as solicitor for the named plaintiffs and

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as solicitor for the Commission on whose behalf the plaintiff was proceeding to judgment. In these actions the plaintiffs recovered judgment on their own behalf and on behalf of the Commission. Had sufficient funds been available for the payment 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.

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” as outlined by Chancellor Boyd in National Fire Insurance Co. v. McLaren[3] at p. 687:

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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 holds any surplus for the benefit of the insurance company.

I would allow the appeal with costs both here and in the Court of Appeal and restore the judgment of the judge of first instance.

Appeal allowed with costs.

Solicitors for the appellants: Du Vernet, Carruthers, Toronto.

Solicitors for the respondent, the Minister of Transport: Gardiner, Roberts, Toronto.

Solicitors for the respondent, Ontario Hospital Services Commission: Raphael, Wheatley, Macpherson & Levitt, Toronto.