



COURT OF APPEAL FOR ONTARIO

CITATION: Prystupa v. Desjardins Financial Security Life
    Assurance Company, 2015 ONCA 298

DATE: 20150501

DOCKET: C59512

Hoy A.C.J.O., Watt and Brown JJ.A.

BETWEEN

Katrina Prystupa

Applicant (Appellant)

and

Desjardins Financial Security Life Assurance
    Company

Respondent (Respondent)

Allan Rouben, for the appellant

Grace Patenall and Emily Caputo, for the respondent

Heard: April 17, 2015

On appeal from the judgment of Justice Hugh R. McLean of
    the Superior Court of Justice, dated October 2, 2014.

By the Court:

Background

[1]

The appellant, Katrina Prystupa, appeals from the oral judgment of
    McLean J. dated October 2, 2014, in which he dismissed her application and the
    cross-application brought by the respondent, Desjardins Financial Security Life
    Assurance Company (Desjardins).

[2]

In her application, Ms. Prystupa had sought declarations interpreting section
    3 of Minutes of Settlement entered into on April 13, 2011 with Desjardins and
    the Canadian Bar Insurance Association (the Minutes). The settlement resolved
    a 2008 action commenced by Ms. Prystupa in which she had sought payment by
    Desjardins of disability benefits under a group insurance policy (the
    Policy).

[3]

Ms. Prystupa had applied to Desjardins for long-term disability benefits
    in June, 2006. A dispute arose between the parties about the calculation of the
    monthly benefit under the Policy, including the amount of Ms. Prystupas
    pre-disability income. The Policy provided that Desjardins would make Monthly
    Income Payments while an employee continued to be totally disabled in
    accordance with the applicable provisions of this policy. The Policy stated:

The amount of Monthly Income payable under this Benefit will be
    the amount shown in the Benefit Schedule based on the monthly Earnings in
    effect immediately prior to commencement of Total Disability.

[4]

The Policy contained a section entitled, Reduction of Monthly Income
    Payments, which described direct and indirect offsets to benefit payments. In
    the direct offset provisions, the Policy stated that the Monthly Income
    otherwise payable to an Employee under this Benefit will be reduced by b) any
    amount to which the Employee is eligible to apply for under the Canada Pension
    Plan

[5]

The main claim advanced by Ms. Prystupa in her 2008 action in respect of
    her Long-Term Disability (LTD) benefits was described in paragraph 19 of her
    Statement of Claim:

The plaintiff disputes, however, the calculation of the monthly
    benefit. Specifically, the plaintiff claims that Desjardins has miscalculated
    her pre-disability income and, since becoming partially disabled, Desjardins
    has miscalculated the amount of her monthly benefit, citing an interpretation
    of the policy that would deny the plaintiff her actual loss.

[6]

In its Amended Statement of Defence, Desjardins had denied that Ms.
    Prystupa had been totally disabled since September 2008, and pleaded that it
    had paid her benefits since that time under the Policys rehabilitation clause.

[7]

The Minutes resolved those disputes. Section 3 of the Minutes stated:

Desjardins agrees that,
for purposes of interpretation of
    its disability policy into the future
, as it applies to the Plaintiff, the
    following is admitted:

(a) the Plaintiffs Pre-Disability Income is set at
    $17,500;

(b) the clause entitled Benefit Under Rehabilitation
    shall have no application to the Plaintiffs ongoing claim under the terms of
    the policy;

(c) payment of monthly benefits, up to $2,000 a month,
    shall continue to be paid to the Plaintiff so long as the Plaintiff is unable
    to practice law, as a result of sickness or injury, at the same capacity as
    prior to the onset of her disability, until the Plaintiff attains her sixty-fifth
    (65
th
) birthday

(d) monthly LTD benefits shall be calculated based on
    the Plaintiffs PDI, as set out above, less net monthly earnings, to a maximum
    of $2,000/month. The Plaintiff shall not be entitled to an LTD benefit for any
    month(s) in which her net monthly earnings exceeds her PDI. [Emphasis added.]

[8]

Section 5 of the Minutes required Ms. Prystupa to execute a full and
    final release in favor of the defendants in a form satisfactory to defendants
    counsel (the Release). The Release signed by Ms. Prystupa on May 20, 2011,
    stated, in part:

AND IT IS UNDERSTOOD AND AGREED that the Policy continues to
    apply to the Releasor with respect to disability benefits and that the Policy
    will be administered as follows

The Release then reproduced section 3 of the Minutes.

[9]

In 2013, after concluding the settlement with Desjardins, Ms. Prystupa
    applied for disability benefits under the Canada Pension Plan (CPP). In
    January, 2014, Ms. Prystupa was informed that she was eligible for the CPP
    Disability Benefit, retroactive to January, 2013, in an initial monthly amount
    of $1,101.08.

[10]

Ms.
    Prystupa informed Desjardins about her entitlement to CPP Disability Benefits. By
    letter dated February 5, 2014, Desjardins told Ms. Prystupa that the CPP
    Disability Benefits were a direct offset from LTD benefits under the Policy and
    requested that she refund $14,314.04 as overpayments made to her from the
    commencement of her receipt of the CPP Disability Benefit. Desjardins also
    advised that upon receipt of the overpayment, Ms. Prystupas benefits would
    resume at a revised monthly LTD benefit amount of $898.92.

[11]

In
    June 2014, Ms. Prystupa commenced an application in which she sought a
    declaration that section 3 of the Minutes be interpreted so that the direct offset
    provisions of the Policy concerning CPP Disability Benefits did not apply to
    her.

The Application and Judgment

[12]

It
    was against that background that the application judge gave his brief oral
    reasons dismissing the application. He stated:

Clearly, in the Minutes of Settlement, there was no discussion
    or no excising of the policy general provisions that disability benefits should
    be reduced by the amount of Canada Pension Plan benefits should they be
    obtained. This was clearly not brought in the release, nor in the Minutes of
    Settlement, and is not dealt with in any way in these two documents.

What was dealt with was the fact that, indeed, what the nature,
    the pith and substance of the Minutes of Settlement in the release was, the
    disability benefits were going to be paid on certain conditions based on
    certain amounts.

Clearly, when the releasor agreed that the policy provisions
    would still be in effect, subject to the amendments in the Minutes of
    Settlement, the clear implication is that any deductions for Canada pension
    found in the policy itself would be applicable. This was not otherwise dealt
    with. Clearly, when the releasor agrees that the policy would otherwise be
    applicable, indeed the payments are still made under the policy itself.

Positions of the parties

The appellant

[13]

Ms.
    Prystupa submits that the application judge made several errors:


(i)

When interpreting the Minutes, he failed to consider the surrounding
    circumstances which led to their execution;


(ii)

He failed to consider the Minutes as a whole. Had he done so, according
    to Ms. Prystupa, he should have concluded that the Minutes constituted a
    comprehensive and exhaustive formula for the calculation of her monthly LTD
    benefits. Since the Minutes made no reference to CPP Disability Benefits, a
    proper interpretation of the Minutes would conclude that Desjardins could not
    deduct them when calculating the Monthly Income payable to her;


(iii)

He failed to treat the absence of any mention of the CPP Disability
    Benefits in the Minutes as an ambiguity in the contract which should be
    resolved against the insurer; and,


(iv)

He erred in failing to direct a trial of her claim in respect of the
    Minutes and her claim for punitive damages.

[14]

Desjardins
    submits that the application judge properly interpreted the Minutes and Release
    as amending only certain terms the Policy, with the result that Ms. Prystupas
    on-going LTD benefits would be subject to the CPP offset provision which
    remained in the Policy.

Analysis

[15]

As
    the application judge was engaged in the interpretation of contractual
    documents, the standard of review set out in
Sattva Capital v. Creston Moly
    Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633 applies. In that case, the Supreme
    Court of Canada held that contractual interpretation involves issues of mixed
    fact and law because it is an exercise in which the principles of contractual
    interpretation are applied to the words of the written contract, considered in
    light of the factual matrix.

[16]

As
    a result, deference is owed to first instance decision-makers on points of
    contractual interpretation, except with respect to an extricable question of
    law. Extricable legal errors in the context of contractual interpretation
    include the application of an incorrect principle, the failure to consider a
    required element of a legal test, or the failure to consider a relevant
    factor:
Sattva
, at para. 53. The Supreme Court of Canada observed,
    however, at para. 54, that courts should be cautious in identifying extricable
    questions of law in disputes over contractual interpretation.

[17]

When
    interpreting a contract, a court must read the contract as a whole, giving the
    words used their ordinary and grammatical meaning, consistent with the
    surrounding circumstances known to the parties at the time of formation of the
    contract:
Sattva
, at para. 47.

[18]

The
    Minutes had to be interpreted in light of the context in which they arose 
    i.e. the settlement of the disputed issues in Ms. Prystupas 2008 action. The proper
    treatment of CPP Disability Benefits under the Policy was not in issue in that
    action, and it was common ground between the parties that there had been no
    discussion about the treatment of CCP Disability Benefits during the negotiations
    which  led to the signing of the Minutes. The application judge was correct in
    finding that the Minutes did not contain any discussion or modification of the
    Policys general provision that the LTD benefit should be reduced by the amount
    of any CPP Disability Benefits.

[19]

The
    opening language of section 3 of the Minutes clearly stated that the agreement
    made by Desjardins was for purposes of the interpretation of its disability
    policy into the future. The Release, which Ms. Prystupa had executed pursuant
    to section 5 of the Minutes, contained a clear agreement by her that the
    Policy continues to apply to the Releasor with respect to disability benefits,
    subject only to the alterations agreed to by the parties in section 3 of the
    Minutes. Although the Minutes expressly provided that one provision of the
    Policy would no longer apply to Ms. Prystupas claim  the Benefit Under
    Rehabilitation clause  neither the Minutes nor the Release amended the
    provisions of the Policy concerning the direct offset of CPP Disability
    Benefits. Consequently, it was open to the application judge to conclude that
    when [Prystupa] agreed that the policy provisions would still be in effect,
    subject to the amendments in the Minutes of Settlement, the clear implication
    is that any deductions for Canada pension found in the policy itself would
    still be applicable.

[20]

Not
    only is that interpretation by the application judge entitled to deference, we
    think it was correct.

[21]

We
    do not accept Ms. Prystupas submission that the treatment of the CPP
    Disability Benefits formed part of the settlement reached concerning the
    calculation of her monthly LTD benefit. The Policy does not treat direct
    offsets as part of the insureds monthly earnings. The direct offset provisions
    of the Policy clearly state that that the monthly income otherwise payable to
    an employee under this benefit will be reduced by the CPP Disability Benefits.
    See also
Holmes v. Desjardins Financial Security Life Assurance Company
,
    2014 ONSC 4695, at para. 20.

[22]

Ms.
    Prystupa submits that, at the very minimum, an ambiguity existed in the Minutes
    which should be resolved against Desjardins. We do not agree. The evidence
    disclosed that the Minutes were the product of a negotiated settlement of the
    action, with counsel for both parties participating in the drafting of the
    Minutes. Two consequences result from that. First, the
contra proferentem
principle does not apply in the circumstances. Second, there is no merit to Ms.
    Prystupas submission that in those circumstances Desjardins owed her a duty to
    spell out specifically in the Minutes that the CPP Disability Benefit offset
    would continue. The parties were free to raise and settle those matters they
    considered appropriate in those arms-length negotiations.

[23]

Finally,
    Ms. Prystupa submits that the application judge erred by failing to direct a
    trial of issues with respect to the interpretation of the Minutes and her claim
    for punitive damages. We see no merit in this submission. The material facts
    before the application judge were not in dispute, and the application procedure
    provided a fair and proportionate means by which to adjudicate the
    interpretation of the Minutes. The application judge ruled in favour of
    Desjardins interpretation of the Minutes, so there was no basis for Ms.
    Prystupas claim for punitive damages.

[24]

For
    these reasons, we dismiss the appeal.

[25]

Desjardins
    seeks partial indemnity costs of the appeal in the amount of approximately
    $9,000. We see no reason why costs should not follow the cause, and we consider
    the amount sought reasonable. Ms. Prystupa shall pay Desjardins costs of the
    appeal fixed in the amount of $9,000, inclusive of disbursements and HST.

Released: May 1, 2015 (A.H.)


Alexandra Hoy A.C.J.O.


David
    Watt J.A.

David Brown J.A.


