



COURT OF APPEAL FOR ONTARIO

CITATION: Swampillai v. Royal & Sun Alliance Insurance
    Company of Canada, 2019 ONCA 201

DATE: 20190314

DOCKET: C65717

Feldman, Roberts and
    Fairburn JJ.A.

BETWEEN

Joe Swampillai

Plaintiff
    (Respondent)

and

Royal &
    Sun Alliance Insurance Company of Canada
and
Sun Life Assurance Company of Canada

Defendants
    (
Appellant
)

Thomas A. Stefanik, for the appellant

Naphtali Silverman
,
    for the respondent

Heard: March 4, 2019

On appeal from the
    order of Justice Cavanagh of the Superior Court of Justice, dated June 26,
    2018.

REASONS FOR DECISION

[1]

The
    appellant employer appeals from the dismissal of its motion for summary
    judgment to dismiss the respondents action for long-term disability benefits.
    The appellant relied on a broad release signed by the respondent employee in
    conjunction with the financial settlement he received upon his dismissal from
    employment. One term of the release purported to waive any claim for long-term
    disability benefits. The motion judge found that, as it related to the
    respondents long-term disability claim, the release was unconscionable and unenforceable.

[2]

The
    respondent was employed by the appellant for 14 years in a manual position in
    the mailroom. After becoming disabled, he received short-term disability
    benefits for the two-year maximum period from 2013 to 2015, based on his
    inability to do his job.  While the benefit plan was self-funded by the
    appellant, the plan was administered, adjudicated and paid by Sun Life
    Assurance Company of Canada. Sun Life advised the respondent on March 31, 2015
    that he was not eligible for long-term disability benefits because he did not
    meet the definition of disabled from any employment. On June 2, 2015, Sun
    Life advised him that his appeal from that decision was dismissed and that he
    had until October 22, 2015 to make any further appeal. On June 19, 2015, he
    retained a law firm to pursue an appeal.

[3]

On
    June 24, 2015, the appellant advised the respondent that his employment was
    being terminated effective July 22, 2015, and provided him with a severance
    offer, which included a release of all claims against the appellant, including
    for long-term disability benefits. The respondent sought advice on the
    settlement from the law firm handling his appeal on the denial of his long-term
    disability benefits.  He was informed that the firm did not practice employment
    law and that he could seek his legal advice on his severance elsewhere. He did
    not seek employment law advice but instigated further negotiations on his own
    with the appellant.  After some negotiation, which led to the improvement of
    the severance terms, on July 14, 2015, the respondent accepted the appellants
    offer and signed the release. He testified that he never closely read the
    release before signing it because he assumed it was just a more legalese
    version of the June 24, 2015 letter.

[4]

Despite having signed the release in July
    2015, the respondent appears to have continued appealing the denial of his
    long-term disability claim and Sun Life does not appear to have objected.
After unsuccessfully
    pursuing appeals from the denial of his long-term disability claim, the
    respondent commenced an action against the appellant and Sun Life for long-term
    disability benefits.

Once the respondent started his claim, though, the
appellant and Sun Life
    brought a motion for summary judgment dismissing the action based on the
    release signed by the respondent.

[5]

The
    motion judge found that in respect of the release of liability for the long-term
    disability benefits, the release was unconscionable based on the criteria for
    unconscionability set out in
Titus v. William F. Cooke
    Enterprises Inc.
,
    [2007] O.J. No. 3148 (C.A.). Because those criteria were met, summary judgment
    enforcing the release was denied and the release, as it relates to the long-term
    disability claim, was set aside and declared unenforceable.

[6]

At para. 38 of
Titus
, this court endorsed four elements necessary for
    unconscionability:

1. a grossly unfair and improvident
    transaction;

2. the victim's lack of independent legal
    advice or other suitable advice;

3. an overwhelming imbalance in bargaining
    power caused by the victim's ignorance of business, illiteracy, ignorance of
    the language of the bargain, blindness, deafness, illness, senility, or similar
    disability; and

4. the other party knowingly taking
    advantage of this vulnerability.

[7]

In
    our view, the motion judge erred by finding unconscionability based on the
    record before him on summary judgment. In the circumstances of this case, the issue
    of whether the release is unconscionable and therefore unenforceable is a
    genuine issue requiring a trial.  We say this for two reasons.

[8]

First,
    the record before the motion judge was insufficient to permit him to determine
    that the severance transaction in which the release was signed reached the high
    threshold of grossly unfair and improvident because it included the release
    of the respondents long-term disability claim.  It is not disputed that the amount
    of severance based on years of service was more than fair. It is also not
    disputed that there was no specific amount that was designated to compensate
    for the loss of the potential success of the respondents long-term disability
    appeal claim. If successful, that claim to age 65 was estimated at $300,000. The
    absence of any information in the record about the appeal proceedings or the potential
    merit of those proceedings left a critical factual void. Without that
    information, it is difficult to know the respondents risk in giving up his entitlement to a claim for long-term disability benefits or whether the
    admittedly enhanced severance adequately compensated for what may have been released.
    In other words, there was insufficient information against which the fairness
    of the transaction could be considered.

[9]

Further,
    while the motion judge took into account the fact that the release did not
    mention Sun Life, he did not consider whether the respondents failure to closely
    read the release impacted the analysis when applying the
Titus
factors. This was a
    circumstance that the motion judge should have adverted to when determining
    whether the transaction was grossly unfair and improvident.

[10]

We
    allow the appeal and refer the issues of the unconscionability and
    enforceability of the release for determination at trial.

[11]

As
    the appellant was successful in setting aside the finding of unconscionability,
    but not in obtaining summary judgment enforcing the release, costs in the agreed
    amount of $7,500, inclusive of disbursements and HST, shall be payable in the
    cause of the trial.

K. Feldman J.A.

L.B. Roberts J.A.

Fairburn J.A.


