Moral values highlighted in tainted-blood settlement

Moral values must be part of the analysis when interpreting a settlement agreement, a senior Ontario Superior Court judge has stated, in ruling against the federal government’s claim to more than $200 million in “excess capital” from settlements in two national class actions stemming from the tainted-blood tragedy.

The ruling is the latest chapter in the long-running and multi-jurisdictional litigation related to the tainted-blood scandal of the 1980s.

The process by Justice Paul Perell, Chief Justice Christopher Hinkson of the B.C. Supreme Court and Quebec Superior Court Justice Chantal Corriveau, who adjudicated the dispute, may also pave the way for similar hearings in national class actions.

“It is legal arguments, not moral ones, which will decide these applications,” said Perell in his ruling on how to interpret a settlement agreement reached 17 years earlier, stemming from the failure of the Canadian Red Cross to screen blood donations for Hepatitis C.

“That is not to say, however, that morality has no role to play in deciding these applications. The law of contract and the law of civil procedure, including the law that governs class proceedings, are infused with moral values,” wrote Perell, in his decision issued Aug. 15.

Toronto lawyer Kathryn Podrebarac, part of a joint committee that was set up to administer the ongoing disbursement of funds from the initial $1.1-billion settlement with the federal government that was approved in 1999, says the ruling is “one of the first of its kind.”

It is believed to be the first time judges from different jurisdictions in Canada have sat together in a class action proceeding other than to decide whether to approve a joint settlement agreement, Podrebarac says.

The judges were presiding over applications by the federal government seeking the return of $207 million held in trust, which was described as excess capital from what it agreed to pay in the 1999 settlement.

The class actions involved people who contracted Hepatitis C from blood transfusions between 1986 and 1990. By the end of 2013, nearly $780 million had been paid out to 5,283 infected class members. 

A successful investment strategy undertaken by the trustee on the recommendation of the joint committee resulted in more money remaining in the fund than was originally expected. For any order to take effect, approval from the judges in all three provinces where the class actions were brought was required.

Rather than hold separate proceedings, the judges presided over a special joint hearing in Toronto this summer. Video technology was used so the public could watch the hearing in courts in B.C. and Quebec (a Supreme Court of Canada decision on whether video links are required in each court in these types of hearings is expected to be released this fall). There were more than 700 submissions from class members and their families, as part of the evidentiary record.

While each judge was required to come up with independent decisions, they were permitted to consult with each other, despite being from different jurisdictions.

“This was an ambitious hearing,” says Podrebarac, principal at Podrebarac Barristers, in reference to the extensive evidentiary record and the use of video technology.

The approach taken by the courts “saved costs and saved money for class members,” she adds.

Ranjan Agarwal, a partner at Bennett Jones LLP in Toronto who specializes in class actions, says more courts in multi-jurisdictional proceedings may adopt this approach.

Agarwal was not involved in the case.

“Judges are increasingly looking for common sense solutions,” he says.

The main decision was issued first by Perell. His colleagues released rulings that concurred with his findings along with their own analysis of the issues.
The joint order was that $175 million of the excess funds be allocated for class members.

The courts rejected a request by the joint committee to allocate $27.6 million for loss of income payments as a result of deductions for other government benefits. That money, though, is to remain in the trust fund rather than be returned to the federal government.

In describing the case before the court as one of strict contractual interpretation, Perell referred to an amendment to the 1999 settlement agreement that gave the courts “unfettered discretion” to decide what to do with surplus funds. He noted that while the federal government was seeking the excess capital in this case, it was not obligated to provide more money to funds from other tainted-blood class actions that are now depleted.

Bill Dermody, who represents two class members who were successful in having their compensation claims re-assessed because of their personal circumstances, says it was appropriate to make a reference to morality.

“I think Justice Perell and the other judges are speaking to class members. That is important. At the same time, the decision is grounded in the terms of the settlement agreement,” says Dermody, who heads Dermody Law in Hamilton.

That view is shared by Daniel Bach, a class action lawyer and partner at Siskinds LLP in Toronto. Bach was not involved in the case.

“Justice Perell is affected by the life stories of class members, but he makes clear his decision is consistent with the intention of the parties,” says Bach.

The outcome in this case is a reminder for class action lawyers to be careful about every term in a settlement agreement, even if it is being urged by the judge presiding over the hearing, says Agarwal.

“No matter what the judge says, the deal is yours. It is your words that will be scrutinized,” he states. The federal government has not yet stated if it will appeal the decisions.

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