Federal Court of Appeal Decisions

Date: 20050707

Docket: A-485-04

Citation: 2005 FCA 254

CORAM:        NOËL J.A.

SEXTON J.A.

SHARLOW J.A.

BETWEEN:

                                                           ERIC SCHEUNEMAN

                                                                                                                                            Appellant

                                                                           and

                                                    HER MAJESTY THE QUEEN

                                             (SOCIAL DEVELOPMENT CANADA

                                                                       formerly

                                 HUMAN RESOURCES DEVELOPMENT CANADA)

                                                                                                                                        Respondent

                                            Heard at Ottawa, Ontario on June 15, 2005.

                                    Judgment delivered at Ottawa, Ontario on July 7, 2005.

REASONS FOR JUDGMENT BY:                                                                           SHARLOW J.A.

CONCURRED IN BY:                                                                                                       NOËL J.A.

                                                                                                                                     SEXTON J.A.

Date: 20050707

Docket: A-485-04

Citation: 2005 FCA 254

CORAM:        NOËL J.A.

SEXTON J.A.

SHARLOW J.A.

BETWEEN:

                                                           ERIC SCHEUNEMAN

                                                                                                                                            Appellant

                                                                           and

                                                    HER MAJESTY THE QUEEN

                                             (SOCIAL DEVELOPMENT CANADA

                         formerly HUMAN RESOURCES DEVELOPMENT CANADA)

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

SHARLOW J.A.

[1]                This is an appeal of a judgment dismissing the appellant's claim for damages arising out errors made in relation to the administration of the appellant's disability benefits under the Canada Pension Plan, R.S.C. 1985, c. C-8. The reasons for decision are reported as Scheuneman v. Canada (Human Resources Development) (2004), 259 F.T.R. 317.

[2]                Most of the evidence was presented in documentary form. The facts are undisputed.

[3]                By letter dated February 10, 1989, the Director of the Appeals and Ministerial Enquiries Division of the Income Security Programs Branch, Health and Welfare Canada, notified Mr. Scheuneman that he had been found to be entitled to disability benefits under the Canada Pension Plan, R.S.C. 1985, c. C-8. That decision signified that Mr. Scheuneman had been found to have a disability that met the conditions in paragraph 42(2)(a) of the Canada Pension Plan, which reads as follows:

[4]                Implicit in the determination that Mr. Scheuneman was entitled to disability benefits is the finding that his disability was severe, that is, that he had been found to be "incapable regularly of pursuing any substantially gainful occupation". There is a large body of jurisprudence on the meaning of that phrase. The leading case, Villani v. Canada (Attorney General) (C.A.), [2002] 1 F.C. 130, establishes that an assessment of the claimant's employability must be realistic and practical.

[5]                In Mr. Scheuneman's case, the finding of disability was based on a primary diagnosis of chronic fatigue syndrome, as determined by Dr. John F. Coombs, M.D. and submitted in a report dated October 20, 1988. The same report indicated a secondary diagnosis of candida hypersensitivity syndrome and post-viral syndrome (myalgic encephalomyelitis).

[6]                Monthly payments to Mr. Scheuneman began as of January, 1989. Contributor child benefits were also payable to his four children.

[7]                Disability benefits under the Canada Pension Plan are subject to periodic review to ensure that the recipients have not ceased to be entitled to them. The authority for such reviews is found in paragraph 69(1)(a) of the Canada Pension Plan Regulations, C.R.C., c. 385, which reads as follows:

[8]                Regulation 70 deals with the consequence of failing to comply with a requirement under Regulation 69 to undergo a special examination. It reads as follows:

[9]                By letter dated October 4, 1996, a reassessment officer notified Mr. Scheuneman that a review was being conducted in relation to his disability benefits. The letter enclosed a questionnaire and a guide for completing the questionnaire. Mr. Scheuneman was asked to return the completed questionnaire within 45 days. He was invited to ask any questions or raise any concerns he had about meeting the 45 day deadline. Mr. Scheuneman completed and returned the questionnaire on or about December 21, 1996.

[10]            Item 5 of the questionnaire began with this statement: "When you were granted your CPP disability benefit we considered your main medical problem to be "729.8 Other symptoms referable to limbs". Beside the opening statement, Mr. Scheuneman added a handwritten comment that reads "I never saw this classification before. I presume that is what you used in 1988/89 for chronic fatigue syndrome and the myalgia / arthralgia present with chronic fatigue syndrome."

[11]            Two questions were asked under item 5. The first question was, "a) At the present time is your main problem the same?". Mr. Scheuneman answered, "Yes." The second question was, "b) If yes, has your overall condition improved, remained unchanged, [or] worsened?". Mr. Scheuneman answered, "Unchanged."

[12]            Item 6 of the questionnaire asked whether there were any new medical problems since the CPP disability benefit was granted. Mr. Scheuneman said, "Yes", and explained, "In spring 1996 I appear to have developed an allergy-like problem that is still present."

[13]            The questionnaire included a section to be completed by a physician. It was completed by Dr. Coombs. Item 2 of that part of the form began with this statement: "When your patient was granted a CPP disability benefit it was on the basis of 729.8 Other symptoms referable to limbs." Dr. Coombs attempted to correct the opening statement with this handwritten comment: "No - diagnosis given on original application was chronic fatigue syndrome."

[14]            Two questions were asked following the opening statement in item 2 of Dr. Coombs' part of the form. The first question was "Is that still the primary diagnosis?" Dr. Coombs answered "No." The second question was "If no, please state the current primary diagnosis." Dr. Coombs answered "Myalgic encephalomyelitis (a more precise name for the same condition)."

[15]            Item 3 of Dr. Coombs' part of the form asked for a list of conditions, in descending order of importance, which are causing a physical or mental disability. Dr. Coombs answered, "(1) profound fatigue, (2) myalgia / arthralgia, (3) headache, (4) impaired mental clarity."

[16]            In the part of the form that invited further comments, Dr. Coombs wrote, "This form does not adequately describe the patient's disability. The profound fatigue associated with myalgic encephalomyelitis allows at most a few hours per day of sedentary activity in a random, interrupted, and highly unpredictable manner. He is essentially the same as he was in 1990. The random, intermittent, and unpredictable nature of his minimal tolerance for sedentary activity renders him unfit for employment, even on a part-time basis."

[17]            Included with the questionnaire was a form called "Authorization to Disclose Information/Consent for Medical Evaluation", which Mr. Scheuneman signed on December 21, 1996, and returned with the completed questionnaire. By signing that form, Mr. Scheuneman

authorized any physician or medical agency to disclose information about his condition to the Canada Pension Plan authorities. He also agreed, upon request by those authorities, to be examined by a qualified physician or consultant specialist.

[18]            The completed questionnaire was reviewed by a reassessment adjudicator. The adjudicator's report includes these comments under the heading "RBRS Recommendation":

[19]            On June 13, 1997, the adjudicator sent another letter to Mr. Scheuneman explaining that the review of his file was continuing. He was asked to agree to be examined by a physician named in the letter, and to undergo a functional capacity evaluation at a certain orthopaedic physiotherapy clinic. The letter said that if he did not agree to be examined by the physician, he should say so and explain his reasons. The letter did not appear to give such a choice with respect to the functional capacity evaluation. It is not clear why.

[20]            On June 25, 1997, Mr. Scheuneman wrote to the adjudicator to explain that just days after receiving the June 13, 1997 letter, he received a phone call to book an appointment with the orthopaedic physiotherapy clinic named in the letter. Mr. Scheuneman expressed concern that he felt stressed by being rushed to make a decision, and said that before he would agree to submit to the requested examinations, he required further information. Among the information requested was information contained in his file, information about the qualifications of the physician he had been requested to see, information about the qualifications of the staff at the orthopaedic physiotherapy clinic, and information about the functional capacity evaluation methodology proposed to be used.

[21]            On August 4, 1997, Mr. Scheuneman's letter was answered by a disability liaison officer. The letter indicated that information from Mr. Scheuneman's file was being sent to him under separate cover. The letter explained that the consent form he had signed on December 21, 1996, was valid for two years and allowed the Canada Pension Plan authorities to write to Mr. Scheuneman's doctor or to refer Mr. Scheuneman for an independent examination. The letter also explained that Mr. Scheuneman had the right to refuse the appointments, in which case the decision regarding his continuing eligibility would be made based on the information currently on file. With respect to information about the physician and the clinic, Mr. Scheuneman was advised to direct his inquiries to them. The letter then asked Mr. Scheuneman to let the Canada Pension Plan authorities know whether or not he intended to agree to the examinations, and warned that a failure to respond could result in the suspension of benefits in order to avoid unnecessary overpayments.

[22]            By August 8, 1997, Mr. Scheuneman had received the documents from his file. He wrote to the Canada Pension Plan authorities on that date to request clarification of certain of the documents.

[23]            On August 12, 1997 Mr. Scheuneman replied to the August 4, 1997, letter. He explained that he had still not decided whether or not he would agree to the examinations. He requested further information to assist him in making that decision.

[24]            On August 19, 1997, the adjudicator wrote to Mr. Scheuneman asking for a response to the August 4, 1997 letter, within 30 days, indicating whether or not he would attend the medical evaluations. That letter said that if no response was received within that time period, his disability benefit payments would be stopped. Mr. Scheuneman telephoned the Canada Pension Plan office on August 28, 1997 to advise that he had responded to the August 4, 1997 letter on August 12, 1997.

[25]            On September 10, 1997, a reassessment supervisor wrote to Mr. Scheuneman to respond to his August 7, 1997 letter. The letter provided some of the information requested by Mr. Scheuneman, including the information that the physician they wished Mr. Scheuneman to see was a physical medicine and rehabilitation specialist, and an explanation that the reference to the classification of his condition as "729.8 Other symptoms referable to limbs" was based on codes in the International Classification of Diseases published by the World Health Organization, in which the preface 729 referred to "Rheumatism, unspecified and fibrositis".

[26]            The letter again explained that his ongoing eligibility had to be determined, and stated that the information on file did not contain sufficient medical information to show that he continued to be eligible for benefits. The letter also reminded him of the deadline imposed by the August 19, 1997 letter, and asked Mr. Scheuneman to advise by that deadline whether or not he would submit to the requested medical examinations.

[27]            Mr. Scheuneman responded by letter dated September 11, 1997, sent by fax, thanking the writer for the information, but explaining that there was still other relevant information that he had requested but had not yet received. He also attempted to correct the classification of his condition, based on his own review of the International Classification of Diseases. He stated that his condition should have been classified as "G93.3, Postviral fatigue syndrome, Benign myalgic encephalomyelitis." He stated that the classification error may have resulted from the fact that in 1988 and 1989, not much was known about his condition, but that a great deal had been learned since then. He offered to provide additional information.

[28]            As to the medical examinations, Mr. Scheuneman indicated that he was still awaiting information and until such time as he received that information, he was not in a position to make a decision regarding the medical examination requests.

[29]            On September 19, 1997, the adjudicator wrote to Mr. Scheuneman explaining that based on the information in his file, payments would be "held back" while the review continued. The letter stated that Mr. Scheuneman would be contacted when the review was complete.

[30]            On September 25, 1997 Mr. Scheuneman faxed another letter protesting the cessation of payments on four grounds: (1) that the cessation of payments indicated that his case had been prejudged, (2) that he had not yet been provided with the information he had requested, (3) that the documents provided to him indicated that they were operating on the basis of a "fundamental error and ignorance in the classification and evaluation" of his disability, and (4) that although he had offered to update their knowledge of his condition, they had not responded to his offer. He requested the restoration of benefits, failing which he would hold them liability for any resulting damages. He followed this letter with another on October 4, 1997, asking who he should contact to have his benefits restored.

[31]            On November 6, 1997, having heard nothing from the Canada Pension Plan authorities, he asked for a response to his letters. On the same date, an analyst wrote Mr. Scheuneman a letter reading in part as follows:

[32]            It is clear from the correspondence that preceded this letter that Mr. Scheuneman had not refused to submit to an examination that had been required of him. On the contrary, he had asked for information to satisfy himself that the examinations would be conducted by someone with appropriate knowledge and experience, and was awaiting that information before he decided whether he would submit to an examination.

[33]            It is not difficult to understand why Mr. Scheuneman had taken that position. He had formed the impression, which may or may not have been correct, that the Canada Pension Plan authorities did not understand what his condition was, or how it affected him. That impression arose from what Mr. Scheuneman believed to be an error in the classification of his condition as "other symptoms referable to limbs". Naturally, he was concerned that such an error could lead the authorities to request an examination by the wrong kind of medical specialist. Nothing in the record indicates that anyone attempted to provide Mr. Scheuneman with information that might have given him some reassurance in that regard.

[34]            On December 14, 1997, Mr. Scheuneman submitted a request for reconsideration of the decision to cease his disability benefits. Mr. Scheuneman's letter details a number of reasons why his benefits should be restored, one of which was that he had not refused to submit to the requested examinations. Mr. Scheuneman was advised by letter dated February 6, 1998, that his file would be reviewed.

[35]            On August 18, 1998, an official with the Appeals Unit, Disability and Reconsideration Division wrote to Mr. Scheuneman confirming the prior decision to stop his disability benefits. The reason for that decision is stated as follows:

[36]            By letter dated August 26, 1998 from Mr. Scheuneman's legal counsel, the August 18, 1998 determination was appealed to a Review Tribunal under section 82(1) of the Canada Pension Plan. The appeal letter states, among other things, that Mr. Scheuneman had not refused to agree to an independent medical examination or a functional capacity evaluation, that Mr. Scheuneman met the statutory conditions in 1989 when he was found to be entitled to disability benefits, and that his condition had not changed.

[37]            The Review Tribunal convened on May 26, 1999. The hearing was adjourned because Mr. Scheuneman's counsel had raised certain arguments under the Canadian Charter of Rights and Freedoms that required compliance with certain notice provisions.

[38]            Mr. Scheuneman and his counsel made numerous attempts in 1999 and 2000 to obtain information and arrange for the hearing to be continued, but it was never reconvened. That appears to be because, on April 6, 2001, Mr. Scheuneman's file was sent to the Policy Interpretation Division for further consideration of Mr. Scheuneman's allegations of administrative error, which were part of the basis of his appeal to the Review Tribunal.

[39]            The review of the file for administrative error is significant because section 66 of the Canada Pension Plan authorizes the Minister to take action to provide relief from the consequences of administrative errors. Subsection 66(4) deals with administrative errors resulting in an erroneous denial or cancellation of benefits. Subsection 66(4) reads in part as follows:

[40]            It is not clear why the file had not been referred to the Policy Interpretation Division in December 1997, when Mr. Scheuneman first applied for reconsideration, or in August 1998 when he appealed to the Review Tribunal. In any event, the Policy Interpretation Division reviewed the matter and set out its conclusions in a report dated April 16, 2001. That report reads in part as follows:

[41]            On May 17, 2001, a summary report containing the same recommendation was submitted to a manager. On May 31, 2001, that recommendation was approved. Mr. Scheuneman was informed by letter dated June 18, 2001 that his disability benefits were being reinstated as of October 1997. He received the retroactive benefits in a lump sum payment.

[42]            Meanwhile, on May 31, 2001, Mr. Scheuneman had commenced an action in the Federal Court claiming (a) retroactive reinstatement of his disability benefits, (b) interest on the retroactive benefits calculated at the rate applicable to personal loans, (c) compensation to offset any income tax ramifications of receiving the benefits, (d) costs of the action, (e) damages of $10,000 per year for irreparable harm to "physical and mental/psychological health", and (f) a reversal of the decision that resulted in the cessation of his disability benefits. Mr. Scheuneman claimed that the unreasonable delay in resolving his claim amounted to an infringement of his rights under the Charter. On July 19, 2001, after being notified of the reinstatement of his benefits, he amended the Statement of Claim to delete the claims under (a) and (f).

[43]            In a judgment dated August 6, 2004, a Judge of the Federal Court dismissed Mr. Scheuneman's action because it had no legal basis. Mr. Scheuneman now appeals to this Court.

[44]            The Judge concluded that Mr. Scheuneman's claim for damages was based on negligence, and in the alternative on the Charter. The Charter claim was based on the argument that Mr. Scheuneman's right under section 7 of the Charter to liberty and security of the person was violated by the suspension of his benefits and the long delay in their reinstatement. The Judge concluded that the actions of the Canada Pension Plan authorities affected his economic interests, but did not interfere with his fundamental life choices or cause him psychological stress to the degree that would engage section 7 of the Charter. In my view, the Judge was correct to dismiss Mr. Scheuneman's claim for damages insofar as it was based on the Charter.

[45]            As to the claim in negligence, the Judge reviewed the most relevant jurisprudence, including Just v. British Columbia, [1989] 2 S.C.R. 1228 and Cooper v. Hobart [2001] 3 S.C.R. 537. He concluded, first, that the relationship between Mr. Scheuneman and the Canada Pension Plan authorities was such that it was reasonably foreseeable that the decision to terminate his benefits would cause him harm. However, he found that there was no duty of care because, following the analytical framework in Cooper, the existence of an alternative remedy for the kind of administrative error made in this case was a sufficient public policy ground for excluding a tort claim in respect of the same error.

[46]            The Judge found an adequate alternative remedy in the authority of the Minister under subsection 66(4) of the Canada Pension Plan to "take such remedial action as the Minister considers appropriate to place the person in the position that the person would be in under this Act had the ... administrative error not been made." He pointed out that any decision of the Minister under that provision would be subject to judicial review in the Federal Court. When Mr. Scheuneman's benefits were reinstated with retroactive effect, he benefited from subsection 66(4) of the Canada Pension Plan, thus achieving the principal goal he sought in his action.

[47]            I agree with the Judge that, as a matter of public policy, the existence of subsection 66(4) of the Canada Pension Plan should be taken to preclude a tort claim based on an administrative error that results in an incorrect termination of disability benefits. For that reason, I must conclude that the Judge was correct to dismiss the claim for damages for negligence.

[48]            The record establishes beyond doubt that Mr. Scheuneman's disability benefits were terminated because of an administrative error, and that his benefits were reinstated as a remedy under subsection 66(4) of the Canada Pension Plan. Mr. Scheuneman nevertheless continued his action for damages because he considered the reinstatement of benefits not to be an adequate remedy. Unfortunately for Mr. Scheuneman, this Court does not have the jurisdiction, in the context of this appeal, to compel the Minister to reconsider that remedy. However, it remains open to Mr. Scheuneman to ask the Minister to reconsider the remedy on the basis that the reinstatement of benefits did not place him in the position he would have been in if the administrative error had not been made.

[49]            In that regard, it appears that the Minister has taken the position that the most that can be done for a claimant under subsection 66(4) of the Canada Pension Plan, in the case of wrongfully terminated benefits, is to reinstate the benefits with retroactive effect. However, that does not take into account the decision of this Court in Whitton v. Canada (Attorney General) (C.A.), [2002] 4 F.C. 126, which suggests that remedial provisions like subsection 66(4) contemplate a broader range of remedies.

[50]            Whitton dealt with a remedial provision in section 32 of the Old Age Security Act, R.S.C. 1985, c. O-9, that uses substantially the same language as subsection 66(4) of the Canada Pension Plan, in that it requires the Minister to take "such remedial action as the Minister considers appropriate to place the person that the person would be in under this Act had . . . the administrative error not been made." Benefits to which Mr. Whitton was legally entitled had been wrongfully withheld. Mr. Whitton filed an application for judicial review, seeking a writ of mandamus. The application failed at first instance, but succeeded on appeal. Décary J.A., writing for the Court, made the following comment about section 32 of the Old Age Security Act (at paragraph 37) (my emphasis):

[51]            For the foregoing reasons, I would dismiss this appeal. I would award no costs.

                                                                                                                                   (s) "K. Sharlow"               

                                                                                                                                                      J.A.       

"I agree.

     Marc Noël J.A."

"I agree.

     J. Edgar Sexton J.A."

                                                  FEDERAL COURT OF APPEAL

                            NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                   A-485-04

APPEAL FROM THE ORDER OF THE FEDERAL COURT DATED AUGUST 6, 2004, DOCKET NO. T-974-01

STYLE OF CAUSE:               Eric Scheuneman v. The Queen

                                                                             

PLACE OF HEARING:                     Ottawa, Ontario

DATE OF HEARING:                       June 15, 2005

REASONS FOR JUDGMENT:        Sharlow J.A.

CONCURRED IN BY:                      Noël J.A.

Sexton J.A.

DATED:                                              July 7, 2005

APPEARANCES:

SOLICITORS OF RECORD: