T-2670-84
Harle Benson Long (Plaintiff)
v.
The Queen in Right of Canada as represented by
the Treasury Board (Defendant)
INDEXED AS: LONG V. CANADA (TRE4,SURY BOARD) (T.D.)
Trial Division, McNair J.—Ottawa, February 13
and May 29, 1989.
Public service — Plaintiff member of Group Surgical—
Medical Insurance Plan — Subsequent to commencing psy
chotherapy, benefits relating thereto reduced — Plaintiff noti
fied but continuing treatment — Claiming damages for breach
of implied term of employment relationship in amount would
have received but for change — Employment relationship not
dependent on contract of employment, but governed by legisla
tion — No implied contractual term arising out of employ
ment relationship that no reduction of GSMIP or other fringe
benefits without employee's express consent, or without
affording plaintiff reasonable opportunity to make representa
tions prior to changes to benefits.
Insurance — Plaintiff member of group medical insurance
plan — Subsequent to commencing psychotherapy, benefits
relating thereto reduced — Deciding to continue treatment —
Lives insured, as third party beneficiaries, having no rights
except those given to them under contract made by sponsor —
Authority to select and alter coverage lying wholly with insur
er and employer.
Estoppel — Promissory estoppel — Plaintiff, public ser
vant, member of group medical insurance plan — Subsequent
to commencing psychotherapy, benefits relating to same
reduced — Deciding to continue therapy — Arguing changed
position to detriment by entéring long-term psychotherapy in
reliance upon GSMIP booklet explaining benefits — No
unambiguous representation as to immutability of GSMIP
benefit — Policy expressly permitting changes at any time
without consent of lives insured — Plaintiff aware of change
and financial consequences of continuing treatment — No
inducement to continue by defendant.
This was an action for damages for the breach of certain
implied terms arising .out of the employment relationship. The
plaintiff, a public servant, belongs to the Group Surgical-Medi-
cal Insurance Plan (GsMIP). In 1981, he and his children began
to undergo psychotherapy. In 1983, the eligible expenses for
psychologists' services were reduced. Upon notice of the pro
posed changes, the plaintiff decided it was necessary to contin
ue the psychotherapy. He now claims the amount he would
have received had the changes not been made. The master
policy authorized changes to the GSMIP and the insured ben
efits. The plaintiff argued that it was an implied term arising
out of the employment relationship that there would be no
reduction of benefits without the plaintiffs consent, or without
giving him an opportunity to make representations, or that no
alteration of GSMIP benefits would be implemented so as to
prejudice employees who had commenced treatment in reliance
on existing benefits. He argued that paragraph 5(1)(e) of the
Financial Administration Act gives Treasury Board the power
to determine the terms and conditions of employment of public
servants, but once it has done so, the particular employment
changes from statutory employment to a contractual one. In
other words "terms and conditions of employment" in para
graph 5(1)(e) import an implied contractual term of employ
ment. He also argued that the doctrine of promissory estoppel
applied, as in the context of a legal relationship, the GSMIP
booklet constituted a representation as to the existence of a
particular benefit on which he had relied to his detriment, by
entering long-term psychotherapy. The issue was whether there
was an implied term arising out of the employment
relationship.,
Held, the action should be dismissed.
The employment relationship was not dependent on a con
tract of employment, but was governed by the Public Service
Employment Act and the Financial Administration Act. Sec
tion 24 of the former codifies the common law rule that the
tenure of office is during the pleasure of Her Majesty, subject
only to such protection and redress as are formally and express
ly granted by that Act or any other statutory enactment
pertaining to public service employment. There was no implied
term as argued by the plaintiff. The statutes and case law
refute the assertion that the GSMIP benefit relating to psycholo
gists' services as it stood prior to the plan amendments con
stituted an enforceable contractual obligation.
The general proposition in employment law, that a fringe
benefit provided to an employee becomes an obligation of the
employer under the contract of employment, does not apply to
public servants. In any event, employers usually include a
statement in explanatory pamphlets that the fringe benefit plan
is of no contractual effect. Such a statement negatives any
intention to create legal relations. The GSMIP booklet notifying
participants of the proposed changes had a similar effect.
Under the law of insurance, the lives insured, as third party
beneficiaries have no rights except those given to them under
the contract made by the "sponsor". The authority to select and
alter the type and the terms of the coverage lies wholly between
the insurer and the employer. The plaintiff participated in the
GSMIP knowing that the plan and the insured benefits could be
changed periodically without his consent.
Nor could the argument based on promissory estoppel avail
plaintiff. There had been no unambiguous representation as to
the immutability of the GSMIP psychological benefit. It was an
express term of the group insurance policy that changes, includ
ing the right to make changes to the GSMIP benefits, could be
made at any time without the consent of the persons insured.
The plaintiff knew of the proposed change when he decided to
continue the psychotherapy regimen. He knew of the financial
consequences of his decision. The choice was not prompted by
any inducement by the defendant.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Rules, C.R.C., c. 663, RR. 324,
337(2)(b).
Financial brAdministration Act, R.S.C. 1970, c. F-10, s.
5(1)(e).
Petition of Right Act, R.S.C. 1970, c. P-12 (rep. by
R.S.C. 1970 (2nd Supp.), c. 10, s. 64).
Public Service Employment Act, R.S.C. 1970, c. P-32,
s. 24.
CASES JUDICIALLY CONSIDERED
APPLIED:
Phillips v. The Queen, [1977] 1 F.C. 756 (T.D.); Hale v.
American Home Assur. Co., 461 S.W. 2d 384 (1970).
DISTINGUISHED:
Brown v. Waterloo Regional Board of Commissioners of
Police (1982), 37 O.R. (2d) 277 (H.C.).
CONSIDERED:
Re Tudale Explorations Ltd. and Bruce et al. (1978), 20
O.R. (2d) 593 (Div. Ct.).
REFERRED TO:
deMercado v. The Queen, T-2588-83, Cattanach J., judg
ment dated 19/3/84, F.C.T.D., not reported; Evans v.
Canada (Government of) (1986), 4 F.T.R. 247
(F.C.T.D.); Evans v. The Queen, T-1414-86, Dubé J.,
order dated 13/4/87, F.C.T.D., not reported; affd (1989),
93 N.R. 252 (F.C.A.); Malone v. Ontario (1983), 3
C.C.E.L. 61 (Ont. H.C.).
AUTHORS CITED
Baer, M.G. and Rendall, J.A. Cases on the Canadian
Law of Insurance, 4th ed. Toronto: Carswell, 1988.
Christie, I. Employment Law in Canada, Toronto: But-
terworths, 1980.
COUNSEL:
Steven C. McDonell for plaintiff.
Peter Engelmann for defendant.
SOLICITORS:
Binks, Simpson, Ottawa, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
MCNAIR J.:
The Nature of the Case
This is an action for damages by the plaintiff for
the alleged breach of certain implied terms arising
out of his employment relationship with the
defendant. The plaintiff is presently employed by
the defendant as a senior manager in the public
service. He has been a public servant since 1959
and a member of the Public Service Group Surgi-
cal-Medical Insurance Plan (GSMIP) since 1980.
The GSMIP is a private health insurance plan
sponsored by the Government of Canada to sup
plement the benefits provided by provincial health
insurance programs, which is available to public
servants who wish to participate in it. It is an
indemnity-type plan, the basic principle of which is
that the policy terms will apply as they read at the
time an insured person actually incurs a particular
expense. The parties to the GSMIP group insurance
policy are The Mutual Life Assurance Company
of Canada, as insurer, and Her Majesty the Queen
in right of Canada as represented by the President
of the Treasury Board, as policyholder.
In 1981 the plaintiff and his older son and his
older daughter became committed to a regimen of
psychotherapy counselling with a professional psy
chologist, to whom they had been referred by a
child psychiatrist. At that time, the GSMIP supple
mentary coverage for major medical expense ben
efit provided for reimbursement to members of the
plan of eighty percent of "eligible expenses",
which term was defined as meaning "reasonable
and customary charges" for certain prescribed
items and services. Among these were:
(g) psychotherapy services rendered by a registered psycholo
gist, if the patient is referred by a psychiatrist or
pediatrician;
The plan imposed a maximum lifetime ceiling or
cap of $30,000 for each person insured thereunder.
On April 1, 1983 a number of benefit changes
were made to the GSMIP, one of which was to
impose a limit of $600 per calendar year on eli
gible expenses for psychologists' services. The
plaintiff complains that the changes regarding
eligibility for psychologists' services were particu
larly detrimental to him and, in consequence,
could not be changed without his consent. The gist
of the plaintiff's case is set out in paragraph 9 of
his statement of claim as follows:
9. The plaintiff pleads that it was an implied term arising out
of his employment relationship with the Defendant that there
would be no reduction of GSMIP or other fringe benefits enjoyed
by him, as an employee, without his express consent or, in the
alternative, without notice to him and a reasonable opportunity
to make representations, and that it was a further implied term
arising out of the Plaintiff's employment relationship with the
Defendant that no alteration of GSMIP benefits would be imple
mented so as to prejudice employees who had commenced
treatment in reliance on existing benefits, or, in the alternative
without notice and a reasonable opportunity to make represen
tations by employees, such as the Defendant, who would be
adversely affected by the proposed alterations to the GSMIP. By
reason of the facts set out in paragraphs 7 and 8 hereof, the
Plaintiff pleads that the Defendant has breached the said
implied obligations arising out of his employment relationship
with the Defendant. [Underlining omitted.]
The plaintiff claims to have expended $6,550 or
more for psychologists' services since the date of
the reduction of the GSMIP benefits, by reason
whereof he claims a loss of $5,676 for the eligible
expenses he would have received from GSMIP had
the changes not been made. The plaintiff claims
this latter amount as damages sustained by him,
together with interest at the prime rate to the date
of payment and his costs of the action.
Some Factual Background
The plaintiff is a resident of the City of Glouces-
ter in the Regional Municipality of Ottawa-Carle-
ton, and at all material times was employed as a
senior manager in the public service. He is present
ly serving in the capacity of Director of Program
Evaluation with the Department of National
Health and Welfare. The plaintiff embarked on
his public service career in or about the year 1959
and his employment with the defendant has been
governed at all material times by the provisions of
the Public Service Employment Act, R.S.C. 1970,
c. P-32, and the Financial Administration Act,
R.S.C. 1970, c. F-10.
In June of 1981, Mr. Long and his older son and
daughter were confronted by the realization that
they were suffering from psychological problems
of such magnitude that they required professional
help. The plaintiff consulted a child psychiatrist,
Dr. R. G. Mouldey, who recommended that they
undergo psychotherapy with Dr. M. H. Wiener, a
registered psychologist, who later assumed the
name of Dov Vinograd (hereinafter referred to as
"Dr. Vinograd"). The problems confronting the
plaintiffs son and daughter created certain mari
tal tensions and other attendant difficulties with
the result that all members of the family embarked
on a regimen of psychotherapy conselling with Dr.
Vinograd. The plaintiffs daughter Christina, who
was then sixteen years of age, was suffering from
anorexia nervosa and accompanying loss of weight
which necessitated a fairly long-term course of
psychotherapy in her case. At the time the plainitff
engaged the professional services of Dr. Vinograd,
there was no question that eighty percent of the
latter's fees would be covered by GSMIP because
the pre-April 1983 benefit structure still subsisted.
The original group policy No. GD1500 under
writing the GSMIP was issued on July 1, 1960. The
parties thereto have made amendments to the
underwritten GSNnP from time to time in accord
ance with the express provisions of the policy. The
consistent practice has been that such amendments
are only made after the National Joint Council of
the Public Service of Canada makes recommenda
tions to the defendant regarding any proposed
amendments. The National Joint Council is com
posed of management representatives of the public
service, whose function is to represent the employ
er's interests, and bargaining agent representa
tives, who represent the interests of the unionized
public service employees. The recommendations of
the National Joint Council regarding changes to
GSMIP benefits are made only after a thorough
investigation and discussion, but without any
direct input or consent on the part of the plaintiff
or his management peers employed in the public
service.
A report of the National Joint Council Standing
Committee on Health Insurance Programs, dated
September, 1982, made a number of recommenda
tions for revisions to the GSMIP. The specific
recommendation with respect to psychotherapy
services reads as follows:
The Committee recommends that the referral requirements be
relaxed to also permit referral by physicians, but that in order
to retain a reasonable control on expenditures, a monetary limit
be placed on the amount of benefits which may be considered
eligible in respect of psychotherapy services. The specific
annual monetary limit proposed is $600, which compares
favourably to other employer-sponsored extended health-care
plans surveyed.
In March, 1983, the defendant caused a notice
to be circularized among GSMIP members advising
of the benefit changes, which were to become
effective on April 1, 1983. As a result of this, the
plaintiff consulted Dr. Vinograd regarding the
advisability of engaging the services of a psychia
trist in view of the eligible expense limitation on
psychologists' services. Based on the latter's
advice, he decided that it would be harmful to
effect any change in the psychotherapy regimen at
that juncture.
The Issues
The crux of the plaintiffs case, as it seems to
me, rests on the proposition that the GSMIP benefit
with respect to psychologists' services in effect
prior to April 1, 1983 was an implied contractual
term of his employment relationship with the
defendant which could not be altered to his detri
ment, save by consent or after having been afford
ed an opportunity to make representations. The
case is also made that it was a further implied
term of the employment relationship that there
would be no alteration of GSMIP benefit to the
prejudice of those subscribers who had commenced
treatment in reliance on existing benefits without
at least giving notice and affording them an oppor
tunity to make representations.
Relevant Statutory Provisions
The statutory provisions particularly relevant to
the disposition of the case are section 24 of the
Public Service Employment Act and paragraph
5(1)(e) of the Financial Administration Act
which, for convenience of reference, are repro
duced hereunder:
Public Service Employment Act, R.S.C. 1970, c. P-32:
24. The tenure of office of an employee is during the pleas
ure of Her Majesty, subject to this and any other Act and the
Regulations thereunder and, unless some other period of
employment is specified, for an indeterminate period.
Financial Administration Act, R.S.C. 1970, c. F-10:
5. (1) The Treasury Board may act for the Queen's Privy
Council for Canada on all matters relating to
(e) personnel management in the public service, including
the determination of terms and conditions of employment of
persons employed therein;...
The Respective Arguments
Counsel for the plaintiff submits that his client,
as a senior management employee of the Crown,
had an absolute right by virtue of the employment
relationship to the fringe benefit afforded by
GSMIP in respect of psychologists' services as mat
ters stood before the changes of April, 1983. He
contends that the plaintiff was not represented by
either the employer's side or the union's side
during the deliberations of the National Joint
Council Standing Committee which led to these
changes, and that the plaintiff was entirely exclud
ed from the decision-making process. Plaintiff's
counsel makes the further point that the abolition
of the Petition of Right Act [R.S.C. 1970, c. P-12
(rep. by R.S.C. 1970 (2nd Supp.), c. 10, s. 64)]
resulted in the removal of any limitation on the
right of every person to sue the Crown in contract.
It follows, in his submission, that the plaintiff, like
every other citizen of Canada, may sue the Crown
in contract.
Having thus laid the groundwork, plaintiff's
counsel then points to the existing employment
relationship between the plaintiff and the defen
dant and what he says are terms and conditions
engrafted thereon. He submits that paragraph
5(1)(e) of the Financial Administration Act con-
fers on the Treasury Board the statutory power to
determine the terms and conditions of employment
of persons employed in the public service. It fol
lows, in his submission, that GSMIP is one of the
terms and conditions of the employment relation
ship between the plaintiff and the defendant, and
that it is one that exists as a right. This major
premise provides the contractual underpinning for
the present lawsuit. Essentially, the position is that
once the Treasury Board has determined the terms
and conditions of employment of a particular cate
gory of employee and a person accepts public
service employment in reliance thereon, then from
that time henceforth those terms and conditions
cannot be changed without negotiating any pro
posed changes with the employee in question. If
the Treasury Board chooses to make changes that
may breach the established contractual relation
ship then they must be prepared to suffer the
consequences thereof.
He distinguishes the present case from the sce
nario of an action for wrongful dismissal, conced
ing that section 24 of the Public Service Employ
ment Act precludes any cause of action against the
Crown sounding in the wrongful dismissal of a
public servant. However, he says that this circum
scription does not apply to the implied term arising
out of the employment relationship with respect to
the fringe benefit of GSMIP. In his submission, this
is what created the obligation owed by the govern
ment to the plaintiff and the existence of a group
insurance plan is irrelevant to the question whether
the government has properly discharged that
obligation.
Plaintiff's counsel concedes that his client has
nothing to do with any amendments to the group
insurance policy which the government has chosen
as a means of underwriting its obligations to its
employees; the right to change that policy rests
exclusively with the insurer and the policyholder as
provided by clause 17(2) in the general provisions
of the group insurance policy relating to the con
tract. Nonetheless, he contends that it is the
employer and not the insurance company who
owes the obligation to provide the fringe benefit of
GSMIP to the plaintiff or be accountable in dam
ages for its failure to discharge that obligation. In
support of this, plaintiff's counsel cites the case of
Brown v. Waterloo Regional Board of Commis
sioners of Police (1982), 37 O.R. (2d) 277 (H.C.).
Although the Brown case is one relating to dam
ages for breach of a contract of employment of a
police chief, plaintiff's counsel contends that it is
authority for the proposition that an obligation
with respect to the payment of fringe benefits, in
the absence of a disclaimer to the contrary, rests
ultimately with the employer rather than the in
surance company.
Counsel for the plaintiff also relies on the doc
trine of promissory estoppel as advancing his cli
ent's cause of action, citing Re Tudale Explora -
dons Ltd. and Bruce et al. (1978), 20 O.R. (2d)
593 (Div. Ct.). He submits that this case stands
for the proposition that where there is a legal
relationship and a representation as a result of
which a person changes his position to his detri
ment then the doctrine of promissory estoppel
applies. I had some doubts initially whether he
ought to have been heard on this point because of
the well-established rule that a party relying on
estoppel must expressly plead it. However, para
graph 5 of the plaintiff's statement of claim can be
seen as raising the scintilla of a plea of promissory
estoppel by the allegation of what the plaintiff and
his daughter did in the way of commencing psy
chotherapy in reliance upon the GSMIP benefits.
Moreover, defendant's counsel took no objection as
to any insufficiency of pleading in this regard and
indeed argued the point of estoppel.
Plaintiff's counsel argues that a legal relation
ship existed by virtue of the employment relation
ship between the plaintiff and the defendant; that
the GSMIP booklet constituted a representation as
to the existence of the particular psychotherapy
benefit; and that, notwithstanding the notification
of change in the GSMIP he received in March of
1983, the plaintiff clearly relied on that represen
tation to his detriment. Counsel for the plaintiff
puts his case as follows:
As a result of that representation, he entered into a long-term
course of therapy with a psychologist on the understanding it
would be paid. And in midstream, in the middle of the course of
psychotherapy, the representation, as a result of the change
made by the government, was no longer true.
And accordingly, it's my submission that the doctrine or the
elements of the doctrine are satisfied, and that the cause of
action can be founded upon the notion of promissory estoppel.
As to the traditional view that promissory estoppel
can only be used as a shield and not as a sword,
plaintiff's counsel argues that the statement of
Grange J. in the Tudale case represents the culmi
nation of judicial thinking in rejecting the notion
that promissory estoppel was unavailable to the
plaintiff "because of its being used as a sword and
not a shield".
Finally, plaintiffs counsel touches briefly on the
question of mitigation, pointing out that there is an
obligation on the person damnified by a breach of
contract to take reasonable steps to mitigate the
loss.
If I apprehend the matter correctly, the upshot
of the plaintiffs case is simply that paragraph
5(1)(e) of the Financial Administration Act gives
the Treasury Board power to determine the terms
and conditions of employment of persons employed
in the public service, but, once having done so, the
particular employment becomes transposed from a
statutory employment into a contractual one. In
other words, the words "terms and conditions of
employment" in paragraph 5(1)(e) of the Act
import an implied contractual term of employ
ment.
Needless to say, counsel for the defendant
rejects this ingenious proposition out of hand as
having no basis in law. He relies heavily on the
aforementioned statutory provisions and cites a
number of authorities upholding the position that
the rights of redress of a public servant are limited
to the specific remedies prescribed by the statutes
governing his employment status.
Defendant's counsel also rejects the plaintiffs
argument that the changes wrought by the Trea
sury Board with respect to GSMIP benefits required
prior consultation and consent. He also takes
exception to the submission that the existence of
the group insurance plan is irrelevant. He submits
that the plaintiffs reliance on Brown v. Waterloo
Regional Board of Commissioners of Police,
supra, is unwarranted because in the Brown case
the court held there was an illegal breach of a
contract of employment and proceeded to assess
the damages consequent thereon. I agree with
counsel's submission that Brown is readily distin
guishable on that basis from the present case.
With respect to the plaintiff's promissory estop-
pel submission, counsel for the defendant voices no
disagreement with the rationale that the doctrine
can be used as a sword as well as a shield, but he
rejects its application to the case at bar. In support
of this, he points to the following statement from
the judgment of Grange J. in Re Tudale, supra, at
page 596:
The essential features are an unambiguous representation
which was intended to be acted upon and indeed was acted
upon.
In order for this to apply in the present case, he
argues that there would have to be something
enshrined and written in stone either in the GSMIP
itself or in some contract of employment to the
effect that the psychological benefit would not be
changed to the plaintiffs detriment. Instead, he
submits the situation is the exact converse; the
Treasury Board can change the terms and condi
tions of employment and the parties to the group
insurance policy can make changes thereto without
the consent of the persons insured thereunder.
The main thrust of the defence is that there
never was any contract of employment between the
plaintiff and the defendant with the result that his
rights and remedies, if any, are only those he has
by statute. Defendant's counsel urges strongly that
the plaintiff does not have the right to bring this
action in contract. Alternatively, he argues that
the plaintiff, as third party beneficiary under the
group insurance policy, only has the rights given to
him under the policy.
The Law and Its Application
The law relating to the employment status of a
public servant such as the plaintiff is governed
primarily by the statutory provisions contained in
the Public Service Employment Act and the
Financial Administration Act and any regulations
enacted thereunder. In particular, section 24 of the
Public Service Employment Act codifies the
common law rule that the tenure of office of such
an employee "is during the pleasure of Her Majes
ty", subject only to such protection and redress as
are formally and expressly granted by that Act or
any other statutory enactment pertaining to public
service employment: see Phillips v. The Queen,
[1977] 1 F.C. 756 (T.D.); deMercado v. The
Queen, T-2588-83, Cattanach J., judgment dated
19/3/84, F.C.T.D., not reported; Evans v. Canada
(Government of) (1986), 4 F.T.R. 247 (F.C.T.D.);
Evans v. The Queen, T-1414-86, Dubé J., order
dated 13/4/87, F.C.T.D., not reported; affd
[(1989), 93 N.R. 252 (F.C.A.)]; and Malone v.
Ontario (1983), 3 C.C.E.L. 61 (Ont. H.C.).
Mr. Justice Dubé gave an excellent exposition of
the principle in Phillips v. The Queen, supra, at
page 758:
At common law, all public servants held their appointments
at the pleasure of the Crown, and all, in general, were subject
to dismissal at any time without cause assigned and without
any right of action (Vide 7 Halsbury's Laws of England (3rd
ed.) 340, paragraph 732). So their right of redress, if any, is
conferred by statute and in accordance with the provisions of
that statute. A privilege of any kind created by statute must be
enforced in the way that statute provides (Vide Union Bank of
Canada v. Boulter Waugh Ltd. (1919) 58 S.C.R. 385).
Section 24 of the Public Service Employment Act defines the
tenure of office of an employee as follows:
24. The tenure of office of an employee is during the
pleasure of Her Majesty, subject to this and any other Act
and the regulations thereunder and, unless some other period
of employment is specified, for an indeterminate period.
When a statute prescribes a specific remedy, the general rule
is that no remedy can be taken but that particular remedy
prescribed by the statute.
In my opinion, the statutes and case law above
referred all go to refute the plaintiffs assertion
that the GSMIP benefit relating to psychologists'
services as it stood prior to the plan amendments
of April 1, 1983 constituted an enforceable con
tractual obligation on the part of the defendant.
Plaintiff's counsel submitted during the course
of argument that where an employer provides a
fringe benefit to an employee it becomes an obliga
tion of the employer under the contract of employ
ment and the manner of discharging it by way of
insurance is irrelevant. He cites in support of this
proposition a statement from Christie, I. Employ
ment Law in Canada, Toronto: Butterworths, 1980
at pages 231-232. With respect, I am of the view
that the particular passage from Employment Law
in Canada does not go nearly as far as plaintiff's
counsel would have it go. If anything, it seems to
me that it indicates just the converse. The learned
author was careful to point out that employers
providing fringe benefit plans usually circularize
explanatory pamphlets among the employees
carrying a statement "that it is of no contractual
effect and such a statement would appear to effec
tively negative any presumed intention to create
legal relations". Professor Christie also made it
abundantly clear that the law relating to public
employees was beyond the scope of his text.
The opening paragraphs of the March 1983
notice to the GSMIP members read as follows:
The purpose of this Notice is to advise all members of the
GSMIP (Group Surgical-Medical Insurance Plan) of changes
to certain of the GSMIP benefits, which will be effective on
April 1, 1983. The GSMIP is underwritten by the Mutual Life
Assurance Company of Canada.
A new GSMIP employee information booklet is being pro
duced, which will describe the coverage provided under the
Plan. However, the booklet is not expected to be available to
Departments for distribution to members of the Plan for several
months. Therefore, since the changes to the benefits described
in this Notice will become effective for all eligible expenses
incurred on or after April 1, 1983, this advance notification and
description of the benefit changes is being provided to ensure
that all members of the GSMIP are made aware of the changes
prior to the date they become effective.
These benefit changes result from a review of the GSMIP by
management and union representatives in the National Joint
Council of the Public Service of Canada, to determine where
changes to the GSMIP benefits might be warranted, in order to
make the Plan more meaningful to the entire membership by
permitting a more equitable and balanced access to the ben
efits. As a result of this review, the Council recommended, and
the Treasury Board of Canada approved, a number of changes
and additions to the existing benefits.... [My emphasis.]
The GSMIP information booklet referred to in
the above notice was eventually distributed to the
participants in the plan. The one proffered by
plaintiff's counsel at the trial, and marked Exhibit
P-1, is dated August 1984. The foreword to this
booklet describing the benefits available to partici
pants in the GSMIP reads in part as follows:
As a participant in the GSMIP you are encouraged to read the
contents of this booklet carefully. However, you should keep in
mind that periodic changes are made to the plan, including
changes to the benefits and to the monthly premium rates....
This booklet is intended for information purposes only, and
describes the provisions of the plan in general terms. The
complete terms and conditions of the plan are set out in a
contract of insurance entered into between the Government of
Canada and the principal underwriter of the plan, the Mutual
Life Assurance Company of Canada, herein referred to as the
Insurer.
IN CASE OF CONFLICT BETWEEN THIS BOOKLET AND THE
INSURANCE CONTRACT, THE TERMS OF THE CONTRACT
SHALL PREVAIL. [My emphasis.]
The contractual authorization for changes to the
GSMIP and the insured benefits is contained in
clause 17(2) of the master policy between Mutual
Life and the defendant, which reads as follows:
17. (2) This policy may be amended, or terminated as herein
provided, at any time without the consent of the persons
insured under it, but any amendment or termination shall be
without prejudice to any claim for an expense incurred prior to
the date of the amendment or termination.
Incidentally, this particular wording was changed
slightly in subsequent reissued policies, but with
out changing the essential substance thereof.
As to group insurance policy changes, the fol
lowing statement from Baer and Rendall, Cases on
the Canadian Law of Insurance, 4th ed. Toronto:
Carswell, 1988 at page 48 is quite instructive:
An increasing portion of personal insurance (life, health and
accident insurance) is in the form of group insurance, which is
designed to insure classes of persons rather than specific
individuals. The lives insured are not named or otherwise
identified as individuals. The controlling or "master" contract
is between the insurer and the "sponsor" of the lives insured—
usually their employer. The lives insured, as third party
beneficiaries, have no rights except those given to them under
the contract made by the "sponsor".
In Hale v. American Home Assur. Co., 461
S.W. 2d 384 (1970), Creson J., per curiam, said,
at page 386:
it is well to note the nature and purpose of group insurance
and the status of the parties thereto. The Courts are virtually
unanimous in the view as to where the authority to select the
type and the terms of the coverage lies. That is, that such
authority rests wholly between the insurer and the employer as
the primary insured to select its terms and alter same.
Applying these legal principles to the facts of
the case, I find that the plaintiff must be taken to
have become a participant in the GSMIP with full
cognizance that the plan and the insured benefits
could be changed from time to time without his
consent. In my judgment, any other conclusion
would be erroneous and contrary to the evidence.
For the same reasons, I consider that the argu
ment based on promissory estoppel must also fail.
Membership in the GSMIP is strictly voluntary. I
can find no evidence of anything resembling an
unambiguous representation as to the immutability
of the GSMIP psychological benefit in the context
of something "which was intended to be acted
upon and indeed was acted upon" to the plaintiff's
detriment. Clearly, it was always an express term
of the group insurance policy underwriting the
GSMIP that changes could be made to the policy
"at any time without the consent of the persons
insured under it". In my view, this encompasses as
well the right to make changes to the GSMIP
benefits insured thereunder. The evidence is also
clear that the plaintiff received notice of the
change of benefit about which he now complains.
The plaintiff was fully aware of the GSMIP benefit
change limiting the maximum eligible expenses for
psychologists' services to $600 per year when he
made the decision to continue the psychotherapy
regimen with Dr. Vinograd. He knew, and must be
presumed to have weighed, the financial conse
quences of his decision. The choice was his alone
and was not prompted by any inducement on the
part of the defendant.
Conclusion
In my opinion, the evidence establishes conclu
sively that the employment relationship between
the plaintiff and the defendant was not dependent
on any contract of employment, but rather was
governed by the provisions of the Public Service
Employment Act and the Financial Administra
tion Act. Specifically, I find on the evidence that
there was no implied contractual term arising out
of the subsisting employment relationship to the
effect that there would be no reduction of GSMIP
or other fringe benefits enjoyed by the plaintiff as
an employee without his express consent. Nor can
it be implied from such employment relationship
that the plaintiff should have been afforded a
reasonable opportunity to make representations to
the National Joint Council about the changes to
GSMIP benefits. Moreover, I am of the opinion that
there was nothing arising out of this employment
relationship that raised anything in the nature of a
promissory estoppel operating in the plaintiffs
favour with respect to the limitation on eligible
expenses for psychologists' services.
For the foregoing reasons, the plaintiffs action
is dismissed but with the costs reserved to the
motion for judgment, as requested by counsel.
Counsel for the defendant may submit a draft of
an appropriate judgment implementing my deci
sion and move for judgment accordingly under
Rule 337(2)(b) of the Federal Court Rules
[C.R.C., c. 663]. The motion for judgment can be
made in writing under Rule 324 unless counsel are
insistent that the matter should be addressed
orally in which case it will be necessary to fix a
date, time and place for an oral hearing. As
indicated, the matter of costs will be settled on the
motion for judgment.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.