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2005 Annual Report

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I. Year 5 (for the period ending March 31, 2005) Report of the Joint Committee

Overview And Summary

  1. The 1986-1990 Hepatitis C Fund (the “Trust Fund”) completed its fifth full year of operation on March 31, 2005 (“Year Five”).

  2. In Year 5, the Centre received 1,089 new claims as follows:

    223 - Primarily Infected Transfused
    14 - Primarily Infected Hemophiliac
    7 - Secondarily Infected
    90 - HCV Personal Representative claims where
    deceased died on or after January 1, 1999
    29 - Personal Representative Claims where
    deceased died before January 1, 1999
    726 - Family member/dependant claims

    The Centre paid out approximately $65 million to all claimants (prior and new) in Year 5. Since its inception, the Centre has paid out a total of approximately $427 million in benefits in response to approximately 9,883 claims.1 There are a further 992 claims which are in process awaiting the submission of further information by the claimants or the completion of a traceback search, or both.

  3. The Investment Summary of Eckler Partners Ltd. at Schedule "H" indicates a value of $888 million held by the Trustee as at March 31, 2005. The total unpaid liability of the provincial governments is approximately $228 million for a total available to satisfy the claims of class members of approximately $1.116 billion.

  4. The following chart summarizes the budget versus actual expenses for the service providers in the past year ended March 31, 2005:

    Service Provider

    Budget to March 31 2005

    Actual

    Variance from budget

    Note

    Auditor [Audit Only]
    Deloitte & Touche

    61,000

    61,000

     

    See paragraphs 15 to 23 below.

    Trustee
    Royal Trust

    130,000

    95,800

    (34,200)

    No monies beyond actual expenses have been paid.

    Investment Manager
     TD Asset Management Inc.

    225,000

    184,484.37

    (40,515.63)

    No monies beyond actual expenses have been paid.

    Actuarial Services & Investment Review
    Eckler Partners Ltd.

    66,000

    52,540

    (13,460)

    Credit balance includes overage from Year 4 and will be offset by billings in Year 6. See paragraph 39 below.

    Administrator [HepC & EAP22 ]
    Crawford

    2,728,046

    2,594,307

    (133,739)3

    Credit balance will be offset by billings in Year 6.

    Canadian Blood Services (CBS)

    100,791

    70,755.25

    (30,036.14)

    Credit balance will be offset by billings in Year 6. See paragraphs 46 to 49 below.

    PriceWaterhouse Coopers

    20,660

    11,572.50

    (9,087.50)

    See paragraphs 42 to 45 below.


  5. The Joint Committee is recommending that the budgets for the Administrator and Canadian Blood Services (“CBS”) be reduced in Year 6 to reflect a lower volume of applications and claims processing.

  6. The following chart summarizes the proposed budgets for service providers in Year 6:

    Service Provider

    Proposed Budget
    to March 31, 2006
    (excludes GST)

    Proposed Monthly Charges (excludes GST)

    Auditor [audit only]
    (Deloitte & Touche)
    [excluding travel and administration costs]

    63,000

    5,250

    Auditor [financial statements]
    (Deloitte & Touche)
    [excluding travel and administration costs]

    10,000

    833.33

    Auditor [administrator cost review]
    (Deloitte & Touche)
    [excluding travel and administration costs]

    9,000

    750

    Trustee
    (Royal Trust)

    115,000

    up to 9,583.33

    Investment Manager
    (TD Asset Management Inc.)

    200,000

    up to 16,666.66

    Actuary & Investment Review
    (Eckler Partners Ltd.)

    55,000

    4,400

    Administrator [HepC & EAP2]
    (Crawford)

    2,140,937

    178,411.41

    Canadian Blood Services (CBS)

    41,976

    3,498

    PriceWaterhouseCoopers LLP

    20,000

    1,666.66

  7. Fund Counsel incurred fees in the 12 months ending March 31, 2005 of approximately $473,150.50 (exclusive of taxes and disbursements). It is anticipated that this amount will be similar in Year 6 as the volume of appeals will be substantially the same as in Year 5. No amounts are paid to Fund Counsel without a specific court order.

  8. Joint Committee fees incurred in the 12 months ending March 31, 2005 (exclusive of taxes and disbursements) were approximately $1,019,334. No amounts are paid to the Joint Committee without a specific court order. In Year 6 the Joint Committee will be involved in the sufficiency review which will entail significant actuarial and legal work.

General

  1. This is the fifth annual report of the Joint Committee to the Supreme Court of British Columbia, the Superior Court of Justice for Ontario and the Superior Court of Quebec (collectively the “Courts”) on the status of the Trust Fund and the administration of the Hemophiliac HCV Plan and Transfused HCV Plan (collectively the “Plans”).

  2. The Joint Committee is comprised of Harvey Strosberg, J.J. Camp, Bonnie Tough and Michel Savonitto. Harvey Strosberg was appointed by Order of the Superior Court of Justice for Ontario. J.J. Camp was appointed by Order of the Supreme Court of British Columbia and Michel Savonitto by Order of the Superior Court of Quebec. Bonnie Tough was appointed by Order of each of the Superior Court of Justice for Ontario, the Supreme Court of British Columbia and the Superior Court of Quebec. This Report is prepared by and on behalf of all members of the Joint Committee.

  3. In conjunction with the advice of Deloitte & Touche, the Joint Committee has, for audit and reporting purposes, established March 31 as the year-end of the Trust Fund and the administration of the Plans.4 The Year 5 Audit Report, therefore, is based upon a twelve-month cycle commencing April 1, 2004 and ending March 31, 2005.

  4. In the period commencing April 1, 2004 and ending March 31, 2005, approximately $ 65 million was paid to claimants. Since inception of the Plans a total of approximately $427 million has been paid to claimants.

  5. The budget and expenses of each of the service providers are discussed in detail below.

  6. The Joint Committee recommends that the budgets of service providers include payment through to June 1, 2006 in order to provide time from March 31, 2006 until June 2006 for the audit and accounting review of the expenses in preparation for a report to the Courts in June 2006.

Deloitte & Touche

  1. Deloitte & Touche was appointed auditor of the Trust Fund pursuant to the Orders of the Courts. The Joint Committee recommends the continuation of this appointment.

  2. In addition to the audit of the Trust Fund, the Joint Committee requested the following services from Deloitte & Touche:

    1. A cost review (but not an audit) of the expenses charged by the Administrator to the Trust Fund. Attached hereto and marked as Schedule  "B" is a copy of the Cost Review of the Administrator.

    2. The preparation of the annual financial statements. Attached hereto and marked as Schedule "A" is a copy of the financial statements prepared and audited by Deloitte & Touche.

  3. In prior years Deloitte & Touche has completed special projects at the request of the Joint Committee, such as a cost review of the expenses of CBS. In the past year there have been no such special requests. In the current year, Year 6, we have requested certain special projects, such as a review of the top five out-of-pocket expense claims.

  4. The chart set out below summarizes the work done by Deloitte & Touche in Year 5 in comparison to the Year 5 budget and the proposed budget for Year 6.

    Work

    Year 5 Budget
    $

    Year 5 Actual
    $

    Year 6 Budget
    $

    Audit

    61,000
    + administration and travel costs

    61,000
    + administration and travel costs

    63,000
    + administration and travel costs

    Financial Statements

    8,000 – 10,000
    + administration and travel costs

    9,000
    + administration and travel costs

    10,000
    + administration and travel costs

    Administrator Cost Review

    6,000 – 9,000
    + administration and travel costs

    9,000
    + administration and travel costs

    9,000
    + administration and travel costs

    Special Projects

    0

    0

    up to 15,000
    + administration and travel costs

  5. The Deloitte & Touche budget numbers are exclusive of travel costs, administration charges and GST. Variances from budget in the final invoices are solely a result of the addition of travel and administration charges. The costs incurred by Deloitte & Touche for the Audit, the Financial Statements and the Administrator Cost Review are $79,000 inclusive of an administrative charge of $4,740 and travel expenses of $1,464, for a total of $85,204.

  6. A copy of the invoices for the work of Deloitte & Touche in Year 5 is attached as Schedule "C". Deloitte & Touche received payment throughout the year of $61,000.30. The Joint Committee recommends approval of Deloitte & Touche’s outstanding invoices in the amount of $24,203.70 plus taxes, for a total of $25,897.96.

  7. Deloitte & Touche proposes and the Joint Committee recommends that its budget for the year April 1, 2005 to March 31, 2006 be $63,000 (Audit), $10,000 (Financial Statements) and $9,000 (Administrator Cost Review), all exclusive of travel and administration and taxes.

  8. The Deloitte & Touche budget amounts will be paid in monthly instalments of $5,250 (Audit), $833.33 (Financial Statements) and $750 (Administrator Cost Review), for a total of $6,833.33 per month.

  9. In addition to monthly budget payments, the Joint Committee seeks an Order to pay Deloitte & Touche up to $15,000 in respect of special projects as determined by the Joint Committee upon presentation of invoices by Deloitte & Touche.

  10. Deloitte & Touche has brought to the attention of the Joint Committee the cash balance of approximately $524,000 in the Trust Fund account which is shown in the financial statements. A significant portion of this sum, specifically $341,626, is comprised of interest earned as a result of timing differences between the time that funds are deposited for payment to claimants and the time when such cheques are cashed. The Joint Committee seeks an Order directing Royal Trust to transfer this accumulated interest to TD Asset Management on a quarterly basis, so that the interest may be invested in due course.

Royal Trust

  1. Royal Trust was appointed Trustee of the Trust Fund pursuant to Orders of the Courts. The Joint Committee recommends the continuation of this appointment.

  2. Attached hereto and marked as Schedule "D" is a brief description from Royal Trust of its Custodial Trustee activities in the year ended March 31, 2005.

  3. The Courts approved an annual budget for Royal Trust of $130,000 for the year ended March 31, 2005.

  4. The actual charge to the Trust Fund by Royal Trust for the year ended March 31, 2005 was $95,800. No payments have been made to Royal Trust beyond those expenses actually incurred.

  5. Royal Trust proposes and the Joint Committee recommends that Royal Trust’s budget for the year April 1, 2005 to March 31, 2006 be $115,000. Royal Trust will charge monthly an amount not to exceed $ 9,583.33.

TD Asset Management Inc.

  1. TD Asset Management Inc. (“TD Asset Management”) was appointed Investment Manager of the Trust Fund pursuant to Orders of the Courts. The Joint Committee recommends the continuation of that appointment. Attached as Schedule "E" is confirmation that TD Asset Management has complied with the court approved Investment Guidelines.

  2. The Courts approved an annual budget for TD Asset Management of $225,000 for the year ended March 31, 2005.

  3. Total fees charged by TD Asset Management for the year ended March 31, 2005 were $184,484.37. No payments have been made to TD Asset Management beyond those expenses actually incurred. Attached as Schedule "F" is the TD Asset Management Report setting out the actual charges for the year ended March 31, 2005 by quarter.

  4. TD Asset Management proposes and the Joint Committee recommends that its budget for the year April 1, 2005 to March 31, 2006 be $200,000. TD Asset Management will charge monthly an amount not to exceed $16,666.66.

Eckler Partners Limited

  1. Eckler Partners Limited (“Eckler Partners”) was retained by Class Counsel and subsequently the Joint Committee to provide actuarial advice in respect of the Trust Fund.

  2. Eckler Partners also provides advice to the Joint Committee in respect of investments on an as needed basis.

  3. Attached as Schedule "G" is the Report of Eckler Partners regarding their activities during the year ended March 31, 2005.

  4. Attached as Schedule "H" is an Investment Summary provided by Eckler Partners.

  5. The Courts approved an annual budget for Eckler Partners’ actuarial and investment review services of $66,000 for the year ended March 31, 2005 to be paid in monthly instalments of $5,500.

  6. Eckler Partners incurred $52,540 in charges for the period from April 1, 2004 to March 31, 2005. Eckler Partners was paid $57,095. For Year 5, Eckler Partners has a credit balance owing to the Trust Fund of $4,555, in addition to the credit balance owing from Year 4 of $7,905, for a total credit balance of $12,460. This credit balance of $12,460 was applied to Eckler Partners’ charges to March 31, 2005 for actuarial work related to the sufficiency assessment of the Trust Fund, which is described in paragraph 41 below. Attached as Schedule "I" is the Accounting Summary from Eckler Partners.

  7. Eckler Partners has proposed and the Joint Committee recommends that the total budget for both actuarial services and investment review services be $55,000 for the year ending March 31, 2006 to be paid in 2 payments of $5,500 each (as previously ordered by the Courts to be paid in April and May 2005) and 10 monthly payments of $4,400. Attached as Schedule "J" is the proposed budget for Year 6.

  8. Eckler Partners has been and continues to be engaged in the sufficiency review required by s. 10.01 of the Settlement Agreement, which is to take place in June of 2005. The Courts approved a budget of $420,000 for actuarial work related to the 2005 sufficiency review which was commenced in Year 5 and continues into the present year, Year 6.

PriceWaterhouseCoopers LLP

  1. PriceWaterhouseCoopers LLP provides annual updates for tax calculations on software used to calculate income loss, software maintenance for the software used to calculate loss of income claims and separate software used to calculate and track loss of income payment caps and holdbacks, and advice, assistance and training to the Administrator of the Trust Fund with respect to both types of software.

  2. The total budget approved for PriceWaterhouseCoopers LLP in the period between April 1, 2004 and March 31, 2005, by court Order was $20,660, exclusive of G.S.T.

  3. Actual billings by PriceWaterhouseCoopers LLP for services between April 1, 2004 and March 31, 2005 were $11,572.50, of which $7,560 was credited to the Trust Fund to use the overpayment from Year 4.

  4. There are a number of complex self employment loss of income claims and appeals which require expert accounting assistance. The Joint Committee is reviewing which service provider is most appropriate to provide this service. The Joint Committee has budgeted $60,000 for the cost of these services in year six and the Joint Committee will seek court approval for these expenses at the end of fiscal year 6.

Canadian Blood Services

  1. The total budget approved for CBS in Year 5 was $100,791.39 inclusive of taxes. Actual expenses incurred by CBS in Year 5 were $ 70,755.25, which was $30,036.14 under budget. At the beginning of Year 5, on April 1, 2004, CBS had a credit balance of $75,267.53, and in Year 5, CBS received payments from Royal Trust in the amount of $ 27,901.05 exclusive of GST, for a total of $103,168.58. CBS thus has a credit balance owing to the Trust Fund of $32,413.33. The CBS actual versus budget reconciliation is attached as Schedule "L".

  2. The efficient and effective conduct of tracebacks is a key component of the administration of the Plans. However the demand for such tracebacks has been reduced significantly as has the costs. The Joint Committee anticipates that this trend will continue.

  3. Attached hereto and marked as Schedule "M" is a copy of the proposed budget for CBS for the period April 1, 2005 to March 31, 2006. The budgeted amount is $41,976, to be paid in monthly instalments not exceeding $3,498 plus GST, after CBS has provided services equal to the outstanding credit balance in Year 5.

  4. The CBS budget again includes a cost for the continued storage of frozen blood samples obtained in the period from 1986 through 1992. The Joint Committee has doubts about the ability to utilize any results pertaining to these frozen samples and is seeking an expert opinion as to the reliability of these samples. The Joint Committee expects to report to the courts further on this matter in the fall of 2005.

Crawford

  1. Crawford Adjusters Canada Incorporated/Expertises Crawford Canada Incorporée and The Garden City Group Inc. (“Crawford”) was appointed by the Courts as Administrator of the Plans for a 5-year term ending March 2005. In June 2004, the Courts extended Crawford’s appointment as Administrator to March 31, 2006.

  2. The Courts approved a budget for Crawford for Year 5, which provided for an annual payment to Crawford of $2,728,046 (HepC and EAP2) to be paid on a monthly basis, subject to certain adjustments, at the rate of $227,337.21 per month, exclusive of GST.

  3. Deloitte & Touche conducted an annual cost review of the expenses of Crawford. In the year ended March 31, 2005, the total expenses for Crawford were $2,656,741 which was $71,304 under budget. The report on Crawford expenses by Deloitte & Touche is attached as Schedule "B". Deloitte & Touche identified an overstatement of expenses of $62,433 (inclusive of the matter discussed in paragraph 53 below). Crawford restated its actual expenses removing the $62,433 for a total under budget of $133,739.

  4. During the 12-month period ending March 31, 2005, Crawford's Ottawa Branch that administers the Hepatitis C Settlement, incurred approximately $56,000 in legal fees to represent its position in a dispute with the Canada Revenue Agency.  Crawford retained legal counsel to present its case that the Death before January 1, 1999 overpayments that Crawford is in the process of paying, should be deductible for tax purposes.  During the annual audit, Deloitte & Touche identified these legal expenses to the Joint Committee.  The Joint Committee took the position that this expense should not be reimbursed from the Trust Fund.  Crawford agreed to remove this expense from its budget statements.  The Joint Committee and Crawford have agreed that in the future, charges of this nature will be jointly reviewed prior to allocating the costs to the Hepatitis C Budget financial statements. 

  5. Attached as Schedule "N" is a brief description from Crawford of its activities in the period ending March 31, 2005.

  6. Crawford proposes and the Joint Committee recommends a budget for the year commencing April 1, 2005 of $2,140,937 plus GST. Attached hereto as Schedule "O" is a detailed budget proposal prepared by Crawford. The proposed budget is less than the previous year due to reduced claims, staffing and operational costs.

  7. The Joint Committee therefore recommends that Crawford be paid in monthly instalments of $178,411.41 plus GST.

  8. Over the course of the next 12 months, the Joint Committee will be evaluating different financial models relating to the administration costs with a view to achieving further efficiencies and costs savings in the future.

Fund Counsel

  1. Belinda Bain and John Callaghan were appointed as Fund Counsel in the Ontario Class Actions by Order of the Ontario Court of Justice for Ontario. Mason Poplaw was appointed Fund Counsel in the Quebec Class Actions by Order of the Quebec Superior Court and Bill Ferguson was appointed Fund Counsel in the B.C. Class Actions by Order of the B.C. Supreme Court.

  2. In the 12-month period ending March 31, 2005, the total Fund Counsel fees were $473,150.50 exclusive of taxes and disbursements. No amounts have been or will be paid to Fund Counsel without prior court approval of the fees and disbursements.

  3. The Joint Committee and Fund Counsel estimate that the fees for the year April 1, 2005 to March 31, 2006 will be in the same range as in the past. The volume and complexity of appeal work is anticipated to be substantially the same as in Year 5.

  4. Attached hereto and marked as Schedule "P" is a report of Fund Counsel on their activities and their fees incurred in the 12 months ending March 31, 2005.

Héma-Québec

  1. The total budget approved for Héma-Québec for the year ended March 31, 2005 was $71,424.50. Actual expenses incurred by Héma-Québec in Year 5 were $13,285.39, for an overpayment of $58,138.11. The proposed budget for Héma-Québec in Year 6 is $16,939. A court order will be sought in Quebec to deal with the Héma-Québec budget and the use and/or refund of any overpayments.

Joint Committee

  1. A brief summary of the work of the Joint Committee in the past 12 months is set out in Schedule "Q".

  2. In the 12-month period ending March 31, 2005, the total Joint Committee fees were approximately $1,019,334 exclusive of taxes and disbursements. A summary of fees incurred by the Joint Committee is set out in Schedule "R". No amounts have been or will be paid to the Joint Committee without prior court approval of the fees and disbursements.

  3. The Joint Committee estimates that the fees for the year April 1, 2005 to March 31, 2006 will be higher than in Year 5 because the Joint Committee will be engaged in full-scale fund sufficiency hearings.

Referees and Arbitrators

  1. In the 12-month period ended March 31, 2005, the total fees of the Arbitrators and Referees were approximately $175,449.75 exclusive of taxes and disbursements.

  2. A brief summary of the work of the Referees and Arbitrators as well as the fees incurred for the period April 1, 2004 to March 31, 2005 is set out in Schedule "S".

  3. The Joint Committee estimates that the fees of the Arbitrators and Referees will be similar for the year April 1, 2005 to March 31, 2006 and recommends a budget equal to that actually incurred in Year 5.

Year End

  1. The fiscal year end of the Trust Fund is March 31, whereas the current sufficiency assessment was conducted as of December 31. The Joint Committee thinks it would be of value for the fiscal year end of the Trust Fund to coincide with the year end for sufficiency purposes.

  2. The Joint Committee recommends and the auditors agree that the fiscal year end of the Trust Fund be changed to December 31 in the year beginning April 1, 2006 (Year 7), so that the current year (Year 6) be the last year to end at March 31, in 2006. The Joint Committee will make an application in due course to the Courts for an Order changing the year end.

 

Dated: June 22, 2005
_________________________
J.J. Camp,
Camp Fiorante Matthews

Dated: June 22, 2005
_________________________
Harvey Strosberg,
Sutts Strosberg  LLP

Dated: June 22, 2005
_________________________
Michel Savonitto,
Marchand Melançon Forget LLP

Dated: June 22, 2005
_________________________
Bonnie A. Tough,
Tough & Podrebarac  LLP

 

*Proprietary, personal and financially sensitive information has been excluded from the publicly-disclosed copies of this report.

1 Includes dependant and family member claims. These numbers cannot be compared directly to the numbers in the fund sufficiency review because the fund sufficiency review addresses the period ended December 31, 2004 and because the fund sufficiency review focuses on primarily infected claims.

2 EAP2 is the abbreviation for the HIV Secondarily-Infected Settlement.

3 The Deloitte & Touche review of costs of the Administrator reviewed expenses of $2,643,601 (HepC) and $13,140 (EAP2), which resulted in Crawford being under budget by $40,534 (HepC) and $30,770 (EAP2), for a total of $71,304. Deloitte & Touche identified an overstatement of Crawford expenses of $62,433. The Crawford actuals at Tab “O” remove this $62,433 of expenses for an under budget of $133,737.

4 See paragraphs 69 and 70 below for the recommended change in year end effective April 1, 2006 (Year 7).

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