2006 Annual Report

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Schedule O - Summary of Joint Committee Work

Overview

1. The Joint Committee (“JC”) has a mandate to implement the 1986-1990 Hepatitis C Settlement Agreement and Plans and to supervise the ongoing administration of claims.

2. The JC worked on a regular basis with the Administrator to assist in getting claims processed as efficiently as possible.  The JC held quarterly meetings with the Administrator either face-to-face or by conference call and liaised monthly with the Administrator to ensure:

   1. adequate management and staffing was in place;

   2. efficient claim evaluation and payment of claims;

   3. proper performance by the administrator;

   4. timely claims processing time and claimant satisfaction;

   5. appropriate monitoring of complaints; and

   6. budget commitments were being monitored and kept.

3. The JC considered additional Court Approved Protocols and Standard Operating Procedures to govern and guide the Administrator in handling claims and claimants. 
   

Fund Sufficiency

4. The JC continued to closely monitor the sufficiency of the Trust Fund, the performance of the portfolio of assets held by the Trust Fund, whether the portfolio components are meeting benchmark targets and disbursements out of the Trust Fund. In summary, the overall return was again very substantial with total assets continuing to grow after deducting total disbursements for compensation payments and administrative costs. Total compensation paid to class members amounted to approximately $480,000,000 at the end of year six.
   
   
5. In the sixth fiscal year, the JC undertook a great deal of work in preparation for the triennial Trust Fund sufficiency hearing. Briefly, this work included: (a) extensive liaison with Dr. Murray Krahn and his associates to prepare appropriate medical modeling for the class members; (b) extensive liaison with Dr. Frank Anderson to update medical developments and treatments pertaining to HCV; (c) extensive liaison with Eckler Partners Ltd. to prepare an actuarial assessment of Trust Fund sufficiency; (d) preparation of extensive Trust Fund sufficiency material filed with Courts.
   
   
6. The JC also committed very extensive time and resources to dealings with the FPT Governments (primarily the Federal Government) on the subject of Trust Fund sufficiency including: face-to-face negotiations; attending several meetings both by telephone conference and face-to-face between Morneau Sobeco, the actuaries retained by the FPT Governments, and Eckler Partners Ltd., the actuaries retained by the JC; attending meetings with representatives of the FPT Governments and the Administrator; attending meetings with representatives of the FPT Governments, their epidemiologist/statistician, Dr. Samuel Lee, and Dr. Murray Krahn.
   
   

Pre-1986 HCV Cohort

7. The Federal Minister of Health announced that the Government of Canada intended to "enter into discussions on options for financial compensation to people who were infected with hepatitis C through the blood system before January 1, 1986, and after January 1, 1990". Although some limited discussions have ensued, the JC fully understands its first and foremost duty to the class members and intends to ensure that there will be no negative effect on current benefits or future entitlements of class members.

Miscellaneous Matters

8. The JC monitored appeal decisions for claimants whose claims were denied by the Administrator. The JC provided guidance to Fund Counsel with respect to difficult and exceptional cases.
   
   
9. The JC continued to monitor legal proceedings in Alberta which started off as a challenge to the 1986-1990 Hepatitis C Settlement Agreement.
   
   
10. The JC continued to liaise with Canadian Blood Services and Héma-Québec on trace back issues and obtaining claimants’ medical records from hospitals and on various issues pertaining to the stored frozen blood samples.
    
    
11. The JC continued holding bi-weekly conference calls to discuss and resolve administrative issues as they arose. The JC also held periodic conference calls with Fund Counsel, the Administrator and Justice Winkler’s monitor to discuss and resolve issues as they arose.
    
    
12. The JC has also done the following to improve the administration of the Plans:
    
    
1. addressed the complaints and inquiries of class members including meetings with class members and representatives of class members;
   
   
2. met with physicians/experts to keep abreast of medical science pertaining to HCV; and
   
   
3. responded to direction from the Courts of Ontario, British Columbia and Quebec with respect to the implementation of the plan and issues pertaining to sufficiency.
   
   
13. The JC continues to appear before the Courts of Ontario, British Columbia and Quebec to seek orders as necessary for the implementation and administration of the Plans and to report to the Courts on material issues.
    
    
14. The JC has reported to the courts from time to time pertaining to the trace back program which constitutes one measure of “gate keeping” to ensure, as far as possible, that only eligible class members are compensated under the Plans.

Trace Back Issues

15. Trace backs are conducted for Health Canada by Canadian Blood Services (“CBS”) and the sister organization in Quebec, Héma-Québec. During the first few years of the administration of the settlement plan, the available trace back resources of CBS and Héma-Québec were overtaxed and the courts approved interim funding from the settlement funds to provide the trace back services required for the Plans. The annual trace back costs have dropped dramatically and CBS and Héma-Québec have not had any problem in the last few years meeting the demand for trace back services.
    
    
16. In addition to increasing the resources available to meet the early substantial demand for the trace back services, the courts approved a trace back protocol which also permitted preliminary approval of class members and compensation in the absence of a completed trace back in some cases. For example, claimants who only received blood during the class period and who were under the age of 18 at the time they received transfusions, received preliminary approval through the use of the “yes/no table” included in this trace back protocol. Furthermore, for claimants for whom a trace back was required, there was an arbitrary six month cut off timeframe to complete the trace back procedure required by the Plans. If a trace back procedure was not fully completed in six months, a claimant who was not otherwise disqualified, received preliminary approval as a class member and compensation based upon the incomplete trace back results.
    
    
17. The JC acknowledged that some class members who received preliminary approval as a result of the application of the “yes/no table” or the arbitrary six-month cut off rule, would subsequently be determined not to be eligible when trace backs were eventually completed under the trace back obligation imposed on Health Canada. At the time of their preliminary approval, those class members were advised that if the administrator received a completed trace back as required by Health Canada at a later date which showed that they received a transfusion of blood contaminated with HCV prior to the class period or that all of the blood they received during the class period was not contaminated with HCV, their preliminary approval as a class member and compensation benefits would be terminated although they would not be required to repay the compensation benefits received up to that time.
    
    
18. In the vast majority of cases where class members received preliminary approval, the administrator has received trace back results from Health Canada confirming the infection with HCV through a blood transfusion within the class period. In some cases, the administrator has not received a completed trace back from Health Canada.
    
    
19. The JC earlier advised the courts that as of May 31, 2004, 6.7% of preliminary approvals were terminated by the trace backs ultimately concluded by Health Canada. At that time approximately $4.6 million had been paid to class members on the basis of preliminary approvals out of a total of $362 million paid to class members, that is about 1.3% of payouts. The JC indicated to the courts at that time that they expected these percentages to decline over time.
    
    
20. The number of preliminary approvals that have been terminated by the completed Health Canada trace backs has indeed dramatically declined. During year four, the eligibility of 26 preliminarily approved class members who had received $1,292,000 in benefits was terminated. During year five, the eligibility of 13 preliminarily approved class members who had received $840,000 in benefits was terminated. During year six, the eligibility of 3 preliminarily approved class members who had received a total of $440,000 in benefits was terminated. As at the end of year six, the total amount paid out to preliminarily approved class members who have had their eligibility as class members terminated amounted to $5,587,000 out of the total compensation of $480,000,000 paid to class members or 1.16%. In terms of the number of preliminary approvals as a class member terminated by completed trace backs, the percentage has fallen from 6.7% in May, 2004 to 1.2% as at the end of year six. The JC expects this trend to continue. The average number of days waiting for the completed Health Canada trace back that has resulted in terminating preliminary approval as a class member and compensation benefits is 480 days.
    
    

Financial Matters and Budgetary Process

21. The JC is responsible for making recommendations to the courts pertaining to the appointments of service providers, negotiating budgets for service providers, obtaining court orders pertaining to approval of their budgets, instructing service providers and receiving and assessing advice and reports from service providers. The service providers to which this description applies include:
    
    
    1. the trustee;
       
       
    2. the investment managers;
       
       
    3. the investment consultants;
       
       
    4. the auditors;
       
       
    5. the actuaries;
       
       
    6. physicians who assist in medical modelling; and
       
       
    7. epidemiologists.
       
       
22. The JC has oversight responsibility on both the revenue side and, in particular, on the expense side of the Trust Fund. On the revenue side, the Trust Fund is very robust. On the expense side, the JC has taken great care to discharge its responsibilities as a watchdog. For example, the JC has negotiated the annual budget with the Administrator and has affected savings over time well in excess of $1,000,000. Another example is the elimination of the role of Investment Consultant and collapsing the role into the role played by our actuaries saving in excess of $30,000 annually. The JC has closely monitored the budgets and activities of other service providers and the JC has effected further savings wherever possible. For example, Royal Trust, the Trustee, has had its initial budget of $166,870 reduced over time. In the last fiscal year the actual amount of funds paid to Royal Trust (now RBC Dexia) was $95,800. Similarly, TD Asset Management Inc., our Investment Manager, has had its initial budget of $263,000 reduced over time. In the last fiscal year the actual amount paid to the investment manager was $184,500. Almost all other service providers have been on or under budget each year.
    
    
23. There are JC costs and services over which it has little control such as:
    
    
1. political interests which surface from time to time and must be addressed in this highly charged area;
   
   
2. press inquiries and other public relations concerns to ensure, as far as possible, that the implementation of the settlement is correctly understood and the judges, as far as possible, are protected from attack and adverse publicity;
   
   
3. communication with and correspondence to and from class members regarding concerns about their particular circumstances and requests for assistance;
   
   
4. preparation for an attendance at a contested sufficiency hearing which, in all probability, will become more intensive as time goes on; and
   
   
5. exceptional events such as the overpayment of certain cohort members by the Administrator unearthed by the JC and addressed and resolved by the JC.
   
   
24. On May 10, 2005, Mr. Justice Pitfield handed down reasons for judgment dismissing the application by the British Columbia Joint Committee Member for an increase in fees. Mr. Justice Pitfield noted that the JC required other service providers to provide budgets but the JC itself was not subjected to the budget process. He thought it should be. The JC has considered this matter and proposes to be governed by a budgetary process similar to other service providers. However, the budgetary process is not straightforward. For example, the Administrator has a 15% budgetary excess buffer built into its contractwith the JC. Furthermore, as pointed out above, unlike other service providers, the JC faces demands for its services from time to time over which it has little or no control.
    
    
25. Historically speaking:
    
    
1. the JC fees amounted to approximately $1,100,000 in the first fiscal year ending March 2001, and were driven by getting the project off the ground, developing forms, standard operating procedures and court-approved protocols and getting the whole administrative apparatus up and running;
   
   
2. in the second year of operation ended March 2002, JC fees were substantially reduced to approximately $775,000. Much of the work that year was driven by ironing out claims matters and dealing with CBS to develop strategies to improve the speed of the trace back process;
   
   
3. in the third year of operation ended March 2003, JC fees were approximately $1,100,000. The increase over year two was primarily driven by preparation for the first fund sufficiency hearings;
   
   
4. in the fourth year of operation ended March 2004, JC fees were again substantially reduced to approximately $635,000. The JC fees in that fiscal year were largely driven by a mini-review of the cohort size and sufficiency of the Trust Fund to determine whether the remaining restraints pertaining to income loss and loss of services could be prudently lifted;
   
   
5. in the fifth year of operation ended March 2005, JC fees increased to approximately $1,000,000 driven largely by a full-scale preparation for fund sufficiency; and
   
   
6. in the sixth year of operation ending March 2006, as outlined below, the JC fees total $1,077,401.01 of which $424,842.55 is attributable to ongoing Trust Fund sufficiency review matters.

This synopsis of work by the JC is obviously not intended to be comprehensive. For instance, complex areas that have recently required the attention of the JC include cross-border transplantation issues, development of an alternative to liver biopsy and monitoring the financial impact of medical and treatment developments pertaining to HCV.

26. The approximate JC fees and disbursements for year six were broken down by the JC members into two categories: first, general JC fees and disbursements; second, JC fees and disbursements relating to fund sufficiency matters. The total general JC fees in year six amounted to $608,252.46 and the total JC disbursements for general matters were $64,915.75. The total JC fees relating to fund sufficiency matters for year six amounted to $424,842.55 and disbursements amounted to $34,050.35. This breakdown shows the impact that fund sufficiency matters have on the legal services provided by the JC. The JC expects the fund sufficiency matters to substantially engage its attention in the seventh fiscal year commencing April 1, 2006, assuming, among other things, that oral hearings are required in all three courts. This current review of sufficiency matters also demonstrates that the legal work imposed on the JC members is to a large extent out of their control. The Federal Government is taking a very active role with respect to the current trust fund sufficiency review process as opposed to the role they took during the 2002 sufficiency hearing process.
    
    
27. The JC also incurred fees related to work performed by the JC pursuant to Court Orders dated August 17, 2005 and December 28, 2005 and at the request of the Federal Government. These fees of $44,306, along with disbursements totalling $1,109.59, are to be reimbursed to the Trust Fund by the Federal Government pursuant to the same two Court Orders.
    
    
28. The JC understands that it must rigorously apply the same standards to its own fees and disbursements as the JC applies to other service providers. The JC strives to ensure that its fees are constrained as much as reasonably possible. Some of the ways the JC has achieved fees savings without sacrificing essential JC services include:
    
    
1. introducing more junior lawyers/paralegals to perform routine tasks such as minute taking, recordkeeping, charting and other purely administrative tasks, and to conduct legal research and prepare memoranda and motion materials in respect of various legal questions and issues that arise from time to time;
   
   
2. having junior lawyers implement policy decisions made by senior JC members;
   
   
3. reducing the number of face-to-face JC meetings and the number of JC and JC/FC/Administrator conference calls;
   
   
4. assigning JC tasks to appropriate individual JC members and ensuring that those tasks are not duplicated by other JC members; and
   
   
5. avoiding in-person hearings in court wherever possible and utilizing consent orders wherever possible.
   
   
29. The JC has required all service providers to provide budgeting based on the calendar year end which means that year seven will be a nine-month year (April 1, 2006 to December 31, 2006). The JC proposes a bifurcated budget for the seventh fiscal year. First, the JC proposes a budget of $550,000 for fees and $60,000 for disbursements, exclusive of taxes, for the shortened seventh fiscal year for general JC matters. This budget includes a small contingency in the event that matters arise over which the JC does not have any control. Second, the JC proposes a budget of $300,000 for fees plus disbursements of $60,000, exclusive of taxes, for fund sufficiency matters in the shortened seventh fiscal year. This budget pertaining to fund sufficiency matters is predicated in part on the assumption that fund sufficiency hearings will be conducted in the seventh year before all three courts. Finally, the JC proposes to monitor these budgeted amounts on a quarterly basis and in the event the JC anticipates that the budgeted amounts will be exceeded, the JC will apprise the courts and seek directions.
    
    

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