2007 Annual Report

Schedule  P - 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.
4. The seventh year is a nine-month year running from April 1, 2006 to December 31, 2006 and creates uniformity with JC reporting and the reporting by all of the other service providers.

Fund Sufficiency

5. 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 $510,000,000 at the end of year seven.
6. In the seventh fiscal year, the JC completed the work of preparing for the triennial Trust Fund sufficiency hearing. Briefly, this work included: (a) liaison with Dr. Murray Krahn and his associates with respect to medical modeling for the class members; (b) 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 and filing Trust Fund sufficiency material with the Courts.
7. The JC also committed extensive time and resources to dealings with the Federal, Provincial and Territorial Governments (primarily the Federal Government) on the subject of Trust Fund sufficiency including: conferences and negotiations culminating in an agreement to avoid in person hearings in each of the three jurisdictions.

Pre-1986 HCV Cohort

8. The Federal Minister of Health announced that the Government of Canada had entered into an agreement in principle with respect to financial compensation to people who were infected with hepatitis C through the blood system before January 1, 1986, and after January 1, 1990. The JC liaised with class counsel for this cohort and reviewed the settlement documentation to assess the impact of this agreement on the 1986-1990 class members and on the administration of the Trust Fund.

Administrator

9. Over the course of the past 9 months, the JC has been engaged in negotiations with Crawford in respect of the administration contract. The JC was concerned that the historical cost plus contracting basis with Crawford did not contain any incentive for increased efficiencies by Crawford. A new arrangement was finalised, effective for Year 7 and Year 8 which provides for remuneration of Crawford on a fixed fee basis subject to adjustment based on certain predetermined volumes. The JC delegated the negotiation of the contract to Bonnie Tough. The remaining members of the JC reviewed the various contract drafts and provided general direction and policy guidance to the negotiations.

Prince Edward Island

10. During the course of the past year, the JC was advised by the Trustee that the Province of PEI had failed to make its required remittances to the Trust Fund. No payments to any claimants were delayed. However, PEI was in an overdraft position. The JC worked with outside counsel for the Province of PEI to resolve this problem and obtain the necessary funds from PEI without the necessity of a court application. The existence of the PEI overdraft created complexities for the Trustee and also for the Auditors. The JC believes that the problem is now solved and PEI understands its obligations. The problem appears to have arisen as a result of a change in personnel.

Liver Transplant

11. A class member had a liver transplant in California and his home province refused to reimburse any of the costs associated with the transplant. The issue for the home province was whether the individual could have received such a transplant in Canada. The JC supported the class members’ submissions that such a transplant was not available in Canada. Motion material including extensive affidavits were prepared in respect of the transplant issue. The JC collected information and forwarded it to the home province together with a statement of the JC position that the Province was the “first payer” and that a substantial portion of the cost of the liver transplant should be born by the province. Ultimately, the home province agreed to reimburse the individual. The final amount of the reimbursement is not yet crystallized, but it is expected that it will be approximately $750,000 to $1,000,000, an amount which would otherwise have been paid by the Trust Fund.

Alternative to Biopsy

12. The JC learned that an unfairness had developed between the Plan for hemophiliacs and the Plan for transfused individuals. Hemophiliacs (as a result of their underlying health issues) are permitted to prove their entitlement to compensation at certain levels without requirement of a liver biopsy. The JC was advised that there were some individuals in the transfused class who had not dissimilar underlying health conditions which resulted in a liver biopsy being contra-indicated. The JC worked with the Administrator and medical experts to construct a protocol for an alternative to liver biopsy for transfused class members which was subsequently approved by the Courts.

Miscellaneous Matters

13. 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. The JC had to deal with two cases of suspected fraud which may have been perpetrated by the personal representatives on several family members and involving false or incomplete declarations to the Administrator of the Trust Fund. The JC is seeking directions as to appropriate measures to be taken.
14. The JC continued to monitor legal proceedings in Alberta which started off as a challenge to the 1986-1990 Hepatitis C Settlement Agreement.
15. The JC continued to liaise with Canadian Blood Services and Héma-Québec on traceback issues and obtaining claimants’ medical records from hospitals.
16. 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.
17. 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.
18. The JC continues to seek orders as necessary for the implementation and administration of the Plans and to report to the Courts on material issues.
19. The JC has reported to the courts from time to time pertaining to the traceback program which constitutes one measure of “gate keeping” to ensure, as far as possible, that only eligible class members are compensated under the Plans.

Traceback Issues

20. Tracebacks 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 traceback resources of CBS and Héma-Québec were overtaxed and the courts approved interim funding from the settlement funds to provide the traceback services required for the Plans. The annual traceback costs have dropped dramatically and CBS and Héma-Québec have not had any problem in the last few years meeting the demand for traceback services.
21. In addition to increasing the resources available to meet the early substantial demand for the traceback services, the courts approved a traceback protocol which also permitted preliminary approval of class members and compensation in the absence of a completed traceback 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 traceback protocol. Furthermore, for claimants for whom a traceback was required, there was an arbitrary six month cut off timeframe to complete the traceback procedure required by the Plans. If a traceback 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 traceback results.
22. 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 tracebacks were eventually completed under the traceback obligation imposed on Health Canada. At the time of their preliminary approval, those class members were advised that if the administrator received a completed traceback 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.
23. In the vast majority of cases where class members received preliminary approval, the administrator has received traceback 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 traceback from Health Canada.
24. The JC earlier advised the courts that as of May 31, 2004, 6.7% of preliminary approvals were terminated by the tracebacks 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.
25. The number of preliminary approvals that have been terminated by the completed Health Canada tracebacks has indeed dramatically declined. During year four, the eligibility of 26 preliminarily approved class members who had received $1,282,000 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 $404,000 in benefits was terminated. At the end of year 7, only one preliminarily approved class member who had received a total of $231,000 in benefits was terminated. At the end of year 7, the total amount paid out to preliminarily approved class members who have had their eligibility as class members terminated amounted to $5,818,000 out of the total compensation of $510,000,000 paid to class members or 1.14%. In terms of the number of preliminary approvals as a class member terminated by completed tracebacks, the percentage has fallen from 6.7% in May, 2004 to 0.38% as at the end of year seven. The JC has been advised that there has been no HCN claim in the first 2 months of 2007. The JC expects this trend to continue. The average number of days waiting for the completed Health Canada traceback that has resulted in terminating preliminary approval as a class member and compensation benefits is 493 days, an increase of 13 days from year six.

Financial Matters and Budgetary Process

26. 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.
27. 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. 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. Almost all other service providers have been on or under budget each year.
28. 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.
29. 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 proposed a bifurcated budget for the seventh fiscal year. The JC proposed 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 included a small contingency in the event that matters arose over which the JC did not have any control. Second, the JC proposed 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 was predicated in part on the assumption that fund sufficiency hearings would be conducted in the seventh year before all three courts. Finally, the JC proposed to monitor these budgeted amounts on a quarterly basis and in the event the JC anticipated that the budgeted amounts would be exceeded, the JC would apprise the courts and seek directions.
30. The JC fees and disbursements for the general administration and implementation of the settlement terms is under budget for the seventh fiscal year at $468,793.56. JC fees and disbursements for sufficiency related matters is considerably under budget at $79,460.87. This is primarily attributable to the fact that an arrangement was reached with respect to the assessment of fund sufficiency and this largely eliminated the need for preparation for hearings and eliminated the need for hearings in each of the three jurisdictions.
    
31. 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 traceback 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;
    6. in the sixth year of operation ending March 2006, the JC fees totaled $1,077,401.01 of which $424,842.55 was attributable to ongoing Trust Fund sufficiency review matters; and
    7. in the seventh year of operations ending December 31, 2006 (nine months), the JC fees totaled $516,588.44 of which $78,087.19 was attributable to Trust Fund sufficiency 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 and monitoring the financial impact of medical and treatment developments pertaining to HCV.
32. 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.
33. The JC proposes a budget for fiscal year number eight (twelve months) of $650,000 for fees for general matters and $50,000 for disbursements. The JC is presently considering and assessing the work which it will have to perform this year for the next trust fund sufficiency hearings which, under the terms of the HCV Settlement Agreement, are slated to be conducted on or after June, 2008. The JC is exploring ways and means to streamline the burdensome, expensive and protracted amount of time spent on trust fund sufficiency matters. The JC anticipates that it will provide this budget within the next 30 days approximately. The JC will report to the Courts on a quarterly basis with respect to the JC budget(s) and, if the JC finds or anticipates that it is going over budget, the JC will report to the Courts and seek approval for any overage.