CITATION: Surani v. Perth Insurance Company, 2018 ONSC 7254
DIVISIONAL COURT FILE NO.: 541/17
DATE: 20181207
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, MATHESON and GIBSON JJ.
BETWEEN:
NEVINE SURANI and SALIM SURANI
Applicants
– and –
PERTH INSURANCE COMPANY
Respondent
Nicole Correiro, for the Applicants
Helen D.K. Friedman and Ashleigh T. Leon, for the Respondent
Michael Scott, for the Financial Services Commission of Ontario
HEARD at Toronto: November 15, 2018
Swinton J.
Overview
[1] The applicants, Nevine and Salim Surani, seek judicial review of an order of the Director’s Delegate dated August 18, 2017 that found Ms. Surani’s post-accident business income from a pharmacy should be deducted from her income replacement benefits (“IRBs”) in accordance with s. 7(3)(b) of the Statutory Accidents Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10 as amended (“SABs”), because it was income earned from self-employment.
[2] In my view, the decision of the Director’s Delegate was reasonable, and I would dismiss the application for judicial review.
Background
[3] Ms. Surani is a pharmacist. She was employed in a pharmacy in Scarborough owned by the family at the time she and her husband were injured in a motor vehicle accident that occurred in December 2010. Although she tried to return to work as a pharmacist, she was unable to do so, and she hired individuals to replace her. While she was no longer able to work as a pharmacist, she continued to play a modest role by advising and taking on some limited tasks.
[4] Pre-accident, the family pharmacies produced business income that was distributed from time to time to the Suranis. The pharmacies continued to produce business income after the accident.
[5] Post-accident, both of the Suranis claimed IRBs from the Respondent insurer. A dispute arose as to the deductibility of income received from their businesses post-accident.
[6] At arbitration, it was determined that Mr. Surani’s post-accident business income should be considered “earned income” that should be deducted from his IRBs. This decision is not at issue in this application for judicial review.
[7] The arbitrator held that Ms. Surani’s post-accident business income should not be considered “earned income.” That income should not be deducted in calculating her IRBs, because she was not actively engaged in the business of the pharmacy when the income was earned.
[8] The Director’s Delegate overturned this order on appeal. He found that Ms. Surani was a self-employed person, which had not been in dispute. However, he concluded that the arbitrator erred in her interpretation of s. 7(3) of the SABs, as the provision does not require active engagement in the business post-accident. Accordingly, the income from the Scarborough pharmacy was income from self-employment earned by Ms. Surani post-accident, and he ordered that the income be deducted in calculating her IRBs.
[9] His order led to this application for judicial review. In the discussion that follows, I deal only with the situation of Ms. Surani, and I will describe her as the “Applicant”.
Analysis
[10] The parties are agreed, based on past jurisprudence, that the decision of the Director’s Delegate is reviewable on a standard of reasonableness, as he was interpreting and applying his home legislation.
[11] There is no dispute that the Applicant is self-employed, and that she received salary and dividend income from the Scarborough pharmacy prior to the accident. At issue in this application is the interpretation of s. 7(3) of the SABs, which deals with deductions from IRBs. It provides:
The insurer may deduct from the amount of an income replacement benefit payable to an insured person,
(b) 70 per cent of any income from self-employment earned by the insured person after the accident and during the period in which he or she is eligible to receive an income replacement benefit. (emphasis added)
[12] The Applicant submits that the use of the term “earned” in paragraph (b) is significant, and contrasts that word with the term “received” in paragraph (a), which deals with income from employment. It reads:
(a) 70 per cent of any gross employment income received by the insured person as a result of being employed after the accident and during the period in which he or she is eligible to receive an income replacement benefit; ... (emphasis added)
The Applicant relies on dictionary definitions to argue that the plain meaning of “earned” requires some effort and activity by the income recipient. As well, the Applicant points out that the word “earned” in paragraph (b) resulted from an amendment that replaced “received” with “earned” in the paragraph.
[13] The Director’s Delegate found that the arbitrator erred in law when she interpreted s. 7(3)(b) to require that the income recipient be “actively engaged in the business.” I agree with his conclusion. The arbitrator erroneously relied on s. 146 of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.) (“ITA”), which deals with deductions for purposes of registered retirement savings plans. She misinterpreted that provision as well. Further on the arbitrator’s own factual findings, the Applicant was not totally passive with respect to the activity of the Scarborough pharmacy after the accident.
[14] The Director’s Delegate did not accept the Applicant’s argument with respect to the plain meaning of the term “earned” in s. 7(3)(b). Instead, he took a contextual approach to the interpretation of the provision. Specifically, he looked at the way in which s. 4(3) and 4(4) of the SABs determine the pre-accident income or loss of a self-employed person and the loss after the accident. He then interpreted s. 7(3)(b) in light of these other provisions. This approach was consistent with the modern approach to statutory interpretation set out in Rizzo & Rizzo Shoes Ltd., [1998] 1 S.C.R. 27, 1998 837 (SCC) at para.21 – that is, “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.”
[15] Subsection 4(3) is found in the interpretation section relating to IRBs. It deals with the determination of pre-accident income or loss for the self-employed. It stipulates that this will be determined in accordance with Part I of the ITA. Part I deals with determining a person’s income or loss from a business. Subsection 9(1) of the ITA provides that, subject to Part I, “a taxpayer’s income for a taxation year from a business or property is the taxpayer’s profit from that business or property for the year.”
[16] Subsection 4(4) of the SABs then deals with the determination of a self-employed person’s loss following an accident. The loss is to be determined in the same manner as losses from the business in which the person was self-employed, although certain deductions are allowed – for example, deduction of a reasonable salary expense to replace the active participation of the self-employed person. Again, this subsection makes reference to the ITA, specifically s. 9(2).
[17] The Director’s Delegate concluded that the pre-accident income and the post-accident loss of a self-employed person are those of the business (subject to limitations on deductions to prevent exaggerated loss). When he then considered the deduction for post-accident income in s. 7(3)(b), he relied on the principle of consistency in statutory interpretation. He concluded that the calculation of income and loss of a self-employed person should be determined in the same manner before and after the accident – that is, by considering the profits and losses of the business.
[18] As the Director’s Delegate correctly pointed out, a requirement of active participation is not found in the words of s. 7(3)(b). Indeed, the Applicant was found to be entitled to IRBs because she was substantially unable to fulfil the essential tasks of her self-employment (see s. 5). Moreover, the SABs take into account the loss to a self-employed person from the need to hire a replacement by allowing a reasonable deduction for the salary of the replacement when calculating the loss after the accident (s. 4(4)).
[19] The Applicant argues that the Director’s Delegate did not give any effect to the amendment that changed “received” to “earned” in s. 7(3)(b). I disagree. The Director’s Delegate cited s. 56 of the Legislation Act, 2006¸ S.O. 2006, c. 21, Schedule F, which provides that an amendment to a law does not imply anything about the previous state of the law or imply that the previous state of the law was different. He made reference to the accounting experts’ evidence before the arbitrator to the effect that under the previous legislation, “received” had been treated as “earned” in some cases – for example, real estate commissions were treated as earned when the work was done to generate the income, even if the amount was actually received later. Thus, he concluded, the amendment to the legislation clarified this practice, and “earned” relates to timing.
[20] In sum, the Director’s Delegate concluded that the overall structure of the SABs with respect to the entitlement to and calculation of IRBs for the self-employed focuses on the loss and profit of the business. In my view, that is a reasonable interpretation. Indeed, the Applicant’s approach is not reasonable, in that it fails to consider the words of s. 7(3)(b) in the context of the SABs as a whole.
[21] Finally, I reject the Applicant’s argument that the Director’s Delegate erred in failing to give a large and generous interpretation to the SABs, given this is consumer protection legislation (Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129 at para. 11).
[22] As the Respondent stated in its factum, the purpose of the IRBs is to provide compensation for income loss – but subject to statutory limits. The SABs reflect the fact that the self-employed person who has been injured may not have lost anything financially, so as to be entitled to the $400 weekly benefit sought here, if he or she has a business that continues to operate after the accident and to generate income. If the individual has incurred losses because of the accident – for example, by having to hire replacement staff – he or she is compensated by s. 7(2).
[23] Accordingly, I see no reason to set aside the Director’s Delegate’s decision, which accords a reasonable interpretation of s. 7(3) of the SABs.
Conclusion
[24] For these reasons, the application for judicial review is dismissed. Costs to the Respondent are fixed at $5,000.00, all inclusive an amount agreed upon by the parties.
Swinton J.
I agree _______________________________
Matheson J.
I agree _______________________________
Gibson J.
Released: December 7, 2018
CITATION: Surani v. Perth Insurance Company, 2018 ONSC 7254
DIVISIONAL COURT FILE NO.: 541/17
DATE: 20181207
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, MATHESON and GIBSON JJ.
BETWEEN:
NEVINE SURANI and SALIM SURANI
Applicants
– and –
PERTH INSURANCE COMPANY
Respondent
REASONS FOR JUDGMENT
Swinton J.
Released: December 7, 2018