Neutral Citation: 1991 ONICDRG 8

File No. A-000090

ONTARIO INSURANCE COMMISSION

BETWEEN:

Stanley B. Moxon

Applicant

and

State Farm Insurance

Insurer

DECISION

Issue:

The Applicant Stanley B. Moxon was injured in an automobile accident on November 21, 1990. He applied for and received personal injury benefits payable under Regulation 273/90 under the Ontario Insurance Act, R.S.O 1980, chap. 218, as amended, (the" No-Fault Benefits Schedule").

The Applicant is a self-employed sign-painter, who also runs a sign leasing operation, and designs and sells computer software programmes. He owns a corporation called "The Affordable Group Inc.", through which he operates his businesses.

The Applicant initially received weekly benefits at the maximum rate of $1050 per week, pending the Insurer's receipt of documentation verifying his income and expenses. Effective January 16, 1990 the Insurer determined that the Applicant was only entitled to a weekly benefit of $755.23, based on the documentation which the Applicant had submitted regarding his income.

The Applicant applied for mediation claiming that he was entitled to the maximum weekly benefit of $1050. The mediation was unsuccessful, and the Applicant subsequently applied for the appointment of an arbitrator, under s. 242d of the Insurance Act, as amended.

The issues to be determined at the arbitration hearing were:

(1) What is the correct amount of the weekly benefit payable to the Applicant?

(2) Is the Applicant entitled to interest for any outstanding amounts payable?

(3) Is the Applicant entitled to a special award pursuant to section 242d (10) of the Ontario Insurance Act, as amended, on the basis that the Insurer has unreasonably delayed or withheld payments?

Result:

The decision is:

The Applicant is entitled to weekly benefits of $523.00.

No interest for outstanding amounts is owed to or payable to the Applicant by the Insurer.

The Applicant is not entitled to a special award under sec. 242d (10) of the Ontario Insurance Act.

Hearing:

A hearing was held at North York, Ontario on May 1, 1991 and resumed on May 2, May 8, May 9, May 13, May 27 and May 28, 1991 before me, Frederika M. Rotter, Senior Arbitrator.

Present at the hearing were:

Applicant:

Stanley B. Moxon

Insurer's Representative:

Harry P. Brown, Barrister and Solicitor

Witnesses for the Insurer:

Carlos Foster Krasilczuk, Claims Representative, State Farm Insurance, Daniel Martin Edward, Chartered Accountant, Coopers & Lybrand Christine Elkin, Branch Manager, Canadian Imperial Bank of Commerce Douglas Grant Kinsman, Claims Superintendent, State Farm Insurance

Documents filed:

From the Applicant:

(1) An application for arbitration in Form 4 dated March 1, 1991 and received March 6, 1991, indicating that the Applicant feels that the insurer is not paying him the full benefits to which he is entitled.

(2) Eleven pages of computer-generated documents entitled "The Affordable Group Inc Invoice Register". The documents deal with the months of January through November 1990, and each document lists invoices charged to customers that month, and provides details such as the date, the amount, the name of the customer, and the type of sale.

From the Insurer:

(1) A Response in Form 5 dated March 25, 1991 and received March 28, 1991. The Response indicates that the insurer is unable to accurately establish the benefits payable to the Applicant because the Applicant has failed to provide adequate financial records and documents regarding his business operations.

(2) Production Book containing the following items:

1. Copy of Ontario Automobile Insurance Application for Accident Benefits dated November 27, 1991, completed by the Applicant;

2. Payment Record and Payment Transmittal of the Insurer;

3. Report of Dr. E.P. Urovitz dated December 27, 1990;

4. Report of Nancy Haston & Associates dated January 28, 1991;

5. Copies of Gross Revenue of Stan Moxon for the years 1988, 1989, 1990;

6. Typewritten transcript of a conversation between Carlos Krasilczuk with Stanley Moxon of March 22, 1991;

7. Copy of Invoice from the YMCA of Mississauga and application form;

8. Copy of Income Statement for the Affordable Group Inc., from July 1, 1990 to November 30, 1990;

9. Copy of Progress Report dated January 24, 1991;

10. Copy of "Monthly Fixted Expenses of Stan Moxon"(sic);

11. Copy of Ontario Automobile Insurance Assessment of Claim by Insurer dated December 12, 1990;

12. Copy of the records of the Credit Valley Hospital;

(3) Coopers & Lybrand Report

A Report dated April 23, 1991 prepared by Daniel Martin Edwards of Cooper and Lybrand outlining the work of the accountant in preparing the Report determining the benefits payable to the Applicant following the motor vehicle accident on November 21, 1990. The Report summarizes the information and accounting records which were reviewed, outlines the basic approach taken in the calculations as well as the assumptions included in the calculations. The Report also provides schedules which set out most of the calculations, as follows:

Schedule 1:

provides a calculation of the weekly benefit based on an average gross weekly incomes which have been determined in other schedules.

Schedule 2:

is a calculation of the estimated average gross weekly income of the Applicant during the last 52 weeks.

Schedule 3:

a calculation of the estimated average gross weekly income of the Applicant for the last 4 weeks.

Schedule 4:

the reconstruction of the Applicant's revenues for the 52 weeks prior to the accident on November 21, 1990.

Schedule 5:

sets out the estimated sign painting and consulting expenses excluding the fixed expenses of the applicant and expresses the ceasing expenses as a percentage of the applicant's gross receipts.

Schedule 6:

a reconstruction of receipts and payments during the 9 month period between January and September 1990. Appended to Schedule 6 is a page of notes which explains the assumptions made in certain figures used in Schedule 6.

Schedule 7:

a calculation which shows the estimated weekly benefits payable to the Applicant using the method adopted by the insurer. It is composed of two columns, one which shows the benefit payable as calculated by the insurer and one that shows the benefit payable using the insurer's method but with the revised figures available to the acccountant.

(4) A number of documents which were submitted as exhibits to the hearing are listed as follows:

Exhibit 1:

One page document headed "Monthly Fixted Expences of Stan Moxon" (sic) setting out expenses for rent, mortgage, loan payment, Bell Canada, car loan, utilities, insurance, business tax and also personal expenses. I note that in this document the personal expenses of the applicant are shown as approximately $1,200.

Exhibit 2:

A second document entitled "Monthly Fixted (sic) Expenses of Stan Moxon" which also lists business expenses. I note that in this document, the personal draw is listed as $1,600.

Exhibit 3:

A letter dated February 4, 1991 addressed to Mr. Carlos Krasilczuk and signed by Christopher Plaxton of Coopers & Lybrand. The letter summarizes the discussions between Mr. Plaxton and Mr. Krasilczuk with respect to the Applicant's claim. The letter suggests that Mr. Krasilczuk attempt to obtain further information from the Applicant, and requests that the Applicant provide details of financial information for the last 12 months.

Attached to this letter is a document entitled "Summary of Claim" which summarizes the activities of the insurer's claim representative with respect to the Applicant's claim from November 23, 1990 up to January 24, 1991.

Exhibit 4:

A computer generated document entitled "Gross Revenue of Stan Moxon" for the years 1988, 1989 and 1990. The document lists revenues by the month, gives the yearly percent increases and monthly averages for the years. I not that figures beside the column for 1989 bear a checkmark.

Exhibit 5:

Curriculum Vitae of Daniel M. Edwards, M.A., A.C.A., C.A.

Exhibit 6:

The report of Daniel M. Edwards to State Farm, determining the weekly income benefits payable to the Applicant, described above. Appended to the Report are seven schedules.

Exhibit 7:

A letter from Mr. Daniel M. Edwards of Coopers & Lybrand dated April 23, 1991 addressed to the insurer's representative. The letter indicates that certain bank records of the Applicant were not available for the Accountant's review. The letter indicates that the Accountant called the Applicant during the evening of April 22, 1991 to request access to the missing information but the Applicant declined to provide such access. The letter indicates that it is most important that bank deposit slips are made available in order to confirm the Applicant's revenues collected prior to the accident and to examine the revenues which have been received subsequent to the accident.

Exhibit 8:

A computer generated document entitled "G.L. Postings of Sale for the Tax Year 1989" and "G.L. Postings of Sale for the Tax Year 1990".

Exhibit 9:

Copy of a cheque payable to the Affordable Group in the amount of $78.72 dated March 27, 1991.

Exhibit 10:

Copy of an invoice from Sale Electronics, to the Affordable Group, in the amount of $78.72.

Exhibit 11:

Copy of a computer generated document entitled "Income Statement, The Affordable Group Inc." from July 1, 1989 to June 30, 1990. The document shows total income from sales of $65,159, expensesof$42,923.24, a gross profit of $22,236.56 and a draw of $21,678.90 by the Applicant.

Exhibit 12:

A computer generated document entitled "Income Statement from July 1, 1990 to November 30, 1990" showing total sales and orders of $34,393.36, expenses of $17,626.99, gross profit of $16,766.37 and a draw of $8,000.00 by the Applicant.

Exhibit 13:

A letter from the Halton Community Credit Union Limited dated March 21, 1991 confirming that the payments required to service the Applicant's debt are $833.29 monthly, due the 5th day of each month commencing August 5, 1990.

Exhibit 14:

A computer generated document entitled "Bank Ledger Card" which refers to the month of June 1990.

Exhibit 15:

Copies of the C.I.B.C. deposit book of the applicant showing deposits made into the Applicant's bank account at the C.I.B.C. from October 15, 1990 through to March 8, 1991.

Exhibit 16:

Copy of a Credit Union deposit slip dated January 11, 1991.

Exhibit 17:

Copy of a C.I.B.C. deposit slip dated January 28, 1991.

Exhibit 18:

A letter stamped "Confidential" from Mavis C. Hines, Ph.D., C. Psych, dated May 14, 1991. The letter indicates that the Applicant's current state of emotional distress and psychological ill health is such that she recommends that the hearing regarding the applicant be adjourned.

Exhibit 19:

A letter dated May 24, 1991 addressed to the Insurer's solicitors from Halton Community Credit Union Ltd.. The letter provides information with respect to the Applicant's transactions and involvement with the Halton Community Credit Union Ltd. through his two bank accounts. Appended to the letteer are copies of computer printouts with regards to banking transactions from the Applicant's personal and corporate accounts. Also attached is a copy of the application for credit signed by the Applicant, copies of the bank's original records, copy of the Operation of Account agreement, and a copy of the articles of incorporation for the Affordable Group Inc.

The Law:

The No-Fault Benefits Schedule provides for weekly income benefits to be paid to persons injured in automobile accidents. In the present case, benefits are payable under section 12 of the No-Fault Benefits Schedule, which section sets out the method for computing the benefits payable to employed and self-employed individuals. The required calculations are somewhat complex and necessarily entail the gathering of specific and detailed financial information.

The portions of the No-Fault Benefits Schedule relevant to the calculation of the Applicant's benefits in this case are reproduced as follows:

Section 12.

(1) The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident a weekly income benefit during the period in which the insured person suffers substantial inability to perform the essential tasks of his or her occupation or employment if the insured person meets the qualifications set out in subsection (2) or (3).

(2) The following qualifications apply to an insured person who claims a weekly benefit under subsection (1):

1. Her or she must have been at the time of the accident,

i. employed of self-employed,

ii. on a temporary lay-off, or

iii. entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

2. Her or she as a result of and within two years of the accident must have suffered a substantial inability to perform the essential tasks of his or her occupation or employment.

(4) Subject to subsection (5), the weekly benefit under subsection (1) will be the lesser of,

(a) $600 plus, if Optional Benefit 2 has been pruchased, the amount of the benefit chosen; and

(b) 80 per cent of the insured person's gross weekly income from his or her occupation or employment, less any payments for loss of income, except Unemployment Insurance benefits,

(i) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan, or

(ii) received under any sick leave plan.

(5) The insurer is not required to pay a weekly benefit under subsection (1),

(a) for the first week of the disability;

(b) for any period in excess of 156 weeks unless it has been established that the injury continuously prevents the insured from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience.

(7) The following rules apply to the calculation of gross weekly income:

1. A person's gross weekly income shall be deemed to be the greatest of,

i. his or her average gross weekly income from his or her occupation or employment for the four weeks preceding the accident,

ii. his or her average gross weekly income from his or her occupation or employment for the fifty-two weeks preceding the accident,

iii. $232.

3. Business expenses which cease as a result of the accident shall be deducted from a person's income from self-employment before calculating his or her gross weekly income.

Section 15

The insurer may deduct from any benefit payable under this Part 80 per cent of any income received or available from any occupation or employment subsequent to the accident.

Section 19.

(1) Every insurer shall offer the following optional benefits:

1. Optional Benefit 1: Increased Funeral

Expenses and Death Benefits If this option is purchased,

(a) the maximum amount payable under section 10 (Funeral Expenses) will be $7,500; and

(b) the maximum amount payable under section 11 (Death Benefits) will the amounts set out in subsection 11(2).

2. Optional Benefit 2: Increased Weekly

Income Benefit If this option is purchased, the amount referred to in clause 12(4)(a) will be increased by such amount from the following as may be chosen when purchasing the option:

1. $150.

2. $300.

In the present case, because the Optional Benefit 2 package was in effect, the weekly benefit payable to the Applicant, according to section 12(4), is the lesser of $600 + $450 = $1050, or 80% of the Applicant's gross weekly income as calculated under subsection 12(7), less 80% of any income received subsequent to the accident, pursuant to section 15.

Subsection (7)1. explains that the Applicant's gross weekly income is deemed to be the greater of:

(i) the Applicant's weekly average earnings for the four weeks prior to the accident

(ii) the Applicant's weekly average earnings for the 52 weeks prior to the accident

(iii) $232

Subsection (7) 3 goes on to specify that in the case of a self-employed individual, business expenses which cease as a result of the accident are to be deducted from the person's income from self employment, before calculating the gross weekly income.

Therefore, in order to determine the weekly income benefit payable to this Applicant, financial information is required to establish :

(1) The applicant's gross weekly average earnings less ceasing expenses for the four weeks prior to the accident

(2) The Applicant's gross weekly average earnings less ceasing expenses for the 52 weeks prior to the accident

(3) The Applicant's income from employment subsequent to the accident.

Information about the Applicant's income and expenses prior to the accident is therefore required, in order to compute the weekly average earnings in both cases, and in order to make the necessary deductions for business expenses which cease. The two weekly average amounts can then be compared and the weekly benefit will be established at 80% of the highest applicable figure. From this weekly benefit payable, a deduction of 80% of income from employment received subsequent to the accident will then be made.

Preliminary Issues:

On the first day of the hearing, the Applicant made three preliminary motions, as follows:

(1) That I re-consider my order regarding production, which order was made in the course of a pre-hearing conference and issued prior to the commencement of the hearing. Specifically, the Applicant requested production of the Insurer's investigation and surveillance reports, as he felt that the contents of these reports would assist him in proving that he had not been working since his accident, and that therefore no deductions from his weekly benefits should be made pursuant to section 15 of the No-Fault Benefits Schedule.

(2) That I order that the Applicant's financial records be submitted to a third party accounting firm, in order that such third party firm prepare, at the expense of the Insurer, full financial statements regarding the Applicant's business. The Applicant submitted that this was necessary because he had problems with the report by Coopers & Lybrand, prepared on behalf of the Insurer. The Applicant submitted that the information in the report by Coopers & Lybrand was "tainted" and that he would have trouble defending himself against such a large firm. He argued that since the Insurer wanted the information about his financial affairs, the Insurer should have the obligation to pay for a full set of accounting records to be prepared by a third party firm.

(3) Finally, the Applicant submitted that it was his view that I was biased and that I should therefore disqualify myself from hearing this matter.

In response, counsel for the Insurer indicated that with respect to the Applicant's first motion, the Insurer was not relying on the Investigator's report in this matter, and would not be using any information from it in evidence. The Insurer submitted that this report was private and confidential in nature, and that the bulk of the information contained in the report was not pertinent or relevant to the issues in dispute. Furthermore, it was submitted that some of the information in the report was very candid, and could be upsetting and prejudicial to the Applicant. For these reasons, the Insurer submitted that the report should not be produced.

The Insurer indicated that it was also opposing the Applicant's other motions, and also submitted that the Applicant had not fully complied with the order for production which had been made by the Arbitrator subsequent to the pre-hearing discussion.

Decision on Preliminary Issues:

(1) The request that the surveillance report of the Insurance Company be ordered to be produced to the Applicant was denied. The reasons for this ruling are as follows:

I am not satisfied that the Applicant requires this document in order to prove that he has not been working or earning income since the automobile accident. The best evidence with respect to the Applicant's income from employment subsequent to the accident must come from the Applicant himself, in the form of his own testimony and records. The evidence contained in the Insurer's surveillance report is at best hearsay, and of dubious probative value. At its highest, that evidence could only be corroborative of the Applicant's own statements with respect to his earnings and income. The report therefore has little independent evidentiary value.

Because the insurer has indicated that the document contains material of a confidential and sensitive nature, which material is not relevant to the issue in dispute and could be prejudicial to the Applicant, and because the Insurer did not rely on the contents of the document to prove its case, I have determined that the document ought not to be ordered to be produced. I am persuaded that the contents of the document are generally not relevant to the issue in dispute, and that its evidentiary value is insignificant in comparison to its prejudicial effect. I am satisfied that the Applicant does not require the document in order to present a coherent account of his income from employment subsequent to the automobile accident.

(2) I denied the Applicant's motion that I order that his records and documents be examined, at the expense of the Insurer, by a third party accounting firm who would prepare full financial statements. I have been provided with no legal or moral authority for allowing such a motion. The onus is on the Applicant to present his own case in its best light. The Applicant, of course has the right to retain the financial or legal experts of his choice, to assist him to prepare and present his case. He has the right to have prepared and to present whatever financial statements he desires, and to request that he be reimbursed for his expenses in retaining his experts, pursuant to section 242e(11) of the Insurance Act. He chose not to exercise these rights.

Similarly, the Insurer has the right to retain the experts of its choice. As arbitrator, I have no authority or jurisdiction to dictate to either of the parties how they should present or argue their cases. Further, I was presented with no evidence whatsoever for the proposition that the report prepared by the Insurer's expert was in any way "tainted" or otherwise unreliable.

(3) I declined to disqualify myself from proceeding to hear this matter further on the basis that I was biased. I held that the issue of bias was a matter which only the Director has the authority to determine, pursuant to section 242e(12) of the legislation which states:

(12) Bias.-- A party may apply to the Director for the appointment of a new arbitrator if the party believes that the arbitrator is biased and the Director shall determine the issue.

In the absence of a finding of bias by the Director, I felt that it was my duty and obligation to carry on with the arbitration hearing, pursuant to my appointment under the legislation.

(4) Finally, in response to the Insurer's submission that the Applicant had failed to produce certain documents as ordered, I again required the Applicant to re-attend with those documents, since I am satisfied that these documents are relevant to the issues in dispute between the parties. The documents and records in question were items pertaining to the Applicant's business in the year prior to and months subsequent to his automobile injury.

Procedural Issues

As a matter of course, the Applicant was invited to present his case first. It is my view that the Applicant, as the individual requesting the hearing on the basis that he is not satisfied with the Insurer's payments under the No-Fault Benefits Schedule, bears the onus of proof in this case. He must prove, on the balance of probabilities, that the Insurer has erred in assessing the benefits payable, and that on the basis of his average gross weekly income as determined under the legislation, he is entitled, as he claims to be, to the maximum benefits of $1050 payable under the legislation.

After the preliminary motions and arguments had been dealt with, the Applicant appeared unprepared to present his case. He indicated that he wished to question the financial expert of the Insurer about the report which had been filed. In the circumstances, and with the consent of both parties, I determined that in order to accommodate the Applicant and to facilitate and expedite the hearing process, the normal order of proceeding would in this instance be reversed. That is, the Insurer would present its case first, and the Applicant would then have the opportunity to respond to the Insurer's position. This would give the Applicant the opportunity to cross-examine the Insurer's expert witness before he himself presented his evidence.

In the result, this decision is being written without the benefit of having heard the Applicant's version of the facts. The Insurer did proceed to present its case and the Applicant had the opportunity to cross-examine the Insurer's witnesses, and in particular, the Insurer's financial expert Mr. Daniel Edwards. On Wednesday May 9, 1991, part way through the Applicant's second day of cross-examination of the witness, I made a ruling limiting the time for the Applicant's cross-examination to two more full days.

I made this ruling because it appeared to me that the Applicant was deliberately prolonging the cross-examination by asking questions that were unduly speculative, argumentative, repetitive, and in some cases irrelevant. The witness had given his evidence-in-chief in the space of approximately one day: his testimony commenced on the afternoon of the first day of the hearing (May 1, 1991) and was concluded on the second afternoon (May 2). I felt that there was no real need for the cross-examination to be extended for more than two days, in light of the fact that the evidence which had been presented was relatively clear and straightforward. Moreover, I was concerned that the Applicant's motives for prolonging the cross-examination may have been tactical rather than evidentiary; the Applicant stood to gain by prolonging the hearing, because until the hearing was concluded and my decision rendered, the Insurer was obliged to continue to pay weekly benefits at the established rate of $750, pursuant to the provisions of section 242c(3) of the Insurance Act, as amended.

That section states:

(3) Payment pending dispute resolution.-- Subject to subsection (4), if mediation fails, the insurer shall pay no-fault benefits in accordance with the last offer of settlement that it had made before the failure until otherwise agreed by the parties or until otherwise ordered by a court, an arbitrator or the Director.

The Insurance Act, as amended, has provided for arbitration hearings as a relatively speedy and cost-efficient alternative to the court process, in the case of disputes about no-fault benefits. An Applicant's costs for commencing an arbitration process are relatively modest, and the legislation provides (at section 242e (11) of the Insurance Act, as amended) that Applicants can be remunerated for costs that have been incurred. Further, section 242e (10) allows an arbitrator to penalize an insurer through costs, by awarding to an applicant a special lump-sum award where the arbitrator finds that the insurer has unreasonably delayed or withheld payments. No mechanism exists, under the legislation, for awarding costs to Insurers, or for penalizing through costs Applicants who unreasonably delay or impede the arbitration process.

Therefore it is my responsibility, as Arbitrator, to safeguard the integrity of the arbitration process by ensuring that hearings are held in an expeditious manner, and are not unreasonably protracted by procedural and technical manoeuvres.

Moreover, as a statutory decision-maker under the Statutory Powers Procedures Act (R.S.O. 1980, Chap. 484, as amended) I have the authority granted to every tribunal under sec 23 (1) of that statute to "make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its procedure." Further, section 23(2) allows a tribunal to:

"reasonably limit further cross examination of a witness where it is satisfied that the cross examination of the witness has been sufficient to disclose fully and fairly the facts in relation to which he has given evidence".

Therefore, I consider that in this case I properly limited the cross examination pursuant to my authority as arbitrator.

On Thursday, May 8, 1991, the Applicant requested a two-day adjournment, claiming that he was both physically and mentally unable to proceed. I granted the adjournment and at the same time advised the Applicant that if he required a further adjournment a doctor's letter should be provided, verifying that he was medically unable to attend at the hearing. The hearing was scheduled to be resumed on Monday May 13, 1991.

On Monday May 13, 1991 the Applicant requested a further adjournment, stating that he was still not able continue with the hearing, but that he had not been able to arrange for an appointment with his doctor, to obtain a letter. In the circumstances I was reluctant to grant a further adjournment without some documentation or explanation why the Applicant could not proceed. We therefore continued with the hearing until the noon break, when we adjourned as it appeared that the Applicant was too fatigued to be able to usefully carry on. The hearing was adjourned to the following day, Tuesday May 14, at 1 pm.

Upon the resumption of the hearing, on May 14, the Applicant presented a letter from his psychologist, Dr. Mavis Himes, which was marked Exhibit 18 to the hearing. The letter contained a suggestion that the arbitration hearing be adjourned for a period of two months because the Applicant was suffering from "emotional distress and psychological ill-health". The psychologist did not provide a more specific diagnosis or description of the Applicant's problems, nor did she explain why she felt a two month adjournment was advised.

The Insurer objected to the granting of any adjournment and submitted that it was prejudiced by any adjournment, because of the statutory obligation to continue payments under sec. 242c(3) of the legislation, cited above. The Insurer argued that the Applicant was requesting the adjournment as a tactical manoeuvre, and not because of a bona fide illness.

I granted an adjournment of two weeks and advised the Applicant that I would contact the psychologist in order to ascertain whether a further adjournment was warranted. I wrote to the psychologist on May 16, 1991 requesting more specific information with respect to her recommendation for a two month adjournment. I indicated that the hearing was scheduled to resume on May 27, 1991.

I received no response to my letter from the psychologist. The Applicant failed to re-attend at the hearing on the scheduled resumption date. Before continuing with the hearing, I requested that the Registrar of the Dispute Resolution Group of the Ontario Insurance Commission contact the Applicant to ascertain whether the Applicant was aware of the resumption and whether he intended to appear to carry on with the hearing. I was advised by the Registrar that the Applicant did not propose to attend. I therefore resumed the hearing in the absence of the Applicant and heard evidence from the Insurer's last witnesses. At the conclusion of the Insurer's case I adjourned in order to allow for final argument and submissions on the following day. The Applicant was advised in writing that the hearing was to be resumed on May 28, 1991 in order to hear final argument. The Applicant again failed to attend and therefore the hearing was resumed and concluded in his absence.

In the result, I have heard no direct testimony under oath from the Applicant, nor has he presented me with his arguments and submissions. My understanding of the Applicant's position in this matter is based solely on the points he raised during his cross-examination of the Insurer's witnesses. In the circumstances, I have made every effort to determine the merits of this case based on the evidence and arguments which were presented to me during the course of the hearing. However, in the absence of direct evidence from the Applicant, proving on the balance of probabilities that the Insurer erred in its assessment of the quantum of weekly benefits payable, I was left to rely only on the evidence of the Insurer, and on my own assessment of that evidence.

Evidence and Findings

The Insurer's case consisted of the following:

(1) A package of twelve documents produced prior to the hearing, as enumerated above.

(2) Documents produced as exhibits at the hearing, as enumerated above.

(3) The viva voce evidence of witnesses for the Insurer.

The Insurer's first witness was Carlos Foster Krasilczuk, a claims service representative who was assigned to the Applicant's case on November 23, 1991, two days after the Applicant was involved in an automobile accident, which occurred on November 21, 1991.

The witness' evidence was that he reviewed the Applicant's claim with the Applicant. He discussed the issue of income with the Applicant, and at the initial discussion the Applicant advised that he had no formal business records and had filed no income tax returns in the past year. The witness therefore indicated to the Applicant that the insurance company would need to review the documents that he had, such as ledgers, bank records, cheques and the like, in order to establish and verify the Applicant's income, and accordingly compute the weekly benefits payable.

The Applicant undertook to produce the required business records. At the next meeting of the witness and the Applicant, on December 17, 1990, the Applicant brought to the Insurance company offices computer-generated business records, and invoices supporting those records. The Applicant and the witness spent some two-and-one-half hours reviewing the documents. The Applicant would not allow the witness to photocopy the documents so the witness was obliged to hand copy much of the relevant information from the invoices.

The witness testified that with the documents the Applicant had provided, the Company was able to establish the Applicant's gross income, but was not able to deal with the issue of the business expenses which cease as a result of the accident (or "ceasing expenses"). The witness therefore requested more information from the Applicant regarding his expenses. The Applicant had indicated that because of his injuries, he was not able to immediately assemble all the documentation required. It was agreed between the Applicant and the witness that the Company would pay the Applicant maximum benefits of $1050.00 weekly from the time of the accident through to January 15, 1991. This would provide the Applicant with an additional four weeks to prepare the information regarding his expenses.

The next contact occurred on January 16, 1991 after the Company had received a document regarding his expenses which the Applicant had mailed in. This one-page computer-generated document, headed "Monthly Fixted Expences of Stan Moxon" (sic) was produced at the hearing and marked Exhibit No. 1. It purports to list both the Applicant's personal and business expenses, as follows:

Business

Personal

The witness testified that after receiving this document, he explained to the Applicant that complete documentation of his business expenses, as well as access to his bank records, was still required by the Insurance company. The witness explained that Exhibit 1 did not assist the Company in determining the Applicant's ceasing expenses. It was apparently the Applicant's view that his weekly insurance benefits should be calculated without reference to the ceasing expenses. The witness stated that the company was at a stalemate since the information which had been provided was not sufficient to accurately determine the benefit payable. The company therefore determined the benefit payable to the Applicant by adding up his total business expenses, as listed in Exhibit 1, i.e. $2890. and his monthly "draw" of $1200, also as outlined in Exhibit 1. The total $2890 + $1200 = 4090 was multiplied by 12 = and divided by 52, to give an average weekly amount of $900 (approx). The benefit was calculated by taking 80%, of that average amount, giving a benefit payable of $753 per week.

The witness testified that he next spoke to the Applicant after he had received a revised statement of expenses on January 18, 1991. This revised statement was marked Exhibit 2 to the hearing. It is similar to Exhibit 1, listing the Applicant's business and personal expenses. The business expenses shown are the same as in Exhibit 1. The personal expenses are changed in that the Applicant now shows a monthly "draw" of $1600. The witness testified that the Applicant provided no explanation for the discrepancy between the two statements. He was upset by the company's offer of approximately $750 in weekly benefits, and left the office. The witness testified that the $750. amount had been arrived at by including the Applicant's mortgage payments, listed on Exhibits 1 and 2, as part of his valid ongoing business expenses. He stated that the company did not feel that the mortgage was an allowable business expense, but included it on the basis that the Applicant should be given the benefit of the doubt.

The witness testified that after the Applicant left, and because the Applicant was upset by the company's calculations, he discussed the case with his supervisor, Mr. Doug Kinsman. He suggested to the supervisor that an accountant be approached, since the witness was concerned that the company still did not have enough information to accurately determine the benefit payable --i.e. there was insufficient information regarding business expenses which had ceased as a result of the accident. Also, the witness was concerned that the Applicant had altered the figures with respect to the monthly draw.

Therefore on January 18, 1991 the witness contacted Mr. Chris Plaxton of the accounting firm of Coopers & Lybrand.

After a discussion with the witness, Mr. Plaxton forwarded to the witness a letter summarizing that discussion and making suggestions as to how to more accurately calculate the weekly income benefits payable. This letter was produced at the hearing and marked Exhibit 3. The letter indicates that without further information from the Applicant, only an approximate value will be achieved. The letter suggests that the insurance company obtain details of the Applicant's banking accounts and records if it wishes to arrive at a more accurate figure.

The witness testified that after he received this letter, he again contacted the Applicant and attempted to obtain the bank documentation, as had been recommended. He arranged for another meeting with the Applicant, which never took place, as the Applicant later called it off. By then the Applicant had contacted the Ontario Insurance Commission in an attempt to have the dispute resolved.

The Applicant cross-examined the witness, who confirmed, in the course of the cross-examination, that based on the information that the Applicant had provided, he was able only to determine the Applicant's gross income. The witness also confirmed that he had reviewed, with the Applicant, a document marked Exhibit 4 to the hearing, headed "Gross Revenue of Stan Moxon for the Years 1988, 1989, 1990". The document lists monthly revenue figures for each of the years in question. The witness testified that he had not been concerned with the figures for the year 1988, but did check the figures for 1989 and 1990 against the original source invoices. He testified that he was satisfied that the information that the Applicant had provided in exhibit 4 about his gross income was accurate and correct.

The Applicant questioned the witness about whether he had considered inventory and supplies in reviewing the financial information. The witness responded that he had not considered inventory, since the Applicant had advised him that his (the Applicant's) supplies were negligible and that he did not carry an inventory. The witness also testified that it was his view that figures regarding inventory were not relevant to the issue with which he was concerned: namely, the necessary information about the Applicant's gross business income less expenses which cease. The witness defined a ceasing expense as one that stops when the business is no longer operating. The witness testified that the Applicant had said that his business was no longer operating on the day of their first meeting.

Daniel Martin Edwards, chartered accountant, of the chartered accounting firm Coopers & Lybrand, gave viva voce evidence under oath on behalf of the Insurer. He testified as to his experience, qualifications and expertise, and submitted his resume, which was marked Exhibit 5 to the hearing.

The Accountant testified that he had prepared the report dated April 23, 1991, addressed to Mr. Kinsman of the Insurer, which provides a preliminary assessment of the weekly benefits payable to the Applicant, pursuant to the legislation. The report is accompanied by seven schedules which set out the figures relied on by the company, and explain how those figures were obtained. The report and the accompanying schedules were marked Exhibit 6 to the hearing.

The Accountant explained that he had prepared his report based on information he had received at a meeting with the Applicant on Friday, April 19, 1991. At that meeting, certain records of the Applicant were reviewed, and a discussion took place regarding various aspects of the Applicant's business. The accountant also reviewed Exhibit 3, the report of his associate Mr. Plaxton.

He testified that on the following Monday, April 22, 1991, he telephoned the Applicant to request access to further information and documents, including bank deposit slips. The Applicant refused to provide the information requested.

The Accountant testified that the Applicant's records, which he reviewed at the meeting of April 19, 1991, were incomplete. He testified that it was evident that the Applicant had not maintained accounting records in a normal fashion, and this was why he subsequently requested that the Applicant provide the bank deposit slips. I note that these bank deposit slips were ultimately made available to the Insurer on May 2, 1991, the second day of the hearing.

The Accountant testified that he examined certain source documents, but that in the absence of a full set of accounting records, these documents were insufficient to determine the Applicant's income for the 52 weeks prior to the accident. He testified that without the bank deposit slips, it was impossible to determine whether a particular invoice had actually been paid by a customer. Similarly, the deposit slips and bank records were required in order to accurately determine what income was earned by the Applicant after the accident. This information is necessary to accurately compute the appropriate deduction from the weekly income benefit payable.

The Accountant testified that he prepared his report based on the information which had been provided by the Applicant, but because of the gaps in that information, he was required to make many assumptions. He testified that in his view, those assumptions were made fairly and were generous to the Applicant.

The Accountant testified that after reviewing the information provided, he concluded that the Applicant's business was not overly successful. He considered that the amounts withdrawn from the business by the Applicant were in large part being financed by new bank borrowings or by unpaid sales tax liabilities. He testified that the bank statements for the month of February 1990, which he had reviewed, showed an overdraft position of about $5000.00, which was then the Applicant's credit limit. Because of his unfavourable bank position, the Applicant was obliged to borrow an additional $10,000.00 in July 1990.

The Accountant testified that he had reviewed the information provided for February 1990 in some detail, and had found that the expenses of the business were much higher than he had expected. Some of these expenses consisted of significant payments to subcontractors. He also noted that although amounts for federal and provincial sales were explicitly stated on the front of customer invoices, there was no evidence that the Applicant had actually remitted the sales tax collected, either in February 1990 or in any other month. He testified that the Applicant had verbally confirmed that he had not been making sales tax remittances. The Accountant confirmed that the normal business practice is to make a sales tax remittance on a monthly basis.

The Accountant referred to Schedule 4 of his report, which attempts to reconstruct the Applicant's revenues from his business for the 52 weeks prior to the motor vehicle accident, and for the four weeks prior to the accident, for the purpose of establishing the average weekly amounts. He testified that in attempting to determine the revenues, he made three significant assumptions, as follows:

(1) he relied on invoice data which had been provided by the Applicant, as accurate

(2) he assumed that the PST and FST as stated on the customer invoices must be treated as a liability and not as revenue, and that therefore these amounts must be deducted when calculating revenue

(3) he assumed that income from the Applicant's sign leasing business should be treated as income for the purposes of the weekly benefit calculation

He also testified that he obtained the applicable figures for the PST and FST from a computer-generated spreadsheet-type document which had been prepared by the Applicant, and which is identified as "GL Posting of Sales for the Tax Year 1990". This document was marked Exhibit 8 to the hearing. The Accountant noted that this document did not provide sales tax figures for the month of September 1990, and that he was accordingly required to estimate the amounts for that month.

The Accountant testified that since the 52 week period began on November 21, 1989, and since no week-by-week breakdown had been provided for November 1989, he simply picked up 1/3 of the applicable figures for that month.

He testified that in order to calculate the Applicant's income for the four weeks prior to the accident, he referred to invoices for the period October 24 through to November 20, inclusive. He then estimated the amounts to be deducted for PST and FST. He also included a pro-rated amount for the Applicant's revenue from sign leases, from which 8% for provincial sales tax was also deducted.

The Accountant then referred to Schedule 6 of his report. This schedule is labelled "Reconstruction of Receipts and Payments During the Period January-September 1990", and was prepared to estimate the level of the Applicant's ceasing expenses, after the motor vehicle accident. The Accountant explained that the nine month period from January to September 1990 was used in this calculation because no detailed payment records for the period prior to January 1990 were available. Further, no payment records for the first half of October 1990 were available, either. Finally, the November 1990 payments included a capital expenditure of over $15,000 and the Insurer did not wish to unfairly include a payment which had been identified as capital when computing ceasing expenses.

The Accountant indicated that the part of Schedule 6 that reconstructs receipts uses amounts which had been identified by the Applicant as "collections", rather than invoiced amounts. This was done because it was not known whether all of the invoices had been collected, but it was assumed that amounts identified as "collections" had indeed been collected. The Accountant also indicated that he assumed that the Applicant had injected no cash into the business, but identified in receipts the amount for the new loan, taken out in July 1990, and also small amounts of interest earned. The only other item that was specifically identified was a standard amount of $348.33 per month in respect of receipts from sign leases.

The Accountant testified that for the section of the schedule which refers to payments, he utilized figures from the Applicant's own statements and from bank statements. He stated that when he met with the Applicant on April 19 he had asked the Applicant to identify on the monthly bank statements all amounts that had been withdrawn as the Applicant's personal "draw". He testified that the Applicant had indicated that "draw" amounts were high for the months of June and July 1990, because of an unsuccessful new business venture. However, the amounts in question were simply treated as personal "draw".

The Accountant testified that in this part of Schedule 6, all the "fixed expenses" which the Applicant had identified in Exhibits 1 and 2 were separately itemized as such, including the Applicants mortgage payments. The total of the itemized "fixed expenses" was subtracted from the amount of total payments, which gave a figure for "other expenses". These other expenses were viewed as the "ceasing expenses", which would no longer be payable when the business stopped operating.

The Accountant referred to Schedule 5, which determines the "ceasing expenses" as a percentage of the Applicant's total receipts. The figures with respect to receipts and payments are derived from Schedule 6, except for an estimated amount for payment to the Applicant's sons for casual labour. The Accountant testified that he felt that it was appropriate to include an amount in this regard since the Applicant had advised him that his sons did some casual work for him from time to time, and that he had made a payment of $325 to "Young Drivers of Canada" in return for work done. He therefore estimated an amount of $1000 per year for the value of the sons' labour, which amount was included as part of the ceasing expenses. In the result, a figure of 55.8% was arrived at for ceasing expenses, expressed as a percentage of receipts.

The Accountant reviewed Schedule 2, which is a calculation of the Applicant's estimated average gross weekly income for the fifty-two weeks prior to the accident. The schedule utilizes the figures from schedule 4 (the reconstruction of revenues). From the gross revenues, an amount for bad debts and discounts, estimated at 2%, is deducted. The Accountant testified that this was an approximate amount, deducted on the basis that he had observed that certain invoices had not been collected, and also because it was his professional opinion that the financial condition of the business made it likely that in certain cases discounts would be offered. Deductions are also made for PST and FST amounts owing. Finally, an amount for ceasing expenses was deducted, using the figure of 55.8% arrived at in Schedule 5. The final subtotal gives an average amount for the Applicant's gross income less ceasing expenses for the last 52 weeks. The calculations are performed both including and excluding the sale of a software package, which sale apparently took place in November 1990. Including the software sale, the Applicant's gross income less ceasing expenses is calculated at $514.00 weekly, and without the software sale the figure is $412.00 weekly.

Schedule 3 is a similar calculation performed to determine the Applicant's estimated gross average income, less ceasing expenses, for the four weeks prior to the accident. In this case again, the figures from schedule 4 reconstructing the Applicant's gross revenues are utilized. In this schedule, an amount from an actual uncollected invoice which had been identified as such, is deducted for bad debts, rather than the estimated percentage amount deducted in schedule 2. Deductions are also made for PST and FST, as in the previous schedule, and finally the percentage amount for ceasing expenses is also deducted. The amount for ceasing expenses is calculated as the actual percentage of receipts for the four week period in question, and not as 4/52 of the amount of ceasing expenses for the entire year. The Accountant testified that this result is more favourable to the Applicant, since the amount for ceasing expenses arrived at is approximately $1000.00 less. In the result, four-week average amounts are arrived at, again both including and excluding the software sale. The average four week amount including the software sale is $698 and without the sale it is $323.00.

Finally, the Accountant referred to Schedule 1, which is a simple table calculating the weekly benefit payable to the Applicant, based on the average figures for income which have been arrived at in schedules 2 and 3. Again, the calculations have been performed both including and excluding the software sale. Pursuant to the legislation, 80% of the higher average figure is payable, less 80% of the Applicant's post-accident income. The higher weekly average figure, if the software sale is included, is $698; excluding the software sale the higher weekly average is $485. This produces weekly benefits, before deductions, of 80% of the weekly average earnings, that is $558 or $388. The amount of $35 for post-accident income is deducted, representing 80% of an estimated $44 weekly received on account of income from ongoing sign leases. The net amount payable is $523 weekly, if the figures including the software sale are used, and $353 weekly without the software sale.

The Accountant stressed that throughout the calculations he was obliged to make certain assumptions, because the Applicant had not maintained complete and accurate records, and he indicated that for the most part, these assumptions were favourable to the Applicant. He identified the assumptions as follows:

(1) The deduction for bad debts and discounts was assessed at 2%. He identified this as a favourable assessment, especially during difficult financial times.

(2) He estimated that payments made to or on behalf of the Applicant's sons, in return for work done by the sons, were approximately $1000.00 for the year. He based this estimate on information provided by the Applicant, to the effect that the Applicant had made certain payments on behalf of his sons, in return for help rendered.

(3) In Schedule 6, the schedule reconstructing the Applicant's receipts, the assumption was made that there had been no injections of cash into the business. Also, it was assumed that the failed business venture which the Applicant identified had created no expenses that should have been accounted for when considering ceasing expenses. Both these assumptions were favourable to the Applicant.

(4) It was assumed that if the software sale was included in calculating the Applicant's benefits, the entire amount received was for the sale was revenue. This assumption is most favourable to the Applicant but not entirely realistic, as there might have been some costs or expenses associated with the sale.

(5) It was assumed that the majority of the fixed costs associated with operating the Applicant's business (such as rent, telephone, etc.) were ongoing, although in fact the Applicant did have the opportunity to mitigate his losses, since the business lease was on a month-to-month tenancy.

(6) No deductions or allowances were made for the savings to the Applicant in depreciation costs, as a result of the fact that his machinery was not being operated subsequent to the accident.

The Accountant referred to Schedule 7, which is a table showing the method utilized by the Insurer when it originally calculated the weekly benefit payable to the Applicant. The table also shows the "revised estimate", that is, the same calculation, performed using the information which was later obtained by the Accountant in the course of his investigation. The calculation is done without including the software sale, and the Accountant indicated that "revised estimate" amounts (without taking into account the software sale) are otherwise quite comparable to the amounts arrived at in Schedule 1. Those revised figures show a net monthly gross income of $457.87, compared to the net amount of $485.00 obtained in Schedule 1. The accountant therefore submitted that the method adopted by the company, in the circumstances, had been appropriate.

The Accountant also observed that whereas the Insurer had assumed that the Applicant's business was breaking even or making a profit, the fact that a new bank loan was taken, and the balance owing had increased, shows that the business was actually losing money.

The Accountant testified that it was his impression that the business was not particularly successful, and was in fact being financed by the combination of new borrowings and unpaid federal and provincial sales tax liabilities.

In cross examination, the Accountant gave particulars of his work history and experience. I am satisfied that his skills and experience qualify this witness as an expert in his field, and it is my view that the details of his work history are otherwise irrelevant to the matters in issue in this case. In particular, I find that the evidence that was elicited by the Applicant, regarding the witness' business activities during his previous employment, to be irrelevant to the issue of how the Applicant's income and insurance benefits should be calculated in this case.

The Applicant in cross-examination made the point that the Accountant had not referred to inventory on hand, in his report. He submitted that the cost of inventory should have been used to reduce his expenses. He also elicited, in cross examination, the fact that the Accountant had not referred to work-in-progress throughout his report. He put it to the Accountant that the report had taken into account expenditures such as the cost of materials that went towards work-in-progress, but revenue for orders on hand or work-in-progress had not been credited.

The Accountant in his response indicated that work-in-progress had not been recognized in his report, because his report was concerned with recognizing and identifying income earned and received prior to the accident. Work-in-progress does not represent income earned prior to the accident, since the income has not yet been received.

With respect to the question about inventory, the Accountant indicated that had an accounting statement been provided, giving information as to revenue and expenses, inventory might properly have been taken into consideration. However, the Applicant had not provided such an accounting statement, nor had he provided the raw information necessary to produce such a statement. For the purposes of determining the Applicant's income in order to assess the weekly benefits payable, the inventory on hand was not relevant. Moreover, the witness pointed out that the Applicant had advised him, during their discussions, that in any case the material costs of his business were insignificant in relation to the ultimate value of the sale: for example, the material cost for 800 pieces sold for $1.50 each came to approximately 2 cents a piece.

The Applicant also cross-examined the Accountant about whether he had considered, in schedule 6 of his report, any capital purchases. The Accountant replied that he had not considered capital purchases since he was not aware that any significant capital purchases had been made during the period January-September 1990. He was aware of a capital purchase in November, but schedule 6 does not deal with the month of November. The Accountant testified that the Applicant had advised him about the November purchase, but had given him no information about any other significant capital purchase.

The Applicant, in cross-examination, put it to the Accountant that the amounts for accounts receivable, which had not been recognized in his report, would actually have balanced out or supported the unpaid sales tax liability. The Accountant responded that this was a "ridiculous" proposition, since the sales tax was not being paid in any month, and the unpaid sales tax liability was increasing from month to month. The unpaid tax could not be viewed as a normal account payable which is regularly turned over from month to month, since it was a debt that was increasing. Moreover, if the Applicant had been paying tax in a regular fashion, his bank loan would have had to be $7000-$8000 higher.

In cross-examination, the Applicant confirmed that for the purposes of the revised estimate in schedule 7, the Accountant had used average figure for rent, and also for loan payments. The Accountant clarified that for the purposes of this schedule he had indeed used the average figures which seemed appropriate, and that the figure for rent was taken from the Applicant's own statement. He indicated that an average figure was used for the loan payments, since the Applicant had taken out a new loan in the month of July. He testified that if he had not used an average figure, for the purposes of the schedule, the result would have been that the figure shown for the monthly cash monthly cash deficit would have been approximately $400 higher. The ultimate outcome, for the purposes of the weekly benefit payable, would have been the same. He indicated that in any case, an average figure was appropriate since the income was required to be calculated on an average basis.

The Accountant was questioned by the Applicant about why, in the "revised estimate" portion of schedule 7, he had put in no amount for payment for a car loan. The Accountant responded that from his discussion with the Applicant, he was given to understand that neither the Applicant nor his company was making car loan payments to a bank or to any other lending institution. Although the Applicant had indicated that some loan existed between himself and his company, he had been advised by the Applicant that no payments were actually being made in respect of the loan. Therefore, for the purposes of the calculation, no figure for a loan payment was shown.

The Applicant also asked the Accountant why he had shown no amount for expenses for utilities in the "revised estimate" of schedule 7. The Accountant responded that some amount could possibly have been included, although it would not have had much significance in terms of the overall result of the calculation. The Accountant indicated that the purpose of schedule 7 is to show that the method which the insurance company had adopted to calculate the weekly benefits payable was appropriate in the circumstances, and that was why he had not been overly concerned with the actual figure for utilities.

The Applicant confirmed with the Accountant that the amount for insurance payments cited in Schedule 7 was correct, based on the invoices from the company. The Accountant indicated that no amount for business tax was shown in the "revised estimate" on schedule 7, because it was possible that the business tax might be reduced or eliminated if the business was not operating. In any event, the original amount cited was $50 and such an amount would not significantly affect the ultimate calculation of the benefit payable.

The Applicant questioned the Accountant about his reasons for including remuneration to his sons in the calculations. He indicated that it was his view that his sons were not employed in the business, and therefore this figure for remuneration was not appropriate. The Accountant replied that while examining the bank ledger card for June 1990, identified as Exhibit 14 to the hearing, he came across a cheque for $325.00 payable to Young Drivers of Canada. He questioned the Applicant about this cheque, and was advised that the Applicant had paid for driving lessons for one of his sons, in return for help with the business. He therefore treated the payment as compensation for services rendered. The Accountant also indicated that cheques which had been identified as payments to the Applicant's wife were treated as part of the Applicant's "draw", and not in connection with services rendered, since the Applicant had never advised that his wife performed any services for the business.

During the cross-examination, the Applicant questioned the Accountant about their discussions on April 17, and about the documentary material he had examined on that occasion. He also repeatedly questioned the Accountant about his reasons for not listing the unpaid sales tax liabilities under the general heading of Accounts Payable. He put it to the Accountant that the schedule 6 amounted to "nothing more than a cash flow statement" but this proposition was unequivocally denied by the Accountant. The Applicant also put it to the Accountant that to properly determine his income, financial statements and income statements should have been produced. The Accountant responded that this was impossible because the Applicant had not maintained normal accounting records for such items as receivables, payables, and inventory. Because of the state of the Applicant's records, the report that was produced was the best that could be done.

At this point in the process the hearing was adjourned. Further adjournments were granted, as I have outlined above, and ultimately the Applicant failed to re-attend to complete this cross-examination and present his own evidence.

The hearing was resumed on May 27, 1991 and on that date Ms. Christine Elkins, Branch Manger of the CIBC at the Dixie Mall gave viva voce evidence under oath on behalf of the Insurer. She testified that she was away on holidays during the month of March. She returned from her holiday on March 26 and sometime after that date she observed the Applicant working on a sign for Bally Shoes, one of the companies in the mall.

Mr. Carlos Krasilczuk gave further testimony with respect to his negotiations with the Applicant about the weekly benefits payable. It was his evidence that the Applicant wished to return to work without having any deductions from his weekly benefits taken on account of his earnings. The witness also testified that he was aware that the Applicant had moved his business to a new location, and could no longer be reached at his old business phone number as the number had been changed.

Finally, Mr. Douglas Grant Kinsman, claims superintendent for the Mississauga branch of the Insurer, gave viva voce evidence under oath with respect to the contents of a telephone conversation he had with the Applicant on the afternoon of Friday May 3, 1991. The witness testified that the Applicant had called him in order to "make a deal". The Applicant indicated that if the Insurer agreed to make higher weekly payments, he would be prepared to return to work in four to six weeks. Otherwise, he was prepared to extend the cross examination for another five or ten days, at great expense to the Insurer.

I should note that in determining the weekly benefits payable to the Applicant, I have not had regard to the evidence from these three witnesses, outlined above. However, the evidence has contributed to my assessment of the conduct of the Applicant in this matter.

Counsel for the Insurer made oral submissions reviewing the evidence which had been led. He submitted that based on the available evidence, the highest weekly benefit payable to the Applicant was $523 (the amount which took into account the software sale of November 1990) as indicated in the Accountant's report. He stressed that the Applicant had failed to produce normal accounting records or even an income tax return verifying his claims as to his earnings. Under the circumstances, the Insurer was obliged to retain an accounting expert to reconstruct the records from the raw data provided, and thus calculate the benefits payable.

It was submitted that the expert had thoroughly reviewed all the documents which had been provided by the Applicant and had carefully prepared his report, clearly identifying all the assumptions upon which his conclusions were based. It was submitted that the expert's report constitutes a realistic appraisal of the state of the Applicant's business.

Counsel submitted that the Applicant had been misrepresenting his financial position by including taxes collected but not remitted as part of his receipts. Further, he submitted that the discrepancies between Exhibits 1 and 2 also pointed to a lack of good faith on the part of the Applicant. He argued that the Applicant had increased the amount of his reported "draw" by $400 simply to try to get the insurer to increase the benefit payable. Finally, he submitted that the Applicant had misrepresented his position with respect to the car loan, again in an attempt to generate more income.

Finally, counsel reviewed the assumptions that had been made by the Accountant and submitted they were generous and advantageous to the Applicant. He submitted that the Accountant's method of computing the ceasing expenses was also advantageous to the Applicant. He submitted that there was some evidence that the Applicant had been working and earning income after the accident, and he referred to the testimony of the bank manager. However, no earnings other than the uncontroverted earnings from the sign leases were deducted when computing the benefit payable. He therefore submitted that on the evidence, the absolute maximum weekly allowance payable by the insurer was $523. Since the Insurer had been paying weekly benefits of $753 he requested that I order that the Applicant reimburse the Insurer for the overpayment ($753-523 = $230 per week).

As indicated above, I accept the submissions of counsel for the Insurer with respect to the issue of the weekly benefit payable. As I have noted earlier, the Applicant failed to present any credible evidence with respect to his earnings, in a situation where he bore the burden of proving his allegation that the Insurer had not paid the correct benefit pursuant to the legislation.

Although the Applicant cross-examined the Insurer's financial expert at length, in an attempt to show that the accounting methods used were inappropriate or unfair, I am satisfied that, on the contrary, the contents and conclusions of the report represent a fair and even-handed assessment of the Applicant's financial position. The Applicant, during the cross-examination, failed to identify any instance where the figures and calculations were inaccurate, or where the assumptions were unreasonable or unfair. Further, I am satisfied that the method used by the Accountant to calculate the benefit payable, including the method adopted for computing the ceasing expenses, was entirely appropriate, in the context of the Applicant's failure to produce clear documentation with respect to his receipts and expenses, in the form of regular accounting records.

On this basis, I find that the weekly benefit payable to the Applicant is $523, pursuant to the calculation of the Insurer, in Schedule 1 of Exhibit 6, which includes the software sale as part of the Applicant's earnings. I therefore find that there has been an overpayment to the Applicant of $230 per week, paid to the Applicant through error, which amount the Applicant is obliged to repay to the Insurer, pursuant to the provisions of section 27(1) of the No-Fault Benefits Schedule). That section states:

(1) A person must repay to the insurer any benefit received under this Schedule that is paid to the person through error or fraud.

With respect to the issue of a special award under section 242e(10) of the Insurance Act, as amended, counsel argued that no special award is payable. The legislation with respect to this matter states as follows:

(10) Special award.- If the arbitrator finds that an insurer

In this case, I find that there has been no evidence of unreasonable withholding or delay in failing to pay benefits on the part of the Insurer.

Counsel submitted that the Insurer had behaved reasonably throughout the course of its dealing with the Applicant. Counsel argued that in fact it was the Applicant who had failed to behave reasonably in this case, by withholding and concealing information from the Insurer.

Therefore counsel submitted that no penalty should be awarded should be awarded to the Applicant by reason of the Insurer's conduct in this case. I accept that submission.

Finally, counsel argued that no costs should be awarded to the Applicant in this matter. He argued that an award of costs, in effect, would reward the Applicant for his conduct, in a case where he deliberately delayed in providing information required by the insurer, and attempted to conceal information from the insurer.

After carefully considering this question, I am indeed declining to award costs to the Applicant in this case. The costs involved are not significant, since they would cover only the Applicant's travel expenses to and from the hearing place. However, in light of the totality of the Applicant's conduct throughout this hearing, culminating in the Applicant's refusal, without excuse or explanation, to re-attend at the resumption of the hearing, I find that an award of costs is not warranted.

Order:

1. The Applicant is entitled to weekly benefits of $523, under the No-Fault Benefits Schedule. The Applicant must repay to the Insurer the difference between $755.23 (the weekly benefits that had been paid to the Applicant, through error) and $523, that is $232.23 weekly for the number of weeks that benefits have been paid, in error, at the higher rate.

2. No interest for outstanding amounts is owed to or to be paid to the Applicant by the Insurer.

3. A special award under sec. 242d(10) of the Ontario Insurance Act is not payable to the Applicant by the Insurer.

Frederika M. Rotter

Senior Arbitrator

Date