Bress v. State Farm Insurance Companies, 1992 ONICDRG 10

Ontario Insurance Commission

Neutral Citation: 1992 ONICDRG 10 File Nos. A-000191 & A-000192

Between: David Bress and Erica Bress (Applicants) and State Farm Insurance Companies (Insurer)

Decision

Issue:

The Applicants, David Bress and Erica Bress, were injured in a motor vehicle accident on February 4, 1991. The Applicants were insured under a standard automobile insurance policy issued by the Insurer. They applied for no-fault benefits under the policy. Every motor vehicle policy provides for the no-fault benefits specified in Ontario Regulation 273/90 ("the No-Fault Benefits Schedule"), and enacted under the Insurance Act, R.S.O. 1990, Chapter I.8 ("the Act").

The Insurer disputed payment of certain benefits claimed. Mediation was unsuccessful and the Applicants applied for the appointment of an arbitrator under the Act.

A number of issues were settled by the parties prior to the arbitration hearing. Counsel for the Applicants and the Insurer agreed to narrow the issues at the hearing to the issue of the Applicants' qualification for weekly income benefits and the amount of such benefits. Counsel also presented an agreed statement of facts at the hearing. The issues, based on these agreed facts, are as follows:

1. In calculating the Applicants' gross weekly income from their occupation or employment under s. 12(4) and s. 12(7) of the No-Fault Benefits Schedule, are the Applicants entitled to include the value of services performed by them in the business of renovating their cottage property ("the value-for-services issue") as income from their occupation or employment?

2. Are the Applicants qualified to receive weekly income benefits under s. 12(2) 1.111, on the basis that, at the time of the accident, they were entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing? ("the offer of employment" issue)? If so, what is the gross weekly income payable under the contract of employment?

Result:

1. The Applicants are not entitled to include the value of services performed by them in the business of renovating their cottage as gross weekly income from their occupation or employment under s. 12(4) and s. 12(7).

2. The Applicants do not qualify for benefits under s. 12(2) as persons who, at the time of the accident, were entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

The Hearing:

An arbitration hearing was held at Toronto, Ontario on December 16, 1991, before me, Susan Naylor, Arbitrator. No evidence was called, and the case proceeded on the basis of an agreed statement of facts.

Present at the hearing were:

Applicants' Representative: Donald Dacquisto Barrister & Solicitor

Insurer's Representative: Harry Brown Barrister & Solicitor

Insurer Represented by: Jerry Buckley Claims Manager Jim Smith Claims Superintendent

Documents Filed:

1. Report of Mediator, dated April 17, 1991
2. Application for Appointment of an Arbitrator from David Bress, dated September 19, 1991;
3. Application for Appointment of an Arbitrator from Erica Bress, September 19, 1991;
4. Response of Insurer, dated October 17, 1991
5. Response of Insurer, dated October 17, 1991

Cases cited:

Schacter v. the Queen in right of Canada, (1989) 1988 CanLII 9382 (FC), 52 D.L.R. (4th) 525, (F.C.T.D.), (1990) 66 D.L.R. (4th) 365 (F.C.C.A.)

The Legislation

The relevant provisions of Section 12 of the No-Fault Benefits Schedule provide as follows:

(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. He or she must have been at the time of the accident,

i. employed or 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. He 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.

(3) A person who was unemployed and who was not self-employed at the time of the accident is qualified to receive a weekly benefit under subsection (1) if he or she was employed or self-employed for any 180 days in the twelve-month period before the accident, and if he or she as a result of and within two years of the accident has suffered a substantial inability to perform the essential tasks of the occupation or employment in which he or she spent the most time during the twelve-month period before the accident.

(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 purchased, 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.

(6) The insurer is not required to pay a weekly benefit under subsection (1) to a person described in subparagraph iii of paragraph 1 of subsection (2) until the day the person would have been entitled under the contract to begin employment unless before that day the person is qualified for a benefit under another paragraph of that subsection.

(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.

2. When a person becomes qualified to receive an income benefit under subparagraph iii of paragraph 1 of subsection (2), the person's gross weekly income shall be deemed to be the greatest of,

i. if the person was qualified under either subparagraph i or ii of paragraph 1 of subsection (Z), his or her gross weekly income as determined under paragraph 1,

ii. the gross weekly income payable under the contract of employment,

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. O.Reg. Z73/90, s. 1Z.

The "Value-for-Services" issue:

(a) Agreed Facts:

The following facts were agreed:

The Applicants purchased a cottage some time before the accident. They paid $247,000.00 for it. They put into it approximately $80,000.00 worth of renovations. The total value of the cottage therefore was $327,000.00. The Applicants regarded the renovations to the cottage as a development opportunity.

For various reasons, including their injuries and the state of the market, the enterprise was not successful. The property was foreclosed. The property is presently being sold at a loss. There has been no income from that enterprise.

The issue is whether the value of the services that the Applicants performed on the cottage can be taken into account in determining their income for the 52 weeks before the accident. It is agreed otherwise that the Applicants had no income from their venture and suffered a loss.

b) Submissions

Counsel for the Applicants submitted that the Applicants' income should be based on the value of the services they rendered, although the property was sold at a loss. The principle of quantum meruit (value for services rendered) should be applied in determining the amount of the Applicants' income. He submitted that the legislation should be accorded a broad and liberal interpretation. There was no definition of income in the Act, and the term should be broadly construed. Furthermore, because the legislation takes away the Applicants' right to sue for damages for personal injury, the restrictive formula for calculating income in s. 12(7) of the No-Fault Benefits Schedule must be narrowly construed.

In the submission of counsel, it was unfair that the Applicants should be treated in the same way as an unemployed person, who had no income, because their business had failed. The fact that they suffered a loss was irrelevant, because they improved the house and gave up other opportunities at the same time.

In support of his proposition, counsel alluded to the case of Schacter v. The Queen, (supra). He conceded that he was not arguing that the provisions of the No-Fault Benefits Schedule breached the Canadian Charter of Rights and Freedoms. However, he submitted that the regulations should be read in a manner that treats parties equally.

He submitted that the Applicants should be given the opportunity to establish the income that they would have received and to submit evidence as to the value of the services. If there was evidence of valuable services rendered, they were entitled to the monetary value of those services.

Counsel for the Insurer submitted that the principle of contra proferentem did not apply to the interpretation of statutory language in insurance policies and that the legislation was to be given a remedial interpretation. However, he argued that the Act had its own remedial purpose, namely reduction of the amount of automobile premiums payable by consumers.

He submitted that the definition of income in s. 12(7) was not ambiguous, and should be interpreted in its natural and ordinary manner as money received from employment or self-employment.

He submitted that the legislative scheme contemplated that the amount of benefits was to be based on an applicant's track record, over the 4 or the 52 weeks prior to the accident, subject to a minimum safety net of $185.00 per week.

He further submitted that it would be impossible to determine the actual value of the services that had been performed.

In reply, Counsel for the Applicants submitted that the legislative scheme was intended to simplify the calculation of income from employment in order to provide a fast and efficient remedy. It was designed to do away with arguments about loss of income in a litigation sense. Furthermore, difficulties of calculation should not be predominant. While it may be difficult, the Applicants were entitled to prove the value of their services. In this hearing, the arbitrator was required to determine whether the principle of quantum meruit applied. How it was going to apply in the particular case was a matter of evidence.

Findings:

This issue concerns the amount of no-fault benefits to which the Applicants are entitled. Specifically, it concerns the interpretation of s. 12(4) and 12(7) of the No-Fault Benefits Schedule that governs the calculation of an applicant's gross weekly income upon which benefits are based.

The facts in this case are agreed upon. The Applicants were in the business of renovating their cottage, with a view to selling it. By the time of the accident, they had made $80,000.00 worth of improvements to the property. However, since their profits were bound up in the sale of the renovated house, they had not received any money from the enterprise at the time of the accident. Due both to their injuries in the accident which prevented them from working at the business, and the soft state of the real estate market, the outcome of the enterprise was not profitable. In fact, the mortgage was foreclosed and the property is being sold at a loss.

The issue is whether the unrealized value of the services that the Applicants performed can be taken into account in determining their income before the accident.

Weekly income benefits are paid under Section 12 of the No-Fault Benefits Schedule. The provisions of Section 12 are reproduced on pages 4, 5 and 6.

The courts have stated the principles that govern the interpretation of automobile insurance policies incorporating statutory no-fault benefits.

In Madill v. Chu (1977) 1976 CanLII 32 (SCC), 2 S.C.R. 400, the Supreme Court of Canada stated that the rule governing construction of private insurance contracts - that restrictive terms should be read against the insurance company (known as the "contra proferentem" rule) - does not apply to statutory benefits fixed by legislation. Instead, the usual principles for construing the meaning of statutes and regulations apply to the No-Fault Benefits Schedule.

Under these general principles of statutory interpretation, the provisions of the No-Fault Benefits Schedule must be interpreted in their usual and grammatical sense, in context and in a manner that best achieves the purpose of the legislation.

A weekly income replacement benefit is paid to an insured person who is disabled from his or her employment or self-employment, to the extent required, because of injuries suffered in a motor vehicle accident.

The purpose of these benefits is to put fair and adequate compensation quickly into the hands of persons who are unable to work because of their injuries, without regard to fault.

An applicant must qualify for benefits under s. 12(2) or (3). Under s. 12(2), persons qualify for benefits if at the time of the accident they were employed or self-employed or on a temporary lay-off or entitled to start work under a legitimate offer of employment, evidenced in writing. Under s. 12(3), unemployed persons qualify if they have a record of 180 days employment or self-employment in the 12 months before the accident.

It is not disputed that the Applicants qualified for benefits on the basis that they were self-employed at the time of the accident, and that their injuries disabled them from their occupation.

Interpretation of the provisions of s. 12(4) and 12(7) that deal with the amount of benefits to which an applicant is entitled must be construed in this overall context.

S. 12(4) determines the amount of benefits that are payable. The amount of benefits is related to the individual applicant's earnings before the accident. It is either $600.00 (the applicant can opt for a higher amount in advance under the insurance policy), or 80 percent of the applicant's "gross weekly income from his or her occupation or employment", less deductible payments. Benefits are based on the lower of these two figures.

S. 12(7) states how gross weekly income is to be calculated, but it does not state what it is: s. 12(7) 1. provides

A person's gross weekly income shall be deemed to be:

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

The amount calculated under this formula is deemed to be the amount of the gross weekly income - there is no room for an alternative approach. Gross weekly income is based upon the applicant's past earnings in either the four or the fifty-two weeks before the accident, whichever is better. However, if an applicant's income for the two periods comes to less than $232.00, this amount is treated as the applicant's income in order to provide a fixed minimum level of benefits, ($185.00) that is payable to everyone.

There is an exception to the rules that calculate benefits on an applicant's earnings track record before the accident. An applicant who qualifies for benefits because he or she has an existing offer of future employment under s. 12(2) 1. iii can count the amount payable under the contract of employment as his or her gross weekly income, again subject to the basic minimum.

The issue before me is whether the value of the services provided by the Applicants - the improvements they made to the property - in the course of their business can be included in calculating their gross weekly income under s. 12(7).

Counsel for the Applicants submits that a claim based on the value of the services rendered is not a claim for potential business losses, but reasonably falls within the concept of income under the legislation. In aid, he cites the principle of "quantum meruit" in contract or quasi-contract law. This principle is described in the text book, Employment Law in Canada, (Christie, 1980, Butterworth) in the following terms (p. 15):

Where one person has received valuable services from another in circumstances that make it obvious that the services were not intended to be given gratuitously, the law will normally imply a contract to pay at the going, or fair, rate.

For example, if the Applicants had contracted with a purchaser to make the improvements on the property, but they had not agreed on a price for these additional services, a court under this doctrine could award them a reasonable amount for their unpaid work against the purchaser who benefited from these services.

The principle has also been recognized by the courts in assessing damages in personal injury cases. For example, an injured plaintiff who receives nursing services from a relative for whom no remuneration is paid, nonetheless is regarded as suffering a compensable pecuniary loss:

His loss is the existence of the need for nursing services, the value of which for the purposes of damages - for the purpose of ascertainment of the amount of his loss - is the proper and reasonable cost of supplying these needs .. so far as the defendant is concerned, the loss is not someone else's loss it is the plaintiff's loss.

(Law of Damages , Waddams, 2nd ed. 1991, Canada Law Book, p. 320 citing Cunningham v. Harris (1973) 1 QB 942 (Eng. C.A.))

However, payment of no-fault benefits under Section 12 is a purely statutory function. Benefits are paid on the basis of an applicant's "gross weekly income from his or her occupation or employment". The purpose of the benefits is to continue an applicant's income stream following an automobile accident. However, under s. 12(7) the amount of benefits - to compensate for the loss - are statutorily defined as the applicant's average gross weekly income from employment or self-employment for the four or fifty-two weeks before the accident, or $232.00.

The term "income" is undefined in the legislation. It is a term employed elsewhere in other statutory schemes - taxation statutes, for example. I was provided with no case-law on the inclusion of the concept of imputed or unrealised value-for-services as income in other schemes. However, the term "income" must be construed in the context of the specific legislation in which it appears.

The Concise Oxford Dictionary defines the word as :

the money or other assets received esp. periodically or in a year, from one's business, lands, work, investments, etc.

Black's Law Dictionary defines "income" in similar terms:

The return of money from one's business, labour or capital invested; gain, profits, salary, wages, etc.

Under these dictionary definitions, the ordinary and grammatical meaning of the term "income" is money received in respect to a particular period of time. In the case of the No-Fault Benefits Schedule, this time period is the four and fifty-two weeks before the accident.

The scheme and purpose of the legislation support a broad definition of the term "income" so as to capture the real return from employment or self-employment generated to an applicant in these periods. Money accrued but not received could be included. Moreover, it might reasonably extend beyond money to money's worth - to remuneration or return capable of being estimated in monetary terms.

However, even giving the statutory language the broadest possible scope, I cannot conceive that it reasonably encompasses a notional or imputed value for services that have been rendered by the Applicants in the course of their business, for which there is no remunerative - or other - return to them, within the legislative time-frames. In other words, the word income implies that something - money, money's worth, a thing of some value, greater command over goods and services - comes into an applicant's hands or accrues to him or her in return for their employment or occupational endeavours. In this case, the Applicants have received no such return for their work. Indeed, the absence of any reasonable return for work done is precisely the basis of a quantum meruit claim in contract which is brought against the beneficiaries of such work.

The argument of counsel for the Applicants is thoughtful and creative. However, in my view, the concept of such imputed value cannot constitute the Applicants' "gross weekly income" within the plain meaning of the No-Fault Benefits Schedule.

If they cannot include the value of these services as their income, - and establish what the value should be - the Applicants are still entitled to a benefit of $125.00, based on the minimum deemed income of $232.00. However, people who cannot qualify for employment-related benefits under Section 12 - such as the longer-term unemployed, or retired persons who are outside the labour force altogether - are nonetheless entitled to a flat-rate benefit of $185.00 if they are disabled from their usual tasks. This falls under Section 13. The Applicants' counsel submits that it would be unfair to treat the Applicants as if they were in this category, simply because their business failed. He cites the decision of Schacter v. the Queen in right of Canada (supra) in support of the proposition that statutes should be interpreted in a manner that avoids such inequality of treatment.

The Schacter case involved the issue of whether benefits under the Unemployment Insurance Act should be paid to natural fathers of new-born infants for time off work on the same basis as they are paid to adoptive parents. The plaintiff challenged the legislative rules that denied such benefits to fathers under Section 15 of the Canadian Charter of Rights and Freedoms. This provides that every individual is equal before and under the law and has the right to equal protection and equal benefit of the law without discrimination, and, in particular, without discrimination on a number of enumerated grounds such as race, sex, or mental or physical disability.

The court held that the distinction in the legislation created an inequality of benefit in terms of the purpose of the legislation, and discriminated against natural fathers on the basis of sex or an analogous personal characteristic.

The court therefore extended the benefit of the legislation to natural fathers.

Counsel for the Applicants did not argue that the provisions of Section 12 somehow breached the Charter. However, he argued that legislation should be construed so that it does not confer unequal benefits on similarly situated persons. However, where statutory language is clear - as it is here - the legislation must be applied, unless it contravenes a higher constitutional imperative such as the Charter. As stated previously, counsel did not take this position.

The agreed statement of facts acknowledges that the Applicants' business failed, at least in part, because of their automobile accident. While the precise effect of the accident on their business is a matter to be proved by evidence, it can be assumed that the Applicants' injuries deprived them of potential profits from their business. This case is, at heart, a claim for loss of future business profits resulting from the automobile accident. However, this is not a loss that is compensable under the no-fault benefits scheme. As stated above, the statutory scheme compensates for loss of income from employment and self-employment but compensates such loss in specific terms: benefits are based on an applicant's prior earnings record before the accident, subject to a minimum amount.

As an arbitrator exercising statutory powers, I have no jurisdiction to award benefits or compensation for losses that do not fall within the existing statutory no-fault benefits scheme. I have no jurisdiction to award income replacement benefits on any other basis, regardless of whether the legislation works unfairly in individual cases, or whether it fails to compensate an applicant to the full extent of his or her loss. I have no jurisdiction therefore to award compensation for loss of potential or future business profits, or for future economic loss.

The fact is that the present no-fault benefits scheme does not guarantee full and perfect compensation to persons injured in motor vehicle accidents. The choices or trade-offs involved in establishing the present no-fault system - in balancing the competing goals of full compensation, affordable premiums and universal benefit coverage regardless of fault - are legislative choices. It is for the Legislature - and only the Legislature - to address that balance, as it sees fit.

"The Offer of Employment" Issue:

(a) Agreed statement of facts

The agreed facts are as follows:

At the time of the accident, the Applicants were self-employed, and had a partnership business in the name of "Senior Shoppers".

The partnership, comprising the two Applicants, was registered on January 5, 1991. The business was not incorporated. On January 28, 1991, the partnership received a $15,000.00 loan from the bank to finance the business.

Before the accident, the Applicants incurred a number of expenses in setting up the business. They had paid $450.00 for 10,000 flyers, and $1,200.00 for a business phone. In April, 1991, they released 1,000 flyers.

The partners intended to draw $500.00 each per week. It is not clear whether there was a draw just before the accident. The Applicants received no other income from the business until May or June 1991, when they received $500.00 in revenue.

It was their intention to have two employees, depending on the business. One employee was either hired or about to be hired at the time of the accident, at earnings of $500.00 per week - the same as the Applicants.

The intent of the parties was to proceed as they were, but for the accident.

(b) Submissions

The Applicant submitted that the legislation must be broadly interpreted, because it restricts substantive rights.

He submitted that the Applicants qualified for benefits under s. 12(2) 1. iii.

They were about to start their business prior to the accident. They were also entitled to start work within one year. They were getting flyers and intended to go forward shortly. He submitted there was evidence of their clear intention to start business within one year of the accident.

He also submitted that there was an "offer of employment" within the terms of the subsection. There was no guidance in the legislation as to whether the offer must come from an outside source, such as an employer or corporation. The legislation should be read broadly, against the insurer.

He submitted that the partners offered themselves the employment and had the intent to pay themselves every week. In his view, there was no difference whether they intended to pay themselves or someone else. He submitted that they had a well-developed plan of business that comprised the offer of employment.

A contract in writing was not required by the legislation. The legislation required only evidence in writing. He submitted that, provided there was some written evidence of the Applicants' intention to pay themselves, e.g. the partnership agreement or another piece of documentation, they fell within the section.

In his submission, unsophisticated business people, such as the Applicants, should be treated in the same manner as anyone else. He submitted that had they set up business as a corporation, they would fall within the section.

He also submitted that, had their employee been injured, he or she would have been able to claim under this subsection. He submitted that the decision in Schacter (supra) supported equity of treatment.

He submitted that the parties were involved in the organization, and the administration of the enterprise, and that they made an offer of employment to themselves.

Counsel for the Insurer submitted that in interpreting the legislation, it should be remembered that the legislation tries to balance perfect compensation with paying everyone regardless of fault. He submitted that the Applicants were really arguing that they should be compensated for loss of potential business profits. This is not recognized under the legislation.

He submitted that, before the accident, the Applicants were self employed; they had never changed their employment status. He submitted there was no offer for employment before the accident, because there had to be an intended change to an applicant's pre-accident employment situation.

Counsel for the Insurer submitted that there was no offer, no certainty as to the amounts of money to be paid and no certainty as to the date employment was to start. In his view, there had to be something in writing, there had to be an offer of employment, and it had to be by someone guaranteeing money. However, in all cases, there was a safety net of $232.00.

In reply, counsel for the Applicants submitted that subsection 12(7)2.i contemplated that an applicant falling within its terms could be either employed or self-employed. In this case, the Applicants had agreed to pay themselves starting in a certain week. This was different from claiming for loss of profit. He argued that the commencement date had not happened, and the difficulties with respect to certainties could be dealt with by calling evidence.

Findings:

This issue raised here is whether the Applicants qualify for weekly income benefits on the basis of the business arrangements in place before the accident. According to the agreed statement of facts, the Applicants had entered into a partnership agreement with a view to setting up a business. They had taken some steps in the business, and they had hired, or were about to hire, an employee.

The question is whether the Applicants qualify for no-fault weekly income benefits by reason of these arrangement under s. 12 (2) 1.iii.

The purpose of and conditions necessary for entitlement to no-fault weekly income benefits are stated previously in this decision. In summary, these benefits are intended to compensate an applicant for loss of income from employment or self-employment as a result of the accident. It is not disputed that the Applicants were unable to attend to their business because of their injuries. However, the question is whether they meet the necessary qualifications for benefits contained in s. 12(2) or (3).

The question is whether they fall within the terms of s. 12(2) Under this provision, an applicant can qualify for benefits if, at the time of the accident, he or she is:

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

Under s. 12(7) 2, benefits are calculated as "the gross weekly income payable under the contract of employment" or $232.00, whichever is greatest. However, if the applicant was either employed or self-employed or on a temporary lay-off at the time of the accident, and so also qualifies for benefits under these heads, benefits are based on the best of the contract amount, the minimum statutory amount, or the income averaging provisions under s. 12(7) 1.

S. 12(6) provides that benefits need not be paid until the person "would have been entitled under the contract to begin employment" unless he or she qualifies for benefits under another head.

The interpretation of these provisions is governed by the same principles of statutory construction as are laid out previously. The No-Fault Benefits Schedule is remedial legislation and must be given a broad and liberal construction.

Counsel for the Applicants submits that the Applicants qualify for benefits under this provision because their arrangement to start business through the partnership vehicle represents an offer of employment to themselves, that entitled them to start work within a year after the accident within the requirements of s. 12(2) 1.iii. There was evidence of a clear intention to pay themselves a weekly amount of money. The partnership agreement or some other documentation could constitute the written evidence of the offer, to be proved in the ordinary course.

The agreed statement of facts is brief in regards to this issue. Counsel submits that the Applicants were unsophisticated business people and little regard accordingly should be given to their mode of operation. The agreed statement of facts states that the parties were self-employed, and that a partnership agreement had been executed. However, the true nature of the relationship of the parties is obviously a question of evidence. This ruling is based strictly on the facts as presented in the agreed statement of facts, and is limited to those assumed facts.

It was also agreed, in the event that I accepted the position of the Applicants, that there was insufficient evidence before me to determine the amount of benefits payable under the contract. Therefore, it was agreed that the issue of the amount of benefits would be deferred until the entitlement of the Applicants had been established.

Counsel for the Insurer argues that the provisions of s. 12 (2) l.iii are premised on an intended change of status on the part of an applicant - a move from one job to another, a change of business - that is affected by the accident. He submits that in this case, there was no such change of direction or status ... the Applicants would have continued to do what they did before the accident but for its occurrence.

Even if I accept however that the business plan of the Applicants did in fact constitute such a change of direction, there seems to me to be a more fundamental problem.

The legislation draws a distinction between employment and an occupation or self-employment. This distinction is made throughout the section.

S. 12(2) 1.iii is limited to "an offer of employment", under which an applicant is "entitled to start work". S. 12(6) states that benefits will not start until "the day the person would have been entitled under the contract to begin employment". It equates "offer of employment" under s. 12(2) 1. to "the contract", and implies a specific date for its commencement. S. 12(7) 2. ii. also speaks of the amount "payable under the contract of employment", on which benefits are based. This suggests a reasonably certain sum. On their face, these requirements do not fit the business arrangements of the Applicants.

There is no definition of these terms in the legislation. At common law, there is a clear distinction between the concepts of employment and self-employment. The term "contract of employment" generally relates to the employment relationship between employer and employee, not other business relationships. Employees, independent proprietors, partners, corporations are distinct entities well known in law. The wording and the scheme of Section 12 suggests strongly s. 12(2) refers to an employer-employee situation.

The basic principle of partnership is stated in Employment Law in Canada, (Christie, 1980, Butterworth) in the following terms (p. 24):

a partner cannot be employed by the partnership any more than a person can be his own employer

The concept that the parties have made an offer of employment to themselves and that an offer does not require a third-party "offeree", external to the Applicants, finds little support in common law precepts. The text-book, The Law of Contract in Canada, (Fridman, 2nd ed. 1986, Carswell) states at p. 24:

An "offer" means the signification by one person to another of his willingness to enter into a contract with him on certain terms.

Caution must be applied in superimposing common law definitions of "offer of employment" and "contract of employment" on a statutory scheme. Statutory wording must be construed in the context of the particular statutory scheme, having regard to its specific purposes.

However, I am satisfied that the Legislature did not intend these words in the No-Fault Benefits Schedule to be given a meaning that is different from their usual and ordinary sense, well recognised in law. I see little in the context of the statutory provision that would assist the Applicants' argument in this regard. Indeed, as stated previously, the context suggests otherwise.

Moreover, the interpretation of s. 12(2) 1.iii, that requires an offer of employment from an employer, in accordance with the usual sense of the words, is compatible with the objectives of this legislative scheme. The rules governing calculation of benefits emphasize the value of administrative ease and workability. As stated previously, benefits are generally based on an applicant's past earnings record, which is capable of relatively precise verification. In the case of an applicant who qualifies for benefits under an offer of employment, benefits are calculated on the basis of the gross weekly income payable under the contract of employment, which is also verifiable. However, future earnings from self-employment are generally not verifiable with the same certainty.

Counsel for the Applicants submitted that s. 1Z(7) Z.i. supports his argument because it refers back to s. 1Z(Z) 1.i. which relates to both employed and self-employed persons. He therefore submits that the subsection contemplates that an applicant can be either employed or self-employed. However, it is quite conceivable that a person who is self-employed at the time of the accident may also have an offer of employment from an employer for the future, and therefore qualifies under both heads.

Counsel for the Applicants argued that limiting s. 1Z(Z) 1. iii to situations where a contract of employment exists may place undue emphasis on the vehicle that applicants chose to do business by. The Applicants are not sophisticated business people. Why should their entitlement to benefits vary according to the manner they chose to structure their business affairs, and obtain remuneration? Counsel points out that, had the Applicants incorporated their business, and appointed themselves officers, they would qualify for benefits as employees of their own corporation. Moreover, as partners, they employed or intended to employ an employee to assist them in the operation of the business. That employee likewise would qualify for benefits.

I also recognise that the courts in the area of assessing damages for personal injuries have generally recognised the realities of the situation, and have looked beyond the form of business used.

I am sympathetic to these arguments. However, in my view, the wording of the provisions interpreted in their usual grammatical sense and in context, cannot support the arguments of counsel. I find therefore that the Applicants do not qualify for benefits as persons, who, at the time of the accident, were entitled to start work within one year under a legitimate offer of employment made before the accident, and evidenced in writing under s. 12(2) 1.iii.

The Applicants' Expenses

The Applicants also seek an award for the expenses they have incurred in respect of the arbitration proceeding. An award for expenses may be made under section 242d(11) which provides as follows:

The Arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.

The prescribed expenses and amounts are set out in the Schedule to Ontario Regulation 275/90, and in the Schedule to the Dispute Resolution Practice Code, governing the conduct of arbitration proceedings.

In the prior arbitration decision of McCormick v. Economical Mutual Insurance Company, appropriate criteria guiding the exercise of an arbitrator's discretion to award an applicant his or her expenses were discussed. In that decision, it was stated:

...It is appropriate to award an applicant his or her expenses unless, in the circumstances of the particular case, it is determined that the application for appointment of an arbitrator was manifestly frivolous or vexatious, or that the applicant's conduct unreasonably prolonged the proceedings.

I received no submissions that suggested that these criteria are inappropriate, or otherwise inapplicable in this case. Therefore, having regard to them, I find that the Applicants are entitled to an award for their expenses, as prescribed in Ontario Regulation 275/90, and Schedule 1 of the Dispute Resolution Practice Code. I remain seized of this matter in the event that there is a dispute in regards to the amount of expenses claimed.

Order:

1. The Applicants are not entitled to include the value of the services performed on their cottage property in the course of business, in calculating the gross weekly income from their occupation or employment under s. 12(4) and 12(7) of the No-Fault Benefits Schedule.

2. The Applicants do not qualify for benefits under the s. 12(2) 1.iii., as persons who, at the time of the accident, were entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

3. The Applicants' gross weekly income from their occupation or employment is $232.00, pursuant to s. 12(7) 1.iii. They are therefore entitled to a weekly income benefit of $185.00, each.

4. The Applicants are entitled to their reasonable expenses incurred in participating in the arbitration in accordance with Ontario Regulation 275/90 and Schedule 1 to the Dispute Resolution Practice Code.

March 23, 1992

Susan Naylor Senior Arbitrator