Neutral Citation: 1993 ONICDRG 16
File No. A-000082(no.2)
ONTARIO INSURANCE COMMISSION
BETWEEN:
PETER BONITATIBUS
Applicant
and
WELLINGTON INSURANCE COMPANY
Insurer
DECISION ON QUANTUM
Issues:
This is the second decision involving these parties. The Applicant, Peter Bonitatibus, was injured in a motor vehicle accident on August 17, 1990. After the first hearing, I held that he was entitled to weekly income benefits from the Insurer for the period August 24, 1990 to April 26, 1991, under the provisions of Ontario Regulation 672 (the "No-Fault Benefits Schedule"), enacted under the Insurance Act, R.S.O. 1990, c. I.8.
This hearing was reconvened to determine the amount of those benefits after the parties could not come to an agreement. The Applicant also claims interest on any outstanding amounts owing and his expenses incurred in the hearing.
Result:
The Applicant is not entitled to any further weekly income benefits.
The Applicant is entitled to his expenses incurred in respect of the arbitration proceeding.
The Insurer is entitled to a repayment of $6,496. This sum was paid in error to the Applicant.
Hearing:
The hearing was held in Hamilton, Ontario, on January 18 and February 24, 1993, before me, K. Julaine Palmer, arbitrator.
Present at the Hearing:
Applicant: Peter Bonitatibus
Applicant's Representative: Cono Spitale Barrister & Solicitor
Insurer's Representatives: Deborah Zimmerman Lorri Frederick
Interpreter: Anna Sbrissa
Witnesses:
Peter Bonitatibus; Norm McCully, C.A.
Exhibits:
The parties filed 10 exhibits at this second hearing.
Evidence and Findings:
The Applicant, Peter Bonitatibus, is the president and a shareholder of ARP Construction Ltd. The company is involved in residential and commercial construction and renovation. The Applicant testified at the hearing that he owns 50 per cent of the shares in the corporation.
Partial copies of the corporation's 1990 and 1991 income tax returns, filed as exhibits, confirm this testimony. They also show Agata Bonitatibus, the Applicant's wife, as the owner of 25 per cent of the shares and their son, Paul Bonitatibus, as the owner of the remaining 25 per cent. However, copies of the share register of the corporation, also filed, show different figures. The share register of the corporation shows the Applicant as the owner of 51 per cent of the shares and his wife as owner of 30 per cent of the shares. Their son, Paul Bonitatibus, is shown as owner of the remaining 19 per cent of the shares. No explanation for the discrepancy in the evidence was provided. I accept the corporation's share register as authoritative evidence of the shareholdings of the corporation, ARP Construction Ltd.
The Applicant testified that, after the motor vehicle accident, he did not perform any physical work for the corporation until May 1990. He would occasionally attend at a job site where work was being performed by his son Paul, on behalf of the corporation, or where subcontractors were working at jobs for which ARP was the general contractor.
The main project which was constructed by ARP during the period of the Applicant's disability was a house for the Applicant's son, Ascenzo. The Applicant testified that prior to the accident it was planned that the Applicant and the corporation would build this house for Ascenzo, for which ARP would be paid. The Applicant testified that this project was intended to be a profit-making venture. As a result of the accident, the Applicant subcontracted almost all of the work on the house and no profit was earned. The $72,200 construction cost of the house was paid by ARP. Ascenzo Bonitatibus eventually reimbursed ARP by paying $46,000 in April/May 1991 and $26,000 in March 1992. ARP received no fee as general contractor. This activity by the corporation during the period of the Applicant's disability was a source of concern to the Insurer.
Despite the fact that he worked full-time for ARP Construction Ltd., at the time of the accident, the Applicant received no salary from the corporation. He received only director's fees and dividends. At the second hearing, he testified: "It was decided by my accountant when it was possible to take money for household purposes." Before the accident, only very seldom was money taken from the company, the Applicant testified. Most of the money the corporation earned was reused for the company. The Bonitatibus family lived chiefly from money Agata Bonitatibus held in a separate investment account.
At the hearing, incomplete copies of ARP Construction Ltd.'s 1990 and 1991 income tax returns and incomplete individual income tax returns of the Applicant for the same years were filed. Some schedules and T-forms were missing from the exhibits. For its year ending November 30, 1990, the corporation reported a net business income of $178,466. The share of Peter Bonitatibus is shown as $89,233. However, as the balance sheet shows, the earnings were largely retained by the corporation. The Applicant reported only $7,071 in employment income and $7,188 in dividend income in 1990 and corresponding figures of $6,500 and $5,145 in 1991. I accept these documents as accurate representations of both the corporation's and the Applicant's income in 1990 and 1991.
The Applicant submitted an Application for Accident Benefits to the Insurer dated September 11, 1990. This document shows that the Applicant was "self-employed" with ARP Construction Ltd. as a general contractor performing residential and commercial renovations. It also states that the Applicant earned $6,375 in the four weeks preceding the accident and $82,875 in the 52 weeks preceding the accident. On the basis of this statement and a similar document from ARP Construction Ltd., the Insurer paid the Applicant $600 per week in weekly income benefits for more than 10 weeks.
This conflict in the evidence goes to the heart of the dispute between the parties. Although it was evident from his testimony that the Applicant considers ARP Construction Ltd. to be "his company" and its earnings his earnings, the documentary evidence fails to support his position. In fact, throughout the hearing, the Applicant's counsel strenuously pointed to the fact that his client was only a 50 per cent or 51 per cent shareholder of the company.
I find that the Applicant ordered his financial affairs in a way that minimized the income he received from the company. I accept that the Applicant clearly has the right to structure his financial affairs, within the law, in whatever manner he chooses. However, I find I cannot accept inconsistent evidence which restates the Applicant's income from employment or self-employment so as to maximize his benefit under the No-Fault Benefits Schedule. The consequences of this finding produce a startling result in this case.
I find that in 1990, the Applicant's gross income from his occupation or employment was $7,071. I find that the figure in 1991 was $6,500. This income was "other income" received in the form of payments for his work as a director of ARP Construction Ltd. I heard no evidence as to when these payments were received in each year.
The Applicant also received dividend income from ARP Construction Ltd. The very nature of dividend income is that it is derived from investment. I find that, without evidence that the Applicant's occupation involved investing, I cannot consider this income as being "income from ... occupation or employment" to determine the Applicant's gross weekly income under the No-Fault Benefits Schedule.
In order to qualify for more than the minimum weekly income benefit of $185.60, the Applicant must prove an average gross weekly income of more than $232, or $12,064 annually. The Applicant has failed in his onus to establish a higher gross weekly income from his occupation or employment. Thus, I find he is entitled to the minimum sum of $185.60 for the 35 week period beginning August 24, 1990 and ending April 26, 1991, or a total of $6,496.
The result in this case is not what, at first glance, might have been expected where the president of this small, closely-held corporation was entitled to more than $89,000 of the company's income for 1990. However, the Applicant was not receiving salary income of a level to support a greater benefit. The manner in which the financial affairs of the company and its president, the Applicant, were structured does not allow for the calculation of a higher weekly income benefit.
Income from Occupation "Received" after the Accident:
From the weekly income benefit calculated above, the Insurer may deduct 80 per cent of any income "received or available from any occupation or employment subsequent to the accident" (section 15). It is important to note that, while the No-Fault Benefits Schedule sets out rules which apply to the calculation of gross weekly income prior to an accident, no such rules are set out in section 15 to deal with income after the accident. However, section 15 covers both income received and income available subsequent to the accident.
What is the evidence on this point? The Applicant received $6,500 in director's fees in 1991. I heard no evidence as to when this income was earned or paid. Accordingly, I deem it appropriate to prorate this income over the 52 weeks of 1991, resulting in a figure of $125 per week; $100 per week is thus 80 per cent of that figure. The Applicant was entitled to weekly income benefits for 17 weeks in 1991, so $1,700 may be deducted by the Insurer pursuant to section 15.
Similarly, the $7,071 in 1990 director's fees may have been earned entirely subsequent to the accident, entirely before the accident, or throughout 1990. I have no evidence with respect to that point. Accordingly, I deem it appropriate to prorate this income over the 52 weeks of 1990 or $135.98 per week. 80 per cent of that figure is $108.78. The Applicant was entitled to weekly income benefits for 18 weeks in 1990, so $1,958.04 may be deducted by the Insurer pursuant to section 15.
Income "Available to" the Applicant after the Accident:
The Applicant presented evidence that over the period of his disability the corporation earned gross revenues of $14,073.05 on jobs other than the construction of his son's house.
Where an Applicant is "self-employed", business expenses which cease should be deducted prior to calculating the gross weekly income (section 12(7)3.). Mr. Norm McCully, a chartered accountant, testified as an expert witness that the ratio of "ceasing expenses" in ARP Construction Ltd. appeared to be in the order of 71 per cent prior to the accident. There was no evidence presented of extra expenses incurred by the corporation after the accident, other than the statement that the house for Ascenzo Bonitatibus was completely subcontracted.
I accept the ratio of ceasing expenses at 71 per cent from gross revenues of $14,073.05. This calculation leaves $4,081.19 in revenues "available from" the corporation over the period of the Applicant's disability. I accept for this purpose the Applicant's submission that he is entitled to only 51 per cent of the income of the corporation; thus, $2,081.41 is the share available to the Applicant. When this figure is divided by the 35 week period of disability, then $59.47 per week was "available" to the Applicant during the period in which he was entitled to receive weekly income benefits. The Insurer may deduct 80 per cent of this further amount, or $47.57 per week, from the weekly income benefit payable.
In summary, to this point, then:
Amount of weekly income benefits to which the Applicant is entitled (35 weeks x $185.60): $6,496.00
Less: Portion of 1990 director's fees -1,958.04
Less: Portion of 1991 director's fees -1,700.00
Less: Amount "available" during period of disability ($47.57 x 35 = $1,664.95) -1,664.95
Total entitlement after these deductions: $1,173.05
Amount of weekly income benefits paid to the Applicant: $6,496.00
Amount of overpayment by Insurer: $4,831.05
There remains the issue of what recognition, if any, should be given to the fact that the corporation built a house for Ascenzo Bonitatibus during the period in which the Applicant is claiming weekly income benefits. The Insurer argues that an implicit "profit" figure of at least 10 per cent should be calculated for the corporation on the value of the construction. In fact, the corporation made an interest-free loan to Ascenzo Bonitatibus of $72,200 until it was repaid, among other benefits conferred by the corporation on him as a result of this project.
I agree with the Insurer that, if the house had been built by ARP Construction Ltd. for an individual who was dealing at arm's length with the corporation, then the contract price would have allowed some profit for the corporation, based on its practices and previous financial statements. The Applicant testified that this project was intended to be a profitable one for the corporation. However, due to the physical disability of the Applicant during the period of this construction, virtually the entire job had to be subcontracted. Less profit would have been earned, even if the house had been built for a stranger. However, the corporation would not have made an interest-free loan to an arm's-length purchaser of $26,000 between the fall of 1990 and March 1992 and $46,000 from the fall of 1990 to April/May 1991.
The only remaining amount to be paid by the Insurer to the Applicant is $1,173.05. In my view, this sum should be repaid by the Applicant to the Insurer in recognition of a greater notional sum which would have been "available" to the Applicant in the normal course, arising out of a project identical to the house constructed for Ascenzo Bonitatibus, to a person with whom ARP Construction Ltd. was dealing at arm's length.
In the result, then, the Insurer owes nothing to the Applicant for the 35 week period of his disability. The apparently anomalous result has been caused by the particular manner in which this Applicant arranged his personal and corporate financial affairs juxtaposed with a statutory scheme of accident benefits. The No-Fault Benefits Schedule provides a formula for calculation of benefits, based upon gross weekly income prior to the accident. The Schedule also allows the Insurer to deduct from any weekly income benefit payable, 80 per cent of any income received or available from any occupation or employment after the accident. In addition, in this case, a project carried out by the Applicant's corporation during the time of his disability, for a person with whom the Applicant was not dealing at arm's length, complicated the calculations.
The Applicant will be disappointed with this result. I share in his discomfort with the result, to the extent that I have found him to have been disabled from the physical tasks which he performed for ARP Construction Ltd. for 35 weeks during 1990-91. It seems incongruous that he should recover no weekly income benefits from his insurer. However, the manner in which his personal and corporate financial affairs were structured left me with no alternative.
Expenses:
The Applicant seeks an award of the expenses he has incurred in this arbitration. An award for expenses may be made under section 282(11) of the Insurance Act, 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 Schedule 1 of the Dispute Resolution Practice Code and in Ontario Regulation 664 (R.R.O. 1990).
In the Ralph McCormick v. Economical Mutual Insurance Company case (O.I.C. File No. A-000139), Arbitrator Susan Naylor made the following comments about expenses, with which I agree:
The discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. The arbitration process has been established under the Insurance Act, as amended, in order to facilitate applicants' access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case.
Accordingly, 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.
The Applicant is entitled to his expenses as set out in Schedule 1 of the Dispute Resolution Practice Code. In the event that the parties cannot agree as to the total amount of expenses, I remain seized of this matter and a party may apply for assessment of the expenses before me.
Order:
The Applicant is not entitled to any further weekly income benefits.
The Applicant is entitled to his expenses incurred in respect of the arbitration proceeding.
The Insurer is entitled to a repayment of $6,496. This sum was paid in error to the Applicant.
April 8, 1993
K. Julaine Palmer Arbitrator
Date