Ontario Insurance Commission
Neutral Citation: 1994 ONICDRG 73
Between:
Serafino Patriarca, Applicant
and
Pilot Insurance Company, Insurer
Decision
Issues:
The Applicant, Serafino Patriarca, was injured in a motor vehicle accident on July 12, 1991. He applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 6721. Weekly income benefits were paid by the Insurer until October 26, 1993.
The Applicant disagreed with the amount of weekly income benefits and contended that he should receive more than the sum paid by the Insurer. The parties participated in mediation, but were unable to resolve their dispute. Mr. Patriarca then applied for arbitration.
The issue in this hearing is:
- What is the correct amount of weekly income benefits to which the Applicant is entitled?
The Applicant also claims interest on any outstanding amounts owing, and his expenses incurred in the hearing. The Insurer claims a repayment of any amounts that have been overpaid to the Applicant.
Result:
The Applicant is entitled to weekly income benefits of $185.60 per week from July 19, 1991 to October 26, 1993.
The Insurer is entitled to repayment of $15,951.51 and interest according to the provisions of section 27(1) and (4) of the Schedule.
The Applicant is entitled to his expenses incurred in respect to the arbitration.
Hearing:
The hearing was held in North York, on May 9 and 10, 1994, before me, K. Julaine Palmer, Arbitrator.
Present at the Hearing:
Applicant: Serafino Patriarca Applicant's Representative: Brent Vickar, Barrister and Solicitor Insurer's Representative: Rudolph Lobl, Barrister and Solicitor
Witnesses: Raymond Davidson Serafino Patriarca Jim Muccilli Daniel M. Edwards
The parties filed 15 exhibits.
Evidence and Findings:
Background:
This hearing is about the amount of weekly income benefits which should be paid to Mr. Serafino Patriarca, the Applicant. There is no dispute between the parties about Mr. Patriarca's disability. Mr. Patriarca returned to work by November 1993.
Serafino Patriarca, now aged 44, has been self-employed in a business known as Terelle Carpentry since approximately 1979. Mr. Patriarca testified that in the summer he usually worked as a foreman for another business, owned by his brother-in-law, called JVM Carpentry. In the winter, he testified that he was self-employed. Frequently in the winter he would also collect unemployment insurance benefits. Mr. Patriarca testified that in the summer of 1990, on weekends he worked as a self-employed person and during the week he worked for JVM Carpentry. From January until the end of April 1991, he received unemployment insurance benefits.
In the spring of 1991, when Mr. Patriarca's son, Alfredo Patriarca, was about to be licensed as an electrician, the father and son decided to begin a new business known as Terelle Construction. They were equal partners in the operation. The business registration of Terelle Construction was filed on June 26, 1991.
The first job which was undertaken by the new business, Terelle Construction, was a renovation for Mr. and Mrs. Raymond Davidson on Rumsey Road ("the Davidson job"). Also about the same time, the new business began a project for Mr. Domenic Rosi. Mr. Patriarca testified that he began the Davidson job during the last week of June, a couple of days before the new business was registered. He testified that it took one and a half to two weeks to complete the work. The work was done by Mr. Patriarca and his son Alfredo, as well as a couple of friends of his son Alfredo when concrete was being poured during the last few days.
Mr. Patriarca testified that his son's friends were not paid, because they owed a favour to his son. In addition, after the accident, Mr. Patriarca's brother hung the front door as a favour, because the Applicant had been injured in the accident. Mr. Patriarca testified that after the accident he did no further physical work for Terelle Construction. He did some administrative work, however, including signing cheques. Mr. Patriarca testified that his son Alfredo continued on with some jobs which had been arranged before the accident -- some he did with friends and some he subcontracted to others.
Terelle Construction did no further business after the end of 1991, according to Mr. Patriarca, because business was starting to decrease. He testified that he lost money because he had given low prices and then had to subcontract many jobs.
The Applicant testified that he began work on the Davidson job about June 25, 1991, when he went to take some measurements and order material. He had met Mr. Davidson the week before through a friend who was going to be resurfacing the Davidson's driveway. Mr. Patriarca testified that the work took one and a half to two weeks and that he was finished the job on July 9, 1991. He testified that he was paid the balance owing by Mr. Davidson about 30 days after the contract finished, when he went back to collect the money.
Raymond Davidson testified. Mr. Davidson and his wife have lived on Rumsey Road for about 25 years. Mr. Davidson is in the advertising business and was the creative director at Sears for their catalogue and retail division for approximately 20 years. Mr. Davidson testified that he was introduced to Serafino Patriarca by a representative of a company he had contacted to resurface his driveway. The Davidson's porch needed renovation and it was suggested that this work be completed before the driveway work was begun. Mr. Davidson testified that he gave Mr. Patriarca a down payment of $2,180, followed by a deposit of $4,000 which was intended to cover the cost of the materials on the contract. He also paid a balance of $3,945 after the contract was completed. Mr. Davidson testified that he paid by cheque made out to "Cash" for the down payment and the deposit, on the understanding that the materials could be purchased more cheaply if they were paid for in this manner.
Mr. Davidson did not have a good recollection of when the porch work was done, except that he was emphatic that the work had been done in 1991, and prior to the driveway being paved. Mr. Davidson initially testified that he thought the work was completed by the middle of June. He did not recall if he signed a contract before, during, or after the work was done. Mr. Davidson did confirm, however, that the work took approximately two weeks to complete.
On re-examination, Mr. Davidson reiterated that he felt the work had to have been done before the middle of June, because by July 1, 1991, the driveway was completed and everything was finished.
Two chartered accountants testified at the hearing: Mr. Jim Muccilli for the Applicant and Mr. Daniel M. Edwards for the Insurer. Both parties filed written accounting reports as well.
Section 12(7) of the Schedule sets out the rules for the calculation of income benefits for employed or self-employed persons:
(7) The following rules apply to the calculation of gross weekly income:
- 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.
- 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. 273/90, s. 12.
The Applicant is basing his claim on the income which he earned in the four weeks preceding the accident. At that time the Applicant was self-employed with his son in the partnership of Terelle Construction. The accident occurred July 12, 1991, hence I am interested in the operations of Terelle Construction from June 14, 1991 until July 12, 1991.
From the documents filed at the hearing, I learned that two contracts were underway during the period in question: one for Mr. Davidson and one for a Mr. Domenic Rosi, the principal of Disc-Pro Consulting Services, who is also Mr. Patriarca's bookkeeper or accountant. I heard no oral testimony whatsoever about the Rosi contract. I was only told by the Applicant's counsel that Mr. Patriarca would not be arguing that any profit from that contract should be taken into account in computing the Applicant's gross income during the four weeks preceding the accident.
I am troubled by this selectivity in the presentation of evidence as to the Applicant's business activities in the four weeks before the accident. I am not confident, based on the other evidence presented, that the "Rosi contract" would necessarily have earned a profit, and hence, any loss would have direct impact on the net income earned by the Applicant and Terelle Construction in the four weeks before the accident. Since I also have concerns about the proof of the dates when the Davidson contract was performed, it would have been useful to have evidence about exactly when the "Rosi contract" was underway.
Mr. Patriarca's case is based upon very little original documentation. No original documents were presented on which his claims relating to operating expenses were based: for example, no documents were produced relating to material expense, telephone expense, truck expense and vehicle insurance, and subcontract expense, all of which form part of the expenses claimed by Terelle Construction in its Income Statement at December 31, 1991. Mr. Patriarca did testify initially, however, that his receipts had been stolen from his van. No details of the theft were provided, nor any explanation of why at least some duplicate invoices or receipts could not be obtained.
A photocopied document, purporting to be a photocopy of the registration of the business name Terelle Construction under the Business Names Act, 1990, was filed as an exhibit at the hearing. The Ministry registration date on this document appears to be June 26, 1991. The form asks for the "Date of First use of name", to which a response of "June 25, 1991" has been written over what appears to me to be another date which has been obliterated by opaque correction fluid. No oral evidence explained this apparent alteration. Mr. Patriarca testified that his son attended to the registration of the name, while the Davidson job was underway. In a hearing where evidence of the first contract this business undertook is being offered, this apparent alteration of a date could be significant.
The banking documents filed at the hearing appear to be the most credible, independent documents in this arbitration. I note that the bank account of Terelle Carpentry was closed June 5, 1991. The Terelle Construction bank account was not opened until August 2, 1991. Only the bank statement for August 1991, together with its returned cheques was filed at the hearing. On August 9, 1991, a deposit of $3,945 was posted to the account. Mr. Patriarca testified this represented the balance owing by Mr. Davidson on his contract; Mr. Patriarca testified that Mr. Davidson had wished to withhold payment of the balance owing for 30 days after the work was completed. Mr. Davidson did not testify about any waiting period; he did, however, verify his signature on a copy of an invoice dated July 9, 1991.
An original and several differing photocopies of a contract dated, simply, "June 25" relating to the Davidson renovations were filed at the hearing. Mr. Patriarca testified that he had produced more than one copy of the contract by reprinting it on his computer. Although the contract is dated June 25, it refers to a deposit of July 6, 1991. It also refers to a door costing $125, which Mr. Davidson testified they added to the contract later. This door was hung by Mr. Patriarca's brother, after the accident. The start date for the work is not noted on the contract. Mr. Davidson could not recall with any precision when he signed this contract, although he believed it to be while the work was underway; he further recalled signing some document after the work was completed.
Mr. Davidson testified at the hearing, to the best of his recollection, about work done on his home nearly three years prior to the hearing. He had no special reason to remember the exact dates when the work was accomplished. His evidence puts the work being completed earlier in the spring of 1991 than Mr. Patriarca's evidence. However, I am persuaded, on a balance of probabilities, based upon Mr. Patriarca's sworn evidence and the flow of events from the closing of Terelle Carpentry's bank account, the business registration, the accident, and the hanging of the door by Mr. Patriarca's brother, that the work on the Davidson contract was completed during the four weeks prior to the accident of July 12, 1991.
The Applicant must also bring evidence, however, to enable me to find that his net income from his self-employment in the four weeks before the accident was greater than $232 per week, to be entitled to more than the minimum weekly income benefit. The Applicant has the burden of providing sufficient proof to allow an arbitrator to make such a finding. The standard of proof required is not proof beyond a reasonable doubt but only sufficient evidence to tip the scales on a balance of probabilities.
The Davidson contract paid $3,945 in labour costs to Terelle Construction. That is the only contract in the four weeks before the accident on which the Applicant relies. Mr. Patriarca is entitled to only half the profits of the partnership, so this must be taken into account in calculating the net income of the business in the four weeks preceding the accident.
In addition, according to the provisions of section 15 of the Schedule, the Insurer is entitled to deduct 80 per cent of any income received or available from employment following the accident by the Applicant from any weekly benefits paid. If one were to accept one of Mr. Edwards' recommended alternatives, then Mr. Patriarca would receive no weekly income benefits in the early fall of 1991, based on the premise that Mr. Patriarca's average weekly post-accident income exceeded $232 per week.
Mr. Patriarca filed an Application for Accident Benefits, dated October 16, 1991, with the Insurer, together with an Employer's Confirmation of Income Statement, signed by his son, dated October 7, 1991. Both forms show gross income of $48,000 in the 52 weeks preceding the accident. This gross income does not coincide with amounts reported in Mr. Patriarca's 1990 and 1991 income tax returns. In 1990, he reported employment income of $22,711.61, unemployment insurance benefits of $6,841 and a loss on self-employment of $3,261.27. In 1991, he reported no employment income, unemployment insurance benefits of $10,536 and a loss on self-employment income of $5,986.20. Even in 1989, Mr. Patriarca reported earning only $23,143.72 from employment and $5,754.43 from self-employment.
Two differing income statements of Terelle Construction at December 31, 1991, were produced. One shows a net loss of $11,972.41, coinciding with the loss reported by Mr. Patriarca to Revenue Canada. The other shows $5,740 more in revenue and $5,740 more in subcontract expense, apparently related to the period after the accident.
On the basis of the documents and oral evidence, I am simply not able to take the figure of $3,945 for labour on the Davidson contract, half it, then divide the result by four to obtain the net weekly income figure for Mr. Patriarca. Other operating expenses and any expenses which ceased following the accident must first be deducted. A portion of the amounts relating to telephone expense, the truck lease, vehicle insurance, truck gas, repairs and parking charges, bank charges, benefit plans, office costs, and perhaps even materials, must all be deducted as they are proportionately attributable to the Davidson contract.
Mr. Patriarca was not able to explain how two men who worked on the Davidson project were to be paid; he thought that they worked on the concrete portion of the job as part of an arrangement with his son, who did not testify. I heard no evidence at all of any expenses which may have ceased following the accident. I heard very little evidence of how the business operated after the accident and whether Mr. Patriarca earned any income from the partnership in the early weeks following the accident. Neither Mr. Patriarca, nor his son Alfredo, nor his bookkeeper, Mr. Rosi, who were familiar with the contracts and the accounting, testified about these important matters. Over $13,000 was deposited to the Terelle Construction bank account in September and November 1991.
In the result, the Applicant has not provided sufficient proof to enable me to find that he is entitled to more than the minimum benefit of $185.60 per week. I have not been satisfied that his correct gross weekly income from self-employment for the four weeks preceding the accident exceeds $232.
In addition, I have concerns that the Applicant may have received or had available some income from his occupation or employment subsequent to the accident, at least for a period to the end of September 1991. This observation stems from the fact that the business revenues of Terelle Construction were higher after the accident, for a time, then before it. However, it is the Insurer who bears the burden of providing sufficient proof of this income deduction under section 15 of the Schedule and, in my view, the test here also has not been met.
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, R.S.O. 1990, c. I.8, as amended, 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, Dispute Resolution Expenses.
In Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC 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 Director of Arbitrations approved this statement of the principles guiding an award of expenses in the appeal decision in Vito Luigi Calogero and The Co-Operators General Insurance Company, February 13, 1992, OIC File No. P-000251.
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 entitled to weekly income benefits of $185.60 per week from July 19, 1991 to October 26, 1993.
The Insurer is entitled to repayment of $15,951.51 and interest according to the provisions of section 27(1) and (4) of the Schedule.
The Applicant is entitled to his expenses incurred in respect to the arbitration.
August 22, 1994
K. Julaine Palmer Arbitrator