Neutral Citation: 1997 ONICDRG 79

OIC A95-000384

ONTARIO INSURANCE COMMISSION

BETWEEN:

ANASTASE SOFANTZIDELIS

Applicant

and

AXA INSURANCE (CANADA)

Insurer

DECISION ON PRELIMINARY ISSUES

Issues:

Mr. Anastase Sofantzidelis was injured in an automobile accident on January 19, 1994. He applied for and received statutory accident benefits from AXA Insurance (Canada) ("AXA"), payable under the Schedule.¹ Mr. Sofantzidelis received weekly income replacement benefits at the rate of $282.50. The parties disagreed about the amount of the weekly income benefit. They were unable to resolve their dispute through mediation and Mr. Sofantzidelis applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended ("the Act").

In his Application for Arbitration, Mr. Sofantzidelis claimed that at the time of the accident he was an employee of Snow-White General Contracting Ltd. ("Snow-White") and that the amount of the weekly income replacement benefit to which he was entitled should be determined on this basis. In its Response, AXA contended that Mr. Sofantzidelis was the self-employed owner of Snow-White, and that it was not required to pay any benefits under the Schedule because Mr. Sofantzidelis was entitled to receive workers' compensation benefits. AXA sought repayment of all benefits paid to Mr. Sofantzidelis.

A hearing was scheduled to deal with the preliminary issues in respect of Mr. Sofantzidelis' employment status and entitlement to workers' compensation benefits. Part way through this hearing, Mr. Sofantzidelis acknowledged that he ought to be treated as a self-employed person.

The preliminary issues in this hearing are:

1. Is AXA required to pay any benefits under the Schedule?

2. If the answer is no, is AXA entitled to repayment of benefits received by Mr. Sofantzidelis?

AXA also seeks an award against Mr. Sofantzidelis in the amount of its assessment fee.

Mr. Sofantzidelis claims his expenses incurred in respect of the hearing.

Result:

1. AXA is not required to pay benefits under the Schedule.

2. AXA is not entitled to repayment of benefits received by Mr. Sofantzidelis.

3. Mr. Sofantzidelis shall pay AXA $2,000.00.

4. Mr. Sofantzidelis is not entitled to his expenses incurred in respect of this hearing.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on April 26, 1996, before Shemin Manji, Arbitrator. A motion to re-open the hearing to permit Mr. Sofantzidelis to file further evidence was heard by a telephone conference call on August 12, 1996. The motion was denied.

Present at the Hearing:

Applicant:

Anastase Sofantzidelis

Mr. Sofantzidelis's

Gary Spector

Representative:

AXA's

Richard F.L. Rose

Representative:

Barrister and Solicitor

AXA's

Cassandra Phillips

Officer:

Witnesses:

Mr. Nader Saad

Mr. Anastase Sofantzidelis

Mr. James Thompson

The proceedings were recorded by Ms. Connie Horton, of Legal Transcript Services.

Exhibits:

The exhibits filed by the parties and other documents on the record are listed in the Appendix.

Reasons for Decision:

I. AXA's motion for dismissal:

At the outset of the hearing AXA moved for an order summarily dismissing Mr. Sofantzidelis application for arbitration and requiring Mr. Sofantzidelis to repay all benefits received by him. After hearing from the parties, I issued my decision and gave brief reasons. These are my fuller reasons.

AXA’s motion was based on Mr. Sofantzidelis continuing failure to produce documents pursuant to undertakings given on his behalf by his representative, Mr. Spector, at the pre-hearing discussion on January 8, 1996.

The pre-hearing letter states that at the pre-hearing discussion, Mr. Spector, undertook, on Mr. Sofantzidelis behalf, to provide AXA with the following documents:

1. Copies of the 1991 and 1995 tax returns filed with Revenue Canada;

2. Clarification in regard to whether Mr. Sofantzidelis disputed AXA's position that he was injured during the course of his employment;

3. A copy of Mr. Sofantzidelis' statement of claim evidencing that he had elected to bring an action referred to in section 10 of the Workers' Compensation Act within four weeks of the date of the pre-hearing discussion;

4. Minute Book of Snow-White, in particular those sections of the Minute book identifying the officers, directors and shareholders of the Company;

5. Financial statements of Snow-White for 1993, 1994 and 1995, from Snow-White's accountant;

6. Any records of Snow-White reflecting payment of income or remuneration from Snow-White to Mr. Sofantzidelis from January 1, 1990 to the present, including payroll records, records documenting repayment of shareholders' loans, records documenting payment of dividends and records documenting retained earnings; and,

7. Workers' Compensation Board (WCB) records pertaining to Snow White, including records identifying employees eligible to receive workers' compensation benefits and Snow-White's last filing before the accident.

At the time of the hearing, Mr. Sofantzidelis had only provided AXA with a copy of his 1991 income tax return and a notice of action indicating that, on January 18, 1996, he had commenced an action against a third party for damages as a result of the automobile accident.

Prior to the hearing, in a letter dated March 4, 1996, Mr. Spector advised AXA's counsel, Mr. Rose, that Mr. Sofantzidelis would not be producing the documents listed in paragraphs 4 through 6 of the pre-hearing letter because Snow-White was refusing to release these documents. He also advised that Mr. Sofantzidelis would not be producing the information/documents listed in paragraphs 2 and 7 of the pre-hearing letter because the notice of action, which was enclosed with the letter to Mr. Rose, "resolved" the "WCB issue".²

At the hearing, Mr. Spector submitted that Mr. Sofantzidelis had disclosed all the documents over which he had control. He reiterated that Snow-White would not release the documents listed in paragraphs 4 through 6 or, even any WCB records. He submitted that Snow-White is an incorporated company and while Mr. Sofantzidelis was a shareholder and director of Snow-White, he was not the "controlling" shareholder. There were two other shareholders, one of whom, in particular, was against the release of the documents. Mr. Spector submitted that in any event the documents listed in paragraphs 4 through 6 of the pre-hearing letter were not essential in determining the issues in respect of Mr. Sofantzidelis' employment status and entitlement to workers compensation benefits.

After having undertaken to produce the documents listed in paragraphs 4-6 of the pre-hearing letter, it is a little late for Mr. Spector to be taking the position that they were not essential. In any event, I disagree with Mr. Spector. In my opinion these documents were necessary to determine the issue in respect of Mr. Sofantzidelis' employment status. If Mr. Spector had not undertaken to produce these documents at the pre-hearing discussion, I would have ordered them to be produced.

Mr. Spector submitted that Mr. Sofantzidelis had disclosed to AXA all of the documents over which he had control, at the outset of the hearing. However, part way through the hearing, AXA advised me that it had tried but failed to serve each of the other two shareholders of Snow-White with a summons because they were evading service. Mr. Sofantzidelis then advised that Mr. S. Papadopoulas, the shareholder most strongly opposed to disclosing the documents, had died on December 16, 1995. He also confirmed that his wife, Sotiria Sofantzidelis, was the third shareholder. Therefore, at the time of the pre-hearing, when the undertakings to produce the documents to AXA were given, Mr. Sofantzidelis and his wife had control over the documents as the remaining surviving shareholders and officers of Snow-White.

Mr. Sofantzidelis also acknowledged on cross-examination that he made no efforts to obtain the documents in question even though they had been stored in his apartment since April 1, 1996. Prior to that they were stored at the offices of Snow-White on Consumers Road, premises to which he had access.

I am not satisfied with Mr. Sofantzidelis' explanation that he wished to respect Mr. Papadopoulas' wishes in this matter.

The exhibits filed at the hearing indicate that since the beginning of his dispute with AXA, Mr. Sofantzidelis has consistently refused to tell AXA who the other shareholders of Snow-White were.³ He has also denied AXA access to Snow-White's books and records on the basis that they were confidential and not relevant to Mr. Sofantzidelis' personal matter (his accident) and not on the basis that Mr. Papadopoulas was objecting to their disclosure.⁴

From the outset Mr. Sofantzidelis has drawn a very distinct line between himself and Snow-White.⁵ He has taken the position that because his remuneration was derived from an incorporated business, he must be considered an employee of that business, and AXA could not look beyond the legal form to the substance of his relationship with Snow-White.⁶ However, Mr. Sofantzidelis has a controlling interest in Snow-White⁷, a small, closely held corporation, for which he works. Some evidence exists to show that he does not deal at arms length with the company.⁸ Accordingly, I believe that AXA would be seriously prejudiced if it was prevented from looking at the reality of his business arrangements to determine whether he was employed or self-employed.⁹ Mr. Spector acknowledged the necessity of AXA looking at the substance of Mr. Sofantzidelis' relationship with Snow-White when he undertook to produce documents listed in the pre-hearing letter.

In conclusion, I find that Mr. Sofantzidelis had custody and/or control over all of the documents that Mr. Spector undertook to produce on his behalf at the pre-hearing, but chose to produce only those few documents that he considered favourable to his case. I find that prior to and during the course of the hearing he attempted to deceive AXA and me by misstating facts about the nature of his relationship with Snow-White. He stated initially that he was not the "controlling" shareholder and therefore had no control over or access to the documents relating to Snow-White. Later he conceded that he had control over or access to the documents. He also attempted to deceive AXA and me about his attempts to fulfill his disclosure obligations. He indicated initially that he had made attempts. Later he acknowledged that this was not true. He also attempted to hide behind the corporate veil of Snow-White to avoid producing the documents.

An important aspect of the pre-hearing procedure at the Ontario Insurance Commission has been to require early, fair, and frank disclosure of relevant documents by both parties in order to promote settlement of claims, and where settlement is not possible, to ensure that each party knows the case it must meet prior to the hearing. Undertakings given by parties or their representatives at pre-hearing discussions must be strictly and scrupulously complied with. I accept that there may be cases where a party, despite his or her or its best efforts, may not be able to fulfill undertakings given in respect of documents in the possession or control of a third party. However, this is not such a case. In this case, I find Mr. Sofantzidelis' decision to ignore his disclosure obligations in the arbitration, as well as his attempts to mislead AXA and me, show a lack of appreciation for the principles of fairness, and amount to contempt of and disrespect for the arbitration process at the Ontario Insurance Commission.

What should be the consequences of Mr. Sofantzidelis' decision to ignore his disclosure obligations?

AXA requested that I summarily dismiss Mr. Sofantzidelis' application for arbitration and order him to repay all benefits received by him. I was not satisfied that I had the authority to dismiss an application for arbitration without a hearing of the application on its merits.¹⁰ AXA suggested, in the alternative, that I could commence contempt proceedings against Mr. Sofantzidelis. This option involves a complex and lengthy process including stating a case to the Divisional Court.¹¹In this case, I found it most appropriate to proceed with the hearing but to draw adverse inferences against Mr. Sofantzidelis in respect of the documents he failed to produce, as was done in Manti and Wawanesa Mutual Insurance Company (December 17, 1992), OIC A-001496.

Manti has recently been codified in section 32.5 of the new Dispute Resolution Practice Code (Third Edition - April 15, 1997).

Further, while I permitted Mr. Sofantzidelis to adduce evidence on the preliminary issues, he was not able to adduce evidence which related to the documents that he had failed to produce. To permit Mr. Sofantzidelis to adduce evidence relating to these documents without producing the documents themselves would be to allow him to control what information about his employment status and WCB entitlement would be heard in this arbitration. This would be unfair to AXA.

II. Preliminary Issues

After I issued my decision on AXA’s motion to dismiss the arbitration, Mr. Sofantzidelis withdrew his claim that he was an employee of Snow-White and acknowledged that he ought to be treated as a self-employed person.

I heard evidence and submissions from the parties on the remaining issues. I issued my decision on the remaining issues by way of a letter dated November 21, 1996 with reasons to follow. These are my reasons.

Is AXA required to pay any benefits under the Schedule?

(A) Is Mr. Sofantzidelis entitled to receive workers' compensation benefits?

AXA submits that it is not required to pay benefits to Mr. Sofantzidelis under the Schedule because he is entitled to receive benefits under the Workers Compensation Act. AXA relies on section 76(1) of the Schedule in support of its submission. Section 76(1) of the Schedule provides as follows:

76. (1) The insurer is not required to pay benefits under this Regulation in respect of any insured person who, as a result of an accident, is entitled to receive benefits under any workers' compensation law or plan.

The test for entitlement to workers compensation benefits is that a worker must have suffered a personal injury by accident "arising out of and in the course of his employment."¹²

At the time of the accident, in addition to being a shareholder, Mr. Sofantzidelis was the General Operations Manager of Snow-White. He described the essential tasks of his job as follows: "run(ning) the operations of (the) business in office; driv(ing) to prospective client's business to see what needs to be done; organiz(ing) managers to go to job site to make sure they do the work; go(ing) to job site and inspect(ing) progress of work; meeting with owners of business and managers; also mak(ing) purchasing orders, scheduling of operations, (and) analys(ing) work and material specifications for contract purposes and reasons."¹³

Mr. Sofantzidelis' automobile accident occurred on Wednesday January 19, 1994 at 10:30 a.m., when he was hit by another automobile in the driveway of a property in North York.¹⁴

In his Application for Accident Benefits, Mr. Sofantzidelis indicated that the accident occurred while he was working,¹⁵ and at the hearing he did not dispute this. I infer from this, and from his failure to clarify his position on this issue, pursuant to the undertaking given by Mr. Spector at the pre-hearing discussion on January 8, 1996 (supra), that Mr. Sofantzidelis agrees that his injuries were caused while he was in the course of his employment.

In his Application for Accident Benefits Mr. Sofantzidelis indicated that he had not applied for workers' compensation benefits and at the hearing both Mr. Sofantzidelis and Mr. Nader Saad, Snow-White's accountant since February 1996, testified that Mr. Sofantzidelis had not received any workers' compensation benefits since the accident. In my view, nothing turns on this fact. Section 76(1) of the Schedule uses the words "is entitled to receive benefits" and not "has received benefits". The Supreme Court of Canada decision in Madill v. Chu, 1976 CanLII 32 (SCC), [1977] 2 S.C.R. 400 interpreted a provision which contained wording very similar to that found in section 76(1) of the Schedule and held that where a person is covered by the Workers' Compensation Act, he or she cannot elect to receive no-fault benefits (now statutory accident benefits) simply by not pursuing his or her entitlement to workers' compensation benefits.

Mr. Sofantzidelis testified that to the best of his knowledge he was not covered by the Workers' Compensation Act because he was a shareholder of the company. However, Mr. Sofantzidelis was also an executive officer of Snow-White and as such he may have elected to be deemed a worker for the purposes of the Workers' Compensation Act, under section 13 of the Workers' Compensation Act. Section 13 provides as follows:

13.-(1) On application, an employer, an independent operator, a person the Board deems to be an employer, or an executive officer of a corporation, may elect to be deemed a worker for the purposes of this Act, provided that,

(a) he or she is carried on the payroll of the business at his or her actual earnings for the year, or files with the Board a statement of his or her estimated earnings for the year which is acceptable to the Board; and

(b) he or she consents to the application. [Emphasis added]

As was noted by AXA, Mr. Sofantzidelis' job description indicates that he was often out on job sites supervising the work of subcontractors. There is always a risk of injury on the job site, which would make it logical to seek workers compensation coverage. Mr. Sofantzidelis indicated in his testimony that he had not elected to be deemed a worker. However, I do not accept his testimony, in the absence of any other evidence to corroborate it. It is self-serving and I did not find Mr. Sofantzidelis to be a credible witness because earlier he had attempted to deceive AXA and me by misstating facts about the nature of his relationship with Snow-White.¹⁶He had also attempted to deceive AXA and me about his attempts to fulfill his undertakings. Further, I infer from his failure to produce documents that would have been helpful in determining the question of whether he was covered under the Workers' Compensation Act, that these documents would have indicated that he had elected to be deemed a worker for the purposes of the Workers' Compensation Act.

The issue of whether Mr. Sofantzidelis was entitled to workers' compensation benefits was first raised by AXA in its Response to Mr. Sofantzidelis' Application for Arbitration, in October 1995 (six months before the hearing). Knowing that this was an issue in the arbitration well in advance of the hearing, it would have been a simple matter (if in fact he was not entitled to receive workers compensation benefits) for Mr. Sofantzidelis to have produced to AXA a document from the WCB confirming this. Alternatively, it would have been a simple matter for Mr. Sofantzidelis to have produced a document from the WCB confirming that Snow-White was exempt from coverage under the Workers 'Compensation Act. Mr. Saad testified that Snow-White would have received such a document from the WCB. The production of both or either of these documents would have made a hearing on this issue unnecessary. However, Mr. Sofantzidelis did neither of these things. Again, the only reasonable explanation for his failure to do so is that he was covered by the Workers' Compensation Act.

Mr. Sofantzidelis submits that the financial statements of Snow-White for 1990, 1991 and 1992 show no record of any payment of premiums to the WCB for coverage.

However the financial statements for 1990, 1991 and 1992 are not helpful. Aside from the fact that these statements do not cover the period immediately preceding the accident (January 19, 1994)¹⁷, they are inconclusive. Mr. Saad, testified that if the company had paid workers compensation premiums during these years, these payments would appear on the financial statements as an expense either separately or grouped with something else, for example employee benefits. The statements indicate that the company paid employee benefits during those years - $4,782 in 1990, $2,822 in 1991 and $2,084 in 1992 .¹⁸

Mr. Sofantzidelis submits that the amounts paid by the company for employee benefits are so minimal that they would not cover workers compensation premiums. I am unable to accept this submission without further evidence on this point.

Mr. Sofantzidelis submits that AXA is obliged to produce evidence to support its position that Mr. Sofantzidelis was entitled to workers' compensation benefits. He submits that AXA made no inquiries of its own or contact the WCB before raising this issue. Mr. Sofantzidelis submits that if AXA had made such inquiries it would have found out that Snow-White has no workers' compensation coverage.

I accept AXA's submission that the WCB will not provide it with information or documents relating to Mr. Sofantzidelis and Snow-White without their authority. The confidentiality provisions in the Workers' Compensation Act and Freedom of Information and Protection of Privacy Act, R.S.O. 1990, Chap. F.31, which apply to general records and personal information in the custody or control of the WCB, prohibit the WCB from releasing records or information relating to Mr. Sofantzidelis and Snow White without their consent.¹⁹

I agree with Mr. Sofantzidelis that AXA has the burden of proof in this case, because it is invoking an exclusionary provision to deny him benefits. However, I am satisfied that AXA has discharged this burden. It has adduced evidence about the nature of Mr. Sofantzidelis' work with Snow-White. It has also adduced evidence which indicates that Mr. Sofantzidelis was injured during the course of his employment.²⁰ On the question of whether Mr. Sofantzidelis was covered by the Workers Compensation Act, Mr. Sofantzidelis helped AXA meet its burden by failing to provide it with the requisite WCB documents. Mr. Sofantzidelis' failure to produce the documents permitted me to draw adverse inferences of fact against him in respect of these documents.

Based on the evidence adduced and adverse inferences that I have drawn, I conclude, for the purposes of section 76(1) of the Schedule, that Mr. Sofantzidelis is entitled to receive benefits under the Workers 'Compensation Act, as a result of the accident on January 19, 1994,

(B) Does the exception in section 76(2) apply?

Mr. Sofantzidelis submits that even if I find that he is entitled to receive benefits under the Workers 'Compensation Act, AXA is still required to pay benefits under the Schedule because he has elected to bring an action referred to in section 10 of the Workers' Compensation Act. Mr. Sofantzidelis relies on section 76(2) of the Schedule. Section 76(2) provides as follows:

(2) Subsection (1) does not apply in respect of an insured person who elects to bring an action referred to in section 10 of the Workers 'Compensation Act so long as the election is not made primarily for the purpose of claiming benefits under this Regulation. [Emphasis added]

Section 10(1) of the Workers' Compensation Act provides as follows:

10.-(1) Where an accident arising out of and in the course of a worker's employment happens to the worker under such circumstances as entitle the worker or his or her dependants to an action against some person other than the employer, or an executive officer or director thereof, the worker or his or her dependants, if entitled to benefits under this Part, may claim such benefits or may bring such action.

Under section 10(1) of the Workers 'Compensation Act, therefore, a worker may elect to claim benefits or bring an action where the circumstances of the accident entitle him to workers' compensation benefits or alternatively to sue someone other than his employer, or an executive officer or director of his employer.

Mr. Sofantzidelis issued a notice of action in the Ontario Court (General Division) on January 18, 1996. The notice of action contains a very short statement of the nature of his third party claim: it indicates that Mr. Sofantzidelis has commenced an action for general and special damages against a third party as a result of the automobile accident of January 19, 1994.²¹

AXA accepts that Mr. Sofantzidelis has elected to bring an action referred to in section 10 of the Workers' Compensation Act. However, it contends that it is not required to pay benefits under the Schedule because Mr. Sofantzidelis has elected to bring the action primarily for the purpose of claiming benefits under the Schedule.

Section 76(2) of the Schedule provides that statutory accident benefits are only available if the person making the election under section 10 of the Workers' Compensation Act has not made the election primarily for the purpose of claiming statutory accident benefits. Thus, the section is not intended to provide a person injured in a work-related automobile accident with the right to elect to receive statutory accident benefits or workers' compensation benefits. It is intended to be available only to allow a person injured in a work-related automobile accident to sue.

The purpose of section 76(2) of the Schedule can best be understood if it is read in conjunction with sections 267.1 and 267.2 of the Act. Section 76(2) of the Schedule and sections 267.1 and 267.2 of the Act were part of the changes made to the automobile insurance system in Ontario that came into force on January 1, 1994. Under sections 267.1 and 267.2 of the Act, a person who is injured in an automobile accident can only pursue an action against the third party for non-pecuniary damages (pain and suffering) (He or she cannot pursue an action against the third party for pecuniary damages or economic losses no matter how serious the injury(ies)). However, even this right of recovery is restricted to certain cases: where the injured person has died or has sustained (a) serious disfigurement; or (b) serious impairment of an important physical, mental or psychological function". There is also a deductible of $10,000.00 in 1993 and 1994 to be indexed for subsequent years.

Since access to tort is restricted under sections 267.1 and 267.2 of the Act, section 76(2) of the Schedule contemplates that a majority of the persons injured in work-related automobile accidents would collect workers' compensation benefits. Normally one would not expect a person, acting in good faith, to initiate a court action against another without some realistic expectation of recovery or settlement. A person would only elect to bring an action referred to in section 10 of the Workers' Compensation Act in circumstances where his or her injuries are serious enough to meet the verbal threshold for recovery of non-pecuniary damages and where the damages are more than $10,000.00.

In this case, in support of its position that Mr. Sofantzidelis has elected to bring the action primarily for the purpose of claiming benefits under the Schedule, AXA relies on the fact that the notice of action was issued one day before the expiry of the two year limitation period, and only 10 days following the pre-hearing discussion of January 8, 1996. AXA also relies on Mr. Spector's letter to Mr. Rose of March 4, 1996, in which Mr. Spector took the position that the notice of action was an answer to and resolved the WCB issue.²²

Mr. Sofantzidelis submits that AXA has not produced any evidence that he elected to bring the the action for the purpose of claiming benefits under the Schedule. Mr. Sofantzidelis submits that "...to infer that there is a connection between the pre-hearing discussion and the issuance of the Statement of Claim is nonsense." He submits that he has the right to decide when to sue. He is not required to commence a third party action at any particular time so long as it is within two years of the automobile accident. Mr. Sofantzidelis testified that in this case he did not learn that he had a right to sue the third party who caused the accident until October or November 1995, a few months before the limitation period was to expire. He then waited until the day before the limitation period expired to commence his action because when he learned he had a right to sue he did not have any reports from his doctors. Until January 18, 1996, he was gathering medical evidence to determine if the injuries he suffered in the accident met the threshold for him to sue for pain and suffering.

The general principle set out in section 76(1) of the Schedule is that the insurer is not required to pay benefits under the Schedule if the insured person is entitled to workers' compensation benefits. In my opinion, it is Mr. Sofantzidelis' responsibility and not AXA's to establish that he falls within the exception in section 76(2) of the Schedule ²³ In this case, Mr. Sofantzidelis has not established that he falls within the exception in section 76(2) of the Schedule.

I agree with AXA that the timing of Mr. Sofantzidelis' notice of action indicates that Mr. Sofantzidelis made the election primarily in response to AXA's claim that he was not entitled to benefits under the Schedule, i.e, for the purpose of claiming benefits under the Schedule. In the absence of other evidence to corroborate Mr. Sofantzidelis' testimony, I do not accept his testimony that the timing of the issuance of the notice of action had nothing to do with his claim for benefits under the Schedule. Mr. Sofantzidelis' testimony is self-serving and he is not a credible witness.

Further, in determining whether an applicant is acting in good faith in bringing the action, evidence that is adduced of the applicant's intent to prosecute the action is helpful. In this case, I have little evidence in this regard. I only have before me Mr. Sofantzidelis' notice of action.²⁴Where a plaintiff has commenced an action by way of a notice of action, the plaintiff is required within 30 days thereafter to file a statement of claim with the court. The statement of claim may alter or extend the claim stated on the notice of action.²⁵ In this case, even though Mr. Spector undertook to provide AXA with a copy of Mr. Sofantzidelis' statement of claim in the third party action, he provided AXA only with a copy of the notice of action. I infer from this that a statement of claim has not been issued and that Mr. Sofantzidelis has no intention of prosecuting that action.

In conclusion, I find that Mr. Sofantzidelis elected to bring an action referred to in section 10 of the Workers' Compensation Act primarily for the purpose of claiming benefits under the Schedule. Therefore, AXA is not required to pay benefits under the Schedule to Mr. Sofantzidelis.

III. Repayment

Is AXA entitled to repayment of benefits paid to Mr. Sofantzidelis?

AXA requests repayment of all benefits received by Mr. Sofantzidelis. Mr. James Thompson, a claims specialist at AXA, testified that AXA had paid Mr. Sofantzidelis a total of $109,126.00 in benefits as a result of the accident. The benefits paid were broken down as follows:

• $27,003.00 in weekly income replacement benefits, from January 27, 1994 to November 24, 1995. The rate varied initially but from approximately June 1994 to November 24, 1995, Mr. Sofantzidelis was paid weekly income replacement benefits at the rate of $282.50 per week;

• $55,883.00 for medical expenses, including all therapies, travel expenses, gym memberships and prescriptions;

• $15,749.00 for rehabilitation; and

• $10,490.00 for medical reports/certificates and Designated Assessment Centre assessments.

Mr. Sofantzidelis did not dispute these figures.

The repayment of benefits is governed by section 70 of the Schedule. Section 70(1) provides as follows:

70.-(1) A person shall repay to the insurer any benefit received under this Regulation that is paid to the person through error, wilful misrepresentation or fraud.

The burden to prove that benefits were paid through error, wilful misrepresentation or fraud rests with the insurer.

In this case, I find that AXA has not met the burden of proving that benefits were paid to Mr. Sofantzidelis through error, wilful misrepresentation or fraud. While Mr. Thompson was called by AXA specifically to give evidence on the repayment issue, in his evidence he did not address the question of whether Mr. Sofantzidelis was paid through error, wilful misrepresentation or fraud. AXA also did not address this question in its submissions.

Sections 70(3) and (4) of the Schedule provide for repayment of benefits in circumstances where there is no "error, wilful misrepresentation or fraud" but where the recipient is disqualified from payment under Part XIV of the Schedule (Exclusions) or where deductible payments have been received, in which case repayment is required to the extent of the deductions.

I am not satisfied that either section 70(3) or section 70(4) apply in this case. Mr. Sofantzidelis has not been disqualified from payment under Part XIV of the Schedule. And, this is not a case where Mr. Sofantzidelis has received collateral benefits which have not been deducted.

In conclusion, I find that AXA is not entitled to repayment of benefits received by Mr. Sofantzidelis.

IV. Expenses

Mr. Sofantzidelis seeks an award of the expenses he has incurred in respect of this hearing.

Mr. Sofantzidelis submits that his application for arbitration was not frivolous. Also, some of the issues were resolved during the course of the hearing.

AXA submits that it would be inappropriate to award Mr. Sofantzidelis his expenses.

Under section 282(11) of the Act, I have the discretion to award Mr. Sofantzidelis his expenses in respect of the arbitration, as prescribed in Ontario Regulation 664.

Mr. Sofantzidelis' decision to withdraw his claim that he was an employee of Snow-White and to allow AXA to treat him as a self-employed person reduced the length of the hearing. However, the hearing on the other issues would have been unnecessary if Mr. Sofantzidelis had fulfilled his disclosure obligations in the arbitration. I therefore decline to exercise my discretion to award Mr. Sofantzidelis his expenses.

V. Assessment against Mr. Sofantzidelis

Under section 282(11.2) of the Act, I may award an amount up to the amount of the assessment fee paid by AXA under section 14 of the Act against Mr. Sofantzidelis, if in my opinion he commenced an arbitration that was frivolous, vexatious or an abuse of process. In this case, the assessment fee paid by AXA was $2,000.00.

In my opinion, Mr. Sofantzidelis commenced an arbitration that was frivolous. From the beginning of his dispute with AXA, Mr. Sofantzidelis has consistently refused to disclose to AXA the information and documents necessary for it to determine the amount of the weekly income benefit to which he was entitled. After he commenced the arbitration, he continued to thwart AXA’s attempts to obtain the information and documents. He also thwarted its attempts to obtain information and documents to determine whether he was entitled to workers compensation benefits. I infer from Mr. Sofantzidelis' failure to produce the requisite information and documents that he commenced an arbitration that was of little merit.

I also find that Mr. Sofantzidelis commenced an arbitration that was an abuse of process. He ignored his disclosure obligations in the arbitration and also misled AXA and myself about the nature of his relationship with Snow-White and his attempts to obtain documents (supra). I have found that his actions showed a lack of appreciation for the principles of fairness and amounted to a contempt and disrespect for the arbitration proceeding at the Ontario Insurance Commission.

Having found that Mr. Sofantzidelis commenced an arbitration that was frivolous and an abuse of process, I order Mr. Sofantzidelis to pay to AXA the sum of $2,000.00.

VI. Mr. Sofantzidelis'motion to re-open the hearing

Three months after the hearing, Mr. Spector wrote to me and advised me that Mr. Sofantzidelis had obtained written confirmation from the WCB regarding his workers' compensation coverage as a result of the injuries he sustained in the automobile accident. Mr. Spector requested that the hearing be re-opened pursuant to section 40.1 of the Dispute Resolution Practice Code to allow Mr. Sofantzidelis to file this evidence. Section 40.1 provides as follows:

40.1 The arbitrator may reopen a hearing at any time before he or she makes a final order disposing of the arbitration.

This is a discretionary provision. In Tran and Pilot Insurance Company (April 16, 1995), A-005207, I discussed this provision and expressed my view of the circumstances under which an arbitrator should exercise his or her discretion to re-open a hearing as follows:

I believe that an arbitrator should exercise his or her discretion to receive further evidence after the case is closed only in exceptional or extraordinary circumstances. To do otherwise would be to delay and jeopardize the arbitration process and the finality required in the process.

Accordingly, even where the evidence is relevant it may be refused when it is offered after the case is closed. In my view, before an arbitrator exercises his or her discretion to receive further evidence, he or she must be satisfied that not only is the evidence relevant but it is also so weighty that if adduced it would have an important influence on the result of the case. It must also be shown that the lateness of its presentation was justified by unusual circumstances beyond the control of the party seeking to adduce it. If the evidence was available to or within the control of the party before the case is closed, it should not be admitted.

Similar criteria have been applied by other arbitrators when dealing with requests to re-open hearings.²⁶

In this case, Mr. Sofantzidelis submitted that the written communication that he obtained from the WCB after the hearing was not only relevant, but so weighty that if adduced, it would have an important influence on the result of the case. Mr. Sofantzidelis submitted that the reason why he had not obtained this document prior to the hearing was because it was a document that AXA ought to have obtained, and not himself.

AXA objected strenuously to Mr. Sofantzidelis' request to re-open the hearing. It submitted as follows:

The report of the pre-hearing arbitrator dated February 15, 1996, page 3, item 7, required the insured to produce: "WCB (records) pertaining to Snow White, including records identifying employees eligible to receive workers compensation benefits and Snow White's last filing before the accident." Both the insured and his accountant testified at the hearing that they had taken no steps to obtain the Workers' Compensation records even though those records were in the exclusive possession of the insured and his wife who were the sole surviving shareholders of the company.

Mr. Spector's letter does not indicate that he now wishes to produce the records. He simply refers to a "written communication from the Workers' Compensation Board."

It is (the insurer's) submission, therefore, that this matter should not be re-opened since the evidence was available to the insured at the time of the hearing and in fact he was under a compulsion to produce the same since February 1996 and failed to do so. The request to re-open the hearing is not supported by any agreement of the insured to now produce his records but only based on some communication received at an uncertain time from an unidentified source at the WCB. Reopening the hearing on these grounds at this time would be grossly unfair to the insurer.

I am not prepared to exercise my discretion to re-open this hearing. The written communication from the WCB appears to be relevant, however, I am unable to find that, if admitted, it would have an important influence on the result of this case because I have not seen the document. Further, Mr. Sofantzidelis gave no reasonable explanation for failing to produce this document at the hearing, if it would have provided him with a defence. Mr. Sofantzidelis is attempting at this late stage to put before me a document which he had been obligated to obtain, could easily have obtained but made no effort to obtain prior to the hearing. Also, I agree with AXA that it would be unfair to require it to respond to this new evidence at this late stage in the proceedings without receiving from Mr. Sofantzidelis production of the balance of the WCB documents that he undertook and failed to produce prior to and at the hearing.

Order:

1. AXA is not required to pay benefits under the Schedule.

2. AXA is not entitled to repayment of benefits received by Mr. Sofantzidelis.

3. Mr. Sofantzidelis shall pay AXA $2,000.00.

4. Mr. Sofantzidelis is not entitled to his expenses incurred in respect of this hearing.

May 7, 1997

Shemin Manji Arbitrator

Date

APPENDIX

Exhibits:

Exhibit 1:

AXA and Sofantzidelis Brief Of Documents

Exhibit 2:

AXA ats Sofantzidelis Loss of Income Brief

Exhibit 3

Claim Financial History Report

Other documents before the Arbitrator:

Report of Mediator dated April 6, 1995

Application for Arbitration dated September 20, 1995

Response to an Application for Arbitration dated October 24, 1995

Pre-hearing letter dated February 15, 1996

Letter from Mr. Gary M. Spector dated July 26, 1996

Letter from Mr. Richard F.L. Rose dated August 6, 1996

Letter from Arbitrator Manji to the parties dated November 21, 1996 (decision)

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993, and before November 1, 1996, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
2. 2Exhibit 1, Tab 3
3. 3Letter dated March 7, 1994 to Mr. Sofantzidelis from Hays Smith & Associates Inc. - Exhibit 2, Tab 13; letter dated May 20, 1994 to AXA from Hays Smith & Associates Inc. - Exhibit 2, Tab 9; and, letter dated April 10, 1995 to Mr. Sofantzidelis from Hays Smith & Associates Inc. - Exhibit 2, Tab 16 [Hays Smith & Associates Inc. was retained by AXA to assist it in determining Mr. Sofantzidelis' income replacement benefit entitlement].
4. 4Letters dated November 14, 1994 and May 31, 1995 to AXA from Mr. Sofantzidelis - Exhibit 2, Tabs 21 and 5.
5. 5Letter dated May 20, 1994 to AXA from Hays Smith & Associates Inc. - Exhibit 2, Tab 9
6. 6Letter dated May 31, 1995 to AXA from Mr. Sofantzidelis - Exhibit 2, Tab 5
7. 7Mr. Sofantzidelis acknowledged this later in the hearing.
8. 8See for example, Exhibit 2, Tabs 5 and 13
9. 9Where a small closely held corporation is run by a sole or majority shareholder, arbitrators have consistently looked at the reality of an applicant’s business arrangements and not merely at their form in determining whether the applicant was employed or self-employed for purposes of the Schedule. See for example, Moxon and State Farm Insurance Company (July 18, 1991), OIC A-000090; Piper and Zurich Insurance Company (December 6, 1993), A-002585 (confirmed on appeal - May 1, 1996); Meandro and Pilot Insurance Company (June 7, 1994), A-004433 and Oliveira and Wellington Insurance Company (April 7, 1997), A96-000010.
10. 10Even where a party fails to attend or participate at the hearing, the Dispute Resolution Practice Code provides an arbitrator cannot dismiss the arbitration for that reason alone. See section 35.4 of the Dispute Resolution Practice Code (Second Edition - August 1, 1995). This is the Edition which applied at the time this hearing was held.
11. 11See section 13 of the Statutory Powers Procedure Act.
12. 12See section 4(1) of the Workers' Compensation Act.
13. 13Statutory Accident Benefits Schedule Initial Contact Form completed by Mr. Sofantzidelis - Exhibit 2, Tab 27.
14. 14Application for Accident Benefits dated February 22, 1994 - Exhibit 2, Tab 28.
15. 15Application for Accident Benefits dated February 22, 1994 - Exhibit 2, Tab 28.
16. 16Initially, he stated that he was not the "controlling" shareholder and therefore had no control over or access to the documents relating to Snow-White. Later he acknowledged that he had control over or access to the documents.
17. 17At the pre-hearing discussion, Mr. Sofantzidelis also undertook to produce financial statements of Snow-White for 1993, 1994 and 1995 but failed to produce them.
18. 18Exhibit 2, Tabs 6, 7 and 8
19. 19See sections 76 and 114 of the Workers' Compensation Act and sections 17, 21 and 42 of the Freedom of Information and Protection of Privacy Act.
20. 20Application for Accident Benefits dated February 22, 1994 - Exhibit 2, Tab 28
21. 21Exhibit 1, Tab 12 - Mr. Sofantzidelis claims general damages in the amount of $750,000.00 and special damages in the amount of $500,000.00
22. 22Exhibit 1, Tab 3
23. 23In Rocchetti and Royal Insurance Company of Canada (March 29, 1996), OIC A-014118, Arbitrator Guy Jones expressed a similar opinion in the context of section 20 and 21 of the Statutory Accident Benefits Schedule - For Accidents Before January 1, 1994.
24. 24The notice of action indicates that Mr. Sofantzidelis is seeking general and special damages. However, Mr. Sofantzidelis is barred from recovering special damages or damages for pecuniary loss.
25. 25See Rule 14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
26. 26Stoll and Kingsway General Insurance (October 18, 1991), OIC A-000386; Shelley L.P. and Royal Insurance Company of Canada (February 9, 1994), A-002235; Norton and Colonial Penn Insurance Company (June 3, 1996), OIC A-014428 and Cheetham and Pilot Insurance Company (June 28, 1996), OIC A-008036.