Shamail Ablakan v. Zurich Insurance Company, 1999 ONFSCDRS 164

Neutral Citation: 1999 ONFSCDRS 164 FSCO A97-000422

BETWEEN:

SHAMAIL ABLAKAN Applicant

and

ZURICH INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Judith Killoran

Heard: May 4, 5 and 6, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto Written submissions were received on June 2, 10 and 16, 1999

Appearances: Tom David for Mr. Ablakan William J. McCorriston for Zurich Insurance Company

Issues:

The Applicant, Shamail Ablakan, was injured in a motor vehicle accident on January 15, 1995. He applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.¹ Mr. Ablakan received weekly income replacement benefits of $238.07 from January 22, 1995 onwards. However, he claimed entitlement to weekly income replacement benefits in the amount of $430.71. The parties were unable to resolve their disputes through mediation, and Mr. Ablakan applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended (the "Act").

The issues in this hearing are:

What is the amount of weekly income replacement benefit that Mr. Ablakan is entitled to receive under section 10 of the Schedule?
Is Zurich liable to pay Mr. Ablakan a special award under subsection 282(10) of the Act because it unreasonably withheld or delayed payments?
Is either party liable to pay the other's expenses in respect of the arbitration under subsection 282(11) of the Act?

Result:

Mr. Ablakan is entitled to a weekly income replacement benefit of $238.07 (plus indexation, where applicable).
Mr. Ablakan is not entitled to a special award.
The issue of expenses may now be spoken to.

EVIDENCE AND ANALYSIS:

Background:

Shamail Ablakan was born in Iraq on July 1, 1960. He received a teaching degree and worked as a teacher in Iraq for two years. Mr. Ablakan arrived in Canada in 1983. He began working for a furniture company in Toronto, and also worked part-time at a store. From 1989-1992, Mr. Ablakan worked as a manager of a Hasty Market. In 1992, he opened Sam's Food Market which was open 17 hours a day for seven days a week. In July 1994, Mr. Ablakan signed an Independent Dealer Contract with Mac's Convenience Stores ("Mac's"), a division of Silcorp Limited, to operate a convenience store on Jarvis Street known as "Friendly Mac's" for 24 hours a day, seven days a week. At that time, he was married with one child. His wife was expecting another child in November 1994.

Mr. Ablakan testified that prior to entering into his contract with Mac's, he was receiving social assistance payments of $1,271 monthly plus prescriptions and other benefits. He claimed that after his wife gave birth to their second child, his family would have received $1,600 monthly in social assistance payments.

Mr. Ablakan decided to work as an independent dealer for Mac's because he expected that he could earn more than he was receiving in social assistance. He testified that he did a background check on the store, known as "Friendly Mac's," and confirmed that it had been in the same location for 10 to 15 years. He reviewed the sales and financial statements for the store. His calculations were that if he worked 14 hours per day, seven days per week, with one employee working 10 hours per day, seven days per week at $5.00 per hour cash, he would earn approximately $45,000 per year.

Mr. Ablakan talked to the previous employee of the store who agreed that he would continue to work at the same rate of pay and for the same hours as he had with the previous owner. Both Mr. Ablakan and his wife referred to the one employee as Zohair and claimed not to know his last name. Mr. Ablakan had no record of payments made to Zohair and testified that he always paid cash.

Quantum of Income Replacement Benefits:

Mr. Ablakan was driving a vehicle rented from Budget Rent-A-Car when he was struck by an unidentified driver who left the scene of the accident. Mr. Ablakan claims that he has been unable to work due to a psychological impairment sustained as a result of the accident. The issue before me relates solely to the quantum of benefits to which Mr. Ablakan is entitled.

Mr. Ablakan claims that he is entitled to a higher amount of income replacement benefits than what was paid by Zurich. He is required to prove, on a balance of probabilities, that the net income from his business supports the quantum of weekly income replacement benefits which he has claimed. Mr. Ablakan elected to claim benefits based on his income during the 52 weeks prior to the accident. He indicated on his application for benefits that he worked 80-100 hours a week. Zurich paid Mr. Ablakan weekly income replacement benefits of $238.07 from January 22, 1995 onwards. However, Mr. Ablakan claims the benefits should be $430.71 weekly. In final submissions, his counsel claimed that Mr. Ablakan's weekly income before taxes is approximately $959 per week which would entitle him to an even higher rate of income replacement benefits.

The difference in quantum between the income replacement benefits paid by Zurich and those claimed by Mr. Ablakan is attributable to calculations which differ in two major aspects:

The amount of employee costs associated with staffing the store which have been subtracted from income; and
Whether amounts remitted for GST have been, or should be, included in income.

Mr. Ablakan's commissions and store expenses, excluding employee costs, are documented in monthly Dealer Operating Statements.² Mr. Ablakan testified that, according to the terms of his contract, Mac's was to pay him $1,500 on the second Friday following each financial period, as part of the remittance for the previous financial period. On the fourth Friday following each financial period, Mac's was to pay all outstanding monies due to him for the previous financial period, after totalling all charges and deductions. Mr. Ablakan testified that these outstanding amounts in addition to the $1,500 are the amounts shown in the Dealer Operating Statements, referred to as "Balance Owing Dealer (cheque attached)."

The only expense that Mr. Ablakan claimed he incurred was for the wages of one employee. His accountant, Mr. Qureshi, prepared a statement of income from July 21, 1994 to December 31, 1994. However, according to Mr. Ablakan, the statement had a typographical error and should have read as the period commencing July 4, 1994 instead of July 21, 1994. Mr. Qureshi calculated Mr. Ablakan's expenses as $9,000 for employees, $400 for accounting, $900 for travel and $450 for an office.³ Revenue was listed as $31,203 with net income after expenses of $20,453.

Mr. Ablakan was shown a transcript of a handwritten statement that he had signed which stated: "I paid one employee $5.50 per hour, 8-10 hours per day, 5-6 days per week."⁴ This statement was taken on March 21, 1995 by Larry Matsuyama, an independent insurance adjuster hired by Zurich. Mr. Matsuyama testified that the statement was given by Mr. Ablakan at the offices of Lofranco Sabetti. He confirmed that the statement was not signed immediately but was read back to Mr. Ablakan and then reviewed by him with his legal representative.

Mr. Ablakan was also questioned about a statement he made to William Thomas, a chartered accountant hired by Mr. Matsuyama, that he employed one person and paid him cash based on $5.00 to $5.50 per hour, eight to ten hours per day, six days a week. Mr. Thomas testified that Mr. Ablakan made this statement on July 20, 1995.

Mr. Ablakan and his wife testified that Mrs. Ablakan came and helped in the store for approximately three to four hours during the day while he visited with their son. Mr. Ablakan did not account for any extra help in the store when his wife gave birth to their second child in November 1994. Zurich claims that it heard at the hearing for the first time that Mr. Ablakan's wife assisted in the store.

Mr. Thomas is the chartered accountant who was hired by Mr. Matsuyama on April 13, 1995 to prepare an accounting report calculating the amount of Mr. Ablakan's income replacement benefits.⁵ He was qualified as an expert in accounting and accounting related matters, particularly as they apply to this matter. His expertise in the area of owner-operated businesses and dealerships was acknowledged with the understanding that he may have had experience with only one Mac's Milk store prior to this particular case.

Mr. Thomas disagreed with the Statement of Income prepared by Mr. Qureshi. He estimated that Mr. Ablakan's actual revenue for 1994 was $40,499.91 and the charges for this period were $10,704.54. In his opinion, Mr. Qureshi included revenue plus GST less charges as Mr. Ablakan's revenue on his 1994 income tax return.

In an effort to calculate Mr. Ablakan's income replacement benefits, Mr. Thomas wrote to Mr. Ablakan on February 27, March 19, April 8 and April 30, 1995. He requested further financial information, particularly employee records. He also telephoned Mac's on July 4, 1995. He talked to Chris Livings, the Toronto Area Manager, who confirmed that employees of the individual stores are not employees of Mac's but are the employees of the dealers who set their hours and wages. He stated that typically a store would have two employees as well as the dealer for a 24 hour a day operation although the dealer could operate with only one employee.⁶ Mr. Thomas estimated wages using two employees with a rate of pay of $6.70 for 49 hours per week. He also estimated that Mr. Ablakan worked 10 hours a day, seven days a week in the 28 weeks prior to the accident.

On April 30, 1995, Mr. Thomas received a letter from Mr. Ablakan's legal counsel explaining that information had been requested from the client and all appropriate documentation would be provided when it was available. However, he received no further documents. Mr. Ablakan testified that many of his business records disappeared from the store after he terminated his Independent Dealer's Contract with Mac's. On April 23, 1999, Mr. Thomas received a letter from Mr. Ablakan's legal counsel advising that Mr. Ablakan had paid one employee to work from 10:00 p.m. to 8:00 a.m., ten hours a day, seven days a week at $5.00 per hour.⁷

Mr. Thomas analysed the documents available but expressed concern with Mr. Ablakan's statement about the staffing expense; Mr. Qureshi's Statement of Income starting from July 21, 1994 instead of July 4, 1994; and the inclusion in income of amounts remitted for GST. Mr. Thomas testified that there were no credible accounting records or evidence of the wage costs presented, other than a listing of expenses that was prepared after the accident.

Mr. Thomas testified about his disagreement with the wage costs claimed by Mr. Ablakan:

The wages based on information presented by Mr. Ablakan, the hours vary, the rates of pay vary, they weren't in compliance with the minimum requirements of the Ontario Government. So, I made certain assumptions based on my past experience, and feel it's more probable than not that a calculation using other hours worked by employees has more closely - does more closely resemble the actual income."⁸

Mr. Thomas was also concerned that Mr. Ablakan's supporting documentation was prepared after the accident and not before and noted that Mr. Ablakan admitted to changing a date on a Dealer Operating Statement from January 22, 1995 to January 15, 1995.

In Mr. Thomas' opinion, Mr. Ablakan did not produce all reasonably available business documents by which reliable calculations of income replacement benefits could be made. However, he calculated weekly income replacement benefits based on the documents available. Mr. Thomas estimated that Mr. Ablakan's gross annual income would be $14,834.30 or $285.20 per week. As a result, his net weekly income was $264.53 with entitlement to an income replacement benefit of 90 percent of that amount, which is $238.07.⁹

Findings:

At a pre-hearing on February 24, 1998, the arbitrator ordered Mr. Ablakan to "provide the basis upon which he asserts a claim for income replacement benefits in the amount of $430.71, plus supporting documents and information."¹⁰ He failed to do so at the hearing. Instead, he relied on his testimony, which varied from his previous statements, and that of his wife.

My findings are based on the documentary evidence and the weight I have given to the witnesses' testimony. Mr. Ablakan presented three different versions of how many hours, days, and at what rate his employee worked:

"I paid one employee $5.50 per hour 8-10 hours per day, 5-6 days per week."¹¹
"Mr. Ablakan advised that he employed only one individual and paid him cash prior to the accident based on $5.00 to $5.50 per hour, eight to ten hours per day and six days a week."¹²
"Ten hours a day, seven days a week, not more than $5.00 per hour."¹³

In the first two versions above, Mr. Ablakan would have been required to work 24 hours a day on one or two days a week while working 14 hours a day during the remaining 5 or 6 days of the week. The employee costs vary considerably depending on the hours, rates of pay and days per week worked. Also, Mr. Ablakan claimed not to know his employee's last name and lacked bank and payroll records documenting his employment. I find that Mr. Ablakan offered no convincing explanation for the inconsistencies in his statements concerning store staffing and his failure to produce employment and banking records. Consequently, I find that Zurich's calculation of employee costs was more persuasive.

Mr. Ablakan's counsel submitted that Mr. Ablakan earned $959 weekly after subtracting wage costs of $350 from the gross revenues of $1309 weekly remitted by Mac's. However, Zurich's witness, Mr. Thomas, reviewed a Dealer Operating Statement dated October 3, 1994 to October 30, 1994, with revenue of $5,040, which included 7% for GST totalling $352.80. This amount of $352.80 is entered in a separate column marked GST which appears to indicate that Mac's was remitting to Mr. Ablakan the GST on certain items. I find that it is proper that Mr. Thomas deducted the GST amount from the revenue remitted by Mac's to Mr. Ablakan. Mr. Ablakan was required to remit this amount to Revenue Canada. The Independent Dealer Contract between Mac's and Mr. Ablakan requires that Mr. Ablakan comply with all applicable federal, provincial and local laws."¹⁴

I find in favour of the Insurer's calculation of weekly income replacement benefits. In light of the evidence presented, Mr. Ablakan failed to meet the burden of proof required to support his claim. On a balance of probabilities, I am not persuaded that Mr. Ablakan is entitled to a larger income replacement benefit.

Special Award:

Mr. Ablakan's counsel claimed a special award on the basis that Zurich has unreasonably delayed paying the proper amount of income replacement benefits to Mr. Ablakan. However, I find that Zurich paid Mr. Ablakan the proper amount of weekly income replacement benefits. Therefore, it is not appropriate to consider a special award in these circumstances.

EXPENSES:

The issue of expenses is deferred. I am prepared to hear submissions on expenses, if the parties are unable to agree.

August 27, 1999

Judith Killoran Arbitrator

Date

Neutral Citation: 1999 ONFSCDRS 164 FSCO A97-000422

FINANCIAL SERVICES COMMISSION OF ONTARIO