Neutral Citation: 1999 ONFSCDRS 224

FSCO A97-000110

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JOSE PIRES

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

M. Kaye Joachim

Heard:

November 24, 25, 26 and 27, 1998, July 28, 29 and 30, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto

Appearances:

Jamie Pollack for Mr. Pires

Darrell P. March for Zurich Insurance Company

The Applicant, Jose Pires, was injured in a motor vehicle accident on April 24, 1994. He applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.¹ Zurich terminated weekly income replacement benefits on April 22, 1996. The parties were unable to resolve their disputes through mediation, and Mr. Pires applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this hearing are:

1. Is Mr. Pires entitled to ongoing income replacement benefits beyond April 22, 1996 under section 7 of the Schedule?

2. Is Mr. Pires entitled to a loss of earning capacity benefit offer under section 21 of the Schedule?

3. Is Mr. Pires entitled to a special award under section 282(10) of the Insurance Act?

4. Is Zurich entitled to repayment of benefits under section 70 of the Schedule?

Mr. Pires also claims interest on any amounts owing and his expenses incurred in the hearing.

Results:

1. Mr. Pires is not entitled to ongoing income replacement benefits beyond April 22, 1996.

2. Mr. Pires is not entitled to a loss of earning capacity benefit offer.

3. Mr. Pires is not entitled to a special award.

4. Zurich is entitled to repayment in the amount of $51,761.86, plus interest

The issue of expenses may now be spoken to.

The parties raised a number of preliminary and procedural matters. The reasons for my rulings are found in the Appendix.

Evidence and Findings:

Mr. Pires was born in Portugal. He arrived in Canada in 1976 at the age of 19 and began working in the construction industry. He apprenticed as a drywaller. After several years he began working as a pieceworker, whereby he was paid a gross wage based on the amount of drywall he installed. In 1980, he began his own business, LaVitesse Drywall and Taping. He disclosed the income from this business on his personal income tax records. In 1989, he incorporated the company (846290 Ontario Ltd.) and began filing separate personal and corporate tax returns. In 1995, he formed a second business, Vitesse Drywall and Taping, to perform the same kind of work on jobs which required unionized workers. This business was never incorporated and remained a sole proprietorship. Mr. Pires reported the income from this business on his personal income tax records. Mr. Pires also owned two multi-unit rental properties and helped manage these properties and did minor repairs. He participated in soccer and Tae-Kwon-Do and was President of his Portuguese community club in 1994.

Mr. Pires was involved in a motor vehicle accident on April 24, 1994. He sought treatment at Northwestern Hospital that day for neck, back and right shoulder difficulties. He visited his family doctor regularly and was prescribed painkillers. Mr. Pires testified that he attended physiotherapy treatments for two and a half years with some breaks between treatments. He stated that his arm and neck symptoms gradually improved after that time, but that he continued to experience problems with his lower back. Mr. Pires claimed that although he attempted to perform drywall installation after the accident, he was unable to continue because of the pain. Eventually, he apprenticed as a taper and at the time of the hearing, claimed that he was working as a taper approximately four hours per day.

Mr. Pires applied for benefits from Zurich, claiming that he was employed as a foreman for 846290 Ontario Ltd, earning approximately $1,000 in gross weekly wages. He submitted an Employer Confirmation of Income form apparently completed by the manager of 846290 Ontario Ltd, Avelino Campos, confirming that his gross weekly wages in the four weeks prior to the accident were $4,000. The form further confirmed that Mr. Pires' essential tasks consisted of lifting drywall sheets, hammering, plastering and taping.

Mr. Pires was paid a weekly income benefit of $603.99 for 100 weeks, less deductions for collateral benefits he received from other disability carriers. His benefits were terminated effective April 22, 1996. Mr. Pires claims that he continued to be unable to perform the essential tasks of his pre-accident employment, drywall installation, because of chronic back pain.

Zurich on the other hand, claims that Mr. Pires continued to operate his drywall and taping businesses after the accident and earned more income after the accident than he had before. Zurich is claiming a repayment of income replacement benefits on the basis of wilful misrepresentation and fraud.

Operation of LaVitesse and Vitesse after the Accident:

The unaudited financial statements from the numbered company (Lavitesse) confirm that the company continued to operate after the accident. In fact, gross revenue from drywall and taping contracts increased substantially after the accident. In 1992, the numbered company generated $91,261 in contracts, $77,123 in 1993, $148,878 in 1994, $238,267 in 1995 and $262,759 in 1996. In addition, Mr. Pires began reporting income from the second business, Vitesse. Mr. Pires reported gross contracts of $63,509 from Vitesse in 1995 and $57,314 in 1996. Before and after the accident, he received professional income from Lavitesse, in the form of a management fee paid by the numbered company. After the accident, he also included the profits and loss from Vitesse on his personal income tax forms.

Mr. Pires does not dispute that Lavitesse continued to operate (and that Vitesse began to operate) after the accident and that he continued to report income from the businesses as his income. However, he testified that he did not do any work for either of these businesses after the accident. He claimed that his wife, Fernanda Pires and his brother, Manuel Pires, took over the running of both businesses. Mr. Pires explained that his wife would answer the telephone and deal with job requests. His brother would visit the site, measure the job to be done and his wife would calculate the bid. She would then negotiate with the general contractor and contact the suppliers. She was responsible for paying the workers and writing the checks. On the work site, Manuel Pires took over Mr. Pires' previous duties, picking up the workers, driving them home, installing drywall, supervising the other workers and generally ensuring that the jobs were done on time. Fernanda Pires and Manuel Pires testified and generally corroborated Mr. Pires' evidence.

I reject their evidence that Mr. Pires was not involved in running his company or the sole proprietorship after the accident. Their evidence is not consistent with the preponderance of probabilities. It is unbelievable that Fernanda Pires, who admitted that she had very little involvement in the business prior to the accident, would have had the knowledge or ability to take over the tasks of calculating drywall bids and negotiating prices. Further, Mr. Pires' alleged disabilities would not have precluded him from performing this type of administrative work.

I also reject the claim that Manuel Pires took over Mr. Pires' physical duties. Again, Mr. Pires' alleged disabilities did not preclude picking up and dropping off workers and supervising their work. The video surveillance taken on September 13 and 14, 1994 demonstrates that Mr. Pires was physically capable of resuming these aspects of his business.² The remainder of the investigation evidence is inconclusive with respect to Mr. Pires' participation in his business, since the investigators were often unable to maintain surveillance on Mr. Pires throughout the entire day.

It seems highly improbable that Mr. Pires would have left the operation of his drywall business, which he had been operating since 1980, in the hands of his wife and brother, when he was clearly physically capable of doing many of those tasks.

While I accept Manuel Pires' evidence (confirmed by Joe Coletti) that he worked for his brother's company after the accident, this is equally consistent with the company's growing labour needs, in light of the increasing number of drywall contracts.

It is also unlikely that Lavitesse would have generated more contracts while in the hands of Fernanda Pires and Manuel Pires. Ms. Pires had no previous experience in drywall, and Manuel Pires had never run his own business. It is even more unlikely that these two would have commenced the operation of a second business, Vitesse, on their own initiative.

Mr. Pires has every reason to distance himself from any involvement in the operation of his business, in order to maintain his position that he did not "earn" any of the income generated from the company or the sole proprietorship after the accident.

Fernanda Pires conceded that she returned to school in February 1998 and stopped working in the business when she began working as an administrative assistant in September 1998. It was never explained who allegedly took over the administrative tasks associated with running the business.

Finally, I note that Mr. Pires reported to an occupational therapist conducting a work site assessment on his behalf in October 1998, that he (through his company) was currently working on a drywall and taping contract and they visited the work site.³ Yet Mr. Pires never actually conceded at the hearing that he had returned to operating his own businesses.

In my view, the preponderance of evidence suggests that Mr. Pires operated his company (and commenced a new sole proprietorship) in the same manner after the accident as he had done before. The overwhelming inference is that he continued to perform essentially the same functions after the accident as before. Mr. Pires continued to do some physical work connected with his rental properties and continued to be involved in his community club. In 1996 and 1997 he was actively involved in the organization of a soccer league.

Accordingly, I conclude that Mr. Pires was capable of performing the essential duties of his pre-accident employment shortly after the accident. It follows that he is not entitled to weekly income benefits beyond April 1996.

Essential Duties:

Mr. Pires gave little evidence of the duties involved in running his company, preferring to leave the impression that he was primarily a labourer in his own business. Mr. Pires claimed that he performed a substantial amount of drywall installation personally, and that this was an essential task of his pre-accident employment. He maintained that he continued to be unable to return to drywall installation because of back pain.

I reject Mr. Pires' claim that installing drywall was an essential task of his pre-accident employment. For reasons discussed above and below, I find Mr. Pires to be an unreliable witness and I do not accept his testimony on this point.

Mr. Pires reported to an occupational therapist conducting a work site assessment on his behalf in October 1998 that he had built up his business before the accident to the point where he had a number of workers working for him. This suggests that he was primarily engaged in operating the business, as opposed to installing the drywall personally.

Mr. Pires relied heavily on the evidence of Joe Coletti, who supervised a drywall contract Mr. Pires' company had performed. Mr. Coletti testified that he personally witnessed Mr. Pires installing drywall on the job before the motor vehicle accident. However, Mr. Coletti, who has known Mr. Pires for 15 years, did not specify when he had seen Mr. Pires performing this work. I have no doubt that Mr. Pires at one time did personally install drywall. However, the evidence falls short of establishing that this was one of the essential duties of his pre-accident employment in the year before the accident.

If, as he claimed, Mr. Pires hired and paid his brother to perform the physical drywall work which he himself had performed before the accident, then it would be expected that the amount the company paid for labour (compared to the gross contracts) would have increased after the accident. In fact, the reverse occurred. In 1992, the labour costs amounted to 54.4 percent of the numbered company's gross contracts. In 1993, the last complete year before the accident, those labour costs jumped to 86 percent. In 1994, the year of the accident, the labour costs were 50 percent of gross contracts. In 1995 they were 51.4 percent and in 1996 they were 55 percent. These figures do not support an inference that Mr. Pires paid his brother to take over his own physical duties in the company.

I conclude that the preponderance of evidence supports a finding that Mr. Pires' essential duties prior to the accident involved running the business and supervising the drywall installation, rather than installing the drywall personally.

Even if Mr. Pires did perform the occasional drywall installation work prior to the accident, I am not satisfied that this was an essential task. I am satisfied that it was always within Mr. Pires' authority, as the owner of his own business, to delegate tasks. Accordingly, I am satisfied that it was within Mr. Pires' authority after the accident to delegate the heavier overhead drywall duties to his workers and pieceworkers.

Ability to Perform Drywall Duties:

If I am mistaken in my conclusion that drywall installation did not form an essential part of Mr. Pires' pre-accident employment tasks, I am nonetheless satisfied that Mr. Pires was in fact capable of resuming the heavy work of drywall installation well before April 1996.

I recognize that drywall installation is physically strenuous work. It involves moving heavy drywall sheets of varying sizes. Wall installation requires the worker to steady the drywall sheets with one hand while fastening the sheet to the wall with the other hand. Ceiling installation requires two workers, working from scaffolding, to install the heavy drywall sheets overhead.

Despite the heavy nature of this work, several medical assessors have concluded that Mr. Pires suffers from no objective impairment which would prevent his returning to this work.⁴

The only restriction which purportedly prevents Mr. Pires from returning to this work is alleged low back pain. The medical evidence supporting his claim is based almost exclusively on Mr. Pires' subjective reports of pain and limitation.⁵ Although I accept that Mr. Pires was involved in an accident and may continue to experience some low back pain, I do not accept his evidence that the pain disables him from performing this work. As mentioned above and below, I find that Mr. Pires is not a reliable witness. On the contrary, I find that he has lied to this tribunal about the operation of his business for the purpose of preserving the benefits he has received and for the purpose of obtaining further benefits.

Another example of the unreliable nature of Mr. Pires' evidence can be seen in his consistent denial of any previous motor vehicle accidents. In fact, Dr. Fernandes' clinical notes and records reveal two serious accidents, including a motorcycle accident in 1985 which left him with chronic right shoulder problems and a car accident in August 1990 which left him with ongoing left leg pain.

Although Mr. Pires testified that his right shoulder problems had resolved and that it was his low back pain which prevented him from returning to drywall, a 1998 functional capacity evaluation conducted at his own request noted that the main restriction which prevented Mr. Pires from returning to drywall work was his right shoulder range of motion and overhead strength. These evaluators noted that Mr. Pires was frequently exercising "submaximal effort" and concluded "In this client's case there is definite impairment of the shoulder region however it should not lead to the current level of self-initiated disability that has occurred."⁶

In contrast to this evidence that Mr. Pires' shoulder was a continuing problem, I note that his family doctor's clinical notes and records do not record any complaints of right shoulder pain after the first couple of months following the accident.⁷

I am unable to accept Mr. Pires' evidence that his low back pain prevents him from performing drywall installation.

I conclude that Mr. Pires is not entitled to income replacement benefits beyond April 1996, is therefore not entitled to a loss of earning a capacity offer, and is not entitled to a special award.

Repayment:

Zurich is claiming repayment of weekly income benefits in the amount of $51,761.86.⁸ Zurich claims this repayment on the basis of wilful misrepresentation and fraud.

I find that Mr. Pires made several misrepresentations to Zurich. First, Mr. Pires submitted an Application for Benefits in which he claimed he was employed rather than self-employed. Using the Commissioner's Guidelines on Self-Employment, it is apparent that Mr. Pires fulfilled most of the criteria of a traditional self-employment situation. He participated in the everyday operations of the business. He determined his own method and schedule for accomplishing tasks. He determined his own hours. He quoted on projects and negotiated his fees for drywall projects. He filed corporate income tax returns and claimed self-employment income on his personal income tax return. He is ineligible for regular employment insurance benefits. He made the employer and employee contributions to the Canada Pension Plan. He remitted tax to the government in respect of his employees and provided them with T-4 forms, where appropriate.

The only factor in the Guidelines which points to employment rather than self-employment, is the criteria of deriving one's remuneration from an incorporated business. LaVitesse was an incorporated business. However, Mr. Pires did not testify that he was aware of this provision in the Guideline when he completed his application or that he was in any way misled by it. This factor is not determinative and I am satisfied that Mr. Pires was self-employed.⁹

I find that Mr. Pires is an experienced businessman. He has run his own construction business for 15 years. He filed income tax returns claiming self-employment income. He never received a T-4 slip, although he prepared them for some of his workers. He understood that being the owner of his own company restricted his right to claim employment insurance and worker's compensation benefits. He understood that he was the [incorporated] company and that the company was him. I am satisfied that Mr. Pires had a basic understanding of the difference between being employed and self-employed and that he understood himself to be self-employed. Most significantly, his wife, who helped him complete the Application for Benefits, spontaneously described Mr. Pires as self-employed during her testimony. I reject Mr. Pires' explanation that he honestly believed that the description "employed and working" more accurately described his situation than "self-employed."¹⁰

Had Mr. Pires' description of himself as being employed been innocent, the fact that he was employed by his own company would have been revealed in the Application. Instead, Mr. Pires appears to have deliberately omitted any information which would have revealed the relationship he had with the alleged employer. In the space designated on the form for the address of the employer, instead of using his home address, which was the business address of his corporation, Mr. Pires put the address of 1278 Dundas Street West, which is the address of his Portuguese social club. The only explanation offered for putting down this address was that, as he was President of the club in 1994, he was always there. I find this explanation unconvincing. Further, it is extraordinary that Mr. Pires did not reveal to the various medical assessors that he operated his own business. To the contrary, he took great pains to maintain the fiction that he was a mere employee. For example, he advised the Health Recovery Clinic that he worked as a pieceworker.¹¹ He advised the Medical and Rehabilitation Assessors that he did not know if his previous job was available to him!¹² He stated to his orthopaedic specialist that he had begun doing part-time taping but that some companies would not hire him if they could not count on him every day.¹³

Whether Mr. Pires was employed or self-employed, he was working prior to the accident, and would have been entitled to a weekly income benefit if he was incapable of performing the essential duties of his pre-accident employment. However, this misrepresentation is detrimental to Mr. Pires' credibility and did foster the misrepresentation, described below, with respect to his earnings.

The more significant misrepresentation is Mr. Pires' claim in the application that he had earned $4,000 in the four weeks prior to the accident, and his submission of a false Employer's Confirmation of Income Form. Mr. Avelino Campos, who signed the form as manager of the numbered company, was not and never had been employed by the numbered company in any capacity. Mr. Campos, a real estate agent, was a friend of Mr. Pires who sometimes referred prospective home buyers to Mr. Pires' drywall company. He testified that he signed the form at Mr. Pires' request.

I conclude that Mr. Pires had no reasonable grounds to represent that he earned $4000 in the four weeks prior to the accident. He was not an employee of his own numbered company, and he did not receive any regular salary or pay cheques. As stated previously, he knew the difference between an employee and a self-employed individual, as he paid his own workers based on their employment status. I conclude that Mr. Pires did not honestly believe that he was an employee earning $4,000 in the four weeks prior to the accident when he completed his application and that he therefore submitted a false Employer Confirmation of Income.

Neither did Mr. Pires honestly believe that he "earned" $4,000 in self-employment income in the four weeks prior to the accident. Mr. Pires suggested in his evidence that he obtained the $4,000 figure by looking at the amounts he had withdrawn from his company during that time. However, the company records do not support this claim. In fact, Mr. Pires had drawn much more than that during the four weeks prior to the accident. Mr. Pires eventually conceded that he had been aware that the maximum benefit available to him was $1,000 per week. I conclude that Mr. Pires used the figure of $4,000 in his application because he mistakenly believed that this would entitle him to the maximum benefit of $1,000 per week. I find that this was a deliberate misrepresentation as Mr. Pires had no basis for believing that he had earned $4,000 in the four weeks prior to the accident.

I also find that Mr. Pires concealed the fact that he continued to operate his drywall business, and earn income, after the accident. Indeed, he continued to maintain at the hearing that he had never returned to work in his own business.

Mr. Pires argued that Zurich had not satisfied the evidentiary onus it faced to establish that it had paid benefits based on Mr. Pires' misrepresentations, because Zurich did not call the adjuster who administered his benefits to testify that benefits were paid based on his claim of gross income of $4,000 in the four weeks prior to the accident. I reject this argument. I find that the only inference to be drawn from the evidence is that Zurich paid a net weekly benefit of $603.99, based on Mr. Pires' claim, supported by the fraudulent Employer Confirmation of Income indicating that his gross weekly income was $1,000. It is also self-evident that Zurich would not have paid Mr. Pires any benefits if it had known that he had returned to work and was earning more than he had before the accident. I reject Mr. Pires' argument that Zurich was obliged to call the adjuster to testify to that effect.

I note that Ray Proctor, a dispute resolution specialist with Zurich, testified that Zurich paid income replacement benefits on the basis of the Application for Benefits and Employer Confirmation of Income.¹⁴ Although Mr. Proctor was not the adjuster on the file at the time benefits were paid, he had reviewed the file and his evidence was not seriously challenged on this point.

The cases relied upon by Mr. Pires to support his argument that Zurich must call the adjuster to explain the connection between the insured's actions and the payment of benefits are distinguishable on the facts. Those cases concerned alleged misinformation provided by the insured. The arbitrators in those cases were not satisfied that the actions of the insured led to the overpayment. In this case, I am so satisfied.

I find that Zurich paid Mr. Pires a weekly benefit of $603.99 (less deductions for collateral benefits) based on Mr. Pires' assertion that he earned $1,000 per week prior to the accident and based on Mr. Pires' assertion that he was unable to return to his pre-accident employment. I find that both of these assertions were false and that Mr. Pires was aware that these assertions were false when he made them. I conclude that Mr. Pires wilfully misrepresented his employment situation, his pre-accident earnings, and his post-accident earnings and received weekly income benefits as a result. I conclude that Zurich is entitled to repayment of these income replacement benefits based on Mr. Pires' wilful misrepresentations.

Amount of Repayment:

Zurich claims that Mr. Pires was never entitled to any weekly benefits because he continued to earn more income after the accident than he had before the accident. Zurich submitted an accountant's report calculating Mr. Pires' self-employment income both before and after the accident. The report was based on Mr. Pires' personal and corporate tax returns, and unaudited financial statements from his businesses. The accountant treated Mr. Pires as self-employed, which I find accurately describes his employment status. The accountant looked through the corporation and attributed to Mr. Pires all the underlying earnings available to him, both before and after the accident.¹⁵ The accountant concluded that in the year prior to the accident, Mr. Pires had self-employment earnings of $25,407, which would have translated into a weekly benefit of $488.60. Using the same method of calculation, the accountant calculated that Mr. Pires earned income of $61,615 in the two years after the accident, which is equivalent to a weekly benefit of $592.45. Mr. Pires did not challenge these calculations, or submit any accounting evidence to the contrary. I conclude that Mr. Pires continued to operate his businesses after the accident and earned more after the accident than before.

Accordingly, even if he suffered injuries in the accident, he was not entitled to any weekly income benefits. Mr. Pires shall repay Zurich $51,761.86 of the weekly income benefits he received. Interest is payable under subsection 70(7) from the fifteenth day after Zurich gave notice of its intention to seek repayment, which is December 9, 1997.

EXPENSES:

If the parties are unable to resolve the issue of expenses, I may be spoken to.

November 19, 1999

M. Kaye Joachim Arbitrator

Date

FSCO A97-000110

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JOSE PIRES

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c. I.8, as amended, it is ordered that:

1. Mr. Pires shall repay Zurich Insurance Company $51,761.86, plus interest from December 9, 1997.

November 19, 1999

M. Kaye Joachim Arbitrator

Date

APPENDIX

PRELIMINARY ISSUES:

On the first day of the hearing, Mr. Pires raised several preliminary objections. I rejected these objections and proceeded with all of the issues outlined above. These are my reasons for my preliminary rulings.

1. Standing

Mr. Pires argued that Zurich had no standing at the proceedings, because it had filed its Response to the Application for arbitration three days late, despite the Commission's warning in its letter of January 16, 1997, that an insurer who files a late response "may not have standing to participate in the arbitration process." I ruled that I had the discretion to waive the Commission's power to deprive Zurich of standing because of late filing and that I was prepared to exercise my discretion to do so in this case. I also noted that Mr. Pires had waived his right to raise this procedural objection, as he had failed to request a ruling or remedy from the Commission until the first day of the hearing. Throughout the arbitration process, Zurich had been treated at all times by the Commission as having standing and Mr. Pires had not once raised the issue of standing, despite participating in two pre-hearings.

2. Failure to Give Notice Under Subsection 70(5)(a) of the Schedule

One of the issues in this proceeding is Zurich's claim for repayment of benefits under section 70. Mr. Pires argued that I lacked the jurisdiction to determine the repayment issue because Zurich had failed to give the notice required by subsection 70(5). I ruled that Zurich had complied with the requirements of subsection 70(5) and in any event, Mr. Pires had waived or was estopped from asserting his right to rely on this procedural requirement. These are my reasons for that decision.

A. Section 70

A precondition to pursuing a claim for repayment of benefits is the provision of "notice of the amount that is required to be repaid" by the insurer to the insured. Subsection 70(5) does not stipulate any particular form of notice, and I am satisfied that notice had been given to Mr. Pires of the amount being claimed in repayment.

There are various grounds upon which an insurer can claim repayment of benefits. Benefits paid to the insured through error are repayable, but only if notice is given within twelve months after the payment was made.¹⁶

The other grounds for repayment have no temporal limitations. Repayment may be claimed at any time. Benefits paid though the insured's wilful misrepresentation or fraud are repayable under subsection 70(1).

B. Chronology of Events

It is necessary to review the chronology of events leading up to this arbitration to appreciate how notice of repayment was given, and to determine the issues of waiver and estoppel.

Mr. Pires filed an Application for Arbitration on January 8, 1997, seeking weekly income benefits beyond April 25, 1996, interest, loss of earning capacity benefits and a special award. Zurich filed its Response February 10, 1997, denying entitlement beyond April 1996 and seeking a deduction for collateral benefits and post-accident earnings. Zurich also sought production of various documents relating to Mr. Pires' earnings and the profits of a business known as LaVitesse Drywall.¹⁷ A pre-hearing was held on June 9, 1997 at which time the following issues were identified: entitlement to weekly income benefits beyond April 29, 1996, entitlement to a loss of earning capacity benefit offer, special award, interest and expenses. Zurich sought to raise the issues of quantum and overpayment, but Mr. Pires objected on the grounds of lack of notice and failure to mediate.¹⁸ Hearing dates of February 2 to 5, 1998 were set. On June 11, 1997, two days after the pre-hearing, Zurich filed an Application for Mediation for "overpayment and repayment of benefits" and "Quantum - whether the claimant was an employee or self-employed" and sought to have these issues added to the arbitration proceeding.

By letter dated June 19, 1997, Mr. Pires disputed the Commission's jurisdiction to accept the Application for Mediation, on the basis that notice had not been provided under section 70 of the Schedule.¹⁹ The Mediation Unit nonetheless accepted the application. By letter dated July 14, 1997, Zurich responded that subsection 70(2) only applied to benefits paid in error, and not to wilful misrepresentation or fraud.²⁰

A Report of Mediator was issued September 16, 1997, identifying two issues: repayment and quantum of income replacement benefits. The Report of Mediator stated "Zurich claimed repayment of up to a maximum of $54, 334.00 resulting from an alleged overpayment in weekly income replacement benefits" and "Zurich disputed the amount of weekly income replacement benefits paid to Mr. Pires and questioned whether he was an employee or self-employed."

By memorandum dated December 9, 1997, Zurich advised Mr. Pires' counsel:

The total amount paid for IRB's in this claim is $54,334.00. This is the maximum reclaim under section 70 of the SABS. I trust this meets my undertaking at the mediation.

On January 14, 1998, Mr. Pires requested an adjournment of the February 1998 hearing dates on the basis that a crucial witness was absent, and because the issues of overpayment and quantum, which had since been mediated, had not been the subject of a pre-hearing. The adjournment was granted and the hearing was rescheduled to begin in July 1998.

In January 1998, the counsel exchanged production material related to the quantum and overpayment issues.²¹ A resumed pre-hearing was held on February 2, 1998, at which time the parties confirmed that the issues of quantum and repayment had been added to the arbitration hearing.²²

Mr. Pires did not raise the issue of lack of statutory notice or request that a preliminary hearing be held on this issue. The arbitration was scheduled to proceed on July 20, 1998. From February to July 1998, counsel for the parties exchanged correspondence and productions concerning the upcoming arbitration.²³

On July 8, 1998, Mr. Pires' counsel advised that his retainer had been terminated and asked to be released as solicitor on record. Mr. Pires retained new counsel, who sought an adjournment of the hearing in order to obtain an accountant's report to respond to the request for repayment.

This second adjournment request was granted and the hearing was rescheduled for November 24 to 27, 1998. At the commencement of the proceedings, Mr. Pires raised for the first time, the alleged lack of statutory notice.

C. Notice pursuant to Subsection 70(5)

As stated previously, subsection 70(5) requires that the insurer give notice of the amount of benefits that is to be repaid.

I find that Zurich did provide notice to Mr. Pires, through his counsel, that the amount of benefits being reclaimed was $54,334.00. This notice was provided in its memorandum dated December 9, 1997.

I reject Mr. Pires' argument that notice given to counsel is insufficient. There are numerous arbitration decisions in which notice to an insured's counsel on record is considered adequate notice to the insured. Mr. Pires led no evidence to suggest that there was any limitation on his counsel's authority to represent him.

D. Waiver and Estoppel

In any event, I also find that Mr. Pires has waived his right to rely on and is estopped from relying on the provisions of subsection 70(5).

Subsection 70(5) affords a procedural protection to insureds that overpayment made in error cannot be claimed unless notice is given within twelve months of the date of the payment. There is less protection with respect to claims for repayment for other reasons, in that there is no time limit for claiming repayment under other subsections. I am mindful that caution should be exercised before concluding that an insured has waived or is estopped from asserting his or her procedural rights.

However, there are ample arbitral precedents proving that the concepts of waiver and estoppel will apply to prevent a party from asserting a procedural right. Most of the cases have arisen in the context of an insurer relying on the two-year time limitation within which the insured must file an Application for Mediation or Arbitration.²⁴

The two doctrines have been described as follows:

waiver...involves either voluntary relinquishment of a known right or the choice between inconsistent remedies.

estoppel ...prevents a person from adopting an inconsistent position once there has been detrimental reliance upon his holding out.

Waiver requires an intentional relinquishment of rights; estoppel requires reliance.²⁵

In this case, I find that the essential features of waiver and estoppel are present. I note that Mr. Pires was represented by counsel from the date of filing of the Application for Arbitration and that he is bound by his counsel's actions, or inaction.

It is clear from the above chronology that Mr. Pires was aware of the procedural protection afforded by subsection 70(5) as he asserted this defence on June 19, 1998. Zurich responded to the procedural objection, by providing the notice required by subsection 70(5) through its memorandum of December 9, 1997.

At no time after that date did Mr. Pires assert that the letter of December 9, 1997 was insufficient notice, or re-assert that subsection 70(5) had not been complied with. Mr. Pires took several fresh steps, without reserving the right to maintain the subsection 70(5) objection. In particular, I note that he participated in the resumed pre-hearing on February 2, 1998, convened specifically to discuss the claim for overpayment, but did not raise the subsection 70(5) issue.

Further, Mr. Pires engaged in the exchange of correspondence and production with Zurich on the issues of quantum and repayment, without raising this procedural objection.

Mr. Pires' counsel's letter of July 1998 requesting an adjournment clearly suggested that they were preparing to address the claims on the merits, and did not suggest that they would be raising a preliminary objection on the basis of lack of notice.

I find that Zurich has relied on Mr. Pires' failure to raise the notice issue, to its detriment. Had Zurich been advised of Mr. Pires' position on the notice issue, it could have preserved its right to demand repayment by giving another notice. I emphasize that in light of the lack of temporal limitation in cases of misrepresentation and fraud, Zurich could have amended this alleged procedural deficiency at any time prior to the hearing.

By waiting in the weeds throughout the entire arbitration process and failing to raise this issue after receiving the December 9, 1997-memorandum, Mr. Pires has waived his right to rely on and is estopped from relying on subsection 70(5).

3. Section 8 of the Statutory Powers Procedure Act

Mr. Pires argued that Zurich had failed to provide reasonable information about the allegations which give rise to the claim for repayment, as required by section 8 of the Statutory Powers Procedures Act. He sought a permanent injunction against Zurich to prevent it from proceeding with its claim for repayment.

I find that Mr. Pires had sufficient information that Zurich was seeking repayment of benefits on the basis that Mr. Pires was not disabled after the accident, but rather, was working in his own business and earning income after the accident.

A review of the correspondence and material exchanged prior to the hearing scheduled for July 1998 reveals ample notice of the allegations and evidence upon which Zurich was relying. In particular, Zurich's letter to Mr. Pires on July 9, 1998²⁶ sets out in detail the witnesses to be called and the evidence to be relied upon. In my view, this material provided sufficient particulars so that Mr. Pires could prepare to respond.

My findings are reinforced by the fact that Mr. Pires did not communicate any need for further particulars to either Zurich or the Commission prior to the hearing.

The arbitration process provides the opportunity for parties to raise these concerns about preliminary issues and particulars at the pre-hearing, or, if necessary, by applying for an order at any time prior to the hearing. Instead, Mr. Pires chose to spring these substantial issues on Zurich the morning of the first day of hearing, without any prior notice.

PROCEDURAL RULINGS:

Investigation Evidence:

Mr. Pires objected to the introduction of the videotape and investigation reports tendered by Zurich on several bases. First, Zurich did not cross-examine Mr. Pires on this information and Mr. Pires argued that the Rule in Brown and Dunn required such cross examination. I ruled that if Mr. Pires wanted to comment on the videotape surveillance, he would be allowed to do so in reply. I note that the videotape and reports were provided to Mr. Pires well in advance of the hearing.

Second, Mr. Pires submitted that the investigators' notes had not been made available, as required by the Dispute Resolution Code. Zurich agreed to provide these notes and I ruled that the evidence would not be excluded on the basis of this technical breach, in light of the fact that Mr. Pires had not requested the notes prior to the hearing.

Several investigators were involved in the investigation and Zurich was unable to locate all of them. However, two investigators who were involved in the investigation upon which Zurich wished to rely, were made available for cross-examination. Mr. Pires sought to exclude all the investigation evidence on the basis that the absence of the remaining investigators jeopardized his right to cross-examine adequately. In light of the fact that the investigators available for cross examination were present at the investigations relied upon, I ruled that Zurich would be allowed to rely on the evidence. I find minimal prejudice to Mr. Pires in not being permitted to cross examine the second or third investigators who were also present. Mr. Pires did not dispute that he was the person depicted in the video surveillance, nor did he dispute the chronology of events which are recorded in the investigation reports. I accordingly accept the investigation evidence as an accurate chronology of Mr. Pires' actions during the investigation.

Reply Evidence:

On the second to last day of the hearing, Mr. Pires issued a summons to the underwriting department at Zurich requiring them to produce all documents regarding any insurance policies concerning Mr. Pires' drywall company. Zurich objected to the introduction of these documents on the grounds that they were not relevant, that it was not proper reply evidence and that it had not received notice of this evidence until the day before it was to be called. Mr. Pires argued that the evidence was relevant to refute Zurich's claim that Mr Pires had deliberately deceived Zurich about the relationship between himself and his numbered company. I ruled that although the evidence was relevant and responsive to Zurich's evidence, these were documents that should have been requested and produced well in advance of the hearing. The fact that Zurich insured his company was clearly known to Mr. Pires throughout the entire proceedings, which had been adjourned twice at Mr. Pires' request. Mr. Pires offered no reason whatsoever for the late notice, other than the fact that it had just occurred to him. I denied the admission of these documents into evidence, and ruled that Mr. Pires could testify in reply as to his company's insurance policies. He did not avail himself of this opportunity.

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94 and 463/96. O.R 776/93 was extensively modified by O.R. 781/94; accordingly, where necessary, "1994 Schedule" refers to the original O.R. 776/93, and "1995 Schedule" refers to O.R. 776/93 as amended.
2. 2Mr. Pires argued that Zurich was precluded from relying on the 1994 surveillance on the basis that Zurich had been aware of the surveillance since 1994, but had failed to rely on it. This argument fails to recognize that in 1994, Mr. Pires was claiming to be an employee, whose primary duty was installing drywall. The video surveillance did not demonstrate Mr. Pires' capacity to return to heavy-duty drywall installation in 1994.
3. 3Exhibit 2, Tab L-3.
4. 4Exhibit 4, Tab J, Dr. F. Langer, Orthopaedic Surgeon, September 13, 1994. Exhibit 4, Tab E, Health Recovery Clinic, May 1, 1995 and May 10, 1995. Exhibit 4, Tab D, Dr. M. Kleinman, Physical Medicine.
5. 5The three medical practitioners supporting Mr. Pires' restrictions who have seen him on a regular basis, Dr. N. Fernandez, family practitioner, Dr. A. Gwardjan, and Dr. M. D. Charendoff, do not note any objective signs of impairment. Their conclusions are based on Mr. Pires' reports of pain.
6. 6Exhbit 2, Tab L, October 7, 1998, Accident Management Group
7. 7In his initial Health Practitiner's statement, of May 17, 1994, Dr. Fernandez mentions right shoulder pain. However in subsequent reports on June 28, 1994 (Exhibit 4, Tab 1 at page 161), July 18, 1994 (Exhibit 4, Tab A-3), and November 28, 1995 (Exhibit 4, Tab A-4), he makes no mention of any right shoulder pain.
8. 8Exhibit 6, a computer printout of income replacement benefits paid by Zurich indicates that $54,456.66 was paid to Mr. Pires. Zurich is not pursuing this full amount.
9. 9Meandro and Pilot Insurance Company (OIC P-004433, May 7, 1997). In Ironside and Royal Insurance Company of Canada (FSCO A97-001143, January 19, 1999), Arbitrator Renahan reached a similar conclusion with respect to an incorporated business.
10. 10I note that during a psychiatric assessment in March 1986, Mr. Pires described himself as self-employed. Exhibit 4, Tab A-1at page 224.
11. 11Exhibit 4, Tab E-3, Health Recovery Clinic.
12. 12Exhibit 4, Tab G at page 4.
13. 13Exhibit 4, Tab I-2, Dr. M. D. Charendoff, June 2, 1997.
14. 14Transcript, November 27, 1998 at page 646
15. 15I find that it is appropriate in this situation to look through the corporation and consider the under lyingearnings of both companies.
16. 16Subsections 70(1) and (2).
17. 17Zurich's Response to Application for Arbitration, February 101997 and Exhibit 1, Tab 2, Letter dated February 10, 1997.
18. 18Exhibit 1, Tab 9 and letter dated January 14, 1998.
19. 19Exhibit 1, Tab 7.
20. 20Exhibit 1, Tab 10.
21. 21Exhibit 1, Tabs 16 and 17.
22. 22Pre-hearing letter dated February 3, 1998.
23. 23Exhibit 1, Tabs 20 to 23.
24. 24Zeppieri and Royal Insurance Company of Canada (OIC P-005237, December 22, 1994), Offeh and Allstate Insurance Company of Canada (OIC P-006494, July 3, 1996) and Steele and Zurich Insurance Company (OIC A-001024, December 3, 1992).
25. 25Offeh and Allstate Insurance Company of Canada (OIC P-006494, July 3, 1996) at pages 5 and 6.
26. 26Exhibit 3, Tab 1.```