Neutral Citation: 1999 ONFSCDRS 41

FSCO A96-000362

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MICHAEL MOORE

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND-ONT. INSURANCE COMMISSION

Insurer

REASONS FOR DECISION

Before: Beth Allen

Heard: August 11, 12 and 13, 1998 and February 8 and 9, 1999, in Hamilton, Ontario.

Appearances: Frank Genesee for Mr. Moore Colin S. Jackson for Motor Vehicle Accident Claims Fund-Ont. Insurance Commission

Issues:

The Applicant, Michael Moore, was injured in a motor vehicle accident on October 21, 1994. He applied for and received statutory accident benefits from Motor Vehicle Accident Claims Fund-Ont. Insurance Commission ("the Fund"), payable under the Schedule¹ The parties seek a determination of whether Mr. Moore was employed at the time of the accident and, in the event of a positive ruling on this issue, a determination of the amount of his income replacement benefit ("IRB").

The Fund also claims, pursuant to section 70 of the Schedule, a repayment of benefits paid in excess of the $185 rate which it agreed at mediation to pay Mr. Moore on a "without prejudice" basis.

The parties were unable to resolve their disputes through mediation, and Mr. Moore applied for arbitration at the Financial Services Commission of Ontario² under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Was Mr. Moore employed at the time of the accident within the meaning of section 5 of the Schedule?

2. If Mr. Moore was employed at the time of the accident, what was the correct amount of his income replacement benefit under section 10 of the Schedule?

3. Is the Fund entitled to an interim order for repayment in the amount of $3,239.34 pursuant to section 70 of the Schedule?

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

Result:

1. Mr. Moore was employed at the time of the accident within the meaning of section 5 of the Schedule.

2. Mr. Moore did not establish the amount of IRBs.

3. The Fund is entitled to an interim order for repayment in the amount of $3,239.34 pursuant to section 70 of the Schedule.

EVIDENCE AND ANALYSIS:

Factual overview:

On October 21, 1994, a motorcycle struck Michael Moore when he was crossing a street. He claims that at the time of the accident he was working, from 1991 until the accident, as an automobile mechanic for a company called Grewar Enterprises ("Grewar"). This company, which went out of business in late 1994 or early 1995, was owned and operated by his friend Eric Grewar. Mr. Moore claims that based on his gross pay of $1,100 for each of the four weeks before the accident, the Fund ought to have paid IRBs at the rate of $653.39. At issue is whether, at the time of the accident, Mr. Moore was actually employed by Grewar within the meaning of section 5 of the Schedule and, if he was employed there, the correct amount of IRBs payable to him.

Evidence and Findings:

Was Mr. Moore employed at the time of the accident?

Mr. Moore and Mr. Grewar testified that Mr. Grewar hired Mr. Moore and paid him as a mechanic's apprentice and recorded his accumulated hours toward his mechanic's licence. Mr. Moore was Mr. Grewar's only employee. Mr. Moore testified that he had a personal hobby of purchasing and fixing cars and sometimes used the Grewar premises to work on his own cars. Mr. Moore called several witnesses — Mr. Grewar, family members and customers — who testified that before the accident Mr. Moore worked on various cars as a mechanic at Grewar.

Neither Mr. Moore nor Mr. Grewar presented source records or documents evidencing Mr. Moore's pre-accident work arrangements. I received only oral evidence in this regard. While there are problems with the evidence, I am prepared to accept that at the time of the accident, Mr. Moore was employed by Mr. Grewar within the meaning in section 5 of the Schedule. Section 5 provides that "a person is employed if, for salary, wages, other remuneration or profit, the person is engaged in employment, including self-employment." What I gather from an overview of this evidence, is that there was a rather loose employment arrangement where hours of work and pay were irregular.

Mr. Grewar supported Mr. Moore's evidence that Mr. Moore worked for him from 1991 until the accident on October 21, 1994, working full-time during the three years before the accident. The evidence as to what was meant by "full-time" is unclear. As I understand it, Mr. Moore claims he worked on average 46 to 48 hours weekly.³ Mr. Grewar testified that he documented Mr. Moore's hours to satisfy the apprenticeship requirements for Mr. Moore's mechanic's licence. Mr. Grewar explained that he recorded the hours for a particular job Mr. Moore performed according to the hours prescribed for that type of job in the mechanics apprenticeship manual.⁴ It is therefore not clear whether the 46 to 48 hours refers to the actual hours Mr. Moore worked or the billable hours prescribed by the manual. Mr. Moore also indicated that he would sometimes complete a particular job more quickly than at other times and Mr. Grewar would record the same hours for the jobs. Mr Moore also testified that he would have a week off here and there (in addition to his holiday time) because there was insufficient work, but was still considered to be employed full-time.

Customers, including Mr. Moore's sister, testified that they encountered Mr. Moore on the Grewar premises around the relevant period of Mr. Moore's alleged employment when each, on more than one occasion, took their cars in for repairs. Three customers, who were friends of Mr. Grewar (and, according to their evidence, not friends of Mr. Moore), observed Mr. Moore working on cars on these occasions. One customer, for whom Mr. Grewar was a mechanic, operated a car sales business next door to Grewar during a period before the accident. He indicated that he saw Mr. Moore working regularly before the accident and that he, Mr. Grewar and Mr. Moore often took coffee breaks together. However, none of the customers had knowledge of Mr. Moore's employment or pay arrangements.

Mr. Grewar testified that once Mr. Moore accumulated the prescribed hours toward his mechanic's license, he (Mr. Grewar) submitted the requisite documents to the government. Mr. Moore submitted into evidence a copy of his motor vehicle mechanic's certificate of qualification, issued January 29, 1995. He testified that he had completed the requisite hours before the accident and successfully wrote the examination after the accident.

Despite the shortcomings in Mr. Moore's and Mr. Grewar's description of the employment arrangement, I am prepared to accept on the balance of probabilities that Mr. Moore was employed by Grewar during the three years before the accident. I accept that, while Mr. Moore might have done some work at Grewar as a hobby, Mr. Moore more likely than not also worked there for pay. I am prepared to accept the customers' evidence of frequently observing Mr. Moore working on the premises, particularly in 1994. This to some extent supports Mr. Moore's evidence that he was an employee, although the customers could not say whether Mr. Moore was being paid for his work. In view of Mr. Moore's frequent presence on the premises, I can draw the reasonable inference that he was employed for pay at Grewar. Again, although not proof, the fact that he was able to pass the mechanic's examination and received his licence shortly after the accident suggests, together with the witnesses' observations, that he was "employed" as a mechanic at Grewar. In absence of any evidence from the Fund suggesting otherwise, I find it more likely than not that Mr. Moore was an employee of Grewar within the meaning of section 5 and accordingly qualifies for benefits under Part II of the Schedule. However, for the following reasons, I am not satisfied that he provided reliable evidence of his earnings to substantiate the amount of the IRB.

The amount of Mr. Moore's IRB?

Mr. Grewar might have been Mr. Moore's most useful witness in establishing Mr. Moore's income, but he in fact provided unreliable and inconsistent evidence. He presented as a very poor historian and an unsophisticated businessman. Mr. Grewar did not recall the year he began his business at Grewar Enterprises; he did not recall whether he incorporated the business or registered it as a sole proprietorship; he did not remember how he recorded Mr. Moore's apprenticeship hours; he had confused recall of how he conducted the monetary aspects of the business; he gave conflicting evidence as to when he closed the business; his and his accountant's evidence conflicted as to who between them completed certain employment documentation; he kept few bookkeeping or other business records and lost the few documents he had once retained. Mr. Grewar explained that around the time he closed the business he suffered from depression which went untreated, and this condition has affected his memory of his business activities. In my estimation, while this latter factor, and Mr. Grewar's obvious lack of business sophistication, might explain some of the shortcomings in his evidence, I am not persuaded that these explanations enhance its reliability.

Mr. Moore testified that Mr. Grewar paid him in cash "by the book" for a full 40-hour week even for weeks that he might have only worked three days. He adduced only his and Mr. Grewar's oral evidence and the employment documents he generated after-the-fact in support the amount of his IRBs. Before the accident, Mr. Grewar issued no T4 slips and maintained no employment records other than those he kept for Mr. Moore's apprenticeship. Mr. Grewar stated that he kept the apprenticeship records in a notebook (the "apprenticeship notebook") containing Mr. Moore's jobs and related hours worked. Mr. Grewar further testified that he did not have a bookkeeper, payroll book or other business records. He kept his business-related bills and invoices in his desk drawers and subsequently transferred them to a box which he stored at his home after the business closed. After the accident, Mr. Grewar approached an accountant, Mr. Robert Chemij, to assist him in preparing supporting employment documents for Mr. Moore's insurance claim. Mr. Chemij admitted that in preparing the employment documents he did not review any of the source documentation Mr. Grewar apparently had with him in a box when they met. Mr. Chemij relied on the information Mr. Grewar provided him orally.

Mr. Moore submitted into evidence statements of earnings and deductions created after the accident for the four weeks pre-accident (the weeks ending October 1, 8, 15 and 22, 1994) which Mr. Grewar and Mr. Moore testified contain Mr. Moore's earnings for this period. Mr. Grewar and Mr. Chemij's evidence conflicted as to who completed these documents. While Mr. Grewar testified that he filled them out, Mr. Chemij claimed that he completed them. According to these documents, for each of the four weeks he earned gross weekly income of $1,100, $859.53 net after deductions. Mr. Grewar admitted that the $1,100 figure was a rounded off, estimated amount. Mr. Grewar testified that he paid Mr. Moore a net weekly wage at 70 percent of his gross earnings and held back the remaining 30 percent (about $330) for remittances to the government. Mr. Grewar admitted, however, that he rarely made the required remittances to the Canada Pension Plan, Unemployment Insurance and Income Tax offices because, according to Mr. Grewar, business revenue was not generally sufficient to permit this.

The conflicting evidence around the preparation of these documents, the fact that the figures were estimates, combined with the fact that the statements were completed after-the-fact seriously limit their usefulness as proof of Mr. Moore's earnings.

Mr. Moore also filed into evidence three T4 slips containing employment income and deductions for the years 1994, 1993 and 1992. Mr. Grewar stated that he completed these slips with the assistance of Mr. Chemij. Mr. Chemij testified that he met Mr. Grewar on one occasion, January 13, 1995, when he assisted with Mr. Moore's employment documentation. To arrive at the income figures on the T4 slips, Mr. Grewar explained that Mr. Chemij used the hours recorded in the apprenticeship notebook and multiplied these by Mr. Moore's hourly wage, which Mr. Grewar and Mr. Moore testified was $20. According to Mr. Moore's evidence, his annual gross salaries for 1994, 1993 and 1992 were $35,750, $29,900 and $23,400 respectively. Mr. Chemij testified that he arrived at the government source deductions on the T4 slips by using a computer application program that calculated these amounts from the gross income figures.

Again, the evidentiary value of the T4 slips is limited as their contents were derived from the apprenticeship notebook which, for reasons discussed above, was itself an unreliable source of information.

I also find the integrity of the UIC Record of Employment (ROE) form Mr. Moore submitted into evidence seriously compromised by the circumstances surrounding its completion. Mr. Chemij explained that the ROE is a document an employer is required by law to provide to an employee upon termination of employment and that failure to do this within certain prescribed time limits can result in a penalty to the employer. The ROE contains insurable earnings of $1,100 for the four pay periods before the accident. The last day Mr. Moore worked is recorded as October 21, 1994.

Mr. Grewar testified, and Mr. Chemij confirmed, that Mr. Grewar signed the ROE. Box 24 on the form contains the date "October 22, 1994" below Mr. Grewar's signature. I find troubling that Mr. Grewar and Mr. Chemij contradicted each other on who completed the information on the ROE. Mr. Grewar stated that he completed it himself (although he seemed to vacillate on this point at times) with Mr. Chemij's assistance, while Mr. Chemij insisted it is actually his handwriting on the form which he prepared with income figures he obtained from Mr. Grewar. Even more problematic is the contradictory evidence about the October 22, 1994 date on the ROE. Mr. Grewar testified that he completed and signed the document in Mr. Chemij's office on October 22, 1994. However, Mr. Chemij insisted that the only occasion he ever met with Mr. Grewar was in his office on January 13, 1995 and it was on this date that Mr. Grewar signed the ROE. This conflicted with Mr. Grewar's evidence that they had possibly met on another occasion. Mr. Chemij also admitted that he knew the date on the ROE was false and that he backdated the form to prevent Mr. Grewar from being fined for failure to provide this form within the legally prescribed time period. After vigorous cross-examination Mr. Chemij admitted that Mr. Grewar had asked him to enter the false date.

Considering Mr. Moore's evidence on a whole — the oral evidence of Mr. Grewar, Mr. Chemij and himself and the employment documents — I cannot accept Mr. Moore's $653.39 per week IRB claim. He produced no source employment income documentation to substantiate this. The income documentation he did produce was generated after the accident apparently for the sole purpose of supporting his insurance claim. The contents of the documents were flawed for reasons discussed above. Mr. Moore s, Mr. Grewar's and Mr. Chemij's oral evidence was clearly unreliable in that these witnesses contradicted each other's and even their own evidence at points.

I fully recognize in making my decision that small business owners frequently lack the sophistication necessary to maintain adequate business records and, for this reason, ought not be held to the same record-keeping standards as large corporations. Arbitrators in previous decisions have acknowledged this reality in considering the amount of an applicant's weekly accident benefits.⁵ Arbitrators have held that the lack of sophisticated financial records ought not in every case be fatal to an applicant's quantum claim, but it is not the task of arbitrators to fill in evidentiary gaps. Applicants who, through lack of business sophistication cannot produce the conventional business and financial records to substantiate an income claim, still have the burden to prove their claims with other reliable evidence on a balance of probabilities. Mr. Moore has not succeeded to do this. He has fallen considerably short of meeting the burden of proof and therefore cannot succeed in his claim.

The Fund's position is that Mr. Moore is entitled to the minimum $185 per week if I find that he was employed before the accident. However, the Fund did not present the basis for this position. Under subsection 10(2)(a) of the Schedule, an insured person is entitled to the minimum IRB of $185 if he is "suffering a partial or complete inability to carry on a normal life" during the 104 weeks after he first qualified for IRBs or caregiver benefits. The disability issue is not before me in this hearing and is yet to be heard at a later date. Therefore, to be entitled to the minimum IRB, Mr. Moore will have to establish at the upcoming hearing that he meets the disability requirement.

Repayment:

Section 70 of the Schedule establishes an arbitrator's authority to order a repayment to an insurer of benefits paid to an insured and sets out the substantive and procedural requirements an insurer must satisfy. An insured person is required to repay to the insurer any benefit received that was paid through error, wilful misrepresentation or fraud. The evidence reveals, and I find, that Mr. Moore wilfully misrepresented his income.

At mediation the Fund agreed to pay IRBs at the rate of $309.59 per week retroactive to October 31, 1994 "without prejudice" to its right to seek an overpayment for benefits paid under this agreement. This IRB rate was calculated based on the $23,400 income (reflected on the 1992 T4 slip) which Mr. Moore alleged he earned in 1992. The Fund claims a repayment for funds paid under this agreement in excess of the $185 weekly rate. It filed the Report of the Mediator dated February 15, 1996 and the Explanation of Assessment by Insurance Company dated February 23, 1996 as evidence of this agreement. The Report of Mediator states in Part 6, ISSUES RESOLVED:

• the insurer, the Motor Vehicle Accident Claims Fund - Ontario ("MVAC"), will pay the insured, Mr. Michael Moore, weekly income replacement benefits of $309.59 per week from October 31, 1994 until May 1, 1996, without prejudice to their right to seek recovery of any repayment that may result;

• MVAC will pay the difference between the $185.00 per week that it has paid Mr. Moore and the interim rate of $309.59 per week ($124.59 per week) retroactive to the start of his benefit period, October 31, 1994;

The Explanation of Assessment by Insurance Company in Part 2, under the section entitled Income Replacement Benefits, contains the handwritten note:

Adjusted benefit to $309.56 / wk [sic] on a without prejudice basis. If no real proof of income will look to recover all amount paid.

Mr. Moore brought no evidence and made no submissions on this issue.

Mr. Moore failed to establish the amount of his IRB. Accordingly, he must repay the Fund the difference between $309.59 per week and the $185 per week ($124.59 per week) over the period October 31, 1994 until May 1, 1995, amounting to $3,239.34 ($124.59 X 26 weeks). I therefore find that Mr. Moore is required to repay the Fund $3,239.34 in accordance with section 70 of the Schedule.

If in the subsequent hearing Mr. Moore does not establish that he meets the partial disability test, the Fund is entitled to request that he also repay the $185 per week.

EXPENSES:

The parties did not raise the expense issue at this hearing. It might be preferable for the parties to raise the issue at the conclusion of the upcoming proceeding. The Commission encourages the parties to settle expense matters on their own. However, if necessary, I can be spoken to about the expenses that arise out of this arbitration hearing.

March 12, 1999

Beth Allen Arbitrator

Date

Appendix

Present at the Hearing:

Applicant: Michael Moore

Mr. Moore's Representative: Frank Genesee Barrister and Solicitor

Sandra Quan Law Clerk

Shirley Collins of Just Benefits

The Fund's Representative: Colin S. Jackson Barrister and Solicitor

The Fund's Officers: Teresa Kayahara, Branch Manager and Linda Bodemann, Claims Examiner, both of Lindsey Morden Claims Services Limited

Observer: Denise St. Amant of Lindsey Morden Claim Services Limited

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. 2Effective July 1, 1998, the Ontario Insurance Commission was changed to the Financial Services Commission of Ontario, pursuant to the Financial Services Commission of Ontario Act, S.O. 1997, c.28.
3. 3In cross-examination of Mr. Moore, the Fund's counsel referred to part 10 of Mr. Moore's Application for Accident Benefits (Exhibit 1, tab 1) where the accident benefits consultant wrote 46-48 hours in the column "Normal Hours per week". Mr. Moore stated that he told the consultant at the time that these were the hours he worked.
4. 4Mr. Moore testified that automobile mechanics use a manual which lists various mechanics jobs and prescribes the hours a particular job should take to complete, together with flat rate prices for the jobs.
5. 5See for instance: Kahkesh and Lloyd's NonMarine Underwriters, (A-000378, March 31, 1992), confirmed on appeal (P-000378, August 19, 1992); Owusu-Ansah and Guardian Insurance Company of Canada (A-951780, December 29, 1995); and Sebastian and Canadian Surety Company (A96-011358, February 9, 1996).