Neutral Citation: 2000 ONFSCDRS 10

FSCO A98-001276

BETWEEN:

GIUSEPPE BIASE

Applicant

and

BELAIR INSURANCE COMPANY INC.

Insurer

REASONS FOR DECISION

Before:

M. Kaye Joachim

Heard:

October 4, 19, 20, 22, and November 5, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Joelle Reboh for Mr. Biase

David G. Merner for Belair Insurance Company Inc.

The Applicant, Giuseppe Biase, was injured in a motor vehicle accident on March 10, 1998. He applied for and received statutory accident benefits from Belair Insurance Company Inc. ("Belair"), payable under the Schedule.¹ Mr. Biase alleges that his income replacement benefits should be paid in accordance with a contract of employment he had entered into prior to the accident. Belair disputes the existence of such a contract. The parties were unable to resolve their disputes through mediation, and Mr. Biase applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

Was Mr. Biase entitled at the time of the accident to start work within one year under a legitimate contract of employment that was made before the accident and that is evidenced in writing under subsection 4(3) of the Schedule?

Mr. Biase was not entitled at the time of the accident to start work within one year under a legitimate contract of employment under subsection 4(3) of the Schedule.

Giuseppe ("Joe") Biase was injured on March 10, 1998 as a result of an incident involving the use of a motor vehicle. The nature and extent of his injuries are not an issue in this hearing.

Mr. Biase alleges that in February 1998 he was offered employment as a truck driver with E & D Trucking, commencing April 1, 1998, at a gross weekly wage of $750. E & D Trucking is the trucking business owned by Mr. Biase's brother-in-law, Earl Conley. Belair disputes that a legitimate contract of employment on those terms was made prior to the accident.

Pre-Accident Employment History of Mr. Biase and Mr. Conley

Mr. Biase has been self-employed in various enterprises involving the purchase and sale of different products, since 1986. In 1992, he purchased a truck, and bought and distributed potatoes to various locations. He also started a business distributing bread to various clients. Each of these enterprises involved extensive truck driving.

In 1995, Mr. Biase ceased working for a period of time because of a drug addiction. In 1997 he began a methadone program. In the two years prior to the accident Mr. Biase operated a resale business with his wife, Linda Biase.

Earl Conley is Mr. Biase's brother-in-law. He holds a DZ class driver's licence, required for driving gravel trucks, which he has been driving for 25 years. He reports his earnings on his income tax returns as business income, generated from his trucking business, E & D Trucking Company. His sole "business" is offering his truck driving services to various brokers. For the past five years, Mr. Conley has worked as a driver for Petrella Transport, hauling gravel from the quarry to various ready-mix plants. He was paid a commission of 25% of the gross haulage fees. His earnings varied with the number and value of the truck loads he drove. The trucking season generally began in April or May and continued until December.

In 1997, Mr. Conley purchased a used truck from Petrella Transport, and began the season driving his own truck, hauling gravel for Petrella Transport. While driving his own truck, he earned a commission of approximately 75%, paying Petrella Transport a commission of 25% for the rental of its trailer. During the 1997 season, the transmission in the truck broke down and Mr. Conley returned to driving Petrella's trucks, while doing the repairs on his own truck.

In late 1997, Mr. Conley considered hiring someone to drive his truck, while he continued to drive Petrella Transport's trucks. He had a discussion with his accountant, Edmund DeFreitas, about the viability of this plan.

Edmund DeFreitas confirmed that these discussions took place in December 1997. Mr. DeFreitas' accounting practice includes many truck drivers. Further, Mr. DeFreitas operates a similar business. He owns two trucks and trailers, and hires drivers to drive loads through Petrella Transport and other brokers. Mr. DeFreitas advised Mr. Conley that his plan was feasible. His opinion was based on his personal experience, his understanding that Mr. Conley owned a truck, and had a stable relationship with a broker who would provide the work, and his belief that Mr. Conley was experienced in the trucking business. He testified that the success of such a venture depends on the driver and the owner obtaining as many loads as possible each day. Mr. DeFreitas was unable to remember if Mr. Conley discussed the name of the proposed driver.

Mr. Conley testified that he had discussions with Joe Petrella, the owner of Petrella Transport. Petrella Transport had a contract with a concrete company to transport gravel between the quarry and various ready-mix plants² commencing April 1, 1998. Mr. Petrella agreed to use Conley's truck to transport gravel under the contract. Mr. Conley agreed to rent a trailer from Petrella Transport and pay a commission of 23% of the gross haulage fees. Mr. Conley also arranged to continue driving Petrella's trucks during the 1998 season, earning his usual commission of 25% of the gross haulage fees.

Mr. Conley testified that he chose his brother-in-law to drive his truck, because Mr. Biase had extensive truck driving experience. In addition, Mr. Conley had worked with Mr. Biase in the past, and believed Mr. Biase was a good driver. He testified that he had a telephone discussion with Mr. Biase prior to the accident. He agreed to hire Mr. Biase as a driver, commencing April 1, 1998, at a gross weekly wage of $750. He explained that the work involved hauling gravel for a concrete company, Monday to Friday.

Linda Biase testified that on February 25, 1998 she telephoned the home of Earl Conley to offer birthday greetings to a family member. Mr. Conley advised her that he had a job for Joe, driving a truck, five days a week, for $750 per week, to commence April 1, 1998. She gave the message to her husband, who telephoned Mr. Conley to discuss the matter that same evening. Mr. Biase testified that he accepted the offer to drive Mr. Conley's truck commencing April 1, 1998. He understood that the job would be Monday to Friday, with some weekend work, approximately 13 hours per day. He understood the gross weekly wage would be $750 and that he would be responsible for paying his own income tax. He understood that Mr. Conley would remain responsible for all the truck-related expenses.

Mr. Biase testified that he began to train his wife to take over his duties in their business, in preparation for commencing his new job. The accident occurred on March 10, 1998.

On March 17, 1998, Glen Akselrod, an adjuster retained by Belair, attended at Mr. Biase's home to complete an Initial Interview Sheet. In response to specific inquiries, Mr. Biase advised that prior to the accident he and his wife had operated their own business "Just Between Kids". When asked whether he had accepted a future contract of employment, in writing, he indicated that he had not, but clarified that he had spoken with his brother-in-law about working for him. Mr. Akselrod confirmed that he had been advised of a contract offer at this initial meeting, but that it was not in writing.³ Mr. Biase testified that Mr. Akselrod advised them to have the offer put into writing.

Linda Biase arranged to have Earl Conley provide a written contract of employment. Mr. Conley dictated the terms of the letter to Mrs. Biase and she arranged to have it typed up. The letter stated:

March 19, 1998

To whom it may concern:

This letter is to confirm that Mr. Biase has a position available in our company as a truck driver to begin on April 1, 1998.

The salary as discussed will be $750.00 per week gross and the hours schedule to work are Monday - Friday from 6:30 am to 5:30 pm.

If you need more information do not hesitate to contact me.

Yours truly,

E & D TRUCKING

Ref.

Earl Conley

Evidenced in Writing

The arbitral jurisprudence has established that the contract may be reduced to writing after the accident, so long as the agreement was entered into before the accident. I accept that this is the correct approach and therefore, Mr. Conley's letter of March 19, 1998 satisfies the requirements of subsection 4(3) of the Schedule if the contract of employment was made prior to the accident. Further, I accept that in the trucking industry these arrangements between truck owners and drivers are informal, and unlikely to be reduced to writing. Thus, I attach little significance to the fact that the alleged contract of employment had not been reduced to writing prior to the accident.

Credibility

Proof of the existence and the terms of the alleged contract of employment is dependent on the testimony of Mr. Biase, Mrs. Biase and Mr. Conley. It has often been observed that the testimony of a witness cannot be gauged solely by the demeanour of the witness, but must be judged against the evidence as a whole.

The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.⁴

Discussions Prior to the Accident

The evidence supports a finding that Mr. Conley had discussions with Mr. Biase about driving his truck in the 1998 season, prior to the accident. Mr. Biase mentioned these discussions to the adjuster ten days after the accident. I find it highly unlikely that Mr. Biase would have planned to fabricate a job offer so quickly after the accident. Mr. DeFreitas' evidence also confirms that Mr. Conley was seriously considering hiring a driver for the 1998 season, well before the accident.

Legitimate Contract of Employment

However, the fact that some discussions took place prior to the accident is not sufficient to establish the existence of a legitimate contract of employment within the meaning of subsection 4(3). I have assessed the reliability of the evidence supporting the existence of the alleged contract of employment against the surrounding circumstances.

Length of the Contract

The contract which was reduced to writing on March 19, 1998, makes no reference to the seasonal nature of the trucking business. However, at the conclusion of the hearing, Mr. Biase's counsel took the position that the evidence supported the existence of a seasonal contract of employment, from April 1, 1998 until the end of the year. Neither Mr. Biase nor Mr. Conley specifically testified about the length of the proposed contract, although Mr. Conley testified that the trucking season generally began in April or May and ended around Christmas. Yet, during cross-examination, Mr. Conley seemed to imply that he believed there would be work available for Mr. Biase year round. I find it highly unlikely that Mr. Conley would have guaranteed a weekly wage, year round, in a seasonal business. The only viable contract of employment would be a seasonal one. I find it odd that the parties to the contract had no discussions with respect to the seasonal nature of the work.

DZ Licence

Belair submitted that it was significant that a DZ licence was required in order to drive Mr. Conley's truck, but that Mr. Biase did not hold such a licence and had taken no steps to acquire one a few weeks before the commencement of the alleged contract.

Mr. Biase testified that he had previously obtained a DZ licence in 1994, in order to accept a few days employment driving trucks with Mr. Conley's previous broker. He submitted copies of a 1994 application for a DZ licence and confirmation that he had passed the written portion of the D class licence and the Z class licence. He believed that it would be a simple matter to renew his DZ licence. He testified that Mrs. Biase telephoned the Ministry of Transportation and told him that he only needed to pay a fee to renew his licence. When cross-examined on this point, Mr. Biase stated that he did not believe it would take long to get a DZ licence, even if he had to apply for a new licence.

Mrs. Biase testified next. She testified that she called the Ministry of Transportation shortly after the job offer and discovered that Mr. Biase would need to do a written test, and possibly a road test, to renew his licence. She was told that it would not take more than a week to schedule the necessary tests.

I find that the absence of a DZ licence less than three weeks before the start of the alleged contract is not determinative. It is possible that Mr. Biase sincerely believed he would be able to obtain the required licence quickly.

However, Mr. Biase's evidence that Mrs. Biase told him that he only needed to pay a fee contradicts Mrs. Biase's evidence that she learned from the Ministry of Transportation that he may need to take some tests, but that it would only take a week. This is a small discrepancy, but it indicates a gradual shifting of position, to counter Belair's suggestion that Mr. Biase was in no position to accept the alleged job offer, because he did not have a DZ licence the month before the alleged contract.

Lack of a Registration Sticker

Belair submitted that it was significant that Mr. Conley had not taken any steps to obtain a registration sticker to enable him to put his truck on the road. The registration stickers are expensive ($670 for three months), and I find that it would be reasonable for Mr. Conley to wait until April 1, 1998 to obtain the necessary registration sticker.

Methadone Program

Belair submitted that it was unlikely that Mr. Biase would have qualified for a DZ licence since he was on a methadone program for a previous heroin addiction. However, Mr. Biase continues to qualify for a regular driver's licence while on the methadone program and Belair presented no evidence to suggest that the medical requirements were more stringent for a DZ licence. Accordingly, whether or not Mr. Biase would have qualified for a DZ licence while on the methadone program is not a factor in my decision.

Financial Viability of the Proposed Job Offer

Belair submitted that the proposed contract would be so unprofitable that it is improbable that Mr. Conley would have made it. Belair relied on a projected profit calculated by Norm McCully, a chartered accountant. Mr. McCully reviewed Mr. Conley's unaudited income tax returns, his statement of business income and his call sheets for 1997 and 1998. He projected a gross income of $100,000 based on the haulage fees Mr. Conley generated in 1998. After deducting the broker's commission, motor vehicle fuel and expenses, other expenses claimed by Mr. Conley in 1997, and Mr. Biase's alleged weekly salary of $750, Mr. McCully concluded that Mr. Conley would have lost money by paying Mr. Biase to drive his truck. Belair relied on this accounting evidence to establish that the alleged contract of employment was not practical or genuine.

I find that some of the assumptions underlying Mr. McCully's projections are not warranted. In 1997 Mr. Conley generated approximately $113,500⁵ in haulage fees. It would be reasonable to use this as the projected gross income, since the issue is what Mr. Conley reasonably believed his truck would have generated in 1998, not necessarily what it did generate. The usual broker's commission of 23% would yield $26,105 of broker's fees. In 1997, fuel costs were 32.5% of gross income, which would yield $36,887 in fuel expenses in my projection.⁶ Insurance, licence and registration fees were $8,045 in 1997 and would likely have been similar in 1998. I have used the 1997 figure of $10,902 for projected repairs, since Mr. DeFreitas specifically testified that it would be reasonable to expect these maintenance expenses. Accounting expenses of $325 and telephone and utilities of $1,877 would likely remain the same. In the trucking industry, drivers are generally responsible for road expenses and therefore I would not project the road expenses ($3,982) incurred by Mr. Conley into 1998. In addition, the capital cost allowance of $4,095 claimed in 1997 was a discretionary claim which Mr. Conley used to decrease his income tax liability, but did not require an actual outlay of cash. Belair argued that some amount must be deducted for the cost of purchasing a new truck in the future. I disagree. It is not my task to assess whether Mr. Conley could have maintained his offer of employment indefinitely. Accordingly, I am prepared to exclude the capital cost allowance from my projection. My projection yields a net income of $29,359⁷ which is consistent with Mr. Conley's net earnings in previous years, if capital cost allowance and road expenses are added back in. Assuming a seasonal wage of $750 per week for 35 weeks,⁸ Mr. Biase's wages would have amounted to approximately $26,250. This projection does not predict a significant profit for Mr. Conley, unless Mr. Biase, with less experience in the trucking business, was able to generate more gross sales than Mr. Conley did.

However, Mr. Conley did not make his offer of employment based on this type of detailed financial calculation. Mr. Conley is not a sophisticated businessman. The evidence supports a finding that Mr. Conley could reasonably have believed that hiring Mr. Biase to drive his truck during the 1998 season would have been profitable for him. He owned his own truck. He had a good relationship with a broker who was willing to use his truck. His own accountant advised that the plan was feasible. Although Mr. Conley's expectations of profit were wildly optimistic (he testified that he believed that he would obtain profits of $40,000 for the 1998 season), I accept that he could reasonably have believed that he would earn a profit by hiring Mr. Biase to drive his truck in the 1998 season.

Whether his belief was correct or not is not definitive of the issue before me. An employer may make a legitimate offer of employment and then be unable to honour it.

Failure to Hire Another Driver

Belair submitted that if the contract of employment had been genuine, and if Mr. Conley sincerely believed that he would earn a profit, he would have hired another driver after Mr. Biase's accident, and carried on with his plan. Mr. Conley testified that he had tested two other drivers but that he did not hire them, because they could not shift gears properly and he believed an inexperienced driver could cause damage which would be expensive to repair. He did not recall the names of the persons he tested. He stated that since he was unable to obtain a driver by April 1, 1998, Petrella's offer to use his truck was no longer available. He did not put his truck on the road that year, and sold it in the fall.

I note that Mr. Petrella was not called to corroborate the initial agreement to use Mr. Conley's truck, or the cancellation of the agreement after Mr. Biase's accident.

Mr. Conley testified during cross-examination that he would have used other brokers in addition to Petrella to ensure his truck was profitable. Thus, the loss of Petrella Transport as a possible broker should not have been fatal to his proposal to hire a driver. I find that if Mr. Conley sincerely believed that he had an opportunity to earn as much as $40,000 profit from hiring a driver during the 1998 season, then it is rather odd that he would abandon the project so quickly when Mr. Biase became unavailable. While the explanation that Mr. Conley was not satisfied with the other drivers that presented themselves is plausible, it is not very convincing.

Start Date of April 1, 1998

Belair submitted that the alleged start date of April 1, 1998 was improbable, as it is early in the season. Further, there was little work available to Mr. Conley in April 1998, which casts doubt on whether there would have been any work available for Mr. Biase as early as April 1, 1998. The evidence demonstrates that there was not a significant amount of work available for Mr. Conley in April 1998.⁹ It is reasonable to assume that Mr. Petrella would give the available work to Mr. Conley before making work available to Mr. Biase, since Petrella Transport earned a higher commission from its drivers than from those who merely rented trailers. The evidence demonstrates that there would likely have been very little work available to Mr. Biase through Petrella Transport in the first few weeks of April 1998.

On the one hand, this weakens the evidence supporting the alleged contract commencing April 1, 1998. On the other hand, Mr. Conley might reasonably have believed that there would be sufficient work to offer Mr. Biase full-time work commencing April 1, 1998. I note that in 1997, Mr. Conley was working steadily in the first two weeks of April, which provides some justification for that belief.¹⁰

The lack of work available from Petrella Transport in April 1998 is not determinative.

Hours of Work

Mr. Conley and Mr. Biase testified, and the letter of March 19, 1998 confirmed a work week of Monday to Friday for approximately 12 hours per day. Although there were some discrepancies in the evidence about hours of work, they were not so serious as to cast doubt on the existence of the contract of employment.

Wages of $750 per week

The most improbable aspect of the alleged contract is the alleged wage to be paid to Mr. Biase. Mr. Conley, Mr. Biase and Mrs. Biase all testified that the agreed upon wage was $750 per week, commencing April 1, 1998. Under cross-examination, Mr. Biase testified that he specifically asked Mr. Conley whether he would be paid "by the run", but was assured that he would be paid a salary. When cross-examined, Mr. Conley insisted that this was a guaranteed wage, regardless of what income the truck actually generated.

I find it highly unlikely that Mr. Conley would guarantee a wage in a business where the profit was dependent on the amount of loads carried. Mr. Conley may be an unsophisticated businessman, but he is very knowledgeable about truck driving.

Mr. Conley himself did not earn a guaranteed wage when he drove trucks for Petrella Transport, although he had worked there five years, and had 25 years of experience hauling gravel. Rather, he earned a percentage of the haulage fees generated by the truck he drove. Mr. Conley's personal experience would have taught him that the earnings of a truck driver fluctuate wildly during the season. His experience as a truck owner during the 1997 season would have taught him that unexpected repairs might take his truck off the road occasionally.

Mr. DeFreitas testified that truck owners might guarantee wages, in order to obtain and keep a good driver and that a gross weekly wage of $750 was reasonable for a truck driver. It is also true that Mr. Conley himself averaged $766.28 during the 35 weeks he worked in 1998.¹¹

Overall the evidence suggests that the general practice in the industry is to tie a driver's earnings to the profitability of the truck, although in exceptional cases, an owner might guarantee a wage in order to secure a good driver. However, in this case, it seems improbable that Mr. Conley would have offered his brother-in-law a guaranteed wage. This was the first year Mr. Conley was attempting to earn a profit by having someone else drive his truck, and the amount of profit, if any, was extremely speculative. While Mr. Conley professed to be satisfied with Mr. Biase's driving skills, based on his knowledge of Mr. Biase's driving experience, Mr. Biase had rarely driven trucks requiring a DZ licence. Thus, he was not such an experienced gravel truck driver as to attract a guaranteed wage. Also, it is puzzling why Mr. Conley would need to guarantee Mr. Biase's wage in order to attract him. Mr. Biase was not giving up a steady salary to accept this job. On the contrary, he had been self-employed for the previous ten years, and seemed eager to take on new work. It is also strange that Mr. Conley would allegedly agree to pay all expenses, including road expenses, contrary to the industry practice.

I reject as improbable the evidence that Mr. Conley offered Mr. Biase a guaranteed gross weekly wage of $750 commencing April 1, 1998. Mr. Biase testified that the contract of employment was for $750 per week, and has specifically denied that his prospective earnings would be based on runs or haulage fees. Accordingly, it is not open to me to find that this alternative arrangement could found the basis of a legitimate contract of employment.

Conclusion

I must balance the factors which support the alleged contract against those which do not. On the one hand, the evidence establishes that Mr. Conley and Mr. Biase had some discussions about Mr. Biase driving Mr. Conley's truck in 1998. On the other hand, the only evidence supporting the terms of the alleged contract of employment is from witnesses who have an interest in the outcome. The only potentially disinterested witness who may have corroborated the contract of employment, Mr. Petrella, did not testify. Additionally, I have concerns about the reliability of the Biases' evidence with respect to the DZ licence. Mr. Conley's failure to hire another driver if he genuinely anticipated a profit of $40,000 during the 1998 season, the failure to discuss the seasonal nature of the business, and the improbability of guaranteeing a gross weekly wage from April 1, 1998 to the end of the construction season, contrary to the usual industry practice, are inconsistent with what a practical and informed person would recognize as reasonable in the circumstances. Having regard to all these factors, I find that Mr. Biase has not satisfied the onus upon him of establishing the existence of a legitimate contract of employment entered into prior to the accident.

EXPENSES:

The parties may now address the issue of expenses, if they are unable to resolve the issue between themselves.

January 17, 2000

M. Kaye Joachim Arbitrator

Date