Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2000 ONFSCDRS 195

Appeal P98-00024

Appellant Respondent on Cross-Appeal

and

Respondent Appellant on Cross-Appeal

Before:

Stewart McMahon, Director's Delegate

Counsel:

Rita Bambers (for Lloyds)

Steven Sieger (for Mr. Dhir)

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that the appeal is allowed in part:

Paragraphs one and two of the arbitration order dated May 11, 1998 are rescinded, and the matter is remitted to the Arbitrator for the following determinations:

What were the essential tasks of Mr. Dhir's usual employment?

Was Mr. Dhir substantially unable to complete those essential tasks for any period beyond the date that benefits were terminated?

Has the second accident made a material contribution to any such disability?

Paragraphs 3 and 4 of the arbitration order are confirmed, but for reasons that differ from those provided by the Arbitrator.
Mr. Dhir is entitled to 90% of his expenses of the combined appeals.

October 25, 2000

Stewart M. McMahon

Director's Delegate

Date

As a result of an accident on January 22, 1994, Non-Marine Underwriters, Members of Lloyd's ("Lloyd's") paid Mr. Dhir an income replacement benefit ("IRB"). Lloyd's terminated the benefit on April 27, 1995, on the basis that Mr. Dhir was no longer disabled. Mr. Dhir contested the termination. He also took the position that he had been underpaid because Lloyd's calculations failed to take account of real estate sales agreements that had been signed prior to the accident, but had not closed until after the accident.

Section 7 of the SABS-94[1] contains the test an injured person must meet to qualify for IRBs. It states in part that if the individual is employed at the time of the accident, he is entitled to benefits if he suffers a substantial inability to perform the "essential tasks" of that employment. Based on this test, one of the preliminary questions an arbitrator must answer is: what are the essential tasks of the individual's employment?

The arbitrator defined Mr. Dhir's essential tasks by reference to a set of modified duties that he was performing at the time of the accident. Mr. Dhir appeals this ruling, arguing that his essential tasks should have been defined by reference to his usual job duties.

The second issue on appeal concerns the amount of the benefit. The adjuster calculated the benefit on information contained in T4 slips issued by two real estate firms which employed Mr. Dhir in 1993. Mr. Dhir argued that commissions paid in early 1994 ought to have been included in the calculation.

However, the arbitrator found that the evidence presented by Mr. Dhir was insufficient to allow him to calculate what, if any, additional commissions should be included. The arbitrator determined that the income reported on the T4 slips represented the best evidence of what Mr. Dhir had earned in the year preceding the accident. Mr. Dhir appeals this ruling. In support of his appeal he seeks to introduce further evidence concerning deals that closed after the accident.

The third issue on appeal is also related to the amount of the benefit. During the course of the pre-arbitration discussions, Lloyd's asked for a copy of Mr. Dhir's 1993 income tax return. The return showed that Mr. Dhir fell into that relatively small class of commissioned salespersons who, notwithstanding that they file income tax returns as employees rather than self-employed individuals, are entitled to deduct "employment expenses." These expenses are not recorded on the T4 slips and Lloyd's adjuster was not aware of them at the time he calculated Mr. Dhir's benefit. When counsel obtained the income tax return, she took the position that these expenses should have been accounted for and that Mr. Dhir's benefit ought to have been $329 per week, rather than the $696.72 he had received. Lloyd's sought repayment of the difference.

In order that the expenses could be deducted, Lloyd's took the position that Mr. Dhir should be characterized as self-employed. The arbitrator agreed with this submission, and found that the proper amount of the benefit was $329 per week. However, the arbitrator was not prepared to order a repayment of the difference. Lloyd's appeals the refusal to order a repayment. Mr. Dhir appeals the ruling that he was self-employed, and that the "employment expenses" are deductible.

A. Essential Tasks

Mr. Dhir was injured in two accidents in close succession. The first was on December 12, 1993. The second was approximately five weeks later, on January 22, 1994.

Mr. Dhir had worked as a real estate agent for a number of years before the first accident. The evidence concerning the number of hours he worked prior to the first accident varied from 40 to 70 hours per week. Following the first accident, Mr. Dhir was off work for approximately three weeks. He then made a partial recovery, and the arbitrator found that as of the second accident he was working approximately 20 hours per week.

Mr. Dhir was paid an IRB after the first accident, but it was terminated prior to the second accident. Mr. Dhir did not contest the termination, but applied for benefits arising out of the second accident. When Lloyd's terminated the benefit after approximately15 months, Mr. Dhir applied for mediation and arbitration. The arbitration and present appeal relate solely to the claim arising out of the second accident.

The arbitrator defined Mr. Dhir's essential tasks by reference to the 20 hours per week he found that Mr. Dhir was working in the two weeks preceding the second accident. Mr. Dhir appeals this ruling, arguing that this "snap-shot" does not accurately reflect his essential tasks and that they should have been defined by reference to the hours he was working prior to the first accident.

Excluding multi-accident scenarios, arbitrators have shied away from requests to define essential tasks by reference to a snap-shot taken on the day of the accident. This is true in both employment and non-employment scenarios. In Donohue and State Farm Mutual Automobile Insurance Company (OIC A-006756, August 31, 1994), Arbitrator Draper stated "the person's essential tasks cannot be based solely on a 'snap shot' of what he or she happened to be doing on the date of the accident." He went on to say; "In my view, the phrase, 'in which he or she would normally engage', means that although the person's essential tasks must be determined at the time of the accident, they must be considered over some reasonable time period."

Similarly, in McAngus and Guardian Insurance Company of Canada (FSCO A96-001466, August 31, 1998), Arbitrator Blackman refused to define a recently self-employed handyman's essential tasks by reference to the handful of jobs he had undertaken in the weeks immediately before the accident. The arbitrator noted that "What is linked to the time of the accident is employment. Once employment is established, one then looks at the tasks reasonably encompassed by that employment. If one starts work the day of the accident, it is unreasonable to only consider the work actually performed that first day. Rather, the overall essential job duties reasonably encompassed in one's employment must be considered."

The caution against defining a person's essential tasks by a snap-shot taken on the day of the accident, is supported by a review of section 7 of the Schedule, which defines the types of individuals who can qualify for IRBs. Not all claimants need be employed at the time of the accident. A person who is unemployed at the time of the accident can still qualify for IRBs if they were employed at some point in the preceding three years [s. 7(1)2ii]. Notably, if that person had been employed in a series of jobs, their essential tasks are defined by the job they spent the most time in, rather than the one they occupied closest to the date of the accident.

When the individual is involved in two accidents in close succession, and has remained off work continuously from the time of the first accident, when considering the second accident, he may define his essential tasks by reference to the work he had been employed in before the first accident. This result will be obtained in one of two ways. If he is absent from work due to his disability, but his employment relationship has not been terminated, he will still be treated as employed at the time of the second accident. In such a case, the normal rules apply and his essential tasks would be defined by reference to his employment duties. Alternatively, if his disability has severed his employment relationship leaving him unemployed, he can rely upon the aforementioned section 7(1)2ii. In that case, his essential tasks are defined by reference to the job he had been doing prior to the first accident. Why should an individual who has made a partial recovery in the interim between the two accidents be treated any differently?

However, where there have been multiple accidents and the insured person has made a partial recovery, the Commission has on occasion been asked to define essential tasks differently, depending upon which accident is being considered. This situation has arisen when considering two automobile accidents, or one automobile accident and one non-automobile related accident. When considering the effects of the second accident, the Commission has sometimes been asked to consider the impact of the accident on his ability to fulfill the essential tasks of the modified work being done at the time of the second accident.

The approaches taken in these cases are not altogether consistent, but a common factor seems to have been a concern with whether or not the modified duties were temporary or permanent.

In Bailey and CAA Insurance Company (Ontario) Decision No. #3 (OIC A-001139, October 18, 1994), the insured worked as a letter carrier before he was injured in a work-related accident. At the time of the automobile accident, he was working at light duties inside the post office. However, arrangements had been made for him to return to his letter carrier job the next month. Mr. Bailey was to start out with a lighter than normal load. It was uncertain when he would be able to carry a full load. The arbitrator defined his essential tasks by reference to the modified letter carrier duties he was expected to take up, rather than either the duties he was engaged in at the time of the accident, or his usual full load as a letter carrier.

In Bajic and Zurich Insurance Company, and Pafco Insurance Company Limited (FSCO A97-000572, July 5, 2000, under appeal), the insured person was involved in three incidents. The first was a work-related accident. The arbitrator found that after the accident Mr. Bajic had been able to return to work, but only for three hours per day. Approximately 15 months later, he was involved in an automobile accident, and then 13 months after that, while still disabled, he was involved in a second automobile accident. When considering the effect of both automobile accidents, the arbitrator defined his essential tasks by reference to the three hours per day he was working at the time of the first automobile accident.

In Cabral and Canada Life Casualty Insurance Company (OIC A95-000613, October 1, 1996, upheld on appeal FSCO P96-00077, April 8, 1998), the insured had worked as a piper fitter before a work-related accident. At the time of his automobile accident, approximately eight months later, he was working at a much lighter job in a tool crib. In defining his duties by reference to the tool crib job, the arbitrator noted that at the time of the accident everyone hoped that Mr. Cabral would be able to return to working as a pipe fitter, but that it was uncertain if, or when this would take place. The automobile accident temporarily prevented Mr. Cabral from fulfilling his tool crib duties. The arbitrator ruled that at the point he was able to resume working in the tool crib, he was no longer entitled to benefits, as he was no longer substantially unable to perform the essential tasks of the work he was doing at the time of the motor vehicle accident. The arbitrator did not consider what, if any, effect the injuries sustained in the automobile accident made to Mr. Cabral's ongoing inability to return to work as a pipe fitter. In an obiter comment, Director's Delegate Rotter stated that the insured person's intention to return to his old job was only one factor, and that the arbitrator was "not obliged to speculate on the possibilities, likelihood, or extent of his future recovery, but for the motor vehicle accident."

The logic that compelled the arbitrators in Donohue and McAngus to resist the invitation to define essential tasks by reference to a snap-shot taken on the day of the accident, is based upon a concern that the snap-shot will distort the definition of the individual's essential tasks, by failing to depict the complete array of tasks associated with the insured's usual duties. To my mind this logic is equally compelling if the individual is temporarily engaged in modified duties because of some prior trauma. When considering the impact of two automobile accidents, if the second accident has superimposed injuries upon those sustained in the first accident, it is inappropriate to define essential tasks by reference to a snap-shot of what he is doing at the time of the second accident.

In my view, the arbitrator should define the insured's essential tasks by reference to his usual job. The arbitrator's task is then no different than in any "causation" case. He or she must consider whether, for any given period, the insured is substantially unable to perform those essential tasks. If the answer is yes, the arbitrator must assess whether the second accident has made a material contribution to the insured's disability. If it has not, then no benefit is owing. If it has, an IRB is payable subject to a deduction for collateral benefits (including any IRBs paid as a result of the first accident).

Mr. Dhir was employed as a real estate agent at the time of the first accident. He was still employed as a real estate agent at the time of the second accident. He applied for IRBs on the basis that he was employed as a real estate agent. There was no evidence to suggest that his employment relationship with either broker had changed, or that his fundamental duties had been permanently altered or diminished. His essential tasks should be defined by reference to the duties he ordinarily assumed as a real estate agent. More specifically, they should be defined by reference to the hours he typically worked prior to the first accident. The duties should not be altered to reflect the modified duties he was doing for the few weeks immediately preceding the accident.

If it is beyond doubt that the injuries sustained in the first accident have irreversibly changed the individual's circumstances, and there is no reasonable likelihood that he will return to his prior occupation, it may be appropriate to define essential tasks by reference to the alternate employment. In these circumstances, it cannot be said that the insured was still employed in his original position as of the date of the second accident. Instead, it is more appropriate to say that as of the accident, he had a new job and his application for benefits is based upon a substantial inability to complete the essential tasks of that new job. However, if the future course of the disabilities caused by the first accident is unclear, there is a real danger that if the essential tasks are redefined when considering the second accident, the insured person may be left without benefits notwithstanding that he/she remain disabled.

This potential danger can be illustrated by the case at hand. Mr. Dhir was paid weekly benefits after the first accident. He has consistently maintained that his alleged ongoing inability to return to his usual work week is due to the second accident, and the application for arbitration refers only to the second accident.

Because the arbitrator found that Mr. Dhir had resumed working at least 20 hours per week prior to the summer of 1996, he ruled that Mr. Dhir was not entitled to any further benefit. The arbitrator did not determine if Mr. Dhir was, at the time of termination, substantially unable to resume the more demanding duties he was engaged in at the time of the first accident. Nor did he determine if the second accident made a material contribution to any such disability.

If Mr. Dhir is correct in his assertion that he remains unable to return to his usual job, and, in his assertion that the disability is attributable to the second accident, then he has been left without benefits when they are properly owing.

In support of his decision to define the essential tasks at 20 hours per week, the arbitrator noted that he "heard no persuasive evidence as to when he [Mr. Dhir] would be capable of working the 60 to 70 hours he said was a requirement of his employment." However, there was very little medical evidence concerning Mr. Dhir's condition in the five weeks between the two accidents, and I am not satisfied that it can be said with any certainty that the first accident had irreversibly changed Mr. Dhir's circumstances and there was no reasonable likelihood that he would have been unable to return to work. Accordingly, it was an error to define his essential tasks by reference to the modified tasks he was doing at the time of the accident.

The matter is remitted to the arbitrator in order that he may make the following determinations:

What were the essential tasks of Mr. Dhir's usual employment?
Was Mr. Dhir substantially unable to complete those essential tasks for any period beyond the date that benefits were terminated?
Did the second accident make a material contribution to any such disability?

B. Did the arbitrator err in assessing the amount of Mr. Dhir's benefit on the basis of his 1993 income tax return?

The amount of an IRB is based upon income earned in a designated time before the accident. In Mr. Dhir's case, the designated time frame was the 52 weeks preceding the accident. Lloyd's paid Mr. Dhir an IRB of $696.72 based upon the T4 slips issued by the two brokers who employed Mr. Dhir in 1993.

A real estate agent is generally paid his commission on closing. When the commission is earned, as opposed to paid, has been a matter of some debate. The arbitrator reviewed the jurisprudence and concluded that commissions are earned as of the date the deal becomes "firm." This ruling has not been challenged by either party. At the hearing, Mr. Dhir asserted that he had negotiated a number of deals that had become "firm" late in 1993, but did not close until 1994. Accordingly, these commissions were not included in either of his 1993 T4 slips. Based upon the "firm date" approach, Mr. Dhir argued these commissions should have been included in the calculation of his pre-accident income.

The arbitrator concluded that Mr. Dhir failed to provide adequate evidence concerning these additional commissions. The arbitrator relied on the 1993 income tax return as the best evidence of what income had been earned in the year preceding the accident. In coming to this conclusion, he noted that any commissions that should have been included in the calculation because they were earned at the tail end of 1993, but not reported on the 1993 tax return, would inevitably be offset by commissions that should have been excluded because notwithstanding that they were reported on the 1993 T4 slips, they had in fact been earned in 1992.

In support of his argument that the arbitrator erred in relying upon the 1993 tax return, Mr. Dhir sought at the appeal hearing, to introduce a list of deals that became firm at the end of 1993, but did not close until 1994. He made no attempt to balance the equation by tendering the list of deals that had closed early in 1993, but had become firm in 1992.

The appeals unit at the Commission has consistently said that new evidence will be accepted on appeal if the following three criteria are met:

the evidence is reliable;
the evidence would likely have had a bearing on an important ruling; and
the party could not reasonably have been expected to have had the evidence available at the hearing.

The new evidence Mr. Dhir seeks to introduce fails to meet the first two criteria. It is not reliable evidence of what Mr. Dhir made in 1993, in as much as it fails to account for the commissions that ought to have been excluded. It would not likely have had a bearing on the arbitrator's ruling for the same reason. The arbitrator's decision to rely upon the 1993 tax return as the "best evidence" is unassailable. This ground of appeal is rejected.

C. Are Mr. Dhir's employment expenses deductible in the calculation of his IRB?

(1) Was Mr. Dhir self-employed or was he an employee?

As a general rule, employed individuals are not permitted to deduct "employment expenses" in the calculation of income tax liability. The opposite is true of self-employed individuals, who pay tax on the "profit" that remains after expenses are deducted from revenues. However, as a commissioned salesperson who was required to work away from his employer's usual place of business, Mr. Dhir was entitled to deduct certain "employment expenses" in the calculation of his income tax liability. These expenses related primarily to the cost of maintaining a home office, travel costs, and promotional activities.

The calculation of the IRBs involves a formula that is designed to approximate after-tax income. When the adjuster performed this calculation, he was not aware that Mr. Dhir was entitled to claim employment expenses. On employment income of approximately $60,000, Mr. Dhir claimed expenses of approximately $34,000. If the expenses are accounted for in the formula, Mr. Dhir's benefit drops from $696.72 to $329 per week. When, Lloyd's learned of the employment expenses, it demanded an adjustment and repayment.

Because expenses are clearly deductible for self-employed persons, Lloyd's took the position that Mr. Dhir should be characterized as self-employed. The arbitrator found that Mr. Dhir was self-employed, and hence the expenses were deductible. Mr. Dhir challenges this finding.

The arbitrator looked at a number of the indicia that judges and arbitrators have referred to in employment law contexts, when trying to distinguish between employment and self-employment. The arbitrator also referred to the Commissioner's Guideline for Identifying Self-Employed Individuals. However, it is clear that the driving consideration was the laudable goal of trying to ensure that Mr. Dhir's benefit approximated his actual after-tax income. To do this, Mr. Dhir's employment expenses must be accounted for. Although the decision does not analyse the situation if Mr. Dhir is treated as an employed individual, it is evident that the arbitrator was operating from the premise that the expenses could only be accounted for if Mr. Dhir were characterized as self-employed. The arbitrator found "Mr. Dhir's gross commission less expenses more accurately reflects the income he lost as a result of his disability and that to satisfy the purpose of the income replacement benefit, his weekly benefit should be calculated on the basis of this loss. I therefore find that Mr. Dhir was self-employed within the meaning of the Schedule and that his expenses should be deducted from his gross income in the determination of his income."

In Neill and Zurich Insurance Company (FSCO A97-001983, May 10, 1999), Arbitrator Makepeace considered a case on all fours with Mr. Dhir's. She too was faced with the argument that a real estate agent had to be characterized as self-employed so that employment expenses could be deducted in the calculation of her IRB. The arbitrator concluded that it was wrong to allow the end-goal of accounting for employment expenses to dictate how the person's employment status should be characterized. She stated that the "threshold task" was to define the insured's employment status, with the IRB calculations following naturally from the status. I agree with this approach.

The evidence proffered in the Neill case was much fuller than what was offered by Mr. Dhir. However, I am satisfied that if the desire to account for the employment expenses is not allowed to sway the analysis, the overwhelming weight of the evidence supports a finding that Mr. Dhir was an employee rather than self-employed. In reaching this conclusion, I place a great deal of weight on how the two real estate brokers and Mr. Dhir characterized their relationship. Both the brokers treated Mr. Dhir as an employee and issued him T4 slips. Those slips show that the brokers withheld at source both CPP and EI premiums. The latter are only payable by employed as opposed to self-employed individuals. The fact that the brokers executed a "Declaration of Conditions of Employment" used by employees wishing to deduct "employment expenses" further supports a finding that Mr. Dhir was an employee rather than self-employed. If Mr. Dhir was self-employed, this form would have been entirely redundant. In addition, Mr. Dhir's evidence concerning his change in status after the accident, to a self-employed agent associated with a broker, rather than an employee of a broker, further supports a finding that he was an employee at the time of the accident.

The arbitrator refers to the fact that Mr. Dhir determined his own method and schedule for accomplishing tasks. However, as noted by Arbitrator Makepeace, this is not a very reliable factor when dealing with professionals. Salespersons who work away from their employer's place of business, by the very nature of their work, enjoy significant independence. This independence does not change the fact that they are ultimately subject to the control of their employer.

I conclude that the arbitrator erred in characterizing Mr. Dhir as self-employed. However, I am not satisfied that it necessarily follows that the employment expenses cannot be factored into the calculation of Mr. Dhir's IRB.

(2) Are Mr. Dhir's employment expenses deductible?

Section 10 of the SABS-94 provides that the IRB is to be 90% of the insured's "net weekly income." Part XIX, comprised of sections 81 through 85, provides a scheme for the calculation of the net weekly income, which is designed to approximate the insured persons's after-tax income.

Section 81 provides the formula for the calculation of "net weekly income."

A =

B-C-D-E

where,

A = the person's net weekly income from employment,

B = the person's gross annual income from employment,

C = the annual premium payable by the person under the Unemployment Insurance Act (Canada) on the gross annual income from employment,

D = the annual contribution payable by the person under the Canada Pension Plan (Canada) on the gross annual income from employment,

E = the income tax payable by the person under the Income Tax Act (Canada) and the Income Tax Act (Ontario) on the gross annual income from employment.

Elements C and D; the UIC and CPP premiums, do not effect the analysis, and I will not mention them further.

Element B, the key factor in this case is left undefined. It is obviously meant to be gross of tax. The question is whether it is to be net or gross of expenses, and if it is net of expenses, what expenses are to be deducted?

It is sometimes mistakenly assumed that section 81 defines how an employee's net weekly income is to be calculated, and in its place, section 83, stipulates how a self-employed individual's net weekly income is to be calculated. This is incorrect. Section 81 is used to calculate the "net weekly income" of both employees and self-employed individuals. Section 83, like section 85, provides rules used in the calculation of the individual elements that make up the formula set out in section 81. Section 85 indicates how the income tax calculations that make up element "E" are to be performed. Section 83 indicates how the gross annual income from self-employment, that is plugged into the formula as element "B", is to be determined.

If there is any doubt that section 81 applies to both employees and self-employed individuals, reference can be made to section 82 which provides that in place of the formula set out in section 81, insurers may use a work sheet and tables that are prepared by the Financial Services Commission. In accordance with section 82, the Commission has prepared and disseminated two sets of tables. One for employees and one for self-employed persons. If section 82 provides an alternate way of determining "net weekly income" for both employees and self-employed individuals, it necessarily follows that the formula in section 81 must also be concerned with the treatment of both employees and self-employed persons.

It is apparent that "gross annual income from employment" as used in element "B" must refer to an amount that is gross of income tax. The question is: is it net of expenses? For self-employed persons the answer is clearly yes. Section 83 provides that income from self-employment is to be determined in the same fashion as profit. That is to say revenue less expenses.

This begs the question: if a self-employed person's "gross annual income from employment" is net of employment expenses, what is it for an employed person? Whereas section 83 tells us how to deal with self-employed persons, Part XIX is silent with respect to the calculation of an employee's "gross annual income from employment." The absence of any section analogous to section 83 is probably attributable to the fact that under the Income Tax Acts of Canada and Ontario, employees are generally not entitled to deduct employment expenses. Accordingly, their "gross annual income from employment" is synonymous with the income reported on their T4 slips under box 14 "employment income before deductions." It is a fair presumption that in light of this, the drafters did not see the need for specific instructions in relation to the calculation of an employee's gross income from employment.

The drafter's presumption failed to account for those commissioned salespersons who are required by the terms of their employment to incur employment expenses and who, in recognition of their unique situation, are entitled to deduct those expenses when they file their income tax returns. However, the drafter's omission does not relieve me of the obligation to calculate the insured's IRB in accordance with the intention of the legislation as a whole, and to interpret the existing words in a fashion that is consistent with that intention, and which provides a just result. As was pointed out by Laskin J.A. in Bapoo v. Co-operators General Insurance Company of Canada (1997), 1997 CanLII 493 (ON CA), 33 O.R. (3d) 782:

The modern approach to statutory interpretation calls on courts to interpret a legislative provision in its total context. The court's interpretation should comply with the legislative text, promote the legislative purpose and produce a reasonable and just meaning.

As has been stated repeatedly, the intention is to provide the insured person with a benefit that approximates after-tax income. If Mr. Dhir's employment expenses are not accounted for in the calculation of his net weekly income, his IRB will grossly exceed his after-tax income. This would be inconsistent with the legislature's intent. Further it would be unjust, and ought to be avoided if it can be done without distorting the wording of the SABS-94.

If gross income from employment for self-employed persons is treated as net of expenses, then gross income from employment for commissioned employees who are entitled to deduct employment expenses should be determined in the same fashion. That is to say, the employment expenses recognized by the Income Tax Acts should be deducted. Treating "gross income from employment" in this fashion is consistent with the overall intention of the scheme, and it is just in as much as it will produce an IRB that approximates the person's after-tax income for all insured persons, irrespective of whether they are employed or self-employed.

Proceeding in this fashion requires the parties to determine gross income from employment for commissioned salespersons in the absence of any explicit rules as to what expenses are to be deducted. Given that a self-employed person's gross income from employment is considered to be net of those employment expenses recognized by the Income Tax Acts, it does not distort the meaning of the words to apply the same rules to the class of commissioned salespersons who can also claim employment expenses.

There is no avoiding the comment that proceeding in the fashion I have suggested is filling a void left by the drafter's omission to deal with a small but significant group of insured persons. This omission is still evident in the current version of the SABS. It would be prudent of the drafters to rectify this omission at the earliest possible juncture.

D. Did the arbitrator err in failing to award the Insurer a repayment?

Subsection 85(2) obliges the insured person to "provide the insurer with such information as is reasonably necessary to enable the insurer to determine the income tax payable by the insured person..." If the insured person fails to provide this information, subsection 85(3) obliges the insurer to calculate the benefit on the basis of its "best estimate" of the income tax payable. The section goes on to provide that the benefits based upon this estimate will be "subject to later adjustment...when subsection (2) is complied with."

There was no direct evidence of what information the adjuster asked for initially, but the calculations he made were based upon T4 slips. I infer that he must have asked for these, or other proof of income. No evidence was led to suggest that he made any inquiry about employment expenses, or just as importantly, that Mr. Dhir knew that these expenses were relevant to the calculation of his benefit. On that point, I note that nothing in the standard claim forms prepared by the Commission, that are routinely filled out by an employee or their employer, would suggest that these expenses are relevant.

During the course of the pre-hearing discussion, Lloyd's counsel asked for, and thereafter received, copies of Mr. Dhir's income tax return. When she reviewed the returns, she noted the expenses and advised Mr. Dhir's counsel that she would be seeking a repayment of the difference between the $696.72 that was paid, and the $329 that would have been owing, had the expenses been taken into account.

As noted above, the arbitrator agreed that the correct amount was $329. However, he rejected the argument that the Insurer's right to an adjustment included the right to a repayment. He concluded that a repayment order could only be made pursuant to section 70. He further found that the Insurer had failed to establish the criteria set out in section 70, and therefore declined to order a repayment. The Insurer appeals this ruling, arguing that the arbitrator erred in concluding that section 85 does not authorize a repayment order.

The Insurer's demand for a repayment must fail even before a determination is made on whether an "adjustment" can include the right to a repayment. The relief provided to an insurer is premised upon an insured person failing to provide necessary information.

In ordinary circumstances, the adjuster requests the information he or she believes is necessary to calculate the benefit. No evidence was led to suggest that this case was any different. The wording of subsection 85(2) obliges the insured to provide "such information as is reasonably necessary..." This obligation is broader than simply responding to requests made by the adjuster. However, if the insured has satisfied all of the insurer's requests, and the insurer is still intent on arguing that the insured has failed to comply with his obligations, it must establish that the insured knew that he had necessary information, and yet remained silent about its existence. There is no such evidence here. Lloyd's appeal on this issue is dismissed.

IV. EXPENSES

Mr. Dhir is entitled to his expenses related to Lloyd's failed appeal.

Mr. Dhir's success on the issues raised in his appeal was divided.

The employment expenses issue was novel, and Mr. Dhir was successful in having the determination that he was self-employed overturned. I am satisfied that Mr. Dhir should have his expenses related to this issue.

I do not think that Mr. Dhir should be entitled to the expenses related to his request to include additional commissions in the calculation of his benefit. The appeal on this issue was without any merit unless Mr. Dhir was permitted to introduce new evidence. Notwithstanding that the arbitrator clearly signalled the importance of balancing the addition of commissions generated at the end of the year, by the deletion of commissions that were earned in the previous year, Mr. Dhir attempted to introduce only the evidence concerning the commissions he wanted to add. In my view this was a deliberate attempt to mislead the Commission that cannot be countenanced. However, this part of the appeal took up relatively little time.

Mr. Dhir is entitled to 90% of the expenses related to the combined appeals.