Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 197

FSCO A05-002829

BETWEEN:

JOYCE BUTTS

Applicant

and

PEMBRIDGE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Robert A. Kominar

Heard:

August 28, 2006, in Thunder Bay, Ontario.

Written submissions were received on June 29, 2006 from the Applicant and on July 25, 2006 from the Insurer.

Appearances:

Kristopher H. Knutsen for Mrs. Butts

Tricia McAvoy for Pembridge Insurance Company

Issues

The Applicant, Joyce Butts, was injured in a motor vehicle accident on July 2, 2003. She applied for and was denied various statutory accident benefits from Pembridge Insurance Company ("Pembridge"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Butts applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The Preliminary Issue Is:

1. Was the applicant, Joyce Butts, either employed or self-employed at the time of the accident, such that she is a person who qualifies for income replacement benefits pursuant to section 4 of the Schedule?

Result:

1. Mrs. Butts was self-employed as a result of her activities of foster parenting at the time of the motor vehicle accident on July 2, 2003.

EVIDENCE AND ANALYSIS:

The question giving rise to this Preliminary Issue hearing is whether a stipend paid by a Children's Aid Society to a foster parent can count as "income" for the purposes of claiming income replacement benefits under the Schedule?

The Applicants position is that, in some cases, and in particular in this one, such payments do amount to a source of income in her hands and therefore, when they are lost as a result of an accident-related disability, they potentially trigger entitlement to income replacement benefits.

The Insurer's position is that foster parent payments cannot count as income for the Schedule's purposes, as they are in reality payments made on behalf of the children in the care to foster parents with the specific purpose of providing for the various needs of those children. In essence, Pembridge's argument is that foster care parents are merely conduits for managing funds which the Children's Aid Society provides solely for the care of the foster children involved.

Although the issue in dispute is primarily a legal issue, the parties were unable to completely agree on a statement of facts and so it was agreed that the hearing would include viva voce evidence relevant to the preliminary issue, taken in Thunder Bay, in addition to written submissions and oral argument on the law.

Factual Background

Notwithstanding that the parties were unable to generate an agreed statement of facts the reality is that there is very little, if any, factual disagreement about the circumstances giving rise to the preliminary issue in this arbitration.

Joyce Butts and her spouse Andy Butts were involved in an automobile accident on July 2, 2003. She was very seriously injured when a spare tire flew off an oncoming vehicle, smashing through her windshield and striking her in the face. Her injuries included a traumatic brain injury as well as a fractured skull, resulting in her needing to be confined for six months for medical and rehabilitation purposes.

At the time of the automobile accident Mrs. Butts and her husband were engaged in the activity of providing foster care for three children in accordance with an agreement they had entered into with the Kenora-Patricia Child and Family Services, hereinafter referred to as the "Children's Aid Society." Such agreements for foster parenting are governed by the provisions of the Child and Family Services Act² and its associated regulations. Mr. and Mrs. Butts had been regularly acting as foster parents for some time prior to the automobile accident.

Other than foster parenting, Mrs. Butts has not been employed in any significant sense since she was 18 years of age. Her spouse's evidence was that she may have worked for a very short period of time in a hotel in Fort Francis, Ontario many years ago. She has been in receipt of benefits from the Ontario Disability Support Program (ODSP), and its predecessors, for more than 20 years. Mr. Butts has had sporadic employment during the time he has been with his wife. At the time he met her he was working in a job readiness program which assisted him in developing skills such as preparing resumes and conducting interviews. He testified that this program supported him for about one year and after that he entered the work force. He started working as a cook and then a roofer and a dishwasher and ultimately decided to enter a college program to train as a small engine repair person. This training allowed him to obtain employment repairing small engines and at gas stations.

At the time Mr. and Mrs. Butts were married he was working at a Husky gas station in Dryden and also part time at the local Safeway store. This employment lasted until about 2000. Mr. and Mrs. Butts were involved in providing foster care at this time. Mr. Butts stated that they had five foster children with them, even though the legislation provides that "officially" they can only have four, due to the desire of the Children's Aid Society to keep a family of three siblings together notwithstanding that these foster parents already had two other children in their care. Mr. Knutsen noted, and I am prepared to take notice of the fact, that at times finding foster parents is a serious challenge for Children's Aid Societies and this challenge is often even greater in remote northern areas of Ontario.

Although Mrs. Butts was challenged by a number of health problems, particularly an arthritic condition which qualified her for ODSP, she was involved with child care for many years. She used to baby sit her nieces and nephews, including having the children stay overnight at times. Mr. Butts testified that before the automobile accident his wife was fully able to care for children, both physically and emotionally, even in the remote locations they lived in.

Mr. and Mrs. Butts participated in foster parenting through agreements with the Children's Aid Society. The only evidence before me is that they were in fact very good foster parents. They took in many children over the years, including native children and children with various special needs. They also participated in various educational programs offered by the Children's Aid Society to upgrade their qualifications as foster parents to care for special needs children, including taking courses on the effects of fetal alcohol syndrome, appropriate discipline of children, etc. Mr. Butts testified that he and his wife took these courses because they believed that they needed the specialized knowledge and skills, not because they were required to take them, noting that the children they took into their care often had behaviour issues which they wanted to understand how to respond to properly. By all accounts, Mr. and Mrs. Butts were the kind of people that foster parenting depends on for its success.

At the time of the automobile accident Mr. and Mrs. Butts had three foster children in their care, as well as their own daughter Chelsea. It is uncontroverted, and I accept as a fact, that the automobile accident of July 2, 2003 directly resulted in very serious injuries and consequent disability which rendered Mrs. Butts unable to continue to act as a foster parent. After the accident the foster children were removed by the Children's Aid Society from the care of Mr. and Mrs. Butts and they have not fostered children since. This removal was in no way occasioned by any problem with the quality of care being provided by Mr. and Mrs. Butts before the accident, but solely because they were no longer able to fulfill the obligations required of foster parents afterwards.

As noted above, the competence and quality of the foster parenting which Mr. and Mrs. Butts engaged in are not disputed by Pembridge. The real issue in dispute relates to how the funds paid by a Children's Aid Society to foster parents should be characterized for the purposes of the Schedule. This is not a strictly legal issue but rather an issue of mixed fact and law, and thus there was need to hear some oral evidence from Mr. and Mrs. Butts.

Mrs. Butts claims that the foster parenting funds which were paid to her by the Children's Aid Society were, for all intents and purposes, self-employment income. This is a claim she asserts in her own case, and she is not arguing that all foster parents would necessarily be in the same situation. Essentially, her argument is that, due to the reality that she was living on ODSP benefits as well as small supplements from Mr. Butts sporadic employment, regular foster parenting funds generated a "surplus" which can be likened to the "profit" other businesses earn when their revenues exceed their expenses.

Both parties to this arbitration agree that Mrs. Butts was not an employee of the Children's Aid Society, and the foster parent documentation before me does not lead me to conclude that there was ever any intention on Mrs. Butts part or the Children's Aid Society's part to enter into an employer/employee contract for foster parenting.

The evidence I have before me is that Mrs. Butts was receiving $1,382.00 per month, or $16,584.00 annually, from ODSP. In addition to her disability pension the Children's Aid Society paid to her, for each child she had in care, for Basic Foster Care:

• Board

$ 25.71 per day

• Respite

$ 1.69 per day

• Training and Experience

$ 2.75 per day

TOTAL

$30.15 per day

Because entitlement to income replacement benefits is being claimed based on Mrs. Butts being self-employed, Mr. Knutsen has calculated that, in the 52 weeks prior to the accident, she received approximately $24,096.89 in foster care payments from the Children's Aid Society.

The relevance of the amount of the foster care payments which Mrs. Butts received from the Children's Aid Society is that she is claiming that the money which she received from them was sufficient to provide for all the needs of the children she had in care. She and her husband typically fostered more than one child at a time, and therefore she had extra money that she would not have had if they were not fostering. In effect, she and her husband were earning something equivalent to a "profit" through the activity of regularly fostering children.

At this stage I want to note that although Mrs. Butts testified before me in Thunder Bay, it is clear that this accident sadly has had a very serious effect on her and that her challenges related to foster parenting on an ongoing basis are evident. The evidence about Mrs. Butts abilities, before and after the accident and related to how the couple handled their finances, primarily came from Mr. Butts testimony.

Mr. Butts testified that, prior to the automobile accident, he and his wife were easily making ends meet when they had foster children. He testified that the couple had started fostering for two reasons, because they wanted children and at the time did not believe they were able to have their own, and also for financial reasons. His evidence was that regular foster parenting funds allowed the whole family, including the foster children, to live a better quality of life. Specifically, he testified that the family always economized by purchasing bulk foods, to the extent that they acquired a meat slicer so that they could buy lunch meats at a lower price. He also stated that they had relatively fixed expenses for housing and utilities whether they had foster children or not. There was no significant increase in hydro or heating to have the children in their home. They also chose to use funds allocated for respite care provided by the Children's Aid Society in their general budget, rather than paying for someone to relieve them once and awhile from caring for the children.

In essence, Mr. Butts testimony was that he and his wife had a very modest life style in Northern Ontario and found that with the stable amounts the Children's Aid Society paid them for their fostering they were able to live a reasonably good life. His evidence was that not all of the money which they were paid by the Children's Aid Society was necessary to care for the foster children properly, primarily due to their frugality and the fact that it was not three times as expensive to care for three foster children as it was to care for one. Volume purchasing was part of their life and so was "volume" foster care.

Mr. and Mrs. Butts did not keep books of profit and loss. They did not pay or collect any form of taxes. However, Mr. Butts testified that if they had expenses exceeding the money available to pay for them it would have been their responsibility, not the Children's Aid Society s. In return for the stipend Mr. and Mrs. Butts had responsibilities to look after the foster children's physical and emotional needs, to make sure they went to school, and to liaise with social workers as required.

After the accident, Mr. Butts testified that he and his wife lost their automobile, they almost lost their home and they had problems paying for ongoing telephone and hydro. They had their cell phone disconnected due to their inability to maintain payments. Their computer internet services were also terminated. I accept, as there is no contradictory evidence before me, that Mr. and Mrs. Butts clearly encountered economic challenges associated with the termination of their foster parenting after the automobile accident.

Analysis

Mrs. Butts does not argue that she was an employee of the Children's Aid Society at the time of the accident. Her claim is that the foster parent payments she received should be treated as a form of self-employment income for the purposes of the Schedule.

Section 2(5) of the Schedule, which defines "employment", needs to be considered here and states:

For the purposes of this Regulation, a person is employed if, for salary, wages, other remuneration or profit, the person is engaged in employment, including self-employment, or is the holder of an office, and "employment" has a corresponding meaning. (emphasis added)

I take it as uncontroversial on the evidence before me that Mrs. Butts was not in receipt of either salary or wages from the Children's Aid Society for her foster care activities. This leaves open the possibility that the funds she received can be interpreted as constituting "other remuneration or profit." And this is really where the parties disagree.

The Oxford English Dictionary defines three relevant statutory terms as follows:

"remuneration":

reward, recompense, repayment; payment, pay.

"profit" in the relevant sense:

the pecuniary gain in any transaction; the amount by which value acquired exceeds value expended; the excess of returns over the outlay of capital (emphasis added)

"employment" in the relevant sense:

A person's regular occupation or business; a trade or profession. (emphasis added)

The Schedule does not specifically define "income." Nor does it tie the income replacement benefit, as one might logically expect, to the earning of "income." Rather, section 4 of the Schedule sets out the criteria for qualifying for an income replacement benefit in terms of an Applicants being employed, self-employed, or up until April 15, 2004, subject to a legitimate contract of future employment to commence within one year after the accident.

Pembridge argues that since foster parent payments are, without question³, not taxable in the hands of a foster parent under the provisions of the Income Tax Acts (Canada and Ontario), they should not be treated as "income" for the purpose of an income replacement benefit under the Schedule. I do not find that there is any compelling reason to import the provisions or definitions of the Income Tax Act into the Schedule, other than in sections where this is specifically contemplated, such as in section 6(6) which specifically indexes the meaning of "business losses" to the manner of determining these under the income tax statutes. The end purposes of the Schedule are not identical to those of the Income Tax Act

Even if I am wrong on the matter of the proper meaning of "income" I find that it is not particularly relevant to the issue presently before me. What I am required to determine in this Preliminary Issue hearing is whether, under the Schedule, Mrs. Butts is able to continue forward in the arbitration on the basis of her claim that she was self-employed at the time of the accident. In order to be successful in such a claim, in the relevant sense, she must be able to prove, on the balance of probabilities, that the payments she was receiving from the Children's Aid Society were in fact "remuneration or profit."

It is an uncontroversial principle of statutory interpretation that every word in a piece of legislation bears meaning. Section 2(5) of the Schedule clearly says that, to qualify for income replacement benefits, someone must be "for salary, wages, other remuneration or profit, ... engaged in employment."

Based on the ordinary meaning of "employment" and consistent with the definition of that term in the Oxford English Dictionary, I find that employment in Mrs. Butts case was in fact her ongoing foster parenting activity. There is simply no doubt that this was her regular occupation in the sense that this is what she devoted her normal, regular, day to day activity towards. Employment is more than an occasional engagement in a specific activity and requires that she be participating in it regularly as the dictionary definition requires. The only evidence before me confirms without contradiction that Mrs. Butts was engaged in foster care parenting for a long period of time as her regular daily activity and, as such, I find that she was "employed" in so doing.

However, this does not completely resolve the issue of qualifying for income replacement benefits. Mrs. Butts must also prove, on the balance of probabilities, that her foster care employment was carried on for the purpose of obtaining "remuneration or profit." It is certainly possible that someone could be "employed" in the activity of foster parenting as a regular activity with no such financial motive. I believe it is fair to say that Mr. Knutsen acknowledged this as a general principle. The inference from this is that it is a question of mixed fact and law whether foster parenting in this situation can meet the test.

There is no case law which specifically deals with the issue under consideration here. Both counsel provided me with decisions that touch tangentially on the issue in dispute, a number of them dealing with the distinctions between employment and self-employment. Given that there is no claim here that Mrs. Butts was employed, I find the cases dealing with that distinction not particularly helpful.⁴

More helpful are the few cases in Canada which have commented on the nature of foster care payments, albeit in other contexts. In McDermid, et al v. The Queen in right of Ontario⁵, Justice Rosenberg dealt with the question of lost foster parent income in the context of a tort claim. Although, as Pembridge points out, the criteria for recovery of economic loss in tort are not identical to those for qualification for income replacement benefits under the Schedule, I agree with Justice Rosenberg's reasoning and find it relevant to the issue before me. He states:

Mr. and Mrs. McDermid ceased to care for foster children in 1983. I accept their evidence that they would, if physically and emotionally able, have continued to take in foster care for approximately 10 more years. Although the information bulletin distributed by the children's aid society for which they worked referred to the remuneration that they received as covering disbursements, I accept their evidence that they made a profit from the moneys received for caring for foster children. They did not keep books.

...Since the McDermids already had accommodation in their home vacated by their three daughters, they had no significant extra cost for shelter and since Mrs. McDermid was a frugal shopper and already feeding two people, the additional cost of food was not unusually high. (emphasis added)

This case is as close as any case to which I was referred to Mrs. Butts' actual situation. The other case which I find to be relevant to this situation is Williams v. Brocker⁶ In that case, the Manitoba Queen's Bench stated:

There is an initial question here as to whether or not money which the plaintiff obtained as a result of foster parenting can be treated as a regular income source for which he is entitled to be compensated. It is clear from the evidence that amounts paid to foster parents are not intended to result in profit to them. The daily rates are based on various costs associated with raising the children. To the extent that a foster parent is left with a surplus of money, these amounts need not be declared for income tax purposes. Nevertheless, it appears that the plaintiff was able to make a profit from foster parenting and indeed in 1993 earned over $27,000.00 for this activity. (emphasis added)

Both of these cases stand for the proposition that, notwithstanding that foster care payments are not specifically intended by governments and Children's Aid Societies to generate profits for foster parents, the reality is that some foster parents do, usually by taking in multiple foster children on a regular basis, end up generating revenues that exceed their expenses. Although Pembridge argues that "profiting" is not the primary purpose of foster parenting, a view which I accept, this does not mean that people of good will who care for foster children cannot, by careful management of the funds they are paid, end up with more money than they actually need to properly, and I emphasize the word "properly", discharge their foster parental obligations.

Whether foster parenting actually generates revenue for foster parents is in each case ultimately a question of fact. To a large degree the answer will be a function of the family's life style, the specific needs of the children in care and the efficiency in running a household which the foster parents demonstrate. In this case, Mrs. Butts and her husband were, for a long period of time, used to living on, what by common standards is a low income from disability payments and the sporadic employment income which Mr. Butts generated. They lived in a relatively remote area of Northern Ontario where, it is fair to say, there were not many opportunities to lavishly spend money. They shopped in bulk and recycled clothing and toys. They enjoyed simple family entertainments. As a result of all this Mrs. Butts claims that she not only properly took good care of the foster children entrusted to her, but also improved her family's general quality of life.

It seems to me that this is one common reason for people to seek employment or to engage in self-employment. They do so in order to pay their bills on a regular basis and hopefully to improve their quality of life by generating funds which can allow them to consider putting away savings or make discretionary purchases that otherwise would not be available options for them.

As the cases above illustrate, it is ultimately a question of fact whether any given foster parent engages in the activity with an expectation of "other remuneration or profit." In this case, I accept the evidence of Mr. Butts that he and his wife did regard foster parenting as a steady source of funding for which they exchanged labour and from which, through efficient household management and a frugal lifestyle, they were able to extract the equivalent of a "profit" in the dictionary sense of that word noted above. Even if this surplus is not strictly profit in the classical capitalist sense, I find that it is properly included under the category of "other remuneration."

The specific evidence which I find supports a conclusion that Mrs. Butts did, as a matter of fact, regard and engage in foster parenting as a kind of self-employment is as follows:

• I find that the general lifestyle which Mr. and Mrs. Butts lived in remote Northern Ontario, along with their having access to only modest financial means over a long period of time, supports the plausibility of a conclusion that they would find the option of foster parenting to be an attractive, practical and available type of self-employment for them.

• Mr. and Mrs. Butts continued to regularly foster children after they were able to have their own daughter and one initial reason for choosing to foster, to care for children they could not have themselves, ended.

• The fact that foster parent stipends do not attract income tax is also consistent with the kind of self-employment that this couple would likely find attractive, as it did not require them to keep the kinds of books and records that traditional businesses typically do.

• The consistency which the couple demonstrated in regularly fostering more than one child at a time - at times even accepting more children than they really should have - even after they had a natural child of their own, reasonably supports an inference that the financial aspect of fostering was important to them.

• The evidence of Mr. Butts that, when the foster parenting ended after the automobile accident, the couple experienced serious financial setbacks supports a conclusion that the funding was not "only" benefiting the children in their care but them as well. It needs to be remembered here that there is no suggestion whatsoever in this case that Mr. and Mrs. Butts were providing anything but proper care to their foster children prior to the automobile accident. They had been engaged in this activity for years and were always subject to the scrutiny of the Children's Aid Society in this regard. Thus, if they did manage to improve the quality of their own lives while being foster parents it was not at the expense of the children entrusted to their care.

• Foster parent stipends are not a direct function of specific expenses any given foster parent incurs as a result of caring for any given child. The legal obligation of foster parents is to properly care for the children in their care with the assistance of the stipend they receive. Foster parents are not required to "account for" the way they spend the funds. What they are accountable for is the way they care for the children. Ontario's current funding practices is described in a Federal Government publication, Foster Care Report, published in September 2000:

The basic rate for "regular" foster care is prescribed at a minimum of $25.71 per day. The basic rates for "specialized" and "treatment" foster care, however, are not prescribed. The CASs responsible for applications of the rates have discretion in applying rates beyond that prescribed as the minimum, depending on the identified needs of the child and demonstrated skills of the foster parent(s). The new child welfare funding framework uses a series of "benchmarks" intended as "optimal averages" not intended to be applied to individual cases.⁷ (emphasis added)

Given this reality it is certainly plausible that foster parents who live in areas of the province where the basic cost of living is lower than elsewhere could end up receiving more funding than they actually need to provide for the proper care of the children in their care. There is nothing particularly implausible about Mrs. Butts claim that this surplus is the "value acquired in excess of the value expended" which the dictionary defines as profit.

In conclusion, taking all of the evidence before me into account, I find that Mrs. Butts was, at the time of her automobile accident, self-employed, based on her foster parenting activity and that foster parenting stipends paid to her can be counted towards "other remuneration or profit" as provided for in section 2(5) of the Schedule.

I make the general finding that foster parenting stipends can, in appropriate cases, amount to "other remuneration or profit" as provided for in section 2(5) of the Schedule. I also make the specific finding that Mrs. Butts has demonstrated, on the balance of probabilities, that she did participate in foster parenting as a form of self-employment for the purposes of claiming income replacement benefits under the Schedule.

However, for the sake of clarity, I am not making any finding as to the length of time during which Mrs. Butts may or may not have met the required disability test to qualify for income replacement benefits. The parties will need to continue to discuss that issue or submit it to the hearing arbitrator.

I also am not making any finding as to what the quantum of any income replacement benefit Mrs. Butts may be entitled to would be. Both counsel acknowledged during their submissions that calculating this amount, given that I find that the foster parenting here was a kind of self-employment, may be a challenge requiring the intervention of accountants and will be additionally challenging due to the nature of this venture and lack of business records. I strongly encourage both parties to work collaboratively to resolve these other issues related to income replacement benefits if at all possible.

EXPENSES:

The issue in this dispute was novel. Both counsel provided me with helpful written and oral submissions and conducted themselves in a very professional manner. I thank Mr. Knutsen and Ms McAvoy for that.

I encourage the parties to resolve the issue of entitlement to and quantum of expenses on the Preliminary Issue hearing in the context of their ongoing discussions regarding the claims in this arbitration. If they cannot reach a settlement, I exercise my discretion to leave a determination of the expense issue to the hearing arbitrator, primarily because there are still unresolved questions about income replacement benefits, the results of which need to be weighed in awarding expenses for these particular proceedings.

December 18, 2006

Robert A. Kominar

Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 197

FSCO A05-002829

BETWEEN:

JOYCE BUTTS

Applicant

and

PEMBRIDGE 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. Mrs. Butts was self-employed as a result of her activities of foster parenting at the time of the motor vehicle accident on July 2, 2003.

2. If the parties are unable to resolve the issue of expenses of the Preliminary Issue Hearing, the decisions on entitlement to and quantum of such expenses are reserved to the hearing arbitrator.

December 18, 2006

Robert A. Kominar

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2R.S.O. 1990, c. C.11
3. 3Both parties agree that foster parent funding is not treated as income for income tax purposes and information prepared by the Children's Aid Society on file in this arbitration confirms this understanding.
4. 4Prior to taking evidence and hearing argument in Thunder Bay, it was unclear whether the Applicant would argue that she might also be considered an employee of the Children's Aid Society. However at the Preliminary Issue hearing, no argument was made that Mrs. Butts could reasonably be considered an employee in these circumstances.
5. 51985 CanLII 1922 (ON HCJ), 53 O.R. (2d) 495
6. 6[2004] M.J. No. 339, p. 16 (Man. Q.B.)
7. 7http://www.hrsdc.gc.ca/en/cs/sp/sdc/socpol/publications/reports/2000-000045/page08.shtml - retrieved on December 15, 2006