Wayne Webber v. State Farm Mutual Automobile Insurance Company, 2008 ONFSCDRS 16

Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2008 ONFSCDRS 16

FSCO A06-002695

BETWEEN:

WAYNE WEBBER Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: John Wilson

Heard: December 18, 2007, in London, Ontario.

Appearances: Gordon Good for Mr. Webber Jonathan B. Schrieder for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Wayne Webber, was injured in a motor vehicle accident on November 14, 1995. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ Under the provisions of the Bill 164 Schedule, a second type of benefit potentially becomes payable after some two years of entitlement to income replacement benefits. This is the Loss of Earning Capacity Benefit (LECB). Mr. Webber was entitled to a loss of earning capacity offer in accordance with section 21 of the Schedule which reads as follows:

(1) Subject to subsections (7) to (9), an insurer shall promptly deliver a written offer to an insured person with respect to the payment of weekly loss of earning capacity benefits if one or more of the following circumstances occurs:
The insured person qualified for weekly income replacement benefits under Part II and continues to qualify for those benefits 104 weeks after the onset of the disability in respect of which he or she first qualified for those benefits.

Although Mr. Webber did, ultimately, receive an LECB offer from State Farm, he disagreed with their calculation of his pre-accident earning capacity (PEC) and consequently with their determination of his loss of earning capacity.

The parties were unable to resolve their disputes through mediation, and Mr. Webber 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 as follows:

Is Mr. Webber’s pre-accident income calaculation to be determined only by reference to his actual net weekly income from employment used in section 10 of the Schedule in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins, converted to a full-time net weekly income in accordance with section 86, if section 86 applies?

Result:

Mr. Webber’s pre-accident income calaculation is not to be determined only by reference to his actual net weekly income from employment. Mr. Webber is also entitled to bring evidence that his pre-accident earning capacity should be greater and that it should take into consideration his substantial completion of his professional qualifications as a journeyman plumber.

EVIDENCE AND ANALYSIS:

This preliminary issue arises from a basically undisputed fact situation. Mr. Webber at the time of his accident was in the process of completing his training and certification as a journeyman plumber. Although he had completed the necessary apprenticeship time, he had not yet achieved the designation of journeyman plumber, nor the higher level of income generally payable to a journeyman plumber.

That he was on the cusp of accreditation is apparent from his ability to complete the formal requirements shortly after the accident.

It is the Insurer’s contention that any determination of Mr. Webber’s pre-accident earning capacity must be strictly based on his actual pre-accident earnings (during the apprenticeship period) and not take into consideration any greater remuneration that might be due his emerging skill-set as a journeyman plumber.

The Insurer’s position is based on a literal reading of section 29 of the Schedule which provides that the pre-accident earning capacity should be determined by the actual net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins: in other words the actual pre-accident income as calculated for IRB purposes.

Counsel for Mr. Webber takes a more nuanced interpretation of the PEC calculation provisions. Given the identification of the benefit as specifically a loss of earning capacity benefit, and the design of the Bill 164 scheme itself, he submits that the scope of the PEC calculation is wide enough to include not only income actually received prior to an accident but also consideration of the potential earning capacity present prior to the accident. In Mr. Webber’s case, his potential to earn at least journeyman wages should form part of the PEC analysis.

The question raised by the parties in this matter is essentially a matter of statutory interpretation. If section 29 is to be taken literally in the manner suggested by the Insurer, then no consideration can be given to the journeyman’s qualifications in calculating Mr. Webber’s PEC. Once again the statutory provision reads as follows:

29 (1) For the purpose of determining the amount of a weekly loss of earning capacity benefit under this Part, the pre-accident earning capacity of a person who is entitled to receive weekly income replacement benefits under paragraph 1, 3, 4 or 6 of subsection 7 (1) shall be deemed to be the person’s net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins, converted to a full-time net weekly income in accordance with section 86, if section 86 applies.

The Supreme Court in Rizzo v. Rizzo Shoes² has adopted the late Elmer Driedger’s approach to statutory interpretation as its guiding light.

Rizzo, which dealt with the interpretation of the provisions relating to an employer’s obligation to pay severance pay at a time when the employer was under receivership, looked at both the individual words of the provision and the overall intent of the legislation as a whole.

Iacobucci J. in writing the decision for the court framed the problem as follows:

At the heart of this conflict is an issue of statutory interpretation. Consistent with the findings of the Court of Appeal, the plain meaning of the words of the provisions here in question appears to restrict the obligation to pay termination and severance pay to those employers who have actively terminated the employment of their employees. At first blush, bankruptcy does not fit comfortably into this interpretation. However, with respect, I believe this analysis is incomplete.

Although much has been written about the interpretation of legislation (see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter “Construction of Statutes”); Pierre-André Côté, TheInterpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. I also rely upon s. 10 of the Interpretation Act, R.S.O. 1980, c. 219, which provides that every Act “shall be deemed to be remedial” and directs that every Act shall “receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit”.

What then is the spirit of the Bill 164 Schedule, and can that spirit be harmoniously reconciled to section 29 of that Schedule?

To begin the analysis it is worthwhile to take a closer look at the section itself. From Mr. Webber’s point of view, the most challenging part of section 29 is the deeming provision, which appears on its face to make the pre-accident IRB the PEC as well. As noted earlier, if such were to be the case, no value would be attributed to Mr. Webber’s apprenticeship and training as a journeyman plumber, since his pre-accident wages did not reflect that he was on the cusp of completing his journeyman’s qualifications.

While there was no evidence before me as to the quantum of wages paid respectively to apprentices and journeyman plumbers, it is assumed for the purposes of this hearing only that the latter situation would be more favourable to the calculation of Mr. Webber’s PEC.

The use of the word “deem” in section 29 of the Schedule is not without some controversy as to its effect. According to Black’s, “deems” means:

To treat (something) as if (1) it were really something else, or (2) it has qualities that it doesn’t have < although the document was not in fact signed until April 21, it explicitly states that it must be deemed to have been signed on April 14 >. 2. To consider, think, or judge < she deemed it necessary >.³

Ruth Sullivan, in her update of Driedger’s opus, also identifies several often contradictory ways that the courts have approached deeming provisions.

Deems. The verb ‘to deem’ is used in legislation for a variety of purposes:

To create a legal fiction by declaring that something exists or has occurred regardless of the truth of the matter
To create a legal presumption by declaring certain facts are to be taken as established
To declare the law
To confer discretion

While each of these approaches respects the sense of the creation of a legal fiction that is taken to be true, some approaches deal with a deeming provision as the creation of a rebuttable presumption, while others strictly define the situation, even to the extent of turning black into white, if the legislature deems that to be appropriate.

As Professor Sullivan notes “When deems is used to create a legal fiction, the fiction cannot be rebutted.” However, the word may equally be used to create a presumption. The same reference notes that:

The purpose of a presumption is to establish something as a fact without the benefit of evidence. Presumptions are rebutted by tendering evidence that tends to show that the presumption is false … It is sometimes difficult to determine whether “deem” as used in a particular provision was intended to be rebuttable or conclusive.⁴

To help determine what the draughters intended by the use of “deem” in the provision, it may be necessary to resort to further interpretative aids. This legislative provision, as with most modern enactments of course has two linguistic faces, English and French, both equally authoritative. The French version of the legislation uses the expression “est reputé” instead of “is deemed to be”

29 (1) Pour déterminer le montant d’une indemnité hebdomadaire pour perte de capacité de gain aux termes de la présente partie, la capacité de gain avant l’accident de la personne qui a le droit de recevoir des indemnités hebdomadaires de remplacement de revenu aux termes de la disposition 1, 3, 4 ou 6 du paragraphe 7 (1) est réputée son revenu hebdomadaire net tiré d’un emploi qui est utilisé à l’article 10 pour déterminer le montant des indemnités hebdomadaires de remplacement de revenu immédiatement avant que les indemnités hebdomadaires pour perte de capacité de gain commencent à être versées, converti en un revenu hebdomadaire net à temps plein conformément à l’article 86, si cet article s’applique. Règl. de l’Ont. 635/94, art. 1.

Le Robert & Collins Senior defines reputé as:

Reputable, renowned, of repute; l’un des médecins le plus Xs de lsa ville one of the town’s most reputable doctors, one of the best known doctors in town; c’est un fromage\vin hautement x it’s a cheese/wine of great repute or renown orateur x pour ses bons mots speaker renowned for his witticisms; ville xe pour sa cuisine/ses monuments town which is renowned for ou which has a great reputation for its food its monuments;il n’est pas x pour son honnêteté! He’s not exactly renowned or famous for his honesty!

(b) (consideré comme ) reputed; remède x infaillible cure which is reputed ou supposed ou said to be infaillible; professeur x être très severe teacher who has the reputation of being ou who is reputed to be or said to be very strict.

The Petit Robert likewise suggests “compter” « évaluer tenir pour considérer comme croire, regarder (comme) and gives the example « s’il est chaste, on le répute péderaste; c’est la règle » by way of definition for réputer.

Assuming that there is some consistency of expression between the Bill 164 Schedule in both English and French, the use of “reputer” in the French version would suggest a less forceful interpretation of the deeming provisions of section 29, than that envisaged by the Insurer. I accept that the use of “deem” with regard to the calculation of the PEC creates at best a rebuttable presumption in favour of consideration of the actual pre-accident income as set out in the Schedule.

Such an interpretive approach also has the advantage of being more capable of being harmoniously reconciled with the special nature of the Bill 164 Schedule.

The Bill 164 Schedule was a unique experiment in dealing with accident benefits, and the perceived need to remove compensation for personal injury in motor vehicle accidents out of the litigation stream.

Unlike the current Schedule, the Bill 164 Schedule attempted to address what many saw as tort issues within the context of an accident benefits scheme. Thus, instead of simply providing limited compensation for lost income due to accident-related income, Bill 164 went on to address the long-term loss of the ability to earn income as well: that is the loss of the capital asset that generates income.

This was the genesis of the loss of earning capacity benefit that especially distinguishes the Bill 164 Schedule from the other accident benefit schemes. In the words of the courts at the time, the public exchanged certain rights under tort for such compensation for a no-fault scheme that could address the issue of diminished earning capacity due to accident.

The courts have had ample opportunity to explore the purposes of the Bill 164 Schedule. G. Thomson J. summarized it in Hodgson v. Walsh:⁵ as follows:

Under the law [Bill 164] an injured party is precluded from bringing an action against a member of the protected class of defendants unless the person died, suffered serious disfigurement or suffered serious impairment of an important physical, psychological or mental function as a result of a motor vehicle accident.

Bill 164 provided for what the defendants called an enhanced level of statutory accident benefit, on a first party basis, as compared to the no fault benefits provided under OMPP, and a greatly increased level of first party compensation for pecuniary losses.

Regarding the limitations on non-pecuniary damages payable under section 267.1 the defendants all adopted the following breakdown of pecuniary damages, namely; . . .

The term “loss of earning capacity” was not invented for the Bill 164 Schedule. It developed in the context of tort actions and addressed, as the name suggests, more than just the simple pecuniary loss created by a loss of income stream from employment.

As G. Thomson J. elaborated:

Loss of earning capacity is an award of damages based on the recognition that a plaintiff’s capacity to earn money is an asset which has been taken away. Damages for loss of earning capacity are properly awarded to compensate the injured party for the loss of a capital asset consisting of income earning capacity, rather than loss of income. When viewed as a capital asset it is clear that damages for loss of earning capacity are awarded to compensate a plaintiff for pecuniary loss. [Andrews, supra, at p. 251; Jennings, supra, at pp. 545-6; D’Amato v. Badger (1996), 1996 CanLII 166 (SCC), 137 D.L.R. (4th) 129

(S.C.C.) at 140].

Loss of earning capacity is an award based on the recognition that a plaintiff’s capacity to earn money was an asset which has been taken away. See Andrews v. Grand & Toy Alberta Ltd., 1978 CanLII 1 (SCC), [1978] 2 S.C.R. 229. The calculation was based on the level of earning which the plaintiff would likely have achieved and the period that he would sustain it, subject to deductions made for contingencies of life.

The circumstances surrounding the Bill 164 provisions were also an important consideration for the courts:

The object and scheme of the act encompasses an exchange of rights, that is, the loss of the right to sue for pecuniary loss in favour of the provision of enhanced statutory accident benefits. In the case of non-pecuniary damages, the act preserves them being assessed in the same manner as in any other proceeding and without regard to the tort immunity created in relation to pecuniary losses.⁶

Given the trade-off between the loss of rights to sue under tort for certain economic losses and the enhanced accident benefits, it would follow a certain logic if those enhanced benefits, or more specifically the loss of earning capacity benefit, had some resemblance to the rights given up.

Both the judicial commentary on Bill 164, and the use of the technical term, loss of earning capacity suggest that what the legislative draughters had in mind was something distinct from the income replacement benefit that characterized compensation during the first two years of entitlement. Indeed, given its use in jurisprudence and practice as a term of art describing a loss of the capability to generate future revenue, any other interpretation would be highly unlikely. Bill 164 already has an income replacement benefit provision.

The rule against tautology would suggest that simply re-naming the income replacement benefit as a loss of earning capacity benefit at the two-year mark would not have required such different nomenclature. To have meaning, “earning capacity” as used in sections 20 to 30 and particularly section 29 of the Schedule must be capable of including more than just the income as calculated for the purposes of an income replacement benefit.

While a PEC presumptively includes actual pre-accident income, it has also to be able to take into consideration the nature of the “asset which has been taken away.” In Mr. Webber’s case, the nature of that asset would include his training as a journeyman plumber.

Granted there must necessarily be an element of uncertainty. Mr. Webber may have never finished the course. He may have died, quit, or moved on to more exciting occupations. He may never have been entitled to charge a journeyman’s rate. Exact precision, however, is not a requirement of an award for loss of earning capacity. Indeed, there is a certain element of “guesstimate” in any such calculation, no matter how mathematically expressed. As Major J. stated in D’Amato v. Badger⁷, the computation is based on the level of earning which a person would likely have achieved and the period that he or she would sustain it, subject to deductions made for contingencies of life. Words such as “likely” and “contingencies” do not reflect absolutes, but rather hypotheses that may be sustainable on the balance of probabilities.

In this preliminary issue, it is not necessary to decide whether or not Mr. Webber has marshalled sufficient evidence to support an assertion that he would have ended up entitled to a journeyman’s wages for his plumbing related work, although his apparent satisfaction of the final qualifications shortly after the accident strongly suggest such a conclusion. Rather, it is only necessary to decide whether such evidence is admissible to suggest that his pre-accident earning potential would have been higher than indicated by his actual wages.

I find that although section 29 of the Schedule deems the pre-accident earning capacity to be Mr. Webber’s actual net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins, the provision is open to interpretation. As discussed earlier, the exact meaning of “deem” in this provision can only be ascertained in the greater context of the Bill 164 accident benefit scheme. The interpretation of “deemed” in this case as creating an absolute and irrevocable link between pre-accident earnings and earning capacity flies in the face of its earlier, judicially construed meaning. I do not accept that the legislators intended to modify this meaning, nor do I accept that such an interpretation can stand as congruent to the intentions of the Bill 164 scheme.

A liberal interpretation of the deeming provision is consistent with both the wording used in the French version of the Schedule and “the scheme of the Act, the object of the Act, and the intention of Parliament” which was to compensate the injured party for the loss of a capital asset consisting of income earning capacity, rather than loss of income.

I find, therefore, that the use of “deem” in this particular case can only be a presumption that may be rebutted by tendering evidence that tends to show that the presumption is incorrect and inappropriate.

Consequently, Mr. Webber’s pre-accident income calaculation is not to be determined only by reference to his actual net weekly income from employment. Mr. Webber is also entitled to bring evidence that his pre-accident earning capacity should be greater and that it should take into consideration his substantial completion of professional qualifications that would have ultimately entitled him to a greater income potential.

EXPENSES:

I exercise my discretion to award Mr. Webber his expenses incurred in this preliminary issue hearing. If the parties are unable to agree on an appropriate amount, I may receive brief written submissions as to the quantum of the order.

February 4, 2008

John Wilson Arbitrator

Date