Neutral Citation: 2016 ONFSCDRS 65

FSCO A13-009880

BETWEEN:

T. C. Applicant

and

PERSONAL INSURANCE COMPANY OF CANADA Insurer

REASONS FOR DECISION

Before: Alec Fadel

Heard: July 21, 2015, in Hamilton, Ontario with written submissions completed by September 4, 2015.

Appearances: Sumitra Lagoo and Daniel Roncari for T.C. Robert H. Rogers and Jessica Rogers for Personal Insurance Company of Canada

Issues:

The Applicant, T.C., applied for and received statutory accident benefits from Personal Insurance Company of Canada (“Personal”), payable under the Schedule.¹ Her claim for accident benefits arose after her son was seriously injured in a motor vehicle accident on October 31, 2012. A dispute arose concerning the applicant’s income replacement benefit that the parties were unable to resolve through mediation. The applicant therefore applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Do the monies received by the applicant for providing attendant care services to her son constitute post-accident income that is deductible from the amount of her income replacement benefits?
Is interest payable on overdue benefits?
Is Personal required to pay a special award?
Is either party entitled to their expenses of the arbitration?

Result:

The attendant care monies being received by the applicant are not considered post-accident income.
Interest is payable on overdue benefits.
Personal is not liable to pay a special award.
The applicant is entitled to her expenses of the arbitration.

BACKGROUND:

On October 31, 2012 the applicant’s son (C.C.) was involved in a motor vehicle accident while he was a pedestrian. He sustained life-threatening injuries resulting in a need for 24-hour attendant care supervision. By February 28, 2013, the insurer determined that C.C. had sustained a catastrophic impairment in the accident pursuant to the Schedule.

As a result of this accident, the applicant was unable to return to her employment in the retail industry. She became entitled to an ongoing income replacement benefit beyond 104-weeks after being diagnosed with: a major depressive disorder; an adjustment disorder; PTSD; a GAF score of 51-55 indicating moderate difficulty in social and occupational functioning. The parties agree that the quantum of the income replacement benefit is $400.00 weekly prior to any deductions for post-accident income.

The parties agree that C.C. requires 24-hour adult support and supervision and is emotionally dependant on his mother who is the primary attendant care provider.² C.C. receives an attendant care benefit from the insurer in the amount of $6,000, which he gives to his mother.³ The parties agree that the applicant has sustained an economic loss as required under s. 3(7)(e)(iii)(B) of the Schedule.

The applicant was paid an income replacement benefit in the amount of $400.00 weekly from November 7, 2012 to March 30, 2013. The insurer reduced the income replacement benefit to $0.00 on March 22, 2013, on the basis that the $6,000.00 the applicant received monthly from C.C. constituted post-accident income and was therefore deductible from her IRB pursuant to s. 7(3) of the Schedule.

At the hearing, the insurer clarified its position that it was alleging that the applicant was not an employee but was involved in a self-employment situation. I ruled that the insurer could proceed with this defence after the applicant objected that the insurer had never earlier alleged that the “income” the applicant was receiving was from self-employment.

Insurer’s Position

At the hearing, the insurer submitted that the monthly payment being received by the applicant for providing attendant care to her son is “income from self-employment” and therefore should be deducted from her income replacement benefit. It argued that the activity that the applicant is engaged in by providing the attendant care to C.C. and being reimbursed in the monthly amount of $6,000.00 should be considered “other type of business” as found in the definition of self-employed in the Schedule.

Further, the insurer submits that with the legislative changes to the meaning of “incurred” in the 2010 Schedule, these payments of attendant care are more akin to income, because of the need of the family member, or friend providing the service, to prove an economic loss.

Applicant’s Position

The applicant submits that she is not involved in a self-employment situation or an employee-employer relationship. She points to Maurice v. The Queen⁴, and Pellerin v. The Queen⁵, Tax Court decisions (informal procedure⁶) which suggest that the monies are not considered income for the purpose of the Income Tax Act. The applicant submits that in Canada income is taxed and that taxable status is determinative of the monies being income. Although she receives $6,000.00 per month in attendant care payments to care for her son, the applicant states that these monies are more akin to gifts, inheritances, allowances between family members, or other transactions that are not taxed.

Finding

For the reasons that follow, I find that the payments being received by the applicant for the attendant care she is providing to C.C. are not considered “income from self-employment” for the purpose of s. 7(3) of the Schedule. The applicant’s actions do not resemble that of a person involved in a business. Also, I find that the new definition of “incurred” in the Schedule does not state or imply that the attendant care monies being received by a family member should be considered income for the purposes of s. 7 of the Schedule. Further, the new economic loss requirement does not imply that the payments in turn are to be considered income. Therefore, the applicant’s income replacement benefit should not be reduced because of the payments being received from C.C.

EVIDENCE AND ANALYSIS:

Section 7(3) of the Schedule contemplates a reduction of an income replacement benefit received if the insured person is in receipt of post-accident income. It states:

(3) The insurer may deduct from the amount of an income replacement benefit payable to an insured person,

(a) 70 per cent of any gross employment income received by the insured person as a result of being employed after the accident and during the period in which he or she is eligible to receive an income replacement benefit; and

(b) 70 per cent of any income from self-employment earned by the insured person after the accident and during the period in which he or she is eligible to receive an income replacement benefit. O. Reg. 34/10, s. 7 (3). (emphasis added)

Self-employment is defined in the Schedule at s. 3, it states:

“self-employed person” means a person who,

(a) engages in a trade, occupation, profession or other type of business as a sole proprietor or as a partner, other than a limited partner, of a partnership, or

(b) is a controlling mind of a business carried on through one or more private corporations some or all of whose shares are owned by the person;

“self-employment” means a trade, occupation, profession or other type of business the essential tasks of which are carried on by a self-employed person; (emphasis added)

To be a “self-employed person,” C.C. has to be engaged in any type of business as a sole proprietor. I do not find that she is. The Schedule clarifies that “self employment” means any “type of business the essential tasks of which are carried on by a self-employed person.” “Business” is not defined in the Schedule, but to my mind has a characteristic of a commercial enterprise.

The insurer suggests that since the monies in the hands of a third party provider would be considered income it should also be considered income in the hands of the applicant. It states that even if the applicant had not structured herself as a self-employed person (ie applied for an HST number and declared the income on her tax return) nonetheless the monies are income from self-employment. However, I see a number of significant differences between a third party provider and TC and I find from the evidence the following:

T.C. is not set to a maximum number of hours, providing 24-hour care
T.C. would provide the same level of care even if there were no attendant care monies available
T.C. has never declared these monies on her income tax returns, and it appears she is not required to do so as per non-binding decisions of the Tax Court of Canada (discussed below)
T.C. has no flexibility in her hours as her son has to be supervised at all times
T.C. has never provided care to her son with a view to a profit

Further, the evidence suggests that the care provided to C.C. is unpredictable and depends on his daily behaviour. There have been instances where the care provided has been quite challenging, yet despite this it is the applicant’s evidence that she would not stop providing care to her son and that no one else could provide the type of care that she provides. I absolutely believe the applicant when she says that she would provide the care to her son even if he did not have access to the attendant care benefit. I therefore do not see how the applicant is involved in a “business.” She has never considered herself to be in a business, and, as noted, does not and has not had a view to a profit from caring for her son. I find that the applicant is not engaged in a business, she is providing care to her child where monies happen to be available under a policy of insurance, to reimburse her for doing so. I therefore find that the monies being received are not income from self-employment for the purposes of s. 7(3) of the Schedule.

The Schedule at s. 3(7)(e) states that attendant care (in this instance) is not payable unless the insured person received the goods or services, promised to pay, and the provider (when it is a non-professional service provider) “sustained an economic loss as a result of providing the goods or services to the insured person.” The insurer submitted that the economic loss requirement suggests that the monies being received are income. I do not agree. If the Legislature intended that monies paid under this section were to be considered income for the purpose of the Schedule, it would have stated so. Without a specific provision, I do not agree that this section implies that the monies received by the non-professional service provider is income for the purpose of the Schedule.

The applicant relied on two informal Tax Court decisions Maurice and Pellerin, to help bolster her case. While these decisions are not binding on me, I found them helpful in illustrating the reasons why attendant care service provided by a family member is not self-employment or employment, and therefore not income. To be clear, while I agree with the comments highlighted from the Tax Court decisions, I find that the applicant was not involved in a business and therefore not self-employed based on the evidence in this case.

In Maurice, Justice Tardif looked at the issue of whether attendant care monies received by a mother for her disabled son under the SAAQ in Quebec was taxable income.⁷ Importantly, the Court found that the mother was neither an employee nor an independent contractor.

In making this determination, the Court commented that the Income Tax Act did not specifically define the concept of “business” but s. 248(1) specified various activities that are included in that concept:

“business” includes a profession, calling, trade, manufacture or undertaking of any kind whatever and, except for the purposes of paragraph 18(2)(c), section 54.2, subsection 95(1) and paragraph 110.6(14)(f), an adventure or concern in the nature of trade but does not include an office or employment. (emphasis added)

Justice Tardif stated that “[t]he courts generally define the concept of business by contrasting it with the concept of employment.” He noted that according to the leading decision in Wiebe Door Services Ltd. v. Minister of National Revenue⁸, the Federal Court of Appeal referred to a four-in-one test being: 1) control, 2) ownership of the tools, 3) chance of profit, 4) risk of loss.

Based on this test, Justice Tardif found that the mother was not an employee or an independent contractor,

mainly because, although she acted independently in performing her work, she was not free to organize her time as she saw fit due to her daughter’s specific and continuous needs and because her alleged potential profit was fixed in advance and in no way depended on her own efforts.

Justice Tardif stated:

It has long been recognized that not all “accretions to wealth” are included as income. Inheritances and gifts are “accretions to wealth” but are nevertheless not taxed because they are not income from employment, property, or business. Profits from hobbies are accretions to wealth, but they, too, are not taxed for the same reason.

In the case at bar, the appellant chose to assume responsibility for her daughter herself, not for the pecuniary benefits she could derive therefrom but rather to fulfil her obligation of support, rightly considering that she was the person best qualified to look after her child. The monetary benefits resulting from that maternal family activity are no more taxable than profits from hobbies or simply amounts that some people give to their non-working spouses to attend to their family's various needs.

In Pellerin, Justice Tardif, although not looking at a self-employment situation, commented on the relationship between the mother and her adult son for whom she was giving attendant care, he stated:

This was in no way a business relationship or even an employment contract. The affection stemming from the parental bond was the primary and fundamental reason for the relationship. The notion of profit was non-existent and there was no relationship of subordination. (emphasis added)

The Tax Court of Canada (under section 12 of the Tax Court of Canada Act) has exclusive original jurisdiction to hear and determine appeals and references to the Court on matters arising under the Income Tax Act. Section 2 of the Income Tax Act, sets out the liability for taxes, it states:

Tax payable by persons resident in Canada

2(1) An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year.

Taxable income

(2) The taxable income of a taxpayer for a taxation year is the taxpayer’s income for the year plus the additions and minus the deductions permitted by Division C.

In examining the situation in Maurice, the Tax Court found that the monies being received by the parent for attendant care were not taxable income. Section 2(2) of the ITA states that taxable income “is the taxpayer’s income,” it therefore appears that the Tax Court is saying that when interpreting the ITA, monies received in this way are not considered income for the purpose of the ITA.

The Schedule allows for a deduction of the IRB for any post-accident “income” from self-employment. The insurer points to “other type of business” in the definition of self-employed in the Schedule to argue that the applicant is in a self-employed situation. “Business” is not defined in the Schedule. The Superintendent’s Guideline 4/96 defines “business.” However, I find that Guideline of no assistance in this instance given that it is to be used when it has already been established that the individual is employed, but it is unclear whether the individual is self-employed. In Maurice, when looking at a definition for business in the Income Tax Act which includes the wording “undertaking of any kind whatever,” the Tax Court found that the parent providing care for her son was not involved in a business and therefore the monies received to provide that care were not considered taxable income.

The insurer refers to Butts and Pembridge Insurance Company (FSCO A05-002829, December 18, 2006) where the arbitrator found that monies received from the Children’s Aid Society for fostering children was considered income for the purpose of quantifying the income replacement benefit. I do not find this case of any assistance. The arbitrator in that case noted that it was “ultimately a question of fact whether any given foster parent engages in the activity with an expectation of ‘other remuneration or profit.’” The arbitrator accepted that the applicant and his wife regarded foster caring as a “steady source of funding,” for which they were able to extract a “profit.” In the case of T.C. there is no evidence to suggest that she has regarded her attendant care to her son with a view to a profit. In fact, the evidence suggests the opposite.

On the evidence, I find that the applicant was not involved in a business by giving her son the attendant care he needs and receiving the monies paid to him as an attendant care benefit. The only characteristic of a business is the regular amount being received from C.C. Otherwise, the applicant has not set up a business. She has not applied for an HST number, she has not filed taxes as a self-employed person, the Tax Court tells her, in non-binding decisions, that the amounts she is receiving are not considered taxable income for the purpose of the ITA and finally she did not provide care for her son in order to earn a profit. Even the insurer was not treating this as self-employed income at the outset. It did not ask the applicant about business deductions in order to quantify the amount of income that could be deducted from the IRB. In fact, it never made its position clear, that it considered the applicant to be self-employed until the first day of hearing when I was asked to rule on whether it could go ahead with the defence.

SPECIAL AWARD:

The applicant is entitled to a special award if the decision of the insurer is found to be unreasonable. I do not find that the insurer’s position is unreasonable. On its face, it does appear that the applicant was receiving a regular payment that has some of the characteristics of income. There was regularity to the funds and the applicant was providing her child a service (though I have found not in a business context). Further, the legislative change in 2010 restricted the payment of attendant care benefits when a family member was providing the care adding a test that was tied to the service provider sustaining an economic loss. It was therefore not unreasonable for the insurer to question whether or not the payments being received by the applicant constituted income for the purpose of s. 7 of the Schedule. There is a line between adjusting a file and taking an incorrect position when interpreting new legislation and unreasonable adjusting of a file. Given the nature of the legislative change and the payments being received, I find that the insurer’s position was incorrect but not unreasonable.

EXPENSES:

The issue in dispute was novel. Given the success of the applicant in the arbitration, she is entitled to her reasonable expenses. If the parties are unable to agree on a quantum of expense, they may apply for a hearing on that issue as per the DRPC.

February 25, 2016

Alec Fadel Arbitrator

Date

Financial Services Commission of Ontario