D.M. v. Aviva Insurance Canada, 2018 CanLII 141002

Tribunal File Number: 17-006525/AABS

In the matter of an Application pursuant to subsection 280(2) of the Insurance Act, RSO 1990, c I.8, in relation to statutory accident benefits.

Between:

D.M.

Applicant

and

Aviva Insurance Canada

Respondent

DECISION

ADJUDICATOR: Sandeep Johal

APPEARANCES:

Counsel for the Applicant: Charles Thompson,

Counsel Counsel for the Respondent: James M. Brown, Counsel

Heard in-person in Nepean on: May 9, 2018 and May 10, 2018.

OVERVIEW

1The applicant was injured in an automobile accident on January 4, 2013 and sought benefits pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 2010 (the ''Schedule'').

2The applicant submitted an application for dispute resolution services to the Licence Appeal Tribunal - Automobile Accident Benefits Service (AABS) (the “Tribunal”).

ISSUE IN DISPUTE

3From the case conference order dated February 21, 2018 the following issues are to be determined at the hearing:

I. Is the applicant entitled to receive weekly income replacement benefit, (“IRB”) retroactively, in the amount of $400 per week for the period March 10, 2015 to December 17, 2017, during which time the respondent claimed deductions pursuant to s.7(3) of the Schedule?

II. Is the applicant entitled to interest on any overdue payment of benefits?

RESULT

4I find that the applicant is entitled to:

i. IRB’s in the amount of $400 per week for the period of March 10, 2015 to December 17, 2017 and the respondent is not entitled to claim deductions pursuant to s.7(3) of the Schedule.

ii. The applicant is entitled to interest in accordance with the Schedule.

Preliminary issue raised prior to the commencement of the hearing

5At the start of the hearing, the applicant made an oral request for a motion to file a supplementary book of documents. The documents within it have been previously provided to the respondent.

6The respondent submits that they have had these additional documents in their possession however these documents are not relevant and the prejudice is that it has not had time to prepare for the hearing with respect to the new documents.

7A ruling to allow the evidence was made orally after hearing submissions from both parties. The respondent has been in possession of the documents for some time and I do not find it to be prejudicial to the respondent. The supplementary book of documents will be allowed however each document within it will have to be marked as an exhibit to the hearing as it is introduced by the applicant. The respondent will be allowed to provide submissions on the relevance of that document and the weight that should be assigned to it.

ANALYSIS

Parties’ Positions

8The parties agree that the applicant has met the requirement to be entitled to IRB’s and the only issue is with respect to whether the respondent is entitled to deduct 70% of any gross employment income received by the applicant as a result of being employed after the accident.¹ The parties further agree that the applicant was an employee at the [a restaurant] that was owned by her mother who was the sole director.

9The applicant submits that she was not employed as she was not physically working at the restaurant during the time period in dispute and not providing any services to her employer. She submits that she continued to receive her regular pay and that was as a result of a gesture from her mother to continue to pay her as a way to help the applicant financially after the motor vehicle accident and the ongoing pay was a gift and not as a result of employment. The applicant’s mother had no expectations of the money being returned and nor did she expect the applicant to work in the restaurant in exchange for that money.

10The respondent submits that the applicant continued to receive her regular bi- weekly pay as she did prior to the accident and it was treated the same way. Deductions were made for income taxes, Canada Pension Plan contributions and Employment Insurance contributions in the same manner after the accident as they were before the accident and therefore it should be considered employment income.

11The applicant’s tax records also show that she claimed these payments as income on her tax returns and paid taxes on those amounts just as she did prior to the accident. The respondent further submits the payments are not gifts and it is an attempt at double recovery and the payments should be used to offset her IRB payments in accordance with s.7(3)(a) of the Schedule.

Did the applicant receive gross employment income as a result of being employed?

12I find that the applicant was not receiving gross employment income as a result of being employed for the following reasons.

13The applicant testified that her mother is the owner of [a restaurant] and her aunt is the manager. She submits that following the accident she took time off to recover and went back to work in a limited capacity around the beginning of March 2013 and returned to her full duties in May of 2013. She was not able to work at the same pace as she could prior to the accident and found that she was much slower in her duties as she was still recovering from her injuries.

14The applicant testified that she realized she could no longer work because the pain progressively became worse and she could no longer function, as a result of her pain an inability to function her last day of work was March 9, 2015 and she has not returned to work in any capacity since that date.

15The applicant and her family relied on her income as she was the main breadwinner for the family and her husband who was self-employed had to stop working in order to take care of the children as the applicant was no longer able to. The applicant and her mother both testified that her mother was helping the applicant financially after the accident by giving the applicant money for groceries, for the kids’ recreational activities such as skating and soccer and it was her mother’s decision to continue to pay her a salary from the restaurant as a means of helping the applicant and her family. The mother also testified that she continued to pay the applicant from the business without thinking of any consequences of her actions other than she wanted to make sure the applicant could afford to keep her home, pay her bills and try to recover from her injuries.

16According to the mother’s testimony, the decision to pay the applicant was hers alone and not as a result of any benefit plan as part of the applicant’s employment. The mother was the owner of the restaurant and it was done for the purposes of a gift and without any expectation of the money being returned and no expectation of her working for the company to earn that money.

17The applicant’s mother and aunt further testified that the restaurant did not have any policy to deal with an employee who becomes disabled and there was no insurance policy for any of their employees at the restaurant that would continue to pay them while they were not working. If the applicant was not her daughter, she would not have continued to pay her and she would not have done this for any other person.

18The parties both presented several cases in support of their position including cases from the Financial Services Commission of Ontario (FSCO) and although I am not bound by the FSCO decisions, they have addressed the issue of post- accident income and its deductibility with respect to self-employed persons under s.7(3)(b) and I distinguish them on those facts. The respondent further provided a case from this Tribunal² which I distinguish from the current case as that case also dealt with the interpretation of s.7(3)(b) of the Schedule with respect to self- employed individuals and not s.7(3)(a).

19In the case before me, both parties agree the applicant was an employee and not self-employed as she does not have any ownership interest in the business. The applicant has provided evidence to corroborate the ownership by providing the articles of incorporation and tax returns of the business.³

20I adopt the following principle from the FSCO case of Cariati and Wawanesa⁴

where the arbitrator held that pursuant to prior FSCO case law that:

...an insured person’s income tax returns are prima facie proof of employment income, but they are not conclusive of the issue of whether payments received are indeed employment income. The insured person bears the onus to present reliable and cogent evidence to overcome the prima facie presumption.

21It is my finding that the applicant has satisfied her onus and provided reliable and cogent evidence against the presumption that the income earned after the accident was employment income for the following reasons.

22The respondent’s own accounting expert, [D.M.] and the report commissioned⁵ on behalf of the respondent shows that they also did not find the applicant to be receiving employment income as the applicant was not working and assumed the payments related to a sick pay or a short-term disability benefit.⁶

23[D.M.] testified that the applicant continued to collect T4 income from her employer and reported that income on her tax returns but there was no actual benefit in terms of working hours for her employer and therefore it was considered it to be a collateral benefit and sick leave pay. [D.M.] went on to state that his opinion was that the applicant was receiving some other form of income replacement or a collateral benefit or temporary disability benefit which would be deductible against any IRB’s received.

24During re-direct examination [D.M.] clarified that his firm treated the money the applicant received for not working as a temporary disability payment and they deducted 100% of it for the purposes of their report in accordance with section 47 of the Schedule.

25I disagree with the respondent that the payments received were a temporary disability payment in accordance with s.47 of the Schedule. The term “temporary disability benefit” is a defined term under the Schedule and these payments do not fall within any of the categories listed in s.47(3)(a)-(f) under the definition as suggested by [D.M.]. Furthermore s.47 (1)1. only allows the deduction of a temporary disability payment in respect of an impairment that occurred before the accident (emphasis added) which is clearly not the situation in the present case.

26The applicant’s accountant report⁷ states that the payments were from her mother and it represented a gift because the applicant was not working. The payments were not as a result of any disability plan and the payments are not available to any other employee.

Were the payments received by the applicant a gift?

27It is my finding that the payments received by the applicant were a gift and therefore there should be no deduction in terms of her IRB’s.

28The Ontario Court of Appeal case of McNamee⁸ laid out the essential elements of a legally valid gift. There must be (1) an intention to make a gift on the part of the donor without consideration or expectation of remuneration, (2) an acceptance of the gift by the donee and (3) a sufficient act of delivery or transfer of the property to complete the transaction.

29In the present case, the applicant’s mother testified that her intention was to help her daughter financially during a difficult time as a result of the accident and there was no expectation of a repayment of that money or any other consideration. The applicant herself also testified that she was never asked to repay the monies received and she was not doing any activities for the company in order to receive that money.

30With respect to the second branch of the test from the McNamee case, the gift must be accepted by the donee and in this case the money was accepted by the applicant and was done so in order to help her pay her daily living expenses.

31I also find the third part of the test to have been met in that there was a sufficient act of delivery or transfer of the property. The applicant’s mother transferred the money to the applicant by way of payments from her company. It was documented as an expense for the company and received by the applicant.

32Both parties expert witnesses also agree that the payments the applicant received was not employment income. The applicant’s expert accountant, Mr. Michael Sigsworth testified that when they are looking at post accident income for the applicant it is either, gross employment income, other income replacement assistance, collateral benefits or if it is neither one of those then the income would be excluded.

33According to Mr. Sigsworth, the payments were not collateral benefits or other income assistance and he made that determination by speaking to the applicant’s mother who owned the [restaurant] where the applicant worked and the applicant’s aunt who also worked at the restaurant and was responsible for payroll. They confirmed to him that there was no income plan or disability insurance that was available to employees, the applicant’s mother stated to him that the payments were made as a gift and this arrangement was solely made to the applicant and was not available to any other employees.

34Mr. Sigsworth went on to testify that the payments also could not be considered as other income replacement assistance because that would require the payments to be a Canada Pension Plan (CPP) disability payment or a contract of insurance and since there was no disability contract of insurance for employees and for the applicant and not CPP disability payments it was his opinion that the payments did not fall under that category and therefore were not deductible.

35The respondent submits the post-accident payments should not be treated any differently than income. The respondent presented FSCO case law to which I agree with to a certain extent for the principle that a person’s tax returns are prima facie proof of income and the onus is on the applicant to present cogent evidence to overcome this presumption as discussed above. The respondent further submits that there is no evidence other than at the hearing that the payments were a gift and that there was no intention of a gift at the time it was made.

36I refer back to the Court of Appeal case of McNamee and the elements of a gift and in my opinion all three of the requirements in order to be considered a gift have been met. Furthermore, the respondent’s own expert witness also testified that the post-accident income was not as a result of employment⁹ and the deduction for the payments was as a collateral benefit¹⁰ namely a temporary disability payment. I have discussed this submission above and in my opinion a temporary disability payment is not what the classification of these payments should be as they do not fit within the definition of a collateral benefit and a temporary disability payment under the Schedule.

ORDER

37As a result of the above, I find the applicant to have received a gift and not employment income. The applicant is entitled to IRB’s in the amount of $400.00 per week for the period of March 10, 2015 to December 17, 2017 and the respondent is not entitled to claim deductions pursuant to s.7(3) of the Schedule.

38The applicant is entitled to interest in accordance with the Schedule.

Footnotes

1. 1S.7 (3) (a) of the Schedule.
2. 2A.S. and Economical Mutual Insurance Company 2018 CanLII 28266 (ONLAT)
3. 3Tab 3 and Tab 4 of the Supplementary Book of Documents of the applicant.
4. 4Cariati and Wawanesa Mutual Insurance Company 2017 (FSCO A15-0057969)
5. 5Matson Driscoll & Damico Ltd. Report dated March 13, 2017.
6. 6Ibid at page 6.
7. 7ADS Forensics Inc. Report dated May 11, 2017 at page 4
8. 8McNamee v. McNamee, 2011 ONCA 533 at para 24.
9. 9Matson Driscoll & Damicao LTD Report dated March 13, 2017 at page 6
10. 10Ibid at Schedule 1```