Released Date: 12/15/2020
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:
Stacey Sniderman
Applicant
and
Aviva Insurance Company
Respondent
PRELIMINARY ISSUE DECISION
ADJUDICATOR: Sandeep Johal, Vice Chair
APPEARANCES:
Counsel for the Applicant: Jonathan M. Burton
Counsel for the Respondent: Hermina Nuric
HEARD: By way of written submissions
OVERVIEW
1The applicant was injured in an automobile accident on September 15, 2018 and sought benefits pursuant to the Statutory Accident Benefits Schedule – Effective September 1, 20101 (the ''Schedule'').
2The applicant was injured when her vehicle was struck head-on by another vehicle. As a result of the accident she sustained physical injuries including a fractured clavicle resulting in non-union and requiring surgical intervention.
3The applicant applied for an income replacement benefit (“IRB”) which was denied by the respondent and as a result, the applicant submitted an application to the Licence Appeal Tribunal – Automobile Accident Benefits Service (“Tribunal”).
4A case conference took place and a preliminary issue was raised whether the applicant was “employed” or “self-employed” at the time of the accident. The preliminary issue needed to be determined first in order to calculate the applicant’s IRB quantum.
5The applicant has two jobs and the parties agree that she is self-employed with respect to a bridal boutique company that she runs but where the parties disagree is whether the applicant is employed or self-employed with respect to the television and stereo repair shop she works at, for which her husband is the sole shareholder and director.
PRELIMINARY ISSUE
6The preliminary issue according to the Tribunal order dated May 25, 2020 is whether the applicant was employed or self-employed at the time of the accident at the television and stereo repair shop?
RESULT
7For the reasons as outlined below, I find that the applicant is an employee and was not self-employed at the time of the accident at the television and stereo repair shop.
ANALYSIS
8The applicant submits that in accordance with s. 3(1) of the Schedule, to be considered self-employed, the applicant must be either a shareholder and controlling mind of a corporation or a sole proprietor or partner. In the present case, the applicant was an employee of the television and stereo repair shop and not a self-employed person.
9The applicant worked with her husband at the shop. She submits that she has provided sufficient financial documentation to the respondent, such as her T4 slips, an Employer’s Confirmation Form (OCF-2), and her income tax returns in support of her application for IRBs as an employee of the company.
10The applicant relies upon the Financial Services Commission of Ontario (“FSCO”) case of Farid and Aviva Canada Inc.2 where it was held that as a result of the addition of a definition of “self-employed” in the Schedule, there is no longer a requirement to apply any of the traditional self-employment versus employment tests, if the definition and its application to the facts are clear.3
11The applicant also relies upon the Tribunal case of V.S and Economical Mutual Insurance Company,4 for guidance on what is considered a “controlling mind” of a corporation as this is not a defined term within the Schedule. In V.S. the applicant who was a self-employed truck driver could no longer drive after the accident and his company could not operate until he employed a replacement driver. In that case it was held that despite not driving his truck, he was still the sole owner of the company and he was still the governing mind who retained signing authority and all decisions still required his final approval.5 According to the applicant, that is not the situation in the present case. The applicant is not the governing mind and she does not have signing authority for the company.
12The applicant further relies upon a letter from the General Manager, Kenneth Angeles from the company dated November 13, 2019 who outlined the roles the applicant has with the company as Vice-President. She is responsible for accounting matters, tracking invoices, she is the primary purchaser of the company’s top selling product lines and she monitors the inventory levels of all three store locations. She handles the financial matters and operational logistics such as developing company standards/policies/procedures, communication with the president, store managers, staff scheduling, store hours, delivery and installation scheduling, marketing strategy/implementation. She works 6 days a week and over 50 hours per week. Her paystubs were attached as well as a confirmation that she is not a shareholder in the company and nor does she receive any collateral benefits from the company.
13In her affidavit, the applicant states that the company has been promoted as being both hers and her husband’s business in newspaper and social media but according to the applicant, those publications that state she is the owner of the company are not accurate. She acknowledges that she has an important role with the company, but she is an employee as she is paid as an employee and she does not have an ownership stake in the company.6
14The applicant further relies upon an IRB report by Alan Posner, CPA (Certified Public Accountant) from Capital Actuarial Group dated March 4, 2020.7 In that report, Mr. Posner opines that the applicant was an employee of the television and stereo repair shop because of the official corporate records, including the opening minutes and resolutions, a corporate profile report and a corporation point-in-time report, as well as the signed letter from the General Manager of the company, Kenneth Angeles who stated that the applicant is not a shareholder in the company. Furthermore, Mr. Posner opined that given the applicant’s involvement in the business, coupled with her industry expertise, the compensation she received was not excessive.
15As a result, the applicant submits she does not meet the test for a self-employed person as set out in s. 3(1) of the Schedule as she is not a sole proprietor or partner of the corporation, as evidenced by the official corporate documentation. Second, she does not meet the test of being a shareholder and a controlling mind of the corporation as she does not have signing authority or ultimate decision-making abilities with respect to the company, despite having a role as Vice-President.
16The respondent takes the position that the applicant’s relationship to the company is indicative of a partnership that would make her a self-employed person for the purposes of s. 3(1) of the Schedule.
17Section 3(1) defines “self-employed person” to mean 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, or 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;
18According to the respondent, the word “partnership” is not defined however it relies upon the Supreme Court of Canada case of Backman v. Canada,8 that the existence of a partnership does not depend on the creation of a new business because it is sufficient that an existing business was continued and partnerships may be formed where two parties agree to carry on the existing business of one of them.
19Furthermore, the respondent relies upon the FSCO case of Carr and Lombard Insurance Company,9 in support of its position that the mere fact that company is incorporated is insufficient to qualify a person as an employee and the fact that the claimant in Carr testified that the company’s sole director was his “partner” in the operation of the company rather than his “employer”. In the present case, the respondent submits that social media and online newspaper articles refer to the applicant as the joint owner or partner and therefore, she is considered self-employed.
20The applicant takes the position that there are no definitions for “partner” or “partnership” under the Insurance Act 10 or in the Schedule and therefore the sources relied upon by the respondent are not authoritative.
21The respondent further submits that the applicant and her husband likely agreed to operate the company as partners as contemplated in Backman and Carr and as a result, the applicant’s relationship to the company warrants scrutiny.
22However, despite the respondent’s submission that the applicant and her husband “likely agreed to operate the company as partners”, this is not supported by the evidence. The respondent has not directed me to any evidence that the applicant and her husband entered into any sort of an agreement to operate the company as partners.
23In the case of Carr, Mr. Carr was a director of the company, and during Mr. Carr’s testimony he referred to himself as a “partner” in the operation of the company rather than an “employee”. Those are not the facts in the present case. In Carr, Mr. Carr and a business acquaintance set up an investment company and both were appointed as directors. Mr. Carr testified that he received a weekly salary and his duties were as a decision maker for the company, frequent travel to Nassau, business development and signing as a director for company contracts.11 The Arbitrator held that there was no evidence he actually received any money from the company and there was no evidence he received any money from the company as an employee other than as a director. Furthermore, Mr. Carr, in his application for accident benefits stated he was self-employed and a director of two companies and that he did not have income from these ventures as he and his partners were putting the money back into the business to build equity.12 Once again, those are not the facts in the present case. As a result, I find that the case of Carr is distinguishable and does not support the respondent’s position.
24The respondent further submits that the criteria of a valid partnership are codified in Ontario under the Partnership Act.13 The Partnership Act defines a partnership as one that subsists between persons carrying on a business in common with a view to profit and the relationship is comprised of three essential ingredients; (1) a business; (2) carried on in-common; (3) with a view to profit.14
25Business is defined in s. 1(1) of the Partnership Act to include every trade, occupation and profession. The respondent relies upon the Black’s Law Dictionary (6th ed. 1990) at p. 214 of a simple definition of “carrying on trade or business” as “[t]o hold one’s self out to others as engaged in the selling of goods or services.”15 As a result, it is the respondent’s position that the applicant was carrying on a business.
26The respondent relies on paragraph 21 in Backman to support the meaning of “in common”. The Supreme Court of Canada stated as following to determine whether a business is carried on “in common”
21 In determining whether a business is carried on "in common", it should be kept in mind that partnerships arise out of contract. The common purpose required for establishing a partnership will usually exist where the parties entered into a valid partnership agreement setting out their respective rights and obligations as partners. As was noted in Continental Bank, supra, at paras. 34-35, a recognition of the authority of any partner to bind the partnership is relevant, but the fact that the management of a partnership rests with a single partner does not mandate the conclusion that the business was not carried on in common. This is confirmed in Lindley & Banks on Partnership (17th ed. 1995), at p. 9, where it is pointed out that one or more parties may in fact run the business on behalf of themselves and the others without jeopardizing the legal status of the arrangement. It may be relevant if the parties held themselves out to third parties as partners, but it is also relevant if the parties did not hold themselves out to third parties as being partners. Other evidence consistent with an intention to carry on business in common includes: the contribution of skill, knowledge or assets to a common undertaking, a joint property interest in the subject-matter of the adventure, the sharing of profits and losses, the filing of income tax returns as a partnership, financial statements and joint bank accounts, as well as correspondence with third parties: see Continental Bank, supra, at paras. 24 and 36.
27The respondent’s position is that: (1) a business, is defined as holding one’s self out to others as being engaged in the selling of goods or services and (2) the applicant has held herself out to be a partner or owner of the business based on the online articles.16
28To determine whether a person is carrying on a business “in-common”, Backman held that partnerships arise out of contract and the common purpose required to establish a partnership will usually exist where the parties entered into a valid partnership agreement setting out their respective rights and obligations as partners. One or more parties may in fact run the business on behalf of themselves and the others without jeopardizing the legal status of the arrangement.17
29However, in the present case, other than a website search of an article which appears to be promoting the business, it refers to the applicant and her husband as “partners”. But that position appears to be from the author and is not attributed to the applicant or her husband. In my view, it is not sufficient on its own to show that the business was being carried on “in-common” as this would not be evidence of a partnership contract or evidence of an arrangement that the parties entered into to run the business “in-common”.
30A “view to profit” according to Backman requires an inquiry into the intentions of the parties entering into the alleged partnership. The court went on in paragraph 25 to say that:
[I]n determining the existence of a partnership…regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case. In other words, to ascertain the existence of a partnership the courts must inquire into whether the objective, documentary evidence and the surrounding facts, including what the parties actually did, are consistent with a subjective intention to carry on business in common with a view to profit.
31In my view, this is where the respondent’s case fails. When looking at the whole facts of the case as Backman suggests, I am not convinced that the applicant’s intention and a true contract of a partnership can be made out based solely on articles found on the internet about the business the applicant works for. The internet articles are relevant in terms of being a part of the whole facts of the case, however in my view, it should be afforded less weight, because these are statements made by the author of the article and it does not appear as though the applicant or her husband were being interviewed or quoted in the article. Furthermore, there is no verification of any of the comments in accordance with Backman. There is no verification of the statement that the applicant and her husband are “owners” or partners. In the current case a statement by the author of an article on the internet alone is not sufficient or determinative of a partnership arrangement. As stated in Backman, regard to the true contract and intention of the parties appearing from the whole facts of the case is required.
32The respondent further relies upon an accounting report from Davis Martindale, dated February 10, 2020.18 In that report, the opinion is that the applicant is self-employed because Davis Martindale takes the opinion that “[the applicant] appears to jointly operate the business with her husband.”19
33In arriving at this conclusion, it was based upon the applicant being in a non arm’s-length relationship and the amount paid to a non arm’s-length person often does not represent the amount an arm’s-length employee would be paid for performing the same duties. Furthermore, the opinion relied upon three Financial Services Commission of Ontario (FSCO) cases where it was held that a person’s pre-and post-accident income should go beyond mere form to examine the substance of each individual’s financial situation. Looking beyond the form of financial arrangements reached in a family business.20 The opinion relied upon in the FSCO case of Rocca and GAN Canada Insurance Company where it was held that tax returns and T4 slips are important evidence, but they are not definitive, the weight given to tax returns and T4 slips depends on other things, on the circumstances under which they are prepared.21 Lastly, the opinion relies upon Carr where it was stated that if the insured person’s employment status is not straightforward, an interpretation of that status may be required. An insured person’s characterizations of his employment arrangements can be re-evaluated if it provides a distorted picture of the person’s income.
34The accountant’s report also relies upon the letter from Kenneth Angeles, the General Manager dated November 13, 2019 which outlines her weekly hours and duties. As a result, the Davis Martindale report concludes that the duties the applicant performs are an integral part of the business operations and “it would not be reasonable to consider the wages [the applicant] withdrew from the [business] while allocating 100% of the business’ net income/(loss) to [her husband].”22
35I place less weight on the Davis Martindale report as I find their conclusions to be mere speculation rather than based on any compelling evidence. Furthermore, the Carr case was distinguishable as noted above and I have not been provided with the other two cases the opinion relies upon, in any event, I am not bound by FSCO case law. The report states “she appears” to jointly operate the business with her husband, but it would appear that the statement is solely based on the fact that she works in the business in a non arm’s-length relationship with her husband and that she may be paid an amount that exceeds, or may be less than the value of the work she performed. However, there is no analysis in the report to justify that conclusion or what documentation or evidence was reviewed in arriving at that conclusion. Furthermore, there is no comparison as to whether her salary is comparable to those managing the same job demands and responsibilities.
36The respondent submits that her salary of $80,804.16 paid to her for her efforts is modest, however the respondent fails to provide any evidence in support that she was paid less compared to others with the same job description in her field of work. Submissions alone are not evidence. Although a T4 from 2017 is provided showing her income from earnings of $100,330 and the respondent submits this is evidence of some form of bonus or profit sharing to show that she is an owner and partner in the business. However, I am not directed to any evidence of a form of profit sharing or bonus structure being paid as a result of a partnership or some form of ownership. Once again, submissions alone are not evidence and the respondent has not provided evidence in support of its submissions.
37The respondent further submits that the applicant and her husband have consistently represented themselves to the public as co-owners and partners in the operation of the business. However, other than the internet article, which I place less weight on for the reasons already outlined, I am not convinced on a balance of probabilities of the respondent’s arguments and evidence that the applicant has represented herself as a partner or owner.
38As mentioned in Backman, the whole facts of the case must be considered. In the present case, the applicant is not a shareholder or director of the business, this is confirmed through the official provincial corporate record, and the applicant’s own affidavit evidence. The applicant’s evidence is that she is an employee even though she plays an important role in her husband’s company, she is paid as an employee and has no ownership stake in it. The company has been promoted in the newspaper and social media publications but any publications that state she is an owner are not accurate. The General Manager of the company, Kenneth Angeles, also confirms the applicant is the Vice-President of the company. The applicant receives a regular salary, a yearly T4 and files her income tax returns as an employee. Canada Pension Plan (CPP) and income tax are deducted from her pay cheque with each pay period as a regular employee.
39The applicant further relies upon an accounting report from Alan Posner of Capital Actuarial Group dated March 4, 2020.23 In that report, they disagree with the respondent’s accounting report because the respondent’s report relied upon a media article to determine the applicant was a joint owner of the business without conducting any searches through official corporate records. Mr. Posner also relies upon the signed letter from the General Manager, Kenneth Angeles that attests to the fact that the applicant has no shareholdings in the business. Furthermore, Mr. Posner opines that her involvement in the business coupled with her industry expertise, her compensation was not excessive. As a result, it is his firm’s determination that the applicant is an employee of the business.
40Accordingly, the applicant submits she does not meet the test of being self-employed under the Schedule as she is not a shareholder, director, controlling mind or a sole proprietor or partner.
41The onus is on the applicant to prove on a balance of probabilities and I find that the applicant has done so. Based on the Backman case, I do not find the applicant was a partner in her husband’s business as there is no evidence to suggest the applicant entered into a partnership agreement or acted in a way that would indicate she was an owner or a partner. The official corporate records and resolutions of the business do not have the applicant as a director or shareholder. The applicant was paid a regular bi-weekly salary which she reported to the Canada Revenue Agency (CRA) as her employment income. Deductions were taken off her pay for CPP and income tax as an employee. I place less weight on the accounting report of the respondent which suggests that since the applicant is related to the owner, she is therefore a joint owner of the business and the social medial articles on the internet wherein the author refers to the applicant as a partner or owner. The applicant was not the one making those representations and she has provided her affidavit evidence to the contrary.
42As a result, of all of the above, I find that the applicant was an employee in her husband’s business.
CONCLUSION
43For the reasons as outlined above, I find that the applicant is an employee and not self-employed at the time of the accident at the television and stereo repair shop.
Released: December 15, 2020
Sandeep Johal
Vice Chair
Footnotes
- O. Reg. 34/10.
- 2016 FSCO 5092 (A15-005875)
- Ibid at pg. 4.
- 2018 CanLII 81896 (ON LAT) (“V.S.”)
- V.S. at para. 33.
- Written Reply Submissions of the Applicant at Tab 2.
- Applicant’s LAT Hearing Document Brief at Tab 17.
- 2001 SCC 10, [2001] 1S.C.R. 367 at para. 17. 2001 SCC 10 (“Backman”)
- FSCO A00-0041 at pg. 6. (“Carr”)
- R.S.O. 1990, c l.8
- Carr at pg. 10.
- Carr at pgs. 13-14.
- R.S.O. 1990 c. P.5 (“Partnership Act”)
- Ibid at s. 2.
- Backman at para. 19.
- Written Submissions of the Respondent at Tabs 7-9.
- Backman at para. 21.
- Written Submissions of the Respondent at Tab 3.
- Ibid at para. 5.
- Buchanan and South Easthope Mutual Insurance Company (OIC A95-000468)
- FSCO (P96-00055).
- Written Submissions of the Respondent at Tab 3, para. 12.
- Written Submissions of the Applicant at Tab 17.