D.M. v. Aviva Insurance Canada, 2020 CanLII 61459

Citation: D.M. vs. Aviva Insurance Canada, 2020 ONLAT 17-006525/AABS

Released Date: 05/27/2020

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:

D.M.

Applicant

and

Aviva Insurance Canada

Respondent

DECISION AND ORDER

ADJUDICATOR: Sandeep Johal

APPEARANCES:

Counsel for the Applicant: Charles Thompson, Counsel

Counsel for the Respondent: James M. Brown, Counsel

Heard: In-person and by way of written submissions.

REASONS FOR DECISION AND ORDER

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, 2010¹ (the ''Schedule'').

2The parties agree that the applicant is entitled to an Income Replacement Benefit (“IRB”) however, where they disagree is whether or not the applicant’s post-accident income she received was a gift and whether the respondent is entitled to a deduction in her IRB.

3As a result, the applicant submitted an application for dispute resolution services to the Licence Appeal Tribunal - Automobile Accident Benefits Service (AABS) (the “Tribunal”).

4A 2-day in-person hearing took place on May 9 and 10, 2018 and a decision was released to the parties on August 7, 2018 wherein I found that the respondent was not entitled to deduct the income the applicant received in determining her IRB’s because the payments were a gift.

5The respondent made a request for a reconsideration on the basis that I made significant errors of fact and law such that I would have likely reached a different conclusion had the errors not been made. The reconsideration decision ordered a rehearing in-writing.

6For the purposes of this rehearing, the full transcript of the original hearing was submitted as part of the evidence which was not before me when the original decision was released.

7Should the applicant’s post-accident employment be deemed to be wages or salary from employment it would then be subject to a deduction from her quantum of the IRBs payable. As her post-accident income is greater than the $400 maximum per week under the Schedule for an IRB, the applicant’s IRB would then become nil.

ISSUE IN DISPUTE

8The 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

9After a review of the transcripts, the evidence and case law, I find that the applicant was receiving employment income post-accident and there is no cogent and compelling evidence in support of the applicant’s claim that the money was a gift.

10As a result, the respondent is entitled to a deduction of the applicant’s post-accident income in accordance with s.7(3)(a).

11As there is no IRB payable, there is no interest that is outstanding or payable.

12As a result of my finding that the applicant was receiving employment income post-accident and the legal requirements of a valid gift were not made, there is no need to conduct an analysis of the respondent’s alternative submissions with respect to the post-accident income being “other income replacement assistance” under s. 4(1) or a “temporary disability benefit” under s. 47.

ANALYSIS

Parties’ Positions

13The 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.² The parties further agree that the applicant was an employee at the [restaurant] that was owned by her mother who was the sole director.

14The applicant submits that she was not employed as she was not physically working at the restaurant during the time period in dispute and she was not providing any services to her employer. The applicant submits that she continued to receive her regular pay, despite not working at the restaurant, as a way for her mother to help financially after the motor vehicle accident. She submits that 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, nor did she expect the applicant to work in the restaurant in exchange for that money.

15The respondent submits that the applicant continued to receive her regular bi-weekly pay in the same manner as she did prior to the accident and it was treated as income. Deductions were made for income taxes, and Canada Pension Plan contributions and Employment Insurance contributions were deducted in the same manner after the accident as they were before the accident. Therefore it should be considered employment income and subject to a deduction in accordance with s.7(3)(a).

16It is the respondent’s position that the applicant mother’s did not make a valid gift because she did not make her intention of a gift known at the time of the payments.³

17The 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 but rather an attempt at double recovery and the payments the applicant received should be used to offset her IRB payments in accordance with s.7(3)(a) of the Schedule.

18I will proceed to discuss whether the money the applicant was receiving from her mother’s business was in fact gross employment income despite not actively working at the business and then I will proceed to discuss whether or not it can be considered a gift in accordance with the legal principles.

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

19I find that the applicant was receiving gross employment income as a result of being employed for the following reasons.

20The applicant’s position is that she did not do any work in exchange for being paid the money and she was therefore, not receiving the money as a result of employment. Essentially, that she was not actively engaged in any employment.

21The respondent submits that there has been a well established principle that when money is reported as income for tax purposes, as is the case with the applicant, then this constitutes prima facie evidence that this was money received as income from employment.

22Gross employment income is a defined term within the Schedule.⁴ It means salary, wages and other remuneration from employment, including fees and other remuneration for holding office.

23The applicant’s position is that she was not actively employed and was therefore not earning employment income from her mother’s business. The applicant submits that the word “employment” should be interpreted broadly and relies upon the contra proferentem rule that contract coverage principles should be construed broadly and exclusion clauses narrowly. The case law in support of this position is Abdulrahim v. Manufacturers Life Insurance Co. (“Abdulrahim”).⁵

24It is the applicant’s position that “employment” which is not a defined term within the Schedule,⁶ means “work in exchange for money”. This definition according to the applicant would be the most ordinary and obvious sense of the term and the most reasonable, and is the meaning that I should adopt for this case. So in essence, the applicant did not do “any work in exchange for money” and therefore the money she received from her mother’s business was not income from employment and therefore not deductible from the IRB’s she was receiving.

25The respondent’s position is that s. 4(1) of the Schedule provides for a broad definition of income as it includes not only salary and wages but also remuneration from holding office as a result of being a director of the company or having a relationship to the company. The position the respondent takes is that the payments are to be treated no differently from income the applicant received whether she was actively participating in the company or not.

26The respondent relies upon the Financial Services Commission of Ontario (“FSCO”) case of Cariati and Wawanesa⁷ in support of its position. Specifically, that the Income Tax Act does not treat income differently depending on how active a person is and income calculation under the Schedule is required to be consistent with the Income Tax Act.⁸ Furthermore, the respondent relies upon the Tribunal case of A.S. v Economical Mutual Insurance Company⁹ in support of its position that active participation in the business is not required for income to be attributed to the applicant for the purposes of deductibility under the Schedule.¹⁰

27I disagree with the applicant’s interpretation and whether the contra proferentem rule should apply. The Abdulrahim case was about an interpretation of a private contractual clause with respect to a long-term disability policy as opposed to a statutorily mandated one such as the Schedule. As stated in paragraph 59 of Abdulrahim, the principle of contra proferentem does not apply to the interpretation of an exclusion clause because it is required to be included by virtue of a Schedule of the Insurance Act. In Abdulrahim the contra proferentem rule applied because it was a private contract rather than a statutorily mandated one.

28In the Tribunal case of A.S., the decision was with respect to s. 7(3)(b) of the Schedule and not s. 7(3)(a), however I find the following persuasive and adopt it for the purposes of this hearing:

I find that section s 4, 7(2), 7(3)(b) of the Schedule do not distinguish between active and passive income in the calculation of the insured’s income. These sections refer to income earned from the business. This means that any net income (active/passive) earned post-accident should be deducted, to avoid either a gross overpayment on the calculation of the Income Replacement Benefit or a gross underpayment of the Income replacement benefit. (emphasis mine)

29The applicant submits the income tax provisions in the Schedule apply only to self-employed individuals which require it to be calculated consistently with the Income Tax Act. Specifically s. 4(4), and that it is not required for the income of employed individuals. Because it is not specifically mentioned elsewhere in s. 4, then it was not intended.

30I disagree with the applicant’s submission on this point. In my view, the overarching principle of s.7 is to avoid a gross overpayment or underpayment of an IRB.

31Furthermore, the applicant has not provided any authority for its position that “employment’ from s. 4(1) means actively engaged in employment or doing work in exchange for money. Other than the submissions, I have not been directed to any evidence in support of those submissions.

32I find the following statement from the FSCO case of Zirger and Commercial Union¹¹ to be persuasive:

In decisions under the previous version of the Schedule, both the Director and the Director’s Delegate determined that employment, for the purpose of determining weekly benefit entitlement was not limited to periods actually worked. [citations omitted] In Tustin and Canadian General Insurance Group, [citation omitted] Director’s Delegate Draper concluded that the analysis utilized in these prior decisions applied to the current version of the Schedule. I am bound by his decision and therefore conclude that “engaged in employment” refers to the status of being in an employer/employee relationship, or being self-employed. An insured person is not required to be actively performing work tasks in order to be considered employed for the purposes of the Schedule.

33Although I am not bound by FSCO case law, I find it to be persuasive and adopt it for the purposes of this hearing. In my view, the applicant does not have to be actively engaged in or “doing work in exchange for money”, in order to be considered to be receiving income as a result of employment as submitted by the applicant.

34As a result of finding that the applicant was receiving gross employment income the respondent is entitled to a deduction of that income in accordance with s. 7(3)(a).

35However, in this case, the applicant submits the income received was not in fact income but rather a gift and therefore not deductible from her IRB calculation. I will now turn to discuss whether the money being paid to the applicant was in fact a legally valid gift.

Were the payments received by the applicant a gift?

36After a review of the evidence and case law, I find that that the applicant has not met the legal requirements of a valid gift for the following reasons.

37The Ontario Court of Appeal case of McNamee¹² 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.

38In 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.

39The applicant submits that her mother decided to gift the money to her even though she was not working because the system for delivering that money was already in place and her mother was giving her money in exchange for nothing, it was being given without consideration. As McLachlin J. observed in Peter v Beblow¹³ “The central element of a gift [is the] intentional giving to another without expectation of remuneration”. According to the applicant, that is what the applicant’s mother has done in this case.

40The respondent submits that prior to the accident the applicant was paid as an employee, and she was issued a T4 (Statement of Remuneration Paid). Income tax, Canada Pension Plan (“CPP”) and Employment Insurance (“EI”) deductions were taken off her pay by the employer and the applicant reported all this income for tax purposes to the CRA (Canada Revenue Agency).

41The respondent further submits that after she stopped working entirely at her mother’s business, the applicant continued to receive the same bi-weekly salary. She was still issued a T4 for the amount that she was paid and once again, income tax, CPP and EI were deducted off of her pay and she reported all of this as income for tax purposes. According to the respondent, the payments were structured the same way as before the accident, which was as income from employment.

42The respondent relies upon the FSCO cases of Zirger v Commercial Union Assurance Company,¹⁴ Lackstone and Lumbermens Mutual Casualty Company¹⁵ and Zosumplik v. Aviva Canada Inc.¹⁶ in support of its position that there is a prima facie presumption that has been consistently applied over the various versions of the Schedule which is as follows:

[T]he insurer bears the onus of establishing that an insured has received income in respect of employment subsequent to the accident; and that an insured person’s income tax returns are prima facie proof of 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.¹⁷

43The respondent’s position is that the applicant has the onus to provide cogent and reliable evidence that the money she received was not employment income. Furthermore, the applicant has not provided any objective or contemporaneous evidence referring to these payments as gifts at the time they were made. There was no declaration of a gift or other document recording an intention that these payments were to be gifts at the time they were made.

44The respondent further submits that all the documents at the time the payments were made, the paystubs and tax forms, all refer to the money as income from employment. Also, all the documentation in support of the applicant’s IRB referred to the money as being received as employment income. Within the applicants OCF-2¹⁸ (Employer Confirmation Form), the money was referred to as a salary, which the respondent submits is a reference to income from employment. When someone from the accounting firm of MD&D who prepared the accounting report on quantum for the respondent asked for clarification of the payments, he received an email dated March 3, 2017 that the applicant is “currently receiving pay from her employment position”.¹⁹

45The applicant testified that she did not have any conversation with her mother about the money being a gift and it is the respondent’s submission that there is no evidence that anyone intended these payments to be anything other than income from employment at the time they were made.

46I agree with the respondent and the principle from the FSCO cases.²⁰ Specifically, an insured person’s income tax returns are prima facie proof of income, and the insured person bears the onus to present reliable and cogent evidence to overcome the prima facie presumption.

47In the present case, the applicant, her mother (the owner of the business) and her aunt (the manager of the business) testified that the payments were a gift and not income.

48The applicant continued to receive the income in the same manner post-accident as she did pre-accident and reported that income on her income tax returns. According to the FSCO cases being relied upon by the respondent, there is a prima facie presumption that reporting income from employment in the same manner post-accident is evidence of employment income. In order to overcome that presumption the applicant must present reliable and cogent evidence that her income that was received post-accident was in fact a gift.

49Unfortunately, other than the applicant, her mother and aunt’s oral testimonies that the payments were gifts, I have no other corroborating or contemporaneous evidence of such. The evidence shows the applicant to have received the money in the same form post-accident as she did pre-accident. There was no difference; it was reported to the CRA as income from employment for tax purposes and the documentation in support of her request for an IRB also showed it to be income from employment.²¹

50I agree with the principles from the McNamee case on the legal elements of a gift, however what I find lacking for the applicant is the first part, the “intention to make a gift on the part of the donor, without consideration or expectation of remuneration”²² (emphasis mine).

51I have not been presented with any evidence from the applicant’s mother (the donor) that her intention was to make a gift. Other than her testimony at the hearing, I have not been directed to or provided with any evidence in support and, in my view, there must be contemporaneous evidence of the intention.

52In McNamee, the donor executed a Declaration of Gift at the time the shares in the company were issued to his sons and the court found that “the documentation to that effect (the Declaration of Gift) is clear.”²³ that Mr. McNamee Sr. did intend to gift the shares.

53In the present case, I have not been presented with contemporaneous evidence to corroborate the applicant’s submission or her mother’s testimony that her intention was to gift the money rather than to pay it as employment income. The applicant’s mother testified that she never talked about the gift with her daughter (although a valid gift can still be made without the donee’s knowledge),²⁴ nor did she talk to her accountant about paying her daughter money as a gift as opposed to income through the business. The applicant’s mother continued to pay her daughter in the same manner, which was as income from employment, however I have not been presented with contemporaneous evidence of the intention of a gift.

ORDER

54As a result of the above, I find that the applicant was receiving employment income post-accident and there is no cogent and compelling contemporaneous evidence in support of the applicant’s claim that the money was a gift.

55As a result, the respondent is entitled to a deduction of the applicant’s post-accident income in accordance with s.7(3)(a).

56As there is no IRB payable, there is no interest that is outstanding or payable.

Footnotes

1. 1O. Reg. 34/10.
2. 2S.7 (3)(a) of the Schedule.
3. 3Pecore v. Pecore, 2007 SCC 17 at para. 56.
4. 4Section 4(1).
5. 52003 CanLII 48161 (ON SC).
6. 6Previous versions of the Schedule (O.Reg. 403/96) defined “employment” as 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. However, in the current version of the Schedule, this definition has been removed.
7. 7FSCO A15-005769.
8. 8Ibid at page 15.
9. 92018 CanLII 28266 (ON LAT) (“A.S.”)
10. 10Ibid at para. 23.
11. 11FSCO A97-001386
12. 12McNamee v. McNamee, 2011 ONCA 533 at para 24.
13. 131993 CanLII 126 (SCC), [1993] 1 S.C.R. 980 at pages 991-92
14. 14FSCO A97-001386.
15. 15FSCO A99-00403.
16. 16FSCO P17-00017.
17. 17Cariati and Wawanesa FSCO A15-005769 at page 14.
18. 18Joint Book of Documents at Tab 4.
19. 19Ibid at Tab 12.
20. 20Supra Note 14, 15 and 16.
21. 21Supra Note 15 and 16.
22. 22McNamee at para. 24.
23. 23McNamee at para. 34.
24. 24Ibid at para. 47.