Mears (Griffiths) v. TD General Insurance Company, 2022 CanLII 78860

Citation: Mears (Griffiths) v TD General Insurance Company, 2022 ONLAT 20-012014/AABS

Licence Appeal Tribunal File Number: 20-012014/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:

Sandra Mears (Griffiths)

Applicant

And

TD General Insurance Company

Respondent

DECISION

PANEL:

Brett Todd, Vice-Chair Rebecca Hines, Member

APPEARANCES:

For the Applicant:

Sandra Mears (Griffiths), Applicant

David S. Wilson, Counsel Adam Wilson, Counsel

For the Respondent:

Peggy Moore, ADR Representative

William Sproull, Counsel

Court Reporters:

Besarta Bricori, Victory Verbatim Kelly Nicky, Professional Court Reporters Inc.

HEARD: by Videoconference:

June 13, 15, and 22, 2022

BACKGROUND

1Sandra Mears (Griffiths) (the “applicant”) was injured in an automobile accident on April 22, 2016, and sought benefits pursuant to the Statutory Accident Benefits Schedule (“the Schedule”) Effective September 1, 2010 (including amendments effective June 1, 2016). The applicant was denied certain benefits by TD General Insurance Company (the “respondent”) and submitted an application to the Licence Appeal Tribunal – Automobile Accident Benefits Service (the “Tribunal”).

2The parties participated in a case conference, but they were unable to resolve the issues in dispute. The matter proceeded to a videoconference hearing that was held on June 13, 15, and 22, 2022. After the hearing started, the parties engaged in mediated settlement discussions facilitated by the Tribunal and were subsequently able to resolve the issues in dispute, with the exception of the two related issues noted below.

3The Tribunal heard oral submissions from both parties on the remaining issues in dispute on June 22, 2022. Neither party called any witnesses, as they relied on multiple accounting reports, the applicant from ADS Forensic Accountants (“ADS”), the respondent from Pricewaterhousecoopers (“PWC”).¹

ISSUES IN DISPUTE

4The following issues are to be decided:

i) What is the appropriate quantum of income replacement benefits (“IRBs”) the applicant is entitled to from April 30, 2016 to June 22, 2022, with a focus on a period of self-employment income from April 30, 2016 to May 31, 2017?

ii) Was the respondent entitled to reduce payments on interest owed on past IRBs due to an alleged overpayment in the first year that the IRB was paid to the applicant?

RESULT

5After considering the parties’ submissions and all of the evidence, we find that:

i) The applicant is entitled to payment of past IRBs in the amount of $152,478.03 in accordance with the report of PWC dated June 21, 2022.

ii) The applicant is not entitled to payment of interest on past IRBs overpaid by the respondent.

PROCEDURAL ISSUE

6The applicant requested that the IRB issue be amended from one-week post-accident to date, to cover roughly the first year of the IRB period (April 30, 2016 to May 31, 2017) when she sustained self-employment income losses from the operation of the hair salon business that she owned and operated, New Way Beauty Depot Limited.

7The basis for the applicant’s argument relies on how the accountants from both parties calculated the IRBs and interest owed from one-week post-accident to June 24, 2022.² Since both parties had been working on this premise going back to the initial PWC accounting report on this matter dated June 16, 2016,³ the applicant argued that this should be taken as an agreement that this rationale and time frame are acceptable for the IRB calculation.

8The respondent opposed the request, noting that the IRB matter was also the focus of the last PWC report.⁴ At the time that we heard this matter on June 22, 2022, this report had yet to be filed with the Tribunal. The respondent argued that this made the request for such an amendment premature, and that a ruling should not be made on something that all parties did not possess.

9We granted the applicant’s request to amend the issue in dispute. The PWC report from June 21, 2022 was provided to the Tribunal during an adjournment before we provided our ruling on the amendment request at the hearing, eliminating a major factor in the respondent’s argument regarding disclosure and timeliness.

10We also ruled in favour of the applicant on this request due to the dates having been accepted by both parties in their accounting reports. This alone removed any prejudice to the respondent, as it seems clear that the respondent tacitly agreed to the period of time in question through each of its three PWC reports.⁵

ANALYSIS

11In the present matter, the parties do not dispute that, prior to the subject accident:

i) The applicant was employed as a health information professional at Toronto East General Hospital.⁶

ii) The applicant was also self-employed as the owner/operator and sole shareholder of New Way Beauty Depot Limited, a hair stylist salon.⁷

iii) The applicant returned to her health care occupation in a reduced capacity from August 1, 2016 to January 21, 2017 and then was unable to return to work at all.⁸

iv) The applicant ceased operations of New Way Beauty Depot on or before May 31, 2017.⁹

12Both parties further agree that the applicant meets the legal test for entitlement to an IRB for the time period claimed.

13This leaves two questions to be answered to resolve the entirety of the IRB quantum matter at issue:

i) Which of the two accounting reports—namely the applicant’s ADS report of June 20, 2022 or the respondent’s PWC report of June 22, 2022—is the most reliable when it comes to estimating the amount of lost income by the applicant as a result of the subject accident?

ii) Was the respondent entitled to reduce payments on interest owed on past IRBs due to an alleged overpayment in the first year that the IRB was paid to the applicant?

I. Assessing the Accounting Reports—Applicant Position

14The applicant relies on the accounting report of ADS, which determined the applicant’s past entitlement from April 23, 2016 to June 22, 2022 to be $128,284.00 plus $49,719.32 in interest. The respondent is also credited with $11,182.00 in IRBs paid to date. This leaves the total claimed outstanding IRBs at $166,821.32.¹⁰ In regard to the losses from New Way Beauty Depot Limited, the ADS Report shows adjusted gross income losses of $9,847.00 for the fiscal year from June 1, 2014-May 31, 2015, $35,049.00 for the fiscal year from June 1, 2015-May 31, 2016, and $29,294.00 for the fiscal year from June 1, 2016 to May 31, 2017.¹¹ All numbers cited are drawn from the applicant’s Canada Revenue Agency (“CRA”) tax returns.¹²

15The applicant argues that the respondent’s accounting report is deficient because it fails to fully consider the applicant’s post-accident losses from self-employment in its calculation of the IRB quantum. The applicant cites the CRA tax returns filed for New Way Beauty Depot Limited to show that the business had to be shut down by May 31, 2017 due to the injuries sustained as a result of the subject accident.

16The ADS Report section on “Post-Accident Losses” covers the methodology used to determine the IRB quantum.¹³ It refers to s. 4 and s. 7 of the Schedule regarding how the IRBs are to be calculated when addressing losses of self-employment income. The main point made by the applicant is that “70 per cent of the amount of the insured person’s weekly loss from self-employment that he or she incurs as a result of the accident” must be added in calculating the quantum of IRBs.¹⁴

17The ADS report referred to various decisions from the Financial Services Commission of Ontario (“FSCO”) and this Tribunal that support the accountant’s position that the case law does not provide much guidance on how to determine self-employment losses resulting from an accident. Further, that income loss does not need to be established with absolute precision.¹⁵

18None of these decisions were submitted for the Tribunal’s consideration, nor did the report include proper legal citations. In our view, this was not helpful in guiding the Tribunal in the determining the appropriate methodology to use in calculating losses from self-employed business.

II. Assessing the Accounting Reports—Respondent Position

19The respondent relies on the (final) accounting report of PWC (June 21, 2022), which was sent in response to the ADS report submitted a day earlier. This report revised the IRB numbers based largely on an explanation provided in the ADS report covering an apparent income of $179,000 (actually $178,945.00¹⁶) in “other revenue” from the New Way Beauty Depot 2017 CRA tax return.¹⁷ The report noted the PWC acceptance of the ADS explanation that this “other revenue” was an “adjusting entry to clear the shareholder amount (i.e. amount owing from Stylist to Ms. Mears),” and adjusted its calculations accordingly.¹⁸ Further recalculations were made regarding the applicant’s health care employment income, and the average weekly collateral benefits were updated to June 24, 2022.¹⁹

20Regardless, the PWC report submits differing total numbers, for the most part. The PWC report calculates the applicant’s total IRB up to June 24, 2022 to be $120,956.82 plus $42,703.21 in interest. The sum of $11,182.00 (identical to the figure in the ADS report) is credited as paid, resulting in a final outstanding IRB total of $152,478.03.²⁰

21With regard to the main point of dispute—namely the amount of the losses incurred by New Way Beauty Depot Limited and how much of this can be based on the subject accident—the PWC report notes that the business operated at a loss even prior to the accident. The report refers to the CRA tax returns, claiming that the business “operated at a much larger loss during the year end of May 31, 2016, and the majority of this year was prior to the accident.”²¹

22As a consequence of the above, the PWC report does not assign any relevant value to the business losses after the subject accident until the end of the New Way Beauty Depot Limited fiscal year on May 31, 2016, and from the following fiscal year of June 1, 2016 to May 31, 2017. To quote the report: “For the purpose of our calculations, given the average weekly business loss after the accident…is similar to the pre-accident weekly loss from June 1, 2015 to April 22, 2016, and the average weekly business loss after the accident…is similar to the pre-accident weekly loss…we have not considered the loss to be an additional loss due to the accident.”²²

23Finally, the PWC report concludes with an emphasis on s. 7 of the Schedule regarding what an insurer can deduct from payable IRBs. The specific citation is that “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” may be deducted from any IRBs payable to an insured person.²³

Decision on Reliability of the Accounting Reports

24Based on a preponderance of the evidence, we find that the argument presented by the respondent is persuasive. The losses of the applicant’s New Way Beauty Depot Limited were occurring before the subject accident and cannot be claimed as any part of an IRB award for the period of time between April 30, 2016 and May 31, 2017, when the business in question ceased operations (or at least did not report any further activity with regard to operating profits or losses).

25We do accept the applicant’s arguments with regard to her post-accident self-employment losses. It is clear that the relevant clauses in s. 4 and s. 7 of the Schedule as well as the cases cited by the applicant allow for a reasonably broad interpretation of the regulations around how to assess self-employment income for the purposes of calculating an IRB.

26With that said, such latitude is not unlimited. Any IRB calculation must be based on a standard of proof demonstrating that any self-employment losses are the result of a subject accident. Income records, CRA tax returns, other financial documentation, or similar evidence needs to be presented showing the negative impact of the subject accident on the ability of the applicant to operate the business in question.

27The applicant has not provided this evidence. Conversely, what the applicant has provided through CRA tax returns from the years 2014 through 2017 show a relatively consistent pattern of losses sustained by New Way Beauty Depot Limited both before and after the subject accident.²⁴ (The sole exception is the “other revenue” line item of $178,945 from the 2017 CRA tax return noted in paragraph 21 above, but that has been fully explained and accepted as outside of regular income by both parties, so requires no further comment.)

28The PWC report shows that the average weekly losses in the year before the accident (June 1, 2015-May 31, 2016) were $670.29, exactly the same as the average weekly losses in the month following the accident (April 23, 2016-May 31, 2016). There is a noticeable decline over the following year (June 1, 2016-May 31, 2017), the last fiscal year of operations for New Way Beauty Depot Limited, but this is still a relatively modest additional loss per week, dropping to $561.83.²⁵ (It should be noted that the PWC and ADS reports agree on the numbers here. They only disagree when it comes to the weight that should or should not be applied to the losses with regard to the IRB calculations.²⁶)

29We find that this is not enough of a decline or change in financial status to be clear that such losses are entirely a result of the accident. Even if one wanted to assign some value to the accident here, it would be impossible to determine a number with any sense of accuracy, as no evidence was presented by the applicant to demonstrate how and why the business suffered losses as a result of her injuries. We just have the financial records, which as noted above, do not demonstrate that the accident caused the losses at New Way Beauty Depot Limited.

30For these reasons, we do not have enough information before us to assign a value for the purposes of calculating a revised IRB quantum.

IRB Quantum

31The crux of the applicant’s argument here is that the respondent was not entitled to reduce the quantum of the IRB payments—due to an alleged overpayment—because no notice was provided.

32The applicant cited s. 52 of the Schedule addressing repayments to an insurer. The Schedule holds that in cases where no allegations have been made about a “wilful misrepresentation or fraud,”²⁷ the respondent is required to “give the person notice of the amount that is required to be repaid.”²⁸ Furthermore, the Schedule holds that if the required notice “is not given within 12 months after the payment of the amount that is to be repaid, the person to whom the notice would have been given ceases to be liable to repay the amount unless it was originally paid to the person as a result of wilful misrepresentation or fraud.”²⁹

33The respondent acknowledged that there was no evidence that it provided notice of an overpayment during the 12-month period as specified in the Schedule. The respondent also did not allege wilful misrepresentation or fraud.

Decision On IRB Reduction Payment Entitlement

34As a result, we conclude that the respondent was required by the Schedule to provide notice to the applicant of an overpayment but did not meet these obligations. Therefore, it cannot make a claim for repayment of any IRBs paid to the applicant or reduce its obligation to retroactively pay any IRBs that are owed.

35However, the disagreement between the parties regarding their respective accounting reports is how interest was calculated on past IRBs. The ADS report calculated interest on past IRBs that had been overpaid between August 29, 2016 to March 2, 2017, whereas the PWC report reduced interest payable as a result of the overpayment. This results in a difference of $8,227.53 in interest for the disputed time period.

36The applicant argues that the respondent is not entitled to reduce interest on past IRBs because it did not provide the applicant with notice of overpayment pursuant to s. 52 of the Schedule. The respondent argues that overpaid amounts should be deducted from the calculation of interest for past IRBs already paid, as the applicant has not proven that the losses from her self-employment are accident related. For the following reasons, we agree with the respondent.

37Although s. 52 of the Schedule precludes an insurer from claiming an overpayment if notice is not provided within the 12-month time period, we do not find that this extends to the payment of interest. For the reasons highlighted above, we prefer the methodology used by PWC in calculating the quantum of the applicant’s IRB and interest as the applicant has not established that her post-accident self-employment losses are a result of the accident.

38Section 51(1) states that interest is payable on overdue benefits if the insurer fails to pay a benefit within the time required under this regulation. In our view, while the respondent is not entitled to claim an overpayment on past IRBs, we do not find that this means that interest is payable on overpaid amounts. In our view, this would create an absurd result.

39For these reasons, we prefer the methodology used by PWC in the report dated June 21, 2022 in calculating the quantum of interest payable on past IRBS between August 29, 2016 to March 2, 2017.

CONCLUSION

40For the reasons outlined above, we find that:

i) The applicant is entitled to payment of past IRBs in the amount of $152,478.03 in accordance with the report of PWC dated June 21, 2022.

ii) The applicant is not entitled to payment of interest on past IRBs overpaid by the respondent.

Footnotes

1. 1Applicant’s 3rd Supplementary Document Brief, Tabs 1 and 2 (Pricewaterhousecoopers Reports, June 16, 2016 and June 10, 2022) and Tab 3 (ADS Report, June 20, 2022); Supplementary Report of PWC (June 21, 2022).
2. 2We prefer this date, as it is the latest used in the accounting reports submitted by both parties.
3. 3Applicant’s 3rd Supplementary Document Brief (June 20, 2022), Tab 1.
4. 4Supplementary Report of PWC (June 21, 2022).
5. 5Applicant’s 3rd Supplementary Document Brief, Tab 1 and 2; Supplementary Report of PWC.
6. 6Ibid. Tab 1, page 4; Tab 3, page 40. (All page numbers refer to the total number of pages in the document brief PDFs.)
7. 7Ibid.
8. 8Ibid. Tab 3, page 40.
9. 9Ibid.
10. 10See Applicant’s 3rd Supplementary Document Brief, Tab 3, page 41 for summary.
11. 11Ibid. Tab 3, page 55.
12. 12Applicant’s Vocational & Employment Brief Part 2, Tab E, New Wave Beauty Depot Ltd., pages 1-274.
13. 13Applicant’s 3rd Supplementary Document Brief, Tab 3, page 46.
14. 14See: O. Reg 34/10 Statutory Accident Benefits Schedule s. 7(2).
15. 15Applicant’s 3rd Supplementary Document Brief, Tab 3, page 46.
16. 16Applicant’s Vocational & Employment Brief Part 2, Tab E, Tab 13, page 255 (2017 T2 Corporate Tax Return).
17. 17Supplementary Report of PWC, pages 2-3.
18. 18Applicant’s 3rd Supplementary Document Brief, Tab 3, page 46-47.
19. 19Supplementary Report of PWC, page 3.
20. 20Ibid. page 5 for summary.
21. 21Ibid. page 6.
22. 22Ibid. page 19, note (4).
23. 23See O. Reg 34/10 Statutory Accident Benefits Schedule s. 7(3)(b).
24. 24Applicant’s Vocational & Employment Brief Part 2, Tab E, New Wave Beauty Depot Ltd., pages 1-274.
25. 25Supplementary Report of PWC, page 19.
26. 26They can be compared by referring to the ADS Report at Tab 3, page 56 of the Applicant’s 3rd Supplementary Document Brief, and page 19 of the Supplementary Report of PWC.
27. 27See O. Reg 34/10 Statutory Accident Benefits Schedule s. 52(1)(a).
28. 28Ibid. s. 52(2).
29. 29Ibid. s. 52(3).