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Volume. 5 Issue. 24 – May 26, 2021

In this all self-employed quantum issue, we lead with an interesting interpretation of the ‘last fiscal year’ in a case involving a self-employed lawyer. The Tribunal ruled that income earned 2 years prior to the loss established the IRB quantum.

In two further decisions the Tribunal once again confirms the primacy of CRA filings in any calculation for a self-employed individual.

2016 Earnings Establish IRB for 2018 Accident

Self-Employed Quantum Conundrum – In Switzer v Waterloo Insurance (19-011403), Switzer was injured in a February 2018 accident in which IRB entitlement was not contested. Switzer was self-employed with his own law firm that he had started in May 2017, having worked with a private law firm prior to establishing his own firm. The records appear to demonstrate that Switzer was in fact self employed throughout the entirety of 2017. Despite this fact, Switzer contended that his IRB quantum ought to be calculated based upon his fiscal year ending December 31, 2016.

He based this upon the fact that his own firm had its initial fiscal year commencing October 1, 2017, which was therefore not completed until September 30, 2018. As for the prior private firm, he was no longer working there when its fiscal year ended December 31, 2017, hence again he did not have a fiscal year as a self-employed person there either. Therefore, Switzer’s last fiscal year was 2016.

For their part, the Respondent argued that the 2016 income was too remote to be considered relevant, and that the appropriate period of time for the purposes of s.4(2)3 was the 2017 calendar year. The Respondent cited the Court in Surani v. Perth, wherein “the calculation of income and income loss of a self-employed person should be determined in the same manner before and after the accident – that is, by considering the profits and losses of the business”. In this matter, the Respondent maintained that “‘the business’ in s.4(2)3. of the Schedule could only mean Switzer PC, as this was the only business being operated by Mr. Switzer at the time of the accident.”

The Tribunal agreed however with Switzer. Firstly, Surani was found distinguishable, as Switzer “was self-employed consecutively at two separate businesses during the year prior to the accident whereas there is no indication in Surani that the applicant in that matter was self-employed at more than one business for at least one year prior to the accident.” Secondly “the Schedule is to be given a large and generous interpretation given that it is consumer protection legislation.” Finally, “on a plain reading of s. 4(2)3., there is no expressly stated requirement that this section is restricted to the business being operated at the time of the accident.”

With Switzer having reported just under $600K in earnings for 2016, he was, having purchased optional benefits, entitled to the maximum $1,000 per week. For 2018, there was a reported $17,000 in income reported, therefore there was a deduction ordered for post accident earnings. However, there was no evidence before the Tribunal as to earnings in the 2019 taxation year. Therefore, the Tribunal ordered IRB payable at the full rate of $1,000 from January 2019 to date and ongoing. You will see that in a decision considered below, the Tribunal deferred an order for further IRB payable until such time as the appropriate evidence was secured.

CRA Filings Help and Hinder

CRA Rules – In Yan v Certas (20-000630), one issue pursued by Yan was the quantum of the IRB he had been paid through to February 2018, as a result of a February 2017 accident. The Respondent based their calculation on information initially from the employment file, confirming annual salary from October 2010 through to October 2016 of 24,500 yuan (approximately $4,600 CDN). Yan however provided paystubs from May to October 2016, confirming earnings in the range of $4,700 CDN per month, arguing therefore that he was entitled to IRB at the rate of $400/week.

However, the CRA records confirmed reported income in the years 2015, 2016 and 2017 of $3,500, $5,800 and $1 respectively. As Yan was deemed self-employed, the earnings for taxation year 2016 would be the basis of an IRB calculation. Despite confirming actual earnings for at least half of 2016 of $4700 per month, the Tribunal confirmed again the Schedule serves to “direct insurers to rely on the amounts reported to and accepted by the CRA when calculating income.” Therefore, the insurer’s calculated IRB of $78.08, based upon earnings in 2016 of $5,800 as filed with the CRA, was found accurate.

Unable to Calculate IRB? – Injured in a November 2017 accident, Degroot in Degroot v Security National (20-005980), sought IRB from November 19, 2017 to date and ongoing. The Respondent, while not contesting entitlement, contended that they had not been provided with sufficient information to allow for a calculation. The accountant retained by the Respondent contended that they required more financial information given that the self-employed Applicant had a corporation. The accountant retained by Degroot however was able to produce a detailed report outlining the IRB quantum payable. The report had been based on information including Degroot’s Notices of Assessment for years 2016 to 2018, and Degroot’s corporate returns for 2017 and 18.

The Tribunal referenced s.4(3) of the Schedule which stipulates that the “amount upon which IRB is calculated is the same as the amount reported to CRA”. Reference was made to an earlier decision which confirmed “that the plain language of section 4(3) of the Schedule makes clear that the amount accepted by the CRA is to be used when determining pre-accident income for self-employment income.” Further, the “respondent had all of the required financial information to calculate an IRB, even on a preliminary basis…(and) the respondent’s request for more documents was excessive and not reasonably required in order to calculate the weekly quantum of IRBs…”.

As a result, the calculation provided by Degroot’s accountant was the only one before the Tribunal and was found to accurately calculate IRB payable to date. As there were no calculations available after October 6, 2020, the Tribunal “cannot therefore make any order to cover that period.” Degroot also sought an award given the Respondent’s maintaining through to the hearing that they were unable to calculate the IRB. However, the Tribunal indicated that “Even though [the Respondent’s accountant[ was requesting more information than CRA and was wrong in its position, this does not meet the criteria for making an award.”

Related LAT inFORMER issues:
CRA Sufficient Despite “Compelling Concerns”

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