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Appeals: Confirmed Referee Decisions : #158 - August 4, 2004

Decision of the Court having jurisdiction in the Class Action attached - May 8, 2006

D E C I S I O N

1. On March 27, 2003 the Administrator approved Claimant’s claim at level 3. On April 30, 2003, the Administrator denied her application with respect to the calculation pursuant to 4.02 of the Transfused HCV Plan as to the amount of compensation representing loss of income.

2. The Claimant requested that the Administrator’s decision be reviewed by a Referee at an oral hearing.

3. The hearing took place before me in Edmonton on January 14, 2004, but there were additional written submissions presented via email and telephone conference on several occasions between that date and July 2004.

4. It was agreed by the parties that the following facts were not in dispute:

(a) The Claimant is a Primarily Infected Person under the 1986-1990 Hepatitis C Settlement Agreement.

(b) The Claimant was approved as a level 2 Claimant in June of 2001 and was paid $25,000 as an unindexed amount with a holdback of $5000 to ensure the Fund is sufficient to pay all claimants.

(c) When she was then approved as a level 3 Claimant on March 20, 2003 she was entitled to make an election to accept a payment equal to the Average Industrial Wage in Canada or to apply for loss of income calculation that would be a higher sum.

(d) The most recently available Average Industrial Wage in Canada was calculated to be $35,853.00.

(e) The Claimant declined to accept the payment of $35,853.000 on the footing that she had proof on a balance of probabilities that her likely earned income would have been higher than the Average Industrial Wage as defined by the program.

(f) The Claimant was unable to present evidence of a proven track record for her career as a massage therapist, although she completed the Massage Therapist Course and had engaged in some employment, due to her contracting of the illness shortly thereafter.

(g) The Administrator determined that the evidence tendered by the Claimant was insufficient to justify any other higher calculation.

5. The parties agreed to disagree on what should be the calculation of hours worked per day, days worked per week and per year, whether she would have earned income through tips and expenses to be deducted, and finally, it now seems whether the calculation should be based on an assumption that she would have been self employed or employed as a contract worker in a clinic setting.

6. The parties agree that the issue on the appeal is whether the Claimant has established on a balance of probabilities that the earned income should be higher than the Average Industrial Wage.

7. The issue requires a consideration of the application of Article 4.02(a) of the Settlement Agreement which is set out below for ease of reference:

4.02 Compensation for Loss of Income

(1) Each Approved HCV Infected Person who normally had Earned Income (as defined below, except as provided in Section 4.02(2)(f)) who:

(a) elects to be paid compensation for loss of income instead of $30,000 pursuant to Section 4.0 1(3); or

(b) delivers to the Administrator:

(i) evidence demonstrating the he or she has developed fibrous tissue in the portal areas of the liver with fibrous bands bridging to other portal areas or to central veins but without nodular formation or nodular regeneration (i.e., bridging fibrous);

(ii) the evidence referred to in Section 4.01(1)(d); or

(iii) the evidence referred to in Section 4.Ol(1)(e); and

who delivers to the Administrator proof satisfactory to the Administrator that his or her infection with HCV caused loss of income will be paid compensation for past, present and future loss of income.

(2) Each Approved HCV Infected Person who is entitled to receive compensation for past, present or future loss of income caused by his or her infection with HCV will be paid, subject to the provisions of Section 7.03, an amount each calendar year equal to 70% of his or her Annual Loss of Net Income for such year until he or she attains the age of 65 years determined in accordance with the following provisions:

(a) “Annual Loss of Net Income” for a year means the excess of the Approved HCV Person’s Pre-claim Net Income for such year over his or her Post-claim Net Income for such year.

(c) “Pre-claim Net Income” of an Approved HCV Infected Person for a year means an amount determined as follows:

(i) an amount equal to the average of the person’s three highest consecutive years of Earned Income preceding the HCV Infected Person’s entitlement to compensation under this Section 4.02 multiplied by the ratio that the Pension Index for the year bears to the Pension Index for the middle year of the foregoing three consecutive years, or, if the Approved HCV Infected Person or the Administrator demonstrates on a balance of probabilities that his or her Earned Income for such year would have been higher or lower than such average but for the HCV Infected Person’s infection with HCV, such higher or lower amount, (the applicable amount being hereinafter referred to as the “Pre-claim Gross Income”), provided that the amount determined under this Section 4.02(2)(b)(i) will not exceed $75,000 multiplied by the ratio that the Pension Index for the year bears to the Pension Index for 1999, minus

(ii) the Ordinary Deductions that would be payable by the Approved HCV Infected Person on the amount determined under Section 4.02(2)(b)(i) on the assumption that such amount was the Approved HCV Infected Person’s only income for such year.

(d) “Post-claim Net Income” of an Approved HCV Infected Person for a year means an amount determined as follows:

(i) the total of (A) the Approved HCV Infected Person’s Earned Income for the year or, if the Administrator demonstrates on a balance of probabilities that the Approved HCV Infected Person’s Earned Income for such year would have been higher than such amount but for the person claiming a level of impairment greater than the person’s actual level of impairment, such Earned Income as determined by the Administrator, (B) the amount paid or payable to the person in respect of the Canada Pension Plan or the Québec Pension Plan on account of illness or disability for the year, (C) the amount paid or payable to the person in respect of Unemployment Insurance and/or Employment Insurance for the year, (D) the amount paid or payable to the person for income replacement under a sickness, accident or disability insurance plan for the year, and (E) the amount paid or payable to the person pursuant to the EAP, MPTAP and/or the Nova Scotia Compensation Plan, (such total being hereinafter referred to as the “Post-claim Gross income”), provided that the amount determined under this Section 4.02(2)(c)(i) will not exceed the proportion of the amount determined under Section 4.02(2)(b)(i) for such year that the Approved HCV Infected Person’s Post-claim Gross Income for such year is of such person’s Pre-claim Gross Income for such year, minus

(ii) the Ordinary Deductions that would be payable by the Approved HCV Infected Person on the amount determined under Section 4.02(2)(c)(i) on the assumption that such amount were such person’s only income for such year.

(e) “Earned income” means taxable income for the purposes of the income Tax Act (Canada) from an office or employment orfrom the carrying on of an active business and any taxable income for purposes of the income Tax Act (Canada) of a corporation from the carrying on of an active business to the extent that the person establishes to the satisfaction of the Administrator that the person has a significant shareholding in such corporation and that such income is reasonably attributable to the activities of such person.

(f) “Ordinary Deductions” means income taxes, Unemployment Insurance and/or Employment Insurance and Canada Pension Plan and/or Québec Pension Plan deductions applicable in the Province or Territory where the person is resident.

(g) Notwithstanding any of the foregoing, an Approved HCV Infected Person who was not working prior to his or her infection with HCV and who was infected either before he or she attains 18 years of age or, if the person had attained 18 years of age, while the person was in full-time attendance at an accredited education institution in Canada and at a time when the person was yet to enter the workforce on a permanent and full-time basis, will be deemed to have Pre-claim Gross Income for the year which includes the date he or she attains 18 years of age and each subsequent year or, if the person had already attained 18 years of age, the year of completion of full-time attendance at an accredited education institution and each subsequent year, in an amount equal to the then most recently available Average industrial Wage in Canada (such amount will be prorated for the year in which the person attains 18 years of age or, completes full-time attendance at an accredited education institution for the number of days in the year in which the person has attained 18 years of age or, completes full­time attendance at an accredited education institution), or, if such person demonstrates on a balance of probabilities that his or her Earned Income for such year would have been higher than such amount, such higher amount.

For the purposes of all income tax calculations required under this Section 4.02(2), the only deductions and tax credits that apply to the Approved HCV infected Person which will be taken into account will be his or her alimony and maintenance payments deduction, basic personal tax credit, married person’s or equivalent to married tax credit, disability tax credit, Unemployment or Employment Insurance premium tax credit and Canada Pension Plan or the Québec Pension Plan contribution tax credit.

8. At the hearing, Fund Counsel produced as a witness Mr. Steve Nimmo, the quality assurance manager responsible to oversee a loss of income team, which includes two claims processors and a certified management accountant. He gave the following testimony about how the loss of income claim was processed where the claimant has a proven track record, where the claimant does not have a proven track record, and then in the instant case:
  • PriceWaterhouseCoopers (PWC) developed a program to assess the loss of income claims, and such claims are then reviewed to ensure compliance with the relevant tax legislation.
  • claims of self-employed persons were always referred to PWC for assessment.
  • when the claimant has a proven track record of income earning capacity before disability, the calculation proceeds from the 3 consecutive best years before the claimant was disabled, then is indexed up to the current year based on the Consumer Price Index and then the ordinary deductions such as federal and provincial taxes, Unemployment Insurance and Canada Pension Plan would be subtracted, to produce a net preclaim income.
  • in the usual case, the claimant is a salaried individual and thus the earned income is salaried, so that by reference to the filed income tax returns the appropriate ordinary deductions can be made to calculate the net take home preclaim income.
  • in the case of a self-employed individual with income tax returns, the average yearly income can be determined and the calculation is normally based upon the revenues less the business expenses.
  • once the preclaim net income amount is arrived at, a calculation is made for post claim income. If the claimant has any post income earnings, the income tax return is reviewed, and the reported gross earnings are taken as the post claim earned income less the ordinary deductions to produce a post claim net income.
  • the post claim income is subtracted from the preclaim income.
  • the last step for any claim is to apply Article 7.03, which currently provides a cap of 70% of the net income.
  • when the claimant does not have a proven track record, because for example, the claimant was attending school in the 3 years before the disability, the claimant has three other options:

    (a) he or she could seek a calculation based a track record of the 3 best years of reported income;
    (b)
    if infected before age 18, he or she could advert to 4.02(f) which is in effect a “deemed income”, or
    (c) he or she could prove on a balance of probabilities pursuant to 4.02(f) that his or her income would have been higher.

  • while the Agreement does not require that the claimant produce an income tax return to support the claim for income loss, the option in (a) above requires income tax returns to make the appropriate calculation. However, in the case of the option in (c) above, the PWC program established could not extrapolate the annual earnings in a case where for example, the person worked only one day at $100 because the exercise would be too difficult.
  • in the instant case, the Claimant was approved as a Level 3 Claimant and elected the loss of income calculation.
  • The Claimant initially submitted information to the Administrator about what her massage therapist colleagues would earn. Mr. Nimmo met with his team but concluded that without an income tax return, there was not enough evidence to go forward with a balance of probabilities approach and informed the Claimant payment would be based on Average Industrial Wage pending production of more probative evidence.
  • The Claimant objected to that determination.
  • Mr. Nimmo searched the Internet for better information and sent what he found to the PWC consultant to calculate.
  • PWC produced two reports last fall but the Claimant continued to produce relevant facts, which demonstrated that some of the initial information relied upon by the Centre was incorrect. For example, it was not initially known that the Claimant was a Registered massage therapist and that fact would require recalculation by PWC of its earlier forecasts.

9. At the hearing, PWC gave evidence through one Kas Rehman, a chartered accountant in practice since 1989. He testified that:

  • he had been quantifying economic losses and personal injury losses in Ontario under a similar schedule exclusively since 1994.
  • he has testified in court in Ontario on economic claims on three occasions.
  • when the claims settlement agreement was first struck, PWC developed software to calculate the net income after inputting the earned income.
  • the process is not difficult when the claimant has a track record.
  • he had reviewed many reports concerning self-employed claimants.
  • he presented updated calculations based on the sum total of information presented.
  • that information included an Alberta wage survey of Massage Therapists.
  • his reconstructed analysis shows its conclusion is comparable to the Average Industrial Wage, since the Claimant never had a proven preclaim track record.
  • through his experience of examining claims of massage therapists, that income could be earned in this profession in several ways, i.e.:

(a) one can work in a clinic and receive a percentage of the charges by the clinic to the client, usually 60/40 or 70/30 split, or

(b) one could set up one’s own clinic where the clients attend upon the therapist, or

(c) one could operate on the basis of making home visits, or

(d) a combination of the above.

  • each alternative attracts a different cost structure to the business.
  • he chose the calculation on the assumption that but for the disability the Claimant would have preferred to work in a clinic because of the client stream, and because it matched that of the Claimant’s therapist expert witness, and was an easier and more quantifiable model to recreate earned income.
  • by contrast, if the Claimant had chosen to run a sole proprietorship there would be more income but also more expenses and some time would be applied to developing a client base.
  • he presumed the Claimant would provide hourly massages at the going hourly rate.
  • he made assumptions about the number of massages performed in a day; number of days worked per week, the number of weeks worked per year, whether tips should be factored in, the net hourly billing fee to the therapist, the annual gross revenue and then likely expenses.
  • he contended his estimate of expenses, which was 16% of revenues, was low in the instant case, as comparable cases of therapists in both a clinic or in own business he considered which showed the calculation of expense would typically be 35-40%.
  • Attached as Appendix 2 to these reasons is a Summary of the Loss of Net Income for 2003 under various scenarios he considered.
10. The Claimant called as an expert massage therapy witness a friend who was a practicing therapist in a clinic setting. Her testimony was:
  • she had been a friend of the Claimant since high school.
  • she attended Grant McEwan Community College.
  • she had been employed as a therapist for 9 years.
  • she trained part time at Grant McEwan Community College.
  • she had worked in a clinic in St. Albert exclusively intermittently for 9 years, taking some time off periodically to have a family.
  • there are 3 full time and 2 part time therapists at the clinic.
  • she currently worked at the clinic part time one day per week.
  • some part time therapists work 3 days per week.
  • one attends from 9-4 pm and then goes to another therapist job.
  • at her clinic, the charge for a ½ hour massage was $21, and $33 for a one hour massage.
  • as of January 1, 2004, the cost of a one-hour massage increased to $36.
  • the therapist and the clinic split the fees on a 60/40 basis.
  • all therapists earn the same income regardless of number of years in practice.
  • she does not perform in excess of 6 massages in a day or more than 6 days per week, although other therapists who work full time will perform at most 6-7 per day usually 5-6 days per week.
  • as to income for gratuities, her experience was that the average was $5 for a 30-minute massage and was received infrequently when the client was attending for an insurance claim. She estimated about 50% of her cases were insurance paid. She did not report this income to Revenue Canada although this income was evidently later reported on the cheques and as of September, 2003, all therapists self report their tips.
  • she also attended home parties where she was invited to perform massages for guests. She would retain all the income, which equaled about $200-250 per event but pay for the oils used which amounted to about $10 per year. If she worked full time, the oil expense would be about $30 per year.
  • she claimed clothing, gasoline, insurance, uniforms, and shoes as expenses on her income tax return. She paid her employer for her membership in the Massage Therapy Association of Alberta but not for oils used at the clinic. The licence fee of $400 includes liability insurance. She pays $35 for 1000 business cards.
  • when she worked full time, four years ago, the best five months and three weeks of income earning were from January to June 21, 1994, which equaled $22,000 in net income for serving 5 clients per day 6 days per week.
  • the expenses she would deduct from that sum would be the same as if she were running her own business.
  • she usually paid about $1000 in tax. She had to pay her accountant to file her income tax return, who currently charges $100. She claims all claimable expenses, including depreciation on her 1996 vehicle.
  • she worked full time for a year.
  • she then worked part time when she had children until her youngest child was in school.
  • her children were older than those of the Claimant.

11. The Claimant gave testimony on her own behalf that

  • but for her illness, she believed she would have served 6 clients per day, which equals 30 clients per week, 50 weeks per year,
  • would have suffered no downtime, no extraordinary expenses or deductions, and
  • would have delayed having children so as to maximize her income earning years.

12. The Claimant presented surveys from Human Resources Development Canada, which showed an overall Alberta salary for a massage therapist, was $27,845.28.

13. The Claimant contended that more often therapists perform half hour massages, which pay more although there is then more down time. The Claimant disputed the Fund’s expense calculations on the basis that they were too high for a working in a clinic scenario.

14. At the oral hearing the Claimant agreed that the wage calculation should assume she would work as a contract worker in a clinic setting and agreed to the hourly rate of $35.67. She contended that the issue for determination by me was the amount of business expenses to be deducted, the hours worked and the weeks worked per year. I also directed that the Claimant could submit the evidence presented to their own accountant and I would permit a rebuttal report by her accountant to be tendered subject to the right of Fund Counsel to cross examine or make further submissions.

15. One other feature of the prehearing and hearing submissions related to come controversy over the intended reliance by Fund Counsel upon a purported survey referenced by the Massage Therapist Association of Alberta (MTAA) in its newsletter of November 25, 2003 that contained information of salary ranges and hours worked.

16. The Claimant and the MTAA objected to the presentation of that information as a wage survey and ultimately it was agreed that none of that information should be tendered into evidence.

17. No accountant report on behalf of the Claimant was submitted to me following the oral hearing.

18. Subsequent to the oral hearing, the Claimant in an email dated Jan 14, 2004

  • maintained her agreement that the wage calculation should assume she would work as a contract worker in a clinic setting and the hourly rate of $35.67.
  • disagreed that the calculation should be based on 5 hours per day for 48 weeks a year.
  • instead asserted the assumption should be 6 hours a day for 50 weeks per year.
  • maintained her disagreement with the Fund’s expert upon the calculation of expenses per year.
  • took issue with the Fund’s reliance upon a document she had earlier tendered because it contained figures relating to a therapist with a mobile massage business that went to clients’ homes.
  • she challenged the reliability of the Fund accountant’s analysis since it was based on only 3 cases in Ontario, one of which referenced a therapist who owned her own business, another of which referenced a therapist who both owned a business and worked in a clinic and a third of which worked out of a clinic.
  • she further contended that because the Fund refused to produce those actual expense items for scrutiny by the Claimant at the hearing ostensibly for privacy reasons that non-disclosure should diminish the weight I attach to that evidence.
  • attached as Appendix 1 is her calculation of her income.

19. The Claimant contended that the Fund expert “drastically” overestimated the costs incurred in comparison to the evidence given by the massage therapy witness’s oral testimony. For example, he considered items such as vehicle gas and maintenance, cell phone, advertising in yellow pages, equipment, bank charges, office expense, capital cost allowance, home expenses and meals and entertainment, and there was no evidence at the hearing that any massage therapist in Alberta would incur such expenses. Further, she contended that Fund counsel did not elicit enough information on cross-examination of her massage therapist expert to verify whether all her tax deductions were business rather than personal. She further contended that the therapist’s income tax returns were not relevant because some of that income derived from work outside the clinic, which permitted certain business deductions that are not allowed in a clinic setting.

20. The Claimant contended that even on the assumptions put forth by Fund Counsel’s expert, 5 hours per day, 5 days per week and 48 weeks per year would equal 1200 hours per year, which when multiplied by $60/hr would produce a gross annual income of $72,000. Applying a business expense calculation of 37.5% would equal 27,000 which would leave $45000 in annual income. On this basis, she contends her annual income would be $45000 per year and much higher than the Average Industrial Wage.

21. Based on her testimony, the Claimant would have worked 6 hours per day, 5 days per week and 50 weeks per year, which would produce 1500 hours and at a current hourly rate of $65/hr. she calculates a total gross annual income of $97,500, which, after deduction of business expenses of $36562.25, would leave an annual income of $60,437.75.

22. I was informed in the email referred to above that the Claimant contacted Revenue Canada and her accountant and was informed that she could not claim vehicle expenses in the clinic setting, and she could not have claimed 100% of her $1000 vehicle insurance unless she would have driven her vehicle 100% of the time for business reasons.

23. The Claimant disputes that all the deductions applied to reduce taxes would be business related.

24. In a subsequent email, the Claimant argued that she would have worked some, if not most, statutory holidays; that she would have had an average of 6 client hours per day; her expenses would have been minimal and would not have included advertising, meals, entertainment, equipment or capital cost allowance. She would need only massage oils, occasionally a new uniform and business cards. She would claim an annual association fee, which would include insurance, and the fee for her accountant. She claimed that she had overestimated her original calculation for oils for a year at $336, and preferred the calculation of the cost of oils given by her massage therapist expert.

25. Subsequent to the oral hearing, the Claimant in emails dated May 20 and June 5, 2004 submitted that she no longer agreed with the hourly rate of $35.67 but contended that the 2003 wage survey for Other Technical Occupations in Therapy Assessments in Alberta showed that the average salary range was $32,300, and the average hourly rate in Alberta was now $20-45 for 30 minute massage and $40-75 for a one hour massage and that combining both half and one hour massage rates would produce an average hourly rate of $60/hr.

26. The Claimant contended that I should factor out the part time massage therapist in the 2003 survey and factor in that she would have worked as a Registered Massage Therapist for 8 years but for the illness and that would put her at the higher range in the scale even without consideration of tips that most therapists receive.

27. The Claimant contended that her gross income as a contract massage therapist would equal $72,000 and her gross income as a self-employed therapist would equal $97,000. She contended that her current billing rate would be $60/hr, despite the evidence of her own accountant on January 12, 2004 stated his survey of Alberta massage therapy clinics was $52/hr.

28. The Claimant argued that her expenses would amount to $815 whereas the Fund argued the amount should equal $8486, which is 50% of the expenses reported by the Claimant’s expert massage therapist.

29. Fund Counsel noted in its written submission that the Claimant’s calculation did not contemplate cancellations, her own sick days or working part-time for any interval.

30. Fund Counsel noted that the Claimant produced some letters from other Alberta therapists (prior to the hearing for consideration of PWC and her own accountant) but some of that evidence conflicted with the Claimant’s contentions as well as that of her massage therapist witness, and in fact, supported the assumptions of PWC. For example, one therapist indicated the average number of clients is 4.5 per day, which would equal 22 patients per week. In the case of weeks worked per year, the claimant’s own documents include a letter from a clinic indicating the average weeks per year are 48.

31. I understand that without any employment track record, Fund Counsel and its expert were at a loss to determine what ought to be the proper assumptions in such a case. The Fund produced three alternative scenarios with a view to calculating an average net income based on information received from the Claimant and the oral testimony of her massage therapist witness testimony. The Fund maintained that all of the scenarios it produced gave total annual income amounts that were slightly lower than its calculation of the Average Industrial Wage and thus the latter was the fairest calculation to the Claimant. It further contended that the Claimant’s own witness and documentation support its position.

32. At the conclusion of all the submissions it appeared to me that the parties were then only in agreement with the following fact:

(a) the deductions for self-employment should be equal to 37.5%.

33. The Referee is required to abide by the terms of the Settlement Agreement, which sets out the basis upon which compensation can be paid to claimants.

34. I find that because the Claimant could not produce three consecutive years of earned income, that mode of calculation cannot be used in this case.

35. The Claimant was found by the Administrator to be entitled to the most recently available Average Industrial Wage in Canada, which was calculated to be $35,853.00.

36. I find that the supporting evidence of salary ranges, hours worked, and massage therapists’ business expenses and deductions produced at this hearing was less than ideal. It would have been helpful to have a larger sampling of Alberta massage therapists salary ranges, hours worked, expenses incurred, however the fact is that even the MTAA does not collect this information in a reliable way and thus it is not available. I would have preferred to receive from the Fund’s expert data from actual massage therapists in Alberta, rather than basing his assumptions on cases he had conducted in Ontario because I am not satisfied that the business practices in Ontario, particularly Metro Toronto are analogous to those of Alberta, especially outside of Edmonton or Calgary. However, in the circumstances it is apparent that the Fund had in fact made its best efforts to attain the reliable Alberta data, and finally, did take into account the information tendered by the Claimant, which likely represented the most favorable factual data possible. As well, during the hearing the Fund’s expert reviewed his own calculations in light of the viva voce testimony of the Claimant’s massage therapist witness. Given that the Claimant so vigorously opposed the consideration of any of the wage information collected by the MTAA, despite its imperfections, I must treat the source information produced in this hearing as the best available evidence to consider in making my findings.

37. Included in that best available evidence was the oral testimony of the massage therapist expert, an age mate and friend of the Claimant, who I found to be entirely candid, forthright and credible. I found her actual experience to be helpful in relation to the issues that remain in dispute as a reasonable barometer of what may have been the experience of the Claimant in her career had she not been deprived of that path by the illness.

38. The Claimant asks me to accept, on the basis of her bona fide belief, that but for her illness, she would have served a minimum of 6 clients per day for 50 weeks of the year. I accept that the Claimant is an honest and forthright witness and holds a genuine belief in what she considers would have been her work practices and choices had the illness not manifested itself. However, her expert’s testimony is in conflict with her own, and she has no pre-illness employment track record at all.

39. The burden of proof required under the agreement is that the Claimant proves her case on a balance of probabilities. She must produce evidence that is of probative value and that outweighs other evidence. In that regard, the Claimant has produced letters from other clinics in addition to her massage therapist expert.

40. I accept that the Claimant holds a bona fide belief that she would work full time for 8 years at the outset of her career. Like her colleague, she has a husband and children now, but she asks me to assume she would have delayed having children in favor of pursuing her career full time but for her illness. She asks me to find that she would have worked not only full time but also most statutory holidays and that she would have represented the upper band of the spectrum.

41. I cannot accept the Claimant’s contention as reliable and probative. Circumstances and attitudes change over time, and the lives of many people do not unfold in practice the way they are constructed in theory. I consider it much more probable that the Claimant would have started a family at some point in the 8 year period, with or without her illness, as did the massage therapist witness. That would have entailed some adjustment to her employment plans in terms of the full time hours. I consider it much more likely that she would have performed part time hours for some part of that 8 year interval. Even if she had not stopped her employment to have children, I do not accept her contention that she would have earned income from 6 clients per day, 6 days a week for 50 weeks a year.

42. I myself questioned the massage therapy expert on this issue as I was not confident that even the most eager massage therapist can serve that number of clients per day for that many days in a week or that many weeks per year, even if they are ready, willing and able, because there are not always clientele to fill all those hours.

43. I was satisfied from the Claimant’s expert’s answers on cross examination that some days massage therapists have fewer clients than they would like, because of cancellations, lack of business, sick days of both clients and therapists, client’s own holiday schedules and the like. I find that the calculation of 5 clients a day, as well as 5 days per week and 48 weeks per year much more realistic over time. I also conclude on the evidence before me that it is much more probable that this Claimant would have worked in a clinic setting than as a self-employed therapist.

44. The next issue was the hourly rate and although the Claimant at first agreed to $35.67 at the hearing, she later recanted and now insists the rate should be accepted as $60/hr as she has produced some survey information to say that is the hourly rate as of 2003. I note that previous documentary evidence tendered prior to and at the hearing which was subject to cross examination was more reliable and I see no reason to reject the calculation agreed upon at the hearing as $35.67 being the net amount of money paid to the therapist contract worker from a customer rate of $60/hr indexed for inflation both before and after the date of the hearing.

45. The most troublesome issue was the conflicting evidence as to the proper calculation of business expenses. The Fund put forth some figures to show that a common figure is 35-40% but then indicated it would assert a deduction of only 19%. It was not clearly explained to me why that percentage was reduced to that particular figure. On the other hand, I recognize that one of the surrogates used for comparison was a therapist in a clinical setting (albeit from Ontario) and as well, the Fund accountant was able to compare its calculations to that of the viva voce evidence of the Claimant’s massage therapist’s expert.

46. My difficulty with the dispute by the Claimant is that her objection is based on speculation of what her expenses might have been. Since I have concluded that she probably would have engaged in part time work during some of the years in question, I cannot accept her calculation of the gross annual income and in turn I cannot accept her submission as to how I should calculate of the business deductions. I consider her calculation to be too low and while the Fund calculation is admittedly too high, the Fund’s own concession that it should be reduced by more than half seems reasonable to me. Thus I conclude that the appropriate hourly rate should be $35.67 (an amount agreed to by the Claimant during the hearing after a full consideration of all the evidence tendered to that date); that the average hours per day should be 5; that there should be assumed to be a 5-day week, and a 48-week year. These factors would produce an average annual income of $39,237.00. Applying a deduction of 19% expenses would produce an average annual income of $31,781.97, which is slightly under the Average Industrial Wage. Moreover, these calculations proceed upon full time hours, and since my conclusion was that she would have probably worked some part time hours, I conclude that the Average Industrial Wage is still more favorable to her.

47. I should add a word about tips, as this was a form of income the Claimant urged very strongly upon me to take into consideration. However, there was no reliable documentary evidence about the amount that might be received by a massage therapist on an annual basis. Even the massage therapist expert conceded that 50% of cases may be insurance paid and those clients rarely provided a tip. As to the remaining 50% of clientele, some of those did not tip in any case, and those that did gave an average of $5. The massage therapist witness did not report tips in her income tax return, although it seemed that some evidence as to that amount might have been currently accessible and produced. In the end, it was not clear to me that even she had a notion of what might be the annual amount received.

48. Absent any more cogent evidence on the part of the Claimant, who after all, does have the burden of proof on a balance of probabilities, I have no alternative but to accept the contention of Fund Counsel that there is no sufficient evidence before me to conclude otherwise than that the best realistic calculation of the Claimant’s lost income is the Average Industrial Wage.

49. I am fortified in my conclusion by the warning of Winkler, J. in approving the subject class action settlement that its provisions were intended to be fair to the class as a whole and not just individuals. (Parsons. v. Canadian Red Cross [1999] O. J. No 3572.) The Claimant is entitled to a liberal interpretation of the Agreement and Transfused Plan, but it must be fair and not prejudicial to those in the class who can independently verify their wage losses by means of actual records of salary, income tax returns and business expense receipts.

In the result, I uphold the decision of the Administrator and dismiss the Claimant’s appeal.

Dated at Edmonton, Alberta, this 4th day of August 2004.

Shelley L. Miller, Q.C.

Referee


APPENDIX 1

Number of clients per week

30

Hourly billing fee

$35.67

Weekly gross revenue

$1070

Number of weeks worked per year

50

Tips…30 clients per week x 50 weeks x $5.00

$7500

Annual gross revenue

$61005

Expenses

vehicle expenses

n/a-clinic setting

vehicle gas and maintenance

$50 for picking up oil, business

cards, uniform & visiting accountant

massage oils

$30-as per Ms Buck’s testimony

fees, license, dues

$400 - as per Ms Buck’s testimony

cell phone

n/a-clinic setting

advertising-yellow pages

n/a-clinic setting

business cards

$35 for 1000 cards, as per Ms Buck’s testimony

Insurance

n/a-included with association fees

equipment and supplies

n/a clinic setting

bank charges and interest

n/a clinic setting

capital cost allowance

n/a clinic setting

Professional fees(accountant)

$100, as per Ms Buck’s testimony

leasing cost or interest on vehicle loan

n/a clinic setting

Business-use-of-home-expenses (heat, electricity, property taxes, mortgage, interest, telephone etc.)

n/a clinic setting

meals and entertainment

n/a as per Ms Buck’s testimony

uniforms, shoes

$200

Total expenses

$815

Net Income

$60190



APPENDIX 2
Summary of Loss of Net Income for 2003
Under Various Scenarios

Scenarios based on possible work situations

Scenarios based on Industry Information

         

Scenario A

Scenario B

Scenario C

Scenario D

Scenario E

Contract Worker

Own Practice

Average Industrial

Wage

Average Wage per HRDC (2001)

Average Wage per MTAA (2002)

Number of clients per week

Hourly billing fee

22

$35.67

22

$52.00

Weekly gross revenue

Number of weeks worked per year

$784.74

48

$1,144.00

48

Annual gross revenue

$ 37,667.52

$ 54,912.00

Expenses

estimated at 19% of revenues

estimated at 37.5% of revenues

7,156.83

20,592.00

Net Income

$ 30,510.69

$ 34,320.00

$ 35,853.00

$ 27,845.00

$ 27,250.00

2001 income indexed to 2003

2002 income indexed to 2003

$ 29,152.00

$ 27,695.00

Less: CPP and income tax [“Ordinary Deductions” as per section 4.02 (2) (e)]

7,318.14

8,624.02

8,690.00

5,072.00

5,479.00

Pre-clam net income (section 4.02 (2) (b))

$ 23,192.55

$ 25,695.98

$ 27,163.00

$ 24,080.00

$ 22,216.00

Less: Post-claim net income (section 4.02 (2))

-

-

-

-

-

Loss of net income

23,192.55

25,695.98

27,163.00

24,080.00

22,216.00

70% of Loss of Net Income (section 7.03 (2) (b))

$ 16,234.79

$ 17,987.19

$ 19,014.10

$ 16,856.00

$15,551.20

 

 

J U D I C I A L D E C I S I O N

Judge Winkler's Decision - May 8, 2006

 

 

 

 

 

 

 

 

 

 

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