by Christopher Bruce

This article first appeared in the autumn 1996 issue of the Expert Witness.

In an article published in the summer 1996 issue of this newsletter, I reviewed the theoretical arguments raised by Coté, J. A. in Galand Estate v. Stewart (1992), 6 Alta. L. R. (3d) 399 (Alta. C.A.). What Justice Coté concluded in his decision was that, in certain circumstances, the estate of a deceased could rely on the Survival of Actions Act to make a claim for loss of earnings. What was less clear in Galand were the types of cases in which such claims would be allowed; and the methods by which damages were to be calculated. The purpose of this article is to identify some of the issues which can be expected to influence the decisions concerning these two issues.

Cases in which Claims will be Allowed

There are at least four types of cases for which it appears that claims will be allowed. First, it appears that an estate will be able to claim under survival of actions legislation when a plaintiff dies after a personal injury trial but before legal proceedings have been completed. In the British case of Pickett v. British Rail Engineering Ltd. (1980), A.C. 136 (H.L.), for example, the plaintiff died after a personal injury trial but during the appeal process; and in the Canadian case of Hubert v. De Camillis (1963), 41 D.L.R. (2d) 495 (B.C.S.C.), the plaintiff died after trial but before the decision had been rendered. In both cases, the estate was successful.

Second, in Galand, Justice Coté noted that

…by the date of trial some of the wage loss of a deceased person may well be past and already incurred and exactly quantified…. So even on the respondent’s view of the law, this cause of action may exist and survive (at 405).

Third, Justice Coté also argued that in a case in which a beneficiary of the deceased was not a dependent and

…the premature death of the deceased clearly deprived the beneficiary of part of his inevitable inheritance… [t]here is a plain financial loss (at 406).

Finally, two of Justice Coté’s examples pointed to the conclusion that he would have been willing to award damages under the Survival of Actions Act in a case in which the deceased had a “…completely secure salary and employment … at the time of his injury or death” (at 403). He referred specifically to the case of a tenured university professor (at 403) and to Wayne Gretzky when he was single (at 406).

The only Alberta case to award damages for lost income under the Survival of Actions Act since Galand is McFetridge Estate v. Olds Aviation Ltd. (unreported, Edmonton, April 12, 1996). In that case, the deceased had been a successful businessman whose future income stream Justice Lee found to be easily quantifiable. That is, it appeared to have fallen into the fourth of the categories identified above.

What is not yet known is how the Appeal Court will deal with cases of a more speculative nature, such as those involving the loss of lifetime income of an individual who was a minor at the time of his or her death. This issue may be decided later this year when the appeal is heard in Duncan Estate v. Bradley (1994), 161 A.R. 357 (Alta. S.C.).

Assessment of Damages

Section 5 of Alberta’s Survival of Actions Act states only that:

5. If a cause of action survives under section 2, only those damages that resulted in actual financial loss to the deceased or his estate are recoverable… (emphasis added)

What is not indicated is how the courts are to assess “actual financial loss” to an estate. Nor does the decision in Galand offer a great deal of assistance as the court was asked only to consider the issue of whether a cause of action survived a plaintiff’s death – not what that “action” might be.

Nevertheless, the courts have provided some information concerning the approaches which they prefer. Three of these will be considered here.

The loss of inheritance approach: In Toneguzzo-Norvell v. Burnaby Hospital, [1994] 1 S.C.R. 114, Madame Justice McLachlin (at 127-128) cited approvingly from Cooper-Stephenson and Saunders (Personal Injury Damages in Canada (1981) at 244) who argued that:

…the award of damages to a very young child for prospective loss of earnings during the lost years should reflect only that portion of the entire lifetime earnings which the court estimates would have been saved by the child for his estate, at the end of his pre-accident life expectancy (emphasis added).

The rationale which Cooper-Stephenson and Saunders offered for this position was that “…the prime purpose of the award during the lost years is to make provision for [the deceased’s] dependants” (at 243). In short, as the purpose of tort damages is to compensate the plaintiffs, an award based on a more liberal approach would result in a “windfall” for the dependants.

In Alberta, there is a number of weaknesses to this approach. First, the “windfall” argument has already been rejected by the majority in Galand. Second, as will be noted below, there is reason to believe that Galand sets a precedent for use of the “lost years” approach.

Also, Section 5 of the Act states that “…damages that resulted in actual financial loss to the deceased or his estate are recoverable” (emphasis added). On a plain reading, “loss to the deceased” would appear to imply something more than “loss of inheritance.” Finally, in Galand Justice Coté cited Pickett as precedent for the view that an estate should be able to “…recover for tortious loss of earnings or earning capacity of the deceased” (at 407, emphasis added).

The lost years approach: Assume that the plaintiff’s injuries have reduced her life expectancy from 40 years to 10 years. During the 30 years which have been “lost,” the plaintiff would have received income which would have been offset, to a certain extent, by expenditures on “necessities.” The theory behind the “lost years approach” is that, during those 30 years, the plaintiff has lost the pleasure associated with the difference between her income and her living expenses. (This issue was discussed in greater detail in the first issue of this newsletter.) During the remaining 10 years, she will be entitled to her full loss of earnings (as she will have to incur her full living expenses during those years).

Now assume that, instead of having a reduced life expectancy of 10 years, the plaintiff’s life expectancy has been reduced to two years. In a personal injury action, she would be entitled to damages equal to her income during those two years plus the difference between her income and her expenses in the remaining 38 “lost” years.

By simple extrapolation, it is seen that if the plaintiff’s life expectancy has been reduced to one year, or one month, or one week, a similar calculation can be made. And if we take the argument to its logical conclusion, if the plaintiff’s life “expectancy” has been reduced to one second, the “lost years” approach would suggest that damages should equal the difference between her projected lifetime earnings and her projected lifetime expenses in the 40 years which have been “lost.”

Both the Pickett and Hubert cases discussed above offered support for use of the lost years approach. If the estate of a plaintiff who has died soon after a trial is to be awarded damages based on the lost years approach, it would seem to be difficult to justify a different approach in the case of a plaintiff who has died soon before (or during) a trial. Furthermore, both Justice Coté’s approval of Pickett and his comment that “…the deceased had a cause of action for loss of future earnings because life expectancy was shortened.” (Galand at 404, emphasis added) seem to suggest that the Alberta Court of Appeal is prepared to employ the lost years approach.

Nevertheless, an inconsistency arises when the lost years approach is extrapolated from personal injury cases to fatal accident cases. One rationale for the lost years approach in the former is that the plaintiff could, in principle, replace the pleasure foregone during the lost years by spending her award during her remaining years. That is, the award in such a case can be seen as compensatory to the plaintiff. This rationale is missing in fatal accident cases (although it is also missing in personal injury cases involving plaintiffs who have become “vegetables”).

Loss of a capital asset: In a leading Supreme Court of Canada case, The Queen v. Jennings ((1966), 57 D.L.R. (2d) 644), Judson, J. concluded that if a plaintiff “…has been deprived of his capacity to earn income… [i]t is the value of that capital asset which has to be assessed” (at 656, emphasis added). Further, in Andrews v. Grand & Toy (1978) D.L.R. (3d) 452 (S.C.C.), Mr. Justice Dickson argued that this asset should be assessed at the value which it possessed before the injury; that is, unreduced for the lost years.

The controversial question then arises whether the capitalization of future earning capacity should be based on the expected working life span prior to the accident, or the shortened life expectancy…. When viewed as the loss of a capital asset consisting of income-earning capacity rather than a loss of income, the answer is apparent: it must be the loss of that capacity which existed prior to the accident (at 469-70).

But if one’s future earning capacity is to be treated as a capital asset, how is that asset to be valued? Two possibilities present themselves. First, as Mr. Justice Dickson implies, one could simply capitalize the future stream of income into a commuted value.

Alternatively, however, one could recognise that the value of a physical asset is not the capitalized value of its future stream of total earnings, but the value of those earnings net of the expenses of operation and maintenance. In that case, the loss of the capital asset, “future earning capacity”, would be found by capitalizing the individual’s future stream of earnings net of expenditures on necessities. That is, the capital asset approach may produce a result similar to that obtained using the lost years approach. Interestingly, this rationale for the lost years method does not encounter the objection raised above – that it assumes the plaintiff will live long enough to consume the award.

Implicitly, Justice Lee accepted the capital asset approach in McFetridge. There, the estate was awarded damages equal to the reduction in the value of the deceased’s businesses.

Comment

If the Court of Appeal does not reverse the Galand decision entirely when it hears the Duncan appeal, I believe that the law will develop as follows: First, the arguments made in the preceding section seem to suggest that it is the lost years approach which will be used to value damages, although the court may couch its decision in terms of the capital asset approach.

Second, over time, I believe that the courts will apply survival of actions legislation to all types of cases, including those involving minors. The reason for this is that once the courts allow actions in cases involving plaintiffs with “well-established” career patterns, such as tenured university professors, they will encounter difficulty distinguishing those situations from cases in which the deceased was “secure” in his or her career, such as a 35 year-old mechanic or engineer. This will give the courts difficulty distinguishing the latter from recent university or technical school graduates, graduates from high school students, and high school students from infants. Eventually, therefore, the estates of all fatal accident victims will be able to claim under the Survival of Actions Act.

Christopher Bruce is the President of Economica and a Professor of Economics at the University of Calgary. He is also the author of Assessment of Personal Injury Damages (Butterworths, 2004).