Selecting the Productivity Factor

Posted on August 1, 2019September 27, 2019 By economica

One of the most important determinants of the plaintiff’s future earnings is the rate at which those earnings will grow. There are two broad determinants of this rate. First, each individual benefits from increases that arise from gains in experience, promotions, and job changes. Second, as the economy grows, the earnings of all individuals rise with it – the source of the popular aphorism “a rising tide lifts all boats.” The purpose of this article is to summarise the most recent research concerning the latter rate, which economists call the real rate of growth of earnings, and which the courts often refer to as the productivity factor.

We divide our discussion into three parts: In the first, we define what we mean by real rate of growth of earnings. In the second, we provide two types of statistical evidence concerning that rate. Finally, we argue that the most reliable projections of that rate are obtained from agencies that specialise in making such projections. We conclude that those projections indicate that real earnings will grow at approximately 1.25 to 1.50 percent per year in the long run.

1. Definition: Real rate of growth of earnings

Assume that it has been observed that economy-wide earnings have increased at five percent per year. This “observed” rate is referred to as the nominal rate of growth of earnings. Economists divide this rate into two factors: those due to increases in the average level of prices, the rate of price inflation, and those due to increases in the purchasing power of wages, the real rate of growth of earnings.

For example, if the rate of price inflation has been two percent per year, the first two percent of a five percent nominal increase will be needed just to allow individuals to buy the same set of goods that they had been able to purchase before the price increase. The remaining approximately three percent will be available to purchase additional goods. That three percent is called the real rate of growth of earnings.

As there is a strong consensus in the financial community that the long-run rate of price inflation will be approximately two percent, the forecast of wage growth can focus on the real rate of growth. [The financial community widely believes that the rate of inflation will be two percent because (a) that is the rate that the Bank of Canada has targeted since 1996; and (b) the Bank has managed to maintain the actual rate of inflation near its target since the latter was introduced.]

2. Methods of predicting the real rate of growth of earnings

In the long run, if workers are to be able to purchase more goods with their earnings (that is, if real wages are to rise), they must produce more goods. Hence, it is commonly argued that long-run increases in average real earnings must approximate long-run increases in average output per worker. As the latter is often called the rate of growth of productivity, the terms “real rate of growth of earnings” and “rate of growth of productivity” are often used interchangeably in the courts. Although this conflation could be misleading in the short run, when deviations between the two are common, if we are concerned with lifetime changes in a plaintiff’s earnings, projections of productivity growth can substitute for projections of real wage growth.

In this section, we provide two types of data concerning the growth of both real earnings and productivity. In the first, projections assume that past growth rates will continue into the future. In the second, models of the growth of the economy are used to derive predictions concerning growth of wages and productivity.

2.1 Historical data

In Table 1, we compare Alberta wage and price inflation, from 2001/2002 through 2017/2018. It is seen from this table that over the 2012-2018 time frame, which coincided with a considerable economic downturn in the Alberta economy (2014-2016), price inflation was higher than wage inflation. However, a longer-term perspective finds that wage inflation averaged approximately 0.78 percent higher than price inflation over the ten-year period 2008-2018; and approximately 1.0 percent higher than price inflation over the seventeen-year period 2001-2018.

If it is assumed that the experience of the last two decades or so is indicative of what will happen in the next few decades, then the data in Table 1 suggest that the real rate of growth of wages will be approximately 1.0 percent per year.

The data reported in Table 2, obtained from Statistics Canada, suggest that Canadian labour productivity has increased at an average annual rate of approximately 1.23 percent over the past 37 years (from 1982 through 2018), and 0.88 percent over the last five years (2014-2018).

Again, a forecast of 1.0 to 1.25 percent seems to be supported by the data.

2.2 Forecasting Agencies

We have identified five reputable, independent agencies that provide public projections of either real wages or labour productivity. We summarise their long-run projections in Table 3, below.

Table 3 suggests that reputable forecasting agencies are predicting that real wages will grow at approximately 1.25 to 1.50 percent per year over the next two or three decades.

3. Selecting a forecast

Our experience is that most financial experts have relied on historical figures, such as those we reported in Tables 1 and 2, to project the rate of growth of real wages/productivity. For two reasons, we caution against acceptance of this approach.

First, there is no theoretical basis for assuming that what has happened in the past will continue into the future. For example, advances in computer technology are introducing changes to the economy that may differ in significant ways from those that have occurred in the past; the wave of “baby boomers” is about to retire from the labour force; and interest rates have fallen to historical lows.

Second, with very few exceptions, the financial experts who testify in personal injury cases have not devoted significant amounts of time to the analysis of long-run changes in labour productivity. Given a choice between the testimony of individuals whose primary expertise is in the preparation of personal injury reports and that of individuals who devote their professional lives to the forecasting of long-term trends in the economy, it seems to us clear that it is the latter that should be preferred.

Accordingly, we recommend that the courts rely on the forecasts of the five agencies identified in Table 3, and on others with similar expertise, when determining the “productivity factor” to be employed in personal injury and fatal accident actions.

Fall 2018 issue of the Expert Witness newsletter (volume 22, issue 3)

Posted on December 12, 2018October 2, 2019 By economica

Contents:

In this issue of The Expert Witness, we present two articles:

The Cost of Household Services, Alberta, 2018: A Survey

The cost of hiring individuals to perform household services such as housecleaning, snow removal, and handyman repairs can amount to a significant percentage of the damages in a personal injury or fatal accident claim. Yet, despite the importance of these costs, reliable estimates of the components of a household services claim are very difficult to obtain. To assist the court in this respect, Economica has conducted several surveys of household services costs since 1997. In this issue of the Expert Witness, Christopher Bruce and Jody Prevost report the findings of the 2018 version of this survey.

The Impact of a Mid-Career Change on Earnings

Vocational psychologists often recommend that injured plaintiffs retrain for a new occupation. An important question that arises in this situation is whether a plaintiff who is, say, 40 years old will start the new occupation at an “entry-level” income (say, that of a 25-year-old) or at the income of a 40-year-old. As the latter typically earn ten to twenty thousand dollars per year more than the former, the answer to this question can have a significant effect on the calculation of the plaintiff’s losses. Fortunately, several empirical studies that provide information concerning this issue have been published in economics journals recently. Derek Aldridge and Christopher Bruce summarise the results of these studies, to help both vocational experts, who may not be familiar with the economics literature, and economists, who may have been asked to calculate a loss in a case in which no vocational expert has provided a relevant opinion.

A Pdf. copy of the newsletter can be found here.

The Impact of a Mid-Career Change on Earnings

Posted on December 12, 2018 By economica

by Derek Aldridge and Christopher J. Bruce

Vocational psychologists often recommend that injured plaintiffs retrain for a new occupation. An important question that arises in this situation is whether plaintiffs will start that occupation at an “entry-level” income (say the income of a 25 year-old) or at the income of an individual of the plaintiff’s calendar age. The importance of this issue can be seen in Table 1, which reports that, in two occupations that are commonly recommended as retraining possibilities – partsman and drafting technologist/technician – incomes for middle-aged workers can be 50 to 100 percent higher than those for 20-24 year-olds.

If it has been recommended that, say, a 40 year-old male retrain to enter one of these occupations, the economic expert is faced with determining which of the income levels from Table 1 best represents the income at which the plaintiff will begin his new career. If experience in the occupation, or movement along a career ladder, are important determinants of income, then we would expect that the plaintiff would begin at one of the lower incomes suggested by the census data. Perhaps with his greater maturity the 40 year-old would not start at the income level of a 20-25 year-old; but with no experience in this occupation, it seems unlikely that he would start at the income of a 40 year-old.

Fortunately, a number of empirical studies that provide information concerning this issue have been published in economics journals recently. We summarise the results of these studies here, to provide assistance both to vocational experts, who may not be familiar with the economics literature, and to economists, who may have been asked to calculate a loss in a case in which no vocational expert has provided a relevant opinion.

In the earliest of these studies, Goldsmith and Veum (2002) used a detailed survey that followed 1400 young workers from 1979 to 1996 to compare the effects of additional years of experience on wages when individuals: remained in the same occupation and industry, remained in the same occupation but moved between industries, remained in the same industry but changed occupations, and changed both occupations and industries. What they found was that the value that was placed on previous experience was approximately the same for all individuals except those that had changed both occupation and industry. In their words:

…experience acquired while a real estate agent is valued similarly as tenure at other occupations, such as accounting, within the real estate industry. In addition, the experience as a real estate agent is valued similarly to tenure at other industries, such as the pharmaceutical industry, if continuing in the occupation of sales. If the real estate agent becomes an accountant in the pharmaceutical industry, however, the experience as a real estate agent is of less value than that within accounting or the pharmaceutical industry.

(p. 442)

Referring to the examples in Table 1, Goldsmith and Veum’s findings suggest that the 40 year-old who retrains as a partsman may be able to earn an income comparable to that of a 40 year-old partsman with 15 years experience, if the retrained individual remains within his previous industry. For example, if an individual who had previously worked on oil rigs becomes a partsman in a shop that provides equipment to oil rigs, he might be expected to obtain a starting salary much higher than he would have obtained if he had become a partsman in an automobile dealership.

Subsequently, however, a number of studies cast doubt on Goldsmith and Veum’s findings. Both Zangelidis (2008), and Kambourov and Manovskii (2009) found evidence to suggest that occupation is much more important than industry. Zangelidis concluded, for example, that “[o]ccupational experience is expected to make an important contribution in determining wages…[whereas the] evidence on industry specificity… is not very supportive.” (p.439) And Kambourov and Manovskii (2009) concluded that “[job] tenure in an industry has a very small impact on wages once the effect of occupational experience is accounted for.”(p. 64)

The findings from these two studies suggest that if the plaintiff has not yet started a new post-accident job (and, hence, the wage at that job is not known), it may be appropriate to assume that she will begin that new job at an “entry-level” wage if she has re-trained for a new occupation (regardless of whether she remains in the same industry she was employed in before the accident); and will begin at a wage commensurate with others of her calendar age only if she has not changed occupations.

Hence, contrary to Goldsmith and Veum’s findings, these studies suggest that the 45-year old welder who retrains as a partsman will begin her new career at the earnings of a partsman at the start of her career.

Finally, two recent studies have asked whether the impact of retraining is a function of the worker’s initial occupation. For example: will craftsmen suffer a greater income loss if they are forced to change occupations than will salespeople? Sullivan (2010), using detailed information from the National Longitudinal Survey of Youth (NLSY), found that changes of occupation and industry each had significant negative effects on the earnings of professional workers and clerical workers; that changes in occupation, but not industry, had negative effects on craftsmen and service workers; and that changes in industry, but not occupation, had negative effects on managers, salespeople, and laborers.

All of these studies imply that the reduction in earnings is likely to be greater, the greater is the difference between the tasks performed in the worker’s previous job and those in his or her new job – especially if the individual had initially been in a high-skill occupation, such as a professional or craftsman. As a first approximation, therefore, the empirical literature suggests using the earnings of individuals in entry-level jobs when estimating the starting income of an individual who has been forced to retrain, regardless of that individual’s calendar age. Of course, this recommendation will have to be modified when information specific to the plaintiff is found to be inconsistent with the statistical data presented here.

References

Gathmann, Christina, and Uta Schonberg.

“How General is Human Capital? A Task-Based Approach.” Journal of Labor Economics 28 (1) (2010) : 1-49.

Goldsmith, Arthur, and Jonathan Veum. “Wages and the Composition of Experience.” Southern Economic Journal 69(2), (2002): 429-443.

Kambourov, Gueorgui, and Iourii Manovskii. “Occupational Specificity of Human Capital.” International Economic Review 50 (1) (2009): 63-115.

Sullivan, Paul. “Empirical Evidence on Occupation and Industry Specific Human Capital.” Labor Economics 17 (2010): 567-580.

Zangelidis, Alexandros. “Occupational and Industry Specificity of Human Capital in the British Labour Market.” Scottish Journal of Political Economy 55(4) (2008): 420-443

A version of this article was published in the Journal of Legal Economics, 24(1-2), September, 37-41.

Christopher Bruce is the President of Economica; he has a PhD in economics from the University of Cambridge

Derek Aldridge has been a consultant with Economica since 1995 and has a master of arts degree in economics from the University of Victoria.

The Cost of Household Services, Alberta, 2018: A Survey

Posted on December 12, 2018 By economica

by Christopher J. Bruce and Jody Prevost

The cost of hiring individuals to perform household services such as housecleaning, snow removal, and handyman repairs can amount to a significant percentage of the damages in a personal injury or fatal accident claim. Yet, despite the importance of these costs, reliable estimates of the components of a household services claim are very difficult to obtain. In order to assist the court in this respect, Economica has conducted a number of surveys of household services costs since 1997.

In those surveys, for example, we found that the average hourly cost of housecleaners in Calgary rose from approximately $13.50 in 1997, to $30.00 in 2014; and for handymen the rates rose from $24.00 in 1997 to $35.00 in 2014.

As four years have passed since our last survey, and as our experience suggests that rates tend to increase appreciably over time, we undertook a new survey of providers in 2018. In each case, we conducted exhaustive searches of relevant quotes using Kijiji and Google (the two most common sources of advertisements). This article summarises our findings.

Housecleaning

Using the internet, we identified sixteen professional agencies (for example, Mango Maids) in Calgary and fourteen in Edmonton that provide house cleaning; and we identified six ads from individuals (on Kijiji) in Calgary and seven in Edmonton.

In Calgary, the average rate among professional agencies was $41.38 per hour, with a range from $25.00 to $56.80. The comparable average for Edmonton was $39.28, ranging from $25.00 to $65.66. Among those individuals who advertised on sites such as Kijiji, the average hourly rate in Calgary was $26.67 and in Edmonton was $30.57.

In the smaller cities, most of our data came from Kijiji. In those cities, the average hourly rates (with numbers of ads in brackets) were: Lethbridge (6), $29.16; Red Deer (7), $29.71; Medicine Hat (5), $29.00; and Grande Prairie (7), $29.30.

We conclude that rates for individual suppliers average approximately $29.00 per hour across all Alberta cities; and that comparable rates for professional agencies average approximately $40.00 per hour (where such services are available).

These data raise two important question: first, if individuals listed on Kijiji charge approximately $29 per hour, why do consumers hire professional agencies at $11 per hour more than that? Second, why do the rates for individual suppliers exceed the hourly wages paid to individuals who work for professional agencies?

Professional agencies versus individuals

We suspect that the answer to the first of these questions derives from three factors.

First, agencies may be able to offer a higher quality of service than can private individuals. For example, they might provide training to their employees, use screening interviews to select the most skilled workers, or offer to replace workers who proved to be unacceptable to the client.

Second, it is possible that agencies might be able to complete their tasks more quickly than would private contractors, thereby lowering the effective hourly rate of the former.

Finally, commercial firms may be better able than individual cleaners to develop reputations for reliable service. If a cleaner is sick or otherwise unable to work, a firm can often replace that individual with another employee; whereas if self-employed individuals are unable to meet their commitments, their jobs go undone. Customers may be willing to pay a premium for the more reliable service.

Regardless of the answer to this question, however, the fact is that it would be very difficult to hire a reliable housecleaner in Calgary or Edmonton for less than $30 per hour – and that cost would rise to more than $40 per hour if the client wished to hire a bonded cleaning service.

Self-employed suppliers versus employees

A second puzzle raised by our findings is that, according to the Alberta Wage and Salary Survey, “light duty cleaners” earned an average of $16.08 per hour in 2017, with a range of $12.75—$20.13, more than $10.00 per hour less than the rates charged by individuals advertising on Kijiji. What is the source of this differential? One possibility is that the individuals identified by the Survey are working as employees for large cleaning companies and, therefore, have security of employment; whereas those advertising on Kijiji are self-employed, with the attendant uncertainties and with the requirement, in many cases, that they provide their own cleaning supplies. Another possibility is that it is the more productive, reliable individuals who choose self-employment. Regardless of the answer, our evidence suggests that individual plaintiffs will not be able to hire housecleaners at the wage found in the Alberta Wage and Salary Survey. It is the rates found on Kijiji and on the websites of professional agencies that best reflect the cost of hiring a housecleaner for an hour.

A caveat

It should be noted, however, that even if it costs, say, $30 to hire a housecleaner for one hour, it does not follow that it will cost $30 to replace one hour of a plaintiff’s time. The reason for this is that professional cleaners may be able to complete more work in an hour than could non-professionals (i.e. than plaintiffs). The best information we have available, for example, suggests that this differential is approximately 25 percent; that is, to replace one of the plaintiff’s hours will require only 0.75 hours of a professional’s time. In this case, the cost of replacing an hour will be $22.50 (= 0.75 x $30). [Note: this argument with respect to the greater efficiency of professional providers applies to all of the other services identified in this report, except child care.]

Handyman

With respect to handyman services, we obtained quotes from Yelp, Google and Kijiji. In each case, we requested a quote to “replace several fence boards, clean and repair the gutters, and paint the step rails and trim.”

In Calgary, where we received responses from four individuals and five professional companies, the average hourly rate was $45.28. Three companies had minimum charges of two hours.

In Edmonton, where we received responses from six professional companies and four individuals, the average hourly rate was $47.50. Only two companies specified a minimum number of hours billed.

In both cities, the preponderance of quotes fell between $40.00 and $50.00.

Lawn care and snow removal

Lawn care

In our search for lawn care rates in Calgary and Edmonton we asked for quotes for a 2400 square foot lot with an 1800 square foot house, front and back. Of sixteen lawn care companies surveyed in Calgary, fifteen ads were from professional companies and one from an individual. In Edmonton, of fourteen lawn care companies surveyed, eleven were from professional services and three from individuals.

In Calgary the average cost was $36.73 per visit for lawn care and $200 per month for lawn cutting. In Edmonton these rates were $46.63 and $157.80, respectively.

Snow removal

With respect to snow removal, we surveyed businesses in Calgary and Edmonton for quotes to remove snow from a home with a two-car driveway, stairs, entry, and city sidewalk.

Twelve companies in Calgary responded, with an average per visit rate of $36.33 and a monthly “unlimited” rate of $176.05. In Edmonton, eleven companies responded, with an average per visit rate of $41.14 and a monthly “on demand program” of $182.05.

Child care

We identified six methods of providing (commercial) child care: day care, day home, live-in nanny, live-out nanny, before- and after-school care, and (hourly) babysitting. We obtained all of our information from Google and kijiji.

Day homes

We identified six day homes in Calgary and nine in Edmonton. In Calgary, the rates averaged $57.50 per day, or $845 per month; whereas the comparable rates in Edmonton were $45 per day, or $759 per month.

Day care

Our findings with respect to the monthly cost of day care are reported in Table 1. There, we provide rates by four age groups: infants (0 to 18 months), pre-toddlers (18-24 months), toddlers (24-36 months) and pre-school (four and five years).

Before- and after-school care

The average monthly rate for before- and after-school care, for children in grades one to six, was found to be $532 per month in Calgary (nine agencies) and $603 in Edmonton (six agencies).

Nannies

The average monthly rate for the three live-in nannies we identified in Calgary was $2,466, and for three live-out nannies it was $3,200. We also obtained hourly rates, averaging $17.50 (approximately $3,500 per month) for fifteen live-out nannies in Calgary.

In Edmonton, the monthly rate for the six live-in nannies we identified was $2,300; and for the five live-out nannies in our survey it was $2,600. We were also able to obtain hourly wages for fifteen live-in and fifteen live-out nannies in Edmonton. The average rates for those samples were $16.00 and $16.47, respectively (approximately $3,200 and $3,300 per month, respectively).

Babysitting

In each of Calgary and Edmonton, we obtained twenty quotes for babysitting services. In each city, eleven of the quotes came from Kijiji and nine came from a website called nannyservices.ca. The average hourly quote from Kijiji was $14.55 in Calgary and $13.23 in Edmonton. The average quote from nannyservices was $15.77 in Calgary and $16.33 in Edmonton. In both cities and for both sources, the most common rate was $15 per hour. (The slightly higher rate from nannyservices appears to have arisen because many of the individuals advertising on that site offered ancillary services such as dog walking and light housekeeping.)

Home care and meal preparation

Generalized home care services range in price by the level of assistance required. We obtained information from five professional agencies in Calgary and Edmonton – Home Care Assistance Calgary, Miraculum Home Care, Wild Rose Caregivers, Classic Life Care, and Paramed Home Health – concerning the costs of caring for “a relative that had been injured in an accident and was recuperating at home”.

Home Care Assistance Calgary provided quotes for both daily and monthly care for: meal preparation, light housekeeping, grocery shopping, grooming and dressing, bathing assistance and in some cases medical assistance. Their rates were $128 per day for part-time care and $256 per day for full-time care. Weekly rates varied from $384 to $1,792; and monthly rates from $1,164 to $7,765, depending on the number of hours required.

We found that hourly rates for the five agencies varied according to the qualifications of the workers who were required. Health care aides cost from $27 to $32 per hour; licensed practical nurses approximately $37 per hour; and registered nurses approximately $60 per hour.

We also obtained rates from individuals advertising on the website nannyservices.ca. Searching under companion and health care aide, we found that health care aides and personal service workers charge an average hourly rate of $21 in Calgary and $18 in Edmonton. In both cities, full time services cost $2,800 per month.

Summary

In this article, we have reported the results of a survey of household services providers in Alberta. Two outcomes are very clear. First, it is inappropriate to use a single, hourly rate to evaluate all such services. Whereas child care services cost less than $10 per hour, ($45 to $57 per day), housecleaning services cost almost $30 per hour, and lawn care and snow removal cost over $35 per visit.

Second, the convention of using $12 to $16 per hour for household services is unsupportable. With the exception of child care, all of the services that were identified in our survey cost significantly more than that, even after allowing for the greater efficiency of professionals.

Our findings also strongly support the view that hourly rates for housekeeping services should not be obtained by simply averaging the figures that have been adopted in previous cases. We are pleased to note that Madame Justice D. C. Read agreed with our conclusion on the latter point in her decision in Palmquist v. Ziegler, 2010 ABQB 337, at para [271] (emphasis added):

By using an average of numbers accepted in other cases in order to establish a number used to make an assumption in this case, all of the possible errors, either of the trial judge or of the economists who gave evidence in those cases, are incorporated into the number to be used in this case. Courts rely upon economists to determine what assumptions are reasonable to make and their decisions are only as reasonable as are the assumptions used. I have no means of evaluating the expert evidence that was before those other courts to determine whether or not I accept the assumptions made. It is circular to accept that an average of numbers accepted by another courts has any validity in respect to the issue of what economic assumptions are reasonable for me to make in this case.

Proposal

Statistics Canada provides data concerning the amounts of time spent on six types of “household work and related activities.” These are: cooking/washing up, house cleaning and laundry, maintenance and repair, other household work, shopping for goods and services, and primary child care. For the purposes of calculating the costs of household services, in our reports we will combine “cooking/washing up” with “shopping” and evaluate that category at the approximate average rate for home care and meal preparation, $32.00 per hour (up from $25.00 per hour in our 2014 survey).

We will combine “maintenance and repair” with “other household work” (a large portion of which consists of “gardening and ground work”) and evaluate the resulting services at the landscaping, snow removal, and handyman services rate of approximately $38.00 per hour (up from $35.00 in 2010).

We will evaluate “house cleaning and laundry” at the rate for housecleaning services. For the purposes of our reports, we propose to use the conservative rate of $29.00 per hour in all regions of Alberta (down from $30 per hour in Calgary and Edmonton in 2014, but up from $25.00 per hour elsewhere).

For each of the preceding services, however, we will assume that professionals will be 25 percent more efficient than the plaintiff would have been. Hence, our assumption is that the cost of those services is 25 percent less than the rate that has been quoted per hour.

We will assume that it in Calgary it costs $1,200 per month to care for each infant (the approximate mid-point of day care and home care costs), or $900 in Edmonton; $1,000 to care for each toddler/pre-school child in Calgary, ($800 in Edmonton); and $525 per month to provide before- and after-school care for each school-aged child in Calgary ($600 in Edmonton).

Finally, for the purposes of quantifying child care costs on an hourly basis, we propose to employ $15.00 per hour, (the most common rate quoted for babysitting in Calgary and Edmonton).

Christopher Bruce is the President of Economica; he has a PhD in economics from the University of Cambridge

Jody Prevost is the administrative assistant at Economica

The Cost of Managing the Expenditures of a Plaintiff with Reduced Mental Capacity

Posted on December 11, 2018December 12, 2018 By economica

by Christopher J. Bruce

When referring to plaintiffs with normal mental capacity, the term “management fee” usually refers to expenses that plaintiffs incur for advice concerning investment decisions. Decisions concerning how their awards are to be spent – on medical care, accommodation, transportation, etc. – can generally be left to the plaintiffs themselves.

Plaintiffs who have suffered an impairment in their mental capacity – usually children injured at birth or adults injured in catastrophic accidents – however, may require assistance with many, if not most, of the decisions concerning expenditure of their awards. In this article, I propose to include the cost of this assistance in the term “management fee” and to investigate what the determinants of this fee will be in the case of plaintiffs with reduced mental capacity.

In the first section of this article, I enumerate the various types of assistance that will be required by these plaintiffs. I call this the “hierarchy of needs,” as the responsibility for this assistance involves a pyramid, or hierarchy, of decision-makers. In the second section, I investigate the costs of this assistance.

A Hierarchy of Needs

The management of the plaintiff’s award requires four types of agents:

Financial manager: Once the court award has been paid to the plaintiff, that amount will have to be invested. This will require either that a trust company invest the award in a portfolio of conservative financial assets, or that a structured settlement be purchased from an insurance company. In either case, a fee may be charged for the management of the plaintiff’s finances. (These are the fees that were discussed in the first article in this edition of the Expert Witness, “The Cost of Managing the Plaintiff’s Investments.”)

Guardian – The role of the guardian is to determine how the invested funds are to be spent: to ensure that the plaintiff is provided food, clothing, shelter, transportation, health care, and emotional care. Generally, it is not intended that the guardian will provide these services directly but will, instead, be responsible for hiring an agent called a case manager (see below), and for providing that individual with directions concerning the types and levels of services that are required. The guardian, for example, might decide that the plaintiff should be moved from his or her own home to a nursing home, but leave the decision about the selection of a specific nursing home to the case manager.

Often, the guardianship function will be performed by a committee which might, for example, include family members, legal representatives, social workers, and a life care planner/cost of care expert. The latter are experts who assist the guardian with the development and implementation of a plan for the care of the plaintiff.

Rehabilitation case manager – The guardian will often consider it necessary to contract with an agent to implement the plan that was developed in coordination with the life care planner. This individual is usually called a rehabilitation case manager, or simply case manager. He or she takes direction from the guardian and reports to the trustee (see below).

These individuals are responsible for:

the physical safety and emotional and social well-being of the individual in the community – for example, contracting with rehabilitation specialists, physical therapists, educational consultants, and speech and language consultants;
contracting with care personnel, such as rehabilitation assistants, home support workers, and nursing staff as warranted by the nature and extent of the injuries sustained and the impact of the impairments on functional ability; and
purchasing and maintaining goods and services, including medically-required equipment, such as wheelchairs and modifications to automobiles.
They are also responsible for monitoring all of the service-providers that have been hired, to ensure that their functions are being carried out as specified, and for replacing any employees who have resigned or been laid-off.

[As the case manager’s role is primarily to arrange for the purchase of goods and services, he or she may hire a subsidiary set of agents who make the actual purchases. Hence, there may be an additional layer of agents in the hierarchy: purchasing agents.]

Trustee: The trustee performs a “gatekeeping” role, ensuring that the bills incurred on behalf of the plaintiff are paid, that relevant income taxes are remitted, and that expenditures are not mismanaged (or misappropriated). Although one person (for example, a close relative) could act as both guardian and trustee, it is generally recommended that these two functions be separated, in order to provide independent checks on spending patterns.

Management fees

Payment may have to be made to each of the four categories of agents described above. I consider each of them separately here.

Financial Manager: As brain injured plaintiffs and children cannot make their own financial decisions, a third party will have to be employed to invest plaintiffs’ awards. Two options are available: a trust company may act as an investment manager, or an insurance company may provide a structured settlement.

If a trust company has been employed, it will provide its services for a fee that normally varies from about 1.0 percent to 2.0 percent of the value of the investment. Thus, for example, if the trust company is able to obtain a rate of return of 4.0 percent on the investment, from which it deducts a fee of 1.0 percent, the net rate of return will be 3.0 percent. Technically, the financial manager’s fee could be included as one of the costs of caring for the plaintiff. However, the data we recommend the courts use when calculating discount rates – the return on balanced portfolio funds (discussed in the first article in this edition of the Expert Witness,) – and the discount rates that are mandated by many provinces, are already net of investment companies’ management fees. Thus, in practice, no additional allowance will be required.

Similarly, insurance companies’ prices for structured settlements incorporate their costs of management. Hence, if the plaintiff’s award has been paid as a structured settlement, it may not be necessary to provide a separate allowance for the insurer’s management fee.

Note, however, that although it is generally not necessary to include a fee for the financial manager, it may be necessary to include a fee for the trustee (see below).]

Guardian/life care planner: There are three potential sources of guardians: the relatives of the plaintiff, a public agency (often referred to as the Public Trustee’s Office), or a private agent.

Relatives: When brain damage arises from negligence at birth, the parents of the injured child will often act as guardians; and when injury occurs later in life, guardians may be selected from spouses, parents, siblings, adult children, or other relatives. To the extent that these individuals are willing to work for free, it might be argued that no claim for their services can be made against the defendant. However, two counterarguments can be made.

First, for the same reason that relatives are often able to claim for the costs of providing household services or nursing care to the plaintiff, they may also be able to claim compensation for the time and effort required to act as guardians. Second, some allowance must be made for the possibility that the relative guardian will die before the plaintiff and, therefore, that a third party will be needed.

When either of these arguments is accepted, the cost of guardianship can be calculated as the cost that would have been charged by a public or private guardian. (For these, see below.)

Public Agency: Depending on the jurisdiction, Public Guardians may not charge fees for their services, or may charge a below-market fee. It should be noted, however, that all of the experts we have consulted have recommended that, if plaintiffs have large awards, they should not rely on the office of the Public Guardian, as the latter generally deals with relatively small sums.

Private Guardian or life care planner: If it is felt that the Public Guardian is not appropriate, it may be necessary to hire a private guardian. A number of knowledgeable individuals have suggested to me that a life care planner might fill this role. As the function of this individual is to develop a plan for the care of the plaintiff and to ensure that that plan is implemented as intended, it may require only a limited number of hours – perhaps five to ten per month – at approximately $200 per hour. Thus, an annual allowance of approximately $20,000 would not be unreasonable.

A guardian committee may also include a lawyer. If we assume five hours per month at $300 per hour, the annual fee would be $18,000.

Rehabilitation case manager: The costs of hiring rehabilitation case managers vary significantly depending on the severity of the injury to the plaintiff. A U.S.-based life care consulting firm, Caragonne and Associates, has developed an “assessment protocol” for calculating the number of hours of case management that will be required for seriously injured clients. The protocol identifies five dimensions of care, and scores each dimension on the degree of involvement required from the case manager: from low, through moderate, to high. The five dimensions are:

Level of client’s independence: This dimension measures the extent to which the client needs advice and encouragement. It ranges from high independence, in which the client requires only “periodic encouragement” from the case manager, to low independence/high need, in which frequent intervention is required to assist and orient the client.
Number of providers of needed services: This dimension ranges from low intervention, in which the client has obtained the resources needed, to high intervention, in which the case manager will have to contact multiple agencies and providers to arrange for the goods and services needed by the client.
Frequency of appraisal: The more often can the client’s status be expected to change, the greater will be the need for reappraisals by the case manager.
Coordination of providers: Once a life care plan has been put into place, the case manager will have to coordinate the implementation of that plan. The greater is the number of providers that have to be coordinated, and the more frequent is the number of interventions, the greater will be the number of hours worked by the case manager.
Travel: The further the case manager has to travel in order to meet with the client and his or her providers, the greater will be the number of hours required.

Caragonne and Associates estimate that if the client’s needs are rated as “high” on four or more of these dimensions, case management will require eight to twelve hours per month. If the client’s needs are rated as “moderate” on most of the dimensions, case management will require five to seven hours per month. Even a “low” rating on most dimensions will require one to four hours per month.

As many brain-injured clients and child plaintiffs will require a high level of services on most of the Caragonne dimensions, it can be expected that case management will require eight to twelve hours per month. Assuming ten hours per month, at $100 per hour, a case manager would cost approximately $12,000 per year.

Trustee: When trust companies act both as financial managers of the plaintiff’s award and as trustees of the plaintiff’s expenditures, they may offer a rate that is lower than the sum of the financial management fee and the trustee’s fee. As practices will vary among companies, it is important that counsel receive clear quotations for the sum of the two services.

If the Public Trustee acts as trustee, it may charge for its services. In Alberta, for example, that fee equals three-eighths of a percent of the total size of the investment – that is, $3,750 per year for each $1million.

When a structured settlement has been purchased from an insurance company, the insurer will not act as trustee. Hence, an additional fee for that service will often have to be calculated. RBC, for example, will act as trustee of a structured settlement for a charge of 5% of the annual annuity payment, subject to a minimum annual fee of $7,500. Tax preparation services would be in addition, at hourly rates, likely under $1,000/yr.

Summary

It has been our observation at Economica that when the courts use the term “management fee” they are usually referring to the fee for a financial manager, to supervise the investment of the plaintiff’s award. What I have argued in this article is that, when the plaintiff is a child or has been brain injured, there are at least three other classes of agents who will be responsible for managing the expenditure of the award, and who may also have to be compensated. In those cases, therefore, the “management fee” may extend well beyond the value normally considered by the courts.

Most importantly, allowance may have to be made for compensation of the guardian, the life care planner, and the case manager; and, when the award has been invested in a structured settlement, allowance may have to be made for trustee fees. As these fees could well exceed $50,000 per year, they could add over $1million to the size of the award to a young person. Hence, it is crucial that these sources of cost be considered seriously.

Christopher Bruce is the President of Economica; he has a PhD in economics from the University of Cambridge

The Cost of Managing the Plaintiff’s Investments

Posted on December 11, 2018December 11, 2018 By economica

by Christopher J. Bruce

As most individuals are unaccustomed to managing large sums of money, it may be appropriate for plaintiffs to employ advisors to assist them with the investment of their awards. In these cases, it has often been argued that the cost of hiring such advisors should be added to the value of the award. This cost is referred to as a management fee or financial management fee.

The fees that are charged by financial advisors are almost universally quoted as a percentage of the total value of the amount that has been invested. For example, the fee charged by a bank or trust company for managing an investment of $1 million might be 2.0 percent of that investment, or $20,000 per year. This percentage normally declines as the size of the investment increases. For example, on an investment of $3 million, it might be 2.0 percent on the first $2 million and then 1.5 percent on the next $1 million.

The effect of the management fee is to reduce the net value of the rate of interest, or discount rate, obtainable by the plaintiff. For example, assume that a trust company is able to obtain a rate of return of 5.0 percent (after accounting for inflation) on an investment of $1 million, and that the management fee is 2.0 percent. The income earned in each year will be 5.0 percent of $1 million, or $50,000. But from that will be deducted a 2.0 percent management fee, or $20,000. Thus, the net return on the investment will be $30,000 ($50,000 – $20,000), which represents a 3.0 percent net rate of return on the investment.

When calculating the value of the plaintiff’s award, the financial management fee could be taken into account either by adding the dollar cost of the financial advisor to each year’s losses, or by discounting the future losses by the net rate of return on investments. The former approach requires the calculation of the management fee for each year in the future, whereas the latter requires only that the rate of return on investments be replaced by the net rate of return (3.0 percent is used in the example above instead of 5.0 percent). Thus, as both approaches produce the same estimate of the award, economists generally prefer to use the simpler approach: the net rate of return.

Assume that it has been agreed that plaintiffs should place their awards in a particular type of investment portfolio, and that the projected rate of return on that portfolio is, say, 4.5 percent. If the financial management fee is 1.75 percent, the appropriate discount rate would be 4.5 percent minus 1.75 percent, or 2.75 percent.

This is the basis of the argument that is often made in court: that a (financial) management fee must be deducted from the discount rate to obtain a “true” net discount rate.

Although this argument sounds reasonable, it is not – for the simple reason that in most cases in which financial experts testify concerning the value of “the discount rate”, it is a net discount rate to which they are referring. That is, they are referring to a rate from which the management fee has already been deducted. Thus, it is not necessary to deduct a further management fee from the recommended discount rate – the latter already includes a management fee.

What I wish to show in the following two sections is that whether it is necessary to deduct the management fee will depend upon the way the discount rate has been determined.

In the first of these sections, I will consider four situations in which the court has used testimony from expert witnesses to select the discount rate. In the second section, I will consider those cases in which the discount rate has been mandated by government regulation.

Court Selected Discount Rate

The courts have been clear that plaintiffs are expected to invest their awards in financial assets that do not expose them to unreasonable risk. For example, in its seminal decision in Lewis v. Todd (1980 CarswellOnt 617), the Supreme Court of Canada approved of the expert’s use of “high grade investments [of] long duration.” [para. 17] Financial experts have generally held that this implies that the plaintiff’s award should be invested in a balanced portfolio of conservative financial assets – for example in a mix of government bonds, highgrade corporate bonds, and “blue chip” stocks.

In this section, I will consider four approaches that plaintiffs could take to the investment of their awards; and investigate whether it would be appropriate to deduct a management fee in each of them. These approaches assume that the plaintiff will either:

Purchase mutual funds that spread their investments across balanced portfolios of financial assets.
Employ a financial advisor to assist them with decisions concerning their investments.
Use their own expertise to invest in financial markets.
Purchase a structured settlement.

Under the first three of these approaches, I assume that the plaintiff, and his or her advisors, will attempt to balance two goals: maximize the rate of return on investments, and minimize the risks associated with the purchase of financial assets. This balance is achieved by investing in a balanced portfolio of assets spread across a range of potential instruments. (Under the fourth, structured settlement approach, the plaintiff leaves the choice of investments to the provider of the structured settlement.)

Balanced portfolio funds: One method of achieving a balanced portfolio is to purchase a type of mutual fund called a balanced portfolio fund. Each of these funds – which are offered by all of Canada’s banks, by many investment houses, and by insurance companies – invests in a balanced blend of asset classes. These funds offer numerous advantages to the plaintiff. They reduce risk by spreading their investments across different types of assets, in different industries, and different countries. They offer clearly identified choices concerning the degree of risk that the plaintiff is willing to accept, often ranging from “very conservative“ to “aggressive growth-oriented”, and the selection of the assets to be incorporated in each fund is made by experts who are supported by teams of researchers.

Furthermore, balanced portfolio funds offer the attractive feature that the rates of return that they have earned are publicly available. Thus, not only can the plaintiff-investor determine easily what any fund’s performance has been; but the rates of return on those funds can be used by the courts as objective measures of the returns that are available to plaintiffs when they invest in conservative, balanced portfolios.

The interest rates that are reported publicly, on balanced portfolio funds, are net of management fees. For example, if a fund earns 4.5 percent on its investments, and the fund’s operators charge a fee of 2.0 percent, the published rate will be 2.5 percent. It is information concerning these published rates – that is, rates that are net of the fund operators’ rates – that Economica uses when discounting plaintiffs’ future losses. [See Selecting the Discount Rate, Expert Witness, Vol. 21, Spring 2017.] As these rates are net of the operators’ fees, there is no need to add a “management fee.”

Financial advisor: Instead of purchasing a mutual fund “off the shelf,” the plaintiff could employ a financial advisor to purchase a balanced portfolio of investments, specific to the preferences of the plaintiff. Generally, these advisors charge a fee that equals approximately 1.0 to 2.0 percent of the value of the assets that they are managing. Is there an argument for adding the cost of this advice to the plaintiff’s award, as a management fee? I will argue that the answer is “no.”

To see why, consider the following example: assume that a financial advisor who charges a management fee of 2.0 percent is able to obtain a rate of return of 5.0 percent. The net rate of return received by the advisor’s clients will be 3.0 percent. [For example, $100,000 invested at 5.0 percent will generate a return of $5,000 per year and, with a management fee of 2.0 percent, will cost $2,000 per year. Thus, there is a net gain of $3,000, which is 3.0 percent of the invested amount.]

In this case, the appropriate discount rate will be the net rate of interest obtained by the advisor, or 3.0 percent. For example, to determine how much would have to be invested today to replace a $103,000 loss a year from now, one would divide $103,000 by 1.03 (= 1 + the interest rate), to get $100,000. When future losses are discounted by this rate, the costs of the advisor’s services have been accounted for in the calculation – the $3,000 gain after one year equals the return on the investment, $5,000, minus the advisor’s fee, $2,000.

Thus, if the discount rate that is used by the court to calculate the value of the plaintiff’s award equals the net investment return obtainable by the financial advisor, no additional allowance needs to be made for a management fee.

Although the rates of return obtainable by financial advisors are not publicly available, a reliable objective measure of that rate is the rate of return on balanced portfolio funds. As
independent financial advisors generally rely on the same research that is available to the operators of mutual funds (they usually work for the same financial institutions), they can be expected invest in portfolios of financial assets that are similar to those that are contained in balanced portfolio funds. They can, therefore, be expected to generate similar rates of return net of management fees.

If that is true, then the estimate of the return available to independent advisors includes an allowance for the management fee, and no additional management fee need be awarded.

Self investment: In those cases in which plaintiffs are expected to use their own skills to invest their awards, there will be no (or only minor) management fees and, hence, no call for such fees.

Structured settlement: The cost of any structured settlement includes the cost to the issuer of managing that settlement. Hence, again, there would be no need for an additional management fee.

Summary: I can find no situation in which it would be necessary to award a management fee to a plaintiff who is mentally competent.

Mandated Discount Rate

An argument might be made for the award of management fees in those cases in which the discount rate mandated by the government exceeds the rate predicted by the experts before the court.

Assume, for example, that the mandated rate was 3.0 percent and that the best evidence before the court was that the net rate of return available on a balanced portfolio of funds was 2.0 percent. It could be argued that the difference between the two rates had arisen because the mandated rate reflected the rate of return available before deduction of management fees. In that case, it might be appropriate to award a management fee of 1.0 percent, to bring the net discount rate to 2.0 percent.

It must be pointed out, however, that the rates currently mandated in British Columbia, Ontario, and Saskatchewan are significantly lower than the net rates available on balanced portfolio funds. Hence, although there is a case for awarding management fees in some cases, the conditions for those cases do not exist at this time.

Conclusion

In virtually every situation in which financial experts testify concerning the value of the discount rate, the rate of return that they refer to is net of the cost of investment. Hence, it is not necessary to deduct a financial management fee. And, although such a deduction might be necessary in cases in which a mandated discount rate had been used, the rates that have been mandated in Canada in recent years are so low that it must be concluded that they are also net of management fees.

Christopher Bruce is the President of Economica; he has a PhD in economics from the University of Cambridge

Admissibility of Expert Evidence: Personal Injury Litigation

Posted on December 11, 2018 By economica

by Christopher J. Bruce

The admission of expert evidence has required that the courts maintain a fine balance between, on the one hand, caution against the possibility that witnesses may usurp the court’s role of forming opinions and drawing conclusions; and, on the other hand, recognition of the fact that juries and triers of fact may lack the technical expertise to draw inferences from the facts as presented.

This dichotomy has led the courts and legal commentators to develop a lengthy set of principles concerning the admissibility of experts and their evidence. These principles can usefully be divided into four categories: the requirement that expert testimony be useful; the identification of whether the expert is qualified; the determination of whether the expert’s testimony is reliable; and the evaluation of the weight that is to be attached to the expert’s opinion.

In this article, I summarise some recent rulings in Canadian and American law with respect to each of these categories. I find that although it is rare in western Canada for the courts to disqualify a witness who has been tendered as an “expert,” there are many instances in which the court will accept a witness’ qualifications subject to the understanding that opposing counsel will exercise its right to subject the witness to vigorous crossexamination. And in many others, the court will caution that an expert’s testimony is to be given reduced weight.

1. Useful
The first requirement that must be met before an expert can be permitted to testify – often referred to as the “gatekeeper” component – is that the expert’s testimony must be shown to be “necessary in assisting the trier of fact.” (R. Mohan, [1994] 2 S.C.R. 9). This requirement has a number of implications.

First, the expert’s testimony must not have the effect of usurping the court’s function, of weighing evidence, evaluating the credibility of witnesses, making findings of fact, reaching conclusions concerning legal matters, etc. In Snelgrove, (2015 ONSC 585, at para 12), for example, the court disqualified a witness, in part because he “…purports to come to legal conclusions,” specifically concerning the defendant’s intent, negligence, misrepresentations, and misconduct.

Second, the expert’s report must offer an opinion concerning the issues in dispute. See, for example, Hoang v Vicentini (2012 ONSC 1358) in which an accident reconstruction expert’s report was dismissed on this ground.

Third, for expert evidence to be admissible:

[t]he subject matter of the inquiry must be such that ordinary people are unlikely to form a correct judgment about it, if unassisted by persons with special knowledge. (Kelliher (Village of) v. Smith, [1931] S.C.R. 67 quoting from Bevan on Negligence)

Or, as Lawton, LJ concluded in R. v. Turner ([1975] Q.B. 834, at 841):

An expert’s opinion is admissible to furnish the court with scientific information that is likely to be outside the experience and knowledge of a judge or jury. If on the proven facts a judge or jury can form their own conclusions without help, then the opinion of an expert is unnecessary.

In Canada, there has been little debate about the definition of the term “scientific information” as used in Turner. In the United States, however, two decisions of the Supreme Court – Daubert v. Merrell Dow Pharmaceuticals, Inc ((1992) 509 U.S. 579) and Kumho Tire Co. v. Carmichael ((1999) 131 ) – have ruled on the interpretation of the terms “scientific, technical, or other specialized knowledge” contained in Rule 702 of the U.S. Federal Rules of Evidence. Of particular importance to Canadian practitioners is that the Supreme Court of Canada, in R. v. J.-L. J. ([2000] 2 S.C.R. 600, 2000 SCC 51) explicitly approved of the four criteria set out in Daubert for determining whether expert testimony met the requirement that it constitute “scientific knowledge.” These are:

Whether the theory or technique “can be (and has been) tested”.
Whether the “theory or technique has been subjected to peer review and publication”.
In the case of a particular technique, what “the known or potential rate of error” is or has been.
Whether the evidence has gained widespread acceptance within the scientific community.

The Daubert criteria proved less applicable to issues involving “technical” than “scientific” knowledge, such as that often proffered by engineers, however. Accordingly, the United States Supreme Court agreed to hear Kumho Tire. In that case, an expert in tire failure analysis relied in part on his own (extensive) experience to determine whether a failure in a tire was caused by a defect and not by misuse on the part of the plaintiff. As the expert’s testimony did not meet any of the criteria set out in Daubert, the issue in Kumho was whether “technical and other specialized knowledge,” as defined in Rule 702, was to be subjected to the same criteria as was “scientific knowledge.”

The Court ruled that it was not. Testimony about a technical matter could be considered to be “expert” if it:

…focuses upon specialized observations, the specialized translations of those observations into theory, a specialized theory itself, or the application of such a theory in a particular case.

The function of Rule 702 was not to restrict expert testimony to a narrow set of “scientific” disciplines, but to:

… make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.

It was the application of “intellectual rigor” that distinguished an expert from a layman, as much as did the possession of specialised, formal training.

2. Qualified
As the expert’s role is to provide information that is not within the “experience and knowledge of a judge or jury,” it is necessary to show that those individuals who are presented as “experts” possess the requisite training and experience. With respect to scientific knowledge, this has generally meant that the witness must have obtained a graduate degree, such as an M.Sc. or Ph.D., or a professional designation, such as a law or accounting degree. With respect to technical skills, an individual (such as the tire expert in Kumho) may develop “expertise” through long personal experience with the matter before the court. In both cases, however, the witness is expected to apply intellectual rigour to the interpretation of the evidence before the court.

Furthermore, the expert’s testimony may not be admitted if his or her qualifications are inferior to those of other witnesses who have been tendered as experts in the same action. It was for this reason that, in Levshtein v Ramirez (2013 ONSC 521), a chiropractor’s opinion concerning the plaintiff’s ability to perform household tasks was not admitted. Although the chiropractor had performed a number of tests of the plaintiff’s hand strength and weight-lifting ability, the court found that other witnesses were more qualified to testify concerning the extent to which the plaintiff’s physical disabilities had affected his activities in the home.

In a recent survey of more than 12,000 American decisions, PWC (formerly Price Waterhouse Cooper) found that the courts had focussed on two factors: relevant academic credentials and relevant experience, when evaluating qualifications. The courts generally ruled that extensive experience might be sufficient to outweigh lack of credentials (for example, working as an bookkeeper in a role relevant to the case, such as franchising); and appropriate credentials might not be enough if the area of specialization was not relevant (for example, an expert testifying on loss of earnings might have a PhD in economics, but in international trade). (PWC, Challenges to Financial Experts: 2000-2016, (pwc.com).)

3. Reliable
Two broad issues are canvassed when determining whether the testimony of the expert is of sufficient reliability to be of value to the court. First, the evidence presented by the expert must be “relevant;” that is, it must be “… so related to a fact in issue that it tends to establish it.” (Mohan, at 20) Second, the expert must provide an “objective and unbiased” opinion.

Relevant

To be relevant, expert evidence must meet two criteria. First, any factual evidence must meet standard tests of statistical reliability. Data must be collected in a manner that ensures that it is representative of the group to which it is to be applied. For example, if a doctor’s opinion is based on observation of his or her own patients, precautions must be in place to ensure that those patients are similar to the plaintiff in question. Similarly, if evidence is drawn from reports published by third parties, the expert must be careful to ensure that the definitions used in those studies refer to the same concepts that are of importance to the case at hand. [For further elaboration on these points, see Christopher Bruce, “The Reliability of Statistical Evidence Concerning the Impact of Disability” The Expert Witness, 2004 (3).]

Second, there must be a compelling logical and/or statistical correlation between the evidence that has been presented and the conclusion that the expert purports to draw. This is particularly problematic when the expert misunderstands or misrepresents statistical studies that have been published by third parties.

Objective and unbiased

If an expert has a financial, personal, or professional interest in the outcome of a case, which may induce that expert to bias his or her opinion, the court may either disqualify the expert or place reduced weight on that opinion. [The following discussion is informed largely by the decisions in United City Properties v. Tong, 2010 BCSC 111 and R. v Klassen, 2003 MBQB 253; and by Paul Michell and Renu Mandhare, “The Uncertain Duty of the Expert Witness,” Alta L Rev 42.3 (2005).]

Financial: A number of factors have been identified by the courts that may have led the expert to have a financial interest in the outcome of the case. These include:

A contingency fee,
A long association, or exclusive association, with one lawyer or party,
Employment by either the plaintiff or defendant.

Personal: The witness’s objectivity may also be questioned if he or she had:

A personal interest in the outcome, either because that outcome would directly affect the witness or because it would set a precedent that would affect him or her,
A personal relationship, such as friendship or a family connection, to one of the litigants.

Professional: If the witness has taken a strong stance on a contentious issue facing the courts – such as the manner in which the discount rate is to be determined – that witness may come to consider his or her professional reputation to be dependant on acceptance of that view by the court. This may lead the expert to discount or ignore evidence contrary to his or her professed view.

Even in the absence of evidence that an expert has an interest in the outcome of the case, the court may still find bias, based on the content of the expert’s statements, report, or testimony. Evidence of such bias has been found when:

The witness has been found to have made statements publicly that show philosophical hostility towards certain subjects,
The expert’s report has been withdrawn or modified without reasonable explanation,
The expert’s opinion has been found to differ, for unexplained reasons, between occasions on which the expert appeared for the defence and those when he/she appeared for the plaintiff,
The expert has departed from any governing ethical guidelines established in the expert’s field of expertise,
The expert has persistently failed to recognize other explanations or to provide a reasonable range of opinion,
The witness has operated beyond his or her field of stated expertise, such as when an economist comments on the appropriate costs of caring for an injured plaintiff,
The expert has failed to substantiate his or her opinions,
The expert has acted as an “…informed champion or enthusiastic supporter of the retaining party’s cause.” (Michell and Mandhare at 648, quoting Halpern v. Canada (A.G.) (2002), 215 D.L.R. (4th) 223 at paras. 143-44 (Ont. Div. Ct.).)

Nevertheless, in Moore v Smith Construction (2013 ONSC 5260), a scientist who worked for an advocacy group that provided legal services to the respondent was allowed to testify as an expert. The court found, following a voir dire, that there was no evidence of bias or partiality. Instead of disqualifying the scientist, the court ruled that the “… fact that the proposed expert is employed by the party can be taken into account when the trial judge assesses the weight and value of the evidence”. (at para 47)

4. Weight

If the court has found a degree of bias in the expert’s testimony, it can choose among: disqualifying the expert, announcing that it will allow the expert’s testimony but give lesser weight to that evidence, or leaving criticism of the expert’s report to cross-examination by opposing counsel.

Of these, the first would seem to be of primary importance in cases that were tried before a jury, and the second and third to cases that were heard before a judge. As a judge will, presumably, be less influenced by biased and unqualified witnesses than would be a jury, it may be less harmful to permit questionable testimony when the case was being tried by judge alone than when it was being heard before a jury. On these grounds, we would expect experts to be disqualified more often in Canadian courts in criminal cases than in tort cases; and more often in tort cases in the United States than in equivalent cases in Canada.

In Gutbir v University Health Network (2010 ONSC 6394), a medical malpractice case, the court allowed the treating physician to testify to fact; but, on the ground that he had a personal interest in the outcome of the case, it denied him qualification as an expert.

Contrary to our speculation above, however, the PWC survey found that American courts are reluctant to exclude expert testimony. Rather they apply a “light hand on the gate”, preferring to subject the expert’s opinion to vigorous cross-examination, especially if the disagreement concerns the choice of an appropriate or inclusive set of data. They were also found to be willing to allow experts to revise their reports in light of objections from opposing counsel.

Summary

The courts admit the testimony of expert witnesses only with a good deal of apprehension. First, they are reluctant to cede their role of weighing evidence, evaluating the credibility of witnesses, making findings of fact, reaching conclusions concerning legal matters, etc. And, second, they have qualms about the qualifications and independence of witnesses who have been tendered as “experts”.

As a result, the courts have developed lengthy lists of requirements that witnesses must meet before they can be accepted. The purpose of this article has been to review these requirements and to ask how they have been applied in practice. The most important finding of this review has been that the requirements have become sufficiently well known that it is uncommon for legal counsel to put forward individuals who fail to meet the court’s assessment. Rare cases remain in which experts are disqualified; but, more commonly, where an expert has been challenged, the court has allowed the expert: to re-write his or her report, to submit the report subject to the condition that it will be given reduced weight, or to testify subject to the understanding that opposing counsel has the right to cross-examine “vigorously”.

Christopher Bruce is the President of Economica and a Professor of Economics at the University of Calgary.

Summer 2016 issue of the Expert Witness newsletter (volume 20, issue 2)

Posted on June 1, 2016March 3, 2017 By economica

Contents:

This issue contains two articles. In the first, Christopher Bruce and Derek Aldridge examine the effect of a criminal record on earnings. In the second, Christopher Bruce and Kelly Rathje discuss the structure and content of expert cost of care reports.

The Effect of Incarceration on Future Earnings

In the first article, Dr. Bruce and Mr. Aldridge find that the literature regarding the effect of a criminal record on income suggests incarceration has a relatively small effect on lifetime earnings. Those who have been incarcerated tend to have lower levels of income than those without a criminal record, not because incarceration has changed their vocational/economic outcomes, but because they are drawn from a group with relatively low income to begin with. Further, the length of a person’s incarceration (holding the severity of the crime constant) appeared to have little impact on earnings, except in the case of “white collar” crime such as fraud or embezzlement. The literature suggests that individuals with supportive family ties, such as those living with their spouses and children, were the most successful at transitioning back into the workforce. In addition, the likelihood of recidivism decreased as an individual aged (i.e., those 30 and 40 year olds who were incarcerated in their early 20s are not likely to become repeat offenders).

The Structure of a Cost of Care Report

In the second article, Dr. Bruce and Ms. Rathje provide an economist’s perspective on various issues that arise in the presentation of cost of care reports. These include issues such as incremental costs, requirements that will vary over a plaintiff’s lifetime, the approach to ranges of estimates for costs or replacement frequencies, the costs of housekeepers and personal care attendants, and presentation. They also provide a sample calculation, to illustrate the issues discussed in the article.

Spring 2016 issue of the Expert Witness newsletter (volume 20, issue 1)

Posted on March 1, 2016October 2, 2019 By economica

Contents:

This issue contains two articles written by Dr. Christopher Bruce. The first reviews the debate over the use of cross versus sole dependency approaches in the determination of loss of dependency on income; while the second article concerns the reliability of income data drawn from the 2011 census.

Cross versus Sole Dependency in Fatal Accident Actions

In the first article, Dr. Bruce notes that a fundamental assumption in economics is that individuals are rational. Therefore, when an individual is observed to make a voluntary choice, it can be concluded that the individual must have expected that choice to make him/her better off (or at least, no worse off). With respect to fatal accident actions, this implies that if spouses are rational, they must have expected that the decisions they made about spending on one another would make them better off. He then shows that if this proposition is accepted, the sole dependency approach is preferred to cross dependency.

Are Data from the 2011 Census Reliable?

In the second article, Dr. Bruce examines the reliability of the 2011 Census income data. In the past, completion of the long form census was mandatory. In 2011, however, completion of this form was voluntary and the response rate decreased. While this created statistical problems concerning the reliability of the data, Statistics Canada had anticipated these problems and took steps to mitigate them. In his article, Dr. Bruce discusses these problems, and the solutions implemented by Statistics Canada, concluding that the 2011 census remains a reliable, high quality data source. It will remain our primary source of earnings information until data from the 2016 census are released sometime in 2018.
With respect to the 2016 census, we would note that it will be mandatory. Further, Statistics Canada will be sending the long-form section to a greater number of households than in past censuses (one in four households instead of one in five households), and will use income data directly from the Canada Revenue Agency, providing data for 100 percent of households. It is anticipated that because of these changes, the income data from the 2016 census will be the most accurate of any census to date.

A Pdf. version of the newsletter can be found here.

Spring 2004 issue of the Expert Witness newsletter (volume 9, issue 1)

Posted on March 1, 2004February 25, 2017 By economica

Forecasting the Rate of Growth of Real Wages (Productivity)
- by Christopher Bruce
- Christopher Bruce summarises the most recent theoretical and empirical evidence concerning one of the most controversial, and poorly-understood, components of the calculation of future earnings – the so-called “productivity factor.” He notes that, although the observed rate of increase in earnings is tied to the rate of increase in labour productivity over the very long run, in shorter periods the two rates may differ if there is a significant increase or decrease in the supply of labour. Specifically, he reports that most economists now believe that the slow down in “real” wage growth (the rate of growth in excess of the rate of inflation) in the 1980s and 1990s occurred because of the increase in labour supply that came with the influx of “baby boomers.” That the baby boom is now working its way through the system implies, therefore, that the rate of growth of real wages will increase significantly in the next two decades.
An Alternative Method for Assessing the Value of Housewife Services
- by Douglas W. Allen
- The article develops a new and creative method for assessing the value of the housework provided by women in “traditional” marriages; that is, by women who stay at home full time. Professor Allen is an internationally recognised expert on economic aspects of marriage and divorce. He has, for example, written extensively on the impact of no-fault divorce laws. In this article, he argues that a widely-accepted theory of the manner in which individuals choose their spouses can cast light on the implied value that couples place on the value of housework. Specifically, he notes that many theories of spousal choice predict that individuals will choose mates in such a way that the contributions of the two spouses will be equal. If this is the case, then if the husband is working in the labour market, where he earns $50,000 per year, and the wife is working only at home, the value of her contribution to the marriage must also be $50,000.

Summer 2003 issue of the Expert Witness newsletter (volume 8, issue 2)

Posted on June 1, 2003February 26, 2017 By economica

Assessment of damages in wrongful birth cases
- by Gerald Robertson, Q.C.
- Gerald Robertson is a Professor of Law at the University of Alberta, and a practising barrister and solicitor in the areas of civil litigation and personal injury. He is co-author of Legal Liability of Doctors and Hospitals in Canada (3^rd ed.). He is also a director of the Robertson Personal Injury Newsletter, an on-line weekly digest of all personal injury judgments in Canada decided over the previous week, along with current developments in the area of personal injury litigation.
Predicting post-secondary education attainment
- by Mohamed Amery
- In this article Mohamed Amery discusses cases involving plaintiffs who are minors, in which it is necessary to predict the level of education that these individuals would have obtained had they not been injured. Mr. Amery’s article provides information concerning indicators that can be used to make this prediction – including the education of the plaintiff’s parents; the level of the plaintiff’s employment while in high school; and whether the plaintiff ever failed a grade.
The impact of parental divorce or death on adolescents’ education & earnings
- by Christopher Bruce & Mohamed Amery
- In this article Christopher Bruce and Mohamed Amery survey recent research concerning the impact that the death or divorce of a parent will have on the lifetime earning capacity of children.
Experience-Rating of Automobile Insurance: A Good Idea that Won’t Work
- by Christopher Bruce
- In this article Christopher Bruce identifies some of the weaknesses of legislation that requires automobile insurance companies to use “experience rating” – a system in which the only factor that determines your premiums is your driving record.

Winter 2001/02 issue of the Expert Witness newsletter (volume 6, issue 4)

Posted on December 1, 2001February 25, 2017 By economica

Selecting the Discount Rate – An Update
- by Christopher Bruce, Derek Aldridge, Scott Beesley, and Kelly Rathje
- In this article the consultants at Economica have combined to review the most recent information concerning the “discount rate;” that is, the rate of interest at which plaintiffs are assumed to invest their award.
Destruction of evidence
- by Christopher Bruce
- In this article Christopher Bruce discusses situations in which information required to establish negligence remains in the possession of one of the parties. In the absence of any penalties, a party who believes that this evidence may suggest that he or she should be held liable will have an incentive to destroy the evidence.
  The purpose of Dr. Bruce’s article is to develop a model of the legal process that will offer insight into the determination of legal remedies for the destruction of evidence by a defendant. He bases this model on the assumption that the first role of such remedies must be to discourage the defendant from destroying any information that might reasonably be expected to assist the court in the determination of liability.
The awarding of costs and payment of legal fees in a case brought before the Court: is there a potential injustice?
- by Derek Aldridge & Ronald Cummings, QC
- This article shows that there may be a potential injustice due to the tax treatment of an employee-plaintiff versus a corporate-defendant. We show that the costs imposed on a losing employee-plaintiff impose a greater burden than the same level of costs imposed on a losing corporate defendant. This is because the employee-plaintiff must such pay costs with after-tax dollars, but the corporate defendant can use before-tax dollars.

Summer 2001 issue of the Expert Witness newsletter (volume 6, issue 2)

Posted on June 1, 2001February 25, 2017 By economica

The Deduction of Accelerated Inheritance
- by Christopher Bruce
- In this article Chris Bruce discusses a requirement established by the Court of Appeal in its October 17, 2000 ruling in Brooks v. Stefura. This was that “accelerated inheritances” should be deducted from each plaintiff’s dependency award.
  The Court did not, however, state clearly what it meant by “accelerated inheritances,” nor did it specify how those inheritances were to be calculated. In this article, Chris offers some observations that may cast some light on these issues.
The Deduction (?) of “Accelerated Inheritance” (Scott Beesley’s view)
- by Scott Beesley
- In this article Scott Beesley discusses a requirement established by the Court of Appeal in its October 17, 2000 ruling in Brooks v. Stefura. This was that “accelerated inheritances” should be deducted from each plaintiff’s dependency award.
  The Court did not, however, state clearly what it meant by “accelerated inheritances,” nor did it specify how those inheritances were to be calculated. In this article, Scott offers some observations that may cast some light on these issues.
Avoiding Overlap Between Fatal Accident Act and Survival of Actions Act Claims
- by Scott Beesley
- This article points out that while the method set out by the Court of Appeal in Brooks v. Stefura does prevent double-recovery, it does not prevent double-payment, that is, the payment of the same dollar to one plaintiff under the FAA and to another under the SAA. The text of the judgment makes it clear that the Court does not wish this to occur. The article suggests a refinement of the Court’s method which would prevent such double-payments. Four detailed examples are provided.
Case Comment: Boston v. Boston
- by Scott Beesley
- The Supreme Court of Canada recently ruled in the case of Boston v. Boston. This was a case involving the variation of spousal support at the time of the husband’s retirement. He retired in 1997 and began to receive his pension. He applied to have the original support payment reduced, on the grounds that he was now paying support from his pension, which had already been considered in the original division of assets. It was argued that the wife had traded off her right to half the pension, and in return had received the bulk of the physical and other assets. He succeeded in having the monthly payment lowered from $3,200 to $950, but the Ontario Court of Appeal increased the figure back to $2,000. The husband was appealing that last OCA decision in the Supreme Court.
  The SCC’s decision allowed the husband’s appeal and restored the motions judge’s decision to reduce support to $950 per month. This was in my view correct, as it would appear to be unjust that the wife should receive half of an asset at separation, and then be allowed to claim part of the husband’s half of that asset later.

Summer 1998 issue of the Expert Witness newsletter (volume 3, issue 2)

Posted on June 1, 1998February 25, 2017 By economica

The Effect of Alcoholism on Earning Capacity
- by Nicole MacPherson
- In this article Nicole MacPherson investigates the effect of alcoholism on earning capacity. She has found that alcoholism has both direct and indirect effects on earnings. Ms. MacPherson brings to our attention both the obvious and overlooked effects of alcoholism.
Applying Economic Analysis to Tort Law
- by Christopher Bruce
- In this article Christopher Bruce expands the use of economic analysis in tort law. Dr. Bruce identifies the distinguishing characteristics of the economic approach versus the more traditional methods of legal analysis. This is the first of a series of articles to follow regarding the economic analysis of torts.
Not All “Bears” Are Bordering Extinction
- by Heber G. Smith
- In this article Heber Smith explains how the claimant converts his or her award to income for the future. He contrasts mutual funds, with high returns and perhaps less stability, with annuities, having lower returns and lower risk. This discussion leads into future articles regarding strategies of structured settlements.
Doctors Are Not Experts on Life Expectancy
- by David Strauss, PhD, FASA and Robert Shavelle, PhD
- In this article David Strauss and Robert Shavelle argue that physicians are usually not experts on life expectancy. They note, however, that doctors’ opinions regarding life expectancy have been relied on by the courts. They identify the different roles of physicians and actuaries in life expectancy determination.
Software Review: Personal Injury Damages Partner (Carswell)
- by Derek Aldridge
- In this article Derek Aldridge reviews a CD ROM titled Personal Injury Damages Partner, available from Carswell. The CD contains a searchable collection of full text and digest summaries of personal injury cases.

Spring 1998 issue of the Expert Witness newsletter (volume 3, issue 1)

Posted on March 1, 1998February 25, 2017 By economica

The Role of the Expert Witness in Developing “New” Law
- by Christopher Bruce
- In this article Christopher Bruce explores the role of the expert witness. He delineates both the advantages and disadvantages to the legal system when an expert adopts a “constructive” rather than a “passive” approach. While recognising the pitfalls with either approach, he points out the potential benefits that may accrue when the specialist is allowed to bring his/her expertise to bear, shedding light upon the complexities of personal injury litigation.
Unresolved Issues in the Valuation of Estate Claims Under Survival of Actions
- by Derek Aldridge
- In this article Derek Aldridge expands upon previous articles in our newsletter which have arisen from the Duncan v. Baddeley court of appeal decision. He raises several questions concerning the calculation of losses in light of this decision, and suggests that it may not be possible to resolve these issues until it is determined whether the Court’s goal is one of compensation or deterrence.
BOOK REVIEW: The Expert: A Practitioner’s Guide, (Carswell) 1997
- by Christopher Bruce
- Christopher Bruce reviews this collection of 27 essays concerning expert testimony, each essay having been written by one or more experts in the relevant discipline. The purpose of the book, according to the foreword, is to provide trial lawyers with a basic understanding of both “… the role of the expert in the legal process … [and] … the fundamental concepts of the discipline within which the expert operates.”.
Outstanding Issues in the Valuation of Household Services
- by Therese Brown and Christopher Bruce
- In this article Therese Brown and Christopher Bruce wrap up the series of five articles on household services which have been presented in our newsletter. They deal with several of the issues which have not been dealt with specifically in previous articles. Included are the following: the suggested approach when a plaintiff is still able to undertake a particular household activity, albeit more slowly than previously; a discussion of how long to run the loss of household services; and the effect of retirement on the loss of household services.

Winter 1997 issue of the Expert Witness newsletter (volume 2, issue 4)

Posted on December 1, 1997February 25, 2017 By economica

Determination of the Hourly Cost of Household Services
- by Therese Brown and Audrey Hallson
- Therese Brown and Audrey Hallson, in the fourth of a five-part series of articles, discuss the estimation of an appropriate hourly rate in cases which involve the loss of household services. This discussion details rates gleaned from a 1997 survey of household providers which was conducted by Economica.
The Role of the Occupational Therapist in Personal Injury Litigation – Part 2
- by Lorian Kennedy
- In the second of her two-part series on the role of occupational therapists in personal injury litigation, Lorian Kennedy explains that the occupational therapist is well placed, in terms of both her/his education and expertise, to assess the loss of functional capacity of a plaintiff, after an accident, to undertake household services.
D’Amato v. Badger – Complications Arising when the Plaintiff is a Business Partner
- by Christopher Bruce and Scott Beesley
- In this article Christopher Bruce and Scott Beesley bring clarity to some of the complex issues that surround the loss of income which arises when the proprietor of a small business is injured. In particular, they deal with the situation encountered in the recent Supreme Court decision of D’Amato v. Badger, in which D’Amato was a partner in a small business. The issue of compensation became clouded because D’Amato, through his partner’s generosity, was in receipt of a wage post-accident that exceeded the value of his contribution, given his compromised condition.
Determination of the Hourly Cost of Household Services
- by Therese Brown and Audrey Hallson
- Therese Brown and Audrey Hallson, in the fourth of a five-part series of articles, discuss the estimation of an appropriate hourly rate in cases which involve the loss of household services. This discussion details rates gleaned from a 1997 survey of household providers which was conducted by Economica.

Autumn 1997 issue of the Expert Witness newsletter (volume 2, issue 3)

Posted on September 1, 1997February 25, 2017 By economica

Using Male Earnings Data to Forecast the Future Income of Females
- by Derek Aldridge
- In this article Derek Aldridge deals with the subject of the “wage gap” between men and women. He discusses the rationale used to explain this difference in earnings and why it might be inaccurate to base a prediction of the future earnings of young women on women’s historical earnings. He suggests that there is considerable support for the use of male earnings data which have been adjusted to reflect the extent to which a female’s career path may differ from that of the average male.
Structured Settlement Assignments
- by Heber G. Smith
- In this article Heber Smith notes that the assignment of the obligations of a defendant under a structured settlement to a qualified assignee now provides self-insured defendants access to the tax-free periodic payment option.
The Role of the Occupational Therapist in Personal Injury Litigation – Part 1
- by Lorian Kennedy
- Lorian Kennedy, in the first part of a two-part series, outlines why an occupational therapist’s education and competencies lend themselves especially well to skills assessment in personal injury cases. In particular, demand for the services of occupational therapists has grown in relation to determination of suitable compensation for the loss of an individual’s capacity to perform household services. Reports by these professionals, in addition, may include assessment of an individual’s functional ability in relation to self-care, leisure, and paid work.
Notable Judgments in the Valuation of Household Services
- by Therese Brown
- Therese Brown, in the third of a series of articles on household services, reviews various judgments which are of interest in this area. She discusses the substantiation of the loss, as well as the issue of replacement cost. It is also noted that assumptions based on traditional beliefs may prove to be erroneous.

Summer 1997 issue of the Expert Witness newsletter (volume 2, issue 2)

Posted on June 1, 1997February 25, 2017 By economica

Implications of Duncan v. Baddeley
- by Christopher Bruce
- This article deals with the impact of the recent Alberta Appeal Court decision in Duncan v. Baddeley. Christopher Bruce discusses the implications of this decision for: fatal accident actions in which there are no dependants; the selection between the Fatal Accidents Act and the Survival of Actions Act; and the valuation of the “lost years” deduction in both fatal accident and personal injury actions.
Issues in Loss of Income Calculations for Self-Employed Individuals
- by Scott Beesley
- In this article, Scott Beesley outlines various factors which complicate the assessment of the loss of income for self-employed individuals. After clearly laying out the potential pitfalls in these cases, he reviews a number of approaches which might be employed to maximise the accuracy of these estimates.
Structured Settlements: Case Suitability
- by Heber G. Smith
- In this article, Heber Smith discusses criteria which are useful in the determination of the suitability of structured settlements. Amongst other benefits, Revenue Canada may make a significant imputed contribution to a personal injury settlement through reduced taxation. He identifies those instances in which this tax contribution may be of particular significance.
The Children of Immigrants – How Do They Fare?
- by Therese Brown
- In this article, Therese Brown notes various factors which may enhance or impede the socio-economic progress of the children of immigrants. Considerable evidence suggests that the positive effects associated with foreign parentage overwhelm all other factors. For that reason, the children of immigrants tend to exhibit higher potential earnings than do their counterparts with native-born parents.
Economic and Employment Prospects of the Disabled
- by Therese Brown
- In this article, Therese Brown reviews a study on the economic and employment prospects of the disabled. The panel data relied on for this study suggest that the impact of disability on income may not be as severe as has been suggested by most previous sources of information.

Spring 1997 issue of the Expert Witness newsletter (volume 2, issue 1)

Posted on March 1, 1997February 25, 2017 By economica

Predicting the Adult Earning Capacity of Minors
- by Faizal Sharma
- In this article Faizal Sharma sheds light upon the complex issue of predicting the potential income stream of a minor who has been injured. He explains that recent studies show a stronger correlation between parents’ income and that of their children than had previously been expected. The child’s level of education is positively correlated with the parent’s education and is negatively affected by being part of a non-traditional family.
BOOK REVIEW: John Barnes, Sports and the Law in Canada, 3rd Edition (Butterworths: Toronto) 1996
- Reviewed by Christopher Bruce
- In this article Cristropher Bruce reviews a book that examines the state of sports law in Canada.
Spousal Influence on the Decision to Retire
- by Scott Beesley
- In this article Scott Beesley notes that the respondents to surveys do not expect the influence of their spouse to be large in terms of choice of retirement age. He also reports that surveys of those who have yet to retire tend to suggest that this factor plays a much stronger role.
Lost Years Maybe, Lost Care – Never
- by Heber G. Smith
- In this article Heber Smith discusses the importance of providing adequate compensation for an injured plaintiff for whom a diminished life expectancy is projected. He reviews Revenue Canada changes, which have reduced the risk of the insurer, thus making them more willing to negotiate in these matters.
Determination of Contribution to Household Services
- by Therese Brown
- In this article, various complexities arising from the determination of the loss of household services in personal injury or fatal accident actions are explored by Therese Brown in the next article. While it is pointed out that information specific to the individual is preferable, average statistics are frequently relied on as well.
The “Lost Years” Deduction
- by Christopher Bruce
- In this article Christopher Bruce deals with the current issue of appropriate compensation for the “lost years” of a plaintiff with reduced life expectancy. One of the approaches discussed includes the view that the plaintiff should be compensated for the lost earnings which remain after the cost of necessities is deducted. Further clarification is required on this issue to establish an estimated cost for “necessities.”

Spring 1996 issue of the Expert Witness newsletter (volume 1, issue 1)

Posted on March 1, 1996February 25, 2017 By economica

Shortened Life Expectency: The “Lost Years” Calculation
- by Scott Beesley
- In this article Scott Beesley analyses the impact which a reduced life expectancy has on the plaintiff’s claim for loss of future earnings – the “lost years deduction.” In a future issue, this discussion will be extended to the calculation of losses in fatal accident actions in which the deceased has left no dependents – following from the Alberta decisions in Galand and Duncan.
The Annuity Solution to Fund Cost of Future Care
- by Heber G. Smith
- In this article Heber Smith provides the first in a series of articles concerning the intricacies of structured settlements. His article addresses such topics as annuity titles and rights, the specifics of structured settlement annuities, new developments in structured settlements and the creative use of annuities in remediating personal loss actions.
What is a “Discount Rate”?
- by Christopher Bruce
- In this article Christopher Bruce provides a simple introduction to a concept which litigators must use every day – the discount rate, or “real rate of interest.” This article is the first in a series which will discuss the underlying concepts employed in the derivation of the lump sum values of future streams of losses.
Loss of Earnings for Wrongful Confinement and Wrongful Sterilization: The Case of Leilani Muir
- by Christopher Bruce
- In this article Christopher Bruce offers a brief comment on the case Muir v. Alberta, in which damages were awarded to the plaintiff because she was wrongfully confined in a home for the mentally defective and was wrongfully sterilized. However, the court denied her loss of earnings claim.
Do Sons Follow their Fathers?
- by Christopher Bruce
- In this article Christopher Bruce offers a brief comment on the link between a father’s earnings and his son’s.

Assessment of damages in personal injury and fatal accident litigation

1. Definition: Real rate of growth of earnings

2. Methods of predicting the real rate of growth of earnings

2.1 Historical data

2.2 Forecasting Agencies

3. Selecting a forecast

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