IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100311

Docket:
M034055

Registry: Vancouver

Between:

Taryn
Burdett, an infant by her

Guardian
Ad Litem Terrence Burdett

Plaintiff

And:

Mohamed
Abdikani Mohamed, Joseph Samuel,

and
Christopher Brent Dubois,

Defendants

And:

Insurance
Corporation of British Columbia

Third Party

Before:
The Honourable Madam Justice Boyd

Ruling on Tax Gross up and Management Fees

Introduction:

[1]            
This ruling concerns the tax gross up and
management fees on the award made by the jury in this action.  Aside from the
award for non pecuniary damages, the jury awarded a total of $1,795,000,
including $1,100,000 for the costs of future care, $455,000 for future loss of
earnings, and $240,000 for the future loss of interdependency.  The total award
of $1,795,000 was subject to a 20% reduction to reflect the jury’s finding of
contributory negligence against the plaintiff. 

[2]            
The plaintiff seeks a net tax gross up fee and
management fee award of approximately $650,000, while the defence seeks to
limit that award to approximately $400,000.  I will address the differences in
the parties’ approaches below.

1.              
Gross or net calculation:

[3]            
The plaintiff relies on the report of Mr. Robert
Carson of Associated Economic Consultants Ltd. (Exhibit 57) while the defence
relies on the report of Mr. Mark Szekely of Columbia Pacific Consulting
(Exhibit 58).  Both economists have assumed the plaintiff will earn either
$10,000 or $15,000 annually from employment to the age of 70.  They have
however approached the calculation of the tax gross somewhat differently. 

[4]            
Mr. Carson has calculated the tax gross up
on the gross amount of the awards noted above ($1,795,000) before deducting 20%
to reflect the jury’s finding of contributory negligence against the plaintiff. 
Mr. Szekely has estimated the gross up, by reducing from the outset, the
award to reflect the finding of contributory negligence.

[5]            
Mr. Szekely’s approach was that apparently
favoured by the 1994 Law Reform Commission of British Columbia report (see
excerpt reproduced at page 6 of the Szekely report).  Mr. Carson
acknowledged that he was one of the authors of that report.  He explained that while
he did not entirely agree with the statement contained in the Law Reform
Commission’s report, he had not viewed it as a matter of great importance and
thus acceded to the position expressed by others on the Committee.  He agreed
however that where the award is first grossed up, as if it had not been reduced
by the court to reflect contributory negligence), the result could be
“seriously distorted” (to use the language of the Law Reform Commission
report), at least in the case of a tax gross up calculation.  However he
suggested that the bias worked the other way in the case of the calculation of
the fund management fees.  Ultimately he approached the matter as he did in his
report, that is basing his calculation on a non-reduced award, based on the instructions
of legal counsel. 

[6]            
For the purposes of this judgment, I direct that
the calculation will be made based on the actual amounts of the award, that is net
of the 20% reduction for contributory negligence, at the outset.  As I
understand it, this approach reduces the overall tax gross up calculation by
approximately 1%.

2.              
Future care costs stream:

[7]            
Mr. Carson’s calculation assumes that
amounts for future care will be spent on a constant basis over the course of
the plaintiff’s life.  By contrast, Mr. Szekely assumes those costs will
be front loaded—that is that the bulk of the award will be spent by the
plaintiff prior to the age of 45, since it is notionally assumed she will be raising
children and spending large amounts on child care.  This assumption was set out
in the report of the defence’s rehabilitation consultant Mr. Kerr, and was
supported by Dr. Anton who opined that in the event the plaintiff had
children, she would require such support. 

[8]            
While I agree that the jury’s future care costs
award of $1,100,000 almost matches the high end of the amount set out in the
Kerr Report (approximately $1 million), I reject the notion that it
follows the jury necessarily adopted Mr. Kerr’s assumptions, including his
assumption that the plaintiff would have children in the future and a that substantial
funds would be spent on child care workers to assist the plaintiff in raising
those children.

[9]            
As the plaintiff’s counsel notes, in addition to
the award for future care costs, the jury also awarded the plaintiff $240,000
for loss of future interdependency.  While I acknowledge that in today’s times
it is much more socially acceptable for a woman to choose to become pregnant
and to raise children as a single parent, I expect the jury’s award for loss of
interdependency likely reflected the much more common assumption that the
plaintiff would not marry in the future and therefore would not likely have any
children.  Accordingly, in my view, it is not reasonable to necessarily assume
the future care costs award includes a component for child care costs, most of
which would be incurred before age 45. 

[10]        
On their face, if one assumes the future care
costs award does include a component for child care costs and the loss of
interdependency award does not, the awards are logically inconsistent.  In my
view, this apparent inconsistency demonstrates what is obvious here—namely that
it is impossible to deduce with any degree of certainty what payments for
future care costs the jury had in mind.

[11]        
It must also be noted that if one accepts Mr. Szekely’s
front end approach, the fund is effectively exhausted by the time the plaintiff
reaches the age of 73, well before the conclusion of her actual life
expectancy.  Adopting Mr. Carton’s approach, the fund will be able to meet
those costs throughout her lifetime.

[12]        
Having heard and considered the evidence and the
reports of both Mr. Carson and Mr. Szekely, I prefer the approach set
out by Mr. Carson in Exhibit 57. 

Conclusion:

[13]        
Thus, subject to the calculation of the tax
gross up and management fees based on the reduced awards (as set out earlier),
I adopt the approach taken by Mr. Carson in calculating both the tax gross
up and management fees.  The final figure shall be based on the average of the
two scenarios shown at Table A of the Carson Report, that is assuming the
plaintiff earns an average annual employment income of $12,500.  I will leave
it to counsel to finalize these calculations and reflect them in an Order for
Judgment.

“The Honourable Madam Justice Boyd”