IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20110119

Docket: M071919

Registry:
Vancouver

Between:

Hanna-Lee Irene
Louise Bransford

Plaintiff

And

Ahmetturan
Yilmazcan, Black Top Cabs Ltd., Booker Bransford,
Canadian Road Leasing Company and/or
Primus Automotive Financial Services Canada Company

Defendant

Before:
The Honourable Madam Justice S. Griffin

Reasons for Judgment

Introduction

[1]            
The plaintiff was awarded damages by a jury in her claim against the
defendants in relation to personal injuries she suffered in a motor vehicle
accident.  The accident occurred on May 6, 2005.  The jury trial completed on
October 28, 2009.  The defendants appealed the jury award.  The Court of Appeal
reduced the jury’s award for non-pecuniary damages but otherwise left the
damages awarded by the jury intact.

[2]            
The defendants have returned to this court for an order that the award
for future loss of earning capacity made by the jury be subject to periodic
payment, pursuant to s. 99 of the Insurance (Vehicle) Act, R.S.B.C.
1996, c. 231 [the “Act”], (formerly s. 55 of the Act).

[3]            
In more common parlance, the defendants wish to have the jury’s award
for future loss of earning capacity paid as a “structured judgment”, as opposed
to a lump sum.  The plaintiff opposes this.

[4]            
Hearing an application for a structured judgment after the jury award
has been appealed is unusual.  This process follows on the terms of an order
consented to by both parties after the jury award, as explained in my Reasons
for Judgment rendered on August 30, 2010, indexed at 2010 BCSC 1217.

Legal Principles

[5]            
Section 99 of the Act reads as follows:

99  (1) The court must order that an award for pecuniary
damages in a vehicle action be paid periodically, on the terms the court
considers just,

(a) if the award for pecuniary
damages is, after section 83 has been applied, at least $100 000 and the court
considers it to be in the best interests of the plaintiff, or

(b) if

(i)  the plaintiff requests that an
amount be included in the award to compensate for income tax payable on income
from investment of the award, and

(ii)  the court considers that the
order, that the award be paid periodically, is not contrary to the best
interests of the plaintiff.

(2) Despite subsection (1), the court must not make an order
under this section

(a) if one or more of the parties
in respect of whom the order would be made satisfies the court that those
parties do not have sufficient means to fund the order, or

(b) if the court is satisfied that
an order to pay the award periodically would have the effect of preventing the
plaintiff or another person from obtaining full recovery for damages arising
out of the accident.

(3) If the court does not make an
order for periodic payments under this section, it may make an award for
damages that includes an amount to offset liability for income tax on income
from investment of the award.

[6]            
In this case, it would appear that both subsections (1)(a) and
(1)(b) potentially apply.  These two subsections appear to suggest differing
burdens of proof: on the one hand, the court must determine whether it
considers a structured judgment to be “in the best interests of the plaintiff”;
on the other hand, the court must consider whether such an order is “not
contrary to the best interests of the plaintiff”.

[7]            
The parties approached this hearing on the basis that it was the
defendants’ application to have the court apply s. 99 and order a
structured judgment; the defendants initiated the hearing and made the first
submissions.  That approach would suggest that the defendants had the burden of
persuading the court that a structured judgment would be appropriate.

[8]            
In any event, the parties do not require this court to decide who has
the burden of proof on this application.  It is agreed that the factual
question for the court to resolve is whether or not a structured judgment in
respect of the loss of future earning capacity award would be in the best
interests of the plaintiff.  As noted by the Court of Appeal in Lines v.
Gordon, 2009 BCCA 106 at para. 101 (leave to appeal to SCC refused,
[2009] S.C.C.A. No. 197): “… the question is the best interests of the
plaintiff…”.

[9]            
There are additional general principles to consider.  In Lomax v.
Weins, 2004 BCSC 1051, the court noted that one of the “most
important principles” in respect of an award of damages, is that the plaintiff
has property over the award and is free to do with that money as she likes. 
This “most important principle”, as described by the Supreme Court of Canada in
Townsend v. Kroppmanns, 2004 SCC 10, [2004] 1 S.C.R. 315 at para. 18,
should be kept in mind in applying s. 99.  That section only permits a
court to interfere with this “most important principle” if it is in the best
interests of the plaintiff to do so: Lomax at para. 64.

[10]        
Another principle to keep in mind is that it is up to the defendant to
produce a specific structured judgment proposal for the court to consider.  It
is not the court’s function to draft the terms of a structured judgment: Lee
v. Dawson, 2006 BCCA 159 at para. 35, leave to appeal to SCC refused,
[2006] S.C.C.A. No. 192.

Evidence

[11]        
The parties filed affidavit evidence, expert reports, and letters, based
on their agreement that these documents would stand as the direct evidence of
the authors.  The opposing party was entitled to request the author to attend
for cross-examination.

[12]        
The defendants filed two letters written by Mark Gosling of Columbia
Pacific Consulting, one dated November 19, 2010 and the other dated December
14, 2010.  Mr. Gosling is an economist.

[13]        
In addition, the defendants filed two letters from P.M. (Pip) Steele, of
ZLC Financial Group, one dated October 7, 2010 and the other dated November 10,
2010.  These two letters contained “structured settlement costings”.  A third
letter by Mr. Steele dated December 2, 2010 was filed, discussing the
nature of structured settlement annuities.  Mr. Steele is a licensed
insurance agent, chartered life underwriter, chartered financial consultant,
and certified financial planner.  He is a structured settlement broker approved
by the Insurance Corporation of British Columbia (“ICBC”).

[14]        
The plaintiff chose not to cross-examine Mr. Gosling or Mr. Steele.

[15]        
The plaintiff filed a letter dated December 14, 2010 by Robert Carson.  Mr. Carson
is an economist who was qualified to give expert opinion evidence at trial.

[16]        
The plaintiff also filed the affidavit of the plaintiff, Ms. Bransford
herself.  The defendants chose to cross-examine both Mr. Carson and Ms. Bransford.

[17]        
In addition, the plaintiff filed a letter dated December 10, 2010 of Mr. Norton
Finkelstein.  This set out other illustrations for structured judgments.

The Defendants’ Proposed Structured Judgment

[18]        
The defendants initiated the hearing of their application for an ordered
structured judgment, based on the premise that all the plaintiff’s damages
awards in relation to future damages should be structured, namely the awards
for loss of future earning capacity, future care costs, and lost future
housekeeping capacity.

[19]        
It was not until the defendants made submissions at the hearing of the
structured judgment issue on December 16, 2010 that they gave notice that they
had changed their position; they now argue that they only seek a structured
judgment with respect to the award for loss of future earning capacity, and not
for the awards for cost of future care and loss of future housekeeping
capacity.

[20]        
The jury awarded the plaintiff the following damages:

[21]        
The jury award for non-pecuniary damages was subsequently adjusted by agreement
and then by the Court of Appeal, but this is not relevant to the issue of the
appropriateness of a structured judgment.

[22]        
Following the jury award, the parties had discussions regarding certain
outstanding issues.  Ultimately, they agreed to address these issues in a form
of final order, which included the following term:

AND UPON it appearing that the
Plaintiff has received or will receive no fault benefits from the Insurance
Corporation of British Columbia in the amount of $50,000, that sum is deducted
from the Plaintiff’s Judgment on loss of income …;

[23]        
The parties did not clarify the category of “loss of income” from which
the $50,000 was to be deducted.  However, the jury awarded damages for past
loss of income of $27,500.  This means that, at a minimum, the balance of
$22,500 would need to be deducted from the award for loss of future earning
capacity of $436,000.  This would leave a net award for loss of future earning
capacity of $413,500.

[24]        
The defendants’ structured judgment expert, Mr. Steele, made a
structured judgment proposal based on an annuity purchased for $436,000 with
terms as follows:

[25]        
This proposal was revised by Mr. Steele in his letter of November
10, 2010, providing the following two alternatives for an annuity for loss of
future earning capacity in the amount of $436,000:

[26]        
Mr. Steele’s accompanying letter explained as follows:

The design of the structured
settlement is very important.  The casualty insurer is purchasing these
periodic payments on behalf of the claimant, and as noted previously the
annuity contract is non-commutable and cannot be altered in the future.  The
norm is for the annuity payments to be made either for life or a fixed period
(i.e. to age 65) paid monthly.  An additional option may include future lump
sum payments on specific dates to satisfy future capital purchases.  The
monthly payments will be indexed for inflation at either a fixed percentage
compounded annually (i.e. 2% or 3%) or can be indexed to the Consumer Price
Index.  To protect against premature death and loss of capital, the monthly
payments will be guaranteed for a minimum period (i.e. 25 years) on a life
annuity, or guaranteed for a fixed term of the annuity. Lump sum payments are
also guaranteed.  Payments made to an Estate or beneficiaries in the event of
premature death also retain their tax-free status.

[27]        
The parties agree that the structured settlement and judgment scheme in
British Columbia is one whereby ICBC purchases an annuity from a life insurance
company and is liable for all future payments in the event that the life
insurance company defaults.  Furthermore, ICBC is the party responsible for any
taxation on interest earned by the annuity.  The person receiving the annuity
payments, in this case the plaintiff, does not pay income tax on the income
generated by the annuity.

[28]        
The plaintiff entered as evidence the December 10, 2010 letter of Mr. Finkelstein. 
He presented two other illustrations for a structured judgment based on a
premium of $436,000 received on or before December 16, 2010:

[29]        
At the conclusion of submissions, the defendants indicated that the
structured judgment proposal they were advocating was not as proposed by Mr. Steele,
but rather, was Schedule B as proposed by Mr. Finkelstein.  This would be
an annuity indexed at 2.5% payable for 38 years and 4 months.  The starting
payment would be $1,357.59, with the final 4 monthly payments being $3,470.00.

[30]        
No proposals were presented to the court based on the cost of $413,500,
the adjusted loss of future earning capacity award based on the order made
October 28, 2009.

[31]        
The terms of these annuities are designed to run until the plaintiff
reaches age 65, based on the theory that the plaintiff would have retired from
earning an income at that age.

[32]        
The various proposals presented by Mr. Steele and Mr. Finkelstein
reveal that there has been considerable fluctuation in the marketplace since
2009, and in the last few months of 2010.  For example, Mr. Finkelstein’s
proposal made on December 10, 2010 for the Term Certain of 38 years and 4
months at 2.5% indexing is significantly better than Mr. Steele’s proposal
made on November 10, 2010, relatively speaking, especially considering that these
payments are to represent the plaintiff’s earning capacity and are to be paid
over 38 years.

[33]        
The defendants argued that a structured judgment has the following
general benefits:

(a)      the payments are tax-free;

(b)      there is a substantial
reduction of the risk of dissipation since there is no large lump sum in the
plaintiff’s hands and there is a monthly guaranteed payment that will continue
throughout the plaintiff’s working life;

(c)      the annuity is structured
as an irrevocable direction of payments.  The person receiving the payments
does not own the annuity and so cannot assign it or transfer ownership.  This
provides protection from creditors and in matrimonial matters;

(d)      not only are the payments
made by a life insurance company, but if the life insurance company defaults,
ICBC guarantees payment;

(e)      the payments will continue
for a fixed term, whether or not the plaintiff dies before the end of that
term.  This means that if she does pass away before age 65, the payments will
go to her estate or beneficiaries.  Those payments will also be tax-free;

(f)       the
guaranteed 2.5% rate of return avoids some of the risks associated with other
investments which are subject to market fluctuations.

[34]        
The defendants concede that the annuity they propose is not indexed for
inflation.  However, the defendants argued that the fixed rate of return of
2.5% would most likely be sufficient to deal with inflation.  Mr. Gosling’s
letter identified that the average increase in the Consumer Price Index (CPI) for
Canada over the ten year period ending in 2009 was 2.1%.  For the twenty year
period ending in 2009, CPI was 2.1%, and for the twenty five year period ending
in 2009, it was 2.6%.

The Plaintiff’s Evidence

[35]        
The plaintiff’s affidavit evidence was prepared to respond to the
defendants’ application to have a structured judgment of all of the damage
awards based on future losses.  She explained in her affidavit that she was
concerned that if the court ordered a structured judgment, it would be too
inflexible to meet her lump sum expenses, both foreseen and unforeseen.  These
expenses include some larger future care costs.  However, they also include
replacing her car at least every ten years, at an estimated cost of $5,000 –
$10,000 each time, and reimbursement of the insured disability payments she
received prior to trial, totalling approximately $28,000 – $35,000.

[36]        
In addition, the plaintiff indicated that she would like to pay off her
share of a mortgage on her residence as soon as possible.  That mortgage is in
the amount of approximately $180,000, and she considers her share to be half of
that amount, namely $90,000.

[37]        
The plaintiff’s evidence suggested that she is naturally conservative
and prudent financially.  She stated that she has always tried to live within
her means.  When she was working, she made contributions to an RRSP.  She also opened
a tax-free savings account.  Once she received an advance on her judgment in
this case, she made contributions to this tax-free savings account and also to
her RRSP.  In addition, since the trial, she has met with a certified financial
planner.  She said that she intends to engage his services or another qualified
and competent investment advisor to invest and manage her damages award.  She
also plans to discuss her investment plans with her parents, with whom she has
an excellent relationship.  Her parents both have sound business experience and
she relies on them for common-sense advice.

[38]        
Since the trial, the plaintiff has had to move out of her residence
which was her grandmother’s apartment, as it was sold by the family.  She
realized that she could not afford to live in the Lower Mainland, and so moved
to Lytton, B.C. and bought a house together with her boyfriend, who works there. 
The purchase price was $185,000.  The plaintiff and her boyfriend share the
monthly mortgage payments, each paying half.  As well, the plaintiff has
decided to have a pre-marriage agreement in place before she receives the majority
of the judgment funds.  She has contacted a family lawyer and has received
advice to have an agreement prepared which would protect her settlement funds
in the event of a separation from her boyfriend.  She has very small debts.

[39]        
In her cross-examination, it was clear that Ms. Bransford does not
have sophisticated investment knowledge, nor does she purport to have that
knowledge.  It was also clear that she intends to retain and rely on a
professional investment manager, while at the same time staying involved in
overseeing the investments.  It was clear in her evidence that she understands
that the damages are intended to get her through the rest of her life, and so
she does not want to take investment risks with the damages award that would
cause her to lose money.

[40]        
Counsel for the defendants cross-examined Ms. Bransford on the
notion that if she received the cost of future care award outside of a
structured judgment, she would have the flexibility she needs.  Counsel for the
defendants argued that Ms. Bransford was evasive in her answers to this
line of questions.  I disagree.  It was clear that until the defendants made
opening submissions in this hearing, Ms. Bransford had no notice that the
defendants had changed their position and were no longer seeking to structure
the whole of the future damages awards.  She therefore had not had time to
consider her needs or to do the calculations that would give her confidence
that she could retain the “flexibility” she desires if only the future earning
capacity damages were structured.  In my view, her answers given to this line
of questioning were consistent with her overall desire to not be hasty in
financial matters.  She indicated that she needed time to figure out how much money
and flexibility she would have if this new scenario was to be the case.  She
was not given that opportunity prior to her cross-examination and I do not
consider that to reflect poorly on her abilities or her credibility.

[41]        
I had the opportunity to observe Ms. Bransford, as well as her
mother, father and brother, at trial.  I found Ms. Bransford to be a rational
and cautious person, and to have good relationships with her family.  Her family
members were each impressive as hard-working, cautious and caring people.

[42]        
Ms. Bransford’s past history indicates that she is not foolish with
her money, nor is she impulsive.  All of her financial decisions to date appear
quite reasonable and conservative.

Factors to Consider

[43]        
The Court of Appeal in Lines suggested that the following may be
relevant factors to consider in determining whether a structured judgment is or
is not in the best interests of the plaintiff:

(a)      a gap between the income
stream that underlies the theory of the assessment of damages (i.e. if invested
as a lump sum) versus the periodic payment proposed in the structured
judgment.  If the structured judgment is lower than the income stream
underlying the lump sum award, this is one factor that may weigh against a
structured judgment, but it is not the sole determinative factor;

(b)      the values of certainty of
income, elimination of risk of dissipation, the opportunity for income on a
longer than expected life, and inflation protection may be factors favouring
periodic payments and if they exist they should be considered;

(c)      the personal circumstances
of the plaintiff, including whether or not the plaintiff might have fluctuating
needs that may require the monies to be used at an uneven rate, may be factors
that do not support the structured judgment; and,

(d)      the
availability of responsible investment advice to the plaintiff may reduce the
advantage of a structured judgment.

[44]        
The defendants rely on the evidence of Mr. Carson given in
cross-examination as to the difference between the periodic payments that would
be made under a structured settlement as proposed by Mr. Finkelstein
(Option B at $1,357.59 monthly) and the monthly amounts that would be available
to the plaintiff based on an award of future income loss of $436,000.  With respect
to the latter, income taxes would need to be taken into account.  Mr. Carson
estimated that the taxes on the investment income would average 10% over time. 
He based this on the following factors:

(a)      as the fund is drawn down,
the amount of investment income will decrease, so the average tax rate will go
down over the life of the fund;

(b)      the
plaintiff might not invest all the money in interest-bearing investments and
might invest in other things that are not income-generating, that will not
generate tax, such as a tax-free savings account, or prepayment of debt, such
as prepayment of a mortgage.

[45]        
Mr. Carson made clear that he was simply giving a ballpark estimate
with the figure of 10% as an estimate of average tax on an investment fund if
the damages award was not structured.

[46]        
In cross-examination, Mr. Carson was asked whether a tax rate of
15% would be outside the realm.  He suggested it was on the outside edge of the
range of estimates.  He agreed that if the tax was considered to be 15% of the
fund, the difference between the lump sum award and Mr. Finkelstein’s
Option B was approximately 6.4%.  In other words, the periodic payment would
pay $1,357.59 whereas the invested lump sum would pay $1,450 per month in rough
numbers.  However, adjusting the figures and using a 10% tax rate, the
Finkelstein Option B would pay 13% less on a monthly basis than if the lump sum
was invested.

[47]        
Mr. Carson’s evidence indicated that the gap between the amount
that might be paid by a structured judgment and the amount that would be
available to the plaintiff if she received a lump sum award would be 33% if Mr. Finkelstein’s
Option A was chosen, and assuming a 15% tax rate.  In other words, if the
structured settlement was to be indexed based on CPI, as opposed to having a
fixed rate of return of 2.5%, the structured judgment would pay the plaintiff
33% less than what she would nominally earn on a lump sum damage award herself,
even after taking into account 15% tax.

[48]        
The difference between the structured judgment based on Mr. Finkelstein’s
Option A and Option B is that Option A is based on CPI indexing, and Option B
is based on a fixed return of 2.5%.  The defendants argue that 2.5% would be
sufficient to take account of inflation.

[49]        
Counsel for the plaintiff argued that the 2.5% fixed rate of return over
38 years and 4 months would place the entire risk of inflation on the
plaintiff.  This is why the CPI indexed annuity is so much more costly; there
is a real risk of inflation.

[50]        
Considering the factors here, I note that there is no elevated risk of
dissipation of the damage award in this case.  The plaintiff is not brain
injured as a result of her accident.  She is a competent and intelligent
person, who is naturally fiscally responsible.  She has made it clear that she
will seek professional investment advice and also will be assisted by her good
relationship with her parents, who will be available to discuss financial
decisions with her.

[51]        
The defendants argued that since they were only seeking a partial
structured judgment, rather than a structured judgment that applied to the
whole of the future damages award, the plaintiff will be left with sufficient
flexibility to meet any fluctuating needs.  I am not convinced this is an
entirely fair approach.  The future care award is allocated for the plaintiff’s
future care needs.  Normally a person uses income to pay for extraordinary
living expenses or to make choices such as repayment of debt.  If the loss of
future earning capacity award is structured, the plaintiff will lose this
flexibility. Such a loss of flexibility is not cured merely because only a
partial structured judgment is sought.

[52]        
In this case, a factor that weighs heavily is the fact that the proposed
structured judgment will run for 38 years.  That means, if a structured
judgment is ordered, that for 38 years of this plaintiff’s life, she will not
have the ability to make her own choices about her investments or her needs,
beyond what she can do with receipt of the monthly periodic sum.  None of the
evidence proffered by the defendants suggested that a fixed rate of return of
2.5% would be a safe investment over 38 years.  If the financial landscape
changes drastically in 25 years, the plaintiff will not have the flexibility to
adapt if she is subject to the structured judgment.  However, if the financial
landscape changes drastically in the next 25 years, and she has been fiscally
conservative in managing a lump sum award of damages, she will have the
flexibility to deal with the change in circumstances.

[53]        
I come back to the principle enunciated in Lomax, namely that a
damage award is the plaintiff’s own property.  Underlying this point, in my
view, is the common sense observation that a central aspect of one’s dignity and
humanity is the ability to control one’s own destiny by the freedom to make one’s
own choices.  Where a plaintiff has been injured through the negligence of
defendants, such that she has suffered a significant loss of earning capacity,
as here, she has already lost some personal dignity in that her future choices
have been limited due to her injuries.  In this case the plaintiff would lose
additional dignity and autonomy if her ability to make her own decisions about
her damages award was taken away.

[54]        
Having observed the plaintiff’s evidence at trial and on this hearing
before me, I was impressed with her capabilities.  I observed that she was a
person who was a “go-getter” before her injuries, and she remains someone with
an independent and strong personality.  I have considered all of the factors
referred to above, and weighed the risks and benefits of a structured judgment against
the risks and benefits of a lump sum award.  I conclude that an order that the
loss of future earning capacity award be structured would not be in the best
interests of this plaintiff.

[55]        
I therefore dismiss the defendants’ application.

“S. Griffin, J.”
The Honourable Madam Justice S. Griffin