IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20141223

Docket: M085469

Registry:
Vancouver

Between:

Roma
Carroll

Plaintiff

And

Jude
A. Hunter,
Canada’s Superior Moving Company Inc.

Defendants

Before:
The Honourable Mr. Justice Pearlman

Supplemental Reasons for Judgment

(Re: Past Loss of Earning Capacity)

[1]            
 

INTRODUCTION

[1]            
By reasons for judgment indexed as Carroll v. Hunter, 2014 BCSC
2193, I assessed the damages payable to the plaintiff, Ms. Roma Carroll, for
personal injuries she suffered in a motor vehicle accident on December 14,
2006.  My award included damages in the amount of $95,400 for past loss of
earning capacity.

[2]            
As I noted at para. 171 of my reasons, under s. 98 of the Insurance
(Vehicle) Act, R.S.B.C. 1996, c. 231, a plaintiff is entitled to recover
damages only for his or her past net income loss to the first day of trial. 
The court must deduct the amount of income tax payable from lost gross
earnings: Hudniuk v. Warkentin, 2003 BCSC 62; Lines v. Gordon,
2009 BCCA 106.

[3]            
At para. 194, I stated:

[194] My award represents the
plaintiff’s past net income loss to the time of trial, as required by
s. 98 of the Insurance (Vehicle) Act.  Counsel for the defendants
requested the opportunity to make further submissions on the tax applicable to
the past income loss award.  Counsel have leave to make further submissions if
necessary.

[4]            
Counsel for the defendants and the plaintiff have now made submissions
on the question of whether there should be any further deduction of income tax
applicable to the award for past loss of earning capacity.

Positions of the Parties

[5]            
The defendants contend that Ms. Carroll’s past income loss was not
apportioned across multiple calendar years and therefore her net loss should be
assessed as if the $95,400 was received by her by October 1, 2013, the first
day of trial.  Based on the plaintiff’s total income of $71,371.24 for the 2012
tax year, the defendants submit that Ms. Carroll’s payments for income tax and
CPP contributions represented 27% of her gross annual income.  The defendants
seek a determination that the plaintiff’s net past loss of earning capacity is
$69,642 ($95,400 x 73%) after deduction of income tax payable for her lost
gross earnings.

[6]            
The plaintiff submits that the Court has already made the appropriate
deduction for income tax by adopting the approach of the plaintiff’s expert,
Mr. Benning, who applied a 33% deduction from the plaintiff’s gross
earnings loss over multiple periods between the date of the accident and the
first day of trial.  The plaintiff says that any further deduction for income
tax is unnecessary.

Discussion

[7]            
The plaintiff claimed damages for past loss of earning capacity on the
basis that but for the accident she would have incrementally built her
accountancy practice from a half-time endeavour in 2007 to a full-time practice
by 2012.  I found there was a real and substantial possibility that absent the
accident, the plaintiff would have expanded her practice and substantially
increased her earnings from 2007 to the time of trial.

[8]            
At paras. 183 to 185, I described the plaintiff’s claim for past loss of
earning capacity, as estimated by Mr. Benning:

[183]  Relying upon the report of her economist,
Mr. Darren Benning, the plaintiff estimates her post-tax past loss of
earning capacity at $127,211.  That estimate is based on the following
assumptions:

(a)  as a result
of the accident, Ms. Carroll has not been able to expand her business to
the level she would have achieved absent the accident;

(b)  absent the
accident, Ms. Carroll would have increased her workload from part-time to
full-time over a five-year period from 2007 to 2011, and from 2012 onward would
have earned income equivalent to that of the average male accountant in British
Columbia of a similar age and educational background.

[184]  On those assumptions, Mr. Benning estimated the
plaintiff’s 2007 without accident income, based on her working half-time, at
$36,164.  Mr. Benning estimated that Ms. Carroll’s income would
increase by 2012 to a full-time income of $92,887.  According to
Mr. Benning, based on census data, the average 2012 annual income for male
accountants in British Columbia was $104,882.  He adjusted that amount to $92,887
to account for labour market contingencies for non-participation in the work
force, unemployment, and part-time work based on Statistics Canada data for the
average British Columbia male with Ms. Carroll’s educational level.

[185]  Mr. Benning’s estimate
of the plaintiff’s past loss of earning capacity of $127,211 represents the
difference between his calculation of Ms. Carroll’s without accident
income from 2007 to the date of trial and the income she actually earned to the
time of trial, after deduction of income tax and employment insurance premiums.

[9]            
My award of $95,400 represented 75% of the net past loss of earning
capacity estimated by Mr. Benning.

[10]        
As I explained at para. 193:

[193]  In 2006, the plaintiff’s
net business income from her accountancy practice was only $16,567.  Her main
client was the Law Society.  Ms. Carroll’s marketing efforts had not yet
borne fruit.  In these circumstances, there is a real chance that the plaintiff
may not have attained the level of pre-trial earnings estimated by
Mr. Benning.  Taking that chance into account, I assess the likelihood of
the plaintiff having earned the pre-trial income estimated by Mr. Benning
at 75%.  Accordingly, I assess damages for the plaintiff’s past loss of earning
capacity in the amount of $95,400.

[11]        
Mr. Benning set out in his report his past loss of income calculations both
in the gross amounts and net of income tax for each year, or partial year, from
the accident to the date of trial.  Mr. Benning assumed the plaintiff would not
have earned any additional income in December 2006, and therefore estimated the
plaintiff’s past loss over each year, or partial year from January 1, 2007 to
the date of trial. In estimating the net amount of the plaintiff’s past loss of
earning capacity, Mr. Benning applied a deduction of 33% for income tax and
employment insurance premiums.

[12]        
As I stated at para. 194 of my reasons, the award of $95,400 for past
loss of earning capacity represents Ms. Carroll’s past net income loss to the
time of trial. That award was derived from Mr. Benning’s methodology, which
incorporated the 33% deduction from the plaintiff’s lost gross earnings applied
over multiple periods from January 1, 2007 to the first day of trial.

[13]        
Sections 95 and 98 of the Insurance (Vehicle) Act provide:

Definitions

"net income loss", in relation to a person
who suffered loss of income as a result of an accident is, for any period,

(a) if the person is a person
referred to in section 2 (1) of the Income Tax Act, the gross income
that the person lost in that period less the amount that would have been
payable on that gross income for the following:

(i)  income tax under the Income
Tax Act, as that Act read on December 31 of the calendar year before the
calendar year in respect of which the net income loss is to be determined,
calculated in accordance with the regulations and with reference to prescribed
deductions and tax credits;

(ii)  income tax under the Income
Tax Act (Canada) as that Act read on December 31 of the calendar year
before the calendar year in respect of which the net income loss is to be
determined, calculated in accordance with the regulations under, and with
reference to deductions and tax credits prescribed under, this Act;

(iii)  premiums under the Employment
Insurance Act (Canada), as that Act read on December 31 of the calendar
year before the calendar year in respect of which the net income loss is to be
determined, or

Recovery for loss of income

98 Despite any other enactment or
rule of law but subject to this Part, a person who suffers a loss of income as
a result of an accident or, if deceased, his or her personal representative, is
entitled to recover from designated defendants, as damages for the income loss
suffered after the accident and before the first day of trial of any action
brought in relation to it, not more than the net income loss that the person
suffered in that period as a result of the accident.

[14]        
By its use of the phrase “for any period” in s. 95, the Legislature
intended the court to have discretion to determine what period or periods are appropriate
for the determination of net income loss in all of the circumstances: Lines
at para. 184.  In a case where there are difficulties in allocating gross
income loss to particular periods of time, the court may use a single period
for calculation of net income loss and calculate that loss as if the gross award
was received on the first day of trial.  In other cases, the court may allocate
the gross income loss to multiple periods between the date of the accident and
the date of trial: Lines at para. 181, 182.  Here, the Court adopted Mr.
Benning’s approach, which incorporated the deduction of income tax from the
plaintiff’s gross loss of earnings over multiple periods to the date of trial.

Conclusion

[15]        
Accordingly, I conclude that no further deduction for income tax is
necessary from the award of $95,400 for past loss of earning capacity.

“PEARLMAN J.”