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Supreme Court of Canada

Damages—Award for loss of future earnings—Determination of probable retirement date—Deduction of director’s fees—Treatment of contributory pension benefits—Diminution of pension benefits as result of early retiral.

Appellant was injured on December 4, 1974, when a piece of plywood fell from the roof of an office building in Halifax owned and occupied by the respondent Trizec while repairs were being effected thereon by the respondent Fundy which had in turn subcontracted to the respondent Maritime. In the course of erecting a construction shack on the roof of the Trizec building a piece of plywood was dropped to the unprotected sidewalk and hit appellant who suffered serious injuries to back and neck. Appellant also suffered psychological side effects and as a result of the accident was, according to medical evidence, prevented from continuing work. On December 31, 1975, he retired. He received a company pension of approx. $14,000 per annum and a director’s fee $2,000 per annum plus $50 per meeting. At trial Cowan C.J. found the respondents liable in negligence for the accident and while this finding was not disturbed his award of $250,000 (a global amount) was reduced to $133,000 by a majority in the Court of Appeal. In determining the award for loss of future earnings the majority proceeded on the basis that had appellant not been injured he would probably in any event have retired within weeks of his sixtieth birthday.

Held: The appeal should be allowed.

The Appeal Division correctly adopted the method set out by this Court (per Dickson J.) in Andrews et al. v. Grand & Toy Alberta Ltd. et al., [1978] 2 S.C.R. 229 in its assessment of general damages and in so doing necessarily made a finding as to the probable date of the appellant’s retirement if no accident had occurred.

[Page 757]

While the director’s fees for 1976 and 1977 should be deducted in making provision for loss of earnings the pension benefits should not be so deducted. The pension was contributory, deriving from the appellant’s contract with his employer and the payments made pursuant to it are akin to payments under an insurance policy. The proposition that the appellant’s pension would be for a diminished amount as a result of lost years of earning was not apparently considered either at trial or on appeal and should not, having regard to the insufficiency of evidence to support it in the record, be considered for the first time in this Court. The cross-appeal based on the failure of the Appeal Division to make a deduction for income tax should be dismissed for the reasons given in R. v. Jennings, [1966] S.C.R. 532, the clarity of which leaves no room for debate as to the law in this country.

Andrews et al. v. Grand & Toy Alberta Ltd. et al., [1978] 2 S.C.R. 229; Thornton v. School District No. 57 (Prince George) et al., [1978] 2 S.C.R. 267; Arnold et al. v. Teno et al., [1978] 2 S.C.R. 287; Parry v. Cleaver, [1970] A.C. 1; Canadian Pacific Ltd. v. Gill, [1973] S.C.R. 654; R. v. Jennings, [1966] S.C.R. 532 followed.

APPEAL from a judgment of the Supreme Court of Nova Scotia, Appeal Division[1], allowing an appeal from a judgment of Cowan C.J.T.D.[2] at trial Appeal allowed, judgment below varied, cross-appeal dismissed.

Keith E. Eaton, Q.C., and A. William Moreira, for the appellant.

David R. Chipman, Q.C., for the respondents.

The judgment of the Court was delivered by

RITCHIE J.—This is an appeal brought with leave of the Appeal Division of the Supreme Court of Nova Scotia from a judgment rendered by it allowing an appeal from a judgment of Chief Justice Cowan, varying the award of damages made by him and dismissing the cross‑appeal entered by the present appellant.

[Page 758]

The facts giving rise to this case have been carefully and exhaustively described in the reasons for judgment rendered by Mr. Justice Macdonald on behalf of the majority of the Appeal Division which are now conveniently reported in (1978), Vol. 26 N.S.R. (hereinafter referred to as the “Report”) at pp. 7 et seq., which Report also embodies the dissenting judgment of Mr. Justice Cooper at pp. 41 et seq., and the reasons for judgment delivered at trial by Chief Justice Cowan of the Trial Division. I find it necessary, however, in order to make these reasons more intelligible, to recite the circonstances giving rise to the questions of law raised in this appeal.

The appellant was injured on Decembre 4, 1974, when a piece of plywood fell from the roof of an office building in Halifax owned and occupied by the respondent Trizec Equities Limited while repairs were being effected thereon by the respondent, Fundy Construction Company Limited which in turn subcontracted for this work to be done by the respondent Maritime Form Work Limited.

A construction shack was being erected on the roof of this building by employees of Maritime Form Work Limited when a piece of plywood was dropped falling to the unprotected sidewalk below and hitting the appellant on the neck and back resulting in the serious injuries giving rise to the present litigation.

The appellant, who was the Executive Vice-President and General Manager of Nova Scotia Savings and Loan Company, and as such was in receipt of a salary in excess of $40,000 per annum, suffered a severe strain of the neck and mid and lower back as a result of this accident which also produced psychological side effects and resulted in his being prevented from continuing work according to the testimony of a number of medical experts who gave evidence at the trial.

On Decembre 31, 1975, the appellant officially retired from his work and there is no doubt that his retirement was occasioned by the injuries he sustained as a result of being struck by the falling plywood. Upon his retirement he received a company pension of approximately $14,000 per annum

[Page 759]

and his services as a director, for which he had theretofor received no salary, were compensated by a payment of $2,000 per annum plus $50 per meeting. After an extensive review of the evidence, Chief Justice Cowan found the injuries to have been occasioned by the negligence of the respondents and this finding was not disturbed in the Appeal Division or seriously questioned in this Court. In varying the award of $250,000 made by Chief Justice Cowan, Mr. Justice Macdonald, speaking for the majority of the Appeal Division, reduced this amount to $133,000, while his brother judge, Mr. Justice Cooper in dissent, would have fixed the damages at a total of $195,166.80.

The learned trial judge found that the appellant would not have continued working until the normal age of retirement, i.e., 65 years, even if there had been no accident, but he made no finding as to the date at which the appellant’s retirement would take place and his failure to do so is characterized as error by the Appeal Division.

In this regard, Mr. Justice Macdonald made the following observation at p. 18 of the Report:

With respect, it seems to me that once he decided that the respondent would have retired early in any event the trial judge should have indicated when, in his opinion, this would have occurred. His failure to do so, in my opinion was an error of omission that amounted, under the circumstances, to an error in principle that entitles, indeed requires, this Court to determine as best we can when such premature retirement would have taken place.

The majority opinion of the Appeal Division was expressed by Mr. Justice Macdonald in the following terms at p.32:

Giving all latitude to the respondent I do not think he would have continued working for the company after age sixty. The trial judge, as mentioned, found that the probabilities are that Mr. Guy would not have continued to age sixty-five. Some date prior to this must be determined and on balance I am of the view that to fix early retirement at age sixty, for assessment purposes, is fair and reasonable.

And Mr. Justice Macdonald later said, at p.34:

[Page 760]

I know that the appellant ceased work as of December 31, 1975. In view of the finding by the trial judge that the probabilities were that the appellant would have taken early retirement it was necessary for me to determine as best I could when this would have taken place. I found on a preponderance of probabilities that it would have occurred at the end of 1978 when the appellant would be within a few weeks of his sixtieth birthday.

Mr. Justice Cooper, on the other hand, expressed a dissenting view at p. 44 where he said:

I now face the question—when would the respondent have retired if he had not had the accident? My answer, having regard to all the relevant evidence and the finding of the trial judge to which I have referred, is December 31, 1980, being 20 days short of the respondent’s sixty-second birthday. I think this date one which does justice to the respondent and is also fair to the wrongdoers responsible for his injuries.

With all respect for the learned dissenting judge, I do not think it appropriate at this stage to overrule the finding made by the majority of the Appeal Division in this regard.

A more important question of law to which the judgment of Chief Justice Cowan gives rise was occasioned by the fact that after reviewing the evidence he assessed the damages for both pecuniary and non-pecuniary loss on a global basis at $250,000 and in so doing he was at variance with judgments subsequently delivered in this Court in Andrews et al. v. Grand & Toy Alberta Ltd. et al.[3]; Thornton v. School District No. 57 (Prince George) et al.[4]; Arnold et al. v. Teno et al.[5], and Keizer v. Hanna et al.[6]. In this regard my brother Dickson, speaking for this Court in Andrews et al. v. Grand & Toy Alberta Ltd. et al., supra, summarized what is now recognized as the proper method of assessing general damages when he said, at p. 235:

The method of assessing general damages in separate amounts, as has been done in this case, in my opinion, is a sound one. It is the only way in which any meaningful review of the award is possible on appeal and the only

[Page 761]

way of affording reasonable guidance in future cases. Equally important, it discloses to the litigants and their advisers the components of the overall award, assuring them thereby that each of the various heads of damage going to make up the claim has been given thoughtful consideration.

It is appreciated that this method had not been so clearly articulated at the time of the trial of the present action and the learned Chief Justice did not have the benefit of the guidelines established in the cases last referred to which had not been decided when he adopted the global approach. I think, however, that it can be said with assurance that the Appeal Division was correct in adopting the method outlined by Mr. Justice Dickson, and if this method is to be followed, it is obvious that it was necessary to make a finding as to the probable date of the appellant’s retirement if no accident had occurred.

In determining the amount to be awarded in respect of loss of future earnings, the majority of the Appeal Division proceeded on the basis that the appellant had been deprived of his earnings from the date of retirement, i.e., December 31, 1975, until December 31, 1978, a period of three years, and in this regard Mr. Justice Macdonald said, at p. 36 of the Report:

Because of the foregoing known facts and bearing in mind that the respondent is to be compensated fully for loss of earnings, it seems to me that the practical approach is to award him for the years 1976, 1977 and 1978 what he would have earned according to his actuarial witness based on an annual escalation rate of five per cent. From such amount I would, like the actuary, and for the reasons given, deduct the director’s fees for the years 1976 and 1977. I would not deduct them for the current year because I have no way of knowing if the respondent will continue to be a director of the company or whether he will resign his directorship or be voted off the board. The pension is received by the respondent as of right and I would therefore propose that it be deducted for the three years with which I am concerned.

Based on the foregoing approach for the year 1976 I would round the respondent’s salary to $50,000.00 from which must be deducted pension benefits of $13,901.16, which I round to $14,000.00, and director’s fees of $4,500.00, making a total deduction of $18,500.00, for a net loss of earnings in 1976 of $31,500.00.

[Page 762]

With respect of the year 1977, I would round salary to $53,000.00. The combined pension benefits of $14,000.00 and director’s fees of $4,725.00 amount to $18,725.00 which, when deducted from salary leaves a net of $34,275.00 for earnings lost for the year 1977.

With respect to the current year the respondent’s projected salary will be $55,979.00. As mentioned I do not think it proper to deduct director’s fees but would reduce such salary by the amount of the pension, namely, $14,000.00, leaving a net of $41,979.00, which I would calculate as loss of future earnings for the year 1978.

I agree with the Appeal Division that the director’s fees for the years 1976 and 1977 should be deducted in making provision for loss of earnings, but I am unable to share the opinion that the pension benefits should be deducted in the manner proposed because I take the view that this contributory pension is derived from the appellant’s contract with his employer and that the payments made pursuant to it are akin to payments under an insurance policy. This view is in accord with the judgment of the House of Lords in Parry v. Cleaver[7], which was expressly approved in this Court in the reasons for judgment of Mr. Justice Spence in Canadian Pacific Ltd. v. GilI[8] where he said, at p. 667, speaking of the reasons for judgment rendered by Nemetz J.A. on behalf of the majority of the Court of Appeal for British Columbia in that case:

Nemetz J.A. gave the reasons for the majority in coming to the conclusion that the pension payments under the Canada Pension Plan should not be deducted from the award of damages. In doing so, he relied most strongly on the recent decision of the House of Lords in Parry v. Cleaver. That was an appeal dealing with a claim by a police constable for damages due to injuries and was not a fatal accident case as is the present one. However, the ratio used in the House of Lords Nemetz J.A. found and, with respect, I agree with him, was most convincing. In the House of Lords the majority of the Law Lords composed of Lord Reid, Lord Pearce and Lord Wilberforce were of the opinion that the pension payment should not be deducted. Lord Pearson and Lord Morris of Borth-y-Gest dissented. It is sufficient to

[Page 763]

quote two short extracts. Lord Reid said at p. 16.

What, then, is the nature of a contributory pension? Is it in reality a form of insurance or is it something quite different? (Example quoted is omitted.) The products of the sums paid into the pension fund are in fact delayed remuneration for his current work. That is why pensions are regarded as earned income.

But the man does not get back in the end the accumulated sums paid into the fund on his behalf. This is a form of insurance. Like every other kind of insurance, what he gets back depends on how things turn out. He may never be off duty and may die before retiring age, leaving no dependents. Then he gets nothing back. Or he may, by getting a retirement or disablement pension, get much more back than has been paid in on his behalf. I can see no relevant difference between this and any form of insurance. So, if insurance benefits are not deductible in assessing damages and remoteness is out of the way, why should his pension be deductible?

If one starts on the basis that Bradburn’s case (1874) L.R. 10 Ex. 1, decided on fairness and justice and public policy, is correct in principle, one must see whether there is some reason to except from it pensions which are derived from a man’s contract with his employer. These, whether contributory or non-contributory flow from the work which a man has done. They are part of what the employer is prepared to pay for his services. The fact that they flow from past work equates them to rights which flow from an insurance privately effected by him. He has simply paid for them by weekly work instead of weekly premiums.

Is there anything else in the nature of these pension rights derived from work which puts them into a different class from pension rights derived from private insurance? Their ‘character’ is the same, that is to say, they are intended by payer and payee to benefit the workman and not to be a subvention for wrongdoers who will cause him damage. [The italics are my own.]

[Page 764]

I agree with Mr. Justice Macdonald that the pension payments for the three years in question amounted to $14,000 per annum, and accordingly, had the Appeal Division applied the reasoning established in Parry v. Cleaver, supra, instead of deducting these payments, the amount of the award for loss of future earnings would have been increased by $42,000, from the $108,000 fixed by the Appeal Division, to $150,000, and in view of the above, I would increase this award according-

The argument was advanced in the factum of the appellant that in assessing damages for loss of earnings account should have been taken of the fact that the early retirement brought about by the accident had the effect of depriving the appellant of the years of work which he would have contributed to the Company had he been continually employed until the normal date of retirement, i.e. age 65, and that by being deprived of these working years the appellant was denied the opportunity to make additional pension contributions which would have resulted in an increased pension for the balance of his life. The contention is that this is a loss for which the appellant is entitled to compensation, but the proposition does not appear to have been considered either at trial or on appeal, and having regard to the insufficiency of evidence to support it in the record, I can see no ground for embarking upon it for the first time in this Court.

As I have pointed out, Chief Justice Cowan made no separate finding representing damages for non-pecuniary loss and Mr. Justice Macdonald was content to assess damages under this head at $25,000. Mr. Justice Cooper, on the other hand, at pp. 46 and 48 of the Report reviewed the elements of pain and suffering and general debility resulting from the accident and speaking of the trial judge observed, at p. 48:

Although the damage award of the learned trial judge must be reduced it is obvious that he who saw and heard the witnesses was convinced that the pain and suffering undergone by the respondent was very serious indeed and I do not think that this factor can be entirely lost sight of.

A very extensive and detailed review of the appellant’s injuries and his resulting disabilities is

[Page 765]

to be found in the judgment at trial, now reported at pp. 60 to 67 of the Report.

Having considered these passages, I am satisfied as was Mr. Justice Cooper, that the trial judge made a substantial allowance for non-pecuniary loss although he did not make any separate finding in this regard. It would be inappropriate in my view for me to suggest any figure not previously considered by way of compensation under this heading, but I am satisfied to adopt the figure of $40,000 which the learned dissenting judge would have awarded for non-pecuniary loss as it appears to me that an amount of at least these proportions must have been included in the global award of $250,000 made by the learned trial judge and, like Mr. Justice Cooper, I think account must be taken of the advantage of having seen and heard the witnesses which was enjoyed by the Chief Justice at trial and denied to the Appeal Division and this Court.

In view of all the above, I would allow this appeal and vary the judgment below by leaving the pension payments out of account in determining loss of earnings and increasing the award for non-pecuniary loss. In the result, the appellant will recover $108,000 plus the $42,000 pension payments previously deducted for an award of $150,000 in respect of loss of earnings together with an award of $40,000 for non-pecuniary loss, making a total of $190,000.

The respondents have cross-appealed contending that the Appeal Division erred in its assessment of compensation for lost earnings in that it failed to make a deduction for income tax which the appellant would have paid had he earned the income. In this regard, Mr. Justice Macdonald stated at p. 25:

One would normally think that in awarding damages for loss of future earnings some deduction would be made for income tax. Such has been the case in England since the decision of the House of Lords in British Transport Commission v. Gourley, [1956] A.C. 185. The Gourley principle was rejected by the Supreme Court of Canada in R. v. Jennings, [1966] S.C.R. 532;

[Page 766]

57 D.L.R. (2d) 644, and the situation in this country now is that the incidence of taxation on future earning should not be taken into account in assessing damages in respect of loss of such earnings.

It is apparent from other parts of the reasons for judgment of Mr. Justice Macdonald that it was with some reluctance that he followed the Jennings case in reaching his conclusion, but the clarity with which Mr. Justice Judson expressed himself in the Jennings case can leave no room for debate as to the law in this country in this regard. In the course of his reasons for judgment, which he delivered on behalf of the majority of this Court, Mr. Justice Judson observed, at p. 545:

To assess another uncertainty—the incidence of income tax over the balance of the working life of a plaintiff—and then deduct the figure reached from an award is, in my opinion, an undue preference for the case of the defendant or his insurance company. The plaintiff has been deprived of his capacity to earn income. It is the value of that capital asset which has to be assessed. In making that determination it is proper and necessary to estimate the future income earning capacity of the plaintiff, that is, his ability to produce dollar income, if he had not been injured. This estimate must be made in relation to his net income, account being taken of expenditures necessary to earn the income. But income tax is not an element of cost in earning income. It is a disposition of a portion of the earned income required by law. Consequently, the fact that the plaintiff would have been subject to tax on future income, had he been able to earn it, and that he is not required to pay tax upon the award of damages for his loss of capacity to earn income does not mean that he is overcompensated if the award is not reduced by an amount equivalent to the tax. It merely reflects the fact that the state has not elected to demand payment of tax upon that kind of a receipt of money. It is not open to the defendant to complain about this consequence of tax policy and the courts should not transfer this benefit to the defendant or his insurance company.

The respondents have failed to satisfy me that there are any features in the present case making the principle established in the Jennings case inapplicable, and I would accordingly dismiss the cross-appeal with costs.

[Page 767]

The appellant is entitled to his costs of the main appeal in this Court.

Appeal allowed, cross-appeal dismissed with costs.

Solicitor for the appellant: Gordon S. Black, Halifax.

Solicitor for the respondents: David R. Chipman, Halifax.

 



[1] (1978), 26 N.S.R. 1.

[2] (1977), 26 N.S.R. 48.

[3] [1978] 2 S.C.R. 229.

[4] [1978] 2 S.C.R. 267.

[5] [1978] 2 S.C.R. 287.

[6] [1978] 2 S.C.R. 342.

[7] [1970] A.C. 1.

[8] [1973] S.C.R. 654.

 

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