Written by Drew Wilson and Sarah Rhydderch, Summer Student

In Deegan v. L’Heureux, 2023 BCCA 159, the BC Court of Appeal stepped in and replaced the trial judge’s significant award of $250,000 for loss of future earning capacity for the lesser amount of $70,000. This is uncommon given the standard of review for damages awards are highly deferential.

Background

In June 2014, the 20-year-old plaintiff was involved in a motor vehicle accident resulting in soft tissue injuries to her neck, shoulders and upper back with associated headaches. Like most 20-year-olds, she had yet to fully develop her career and the Court was left with the task of trying to predict how to fairly compensate her future loss of earning capacity.

At the time of the Accident, the plaintiff was working full-time as a waitress. She missed roughly one month of work after the Accident and then returned to reduced hours for about another month. Her past loss of income claim was not contentious. She resumed working full-time two months after the Accident but she was unable to meet the physical demands of her job due to her Accident-related injuries.

The plaintiff eventually quit working as a waitress and became a nanny for a couple of families over the years. In July 2019, she took an education course to become an administrative assistant after the family she was working for no longer required a nanny. She then became a receptionist in January 2020 but lost her position in March 2020 due to the start of the pandemic. She also found out she became pregnant shortly after the start of the pandemic and did not return to work.

Trial

The plaintiff had not returned to work by the time of trial. She called evidence from her family doctor and two expert physiatrists. Her experts diagnosed her with chronic myofascial pain with cervicogenic headaches caused by the Accident. While there was some variance between the experts, the general consensus was her symptoms would linger but they would become tolerable over the years with no residual disability.

The plaintiff testified her long-term career plan was to open a licensed in-home daycare but argued her ability to manage the daycare and take care of children would be impacted by her injuries.

In addition to the plaintiff’s medical experts, she relied on evidence from her mother who had been running an in-home daycare for 29 years. She provided the Court with a range of prices charged to families for child care and the number of children a typical daycare could accept. The mother also testified she observed the plaintiff struggle with some typical daycare chores when the plaintiff helped out.

The trial judge applied the “capital asset approach” to his assessment rather than the “earnings approach”. The earnings approach is more appropriate when the loss is more easily measurable. The capital asset approach treats a plaintiff’s earning potential as an asset and then tries to determine how much their injuries depreciated that asset. It is more commonly applied to younger plaintiffs who have not yet established their careers. Both approaches require the plaintiff to prove there is a “real and substantial possibility” of the future loss of income.

The trial judge agreed with the plaintiff and found her injuries made it more difficult to find employment that required lifting, sitting at a computer screen for prolonged periods or carrying around heavy bus trays or children. She was rendered less capable overall of earning income. Thus, the trial judge awarded her $250,000 for her loss of future earning capacity but provided little explanation for how he determined the amount.

Appeal

The defendants appealed the trial judge’s award on the grounds he (1) made a speculative determination failing to meet the real and substantial possibility threshold; (2) misapprehended the medical evidence; and (3) failed to provide any justification for his $250,000 quantification.

The Court of Appeal disagreed with the defendants’ first and second argument finding the trial judge carefully examined the evidence to find the plaintiff’s injuries could manifest themselves in a way which causes future financial loss. The trial judge’s thorough reasoning also showed he had a “good grasp” of the evidence.

With that said, the Court of Appeal found the trial judge’s explanation for how he arrived at $250,000 was “lacking”. The trial judge either relied on a factually dissimilar case or “picked a number out of thin air”.

The Court of Appeal also reiterated BC’s three-step process for assessing loss of future earning capacity claims outlined in Rab v Prescott, 2021 BCCA 345:

From these cases, a three-step process emerges for considering claims for loss of future earning capacity, particularly where the evidence indicates no loss of income at the time of trial. The first is evidentiary: whether the evidence discloses a potential future event that could lead to a loss of capacity (e.g., chronic injury, future surgery or risk of arthritis, giving rise to the sort of considerations discussed in Brown). The second is whether, on the evidence, there is a real and substantial possibility that the future event in question will cause a pecuniary loss. If such a real and substantial possibility exists, the third step is to assess the value of that possible future loss, which step must include assessing the relative likelihood of the possibility occurring—see the discussion in Dornan at paras 93–95.

Here, the Court of Appeal found the trial judge essentially skipped the third step. Specifically, the Court of Appeal was critical of the plaintiff’s failure to provide any evidence to establish that her home was suitable for a child daycare. She also failed to provide any evidence regarding the potential profitability of her daycare. However, the Court of Appeal was most critical of the trial judge for failing to account for the fact she had proven herself post-Accident capable of maintaining reasonable employment in an office administrative position.

The Court of Appeal noted there are three acceptable methods to apply when using the capital asset approach (citing Pallos v Insurance Co. of British Columbia, 1995 CanLII 2871 (BC CA)):

One method is to postulate a minimum annual income loss for the plaintiff’s remaining years of work, to multiply the annual projected loss times the number of years remaining, and to calculate a present value of this sum. Another is to award the plaintiff's entire annual income for one or more years. Another is to award the present value of some nominal percentage loss per annum applied against the plaintiff’s expected annual income. (emphasis added)

Here, it appears the Court of Appeal awarded the plaintiff’s entire annual income from her administrative position for two years. Accordingly, the Court of Appeal determined $70,000 was a more appropriate award for the plaintiff’s loss of future earning capacity:

Had it not been for the pandemic, Ms. L’Heureux’s pre-trial annual income at $17 per hour would have been in the range of $35,000. In view of Ms. L’Heureux’s youth, the chronic nature of her injuries and the judge’s finding that her injuries would adversely affect her ability to earn income in her preferred field of child care and her youth, I consider this an appropriate case to award Ms. L’Heureux $70,000 for her loss of future earning capacity.

While it is positive to see the Court of Appeal reduce the award due to the lack of an evidentiary base, the plaintiff was still awarded $70,000 despite having consistently worked full-time for multiple years as a nanny after the Accident.

Take-Aways

It is evident from the Court of Appeal’s reasoning that quantifying a young plaintiff’s loss of future earning capacity is not a simple task and there will always be some aspect of speculation. However, the Court of Appeal also made it clear these awards must still be grounded in evidence and meet this real and substantial possibility threshold.

Here, the plaintiff did not provide enough evidence to establish she would have opened an in-home daycare or how profitable it would be. Further, she had proven herself capable of maintaining employment in an administrative role and there was “no way” for the trial judge to know if she would have earned more or less running an in-home daycare.

Questions? 

Should you have any questions with respect to this bulletin, or if you would like more detailed information related to this case analysis, please contact Drew Wilson at dwilson@brownleelaw.com.