Prove-it! The British Columbia Court of Appeal Confirms the Tripartite Test for Future Loss of Earning Capacity Claims Must Be Met in Full
In the New Brunswick Court of Appeal’s seminal case of Vincent v Abu-Bakare, 2003 NBCA 42, Chief Justice Drapeau, as he then was, directed Trial Judges to adopt a two-stage approach in the assessment of pecuniary general damages for loss of earning capacity. In the first step, the Court must estimate the chance that the Plaintiff will suffer a loss of earnings due to the Defendant’s tort. If the possibility of such loss is speculative or negligible, the Court need go no further, as the claim has not been proven. If the possibility is real and substantial, then the Court must consider the chances of the loss occurring in the amount of damages that it awards.
The Court of Appeal warned that future pecuniary loss cannot be assessed arbitrarily; evidence-based rationality must inform the result. Given such, trial courts should not be expected to quantify the present value of the risk of future pecuniary loss without the assistance of duly qualified experts.
In 2022, the British Columbia Court of Appeal expanded on the operative principles of a future loss of earning capacity claim as set out in Vincent v Abu-Bakare, serving as an excellent reminder of the burden of proof to be met by Plaintiffs when advancing such claims. The matter of Ploskon–Ciesla v. Brophy, 2022 BCCA 217, serves as a caution to Plaintiffs that evidence of loss of capacity alone is insufficient to successfully warrant an award for a future loss of earning capacity claim.
The parties in Ploskon–Ciesla were involved in a motor vehicle impact, as a result of which, the Plaintiff suffered soft tissue injuries with a poor prognosis for full recovery. Employing a capital asset approach, which will be addressed in further detail below, the Trial Judge awarded a loss of future earning capacity award of $255,000.
The Defendant appealed such award, submitting that the Plaintiff had failed to adequately prove there was a real and substantial possibility she would have earned more had the accident not occurred, and further having failed to prove the facts capable of supporting such award.
The appeal was allowed, as the Court of Appeal found that the Trial Judge had not adequately undertaken the tripartite test to assess damages for the Plaintiff’s loss of future earning capacity, nor had he adequately quantified the claim, but rather, had inferred that a loss of capacity equated a loss of future earning capacity.
As per the Court of Appeal, the tripartite test to be satisfied in full requires first, that there be evidence which discloses a potential future event that could lead to a loss of capacity; second, that there be a real and substantial possibility that the future event in question will cause a loss; and if such real and substantial possibility exists, third, the value of that possible future loss be assessed, including an assessment of the relative likelihood of the possibility occurring.
In coming to its conclusion, the Court of Appeal made the following findings:
- while the Trial Judge had referred to the injuries sustained by the Plaintiff, the effect that the injuries would have on the Plaintiff’s ability to complete full-time employment, and the Plaintiff’s restrictions as to the range of employment opportunities available, the Trial Judge had not undertaken steps two or three of the requisite test to assess such damages;
- more specifically, the Trial Judge had failed to sufficiently analyze the following necessary issues:
- the likelihood of potential future events;
- whether the Plaintiff had demonstrated and proven that her injuries would restrict her future earning capacity; and
- whether there was evidence supporting that the Plaintiff was capable of completing full-time work.
The Court of Appeal reiterated the necessity of examining the opportunities that were realistically available to the Plaintiff post-accident, and analyzing costs, time, and/or the likelihood of any required retraining occurring.
In the context of the third step of the test, to determine whether such award is warranted, the Court of Appeal confirmed that two approaches may be employed when completing the valuation of a claim. A Court may adopt the “earnings approach” or the “capital asset approach”.
The Court of Appeal stated that “the earnings approach is often appropriate where there is an identifiable loss of income at the time of trial”, stating that this frequently occurs when a Plaintiff has an established work history and a clear career trajectory.
Where there has been no loss of income at the time of Trial, the Court of Appeal directed that Courts should generally undertake the capital asset approach, which reflects that a Plaintiff has not suffered a loss of earnings, but rather a loss of earning capacity, which is referred to as a ‘capital asset’. The Court of Appeal further commented that the capital asset approach is particularly helpful when a Plaintiff has yet to establish a settled career path, as it allays the risk of under compensation by creating a more holistic picture of a Plaintiff’s potential future. In Ploskon–Ciesla, the Court of Appeal found that the Trial Judge had used the appropriate approach, i.e. the ‘capital asset’ approach, and had appropriately applied such.
However, the Court of Appeal was critical of the Trial Judge for not having provided sufficient analysis of the potential earnings associated with various employment alternatives. Despite having referenced both positive and negative contingencies in passing, the Trial Judge had failed to adequately assess such contingencies, rendering it impossible to discern the basis of the assessment of damages at $255,000.
The Court of Appeal reviewed the Trial Judge’s assessment of contingencies, where it had simply been indicated that negative contingencies typically include unemployment, a rate, and part-time employment. The Trial Judge had then briefly indicated that positive contingencies may include the possibility that the Plaintiff would have worked beyond the normal age of retirement, would have worked greater than full-time hours, or may have supplemented her income by other activities such as a second job. The Court of Appeal found that naming various contingencies in passing did not constitute a sufficient assessment and application of such, which was found to be an error of law.
The Defendant, , successfully argued that the Trial Judge erred in failing to assess the Plaintiff’s residual earning capacity, arguing particularly that there was no evidence the Plaintiff would have worked more than full-time hours, taken a second job, or worked beyond retirement age. The Court of Appeal clarified that a Trial Judge addressing future losses must account for negative and positive contingencies by engaging in a fact-intensive, case-specific inquiry, as simply referring to contingencies is insufficient to meet the requirements as set out in Rosvold v. Dunlop, 2001 BCCA 1, which states:
… Possibilities and probabilities, chances, opportunities, and risks must all be considered, so long as they are a real and substantial possibility and not mere speculation. These possibilities are to be given weight according to the percentage chance they would have happened or will happen.
The analysis was therefore conducted afresh by the Court of Appeal, and the future loss of earning capacity award of $255,000 was set aside and was substituted with an award of $75,000.
Thus, the key takeaway in Ploskon-Ciesla is that even when expert evidence is presented that the Plaintiff has suffered a loss of capacity, the simple presence of such loss of capacity does not automatically correlate to a future pecuniary loss award.
It was reiterated that even if one or more of the required factors to demonstrate a loss of earning capacity is present, this is not inherently indicative that an award will be made; an assessment must be completed as to all the negative and positive contingencies, in order to adequately assess the most likely value of the claim.
The Court of Appeal confirmed that the evidentiary burden is high, as plaintiffs must meet each step of the tripartite test by presenting sufficient evidence of the real and substantial possibility that the future event in question will cause a pecuniary loss. The evidence presented must be of such quantity and quality to allow the Courts to complete a detailed analysis and assessment.
When defending such a claim and in having to counter the various claims put forth by a plaintiff, defence counsel should seek to retain experts whose evidence will provide the Court with the means to calculate and challenge quantum with greater precision; these would include actuaries, accountants, economists where market analysis are necessary, vocational consultants, and/or additional employment experts, to consider, for example, incidences of ill-health on retirement for persons employed in comparably demanding employment.
Cox & Palmer is a Member of Risk Management Counsel of Canada.