In Sebaa v. Ricci, the Plaintiff was injured in a head-on collision, and suffered a variety of injuries both physical and psychological in nature. A previous trial dealing only with the issue of liability established liability against the Defendant. The Plaintiff sought damages for pain and suffering, loss of past earning capacity, loss of housekeeping capacity, diminished earning capacity, and the cost of future care. The Court saw merits in both Plaintiff counsel’s and ICBC’S lawyer’s arguments, and would eventually award the Plaintiff $80,000.00 gross for loss of past earning capacity. In so doing, the Court discussed the general legal principles that a court considers with respect to loss of past earning capacity.

 

[153]     The question of whether a past event occurred is determinable based on the balance of probabilities. But what would have happened in the past but for the injury is not any more knowable than what will happen in the future. Therefore, the likelihoods of both future events and hypothetical past are decided based first on deciding whether there was (for past events) or is (for future events) a real possibility. Then the judge must determine the actual likelihood of its occurring: Smith v. Knudsen, [2004] B.C.J. 2509 (B.C.C.A), at paras. 28 – 29.

 

[154]     The award for wages lost before trial is for the loss of the value of any work the plaintiff would have done but for the accident. This can be measured in a variety of ways. In some clear cases, actual wages lost can be calculated. In some cases, an opportunity to take a higher paying position has been lost. In some cases, the plaintiff’s former position for whatever reasons no longer available to them irrespective of their injuries, but their injuries have limited the number of job opportunities that formerly would have been within their capacity. The court may have to consider the economy, job availability and any other evidence relevant to measuring what the plaintiff has lost.

 

In Gormick v. Amenta, the Plaintiff had been injured in a motor vehicle accident, and was awarded damages for pain and suffering, out of pocket expenses, and loss of income, including loss of banked sick time. Subsequent Reasons to the original trial judgment addressed the issue of whether or not the banked sick time was recoverable as a gross amount or net amount. At trial, the judge had awarded close to $18,000 in banked sick time as a gross amount. This was confirmed in the trial judge’s Reasons, where the law in this area was discussed.

 

[8] The recent decision of DeGuzman v. Ge, 2013 BCSC 1450, follows Bjarnason and elaborates on the rationale for awarding the gross and not the net amount of damages in respect of loss sick bank entitlement. I extract the pertinent portion of the reasons of Smart J. at paras. 40-43:

Mr. Calder submits that the appropriate award is that set out in the Notice to Admit – $45,598.26. This includes the subrogated interest of the plaintiff‘s employer for repayment of her accumulated sick bank time in the amount of $33,354.73. Mr. Calder agrees the plaintiff is only entitled to net past wage loss but argues that the award to replenish the sick bank is the gross amount of past wage loss, not the net amount. He refers me to Chingcuangco v. Herback, 2013 BCSC 268, Chalmers v. Russell, 2010 BCSC 1662, and Bjarnason v. Parks, 2009 BCSC 48.

Mr. Gibb notes that the plaintiff is only entitled under the provisions of the Insurance (Vehicle) Act, R.S.B.C. 1996, c.231, to recover net past wage loss and that income tax contributions and Employment Insurance premiums are to be deducted from the gross earnings to determine net past wage loss. While he does not disagree with Mr. Calder’s arithmetic, he does disagree that repayment of the sick bank time should be the gross wage loss. He argues that it should be consistent with past wage loss awards and should be the net amount – $39,247.42. He says to make the award Mr. Calder suggests would over-compensate the plaintiff.

I respectfully disagree with Mr. Gibb. In my view, the purpose of an award for past wage loss is to compensate the plaintiff for what she actually lost as a result of the MVA. To only compensate her for the net amount of her sick bank time would result in deductions being taken from her twice – now and later when she uses them in the future. This is because when she does use her replenished sick bank time, she will have income tax and other deductions taken from her by the employer and will only receive the net amount.

The plaintiff is entitled to the past wage loss in the amount of $45,598.26.

In Combs v. Bergen, the Plaintiff was injured in a motor vehicle collision, and brought an ICBC claim against the Defendant for damages for pain and suffering, wage loss, diminished earning capacity, and cost of future. Liability was admitted by ICBC’S lawyer. The Plaintiff endured neck pain, back pain, and headaches, and was awarded $70,000.00 for non-pecuniary (pain and suffering) damages. As part of the Plaintiff’s past wage loss, the Court awarded damages for the loss of the Plaintiff’s employer’s contribution to her Canada Pension Plan (CPP), as well as her pension. ICBC’S lawyer argued that such amounts should be deducted, however the Court rejected this submission.

 

[61]         The plaintiff seeks past income loss in the amount of $18,287.25 and the defendant agrees with this amount. However, the plaintiff also seeks payment for her employer’s contributions to the Canada Pension Plan (CPP) and s to her pension. These amounts are $831.05 and $1,737.29, respectively. The defendant opposes any payment for these amounts.

 

[62]         There is authority for the plaintiff’s submission on benefits to the effect that “the compensatory principle requires that the full value of lost fringe benefits must be taken into account when computing loss of working capacity” (Ken Cooper-Stephenson, Personal Injury Damages in Canada, 2^nd ed. (Toronto: Carswell, 1996) at 240). This reasoning was adopted by the Newfoundland Court of Appeal in Hogan (1998), 160 Nfld. & P.E.I.R. 93 at para. 41 (Nfld. C.A.). I conclude that is appropriate in this case.

 

[63]         Past income loss is set at $18,287.25 plus CPP and pension contributions. Total is $20,855.59.

In Chingcuangco v. Herback, the Plaintiff was injured in a motor vehicle collision as a passenger when the vehicle she was traveling in collided with a vehicle that had turned left in front of their path. Consequently, she brought an ICBC claim for damages due to the injuries sustained therein. Liability was disputed by ICBC’S lawyer, however the Court would rule that the Defendant was negligent. The Plaintiff was required to use some of her sick leave hours to compensate her for some of her wage loss. The Plaintiff sought reimbursement for banked sick time hours, however ICBC’S lawyer argued that she should not be entitled to this. The Court, in keeping in line with previous cases, ruled that such banked sick time was in fact recoverable.

 

[209]     During a portion of the time when the plaintiff was unable to work, she was paid the wages that she otherwise would have received by drawing on her sick leave and vacation benefits.  She seeks damages to reflect the depletion of those benefits.

 

[210]     The parties have agreed that the value of the plaintiff’s hours missed (sick leave and vacation time used with pay) totals $7,371.09.

 

[211]     The defendants argue that an award to the plaintiff in this regard will result in double recovery because she did not lose any money – she continued to receive her wages by drawing on her sick leave benefits and vacation time.

 

[212]     This issue was addressed by this court in Bjarnason v. Parks, 2009 BCSC 48.  In that case, Madam Justice Ballance provided a thorough and helpful analysis:

……………….

 

[213]     I agree with that analysis and I adopt it in its entirety.  Here, the plaintiff exhausted her accumulated sick leave.  She also used up several of her vacation days.  She has had illnesses unrelated to the accident that have resulted in her being unable to work.  She is likely to have them in the future.  Her plan is to stay and make a career at CRA. 

 

[214]     I am satisfied that the plaintiff is entitled to be compensated for her lost sick leave and vacation benefits which total $7,371.09.  There will be no deduction for income tax.

In Kilian v. Valentin, the Plaintiff was injured in a rear-end collision, and brought an ICBC claim for damages. The Plaintiff claimed nearly $10,000.00 in loss of banked sick time, which the Court awarded.

 

[126]     The cost to Ms. Kilian to buy back those 29.6 days is $307, for a total of $9,087. Ms. Kilian testified that she intended to buy back those days, as she has very few days left in her sick back and is concerned about future exacerbations of her neck symptoms.

 

[127]     I conclude that Ms. Kilian is entitled to an amount of $9,087 to replenish her sick bank. Given the purpose of this award, there will be no deduction for income taxes on this amount (Bjarnson v. Parks, 2009 BCSC 48 (CanLII), 2009 BCSC 48).

In Russell v. Parks, the Plaintiff was injured in a car accident, and brought an ICBC claim for several heads of damages, including pain and suffering, cost of future care, diminished earning capacity, and past diminished earning capacity. The Plaintiff had been injured as a pedestrian in a parking lot. With respect to the issue of past diminished earning capacity, the Court recognized the legal principle that a Plaintiff’s capacity to earn money is an asset which has been taken away when a person suffers injuries. The Court would eventually award $21,000.00 for past diminished earning capacity, before reducing this amount to account for social assistance benefits that the Plaintiff had already received.

 

[74]        Claims for damages for past and future loss of earning capacity are based on the recognition that a plaintiff’s capacity to earn money was an asset which has been taken away: Rowe v. Bobell Express Ltd., 2005 BCCA 141 (CanLII), 2005 BCCA 141 at paras. 23 – 24.

 

[75]        As was stated in Rowe at paras. 30 – 31:

 

… a claim for what is often described as “past loss of income” is actually a claim for loss of earning capacity; that is, a claim for the loss of the value of the work that the injured plaintiff would have performed but was unable to perform because of the injury.

 

Evidence of this value may take many forms. As was said by Kenneth D. Cooper-Stephenson in Personal Injury Damages in Canada, 2nd ed. (Scarborough, Ont.: Carswell, 1996) at 205-06,

 

… The essence of the task under this head of damages is to award compensation for any pecuniary loss which will result from an inability to work. “Loss of the value of work” is the substance of the claim — loss of the value of any work the plaintiff would have done but for the accident but now will be unable to do. The loss framed in this way may be measured in different ways. Sometimes it will be measured by reference to the actual earnings the plaintiff would have received; sometimes by a replacement cost evaluation of tasks which the plaintiff will now be unable to perform; sometimes by an assessment of reduced company profits; and sometimes by the amount of secondary income lost, such as shared family income.

 

[Underlining added in Rowe.]

 

[81]        When I consider this evidence within the context of the legal principles to which I have referred, I conclude the plaintiff has established a loss of earning capacity to the date of the trial which is causally related to the injuries sustained in the Accident. But I am unable to accept that in the timeframe of approximately a year or so leading up to the Accident the plaintiff was earning $1,000 per month. That would be approximately $250 per week. If one assumes an hourly wage of $10 and that the average length of the grass mowing or snow shovelling jobs was two to three hours then that would amount to two jobs per day, five days a week. The evidence led by the plaintiff, in my view, could not form the basis for such a conclusion.

 

In certain ICBC claims, the Plaintiff will be seeking past loss of income, including where the Plaintiff has not declared his or her full income, such as in the example of tips. When this occurs, it is still possible to claim for these amounts, even if they do not appear on your income tax return. The problem, however, is that you will need to testify in open court. This could later put you at risk with respect to Revenue Canada finding out.

 

In Wong v. Hemmings, the Plaintiff’s occupation was as a server. She was involved in two motor vehicle accidents, and brought an ICBC claim for damages for her injuries. The Plaintiff provided evidence as to actual earnings, however such amounts differed from what she actually declared on her income tax returns. The Plaintiff was quite candid with the Court, in admitting that she did not declare her full amounts, but acknowledging that she knew that she was under an obligation to do so. ICBC’S lawyer argued that the Plaintiff should not be entitled to any amount for loss of income with respect to tips, however the Court would rule otherwise.

 

[125]     The defendants assert that the plaintiff should not be granted a past wage loss award that includes undeclared tips. They assert this position to preserve an ability to argue the issue in another forum as counsel for the defendants otherwise concedes that this Court is bound by Iannone v. Hoogenraad (1992), 66 B.C.L.R. (2d) 106 (C.A.), leave to appeal dismissed [1992] S.C.C.A. No. 185, which holds that failure to declare tip income is no bar to the recovery of undeclared tips as past wage loss.

 

[126]     The defendants also submit that the plaintiff has failed to establish what she would have earned in gratuities on her cash sales. As noted above, the Fairmont’s records reflect only the total amount of the plaintiff’s cash sales as a server. Any tip received by a server on a cash sale would be known only to them. The defendants point out that in 2006, for example, and assuming an average 12% tip on cash sales, the tips received by the plaintiff on cash sales represented 8.6% of her total tip earnings. Using this as a baseline, the defendants argue that the plaintiff’s past tip loss should be discounted by 8.6% to reflect the amount of cash tips allegedly lost but not proven.

 

[127]     The defendants are, at least in theory, on firmer ground on this issue. Iannone stands for the proposition that the plaintiff has the burden of leading evidence of past wage loss and that it will be a difficult burden to discharge where there is no confirmatory evidence, such as income tax returns, to establish that the amount claimed would, in fact, have been earned. In this case, however, I am satisfied that the plaintiff has met her burden of proof on this issue. The records of the Fairmont Hotel clearly establish the total of the plaintiff’s cash sales as a server. The plaintiff testified that she would receive, on average, a 12% tip on her cash sales. I accept her evidence on this point.

 

[128]     In the result, I award the plaintiff $20,250.00 for past income loss.

 

In Ibbitson v. Cooper et al., the Plaintiff was injured in a motor vehicle accident, and was consequently disabled from his occupation. He was able to secure alternate employment, which paid less than his original job, and as such worked longer hours in order to make up for his loss of income from his original position. As such, he fully mitigated his losses with respect to loss of income, meaning that he was not out any money with respect to employment income. Despite this, the Court still awarded the Plaintiff $95,000.00 for past diminished earning capacity. ICBC’S lawyer appealed, arguing that there should not have been any award whatsoever, as there was no actual income loss. The British Columbia Court of Appeal dismissed the appeal, stating that:

 

[14]         The issue on appeal may be stated in this way – did the trial judge err in giving an award for past loss of earning capacity in circumstances where the plaintiff had fully mitigated his loss of income but where the circumstances of his replacement employment required him to work longer hours?

 

[19]         While in many cases the actual lost income will be the most reliable measure of the value of the loss of capacity to earn income, this is not necessarily so. A hard and fast rule that actual lost income is the only measure would result in the erosion of the distinction made by this Court in Rowe: it is not the actual lost income which is compensable but the lost capacity i.e. the damage to the asset. The measure may vary where the circumstances require; evidence of the value of the loss may take many forms (see Rowe). As was held in Rosvold v. Dunlop, 2001 BCCA 1 at para. 11, 84 B.C.L.R. (3d) 158, the overall fairness and reasonableness of the award must be considered taking into account all the evidence. An award for loss of earning capacity requires the assessment of damages, not calculation according to some mathematical formula.

 

[20]         In this case, the respondent clearly suffered as a result of the accident; he can no longer perform the job he was engaged in prior to the accident. He has suffered a pecuniary disadvantage as he needs to work longer hours to maintain his approximate pre-accident level of income.

 

[21]         The trial judge considered pre-trial earnings both before and after the accident, explaining that calculating a precise value for the extra hours was a difficult task, and chose to assess the damages “at large”. Had Mr. Ibbitson worked the same amount of hours post-injury as he had pre-injury, he surely would have been found to have suffered a compensable loss of earning capacity. His entitlement to such damages does not disappear due to his industrious efforts to maintain his level of income, exceeding his legal requirement to mitigate. I agree with the trial judge’s conclusion and analysis.

 

When you have been injured in a motor vehicle accident, and through your contractual agreement with your employer you have received some wage loss benefits, the lawyer for ICBC will likely argue that such payments are to be deducted from your overall damages award.

 

The Court, however, rejected this line of argument in Loeppky v ICBC, where the Court commented that:

 

[83] In my view, Mr. Loeppky’s wage replacement benefits do not constitute an “insured claim” under s. 106 of the Regulation, and therefore may not be deducted from Mr. Loeppky’s award.

 

[84] In Arklie v. Haskell (1986), 33 D.L.R. (4th) 458, 25 C.C.L.I. 277 (B.C.C.A.), McLachlin J.A., writing for the court at para. 26, held that a sum of money advanced by an employer to an employee that had to be repaid in the event of any recovery did not qualify as a benefit under the predecessor of s. 106.

 

[85] More generally, in Lopez v. Insurance Corporation of British Columbia (1993), 26 B.C.A.C. 142, 78 B.C.L.R. (2d) 157, Hollinrake J.A., writing for the court at para. 21, held that an “insured claim” for the purposes of the Regulations must still import at least some element of insurance. He went on conclude that payments made by reason of a contract of employment, without some evidence that they originate from an insurer, do not possess such an element of insurance.

 

[86] The sum of $6,804.77 was paid to Mr. Loeppky under the collective agreement between the Vancouver Police Union and the Vancouver Police Board. Under the terms of that agreement Mr. Loeppky must repay that amount if he recovers it in this action. There is no evidence that the payments originated from an insurer. Thus, it is not an insured claim under s. 106 and the defendant is not entitled to deduct it from any award.

 

In British Columbia, the Plaintiff is only entitled to a “net” income loss, not a “gross” one. In other words, tax deductions must be factored into a final damages award for income loss.

 

In the British Columbia Court of Appeal decision in Laxdal v Robbins, the Court clarified how net past wage loss is to be determined. If it can be shown that the income loss can be attributed to a certain year, then the income loss should be calculated on a yearly basis, and not a lump sum basis, for all years as though the income was earned in one year.  This would be beneficial to Plaintiffs. However, the amount of the lost income should be added to the actual income for a particular year when attempting to determine the marginal tax rate. This would not be so beneficial to Plaintiffs, as this leads to a higher marginal tax rate if the claimant earns an income in the years leading up to trial.

 

[17]           The respondent argued that a plain reading of the reference in s. 95 of the Insurance (Vehicle) Act to only “the gross income that the person lost in that period less the amount that would have been payable on that gross income” compels one to the conclusion that the past income loss award is to be taxed without reference to taxes otherwise payable during the same taxation year. In my view, such a reading of s. 95 is not harmonious with s. 98 of the Act, as amended, which seeks to award “damages for the income loss suffered after the accident and before the first day of trial of any action brought in relation to it, [of] not more than the net income loss that the person suffered in that period as a result of the accident”.

 

[18]         I have concluded that the trial judge was incorrect in interpreting ss. 95 and 98 of the Insurance (Vehicle) Act as not requiring a reduction in her award for past loss of income to reflect the tax consequences when that loss is combined with earned income during the same period. The words of those sections must be read in their grammatical and ordinary sense.

 

[19]         Having found that the losses all occurred in 2006, the trial judge ought to have combined the respondent’s 2006 income with the past income loss award for the purpose of determining the income she would have earned for income tax purposes “as if she had continued working” (as per Tysoe J.A. at para. 185 of Lines). To achieve this result, the appellant proposed the use of what has been referred to as the “stacking approach”.

 

[20]         I am satisfied that, where an income loss can be attributed to a particular tax year or years, the language of ss. 95 and 98 of the Insurance (Vehicle) Act requires a resort to the stacking approach. Although Tysoe J.A. explained in the examples he referred to in Lines that “it was the intention of the Legislature to give a discretion to the judge to determine what period or periods are appropriate for the determination of net income loss in all of the circumstances”, once that determination is made, the legislation requires a deduction from the gross income loss to take into account the provisions of the Income Tax Act of British Columbia, the Income Tax Act of Canada and the Employment Insurance Act of Canada for the relevant year or years.

 

[23]         The application of the stacking approach in accordance with the legislation will result in the combination of the award for past income loss with the other income earned for the same year, but the application of the enumerated legislation from the preceding year to only that portion of the total income for that year represented by the award. While the result is a cumbersome calculation, I see no need to resort to any exceptional construction of the legislation, as discussed by Lamer J., as he then was, in R. v. Paul, [1982] 1 S.C.R. 621 at 662, in order to achieve the legislative intent of ss. 95 and 98 of the Insurance (Vehicle) Act. Section 95(a) of the Insurance (Vehicle) Act refers in each of its subsections to taxes or premiums as the enumerated Acts “read on December 31 of the calendar year before the calendar year in respect of which the net income loss is to be determined”. In my view, this wording accommodates awards for either single or multiple years of income loss by permitting a judge to allocate the loss as discussed at para. 184 of Lines, and to then subject the award for that year or years to the effect of the specified legislation based on their provisions for the preceding year.

 

[24]         A feature of the present legislation that does not arise in this case is the inability of a person injured in a motor vehicle collision to take advantage of any tax planning, such as a contribution to a Registered Retirement Savings Plan. In Lines Tysoe J.A. concluded at paras. 190-194 that such a notional contribution could not be allowed when calculating net income loss under ss. 95 and 98. While the inability to take advantage of such tax planning will not place the injured person in the same position that he or she would have been in, but for the accident, the application of the stacking approach will come as close to so doing as possible, while at the same time giving effect to the intent of the Legislature.

 

[25]         In this case, the respondent’s total reported income for the year 2006 was $40,175.00. The respondent paid $6,024.05 for federal and provincial income tax that year, which represented an overpayment of $202.26.

 

[26]         I conclude that the appropriate means by which to arrive at the respondent’s net past income loss is:

 

a)       to determine her income from other sources during 2006 ($40,175.00);

b)       add that figure to her income loss after taking into account the sick benefits she received ($3,306.24);

c)       determine the tax that would be payable on $43,481.24, based upon the 2005 income tax rules and regulations by computing the amount in accordance with the provisions of theIncome Tax Act of British Columbia, the Income Tax Act of Canada and the Employment Insurance Act of Canada applicable to the calendar year ending December 31, 2005 and on $40,175.00 based upon the 2006 income tax rules and regulations by computing the amount in accordance with the provisions of the Income Tax Act of British Columbia, the Income Tax Act of Canada and the Employment Insurance Act of Canada;

d)       subtract the difference between the two tax figures determined in c, above;

e)       then deduct d from the income loss award, net of sick benefits that she received.