In Riding-Brown v. Jenkins, the Plaintiff was seriously injured as a cyclist when struck by a motor vehicle. At trial, he was awarded over $1,000,000 in total damages, including $210,000.00 for the cost of future care.
After the trial, counsel for both parties could not agree on certain issues such as management fees, and the appropriate tax gross up amount. Management fees, although not automatic, are awarded in certain circumstances to assist the Plaintiff in getting professional investment advice if the Court feels they may not be properly able to manage their awards. Tax gross up is an amount awarded to assist a Plaintiff in offsetting any tax that must be paid that is earned on the future cost of care award.
Prior to ascertaining the amounts for management fees and tax gross up, the Court had to determine the proper method at which the plaintiff’s future cost of care award would be depleted.
Counsel for each party called expert evidence in this regard, with counsel for the Plaintiff urging the Court to use the “probability of survival” approach, meaning that the monthly depletion of the cost of care award should take into consideration negative contingencies, such as the probabilities of survival or death. Counsel for the Plaintiff argued that it should not be assumed that the Plaintiff will spend the same amount each month on his care.
ICBC’S lawyer argued that the Court should adopt the “life certain” approach, which presupposes that the Plaintiff’s future care award will be depleted each month by what is necessary for monthly care expenses.
With respect to the correlation between this issue, management fees and tax gross up amounts, the Plaintiff’s desired method would delay depletion of cost of care amounts, which would necessitate increases for management fees and tax gross up methods. The Defendant’s method would lead to earlier depletion of cost of care funds, meaning that the amount of taxes paid on these funds would be less, which would mean a lower amount for tax gross up, and a reduction in management fees, as there would be less of a period of time needed to manage the funds.
The Court considered previous decisions, eventually adopting the “probability of survival” approach.
[19] The defendant’s proposed method will lead to earlier depletion of the cost of care funds, meaning that less tax will be paid on those funds, likely warranting a lesser amount for tax gross‑up. Earlier depletion of the funds may also justify a reduction in the award for management fees, as the fund will require management for a shorter period of time. Conversely, the plaintiff’s method, which delays depletion of the cost of care funds, may warrant corresponding increases for tax gross‑up and management fees.
[20] Mr. Justice Grist considered this issue in Whetung v. West Fraser Real Estate Holdings Ltd., 2008 BCSC 182 (CanLII), at paras. 7‑10, as did Madam Justice Boyd in Burdett (Guardian ad litem of) v. Mohamed, 2010 BCSC 311 (CanLII), at paras. 7‑12, Mr. Justice Wilson in Sartori v. Gates, 2011 BCSC 214 (CanLII), at paras. 24‑30, and, most comprehensively, Mr. Justice Brown in Cikojevic v. Timm, 2012 BCSC 1688 (CanLII), at paras. 4‑47. Each concluded that the calculated depletion of cost of care funds should account for negative contingencies in the manner proposed by the plaintiff’s expert economist in this case.
[21] I see no reason to depart from the rationale expressed in these decisions, and rule that the assumed depletion of Mr. Riding-Brown’s cost of care award should be calculated in accordance with the “probability of survival” approach.
