The "Lost Years" Deduction
This article was published in the December 1996 issue (number 42) of The Barrister.
Introduction
It is often the case that an injury reduces the plaintiff's life expectancy. For example, a minor may now be expected to live only to age 45 instead of 80 -- a "loss" of 35 years. In the landmark case of Andrews v. Grand & Toy (1978), 83 D.L.R. 452 (S.C.C.), Dickson J. concluded that, in such cases, it is the number of years which the plaintiff could have expected to work had the accident not occurred which must be used when calculating the loss of earning capacity. That is, the plaintiff should be compensated for the income which would have been earned during the "lost years."
Recently, defendants have argued successfully that it is not the full value of the income in the lost years which should be compensated, but that income less an allowance for those expenditures which would have been made for "necessities."
The Legal Principle
The legal basis for the lost years deduction is the principle of restitutio in integrum -- the plaintiff should be restored, to the extent that is possible, to the position which he or she would have enjoyed had the tortious action not occurred. In the case of an individual whose life has been shortened, this implies that the individual should be compensated for those pleasures which would have been enjoyed during the lost years. Thus, on the assumption that expenditures which are necessary for the maintenance of life do not provide "pleasure," restitutio implies that compensation is to be provided only for that portion of income which remains after the deduction of necessities. The clearest statement of this principle is found in Toneguzzo-Norvell v. Burnaby Hospital [1994] 1 S.C.R. 114 where Madam Justice McLachlin concluded at page 127:
There can be no capacity to earn without a life. The maintenance of that life requires expenditure for personal living expenses. Hence the earnings which the award represents are conditional upon personal living expenses having been incurred. It follows that such expenses may appropriately be deducted from the award. (Emphasis added.)
Similarly, in The Queen v. Jennings (1966). Judson J. argued that the deduction should be for "...expenditures necessary to earn ... income." In an unreported British Columbia decision, Bastian v. Mori, Hood J. found that "... it is appropriate to deduct from the amount ascertained the amount that [the plaintiff] would have expended on the basic necessities of life." Lang J., in Pittman Estate v. Bain (1994) 112 D.L.R. (4th) 482, referred to "...expenses necessarily incurred in order ... to earn her income; and the B.C. Court of Appeal, in Semenoff v. Kokan (1991) 84 D.L.R. (4th) 76, quoted approvingly from the British case of Pickett v. British Rail Engineering Ltd. [1979] 1 All E.R. 774, to the effect that the plaintiff should "...recover ... that which would have remained at his disposal after [personal] expenses had been discharged."
The primary disagreement between plaintiffs and defendants has concerned the determination of the value of "personal living expenses." Whereas some defendants have argued that all expenditures except those for personal savings are "necessary," most plaintiffs have argued for a lost years deduction of between 33 and 55 percent of total income. Both arguments are, I submit, flawed.
The Plaintiffs' Position
The most common argument made by plaintiffs is that the value of personal living expenses should be obtained by summing all expenditures on food, clothing, shelter, and transportation. (It is this argument which yields the estimate that necessities compose 50-55 percent of family income.) What this argument fails to recognise is that a significant percentage of Canadians' expenditures on these items provide pleasure. They are not made simply to allow us to survive.
For example, whereas Canadian families earning $20,000 spend approximately 19 percent, or $3,800, of their incomes on food, families earning $50,000 spend approximately 15 percent, or $7,500, on that category. The argument that all expenditures on food are "necessary" suggests that none of the extra $3,700 spent by high income families provide pleasure. This position flies in the face of common sense. When families' incomes rise from $20,000 to $50,000 they do not "need" additional food. Instead, they increase their expenditures on "non- essential" items. They purchase higher quality ground beef, or replace ground beef with chicken; they eat at restaurants more often; they buy more protein and fewer carbohydrates; etc. These additional expenditures are most reasonably interpreted as being for the purpose of providing pleasure -- pleasure which is lost when the individual's life is shortened. If this pleasure can be replaced during the plaintiff's remaining years, restitutio requires that the individual be compensated for this loss.
Similar arguments can be made with respect to shelter, clothing, and transportation. Whereas a (childless) couple could live comfortably in a one-bedroom apartment, many couples live in $500,000 condominia. Whereas individuals could clothe themselves in jeans, t-shirts, running shoes, etc, we know that wealthy individuals purchase designer dresses and suits. Whereas most individuals' transportation needs could be met through the use of public transit, many individuals drive Cadillacs and BMWs. In each case, the argument that all expenditures on clothing, shelter, and transportation are "necessary," suggests that the incremental expenditures made by wealthy individuals are for "necessities."
I do not believe that an objective observer could accept this argument. I suggest that it is only those portions of the individual's expenditures which support a "reasonable" standard of living which can be considered to be "necessary" and, therefore, deductible from the plaintiff's income when calculating the lost "enjoyment of life's pleasures."
The Defendants' Position
In a number of recent cases, the defendants (usually the Canadian Medical Protective Association) have argued that, as it is difficult to quantify personal living expenditures, all expenditures should be considered to be necessary. (For a recent case in which this argument has been accepted, see Granger v. Ottawa General Hospital (unreported, June 14, 1996, Doc. 18473/90, Ont. Gen., Div.).) This is simply the reductio ad absurdum of the plaintiffs' argument, above. According to the defendants' argument, not only are meals in restaurants, $500,000 condominia, designer clothes, and Cadillacs "necessary," so are trips to Hawaii, bottles of wine, and original works of art. It is true that individuals spend portions of their incomes on these items, but it is not credible to suggest that they are required for the "maintenance of life." Nor is it credible to argue that the defendant's action has not prevented the plaintiff from experiencing the pleasure which consumption of these goods could have provided.
An Alternative Approach
If both the plaintiff's and defendants' positions are rejected, the question remains: how are "basic necessities" to be measured objectively? Fortunately, an economics professor, Christopher Sarlo, has calculated detailed measures of the "personal expenses required for the maintenance of life" for families of various sizes in different regions of Canada. He defines an expenditure to be "necessary" if it is
"...required to maintain long term physical well-being. For ablebodied persons, the list would consist of a nutritious diet, shelter, clothing, personal hygiene needs, health care, transportation, and telephone. ... It is assumed that the type and quality of each item ... is at least at the minimum acceptable standard within the community in which one resides." (Poverty in Canada, Fraser Institute, Vancouver, 1992, at p. 49)
This definition coincides extremely closely with the use of the phrases "basic necessities" and "...expenditures necessary to earn ... income" used by the courts. Therefore, the estimates which he provides can act, I submit, as objective measures of those concepts.
In Alberta, Sarlo finds that a single person can meet his or her needs with approximately $6,500 per year (and that a family of four requires approximately $15,000). This implies that if an individual's income would have been $20,000 per year during the lost years, 32.5 percent would have been spent on necessities; whereas if the individual's income would have been $50,000, only 13 percent would have been spent on those items. The remainder -- 67.5 percent in the first case and 87 percent in the second -- would have been available to purchase goods and services which provided pleasure. It is this amount which has been lost. To the extent that equally pleasurable items can be purchased during the plaintiff's remaining lifetime, restitutio requires that the plaintiff be compensated fully for this loss.
Addendum
Two additional cases which discuss the lost years deduction are Wipfli v. Britten (1982) 22 C.C.L.T. 104 (B.C.S.C.); and Sigouin v. Wong (1991) 10 C.C.L.T. 236 (B.C.S.C.). Also, a further analysis of the lost years deduction, by economist Scott Beesley, can be found on our web site.
