Litigation II: Damages Study Notes

SAIT School of Business - Litigation II: Damages Notes

Overview of Damages

  • Definition of Damages

    • Damages are the monetary amount awarded by the Court.

    • Damages are payable by the Defendant to the Plaintiff.

Basic Principles of Damages

  • Key Principles

    • Restitution

    • Punitive damages

    • Unsatisfactory result

    • Double recovery

    • Duty to mitigate

Restitution

  • Concept of Restitution

    • The primary basis for determining damages.

    • The aim is to restore the Plaintiff to the position they would have been in had the incident never occurred.

Punitive Damages

  • Nature of Punitive Damages

    • These are an exception to the restitution principle.

    • Intended to punish the Defendant for outrageous behavior (extremely bad conduct).

    • Also referred to as aggravated or exemplary damages.

    • Awarded in addition to other damages.

Compensation Limitations

  • Unsatisfactory Nature of Compensation

    • Monetary compensation can be inadequate for certain losses.

    • Example: Lifelong loss of mobility due to a disability may not be adequately compensated by money.

    • Damage awards are predicated on predictions regarding what would have occurred in the absence of the incident.

Double Recovery

  • Definition of Double Recovery

    • Occurs when the Plaintiff receives benefits from other sources unrelated to the lawsuit (e.g., insurance benefits, Employment Insurance, social assistance).

  • Mitigation of Double Recovery

    • The organization paying the benefits (e.g., insurance companies) may pursue a subrogated claim against the Defendant to recoup the benefits.

    • Courts may subtract collateral benefits from the Plaintiff's damages to prevent double recovery, especially when funds come from public expenses.

Duty to Mitigate

  • Concept of Duty to Mitigate

    • The Plaintiff is obligated to avoid exacerbating injuries or inflating damages.

    • Example: A Plaintiff who declines a safe surgery that could alleviate pain is failing to mitigate their damages.

Types of Damages

  • Two Main Categories

    • Special damages

    • General damages

Special Damages

  • Characteristics of Special Damages

    • Capable of precise and exact calculation.

    • Special damages arise and are quantified before trial.

    • Also known as pecuniary damages.

  • Documentation in Statement of Claim

    • Referred to item-by-item in the Statement of Claim.

    • Includes a broad claim for potential special damages: “…such special damages in an amount as may be proven at trial.”

General Damages

  • Characteristics of General Damages

    • Also termed non-pecuniary damages.

    • Cannot be calculated precisely; assessed or estimated largely based on intangibles or future considerations.

  • Types of General Damages

    • Loss of Future Income

    • Career Interruption

    • Cost of Future Care/Replacement of Household Services

    • Loss of Quality of Life/Loss of Life Expectancy

    • Loss of Consortium

    • Pain and Suffering

Loss of Future Income

  • Definition and Claims

    • Claims made when an injury precludes the Plaintiff from resuming previous employment.

    • The claim is for projected earnings not realized due to injury.

  • Components of Loss of Future Income

    • Lost future salaries, bonuses, and business profits.

    • Requires input from experts such as economists and actuaries to evaluate the present value of lost income.

  • Steps in Determining Loss of Future Income

    1. Estimate what the Plaintiff would have earned based on past earnings and career trajectory.

    2. Calculate contingencies and deduct a monetary sum for uncertainties regarding future events.

    3. Subtract projected earnings from any viable job opportunities available to the Plaintiff moving forward.

  • Evidence Required

    • Evidence supporting future aspirations from family, teachers, and other associates.

    • Information on normal retirement age, income projections, and statistical contingencies (e.g., career interruptions due to child rearing).

Career Interruption

  • Nature of Career Interruption Claims

    • Claims made when injuries temporarily disrupt the Plaintiff's career without precluding the opportunity to work in the field.

    • Entitlement to specific lost income plus general damages due to career opportunities lost.

  • Example of Career Interruption

    • A concert pianist injured in a car accident may claim for lost income during recovery plus additional damages for missed opportunities in the industry.

Cost of Future Care/Replacement of Household Services

  • Need for Ongoing Care

    • Plaintiffs may require personal assistance due to their injuries, necessitating care and future medical treatment.

    • Normal household chores may be unmanageable leading to a need for domestic help.

  • Expert Evidence Requirements

    • Projected care costs, actuarial data regarding Plaintiff lifespan and medical evidence confirming required assistance.

Loss of Quality of Life/Loss of Life Expectancy

  • Impact on Lifestyle

    • Claims for decreased enjoyment of life or alterations in lifestyle due to injuries.

    • Requires evidence from friends and family surrounding hobbies, interests, and emotional well-being.

  • Loss of Life Expectancy

    • Requires both actuarial and medical evidence.

Loss of Consortium

  • Definition

    • Claims made when the Plaintiff's injury negatively impacts their marital relationship, encompassing both physical and emotional harm.

Pain and Suffering

  • Definition and Scope

    • Covers both physical and mental anguish stemming from injuries.

    • Encompasses pain experienced in the past, present, and future due to the injury.

  • Legal Principles Governing Pain and Suffering

    • Governed by the thin skull rule: The Defendant is fully liable for a Plaintiff's injuries, even if the effects are more severe than average due to pre-existing conditions.

    • The crumbling skull rule limits liability if the injuries are primarily attributable to a prior medical condition—not merely the Plaintiff's inherent traits.

  • Comparative Analysis

    • Thin Skull Rule: Defendant bears full responsibility for the severe impacts on individuals with inherent vulnerabilities (e.g., fragile bones).

    • Crumbling Skull Rule: Defendant's liability reduced when pre-existing conditions would have led to deterioration irrespective of their actions (e.g., osteoporosis).

  • Legal Justifications

    • As explained in Athey v. Leonati, [1996] 3 S.C.R. 458, there is a distinction in liability based on the nature of pre-existing conditions and their anticipated impact on the Plaintiff's future, irrespective of the incident.

Tax Implications of a Damage Award

  • Two Tax Considerations

    • Income tax

    • Government Sales Tax (GST)

Income Tax

  • Income Tax Scenarios

    • Relevant to claims regarding Loss of Future Income and taxes applied to damage awards.

  • Income Measurement

    • Courts use gross income for calculations instead of net income due to the complexities of predicting future tax rates.

  • Tax Treatment of Damage Awards

    • Generally, damage awards are not treated as taxable income, however, any investment income generated from investing the awarded amount is taxable.

    • Example: Investing a $1,000,000 award at 5% generates taxable investment income ($50,000 each year).

Goods and Services Tax (GST)

  • GST Applicability

    • Damages awarded to cover future expenses may be subject to GST when they are disbursed at that time.

    • Attorneys may seek a gross-up in awards to factor in future GST obligations, particularly concerning the Cost of Future Care claims.