Loss of Income-earning Capacity

By Ian Aikenhead, Q.C.

Loss of income-earning capacity is the correct legal term and concept for what is commonly referred to as past and future loss of income. A claim for loss of income-earning capacity is based on hypothetical events, even when the foundation for the claim pre-dates the trial. The timing of a trial date, artificial as it is, does not create separate claims for “past loss” and “future loss”. The loss of capacity claim exists from the date on which the injury occurred.

A plaintiff is required to establish on the balance of probabilities that the defendant’s negligence, in whole or in part, caused the accident and that the injuries sustained in the accident caused or contributed to the loss for which the damages were sought. What would have happened in the past but for the injury is no more knowable than what will happen in the future, and it is therefore appropriate to assess the like­lihood of hypothetical and future events rather than applying the balance of probabilities test that is applied to past actual events.

…that hypothetical events need not be proved on a balance of probabilities, and they are simply to be given weight according to their relative likelihood. In assessing hypothetical events there is no reason to distinguish between those before trial and those after trial.

Damages for loss of income-earning capacity are to be “assessed” rather than “calculated”. Even though, in most cases, the loss of capacity to the date of trial involves the interruption of a stream of income, such as a salary, it remains an assessment and the burden remains the same.

In assessing damages, an allowance may be made for the hypothetical events of positive contingencies (for example, possibility of future promotion, absence of lay-offs due to economic conditions) and negative contingencies (for example, high risk nature of a job, possibility of strikes) that could affect a plaintiff’s employment earnings according to the assessment of their relative likelihood. A loss of capacity might involve business income. The records of the business should be considered. Business expenses might be a contingency affecting the measure of damages.

The business loss of a company in which the plaintiff is a substantial shareholder may be recovered by the plaintiff personally when the busi­ness loss is directly linked to the plaintiff’s injuries. The personal plaintiff is entitled to the whole of the business loss even though he or she is not the sole owner of the small family company, in recognition of the nature of small family business in which everything goes into the family “pot”. The courts, in piercing the corporate veil, recognize that the corporation in such circumstances is merely a vehicle by which the plain­tiff carries on business and the plaintiff should not be penalized because of his or her method of operating the business.

While the assessment of “past loss” is by its nature hypothetical (what would the plaintiff have been able to earn had she or he not been injured?), it may be guided to some extent by the plaintiff’s actual earn­ings prior to the accident. Some claims involve loss of commission income. In these cases, a reasonable projection of post-accident commissions over a given period may be based upon pre-accident performance, performance of comparable commissioned salespersons, or both.

No compensation is payable for periods of loss of earnings while incarcer­ated.

Article by Ian Aikenhead, Q.C.

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