Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee

Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee
Collection
Supreme Court Judgments
Date
1994-03-17
Report
[1994] 1 SCR 359
Case number
22860, 22863, 22867
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank; Major, John C.
On appeal from
British Columbia
Subjects
Insurance
Torts
Notes
SCC Case Information: 22860, 22863, 22867
Decision Content
Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee, [1994] 1 S.C.R. 359
John Earl Miller Appellant
v.
Mariea Cooper Respondent
and
Confederation Life Insurance Company,
The Great‑West Life Assurance Company
and London Life Insurance Company Interveners
and between
Samuel H. Shanks Appellant
v.
Thomas Harry McNee and Beverly Ann McNee Respondents
and between
Thomas Harry McNee and Beverly Ann McNee Appellants
v.
Samuel H. Shanks Respondent
and
Confederation Life Insurance Company,
The Great‑West Life Assurance Company
and London Life Insurance Company Interveners
and between
Bradwell Henry Cunningham Appellant
v.
Cherylee Lyn Wheeler and
Edward Kenneth Wheeler Respondents
and
Confederation Life Insurance Company,
The Great‑West Life Assurance Company
and London Life Insurance Company Interveners
Indexed as: Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee
File Nos.: 22860, 22863, 22867.
1993: November 4; 1994: March 17.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Cory, McLachlin, Iacobucci and Major JJ.
on appeal from the court of appeal for british columbia
Torts ‑‑ Negligence ‑‑ Compensation ‑‑ Plaintiffs receiving compensation for lost wages under employment plans ‑‑ Whether compensation received should be deducted from amount recovered for loss of wages from tortfeasor ‑‑ Whether amount recovered for lost wages should be reduced by amount of income tax which would have been payable on wages.
In Cunningham v. Wheeler the plaintiff was injured when he was struck by a car. While he was off work he collected disability benefits pursuant to a collective agreement with his employer. No deductions were made from his pay for these benefits, but the hourly wage package was made up of an hourly rate of pay together with collateral benefits. Disability benefits recovered from the defendants did not have to be paid either to the employer or to the insurance company managing the plan. The trial judge held that the payments should not be deducted in calculating the amount payable by the defendants for the wages lost by the plaintiff as a result of his injuries, as the plaintiff had established that the indemnity benefits were paid for by him as part of his wage package. The Court of Appeal reversed the judgment. It determined that since there was no subrogation right in the employer, and the direct funding for the disability benefits came from the employer, the plan was not in the nature of a private insurance policy and the funds received should be deducted from the damage award.
In Cooper v. Miller the plaintiff was injured in a motor vehicle accident. She was unable to return to work and was still totally disabled three years after the accident. Under a collective agreement she received short‑term disability benefits and was entitled to further sums post‑trial if her disability continued. Her share of the cost of the short‑term and long‑term disability plans was 30 percent, paid by means of deductions from her pay. She was not obliged to repay the short‑term disability benefits either to her employer or to the insurance carrier. The trial judge held that her benefits should not be deducted from her recovery for lost wages from the defendant. He was of the view that even though there was no subrogation provision, she came within the category of those who had bought insurance because she paid 30 percent of the premium cost. The Court of Appeal upheld the judgment.
In Shanks v. McNee, the plaintiff was injured in a motor vehicle accident in 1988 and was unable to return to work for approximately two years. Under his collective agreement, he was a member of both a short‑term and a long‑term disability plan. From 1986 to 1988, the long‑term plan was funded 70 percent by the employer and 30 percent by the employee through payroll deductions. In the 1988 through 1991 collective agreement the percentages were changed to 50 percent paid by the employer and 50 percent paid by the employee. There was no payroll deduction for the short‑term disability plan, but under the collective agreement the employee's share of the unemployment insurance premium reduction resulting from the provision of the disability benefits was retained by the employer as payment for the plan. There was a subrogation clause in the long‑term disability plan, but not in the short‑term plan. The plaintiff received benefits under both plans. These were not deducted from the amount the defendants were ordered to pay for lost wages, since the trial judge found that the disability payments were in the nature of insurance the plaintiff had paid for as an employee. He further held that there was to be no deduction for the income tax which would have been paid on the lost wages if the plaintiff had received them while he was working. The Court of Appeal upheld the judgment with respect to the long‑term disability benefits and the taking into account of income tax, but held that the short‑term benefits should be deducted since there was no direct contribution by the employee and there was no subrogation clause pertaining to those benefits.
Held (La Forest, L'Heureux‑Dubé and McLachlin JJ. dissenting): The appeal in Cunningham v. Wheeler should be allowed; the appeal in Cooper v. Miller should be dismissed; the appeal by the plaintiff in Shanks v. McNee with respect to the deductibility of the short‑term benefits should be allowed.
Held: The cross‑appeal by the defendants in Shanks v. McNee with respect to the deductibility of the long‑term benefits and the taking into account of income tax should be dismissed.
Per Sopinka, Cory, Iacobucci and Major JJ.: While the plaintiff in a tort action is not generally entitled to a double recovery for any loss arising from the injury, the disability benefits obtained by the plaintiff in Cunningham v. Wheeler as a result of his collective bargaining agreement are in the nature of a private policy of insurance and so should not be deducted from the claim for lost wages under the private insurance exception introduced in Bradburn. The insurance exception should apply where disability benefits are obtained not privately but pursuant to a collective agreement. Since the benefits at issue here were bargained for and obtained as a result of a reduction in the hourly rate of pay, they were obtained and paid for by the plaintiff just as much as if he had bought and privately paid for a disability insurance policy. In order to show that the benefits are in the nature of insurance, there must be evidence adduced of some type of consideration given up by the employee in return for the benefit. The application of the insurance exception to benefits received under a contract of employment should not be limited to cases where the plaintiff is a member of a union and bargains collectively. Benefits received under the employment contracts of non‑unionized employees will also be non‑deductible if proof is provided of payment in some manner by the employee for the benefits. Evidence that the employer takes the cost of benefits into account in determining wages would adequately establish that the employee contributed by way of a trade‑off against higher wages.
The disability benefits in Cooper v. Miller were also clearly in the nature of an insurance policy and therefore should not be deducted from the lost wages recovered from the defendant. While the plaintiff paid only 30 percent of the cost of the benefits by means of deductions from her pay, whatever sums the employer contributed to fringe benefits such as the disability payments were deducted from the total hourly wage that would otherwise have been paid to the employee, and the entire cost of the benefits was thus in fact paid by the employee.
Both the long‑term and the short‑term disability benefits in Shanks v. McNee were in the nature of an insurance paid for by the employee and should not have been deducted. While no evidence was called as to the collective bargaining process whereby the hourly wage rate was reduced in exchange for the provision of the collateral benefits such as these, it can be inferred from the fact that the contract containing the short‑term disability plan was arrived at after a lengthy strike that there must have been trade‑offs made by the employees in return for the collateral benefits which were received. In any event, there is evidence of a direct contribution by the plaintiff to both the long‑term and the short‑term benefits in this case. There was a payroll deduction made for the employee's contribution to the long‑term disability plan, and the employee agreed to give up to the employer the return of the unemployment insurance premiums for the short‑term disability plan. Generally, subrogation has no relevance in a consideration of the deductibility of the disability benefits if they are found to be in the nature of insurance. If the benefits are not shown to fall within the insurance exception, then they must be deducted from the wage claim that is recovered, unless the third party who paid the benefits has a right of subrogation. Finally, the plaintiff's damages for lost income should not be reduced by the amount of tax which would have been payable had they been earned as income.
Per La Forest, L'Heureux‑Dubé and McLachlin JJ. (dissenting in part): The plaintiff in a tort action is entitled to recover to the full extent of the loss, and no more. Double recovery is not generally permitted. This case does not fall within the private insurance exception introduced in Bradburn, which should not be extended to benefits paid under employment contracts. Contribution by the plaintiff to a benefits plan does not avoid the prohibition against double recovery. As a matter of logic, the fact that a plaintiff may lose the benefit of having made a contribution does not affect the fact that, to the extent a loss is made good by the plan, the plaintiff in fact suffers no parallel loss recoverable against the defendant under tort principles. The law reflects this logic in that it has consistently refused to compensate a plaintiff because he or she took precautions which minimized the loss flowing from the negligent act.
It is far from clear that the difference between the damages payable without deduction of collateral benefits received from employment plans and damages payable with deduction would have any effect on negligent conduct. Moreover, even if some connection between non‑deduction of employment benefits from damage awards and deterring negligent conduct could be established, deterrence alone is not a valid basis upon which to justify increasing damages. Since a plaintiff who has been compensated for lost earnings by an employment benefits plan has suffered no loss to the extent of those benefits, it is not a question of who will bear the loss. Nor is this a case of the tortfeasor unjustly benefiting at the plaintiff's expense. The plaintiff contributes regardless of whether or not the accident occurs, and the tortfeasor does not benefit, in any usual sense of the word, since he or she pays the actual measure of the plaintiff's loss.
Where the employer or insurer who pays the wage benefit recovers the damages allocated to lost wages from the employee by way of subrogation, there is no double recovery. The burden is properly placed on the tortfeasor rather than the employee or insurance company. Since rights of subrogation appear to be exercised rarely, the best approach is a regime of deductibility of employment plan benefits, subject to the plaintiff's right to claim the benefits if it is established that they will be paid over to the subrogated third party. The only exceptions that should be endorsed are charity and cases of non‑indemnity insurance or pensions. Since the benefits under the plans at issue in all three cases were paid in lieu of wages to the plaintiffs, they must be brought into account in calculating damages. The plaintiff's long‑term disability benefits in Shanks v. McNee should not be deducted, however, because the employer was subrogated to them.
Cases Cited
By Cory J.
Considered: Ratych v. Bloomer, [1990] 1 S.C.R. 940; referred to: Bradburn v. Great Western Rail Co., [1874‑80] All E.R. Rep. 195; Shearman v. Folland, [1950] 1 All E.R. 976; Parry v. Cleaver, [1969] 1 All E.R. 555; Browning v. War Office, [1962] 3 All E.R. 1089; Hussain v. New Taplow Paper Mills Ltd., [1988] 1 All E.R. 541; Tubb v. Lief, [1932] 3 W.W.R. 245; Dawson v. Sawatzky, [1946] 1 W.W.R. 33; Bourgeois v. Tzrop (1957), 9 D.L.R. (2d) 214; Boarelli v. Flannigan, [1973] 3 O.R. 69; Chan v. Butcher, [1984] 4 W.W.R. 363; Canadian Pacific Ltd. v. Gill, [1973] S.C.R. 654; Guy v. Trizec Equities Ltd., [1979] 2 S.C.R. 756; Cirella v. The Queen, [1978] 2 F.C. 195; The Queen v. Jennings, [1966] S.C.R. 532; Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229; Watkins v. Olafson, [1989] 2 S.C.R. 750; British Transport Commission v. Gourley, [1956] A.C. 185; National Insurance Co. of New Zealand v. Espagne (1961), 105 C.L.R. 569; O'Brien v. McKean (1968), 118 C.L.R. 540.
By McLachlin J. (dissenting in part)
Livingstone v. Rawyards Coal Co. (1880), 5 App. Cas. 25; Hodgson v. Trapp, [1988] 3 W.L.R. 1281; Bradburn v. Great Western Railway Co. (1874), L.R. 10 Ex. 1; Canadian Pacific Ltd. v. Gill, [1973] S.C.R. 654; Guy v. Trizec Equities Ltd., [1979] 2 S.C.R. 756; Parry v. Cleaver, [1969] 1 All E.R. 555; Ratych v. Bloomer, [1990] 1 S.C.R. 940; Hussain v. New Taplow Paper Mills Ltd., [1988] 1 All E.R. 541; Graham v. Baker (1961), 106 C.L.R. 340; The Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152 (1854); Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229.
Statutes and Regulations Cited
Civil Code of Québec, S.Q. 1991, c. 64, arts. 1608, 2474.
Insurance Act, R.S.O. 1990, c. I.8, s. 267.
Authors Cited
Brown, Craig, and Julio Menezes. Insurance Law in Canada, 2nd ed. Scarborough, Ont.: Carswell, 1991.
David, Hillel. "Collateral Benefits: Ratych v. Bloomer" (1990), 12 Advocates' Q. 124.
David, Hillel. "An Update on Collateral Benefits: Ratych v. Bloomer" (1992), 14 Advocates' Q. 221.
Dougans, Gillian. "Collateral Benefits: Some Further Thoughts" (1991), 49 Advocate 43.
Flaherty, James M. "A Purposeful Uniform Collateral Benefits Rule" (1991), 3 C.I.L.R. 1.
Fleming, John G. The Law of Torts, 8th ed. Sydney: Law Book Co., 1992.
Krishna, Vern. The Fundamentals of Canadian Income Tax, 4th ed. Scarborough, Ont.: Carswell, 1993.
Ontario. Law Reform Commission. Report on Compensation for Personal Injuries and Death. Toronto: Ministry of the Attorney General, 1987.
Ontario. Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, vol. 1. Toronto: Ministry of the Attorney General, 1988.
Québec. Code civil du Québec: Commentaires du ministre de la Justice. Montréal: DACFO Inc., 1993.
Shuman, Daniel W. "The Psychology of Deterrence in Tort Law" (1993), 42 Kan. L. Rev. 115.
Taylor, Christopher A. "When is a Loss Not a Loss?: The Deductibility of Collateral Benefits After Ratych v. Bloomer" (1990), 12 Advocates' Q. 231.
APPEALS from a judgment of the British Columbia Court of Appeal (1991), 64 B.C.L.R. (2d) 62, [1992] 3 W.W.R. 258, 95 D.L.R. (4th) 655, 6 B.C.A.C. 268, 13 W.A.C. 268, reversing a decision of Anderson J. (1990), 23 A.C.W.S. (3d) 296 in Cunningham v. Wheeler, affirming a decision of Hutchison J. in Cooper v. Miller and reversing in part a decision of Tyrwhitt‑Drake J. in Shanks v. McNee. Appeal in Cunningham v. Wheeler allowed, appeal in Cooper v. Miller dismissed and appeal by plaintiff in Shanks v. McNee with respect to deductibility of short‑term benefits allowed. La Forest, L'Heureux‑Dubé and McLachlin JJ. are dissenting. Cross‑appeal by defendants in Shanks v. McNee with respect to deductibility of long‑term benefits and taking into account of income tax dismissed.
Mark M. Skorah, Guy Brown and Cheryl Talbot, for the appellant John Earl Miller, the appellants/respondents Thomas Harry McNee and Beverly Ann McNee and the respondents Cherylee Lyn Wheeler and Edward Kenneth Wheeler.
Kenneth W. Thompson, for the respondent Mariea Cooper.
John F. Carten, for the appellant/respondent Samuel H. Shanks.
Richard Sugden and Robin N. McFee, for the appellant Bradwell Henry Cunningham.
P. G. Foy and C. A. Arthurs, for the interveners.
The reasons of La Forest, L'Heureux-Dubé and McLachlin JJ. were delivered by
McLachlin J. (dissenting in part) --
Introduction
Shanks, Cunningham and Cooper were injured in separate accidents. As a result of those injuries, they each missed periods of work. Each received compensation for wages lost under a plan established pursuant to the collective agreement between their employer and their union. Shanks made no contribution to one of the plans under which his lost earnings were paid, but contributed 50 percent of the cost to a second plan. Cunningham made no contributions; his benefit was entirely underwritten by his employer, although it was administered by Aetna Insurance. Cooper contributed to both plans through deductions from her pay cheque.
Shanks, Cunningham and Cooper each brought an action in tort against the person who had caused the accident that injured them. In those actions, each of them made a claim for the full amount of wages that would have been paid to them in the time they were unable to work. They each take the position that they are entitled to recover from the tortfeasor the full amount of their lost wages without any deduction for the fact that they had already received compensation under their employment plan for at least a portion of those wages.
The defendant tortfeasors object. They take the position that the plaintiffs are entitled to recover only what they have actually lost. They say the plaintiffs should not be allowed to recover their lost wages twice and end up in a better financial position than would have been the case had the accident never occurred.
These appeals require this Court to consider the question of whether benefits received as indemnity for lost wages under wage schemes should be taken into account in calculating damages in a subsequent tort action. My colleague, Justice Cory, concludes that plaintiffs who have been indemnified for a loss should nevertheless be able to recover for the same loss from the defendant, provided there is evidence of "some type of consideration given up by the employee in return for the benefit" (p. 407). With respect, I cannot agree. In my view, a plaintiff who has been indemnified for a loss cannot claim it over again from the tortfeasor. Principle, precedent and policy all point to this conclusion, as I see it.
A. The Fundamental Principle
Full and Fair Compensation Without Double Recovery
The fundamental principle is that the plaintiff in an action for negligence is entitled to a sum of damages which will return the plaintiff to the position the plaintiff would have been in had the accident not occurred, in so far as money is capable of doing this. This goal was expressed in the early cases by the maxim restitutio in integrum. The plaintiff is entitled to full compensation and is not to be denied recovery of losses which he has sustained: Livingstone v. Rawyards Coal Co. (1880), 5 App. Cas. 25 (H.L.), at p. 39, per Lord Blackburn. It has been affirmed repeatedly by Canadian courts and once again in more recent times by the House of Lords: ". . . the basic rule is that it is the net consequential loss and expense which the court must measure": Hodgson v. Trapp, [1988] 3 W.L.R. 1281, at p. 1286. At the same time, the compensation must be fair to both the plaintiff and the defendant. In short, the ideal of the law in negligence cases is fully restorative but non-punitive damages. The ideal of compensation which is at the same time full and fair is met by awarding damages for all the plaintiff's actual losses, and no more. The watchword is restoration; what is required to restore the plaintiff to his or her pre-accident position. Double recovery is not permitted.
Cory J. and I agree on the basic principle of recovery in a tort action. As he states, it is simply to compensate the plaintiff as fully as money may do for the loss suffered as a result of the tortfeasor's negligence. The plaintiff is not, we both agree, generally entitled to double recovery (Cory J., at p. 396). However, Cory J. suggests that the case is governed by an exception to the general principles called the private insurance exception.
My colleague and I part company on the issue of whether the present case falls within the private insurance exception. Cory J. seems to assume that the benefits in question fall within the private insurance exception; the issue as he sees it is rather whether the private insurance exception should be maintained (at p. 400). I, on the other hand, do not question that the insurance exception (if indeed it is an exception) should be maintained. The questions which arise, as I see the matter, are the scope of the so-called insurance exception to the rule against double recovery, and whether employment plans such as those here at issue fall within that exception.
B. The Precedents
The fundamental principle, to repeat, is that a plaintiff is entitled to recover to the full extent of the loss, and no more. However, the law, in limited circumstances, has permitted exceptions to the rule against double recovery.
The first exception to the rule against double recovery is the case of charitable gifts. If a plaintiff is injured and his neighbour brings him a basket of groceries or donates to him a sum of money, the law will not deduct the value of the basket from the damages which the negligent defendant must pay nor require that the monetary gift be called into account. This exception reflects the concern of the courts who initiated it that people should not be discouraged from aiding those in misfortune. Arguably, it also reflects the reality that in most cases it would be more trouble than it is worth to require the courts to hear evidence and rule on the value of charitable assistance.
A second apparent exception to the rule against double recovery was introduced in 1874 by the English decision of Bradburn v. Great Western Railway Co. (1874), L.R. 10 Ex. 1. Mr. Bradburn had purchased a private accident insurance policy. He was injured in an accident. The insurance company paid him £31. Bradburn sued the railway company which had negligently caused the accident. The railway company argued that the £31 that Bradburn had received from the insurance company should be deducted from the damages payable by the railway. The court disagreed. It reasoned (per Pigott B., at p. 3) that the plaintiff
does not receive that sum of money because of the accident, but because he has made a contract providing for the contingency; an accident must occur to entitle him to it, but it is not the accident, but his contract, which is the cause of his receiving it.
This language suggests an exception of narrow scope. At very least, the case does not seem to stand for more than the fact that an insurance policy triggered by a specific event, in this case a railroad accident, need not be brought into account in assessing damages for negligence causing the accident. What Bradburn had lost seems to play no role in what he is entitled to recover; it is not his loss which entitles him to payment under the policy, but the event of the accident. While it is impossible to be sure more than one hundred years later, the words used suggest that the contract of insurance was not viewed as an indemnity contract, indemnifying the policy holder for a stipulated loss, but rather as a contract for a payment of a certain sum upon the happening of a certain event.
The distinction between indemnity and non-indemnity insurance is well-recognized in the insurance industry. The following definitions, which I adopt here, were used by the 1988 Report of Inquiry into Motor Vehicle Accident Compensation in Ontario (the Osborne Commission), at p. 429:
An indemnity payment is one which is intended to compensate the insured in whole or in part for a pecuniary loss. . . . A non-indemnity payment is a payment of a previously determined amount upon proof of a specified event, whether or not there has been pecuniary loss.
Perhaps the best example of non-indemnity insurance is that of life insurance. The beneficiary under a life-insurance policy collects a set amount upon the death of the policy holder without reference to any pecuniary loss. Pensions are also considered to be non-indemnity payments: Canadian Pacific Ltd. v. Gill, [1973] S.C.R. 654 (Canada Pension Plan benefits); Guy v. Trizec Equities Ltd., [1979] 2 S.C.R. 756 (company pension plan benefits). Subject to these exceptions and the specific wording of the policy, there is a virtual presumption in the insurance industry that indemnity is the essence of all contracts of insurance: C. Brown and J. Menezes, Insurance Law in Canada (2nd ed. 1991), at para. 1:1:7.
This distinction is critical to a discussion of collateral benefits. If the insurance money is not paid to indemnify the plaintiff for a pecuniary loss, but simply as a matter of contract on a contingency, then the plaintiff has not been compensated for any loss. He may claim his entire loss from the negligent defendant without violating the rule against double recovery. Viewed thus, Bradburn may not even represent a true exception to the compensatory principle of compensation.
This much appears uncontroversial. Controversy arises, however, when attempts are made to apply Bradburn to indemnity policies or plans which compensate the plaintiff for the very loss claimed against the tortfeasor. This is because application of Bradburn to such plans raises starkly the problem of double recovery in a context that is more significant and questionable than the exception for charitable gifts. Courts are far from unanimous on the question of whether Bradburn applies to indemnity policies and plans. Some, particularly the earlier cases, held that it does. The trend in recent years, however, has been to hold that Bradburn does not extend so far. Let us turn then to the cases.
The House of Lords leaned in favour of non-deduction in Parry v. Cleaver, [1969] 1 All E.R. 555. It held that an employment pension for disability should be treated like a private insurance policy for purposes of deduction. It reasoned that the employee must be regarded as having paid for the benefit through his labour or as having purchased it with his wages, and that it would be "unjust and unreasonable to hold that the money which he prudently spent on premiums and the benefit from it should enure to the benefit of the tortfeasor" (per Lord Reid at p. 558). It may be noted that the pension, payable on the event of disability regardless of the loss sustained, was not a benefit designed to indemnify the plaintiff against the loss which he later claimed against the tortfeasor. Like Bradburn, it was a benefit payable on a stipulated contingency, in this case, disability.
More recent decisions in England unanimously favour deductibility*. As Cory J. put it in Ratych v. Bloomer, [1990] 1 S.C.R. 940, at p. 950:
While courts in Canada and England have consistently applied the Bradburn principle with respect to private insurance proceeds, they have encountered difficulties in developing a uniform approach for dealing with collateral benefits provided by an employer to an employee.
As I stated of the British position in the same case, at p. 967:
While some benefits, like private insurance, remain non-deductible, wages or sick benefits paid during the period the plaintiff is unable to work have always been required to be brought into account in calculating the plaintiff's damages. This was affirmed by Lord Reid in obiter dicta in Parry v. Cleaver and applied by the House of Lords in Hussain v. New Taplow Paper Mills Ltd.
Hussain v. New Taplow Paper Mills Ltd., [1988] 1 All E.R. 541 (H.L.), like the appeals at bar, raised the issue of the deductibility of wage benefits paid pursuant to an employment contract. The plan was designed to indemnify the plaintiff against wage loss. It provided that during the first 13 weeks after injury, the plaintiff would receive full pay. Thereafter, he would receive 50 percent of his pre-accident earnings by way of long-term sickness benefits payable under an insurance scheme run by the defendant, which had taken out a permanent health insurance policy to insure itself against contractual liability for long-term sickness benefits to its employees. The only issue on appeal was whether the long-term benefits should be deducted; it was accepted that the trial judge correctly deducted the wage benefits for the first 13 weeks. It was argued that because of its insurance-like nature, the benefits paid under the long-term disability plan fell into the Bradburn principle as extended by Parry v. Cleaver and should not be deducted. The House of Lords accepted that the employment plan could be viewed as "a partial substitute for earnings" (p. 546). Even so, it ruled that the benefits paid under the plan must be deducted from the amount claimed for lost earnings from the tortfeasor. Lord Bridge stated at pp. 546-47:
Counsel for the plaintiff seeks to apply by analogy a principle said to be established by Parry v Cleaver in support of the argument that all payments to an employee enjoying the benefit of the defendants' permanent health insurance scheme are effectively in the nature of the fruits of insurance accruing to the benefit of the employee in consideration of the contributions he has made by his work for the defendants prior to incapacity. Much emphasis was laid on the long-term nature of the scheme payments to which the plaintiff has become entitled and it was submitted that they are strictly comparable to a disability pension. Both these arguments fall to the ground, as it seems to me, in the light of the concession rightly made at an early stage that the nature of payments under the scheme is unaffected by the duration of the incapacity which determines the period for which payments will continue to be made. The question whether the scheme payments are or are not deductible in assessing damages for loss of earnings must be answered in the same way whether, after the first 13 weeks of incapacity, the payments fall to be made for a few weeks or for the rest of an employee's working life. Looking at the payments made under the scheme by the defendants in the first weeks after the expiry of the period of 13 weeks of continuous incapacity, they seem to me indistinguishable in character from the sick pay which the employee receives during the first 13 weeks. They are payable under a term of the employee's contract by the defendants to the employee qua employee as a partial substitute for earnings and are the very antithesis of a pension, which is payable only after employment ceases. The fact that the defendants happen to have insured their liability to meet these contractual commitments as they arise cannot affect the issue in any way. [Emphasis added.]
So in England, any payments under an employment scheme which are a substitute for wages must be deducted from the plaintiff's claim for wages against the defendant. Only if the benefit is not in the nature of an indemnity for wages, but rather a true non-indemnity insurance benefit or pension, does it fall within the Bradburn principle.
Almost a year later, in Hodgson v. Trapp, supra, the House of Lords reaffirmed the fundamental and axiomatic nature of the rule requiring deduction of collateral benefits. The House of Lords further held that all state benefits, such as unemployment benefits, statutory sick pay, attendance and mobility benefits and others not specifically exempted by statute, would be deductible from an award of damages. The court emphasized that, given the compensatory nature of damages, the Bradburn exception must be narrowly applied and that any exceptions to the rule against double recovery must be clearly and demonstrably justified. Lord Bridge stated at pp. 1285-86:
. . . it cannot be emphasised too often when considering the assessment of damages for negligence that they are intended to be purely compensatory. Where the damages claimed are essentially financial in character . . . the basic rule is that it is the net consequential loss and expense which the court must measure. If, in consequence of the injuries sustained, the plaintiff has enjoyed receipts to which he would not otherwise have been entitled, prima facie, those receipts are to be set against the aggregate of the plaintiff's losses and expenses in arriving at the measure of his damages. All this is elementary and has been said over and over again. To this basic rule there are, of course, certain well established, though not always precisely defined and delineated exceptions. But the courts are, I think, sometimes in danger, in seeking to explore the rationale of the exceptions, of forgetting that they are exceptions. It is the rule which is fundamental and axiomatic and the exceptions to it which are only to be admitted on grounds which clearly justify their treatment as such. [Emphasis added.]
The position in Australia echoes that in England. The leading case of Graham v. Baker (1961), 106 C.L.R. 340 (Austl. H.C.) remains authority for the position that sick pay received by a plaintiff from his employer following a car accident will be deducted from the damages assessed against the tortfeasor. That case also decided, as did Parry v. Cleaver, that pension benefits received by the plaintiff would not be deducted.
In the United States, the original rule was that a defendant must bear the full cost of the injury he caused the plaintiff, regardless of any compensation the plaintiff receives from an independent or collateral source: The Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152 (1854). However, many states have overturned this rule by statute and the majority have implemented exceptions to it.
In sum, it can be stated with confidence that, subject to the exceptions of charity and non-indemnifying personal insurance or pensions, the rule in other common law jurisdictions remains one of deductibility. Where plaintiffs have received collateral benefits with respect to wages and "wage-alikes", such as sick leave entitlement and unemployment benefits, these will be deducted from the calculation of loss. J. G. Fleming, The Law of Torts (8th ed. 1992), summarizes the position as follows (at p. 246):
In other words, they [collateral benefits] are treated not as gains which might or might not be set off against an actual loss, but (like free medical services in Britain) as preventing a loss from ever arising.
This Court joined the general trend in the common law world to deduction of collateral benefits with its decision in Ratych v. Bloomer, supra. The Court held that, "[a]s a general rule", and subject to cases where a third party was subrogated to the wage benefit, "wage benefits paid while a plaintiff is unable to work must be brought into account and deducted from the claim for lost earnings" (p. 982). It affirmed the rule against double recovery and stressed that before a claim for damages can be made, the plaintiff must demonstrate an actual loss. Accordingly, it held that a plaintiff who had received payment of wages while he was unable to work due to an accident could not claim damages for loss of earnings against the tortfeasor.
Ratych v. Bloomer might be left at this were it not for the interpretation placed on it by my colleague, which requires some response. Cory J. cites (at p. 403) the following passage (omitting the last sentence) for the proposition that Ratych holds that collateral wage benefits paid for by the plaintiff need not be deducted from a damage claim for wage loss against the tortfeasor (at p. 983):
These comments should not be taken as extending to types of collateral benefits other than lost earnings, such as insurance paid for by the plaintiff and gratuitous payments made by third parties. Those issues are not before the Court and must be left for another day. [Emphasis added.]
With the greatest respect, I cannot draw as much from this passage as does Cory J. The passage cited asserts no principle of law, but merely reserves certain cases for another day. Moreover, it excludes lost earnings from its ambit.
My colleague couples his construction of this passage with an argument that Ratych was only a case about evidence; if better proof had been adduced that the plaintiff paid for the wage benefit, it would not have been deducted. He draws this inference from the following passage of the majority reasons in Ratych (at p. 972):
I accept that if an employee can establish that he or she has suffered a loss in exchange for obtaining wages during the time he or she could not work, the employee should be compensated for that loss. Thus in Lavigne v. Doucet the New Brunswick Court of Appeal quite rightly allowed damages for loss of accumulated sick benefits. I also accept that if an employee can establish that he or she directly paid for a policy in the nature of insurance against unemployment, equivalent to a private insurance, he or she may be able to recover the benefits of that policy, although I would leave resolution of this question for another case. [Emphasis added.]
My colleague goes on to argue that this passage creates "two exceptions" (p. 404). The first, compensation for lost sick days, he agrees, creates no double recovery problem. The second exception, he says, "is an application of the insurance exception" (pp. 404-5).
Again, with respect, the words of the sentence said to create this exception amount only to reservation of the issue for another case, as the passage plainly states. No legal principle is advanced, no exception created. As for the obiter passage relied on by my colleague (at p. 405), it is confined to the situation "where a person has prudently obtained and paid for personal insurance", the classic Bradburn situation, and is expressly distinguished from cases where benefits are paid under an employment plan.
The Court of Appeal on these appeals, (1991), 64 B.C.L.R. (2d) 62, interpreted Ratych v. Bloomer as holding that as a general rule, and leaving aside certain insurance-like situations which were not before the Court, wage benefits paid under an employment scheme must be brought into account (per Southin J.A. at pp. 79-80). I agree with this interpretation. Ratych v. Bloomer is not merely a ruling on evidentiary sufficiency. Rather, following on the lead in other common law jurisdictions, it pronounces on the general requirement for deduction of employment wage benefits from claims for loss of wages against a tortfeasor.
We are not asked to overrule our decision in Ratych v. Bloomer. Therefore, the appellants can succeed only by establishing, first, that they fall within a situation which Ratych left for future decision and, second, that the rule in that undecided category should be in favour of non-deductibility.
On the first point, it is argued that the fact that the appellants have contributed to, or should be deemed to have contributed to, the employment plans under which the wage benefits were paid brings this appeal within the class of cases which Ratych left for future decision. The classes of case excluded from the purview of Ratych were types of collateral benefits other than lost earnings, such as non-indemnity ins