Court Accepts Expert Testimony, Reduces Rule 53.09 Discount Rates for Future Health Care Expenses

In Gordon v. Greig, Justice Bruce A. Glass has assessed damages arising out of catastrophic injuries to two young men who were involved in the same motor vehicle accident. Both were awarded general non-pecuniary damages of $310,000, the maximum available under that head. One had a severe brain injury and the other was a paraplegic. Both men were in the early 20’s and had been ejected from a car being driven by friend whose blood alcohol reading had been between 0.142 and 0.192. Neither plaintiff had been wearing a seatbelt. The parties had settled the issue of contributory negligence prior to the trial, although the reasons of Glass J. indicate that His Honour had not been told what the apportionment was.

The reasons of Justice Glass contain an assessment of damages for such things as non-pecuniary loss, future income loss and future care. It appears that His Honour was singularly unimpressed by the expert evidence led on behalf of the defence (saying of two of the defence witnesses, for example, that they “were left to struggle and in effect try to talk a good line with as much obfuscation as possible when challenging the Plaintiff’s witnesses who had seen and met with Mr. Morrison”). For the most part, he awarded damages under the various heads in the amounts that had been requested by the plaintiffs.

The assessments included awards of $75,000 for the FLA claims of each parent of both injured plaintiffs.

A management fee of 5% was allowed in the Gordon action and a fee of 4% in the Morrison claim.

Interestingly, Justice Glass accepted expert testimony offered on behalf of one of the plaintiffs (Ryan Morrison), that the cost of providing health care will rise in the future at a rate 30% greater than inflation. In relation to the Morrison claim for future care, this led His Honour to reduce by 1% the discount rates then provided for in Rule 53.09 of the Rules of Civil Procedure (the rates are now 0.75% and 2.5%), from 1% for the first 15 years and 2.5% thereafter, to 0% for the first 15 years and 1.5% thereafter. However, in the other action, brought on behalf of the plaintiff Derek Gordon, there was no departure from the Rule 53.09 discount rates, nor was one requested.

Variation of the discount rate, even by 1%, can make a very significant difference to an award of damages, particularly in a serious case. Lower discount rates produce higher present values. For example, assuming an annual loss of $100,000 over 50 years, we calculate the present value, using the rates set out in Rule 53.09 (1% for the first 15 years and 2.5% thereafter), to be $3,398,847.06. Using the rates that were accepted by Justice Glass for the assessment of future care in the Morrison claim (0% and 1.5%), we reckon the present value to be $4,221,671.08, a difference of $822,824.02. (We invite any readers in the actuarial profession to check our math!)

Back in the 1980’s, it was common for parties in personal injury actions to ask the court to depart from the prescribed discount rate. For this purpose, expert economic and actuarial evidence was called. This led the Court of Appeal, in 1989’s Gianonne v. Weinberg, to discourage the practice of departing from the rate (at that time, there was no separate rate for the first 15 years of the loss) prescribed by Rule 53.09:

For the Court to adopt a discount rate other than two and a half percent is to invite a return to the same kind of speculation that existed before rule 53.09 and its predecessor was introduced. The drafters of the rule knew it would not always accurately reflect the real return on capital over certain periods. It will always be possible to show that for a period in the past the two and one half percent rate has not been accurate, and so to predict that it is unlikely to be accurate for some period in the future. That kind of speculation and uncertainty the rule was designed to eliminate.

In Gianonne, the Court of Appeal said that one of the purposes of Rule 53.09 was “to avoid the general injustice of similar cases decided at the same time having different results because of the use of different discount rates in the calculation of the award“. Gordon v. Greig might be considered to be a good example of that sort of problem, since Justice Glass departed from the prescribed rates, based on his acceptance of expert evidence led by one of the plaintiffs, but not the other, as to economic conditions that would probably obtain in the future and that, presumably, are as likely to affect one plaintiff as the other.

It will be interesting to see whether we will now see a greater incidence of economic evidence directed at departing from Rule 53.09’s discount rates.

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