Watkins was in an accident on a highway that was under construction with a van driven by Olafson and owned by Aitkenhead and subsequently brought an action against the two parties and the provincial government. The trial judge awarded a lump sum payment which included damages for loss of earning capacity both to the date of trial and for the future, damages for future care as initial outlay and for ongoing care, and an amount for a financial management fee. The Court of Appeal reduced the damages for pre-trial and for post-trial loss of earning capacity and set aside the lump sum award for future care and ordered instead that the provincial government pay appellant a monthly payment adjusted annually for inflation, subject to deductions for on-going care which appellant might receive from the provincial government.
- Did the Court of Appeal err in substituting periodic payments for a lump sum judgment?
- Should an allowance be made for the effect of taxation in calculating the cost of future care?
- Did the Court of Appeal err in reducing the amount allowed by the trial judge for cost of future care?
- Did the Court of Appeal err in reducing the award for lost earning capacity, past and future?
Appeal allowed in part.
McLachlin, writing for a unanimous court, held that the court should not order periodic payments for several reasons:
- they want to make a clean break between the plaintiff and the defendant, and not to force them to have an ongoing relationship;
- the defendant might not have the funds in the future to continue to make the payments – what would happen then; and
- there would be undue burden on both parties and the court system because they would have to keep revisiting the issue and recalculate the costs.
The court held that an allowance for taxation was reasonably calculated and warranted taking it into account. The Court of Appeal also erred in reducing the amount of the award as it was not open to them to change it without demonstrable error on the part of the trial judge.
Courts should prefer lump sum payments of damages over periodic payments, unless there is a structured settlement between the parties.