Hudniuk overruled

Hudniuk v. Warkentin, 2003 BCSC 62 has long been applied in British Columbia to mean that, in a personal injury case, a determination of tax on the amount of gross income loss must be made as if the past income had all been earned on the first day of trial. Such a ruling caused curious, and untoward, tax implications.

The very recent decision in Lines v. W & D Logging Co. Ltd.,2009 BCCA 106 reinterprets Hudniuk and, in effect, overrules the customary interpretation.

Lines is summarized below:

This appeal concerns the quantum of damages awarded to the respondent for injuries sustained in a motor vehicle accident that resulted in traumatic brain injury. Liability was admitted and the respondent was awarded substantial damages. The appellants argue that the damages awarded are inordinately high and should reflect moderating contingencies, that future awards should be paid periodically, and that the awards for management and committee fees and tax gross-up are excessive. The respondent cross appeals the application of the “net income” provision of the relevant legislation for past income loss. Appeal dismissed in part and cross appeal allowed. With respect to the appeal, the trial judge’s reasons adequately reflect the breadth of the medical evidence before the court and the evidence does not raise the possibility of improvement in the respondent’s condition beyond the merely hypothetical. However, the trial judge erred in treating future events as certain and should have applied a negative contingency in his assessment of past and future pecuniary losses. The trial judge was correct in declining to order a structured judgment for the respondent’s cost of future care after finding that the structures proposed were not in the respondent’s best interests. The issue of whether a structured judgement for lost future earnings is in the respondent’s best interests is remitted to the trial court for reconsideration in light of the tax implications. The trial judge erred in awarding committee fees and management fees together in excess of the amount that would be charged by the Public Guardian and Trustee in the absence of evidence of the market value of such services. With respect to the cross appeal, the trial judge erred in his application of the “net income” provision for past income loss; notional income tax should be assessed on an annual basis.