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Excerpt from Little Plume v. Weir

[1998] A.J. No. 677 (QL) (Alta. Q.B.) [Romaine J., Judicial District of Calgary].

[146] Although both the Plaintiff and the Defendants presented expert evidence relating to appropriate discount rates to determine the present value of cost of care figures, in the end, there was little difference between the discount rates used by Brown Economic Assessments Inc. for the Plaintiff and Peta Consultants Ltd. for the Defendants. The determination of discount rates is speculative and depends upon many variables.

[147] I accept the discount rates of 4.5% for 5 years and 3.5% thereafter used by Ms. Brown, with the following comments:

  1. Management Fee

    2. The Plaintiff has entered into an agreement with Canada Trust whereby it will administer any award he may receive through an inter-vivos trust fund which would be invested for him. This arrangement is intended to prevent the Plaintiff from having his award dissipated, either through bad management or through the demands of his family. The Plaintiff submitted that the cost of these financial management services should be reflected in an adjustment to the discount rate normally used by Brown Economic Assessments Inc. The adjusted discount rates set out in Ms. Brown's report would be lower to take into account the requirement to pay management fees.

    If Canada Trust is able to earn a real rate of return on the trust fund which is higher than the normal discount rates utilized by Ms. Brown, from which the management fee could be deducted, there would be no need for a management fee adjustment to the discount rate. I am satisfied, given the evidence of the Canada Trust representative about historical rates of return on this type of fund, that it is likely that a higher rate of return can be achieved, and that it is not necessary to factor the fees charged by Canada Trust into the award, either by way of adjustment to the discount rates or otherwise. The Weir Defendants argued that the likelihood of a higher rate of return would justify a higher discount rate than normal. Given the speculative nature of the rate of return that may be earned on this fund, I am not prepared to allow a higher discount rate than the normal one used by Ms. Brown.

  2. Mortality Contingency

    3. In calculating a multiplier to determine present value, Ms. Brown incorporated a mortality contingency for Mr. Little Plume based on Statistics Canada's Life Tables. Dr. William Geisler, an expert in the area of internal medicine, physical medicine and rehabilitation, particularly with respect to the life expectancy of individuals with spinal cord injuries, gave opinion evidence that Mr. Little Plume's life expectancy is 21.3 years, not the normal life expectancy for his gender and age group of 25.7 years. Dr. Geisler modified this further at trial to be 20.8 years. Although Dr. Geisler did not examine Mr. Little Plume, I found his evidence to be persuasive. A reduction in life expectancy of this amount would exert downward pressure on the multiplier, and thus, an award of damages, of about 13%. Given that Dr. Geisler did not examine Mr. Little Plume directly and that his research, by necessity, involves a relatively small sample size, and given that all aspects of the claim are not equally affected by the multiplier, the award for cost of future care as calculated using Ms. Brown's original multipliers will be reduced by 8% to reflect the likelihood of a reduced life expectancy.

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[152] In the circumstances, I find that an appropriate discount rate is 25%, which gives a net award for cost of care of $1,128,538.

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[162] Ms. Brown assigned a value of $3,353 per year for Mr. Little Plume's room and board. She agreed, however, that if Mr. Little Plume has received room and board at no cost to him since the accident, there is from an economic point of view, no loss of past income to him. I have calculated lost income on the basis of Ms. Brown's annual figure for the three and a half months Mr. Little Plume was not institutionalized at approximately $1,000, factoring in the change in dollar value and pre-judgment interest, and allow this amount for past loss of income.

[163] With respect to future loss of income, Ms. Brown gave a value of $3,487 per year or a present value to retirement of $25,700 to Mr. Little Plume's earnings of room and board. Since I have awarded accommodation costs to Mr. Little Plume, accommodation must be backed out of the calculation to give a value for food, household furnishings and utilities. Reducing the present value amount to 60% of the total gives an award of $15,420 for future loss of income.

[164] The total loss of income award is therefore $16,420.