BCLI Remembers Former Chief Justice Lance Finch


2 September 2020

By Greg Blue, Q.C.

BCLI joins the rest of the legal community in mourning the death on 30 August 2020 of the Hon. Lance S.G. Finch, Q.C., former Chief Justice of British Columbia. First as a leading insurance law practitioner, then as a trial and appellate judge, and finally as Chief Justice of the province, former Chief Justice Finch contributed in many ways to the development of the law of British Columbia. He was a champion of institutional law reform in general, and made a very important personal contribution to law reform as Chair of the Special Advisory Committee to the former Law Reform Commission of British Columbia that developed standardized actuarial assumptions for calculating income tax gross-up and investment management fees in personal injury cases.

In major personal injury cases, the cost of future care must often be factored into the damages award as a capitalized sum. The present value of the estimated future stream of care expenses is awarded on the basis that its investment will generate income that, together with the principal sum, will cover the cost of care. As the income is taxable, an upward adjustment must be made to the future care component of the award to compensate for the effect of taxation. The amount by which the cost of care award must be increased to offset taxation is known as the “gross-up.” Calculating a gross-up is a complicated task that necessarily involves assumptions about economic conditions and the tax system looking into the future, and choices of methodology can have a decided effect on the outcome.

In appropriate cases, an amount to reflect the need to pay fees for investment advice, or for actual management of the fund where the injured party has been incapacitated, is also included in the award. Assessment of the “management fee,” as it is called, likewise involves assumptions that need to be applied in conjunction with facts known about the injured party’s capabilities and circumstances.

As a trial judge, Lance Finch called attention in his judgment in Tucker v. Asleson[1] to the waste of cost and court time created by the need to introduce expert evidence in every case to prove the validity of the assumptions used in calculating the tax gross-up and management fee, and pointed to the desirability of standardizing them. As Chair of the Special Advisory Committee which the Law Reform Commission subsequently formed in answer to his call for reform, he helped to develop the draft legislation and guidelines contained in the Commission’s Report on Standardized Assumptions for Calculating Income Tax Gross-up and Management Fees in Assessing Damages.[2]

While the legislation recommended in this 1994 report of the Law Reform Commission was never enacted, the guidelines for standardized assumptions it recommended largely became accepted practice. They have been referred to with approval many times by the courts, including the Supreme Court of Canada in Townsend v. Kroppmanns,[3] and are regularly applied by experts preparing quantum of damages reports for court use. The need to re-litigate the theoretical basis for a gross-up calculation and assessment of a management fee in every case has greatly diminished, as there is less scope for difference in the approaches used by experts engaged by the parties. The consequential savings in cost and court time are massive.

Each time reference is made in a serious personal injury case to the 1994 Law Reform Commission report, or its contents are applied in an expert witness report without comment by the court, it is a testimonial to the foresight of former Chief Justice Finch and the efforts of the Special Advisory Committee that he headed. While former Chief Justice Finch will be remembered for many reasons, this too should be among them.

 

[1] (1991), 62 B.C.L.R. (2d) 78 at 91; varied on other grounds (1993), 78 B.C.L.R. (2d) 173 (C.A.)

[2] Law Reform Commission of British Columbia, Report on Standardized Assumptions for Calculating Income Tax Gross-up and Management Fees in Assessing Damages (LRC 133) (Vancouver: The Commission, 1994).

[3] [2004] 1 S.C.R. 315, 2004 SCC 10 at paras. 10 and 13.


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