Engel v. Salyn, [1993] 1 SCR 306

Engel v. Salyn, [1993] 1 S.C.R. 306

 

Sonia Jane Engel         Appellant

 

v.

 

Kam‑Ppelle Holdings Ltd., York Taxi Service Ltd. and

Allan Salyn                                                                                         Respondents

 

Indexed as:  Engel v. Salyn

 

File No.:  21970.

 

1992:  October 14; 1993:  January 21.

 

Present:  La Forest, Sopinka, Gonthier, Cory and McLachlin JJ.

 

on appeal from the court of appeal for saskatchewan

 

                   Torts ‑‑ Damages ‑‑ Calculation ‑‑ Self‑employed person ‑‑ Calculation based on after‑tax cost of replacement labour ‑‑ Whether acceptable method of assessing appellant's pecuniary damages.

 

                   Torts ‑‑ Damages ‑‑ Mitigation ‑‑ Tort victim refusing further tests ‑‑ Expert medical opinion recommending conservative treatment ‑‑ Whether appellant's refusal of medical treatment arbitrary or unreasonable resulting in failure to mitigate damages.

 

                   The appellant suffered a back injury in a motor vehicle accident.  The sole issue at trial was the quantum of damages.  The trial judge adopted a formula where the after‑tax labour cost of replacement staff was calculated, grossed up by 10 percent to account for employee benefits, and then divided by two to reflect the fact that the appellant owned 50 percent of the business.  During the trial, medical experts testified that, although further testing might reveal the exact nature of the injury, back surgery was not recommended unless her pain became unbearable.  The appellant had followed this advice and refused to undergo further testing or surgery.  The Court of Appeal ordered a new trial because it considered the formula for the calculation of loss of earnings to be inaccurate.  It also considered the award for damages to be too high because appellant decided to refuse further testing and so failed to mitigate her losses.  At issue here was:  (1) whether the formula adopted by the trial judge was an acceptable method of assessing the appellant's pecuniary damages; and, (2) whether appellant arbitrarily or unreasonably refused medical testing and so failed to mitigate her damages.

 

                   Held:  The appeal should be allowed.

 

                   The trial judge must attempt to put the injured party in the position that that party would have enjoyed if the accident had not occurred.  Quantifying the victim's contribution to the business is inherently difficult in the case of self-employed persons.  The best approach to calculating future losses is dictated by the particular circumstances.  Expert witnesses may assist the judge in determining the most appropriate method.  Here, the trial judge's approach was reasonable in the circumstances and even somewhat conservative.

 

                   Where the injured party is self‑employed, decrease in salary may not be an appropriate measure of damages where the paid salary does not reflect the victim's actual contribution to the business.  Similarly, a loss of profits approach may be warranted in some cases, and not in others.  Inherent risks involved in owning a business may constitute a strong contingency factor but this can be counterbalanced by evidence of good earning potential.  No evidence was tendered here on loss of profits (other than the loss attributable to the cost of replacement labour).  Since nothing in the evidence suggested that the expert's approach was inappropriate, the Court of Appeal was not entitled to intervene.

 

                   The inviolability of the human body is a fundamental legal principle and, barring emergency situations, the onus for proving the need for medical testing lies on those seeking to have it performed.  Although the appellant had the right to refuse medical testing intended to determine the exact nature of her injuries, the defendant must not be made to bear the cost of the injured party's choice where such refusal is unreasonable and arbitrary.  The decision as to reasonableness is best made by the trier of fact who is in a position to appreciate the evidence first hand.  Here, no evidence was tendered as to the lack of risk in undergoing the test or as to the gravity of the consequences in refusing it.  The trial judge's conclusion that the appellant did not act arbitrarily or unreasonably was well supported by the evidence.

 

Cases Cited

 

                   Considered:  Janiak v. Ippolito, [1985] 1 S.C.R. 146; referred to:  Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229; Arnold v. Teno, [1978] 2 S.C.R. 287; Thornton v. School District No. 57 (Prince George), [1978] 2 S.C.R. 267; E. (Mrs.) v. Eve, [1986] 2 S.C.R. 388.

 

Statutes and Regulations Cited

 

Automobile Accident Insurance Act, R.S.S. 1978, c. A-35.

 

 

                   APPEAL from a judgment of the Saskatchewan Court of Appeal (1990), 81 Sask. R. 153, [1990] 3 W.W.R. 277, allowing an appeal from a judgment of Maurice J. (1988), 68 Sask. R. 312.  Appeal allowed.

 

                   Kenneth W. Wasylyshen and Daniel Dierker, for the appellant.

 

                   E. R. Gritzfeld, Q.C., for the respondents.

 

 

//Gonthier J.//

                   The judgment of the Court was delivered by

 

                   Gonthier J. -- This case involves a claim for damages suffered in a motor vehicle accident.  Two main issues are raised, namely (1) whether the Court of Appeal for Saskatchewan erred in remitting the matter of assessment of pecuniary damages to a new trial, and (2) whether a tort victim's refusal to undergo medical testing in order to determine the nature and extent of physical injuries necessarily constitutes a failure to mitigate damages.

 

I.  The Facts

 

                   The appellant suffered an injury to her lower back as a result of a motor vehicle accident on February 6, 1982.  Kam-Ppelle Holdings Ltd. and Allan Salyn admitted liability and the appellant chose not to proceed against York Taxi Service Ltd.  The sole issue at trial was the quantum of damages.

 

                   The appellant, 29 years of age at the time of the accident, has suffered chronic back pain since that time.  Two weeks after the accident, she lost her job due to management changes.  In April of 1982, she and her husband purchased a bakery which opened May 1, 1982 and has since been a successful venture.  The appellant, characterized by the trial judge as a bright efficient worker with a strong work ethic, was unable to work at the bakery between May 1 and August 1, 1982.  Two replacement workers were hired to do twelve hours of replacement labour per day.  A clerical worker was paid at a rate of $4.25 per hour and a baker was paid at a rate of $8 per hour.

 

                   Since August 1, 1982, the appellant has only been able to work an average of five hours per day at the bakery, due to physical limitations caused by back pain.  Her pain has made it impossible for her to enjoy some of her preferred activities such as dancing, swimming and gardening.

 

                   Physicians told the appellant that they were unsure whether her pain was muscular in nature or caused by a disk protrusion which could potentially be corrected by surgery.  At trial, two medical experts testified that although a CT scan or myelogram might reveal the exact nature of the injury, back surgery was not recommended unless her pain became unbearable.  The appellant chose not to undergo any further testing or surgery, pursuant to the physicians' recommendations.

 

II.  The Decisions of the Courts Below

 

Court of Queen's Bench (1988), 68 Sask. R. 312

 

                   The appellant's non-pecuniary damages were assessed at $30,000.  The trial judge broke down the assessment of pecuniary damages into four distinct periods.  For the period between February 6, 1982 and May 1, 1982, the appellant was awarded two weeks' lost pay ($464).  The trial judge held that it was unlikely that she would have found employment prior to May 1, 1982, had she not been in the accident.

 

                   The second period addressed was between May 1, 1982 to August 1, 1982 when the appellant was unable to work at all.  The trial judge accepted the formula proposed by economist Dr. Cameron which was to calculate the after-tax labour cost of replacement staff, grossed up by 10 percent to account for employee benefits, and divide the resulting amount by two, to reflect the fact that the appellant owned 50 percent of the business.  Using this formula, damages for this period were assessed at $1,340.78.

 

                   As for the third period between August 1, 1982 and June 1, 1988 in which the appellant worked an average of five hours per day, the number of replacement hours required was reduced from twelve to seven.  Using the same formula set forth above, damages for this period amounted to $24,746.13.

 

                   The last period discussed concerned future losses.  The sum of $82,357.60 was awarded under this heading.  To arrive at this amount, the same after-tax replacement labour formula was used, however the total was discounted by 3 percent.  Future losses were calculated until age 65 and were based on the assumption that the appellant would have worked every day except Sundays, public holidays and 14 vacation days per year.  The total was further reduced by 20 percent to take into account various contingencies.

 

                   Further amounts were awarded for the cost of housekeeping services, and special damages.  Sums received as payments under the Automobile Accident Insurance Act, R.S.S. 1978, at c. A-35, were deducted, and the total damage award came to $144,000.  The respondents entered an appeal.

 

Court of Appeal (1990), 81 Sask. R. 153

 

                   The Court of Appeal for Saskatchewan was of the view that a new trial should be ordered on the basis that Dr. Cameron's approach to the calculation of loss of earnings was inaccurate and that the damage award should be reduced due to the appellant's failure to mitigate her losses.

 

                   Wakeling J.A. criticized the replacement costs approach, at p. 156:

 

                   It is important to recognize that Engel is not a wage earner but a business proprietor and her loss of capacity to earn must be assessed on that basis.  The calculation of the loss does not therefore call for a detailed analysis of wages paid to others, but rather an analysis of the factors which make up Engel's contribution as one of the proprietors of a bakery business.  That contribution involved her physical and intellectual energy, her business acumen, administrative, organizational and marketing skills and those other accomplishments which contributed to the operation of a bakery business she and her husband managed on an equal basis.  Taking that proprietorship interest as her role in the business, it is apparent she was able to continue a reasonable and meaningful contribution.

 

He concluded, at p. 157, that there is a "need for a different approach in the calculation of the appropriate loss where the incapacitated party is not a wage earner".

 

                   On the issue of medical testing, the Court of Appeal was of the view that the appellant had arbitrarily refused to take tests and thus to mitigate her damages and that her damage award should be reduced accordingly.  The main authority relied on was the decision of this Court in Janiak v. Ippolito, [1985] 1 S.C.R. 146.

 

III.  Points in Issue

 

(1)  Was the trial judge's calculation, based on the after-tax cost of replacement labour, an acceptable method of assessing the appellant's pecuniary damages?

 

(2)  Did the appellant arbitrarily or unreasonably refuse medical testing, thereby failing to mitigate her damages?

 

IV.  Analysis

 

(1)  Assessment of Pecuniary Damages where the Injured Party is Self-employed

 

                   (a)  The Quantum in Issue

 

                   The appellant claimed special damages, that is, pre-trial pecuniary losses such as medication, hospital services, transportation costs, housekeeping expenses and replacement labour.  The Court of Appeal decision does not take issue with the amounts awarded by the trial judge under this heading and, accordingly, the issue is not before us.

 

                   As for general damages, the trial judge awarded the sum of $30,000 for non-pecuniary damages such as pain and suffering and loss of enjoyment of life.  Again, this award is not disputed.

 

                   The appellant did not tender evidence in support of a claim for non-pecuniary losses associated with inability to work.  The issue before us is whether the trial judge erred in relying on calculations based on after-tax cost of labour replacement in assessing pecuniary damages.

 

                   (b)  The Calculation Method Used by the Court of Queen's Bench

 

                   The trial judge accepted the approach of an expert economist which consisted of calculating the after-tax labour cost of replacement staff, grossed up by 10 percent to account for employee benefits, and dividing the resulting amount by two, to reflect the fact that the appellant was only a 50 percent owner of the family business.  As agreed by the parties, a discount rate of 3 percent was applied.  The total was further decreased by 20 percent to reflect such contingencies as the possibility that the appellant's energy and efficiency level might have diminished over time, that she might have died prior to age 65, and that business reversals might have occurred.  In my opinion, not only was this approach reasonable in the circumstances, it could even be characterized as somewhat conservative.

 

                   In assessing damages for pecuniary losses, the objective sought is full compensation.  Although it is virtually impossible to evaluate future losses with complete accuracy, the trial judge must attempt to put the injured party in the position that the party would have enjoyed if the accident had not occurred (see Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229, Arnold v. Teno, [1978] 2 S.C.R. 287, and Thornton v. School District No. 57 (Prince George), [1978] 2 S.C.R. 267).  In the case of self-employed persons, quantifying the victim's contribution to the business is inherently difficult.  The best approach to calculating future losses must be dictated by the particular circumstances.  Expert witnesses may assist the judge in determining the most appropriate method of calculation.

 

                   In the case of wage earners, forecasts are more easily based on the salary commanded before the date of the accident.  However, where the injured party is self-employed, the decrease in salary may not be the appropriate measure of damages, where the paid salary does not reflect the victim's actual contribution to the business.  Similarly, a loss of profits approach may be warranted in some cases, and not in others.  In the case at bar, no evidence of loss of profits was presented, other than the loss attributable to the cost of replacement labour.

 

                   With respect, I am of the opinion that the Court of Appeal erred in ordering a new trial on this ground.  The appellant claimed nothing more than the cost of replacement labour which clearly decreased her return from the business, namely 50 percent of such cost.  The 10 percent increase for employee benefits was reasonable.  Given the evidence, the 20 percent contingency rate applied was not too low.  While there are inherent risks involved in owning a business which may constitute a strong contingency factor, this is counterbalanced where there is evidence of good earning potential.  In the case at hand, the evidence was indicative of such potential.  Once again, I wish to stress that the appropriate method of calculation depends on the circumstances of the case.  In my opinion, there was nothing in the evidence which suggested that the expert's approach was inappropriate and thus, the Court of Appeal was not entitled to intervene.

 

                   (c)  The Court of Appeal's Proposed Method of Calculation

 

                   The Court of Appeal, at p. 156, suggested that the trial judge's assessment of damages was incorrect, in that it failed to take into account certain factors such as the appellant's "physical and intellectual energy, her business acumen, administrative, organizational and marketing skills and those other accomplishments which contributed to the operation of the bakery business".  All of these factors may indeed be relevant to the determination of loss of earning capacity or the value of her contribution to the business.  However, in the case at bar, no evidence was tendered on loss of profits attributable to the loss of such input.  All that was claimed were replacement labour costs arising from the reduction of the appellant's working hours and thus, the trial judge's approach was not incorrect.  The method of calculation used was not likely to place the appellant in a more favourable position than she would have enjoyed had the accident not occurred.

 

(2)  Right to Refuse Medical Testing

 

                   (a)  Inviolability of the Human Body

 

                   The inviolability of the human body is a fundamental legal principle.  As stated by this Court in E. (Mrs.) v. Eve, [1986] 2 S.C.R. 388, at p. 437, "Since, barring emergency situations, a surgical procedure without consent ordinarily constitutes battery, it will be obvious that the onus for proving the need for the procedure is on those who seek to have it performed."  The same principle can be transposed to medical testing.  Clearly, the appellant had the right to refuse to undergo medical testing, with a view to determining the exact nature of her injuries.

 

                   (b)  The Janiak Test

 

                   The respondents argue that the appellant's refusal to undergo medical testing was arbitrary and unreasonable and that this Court's decision in Janiak v. Ippolito, supra, should be applied.  In Janiak, damages were considerably reduced due to failure to mitigate damages.

 

                   This Court held in Janiak that where an injured party, who is fully competent and capable, unreasonably and arbitrarily refuses to receive treatment, the injured party may not force the defendant to bear the cost of this choice.

 

                   I agree with the submission that the Janiak principle can be applied to medical testing.  Although an injured party is free to decline medical testing, where such refusal is unreasonable and arbitrary, the defendant must not be made to bear the cost of the injured party's choice.  Failure to take medical tests in order to determine the nature and extent of an injury raises the issue of the failure to mitigate damages.

 

                   (c)  Application of the Test to this Case

 

                   The Court of Appeal concluded, at p. 157, that the appellant had "arbitrarily refused to take tests which enable diagnosis of her injury" and thus, damages should be reduced accordingly.  The trial judge's decision was criticized in the following terms, at p. 157:

 

His summary of the evidence may be correct, but it appears to erroneously assume that if the doctors can accept her decision to refuse diagnostic testing and prospective medical treatment, the law should likewise do so.

 

                   The position that the law should take is indeed highly dependant on the position taken by the medical profession.  As stated by Wilson J. in Janiak, at p. 162:

 

It would appear from the authorities that as long as a plaintiff follows any one of several courses of treatment recommended by the medical advisers he consults he should not be said to have acted unreasonably.

 

She referred to three other factors relevant to the analysis, at pp. 162-63:

 

                   In making his finding as to the reasonableness or otherwise of a refusal of medical treatment, the trier of fact will also, of course, take into consideration the degree of risk to the plaintiff from the surgery (Taylor v. Addems and Addems, [1932] 1 W.W.R. 505 (Sask. C.A.)), the gravity of the consequences of refusing it (Masny v. Carter-Hall-Aldinger Co., [1929] 3 W.W.R. 741 (Sask. K.B.)), and the potential benefits to be derived from it (Matters v. Baker and Fawcett, [1951] S.A.S.R. 91 (S.C.)).

 

The same is true of medical tests.  The decision as to the reasonableness of the tort victim's refusal to undergo medical testing or treatment is best made by the trier of fact who is in a position to appreciate the evidence first hand.  In the case at hand, the trial judge's conclusion that the appellant did not act arbitrarily or unreasonably was well supported by the evidence.  The appellant's expert Dr. Jowsey testified that her symptoms did not warrant surgery:

 

. . . her symptoms are not such that I am -- even if this were a disk protrusion, that I am terribly enthusiastic about disk surgery either.

 

The defendants' expert Dr. Ekong was of the same opinion:

 

If she felt that she had enough problems to warrant wanting something for that to be done to correct the problem, that the prudent way to go would be to proceed with CT scan and possibly myelography if so indicated.  I indicated that to her, though, that only -- that based on the examination, I wasn't actually terribly impressed that that was indicated; that conservative treatment should be tried under those circumstances.

 

I agree with the trial judge's conclusion at p. 314 that, given these opinions, it follows that "no useful purpose can be [was] served by further tests" and that the appellant's refusal was therefore fully justified.

 

                   As indicated by the Court of Appeal, the respondents had the burden of proving that the appellant failed to mitigate her damages.  However, no evidence concerning the lack of risk involved in undergoing the test was presented.  The gravity of the consequences of refusing the test was not established, as even the respondents' own expert suggested that the level of pain suffered by the appellant was such that surgery was not warranted.

 

                   Evidence was presented on the issue of the potential benefit which might be derived from surgery.  However, given the recommendation that the appellant not undergo surgery unless her condition worsened, the trial judge rightfully gave no weight to this consideration.

 

V.  Conclusion

 

                   For these reasons, I am of the view that the appeal should be allowed, with costs both here and in the courts below, and that the Court of Queen's Bench decision should be restored.

 

                   Appeal allowed with costs.

 

                   Solicitors for the appellant:  Wasylyshen & Stephaniuk, Yorkton.

 

                   Solicitors for the respondents:  Gritzfeld & Associates, Regina.