COLLATERAL BENEFITS: DEFENDING THE CAUSAL RATIONALE.
I INTRODUCTION 94 II HISTORICAL ARGUMENTS IN FAVOUR OF CAUSATION 96 A. The Foundational Case: Bradburn v Great Western Railway Co 96 B. The Origin of Collateral Benefits in Causal Principles 97 C. The Widespread Historical Acceptance of the Causal Rationale 98 D. The Problematic Rejection of Causation: Parry v Cleaver 99 E. Conclusion 104 III ARGUMENTS AGAINST THE CONTEMPORARY APPROACH IN CANADIAN LAW 104 A. Insurance Exception: Payment Rationale 104 B. Insurance Exception: Indemnity Rationale 107 C. Gifts Exception: Public Policy Rationale 110 D. Gifts Exception: Calculation Difficulties Rationale 111 E. Conclusion 111 IV RECONCILING CAUSATION WITH THE GENERAL PRINCIPLES OF DAMAGES 112 A. Calculating Damages under Heads of Loss 112 B. Time of Assessment 114 C. Mitigation 116 D. Remoteness 118 E. Conclusion 121 V REBUTTING THE CRITICISM OF THE CAUSAL RATIONALE 121 A. The Leading Scholarly Opinions 121 B. The Leading Jurisprudence 122 C. Conclusion 124 VI THE CURRENT STATE OF THE LAW: CANADA VS THE UK 125 A. The Supreme Court of the United Kingdom: The "New Flamenco" 126 B. The Supreme Court of Canada: IBM Canada Ltd v Waterman 126 C. Conclusion 127 VII CONCLUSION 128
Collateral benefits are gains that flow to a plaintiff after a defendant's wrong (aside from the damages being claimed against the defendant) that the plaintiff would not have received but for the wrong. (1) Where a plaintiff receives a collateral benefit, there may be a concern that the awarding of damages for the full amount of the plaintiff's loss could result in excess compensation for the plaintiff. As a result, the court must determine whether to deduct the amount of the collateral benefit from the award for damages.
Although it is commonplace for plaintiffs to receive various sorts of benefits prior to trial, Canadian courts have failed to adopt a clear, coherent test for determining the deductibility of collateral benefits. Currently, the courts will hold a benefit to be non-deductible if it is sufficiently similar to one of two established types of non-deductible benefits: insurance payments and gifts. (2) This analysis by analogy is hampered by judicial disagreement regarding the appropriate rationale for allowing plaintiffs to retain these types of benefits. In the leading case of IBM Canada Ltd v Waterman, the Supreme Court of Canada listed several general propositions in relation to deductibility drawn from case law, but declined to articulate a singular principle to explain deductibility. (3)
Due to the unsettled state of the law, collateral benefits cases are highly unpredictable. As the Supreme Court suggested in Waterman, there remains a need for an "applicable rule [that] is clear, coherent and easy to apply". (4)
This paper argues that the "causal rationale" should be adopted as the guiding principle for collateral benefit problems. According to the causal rationale, the courts should ignore a collateral benefit when calculating damages where the true cause of the benefit is not the defendant's wrong, but some independent cause. (5) The term causa causans describes a cause that is the source of the plaintiff's legal right to a benefit (e.g. a contract, gift, statute, etc.), (6) whereas the term causa sine qua non describes a cause that triggers the plaintiff's entitlement to the benefit in a particular situation. (7)
For example, where a plaintiff is injured by a wrong and recovers upon an insurance policy, the causa causans of the payment is the insurance contract, while the causa sine que non is the tort. The insurance payment is in this way collateral to the tort and, under the causal model, should not reduce the scope of any damages award. (8)
This article argues that the causal analysis provides the most compelling historical and doctrinal framework for resolving collateral benefits issues in Canadian law.
First, I examine the historical jurisprudence surrounding collateral benefits. I argue that, when viewed in its historical context, the causal rationale should appropriately be considered the leading approach to collateral benefit issues. I argue that:
* The foundational case on collateral benefits adopted a causal approach
* The casual approach was founded on longstanding legal principles;
* The courts successfully applied the causal approach for decades; and
* The causal approach was abandoned on the strength of unpersuasive precedent
* adopted by the Supreme Court, namely Lord Reid's judgment in Parry v Cleaver.
Second, each of the other rationales endorsed by the Supreme Court to justify the non-deductibility of insurance and gifts are examined and dismissed. These include:
* The "payment" rationale for insurance;
* The "indemnity" rationale for insurance;
* The "public policy" rationale for gifts; and
* The "calculation difficulties" rationale for gifts.
Third, I argue that the causal rationale is logically consistent with well-established legal principles governing the calculation of damages in tort and contract law, namely:
* Calculating damages under separate heads of loss;
* The time of assessment of damages;
* Mitigation of damages; and
* Remoteness of damages.
Fourth, I address logical criticism of the causal rationale in the leading scholarship and jurisprudence. I argue that the criticism is reducible to the view that the causal approach is difficult to apply; a view that is only borne of a misunderstanding of the causa causans/causa sine que non distinction.
Finally, 1 compare the leading decision of the Supreme Court of Canada with the latest statement of the UK's Supreme Court on collateral benefits in order to highlight the normative and conceptual virtues of the causal rationale.
I conclude that Canadian courts should adopt the causal rationale as the preferable legal framework for addressing collateral benefit questions.
II HISTORICAL ARGUMENTS IN FAVOUR OF CAUSATION
Historically, the causal rationale was the guiding principle underlying the law of collateral benefits in Canada. To begin with, a causal analysis was at the heart of the ratio decidendi of Bradbum v Great Western Railway Co, the first case where collateral benefits were at issue. (9) In Bradburn, the court's acceptance of the causal approach represented a coherent stage in the use and development of causal principles in private law dating back over a century. Once adopted, the courts then consistently applied the causal rationale over a period of several decades. The eventual rejection of the causal rationale in Canadian law, which began with the Supreme Court's decision in Gill v Canadian Pacific Railway in 1973, (10) was unsubstantiated; a change in the law sparked by a single set of reasons with little persuasive value and marked by a misquotation of that same decision by the Supreme Court. The causal rationale was always intended to be at the core of collateral benefit issues. In what follows, I argue against the historical abandonment of the causal rationale by the Supreme Court.
A. THE FOUNDATIONAL CASE: BRADBURN V GREAT WESTERN RAILWAY CO
Acceptance of the causal rationale would mark a return to the original approach to collateral benefit questions in Canadian law. The case that first examined the issue of collateral benefits, the 1874 decision of Bradburn v Great Western Railway Co, was, in fact, decided based on a causal analysis. (11)
In Bradburn, the Court of Exchequer held that the amount of damages awarded against a defendant who causes an injury should not be reduced by the amount of insurance payments that a plaintiff receives as a result of the injury. (12) This created an "exception" to the general rule that courts should deduct the amounts of all benefits received by the plaintiff from any award. The Honourable Baron Pigott held that "[the plaintiff] does not receive that sum of money because of the accident, but because he has made a contract providing for the contingency; an accident must occur to entitle him to it, but it is not the accident, but his contract, which is the cause of his receiving it." (13) Therefore, the original legal principle explaining why certain collateral benefit should not reduce compensatory damage award was causation. (14)
In the contemporary context, insurance payments remain non-deductible in Canada, and the courts continue to cite Bradburn as the definitive authority on the "insurance exception". (15) Not only has Bradburn never been overruled in Canada; (16) the British, Australian, and American legal systems all accept the case as correctly decided. (17) So long as Bradburn stands, the causal rationale will continue to represent a legitimate option for addressing collateral benefit questions at common law. (18)
B. THE ORIGIN OF COLLATERAL BENEFITS IN CAUSAL PRINCIPLES
Further support for the causal rationale is that Bradburn was the conclusion of a line of causal reasoning developed by the courts for more than a century. The first noteworthy development occurred in the mid-eighteenth century when the English courts created the equitable right to subrogation. (19) This right permitted an insurer, upon compensating an insured plaintiff for a loss suffered by a tort, to take the place of the injured party in litigation. The insurer was then able to sue the tortfeasor for the loss. (20)
The right to subrogation created new questions for the courts. Did the receipt of insurance payments preclude a plaintiff from bringing a tort action himself? And conversely, did the receipt of damages preclude a plaintiff from recovering an insurance payment thereafter? In each case, the courts found that a plaintiff who had exercised the right to recover payment from one party (be it the tortfeasor or the insurer) did not forfeit the right to recover from the other. (21) Finally in 1838, the Court of Common Pleas definitively held that an insurer's decision to exercise a right of subrogation should have no effect on a plaintiff's rights to recover both from the defendant and his insurer. (22)
The courts recognized that the right to payments from third parties arises independently of the rights of action in civil claims. This finding of separate sources of rights led to the conclusion in Bradburn that the causa causans of an insurance payment is not a tort but a collateral source, namely the contract with a third party. Because the causa causans of this sum is separate from the tort, it follows that it should not impact a right of action for a loss caused by the tort. The genesis of the causal rationale is best explained through the lens of this line of logical reasoning.
C. THE WIDESPREAD HISTORICAL ACCEPTANCE OF THE CAUSAL RATIONALE
The jurisprudence and legal scholarship in the decades following Bradburn supports the view that the causal rationale was a logical step in the historical development of the common law. By the mid-nineteenth century, the notion of allowing a defendant to retain collateral benefits in addition to damages began gaining acceptance as a general principle. If the reason that the law allowed a plaintiff the right to retain both collateral benefits and damages was the result of causation, rather than a rule unique to insurance, then the doctrine did not need to be restricted to one area of law.
In 1856, John Mayne proposed a general rule on collateral benefits in his leading textbook on damages: "[m]atters of a merely collateral nature cannot be given in reduction of damages." (23) Though an explanation justifying the rule was absent in that edition of the text, Mayne advocated the causal rationale in every edition published after the Bradburn decision. (24) By the end of the century, the causal rationale had gained acceptance as a general principle of damages throughout the Commonwealth. (25)
In Canada, beginning in the early twentieth century, the courts assembled a lengthy record of successfully applying the causa causans/causa sine que non test to resolve all benefit disputes. Unsurprisingly, the Supreme Court applied the test to insurance payments. (26) The Saskatchewan Court of Appeal also applied the test to sick pay. (27) In Ontario, courts applied the causal rationale to justify the non-deductibility of everything from gifts (28) to Worker's Compensation benefits. (29) By the mid-twentieth century Canadian courts had seemingly embraced the causal analysis. (30) The rationale would not come under renewed scrutiny by the Supreme Court until the 1970s.
The reliable use of the causal rationale for several decades bolsters the view that it should become the leading rationale in Canada once again. Canadian courts have shown a clear capability of successfully applying the doctrine in a variety of contexts.
D. THE PROBLEMATIC REJECTION OF CAUSATION: PARRY V CLEAVER
Despite the wealth of judicial decisions supporting the causal rationale, beginning in 1973 the Supreme Court moved away from the doctrine. Whereas the acceptance of the causal approach in Canada was based on a substantial amount of persuasive authorities, the rejection of the rationale was based on a single set of reasons: Lord Reid's judgment from the House of Lords ruling in Parry v Cleaver. (31)
Lord Reid's judgment formed part of the majority decision in Parry. Nevertheless, the Supreme Court's use of Lord Reid's judgment as the basis for changing the law in Canada was improper. To begin with, Lord Reid's judgment mischaracterized a prior decision to use as authority for his position and the other Lords who ruled in the majority actively rejected his reasoning for judgment. Additionally, when applying Parry, the Supreme Court misquoted Lord Reid, mistakenly attributing to him some of Lord Pearce's reasons. This mistake created the false impression that the majority in Parry agreed with Lord Reid. As a result, the Supreme Court improperly adopted Lord Reid's judgment as the most authoritative set of reasons from the decision and changed the law in Canada accordingly.
i. The Problems with Lord Reid's judgment
In Parry, Lord Reid rejected the notion of an established rationale to guide the courts in determining the deductibility of collateral benefits, (32) including the causal rationale. (33) Instead, Lord Reid proposed the interests of justice and public policy as factors that explained why both gifts and insurance payments were not deductible:
[W]hat are the real reasons, disregarding technicalities, why these two classes of receipts are not brought into account. I take first the case of benevolence... It would be revolting to the ordinary man's sense of justice, and therefore contrary to public policy, that the sufferer should have his damages reduced so that he would gain nothing from the benevolence of his friends or relations or of the public at large, and that the only gainer would be the wrongdoer... As regards moneys coming to the plaintiff under a contract of insurance, 1 think that the real and substantial reason for disregarding them is that the plaintiff has bought them and that it would be unjust and unreasonable to hold that the money which he prudently spent on premiums and the benefit from it should enure to the benefit of the tortfeasor. (34)
Lord Reid's rationale for the "gifts exception" (35) is undermined by his selective use of Redpath v Belfast and County Down Railway. (36) He cited Redpath as authority for the proposition that the reason gifts are not deducted from damage awards is because the courts do not want to deter citizens from acting charitably:
I know of no better statement of the reason than that of Andrews C.J. in Redpath v. Belfast and County Down Railway  N.I. 167, 170. There the company sought to bring into account sums received by the plaintiff from a distress fund. Andrews C.J. said that the plaintiff's counsel had submitted "that it would be startling to the subscribers to that fund if they were to be told that their contributions were really made in ease and for the benefit of the negligent railway company. To this last submission I would only add that if the proposition contended for by the defendants is sound the inevitable consequence in the case of future disasters of a similar character would be that the springs of private charity would be found to be largely if not entirely dried up." (37)
Though the argument that "the springs of private charity would dry up" was that of the plaintiff's counsel in Redpath, Lord Reid attributed this reasoning to Chief Justice Andrews to support his position that the non-deductibility of gifts is justified by public policy considerations. However, the portion of Chief Justice Andrews's judgment following the passage cited by Lord Reid shows that, although Chief Justice Andrews may have had some sympathy for the plaintiff's position, he did not find the public policy argument persuasive:
For the plaintiff Mr. Nicholson submitted that... it would be startling to the subscribers to that fund if they were to be told that their contributions were really made in ease and for the benefit of the negligent [defendant]. To this last submission 1 would only add that if the proposition contended for by the defendants is sound the inevitable consequence in the case of future disasters of a similar character would be that the springs of private charity would be found to be largely, if not entirely, dried up. But the issue must be determined not upon what I may call its general merits but upon legal principle and authority. (38) [emphasis added]
Instead Chief Justice Andrews based his judgment on a causal analysis:
The important consideration, to my mind, common to all these cases, is that the circumstance relied upon in mitigation of damages arose independently of the cause of action, and was not naturally attributable to it. Whilst admittedly a sequence it was not a consequence. It arose really as the result of a novus actus interveniens, and was not the outcome of the relations between the plaintiff and the defendants which gave rise to the cause of action. The defendants' wrongful act may in each case have been a causa sine qua non, but in no true sense was it the causa causans of the circumstance relied upon in mitigation of damages. (39)
Redpath was not binding on the House of Lords. However, by mischaracterizing the ratio of Redpath, and by relying on that mischaracterization to support his position, Lord Reid unwittingly established a dubious foundation for the law of collateral benefits pertaining to gifts.
Notwithstanding the contemporary position held by the Supreme Court of Canada, Lord Reid's judgment endorsing the "public policy incentives" rationale in Parry is not persuasive. The only authority Lord Reid cites in support of his argument is Redpath. Further, the critical statement of law in Parry is obiter dictum and endorsed by only one other Lord. (40) Lord Pearson, in dissent, noted that the causal rationale was in fact the correct ratio in Redpath. (41) Nevertheless, Lord Reid's statement was pivotal in shaping the common law approach to collateral benefits in relation to gifts.
The "public policy" rationale for the gifts exception permeates the contemporary approach at common law. The rationale is accepted as the leading explanation for the non-deductibility of gifts in Canada. It is cited in leading textbooks and judgments, (42) including the leading case of Waterman. (43) In every instance, the authorities cite Redpath in support of the public policy approach, a mistake originally born of Lord Reid's selective interpretation of the case. (44)
Troublingly, Lord Reid's position on insurance benefits has also been adopted as law. Lord Reid stated that benefits "in the nature of insurance proceeds" should not be deducted from a plaintiff's damages, (45) and the guiding factor for assessing when a benefit is in the nature of insurance proceeds is whether the plaintiff had paid for it. (46) Again, the other Lords comprising the majority in Parry rejected this rationale.
Lord Pearce also based his method for assessing deductibility on whether the disputed benefit shared the same nature as insurance, but he rejected payment as the essential characteristic. (47) Instead, Lord Pearce found that the characteristic shared by all non-deductible benefits was that they were intended to assist the injured plaintiff and not to subsidize a wrongdoer who had caused the harm. (48)
Lord Wilberforce sided with neither Lord Reid nor Lord Pearce. He disagreed with Lord Reid's rationales underlying the non-deductibility of both gifts and insurance proceeds. He expressly rejected the notion that payments by the plaintiff or feelings of injustice should determine the issue. (49) Lord Wilberforce ultimately found that no single principle was determinative of deductibility.
Despite the lack of consensus in Parry, the Supreme Court adopted Lord Reid's position. (50) The principle that a benefit must be "paid for" to avoid deduction was endorsed as the leading rationale in Cunningham (51) and continues to be recognized as an important criterion. (52)
ii. The Problems with the Supreme Court's Application of Parry
The Supreme Court's decision to follow Lord Reid was also problematic due to an initial misreading of Parry and a subsequent mistake in quoting from the decision. The Supreme Court first endorsed Parry as an authoritative case on collateral benefits in Gill v Canadian Pacific Railway, (53) construing the ratio of Parry as stating that the "nature" of a benefit was the crucial factor in determining its potential deductibility. (54) The Supreme Court cited passages from both Lord Reid and Lord Pearce concerning their respective interpretation of the "nature" of a non-deductible benefit, giving the impression that each Lord's essential characteristic (payment and intent) should be evaluated together in assessing deductibility. However, given Lord Pearce's express rejection of payment as the defining factor, this reading of Parry is inapt.
The Supreme Court's treatment of Parry became further muddled in Guy v Trizec Equities Ltd, (55) resulting from a mistaken reading of Gill. In Guy, the Supreme Court followed Gill, relying in particular on the section of Gill citing Parry. However, when Justice Ritchie quoted the passage from Gill that discussed the two "nature" arguments, he mistakenly combined the two statements, attributing them both to Lord Reid. (56) This newly combined passage gave the inaccurate impression that the overwhelming focus of Parry was the issue of payment and that the sole set of reasons from the judgment that the Supreme Court had endorsed in Gill was that of Lord Reid.
When the Supreme Court next substantially addressed collateral benefits in Ratych v Bloomer, (57) unsurprisingly, the Court solely considered Parry for Lord Reid's reasons. Justice McLachlin (as she then was) stated that Parry had discredited causation and supported the payment rationale. (58) She held that the Supreme Court had adopted Parry in Gill and Guy, and rendered her judgment accordingly. (59) By the time of Cunningham, Lord Reid's reasons in Parry were recognized as binding precedent. (60) Canadian law had adopted the payment rationale despite the majority of the Lords in Parry having rejected it.
An examination of the history of common law rulings regarding collateral benefits shows that the causal approach, as the original guiding principle of this area of the law, was both appropriate and viable. It was a logical development of the common law position through the 18th and 19th centuries and it continued to be effectively applied throughout the Commonwealth through much of the 19th and 20th centuries.
The Supreme Court's modern approach to collateral benefits was built on a single set of reasons from Lord Reid that was neither persuasive to his fellow Lords nor accurate in its statements of the law. As a result, the Canadian approach to collateral benefits has become fragmented and rife with logical inconsistencies.
III ARGUMENTS AGAINST THE CONTEMPORARY APPROACH IN CANADIAN LAW
In the decades since the rejection of causation, no other coherent legal principle has been adopted to explain the judicial treatment of collateral benefits as a whole. Instead, the courts take a fragmented approach to these issues, analyzing benefits differently depending on whether they are similar to gifts or insurance, i.e. the two established exceptions to the general rule that all post-wrong benefits are deductible.
The state of the law on collateral benefits in Canada today is far more confusing than it was in the era of the causal approach. Each of the rationales advanced to explain the non-deductibility of gifts and insurance is inherently flawed. Additionally, some of the rationales stand in tension with one another. The causal rationale remains the preferable approach on the grounds that it applies generally, as well as explains the non-deductibility of both insurance and gifts.
A. INSURANCE EXCEPTION: PAYMENT RATIONALE
The leading rationale for the non-deductibility of insurance payments is the "payment" rationale, born of Lord Reid's reasons in Parry. (61) This rationale states that where a plaintiff gives payment for a collateral benefit the benefit should not be deducted or else the plaintiff is deprived of the value of his payment. (62) On this view, the payment for the benefit does not need to be financial, so long as evidence is adduced that the plaintiff gave something up in return for the benefit. (63) Examples of alternative payments that fulfill the criteria include trade-offs in the collective bargaining process and evidence that the benefits were part of an employee's wages. (64)
One argument advanced in favour of the payment rationale is that the explanation is supported by the principle against unjust enrichment, (65) which holds that a wrongdoer cannot benefit from gains resulting from his wrongdoing. (66) In theory, by allowing the plaintiff to keep benefits that have been paid for, a court prevents the defendant from being unjustly enriched at the plaintiff's expense.
i. Inconsistencies with the Gifts Exception
An obvious problem with this approach is that it is inconsistent with the gifts exception. Gifts are also unquestionably accepted as non-deductible and by their very nature are not paid for by the plaintiff.
So long as the payment rationale is endorsed alongside the gifts exception, it is difficult to conceive of a situation wherein any collateral benefit received by a plaintiff would not fall under one exception or the other. (67) Either a plaintiff receives a benefit because they have paid for it (either through premiums or as part of the consideration for his employment), thereby falling under the insurance exception, or it is gratuitous and so falls under the gifts exception. (68) If gratuitous and non-gratuitous benefits are both non-deductible, a plaintiff's payment is not a necessary element of non-deductible benefits. (69)
ii. Inconsistencies with the Law on Unjust Enrichment
An analysis of the elements of unjust enrichment also reveals the inaptness of the argument that the payment rationale supports the principle against unjust enrichment. (70) There are three criteria necessary to establish an unjust enrichment: (1) benefit to the defendant; (2) corresponding detriment to the plaintiff; and (3) the absence of any juristic reason for the defendant's retention of the benefit. (71) These elements are not met where a plaintiff's collateral benefits are deducted from the damages owed by a defendant. The payment rationale does not engage the principle of unjust enrichment, because no unjust enrichments are created in a situation where collateral benefits are deducted.
The scope of the "detriment to the plaintiff" is not clear in a situation wherein a collateral benefit is deducted from a damages award. Imagine that a plaintiff (P1) pays $1 to receive a $10 insurance payment if injured. A defendant (D) injures him to the extent of a $100 loss. Once injured, P1 recovers $10 in insurance before trial. If the trial judge then decides to deduct $10 from a $100 damages award, it is difficult to argue that P1 has been deprived of the amount of his collateral benefits. P1 did in fact receive the $10 insurance payment and he received compensation for the full extent of his loss (the $10 payment plus the $90 in damages). Based on this example, the $10 reduction in damages does not appear to demonstrate that a deprivation of $10 has occurred.
However, P1 does appear to have been deprived of the $1 premium payment. Imagine if a second plaintiff (P2) was injured in the same accident and to the same extent. But rather than purchase insurance like P1, P2 decided to keep his dollar. Suppose P2 also suffers a $100 loss and is awarded $100 at trial in damages. P2 has received no benefits pre-trial. Comparing the two cases, it would appear that the only difference in financial standing between P1 and P2 is that P1 has been deprived of $1, whereas P2 has not. P1 paid $1 and received $100 total, whereas P2 paid nothing and received the same amount. The prudent plaintiff is financially worse off than the irresponsible one, (72) but only by the amount of the premiums that he paid, not the amount of the benefits. (73)
If the amount of the insurance premiums, not the payouts, represents the plaintiff's potential deprivation, in order for the court to avoid an unjust enrichment it would be necessary for the defendant to compensate the plaintiff for any amount paid in past premiums. (74) However, in situations where plaintiffs receive insurance payments, the courts do not order the defendants to pay the plaintiffs the cost of their insurance premiums. (75) Therefore, where a court deducts a plaintiff's benefits from damages, it is not obvious that the deprivation element of unjust enrichment is met. It is also difficult to establish the element of "enrichment" in these situations. If the amount of benefits received by the plaintiff is deducted from the damages owed by the defendant, it is questionable whether the defendant gains a benefit. The law accepts that a "negative" benefit, being spared a necessary expense, can give rise to enrichment. But to qualify as an enrichment at law, a negative benefit must discharge a legal obligation. (76) The deduction of benefits from a damage award does not fit this profile.
If a judge reduces damages because a plaintiff received a benefit, the defendant may have a smaller remedial obligation, but he has not been discharged of a legal liability. Regardless of the amount payable, the defendant's legal liability is the same: to compensate the plaintiff for the losses attributable to the wrong, (77) which the judge has simply determined to be a smaller amount by deducting the amount of the benefits.
There is also a question with respect to the "lack of a juristic reason" element of unjust enrichment. If a collateral benefit received by the plaintiff is deducted from a damages award, it is because of a juristic reason. As stated by the Supreme Court, "[t]he established categories that can constitute juristic reasons include... a disposition of law", (78) and a judge's decision is a disposition. (79) The decision of judge to reduce a damage award would qualify as a juristic reason.
In sum, there are no grounds to show that the payment rationale upholds the principle against unjust enrichment.
B. INSURANCE EXCEPTION: INDEMNITY RATIONALE
Another leading explanation for the insurance exception is the indemnity rationale. (80) An indemnity is a payment intended to compensate the insured in whole or in part for a specific pecuniary loss. A non-indemnity payment is a payment of a previously determined amount upon the occurrence of a specified event, whether or not there has been a pecuniary loss. (81) In equity, where one party fully indemnifies a plaintiff for his loss, (82) that party gains the right of subrogation. (83)
The indemnity rationale holds that a collateral benefit should be non-deductible only if the benefit is a non-indemnity. (84) The reason is that when money is paid to indemnify a plaintiff, his loss is reduced by the amount of the indemnity, and so he should only receive damages to compensate him for the difference. (85) On this view, the result is justified because the plaintiff receives the full amount of his loss through the combination of indemnity and damages. The defendant will not benefit from the fact that his victim had insurance because the third party can pursue a subrogated claim against him. (86)
i. Inconsistencies with the Gifts Exception
In light of the differences between indemnity and non-indemnity payments, a charitable gift should be considered an indemnity payment. A charitable gift is not paid out in a pre-determined amount, nor is it given upon proof of a specific event. The plaintiff does not get the right to it until after the loss occurs and it is given with the intention to compensate the plaintiff for a specific loss. Yet the fact that gifts qualify as indemnities under this definition has never led the courts to conclude that gifts are deductible. The Supreme Court recognizes this inconsistency in explicitly disregarding the purpose of a gift when evaluating deduction. (87) This supports the position that the Supreme Court lacks a coherent view concerning the deductibility of collateral benefits.
ii. Inconsistencies in Determining Whether Benefits are Indemnities
The courts have struggled with determining whether some types of benefits qualify as indemnities. Accident insurance payments are often labelled as non-indemnities. (88) In theory, such payments cannot be considered indemnities because they are paid on the contingency of an accident, (89) and to recover under the policy, the insured party must only prove the occurrence of the accident, not any pecuniary loss. (90) But some courts argue that it is unclear if accident insurance payments are non-indemnities.
In the influential case of Boarelli v Flannigan, (91) the Ontario Court of Appeal stated that the factor of indemnity cannot be a true indicator of deductibility because accident benefits are intended to compensate specific losses. (92) Other judgments have noted that some accident insurance policies require proof of pecuniary loss for a payout. (93) Finally, there have been cases in which courts have deducted accident insurance benefits without evidence of indemnification. (94) Given these inconsistent decisions, (95) indemnity is not a reliable marker of whether benefits are or are not deductible. (96)
iii. Inconsistencies in Applying the Doctrine of Subrogation
The doctrine of subrogation also fails to justify the indemnity rationale because subrogation does not necessarily result from a "contract of indemnity". (97) Subrogation is an equitable principle and, as a result, it comes with the notorious restrictions underpinning equitable rights. (98) One feature of equitable rights is that they are granted at a court's discretion. By nature, subrogation is not guaranteed.
The requirement of full indemnification for subrogation (99) also poses problems for some losses. This is particularly true with earning capacity. As will be explained further in what follows, the receipt of insurance cannot be said to be actual compensation for a permanently damaged asset. In such instances, a court may refuse to grant a right of subrogation because there is insufficient evidence of full indemnification.
Finally, equitable rights of subrogation are rarely exercised. (100) When a court deducts an amount from a plaintiff's claim, expecting the party who provided the indemnity to pursue his subrogated right to recover, it is important to note that such litigation might never occur. In such a situation the wrongdoer does benefit from the plaintiff having received the benefits, thereby undermining one of the putative justifications underlying the indemnity principle. Indemnity does not guarantee subrogation. Subrogation may avoid double recovery, but indemnity does not.
C. GIFTS EXCEPTION: PUBLIC POLICY RATIONALE
In her dissent in Cunningham, Justice McLachlin (as she then was) advanced the "public policy" rationale for the non-deductibility of gifts. (101) The rationale, endorsed by Lord Reid in Parry resulting from his misreading of Redpath, asserts that the public would not be incentivized to give gifts if those sums were eligible to be deducted from damage awards.
i. Lack of Persuasive Legal Authority to Support the Rationale
Justice McLachlin's Cunningham dissent was the first time this rationale was advanced at the Supreme Court and she cited no authority to support it. Because she endorsed Lord Reid's Parry judgment in Ratych, it seems likely that she adopted the argument from Lord Reid; however, the Supreme Court never actually cited Parry as authority for the rationale. Subsequently, the Supreme Court has only twice approved the rationale, (102) citing only Redpath and Cunningham. Because Chief Justice Andrews did not actually endorse the public policy rationale in Redpath, no judicial authority underlies the position of the Supreme Court.
ii. Lack of Factual Evidence to Support the Rationale
In Waterman, the Supreme Court stated that collateral benefit questions should not be influenced by "public incentives" arguments that are unsupported by actual evidence. (103) There has been no evidence discussed in any Supreme Court judgment that indicates that deducting gifts from damage awards deters generosity. It is equally possible in any given case that a gift was intended to help an injured victim only until he receives the damages from his lawsuit. (104)
There is an argument to be made that the non-deductibility of gifts may actually deter the public from acting more benevolently. Any citizen who knows that an injured victim is entitled to keep both charitable gifts and civil damages may not have an incentive to give benevolently to that victim. The victim does not appear to need charity because he has the right to sue for and retain damages. The public policy argument is therefore based on a speculative empirical claim.
D. GIFTS EXCEPTION: CALCULATION DIFFICULTIES RATIONALE
A further rationale given for the gifts exception is the difficulty of evaluating some types of charity. (105) Justice McLachlin (as she then was) adopted this argument in her dissent in Cunningham. (106) She has noted that benefits such as companionship, assistance with daily errands, and the training of a helper dog are not easily monetized. (107) Due to these difficulties of calculation, she suggested that it is impractical for a court to spend time incorporating gifts into a damages analysis.
i. Lack of Persuasive Legal Authority to Support the Rationale
There is no common law authority to support the calculation difficulties rationale apart from the Supreme Court of Canada cases that rely on it. The rationale appears to originate solely from McLachlin's dissenting judgment in Cunningham. (108)
ii. Jurisprudential Inconsistencies
The contention that household tasks are difficult to value is untrue. In Kroeker v Jansen, (109) the British Columbia Court of Appeal cited multiple cases, including the Supreme Court case of Peter v Beblow, (110) in holding that Canada recognizes that housekeeping and other domestic services have recoverable economic value. (111) Given that courts are capable of valuing these tasks, it is implausible to argue that such benefits are too difficult to calculate.
The causal rationale is preferable to the current leading explanations regarding the deductibility of collateral benefits. The causal rationale succeeds where the other-approaches fall short: it has general applicability and is able to coherently explain the deductibility of both insurance payments and charitable gifts. In addition, the arguments provided to justify each of the other leading rationales are all easily debunked, whereas the causal rationale is logically sound, as evidenced by its coherence with more general legal principles pertaining to damages.
IV RECONCILING CAUSATION WITH THE GENERAL PRINCIPLES OF DAMAGES
It is a governing principle of private law damages that a defendant is responsible for the damages that arise naturally from his wrong. In contract law, the damages are to compensate for the loss naturally flowing from the breach of contract. (112) In tort law, the wrongdoer is liable to the plaintiff for the natural consequences of the tort. (113) Under the causal rationale, a non-deductible benefit is not naturally caused by the wrong. Instead, the benefits are caused by something remote from, and wholly collateral to, the wrong and its natural consequences. (114) Pursuant to the general principle, it appears that these benefits should not impact the calculation of a damage award.
The scope of damages for which a defendant is responsible is, however, only one of several principles that influence the assessment of damages in private law. The compensation principle, restitutio in integrum, is also of paramount importance, as are considerations surrounding the appropriate time to assess the loss, as well as the doctrines of remoteness and mitigation. (115) An examination of each these doctrines, with a focus on the example of loss of earning capacity, shows that the causal approach to collateral benefits is logically consistent with the general principles governing awards for damages.
A. CALCULATING DAMAGES UNDER HEADS OF LOSS
Restitutio in integrum dictates that the plaintiff is to be placed in the same position that he would have occupied had he not sustained the wrong. (116) Damages should compensate the plaintiff to the full scope of his loss: the remedy is to put the plaintiff in a situation as though the wrong never happened.
While restitutio in integrum is an ideal, with certain injuries there is no real way to restore the plaintiff to his pre-wronged state. Some losses, like that of a body part, cannot be replaced by money. (117) Therefore, to arrive at the best estimate of a plaintiff's loss, the appropriate method for calculating damages is adding together an assessment of each individual type of loss under a separate head of damages. (118)
i. Reconciling the Causal Rationale with the Principle
When collateral benefits that are non-deductible under the causa causans/causa sine que non test (i.e. insurance, gifts) are examined through the "heads of loss" analysis, the reason for their non-deductible status is clear. Because different types of losses are calculated separately, logically, benefits received by the plaintiff after the wrong must also be evaluated separately under the heads of loss approach. (119) It is only where the benefits correspond with particular heads of damages that the benefits ought to be deducted, and then only from those particular heads of damages. (120)
One commonly claimed head of loss is loss of earning capacity. If a plaintiff suffers a personal injury resulting in an inability to perform his job, his "earning capacity" asset (121) is devalued. The tort is the causa causans of this loss.
When properly understood using the causal approach, the receipt of non-deductible collateral benefits (i.e. those for which the tort is not the causa causans) has no impact on the extent to which a plaintiff has suffered this type of loss. When a plaintiff receives benefits through insurance or by way of gift, those funds do not actually put him in a better position with respect to his earning capacity. The loss that was caused by the tort, the reduction in income-earning ability, is still present notwithstanding these benefits. (122) The benefits are not connected to the loss of earning capacity head of damages and cannot be deducted from it.
ii. Potential Inconsistencies with the Causal Rationale
The causal rationale has been especially confounding to certain judges in light of the fact that wages from a new job post-injury are held as deductible from damage awards. In British Transport Commission v Gourley, multiple members of the House of Lords found that, like insurance payments, post-injury wages appear to be completely collateral to a tort based on the causal principle. (123) Yet those Lords also accepted the longstanding precedent that a plaintiff's post-wrong income must reduce the scope of damages. Given that these two conclusions seemed to provide an example of a deductible collateral benefit that was not caused by the wrong, the Lords in Gourley found that causation was not a reliable indicator as to whether or not a benefit should be deducted.
Gourley preceded the modern approach to calculating damages under separate heads of loss. Given the modern understanding of earning capacity as an asset, post-wrong wages would not be classified as wholly "collateral" to the loss of earning capacity. Under the causal rationale, post-wrong wages are appropriately viewed as caused by the wrong.
If a plaintiff had a full-time job at the time of a tort, then his asset was fully put to use. He could not have simultaneously worked another full-time job without relinquishing the first one. But if that plaintiff is forced to find a new job as the result of an injury, then any new earning capacity is caused by the defendant's tort. (124) The wrong gives the plaintiff the ability to put the asset to a new use. Thus, causation can explain how the defendant's tort is the cause of the plaintiff's ability to attain a new job.
The causa causans of the wages in Gourley was the wrong of the defendant, not a collateral source. Gourley does not present a persuasive argument for rejecting causation.
B. TIME OF ASSESSMENT
The general rule is that damages are to be assessed at the time the cause of action comes into existence. (125) In personal injury cases the time of assessment is the date of the injury, (126) and in breach of contract cases it is the date of the breach. (127) The plaintiff may not receive damages until later due to the length and inefficiency of the judicial process, but the right of action is complete at the time when the wrong occurs. (128)
i. Reconciling the Causal Rationale with the Principle
The legal principle governing the time damages are assessed is consistent with the causation test for determining the deductibility of any post-wrong benefit. A plaintiff does not receive the types of compensation that are classified as non-deductible collateral benefits (insurance, gifts, etc.) at the moment of the wrongdoing. To receive these collateral benefits, there must be an intervening act, such as an application for disability payments or the donation of money. These benefits are thus not directly caused by the wrong. The tort or breach of contract is only a causa sine que non of these benefits, which is consistent with the causal approach that views these benefits as appropriately non-deductible.
ii. Potential Inconsistencies with the Causal Rationale
One critical perspective is that the time of assessment principle should actually favour the deductibility of benefits that come from an insurance contract or a statute. Unlike in situations involving gifts, at the time of a defendant's wrong a plaintiff possesses the right to receive these types of benefits upon the occurrence of the wrong. Arguably, pursuant to the time of assessment doctrine, contractual or statutory benefits could be viewed as appropriately deductible. (129)
A second criticism is that, under the lens of the time of assessment principle, it also appears that any funds that a plaintiff receives from a new job obtained post-injury should be considered as non-deductible. As a plaintiff does not receive these funds until some time well after the wrongdoing occurs, based on the time of assessment rule, the funds cannot possibly be deducted from damages because total damages should be calculated based on the time of the wrongdoing and not factor in sums subsequently received. (130)
The first counterargument, that a plaintiff having the right to an insurance payment at the moment of a wrong should warrant deduction, neglects a fundamental aspect of causation: a cause must precede its result. If a plaintiff has a pre-existing right to a collateral benefit before the plaintiff was wronged, then logically the wrong cannot be the causa causans of the benefit. (131) Any right to a collateral benefit that arises before the plaintiff's right of action in tort is not caused by the source that provides the plaintiff with a cause of action to sue for damages. The rights are distinct and the plaintiff's ability to exercise one should not be restrained by his decision to exercise the other. There is no logical reason why the plaintiff should not be allowed to enforce both rights. (132)
With respect to the second counterargument regarding the treatment of post-wrong wages, despite the time gap between the wrong occurring and the receipt of the wages, it is appropriate for a court to deduct post-wrong wages when calculating loss of earning capacity. The timing anomaly can be explained by the impracticalities of evaluating certain assets, not by which sums come to the plaintiff at particular times.
There are some types of losses for which it is impossible to assess the extent of the loss at the time the wrong occurs because the value of the asset can only be assessed when it is being used. (133) It would be illogical to assert that because an asset is not in use at the time of a wrong it has no value. As held by the Ontario Court of Appeal, "[m]erely because such damages cannot be determined at that time should not affect the result." (134)
Receiving income from a new job obtained as the result of an injury is analogous to receiving an appraisal on a damaged item to learn its value. In the case of earning capacity, the plaintiff has a valuable asset at the time of the wrong but its value is only determined once the plaintiff sees what work he can perform. The fact that the causal approach classifies wages as deductible does not violate the principle governing the time damages are assessed.
A plaintiff's right to pursue damages imposes on the plaintiff a duty to mitigate any losses directly flowing from the wrong. (135) According to the Supreme Court, "a 'duty' to mitigate should be understood in this sense... a wronged plaintiff is entitled to recover damages for the losses he has suffered but the extent of those losses may depend on whether he has taken reasonable steps to avoid their unreasonable accumulation." (136)
In economic terms, where a defendant commits a legal wrong, one or more assets of the plaintiff will have been damaged. Of these assets, some may be at risk of devaluing further. (137) If there are reasonable ways the plaintiff can use the assets for value, mitigation requires the plaintiff to do so to avoid further devaluation or any consequential harms. (138)
i. Reconciling the Causal Rationale with the Principle
The causal rationale stipulates that, for a non-deductible collateral benefit, the defendant's wrong is an occasion for the receipt of a benefit, not the source of the right to the benefit. By extension, non-deductible benefits do not necessarily need to be triggered by a wrong, but could be triggered on any number of occasions. For example, an insurance payment can be triggered by an accident or an act of nature.
If a plaintiff receives money after a wrong that he could have received even if the wrong had never occurred, then that money cannot possibly be viewed as mitigating the loss being claimed--it must be from a source other than the affected asset. (139) For example, if P owns two cars that he rents for profit and D breaks his rental contract with P for Car 1, P having rented Car 2 to a third party is not an act of mitigation. The defendant cannot argue that because P received money for the second rental, the loss that D caused P with respect to Car 1 has been diminished. The theory of mitigation does not require the deduction of collateral benefits not wholly caused by the wrong.
In the past, the question of whether a post-wrong benefit was attributable to an asset or interest that was damaged by the wrong was actually accepted in Canada as a means of distinguishing "mitigatory" benefits (i.e. those deducted from damage awards) from "collateral" ones (i.e. those ignored when calculating damages). In 1939, the American Restatement of the Law, Torts distinguished deductible and non-deductible benefits along these lines, (140) and the Ontario and Nova Scotia Courts of Appeal and Lord Pearce of the House of Lords have all since endorsed this statement of the law. (141) Collateral benefits should be deductible only if they arise from an asset that was harmed. The best tool for assessing whether benefits arise from an asset that was harmed is the causation analysis.
ii. Potential Inconsistencies with the Causal Rationale
Critics may argue that when a plaintiff exercises a contractual right to insurance payments or accepts a gift he is simply fulfilling his duty to mitigate. (142) This conflicts with the causal rationale, which holds that these benefits are appropriately non-deductible. In particular, the issue of sick pay benefits is problematic for opponents of the causal rationale, as according to this line of reasoning those benefits appear to directly reduce a plaintiff's loss of earnings resulting from any injury caused by the defendant.
The duty to mitigate does not impose an obligation on a plaintiff to seek out any and all financial resources after suffering a loss. (143) It only imposes a duty to mitigate the specific harms actually suffered. Where a plaintiff is wrongfully dismissed, mitigation requires the plaintiff to seek a new job to reduce his loss of earning capacity, but where a plaintiff suffers a personal injury that inhibits him from being able to work at all, he cannot mitigate his earning capacity. (144) Although he may seek or receive other resources such as gifts or insurance, he cannot go out and repurpose his "earning capacity" asset. As insurance and gifts are not connected to this asset, the duty to mitigate does not require those benefits to be deducted from damages for loss of earning capacity. (145)
Viewed through this lens, sick pay benefits received by an injured plaintiff are correctly considered as collateral benefits that should not affect an assessment of damages. For example, a construction worker might suffer a personal injury that keeps him bedridden. While recovering, he could take advantage of his sick pay and simultaneously launch an e-commerce business from his bedside. The sick pay he receives is because of his contract and is unaffected by his new business earnings, but those earnings can be considered to mitigate his loss of earning capacity.
A final consideration in the calculation of damages is remoteness. The law deems some losses as too remote to result in liability to pay damages. In tort law, the test is whether the injury was reasonably foreseeable at the time of the wrong. (146) In contract law, the remoteness inquiry focuses on whether the loss from the breach of contract was within the reasonable contemplation of the parties when the contract was made. (147)
i. Reconciling the Causal Rationale with the Principle
The causal approach to collateral benefits can exist in harmony with the remoteness inquiry in tort. Judges in favour of the rationale note that because the causa causans of every benefit appropriately classified as non-deductible is a collateral source, not the wrong itself, those benefits are inherently too remote to be considered when calculating damages. (148) Judges who do not subscribe to the causal rationale have also found that the remoteness inquiry in tort has no impact on the assessment of collateral benefits as "[n]o one has ever suggested that the defendant gets the benefit of receipts by the plaintiff after his accident if they are of a kind which he could have foreseen". (149)
Regarding breaches of contract, the causal test for assessing the deductibility of collateral benefits is consistent with the dominant approach for assessing damages in contract. Where benefits come to a plaintiff from a third-party source such as a private insurer, those benefits have no bearing on the assessment of damages in a contract dispute. Because the defendant is not a party to the third-party transaction, the doctrine of privity prevents him from taking advantage of the benefit to reduce his damages. (150)
Where benefits come to the plaintiff from the same contract that was breached (a "single contract" case), the expectation principle and the causal rationale suggest the same solution to determining deduction: (151) look to the contract itself and the intentions of the parties. (152) In contract law, because damages are based on reasonable expectations, a court would need to examine the contract to see if it allowed for the receipt of both damages and benefits. (153) Pursuant to the causal rationale, the causa causans of the right to the benefit in a single contract case is the same as the causa causans of the right to sue for damages: the disputed contract. Accordingly, the benefit can also be taken into account when assessing damages if the intentions of the parties indicate that it must.
For example, in the wrongful dismissal case of Sylvester v British Columbia, the plaintiff received disability payments during the notice period from a plan established solely by the employer. (154) The Supreme Court unanimously held that the question of deductibility turned on the terms of the employment contract and the intention of the parties. (155) The issue was whether the contract allowed for the receipt of both wages and benefits simultaneously. In such cases the causal analysis and contractual remoteness test lead to the same result. (156)
ii. Potential Inconsistencies with the Causal Rationale
In the leading case of Waterman, the Supreme Court held that the expectation principle could not resolve the issue of the deductibility of benefits received from an employer liable for wrongful dismissal. In his majority judgment, Justice Cromwell found that a straightforward application of the expectation principle would have resulted in deduction in the case, but he ultimately held that the benefits were not deductible. (157)
The majority in Waterman either misunderstand or else fail to give sufficient weight to the expectation principle. Justice Cromwell treated the expectation principle as a secondary consideration in calculating damages, (158) which is distinct from, rather than synonymous with, the general approach to calculating a plaintiff's loss in contract law. (159) He also overlooked the extent to which the expectation principle determined the result in Sylvester. He stated that the nature of the benefit and broader policy considerations were equally important factors in the result, (160) while the dissent correctly noted that Sylvester turned on determining the intentions of the parties. (161) The majority's relegation of the expectation principle resulted in a decision that is incompatible with Sylvester. (162)
Single contract cases, such as Waterman, in which the contracts are silent on the status of benefits received during a breach of contract, have been a recurring challenge for the courts. In Sylvester, the Supreme Court decided that the parties did not intend for the contract to allow for the receipt of both benefits and damages. (163) In Waterman, the majority of the Court came to the opposite conclusion. (164) However, in both judgments, and in the dissenting judgment in Waterman, the justices' determinations regarding the intention of the parties with respect to the issue of deductibility were the same as their conclusions on the deductibility of the benefits. This consistency between the outcomes and the intentions of the parties indicates that in a single contract case the contract is the causa causans of the benefits. Correspondingly, the benefits are not automatically too remote to be ignored during the calculation of damages.
The causal approach to assessing the deductibility of collateral benefits is consistent with the general legal principles governing the assessment of damages. The non-deductibility of benefits such as insurance and gifts under the causal approach coheres with the principles of remoteness, mitigation, time of assessment and the calculation of damages under distinct heads of loss. Despite the longstanding aversion to the causal rationale, it is logically consistent to adopt the causal approach to collateral benefits as a general principle to guide the courts in the calculation of damage awards.
V REBUTTING THE CRITICISM OF THE CAUSAL RATIONALE
The body of logical criticism levied against the rationale is not sufficiently persuasive to justify its rejection. There appears to be only one distinct logical argument in any of the critiques of the rationale: the causation test can be difficult to apply. However, this position appears to result from a misunderstanding of the causa causans and causa sine que non concepts.
A review of the Canadian literature and Supreme Court jurisprudence on collateral benefits shows that each leading legal authority applies one of two lines of reasoning to justify the rejection of causation. Either the authority adopts the position that causation is unhelpful due to his or her own confusion over the causal terms, or the authority justifies his or her position by citing sources that themselves demonstrate a misunderstanding of the causal rationale. The underlying foundation of every criticism levied against the causal rationale is a failure to properly understand causation.
A. THE LEADING SCHOLARLY OPINIONS
Of the academic scholarship on the law of collateral benefits in Canada only two peer-reviewed articles address the rejection of the causal rationale, both of which only justify the rejection based on precedent set by other sources. In the 1971 article "A Collateral Benefits Principle", author K.D. Cooper cites Parry as discrediting causation. (165) Cooper notes that the decision in Parry built upon criticisms in two previous academic articles. (166) In the 2015 article "Collateral Benefits Revisited: A Case Comment on IBM Canada v Waterman", (167) author Daniella Murynka cites an article (168) that states that causality tends to obscure rather than illuminate the issue of deductibility. Murynka does not address how this obscuration has occurred.
An examination of each of the three sources cited by these two articles shows that the underlying reason for rejecting the causal rationale was the result of the author finding the distinction between a causa causans and a causa sine que non difficult to understand. In "Mitigation of Damages by Benefits Received", G. Ganz rejects the use of a causal analysis, arguing that causal principles seem difficult to apply. (169) In "Deducting Collateral Benefits from Damages: Principle and Policy", Richard Lewis' critique of causation is grounded in the claim that causal terminology is confusing. (170) He accepts, however, that the leading cases for the gifts and insurance exceptions turned on causation. (171) Finally, in "Compensation Versus Punishment in Damages Awards", Harvey McGregor speculates that causation must conceal some other policy rationale. (172) However, McGregor's theory relies on a dubious understanding of the causa causans/causa sine que non distinction. (173) A misunderstanding of the causal rationale is at the core of all of these academic critiques.
B. THE LEADING JURISPRUDENCE
With respect to the leading Canadian jurisprudence, the Supreme Court has never given a logical explanation of why causation is inappropriate. The only decision in which the Supreme Court provides any detailed explanation to justify the rejection of causation is Waterman. Like McGregor, Justice Cromwell rejected the causal approach because it conceals unarticulated policy concerns. (174) However, Justice Cromwell did not provide a detailed explanation of these concerns. Instead, he relied on Parry, Ratych, The Law of Damages by A.I. Ogus, and Remedies for Torts and Breach of Contract by Andrew Burrows as authorities for his position. (175)
None of these sources provide a further explanation regarding policy concerns that does not ultimately trace back to a misunderstanding of causation or to the decision in Parry. Ogus concludes that causation conceals policy decisions, but does so relying on Parry and McGregor, and only after finding that the distinction between a causa sine que non and causa causans is vague. (176) Burrows fails to elaborate on the policy argument in any detail or cite any source apart from Parry. (177) Ratych does not discuss policy concerns whatsoever and merely states that the causal reasoning was discredited in Parry. (178)
As all of Justice Cromwell's sources rely on Parry, to ascertain the logic behind the Supreme Court's rejection of causation it is necessary to review Parry itself. In Parry, the Lords who rejected causation all provided limited explanations to support their decisions. (179) However there is one notable commonality among their judgments: they all cite the case of National Insurance Co of New Zealand Ltd v Espagne as authority. (180)
In Espagne, a majority of justices set aside the causal approach. (181) Justice Windeyer provided the only thorough explanation to justify moving away from causal principles. Justice Windeyer noted that the courts have inconsistently interpreted the Latin causal terminology. (182) He argued that it is conceptually difficult to distinguish any cause as more real or necessary in creating any given result, and he questioned Baron Pigott's differentiation of the causes in Bradburn. (183) Finally, he identified decisions involving navy pensions where the determination of the causa causans of resulted in different conclusions. He noted that in Payne v Railway Executive, (184) the causa causans of the benefits was held to be the injured sailor's service in the navy and the benefits were not deducted, but in Baker v Dalgleish Steam Shipping Co, (185) the causa causans was determined to be the sailor's death and the award was reduced. (186) Based on these findings, Justice Windeyer concluded that causa causans has no set meaning in law and the causal analysis is not helpful in resolving collateral benefit questions. (187)
The core of the critique that led to the rejection of causation in Parry, and by extension at the Supreme Court, was a failure to understand the causal rationale.
It is clear from several of the leading authorities on collateral benefits that causation can be seen as conceptually difficult. In several of the articles and decisions previously mentioned in this paper, justices and scholars failed to comprehend the distinction between a causa causans and a causa sine que non. For example, in Parry, Lord Pearce stated that where an injured employee receives a pension, both the accident that caused the injury and the employment contract are entitled to be considered a causa causans or causa sine que non, even though a proper understanding of the definitions shows that the former is a causa sine que non and the latter is the causa causans. (188)
Justice Windeyer made the same mistake in Espagne, (189) likely due to his failure to distinguish Baker. (190) In Baker, the claim was pursuant to a statutory right of action that required benefits received under statutory authority to be deducted from damages. Unlike other cases involving navy pensions, where the plaintiffs were injured sailors and the benefits were received because of employment, the source of the plaintiff's benefits in Baker was the death of the sailor because the plaintiff was the sailor's widow. She had received the benefits because a statute authorized government pensions to be paid to the widows of sailors and the benefits were necessarily deducted from her statutory claim. (191)
If the courts adopt a proper understanding of a causans causans as the cause that is the source of the plaintiff's legal right to the benefit and a causa sine que non as the cause that triggers the plaintiff's entitlement to the benefit in a particular situation, the potential for judges to make errors of this nature will be greatly reduced. If there remains any concern that a return to the causal rationale will lead to an approach that is unclear, incoherent and difficult for the courts to apply, (192) notwithstanding this clarification of causal principles, difficulty and confusion are not sufficient reasons for changing the law. While the other leading rationales may have the advantage of a perceived simplicity, the causal model is preferable in that it is the only approach that is logically sound, universally applicable and consistent with the other laws governing the assessment of damages. The fact that the causal rationale might be seen as difficult to apply does not outweigh its practical utility for resolving collateral benefit questions. (193)
VI THE CURRENT STATE OF THE LAW: CANADA VS THE UK
A comparison of recent decisions on collateral benefits from the highest courts in both Canada and the UK lends further credence to the causal rationale as a superior approach to collateral benefits issues. The most recent statement from the UK Supreme Court on collateral benefits, which supports a causal analysis, reconciles the historical cases and shows the causal rationale to be consistent with the general principles of damages. By contrast, the current leading Canadian statement on collateral benefits fails to put forth an alternative test that can apply to all types of benefits and reinforces the drawbacks of the other leading rationales. A return to the causal approach could improve the convoluted state of the law in Canada without requiring the Supreme Court to overrule itself.
A. THE SUPREME COURT OF THE UNITED KINGDOM: THE "NEW FLAMENCO"
In 2017, the UK Supreme Court revisited the law on collateral benefits in "The New Flamenco". (194) The Court gave considerable weight to a thorough examination of the historical jurisprudence on collateral benefits undertaken by the judge at the High Court. (195) Justice Popplewell had identified eleven principles governing the deductibility of benefits from the cases, which the Supreme Court quoted in full in their judgment. (196)
The principles quickly capture the crux of a proper causal analysis. The first stipulates that a benefit must be caused by a wrong to be deductible. The third clarifies that a breach that triggers or provides the occasion for the benefit is insufficient. (197)
Many of the remaining principles speak to the logical connections between the causal rationale and the general principles of damages. Several principles identify that determinations of whether a sum is "migratory" or "collateral" yield the same results on deductibility. (198) Others identify that the determination of the true cause of a benefit (i.e. causa causans) is not merely a question of factual causation, (199) but that indicators of remoteness such as pre-existing or intervening factors play a role. (200) Another determines that benefits not caused by a wrong will not correspond to recoverable heads of loss. (201)
Following Popplewell J's reasoning, the UK Supreme Court unanimously concluded that causation is the essential factor for assessing deductibility. (202)
B. THE SUPREME COURT OF CANADA: IBM CANADA LTD V WATERMAN
In 2013, the Supreme Court undertook its own review of past collateral benefits jurisprudence in IBM Canada Ltd v Waterman. (203) Justice Cromwell rejected both the causal approach and the term "collateral benefits" (due in part to its connection to the test). (204) Instead, Justice Cromwell delivered a series of conclusions that endorse the other leading rationales and lay the foundation for a potential new approach. However, these conclusions contradict Justice Cromwell's own findings from his review of past cases.
One conclusion is that "[t]he more closely the benefit is, in nature and purpose, an indemnity against the type of loss caused by the defendant's breach, the stronger the case for deduction." (205) However, this contradicts Justice Cromwell's finding that "the indemnity factor is not a reliable marker of which benefits are or are not deductible." (206) Another conclusion is that "[w]hether the plaintiff has contributed to the benefit [is] a relevant consideration," (207) but Justice Cromwell also determined that "the basis for this is debatable." (208) A final conclusion is that "[t]here is room in the analysis of the deduction issue for broader policy considerations", even though both the majority and the dissent cautioned against "relying too heavily on the incentives that may result from deducting or not deducting." (209) These conclusions complicate rather than clarify the principles determining deductibility.
The approach to collateral benefits that results from these conclusions is convoluted. It is complicated, in that it weighs the three factors (indemnity, payment and public policy), and limited, in that it is not applicable to gifts. Though the Supreme Court successfully applied the new approach in Potter v New Brunswick, (210) the approach is far from Justice Cromwell's stated goal of having clear rules that are easy to apply. (211)
The British approach to collateral benefits is far more likely to lead to consistent decisions than the approach of the Supreme Court. As noted by the dissent in Waterman, Justice Cromwell's factors for assessing deductibility are neither determinative, (212) nor consistent with many of the Court's past statements. (213) Yet, the possibility is still open to the Court to revisit the coherent causal approach of the UK, (214) without disregarding precedent.
The results of all of the Supreme Court's decisions on collateral benefits are consistent with a causal analysis. In Sylvester, Waterman, and Potter, the benefits came from contracts with the wrongdoer (215) and deductibility was consistent with the Court's determination of contractual intention, i.e. the single contract analysis. (216) In Gill, Guy, forgenson v Jack Cewe, and Cunningham, the benefits were from third parties and properly deductible. (217) In Ratych v Bloomer, the benefits were also from a collateral source, a collective agreement, but the terms of the agreement required deduction. (218) The Supreme Court can adopt the causal rationale without overruling binding precedent.
The causal model is the preferable approach to collateral benefit issues. From a logical perspective, a causal analysis is rationally connected to the leading principles of damages and can be applied generally. The causal model also possesses none of the flaws of the other leading rationales or the current approach of the Supreme Court.
The causal approach is also in keeping with historical precedent. Causation was the original guiding doctrine of collateral benefits and the product over a century's worth of logical reasoning. The Canadian courts applied the causal approach for decades and the approach was only abandoned by the Supreme Court due to a misapplication of Lord Reid's judgment from Parry v Cleaver, a judgment which itself was not persuasive to the other Lords who sat on that appeal. A return to the causal rationale in Canada would not interfere with existing Supreme Court rulings and would put Canadian law in line with the UK's approach to collateral benefits.
The causal model can finally achieve consistency in the law of collateral benefits in Canada. Canadian courts should adopt the causal approach to collateral benefit problems to provide predictable and just outcomes for all plaintiffs in the future.
* Hon BA (Ryerson University), ID with Distinction (University of Western Ontario), Student-at-Law, Siskinds LLP. The conception of this article arose from research assistance and course work conducted under the supervision of Professor Zoe Sinel of the University of Western Ontario, to whom I would like to extend my deepest gratitude. I would also like to thank Ryan McSheffrey, the Western Journal of Legal Studies Publication Station, and the editors of the University of Toronto Faculty of Law Review for their commentary and assistance.
(1) MB v British Columbia, 2002 BCCA 142 at para 16, 99 BCLR (3d) 256, Prowse |A [MB CA]; IBM Canada Limited v Waterman, 2013 SCC 70 at para 15,  3 SCR 985, Cromwell I [Waterman]; PS Atiyah, "Collateral Benefits Again" (1969)32:4 Modern L Rev 397 at 397.
(2) Waterman, supra note 1 at para 38, Cromwell J.
(3) Ibid at para 56, Cromwell J.
(4) Ibid at para 40, Cromwell J.
(5) Ibid at para 54, Cromwell [. Cromwell ) uses the phrase "strength-of-connection factor" rather than "causal rational".
(6) National Insurance Co of New Zealand Ltd v Espagne (1961), 105 CLR 569 at 595,  ALR 627 (HCA), Windeyer J [Espagne].
(7) Ibid, Windeyer J.
(8) An exception exists in situations in which a governing statute explicitly addresses how the courts should deal with the type of collateral benefit at issue when assessing damages. See Atiyah, supra note 1 at 397.
(9) (1874), [1874-75] LR 10 Ex 1 at 3. [1874-80] All ER Rep 195, Pigott B [Bradburn].
(10)  SCR 654, 37 DLR (3d) 229 [Gill].
(11) Cunningham v Wheeler; Cooper v Miller; Shanks v McNee,  1 SCR 359 at 396-397, 113 DLR (4th) 1, Cory J [Cunningham].
(12) Bradburn, supra note 9 at 3.
(14) Cunningham, supra note 11 at 397-398, Cory J.
(15) See Cunningham, supra note 11 at 397, Cory J; Waterman, supra note 1 at para 54, Cromwell J.
(16) Cunningham, supra note 11, Cory J ("the principle first set out in Bradbum's case... is understood and accepted. There has never been any confusion as to when it should be applied" at 400).
(17) Harry v Cleaver (1969),  AC 1 at 35,  1 All ER 555 (HL), Lord Pearce [Parry].
(18) See Waterman, supra note 1 at para 54, Cromwell J (questioning the ongoing validity of Bradburn).
(19) Randal v Cockran (1748), 1 Ves Sen 98, 27 ER 916 (Ch).
(20) Morrison and Morrison V Canadian Surety Co,  4 DLR 736 at 757, 1954 CanLII 238, Coyne JA (Man CA).
(21) Mason v Sainsbury (1782), 3 Douglas 61, 99 ER 538 (KB) [Mason]; Cullen v Butler (1816), 5 M & S 461, 105 ER 1119 (KB).
(22) Yates v Whyte (1838), 4 Bing NC 272 at 279, 132 ER 793 (Ct Com PI), Bosanquet J.
(23) John D Mayne, A Treatise on the Law of Damages (London: Bradbury & Evans Printers, 1856) at 224. This passage is the first notable use of the word "collateral" to describe the benefits in question and by all indications appears to have spurned the creation of the term "collateral benefits".
(24) John D Mayne & Lumley Smith, Mayne's Treatise on Damages, 3rd ed (London: Stevens and Haynes, 1877) ("the ground of the action is the wrong done to the individual [and] the fact [of a collateral benefit] neither diminishes the wrong itself, nor the liability of the wrongdoer to pay for it" at 449).
(25) Grand Trunk Railway Company of Canada v lennings,  UKPC 54, 13 App Cas 800 (ICPC).
(26) The Ship Perene v Maid of Scotland: The Ship Perene v RP & WT Starr, Ltd (1924).  SCR 1 at 3-4,  1 DLR 574, Neweombe J [The Perene].
(27) Tubb V Lief,  3 WWR 245, 1932 CanLIl 229 (Sask CA).
(28) Workmen's Compensation Bd v Rutherford (1926), 59 OLR 364, 1926 CanLII 322 (SO.
(29) Bowers v J Hollinger & Co Ltd,  OR 526, 1946 CanLII 84 (SC (H Ct I)).
(30) In 1947, in R V Canadian Pacific Ry Co,  SCR 185 at 195,  2 DLR 1. Justice Taschereau accepted the principle at the Supreme Court as part of his reasons in a majority decision.
(31) Waterman, supra note 1 (Parry is "the foundation of much of the Canadian jurisprudence" at para 58).
(32) Parry, supra note 17 ("it was well established that there was no universal rule" at 13).
(33) Ibid ("the explanation that this [benefit] is too remote is artificial and unreal" at 14).
(35) This term comes from the fact that gifts, like insurance, were held by the courts to be an exception to the general rule that ail sums received by the plaintiff following the wrong should reduce any damages award.
(36)  NI 167 (KB) [Redpath].
(37) Parry, supra note 17 at 14.
(38) Redpath, supra note 36 at 170.
(39) Ibid at 172-173.
(40) Lord Wilberforce also misconstrued the ratio of Redpath. See Parry, supra note 17 at 39.
(41) Parry, supra note 17 at 50, Lord Pearson, dissenting.
(42) Jamie Cassels. Remedies: The Law of Damages, 2nd ed (Toronto: Irwin Law, 2007) at 380; Stephen Waddams, The Law of Damages, 4th ed (Toronto: Canada Law Book, 2004) at 232; Boarelli v Flannigun,  3 OR 69 at 72. 1973 CanLII 690 (CA) [Boarelli].
(43) Waterman, supra note 1 at para 39, Cromwell ].
(44) Ibid; Boarelli, supra note 42 at 73.
(45) Parry, supra note 17 (it "must depend not on their source but on their intrinsic nature" at 15).
(46) Ibid ("[w]hat, then, is the nature of a contributory pension?... The products of the sums paid..." at 16).
(47) Ibid ("[n]or do I think that a dividing line can be drawn between contributory and non-contributory pensions. It would be unreal" at 36).
(48) Ibid at 37.
(49) Ibid at 42.
(50) Ratych v Bloomer,  1 SCR 940 at 971, 69 DLR (4th) 25, McLachlin J [Rutych].
(51) Cunningham, supra note 11 at 400. Cory J.
(52) Waterman, supra note 1 at para 69, Cromwell J.
(53) Gill, supra note 10.
(54) Ibid at 667-668.
(55)  2 SCR 756, 99 DLR (3d) 243 [Guy].
(56) Ibid at 762-763.
(57) Ratych, supra note 50.
(58) Ibid at 971-972. McLachlin J.
(59) Ibid at 970, McLachlin J.
(60) Cunningham, supra note 11 (Cory J claimed the "paid for" rationale was adopted in Parry at 398).
(61) Waterman, supra note 1 at para 141, Rothstein J, dissenting.
(62) Cunningham, supra note 11 at 398, Cory J.
(63) Ibid at 404, Cory J.
(64) Ibid at 407-408, Cory J.
(65) John G Fleming, "The Collateral Source Rule and Loss Allocation in Tort Law" (1966) 54:4 Cal L Rev 1478 at 1519-1521.
(66) Koeppel v Canada (Department of National Defence) (1997), 32 CHRR 107 at 159-162, 1997 CanLII 1443 (Can Human Rights Trib); Pro-Sys Consultants Ltd v Infineon Technologies AG, 2009 BCCA 503 at para 31, 98 BCLR (4th) 272; Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57 at para 27,  3 SCR 477.
(67) Kask v Tain, 1996 CarswellBC 496 at para 24, 21 BCLR (3d) 11 (CA).
(68) But see Harvey McGregor, "Compensation Versus Punishment in Damages Awards" (1965) 28:6 Modern L Rev 629 ("[t]his does not mean that the two arguments are mutually inconsistent" at 634).
(69) Espagne, supra note 6 ("[t]hat distinction, however, seems unsound" at 598, Windeyer ]).
(70) UK, Law Commission, Damages for Personal Injury: Collateral Benefits (Consultation Paper No 147) (London: The Stationery Office, 1997) at 110-115 [Law Commission].
(71) Pettkus v Becker,  2 SCR 834 at 848, 117 DLR (3d) 257.
(72) Parry, supra note 17 ("[w]hy should the plaintiff be left worse off than if he had never insured?" at 14).
(73) Flaherty v Hughes,  4 DLR 43 at 48, 1952 CanLIl 339 (BCCA).
(74) Muson, supra note 21 ("the plaintiff must have a verdict for the amount of the premium" at 64, Ashurst J).
(75) Law Commission, supra note 70 at 94.
(76) Peel (Regional Municipality) v Canada: Peel (Regional Municipality) v Ontario,  3 SCR 762 at 790, 98 DLR(4th) 140.
(77) Rados v Neumann (1970),  2 OR 269, 1970 CanLII 345 (H Ct J) [cited to OR] ("[he] is not unjustly enriched because he has not escaped any burden. The burden is the pecuniary loss of the plaintiff" at 274).
(78) Garland v Consumers' Gas Co, 2004 SCC 25 at para 44,  1 SCR 629.
(79) Garland v Consumers' Gas Company Ltd (2001), 57 OR (3d) 127 at para 118, 2001 CanLII 8619 (CA), Borins JA, dissenting.
(80) Waterman, supra note 1 at para 62, Cromwell J.
(81) Cunningham, supra note 11 at 371, McLachlin J, dissenting.
(82) The order of events does not matter. The insured can sue the wrongdoer and the insurer can withhold payment, or the insured can recover from the insurer, then sue the wrongdoer, and the insurer can recover from the insured. Craig Brown, Insurance Law in Canada (Toronto: Carswell, 2016) at 13.1.
(83) Browning v War Office (1962),  1 QB 750 at 769,  3 All ER 1089 (CA), Diplock LJ [Browning].
(84) Cunningham, supra note 11 at 373-375, McLachlin J, dissenting.
(85) Ibid at 371-372, McLachlin J, dissenting.
(86) Brown, supra note 82 at 13.1.
(87) MB v British Columbia, 2003 SCC 53 at para 30,  2 SCR 477, McLachlin CJC [MB].
(88) Cunningham, supra note 11 at 370-372, McLachlin ), dissenting.
(89) Browning, supra note 83 at 769.
(90) Glynn v Scottish Union & National Insurance Co, Ltd,  2 OR 705 at 714-715, 1963 CanLII 112 (CA) [Glynn].
(91) The case has been followed at least 13 times by appellate courts including in MB CA, supra note 1; Crew Estate v Nicholson (1989), 68 OR (2d) 232, 1989 CanLII 4234 (CA); and Dobbin v Alexander Enterprises Ltd (1987), 63 Nfld & PEIR 1, 1987 CanLII 3961 (CA), Goodridge CJN [Dobbin cited to Nfld & PEIR].
(92) Boarelli, supra note 42 at 76.
(93) Glynn, supra note 90 ("the right to recover depends on the proof of financial loss" at 715).
(94) Boarelli, supra note 42 at 79.
(95) In Cunningham, supra note 11 at 415. the Supreme Court found the benefit to be a non-deductible indemnity.
(96) Waterman, supra note 1 at para 31, Cromwell J.
(97) It may be noted that subrogation in the realm of insurance law is fully regulated by statute. However, this argument pertains to payments that are not specifically regulated by statute, which would qualify as indemnities under McLachlin CJC's definition.
(98) Ledingham v Ontario Hospital Services Commission.  1 SCR 332 at 337. 46 DLR (3d) 699.
(99) National Fire Insurance Co v McLaren (1886), 12 OR 682 at 687,  OJ No 98 (Ch), Chancellor Boyd.
(100) Cunningham, supra note 11 at 387, McLachlin J, dissenting.
(101) Ibid at 370, McLachlin ), dissenting.
(102) MB, supra note 87 at para 30; Waterman, supra note 1 at para 39.
(103) Waterman, supra note 1 at para 74, Cromwell J.
(104) Richard Lewis, "Deducting Collateral Benefits from Damages: Principle and Policy" (1998) 18:1 Leg Studies 15 at 28.
(105) Waterman, supra note 1 at para 39, Cromwell J.
(106) Cunningham, supra note 11 at 370.
(107) MB, supra note 87 at para 30, McLachlin CJC.
(108) The rationale is only mentioned in Cunningham, supra note 11 at 370; MB, supra note 87 at para 30; and Waterman, supra note 1 at para 39, which cites Cunningham.
(109) (1995), 123 DLR (4th) 652, 1995 CanLII 761 (BCCA) [Kroeker cited to DLR].
(110) Peter v Beblow,  1 SCR 980; 101 DLR (4th) 621.
(111) Kroeker, supra note 109 at paras 20-22.
(112) British Westinghouse Electric and Manufacturing Co v Underground Electric Railways Co of London (1912), 50 SLR 617 at 619, [19121 AC 673 (HL), Viscount Haldane [British Westinghouse].
(113) Admiralty Commissioners v Owners of the SS Amerika (1916),  AC 38 at 61, 86 LJP 58 (HL), Lord Sumner. The scope of recoverable damages is further limited within negligence actions to only those natural losses or expenses that the defendant ought to have reasonably foreseen at the time of the wrong. See H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1977),  2 Lloyd's Rep 522,  1 All ER 525 (CA) [Parsons].
(114) Parry, supra note 17 at 51, Lord Pearson, dissenting.
(115) Waterman, supra note 1 at para 36, Cromwell J.
(116) Livingstone v Rawyards Coal Co (1880), 17 SLR 387 at 390. [ 1880] UKHL 387. Lord Blackburn.
(117) British Transport Commission v Courley (1955),  AC 185 at 208,  UKHL 4, Lord Goddard [Gourley].
(118) Andrews v Grand & Toy Alberta Ltd,  2 SCR 229 at 235-236, 83 DLR (3d) 452.
(119) See MB, supra note 87 at para 27, McLachlin CJC.
(120) fang v fang (1991), 54 BCLR (2d) 121 at para 13, 1991 CanLII 2015 (CA).
(121) MB, supra note 87 at para 47, McLachlin CJC.
(122) Puff v Speed (1961), 105 CLR 549 (HCA), Windeyer J ("a claim that because of physical injuries the plaintiff's capacity to earn money has been destroyed is not met simply by showing that he has received money or other assistance from a charity, a former employer, a friend or the State" at 567).
(123) Gourley, supra note 117 at 199, Earl Jowitt, and at 207, Lord Goddard.
(124) British Columbia v Canadian Forest Products Ltd, 2004 SCC 38 at para 184,  2 SCR 74. LeBel J, dissenting (examining a similar "capacity to earn" question in the context of pricing) [Canfor].
(125) loyner v Weeks.  2 QB 31 at 48 (UK CA), Fry LJ.
(126) Boarelli, supra note 42 at 74.
(127) Asumera Oil Corporation Ltd v Sea Oil & General Corporation (1978),  1 SCR 633 at 647-648, 89 DLR (3d) 1 [Asamera].
(128) Boareili, supra note 42 at 74.
(129) Woodworth v Farmer (1963), 39 DLR (2d) 179, 1963 CanLII 586 (NSSC) [cited to DLR] ("the tortfeasor... should be entitled to take her as he finds her--in this case, a person who suffers no loss of pay because of an accident--and should accordingly not be liable" at 188 [emphasis in original]).
(130) Gourley, supra note 117 at 199, Earl Jowitt.
(131) The exception would be contractual benefits bestowed by the same contract that forms the basis of a breach of contract lawsuit. In that situation the source of the right to damages and the right to benefits is the same source, the contract.
(132) Millard v Toronto Railway Co (1914), 31 OLR 526 at 530, 6 OWN 519 (SC (AD)).
(133) See e.g. Dobbin, supra note 91 at paras 70-71, Goodridge CJN.
(134) Boarelli, supra note 42 at 74.
(135) British Westinghouse, supra note 112 at 619, Viscount Haldane.
(136) Red Deer College v Michaels,  2 SCR 324 at 330-331, 57 DLR (3d) 386, Laskin CJC.
(137) Mitigation is not solely concerned with the plaintiff's reasonable attempts to repurpose damaged assets but also with avoiding additional losses. See Waterman, supra note 1 at para 22.
(138) Asamera, supra note 127 at 656-657.
(139) Canfor, supra note 124 at para 107, McLachlin CJC.
(140) American Restatement of the Law of Torts, vol 4 (St. Paul, Minn: American Law Institute Publishers, 1939) at 616, 620-621.
(141) Parry, supra note 17 at 35-37, Lord Pearce; Boarelli, supra note 42 at 78-79; Guy v Trizec (1978), 85 DLR (3d) 634 at 651 -652, 26 NSR (2d) 1 (CA), MacDonald )A.
(142) Waterman, supra note 1 ("[t]here is considerable overlap between the collateral benefit problem and the questions of mitigation" at para 22, Cromwell J).
(143) Canfor, supra note 124 (e.g. "[m]itigation principles do not require the injured party to attempt to recoup its losses by charging higher prices" at para 184, LeBel J, dissenting).
(144) Asamera, supra note 127 ("the creation of an asset [is] a necessary prerequisite of a duty to mitigate" at 657).
(145) Canfor, supra note 124 at para 184, LeBel J, dissenting.
(146) Parsons, supra note 116.
(147) Asamera, supra note 127 at 646.
(148) Ratych, supra note 50 at 965, McLachlin J.
(149) Parry, supra note 17 at 15, Lord Reid.
(150) See Donnelly v Joyce (1973),  QB 454 at 463, [ 1973] 3 All ER 475 (CA); The Perene, supra note 26 at 3-4, Newcombe J.
(151) See Sylvester v British Columbia,  2 SCR 315 at para 17, 146 DLR (4th) 207, Major J [Sylvester]; Waterman, supra note 1 at paras 101, 121, Rothstein J, dissenting.
(152) KD Cooper, "A Collateral Benefits Principle" (1971) 49:4 Can Bar Rev 501 ("[t]he intended purpose of the benefit is the crucial factor in determining whether there should be double recovery or not" at 533).
(153) Sylvester, supra note 155 at para 12.
(154) Ibid at para 2.
(155) Ibid at para 12.
(156) See ibid at para 17; Waterman, supra note 1 at paras 101, 121, Rothstein J, dissenting.
(157) Waterman, supra note 1 at paras 21, 98.
(158) Ibid at para 72.
(159) Ibid at para 36, Cromwell J.
(160) Ibid at para 80.
(161) Ibid at para 119, Rothstein J, dissenting; Sylvester, supra note 151 at para 2.
(162) Daniella Murynka, "Collateral Benefits Revisited: A Case Comment on IBM Canada v. Waterman" (2015) 53:1 Alta L Rev 243 at 247-248.
(163) Sylvester, supra note 151 at para 2.
(164) Waterman, supra note 1 at para 4.
(165) Cooper, supra note 152 at 503.
(166) Ibid, citing McGregor, supra note 68; G Ganz, "Mitigation of Damages by Benefits Received" (1962) 25:5 Modern L Rev 559.
(167) Murynka, supra note 162 at 245-248.
(168) Lewis, supra note 104.
(169) Ganz, supra note 166 at 561-562.
(170) Lewis, supra note 104 ("[t]o ask whether the accident is the 'direct', 'effective' or 'proximate' cause of the plaintiff receiving the non-tort moneys (therefore making them deductible) does not help if we accept these words are so variable in meaning as to be worthless. Again, matters are not improved if the question is translated into Latin and we ask whether the accident is the causa causans of the additional payments" at 18 [emphasis added]).
(171) Ibid at 18-19.
(172) McGregor, supra note 68 at 632.
(173) Ibid. McGregor incorrectly states that the causa causans of a pension was an accident. He also follows Diplock LJ's judgment from Browning, which demonstrates difficulty in understanding the causal approach (See Browning, supra note 83 at 771), and he incorrectly claims that the ratio decidendi of Payne v Railway Executive (1951),  1 KB 26,  2 All ER 910 (CA), which employed the causal rationale, had since been rejected (see Parry, supra note 17 at 36, 40, and Longden v British Coal Corporation (1997),  1 All ER 289 at 297,  AC 653 (HL)).
(174) Waterman, supra note 1 at para 31, Cromwell J.
(175) Ibid at paras 31, 54, Cromwell I.
(176) AI Ogus, The Law of Damages (London: Butterworths, 1973) at 226.
(177) Andrew Burrows, Remedies for Torts and Breach of Contract, 3rd ed (Oxford: Oxford University Press. 2004) at 162.
(178) Ratych, supra note 50 at 965-966, McLachlin J.
(179) Parry, supra note 17 at 15, Lord Reid; at 28. Lord Morris, dissenting; at 33, Lord Pearce; at 41, Lord Wilberforce.
(180) Espagne, supra note 6.
(181) Ibid at 571-72, Dixon CI; at 576, Fullagar I; at 590-597, Windeyer J.
(182) Ibid at 592-93. He notes "Lord Esher treated causa causans as the equivalent of 'real cause' or 'efficient cause', which he distinguished from causa proximo or last cause." But that in other contexts courts have held "[t]he proximate cause is 'the dominant cause', 'the real efficient cause', what was 'in substance' the cause... This rule, when taken with earlier statements, in which the causa causans was said to be the 'real cause', might suggest that, in this context, causa causans and causa proximo are the same thing."
(183) Ibid at 593-594.
(184) Supra note 173 at 36.
(185) (1921),  1 KB 361 at 379, 91 LIKB 392 (CA) [Baker].
(186) Espagne, supra note 6 at 596.
(187) Ibid at 590-596, 600.
(188) Parry, supra note 17 at 34, Lord Pearce.
(189) Espagne, supra note 6 at 596, Windeyer J.
(190) See Bourgeois v Tzrop (1957), 9 DLR (2) 214 at 219-22, 1957 CanLII 339 (NBCA). for an overview of the early law on the deductibility of pensions that places Baker in the appropriate historical context.
(191) Baker, supra note 185. It would have been more accurate for the court to describe the causa causans of the benefits as the Navy Pay and Pensions Order, 1920 (the statute that provided for the pension), rather than the death of the sailor, but the key distinction the court wished to make was that the source of the widow's right to the benefits was different from benefits given to widows as beneficiaries under insurance contracts (which were not subject to deduction under the governing Fatal Accidents Act). With respect to benefits under contracts, the court noted that a "fatal accident to the deceased was in these cases the causa sine qua non of the subscription, it was the occasion but not the causa causans of its payment" at 380.
(192) Waterman, supra note 1 at para 40.
(193) Parry, supra note 17 at 51, Lord Pearson, dissenting.
(194) Globalia Business Travel SAU of Spain v Fulton Shipping Inc of Panama (The "New Flamenco").  UKSC 43,  1 WLR 2581.
(195) Ibid at paras 16,30, 36.
(196) Ibid at para 16.
(198) Ibid (e.g. "it should make no difference whether the question is approached as one of mitigation of loss, or measure of damage; although they are logically distinct approaches, the factual and legal inquiry and conclusion should be the same").
(199) Ibid (i.e. "whether a benefit is caused by a breach is a question of fact and degree").
(200) Ibid (i.e. "[t]he causation test involves... any pre-existing, intervening or collateral factors").
(201) Ibid ("a difference in kind may be indicative that the benefit is not legally caused by the breach").
(202) Ibid at paras 28-30.
(203) The SCC reviewed Gill, supra note 10; Guy, supra note 55; Jorgcnson v fuck Cewe Ltd,  1 SCR 812, 111 DLR (3d) 577 [Jack Cewe]; Cunningham, supra note 11; Sylvester, supra note 151; and Ratych, supra note 50.
(204) Waterman, supra note 1 at para 27. The judgment represents a rejection of all causal principles in that it also rejects that a benefit must be factually caused by the wrong to be subject to a collateral benefits analysis (see Waterman, supra note 1 at para 30). The leading authorities have never questioned "but for" causation as a minimum requirement for deductibility (see Atiyah, supra note 1 at 401; Parry, supra note 17 at 29, 33, 41). Subjecting benefits that are not caused by a wrong to a collateral benefits analysis is logically inconsistent with the question of whether a plaintiff received excess recovery because of benefits received as the result of his injury (Murynka, supra note 162 at 246-248). In discarding causation entirely, Cromwell J's analysis arguably discounts a basic premise at the core of collateral benefits questions.
(205) See Waterman, supra note 1 at para 76.
(206) Ibid at para 31.
(207) Ibid at para 76.
(209) Ibid at paras 74, 76, 150.
(210) Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10 at paras 120-121,  1 SCR 500 [Potter].
(211) Waterman, supra note 1 at para 39.
(212) Ibid, Rothstein J ("the nature of the benefit as non-indemnity or contributory does not answer the question of whether the plaintiff will be provided with the financial equivalence of performance or will receive excess recovery" at para 130).
(213) Ibid at paras 140-149, Rothstein J.
(214) Lowick Rose LLP (in liquidation) v Swynson Limited and another,  UKSC 32,  3 All ER 785, Lord Sumption ("[t]hese principles represent a coherent approach to avoided loss" at para 11).
(215) Sylvester, supra note 151; Waterman, supra note 1; Potter, supra note 210.
(216) Sylvester, supra note 151 at para 2; Waterman, supra note 1 at para 4; Potter, supra note 210 at para 127.
(217) In Jack Cewe, supra note 203, the claim was for a wrongful dismissal, but the benefits at issue were from the government, not the employer. In Gill, supra note 10, Guy, supra note 55, and Cunningham, supra note 11, the wrongdoers were all tortfeasors and the benefits came from various other parties.
(218) Ratych, supra note 50 ("'[f]ull pay' shall be interpreted so as to preclude the possibility of members receiving a greater net pay while on Compensation than while working" at 946. Cory J, dissenting).
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|Date:||Jan 1, 2018|
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