Distinction Between Capital Asset and Earnings Approach
In Lewis v. Gibeau, 2025 BCCA 127, the Court of Appeal addressed the trial judge’s error in applying the capital asset approach rather than the earnings approach to assess Ms. Lewis’s loss of earning capacity. The earnings approach is typically used when a plaintiff has a clear, established work history and measurable income loss, while the capital asset approach is reserved for plaintiffs with uncertain career paths or no clearly quantifiable earnings history.
Ms. Lewis had worked as a hairstylist for nearly 40 years, maintained a consistent client base, and had a steady earnings trajectory prior to the collision. After the accident, she continued to work until January 2022, when she retired prematurely at age 58 due to collision-related injuries. The Court found that the trial judge incorrectly reasoned that there was “no identifiable loss of income” simply because Ms. Lewis’s income did not immediately decline post-accident — overlooking that her complete cessation of work in 2022 represented an identifiable and measurable loss.
Given Ms. Lewis’s stable and proven earning history, the Court concluded that the earnings approach should have been applied. The trial judge’s reliance on the capital asset approach was found to be an error in principle, leading the Court of Appeal to substitute its own assessment of loss based on the earnings method, valuing the past and future loss of earning capacity accordingly.
Use of Contingencies
The Court also found that the trial judge improperly applied negative contingencies to reduce Ms. Lewis’s damages award. Two specific contingencies were identified: (1) the possibility that Ms. Lewis could have continued working part-time if she spaced out her workdays, and (2) the possibility of recovery from her frozen shoulder condition through surgery.
The Court ruled that the trial judge failed to properly analyze the relative likelihood of these contingencies impacting Ms. Lewis’s future earning potential. Further, the judge incorrectly applied these future uncertainties to both past and future loss of earning capacity, despite the fact that neither contingency had materialized by the time of trial. As a result, the award for past loss should not have been reduced at all based on these speculative factors. As stated:
[70] First, the trial judge erred by assessing the claims for past and future loss of earning capacity in a single analysis, and in considering the contingencies without acknowledging that they applied only to the future loss and not the past loss. Neither: (i) the possibility that Ms. Lewis might have been able to return to work on a staggered schedule, nor (ii) the possibility that Ms. Lewis’s frozen shoulder might improve, had materialized by the time of trial. These contingencies therefore had no relevance to Ms. Lewis’s past loss of earning capacity claim. Their only possible relevance was in relation to the claim for future loss of earning capacity. The judge did not acknowledge this in her reasons, and it is impossible to tell how it factored into her “global” award of $89,641.02 for loss of past and future earning capacity.
For future loss, the Court accepted that while some adjustment for the frozen shoulder recovery was appropriate, its likelihood of meaningfully restoring Ms. Lewis’s ability to return to work was minimal. The Court therefore applied only a 10% reduction to the future loss award for that contingency, finding the original 70% reduction (implicit in the trial award) to be excessive and unsupported.
In the result, the Court awarded Ms. Lewis $25,955 for past loss of earning capacity (subject to statutory tax deductions) and $206,583.56 for future loss of earning capacity, replacing the trial judge’s lump sum of $89,641.02.
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