Academic journal article University of Toronto Faculty of Law Review

Collateral Benefits: Defending the Causal Rationale

Academic journal article University of Toronto Faculty of Law Review

Collateral Benefits: Defending the Causal Rationale

Article excerpt

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. …

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