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Unreported Income in Personal Injury Claims

If I haven’t reported all of my income, can I still claim it as lost wages?  What if I worked for my dad and he just paid me cash?  Will I be punished by the court for not reporting those cash earnings?

Today’s case is from back in 1992, but is still today’s key case on how unreported income is dealt with in personal injury law in British Columbia.    The plaintiff in Iannone v Hoogenraad ([1992] BCJ No 682), was only 19 at the time of the crash, and was badly hurt when the truck he was riding in was struck broad-side.  Unfortunately, the plaintiff was not wearing a seatbelt at the time, and he was thrown forward, causing injuries to his lung, back, neck, and knee.  Prior to the crash, he wad worked only sporadically and always for cash.  He had been primarily interested in developing his rugby career, and accordingly his income was from odd jobs usually performed for his father and brother.  No one kept any records of the cash payments the plaintiff received, and the plaintiff was not able to estimate how much he had earned.

The trial judge awarded the plaintiff what ‘seemed like a reasonable figure based on the evidence,’ or $20,000.00.  The defendants appealed the trial decision, arguing the legal doctrine of maxim ex turpi causa non oritur action – the principle that where the plaintiff’s actions are deeply tainted with criminality or culpable immorality, the court will not assist them to recover their losses as a matter of public policy.  The Court of Appeal held that unreported income was not a bar to recovery, provided the plaintiff can prove their losses:

5      The calculation of the quantum of the past wage loss award was based in part upon the plaintiff’s evidence of income earned but not reported on his income tax return. The defendant (appellant before us) contends that to take unreported income into account is to allow recovery which ought to be barred on the grounds of public policy. In my respectful opinion that proposition confuses the concepts of a right to recover on a cause of action and the burden of proof upon a plaintiff whose right of recovery is not barred by a principle like ex turpi causa.

6      This plaintiff, like others in similar circumstances, had the burden of leading evidence of post-accident wages losses. That will be a difficult burden to discharge where there is no corroborating evidence such as income tax returns, but it is not an impossible burden to discharge. Here the trial judge was satisfied on the evidence that the injuries sustained by the plaintiff prevented him from earning income which he would otherwise have earned. The burden of proof was therefore discharged. The loss was proven. It is not, in my opinion, open to the defendant to avoid compensating for that loss on the ground that unreported income was taken into account in computing it.

The trial award of $20,000.00 for past wage loss was upheld.  Leave to appeal to the Supreme Court of Canada was denied.

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