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CQLA Conference
11-13 October 2013
1. LOSS OF ECONOMIC CAPACITY NOT FUTURE ECONOMIC LOSS
1.1 In Medlin v. State Government Insurance Commission McHugh J said:“In Australia, a plaintiff is compensated for loss of earning capacity, not loss of earnings. In
practice, there is usually little difference in result irrespective of whether the damages are
assessed by reference to loss of earning capacity or by reference to loss of earnings. That is
because ‘an injured plaintiff recovers not merely because his earning capacity has been
diminished but because the diminution of his earning capacity is or may be productive of
financial loss’. Nevertheless, there is a difference between the two approaches, and the loss
of earning capacity principle more accurately compensates a plaintiff for the effect of an
accident on the plaintiff’s ability to earn income. Earning capacity is an intangible asset. Its
value depends on what it is capable of producing. Earnings are evidence of the value of
earning capacity but they are not synonymous with its value. When loss of earnings rather
than loss of capacity to earn is the criterion, the natural tendency is to compare the
plaintiffs pre-accident and post-accident earnings. This sometimes means that no attention
is paid to that part of the plaintiff’s capacity to earn that was not exploited before the
accident. Further, there is a tendency to assume that if pre-accident and post-accident
incomes are comparable, no loss has occurred.”
(1995) 182 CLR 1 @ 16
1.2
Professor Medlin ran out of “intellectual energy” and ceased working
“retired” when aged 60 – question of philosophy – should the
Defendant pay for loss of economic capacity beyond age 60.
1.3
Heywood v. Commercial Electrical Pty Ltd per Muir JA at para 53:“In any case, economic loss must be determined by reference to facts of that
case. It is of no assistance, and it is highly likely to be productive of error, to
attempt to set the level of an award for future economic loss by reference to
awards in other cases by a process of adjusting, by means which are not
apparent, to allow for differences in the extent of injury, ages and levels of
income in the subject field of employment.”
1.4
In Heywood (supra) at para 57, Muir JA approved the assessment of damages
for loss of future superannuation to be valued currently at 11.33%. The Appeal
against the trial Judge’s award of $150,000 for future loss of earning capacity
was dismissed. Thus, it cannot be said that a global award of damages for
future
loss of economic capacity is unavailable to a Court.
[2013] QCA 270
1.5
In Heywood v. Commercial Electrical Pty Ltd the 28 year old plaintiff
suffered from a severance of the ulna nerve in his left arm which left
him with a 19% whole person impairment. He suffered daily pain, a
significantly reduced grip strength, an inability to work with vibrating
equipment and major problems with fatigue in his left arm. Although
the plaintiff had been assessed as suffering from a 28% impairment of
his left arm and as an electrician worked constantly with his arms and
hands, the plaintiff’s claim for a loss of economic capacity equivalent to
one-third of his pre-injury capacity, was rejected by the learned trial
Judge at para 46. All that was said about the assessment of future
economic loss is at para 48:“[5]
[6]
The plaintiff has established a diminution of earning capacity; he has not
demonstrated with any degree of precision the loss that is a result of that
diminution.
Given his age- 28 – and the impairment which he has suffered, and after taking
into account the usual contingencies and discounts an appropriate assessment for
future loss of economic capacity is $150,000.”
[2013] QSC 52
1.6 Although said to be a global sum, it is worth noting that Mr Haywood,
at 29 years remaining the workforce, an award of $150,000 was the
equivalent to an award of $185 per week. When injured, and even at
trial, the Appellant was still an apprentice and the evidence placed
before the Court showed that the average weekly nett earnings for an
electrician in his age bracket was $1,085 nett per week in general
electrical work and $1,891 per week in mining electrical work. Thus,
the real award was a loss of approximately 17% of average weekly
earnings of an electrician outside of the mining industry and just
under 10% of the loss for mining electrician earnings.
2.0 LOSS OF ECONOMIC CAPACITY - A PERCENTAGE APPROACH
2.1 In RACQ Insurance Limited v. Brennan the Chief Justice said at para 22:“[22] … The Judge adopted a weekly loss ($500) which, taken with her residual
earning capacity ($800), left her earning approximately 36% of the
earnings achieved by her former subordinate co-employee Ms Nicols
($3,600). That appropriately respected the feature His Honour was
evaluating the lost chance, and the uncertainties necessary attending that.
[24]
Mr Wilson criticised the reasons for failure to set out the assumptions
and methodology (s55 Civil Liability Act 2003) behind the Judge’s
selection of a loss of $500 per week. It is plain from his Reasons that he
was comparing the respondent’s situation with that of Ms Nicols and
Ms McLean, making adjustments to reflect the valuation of the chance.
The Judge has done the best he could in an inherently uncertain area. To
have pretended to greater precision would have been both inappropriate
and artificial.”
[2013] QCA 150
2.2 The s55(3) Civil Liability Act 2003 case – Allianz Australia Insurance
Limited v. McCarthy and in particular White J at para 65 where
Her Honour said:“The primary Judge’s Reasons do not reveal any basis at all for selecting $40,000 to compensate
the respondent for loss of earning capacity and should be set aside as constituting an error of
law.”
2.3
Whilst White J considered there should be no award for economic loss,
Gotterson JA agreed with the President’s assessment of a small global sum
of $15,000. The President said at para 10:“It is impossible to mathematically calculate the precise amount of this loss or even quantify it in
terms of percentages of likelihood. But to do justice between the parties consistent with
principles extracted from Malec, this is a case requiring a modest global award to reflect the
contingencies I have discussed. Bearing in mind that Ms McCarthy has a long working life ahead
of her and the relatively modest chance of significant economic loss I consider that she should
receive $15,000 damages for future economic loss. In a case such as this, these Reasons
sufficiently disclose the assumptions on which I base that award and the methodology used to
arrive at it in terms of s55(3), see Ballesteros v. Chidlow and Another, and Reardon-Smith v. Allianz
Australia Insurance Limited.”
[2012] QCA 312
2.4 In Hunt v. Lemura Henry J said at paras 141 and 142:“[141] I would assume after Mrs Hunt was fit for work that a further period of
8 months would be required to allow for the above adverse contingencies
in her successfully seeking employment.
[142] It appears Mrs Hunt was fit or nearly fit for work by the time of her examinations
on 29 April 2010 by Drs Weidmann and Toft. However, when Dr Burke examined
Mrs Hunt on 27 August 2010 he recommended she undertake a 2 week intensive
pain rehabilitation program. Adding some fair opportunity for her to properly
prepare to return to work, it is reasonable to assume she would have been
fit to return to work by 1 November 2010.
[143] Allowing a further 8 months for her to successfully seek employment I assume
she could have been back in comparable employment by 1 July 2011 at which time
her past economic loss caused by the injury would have ceased.”
[2011] QSC 378
2.4 In Hunt’s case Henry J referred to the s55(3) requirements before
making a global award for future economic loss of $45,000 (for a 5%
whiplash injury). The appeal was dismissed .
2.5 Weaver v. Endeavour Foundation; Phillips v. MCG Group; Hopkins v.
WorkCover Queensland.
[2012] QCA 183
[2013] QSC 93
[2013] QCA 83
[2004] QCA 155
3.0 SUMMARY
3.1
Subsection s55(3) of the Civil Liability Act and s306J of the Workers’
Compensation and Rehabilitation Act 2003 state:“If the Court awards damages, the Court must state the assumptions on which
the award is based and the methodology it used to arrive at the award.”
3.2
The legislature has kindly suggested to the Courts that there is a
preference to
make awards for future economic loss “calculated by reference by a defined weekly
loss”.
3.3
In order to calculate future economic loss by reference to a defined weekly loss, then
one requires evidence of a difference between pre and post accident earnings to
define that loss or, alternatively, evidence of a defined weekly loss by reference to the
degree or percentage inability of the injured person to carry out their usual work
tasks (which would preferably come from another and more experienced worker in
the same industry) and, coupled with medical expert evidence and occupational
therapist’s evidence in appropriate cases.
3.4
Courts, at the highest level, can, and still do, award global sums but the
award is vulnerable unless the trial Judge complies with ss(3) of s55 or
s306J, that is, by stating the assumptions and methodology. Again, whilst
it is not necessary to define the loss by reference to an estimated weekly
sum, it would seem to be safer. Thus again, evidence of the potential
income that the plaintiff could have earned and evidence of the degree and
extent of the plaintiff’s inability to perform the work is of particular
importance.
3.5
Hopkins shows that there is no preference for a traditional approach of
determining future economic loss by the difference between what one could
have earned had they not been injured and what one has earned but, rather,
the Court can simply choose a higher than usual discount, ie, 30% from the
total loss.
3.6 Other methods are also valid such as Fail v. Suncorp where
Moynihan SPJ found that the plaintiff was losing approximately
$200 per week. His Honour said:“[23]
The plaintiff’s submissions in respect of this head take as a starting
point he suffers an approximate $200 per week when his earnings
immediately prior to the accident are compared with his current
earnings. The present value of $200 per week to aged 65 is $75,120.
[24]
As I have already indicated there are, however, a number of
interactive variables to be taken into account which are a matter
of judgment rather than calculation. …
[26]
Taking these considerations into account I will allow $200,000."
Graeme Crow QC
[2003] QSC 077 affirmed on appeal [2004] QCA 061 see in particulars paras 11 to 12 of the Judgment of
McMurdo J