3.2 Pecuniary loss damages1
Judicial notes:
1.
Depending upon the type of case (see the first judicial note in 3.1) these damages may be
the subject of a separate question. If so, identify that question at this time.
2.
Broadly speaking, the availability and aspects of quantification of pecuniary loss damages are
governed by the Transport Accident Act 1986, the Accident Compensation Act 1985 and Parts
III, VA, VB, VBA and XI of the Wrongs Act 1958.
3.
The first two of those Acts say what pecuniary loss damages are available in cases of
transport injuries and industrial accident injuries respectively, set caps on damages, and
prescribe a discount rate. Past and future medical expenses are excluded, as are claims for
gratuitous care.
4.
Part III of the Wrongs Act, which applies to dependants’ claims arising from a death, limits
the availability of damages for gratuitous care, and provides a method for calculating
damages for such care.
5.
Part VA provides that where damages are assessed having regard to loss of earnings or
future probable earnings, amounts net of tax are to be used.
6.
Part VB essentially applies to cases other than those covered by the Transport Accident Act,
the Accident Compensation Act, instances of certain intentional torts and sexual assaults, and
(most) claims for dust and tobacco-related conditions (as to which, see s 28(2)(n) of the
Wrongs (Part VB) (Dust and Tobacco-Related Claims) Regulations 2006). Thus, for instance,
Part VB applies to many, but not all, cases of alleged medical negligence and occupiers'
liability (see paragraph 1 of the first judicial note to the Occupiers’ Liability charge). Under
the Part, damages for past and future earnings loss are capped, but damages for medical
expenses, which are available, are not capped. There is a cap on damages for non-economic
loss. There are minimum requirements before damages for provision of gratuitous attendant
care may be recovered, and a methodology is prescribed for calculating such damages on a
weekly basis; but there is no overall cap. A discount rate is prescribed in relation to the
calculation of future economic loss.
7.
Part VBA sets thresholds for recovery of damages for non-economic loss in most of the cases
addressed by Part VB. But it appears that dust and tobacco-related claims are not excluded
1
Note: This charge is a guide only, and may require modification to fit the facts of an
individual case
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from its purview. So, in a dust-related claim to which the Accident Compensation Act applied,
Part VBA would have no application. But in a case of dust-related injury based upon product
liability, or upon the general duty of care, the Part would apply.
8.
Part XI addresses case of ‘pure mental harm’. Excluded from its purview are cases to which
Parts VB and VBA do not apply, also (most) dust and tobacco-related claims. Among various
limitations upon claims, it is to be noted that damages for economic loss cannot be awarded
for mental harm unless the harm consists of ‘a recognised psychiatric illness’.
9.
The directions which follow principally address claims for loss of earning capacity. Such
claims may be of small significance by comparison with claims for medical expenses and for
cost of care in, for instance, cases alleging medical negligence.
Generally – lost earning capacity
1.
In determining the amount of economic loss damages recoverable by the plaintiff, the law
recognises that all of us have a capacity to earn income in different ways; based upon one’s
age, experience, training, physical and intellectual capacities, and at times, just good luck. If
a person’s earning capacity is lost – the loss may be total or partial, something which I will
not keep repeating - as a result of the negligence of another, the law permits a claim to be
brought for recovery of the reduction in that earning capacity.
2.
The claim may relate to the period between time of injury and time of trial, or to the period
from time of trial into the indefinite future, or both. But whether as to past or future, the
claim is characterised in law as a claim for lost earning capacity – that loss being reflected in
the effect that the injuries have had upon the person’s ability to earn income. The likely
earnings of a person based on pre-accident employment or self-employment will probably be
the starting point in determining the extent of post-accident loss. However, those likely
earnings are not the only consideration. Similarly, what an injured person has earned after
an accident, compared with his or her likely earnings if uninjured, can be a guide as to what
the actual loss is. But remember that the inquiry throughout is to determine what the effect
of injury has been, is, and will be upon the injured person’s earning capacity.
Judicial note: In some instances, the plaintiff’s claim will be restricted to past loss; in others, to
future lost capacity only. Directions later in this module will require adaptation in such cases, so
that only relevant directions are given.
2
Arithmetic certainty not required
3.
Courts, for many, many years, have said that carrying out this exercise is not a mathematical
or scientific analysis. Rather it is left to your good judgment to evaluate the extent of any
lost earning capacity, and then to put a compensatory money sum upon it.
Causation - reminder
4.
In determining what amount you award for loss of earning capacity (be it either for past loss
of earnings or future loss of earning capacity), you bear in mind this fundamental proposition
– the plaintiff is only entitled to damages which are related to the fault of the defendant. The
plaintiff must establish that the accident is a cause of the loss [he/she] alleges. But also
remember that it is not necessary for the plaintiff to establish that the accident is the only
cause – it need only be 'a cause'.
Past loss of earning capacity
5.
In practice, in this State, loss of earning capacity is assessed by considering what earnings
loss the plaintiff has proved in respect of the period between date of injury and date of trial,
and what loss of earning capacity [he/she] has proved in respect of the future. When those
two aspects of loss have been considered, a compensatory value can be put upon the
plaintiff’s lost earnings capacity overall.
Judicial note: In Victoria, it has long been the practice to treat a claim for earnings loss to date of
trial as special damages, and to distinguish it from a claim for (future) loss of earning capacity.
Such a distinction is implicitly recognised in the definitions of ‘pecuniary loss damages’ in s 93(17)
of the Transport Accident Act 1986 and s 134AB(37) of the Accident Compensation Act 1985. A
series of cases in the New South Wales Court of Appeal (Rabay v Bristow [2005] NSWCA 199,
Magnou v Australian Wool Testing Authority [2007] NSWCA 357, Kallouf v Middis [2008] NSWCA
61 and Bathurst Regional Council v Thompson [2012] NSWCA 340) have stated, citing Graham v
Baker (1961) 106 CLR 340, that both as to the past and future it is loss of earning capacity which
is to be compensated. But that has not stopped calculations being made in those matters along
Victorian lines, whether at first instance or on appeal.
6.
In respect of the plaintiff’s claim for loss of earnings from the date of the accident until the
present, you need to evaluate a number of matters:
(a)
what would the plaintiff probably have earned to date but for the injuries?
(b)
what (if anything) has the plaintiff actually earned to date? and
(c)
has anything else, unrelated to the accident, prevented or restricted the plaintiff from
earning income?
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7.
In determining what the plaintiff would probably have earned in the period to date, you will
need to consider what are known as the vicissitudes, or contingencies, of life. In conducting
the hypothetical exercise of determining what the plaintiff’s earnings would have been to
date, you take into account the fact that, in a person’s life, adverse things occur – illness,
unemployment and accidents are the three most common - all of which might affect anyone.
The law says that in putting a money value upon damages for loss of earning capacity, you
should take into account those matters; and, if you think it appropriate, discount or make an
allowance for such events.
8.
Now I say 'if you think it appropriate' for two reasons:
(a)
First, vicissitudes, or contingencies, are to be evaluated on the evidence relevant to the
person bringing the claim. It would be wrong to apply a general discount, no matter
what. You would sensibly look at matters such as the plaintiff’s age, health,
employment history and security of pre-injury employment in determining whether to
make such a discount and, if so, to what extent.
(b)
Second, not all contingencies are adverse, particularly in the field of employment. A
risk of unemployment of the plaintiff may be trumped by a prospect of advancement
or, a second job.
9.
So, after taking into account the contingencies or vicissitudes you should be able to
determine what the plaintiff, but for [his/her] injuries, would probably have earned over the
years since the accident.
10.
[Set out competing submissions regarding earnings loss and contingencies].
11.
But that is not the end of it. Once you have estimated what the plaintiff would have earned
you will need to deduct from that figure whatever sum you conclude the plaintiff has earned
since the accident.
12.
[Set out competing submissions regarding the sum earned since the accident].
Judicial note: A defendant may contend that the plaintiff’s earnings between injury and trial
understated his or her residual earning capacity. If such a contention is raised, the above direction
will require modification.
If reasons, unrelated to the injuries, for the plaintiff not working are raised, add the following
shaded section:
13.
Finally, you will need to consider whether there is any other reason unrelated to the injuries
which has prevented the plaintiff from working
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14.
Now let me remind you of evidence relevant to the issue of past loss of earnings, and
counsel’s submissions about the matter. This of course is my summary of what I understand
to be the major points in the evidence, and counsel’s major submissions.
15.
[Summarise the relevant evidence and submissions].
Fox v Wood damages
16.
[If a claim is made for Fox v Wood damages, insert the charge in 3.5 unless the parties have
agreed that this is unnecessary and that the judge should make an adjustment after verdict.]
Future loss of earning capacity
17.
The task here is to determine what lump sum in damages you consider is a fair and
reasonable amount for any lost earning capacity into the future.
18.
It is no more than common sense that such damages are difficult of mathematical precision
because, looking into the future, you are trying to estimate matters which, if the plaintiff had
not been injured, might have occurred as soon as tomorrow or, on the other hand, at some
time in the next five or ten or more years. It is unreal to imagine that one can simply take
out a calculator and reduce everything to certainty.
19.
You can think of the plaintiff’s capacity for work before injury as being an asset which
[he/she] had – different to a car, a house, money in the bank – but an asset nonetheless.
What has to be compensated, in awarding damages for loss of [both past and] future
earning capacity, is the injury-caused destruction of, or reduction in, the value of that asset,
measuring that destruction or reduction in money.
20.
As to the future, obviously, you look ahead only so far as, in your judgment, the plaintiff’s
injuries are likely to continue to be a cause of loss of earning capacity; and you would not
look beyond the time at which, in your judgment, the plaintiff was likely to have ceased
working in any event.
21.
One way to approach this exercise involves the evaluation of two factors, like the
assessment of the past earnings loss:
22.
(a)
what would the plaintiff probably have earned in the future but for [his/her] injuries?
(b)
what is the plaintiff able to earn in the future, taking into account [his/her] injuries?
In determining the plaintiff’s present and future earning capacity, you should look at the
matter in a practical rather than a theoretical way, because you will realise that when this
case is over the plaintiff goes out into the real world. It would not be right to consider
[his/her] earning capacity as a matter of theory, divorced from the realities of the working
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world. Were you not to take a practical approach, it might well not lead to an outcome which
represents fair and reasonable compensation.
23.
I have already said that when a claim is made for loss of earning capacity, mathematical
precision is impossible. That is so even where you have a plaintiff who was in steady
employment on a particular wage and with a settled career path at the time of injury. Even
then, there may be grey areas.
24.
Let me give you some examples:
(a)
Putting the accident to one side, to what age is it likely that the plaintiff would have
continued in [his/her] pre-injury occupation?
(b)
What would [his/her] earnings probably now be in that occupation?
(c)
Would or might [he/she] have taken on any and what other employment later in life?
(d)
By education, training and skills what other work was the plaintiff fit to undertake?
(e)
What would [his/her] earnings probably have been in such work?
(f)
What realistic chance was there of the plaintiff obtaining any such work in the area
where [he/she] had lived and worked?
(g)
Would some other medical condition have shortened [his/her] working life?
(h)
Then, having account of [his/her] injury, does the plaintiff now have an earning
capacity which is realistically capable of being translated into dollars?
(i)
What is the employment situation in the area where [he/she] lives for a person of the
plaintiff’s age and sex?
(j)
Is any present or future capacity likely to involve full, or only part-time, work?
(k)
If the plaintiff has a present earning capacity, then what amount is [he/she] now
capable of earning?
(l)
If the plaintiff does not have a present earning capacity, may [he/she] have in the
future a capacity realistically capable of being translated into dollars?
(m) If yes, then what amount should be attached to it?
25.
It is not necessary for you to be certain about the course of the future events. It is, of
course, quite unlikely that you could be certain. You assess the degree of probability of the
happening of a particular event and then adjust your findings to reflect the degree of
probability you find.
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26.
Let me give you an example of how you might answer some of the questions I mentioned a
moment ago. It is just an example. There is no single correct way of assessing loss of
earning capacity. As I have said repeatedly, you decide the facts of this case. But suppose
you decided that, if the plaintiff had not been injured, [he/she] had a good chance, but was
not certain, to remain in [his/her] pre-injury job to age 65. You would decide what [he/she]
would probably be earning in that job today. If you next decided that, because of [his/her]
injuries, [he/she] does not have a residual earning capacity, you would have the starting
point for lost earning capacity - expressed as a weekly dollar amount. If, on the other hand,
you decided that [he/she] does have a residual earning capacity, you would estimate that
capacity as a weekly dollar amount, and deduct it from what you estimate would have been
[his/her] weekly earnings if uninjured.
27.
Now - I put the example to one side - if you were minded to approach compensating the
plaintiff for loss of earning capacity by reference to a weekly lost amount, it would not be
right to simply work out a weekly sum after tax and multiply it by the number of weeks to
whenever you consider the plaintiff would have ceased to make use of [his/her] earning
capacity, or whenever (if it be the situation) you consider that [his/her] accident-caused
incapacity will end. That would over-compensate the plaintiff, because if you gave [him/her]
a sum worked out by the multiplication I have described, it would compensate [him/her]
today for earnings that [he/she] would otherwise have received over a period into the
future. Such a capital sum, awarded today, could be invested by the plaintiff so as to earn
more money over that period of time, this producing more than your estimate of lost earning
capacity.
28.
That leads me on to multipliers, about which counsel have addressed you. The multipliers,
the parties agree, are $[X] to age [#] and $[Y] to age [#]. Multipliers are figures calculated
by people called actuaries. Sometimes an actuary is called to explain how the figures are
worked out. Most often, as here, the parties agree upon the figures. Speaking generally, the
purpose of the figures is to provide you, the jury, with a means of calculating how much you
would need to put today into the hands of a person of the plaintiff’s age and sex so as to
yield $1 per week to a specified age, drawing on interest and capital, nothing being left at
the specified age.
29.
In fact, the capital and interest would all be gone a bit before the person reaches the
specified age. That is because multipliers build in the statistical risk of early death.
30.
The multipliers assume an interest rate of [%] Why [%]? Because an Act of Parliament says
so.
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31.
It follows from what I have said that if – this is just an example - you assessed the plaintiff’s
loss of earning capacity as being not $1 but $[X], then the loss to age [#] could be
calculated by multiplying the multiplier to that age by [X].
32.
But that would only be a starting point. You would have to consider whether to reduce the
sum for the contingencies of life. Some of those contingencies apply to us all – the risk of
illness, some other accident, loss of employment. Others might apply to a particular plaintiff
– for instance, the prospect of a downturn in employment in the plaintiff’s particular area of
work. You would not, however, reduce for the possibility of premature death; because that
possibility is already built into the multipliers.
33.
Not all contingencies are unfavourable. Just as well. Perhaps the plaintiff might have been
promoted had [he/she] remained in [his/her] pre-accident job. Perhaps [he/she] might have
changed employment to a better paid job. But it would be proper, having regard to the sort
of matters to which I have been referring, to discount to some extent an amount otherwise
yielded by taking a certain number of dollars per week and applying a multiplier to it. The
further you were looking into the future, probably, the greater might be the discount.
34.
As I have said on a number of occasions, this is not a precise science. Even though what I
have been discussing looks as though it is an exact science - because it has got multipliers
and numbers and calculations - it is not. You are not bound to use the multipliers – they are
simply a guide. What is required is your good judgment as to what you think is a fair sum
representing the present value of the plaintiff’s loss of earning capacity.
35.
In some cases, the jury might conclude that it is not possible to put a weekly amount upon
the plaintiff’s future loss of earning capacity. It might conclude that all it can find is that
there is some loss of earning capacity, but not one to which it can attach a weekly dollar
amount. In such a case the jury can award the amount which in its good judgment is
appropriate to compensate for that loss of earning capacity. But if you were minded to go
down that path in this case, you might like to test the amount which you decide upon by
reference to a weekly amount applied to the multipliers.
Judicial note: If neither counsel urge such an approach in the particular case, it would be best to
make that observation to the jury, whilst not shutting out the entitlement of the jury to do so.
36.
Now here is my summary of what I understand to be major points in the evidence relating to
future loss of earning capacity, and counsel’s major submissions about the matter. I will not
repeat the evidence to which I have referred in relation to past loss so far as it is common to
both. Again, I remind you that it is for you, not me, to decide what parts of the evidence are
of key importance.
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37.
[Summarise the relevant evidence and submissions].
38.
Once you have determined amounts for past earnings loss and future loss of earning
capacity, you will be in a position to answer the question concerning pecuniary loss. The
answer must be a single amount, combining past and future.
39.
Once you have arrived at that amount, and before delivering your verdict, you should stand
back and consider whether it represents fair and reasonable compensation for the
impairment or, perhaps, the destruction, of the plaintiff’s earning capacity. If you think that
the amount is too low, you are entitled to adjust it upwards, so that the amount arrived at
represents, in your judgment, fair and reasonable compensation based on the evidence. If,
on the other hand, you think that the amount is too high, you can adjust it downwards so to
achieve fair and reasonable compensation.
Medical and like expenses, past and future
40.
In this case, the plaintiff claims recompense for medical and like expenses incurred to date,
and for the cost of medical and like expenses to be incurred in the future.
41.
‘Medical and like expenses’ can include, in a particular case, medical and hospital costs, also
the cost of allied health services provided by persons such as physiotherapists, occupational
therapists, podiatrists, dieticians and the like. In the present case, we are concerned with:
[describe the medical expenses which the case raises].
42.
Medical and like expenses incurred to date are an item of so-called special damage. They are
amounts certain. Provided that the services were rendered for the accident-caused injuries,
and were reasonably incurred and reasonable in amount, the plaintiff is entitled to be
recompensed. The plaintiff claims the following amounts: [set out amounts which the
plaintiff claims].
Judicial note: In most cases there is no real dispute as to the reasonableness of the treatment or
amounts charged. In such circumstances, the judge should tell the jury that this is the situation.
43.
A claim for future medical and like expenses has some similarities to a claim for future loss of
earning capacity, about which I have already directed you. Because the claim relates to the
future, there are uncertainties. Thus, for example:
(a)
How many medical specialists’ / general practitioner’s / physiotherapist’s consultations
is the plaintiff likely to require on an annual basis; and at what likely cost?
(b)
What number of pathology tests / X rays / CT scans / MRIs is the plaintiff likely to
require, and when? In each instance, at what cost?
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(c)
Is the plaintiff likely to require hospitalisation in the future? If yes, then how often, for
what periods, and at what cost?
(d)
Is the plaintiff likely to require admissions for respite care? If yes, then how often, for
what periods, and at what cost?
(e)
44.
What is the plaintiff’s life expectancy?
The answers to questions such as I have just mentioned may involve different degrees of
likelihood. They may also involve the prospect of expenses being incurred long into the
future. Each of those factors must be accounted for in your assessment of the cost of future
services.
45.
Any uncertainties about the extent of future provision of services should sensibly be reflected
by some reduction for the contingency that lesser services may suffice.
46.
Because some expenses may be incurred long into the future, it would be wrong to award
the plaintiff today the full cost of those services. The cost should be discounted for present
value. That can be done by using the multiplier methodology to which I referred in
connection with loss of future earning capacity.
47.
The main evidence relating to future medical and like expenses, and counsel’s major
submissions about the matter, appear to me to be these – always remembering that you,
not me, decide what evidence is of prime importance when deciding the facts of the case:
[summarise the relevant evidence and submissions].
Judicial notes:
1.
Remember that medical and like expenses are only claimable in certain cases.
2.
The above direction assumes that a direction has been given about future loss of earning
capacity. If there has been no such direction, discounting for present value will need to be
explained.
3.
Depending upon the kind of case in which medical and like expenses are claimable, there
may be a single damages question for the jury to answer, or two. It will be necessary for the
judge to give an appropriate direction.
Voluntary services (gratuitous care)
48.
People who are seriously injured are often assisted by relatives or friends who provide
nursing or care, or perform domestic chores. The law says that an injured victim may
recover damages for the value of these services, even though [he/she] does not have to
(and will not) pay for them. It is the need for the services that entitles the plaintiff to
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recover the reasonable costs of meeting these needs at commercial rates. It is not
necessary to show that the needs are such that they would ordinarily be met only at some
financial cost to the plaintiff. The question is whether the negligence of the defendant has
created such a need, and then what the reasonable costs of meeting that need at
commercial rates might be.
49.
There are a number of requirements that must be satisfied before you can award damages
for voluntary care. You cannot award damages for voluntary care unless:
(1)
you are satisfied there is or was a reasonable need for the services to be provided;
and
(2)
the need has arisen (or arose) solely because of injury caused by the accident; and
(3)
the services would not be (and would not have been) provided to the plaintiff but for
those injuries; and
(4)
the services have been provided or are to be provided for at least six hours per week
for not less than six months.
50.
If voluntary care damages are to be awarded, they must not exceed [$] in any particular
week or be assessed at an hourly rate in excess of [$].
51.
Similarly, people who are seriously injured may be awarded damages for loss of their
capacity to provide care for others. However, no damages may be awarded under this
heading unless:
(1)
you are satisfied that the care was provided to the plaintiff’s dependents for at least six
consecutive months before the accident for at least six hours per week; and
(2)
there is a reasonable expectation that but for the injuries sustained in the accident,
that care would have continued to be provided by the plaintiff to [his/her] dependents
for a period of at least six consecutive months for at least six hours per week.
52.
Again, damages under this heading cannot exceed [$] in any particular week, or at an hourly
rate in excess of [$].
53.
If you consider that the plaintiff should recover damages for attendant care, or for loss of
capacity to provide care to others, then as to the past it will be possible to arrive at a figure
with some certainty, though always remembering that you may need to make some discount
for the contingencies of life.
54.
But concerning the future, as with future medical and like expenses, there are uncertainties;
and there is the consideration that some care will be rendered, or would have been rendered
by the plaintiff to others, variably into the future. These matters should be addressed by
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discounting for contingencies, and by discounting for present value. I remind you of what I
have already said about the reason for, and methodology of, discounting.
Judicial note: This direction is apt in a case to which Part VB of the Wrongs Act applies. A
number of kinds of case are excluded from the operation of that Part. In some of those cases (e.g.
claims in respect of dust or tobacco-related injury which are not governed by the Accident
Compensation Act 1985, claims based upon intentional conduct or sexual assault or other sexual
misconduct) the cost of gratuitous care appears to be recoverable, and governed by common law
principles.
Last updated: 14 April 2014
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