Many of general principles referred to in this chapter have been drawn from H Luntz and S Harder, Assessment of damages for personal injury, 5th edn, LexisNexis, 2021. This is an excellent general text that deals in detail with the assessment of damages in personal injury cases and provides examples of the practical application of these principles. Other texts used for reference purposes in the preparation of this chapter were D Villa, Annotated Civil Liability Act 2002, 3rd edn, Thomson Reuters, Sydney, 2018; and J A McSpedden and R Pincus, Personal Injury Litigation in NSW, LexisNexis, Sydney, 1995.
The application of the principles discussed below is subject to any relevant statutory provisions. One such provision is the Motor Accident Injuries Act 2017 which applies to motor accidents that occur after 1 December 2017: see [7-0085].
The first basic principle requires that a distinction be recognised between the term damage and damages. Damage is an essential element of a claim in most tortious actions. It is only if a plaintiff is able to establish that he or she has suffered damage that a cause of action becomes available. The position is different with intentional torts, see [7-0130].
Damages are the sums assessed in monetary terms that are paid to a successful plaintiff. Damages may be awarded as compensatory damages for damage sustained, or as aggravated or exemplary damages, although in State of NSW v Corby (2009) 76 NSWLR 439 aggravated damages were described as a form of compensatory damages.
The fundamental principle is that of restitutio in integrum, meaning that damages should be assessed so that they represent no more and no less than a plaintiff’s actual loss: Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, Lord Blackburn at 39. See also Haines v Bendall (1991) 172 CLR 60 at 63; Arsalan v Rixon [2021] HCA 40 at [25].
In personal injury matters, it has been recognised that in most cases it is not possible to measure accurately that part of the award that deals with non-economic loss so as to restore a plaintiff to the health enjoyed pre-injury. The principle has been qualified by the term “so far as money can do so”: Robinson v Harman [1848] All ER Rep 383.
The law recognises that an award will not necessarily be perfect. In Lee Transport Co Ltd v Watson (1940) 64 CLR 1 at 13–14, Dixon J said:
No doubt it is right to remember that the purpose of damages for personal injuries is not to give a perfect compensation in money for physical suffering. Bodily injury and pain and suffering are not the subject of commercial dealing and cannot be calculated like some other forms of damage in terms of money.
The amount awarded is, however, required to be fair to both parties, although fairness to the defendant does not require that the award be less than full or adequate.
There are some qualifications that may have the result that the plaintiff recovers less than his or her actual loss. They arise out of the principles that govern remoteness of damage, the requirement to mitigate and the modifications to common law made by the Workers Compensation Act 1987, Motor Accidents Compensation Act 1999, Civil Liability Act 2002 and Motor Accident Injuries Act 2017. In addition, claims arising out of the death of a relative are limited to the recovery of pecuniary loss.
Conversely, principles relating to aggravated or exemplary damages allow the recovery of greater than actual loss in appropriate circumstances.
In Todorovic v Waller (1981) 150 CLR 402 at 412 Gibbs CJ and Wilson J identified the following four basic principles that they said were so well established that it was unnecessary to cite authority to support them.
Damages are compensatory in character.
Damages for one cause of action must be recovered once and forever and in a lump sum, there being no power to order a defendant to make periodic payments.
The plaintiff is free to do what he or she wishes with the sum awarded; the court is not concerned to see how it is applied.
The onus is on the plaintiff to prove the injury or loss for which damages are sought.
The plaintiff bears the onus of proving that the defendant’s conduct caused the losses claimed. At common law, the defendant bears the onus of proving:
The onus is on the plaintiff throughout to quantify damages. This does not necessarily require proof of the loss in actual monetary terms. Evidence in the form of comparable wages is commonly provided to establish loss of wages. Medical expenses and care costs for the past are rarely disputed and those expected in the future are normally capable of reasonable estimation.
Once a loss is proved, the court is required to do its best to put a value on that loss even if the evidence is less than satisfactory. In the absence of evidence, a plaintiff cannot complain that inadequate damages have been awarded: Dessent v Commonwealth (1977) 51 ALJR 482. See Ashford v Ashford (1970) 44 ALJR 195, where the court dealt with the assessment of income loss in the absence of evidence of likely earnings from planned pre- and post-accident careers. See also Layton v Walsh (1978) 19 ALR 594 (FC) where the court drew inferences concerning the cost of medical treatment.
It is standard practice to itemise amounts awarded to a plaintiff under various heads of damage and to give reasons for arriving at each of the stated figures. Care needs to be taken to avoid the possibility that the amounts assessed under the various heads of damage might be duplicated. For instance, a court must balance, in assessing general damages, the effect on a plaintiff of any incapacity to undertake domestic responsibilities for his or her family against making allowance for the provision of voluntary or commercial carers.
The recognised heads of damage are:
General damages: this is the term applied to non-pecuniary damages or non-economic loss suffered as a result of pain, disability, loss of enjoyment and amenities of life, disfigurement or loss of expectation of life.
Pecuniary loss: this term covers out-of-pocket expenses involved in medical and other treatment expenses; aids and appliances, domestic and personal care.
Income loss: covering actual income loss to the date of trial and loss of income-earning capacity thereafter.
Aggravated damages: awarded to a plaintiff who suffers increased distress as a result of the manner in which a defendant behaves when committing the wrong or thereafter.
Exemplary damages: awarded to mark the court’s disapproval of the conduct of the defendant and to deter its repetition by the defendant or others.
Nominal or contemptuous damages: this head of damage is of little relevance to claims in tort involving personal injury where actual damage is a necessary part of the cause of action. It commonly arises in cases of trespass to the person where the options available to the court range between nominal damages and a more substantial award depending on the circumstances.
Exceptions to these basic principles are found both in the common law and in legislation.
It should be noted that the law of damages is governed by the law of the place of the tort, and different provisions may apply in different States or territories or for different damage: John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at [100]. For example, a person exposed to substance in different States who subsequently develops a substance-related disease may be entitled to different damages awards for the same damage. In Kennedy v CIMIC Group Pty Ltd and CPB Contractors Pty Ltd [2020] NSWDDT 7, the plaintiff, who suffered from mesothelioma, was exposed to asbsestos in NSW by the first defendant and in Western Australia by the second defendant. Ultimately, the plaintiff was entitled to a different award of damages against each defendant.
When it came to assessing damages, the Dust Diseases Tribunal (DDT) was required to apply the statutory provisions relevant to each defendant including:
As noted in [2-6330] the generally accepted practice is that the court determine all issues in question. This extends to the assessment of damages notwithstanding that the case on liability fails. The purpose of the practice is to avoid the costs of a further hearing in the event that the decision on liability is overturned. In Gulic v Boral Transport Ltd [2016] NSWCA 269, the court expressed concern that the trial judge had not adopted this practice and confirmed that a judge should decide all issues to avoid the need for a new trial. On the question of exceptions to the general rule Macfarlan J said at [8]:
There may of course be good reasons for not dealing contingently with issues that the judge does not consider decisive. One reason might be that the judge considers that because the outcome is so clear or there is so little at stake that there is no reasonable prospect of an appeal. Alternatively, the judge might consider that the expenditure of judicial time and effort required to determine other issues is not justified when balanced against the likely costs of a retrial and the likelihood of a retrial being necessary. Another reason might be that determination of an issue whose resolution is considered not to be decisive might require assumptions as to a party’s credit diametrically opposed to the judge’s findings. It might be difficult to give effect to this assumption.
Section 82 of the Civil Procedure Act 2005 (CPA) makes provision for the award of interim damages when:
Orders of this nature may only be made against insured defendants, public authorities or persons of sufficient means: s 82(4) CPA. These provisions do not apply to claims that are dealt with under the Motor Accidents legislation.
In Frellson v Crosswood Pty Ltd (1992) 15 MVR 343, Sully J held:
Section 83 of the Motor Accidents Compensation Act imposes on a third party insurer the obligation to pay for reasonable, necessary and properly verified medical, rehabilitation, respite care and attendant care expenses where liability is admitted or determined, wholly or in part, to meet the care needs generated by injuries resulting from the motor accident.
As to the Motor Accident Injuries Act 2017, see Pt 3.
Section 143 of the Motor Accidents Compensation Act permits the parties to apply to the court for approval of a structured settlement agreement that provides for the payment of all or part of an award of damages in the form of periodic payments funded by an annuity or other agreed means.
Similarly, s 151Q of the Workers Compensation Act permits the court, at the request of a plaintiff and having considered the views of the defendant, to make orders for payment of damages by means of a structured settlement rather than a lump sum award.
The Motor Accidents (Lifetime Care and Support) Act 2006 provides for support for victim of motor accidents who are catastrophically and permanently injured. It imposes on the Lifetime Care and Support Authority the obligation of paying for the expenses incurred in meeting the plaintiff’s treatment and care needs.
Once the defendant’s liability to the plaintiff is proved, the assessment of the plaintiff’s loss and damage must take into account issues that may increase or reduce the amounts awarded under all heads of damages. Considerations to be addressed include: the prospective consequences of the injury; conduct of the plaintiff in failing to mitigate or in aggravating his or her condition; contributory negligence; unrelated conditions that affect the plaintiff before or after injury; causation and aggravated or exemplary damages.
Proof of damage and assessment of damages requires calculation of the consequence of events from the date of injury to the date of trial and of the chance that events will or will not occur. In Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, Deane, Gaudron and McHugh JJ held at [7]:
A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99% – or very low – 0.1%. But unless the chance is so low as to be regarded as speculative – say less than 1% – or so high as to be practically certain – say over 99% – the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain the prediction which has a 51% probability of occurring, but to ignore altogether a prediction which has a 49% probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded.
Loss of opportunity: As noted in the Malec decision, damage and loss suffered to the date of the hearing are reasonably simple to prove and assess. There are, however, occasions when it becomes necessary to assess the effects of injury on, for instance, the opportunity to undertake a particular career path or succeed in a particular business. Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 54 dealt with the recovery of the value of a lost opportunity in circumstances where it was a known fact that the opportunity was lost but there was no certainty that availability of the opportunity would have resulted in a successful outcome. Deane J at [8] said it might be necessary to modify the conventional approach, when assessing damages for past income loss, of deciding an issue on the balance of probabilities and then proceeding on the basis of a certainty where none in fact existed. The Amann Aviation case involved a breach of contract claim but it was made clear that the same principles applied to claims in tort.
Damages may also be reduced for a number of reasons. The common law principle is that a defendant, who asserts that a reduction in damages is warranted, must provide evidence to support the claim. This principle has been modified in some circumstances by legislation.
The courts have accepted the following principles, as set out in H McGregor, McGregor on Damages, 16th edn, Sweet & Maxwell Ltd, UK, 1997 at [283]–[288], as an accurate statement of the law concerning mitigation.
The law disallows recovery of damages in respect of any loss that could have been avoided but which the plaintiff has failed to avoid through unreasonable action or inaction.
The plaintiff may recover loss or expense incurred in a reasonable attempt to mitigate.
The plaintiff may not recover loss in fact avoided, even though damages for that loss would have been recoverable because the efforts that went to mitigation went beyond what was required of the plaintiff under the first principle.
In NSW in motor accident and workplace accident cases, the first rule is embodied in statute: s 4.15 Motor Accident Injuries Act 2017 and s 151L Workers Compensation Act 1987. In workplace accident cases, the onus is on the plaintiff (s 151L(3)), in motor accident cases the onus is on the person alleging that there has been a failure to mitigate (s 4.15(4)).
At common law, the failure of a plaintiff to take steps to mitigate a claimed loss may be raised as a defence to the claim and the onus of proof rests with the defendant.
If the defendant succeeds, damages are reduced to take account of the failure to mitigate. The extent of the reduction is assessed by calculating the value of the plaintiff’s loss on the basis of the condition that he or she would be in, had reasonable steps to mitigate been taken.
section 4.15(3) Motor Accidents Injuries Act 2017 requires consideration of the steps the injured person could have taken to mitigate damages by: undergoing medical treatment, undertaking rehabilitation, pursuing alternative employment opportunities and giving the earliest practicable notice of claim to enable the assessment and implementation of the other matters.
Section 151L Workers Compensation Act imposes a burden on the claimant to establish that all reasonable steps to mitigate have been taken, including as to treatment, employment and rehabilitation by the injured worker, except where it is established that the injured worker was not told by his or her employer or the insurer that it was necessary to take steps to mitigate before it could reasonably be expected that any of those steps would be taken: ACN 096 712 337 Pty Ltd v Javor [2013] NSWCA 352, per Meagher JA.
At common law, what is reasonable for the plaintiff to do is dependent on the consequences of the injury: Grierson v Roberts [2001] NSWCA 420 at [19]. It does not require a plaintiff to engage in rituals or exercises in futility, including embarking on complex litigation, pleading the statute of limitations to avoid liability for hospital expenses (Lyszkowicz v Colin Earnshaw Homes Pty Ltd [2002] WASCA 205 at [64]), continuing to work when their injuries make it reasonable for them to retire (Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 23 per McHugh J), or failing to accept a voluntary redundancy payment (Morgan v Conaust Pty Ltd [2000] QSC 340). The extent of the plaintiff’s injuries may make it reasonable for them not to try to find work during the lead-up to contested litigation: Arnott v Choy [2010] NSWCA 259 at [161].
A claimant’s failure to undergo medical and/or rehabilitative treatment can amount to a failure to mitigate loss. Examples include, failing to take prescribed medications (State of NSW v Fahy [2006] NSWCA 64), in particular where the adverse impacts of the medication are expected to be temporary and reversible. There have been a few cases where the failure to undergo surgery has been decided to constitute a failure to mitigate, but the general rule is that it is not unreasonable to refuse to undergo seriously invasive and/or risky treatment such as spinal surgery: Fazlic v Milingimbi Community Inc (1982) 150 CLR 345. The benefits and costs of the action must be weighed against the risk of death, aggravation of the condition and the inconvenience or discomfort involved: Radakovic v R G Cram & Sons Pty Ltd [1975] 2 NSWLR 751 at 768 per Mahoney JA (the disfigurement of amputation must be outweighed by substantial advantages) and Mantle v Parramatta Smash Repairs Pty Ltd (unrep, 16/2/79, NSWCA) (plaintiff’s subjective view against amputation was relevant in deciding the refusal was not unreasonable). Conflicting medical opinion about the efficacy of medical treatment will usually make it reasonable to refuse treatment: McAuley v London Transport Executive [1957] 2 Lloyd’s Rep 500. The plaintiff’s subjective views based on their understanding of the treatment, risks and benefits are relevant, notwithstanding that the test is objective. A baseless refusal will usually be unreasonable: Fazlic v Milingimbi Community Inc. Religious beliefs are relevant: Walker-Flynn v Princeton Motors Pty Ltd [1960] SR(NSW) 488, cf Boyd v SGIO (Qld) [1978] Qd R 195 (note the doubts expressed by the authors of Luntz at [1.12.5]).
A plaintiff is entitled to recover the reasonable costs of mitigation, even if the attempts are unsuccessful and the consequential loss is greater than if there had been no attempt to mitigate: Tuncel v Reknown Plate Co Pty Ltd [1979] VR 501.
Where a plaintiff’s chattel is damaged as a result of the defendant’s negligence, the plaintiff will generally be entitled to damages for the costs of repair and for consequential loss: Talacko v Talacko [2021] HCA 15 at [45]. An assessment of consequential loss always requires the identification of the manner in which the loss of use of a chattel has adversely affected the plaintiff: Arsalan v Rixon [2021] HCA 40 at [18]. In Arsalan, the High Court recognised the loss of amenity, in the sense of loss of pleasure or enjoyment, in the use of a chattel, as a recoverable head of damage for a tort that involves negligent damage to a chattel: at [17], [25]. It was not unreasonable for the respondents to take steps to mitigate their loss, including loss of amenity consequent on negligent damage to their vehicles by the hire, at a reasonable rate, of an equivalent car for a reasonable period of repair.
The defendant also bears the evidentiary onus of establishing that the plaintiff’s conduct positively exacerbated his or her condition. In this respect, it is necessary to consider the following.
Whether there has in fact been a failure to mitigate. In Munce v Vinidext Tubemakers Pty Ltd [1974] 2 NSWLR 235 the court left open the question of whether refusal of a blood transfusion amounted to a failure to mitigate.
Whether the plaintiff’s conduct that positively exacerbates the condition is itself the result of injuries caused by the defendant’s tortious conduct.
Damages may be denied or reduced where the symptoms of which a plaintiff complains are the result of a pre-existing condition. In Watts v Rake (1960) 108 CLR 158, prior to the accident, the plaintiff suffered from a commonly occurring degenerative spinal condition that might have produced the symptoms suffered after the accident. The High Court settled the issue of onus of proof, deciding that it was for the plaintiff to prove on a prima facie basis the difference between his or her pre- and post-accident condition; once the change in condition was satisfactorily established, the evidentiary onus was then on the defendant “to exclude the operation of the accident as a contributory cause”: Dixon CJ at [160].
Purkess v Crittenden (1965) 114 CLR 164 confirmed Watts v Rake, above, and its reference to the evidential onus necessary to rebut the prima facie case made by the plaintiff. Barwick CJ, Kitto and Taylor JJ, at 168, said it was insufficient for the defendant merely to suggest that the plaintiff suffered from a progressive pre-existing condition or that there was a relationship between any condition and the plaintiff’s present incapacity and that:
On the contrary it was stressed that both the pre-existing condition and its future probable effects or its actual relationship to that incapacity must be the subject of evidence (ie substantive evidence in the defendant’s case or evidence extracted by cross-examination in the plaintiff’s case) which, if accepted, would establish with some reasonable measure of precision, what the pre-existing condition was and what its future effects, both as to their nature and their future development and progress, were likely to be. That being done, it is for the plaintiff upon the whole of the evidence to satisfy the tribunal of fact of the extent of the injury caused by the defendant’s negligence.
Where the defendant alleges that the plaintiff would have suffered disability because of a pre-existing condition, even if the compensable injury had not occurred, the evidentiary burden rests on the defendant to establish what the effect of the pre-existing condition would have been: Watts v Rake and Purkess v Crittenden, above.
The nature of the pre-existing condition, its probable effects, the relationship it has to the ultimate state and any disability, and the time when these effects would have been seen without the tort, must be established with some reasonable measure of precision but not to a standard of near perfection: Expokin Pty Ltd v Graham [2000] NSWCA 267 at [50] (Santow AJA) and Mount Arthur Coal Pty Ltd v Duffin [2021] NSWCA 49 at [64] per Payne JA. If the disabilities of the plaintiff can be disentangled and one or more traced to a cause in which the tort played no part, it is the defendant who must do the disentangling: Watts v Rake at 160 per Dixon J. In this context, the principles stated in Malec v JC Hutton Pty Limited (1990) 169 CLR 638 may need to be taken into account so that consideration may need to be given as to whether the defendant has established that there was a substantial chance that the plaintiff would have been affected by a pre-existing condition: Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 per Ipp JA (Mason P agreeing).
In State of NSW v Skinner [2022] NSWCA 9 the Court of Appeal approved the apportionment of damages by the trial judge to take into account her post-traumatic stress disorder arising from the plaintiff’s employment as a police officer and her non-tortious psychiatric conditions.
In Sampco Pty Ltd v Wurth [2015] NSWCA 117 the Court of Appeal emphasised that the requirement in s 5D(1)(a) Civil Liability Act 2002, that factual causation be established, applies both to the issue of liability and injury.
The apportionment of damages where the plaintiff suffered injury in successive motor vehicle accidents was considered in Falco v Aiyaz [2015] NSWCA 202. Emmett JA at [13] set out the principles of State Government Insurance Commission v Oakley (1990) 10 MVR 570:
where the negligence of a defendant causes injury and the plaintiff subsequently suffers further injury, the principles for determining the causal connection between the negligence of the defendant and the subsequent injury are as follows:
Where it is not possible to apportion damages to take account of other causes of damage, the plaintiff is required to establish that the defendant’s negligence materially contributed to the loss or damage. The evidentiary onus is then on the defendant and, if the defendant is unable to establish an alternative cause, he or she may be held fully liable.
A commonly occurring scenario arises in cases of injuries suffered as a result of more than one accident or exposure to disease-causing dusts. Again, the plaintiff is required to prove that the defendant’s conduct contributed materially to the injury. If this is done and it is not possible to apportion responsibility between one or more potential causes of damage, the plaintiff will recover in full. The onus is on the defendant to establish and quantify the extent of damage caused by another tortfeasor: Bonnington Castings Ltd v Wardlaw (1956) AC 613 (House of Lords); Middleton v Melbourne Tramway & Omnibus Co Ltd (1913) 16 CLR 572; Amaca Pty Ltd v Ellis (2010) 240 CLR 111 and Amaca Pty Ltd (Under NSW Administered Winding Up) v Roseanne Cleary as the Legal Personal Representative of the Estate of the Late Fortunato (aka Frank) Gatt [2022] NSWCA 151.
Where it is possible to divide the harm, the court must do its best to apportion the loss between tortious and non-tortious causes: Adams v Ascot Iron Foundry Pty Ltd (1968) 72 SR(NSW) 120, per Sugerman AP at 125–126 and State of NSW v Skinner [2022] NSWCA 9.
The defendant bears the evidential onus of establishing that the plaintiff’s life expectancy is likely to be shorter than that estimated in standard life-expectancy tables: Thurston v Todd [1966] 1 NSWR 321; Proctor v Shum [1962] SR (NSW) 511. In Golden Eagle International Trading Pty Ltd v Zhang (2007) 229 CLR 498, Gummow, Callinan and Crennan JJ at [4], and Kirby and Hayne JJ at [68]–[70], held “the Court of Appeal was right to conclude that, despite the then prevailing practice in the courts of New South Wales, the primary judge should have used the prospective rather than the historical tables”.
The standard life expectancy was reduced by 10% in the case of a plaintiff who, although only 21 years old at the time of assessment, continued to be a heavy smoker and the nature of his injuries and their effect on his psychological condition suggested that he would not give up the habit: Egan v Mangarelli [2013] NSWCA 413.
Where the plaintiff’s life expectancy is reduced as a result of injury, loss of income during those years is to be assessed by deducting the probable living expenses that would be incurred in maintaining the plaintiff if she or he had survived: Commonwealth of Australia v McLean (1996) 41 NSWLR 389. This principle was adopted by Sheller JA in James Hardie & Co Pty Ltd v Roberts [1999] NSWCA 314 where he confirmed that compensation was directed at loss of income-earning capacity not wages. Damages of this nature were therefore not a windfall but compensation for the destruction of the asset.
At common law a defence of contributory negligence, if successful, defeated a claim, regardless of the extent of any negligence on the part of the defendant. This situation was remedied in NSW by the Law Reform (Miscellaneous Provisions) Act 1965 where provision was made to apportion liability between the parties and to reduce the plaintiff’s damages in accordance with this apportionment.
Contributory negligence must be specifically pleaded as a defence to a claim and, since it is raised by way of defence, the onus is on the defendant to prove that the plaintiff failed to use reasonable care, that had care been taken the plaintiff’s damage would have been diminished, and the extent of that diminution.
The principles that apply to the determination of whether the plaintiff was negligent are the same as those that determine the question of the defendant’s negligence. This involves the application of the general principles set out in s 5B Civil Liability Act. Further s 5R specifically provides that the standard to be applied in determining the issue of contributory negligence is that of a reasonable person in the position of the plaintiff on the basis of what he or she knew or ought to have known at the time. In other words, an objective test is applied without regard to the subjective situation of the plaintiff.
The Motor Accidents Act ss 74, 76, Motor Accidents Compensation Act ss 138, 140 and Motor Accident Injuries Act 2017 ss 4.17 and 4.18 compel a finding of negligence by a plaintiff where drugs or alcohol were involved or the plaintiff failed, contrary to the requirements of the law, to use a seatbelt or use other protective equipment. Some of these provisions do not apply to minors. The provisions concerning drugs and alcohol apply not only to an injured passenger’s condition at the time of an accident; they encompass the situation where the plaintiff, as a passenger in a vehicle at the time of the accident, knew or ought to have known that the driver’s capacity to drive was affected by alcohol.
As to the Motor Accident Injuries Act 2017, see [7-0085] under the subheading Contributory negligence.
The Civil Liability Act goes further in relation to drugs or alcohol. Pt 6 deals with intoxication, defined in s 48 as:
a reference to a person being under the influence of alcohol or a drug (whether or not taken for a medicinal purpose and whether or not lawfully taken).
These provisions apply to civil liability for personal injury or damage to property, except where excluded by s 3B. Section 49 replaces s 74 Motor Accidents Act and s 138 Motor Accidents Compensation Act to the extent of any inconsistency.
The court must determine whether s 50 is engaged where there is an issue about intoxication and an allegation of contributory negligence. The section applies where it is established that the capacity of a plaintiff to exercise reasonable care and skill is impaired by intoxication: s 50(1). No damages are to be awarded unless the court is satisfied that the damage is likely to have occurred even if the injured party had not been intoxicated: s 50(2). If satisfied, contributory negligence is presumed unless the court is satisfied that the person’s intoxication did not contribute in any way to the cause of the death, injury or damage: s 50(3). Otherwise, unless intoxication was not self-induced, the provision mandates a finding of a minimum 25% for contributory negligence on the part of the plaintiff. If s 50(2) is satisfied and the party seeking damages demonstrates that the relevant person’s intoxication did not contribute in any way to the cause of death, injury or damage (s 50(3)) then s 50 has no further role to play. In that event, any allegation of contributory negligence falls to be resolved by applying the balance of the provisions of the Civil Liability Act and s 9 Law Reform (Miscellaneous Provisions) Act 1965. The issues of causation in s 50 and whether the test in s 50(2) is objective or subjective was ventilated without deciding in Payne (t/as Sussex Inlet Pontoons) v Liccardy [2023] NSWCA 73 at [43]–[55] (Beech-Jones JA). Note, several Court of Appeal judgments have opined that ss 50(2) and 50(3) are not easily reconciled: Jackson v Lithgow City Council [2008] NSWCA 312 at [103]; NSW v Ouhammi (2019) 101 NSWLR 160 at [41], [126]; Payne (t/as Sussex Inlet Pontoons) v Liccardy at [45].
Section 50 applies to under-age drinkers. Russell v Edwards [2006] NSWCA 19 held that inexperience concerning the intoxicating effects of alcohol did not lead to the conclusion that intoxication was not self-induced. Ipp JA stating that “self-induced” equated to “voluntary”: at [21].
Once a finding is made that the plaintiff was guilty of contributory negligence, it is necessary to determine the proportions in which each of the parties is to be held liable for the damage suffered by the plaintiff.
The leading authorities on this issue are Pennington v Norris (1956) 96 CLR 10 and Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34. In Podrebersek, above, at [10] it was said:
The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man (Pennington v Norris, above, at 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd (1953) AC 663, at p 682; Smith v McIntyre (1958) Tas SR 36, at pp 42–49 and Broadhurst v Millman (1976) VR 208, at p 219 and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance.
In Wynbergen v Hoyts Corporation [1997] HCA 52, the High Court decided that it was not possible, where a finding of contributory negligence is made, to conclude that damages recoverable by the injured party should be reduced to nothing because the effect of such a conclusion would be to hold the claimant wholly responsible. Section 5S Civil Liability Act now provides for a finding of contributory negligence of 100% with the result that no damages are to be awarded. The claim that a finding of 100% contributory negligence should be made is often coupled with a pleading that the defendant owed no duty of care and is most frequently encountered in motor accident cases where joint illegal purpose or intoxication of both passenger and driver are involved. To date the courts have shown great reluctance to reduce damages by 100% or, except where illegality is concerned, to find no duty of care.
In Gala v Preston (1991) 172 CLR 243 at 254, the High Court noted that there might be special and exceptional circumstances where participants could not have had any reasonable basis for expecting that a driver of a vehicle would drive it according to ordinary standards of competence and care. In Joslyn v Berryman (2003) 214 CLR 552, McHugh J at [29] accepted that the plea of no breach of duty or a plea of no duty in an extreme case remained open in the case of a passenger who accepted a lift with a driver known to the passenger to be seriously intoxicated.
Similarly in Imbree v McNeilly (2008) 236 CLR 510, Gummow, Hayne and Kiefel JJ said at [82]:
The conclusion that the defendant owed a plaintiff no duty of care is open in a case like Joyce if, as Latham CJ said, “[in] the case of the drunken driver, all standards of care are ignored [because the] drunken driver cannot even be expected to act sensibly”. And as indicated earlier in these reasons, it is that same idea which would underpin a conclusion that the plaintiff voluntarily assumed the risk of being driven by a drunken driver.
In Miller v Miller (2011) 242 CLR 446, the High Court confirmed that no duty of care to a co-offender is owed by a person committing a crime unless one party withdraws from the joint illegal enterprise and is no longer complicit in the crime. The duty of care is owed from the point of withdrawal. In deciding the issues in that case, the High Court considered in detail prior authority on issues of duty of care in circumstances of illegal conduct: Henwood v Municipal Tramways Trust (SA) (1938) 60 CLR 438; Smith v Jenkins (1970) 119 CLR 397; Jackson v Harrison (1978) 138 CLR 438; Gala v Preston (1991) 172 CLR 243; Cook v Cook (1986) 162 CLR 376; Imbree v McNeilly (2008) 236 CLR 510; Insurance Commissioner v Joyce (1948) 77 CLR 39.
The issues in Zanner v Zanner (2010) 79 NSWLR 702 concerned the extent to which the defendant, at 11 years of age, should be held liable to the plaintiff, his mother, who allowed him to drive his father’s car. The defendant raised three issues in defence: the duty of care owed by the defendant when he was too inexperienced and incompetent to be expected to control the vehicle; causation, in circumstances where the plaintiff brought about the risk that eventuated; and whether, that if liability were established, contributory negligence should be assessed at 100%.
Tobias AJA rejected all of these defences. He did, however, reassess the plaintiff’s contributory negligence, increasing it from 50% to 80%, a result he considered to be warranted by two aspects of the plaintiff’s conduct. The first was allowing the defendant to drive the vehicle; the second was to stand in front of it while directing the defendant.
The NSW Court of Appeal has considered the issue of how the apportionment of liability is to be undertaken having regard to the provisions of the Civil Liability Act.
In Joslyn v Berryman (2003) 214 CLR 552, the High Court was concerned with the provisions of s 74 Motor Accidents Act (subsequently re-enacted as s 138 Motor Accidents Compensation Act and now dealt with in s 49 Civil Liability Act). Although these provisions differed from those of the Law Reform (Miscellaneous Provisions) Act in that they provided for damages in respect of a motor accident to be reduced by such percentage as the court thinks just and equitable in the circumstances of the case, Kirby J at [127] said that they supplemented common law and enacted law. He noted that the Law Reform (Miscellaneous Provisions) Act did not address the extent to which the plaintiff’s neglect caused the accident and that the responsibility for which it provided:
is that which is “just and equitable having regard to the claimant’s share in the responsibility for the damage”. Such “damage”, as the opening words of s 10(1) make clear, is the damage which the person has suffered as a “result partly of his own fault and partly of the fault of any other person or persons”. [Emphasis in original.]
Doubt on whether these principles continue to apply has arisen from the decisions of the Court of Appeal in Gordon v Truong [2014] NSWCA 97 and T & X Company Pty Ltd v Chivas [2014] NSWCA 235. Both cases involved collisions between vehicles and pedestrians and both involved findings of breach of duty and contributory negligence. Basten JA proposed that s 5R Civil Liability Act, in its application of the general principles of negligence described in s 5B of the Act, altered the approach to be taken to apportioning liability. He took the view that the apportionment is now to be made having regard to the causative contributions of the lack of care of each party and not by reference to the extent to which each act of neglect contributed to the damage suffered by the plaintiff. See also his discussion of the inter-relationship between ss 5R and 49 Civil Liability Act and their application to motor vehicle accidents in Nominal Defendant v Green [2013] NSWCA 219.
Further clarification of the approach to be taken to apportionment was provided in the reasons of Meagher JA, with whom Gleeson JA and Sackville AJA agreed, in Verryt v Schoupp [2015] NSWCA 128. The appeal dealt, amongst other things with the trial judge’s finding that, although there was negligence on the part of a 12-year-old skateboarder who “skitched” a ride uphill by holding onto the back of the appellant’s motor vehicle, the appellant was overwhelmingly responsible and that there should therefore be no reduction in damages for contributory negligence.
Meagher JA noted the difference between the requirement of s 9(1) of the Law Reform (Miscellaneous Provisions) Act 1965 that responsibility be apportioned according to what is just and equitable having regard to the claimant’s share in the responsibility for the damage and that of s 138(3) of the Motor Accidents Compensation Act that damages recoverable be reduced by such percentage as the court thinks just and equitable in the circumstances of the case. This did not involve reference to s 5D to determine a causal connection between the contributory negligence and the injury. It involved, first, as required by s 5R(1) of the Civil Liability Act, the application of the principles of s 5B in determining whether the person who suffered harm has been contributorily negligent.
It was in the apportionment of responsibility that the issue of the extent to which each party was responsible for the accident and the injuries sustained became relevant. In this case, the Court of Appeal accepted that there was no evidence to support the contention that the respondent’s failure to wear a protective helmet caused his brain injury, an element where the onus of proof rested with the appellant. There was, however, evidence that the 12-year-old respondent appreciated that the skitching exercise was dangerous and Meagher JA considered that his lack of care for his own safety was adequately reflected by reducing his damages by 10%.
This approach has been adopted in a number of decisions, including Grills v Leighton Contractors Pty Ltd [2015] NSWCA 72 and Nominal Defendant v Cooper [2017] NSWCA 280. In the latter case, McColl JA noted that the parties did not suggest that there was any significance in the differences between s 9(1) of the Law Reform (Miscellaneous Provisions) Act 1965 and s 138(1) of the Motor Accidents Compensation Act 1999. Her Honour said, using the principles derived from Podrebersek and Pennington, that both provisions required the court to arrive at an apportionment of the parties’ respective shares in the responsibility for the damage by comparing the degree to which they had each departed from the standard of care of the reasonable person and the relative importance of their acts in causing the damage.
Appellate courts consistently note that the facts of earlier cases are rarely of assistance when determining an appropriate apportionment. They also maintain a degree of reluctance to interfere in the first instance determination: Mobbs v Kain [2009] NSWCA 301; Harmer v Hare [2011] NSWCA 229.
Section 5T Civil Liability Act requires the court to take account of the contributory negligence of the deceased in claims under the Compensation to Relatives Act 1897. Section 30 Civil Liability Act extends this requirement to the contributory negligence of a victim killed, injured or endangered by an act or omission of the defendant when assessing claims for nervous shock.
The application of the principles of contributory negligence to blameless accidents was considered by the Court of Appeal in Axiak v Ingram (2012) 82 NSWLR 36. A blameless accident is defined in s 7A Motor Accidents Compensation Act as follows:
“blameless motor accident” means a motor accident not caused by the fault of the owner or driver of any motor vehicle involved in the accident in the use or operation of the vehicle and not caused by the fault of any other person.
Section 7F of the Act provides for the reduction of damages by reason of contributory negligence on the part of a deceased or injured person.
In Axiak, the Court of Appeal held that the words “and not caused by the fault of any other person” referred to tortious conduct of persons other than the plaintiff. In those circumstances the principles of Podrebersek had no application where, because of the provisions of the Act, the driver was not at fault so that comparisons of culpability and contributions to the damage suffered were inappropriate. Tobias JA said that contributory negligence was therefore to be assessed by reference to the extent to which the plaintiff departed from the standard of care imposed in taking care for his or her own safety. He rejected, as contrary to the intention of the legislature, the proposition that a plaintiff, guilty of contributory negligence in a blameless accident must always be the sole cause of his or her injuries and therefore guilty of negligence to the degree of 100%.
This decision was not challenged in Davis v Swift [2014] NSWCA 458 but the Court of Appeal was unanimous in the view that it required reconsideration. The court was divided on the question of whether, it being accepted that the plaintiff’s conduct was the sole cause of the accident, contributory negligence should be assessed at 100%. Meagher and Leeming JJA, held that, since the defendant was, by s 7B(1), deemed to have been at fault, the assessment of culpability for the accident should be 20% to the defendant and 80% to the plaintiff. Adamson J agreed with the trial judge that the plaintiff’s contributory negligence should be assessed at 100%. She suggested that the contributory negligence addressed by s 7F related to conduct, such as failure to wear a seatbelt, that aggravated damage but was not causative of the accident.
The approach taken in Axiak was adopted in Nominal Defendant v Dowedeit [2016] NSWCA 332.
This head of damage is also referred to as general damages or non-pecuniary loss. It covers the elements of pain, suffering, disability and loss of amenity of life, past and future. As already noted, in respect of the future, an element of hypothesis is involved.
There are few remaining areas in personal injury claims where damages remain at large. The Motor Accidents Compensation Act and the Civil Liability Act impose thresholds to the recovery of non-economic loss and an upper limit on the amounts that may be awarded. Common law damages for non-economic loss are no longer recoverable under the Workers Compensation Act.
The maximum sums recoverable for non-economic loss are adjusted annually by reference to fluctuations in the average weekly earnings of full-time adults as measured by the Australian Statistician: s 146 Motor Accidents Compensation Act; s 16 Civil Liability Act. The adjustment takes effect on 1 October in each year. The maximum sum to be awarded is that which is prescribed at the date of the order awarding damages.
Section 3 Civil Liability Act contains the following definition:
(a)“non-economic loss” means any one or more of the following:
pain and suffering
(b)loss of amenities of life
(c)loss of expectation of life
(d)disfigurement.
The same definition is found in s 3 Motor Accidents Compensation Act.
The Motor Accidents Compensation Act applies to injuries suffered in accidents occurring after midnight on 26 September 1995. Sections 131–134 (and s 135, repealed in 2020) deal with non-economic loss. To qualify for an award the plaintiff’s level of whole-person impairment must be assessed at greater than 10%. If the parties disagree on this question, a medical assessor, whose determination is binding on the parties and the courts, is appointed by the Motor Accidents Authority. Unlike the Motor Accidents Act and the Civil Liability Act, s 134 does not require that the court assess damages as a proportion of the maximum sum fixed for an award of non-economic loss. Damages are assessed with the application of common law principles up to the maximum provided for in s 134. This was explained by Heydon JA in Hodgson v Crane (2002) 55 NSWLR 199 when he said it was not possible to construe the concept of proportionality out of the language of ss 131–134. When the threshold of 10% permanent impairment was passed, the court was required to assess non-economic loss without statutory restraint except for the maximum that may be awarded: at [39].
The Motor Accidents Act first introduced the concept of significant impairment to an injured person’s ability to lead a normal life as the basis for assessment of non-economic loss and the assessment of the percentage of that impairment against a most extreme case.
As to the Motor Accident Injuries Act 2017, see [7-0085] under the subheading Non-economic loss.
The Civil Liability Act contains provisions similar to those of the Motor Accidents Act. The threshold for recovery of non-economic loss is an injury assessed by the court to be at least 15% of a most extreme case: s 16(1). Where the severity of the plaintiff’s injuries is assessed to be less than 33% of a most extreme case, the amount to be awarded is to be calculated by reference to the deductibles set out in s 16(3). If the assessment exceeds 33%, the plaintiff is entitled to receive in full the proportion of the maximum sum applicable.
A note appended to s 16 Civil Liability Act describes the following method of assessing damages in accordance with the table of deductibles:
Step 1:The following are the steps required in the assessment of non-economic loss in accordance with this section:
Determine the severity of the claimant’s non-economic loss as a proportion of a most extreme case. The proportion should be expressed as a percentage.
Step 2:Confirm the maximum amount that may be awarded under this section for non-economic loss in a most extreme case. This amount is indexed each year under s 17.
Step 3:Use the Table to determine the percentage of the maximum amount payable in respect of the claim. The amount payable under this section for non-economic loss is then determined by multiplying the maximum amount that may be awarded in a most extreme case by the percentage set out in the Table.
Where the proportion of a most extreme case is greater than 33%, the amount payable will be the same proportion of the maximum amount.
The issue of what constitutes a most extreme case has been considered in a number of decisions arising out of provisions of the Motor Accidents Act that are identical to those now in the Civil Liability Act: Matthews v Dean (1990) 11 MVR 455; Dell v Dalton (1991) 23 NSWLR 528; Kurrie v Azouri (1998) 28 MVR 406. In each case, the courts involved confirmed that the use of the indefinite article “a” allowed for questions of fact and degree to be taken into account in determining whether the severity of injury was such that the maximum sum was to be awarded.
In Dell v Dalton, above, Handley JA said at 533:
In my opinion the definition of non-economic loss and the bench mark in s 79(3) do not enact a statutory table of maims which reduces all human beings to some common denominator and require the impact of particular injuries on a given individual to be ignored.
Another issue that has been dealt with on several occasions is the manner in which damages as a proportion of the maximum are to be assessed. Cautions have been expressed against having regard to the consequences in monetary terms of deciding on a particular percentage, where assessments below 33% may have significant consequences. In Clifton v Lewis [2012] NSWCA 229 Basten JA said at [57]:
It is true that a small variation in the assessment may have significant consequences for the amount of damages to be awarded. In the present case, according to the table provided in s 16 of the Civil Liability Act, a 25% assessment as a proportion of a most extreme case will permit an award of 6.5% of the maximum amount fixed by statute; a 33% assessment will result in 33% of the maximum amount. In rough terms, an increase of one-third in the assessment results in an increase of 500% in the award. However, the fact that a small change in the assessment can have a large consequence in monetary terms does not mean that the nature of the assessment changes or can be assumed to be a more precise exercise than it is. The relationship between the assessment and the consequence is fixed by Parliament. To assess the proportion of a most extreme case by reference to the consequence in monetary terms would be to adopt a legally erroneous course.
Consistent with the Dell approach, a trial judge, assessing the proportion of a most extreme case, is not required to arrive at an unrealistic level of precision provided the percentage falls within a reasonable range of assessment: Berkeley Challenge Pty Ltd v Howarth [2013] NSWCA 370, Basten JA.
The age of a plaintiff may have an effect on the assessment of non-economic loss under the Civil Liability Act. In Reece v Reece (1994) 19 MVR 103, the Court of Appeal remarked upon the need, when assessing, on a proportionate basis, the severity of injury, to consider the age of a plaintiff and the likely length of the period over which the pain and suffering of progressive disability would be suffered. The court held that the consequence of particular injuries were likely to be more severe in the case of a younger person than that of an elderly plaintiff who had a much shorter period of life expectancy.
The requirement to consider the age of the plaintiff was confirmed in Marshall v Clarke (unrep, 5/7/94, NSWCA) and Christalli v Cassar [1994] NSWCA 48 at [3]. In Varga v Galea [2011] NSWCA 76, McColl JA noted at [72] that age was only one of numerous matters to be taken into account in assessing non-economic loss by reference to the definition of that term in s 3 Civil Liability Act.
The principles adopted in Reece v Reece and Varga, above, did not apply to claims under the Motor Accidents Compensation Act or the Motor Accident Injuries Act 2017 where damages are not assessed by reference to a proportion of a most extreme case: RACQ Insurance Ltd v Motor Accidents Authority (NSW) (No 2) (2014) 67 MVR 551 per Campbell J.
The court is required to assess the totality of the plaintiff’s injuries rather than assessing each injury on an individual basis: Holbrook v Beresford (2003) 38 MVR 285. However, where the plaintiff suffered injury in multiple accidents, the assessment is to be made by reference to the injuries suffered in each individual accident: Muller v Sanders (1995) 21 MVR 309.
The plaintiff in Alameddine v Glenworth Valley Horse Riding Pty Ltd [2015] NSWCA 219 claimed for damages both under the Civil Liability Act and the Australian Consumer Law. The issue to be determined was whether her claim for non-economic loss should be calculated according to the more generous provisions of s 16 of the Civil Liability Act or in accordance with s 87M of the Competition and Consumer Act 2010. Macfarlan JA, with whom Simpson JA and Campbell AJA agreed, rejected the argument that the Commonwealth legislation prevailed. He said the Competition and Consumer Act did not purport to, nor did it, have the effect of excluding recovery of non-economic loss under the Civil Liability Act notwithstanding that causes of action were available to the plaintiff under both Acts.
The Court of Appeal dealt with the principles to be applied in the assessment of damages for false imprisonment in State of NSW v Smith [2017] NSWCA 194. The court referred to texts and authorities that emphasised that “[e]ven apparently minor deprivations of liberty are viewed seriously by the common law” (see Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri (2003) 128 FCR 54 at [88]). Damages in such a case, therefore, are intended to take account of, in addition to the deprivation of liberty, the shock of the arrest and injury to feelings, dignity and reputation.
This head of damage includes income loss, superannuation losses and out-of-pocket expenses such as voluntary and commercially provided care expenses.
The authorities make it clear that damages for lost income, past and present, are awarded for impairment to income-earning capacity when the impairment is productive of income loss: Graham v Baker (1961) 106 CLR 340; Medlin v State Government Insurance Commission (1995) 182 CLR 1. There are therefore three questions to be answered in assessing income.
What was the plaintiff’s income-earning capacity at the time of injury?
To what extent was it impaired by the injury?
To what extent was the impairment productive of income loss?
A very useful summary of the applicable principles, with reference to authority, was provided by McColl JA and Hall J in Kallouf v Middis [2008] NSWCA 61 at [44]–[61].
Damages for past and future loss of income are allowed because diminution of earning capacity is or may be productive of financial loss: Graham v Baker, above. An alternative way of expressing the principle is that the plaintiff is compensated for the effect of an accident on the plaintiff’s ability to earn income: Medlin v State Government Insurance Commission, above, McHugh J at [16].
Although the exercise involves assessment of lost earning capacity and not loss of earnings, evidence of wage rates, known for the past and likely in the future, provides a basis for assessment.
Both the lost capacity and the economic consequences of that loss must be identified before it will be possible to assess the sum that will restore the plaintiff to his or her position but for injury.
What was earned in the past may be a useful guide to what might be earned in the future but it does not always provide certain guidance.
Assessment of future income loss necessarily involves the consideration of future possibilities or hypothetical events. The exercise is imprecise and carried out within broad parameters.
Evaluation of the extent to which a plaintiff may in future lose time from work and of the proper compensation to be allowed depends on the evidence.
An error of principle would be involved in concluding, in the absence of evidence, as a matter of certainty that a plaintiff will suffer future income loss.
The onus is on the plaintiff to provide evidence in support of the claimed diminution in earning capacity. Past income is relevant to this consideration but is not always determinative.
The onus is on the defendant who contends that the plaintiff has a residual earning capacity to provide evidence of the extent of that capacity and of the availability of employment.
In both cases the evidence must establish more than a mere suggestion of loss or capacity.
Where it is clear that income-earning capacity has been reduced but its extent is difficult to assess, the absence of precise evidence will not necessarily result in non-recovery of damages. The task is to consider a range of what may be possibilities only that a particular outcome might be achieved to arrive at an award that is fair and reasonable.
Tax treatment of a plaintiff’s income may be relevant to the assessment of his or her income-earning capacity. There are cases where tax returns do not reflect the full amount of that capacity. For example, the case of a husband and wife partnership, where income is divided equally although one partner performs the work necessary to generate the income while the other undertakes the administrative tasks associated with the operation of the business.
Husher v Husher (1999) 197 CLR 138 was an example of such a case. The plurality of the High Court noted:
These principles were applied by the Court of Appeal in Conley v Minehan [1999] NSWCA 432.
In Morvatjou v Moradkhani [2013] NSWCA 157, it was said that it was glaringly improbable that the plaintiff earned only the income disclosed in his tax returns at a time when he was supporting himself, his wife and two children. McColl JA referred to reasons of von Doussa J in Giorginis v Kastrati [1988] 49 SASR 371 in which he said that, while such a discrepancy reflected on a plaintiff’s credit so that his or her evidence generally needed to be scrutinised with special care, it did not necessarily disqualify him or her from recovering damages based on evidence of actual earnings. McColl JA did not endorse the proposition that a plaintiff must admit failure to disclose income to tax authorities but she continued the Court of Appeal’s emphasis on the need to assess diminution of income-earning capacity, acknowledging that evidence of actual income was the most useful guide when undertaking this exercise.
Malec v Hutton and Medlin v State Government Insurance Commission, above, were High Court decisions, the result of which was that, where a plaintiff demonstrates some loss of earning capacity extending beyond the date of trial, although difficult to assess, the courts are bound to award something unless, on the material before the court, it can be seen confidently that the damage suffered by the plaintiff will not in fact be productive of income loss.
The task of assessment of future loss, particularly where there is little or no evidence of loss to the date of hearing, was clarified in State of NSW v Moss (2002) 54 NSWLR 536 where the plaintiff’s injuries clearly pointed to an effect on his capacity to earn and there was therefore evidence of impaired earning capacity. Heydon JA said it was wrong to conclude that damages to compensate for this loss should be minimal. He referred at [69] to authorities that he said contained two uncontroversial themes.
In general it was desirable for precise evidence to be called of pre-injury income and likely post-injury income.
Absence of that evidence will not necessarily result in an award of no or nominal damages for impaired earning capacity.
His Honour’s summary at [89] was:
In short, where earning capacity has unquestionably been reduced but its extent is difficult to assess, even though no precise evidence of relevant earning rates is tendered, it is not open to the court to abandon the task and the want of evidence does not necessarily result in non-recovery of damages. Statements to the contrary such as those made in Allen v Loadsman [1975] 2 NSWLR 787 at 792 are not correct: Baird v Roberts [1977] 2 NSWLR 389 at 397–8 per Mahoney JA; J K Keally v Jones [1979] 1 NSWLR 723 at 732–735 per Moffitt P; Yammine v Kalwy [1979] 2 NSWLR 151 at 154–5 and 156–7 per Reynolds JA and Mahoney JA; Thiess Properties Pty Ltd v Page (1980) 31 ALR 430; see also Radakovic v R G Cram & Sons Pty Ltd [1975] 2 NSWLR 751 at 761 where Samuels JA criticised the “meagre facts” provided but did not say it was not open to the jury to find a substantial sum for diminished earning capacity by the “application of their own knowledge and experience”. The task of the trier of fact is to form a discretionary judgment by reference to not wholly determinate criteria within fairly wide parameters. Though the trier of fact in arriving at the discretionary judgment must achieve satisfaction that a fair award is being made, since what is involved is not the finding of historical facts on a balance of probabilities, but the assessment of the value of a chance, it is appropriate to take into account a range of possible outcomes even though the likelihood of any particular outcome being achieved may be no more than a real possibility.
In Cupac v Cannone [2015] NSWCA 114 the Court of Appeal noted the extremely difficult task of assessment of income loss facing the trial judge when dealing with wildly differing medical opinion and the failure to call any medical expert for cross examination. The court rejected the contention that the award for past income loss should be increased to take account of inflation from the date of the plaintiff’s injury. This was because the trial judge was required to estimate loss when precise calculation was not possible and the figure arrived at took into account a range of factors, including the changing value of money.
In Jopling v Isaac [2006] NSWCA 299 the Court of Appeal confirmed that, notwithstanding the requirement of s 13(1) Civil Liability Act that the plaintiff’s most likely future circumstances, but for injury, be taken into account, the principles of State of NSW v Moss, above, continued to apply when the evidence was deficient and that the option of awarding a cushion or buffer as compensation for future economic loss remained available. This was confirmed in Black v Young [2015] NSWCA 71, where the court also confirmed the need to address specifically the provisions of Motor Accidents Compensation Act 1999 s 126 to the circumstances of each particular case.
In Thorn v Monteleone [2021] NSWCA 319 the Court of Appeal upheld the award of a buffer or cushion for economic loss to compensate the plaintiff for the future prospect of becoming a farm manager or operating his own farm. The buffer of $150,000 was awarded on top of an assessment that the plaintiff had an ongoing loss of $900 per week because he unfit to perform his pre-injury duties.
A similar problem arose in Younie v Martini (unrep, 21/3/95, NSWCA) when the plaintiff suffered no income loss to the date of trial. The court held, however, that an assessment that the plaintiff suffered significant impairment to the extent of 18% should have resulted in a finding of impaired income capacity. In this case, given the nature of the plaintiff’s duties as a nursing assistant, having found that the injury continued to the date of trial, some award ought to have been made for future economic loss. See also Chen v Kmart Australia Ltd [2023] NSWCA 96 where the eight-year-old plaintiff was awarded $5,000 as a buffer sum for loss of future earning capacity, the primary judge acknowledging the possibility of “some limitation of career choices” due to some degree of inhibition or diminished self esteem and an only slight chance of rejection or disapproval by others in the workforce on account of her scarring. In this case, where the assessment of the likely future economic loss of the child plaintiff was a “matter of intuition, or guesswork”, the scope for appellate intervention was limited: at [51]. However, in Clancy v Plaintiffs A, B, C and D [2022] NSWCA 119 at [274]–[278], the court found the primary judge’s assessment of C’s damages for future economic loss in the sum of $111,000, by way of a buffer, could not be sustained. Not only was it non-compliant with the requirements of s 13 of the Civil Liability Act, which are directed to supplying some meaningful and transparent basis for the award of damages for future economic loss, but the fact the damages awarded for this head of loss were identical to those awarded to plaintiff A reinforced the perception that the figure of $111,000 was not calculated by reference to the particular circumstances of C.
Nevertheless, as pointed out by Young AJA at [111] in Perisher Blue Pty Ltd v Harris [2013] NSWCA 38, there can be no compensation for loss of income-earning capacity unless it is also established that diminished capacity is productive or is likely to be productive of actual loss.
In Sharman v Evans (1977) 138 CLR 563 the High Court dealt with the question of the adjustment to be made to the award for income loss where the plaintiff’s injuries were such that she was not expected to live to retirement age. The court held that she was entitled to recover income loss during the lost years subject to the deduction of an amount to account for the expenses that she would have incurred in self maintenance. No deduction was required for the expense of maintaining dependants.
Wynn v NSW Insurance Ministerial Corporation (1995) 184 CLR 485 set aside any suggestion that a working mother’s income should be reduced to account for expenses of providing childcare or domestic help or for the prospect that she “would at some stage (choose) or (be) forced to accept a less demanding job” because she “would be unable or unwilling to remain in her job which placed such heavy demands on her time, energy and health and the love and patience of her husband”: Dawson, Toohey, Gaudron, Gummow JJ at [9]. They pointed out that it was necessary to call evidence that suggested a plaintiff was less able than any other career-oriented person, whether male or female, to combine successfully a demanding career and family responsibilities. Childcare and domestic-care responsibilities, they said, did not always involve expenditure. This was a matter of choice for the family and the expense involved was of a private or domestic nature.
White v Benjamin [2015] NSWCA 75 also rejected the proposition that a wife’s future income loss should be discounted because her husband’s secure employment in a flourishing business might persuade her to abandon her own career ambitions.
Specific evidence is required if a plaintiff proposes to work beyond retirement age: Roads and Traffic Authority v Cremona [2001] NSWCA 338. In that case the court accepted a general practitioner’s evidence that he would continue to work to the age of 70 years but the assessment of his income loss beyond retirement age was reduced to take account of the likelihood that, as he advanced in age, he would earn less.
A certificate of assessment of whole person impairment issued under Motor Accidents Compensation Act 1999 s 61 is not conclusive in respect of economic loss: Pham v Shui [2006] NSWCA 373, Brown v Lewis (2006) NSWLR 587; [2006] NSWCA 87, Motor Accidents Authority of NSW v Mills (2010) 78 NSWLR 125, El-Mohamad v Celenk [2017] NSWCA 242. While the content of the certificate may have some relevance, extreme caution was required in relying on the content of the certificate in assessing damages for economic loss: Brown v Lewis, above, Mason P at [23].
Difficulties arise in valuing a plaintiff’s loss when they are self-employed or operate a business through a partnership, trust or company. The starting point is the joint judgment of Gleeson CJ, Gummow, Kirby and Hayne JJ in Husher v Husher (1999) 197 CLR 138 at [16], which states that the basic principles for the assessment of damages are well known and should not be obscured by particular factual contexts. These principles require the “identification of what earning capacity has been impaired or lost and what financial loss has been occasioned by that impairment or loss”: at [17].
Poor accounting practices, lack of tax returns for previous years, variations in revenue and expenditure from year to year, inability to estimate capacity for expansion and economic downturns (including events such as pandemics) are examples of occurrences that cause particular problems. The problem may be aggravated where a plaintiff intends to start a business but has not done so at the time of injury.
Sometimes a plaintiff’s absence through injury may not adversely impact the profits of an established business, and it is difficult to estimate the financial loss incurred by the plaintiff’s absence. Conversely, the incurrence of a loss does not necessarily mean that it is recoverable by the plaintiff, or anyone else. Similarly, the wage drawn from a business by a self-employed person may not be a true reflection of earning capacity. A court is required to do its best on the material available to measure the loss that is due to the injury: Ryan v AF Concrete Pumping Pty Ltd [2013] NSWSC 113 at [211] and New South Wales v Moss (2000) 54 NSWLR 536 at [72] (Heydon JA).
The requirement to mitigate the loss will ordinarily mean that the damages cannot exceed the cost of employing someone to do what the injured plaintiff is unable to do. However, in an appropriate case the entrepreneurial efforts of a business proprietor may need to be rewarded by a percentage uplift on the wages of the replacement employee or employees. Alternatively, a loss of profit is recoverable if it reflects the pecuniary value of the plaintiff’s physical and intellectual labour, such as self-employed professionals who are dependent on rendering fees for services.
It is an acknowledged principle that life is not always certain and that unpredictable events can affect future income. These events or vicissitudes are dealt with by the application of a discount to the sum assessed as compensation for future income losses.
In State of NSW v Moss, above, Mason P at [33], referring to Wynn v NSW Insurance Ministerial Corporation, above, at 497, said that the negative consequences or vicissitudes that are normally taken into account are sickness, accident, unemployment and industrial disputes.
In Norris v Blake (No 2) (1997) 41 NSWLR 49 Clarke JA confirmed that it was in order to add a sum against the positive contingency of success or income-earning capacity beyond pension age.
In NSW, 15% is the conventional allowance made for vicissitudes. In FAI Allianz Insurance Ltd v Lang [2004] NSWCA 413 at [18] Bryson JA described the conventional allowance as “an expedient and approximate resolution of many imponderables, and the difficulty of producing a justification for any greater or lower figure in a particular case tells strongly against departing from the conventional figure”. In State of NSW v Moss at [100] Heydon JA described it as the starting point and the finishing point in most cases.
The conventional discount of 15% may be varied to take account of particular circumstances. For instance, where the plaintiff is of advanced age with a relatively short period over which the assessment of future income loss is to be made, the percentage applied for vicissitudes may be reduced. It is more common, however, that the percentage is increased, particularly where there is evidence of a pre-existing condition, unrelated to the injury that is the subject of the claim, that is likely to affect the plaintiff’s capacity to continue to earn income: Berkley Challenge Pty Ltd v Howarth [2013] NSWCA 370. See also, for example, Palmer v NSW [2024] NSWSC 179, in which the plaintiff was sexually abused by the third defendant as a child but had also undergone a series of other traumatic events that could not be said to have been caused by the defendant’s conduct. Garling J reduced the plaintiff’s award by 30% for vicissitudes, finding the other traumatic events contributed (and in a material way) to her mental illnesses and diagnoses and would have been likely to have adversely affected her working career: at [102]–[105].
In Taupau v HVAC Constructions (Qld) Pty Ltd [2012] NSWCA 293, Beazley JA at [190]–[192] said that the plaintiff’s past record of imprisonment should not have altered the principles on which his past and future income loss was assessed in any way differently from the principles applied to law abiding members of the community. However, it would have been appropriate to take the plaintiff’s propensity to crime and imprisonment into account by way of the discount for vicissitudes.
Care should be exercised to avoid double counting. In Smith v Alone [2017] NSWCA 287, the plaintiff’s pre-accident income had been limited by his pre-existing alcohol dependency. The trial judge took account of this factor in assessing the sum to be awarded for income loss and further decreased the award by 35% for vicissitudes. Macfarlan JA, with whom Meagher and White JJA agreed, said at [58]:
Both parties accepted that the usual discount to damages for future economic loss that is made for contingencies or “vicissitudes” is 15%. As the plurality said in Wynn v NSW Insurance Ministerial Corporation (1995) 184 CLR 485 at 497; [1995] HCA 53, this discount is to “take account of matters which might otherwise adversely affect earning capacity” and “death apart, ‘sickness, accident, unemployment and industrial disputes are the four major contingencies which expose employees to the risk of the loss of income’” (ibid, citing Harold Luntz, Assessment of Damages for Personal Injury and Death, (3rd ed 1990, Butterworths) at 285).
In re-assessing the deduction at 25%, Macfarlan JA at [63] said:
After all, the average person can hardly be regarded as a paragon of virtue when it comes to heavy drinking.
Care should exercised before departing from the conventional figure to identify and express reasons as to why the plaintiff’s future income is likely to be affected by contingencies to any different or greater degree than normal, notwithstanding that a trial judge’s conclusion is likely to be evaluative and impressionistic: Fuller v Avichem Pty Ltd t/as Adkins Building and Hardware [2019] NSWCA 305 at [69]–[70] (Macfarlan JA) and [105] (Payne JA, White JA agreeing).
The Workers Compensation Act places stringent limits on the recovery of common law damages from an employer, except where the claim is the result of a motor accident. Section 151G disallows any award of common law damages except that which arises out of past and future losses from impairment to income-earning capacity. In order to qualify for any right to claim, the plaintiff must have been assessed with a degree of permanent impairment of at least 15%: s 151H.
Any amount by which the plaintiff’s net weekly earnings exceed or are likely to exceed the amount of gross weekly compensation payments payable under s 34 of the Act is to be disregarded: s 151I. Damages are payable only to pension age as defined by the Social Security Act 1991: s 151IA.
No damages for pure mental harm, or nervous shock, may be claimed where the injury was not a work injury: s 151AD. This provision disallows any claim for nervous shock by, for instance, a relative of an injured worker.
Damages are not to be reduced on account of contributory negligence to the extent that the amount awarded is less than the court’s estimate of the value of the plaintiff’s entitlements by way of commutation of weekly payments of compensation: s 151N.
The defence of voluntary assumption of risk is not available to a claim under the Act but damages are to be adjusted to take account of the plaintiff’s negligence: s 151O.
The Civil Liability Act limits an award of damages for past or future income loss by providing that the court must disregard any amount by which the plaintiff’s gross weekly earnings exceed average weekly total earnings of all employees in NSW in the most recent quarter prior to the date of the award as published by the Australian Statistician: s 12.
In respect of future income loss, s 13 requires a plaintiff to establish assumptions about earning capacity that accord with his or her most likely future circumstances but for the injury. The calculation based on those assumptions must be discounted against the possibility that those circumstances might not eventuate. The court is required to state the assumptions on which the award is based and the percentage by which it has been adjusted. The same provision appears in s 126 Motor Accidents Compensation Act.
In Coles Supermarkets Australia Pty Ltd v Fardous [2015] NSWCA 82 Macfarlan JA said that the requirements of s 13 of the Civil Liability Act were in accordance with the principles established in Purkess v Crittenden (1965) 114 CLR 164 and Morvatjou v Moradkhani [2013] NSWCA 157, namely that a plaintiff at all times bears the onus of proof of the extent of injury and of consequential loss of income-earning capacity. They accorded also with the two-stage process of assessment described in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 that required a plaintiff to establish his or her theoretical earning capacity but for injury and the extent to which that earning capacity would, but for injury, have been productive of income.
Notwithstanding these requirements, common law principles relating to the assessment of income loss, vicissitudes or contingencies continue to apply: Taupau v HVAC Constructions (Qld) Pty Ltd, above, where Beazley JA said ss 12 and 13 made no change to the common law principles, established in Graham v Baker and Medlin v SGIO, that damages for economic loss, past and future, are awarded for impairment to economic capacity resulting from the injury, provided the impairment is productive of income loss.
The Motor Accidents Compensation Act provides in s 125 for a limit on the weekly amount that may be awarded for income losses. The amount of the cap is indexed annually with effect from 1 October in each year. Section 130 requires the court to deduct from payments on account of income loss expenses paid to the plaintiff under the Victims Compensation Act 1996 (repealed, now Victims Rights and Support Act 2013) or by the insurer or Nominal Defendant.
As to the Motor Accident Injuries Act 2017, see [7-0085] under the subheading Economic loss.
The problems presented to a court in meeting the requirements of s 13 Civil Liability Act have been the subject of judicial comment in many decisions. In MacArthur Districts Motor Cycle Sportsmen Inc v Ardizzone [2004] NSWCA 145, Hodgson J noted that s 13 appeared to make no provision for the contingency that a plaintiff’s income might increase significantly. He said it was doubtful that the court could make allowance as in Norris v Blake (No 2), above, for the prospect of superstardom.
Hodgson J also expressed doubt about the power to award a lump sum or buffer when assessing income loss under s 13. This concern was put to rest in Dunbar v Brown [2004] NSWCA 103 where the court held that a buffer could be allowed to account for absences from work from time to time to allow for periods of respite or treatment. This principle has been applied in a number of subsequent decisions, including Allianz Australia Insurance Ltd v Kerr (2012) 83 NSWLR 302 where McColl JA said at [30]:
there is a point (which may be differently assessed by different courts) beyond which the selection of a figure for economic loss is so fraught with uncertainty that the preferred course is to award a lump sum as a “buffer”, without engaging in an artificial exercise of commencing with a precise figure, and reducing it by a precise percentage.
See also Penrith City Council v Parks [2004] NSWCA 201 at [5], [10], [58] (where the Court held that s 13 did not preclude the granting of a buffer for future economic loss when the impact of the injury upon the economic benefit from exercising earning capacity after injury is difficult to determine) and Chen v Kmart Australia Ltd [2023] NSWCA 96 (where a modest buffer was awarded to an eight-year-old plaintiff).
Each statute provides for the net present value of any lump sums paid on account of future income loss to be discounted at a prescribed rate, currently 5%: Workers Compensation Act, s 151J; Civil Liability Act, s 14; Motor Accidents Compensation Act, s 127.
The maximum recoverable for the loss of employer contributed superannuation is that required by law to be paid by the employer: Civil Liability Act, s 15C.
In general terms, where a claimant is injured during their working life, what is awarded in relation to superannuation benefits is the net present value of the court’s best estimate of the fund that the claimant would have had at the date of retirement but for the injury; namely, a fund which would have generated the “lost” superannuation benefits. The capital asset that is being valued (because it is lost) is the present value of the future rights: Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [97] applying Zorom Enterprises Pty Ltd v Zabow (2007) 71 NSWLR 354 at [54], [59], [66]–[67]. The loss suffered is the diminution in value of the asset: Amaca Pty Ltd v Latz at [97].
In Amaca Pty Ltd v Latz, the respondent, who had retired, was in receipt of a superannuation pension and the Commonwealth age pension when diagnosed with terminal malignant mesothelioma. The Full Court of the Supreme Court of South Australia held the value of both pensions were compensable losses, but reduced the award to take into account a reversionary pension payable to his partner after death under the Superannuation Act 1988 (SA), s 38(1)(a). The High Court by majority held that the Full Court was correct to include in the damages award an allowance for the superannuation pension that he would have received for the remainder of his pre-illness life expectancy, less the reversionary pension. The majority held that that his superannuation benefits are a “capital asset”, which has a present value, and which can be quantified: at [101]. As a result of the respondent’s injury caused by the appellant, he would suffer an economic loss in respect of his superannuation pension, which is a capital asset and intrinsically connected to earning capacity. That loss was both certain and measurable by reference to the terms of the Superannuation Act — the net present value of the superannuation pension for the remainder of his pre-illness life expectancy, a further 16 years, and he should be entitled to recover that loss: at [109]. The age pension however is neither a part of remuneration, nor a capital asset. It is not a result of, or intrinsically connected to, a person’s capacity to earn and no sum should be allowed on account of the age pension in the calculation of damages for the respondent’s personal injuries: at [115].
In Najdovski v Cinojlovic (2008) 72 NSWLR 728 the court, by majority, confirmed the adopted practice of awarding 9% if the calculation is based on a gross earning figure or 11% if calculated on earning, net of tax.
This element of income loss arises in situations where a plaintiff has received weekly payments for loss of income under the workers compensation legislation upon which tax has been paid. The plaintiff when recovering common law damages is required to repay to the workers compensation insurer the gross amount of weekly payments received. The tax paid on those weekly payment was held to be recoverable in Fox v Wood (1981) 148 CLR 438 at 441.