Haines v Bendall

[1991] HCA 15

HIGH COURT OF AUSTRALIA

Mason C.J., Brennan, Deane, Dawson, Toohey Gaudron and McHugh JJ.

HAINES v. BENDALL

(1991) 172 CLR 60

1 May 1991

Practice (N.S.W.)

Practice (N.S.W.)—Judgment—Interest—Damages for personal injuries—Interest on damages—Receipt of workers' compensation before judgment—Liability to repay compensation on award of common law damages—Whether compensation excluded from amount on which interest calculated—Supreme Court Act 1970 (N.S.W.), s. 94(1)—Workers' Compensation Act 1926 (N.S.W.), ss. 9, 16, 64(1)(a).

Decisions

MASON C.J., DAWSON, TOOHEY AND GAUDRON JJ. The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed: Butler v. Egg and Egg Pulp Marketing Board (1966) 114 CLR 185, at p 191; Todorovic v. Waller (1981) 150 CLR 402, at p 412; Redding v. Lee (1983) 151 CLR 117, at p 133; Johnson v. Perez (1988) 166 CLR 351, at pp 355, 386; M.B.P (S.A.) Pty. Ltd. v. Gogic (1991) 65 ALJR 203; 98 ALR 193; Livingstone v. Rawyards Coal Company (1880) 5 App Cas 25, at p 39; British Transport Commission v. Gourley (1956) AC 185, at pp 197, 212. Compensation is the cardinal concept. It is the "one principle that is absolutely firm, and which must control all else": Skelton v. Collins (1966) 115 CLR 94, per Windeyer J. at p 128. Cognate with this concept is the rule, described by Lord Reid in Parry v. Cleaver (1970) AC 1, at p 13, as universal, that a plaintiff cannot recover more than he or she has lost.

2. The question in this case is whether the failure to take into account the benefit of the use and enjoyment of a sum paid by way of workers' compensation ($49,037) in the calculation of interest on pre-judgment non-economic damages violated this basic principle and resulted in the respondent (plaintiff) recovering more than he had actually lost as a result of the appellant's (defendant's) negligence.
Background

3. On 5 December 1979, the respondent, a schoolteacher, sustained serious personal injuries in the course of a school excursion to the Blue Mountains National Park. The respondent received payments under s.9 of the Workers' Compensation Act 1926 (N.S.W.) ("the Act"), now repealed, of $10,080 for loss of earnings and $49,037 by way of compensation for injury pursuant to the provisions of s.16 of the Act. Subsequent to this award, the respondent commenced proceedings for negligence against the appellant, the Nominal Defendant appointed pursuant to the Claims against the Government and Crown Suits Act 1912 (N.S.W.). The respondent was successful in these proceedings and judgment was entered in the sum of $750,000. This sum represented the aggregate of amounts awarded under various heads of damage and included an award of interest on pre-judgment damages for non-economic loss.

4. In assessing damages for the respondent's loss of earning capacity as a schoolteacher for the period from the accrual of the cause of action to the date of judgment, the trial judge awarded the respondent $10,080, a figure which coincided with the amount that had been awarded under s.9 of the Act for loss of earnings, and $8,915 which represented loss of earning capacity as a subject co-ordinator, a position to which the trial judge accepted the respondent would have been promoted by 1 January 1983. The trial judge awarded interest on the $8,915 in the sum of $4,140. No interest was awarded on the $10,080 in conformity with this Court's decision in Batchelor v. Burke (1981) 148 CLR 448, where it was held that it was not appropriate "to award interest in respect of that portion of the award which represents damages for earnings lost before trial but replaced by payment of workers' compensation": per Gibbs C.J. at p 455; Aickin, Wilson and Brennan JJ. concurring. Damages for non-economic loss were assessed in the sum of $180,000. Of this amount, $75,000 was apportioned to "the past", in accordance with the approach endorsed by this Court in Fire and All Risks Insurance Co. Ltd. v. Callinan (1978) 140 CLR 427; cf. Cullen v. Trappell (1980) 146 CLR 1, per Gibbs J. at p 21. Interest was calculated on the $75,000 under s.94(1) of the Supreme Court Act 1970 (N.S.W.) at the rate of 8 per cent. This amounted to $52,800.

5. A payment of compensation made under the Act is, to the extent of the amount of the payment, a defence to proceedings brought at the suit of the worker against the employer at common law in respect of the injury: see s.63(5). Likewise, an injured worker who brings proceedings against a tortfeasor other than the employer and the person liable to pay compensation under the Act is not entitled to retain both damages and compensation; if he recovers compensation first and then damages, the worker is liable to repay to the employer out of such damages the amount of compensation which the employer has paid in respect of the worker's injury under the Act and is not entitled to any further compensation: see s.64(1)(a). Thus, in the present case, the respondent was obliged to repay his employer the two amounts paid under ss.9 and 16 upon the award of damages.

6. The New South Wales Court of Appeal (Samuels, Priestley and Meagher JJ.A.) dismissed an appeal from the decision of the trial judge, rejecting the appellant's contention that the payment of $49,037 under s.16 of the Act was a payment in respect of pre-judgment non-economic loss for which $75,000 damages were awarded and, therefore, should have been deducted from the $75,000 for the purpose of the calculation of interest under s.94(1) of the Supreme Court Act. The Court of Appeal seems to have been of the view that, while perhaps the s.16 workers' compensation payment was not "completely collateral", it was nevertheless "too remote" in kind from the head of damages for non-economic loss to be taken into account in determining whether detriment existed which required an award of interest to ensure true compensation. The expressions "completely collateral" and "too remote" trace back to the remarks of Gibbs C.J. in Batchelor v. Burke (at p 453):

"(I)t is not possible to say that workers' compensation received in respect of an injury in respect of which damages have been awarded is completely collateral or too remote to be taken into consideration in deciding whether the plaintiff in being deprived of his wages has suffered a detriment which should be remedied by an award of interest."

In his judgment in the present case, Priestley J.A., with whom Samuels and Meagher JJ.A. agreed, stated that:

"It seems to me that although there might be some small overlap between the injuries for which the plaintiff received his s.16 workers' compensation and the matters included in the head of damage from which the $75,000 assessment came, the bases of the workers' compensation award and the common law head of damages are so different in substance that the figure of $49,037 paid pursuant to s.16 cannot be said in any real sense to have been a payment in respect of the same loss to the plaintiff as was the $75,000 figure."

7. Before we turn to the arguments advanced to this Court, we should refer briefly to the power to award interest and the principles governing its exercise. The power to award interest and its exercise

8. The power to award interest on damages for the period between the date when the cause of action arose and the date on which a judgment takes effect is conferred by s.94 of the Supreme Court Act. The section confers power on the Supreme Court to order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money between the date when the cause of action arose and the date when the judgment takes effect.

9. An award of interest up to the date of judgment is an award of interest in the nature of damages: Fire and All Risks Insurance Co. Ltd., at p 431. This statement acknowledges that the award of interest is an integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained. Hence the award of interest is compensatory in character. While "(i)nterest should not be awarded as compensation for the damage done" (emphasis added) (Jefford v. Gee (1970) 2 QB 130, at p 146), the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v. Faraonio (1979) 54 ALJR 231, at p 233; 24 ALR 1, at p 7, the Privy Council stated that "(t)he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident" (emphasis added). See also Batchelor v. Burke, per Gibbs C.J. at p 455; M.B.P (S.A.) Pty. Ltd. v. Gogic, at p 205; p 196 of ALR; cf. Ruby v. Marsh (1975) 132 CLR 642, per Barwick C.J. at pp 652-653. The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation: Pheeney v. Doolan (1977) 1 NSWLR 601, per Reynolds J.A. at p 613. Thus, it is the award of damages and, where appropriate, interest awarded on damages for the period up until the judgment takes effect which allows the plaintiff to be placed in or restored to the situation, as far as money can do, in which he or she would have been but for the defendant's negligence.

10. Section 94(1) of the Supreme Court Act confers a wide discretion on a court awarding interest. That discretion must, however, be exercised in accordance with legal principle: Cullen v. Trappell, per Gibbs J. at p 17. That means that the discretion must be exercised in conformity with the general principles governing the award of damages so that an award of interest on damages for personal injury should do no more than assist in the restoration of a plaintiff to the position in which he or she would have been but for the defendant's negligence.
The arguments of the parties

11. The appellant sought to rely on the decision of this Court in Batchelor v. Burke. There, though the workers' compensation was repayable on the plaintiff's receipt of common law damages, it had been enjoyed by the plaintiff between the time of payment and the date of judgment. As Gibbs C.J. stated (at p 455):

"(W)hen the plaintiff who has lost earnings has received compensation instead, he has not been out of pocket by reason of the failure to pay him damages, even though the compensation is repayable when the damages have been received."

At first glance, this passage would appear to provide an answer to the question raised in this case. Workers' compensation was received and enjoyed by the respondent up until the award of common law damages and during at least part of the period for which the trial judge made his award of interest to compensate for the loss or detriment suffered by the respondent in being kept out of his money. Unlike Batchelor v. Burke, however, the relevant workers' compensation paid in this case did not relate to lost earning capacity. Instead, on the appellant's argument, the payment of workers' compensation was on account of pre-judgment non-economic loss.

12. On that argument, the question then is whether the payment of workers' compensation pursuant to s.16 was payment on account of pre-judgment loss or damage for which the respondent was awarded damages. The appellant contended that, just as there had been an identity in kind in Batchelor v. Burke between the award of workers' compensation and the head of damages against which it was effectively set off for the purpose of calculation of interest, so also here there was a sufficient similarity in kind between the s.16 payment and the damages awarded for non-economic loss so that, for the period from the time of payment to the award of damages, it could not be said that the respondent had been kept out of his money. Accordingly, on the appellant's argument, failure to take into account the respondent's enjoyment of the s.16 payment in the calculation of interest under s.94(1) of the Supreme Court Act resulted in the respondent receiving an amount by way of damages which exceeded his loss.

13. On the other hand, the respondent sought to characterize a payment under s.16 of the Act not as one by way of compensation in the strict sense of that word but rather as "a statutory tariff for interference with the body and its functions". This he contrasted with damages for non-economic loss which encompassed the familiar categories of pain, suffering and loss of the amenities of life. He submitted that the s.16 payment and the award of damages for non-economic loss were conceptually so distinct that it could not be said that enjoyment of the s.16 payment during the relevant period, whatever else it may have achieved, compensated the respondent for his pain, suffering and loss of the amenities of life.

14. We need to bear in mind that the precise question for determination is whether, for the purpose of computing interest, the amount of the respondent's pre-judgment non-economic loss assessed at $75,000 should be reduced by the amount of the s.16 payment. This general question raises two narrower questions: first, for what type of loss or damage is a s.16 payment awarded; and, secondly, whether, for the purpose of deciding this case, it is necessary to apportion all or any of the s.16 payment as between the date of payment and the date of judgment. The answer to the first question turns partly on the nature and purpose of the payment and partly on the extent of the respondent's pre-judgment loss or damage as assessed by the trial judge.
The nature and purpose of compensation under a s.16 payment

15. Section 16(1) provides:

"A worker who has received an injury mentioned in the first column of the table hereunder set forth shall be entitled to receive from his employer by way of compensation for that injury, in addition to any other compensation prescribed by this Act, the amount indicated in respect of that injury in the second column of that table."

Although the language of the sub-section indicates that an injured worker is entitled to receive a fixed amount of compensation in respect of a specific injury, the provisions of the section make it clear that, in some cases, the making of a discretionary judgment by the Workers' Compensation Commission ("the Commission") will be required in order to ascertain the amount of compensation to be paid to an injured worker. An example is provided by s.16(1BA). Although it places a ceiling on the amount of compensation receivable in relation to the particular injury with which it deals, it nevertheless gives the Commission a wide discretion in the assessment of appropriate compensation. Under s.16(1BA)(b)(ii), where an eye is rendered sightless as a consequence of an injury, the Commission is empowered to award a sum

"not exceeding $6,900 as may be agreed upon or, in default of agreement, as the Commission considers appropriate having regard to the possibility that sight of the eye would, but for the injury, have been, in whole or in part, gained or regained, and to such other matters as the Commission may take into account" (emphasis added).

16. However, the fact that in some cases the amount payable under s.16 depends upon the making of a discretionary judgment by the Commission does not affect the character of the payment when received. It is compensation for the injury, that is, the loss of the part of the body (including loss of use of the part of the body) or the function of the body. So much appears from s.16(4) and (5). Sub-section (4) provides:

"For the purpose of the said table the expression 'loss of' includes 'permanent loss of the use of'."

Sub-section (5) provides:

"For the purpose of the said table the expression 'loss of' also includes the 'permanent loss of the efficient use of' but in such case a percentage of the prescribed amount payable, equal to the percentage of the diminution of the full efficient use, may be awarded in lieu of the full amount."

17. The relationship between a worker's entitlement to compensation under s.16 and his or her incapacity for work, whether total or partial, has varied over the years. Indeed, the section has a long and complex history but we do not consider that this history provides any guidance in resolving the question which now arises. As the Act stood when the respondent sustained injury, a worker was entitled to a lump sum payment for a s.16 loss in addition to weekly compensation payments under s.9 in respect of continuing incapacity for work, whether total or partial.

18. The injury for which compensation is payable under s.16 is an injury or loss for which common law damages are recoverable against a tortfeasor when the injury is occasioned by the wrongful conduct of the tortfeasor. It has not been, and could not be, suggested that compensation payable under the Act extends to loss or damage of a kind not compensable at common law. The fact that the Act directs that no payment made under the Act is to be retained upon the award of common law damages provides a statutory indication that such damages are considered to replace any workers' compensation payments. This, in turn, suggests that the same purpose is served by both payments under the Act and an award of damages at common law. Payments under s.16 of the Act are "by way of compensation". So, too, compensation underscores the award of common law damages.

19. It is not quite so easy to equate the injury or loss for which compensation is payable under s.16 with particular heads of damage in respect of which common law damages are assessed in cases of personal injury. The basis on which statutory compensation is awarded is markedly different from the basis on which common law damages are assessed. The Act sets limits to the compensation payable under s.9, so that the amount awarded under this section may not accurately represent the worker's true loss of earnings. It is conceivable that compensation payable under s.16 may have one eye to the inadequacy of that compensation as a recompense for economic loss and seek to provide some further recompense for the injured worker's economic impairment as well as his or her emotional and psychological impairment resulting from the injury. Indeed, Mr Jackson Q.C. for the appellant conceded this possibility.

20. Although we consider that s.9 looks primarily to compensation in respect of the worker's economic loss (lost earnings) because s.16 looks to non-economic loss or injury, as a matter of construction we cannot altogether exclude the relevance of economic loss from the award of s.16 compensation. The inadequacy of s.9 compensation may be tempered in some situations by the award of s.16 compensation. The language of the statute, in particular s.16, does not provide a sufficiently firm foundation for a contrary conclusion.

21. However, this does not mean that the respondent's enjoyment of the s.16 payment before judgment is to be attributed, in whole or in part, to his pre-judgment economic loss. One must look to the trial judge's assessment of damages for pre-judgment economic loss. He accepted that the amount of $10,080 accurately represented the respondent's loss of earnings as a schoolteacher and his award of $8,915 for loss of earning capacity as a subject co-ordinator, together with interest, ensured that the respondent was fully compensated for economic loss up until the date of judgment. It follows that the respondent's enjoyment of the s.16 payment to the date of judgment should not be attributed to his pre-judgment economic loss.

22. In order to avoid the conclusion that the enjoyment of the s.16 payment should be attributed to his pre-judgment non-economic loss, the respondent contends that compensation under s.16 is confined to physical impairment only, without regard to what is termed pain, suffering and the loss of amenities of life. This notion must be rejected. In this day and age, a statutory scheme of compensation which excluded these aspects of damage in connection with personal injury from consideration could be described only as mediaeval, if not inhuman. Furthermore, the section contains some indication that the Commission's discretion in determining the amount payable is so wide that it extends to the factors already mentioned: see, for example, s.16(1BA). In Powder River Pastoral Company Pty. Ltd. v. Wadley (unreported, New South Wales Court of Appeal, 13 December 1983), Mahoney J.A. said:

"And the Commission will be entitled to look at all of the matters for which compensation is appropriate. Compensation is of its nature relevant, for example, to that which is lost and to such detriments as have been suffered by the person to be compensated. Therefore the Commission would be right to have regard to the nature and extent of the loss and the pain, embarrassment, and other detriments suffered and to be suffered by the worker because of the injury."

His Honour was speaking with reference to s.16(1B)(a2), but once it is accepted, as it should be, that the factors mentioned are relevant to the assessment of compensation under that provision, there is no sensible hypothesis on which they should be excluded from consideration in applying the other provisions in s.16.

23. To say, as the respondent contends, that s.16 compensation is compensation for the fact rather than the consequences of the injury and that it represents merely a statutory tariff for interference with the body and its functions is to ignore central elements in the concept of compensation for personal injury. In Skelton v. Collins, Windeyer J., when discussing what is entailed in the loss of a limb, observed (at p 130):

"A man who loses a limb, his eyesight, or his mind, does not lose a thing that is his, as his ox or his ass or his motor car is his, but something that is a part of himself, something that goes to make up his personality."

Clearly enough, his Honour considered that, in the context of compensation, it is quite artificial to speak of the loss of a limb without regard to the consequences of that physical loss. See also Teubner v. Humble (1963) 108 CLR 491, per Windeyer J. at pp 507-508. In similar vein, Professor Fleming writes:

"To say, as we are wont to do, that compensation is due for loss of an eye or a leg obscures the fact that the real injury consists in the loss of its profitable and pleasurable use" (emphasis added): The Law of Torts, 7th ed. (1987), p 215.

In this respect it is not without significance that s.16 provides for the payment of compensation for injury, not compensation for the loss of a part or a function of the body. The word "injury" in the context of the expression "by way of compensation for that injury", as it appears in s.16(1), is apt to comprehend the consequences that flow from the loss of the part or function of the body.

24. It follows from all that we have said that compensation paid under s.16 serves the same purpose as the award of damages at common law. Having regard to our earlier conclusion that the respondent's enjoyment of the s.16 payment before judgment cannot be attributed to the respondent's economic loss to that date, it should in the circumstances of this case have been taken into account in computing the sum on which interest was calculated in respect of the respondent's non-economic loss.
Is there a need to apportion the s.16 payment?

25. In argument it was suggested that the s.16 payment might have been intended to compensate the respondent wholly or partly for future non-economic loss, in which event it was wrong to take the entire amount into account in the calculation of interest on damages for pre-judgment non-economic loss. Further, it was said that it would be impossible to apportion the amount of the $49,037 as between past and future loss or damage. Such an exercise, it was said, would be both artificial and arbitrary. So it would.

26. But these difficulties are not to the point in the circumstances of this case. Even if we assume that the sum of $49,037 was intended as compensation in respect of future loss and damage, the fact is that the respondent enjoyed the benefit of the payment before judgment. Accordingly, to the extent that he has enjoyed that benefit, it must be taken into account in ascertaining the amount on which interest should be awarded as compensation for his being kept out of the money to which he was entitled by way of damages. If the s.16 payment is not taken into account for the purpose of making the interest calculation, the respondent will receive an award of interest in respect of that amount, notwithstanding that he has had the benefit of it before judgment. This result would not conform to the fundamental compensatory principle stated at the beginning of this judgment that the award of damages and interest on those damages should restore rather than improve the plaintiff's position and that interest should be awarded only when a plaintiff has been kept out of money due to him or her. In our opinion, the plaintiff in this case had not been kept out of $49,037 damages for pre-judgment non-economic loss from the time of the s.16 payment. In arriving at this conclusion, we express our agreement with the observation of Gibbs C.J. in Batchelor v. Burke (at p 455) that the fact that the facility to award interest may discourage dilatory defendants from delaying the settlement of claims is not a relevant consideration in resolving the question raised in this case.

27. We would allow the appeal and set aside the judgment of the New South Wales Court of Appeal in so far as it related to the award of interest on damages for pre-judgment non-economic loss. During the hearing of the appeal, Mr Jackson for the appellant handed up a schedule setting out the interest which the respondent would be entitled to if the Court was of the view that the entire s.16 payment should be taken into account in the calculation of interest. That interest totals $39,404.26, $13,395.74 less than the amount of $52,800 awarded as interest on the pre-judgment non-economic loss by the trial judge. The figure of $39,404.26 is constituted by an amount of $32,134.62 which represents interest at 8 per cent (the rate employed by the trial judge) on the $75,000 for the period from the time of the accident to the date of the s.16 payment and an amount of $7,269.64, which represents interest at 8 per cent on $75,000 less $49,037 for the period from the time of payment to the date of judgment. Accordingly, the amount of interest awarded on damages for pre-judgment non-economic loss should be reduced by $13,395.74. The judgment of the trial judge should be varied by substituting the sum of $736,604.26 for the sum of $750,000. It was made clear at the hearing that the appellant would not seek an order as to costs in the event that the appeal was allowed. Accordingly, there should be no order as to costs.

BRENNAN J. I am in agreement with the judgment of the majority in their statement of the measure of damages in tort and with the conclusion that the appeal must be allowed, but in reaching this conclusion I do not find it necessary to attribute to the $49,037 paid to the respondent under s.16 of the Workers' Compensation Act 1926 (N.S.W.) ("the Act") - the then existing legislation - a more particular character than a payment "by way of compensation for" the injury received. Payments under the table of injuries are so described in s.16. Payments under the table of injuries can be distinguished from payments made under other provisions of the Act, but it is sufficient that they be identified as subventions to which an injured worker is entitled by reason of his having received an injury. Prima facie, an injured worker who avails himself of his entitlement to a payment under s.16 cannot establish or calculate his damages against a tortfeasor who inflicted the injury on the footing that the worker did not avail himself of that entitlement, but the prima facie rule does not apply when the intention of the provider of the subvention - here, the legislature - is that the injured worker shall enjoy the subvention in addition to and not in diminution of his claim for damages: The National Insurance Co. of New Zealand Ltd. v. Espagne (1961) 105 CLR 569, at pp 573, 599-600; Redding v. Lee (1983) 151 CLR 117, at pp 124-125, 135-137, 162.

2. Section 63(5) provides that a payment by way of compensation is "a defence" pro tanto to proceedings against the employer brought independently of the Act "in respect of the injury". Section 64 expressly provides for refunding compensation paid out of damages recovered against a third party (sub-s.(1)(a)) or for a diminution in damages corresponding with the amount of any indemnity paid by the third party to the employer in respect of compensation paid (sub-s.(1)(c)). The Act reveals no intention that payments under the Act should be enjoyed in addition to the damages to which, apart from compensation under the Act, an injured worker is entitled. The prima facie rule is not displaced. The compensation paid under s.16 was enjoyed from the time of its payment to the respondent until he became liable to refund it on the recovery of his damages. From that time, he has not been out of pocket for that amount. There is no warrant for an award of interest on so much of the damages awarded as is equal to the amount of $49,037 paid as compensation under s.16. The principle is the same as that applied in Batchelor v. Burke (1981) 148 CLR 448.

3. The appellant attacks the award of interest on the sum of $75,000 which the learned trial judge awarded in respect of damages under all heads save loss of earning capacity up to the date of judgment. Interest on that sum was included in the global award of $750,000. In determining whether a pre-trial receipt of compensation affects the award (or the calculation of an award) of interest to be included in an award of damages, it is not necessary that the factors which are taken into account in assessing under a particular head an interest- bearing amount be the same or substantially the same factors as those which the legislature took into account in enacting the relevant provisions of the Workers' Compensation Act. If the payment made under the statute were shown to be a payment in respect of matters for which an award of damages gives no compensation, the prima facie inference would be that the legislature intended the payment to be enjoyed in addition to and not in diminution of the award of damages. But a payment under the table of injuries is not a payment of that kind.

4. When a payment of compensation is in respect of matters for which an award of damages gives compensation, the court will decline to award interest on amounts which would otherwise bear interest to the extent of the compensation payments received and if, in order to calculate the interest correctly, it be necessary to allocate the compensation payments between or among two or more interest-bearing amounts, the court must do the best it can in matching up the compensation payment and the relevant heads of damage. But the refusal of interest on any amount is not conditional on substantial identity between the factors related to the payment of compensation and the factors related to an assessment of damages under a particular head. Provided the compensation payment can be truly described as a compensation for the injury or its consequences to the worker, the award of damages in respect of that injury and its consequences must not contain an amount for interest on an amount corresponding with the amount of the compensation payment for the period after its receipt.

5. In the present case, the relevant sum of interest is $52,800 calculated at 8% per annum on pre-trial non-economic loss assessed at $75,000 from the date of injury to trial. No attack was made on any factor in the calculation and it is therefore unnecessary to consider the correctness of the calculation except in so far as it did not allow for the payment of $49,037 compensation under the table of injuries on 12 April 1985. Allowing for that payment, the relevant sum of interest should be reduced to $39,404.26.

6. I would allow the appeal, vary the judgment of the Court of Appeal by setting aside the order dismissing the appellant's appeal to that court and in lieu thereof order that the appeal to that court be allowed, the judgment of Carruthers J. be varied by substituting for the sum of $750,000 therein mentioned the sum of $736,604.26. By agreement of the parties, the orders for costs in the courts below should stand and no order should be made for costs in this Court.

DEANE J. I agree with the reasons given by Priestley J.A. in his judgment in the New South Wales Court of Appeal and by McHugh J. in his judgment in this Court for the conclusion that, in the circumstances of this case, the learned trial judge (Carruthers J.) was correct in disregarding the lump sum payment under s.16 of the Workers' Compensation Act 1926 (N.S.W.) ("the Act") in determining the amount of interest to be paid by the defendant in respect of damages for non-economic loss to the date of trial. I add some supplementary comments to what is said in those judgments.

2. In a case where a defendant tortfeasor is also the "employer" of the injured plaintiff for the purposes of the Act, s.63(5) of the Act ensures that an appropriate adjustment is made to take account of the benefit and burden of a payment by the defendant of lump sum compensation under s.16 for loss of (or for loss of the use of) a bodily part. In such a case, the amount of the lump sum payment is credited to the employer and, "to the extent of its amount, (is) a defence to proceedings against the employer independently of (the) Act in respect of the injury" (s.63(5)). The result is that any award of damages will be reduced by the amount of the lump sum payment and that interest will not be payable on the equivalent of that lump sum from the time when it was paid.

3. The position is, however, quite different where the defendant tortfeasor is not an "employer" but is a third party. In such a case, the Act seems to me to manifest a legislative intent that the third party tortfeasor is not entitled to any benefit by reason of the payment of compensation by the employer. To the contrary, if the worker has not recovered common law damages, the third party tortfeasor is liable to indemnify the employer in respect of the payment (s.64(1)(b)). If the third party tortfeasor has not already indemnified the employer in respect of compensation payments, the plaintiff is entitled to an unreduced verdict for economic and non-economic loss but is "liable to repay to his employer (out of the damages recovered) the amount of compensation which the employer has paid in respect of the ... injury under (the) Act" (s.64(1)(a)). In that context, consistency of legislative policy and considerations of what is fair and equitable would support the approach that the worker should also account to the employer for that part of any award of interest which can be appropriated to the lump sum payment during the period from the time when it was received by the worker. The Act does not, however, make any provision in that regard and the question whether the employer would be entitled to recover an appropriate share of any award of interest on restitution or unjust enrichment principles was not explored in argument.

4. Regardless of the entitlement of the employer to benefit pro tanto from any award of interest made in the worker's favour against the third party tortfeasor, it does not seem to me that authority, principle or considerations of policy support a conclusion that the third party tortfeasor should be entitled to avoid interest on part of the damages by reason of the fact that a payment of an amount of lump sum compensation was made by the employer. In so far as authority is concerned, the decision of this Court in Batchelor v. Burke (1981) 148 CLR 448 is distinguishable for the reason that weekly compensation under the Act can be equated with lost earnings in a way that a statutory lump sum for loss of a bodily part cannot be equated with any part of an award of damages for compensation for economic or non-economic loss in a negligence action. In so far as principle is concerned, the fact that the statutory amount of lump sum compensation cannot be equated with any component of the damages awarded against the tortfeasor means that there is no acceptable basis in principle for excluding a corresponding amount from the damages in respect of which an award of interest should be made. In so far as considerations of public policy are concerned, it is arguable that the ultimate burden of both negligence and workers' compensation payments, in the common case where both employer and tortfeasor are insured, falls upon the public generally and that, for that reason, the general insurer (against liability for negligence) should, for the purposes of the ascertainment of interest, be given the benefit of a payment of lump sum compensation made by the workers' compensation insurer from the time when it was made. On the other hand, not all tortfeasors are insured. More important, the general policy to be discerned in the Act and ordinary notions of fairness seem to me to militate against a third party obtaining a benefit by reason of the combined effect of a payment of lump sum compensation made by an employer to a worker injured by the negligence of that third party and that third party's own delay in discharging his own liability to the injured worker. In that regard, considerations of public policy do not favour a situation in which the third party tortfeasor (or his insurer) has a positive incentive to delay settlement or verdict by reason of the fact that so much of the damages as can be treated as having been received by the insured worker at the time of the lump sum payment can be withheld without penalty.

5. I would dismiss the appeal.

McHUGH J. The question in this appeal is whether, in determining the amount of interest payable in New South Wales to a plaintiff in respect of damages for non-economic loss to the date of trial, account can be taken of a lump sum payment made pursuant to the provisions of s.16 of the Workers' Compensation Act 1926 (N.S.W.) ("the Act") (now repealed).
Factual Background

2. As the result of an incident which occurred in 1979, the respondent (the plaintiff) suffered an incomplete C5 quadriplegia. In 1988 in an action for damages in the Supreme Court of New South Wales, Carruthers J. found that the appellant's negligence had caused the plaintiff's injury. His Honour assessed the general damages of the plaintiff for pain, suffering and loss of the amenities of life at $180,000. For the purpose of calculating interest, his Honour apportioned $75,000 of the $180,000 to the pre-trial period.

3. In 1985, the plaintiff's employer had paid to the plaintiff the sum of $49,037 pursuant to the provisions of s.16 of the Act. Section 16(1) provides:

"A worker who has received an injury mentioned in the first column of the table hereunder set forth shall be entitled to receive from his employer by way of compensation for that injury, in addition to any other compensation prescribed by this Act, the amount indicated in respect of that injury in the second column of that table."

The table contains two columns. The first is headed "Nature of Injury" and specifies various physical losses, e.g. "Loss of either arm, or of the greater part thereof". The second column specifies the amount payable in respect of the total loss appropriate to each particular loss. Section 16(4) provides that, for the purpose of the table, the expression "loss of" includes "permanent loss of the use of". Section 16(5) provides that, for the purpose of the table, the expression "loss of" also includes the "permanent loss of the efficient use of", but that in such case a percentage of the prescribed amount payable, equal to the percentage of the diminution of the full efficient use, might be awarded in lieu of the full amount.

4. Section 63(1) and (2) of the Act gives a worker the right to proceed against his or her employer both under the Act and independently of the Act. Where any payment by way of compensation under the Act has been made, the payment, to the extent of its amount, is "a defence to proceedings against the employer independently of this Act in respect of the injury": s.63(5). Section 64 provides that, where injury for which compensation is payable under the Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof, the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under the Act. However, the worker is not entitled to retain both damages and compensation. In such a case, if the worker recovers compensation before he or she recovers damages, the worker is liable to repay to the employer out of the damages the amount of compensation which the employer has paid in respect of the injury. If the worker has recovered compensation under the Act, the person who has paid the compensation is entitled to be indemnified by the person liable to pay the damages. Where any payment is made under that indemnity and, at the time of the payment, the worker has not obtained judgment for damages against the person paying under the indemnity, the payment, to the extent of its amount, shall "be a defence to proceedings by the worker against that person for damages": s.64(1)(c). But the Act makes no reference as to the effect of a payment under the Act in calculating interest in a common law action.

5. Carruthers J. rejected the appellant's contention that the sum of $49,037 or some part of it should be taken into account in considering the interest payable on the sum of $75,000 for non-economic loss sustained to the date of trial. His Honour awarded $52,800 as interest on that sum. The interest was calculated on a figure of 8 per cent per annum for the whole period.
The purpose of an award of interest

6. Section 94(1) of the Supreme Court Act 1970 (N.S.W.) provides:

"In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect."

7. It has been authoritatively determined that the purpose of an award of interest in a personal injury case is to compensate a plaintiff for the detriment suffered by being kept out of his or her money during the relevant period: Thompson v. Faraonio (1979) 54 ALJR 231, at p 233; 24 ALR 1, at p 7; Cullen v. Trappell (1980) 146 CLR 1, at p 18; Batchelor v. Burke (1981) 148 CLR 448, at p 455; M.B.P. (S.A.) Pty. Ltd. v. Gogic (1991) 65 ALJR 203, at p 205; 98 ALR 193, at p 196.

Applicability of Batchelor's Case

8. In Batchelor, this Court unanimously held that interest should not be awarded in respect of any damages for earnings lost before trial where periodic payments under the Workmen's Compensation Act 1971 (S.A.) had replaced those earnings. Gibbs C.J., with whose judgment Aickin, Wilson and Brennan JJ. agreed, said (at p 453):

"In my opinion it is not possible to say that workers' compensation received in respect of an injury in respect of which damages have been awarded is completely collateral or too remote to be taken into consideration in deciding whether the plaintiff in being deprived of his wages has suffered a detriment which should be remedied by an award of interest. It is not necessary to attempt the impossible task of devising a 'principle so general as to be capable of covering the great variety of benefits from one source or another which may come to an injured man after, or because, he has met with an accident', to use the words of Lord Wilberforce in Parry v. Cleaver ((1970) AC 1, at pp 41-42). The answer to the question whether the compensation should be taken into account in the present case is largely provided by a consideration of the legislation under which the compensation is payable - the Workmen's Compensation Act 1971 (S.A.), as amended."

After examining the statutory scheme, his Honour said (at pp 454-455):

"Clearly the advantage given to a workman by this legislation is not conferred upon him with the intention that he may retain the compensation even if he enforces his right to damages, and since the amount received as compensation is repayable to the extent to which damages are recovered the fact that the injured worker has received compensation will not relieve the tortfeasor who caused the injury of liability. That however does not mean that any advantage or disadvantage which results to the injured worker, and which is relevant in some other way to the assessment of damages, should be disregarded as collateral or remote. The legislation has treated the payment of compensation and of damages in respect of any one injury as closely related, and the fact that the lost earnings have been replaced by compensation paid under a statutory scheme whose very purpose is to provide money to take the place of the lost wages should be regarded when the court comes to consider whether a plaintiff has suffered any practical detriment by the loss of the earnings. In the present case it was not suggested that there was any significant lapse of time between the loss of earnings and the payment of the compensation. In those circumstances, when the plaintiff who has lost earnings has received compensation instead, he has not been out of pocket by reason of the failure to pay him damages, even though the compensation is repayable when the damages have been received. The circumstance that the compensation was paid by a third person (the employer) obviously does not mean that the payment was irrelevant to the enquiry whether in fact the plaintiff has suffered a practical detriment by the loss of his wages, and it does not provide any reason in law for disregarding the fact that the plaintiff received the compensation in place of the wages."

9. If the purpose or character of a payment made pursuant to s.16 of the Act was to compensate a plaintiff for an injury and its consequences in the same way that damages at common law compensate a plaintiff for an injury and its consequences, the reasoning in Batchelor would be relevant. It would then be difficult to resist the conclusion that, to the extent that a plaintiff has received payment under s.16, he or she has suffered no practical detriment by being deprived of his or her common law damages to the date of trial. Accordingly, it is necessary to determine the purpose and character of a payment made pursuant to s.16 of the Act.

The purpose and character of a s.16 payment

10. In my opinion, the purpose or character of a payment under s.16 is not in any practical sense the same as the purpose or character of an award of damages for pain and suffering and loss of amenities occurring up to the date of the trial. The amount paid pursuant to the provisions of s.16(1) depends upon the objective nature of the injury and the extent of the loss of use of the bodily part affected and not upon its effect on the worker personally. Under s.16, the worker receives the same amount for an injury whether he or she is aged 16 or 60. The worker receives the same amount if the loss of part of his or her body or of its efficient use is accompanied by great pain over a long period or with little pain over a short period. In some cases, the s.16 payment will be far greater than the amount which will or would be received as damages for pain and suffering and loss of amenities in a common law action. In other cases, the s.16 payment will be far less than will or would be obtained in a common law action. An award of damages for pain and suffering, on the other hand, is "based upon solace for a condition created not upon payment for something taken away": Skelton v. Collins (1966) 115 CLR 94, per Windeyer J. at p 130. That case established that, in Australia, general damages for an injury and its non-economic consequences are awarded to compensate a plaintiff more for the change in his or her subjective feelings than for the objective fact of the injury. Thus, Taylor J. said (at p 113):
"It may be said, of course, that a person who is completely
incapacitated as a result of his injuries suffers such a loss whether or not his injuries are of such a character to render him insensible to his loss. But, in my view, a proper assessment can be made only upon a comparison of the condition which has been substituted for the victim's previously existing capacity to enjoy life and where the mind is, as it were, willing and the body incapable there is, in my view, a much higher degree of loss than where the victim is completely insensible to his lost capacity. Perhaps, in other words, it may be said that a person who is obliged for the rest of his life to live with his incapacity, fully conscious of the limitations which it imposes upon his enjoyment of life, is entitled to greater compensation than one who, although deprived of his former capacity is spared, by insensibility, from the realization of his loss and the trials and tribulations consequent upon it."

11. The 60 year-old worker who, by reason of brain damage, is unaware that he has lost the use of both arms and legs is entitled to the same s.16 payment as the 16 year-old worker who has suffered the same injuries and is conscious of her losses. But the 60 year-old worker's common law damages for pain and suffering and loss of amenities would be small indeed compared to those of the 16 year-old worker.

12. A s.16 payment is a tariff for interference with the body and its functions and the payment is in no way proportioned to the consequences of the injury to the worker concerned. While the provisions of s.16 give the Workers' Compensation Commission a discretion in determining the amount of a s.16 payment, the fact remains that it is a compensatory payment for the loss of a bodily part or function. It bears more resemblance to the bots prescribed by Anglo-Saxon law than to a common law award of damages. If a s.16 payment is intended to compensate a worker for pain, suffering and the loss of amenities of life, it does so without regard to the actual pain, suffering or loss of amenities of that worker.

13. Moreover, if a s.16 payment is made to compensate the worker for the consequences of an injury of the prescribed kind, it must be for all the consequences - financial and non-financial - of that injury for the rest of that person's life and not merely for pain and suffering and loss of amenities for the period between the date of injury and the date of trial. Counsel for the appellant contended that this problem could be overcome by an apportionment. But ex hypothesi the award for damages for pain and suffering and loss of amenities and the s.16 payment are incomparables; apportionment is not an option.
Conclusion

14. It follows in my opinion that the receipt of a s.16 payment is not a matter that should be taken into account in determining the detriment which a plaintiff has incurred by being deprived of his or her damages for pain and suffering and loss of amenities to the date of the trial. When the tortfeasor is a person other than the worker's employer, the receipt of the s.16 payment is no more relevant to the interest issue in the common law action than a payment by an insurer under an accident policy. When the tortfeasor is the employer, the s.16 payment cannot be dismissed as res inter alios acta. Nevertheless, even in that case, the purpose and character of the s.16 payment and the award of damages are so different that the s.16 payment cannot be regarded as a payment on account of a plaintiff's damages for pre-trial pain and suffering and loss of the amenities of life.

15. The appeal should be dismissed.

Orders

Appeal allowed.

Set aside the order of the New South Wales Court of Appeal in so far as that order dismissed the appeal relating to the award of interest on damages for pre-judgment non-economic loss.

Vary the judgment of the trial judge by entering judgment for the respondent in the sum of $736,604.26.

No order as to costs.