McLennan v Luttrell
[2006] TASSC 44
•25 July 2006
[2006] TASSC 44
CITATION: McLennan v Luttrell [2006] TASSC 44
PARTIES: McLENNAN, Adam
v
LUTTRELL, Debra Therese
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 63/2005
DELIVERED ON: 25 July 2006
DELIVERED AT: Hobart
HEARING DATE: 14 March 2006
JUDGMENT OF: Slicer, Evans and Tennent JJ
CATCHWORDS:
Appeal – General principles – Circumstance justifying interference by appellate court – Personal injury- Rarity of interference with assessment.
Lai Wee Lian v Singapore Bus Service (1978) Ltd [1984] AC 729, Gamser v The Nominal Defendant (1977) 136 CLR 14, considered.
Wilson v Peisley (1975) 50 ALJR 207; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, applied.
MAIB v Richards (1991) 14 Tas R 221; Murfet v AAPC Australia Pty Ltd [1999 TASSC 6, Calder v Boyne Smelters Limited [1991] 1 Qd R 325, followed.
Supreme Court Civil Procedure Act 1932 (Tas), s45.
Aust Digest Appeal [110]
REPRESENTATION:
Counsel:
Appellant: P L Jackson
Respondent: C H Hobbs
Solicitors:
Appellant: Jackson & Tremayne
Respondent: C H Hobbs
Judgment Number: [2006] TASSC 44
Number of paragraphs: 47
Serial No 44/2006
File No FCA 63/2005
ADAM McLENNAN v DEBRA THERESE LUTTRELL
REASONS FOR JUDGMENT FULL COURT
SLICER J
EVANS J
TENNENT J
25 July 2006
Order of the Court
Appeal dismissed.
Serial No 44/2006
File No FCA 63/2005
ADAM McLENNAN v DEBRA THERESE LUTTRELL
REASONS FOR JUDGMENT FULL COURT
SLICER J
25 July 2006
The respondent was injured in a motor vehicle accident in November 2001. Liability was admitted and damages assessed in the sum of $326,430. This appeal is confined to the amount awarded for future loss of income and superannuation of the respective amounts of $199,317 and $33,346. It concerns the basis of calculation for future impairment and loss, and the provision for contingencies.
The respondent, aged 47 at trial, was employed at the date of accident as a level 4 clerk at the Royal Hobart Hospital and earned a second income from cleaning work. The level 4 position was held in an acting capacity.
The exercise involved, by necessity, an exercise in judgment in projection and allowances for contingencies (State of Tasmania v Clark [2000] TASSC 126). The respondent advanced her case fully and the appellant attempted to meet the variable alternatives as presented. Questions of her future working life, effects of age, the impact on the respondent of having completed raising a family on the secondary employment and the like remained problematic and permitted a range of approaches in the assessment. Future promotion or maintenance of classification in a statutory but "non-permanent" position were uncertain but permitted a degree of predictability. Here the commencing point for any future prediction was likewise dependent upon variables and probabilities between the dates of accident and assessment. The learned primary judge accepted the appellant's submission that damages ought be assessed on a mathematical approach. He accepted that but for the accident it was likely that the respondent would have been, as of the date of trial, working at the hospital and more likely that:
"If still employed at level 4, she would now be earning $40,417 per annum gross. If now employed at level 3, she would be earning $37,234 per annum gross, which is about 92 per cent of the level 4 salary. If now employed at level 2, she would be earning $32,994 per annum gross, about 82 per cent of the level 4 salary. If still employed at level 4 and in the cleaning job, her gross income as a cleaner would be $5,216 per annum, or about 11.4 per cent of her taxable income. These figures are gross figures. If the plaintiff had not been injured, and her gross income had been reduced by 10, 20 or 30 per cent for one reason or another, the corresponding decrease in her net income would have been a slightly smaller percentage. That is because her marginal percentage tax rate would have been greater than her overall percentage tax rate."
In assessing the claim for past loss, his Honour provided for adverse contingencies at 17.5 per cent, and having made certain adjustments, allowed:
"Hypothetical earnings since accident $125,521 Less 17.5 per cent (21,966) Balance $103,555 Less net earnings from work trials (5,371) Less net payments from RBF Board
64 weeks @ $452.64 per week
(28,969)
Amount awarded
$69,215"
In assessing future loss, the learned primary judge accepted that:
"… there [were] very strong risks that the plaintiff will never return to the workforce, or that she will return to it only for a short time, or that she will return to it only intermittently, and there is a very strong risk that, if she does return to work, she will not be able to work anything like 20 hours per week for much, if not all, of the time that she spends in the workforce in the future"
and in accordance with the risks of aggravation and "trial and error" procedures outlined by a specialist physician, estimated her residual earning capacity as:
"… worth about 50 per cent of the present day value of the income that she would have if she worked as a level 2 employee for 20 hours per week until the age of 65 years."
He then assessed damages as:
Present value of $686.38 per week for 18 years $372,704 Less 25 per cent 93,176 Balance $279,528 Less residual earning capacity (50 per cent of $160,423) $80,211 Amount awarded
$199,317"
The notice of appeal claims error on the grounds that:
"1His Honour erred (at paragraphs [45] and [46] of the reasons for judgment delivered on 19 August 2005) in calculating the damages to be awarded for impairment of the Plaintiff's future earning capacity; in particular:
(a)At [45] by calculating the value of the Plaintiff's future earning capacity on the basis that had it not been for her injuries her net earnings would have been, at the date of trial, $686.38 per week.
(b)At [45] by failing to discount the figure of $686.38 (or the product of the calculation that appears at [45]) by a factor of 17.5% consistent with the conclusions reached by His Honour at [44] for the reasons expressed by His Honour at [42] and [43].
(c)At [46] by discounting the approximate value that the Plaintiff's earning capacity would have had at the date of trial, but for her injuries, by a factor of only 25% when a greater discount was appropriate having regard to:
¾the adverse contingencies identified by His Honour:
· at [42] in respect of the Plaintiff's earning capacity to the date of trial; and
· at [46] in respect of the Plaintiff's future earning capacity from the date of trial; and
¾the discount factor of 17.5% which His Honour determined at [44] was appropriate to the calculation of the Plaintiff's potential earnings to the date of trial.
(d)At [48] by excessively discounting the value of the Plaintiff's residual earning capacity by a factor of 50%.
2His Honour erred at [49] in calculating the damages to be awarded for loss of the Plaintiff's superannuation entitlements by discounting the figure of $59,570.00 produced by the evidence of Mr Bendzulla by a factor of only 40%, such factor being insufficient to take into account the cumulative effects of:
¾the appropriate discount determined by His Honour at [44] (17.5%) in respect [sic] the Plaintiff's potential earnings to the date of trial;
¾a proper discount, or at least the discount factor of 25% determined by His Honour at [46] to be appropriate, in respect of the approximate value that the plaintiff's earning capacity would have had, but for her injuries, at the date of trial;
¾the Plaintiff's residual earning capacity either as determined by His Honour at [48] or as it should have been determined with a lesser rate of discount."
Ground 2 depends upon the success of ground 1. Although no specific errors of fact or law are claimed, the basis of the appeal is that the award itself is so disproportionate that it manifests error. Although critical of the basis for the award for past economic loss, the appellant does not contest its making, but challenges the use of the figure of $686.38 as an appropriate commencing point and its projection into future loss.
His Honour had earlier examined the calculation of earnings based on continued employment in two positions which showed expected earnings of $122,912.79 after tax from November 2001 to 25 July 2005 which "would presently be … $686.38 per week after tax". To that calculation he added a further $2,608.24 representing 3.8 weeks for lost earnings and arrived at a total of $125,521.03. That sum was adjusted by a 17.5 per cent reduction for adverse contingencies which included the varying possibilities of absence of promotion, abandonment or loss of the second employment position, and the nature of her position as a "temporary" employee. The discount resulted in calculated earnings of $566.26, which was specific to the vagaries of employment. However, his Honour accepted the full amount, absent that contingency discount, as the commencing point for his projection of future economic loss.
In assessing pre-accident earning capacity, the learned primary judge allowed for adverse contingencies of "mortality, including illness, injury, unemployment, underemployment, early retirement, voluntary absence from the workforce, and strikes". He repeated that he took "into account all that I have already said as to her status as a part-time employee, the availability of work at levels 2, 3 and 4, and the chance of her losing or relinquishing her cleaning job". He then discounted a notional award by 25 per cent, and allowed for a residual earning capacity of 50 per cent in reaching the award of $199,317.
The appellant's critique is two-fold, namely:
(1)the commencing point ought to have been the amount of $566.26, with the calculation further discounted in the usual way;
(2)the commencing figure of $686.38 ought to have been discounted by 32.5 per cent as representing the past economic figure of 17.5 per cent, plus the usual 15 per cent figure for future vagaries.
There is merit in the contentions. The learned primary judge was dealing with two sets of vagaries which required discounting. The first was in attempting to assess past loss which depended on status of position, possibilities of promotion, maintenance of a temporary classification, cleaning contracts and the like. The assessment was generous but not unduly so. The second was a projection of the vicissitudes of life which include the likelihood or otherwise of the respondent continuing with both forms of employment until she had attained the age of 65. The commencing point for any assessment of future loss was what the respondent would probably have been earning at the date of assessment had there been no injury. That figure had been assessed at $566.26 and future projection required consideration of a period of 18 years. There were two components to the calculation, namely residual work capacity and vagaries of life. His Honour determined residual capacity as representing 50 per cent, measured "by reference to the amount that she could earn if she were to return to work as a level 2 employee working 20 hours per week". Allowing for the statutory discount he assessed that sum in the amount of $160,423.92. In doing so he allowed for a higher commencing point for projected income but reduced it in determining capacity at a lower rate. The latter approach is not challenged. In considering the higher future loss he applied a contingency calculation of 25 per cent. In doing so he took into account "favourable" contingencies and attempted a balance.
In order to test the critique advanced by the appellant three sets of calculations will be considered.
(1)The learned primary judge assessed the award as:
Present value of $686.38 per week for 18 years
$372,704
Less 25%
$93,176
Balance
$279,528
Less residual earning capacity (50 per cent of $160,423)
$80,211
Amount awarded
$199,317
(2)Accepting the approach advanced by the appellant:
Present value of $566.26 per week for 18 years
$307,479
Less 15 per cent contingency
$46,121
Less residual earning capacity (50 per cent of $160,423)
$80,211
Amount to be awarded
$181,147
(3)Accepting a discounted calculation of 32.5 per cent on $686.38:
Present value of $686.38 for 18 years
$372,704
Less 32.5 per cent discount
$121.128
$251,576
Less residual earning capacity
$80,211
Amount to be awarded
$171,365
There have been diverging lines of authority between English and Australian courts as to whether an error such as that claimed by ground 1(a) of the notice of appeal ought only succeed if the appellate court is convinced that the primary judge acted "on a wrong principle of law or that he has misapprehended the facts or that the amount of damages awarded is so inordinately low or so inordinately high as to be a wholly erroneous estimate of the damage suffered" (Wilson v Peisley (1975) 50 ALJR 207 per Mason J at 214). In Lai Wee Lian v Singapore Bus Service (1978) Ltd [1984] AC 729, a decision of the Privy Council, Lord Fraser of Tullybelton gave as the opinion of the Board, at 735:
"Before considering the facts of the appeal in more detail, their Lordships will refer to a question of general importance which arises. Mr Rashid, on behalf of the respondent, submitted that the Court of Appeal had rightly held that what matters is the global figure and that, if the global figure was reasonable and fair, an appellate court should not increase or diminish a component item of damages on the basis that that item was either too low or excessive. He sought to support that contention by reference to the advice of this Board, delivered by Lord Diplock, in Paul v Rendell (1981) 55 ALJR 371. It is of course true that at the end of the day the total sum awarded is what matters to both parties. But that does not mean that the component items do not have to be separately considered. They are the necessary parts which make up the whole, and the only proper way of deciding whether the global award is too low or too high is by assessing the separate items and arriving at a fair total. … Of course the assessing judge has a considerable range of choice because many of the variable elements in the damages cannot be precisely quantified. This applies notably to the plaintiff's loss of future earning capacity, the assessment of which
'involves a double exercise in the art of prophesying not only what the future holds for the injured plaintiff but also what the future would have held for him if he had not been injured': see Paul v Rendell (1981) 55 ALJR 371, 372.
But if the award for loss of future earnings, or for any of the other items, is so far out of line with what the appellate court considers appropriate as to indicate that the assessing judge has erred in principle, and if the substitution of an appropriate award for that item would make a substantial alteration in the total award, then the appellate court has the duty to make the substitution and to alter the total accordingly."
This approach was followed by the Queensland Full Court in Keefe v R T & D M Spring Pty Ltd [1985] 2 Qd R 363, which considered the appropriate test to be whether substitution of an appropriate award to a component would make a substantial alteration to the total. In an earlier decision of Gamser v The Nominal Defendant (1977) 136 CLR 145, the High Court was divided in its opinion. Barwick CJ and Gibbs J preferred to apply a test of disproportion. Barwick CJ's approach was consistent with what he had earlier said in Wilson v Peisley (supra) at 209:
"The setting aside of an award of damages in a trial which has not been irregular or unfair, and where there is neither challenge to the findings of fact made by the trial judge not any demonstrated misconception of the evidence should, in my opinion, be a most unusual event, to occur only in circumstances where the disproportion between injury and award of damages is so great as to make the award quite unreasonable, indeed outrageous, in the circumstances, whether by being too great or too small: and therefore of itself a demonstration of error present though otherwise undisclosed. The less ponderable the elements of the damages under consideration, the less likely will there be a case for setting aside an award by a judge who has not overlooked any significant fact at the end of a trial not blemished by error or irregularity."
Gibbs J, took a contrary view, stating, at 149:
"To say that an award of damages made by a judge must be outrageous, or out of all reason, before an appellate court is entitled to intervene is, I think, with all respect, to state too high a test. However in the present case, in the circumstances stated by my brother Aickin, it should not have been held by the Court of Appeal that the award made by the learned trial judge was a wholly erroneous estimate of the damage suffered, and there was no sufficient ground for the Court of Appeal to have interfered with that award."
Stephen J agreed with the reasons stated by Aickin J, whilst Murphy J expressed no view on the appropriate test. The Victorian Full Court preferred the reasoning of Gibbs J in Thresher v Guzzarei Petroleum Pty Ltd v Johnston 71/1984, as did a similar court in South Australia (Masson v Crook (1979) 22 SASR 473). A contrary view was taken in Western Australia in Lloyd v Faraone [1989] WAR 154. In this Court, the assessment of damages by a trial judge was regarded as a discretionary judgment and interference only required in cases involving wrong principles of law, misapprehension of the facts, or the estimate of damage wholly erroneous (Walford v Millner 132/1986; Dodge v Matcham 64/1986; McKinlay v Reading A2/1977). In Calder v Boyne Smelters Limited [1991] 1 Qd R 325, the Full Court declined to follow its earlier decision in Keefe (supra). Having reviewed the competing approaches, Shepherdson J concluded at 342 – 343:
"This Court should decline to follow Keefe v Spring any further because it conflicts with the authority of the High Court of Australia and this Court should instead approach the present appeal applying the principles which I have earlier set out.
To follow the High Court of Australia tests does not mean that trial judges, when assessing damages for personal injury, will no longer need to disclose the actual processes by which the total sum is arrived at. There must still be 'some assessment of each item of detriment and some process of computation in order to arrive at the ultimate sum to be awarded' (Stephen J at 149-150 in Gamser). Nevertheless, 'there can certainly be no error in refraining from attributing separate amounts to various headings or topics regarded as matters to be adverted to in assessing general damages' (per Aickin J in Gamser at 155).
In any case of appeal against the assessment of damages for personal injury by trial judges it is the total sum which must be looked at and this Court applying the principles earlier stated has to ask itself ¾ is it a wholly erroneous estimate.
In many cases on appeal against assessment of damages for personal injury arguments are advanced against amounts assigned by a trial judge in respect of selected heads of damage. The present case is one such. There is I think a danger that in focusing on a particular item attacked as too high or too low as the case may be an appellate court can lose sight of the other heads of damage to which the amounts have been allocated and the possibility that those amounts or any of them may be either on the high side or on the low side and in a particular case offset the amount in the particular head attacked as either too high or too low. All this is to really emphasise the point constantly made in the cases that it is the total sum awarded which must in the final analysis be looked at by the appellate court."
However a later court, differently constituted, preferred the approach taken in Keefe; (Elford v FAI General Insurance [1984] 1 Qd R 258). In this State, the reasoning in Calder was followed (MAIB v Richards (1991) 14 Tas R 221) and although some mathematical recalculation permitted in relation to a specific component (Leighton Contractors v Cube A67/1993), the position remains as stated by Wright J in Murfet v AAPC Australia Pty Ltd [1999] TASSC 6 at par20, that:
"… an appellant's ability to persuade appellate judges that a figure assessed under a particular heading differs somewhat from the amount which they may have assessed had they been sitting at first instance, will not necessarily result in the trial judge's assessment being overturned, particularly where a broad brush approach has been used appropriately and a balancing of the high and low components under challenge tend to cancel each other out (see MAIB v Richards A92/1991 [(1991) 14 Tas R 221]). We do not sit to reassess damages but to correct error if error has been demonstrated."
Civil appeals in Tasmania are provided for by the Supreme Court Civil Procedure Act 1932, PtV, and the limitations provided for by ss39, 41 and 45. It is s45 which governs the basis of this appeal.
The differences between the calculations of $18,170 and $27,952 respectively are not, in the context of the total sum awarded, significant. The contention advanced by the appellant is that a contingency figure of 15 per cent is not uncommon (State of Tasmania v Clark [2000] TASSC 126; Brown & Anor v Falzari [2001] TASSC 46, Crockett v Roberts & Anor [2002] TASSC 73, Anthony v Tasmanian Alkaloids [2004] TASSC 118). Statistically that contention is correct, but not invariably so since circumstances between cases vary significantly (Tapp v Devlaun Pty Ltd B49/1990, Murfet v AAPC Australia Pty Ltd (supra), Whayman v MAIB [2003] TASSC 149; Payne v Laver Pty Ltd [2000] TASSC 96).
Future economic loss or risk of loss in many cases is incapable of quantification according to a mathematical formula. As Brennan and Dawson JJ stated in their joint judgment in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 639 – 640:
"By contrast earning capacity can be assessed only upon the hypothesis that the plaintiff had not been tortiously injured: what would he have been able to earn if he had not been tortiously injured? To answer that question, the court must speculate to some extent. As the hypothesis is false (for the plaintiff has been injured (the ascertainment of earning capacity involves an evaluation of possibilities, not establishing a fact as a matter of history. Hypothetical situations of the past are analogous to future possibilities; in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past."
Here the learned primary judge made allowance for a greater contingency than would ordinarily be the case, but he did so within accepted methodology. Had he chosen a lower commencing point he might well have considered a different contingency allowance. It might have been preferable had he chosen the lower income figure and as such it might be said that particular 1(a) has been made out. Ground 1(b) is not made out in its own terms. Projection of a figure of 17.5 per cent over 18 yeas is different from that calculated on a past period of some three years. The same difficulty arises in relation to ground 1(c). The provision for residual earning capacity was clearly permitted by the evidence.
The difference between the appellant's suggested methodology (2) and that adopted by the learned trial judge is $18,000. As Mason J said in Wilson v Peisley (supra) at 214:
"The settled rule, then, is that an appellate court will not disturb a primary judge's award of damages for personal injury unless it is convinced that he has acted on a wrong principle of law or that he has misapprehended the facts or that the amount of damages awarded is so inordinately low or so inordinately high as to be a wholly erroneous estimate of the damage suffered."
Had the learned primary judge assessed future loss from a lower commencing point, he may well have adopted a differing contingency figure for future capacity and reached a figure similar to that actually awarded. This was not a case involving misapplication of facts, but a discretionary exercise in the assessment of future loss.
I would not uphold ground 1 of the appeal and it follows that, in my opinion, ground 2 ought fail.
File No FCA 63/2005
ADAM McLENNAN v DEBRA THERESE LUTTRELL
REASONS FOR JUDGMENT FULL COURT
EVANS J
25 July 2006
The respondent/plaintiff's damages arising from a whiplash injury she suffered in a motor vehicle accident on 19 November 2001 were assessed at $326,130. The appellant/defendant appeals that assessment and has confined his appeal to the calculation of two heads of damage, they being:
· impairment of future earning capacity, which was assessed at $199,317; and
· loss of superannuation entitlement, which was assessed at $35,742.
In summary, the task confronting an appellant on an appeal such as the present is to establish that the assessment was wholly erroneous. The reasons for this are explained in Dodge v Matcham A19/1988 by Cosgrove J at 1 – 3 where he said:
"The assessment of an appropriate award of damages for a tort involves many processes which are subjective, if not downright speculative. Take, for example, compensation for loss of earning capacity. This head of damages is often presented as involving no more than a few findings of fact and a mathematical calculation. It is, we are told, one of the simpler processes involved in assessment. But, in truth, it is never simple and often involves the making and balancing of a number of forecasts of a speculative nature, the accuracy of which is at best doubtful. Sometimes it involves the making of several forecasts about the same thing followed by an endeavour to select a mean or a probability among them.
In this case; it was necessary for the trial judge to quantify in money terms the plaintiff's loss of earning capacity attributable to the injuries sustained by him. In order to do this, the judge had to make some estimate of the income which the plaintiff would have generated in the remainder of his working life had he not been injured, and to set that against an estimate of the income he will in fact generate during that time. It is a fact that the plaintiff has been in secure and steady employment with the one employer for most of his working life to date. But, in forecasting the future, his Honour had to bear in mind that a society which was relatively static in terms of residence and employment when his Honour (and most of us) were young, is now very mobile. As a result, forecasting of future employment is less reliable. Further, employees and organisations of employees have bargained for and achieved employment conditions (including superannuation schemes) which offer positive incentives for retirement at a time when the worker's capacity for, and desire to work is still strong and relatively unaffected by the aging process. This creates an added future pressure in favour of mobility. This tendency to mobility means that a judge assessing the value of lost earning capacity may envisage a number of alternative possibilities as to the future employment of the plaintiff had he not been injured. And, of course, the same alternatives appear in any forecast of his future employment as he now is. It may be, and often is, necessary to make a number of forecasts on either side of the likely earnings table involving prognostications as to periods in varying employment, and earnings therefrom. When all that is done, and the various uncertainties laid bare, a judgment must be made as to what is a fair and adequate compensation for the injury-caused loss of earning capacity, using, as best one can, the 3% tables, and making any appropriate discounts. In doing so, a judge must and should be greatly influenced by his assessment of the plaintiff and other witnesses whom he has the opportunity of examining during the trial.
The task of assessing any reduction in value of the plaintiff's superannuation opportunities calls for a similar approach although perhaps a less complex one. The assessment of a fair award in respect of pain, suffering and loss of amenities is par excellence a matter of judgment as opposed to mathematical calculation.
I have said all this in order to demonstrate in the context of this case the relevance of the following comments made by Lord Wright in Davies v Powell Duffryn Associated Collieries Ltd [19421 AC 601 at 616 - 617 and cited with approval in Miller v Jennings (1954) 92 CLR 190 at 195 - 196 and Gamser v Nominal Defendant (1977) 136 CLR 145 at 148 - 149:
'There is an obvious difference between cases tried with a jury and cases tried by a judge alone. Where the verdict is that of a jury, it will only be set aside if the appellate court is satisfied that the verdict on damages is such that it is out of all proportion to the circumstances of the case: Mechanical & General Inventions Co Ltd v Austin [1935] AC 346. Where, however, the award is that of the judge alone, the appeal is by way of rehearing on damages as on all other issues, but as there is generally so much room for individual choice so that the assessment of damages is more like an exercise of discretion than an ordinary act of decision, the appellate court is particularly slow to reverse the trial judge on a question of the amount of damages. It is difficult to lay down any precise rule which will cover all cases, but a good general guide is given by Greer LJ in Flint v Lovell [1935] 1 KB 354, at p360. In effect the court, before it interferes with an award of damages, should be satisfied that the judge has acted on a wrong principle of law, or has misapprehended the facts, or has for these or other reasons made a wholly erroneous estimate of the damage suffered. It is not enough that there is a balance of opinion or preference. The scale must go down heavily against the figure attacked if the appellate court is to interfere, whether on the ground of excess or insufficiency'."
See also Wilson v Peisley (1975) 50 ALJR 207, where Mason J said at 214:
"In the case of an award of damages for personal injury by a trial judge, although the appeal is by way of re-hearing … as the assessment of damages is 'more like an exercise of discretion than an ordinary act of decision', an appellate court is particularly slow to reverse the primary judge.
The settled rule, then, is that an appellate court will not disturb a primary judge's award of damages for personal injury unless it is convinced that he has acted on a wrong principle of law or that he has misapprehended the facts or that the amount of damages awarded is so inordinately low or so inordinately high as to be a wholly erroneous estimate of the damage suffered."
Where, as is almost invariably the case, the appellant focuses on a particular head or particular heads of damage, it must be kept in mind that it is the total award of damages that must be looked at. In Calder v Boyne Smelters Limited [1991] 1 Qd R 325, Shepherdson J, agreed with by Kneipp J, said at 343:
"In many cases on appeal against assessment of damages for personal injury arguments are advanced against amounts assigned by a trial judge in respect of selected heads of damage. The present case is one such. There is I think a danger that in focusing on a particular item attacked as too high or too low as the case may be an appellate court can lose sight of the other heads of damage to which the amounts have been allocated and the possibility that those amounts or any of them may be either on the high side or on the low side and in a particular case offset the amount in the particular head attacked as either too high or too low. All this is to really emphasise the point constantly made in the cases that it is the total sum awarded which must in the final analysis be looked at by the appellate court."
The appropriateness of an approach of the nature set out above has been accepted by members of the Full Court in this jurisdiction in MAIB v Richards (1991) 14 Tas R 221, Underwood J (as he then was) at 2 and 10, and Leighton Contractors Pty Ltd v Cule A67/1993, Wright J, agreed with by Cox CJ and Crawford J at 15.
The first of the two grounds of appeal is as follows:
"1His Honour erred (at paragraphs [45] and [46] of the reasons for judgment delivered on 19 August 2005) in calculating the damages to be awarded for impairment of the Plaintiff's future earning capacity; in particular:
(a) At [45] by calculating the value of the Plaintiff's future earning capacity on the basis that had it not been for her injuries her net earnings would have been, at the date of trial, $686.38 per week.
(b) At [45] by failing to discount the figure of $686.38 (or the product of the calculation that appears at [45]) by a factor of 17.5% consistent with the conclusions reached by His Honour at [44] for the reasons expressed by His Honour at [42] and [43].
(c) At [46] by discounting the approximate value that the Plaintiff's earning capacity would have had at the date of trial, but for her injuries, by a factor of only 25% when a greater discount was appropriate having regard to:
-the adverse contingencies identified by His Honour:
•at [42] in respect of the Plaintiff's earning capacity to the date of trial; and
•at [46] in respect of the Plaintiff's future earning capacity from the date of trial; and
-the discount factor of 17.5% which His Honour determined at [44] was appropriate to the calculation of the Plaintiff's potential earnings to the date of trial.
(d) At [48] by excessively discounting the value of the Plaintiff's residual earning capacity by a factor of 50%."
The following paragraphs from the decision subject to appeal are relevant to this ground:
"2 The plaintiff was 43 years old at the time of the accident and is now 47 years old. Before the accident, she was working full-time as an admissions clerk at the Royal Hobart Hospital. She had a second job doing part-time cleaning work three nights per week. Her husband was a professional horse trainer until 10 July 2005, and carried on business as a horse trainer in partnership with her. …
3 Before the accident, the plaintiff had worked hard for many years. During her teenage years, she worked in a service station from 1973 to 1976. She worked as a part-time cleaner at the Royal Hobart Hospital for about four years when her children were young. She left to do more lucrative part-time cleaning work. She worked full-time as the manager of a service station from 1983 until 1994, when the business was sold. She was out of work for only about three months before obtaining a full-time position at the Royal Hobart Hospital as a hospital aide. In or about February 1998 she obtained a position at the hospital as a level 3 admissions clerk. After about 18 months in that position, she was promoted to the position of a level 4 admissions clerk. That was the position that she held at the time of the accident.
39 Mr Jackson submitted on behalf of the defendant that this was not a case in which damages for economic loss should be assessed using a mathematical approach. He submitted that a "broad brush" approach was appropriate. He made that submission on the basis that, if a mathematical approach were adopted, more uncertainties than usual would have to be allowed for in this case. Although the plaintiff had been working at the Royal Hobart Hospital for 6½ years before the accident, and although she continues to be an employee of the Department of Health and Human Services, she has only ever been a temporary employee. Her position would have been advertised within months after the accident. Any suitable permanent employee on the department's redeployment list who applied for the position would have been given priority. Whilst it was likely that the department would have found the plaintiff another position if she had lost that one, it would probably have been at a lower level since a temporary employee does not have a substantive level, and since there are very few level 4 positions for which the plaintiff has appropriate qualifications or experience. Apart from her hospital position, the plaintiff was doing part-time cleaning work, as I have said, but she had only been doing that work for about 12 months, and there is a degree of uncertainty as to how long she would have continued to do that sort of work as a second job. She had not always had a second job. Some temporary employees at the Royal Hobart Hospital become permanent, but many do not, and many continue as temporary employees for years before becoming permanent. There are also a number of uncertainties regarding the plaintiff's residual earning capacity. I believe she will never be fit to return to full-time work, and that she will have trouble exploiting her capacity for part-time work because of the unavailability of suitable positions and the reluctance of employers to engage someone of the plaintiff's age with a chronic pain problem. If the plaintiff does return to work, it is very difficult to predict when she will do so, how many hours per week she will work, or the salary level of any future position.
40 Whilst all these uncertainties make the assessment of damages for the impairment of the plaintiff's earning capacity by means of a mathematical approach difficult, I do not think they make it inappropriate. The only alternative is to arrive at a figure by some sort of process of intuition. I think that would involve too great a risk of injustice in a case like this. I think such a course is usually only appropriate when a plaintiff has suffered a relatively minor impairment of his or her earning capacity.
Past impairment of earning capacity
41 The plaintiff adduced evidence as to the earnings that she would have received if she had retained her employment as an admissions clerk and as a part-time cleaner ever since the day of the accident. The plaintiff's solicitor/counsel provided particulars containing detailed calculations of the net earnings that the plaintiff would have received if she had continued in those two positions until trial, making allowance for income tax, annual leave loadings, and award wage increases. There is no dispute as to the accuracy of those calculations. Those calculations show that the plaintiff would have earned $122,912.79 after tax from 19 November 2001 to 25 July 2005, and would presently be earning $686.38 per week after tax. On that basis, I calculate the earnings that she would have received to today's date as follows:
Earnings to 25 July 2005
$122,912.79
Plus 3.8 weeks at $686.38 per week
2,608.24
Total to date
$125,521.03
42 This figure needs to be discounted to make allowance for adverse contingencies. There is a strong chance that the plaintiff would not have retained her position as a level 4 admissions clerk to the present day. It might have been filled by someone else from the department's redeployment list within months of the date of the accident, or at some later time. It might have been advertised as a permanent position, and filled by another applicant chosen according to apparent merit. If the applicant had lost that position, it is very likely that she would have obtained another full-time position at the Royal Hobart Hospital, perhaps after an interval of weeks or even months, but most likely with little or no time away from work. However, because there are few level 4 positions for which she is suited by education, training or experience, she would more likely have obtained a level 2 or level 3 position. It is not very likely that she would have returned to level 4. There is a chance that she might have obtained a level 3 position, but it is also quite possible that she might never again have risen above level 2. It is quite likely that she would have remained a "temporary" employee, in which case she would have been at risk of losing positions, and of becoming unemployed or underemployed, throughout the last 4 years. However, since she had been working at the hospital as a temporary employee in various positions for 6½ years before her accident, had been promoted, and was apparently performing well, I do not think there is much chance that she would not still be working at the hospital. There is some chance that she might have lost or relinquished her cleaning work by now. However I think it more likely that she would still be working in a second job, especially since she was the breadwinner in her household, and the profitability of her husband's horse training business declined over recent years to such an extent that the business had to be abandoned. I do not think there are any favourable contingencies that need to be taken into account since the plaintiff was unlikely to obtain employment at the hospital in a position above level 4, was unlikely to find more lucrative work elsewhere, and was unlikely to want to work longer hours in a second job.
43 Evidence was adduced as to what the plaintiff would have earned in level 2 or level 3 positions if she had lost her level 4 position. If still employed at level 4, she would now be earning $40,417 per annum gross. If now employed at level 3, she would be earning $37,234 per annum gross, which is about 92 per cent of the level 4 salary. If now employed at level 2, she would be earning $32,994 per annum gross, about 82 per cent of the level 4 salary. If still employed at level 4 and in the cleaning job, her gross income as a cleaner would be $5,216 per annum, or about 11.4 per cent of her taxable income. These figures are gross figures. If the plaintiff had not been injured, and her gross income had been reduced by 10, 20 or 30 per cent for one reason or another, the corresponding decrease in her net income would have been a slightly smaller percentage. That is because her marginal percentage tax rate would have been greater than her overall percentage tax rate.
44 Taking all these matters into account, I think it appropriate to discount the figure that the plaintiff would have earned if she had continued her pre-accident employment to the present day by 17.5 per cent to allow for adverse contingencies. To calculate the plaintiff's damages for the past impairment of her earning capacity, it is necessary to take into account her net earnings on the six occasions that she returned to work. I must also take into account the interim invalidity pension paid by the RBF Board: State of Tasmania v Wilson [2000] TASSC 152. The plaintiff also received payments of disability allowance by way of scheduled benefits pursuant to the Motor Accidents (Liabilities and Compensation) Act 1973, s27 of which requires those payments to be taken into account. There must also be an adjustment of $10,712 in the plaintiff's favour in respect of the tax paid on her disability allowance: Fox v Wood (1981) 148 CLR 438. I will deal with the claim in respect of superannuation benefits separately. Subject to adjustments in relation to the disability allowance and Fox v Wood, I assess the plaintiff's damages for the past impairment of her earning capacity as follows:
Hypothetical earnings since accident
$125,521
Less 17.5 per cent
(21,966)
Balance
$103,555
Less net earnings from work trials
(5,371)
Less net payments from RBF Board
64 weeks @ $452.64 per week
(28,969)
Amount awarded
$69,215
Impairment of future earning capacity
45 The plaintiff gave evidence that, prior to the accident, she intended to work until she was 65 years old. A woman of her age will not be eligible for an age pension until her 65th birthday: Social Security Act 1991 (Cth), s23(5D). She was the breadwinner of her household. She and her husband seem to have little by way of assets. They live in rented accommodation. I am satisfied that the plaintiff, but for her accident, would have made every reasonable effort to remain in full-time employment until she was 65. In fact I think it likely that, if she had not been injured, she would have supplemented her age pension by working, at least part-time, after her 65th birthday, subject to appropriate work being available, and I take that factor into account as a favourable contingency. As I have said, if she were still working in the two jobs that she had at the time of the accident, her net earnings would now be $686.38 per week. The amount required to compensate her for the loss of that amount for the next 18 years, adopting a discount rate of 7 per cent in accordance with the Common Law (Miscellaneous Actions) Act 1986, would be calculated as follows:
$686.38 x 543 = $372,704.34.
The multiplier of 543 does not allow for mortality: Luntz, Assessment of Damages, 4th ed, 683, Table 2. The appropriate multiplier, if allowance is made for mortality, is 532.6 Luntz, supra, at 699, Table 4D.
46 To arrive at a figure representing the value that the plaintiff's pre-accident earning capacity would have had if she had not been injured, it is necessary to allow for various adverse contingencies as well as mortality, including illness, injury, unemployment, underemployment, early retirement, voluntary absence from the workforce, and strikes. In the plaintiff's case, there is not a strong chance that she would have chosen to retire early, or to absent herself from the workforce, given that she is the breadwinner of the household, and given her financial circumstances. However, there must be some chance that she would have done one of those things if, for example, her husband were to find lucrative full-time work, or one of her grandchildren were to need a full-time carer. Unemployment and underemployment are significant factors in her case. I take into account all that I have already said as to her status as a part-time employee, the availability of work at levels 2, 3 and 4, and the chance of her losing or relinquishing her cleaning job. The plaintiff left school during Grade 9. She has had no further formal education. She might have undertaken computer training or other significant training or retraining. If she had lost or relinquished her cleaning work, she might thereafter have taken on part-time cleaning work or some other sort of second job intermittently. Her earnings might have fluctuated according to what work was available at the Royal Hobart Hospital or elsewhere from time to time. Taking all these factors into account, I think the approximate value that the plaintiff's earning capacity would now have had, but for her injuries, should be calculated by discounting the figure of $372,704 by 25 per cent.
47 I think the plaintiff's residual earning capacity should be measured by reference to the amount that she could earn if she were to return to work as a level 2 employee working 20 hours per week. If she were to return to work full-time as a level 2 employee, she would earn $32,994 per annum before tax, and be entitled to a 17.5 per cent annual leave loading for 4 weeks per annum. Under the Community and Health Services (Public Sector) Award, which was tendered as an exhibit, a full-time employee works 38 hours per week, and a part-time employee is paid on a pro rata basis according to his or her weekly working hours. I calculate that the leave loading of a full-time employee would amount to $444 per annum. The plaintiff would therefore earn $33,438 per annum, inclusive of that loading, if employed full-time, or $17,599 per annum if working 20 hours per week. If $17,599 were her taxable income, she would have to pay income tax of $1,971.83 at current rates, and a Medicare levy of 1.5 per cent or $263.98: CCH Australian Master Tax Guide 2005, pars 2-330, 42-005. Her net income would therefore be $15,363.19 per annum, or $295.44 per week. The present value of such an income for 18 years, adopting the multiplier 543 used above, is calculated as follows:
$295.44 x 543 = $160,423.92.
48 There are favourable contingencies that need to be taken into account. The plaintiff may return to work and obtain work at level 3 or level 4, or similarly well paid work in the private sector, at least intermittently. However, those favourable contingencies are more than offset by the adverse contingencies. Death, sickness, injury and strikes must be taken into account. But, more significantly, there are very strong risks that the plaintiff will never return to the workforce, or that she will return to it only for a short time, or that she will return to it only intermittently, and there is a very strong risk that, if she does return to work, she will not be able to work anything like 20 hours per week for much, if not all, of the time that she spends in the workforce in the future. She is lucky to work for a large employer with a benevolent policy towards employees who have been injured or disabled. I think it likely that, given time, she will return to part-time work, more likely with the department than in the private sector, but that the need to avoid situations that aggravate her symptoms, and the risks associated with the trial and error procedure described by Dr Francis, will operate to her disadvantage. Taking these matters into account, I estimate that the plaintiff's residual earning capacity is worth about 50 per cent of the present day value of the income that she would have if she worked as a level 2 employee for 20 hours per week until the age of 65 years. I therefore assess her damages for the impairment of her future earning capacity, leaving aside superannuation, as follows:
Present value of $686.38 per week for 18 years
$372,704
Less 25 per cent
93,176
Balance
$279,528
Less residual earning capacity (50 per cent of $160,423)
$80,211
Amount awarded
$199,317"
Counsel for the defendant says he makes no attack upon the learned trial judge's findings of fact or any inferences that his Honour has drawn from those findings, but it is clear from the way in which the appeal was conducted that this concession does not extend to findings and inferences concerning the plaintiff's earnings and earning capacity.
Adoption of a discount rate of 25 per cent – Grounds 1(a) to (c)
Notwithstanding the many uncertainties involved in assessing the plaintiff's impairment of her earning capacity, the learned trial judge adopted a mathematical approach, correctly in my view, eschewing endeavouring to arrive at a result by some sort of process of intuition. His Honour's starting point was to calculate the plaintiff's weekly earnings as at the date of the hearing had she continued in the employment she was performing at the time of her injury. He calculated her earnings at $686.38 per week after tax. The accuracy of this calculation is not challenged.
In assessing the plaintiff's past loss for the impairment of her earning capacity, the learned trial judge discounted the product of $686.38 per week during the relevant period by 17.5 per cent for adverse contingencies. The contingencies identified by his Honour are detailed in par42. The defendant does not challenge the learned trial judge's adoption of a discount rate of 17.5 per cent in relation to the plaintiff's past loss. On the contrary, the defendant embraces that discount rate and relies on it to argue that the discount rate of 25 per cent that the learned trial judge applied when determining the plaintiff's future loss for the impairment of her earning capacity was too low. In effect, the defendant contends that the determination of her future loss should have involved the application of the following to the product of the plaintiff's estimated weekly earnings of $686.38 after tax during the relevant period:
·a discount of 17.5 per cent for the contingencies identified by the learned trial judge in par42;
·the statutory discount of 7 per cent to determine the present value of a future loss; and
·a further discount of 15 per cent for contingencies.
The defendant correctly acknowledged that the assessment of an appropriate discount for contingencies is a matter of fact in each case. However, the defendant relied on a number of authorities in this jurisdiction that deal with damages for an impairment of earning capacity to demonstrate that the most commonly applied discount for contingencies is 15 per cent. Accordingly, the defendant contends that apart from the statutory discount of 7 per cent, the discount that should have been applied in this case was 17.5 per cent plus 15 per cent, that is 32.5 per cent, not the discount of 25 per cent adopted by the learned trial judge.
A premise that is fundamental to the defendant's contention is the assumption that there is no duplication between the contingencies that are the basis for the discount of 17.5 per cent applied to the plaintiff's claim for past loss of income and the contingencies that are the basis of the discount of 15 per cent commonly applied to claims for future loss of income. That assumption is not correct. There is an overlap between the contingencies that form the basis of both discounts. At par42 of his decision, his Honour identifies the contingencies he takes into account in adopting the discount of 17.5 per cent. They include the risks of the plaintiff "losing positions, and of becoming unemployed or underemployed" and the chance "that she might have lost or relinquished her cleaning work". These matters also come within one category of the major contingencies that are the basis for the discount applied to a claim for loss of future earnings, the unemployment category. As to those major categories, in Wynn v NSW Insurance Ministerial Corporation (1985) 184 CLR 485 at 497, Dawson, Toohey, Gaudron and Gummow JJ, agreed with by Brennan CJ, said at 497:
"It is to be remembered that a discount for contingencies or 'vicissitudes' is to take account of matters which might otherwise adversely affect earning capacity and as Professor Luntz notes, death apart, 'sickness, accident, unemployment and industrial disputes are the four major contingencies which expose employees to the risk of loss of income.'"
To assist in gauging the magnitude of the overlap that results from unemployment being taken into account when determining both of the discount rates under consideration, I refer to the assessment of the weight to be given to the major contingencies contained in Luntz, Assessment of Damages for Personal Injury and Death, 4th ed, par6.4.
Death
The discount applicable to mortality can readily be calculated. The multiplier of 543 that was adopted by the learned trial judge did not allow for mortality. As noted by the learned trial judge [45], the applicable multiplier allowing for mortality was 532.6. The difference between these multipliers, 10.4, equates to a discount of 1.92 per cent.
Sickness and accident
Nothing in the plaintiff's pre-accident history suggests that she was likely to suffer above average loss as a consequence of sickness or accident. As pointed out in Luntz, par6.4.10, sickness and accident are only relevant contingencies insofar as they result in income loss. Workers are frequently protected against such loss by sick leave and workers compensation. At par6.4.11, Luntz calculates the average effect of these contingencies on the net earnings of a full time worker at 0.4 per cent.
Industrial disputes – strikes
There is no evidence to suggest that the plaintiff's employment is likely to have involved her in an above average quantity of industrial disputes. At pars6.4.12 and 6.4.14, Luntz calculates the effect of industrial disputes on the average employee's income at 0.1 per cent at most.
Unemployment
At par6.4.13, Luntz concludes that in the average case it is more than fair to a defendant to allow a 5 per cent deduction for income loss due to the chance of a regular member of the workforce being unemployed. However, the plaintiff is not the average case. His Honour identified more than the average number of risks associated with the possibility of the plaintiff becoming unemployed or under employed in the future, regardless of her injuries. Whilst this strongly suggests that a higher discount than 5 per cent should be applied in respect of the plaintiff's unemployment risk, this is not necessary, as the adoption of a 5 per cent discount is sufficient to demonstrate the fallacy in the defendant's contention.
Adopting the above calculations the appropriate discount would be:
Mortality
1.92 per cent
Sickness and accident
.40 per cent
Industrial disputes
.10 per cent
Unemployment
5.00 per cent
7.42 per cent
As pointed out by Luntz at par6.4.14, his calculation of the maximum discount for all contingencies is much less than the standard 15 per cent employed in New South Wales, and I would add, in Tasmania. Accepting however that 15 per cent, not 7.42 per cent, is the appropriate discount, what portion of it should be attributed to unemployment? A reasonable guide to the answer can be obtained by apportioning 15 per cent between the major contingencies in accordance with the allowance for those contingencies in the above calculation. The result is:
Mortality
3.88 per cent
Sickness and accident
.81 per cent
Industrial disputes
.20 per cent
Unemployment
10.11 per cent
15 00 per cent
The above apportionment pays no regard to contingencies other than the major contingencies. The reason is that on the analysis of Luntz, three of the major contingencies, sickness, accident and industrial disputes, warrant a total discount of no more than 0.5 per cent. This demonstrates that, accepting that there are contingencies other than the major contingencies, the discount that should be attributed to them is nominal.
The above analysis shows that it is reasonable to say that ordinarily the portion of the commonly applied discount of 15 per cent for contingencies that is attributable to unemployment is about 10 per cent. Accordingly, if it is accepted, as contended by the defendant, that a discount of 15 per cent for contingencies should have been added to the discount of 17.5 per cent, then 10 per cent should be deducted because unemployment is allowed for in both discount rates. If the 15 per cent discount is reduced to 5 per cent in recognition of this duplication, consistent with the defendant's contention the discount rate that should have been adopted by the learned trial judge is 17.5 per cent plus 5 per cent, that is, 22.5 per cent. This is 2.5 per cent less than the discount of 25 per cent rate adopted by the learned trial judge. For these reasons I am not persuaded that the discount of 25 per cent applied by the learned trial judge was too low.
The discount of 50 per cent applied to the plaintiff's residual earning capacity was too high – Ground 1(d)
The defendant does not challenge the appropriateness of the starting point in the learned trial judge's quantification of the plaintiff's earning capacity, a calculation based on the amount that she would earn if she worked as a Level 2 working for 20 hours per week. The defendant, however, submits that the evidence does not justify the 50 per cent discount that his Honour applied to that calculation. His Honour, correctly in my view, observed that there were very strong risks that the plaintiff would never return to the workforce, or that she would return to it only for a short time, or that she would return to it only intermittently, and that there was a very strong risk that, if she did return to work, she would not be able to work anything like 20 hours per week for much, if not all, of the time that she spent in the workforce in the future. In the light of those findings, the discount of 50 per cent applied by his Honour was well within the appropriate range.
I would dismiss ground 1 of the appeal. The defendant concedes that if ground 1 fails, then ground 2 must also fail, so there is no occasion for me to address the second ground.
I would dismiss the appeal.
File No FCA 63/2005
ADAM McLENNAN v DEBRA THERESE LUTTRELL
REASONS FOR JUDGMENT FULL COURT
TENNENT J
25 July 2006
I have had the advantage of reading the reasons for judgment of Slicer and Evans JJ. I agree in substance with those reasons and would also dismiss the appeal.
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