Pacific Power v Royal

[1999] NSWCA 350

Reported Decision: 47 NSWLR 366

New South Wales

Court of Appeal

CITATION:	PACIFIC POWER v ROYAL & ANOR [1999] NSWCA 350
FILE NUMBER(S):	CA 40349/99
HEARING DATE(S):	6 July 1999
JUDGMENT DATE:	28 September 1999
PARTIES :	Pacific Power - Appellant Robert Royal - First Respondent Babcock Australia Limited - Second Respondent
JUDGMENT OF:	Sheller JA at 1; Cole AJA at 7; Foster AJA at 27

LOWER COURT JURISDICTION:	Dust Diseases Tribunal
LOWER COURT FILE NUMBER(S) :	17/92
LOWER COURT JUDICIAL OFFICER:	Judge O'Meally

COUNSEL:	MF Holmes QC/DP Robinson - Appellant A J Leslie QC - Respondents
SOLICITORS:	Goldrick Farrell Mullan - Appellants Turner Freeman - Respondents
CATCHWORDS:	DAMAGES - measure of - personal injuries - dust diseases - non-economic loss - interest - whether interest on award for non-ecomic loss part of that award or whether part of award for economic - whether interest on award for non-economic loss protected from reduction by s12D
ACTS CITED:	Dust Diseases Tribunal Act 1989 Workers Compensation Legislation Amendment (Dust Diseases & Other Matters) Act 1998 Workers’ Compensation (Dust Diseases) Act 1942 Income Tax Assessment Act 1936 (Cth)
CASES CITED:	James Hardie & Co v Newton (1997) 42 NSWLR 729 Harris v Commercial Minerals Limited (1996) 186 CLR 1 Haines v Bendall (1991) 172 CLR 60 Whitaker v Commissioner of Taxation (1998) 82 FCR 261 MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54 Redding v Lee (1983) 151 CLR 117 Riches v Westminster Bank Ltd [1947] AC 390
DECISION:	Appeal dismissed with costs.

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40349/99
DDT 17/92

SHELLER JA
COLE AJA
FOSTER AJA

PACIFIC POWER v ROYAL & ANOR

The first respondent was awarded damages against the appellant and the second respondent for injuries, disabilities and consequent economic loss arising from exposure to asbestos dust and fibre in the course of his employment.

The trial Judge gave judgment of $145,000. Part of this award consisted of $20,000 for interest on past general damages.

The appellant appealed from the decision of the trial Judge on the ground that the protection against reduction for compensation already paid provided by s12D of the Workers’ Compensation (Dust Diseases) Act 1942 did not apply to the award of interest on past general damages, and that consequently the amount of the award should be reduced by $20,000.

Held:
Per Sheller JA:
(1) Reduction of common law damages was an application of the fundamental rule that compensation was the cardinal concept in the award of damages and that a plaintiff cannot recover more than he or she had lost. But the legislature provided that whatever compensation may have been received under the Workers’ Compensation (Dust Diseases) Act for the injuries suffered, the plaintiff was entitled to damages for non-economic loss intact and without reduction. The plaintiff was also entitled to be compensated for being kept out of that money. It could not be argued that the order for interest over-compensated the plaintiff. Accordingly, there was no principle upon which any reduction of the amount of interest was permissible. Harris v Commercial Minerals Limited (1996) 186 CLR and Haines v Bendell (1991) 172 CLR 60 referred to.
Per Cole AJA (dissenting):
(1) Interest awarded on damages for non-economic loss (general damages) was not itself “damages for non-economic loss” either within the meaning of s12D(3) of the Workers’ Compensation (Dust Diseases) Act or under the general law. Section 12D(3) defined with precision what was meant by “damages for non-economic loss” where that expression was used in s12D. It did not include interest. Accordingly, there was no legislative intention exhibited by ss2 that amounts of compensation paid or payable under the Workers’ Compensation (Dust Diseases) Act were not to be deducted from interest, even if that interest be on an award of damages for non-economic loss.
(2) The correct characterisation of pre-judgment interest was that derived in MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 and Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54. It was a sum to compensate the plaintiff for being deprived of damages, of whatever nature, he was entitled to at the date of injury and in consequence thereof. The submission that interest payable on general damages ceased to be a payment of an aspect of economic loss but absorbed the character of the item of damage for which it was awarded must be rejected.
Per Foster AJA:
(1) Interest awarded in respect of pre-judgment damages was not interest in the true sense. It had nothing to do with the actual investment or notional investment of the amount of damages. It was not “interest of money”. Amounts of interest awarded in accordance with MBP (SA) Pty Ltd v Gogic and Metropolitan Meat Industry Board v Williams could not be properly characterised as damages for economic loss. They did not represent amounts that an injured plaintiff could have earned through the investment of his damages up to judgment. They were different in kind from amounts awarded by way of post judgment interest under rules of Court. Accordingly, they qualified for the description of “damages awarded for non-economic loss”. Whitaker v Commissioner of Taxation (1998) 82 FCR 261 referred to.
(2) A proper interpretation of s12D required that the award of interest in respect of pre-judgment non-economic loss be included within the descriptive words of the section. These awards performed no other role than that of perfecting an award of damages for past pain and suffering and loss of amenities by fully compensating the plaintiff in respect of those heads of damage, up to the time of judgment, and could properly be regarded as an integral part of the damages awarded for those heads and not as standing separate from them. The legislature intended to include “interest” payable upon pre-judgment awards of damages for pain and suffering and loss of amenities of life within the protection of s12D.
Legislation:
Dust Diseases Tribunal Act 1989
Workers Compensation Legislation Amendment (Dust Diseases & Other Matters) Act 1998
Workers’ Compensation (Dust Diseases) Act 1942
Income Tax Assessment Act 1936 (Cth)

Cases:
James Hardie & Co v Newton (1997) 42 NSWLR 729
Harris v Commercial Minerals Limited (1996) 186 CLR 1
Haines v Bendall (1991) 172 CLR 60
Whitaker v Commissioner of Taxation (1998) 82 FCR 261
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657
Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54
Redding v Lee (1983) 151 CLR 117
Riches v Westminster Bank Ltd [1947] AC 390

ORDERS

Appeal dismissed with costs.

*******

THE SUPREME COURT

OF NEW SOUTH WALES
COURT OF APPEAL

CA 40349/99
DDT 17/92

SHELLER JA
COLE AJA
FOSTER AJA

Tuesday, 28 September 1999

PACIFIC POWER v ROYAL & ANOR

JUDGMENT

1    SHELLER JA: In this matter I have had the benefit of reading the judgments in draft prepared by Cole AJA and Foster AJA. Before the introduction of s12D into the Dust Diseases Tribunal Act 1989 by the Workers Compensation Legislation Amendment (Dust Diseases & Other Matters) Act 1998 this Court decided in James Hardie & Co v Newton (1997) 42 NSWLR 729 that pension payments received under s8 (2) (a) of the Workers’ Compensation (Dust Diseases) Act 1942 (the Dust Diseases Act) for disability from a dust disease were deductible from common law damages for that dust disease, whether or not the plaintiff made any claim for economic loss in the action for damages. This conclusion seemed to the Court consistent with what the High Court had held in Harris v Commercial Minerals Limited (1996) 186 CLR 1 particularly at 18 where the Court said:

“Consequently, the common law courts should regard benefits under the Dust Diseases Act as compensation for injury and as a substitute or partial substitute for wages lost. Because the fundamental rule in an action for damages for tort is that a plaintiff cannot recover an amount more than he or she has lost ….., payments under that Act are deductible from any award of damages payable in respect of injuries that give rise to those benefits. Benefits receivable under the Dust Diseases Act are therefore deductible from any common law damages otherwise payable by an employer for injuries compensable under that Act.”

2    I emphasise the description of benefits under the Dust Diseases Act as compensation for injury and as a substitute or partial substitute for wages lost. In James Hardie & Co v Newton, Stein JA, with whose judgment on this point the other members of the Court agreed, said at 736:

“The second factor is the nature of the benefits. It is true that in Harris , the High Court were looking at a situation where wages were lost, in contrast to this case where the respondent had retired ten years earlier. However, the Workers’ Compensation (Dust Diseases) Act makes it clear that the weekly pension is also payable to people, such as the respondent, who are no longer working and have not suffered any economic loss in the nature of past earning or future earning capacity.
In my opinion, both factors are indicative that the legislative intention is that the weekly pension benefits received by the respondent should be taken into account in the assessment of common law damages. The pension is not independent of common law damages nor cumulative upon it.”

3 In that state of the law the present problem could not arise. To the extent that common law damages for non-economic loss were reduced, there could be no interest on the basis that the plaintiff had been kept out of money theoretically due to him from a date before judgment until judgment. Moreover, since the amounts paid pursuant to s8 (2) (a) of the Dust Diseases Act were not repayable but taken into account in assessing the common law damages, no question arose about taking them into account in determining how interest should be calculated; compare Haines v Bendall (1991) 172 CLR 60.

4    The text of s12D has been set out in the other judgments and I need not repeat it in full. Relevantly, in determining damages for non-economic loss in relation to dust related conditions, the Tribunal is to make no deduction for any amount of compensation already paid or payable or payable in the future under the Dust Diseases Act. Damages for non-economic loss is defined to mean damages or compensation for particular heads of damage which are set out. This means that compensation paid or payable is not to be taken into account in assessing damages for non-economic loss so defined. It follows that it should not be taken into account in assessing interest to compensate for keeping the plaintiff out of those damages. The payments under the Act can no longer be treated as a substitute or partial substitute for compensatory damages for non-economic loss; compare Harris v Commercial Minerals Limited in the passage quoted above. Accordingly, enjoyment of the payments received under the Act cannot be attributed to the enjoyment of damages for non-economic loss; compare Haines v Bendall at 70-71. The plaintiff is entitled to both but deprived of the payment of one during the relevant period.

5    The appellant’s argument is that the interest awarded by Judge O’Meally on “past general damages” does not fall within the definition of damages for non-economic loss and so remains available for a deduction to be made in accordance with the principles established in James Hardie & Co v Newton. But with due respect I think this is beside the point. Reduction of common law damages occurs by application of the fundamental rule, referred to in Harris v Commercial Minerals Limited, that compensation is the cardinal concept and that a plaintiff cannot recover more than he or she has lost; see Haines v Bendall at 63. But the legislature has provided that whatever compensation may have been received under the Act for the injuries suffered, the plaintiff is entitled to damages for non-economic loss intact and without reduction on that account. The plaintiff is also entitled to be compensated for being kept out of that money. It cannot be argued that the order for interest over-compensates the plaintiff. Accordingly, there is no principle upon which any reduction of the amount of interest is permissible. This is so regardless of the definition once it is accepted that the damages awarded in this case for non-economic loss fall within it.

6    I agree with Foster AJA that the appeal should be dismissed with costs.

7    COLE AJA: In James Hardie & Co v Newton 1997 42 NSWLR 729 this Court decided that pension payments paid to a worker with a disability from a dust disease pursuant to s8(2)(a) Workers' Compensation (Dust Diseases) Act 1942 were deductible from common law damages awarded in respect of that disability, and that was so whether or not the plaintiff made claim for economic loss in his claim for damages. In so holding, the Court followed the reasoning of the High Court in Harris v Commercial Minerals Limited (1996) 186 CLR 1 which made the deductibility of payments from common law damages dependent upon a determination of the intention of the Legislature whether the damages were to be additional to, or inclusive, of such pension payments.

8    Subsequent to that decision the New South Wales Legislature amended the Dust Diseases Act by inserting s12D. That section reads:

"12D (1) This section applies to proceedings before the Tribunal (including proceedings on an appeal from the Tribunal) for damages in relation to dust-related conditions.

(2) In determining damages for non-economic loss in any such proceedings, no deduction is to be made for any amount of compensation already paid or payable, or payable in the future, under the Workers' Compensation (Dust Diseases) Act 1942.

(3) In this section:
'Damages for non-economic loss' means damages or compensation for the following:

(a) pain and suffering,
(b) loss of amenities of life,
(c) loss of expectation of life,
(d) disfigurement,
(e) the need for services of a domestic nature or services relating to nursing and attendants which have been or are to be provided to a person by another person, and for which the first person has not paid, and is not liable to pay any fee or charge’.”

9 Mr Royal, the respondent, suffered a dust-related injury and claimed damages from the appellant. O'Meally P, sitting as the Dust Diseases Tribunal of NSW, on 5 May 1999 awarded Mr Royal damages totalling $173,000. There were agreed deductions of $28,000 resulting in a verdict of $145,000. Included in that sum was general damages $100,000 and interest on past general damages $20,000. Past payments to Mr Royal by the Dust Diseases Board pursuant to s8 amounted to $21,920, and the present value of future payments on the findings made amounted to $47,977. The appellant contended that, whilst such sums representing Dust Diseases Board payments could not be deducted from the general damages of $100,000, they could be deducted from the sum of $20,000 awarded for interest on past general damages. Thus the appellant seeks a reduction in the amount of the judgment from $145,000 to $125,000.

10    In my view the appellant's contentions are correct.

11 Interest awarded on damages for non-economic loss, frequently referred to as general damages, is not itself "damages for non-economic loss" either within the meaning of s12D(3) of the Act, or under the general law. Section 12D(3) defines with precision what is meant by "damages for non-economic loss" where that expression is used in s12D. It does not include interest. Accordingly there is no legislative intention exhibited by sub-s2 that amounts of compensation paid or payable under the Act are not to be deducted from interest, even if that interest be on an award of damages for non-economic loss. Had the legislature intended that pension payments under the Act were not to be deductible from interest payments on damages awarded for non-economic loss, it could readily have added to s12D the words "or interest thereon"

12 Interest is awarded to compensate a successful plaintiff for "the loss or detriment which he or she has suffered by being kept out of his or her money (ie damages for pre-trial non-economic loss) during the relevant period". MBP(S.A) Pty Ltd v Gogic (1991) 171 CLR 657 at 663 The legal theory is that damages are to be treated as though awarded at the date of accrual of the cause of action. Haines vBendall (1991) 172 CLR 60 at 66-67; Whitaker v Commissioner of Taxation (1998) 82 SCR 261 at 263-264. For the delay between when the damages ought to have been awarded, and the date when they are, interest is paid. It is thus itself an economic loss. Section 12D(2) thus has no application to that interest factor.

13    Mr Leslie QC, senior counsel for the respondent, sought to avoid the consequences of s12D, and the general law position, that interest is an economic loss by two arguments. First, he contended that interest is to be characterised by reference to the sum upon which it is awarded. As the interest was awarded on "general damages, being damages for non-economic loss", both at common law and within s12D the interest itself should be characterised as "non-economic loss". Authority to support this submission was said to be found in Whitaker v Commissioner of Taxation (1998) 82 FCR 261, in the judgments of each of Black CJ, Lockhart J, and especially Burchett J.

14    Whitaker was concerned with whether pre-judgment interest awarded upon damages for personal injury was to be characterised as income within the meaning of the Income Tax Assessment Act 1936 (Cth), and thus taxable, or characterised as capital. It was held to be of a capital nature. The Court was not concerned with whether pre-judgment interest was properly characterised as "damages for non-economic loss". Black CJ said:

"It is well established that in actions for damages for personal injuries, the payment of what is called 'interest' in s94(1) of the Supreme Court Act and the equivalent provisions in other jurisdictions is to compensate a plaintiff for the loss and detriment which he or she has suffered by being kept out of his or her money during the relevant period: see MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 at 663 and Haines v Bendall (1991) 172 CLR 60 at 63. In other contexts the characterisation of an amount ordered to be paid as 'interest' as compensation for the loss or detriment suffered by a person being kept out of his or her money would point to an amount receivable as income rather than as capital. The present context is, however, of a special character since there is a broader and fundamental function involved, namely compensation of an injured person by means of an award of damages for negligence and the amount of interest is an integral element in the payment of that object: See Haines v Bendall at 63. An amount ordered as interest in these circumstances takes its character from the award of damages for negligence and is of a capital nature".

15    Mr Leslie emphasised the words "takes it's character from the award of damages for negligence" to support his submissions, but in context, I do not think that it does.

16    Lockhart J said:

"The primary purpose of an award of pre-judgment interest is to compensate a successful plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period; that is to compensate the plaintiff for having been deprived of the use of the money: Ruby v Marsh (1975) 132 CLR 642; Batchelor v Burke (1981) 148 CLR 448 and MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657. See P.D. Finn (ed, Essays on Damages (1st ed), 1992) and in particular the essay by J.L.R. Davis 'Interest as Compensation', DP 149-152.

There is a secondary purpose for awarding pre-judgment interest, namely, to provide a discouragement to defendants from delaying the conclusion or settlement of proceedings: Ruby v Marsh per Barwick CJ at 652; with whose reasons for judgment McTiernan J agreed at 655. However, it is not a purpose of the award of pre-judgment interest to punish a defendant for having been dilatory in conducting the case or settling the plaintiff's claim. As Gibbs CJ observed in Bachelor v Burke (at 455):

'The interest is awarded to compensate the plaintiff for the detriment that he has suffered by being kept out of his money, and not to punish the defendant for having been dilatory in settling the plaintiff's claim'." 82 FCR 269

17    His Honour concluded:

"Hence, the Federal Court need not engage in calculating the interest in essence as provided for in s94 of the Supreme Court Act 1970 (NSW); but may include in the sum for which judgment is given a lump sum in lieu of any such interest. This reinforces the view that in a case of damages for personal injuries the element of pre judgment interest included in the amount of the judgment is itself a head of compensation, of a capital nature."

18    I find nothing in those words to suggest characterisation of pre-judgment interest as "damages for non-economic loss".

19 Greatest emphasis was placed on some passages in the judgment of Burchett J. His Honour said: 82 FCR at 282-3

"…'Prejudgment interest is normally designed to make the plaintiff whole and is part of the actual damages sought to be recovered'. In my opinion, it follows from the principle upon which pre-judgment interest is awarded in respect of past pain and suffering and loss of the amenities of life that it is not in any sense of an income character. It does not replace any actual income lost, and the statements of principle in the High Court and in the Court of Appeal of New South Wales make it clear that it does not replace notional income lost either. Whether by the adoption of a commercial interest rate or, as has been the practice since Gogic , by the adoption of a conventional interest rate, the use of an interest rate is no more than a guide to the determination of an appropriate figure. When determined, the figure is part of the total amount awarded by the judgment in order to achieve the law's object - to put the plaintiff back, so far as money can do so, in the position he would have been in but for the injury. That cannot be done without making up in some way for the fact that some parts of the award compensate the plaintiff for losses suffered, perhaps years previously. But to do that it is not necessary to assume, contrary to human experience that if moneys had been received earlier they would necessarily, or even probably, have been invested at interest. It is more likely that a solace for pain and suffering would have gone into immediate expenditure to relieve a pressing need, or to provide some comfort. The law is not so foolish as to suppose otherwise. It compensates the plaintiff for not having been able to do what he would have done, not what he would not have done."

20 Later his Honour said 82 FCR at 285

“Since, as the authorities cited earlier make clear, the allowance of interest in respect of past economic loss is wholly ancillary to the assessment of the proper measure of damages in respect of that loss, the application of an interest rate being merely by way of estimation, the inclusion of the resulting sum in the total award cannot alter its nature. The total award is received in the character of damages , including the destruction or impairment of the injured person's earning capacity at a date preceding the date of the assessment. Accordingly, I think the dictum of Davies J in Commissioner of Taxation v Northumberland Development Co Pty Limited (1995) 59 FCR 103 at 106 is correct:

'A court in this country would be unlikely to hold that an award of pre-judgment interest, included in an award of damages for personal injury, constituted a receipt in the nature of income’.”

21    Mr Leslie sought to elevate these remarks to submit that as Burchett J had said "the total award is received in the character of damages for a personal injury", that meant that interest, being an ingredient in those damages, should be regarded as "damages for non-economic loss". It is apparent, in my view, that a fair reading of the passages in Burchett J's judgment did not so intend.

22    The correct characterisation of pre-judgment interest, on whatever it is awarded, is that derived from Gogic and Haines v Bendall. It is a sum to compensate the plaintiff for being deprived of damages, of whatever nature, to which, in legal theory, he is entitled at the date of injury and in consequence thereof.

23    I would reject the submission that interest payable on general damages ceases to be a payment of an aspect of economic loss but absorbs the character of the item of damage for which it is awarded.

24    The second submission was that the decision of this court in James Hardie & Co Pty Limited v Newton was wrongly decided. The contention was that where money payments, such as pension payments under the Act, are to be offset against damages awarded, they could only be offset against damages awarded for economic loss. Like could only be offset against like.

25    No application was made to re-argue the decision in Newton, and, it being a recent decision of this Court, is binding upon this Court until reviewed or overruled.

26    In my view the appeal should be upheld, the judgment of O'Meally P set aside and in lieu thereof judgment in the sum of $125,000 be entered, such judgment to date from 5 May 1999. The respondent should pay the appellant's costs of appeal, but should have, if qualified, a certificate under the Suitors Fund Act 1951.

27    FOSTER AJA: This is an appeal from one aspect of the judgment of O’Meally P given in the Dust Diseases Tribunal of New South Wales on 5 May 1999. The respondent, Robert William Royal (Royal), succeeded in an action for damages brought against Pacific Power and Babcock Australia Limited for injuries, disabilities and consequent losses arising from his having been subjected to high concentrations of asbestos dust and fibre in the course of his employment.

28    His Honour found damages in the total sum of $173,000, which, after deductions irrelevant to this appeal, was reduced to $145,000, for which judgment was given. Part of this award consisted of $100,000 given for general damages and $20,000 for “interest on past general damages”. It appears that this latter figure was arrived at by his Honour’s allocating half of the amount of general damages, namely $50,000, to the period up to the date of judgment and applying thereto an appropriate interest rate in conformity with the decisions of the High Court in MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 and of this Court in Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54.

29 It had been submitted to his Honour on behalf of the defendants that it was inappropriate to make this award of interest. It was contended that because of payments already made to Royal by the Dust Diseases Board and because of the provisions of s12D of the Workers’ Compensation (Dust Diseases) Act 1942 (the Dust Diseases Act), this amount could not be awarded. It was, in effect, eliminated by the level of deductions required to be made from the total amount awarded, by virtue of the amounts already paid to Royal.

30    His Honour held that, as a matter of construction of s12D, the award of $20,000 was not susceptible to deduction. He entered judgment for the plaintiff but granted a stay on so much of it as related to the interest on past general damages, namely the sum of $20,000. It is the appellant’s contention on this appeal that that figure should not have been allowed and that the amount of the judgment should be reduced by $20,000.

31    Before I turn to the submissions of the parties to this appeal, it is convenient to set out, briefly, the events which led to the enactment of s12D.

32    In Harris v Commercial Minerals Ltd (1996) 186 CLR 1, the High Court considered (inter alia) the effect of benefits payable under the Dust Diseases Act to an injured worker upon the amount of damages awarded to him at common law, in respect of injuries and disabilities occasioned to him by exposure to dust during the course of his employment. The respondent worker was in receipt of weekly payments of compensation which the Court considered to be “compensation for economic loss suffered as the result of work injuries falling within the scope of the Dust Diseases Act”. The purpose of the payment was “to remedy the loss of earning capacity” of the injured worker (Redding v Lee (1983) 151 CLR 117 at 125). Accordingly the payments should be regarded as “a substitute or partial substitute for wages lost”. The Court concluded (at 18):

“Because the fundamental rule in an action for damages for tort is that a plaintiff cannot recover an amount more than he or she has lost, payments under that Act are deductible from any award of damages payable in respect of injuries that give rise to those benefits. Benefits receivable under the Dust Diseases Act are therefore deductible from any common law damages otherwise payable by an employer for injuries compensable under that Act.”

33    That decision was followed by this Court in James Hardie & Co Pty Ltd v Newton (1997) 42 NSWLR 729. In that case, the injured worker’s claim for damages at common law did not include any claim for lost wages or impairment of earning capacity. He had been receiving weekly payments of compensation under the Dust Diseases Act but the Court held, on the authority of Harris, that these payments must be deducted from his damages notwithstanding that those damages contained no component for economic loss.

34 This decision led to an amendment of the Dust Diseases Act by the addition of s12D. The purpose of the amendment appears from the Second Reading Speech in relation to the amending legislation. The following passage appears:

“Another proposal involves the relationship between a worker’s rights to workers compensation and to damages at common law in respect of the same dust disease. In the December 1997 decision of James Hardie v Newton the Court of Appeal extended the previously accepted principles for offsetting between those two categories of entitlement.
It was held in that case that although the worker’s common law claim related only to damages for pain and suffering the amount of weekly compensation already received by the worker must nevertheless be deducted from those damages. The Government considers that that approach tends to result in an inordinate reduction in the worker’s overall entitlements in these cases. The bill will restore the status quo that applied before that decision. The result will be that workers compensation entitlements of a person claiming damages for a dust disease will still be deducted, but only from the part of damages relating to economic loss.”

35    This purpose was sought to be achieved by the enactment of s12D which provides as follows:

“12D (1) This section applies to proceedings before the Tribunal (including proceedings on an appeal from the Tribunal) for damages in relation to dust-related conditions.

(2) In determining damages for non-economic loss in any such proceedings, no deduction is to be made for any amount of compensation already paid or payable, or payable in the future, under the Workers’ Compensation (Dust Diseases) Act 1942.
(3) In this section:
damages for non-economic loss means damages or compensation for the following:
(a) pain and suffering,
(b) loss of amenities of life,
(c) loss of expectation of life,
(d) disfigurement,’
(e) the need for services of a domestic nature or services relating to nursing and attendance which have been or are to be provided to a person by another person, and for which the first person has not paid and is not liable to pay any fee or charge.”

36    It is to be observed, of course, that the section makes no reference to interest on damages for non-economic loss.

37    O’Meally P was required to consider the effect of the section upon the award to Royal for interest on past general damages. His Honour dealt with the matter as follows:

“It is submitted for the defendants that interest on past general damages is not compensation for pain and suffering, for loss of amenities of life, or for loss of expectation of life, but is compensation for deprivation of general damages until judgment has been entered. No authority has been cited to me in support of the defendants' submission that general damages do not include interest on past general damages, nor by the plaintiff that they do. With some degree of hesitation and unaided by authority on the question, it is my view that interest on past general damages should be regarded as part of general damages.”

38 Accordingly, his Honour did not set-off against the amount of $20,000, which he awarded as such interest, the payments made to Royal under the Dust Diseases Act, with the result, as already indicated, that Royal received $20,000 more by way of verdict than was contended for by the appellant.

39 It is convenient at this stage, also, to set out s15(1) of the Dust Diseases Act which provided the Tribunal with the power to award interest. It read as follows:

“Section 15(1)
In any proceedings before the Tribunal, the Tribunal may order that there be included in any award of damages or of any other sum that is adjudged or ordered to be paid interest at such rate as it thinks appropriate on the whole or any part of that award for the whole or any part of the period from the date when the cause of action arose until the date when the damages or sum became payable.”
The Appeal:

40    By its notice of appeal, the appellant sought the setting aside of his Honour’s judgment in the sum of $145,000 and the entry in its place of judgment in the sum of $125,000. The ground of appeal relied upon was that:

“The Tribunal erred in determining that damages in the nature of interest awarded on past general damages are, as a matter of construction, “damages for non-economic loss” within the meaning of Section 12D(2) of the Dust Diseases Act 1989 as amended.”
The Appellant’s Submissions:

41 The appellant relied upon the wording of s12D(3) as indicating that “damages for non-economic loss” were the subject of exclusive definition. Accordingly, interest on damages awarded for pain and suffering and loss of amenities of life were not comprehended in the statutory concept of “damages for non-economic loss”.

42    Apart from the fact that the legislation made no mention of interest on such damages, it was also submitted that such an award of interest was conceptually different and stood apart from the award of damages for these heads of loss. Reliance was placed upon the High Court’s decision in MBP (SA) Pty Ltd v Gogic where it was said (at 663) that the function of an award of interest in respect of damages for pre-trial non-economic loss “is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period”.

43    It was put that an award of interest on past general damages could not properly be regarded as compensation “for” pain and suffering and loss of amenities but was rather compensation “for” the non-receipt from the time when the injury was suffered until judgment of the compensation awarded for pain and suffering. The award was purely and simply to compensate the plaintiff for deprivation of the use of the money during this period.

44    Accordingly, as a matter of construction, the section did not protect from relevant deduction an award of interest in respect of damages for non-economic loss.

Submissions of the Respondent:

45    It was submitted on behalf of Royal that, although no express mention was made in s12D of interest on damages awarded for the headings of non-economic loss therein referred to, the inclusion of such an award was necessarily implied; in other words, the concept of damages for pain and suffering and loss of amenities of life, necessarily included interest awarded on such damages. The interest was an integral part of the damages and, therefore, required no specific reference in the section. The argument depended upon submissions as to the nature of an award of interest for non-economic loss based upon passages in decided cases. It is necessary to consider these authorities.

46    In Haines v Bendall (1991) 172 CLR 60, the nature of an award of interest under s94 of the Supreme Court Act (NSW) was considered by the High Court (Mason CJ, Dawson, Toohey and Gaudron JJ) (at 66). It may be noted that s15 of the Dust Diseases Act is, for practical purposes, the same as s94 of the Supreme Court Act. Their Honours said:

“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 (1978) 140 CLR, at p431. 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 p146), 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 p233; 24 ALR 1, at p7, 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 (1981) 148 CLR, at p455, per Gibbs CJ; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR, at pp 663-665; cf Ruby v Marsh (1975) 132 CLR 642, at pp 652-653, per Barwick CJ. 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, at p613, per Reynolds JA. 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.”

47    In Metropolitan Meat Industry Board v Williams, the Court of Appeal (Samuels AP, Mahoney JA and Hunt AJA) had occasion to consider the discretion to award interest under s 94 of the Supreme Court Act 1970 and the relation of such interest to damages for non-economic loss. Their Honours said (at 56-57):

“It is true, of course, that s94 of the Supreme Court Act 1970 confers a wide discretion. But discretions of this sort are to be exercised judicially and therefore upon grounds of principle. The notion that the recovery of a verdict turns the plaintiff into an investor advanced by Barwick CJ in the passage from Ruby to which we have referred, has been, with all respect, effectively demolished in MBP (SA) Pty Ltd v Gogic ; and see Beneke v Franklin [1975] 1 NSWLR 571. An award of damages for non-economic loss is designed to provide solace to a plaintiff for the pain and other disabilities which the defendant’s tort has inflicted. In Thatcher v Charles (1961) 104 CLR 57 at 75-76, Windeyer J said that “in very many cases damages are given, not to meet particular needs, but so that the injured person may use the money as he wishes: so that by it he may get things, tangible or intangible, that he otherwise could not have had to make up for the loss of the things that he now can never have again.” And, in Teubner v Humble (1963) 108 CLR 491 at 507, he observed: “But in so far as the possession of money can in a particular case give pleasure or provide comfort, money can properly be said to compensate for pain and suffering.” It is by no means easy, to our minds, to work out a means of assessing a rate of interest capable of satisfactorily valuing the delay in receiving a sum destined for use for such a purpose.”

48    Royal points to statements such as these as being indications that awards of interest in respect of damages for non-economic loss should not fall into the category of awards for economic loss. Given that, since Gogic, an award of damages for past pain and suffering is not to be regarded as the provision to the plaintiff of a fund for investment, the deprivation of which for the period of time up to judgment should necessarily carry an award of interest at commercial rates, it is put that a post-Gogic award of interest, at significantly reduced rates, on such damages, should be regarded as compensation for a non-economic loss.

49    This was the view taken by a Full Court of the Federal Court of Australia in Whitaker v Commissioner of Taxation (1998) 82 FCR 261, a decision heavily relied upon by Royal. In that case it was necessary for the Court to determine whether moneys awarded as interest upon damages for pre-judgment pain and suffering and loss of amenities of life were received by the plaintiff on capital or revenue account. It was the contention of the Commissioner that the receipts were true interest receipts and, accordingly, properly characterised as income. Conversely, the appellant contended that they were of a capital nature and not assessable in her hands. In these circumstances it was necessary for the Court to determine what was the essential character of such an award of interest.

50    Lockhart J, after considering (at 268-9) the history of the acquisition of power by the Court to award interest on damages, said (at 269):

“The primary purpose of an award of pre-judgment interest is to compensate a successful plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period; that is to compensate the plaintiff for having been deprived of the use of the money: Ruby v Marsh (1975) 132 CLR 642; Batchelor v Burke (1981) 148 CLR 448; and MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657. See P D Finn (ed), Essays on Damages (1st ed, 1992) and in particular the essay by J L R Davis, “Interest as Compensation”, pp149-152.

There is a secondary purpose for awarding pre-judgment interest, namely, to provide a discouragement to defendants from delaying the conclusion or settlement of the proceeding: Ruby v Marsh per Barwick CJ at 652; with whose reasons for judgment McTiernan J agreed at 655.”

(His Honour indicated that the secondary purpose was of little importance today having regard to case management practice in the courts.)

51    His Honour, after a consideration of certain English cases, turned his attention to Australian authorities. There is no need to set out his Honour’s discussion of these cases. I refer merely to his Honour’s conclusions, with which I respectfully agree. His Honour said (at 273):

“The word “interest” has a variety of meanings, the aptness of which depends on the context in which it is used. It can mean compensation for some injury or wrongdoing, or money paid for the use of money lent or for forbearance of a debt. Interest awarded under s94 and equivalent sections in other jurisdictions in Australia and elsewhere is calculated on a base figure which is not known until judgment is given. Since a claim for damages for personal injuries is unliquidated, the amount of interest is not ascertainable until the reasons for judgment have been given by the trial judge or until the jury gives its verdict, as the case may be. There is no certain or ascertainable sum until that time, unlike interest on a debt or other obligation. This point was made by Moffitt P in Bennett v Jones [1977] 2 NSWLR 355 at 368.

Receiving compensation for the compulsory acquisition of a capital asset which would have been put to a revenue use is quite different from compensation for damages for personal injury. The latter is compensation for not having received damages when they should have been paid, where the plaintiff should not be treated as having invested the judgment moneys in such a way as to earn taxable income. Interest is awarded in cases of this kind because the plaintiff has been deprived of the use of his money, not because he has foregone investment opportunity.
Also, as the terms of s94 make clear, the interest is to be included in the sum for which judgment is given. It is one of the components which together make up the global sum constituting the amount of the award: cf Pheeney v Doolan(No 2) [1977] 1 NSWLR 601 (NSW Court of Appeal).”

52    His Honour also said (at 274):

“It should not be assumed that a successful plaintiff would have invested the moneys awarded in the judgment in such a way as to earn assessable income. The plaintiff may have done all manner of things with the amount of the award: purchased a home for himself or herself and family, or a car, or travelled overseas, or spent the money in any of the multifarious ways which are possible. In Tipper v Williams (unreported, Court of Appeal, NSW, Full Court, No 40034 of 1990, 12 May 1993) Priestley JA said (though in dissent) (at p2):
‘I do not see why the plaintiff should be treated as having invested the judgment moneys in such a way as to earn taxable interest; he might have bought a home to live in; he might have bought shares with fully franked dividends; he might have bought vacant land with a view to holding it as a gift for his children in twenty years time; the possibilities are endless, and not all have the same tax consequences.’ ”

53    His Honour indicated that in his view interest awarded in these circumstances was of a capital nature “as part of the global amount for which judgment is entered in personal injury cases” (at 275).

54    Burchett J reached the same conclusion. He said (at 279):

“… the question whether the appellant must bring the amount awarded under s94 to account for income tax purposes requires an examination of the nature of such an award. That … does not depend upon the law of income tax; it depends upon the law applicable to the assessment of damages in a case of this kind.”

55    After a consideration of a number of authorities, including Gogic and Williams, his Honour said (at 282-283):

“These various statements of the position under s94 of the Supreme Court Act and similar provisions in Australia are consistent with the statement of White J, delivering the opinion of the Supreme Court of the United States in Monessen Southwestern Railway Co v Morgan (1988) 486 US 330 at 335: “Prejudgment interest is normally designed to make the plaintiff whole and is part of the actual damages sought to be recovered.” In my opinion, it follows from the principle upon which pre-judgment interest is awarded in respect of past pain and suffering and loss of the amenities of life that it is not in any sense of an income character. It does not replace any actual income lost, and the statements of principle in the High Court and in the Court of Appeal of New South Wales make it clear that it does not replace notional income lost either. Whether by the adoption of a commercial interest rate or, as has been the practice since Gogic , by the adoption of a conventional interest rate, the use of an interest rate is no more than a guide to the determination of an appropriate figure. When determined, the figure is part of the total amount awarded by the judgment in order to achieve the law’s object - to put the plaintiff back, so far as money can do so, in the position he would have been in but for the injury. That cannot be done without making up in some way for the fact that some parts of the award compensate the plaintiff for losses suffered, perhaps, years previously. But to do that it is not necessary to assume, contrary to human experience, that if moneys had been received earlier they would necessarily, or even probably, have been invested at interest. It is more likely that a solace for pain and suffering would have gone into immediate expenditure to relieve a pressing need, or to provide some comfort. The law is not so foolish as to suppose otherwise. It compensates the plaintiff for not having been able to do what he would have done, not what he would not have done.”

56    His Honour was also of the opinion that a similar approach should be taken to interest paid on awards of damages for past economic loss. He said, in respect of interest awarded both for past economic and non-economic damages:

“That compensation has nothing to do with a notional investment at interest. It is, in Lord Wright’s phrase, “estimated in terms of interest”, but interest it is not.”

57    Lord Wright’s words, to which his Honour makes reference, come from his speech in Riches v Westminster Bank Ltd [1947] AC 390 (at 402-403). Burchett J made reference to that case and to what was said by Evershed J (as he then was) when hearing the case at first instance ([1945] 1 All ER 466). The issue in the case was whether interest upon the taking of an account of profits was “interest of money” within the meaning of Schedule D to the Income Tax Act 1918 (UK). Evershed J, in his judgment (at 479), made a distinction between an assessment of “damages for fraud or negligence”, including an amount for pre-judgment interest, from the case of a judgment allowing recovery of a debt with interest.

58    As Burchett J points out (at 280):

“His Lordship said that: ‘in the case, for example, of a claim for damages for fraud or negligence it is plainly easier to conceive of an award calculated in terms of interest being in reality an integral part of a single award of damages as such.’ ”

59    Burchett J also refers (at 280) to the statement of Lord Wright made in the House of Lords as follows:

“When the case reached the House of Lords as Riches v Westminster Bank Ltd [1947] AC 390, the amount allowed as interest was held, in the words of Lord Wright (at 402), to fall “within the scope of the charging words of Sch D to the Income Tax Act 1918 … which charges ‘all interest of money’”. Lord Wright made it clear (at 402-403) that cases of this kind depended on the distinction ‘whether the payments were payments of profits, that is, were income, or were payments on capital account estimated in terms of interest … This distinction depends on substance not on the mere name’.”

60    Black CJ agreed with the reasons given by Lockhart and Burchett JJ. I am also in respectful agreement with their Honours in their approach to the ascertainment of the true nature of “interest” awarded in respect of pre-judgment damages. It is not interest in the true sense. It has nothing to do with the actual investment or notional investment of the amount of damages. It is not “interest of money”.

61    Accordingly, I accept the submissions made to this effect on behalf of Royal. This means, in my opinion, that amounts of interest awarded in accordance with Gogic and Metropolitan Meat, besides being capital receipts for income tax purposes, cannot properly be characterised as damages for economic loss. They do not represent amounts that an injured plaintiff could have earned through the investment of his damages up to judgment. They are different in kind from amounts awarded by way of post judgment interest under rules of Court. Accordingly, they qualify for the description of “damages awarded for non-economic loss”.

62    It is the submission of the respondent that, notwithstanding these “interest” payments are not included expressly in the definition of “damages for non-economic loss” in s12D, they should nevertheless be held, as a matter of construction, to be so included, it being contended that the legislature necessarily intended that they be comprehended within the concept of damages for past pain and suffering and loss of amenities of life. Accordingly, I turn to consider this submission.

Conclusion:

63    With some hesitation, and with due respect to those who hold a different view, I have come to the conclusion that the respondent’s submission should be accepted. A proper interpretation of s12D requires that the award of interest in respect of pre-judgment non-economic loss be included within the descriptive words of the section. If it be accepted, as I do, that these awards perform no role other than that of perfecting an award of damages for past pain and suffering and loss of amenities, by fully compensating the plaintiff in respect of those heads of damage, up to the time of judgment, then, in my view, they can properly be regarded as an integral part of the damages awarded for those heads and not as standing separate and apart from them. I am fortified in this view by the absence of any discernible policy considerations which would have subjected these awards to deduction when the heads of damage with which they are so fundamentally associated are free of deduction.

64    In my opinion, the legislature intended, in the words it used in s12D, to include “interest” payable upon pre-judgment awards of damages for pain and suffering and loss of amenities of life within the protection of the section.

65    Accordingly, I am of the view that O’Meally P correctly included the disputed amount of $20,000 in the sum for which he entered judgment in favour of Royal. I propose, therefore, that this appeal be dismissed with costs.

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