Skelton v Collins

The High Court of Australia heard an appeal in *Skelton v Collins*. The case concerned a claim for damages for personal injuries sustained by the plaintiff, Mr. Skelton, who was a passenger in a motor vehicle driven by the defendant, Mr. Collins. Mr. Skelton suffered a fractured skull and a fractured femur in the accident. The central dispute revolved around the plaintiff's entitlement to recover damages for the loss of earning capacity, specifically in relation to his future inability to perform certain types of work due to his injuries.

The primary legal issue before the High Court was whether the plaintiff was entitled to recover damages for the loss of his *earning capacity* as distinct from the loss of *actual earnings*. The court was required to determine the correct approach to assessing damages for future economic loss, particularly where the plaintiff's injuries might prevent him from engaging in certain types of employment, even if he could still earn income in other capacities. This involved considering the nature of earning capacity and how it should be valued in monetary terms.

The High Court, in a majority decision, held that damages for loss of earning capacity are not awarded for the loss of the *opportunity* to earn money, but rather for the loss of the *capacity* to earn money. The court reasoned that earning capacity is a capital asset, and its loss should be compensated by a capital sum. This capital sum is to be calculated by assessing the difference between the plaintiff's earning capacity before the injury and his earning capacity after the injury, and then discounting that difference to its present value. The court clarified that the plaintiff's ability to earn income in alternative employment, even if at a lower rate, is a factor to be considered in assessing the extent of the loss of earning capacity, rather than a complete bar to recovery. The court affirmed that the assessment should focus on the plaintiff's ability to perform work generally, not just specific jobs.