Damages Economic Non-Economic Introduction compensatory once and for all lump sum fault system Three main types of damages Compensation Damages

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1 7/08/ :17 PM Damages Economic 1. Past loss of earnings = actual loss 2. Future loss of earnings - CLA s 13(1) Most likely projected income * remaining working years - Minus outgoings(work expenses) (Wynn) - Minus lost years cost of living - Plus or minus contingencies (promotion, unemployment, marriage, maternity leave, sickness, industrial action) - CLA s12 No mere than 3* average weekly wage 3. Medical expenses = reasonable = cost v benefit (Sharman) 4. Is there a gratuitous carer? - CLA s15(1) Services provided by another person without cost + - CLA s15(2) reasonable need = solely because of injury and would not be provided but for the injury + - CLA s 15(3) More than 6 hours per week or more than 6 months + - CLA s 15(4) no more than 40 average weekly earnings at market rate (Van Gervan) 5. Discount rate on all future economic damages = CLA s14 = 5% Non-Economic CLA s16 (15% of most extreme case + $510,000 cap) 1) Pain and suffering (subjective) (Skelton) 2) Loss of amenities (sub/obj) (Muzic,Namala) 3) Loss of expectation of life (sub/obj) Introduction 1. A plaintiff must prove that he has suffered a loss (or 'damage') in order to be able to recover monetary compensation for the negligence of another. The monetary compensation for that loss is called damages. The laws regarding damages in tort law are as follows: 1) Damages are given on a compensatory basis - restoring the party to his original position. 2) Damages are given in a once and for all lump sum. Can be made in periodic payments if both parties agree. 3) Damages are paid by the defendant (the fault system) 4) The plaintiff must prove his loss Three main types of damages 1- Compensation Damages - damages aimed at compensating the plaintiff. These are the damages used by the torts system - The damages are meant to put the plaintiff in the same position as if he never got injured. This is called restitutio in integrum - Damages are recovered once and in the form of a lump sum to compensate for all past and future losses. This is called once and for all rule - Exceptions: There are cases in which legislation allows for exceptions to the 'once and for all' rule. For example, s 24 of the Civil Liability Act 2002 (NSW) allows periodic payments ('structured settlement') if both parties consent to it - The court is not concerned with how the plaintiff chooses to use the sum he was awarded - The burden lies on the plaintiff to prove the injury or loss for which he seeks damages - The tort system in Australia also relies on the 'fault' system, which means that the damages are paid by the defendant (the one at fault) to the plaintiff. This is a widely contested issue 2 - Exemplary (or 'punitive') damages - these are damages aimed at punishing or deterring wrongdoers. They allow windfall profits. These are prohibited by s 21 of the Civil Liability Act 2002 (NSW) 3 - Nominal (or 'contemptuous') damages - these are small sums awarded simply in recognition that a plaintiff s rights have been invaded but no damage has been sustained. They don't really apply to negligence since damage being sustained is required for a negligence action

2 General damages v Special damages Special damages compensated for actual monetary loss that have occurred up to the date of trial Paff v Speed (1961) 105 CLR Be able to calculate with precision 2. Include - medical expenses - Other expensed - Loss of earnings General damages 1. Cannot be calculated with precision 2. Include pecuniary loss v non-pecuniary loss 1) Pecuniary loss include future economic loss + future general expenses + future medical expenses 2) Non-pecuniary loss pain and suffering (past, present and future) + loss of amenities + loss of expectation of life + disfigurement 2

3 7/08/ :17 PM Economic 1. Past loss of earnings = actual loss 1) P is entitled to be compensated for a loss of earning capacity if they were working at the time. If not, P must show that he/she would have earned money had the accident not occurred 2) The loss must be financial Cullen v Trappel 3) at common law, the amount received for loss of earning capacity is based on P s pre-injury earning capacity, no matter how high that may have been (reflects the same position principle) 4) as a result, damages for loss of earning capacity often forms the greatest part of a damages award 5) Husher v Husher (1999) 197 CLR 138 Fact: P was in partnership arrangement with his wife at the time he was injured through D s negligence. While the partnership paid the income in equal shares to P and his wife, he claimed the full amount of the partnership s income as his loss of future earning capacity. D claimed he should only be entitled to 50%, as this represented his loss of earnings Held: the basis of the damages was for the loss of earning capacity, not loss of actual income. As the husband was able to establish that he controlled the capacity of the partnership to earn, he was entitled to the assessment of the full amount of the partnership income as representing his loss of earning capacity 6) Cullen v Trappell (1980) Note: the income tax is also taken into account, so that P receives the net (after tax) value of the earning capacity 7) Cap (CLA s12) - the maximum P can be awarded is three times the average weekly earnings 2. Future loss of earnings - CLA s 13(1) Most likely projected income * remaining working years CLA s 13(1): A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant s most likely future circumstances but for the injury - Minus outgoings (work expenses) (Wynn) outgoing expenses these expense that are usually incurred in the process of holding a job (transport, clothing etc) and that will not be incurred e.g. clothing cost of clothing suitable to his particular employment cost of transportation - transportation to and from work Note: there is no deduction for saving expenses which were incurred due to pastime activities, or maintenance of oneself or one s dependents - Minus lost years cost of living 1) it refers to the expected reduction in P s life expectancy as the result of D s negligence 2) P will still be awarded damages for future los of earning capacity up until the pre-accident date of death 3) as P will not require medical acre and other living expenses for the lost years, damages are discounted to take that into account Sharman v Evans - Plus or minus contingencies (promotion, unemployment, marriage, maternity leave, sickness, industrial action) 1) contingencies including (may be positive or negative on earning capacity) 2) Factors may force a person out of work for periods of time (negative) illness, pregnancy and childrearing and economic conditions 3) Factors (positive increasing the earning capacity) promotion opportunities 4) Wynn: Fact: Mrs Wynn was employed at American Express in 1981 and within five years was promoted to manager of authorisations. She was injured in a motor vehicle accident caused by D s negligence in 1986 and, while she returned to work for a period after the accident, she was forced to

4 leave in 1988 due to her deteriorating condition. In determining the appropriate award, D argued, among other things, that the amount to be awarded for loss of earning capacity should be reduced to take into account the possibility that P would have spent some of the earnings on childcare, if she had not been injured and had decided to raise a family Held: a) the possibility that a person may have needed childcare in order to earn income was not a factor to be taken into account in discounting the lump sum payment for contingencies of life b) Due to the variations inherent in types of childcare and costs, it was simply another cost associated with childrearing, which was essentially private in nature and not to be used as a deduction in calculating loss of earning capacity c) Possible absence from work due to maternity leave could be taken into account d) By balancing the factors of a previous injury, possible maternity leave and also the possibility of future promotion, the court determined that the appropriate discount amount for P s economic loss was 12.5% - CLA s12 No more than 3* average weekly wage 3. Medical expenses = reasonable = cost v benefit (Sharman) 1) P would be compensated for all expenses that are reasonably incurred 2) What is reasonable the court will weight the cost of care against the health benefits to P (Sharman) 3) Sharman: Fact: P was 20 years old when she was severely injured in a motor vehicle accident caused by D. Her injuries included quadriplegia, epilepsy, loss of speech and impaired respiratory functioning. She was fully aware of her plight and sought damages that included the cost of medical care to be provided at her parent s home. One of the question before the court was whether the cost of care at home was a reasonable expense or should be limited to the lower cost of hospital care Held: the reasonable requirements of P could be met through the provision of less expensive hospital care. It was felt that hospital care would not affect her physical or mental health, it is therefore reasonable 4. Is there a gratuitous carer? 1) CLA s15(1) Services provided by another person without cost + CLA s15(1): - attendant care services mean any of the following: (a) services of a domestic nature (b) services relating to nursing (c) services that aim to alleviate that consequences of an injury - gratuitous attendant care services means attendant care services: (a) that have been or are to be provided by another person to a claimant, and (b) for which the claimant has not paid or is not liable to pay 2) CLA s15(2) reasonable need = solely because of injury and would not be provided but for the injury + CLA s15(2): No damages may be awarded to a claimant for gratuitous attendant care services unless the court is satisfied that: (a) there is (or was) a reasonable need for the services to be provided, and (b) the need has arisen (or arose) solely because of the injury to which the damages relate, and (c) the services would not be (or would not have been) provided to the claimant but for the injury 3) CLA s 15(3) More than 6 hours per week or more than 6 months + CLA s 15(3): further, no damages may be awarded to a claimant for gratuitous attendant care services unless the services are provided (or to be provided): 4

5 (a) for at least 6 hours per week, and (b) for a period of at least 6 consecutive months 4) CLA s 15(4) - more than 40 average weekly earnings at market rate (Van Gervan) CLA s 15(4): if the services are provided or are to be provided for not less than 40 hours per week, the amount of damages that may be awarded for gratuitous care services must not exceed: a) the amount per week comprising the amount estimated by the Australian Statistician as the average weekly total earnings of all employees in NSW CLA s 15(5): If the services are provided or are to be provided for less than 40 hours per week, the amount of those damages must not exceed the amount calculated at an hourly rate of one-fortieth of the amount determined in accordance with subsection (4) (a) or (b), as the case requires 5) Common law Griffiths v Kerkemeyer: where care is provided free of charge by a friend or relative, P is entitled to the sum of money that represents the reasonable cost of such care Van Gervan: assessed according to the market value of the care rather than the lost earnings of the care provider Kars v Kars: the sum will be paid even where the care provider is also D Woolworths Ltd v Lawlor: Mrs Lawlor was injured when she fell on a moving walkway at D s sopping complex. She sued D, claiming damages, which included the costs of gratuitous care provided by her husband + The court: the requirement that the care arose solely from the injury caused did not mean that aggravation to a pre-existing injury excluded the right to recovery. Assessment could be made for the amount of extra care arising solely from the injury 5. Discount rate on all future economic damages = CLA s14 = 5% 1) rationale a) by receiving the damages in one large lump sum, P can invest the money to earn further income well into the future. This means that the money can increase significantly in value, thereby representing a far greater award than had originally been assessed, and possibly over-compensating P b) inflation invariably increases the cost of living, so that damages of $270,000 awarded to Ms Evans in 1977 (Sharman), which was one of the largest awards at the time, could not in today s society provide for her care, medical expenses and loss of earning capacity c) Balancing the potential windfall P receives through a lump sum payment against inflation and increase in real income, the court adjusts the lump sum damages by applying a discount factor at common law of 3% (Todorovic v Waller) + statutory discount of 5% (s 14 of the CLA) 5

6 7/08/ :17 PM Non-Economic CLA s16 (15% of most extreme case + $350,000 cap) - CLA s16 (1): No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15% of a most extreme case - CLA s 16 (2): The maximum amount of damages that may be awarded for non-economic loss is $350,000, but the maximum amount is to be awarded only in a most extreme case - CLA s 3, non-economic loss may include: a) pain and suffering b) loss of amenities of life c) loss of expectation of life d) disfigurement 1) Pain and suffering (subjective) (Skelton) a) pain and suffering damages only awarded where they are subjectively experienced b) Skelton: P left unconscious by D s negligent Held: a person who is aware of his condition and has to live with it suffers more than the unconscious person and therefore will get receives more compensation for pain and suffering loss of amenities etc. c) physical pain that needs to be endured, so if shorter life expectancy, then less pain and suffering paid 2) Loss of amenities (sub/obj) (Muzic,Namala) - loss of capacity to consciously enjoy life to the full Skelton - is usually calculated with pain and suffering and is aimed at compensating the P for reduces capacity to enjoy life - subjective approach is taken in AUS, such that the level of damages for loss of a limb will depend on what that means to P (e.g. knowledge that a sporting career or certain recreational activities are excluded) but with some objective element (i.e. allowing modest compensation where no subjective sense of loss) - Examples: loss of opportunity for fulfilling marriage, parenthood, sexual satisfaction, realization of ambition, hobbies, sport - none for lost years as not experienced 3) Loss of expectation of life (sub/obj) - assessed on an objective basis, granted only where the injury has reduced the P s life expectancy - note that P must live until the trial date to claim damages under this head Sharman - meant to be no more than a quite conventional sum, very moderate in amount - Sharman