BLAXTER v COMMONWEALTH OF AUSTRALIA

(a) loss of income whilst he remained in the Navy; (b) loss of the pension which would have been received had he served for 20 years, and (c) loss of earnings in civilian life. 67 In relation to the first two elements, his Honour concluded that the claim was "not made out" apparently on the basis that the psychological injury which the appellant suffered as a result of the collision did not cause him to leave the Navy or to fail to progress in his last three years of service: at [56] and [57]. His Honour stated that the evidence fell short of "establishing that he left the Navy because of his psychological injury". He then noted the many references, both in the medical histories, in statements to third parties and in his evidence, to his "disillusionment following his treatment by the naval doctor and the charge of insubordination laid against him on the morning after the collision, leading to his decision that he was finished with the Navy". After referring in a summary way to this evidence his Honour concluded at [58]: "To none of these experts did he say that his decision to see out his term and leave the Navy was the result of the psychological sequelae of the collision itself." 68 As explained above, his Honour appears to have accepted the evidence (which was unchallenged) that the appellant was an enthusiastic seaman prior to the collision, and was pursuing a course to promotion. After the collision he lost all of that enthusiasm and abandoned any attempt at further promotion. Absent any other explanation, the temporal connection would appear to lead almost inexorably to satisfaction as to a causal link. No other explanation is given, except for the proposition that it was the treatment by the Naval doctor, rather than the collision itself, which led to disillusionment. 69 Although the argument was put in part on the basis of the proper application of Medlin principles, the distinction must arise not from any voluntary conduct on the part of the plaintiff, but from an intervening act, for which the defendant was undoubtedly responsible, but which did not itself constitute tortious conduct. Nevertheless, the causal connection is clear. First, the fact of the collision had rendered the appellant cynical about the competence and abilities of officers. Secondly, the appellant was still conducting himself in the context of the collision and its immediate aftermath and no doubt responding to events consistently with the immediate effects of the trauma; and, in a straightforward causal sense, the incident with the Naval doctor would not have occurred but for the circumstance of the rescue operations undertaken on the previous night. 70 In Chapman v Hearse (1961) 106 CLR 112, the High Court considered whether the driver of a car at fault in a two-car collision, which led to a bystander, Dr Cherry, going to the assistance of one of the injured parties, could be liable for the injuries sustained by Dr Cherry when hit by a third car. Because the circumstances in which Dr Cherry was fatally injured were not beyond the reasonably foreseeable circumstances resulting from the initial negligent driving, the Court accepted that the negligent driver in the first accident was responsible for the injury to Dr Cherry "notwithstanding the later intervention of an act of a third person which has more immediately caused the injuries of which the plaintiff complains", following not dissimilar American authority: at p 121. The judgment of the Court continued: "Such intervening acts may, of course, be culpable or not and since reasonable foreseeability is the test the fact that a later act is culpable does not necessarily preclude the conclusion that the earlier act was a 'proximate' or 'legal' cause." 71 As the Court noted, this conclusion was entirely consistent with earlier authorities in analogous "rescue cases": p 125. The present case was itself "a rescue case" and no one doubted that the psychological injury caused in the course of the rescue constituted part of the loss for which the Commonwealth was liable. However, it is artificial to say that the rescue was completed, and thus no further loss could eventuate, once the cutter was removed from the water. In a commonsense assessment, it should be accepted that the events of the following morning were part of the rescue operation. Indeed, one can envisage a range of further circumstances which might have arisen, including exposure to injured seamen and continuing fears as to the safety of the Melbourne. A commonsense approach does not permit any bright line to be drawn between the psychological effects of the previous evening and those resulting from the events of the morning after. 72 Nevertheless, it appears that his Honour drew such a distinction: in my view that approach was in error and, to the extent that the appellant's disillusionment with the Navy followed from the events of the day following the collision, they were inextricable sequelae of the tortious act. Indeed, were it otherwise, there should logically have been a dissection of the psychological effects of the night of the collision from any effects attributable to the events of the following morning. No psychologist or psychiatrist sought to undertake this task, nor does it appear to have been proposed at the trial. Such an exercise would not only have been futile, but unnecessary. 73 It follows that the Commonwealth, absent any other intervening factor, must be liable for any diminution in earning capacity attributable to the appellant's disillusionment with the Navy. That loss can properly be assessed by reference to his failure to seek further promotion and his failure to re-enlist at the end of his contracted period of service. 74 The only other basis for limiting the liability for such loss was the suggestion that the appellant had three years to reconsider his attitude and the lapse of time rendered his failure to re-enlist a consequence which could not be attributed to the collision. 75 The logic of that proposition is, with respect, faulty. It fails to recognise that the disillusionment with the Navy formed part of the psychological effect of the collision, which effect continued, as his Honour found, until well after 1967, with the result that he had a continuing diminution of earning capacity after he left the Navy. 76 It therefore follows that the appellant's appeal in relation to economic loss should be allowed in relation to the first two elements of his claim so that the judgment must be increased to reflect the loss of income in the Navy and the loss of a pension. Loss of a chance 77 It does not, however, follow that he should be compensated for the full amount of the pension. It is necessary to take into account the possibility that, absent the psychological effects of the collision, the appellant would in any event not have progressed as far as chief petty officer (being the proposed rank he would have expected to achieve by 1978) or would have left the Navy without re-enlisting for a further 11 year period. 78 In support of this approach, evidence was tendered as to the small proportion of seamen who enlisted around 1958 and who continued with the Navy for 20 years or more. Because his Honour rejected the appellant's claims in relation to Naval service entirely, he did not need to consider that evidence. On the basis that such losses are recoverable, it becomes necessary to consider the hypothetical question as to what might have happened absent the collision. 79 The material tendered in respect of this question involved statistics prepared by the Navy in relation to the enlistments between 1957 and 1960. Information had been sought excluding those who served on HMAS Melbourne or HMAS Voyager, but the response from the Navy indicated that there was "no easy method of determining the number of sailors from this group who were not aboard" one of the ships on the night of the collision, although the statistics were said to exclude personnel "known to have been serving aboard" those ships. Beyond that, it can be said that the statistics are by no means self-explanatory. For example, it is not easy to know (and the Court was given no assistance in this regard) what were the chances of a seaman who had commenced on examinations for promotion, and been successful in his initial years, progressing to petty officer or chief petty officer. Similarly, there was no indication as to whether the likelihood of a seaman remaining in the Navy for periods between 12 and 20 years was increased by obtaining promotion. The Commonwealth contented itself with a submission that only some 15% of recruits who entered the non-commissioned ranks in the late 1950's achieved 20 years of service. The relevance of that figure depended upon taking the appellant as an average member of the pool of 1,492 persons who enlisted in his year. An alternative approach would have been to consider the characteristics of the 224 who did achieve 20 years or more of service and inquire to what extent the appellant, prior to the collision, demonstrated features in common with those individuals. 80 At trial, the appellant tendered an actuarial report which sought to estimate the value, as at 31 May 2004, of earnings and superannuation that the appellant lost as a result of the collision on 10 February 1964. There were numerous assumptions built into those calculations. One assumption was that, but for the collision, he would have been promoted to petty officer on 7 July 1966 and to chief petty officer on 7 July 1972. The calculations also assumed that he would have retired to civilian life on 20 March 1978. The figures included interest throughout the period, although it was conceded by the appellant that interest was only calculable from 1 July 1972. 81 At the hearing of the appeal, some expectation was expressed that the parties might be able to agree on the value of the damages which would accrue under each head, if the appellant were successful. 82 There was some uncertainty on both sides of the record as to what course this Court should take if the appellant were in any degree successful. The final position for the appellant was that this Court should assess damages as best it could on the material before it. The Commonwealth sought a reference to compulsory mediation in the event that the appellant was successful. However, it provided neither evidence nor argument in support of such an order. In a general sense, the Commonwealth has had more than 40 years to consider a fair and reasonable mechanism for compensating seamen injured in the collision. In relation to this appellant, it is close to 10 years since the proceedings were commenced. If it is possible for this Court to determine the issue, as requested by the appellant, that course should be taken. There is no reason to suppose mediation would now be successful. 83 The Commonwealth does not say that the actuarial report should not be applied, although it does challenge certain factual assumptions. There is some complexity in the factual assumptions which make the ensuing calculations difficult, but the appropriate course for this Court to take is to identify the relevant assumptions and, to the extent that their application may be thought to give rise to arithmetical error, grant leave to the parties to indicate what if any corrections are required. Calculation of loss 84 The first question is the assessment of the loss of chance of a pension, which in turn depends upon the likelihood that, absent the collision and its sequelae, the appellant would have stayed in the Navy for 20 years. The best that one can do on the material available is to say that his personal circumstances before the collision suggested a better than average chance of fulfilling that requirement. As the proportion of those who enlisted in 1958 (and the two succeeding years) and stayed for the relevant period was in each case approximately 15%, it is appropriate to double that chance for the appellant, thus providing him with a loss of chance of a pension calculated as 30%. The pension itself was assessed as a lump sum of $344,303, although it is not clear as to whether the pension would have been payable on a fortnightly basis or by way of lump sum on retirement. That question may affect the calculation of interest in due course. Taking that sum as the value of the lost chance, the amount to be allowed is $103,291. 85 The second part of the question concerns the calculation of loss of earning capacity following the collision. That appears to have been variable over time, but to the extent that he lost a chance to remain in the Navy, he also lost the chance for promotion to petty officer and chief petty officer. The third claim for loss of damages would require an assessment of his loss of earning capacity in civilian life, from 20 March 1978. 86 Addressing the claim for economic loss following his departure from the Navy in 1967, his Honour accepted that his earning capacity was reduced and that "but for his psychological injury, he could have achieved more responsible and stimulating employment": second Judgment at [12]. His Honour was not inclined to allow any amount for future loss - at [13] - and no complaint is now made as to that conclusion. His Honour then stated that the evidence did not support any mathematical calculation based upon expected earnings in a particular occupation and therefore the best that could be done was to arrive at "a lump sum as a buffer or cushion": at [14]. 87 Despite the fact that the appellant put material before the trial judge in the form of the actuary's report, providing a basis for a mathematical calculation, no complaint was directed at the global approach as such; rather, the complaint was that the amount of $70,000 awarded was manifestly inadequate. However, as was explored with counsel in the course of argument, manifest inadequacy can only be demonstrated by reference to relevant criteria. As a result, the appellant reverted to reliance upon the actuarial report in submissions filed after the hearing. That calculation assessed his likely after-tax earnings, but for the injury, in an amount of $833,853. From that was deducted actual after-tax earnings and a redundancy payment received in May 1991, to give a net figure of $489,640. That calculation was based upon an assumption that the appellant would have obtained the rank of chief petty officer whilst in the Navy and would have continued to earn income on a full-time basis after leaving the Navy, at the same rate with due allowance for increases in line with average weekly earnings. 88 The Commonwealth tendered a critique of the actuarial report prepared by a business known as Lexiq. One comment made in that critique was that the estimated annual income had risen above that which would have been expected had the appellant remained in the Navy. Thus, in the calculations now relied upon, he was expected to have had an annual income of approximately $66,000 in the 2004 financial year. According to Lexiq, the income of a chief petty officer in that year was $56,441. This suggests an accumulation, at least by the end of the period, of approximately 14.5% over the earnings of a chief petty officer. Precisely when the discrepancy began, and how it operated is not known. Nevertheless, in rough terms, it is appropriate to reduce the amount claimed by 14% to allow for some over-estimation in the calculation relied upon by the appellant. 89 Secondly, the appellant's figures assume full-time employment until he turned 65 years of age. Given that, on the present hypothesis, the appellant would have enjoyed a Naval pension after retirement in 1978, there is a significant chance that he would not have worked full-time until the age of 65. 90 Given the fact that the appellant would have had limited skills, even assuming progression in the Navy, and given the possibility that he might have suffered other circumstances resulting in a diminution in earning capacity, I would apply a higher than usual percentage by way of vicissitudes. Although the figure is entirely impressionistic, a further reduction by an amount of 25% for vicissitudes is, in my view, appropriate. The result would be an allowance for lost wages in an amount, in round figures, of $316,000. 91 There remains a question of interest on these amounts. 92 The appellant claims an amount of interest on the pension loss calculated from 20 March 1978 until 20 March 2007 (a period of 29 years) at an average rate of 6%, being half the average rate prescribed under the rules over that period. As noted above, that calculation appears to depend on an assumption that the figure arrived at is that which would have been received as a lump sum on 20 March 1978. But that would be inconsistent with the adoption of an interest rate which suggests accrual over the whole period. 93 The appellant seeks to undertake a similar calculation in relation to lost wages. Each calculation assumes that the loss accrued steadily over the period and that the calculation of interest is therefore achieved by taking the total sum, multiplied by half the average interest rate, multiplied by the period of years. However, that approach appears to be misconceived in relation to both loss of income and the pension, which is calculated by reference to current wage rates. Thus, the total pension in the first 13 years of the calculation from 1978 to 2003 (as set out in the actuarial report at p 18) indicates that the amount of the pension was approximately one-half of the amount payable in the second period. One way of adjusting for this consideration would be to treat the sum as having been outstanding on average for one-third of the period. That could be done by allowing for an interest rate of 4% to be applied. In relation to lost income, the calculation would then be 316,000 x 34.75 x 0.04, being an amount of $439,240. Adopting the same approach in relation to the pension, the amount to be allowed by way of interest is 103,290 x 29 x 0.04, which gives a figure of $119,816. 94 On these calculations, the total award for loss of earning capacity is $559,056 and in respect of the pension, $223,107. To these figures must be added general damages allowed by the trial judge at $160,000. Conclusions 95 Order 1 made by the trial judge gave judgment in favour of the appellant in an amount of $304,422.88. That order should be set aside and judgment be given in favour of the appellant in the amount of $942,163. 96 Orders 2 and 3 made by the trial judge related to costs and were not the subject of challenge in the course of the appeal. 97 The cross-appeal by the Commonwealth has been unsuccessful and should be dismissed. 98 The appellant should have his costs of the appeal and cross-appeal in this Court. 99 Accordingly, I would propose the following orders:

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Cases Cited (13)

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