29 It was this formula which struck me as wrong very shortly after I handed down judgment. I recognised that that formula would under compensate Mr Covington-Thomas. The finding I had made was that Mr Covington-Thomas would have pursued one or other of the futures which I had identified (para [754]). It was therefore inappropriate to select one future (the most probable) and then apply a discount based upon the likelihood of that future being pursued rather than another.
30 What, then, is the proper approach consistent with Malec v J C Hutton? In the judgment (para [709]) I set out a passage from Norris v Blake [No 2] (1997) 41 NSWLR 49, per Clarke JA at para 63, which provided a useful guide, that is, looking to the most probable future and then adjusting up or down for contingencies. In Commonwealth of Australia v Ryan [2002] NSWCA 372, Hodgson JA expressed the concept in these terms: (at para [73])
"Where there is a wide spectrum of possibilities … the best approach is often that supported in Norris v Blake No 2 (1997) 41 NSWLR 49 at 73; namely, to take the figure applicable to the most likely alternative (if there are many alternatives, even this may have a probability considerably lower than 0.5 [ie 50%], and then adjust it upwards or downwards according to one's assessment of the chances and figures associated with more favourable and less favourable alternatives."
31 In Macarthur Districts Motor Cycle Sportsmen Inc & Ors v Ardizzone [2004] NSWCA 145, Hodgson JA (with whom Stein AJA agreed) said this, although writing in the context of s13 of the Civil Liability Act 2002: (at paras [8ff])
"[8] In the first place, there is at least theoretically some tension between the requirements of s13 and what the High Court of Australia said in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 about assessing damages, namely, that in respect of hypothetical and future events, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts the award of damages to reflect that degree of probability. This could be understood as suggesting that the court should not base its award on the 'most likely future circumstances' but rather should base it on probability weightings or a range of alternative possibilities.
[9] That matter was considered with some care in Norris v Blake [No 2] (1997) 41 NSWLR 49, where it was concluded that the proper approach in that case was to assess what it was most likely the plaintiff would have earned during the rest of his working life, and then adjust this for contingencies. So far, this would appear generally in accord with s13. But in Blake , at 73, it was expressly noted that the contingencies included the possibility that the plaintiff might have done far better; and that is a matter to which s13 appears to make no reference.
[10] Subject to what I say later about 'buffer' awards, it seems that the Blake approach has in fact been adopted in most personal injury cases, as a practical way to give effect to the Malec principle; and s13 may be regarded as making it mandatory to do this. However, and this leads to the second major problem with s13, the wording of s13(2) is not entirely apt to the purpose of requiring an appropriate adjustment for vicissitudes or contingencies."
32 The plaintiff urged a mathematical approach, rather more exact, although probably little different in practical effect. The Court's finding was that Mr Covington-Thomas would have worked until retirement, subject to vicissitudes (attracting a discount of 20 percent). His loss of earning capacity should therefore be calculated by combining the two futures thought to be likely, according to the findings made as to their probability, namely (cf MFI 49):
· 75% of the earning in a naval career progressing to Lieutenant and retiring at the age of 55 and thereafter serving in the Naval Reserve 50 days p.a. to the age of 60; plus
· 25% of the earnings from a naval career for 20 years progressing to Warrant Officer and thereafter civilian employment commencing at a salary equal to that of a Warrant Officer, adjusted thereafter until retirement at the age of 65 years according to adjustments made to average weekly earnings.
33 The second future included a number of assumptions, not the subject of findings in the judgment of 2 August 2007. I will return to those assumptions shortly. The calculated loss using that formula and those assumptions was $274,908.20 (MFI 49), having made a 20 percent discount for vicissitudes.
34 The plaintiff, in argument, drew attention to the desirability of precision where it can be achieved. In Cullen v Trappell [1979-1980] 146 CLR 1, Gibbs J said this: (at 17)
"I cannot accept that if Gourley's Case is followed, it will lead to unacceptable difficulty and complication in the assessment of damages. The accepted method of determining the present value of a future loss by the use of appropriate tables will continue to be employed whether net or gross figures are taken. It is no more than a proper application of this method to take into account the notional tax on the income from the sum awarded. Whether the court proceeds as accurately as possible (as no doubt it should) with the assistance of actuarial material, or along very broad lines, the assessment of damages in this way does not appear to me to cause any great difficulty. But even if Gourley's Case renders the assessment of damages more complicated, that is no reason for departing from the fundamental principle on which that decision rests."
(emphasis added)
35 In Norris v Blake [No 2] (supra), Clarke JA said this: (at 68/69)
"There is nothing in any of the judgments of the High Court (except perhaps the reference to percentages in the majority judgment in Malec ) which supports the adoption of a scientific, or quasi-scientific, approach to the assessment of damages in a case in which there is a requirement that account be taken of future possibilities and past hypothetical situations. That is not to say that where a scientific method is available it should not be adopted. Indeed, in my opinion, if there is evidence in a case capable of demonstrating that a particular scientific approach is likely to reach a more accurate assessment than an intuitive judicial approach then, provided full weight is given to the uncertain nature of the future, there is no reason for failing to adopt that method."
36 Such an approach, according to the plaintiff, was conservative, in that it did not include any loading for the possibility (which was recognised) that the plaintiff may have been promoted beyond Lieutenant to Lieutenant Commander.
37 The defendant, at the resumed hearing, adopted the stance that the judgment of 2 August 2007 was appellably wrong and the plaintiff's submissions were also wrong (T28), such that it was inappropriate to make a contribution to the debate. The flaw, so far as counsel would elaborate, was the failure to take account of contingencies inherent in the issue of re-enlistment in the Navy and the achievement of each successive rank (T29).
38 However, the vast majority of employees in the workforce continue to work until retirement, subject to ill health and accident. That is the context of Malec v J C Hutton in this case. One is not dealing with uncertainties arising from, for instance, a business venture or a disease. Mr Covington-Thomas, like others in the workforce, would, I believe, have continued working until retirement unless struck down by ill health or accident. The only uncertainty in his career path, given his capacity and the requirements for each rank, was the question of timing. By approaching that issue conservatively, as already described, there appears to me no warrant for a discount beyond vicissitudes. Progression beyond Lieutenant to Lieutenant Commander, Commander and Captain, may well be different. Such positions represent the very peak of the hierarchy, where luck and chance may well play a part. I do not believe such factors would have prevented Mr Covington-Thomas from comfortably attaining the rank of Lieutenant, although they may have affected the time at which he achieved that rank.
39 At the end of the day, I do not believe that the result would be greatly different whether the mathematical approach, urged by the plaintiff, were adopted, rather than adjusting for contingencies, as suggested by Norris v Blake [No 2]. I am, nonetheless, attracted to the approach suggested by the plaintiff and shall therefore examine the reasonableness or otherwise of the assumptions which underpin that approach.