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[1983] HCA 16
High Court of Australia
1983-05-19
Dawson JJ, Connolly J, Fullagar J
Original judgment source is linked above.
For the reasons I have given it should in my opinion be held that payments, actual or prospective, of an invalid pension granted for permanent incapacity should be disregarded in the assessment of the damages of a plaintiff whose incapacity has been brought about by the negligence of the defendant. I would accordingly dismiss the appeal in Redding v. Lee.
I turn now to consider the question which arises in Evans v. Muller, whether unemployment benefits should be taken into account. Under s. 107(1) of the Social Security Act, a person who is not in receipt of, inter alia, an invalid pension, is qualified to receive an unemployment benefit in respect of a period (called "the relevant period") if, inter alia -
(c) the person satisfies the Director-General that -
(i) throughout the relevant period he was unemployed and was capable of undertaking, and was willing to undertake, paid work that, in the opinion of the Director-General, was suitable to be undertaken by the person; and
(ii) he has taken, during the relevant period, reasonable steps to obtain such work.
By s. 107(7): "unemployment", in relation to a person, includes -
(a) unemployment of the person arising by reason of a person or persons being, or having been, engaged in industrial action;
(b) unemployment of the person resulting from the termination of his employment; and
(c) the person being, or having been, stood down or suspended from his employment or work.
The question whether unemployment benefits may be deducted in the assessment of damages has been the subject of conflicting decisions in the courts of the States and Territories. The leading authority in favour of the view that payments of unemployment benefits received by a plaintiff are to be brought into account is Tuncel v. Renown Plate Co. Pty. Ltd. [28] , where the matter was fully and carefully discussed by the Full Court of the Supreme Court of Victoria. The Court referred [29] , to the statement in National Insurance Co. of New Zealand Ltd. v. Espagne [30] , that if the injured plaintiff has availed himself of certain benefits, such as hospital and pharmaceutical benefits, he cannot establish or calculate his damages on the footing that he did not do so. Their Honours then said that they were unable to see, why, as a matter of logic, any distinction could be drawn in relation to unemployment benefits. Their Honours went on to say [31] :
The unemployment benefits payable by the Commonwealth and the compensation payable by the tortfeasor are concerned with the same subject matter, namely payment for periods when the plaintiff was in fact not working. The actual amounts payable were arrived at by the same mode of calculation for both payments. Both are based directly on the precise periods the plaintiff was not working. They would be similarly calculated on a weekly rate. This decision was followed in South Australia in McIntosh v. Mair [32] and in Queensland in Cobb v. O'Donoghue [33] . The same result had earlier been reached in Western Australia in Samios v. Repatriation Commission [34] . On the other hand, in other cases in Queensland including Henman v. Stephenson [35] , it was held that the benefits should not be taken into account, and this view was also expressed in the Supreme Court of the Australian Capital Territory by Blackburn C.J. in Canny v. John Pfeiffer Pty. Ltd. [36] and Morley v. Murray [37] . 1. [1976] V.R. 501. 2. [1976] V.R., at p. 505. 3. (1961) 105 C.L.R., at p. 573. 4. [1976] V.R., at p. 509. 5. (1979) 21 S.A.S.R. 150. 6. [1980] Qd R. 402. 7. [1960] W.A.R. 219, at pp. 232-233. 8. [1980] Qd R. 410. 9. (1979) 37 F.L.R. 105; 28 A.C.T.R. 11. 10. (1980) 42 F.L.R. 271; 31 A.C.T.R. 25.
Two cases in this Court need to be mentioned. In Neall v. Watson [38] , it was held that a pension under the Social Services Act was not to be taken into account, but it is not clear from the report (or from the appeal book, to which I have referred) what was the nature of the payment in question; the amount of the pension shows that it must have been either an unemployment benefit or a sickness benefit: see s. 112 of the Act as amended by the Social Services Act, 1957. The Court said of the plaintiff [39] :
While out of work he received £6 2s. 6d. per week from the Social Service Department. And for the maintenance of his children - he now has six children - he got £9 5s. per fortnight from the Children's Welfare Department less any amount that he earned from time to time. He has, it seems, undertaken to repay the amounts he has thus received "if I succeed in this litigation". That, however, presumably meant succeed in establishing that the respondent was liable for his present condition. But, however, this may be, these allowances ought not to affect the damages he is entitled to in this action. The Court in Tuncel v. Renown Plate Co. Pty. Ltd. may have been right in saying that "the nature of the payments seems to have been sickness benefits payments" [40] . However, the significance of the case lies in the fact that it does not seem to have mattered to the five Justices who joined in the decision what sort of pension it was. They appear to have proceeded on the general rule stated by Menzies J. in Paff v. Speed [41] that pensions do not go in mitigation of damages. On the other hand, in the course of a dissenting judgment in Dessent v. The Commonwealth [42] , Barwick C.J. said: If the judge had attempted to assess a sum for loss of earning capacity which would manifest its presence on the appellant's retirement, he may have considered the effects of the availability of unemployment relief (see Tuncel v. Renown Plate Co. Pty. Ltd. ) This remark however was obiter, since Barwick C.J. was of the opinion that there was no finding that the appellant suffered any loss of earning capacity which in itself called for any substantial award of damages. 1. (1960) 34 A.L.J.R. 364. 2. (1960) 34 A.L.J.R., at p. 366. 3. [1976] V.R., at p. 509. 4. (1961) 105 C.L.R., at p. 563. 5. (1977) 51 A.L.J.R. 482, at p. 485.
In England it was held by the Court of Appeal in Parsons v. B.N.M. Laboratories Ltd. [43] and in Nabi v. British Leyland (U.K.) Ltd. [44] that unemployment benefit must be deducted from an award in respect of loss of earnings. The English cases are not precisely in point, since the statutory provisions are different, and in any case it was recognized in Nabi v. British Leyland (U.K.) Ltd. [45] that the question should be reviewed in the light of Parry v. Cleaver [46] . On the other hand in Canada (Bourgeois v. Tzrop [47] and Boarelli v. Flannigan [48] ) and Northern Ireland (Fitzpatrick v. Moore [49] ) unemployment benefits have been held not to be deductible.
In the present state of the authorities the matter must be decided by the application of the principles which I have endeavoured to state. It seems to me, with all respect, that the Court inTuncel v. Renown Plate Co. Pty. Ltd. [50] fell into error in drawing an analogy between the case of unemployment benefits and one in which hospital or pharmaceutical benefits have been received. As I have already endeavoured to show, if an injured person receives hospital treatment, but pays nothing because the costs are met by a scheme of hospital benefits, he suffers no loss. He cannot claim as part of his damages a cost of hospital treatment which he did not incur. The plaintiff in Evans v. Muller did, however, suffer a loss: he lost his wages. The question in that case is whether, as against that loss, the defendant must be given credit for the benefit which the plaintiff received and which, when received, in fact had the effect of reducing the loss. However, and again with all respect, I cannot share the view of Blackburn C.J. in Canny v. John Pfeiffer Pty. Ltd. [51] that the judgment in Tuncel v. Renown Plate Co. Pty. Ltd. cannot be reconciled "with the proposition that loss of wages is a means of valuing the loss of the capital asset which is earning capacity". It is beyond question that the Court in Graham v. Baker was correct in saying that "an injured plaintiff recovers not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss" [52] . In assessing damages it is therefore not inappropriate to look at the economic loss in fact suffered or likely to be suffered by the plaintiff and to deduct from the amount of that loss any benefit that is proper to be considered in accordance with the principles laid down in National Insurance Co. of New Zealand Ltd. v. Espagne [53] . However, I do agree with the view which Blackburn C.J. suggested in Morley v. Murray [54] , that considerable practical difficulties would arise in taking into account the possibility that the plaintiff might in future receive unemployment benefit.
If in the present case we were to inquire what result would best accord with public policy, there would, on the one hand, be much to be said for the view that in reality the plaintiff's loss was reduced by the receipt of the unemployment benefits, and that since both the benefits and the insurance moneys which are used to meet the defendant's liability for damages are provided as a result of contributions made by the public in one form or another, the plaintiff should not be allowed to recover his loss of wages twice over. On the other hand, exactly the same might be said of a benefaction provided by a benevolent association financed by public contributions, and in such a case logic yields to charity. Further, it is also very much in the public interest that the assessment of damages for personal injuries should not become so complex that settlements are discouraged, trials are prolonged and appeals are multiplied. There is no doubt that to take unemployment benefits into account will add to the complications of an assessment. I have already referred to the difficulty of taking into account, in assessing future loss of earning capacity, the possibility that the plaintiff will or may receive unemployment benefits in the future. The benefit must be reduced if the income of the plaintiff exceeds quite a small weekly amount (s. 114 of the Social Security Act) and the effect of the award of damages itself on the plaintiff's income will be very difficult to predict. Yet there is no reason in principle to distinguish between present and future receipts of unemployment benefit in making an assessment. There are other complications in relation even to unemployment benefit received before trial. The plaintiff is not entitled to the benefit unless he has taken reasonable steps to obtain work (s. 107(1)(c)) and it therefore seems right to deduct from the benefit the costs of unsuccessfully endeavouring to obtain work. If the plaintiff does not apply for the benefit, it would seem to follow, as a matter of logic, that if the benefit is deductible from the damages, a failure to apply for the benefit will amount to a failure to mitigate damages. That view was not taken by Demack J. in Vassilef v. B.G.C. Marine Services (N.S.W.) Pty. Ltd. [55] , but if it were correct it would create additional problems in making the assessment.
However, in my opinion, rather than embark afresh on a consideration of what, on balance, might best suit the public interest, when such an inquiry is unlikely to lead to any definite conclusion, we should endeavour to maintain consistency in the application of the principle that has been established in the National Insurance Co. of New Zealand Ltd. v. Espagne [56] . In applying that principle it is clear that the unemployment benefit is conferred on a person who is entitled to it independently of the existence in that person of a right of redress against others. The entitlement to a benefit does not depend on the fact that the person concerned has been done any wrong; his unemployment may be due to the termination of his employment because of the depressed state of the public economy. Further, a person may be entitled to a benefit although he has suffered no injury; indeed, to be eligible for the benefit, the person concerned must satisfy the Director-General that he "was capable of undertaking paid work that, in the opinion of the Director-General, was suitable to be undertaken by the person" (s. 107(1)(c)(i)) and he must not be in receipt of an invalid pension. Moreover, the benefit may in some circumstances be paid throughout a particular period notwithstanding that the recipient has undertaken paid work during the whole or part of that period: s. 107(3). The benefit does not depend either on the fact that the person entitled to it has suffered a diminution of his earning capacity, or has lost wages that he was previously able to earn, since a person who has never shown any capacity to earn and who has never in fact earned anything may get the benefit. The benefit is intended to provide some relief against destitution for a needy person who is unemployed, whether or not his unemployment is due to an injury, and whether or not he has any cause of action for damages. In my opinion it should be concluded that the Parliament intended that unemployment benefit should enure entirely for the benefit of the person who receives it and should not relieve from liability any other person who may be liable to pay damages to him. The case seems to me to fall entirely within the principles enunciated in National Insurance Co. of New Zealand Ltd. v. Espagne and I am unable to see any valid point of distinction between the unemployment benefit now in question and the invalid pension considered in that case.
For these reasons I would hold that the Full Court in Evans v. Muller was correct in deciding that the unemployment benefit should not be taken into account in the assessment of damages.
These appeals, brought by special leave, involve an excursion into a field in which it has been said that "logic is conspicuous by its absence" (see Browning v. The War Office [57] ). In the assessment of damages in an action for personal injury should the damages be reduced by an amount equivalent to unemployment benefits, or an invalid pension, received by the plaintiff subsequent to the occurrence of the injury?
Generally speaking, in an action in tort the plaintiff is entitled to receive that amount which will put him in the same position as he would have been in had he not been injured (British Transport Commission v. Gourley [58] ; Parry v. Cleaver [59] ). An alternative formulation is that a plaintiff cannot recover more than he has lost (Parry v. Cleaver [60] ). When the plaintiff's earning capacity has been impaired by his injury he is entitled to damages to compensate him for that loss. In Australia it is well settled that an injured plaintiff is entitled to damages for his loss of earning capacity, whereas in England he receives compensation for his loss of earnings. But, as Dixon C.J., Kitto and Taylor JJ. pointed out in Graham v. Baker [61] "an injured plaintiff recovers not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss". This statement was repeated by Gibbs J. in Griffiths v. Kerkemeyer [62] . Accordingly, the plaintiff is entitled to compensation for his loss of earning capacity that is or may be productive of financial loss.
An objective observer, unversed in the law, could be forgiven for thinking that acceptance of this principle necessarily involves the simple approach that an injured plaintiff cannot have compensation for what he has lost in addition to what he has received as a result of the injury but would not have received if there had been no injury. However, since Bradburn v. Great Western Railway Co. [63] , the courts have declined to measure the injured plaintiff's loss by crediting him with all the financial benefits which he may receive following upon his injury - for the most part benefits in the nature of accident insurance, pensions and superannuations have not been brought into account in reduction of the plaintiff's damages. If, on the other hand, the approach of the courts in assessing damages was to disregard all financial benefits received by a plaintiff as a result of his injury, then that approach would exhibit the virtue of uniformity, even though it would involve the problem of deciding in particular cases whether the benefit is received "as a result of" the injury. But this broad approach has also been rejected in favour of a more selective approach.
In Bradburn itself the Court refused to discount the plaintiff's damages by reference to the proceeds of an accident insurance policy which became payable following his injury, declaring that the plaintiff's damages should not be reduced by his receipt of a financial benefit which was, not the consequence of his injury, but the consequence of a contract which he had made with a third party.
The decisions relating to pensions reflect the problems which have arisen in pursuing the selective approach. Pensions have very often been disregarded in assessing damages for loss of earning capacity. Thus, an invalid pension payable under the Social Services Act 1947 Cth, as amended, ("the Act") (National Insurance Co. of New Zealand Ltd. v. Espagne [64] ), a pension payable on compulsory retirement pursuant to the Superannuation Act 1916 N.S.W., as amended, (Graham v. Baker [65] ), a disability pension under the Police Regulation (Superannuation) Act 1906 N.S.W., as amended, (Paff v. Speed [66] ) and a superannuation benefit payable under a contributory scheme (Jones v. Gleeson [67] ) were disregarded in the assessment of damages. A contrary view was taken by a majority of the English Court of Appeal of a disability pension payable to an injured plaintiff who by reason of injuries caused to him had retired from the United States Air Force (Browning v. The War Office [68] ). But in this Court "a very different view has been taken from that which is expressed in the majority judgments" in Browning (Jones v. Gleeson [69] ). More recently the House of Lords refused to follow Browning (Parry v. Cleaver [70] ).
The focal point of any discussion of the topic is Espagne. This is because it has been generally recognized as an authoritative declaration of the law on the topic in Australia and because the judgments of Dixon C.J. and Windeyer J., concurred in by Fullagar J., in Espagne were relied upon by the House of Lords in Parry v. Cleaver. The plaintiff in Espagne, having lost his sight in consequence of the tortfeasor's negligence, was awarded a pension for permanent total blindness under the Act. The Court held unanimously that the plaintiff's damages were not to be reduced on this account. Dixon C.J. and Windeyer J. were united in the view that no legal rule exists which could be applied to every case where an advantage accrues to an injured person which would not have been obtained but for his injuries [1] . They were in agreement too in rejecting as unhelpful the suggestions that the pension could be described as a "collateral" advantage or as res inter alios acta or that the relation of the injury to the advantage could be described as a causa sine qua non. Instead Dixon C.J. gave emphasis to the notion that the plaintiff is entitled to compensation for his "injuries and the incapacities and deterioration involved in them" [2] . Central to his Honour's reasoning was a distinction which he elaborated in this way [3] :
There are certain special services, aids, benefits, subventions and the like which in most communities are available to injured people. Simple examples are hospital and pharmaceutical benefits which lighten the monetary burden of illness. If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so. On the other hand there may be advantages which accrue to the injured plaintiff, whether as a result of legislation or of contract or of benevolence, which have an additional characteristic. It may be true that they are conferred because he is intended to enjoy them in the events which have happened. Yet they have this distinguishing characteristic, namely they are conferred on him not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right: they are the product of a disposition in his favour intended for his enjoyment and not provided in relief of any liability in others fully to compensate him. This is readily seen in the case of benevolence. If a fund is raised by subscription for the benefit of a badly injured neighbour obviously this cannot operate in relief of the liability of a man who negligently caused the injury. So in a contract of accident insurance; where in the absence of special stipulation the insurer will not succeed by subrogation or otherwise to the insured's right of recourse against others in the case of injury by their negligence. 1. (1961) 105 C.L.R., at pp. 572, 600. 2. (1961) 105 C.L.R., at p. 572. 3. (1961) 105 C.L.R., at p. 573.
Windeyer J. thought that the question was not whether a harm that the plaintiff has suffered is a consequence of the defendant's negligence but whether an advantage that the plaintiff has gained should be regarded as mitigating that harm [4] , causal considerations not being decisive of this question. His Honour went on to say [5] :
In assessing damages for personal injuries, benefits that a plaintiff has received or is to receive from any source other than the defendant are not to be regarded as mitigating his loss, if: (a) they were received or are to be received by him as a result of a contract he had made before the loss occurred and by the express or implied terms of that contract they were to be provided notwithstanding any rights of action he might have; or (b) they were given or promised to him by way of bounty, to the intent that he should enjoy them in addition to and not in diminution of any claim for damages. The first description covers accident insurances and also many forms of pensions and similar benefits provided by employers: in those cases it is immaterial that, by subrogation or otherwise, the contract may require a refund of moneys paid, or an adjustment of future benefits, to be made after the recovery of damages. The second description covers a variety of public charitable aid and some forms of relief given by the State as well as the produce of private benevolence. In both cases the decisive consideration is, not whether the benefit was received in consequence of, or as a result of the injury, but what was its character: and that is determined, in the one case by what under his contract the plaintiff had paid for, and in the other by the intent of the person conferring the benefit. The test is by purpose rather than by cause. 1. (1961) 105 C.L.R., at p. 597. 2. (1961) 105 C.L.R., at pp. 599-600.
The subsequent decisions in this Court apply the principles expressed by Dixon C.J. and Windeyer J. in Espagne. They make it clear that the issue turns on the character and purpose of the particular financial benefit which the plaintiff receives: Was the benefit conferred on him independently of any right or redress against others and so that he might enjoy the benefit even if he enforced the right? However, Graham v. Baker [6] has an additional importance because it shows that the effect of some benefits received by a plaintiff, especially when they are provided by his employer pursuant to the terms and conditions of the plaintiff's employment, is to negate the claim that there has been a relevant financial loss. Thus, the receipt of sick leave payments, when it is the measure of the employee's right to receive ordinary pay, though absent on sick leave, demonstrates that the plaintiff has not pro tanto suffered financial loss [7] .
In Parry v. Cleaver [8] the House of Lords by majority held that a disability pension payable under a police pension fund to which the plaintiff, a police constable, contributed should be disregarded in the assessment of his damages. The speeches of Lord Morris, Lord Pearce and Lord Wilberforce reflect an acceptance of the approach adopted by this Court in Espagne.
The array of judicial decisions to which we have referred makes it imperative that we continue to pursue and apply the principles expressed in Espagne which are an elaboration of an approach that began with the decision in Bradburn [9] .
Indeed, the arguments advanced in the present cases proceed on the footing that the Espagne principles are to be accepted and applied - the issue being whether, according to those principles, the benefits are to be brought to account in the reduction of the plaintiff's damages.
Quite apart from the compelling influence of authority, there are persuasive reasons for thinking that the course marked out by Espagne is correct. It is certainly more attractive than the alternative solutions, such as that based on causation, which were roundly and soundly criticized in the judgments in Espagne and in the speeches in Parry v. Cleaver. And it accords with the approach adopted by the courts to the receipt of proceeds of insurance policies and benevolent gifts.
It would be unjust and unreasonable to reduce the damages of the prudent plaintiff who insures himself against accident by allowing the premiums which he paid and the proceeds of the policy to enure for the benefit of the tortfeasor and make the existence of the insurance the occasion for giving the plaintiff a lesser award of damages than he would have obtained had he not been insured. If he had not taken up the policy his assets would not have been depleted by the payment of premiums and his damages could not then have been reduced by reference to the greater worth of his assets (Parry v. Cleaver [10] ).
Again, it has been acknowledged that it would be unjust and unreasonable to reduce damages on account of benefits received by the plaintiff resulting from benevolence. Benefits of this kind spring from a desire to assist the plaintiff, not from any wish to relieve against the tortfeasor's liability (Espagne [11] ).
A similar comment may be made about pension and superannuation benefits whose purpose is to ameliorate the plaintiff's situation irrespective of his right to recover compensation against the tortfeasor. For this reason no distinction should be drawn between pension and superannuation benefits to which the plaintiff has contributed and those to which he has made no contribution, although there is a stronger reason for refusing to reduce the plaintiff's damages on account of payments which he has himself made, thereby diminishing the assets which he otherwise owns.
Our experience since Espagne enables us now to say that generally speaking the entitlements to, or the conditions for eligibility for, pension and superannuation benefits are so expressed that they do not have regard to the recipient's right to recover compensation from a third party. No doubt there are exceptions to this general rule - where, for example, that situation is expressly referred to or, though not expressly referred to, is necessarily contemplated.
In addition to pension and superannuation benefits and benefits arising from benevolence, all of which may be disregarded provided their purpose is to confer a benefit on the plaintiff irrespective of the plaintiff's right of action against the tortfeasor, it is necessary to identify two other broad categories of benefits, the first of which will in general be disregarded and the second of which will in general have to be brought into account in the assessment of damages.
The first category concerns proceeds from insurance policies, such as those received by the plaintiff in Bradburn [12] . The second category comprises benefits provided to the plaintiff which are a substitute, or partial substitute, for wages. The clearest example of such benefits is provided by the receipt of sick leave payments. Graham v. Baker [13] illustrated that the effect of these payments, because they are provided by the employer pursuant to the terms and conditions of the plaintiff's employment, is to negate the claim that the plaintiff has suffered a relevant financial loss. Other benefits, though not strictly provided pursuant to the terms and conditions of the plaintiff's employment, may be of such a nature that they should be placed in the same category. In the second appeal the question is whether unemployment benefits should be placed in this category.
We turn to consider each appeal in the context of these principles.
In this case the plaintiff claimed damages for negligence arising out of a road accident on 29 January 1976. The assessment of damages included a claim for impairment of earning capacity from the date of the accident until September 1981, when the plaintiff attained the age of sixty-five years. The plaintiff since 1978 has been in receipt of an invalid pension under the Act (which, after an amendment effected by Act No. 37 of 1982, now has the title of the Social Security Act 1947 Cth). At the time of the trial before Zelling J. these receipts amounted to over $6,000 and it is only these pre-trial moneys with which we are concerned. Zelling J. was in doubt as to whether he should bring this amount into account in the assessment of damages for the impairment of the plaintiff's earning capacity and stated a case for the Full Court of the Supreme Court of South Australia, asking the following question: "Should the payments of invalid pension above referred to be deducted from the plaintiff's loss of wages arising out of the accident?"
The Full Court (King C.J., Zelling and Jacobs JJ.) held that the benefits should be disregarded, saying that Espagne concluded the point that invalid pensions should not be deducted when assessing damages for personal injury [14] .
Part III of the Act governs invalid pensions. Under the Act as it stood at the time of the decision in Espagne a person over sixteen years of age who was not receiving an age pension and (a) was permanently incapacitated for work or was permanently blind; and (b) satisfied residence requirements, was "qualified to receive an invalid pension" (s. 24(1)).
Section 25(1) provided that an invalid pension could not be granted to a person in certain circumstances. Those circumstances were (a) that the person be "not deserving" of a pension; (b) that the incapacity or blindness did not occur in Australia or during a temporary absence from Australia; (c) that the incapacity was brought about with a view to obtaining a pension; (d) that the person had "an enforceable claim against any person, under any law or contract, for inadequate compensation in respect of his permanent incapacity or permanent blindness"; or (e) that the person directly or indirectly deprived himself of property or income in order to qualify for a pension. Paragraph (f), which imposed a property test, was repealed between the hearing and judgment in Espagne.
Section 28(1) stated that the rate of the pension should be "a rate determined by the Director-General as being reasonable and sufficient, having regard to all the circumstances of the case", but no greater than a prescribed maximum. Section 28(2) and (2A) provided that the rate of a pension, except that of a permanently blind person, should be reduced if the income or a proportion of the value of the property of the claimant or pensioner exceeded a certain sum. The present s. 28(2), introduced by Act No. 111 of 1976, provides that the rate of a pension as determined shall be reduced by one half of the amount per annum by which the income of the claimant or pensioner exceeds a prescribed amount, except in the case of a person who is permanently blind.
Section 46 gave the Director-General power to cancel, suspend or vary a pension which had been granted. Section 46(1) provided:
(a) having regard to the income, or the value of the property, of a pensioner;
(b) by reason of the failure of a pensioner to comply with either of the last two preceding sections; or
the Director-General considers that the pension which is being paid to a pensioner should be cancelled or suspended, or that the rate of the pension which is being paid to a pensioner is greater or less than it should be, the Director-General may cancel or suspend the pension, or reduce or increase the rate of the pension, accordingly. The reference in s. 46(1)(b) to "the last two preceding sections", ss. 44 and 45, was a reference to the duty of the pensioner to furnish certain statements and to notify the Director-General of certain matters. Those sections stated that they had no application to a permanently blind person and s. 46(2) stated that s. 46(1)(a) had no application to a pensioner who was permanently blind.
In holding that the plaintiff was entitled to the benefit of both the pension and any damages recovered from the tortfeasor Dixon C.J. considered that the discretionary nature of the pension was important. His Honour said [15] that the invalid pension "cannot be obtained as of strict right and it is plain that it is granted after a consideration of the position or situation in which the applicant stands and entirely for his use and benefit". Thus the Director-General had to be taken to have considered the possibility of a common law damages claim by the applicant in arriving at his conclusion that the applicant was "deserving" of a pension within s. 25(1)(a).
Dixon C.J. clearly thought that where the exercise of the discretion involves considerations such as whether an applicant is "deserving" of a pension it should be assumed that Parliament intended that successful applicants should enjoy the benefit of the pension notwithstanding, and in addition to, an award of damages in a later common law claim. In considering whether an applicant is "deserving" of a pension the Director-General would advert to the possibility of the later common law claim and take account of it. The Director-General's discretion did not require an arithmetical analysis of the chances of establishing liability but rather some advertence to the possibility that damages would be recovered.
Another explanation of the relevance of the existence of a discretion in the Director-General is that "in view of the width of discretion given, not only as to the size, but also as to the withholding or termination of a pension, the possibility of a person receiving an invalid pension should be regarded as too speculative a matter to be submitted to the jury" (see Shuter v. Crosby [16] ). However, that explanation is not strictly relevant to the present case, in which we are exclusively concerned with pretrial pension moneys.
Windeyer J.'s analysis of the statutory provisions differed from that of the Chief Justice. He thought that the statutory intention was that the blind pensioner was to enjoy his pension in addition to any right to compensation that he might have. On the other hand Windeyer J. considered that, because the receipt, or the prospect of receiving, damages was a factor to be taken into account in granting, discontinuing or reducing an invalid pension to a person not permanently blind, damages had to be assessed without regard to a plaintiff's invalid pension. In so saying his Honour denied that the pension was intended to be enjoyed in addition to compensation and advanced another reason for concluding that an invalid pension should be disregarded in the assessment of damages.
The question, then, is to what extent amendments to the Act since the decision in Espagne now evince an intention that the plaintiff is not entitled to enjoy the benefit of both the invalid pension and the damages he may recover.
Section 24 has been amended since the decision in Espagne, but only in minor and immaterial ways. Paragraphs (a), (e) and (as we earlier noted) (f) of s. 25(1) have been repealed and par. (b) has been amended in a minor way. An important amendment to s. 46 has been to omit the property test from s. 46(1)(a), leaving only an income test, and to modify s. 46(2) accordingly. As we have seen, section 28(2) has been correspondingly amended, but s. 28(1) remains in substantially the same form. "Income" is not defined so as to include damages recovered in an action (see s. 18).
The applicant submits that the consequence of the repeal of s. 25(1)(a) is that under the present Act the applicant is entitled to a pension once he has satisfied the criteria in ss. 24 and 25. The appellant therefore says that the element of general discretion which was considered to be of importance in Espagne no longer exists.
The appellant then argues that s. 46(1)(c), in saying that a pension could be cancelled "for any reason" other than the reasons specified in pars. (a) and (b) of that sub-section, does not confer a general discretion to cancel as par. (c) must be read in the light of pars. (a) and (b). We have some difficulty with the suggestion that s. 46(1)(c) confers no discretion at all on the Director-General to cancel a pension. It is an interpretation which may unduly narrow the Director-General's power to deal with persons who, for instance, are guilty of certain misconduct which justifies cancellation but which is outside the ambit of other more specific provisions in the Act. But it is a question which, on the view which we take, need not be resolved here.
In our opinion, the appellant's argument fails to deal with s. 28(1). That sub-section, which has, in substance, been unamended since the decision in Espagne, provided, and still provides, a basis for the reasoning which led Dixon C.J. to conclude that the invalid pension should be disregarded in the assessment of damages. The essence of his Honour's reasoning was that a pension could only be granted under the Act "after a consideration of the position or situation in which the applicant stands" [17] , a consideration which would take account of any damages claim.
We are prepared to assume, without deciding, that the actual grant of a pension under the present Act has no discretionary element and that the discretion conferred on the Director-General by s. 46(1)(c) to terminate, suspend or reduce a pension "for any other reason" may be limited. But the Director-General is still required by s. 28(1), once he has granted a pension, to have "regard to all the circumstances of the case" in determining what rate of pension is "reasonable and sufficient". That discretion is completely unfettered in its terms and in determining what is a "reasonable and sufficient" rate the Director-General may well have regard to the existence of a damages claim.
It may be argued that to concede this power to the Director-General is to indirectly reintroduce the property test which Parliament has seen fit to omit. However, the essence of the reasoning in Espagne of Dixon C.J. in relation to the permanently blind, to whom no property test applied, was that the Director-General did have a discretion to consider the position in which the applicant stood before granting the pension. His Honour appears to have contemplated that the Director-General in exercising his discretion could take into account the existence of a damages claim. In any event, a discretion to take into account the existence of such a claim is not the equivalent of a strict property test. Section 28(1) does not in terms absolutely prohibit any duplication between the pension and the damages. In determining what is a "reasonable and sufficient" rate the existence of the damages claim will only be one of many circumstances to be taken into account.
Accordingly, the existence of s. 28(1) is indicative of a legislative intention that pensions paid under the Act should be disregarded in the assessment of damages, the latter having already been taken into account in the payment of the former.
The reasoning of Windeyer J. in Espagne has been substantially affected by the omission of the property test from the provisions upon which his Honour relied. However, we are inclined to think that the result is that the reasoning his Honour applied to blind pensioners by reason of their specific exemption from the property test provisions becomes universally applicable after the omission of the property test. In other words, just as his Honour discerned a clear policy in the Act as it then stood that a blind pensioner was to have his pension in addition to whatever rights of action or proprietary rights he may have had, the omission of the property test is, it seems to us, indicative of a similar policy in respect of pensioners generally.
We should also note that the continued existence, unamended, of s. 25(1)(d) lends weight to the conclusion that the amendments to the Act since Espagne were not intended to effect an alteration in the purpose for which invalid pensions are paid. Section 25(1)(d) provides, as we have seen, that an invalid pension shall not be granted to a person "if he has an enforceable claim against any person, under any law or contract, for adequate compensation in respect of his permanent incapacity". The words "claim under any law for adequate compensation" do not include a common law claim for damages (see Espagne [18] ). By this omission the legislature indicated, and has continued to indicate in a manner now underlined by Espagne, an intention that the grant of an invalid pension to an injured person is for the benefit of that person notwithstanding any common law claim for damages which he might have in respect of his injury and that the invalid pension payments are not to operate in relief of the liability of any person liable to pay those damages.
We would therefore dismiss the appeal and answer the question asked on the case stated "No".
The respondent was awarded $52,875 at first instance in an action for negligence against the appellant arising from a road accident between the two parties on 17 December 1974. The primary judge, Connolly J., assessed the respondent's net loss of wages from the date of the accident up to the trial at $30,000. During that period the respondent's earnings in fact totalled $4,653 and, in addition, he received an amount of $7,250 for unemployment benefits. On any view the $4,653 had to be brought into account. In addition the primary judge brought the $7,250 into account, awarding the plaintiff an amount of the order of $18.000 for economic loss up to the the trial [19] .
The respondent appealed to the Full Court of the Supreme Court of Queensland on several grounds, one of which concerned the bringing into account by the primary judge of the unemployment benefits. The Full Court by majority (Wanstall C.J. and Dunn J., Macrossan J. dissenting) held that the unemployment benefits should have been disregarded, increasing the award of damages to $91,600 [20] .
As we indicated earlier, the central question in this appeal is whether the unemployment benefits can be said to be a substitute or partial substitute for wages, justifying the same treatment as wages in terms of assessment of damages.
Some insight into the interrelationship between wages and unemployment benefits is provided by the application of the principle of mitigation of loss to unemployment benefits. It cannot be disputed that the plaintiff had a duty after the accident to seek employment. As MacKenna J. said in Eley v. Bedford [21] , "a plaintiff must always do what is reasonable to mitigate his loss". If the incapacitated plaintiff fails to find work the duty to mitigate remains imposed upon him. Thus in Parsons v. B.N.M. Laboratories Ltd. [22] , Pearson L.J. thought that the plaintiff had "a duty to mitigate the damage by seeking other employment and drawing unemployment benefit in the meantime". There the benefit was described as a partial substitute for wages [23] .
This was the view taken in Tuncel v. Renown Plate Co. Pty. Ltd. [24] . In that case the plaintiff claimed that he was unable to obtain employment because of the physical handicap caused by his injury. The Court held that the plaintiff's duty to mitigate his loss did not cease at that point and that the unemployment benefits received by him were very much in the nature of mitigation [25] .
Under the Act unemployment benefits have the character of a partial substitute for wages. An applicant for an unemployment benefit, among other things, must satisfy the Director-General that he is unemployed and capable of undertaking and willing to undertake suitable paid work and that he has taken reasonable steps to obtain such work (s. 107(1)(c)). True it is that the amount of the benefit bears no relationship to the wages which the recipient could earn if he obtained employment and that the amount of the benefit will be reduced if his income exceeds a prescribed amount which is not large (s. 114). However, these factors do not lead to the conclusion, as the respondent would have it, that the unemployment benefits are merely provided in relief of impecuniosity. Certainly the existence of an income test indicates that some who are unemployed through no fault of their own will not qualify for the benefit by reason of their income from sources other than work. And it is correct to say that the benefit does not spring from the terms and conditions of employment. But the fact remains that payment of unemployment benefits is made to depend on the condition of unemployment. That some persons who are in that condition are excluded by virtue of s. 114 from the class of persons who may qualify for payment of the benefits does not alter the fact that the benefits are inherently in the nature of compensation payable in respect of involuntary unemployment. The English Court of Appeal in Parsons was correct in saying that the true nature of an unemployment benefit is that it is a partial substitute for wages. Both the name of the unemployment benefit and the criteria enumerated in s. 107(1)(c) make it clear that it is a benefit paid in lieu of what could have been earned in employment if suitable employment had been available. This was the view taken in Tuncel [26] .
It is significant that the granting of the unemployment benefit is not dependent upon the exercise of any large area of discretion on the part of the Director-General. Any person who satisfies the three criteria enumerated in s. 107(1) is "qualified" to receive the benefit. True it is that s. 107(1)(b)(ii) and (c) require the Director-General to be satisfied of certain matters before granting the benefit. But there is no discretion vested in the Director-General which requires him to consider the general circumstances of the applicant before granting the benefit and there is no discretion of that kind which enables him to determine what rate of benefit would be "reasonable and sufficient" in the light of all the circumstances relevant to the applicant (cf. s. 28(1)). In a real sense, therefore, it may be said that the applicant for an unemployment benefit who satisfies the various criteria laid down in Pt VII is entitled as of right to the payment of the benefit. This distinguishes the case from both Espagne and the first appeal. In those two cases either the granting of or the rate of the pension was dependent on an exercise of discretion by the Director-General, involving an examination of all the circumstances surrounding the applicant, indicating that the pension was paid with the damages claim in mind. In Pt VII, however, even if the Director-General had the damages claim in mind, he could not reflect that fact in the payment of the unemployment benefit.
The respondent submits that there are several matters which, if unemployed benefits were to be brought into account in a common law damages claim, would have to consequentially be taken into account, but which could only be taken into account with a great deal of difficulty. He points to the possibility of expenses of unsuccessful attempts by the plaintiff to find work, saying that the plaintiff would be entitled to an allowance for these expenses before the unemployment benefits were brought into account. The significance of this is said to be that these complexities are indicative of a legislative intention that the benefits should be totally disregarded. Assuming the existence of difficulties of the kind suggested, we do not think that they are so great as to indicate a legislative intention that the benefits should be totally disregarded.
For these reasons we would allow the appeal. The majority of the Full Court would have assessed the total award of damages at $107,000. We would reduce that figure by $7,250, leaving $99,750. Allowing for contributory negligence, 80 per cent of that figure is $79,800. Interest on past economic loss and pain and suffering must be adjusted accordingly and reduced from $6,000 to $4,750. Adding this figure, the total becomes $84,550. In the result we would reduce the damages to that figure.
The question is whether, in assessments of damages for personal injury, awards should be reduced by offsetting Commonwealth invalid pensions and unemployment benefits against loss of earnings or earning capacity.
The general principle is that the measure of damages is restitution; the injured party is compensated so as to restore him or her, as far as can reasonably be done, to the circumstances he or she would be in if not injured. Non-financial loss, such as permanent physical injury is compensated by subjective assessment. Loss of earning capacity is met by award of an amount payable by the wrongdoer which is intended accurately to replace the loss. Whether payments made to or benefits conferred on the plaintiff from other sources are to be offset in an assessment against such loss is a continuing problem.
Various national legal systems have adopted one or other of four main solutions (see Fleming, Collateral Benefits in International Encyclopaedia of Comparative Law (Torts), vol. XI, Ch. 11 (1971) ).
By one, adopted under early Anglo-American workers' compensation laws, the injured person was put to his or her election between recourse against the tortfeasor or accepting compensation from the "collateral source". In practice this gave little choice to a victim who needed compensation immediately. This solution has gradually fallen into disfavour (Sykes and Yerbury, Labour Law in Australia, vol. 1, Individual Aspects (1980), pp. 310-316; Fleming, p. 6).
By a second, adopted by many Scandinavian countries (see Ussing The Scandinavian Law of Torts - Impact of Insurance on Tort Law, Am. Jo. of Comparative Law, vol. 1 (1952), p. 359; Kruse The Scandinavian Law of Torts - Theory and Practice in the Twentieth Century, Am. Jo. of Comparative Law, vol. 18 (1970) 58, at p. 77 ; Fleming, p. 47), assessments of damages may be reduced by the amount of any collateral benefit without providing for reimbursement to the collateral source.
A third, which Fleming describes as in a "marked position of ascendency as the most widely favoured solution" (p. 16) involves reimbursement of the collateral source, in this case public funds for social service payments, by means of repayment, subrogation or indemnity. This has been authorized by social security statutes in many countries including France, Germany, Belgium, Israel, Japan and New Zealand (Fleming, pp. 21-24 and 43-46; Social Security Act 1964 N.Z. s. 71(1)(b)).
A fourth allows the injured person to cumulate benefits and damages even in excess of his or her loss. The United States has adopted this as a general solution. This is the "collateral source" rule and has been in use since 1854 (see The Propeller Monticello v. Mollison [27] ). There has been a general acceptance that it should apply to payments such as private charity and plaintiff's insurance. It has also been generally applied to receipts from public funds, for example unemployment benefits (Kurta v. Probelske [28] ), disability pension payments (Eichel v. New York Central Railroad Co. [29] ), United States Employment Service disability payments (Gersick v. Shilling [1] ), social security payments and veterans' pension payments (A. H. Bull Steamship Co. v. Ligon [2] ); Stein Damages and Recovery: Personal Injury and Death Actions (1972), pp. 321-322; 22 Am. Jurisprudence 2d, Damages, ss. 206-211).
The collateral source rule has also largely prevailed in Australia though with some exceptions that do not exist in the United States. Thus in National Insurance Co. of New Zealand v. Espagne [3] , a statutory pension for the blind was held to be in the nature of a bounty on humanitarian grounds, and not to be taken into account in assessing damages. Espagne has been followed by this Court in relation to private superannuation funds in Graham v. Baker [4] ; Ramsay v. Watson [5] and Jones v. Gleeson [6] . The decision has also been applied, not always consistently, to other social welfare benefits in the Supreme Courts of the States. It has been applied to widows pensions (Vaughan v. Olver [7] ; Lindquist v. Maier [8] ), bushfire relief payments (Wollington v. State Electricity Commission of Victoria [No. 2] [9] ) and to invalid pensions or benefits (Fearnley v. Griffiths [10] ;Donaldson v. Korostovetz [11] ; Tsanaktsidis v. Oulianoff [12] ). However there has been a tendency to take unemployment benefits into account (see Tuncel v. Renown Plate Co. Pty. Ltd. [13] ; Cobb v. O'Donoghue [14] ; McIntosh v. Mair [15] ; Vassilef v. B.G.C. Marine Services (N.S.W.) Pty. Ltd. [16] ; Luntz, Assessment of Damages for Personal Injury and Death, 2nd ed. (1983), pp. 380-381; but see Henman v. Stephenson [17] ; Canny v. John Pfeiffer Pty. Ltd. [18] and Morley v. Murray [19] ).
Espagne [20] has also been accepted in the United Kingdom (see Parry v. Cleaver [21] ; Daish v. Wauton [22] and Lincoln v. Hayman [23] ). English law, however, has never subscribed unreservedly, to the "collateral source" rule. Under the Law Reform (Personal Injuries) Act 1948 U.K. half of the specified social security benefits received during the first five years of incapacity are taken into account in an assessment of damages (see Atiyah, Collateral Benefits Again, Modern Law Review, vol. 32 (1969) 397, at p. 406 ).
The rationale for a differential treatment of pensions and unemployment benefits under the Australian system is not obvious, especially where recipients of invalid pensions who originally lost jobs because of injury might have become unemployed anyway during the period in question because of economic conditions.
Application of the "collateral source" rule so that a plaintiff receives benefits from public funds, in addition to full compensation from the wrongdoer, is hard to reconcile with the principle of restitution. In the Australian social welfare system invalid pensions and unemployment benefits represent replacement, or part replacement, of earnings "lost" because of sickness or unemployment. If, under an award of damages, a person receives and retains compensation for lost earnings (or "lost earning capacity") of an amount equal to or greater than the amount of social welfare benefits paid to him or her over the same period then the system is not operating rationally. Social welfare benefits are a heavy burden on the community, especially during the present widespread and persisting unemployment. It appears socially unjust for the recipient to retain the benefits as well as full recovery of lost earnings. As Fleming writes:
Aside from the U.S.A. the world's Social Security systems adhere with almost undeviating consistency to the overriding philosophy that beneficiaries should not be permitted to enrich themselves through cumulative recoveries (p. 22).
Where social welfare benefits are low, ignoring them when assessing damages may do rough justice because often other factors which should appreciably offset the benefits are not taken into account, such as costs of attempts to gain work (although these may be recoverable as costs of attempting to mitigate the damage; see Rench v. Hayes Equipment Manufacturing Co. [24] ). Also, many workers who lose earnings by industrial or road accidents cannot maintain their standard of living on an invalid pension or unemployment benefits and must borrow (at high interest) or use up savings (as I pointed out in Kaufmann v. Van Rymenant [25] ). Those losses are not fully compensated by orders for payment of interest. However where the benefits are higher because the injured worker has a dependent spouse or spouse and children, these offsets will generally be relatively less. Often cases take three or four years from accident to trial so that the amount in question may be substantial; amounts of the order of twenty or thirty thousand dollars will not be rare.
Almost all awards are met by insurers. If the benefits are taken into account to reduce the award, the defendant's insurer is advantaged. This may seem anomalous, but if it reduces insurance costs, in theory, the public should benefit. One disadvantage of this is that lowering the awards will tend to reduce the pressure for action to reduce deaths and personal injuries on the roads and in work places (to which I referred in Todorovic v. Waller [26] ). Another disadvantage is the strong incentive for insurers to delay the assessment (by trial or settlement). In general, plaintiffs, anxious to obtain an award including amounts for pain and suffering, do not have an incentive to delay.
Since Espagne's Case [27] the social welfare legislation has been amended many times, without purporting to supersede its ruling, from which it is proper to infer that it has been accepted by the legislature. A coherent solution of the problem consistent with Espagne's Case can only be achieved by legislation. When assessing pre-trial loss there is no real justification for distinguishing between sickness benefits, invalid pensions, unemployment benefits or workers' compensation. Pre-trial benefits should be repayable to the Commonwealth just as there is return of workers' compensation payments when a plaintiff receives a verdict for damages under State or federal legislation (see for example, Workers Compensation Act 1926 N.S.W. s. 64(a); Workers' Compensation Act 1958 Vict. s. 79(3A); Workers' Compensation Acts 1916-1965 Q. Schedule 1 c. 24A(2); Compensation (Commonwealth Government Employees) Act 1971 Cth s. 99(7)). This is already done, but not so definitely and directly, in respect of some other federal benefits. Thus sickness benefits, and rehabilitation training and treatment costs, are recoverable under the Social Security Act Cth 1947 s. 115(4) and s. 135R(1A). However, the Director-General of Social Security has a discretion to release a person from the liability if satisfied that "special circumstances" exist (ss. 114(4A), 135R(1B)).
My conclusion is that pre-trial amounts of invalid pension and unemployment benefits should not be taken into account in an assessment of damages.
This case demonstrates starkly the desirability of federal legislation for recoupment of social service benefits out of awards. Such recoupment may need to allow for factors such as reduction of awards due to contributory negligence, and also for special circumstances.
I have had the advantage of reading the reasons for judgment prepared by Mason and Dawson JJ. I agree substantially with the discussion of the principles and authorities which precedes their Honours' particularized consideration of the two cases that are before us. It is sufficient for me to proceed immediately, on the basis of that discussion, to a consideration of the two cases, the facts of which are described by Mason and Dawson JJ.
The appellant accepts that the tests propounded in National Insurance Co. of New Zealand Ltd. v. Espagne [28] by Dixon C.J. [29] and by Windeyer J. [30] are authoritative and applicable to this case. He does not seek any review of those principles. In short, those principles emphasize the purpose which underlies the payment of a benefit which the plaintiff does or may receive. Is it intended that the plaintiff should enjoy it in addition to and not in diminution of any claim for damages? The question then is as to the intrinsic character of the invalid pension which was paid to the respondent. What is the purpose which the Social Security Act 1947 Cth as amended ("the Act") expresses in authorizing that payment? If the pension were payable by reason of the permanent blindness of the recipient there would be no occasion to doubt the continued correctness and authority of the actual decision in Espagne. Such a pension is payable quite independently of the financial circumstances of the recipient. It is immaterial whether or not the pensioner is affected in his earning capacity by his blindness or is of independent means. Given such clear indications of the intention of the legislature the pension payments are properly seen as an act of bounty extended to him "not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right: they are the product of a disposition in his favour intended for his enjoyment and not provided in relief of any liability in others fully to compensate him" (Espagne [31] ).
However, the respondent does not qualify for an invalid pension by reason of permanent blindness. His qualification is that he is permanently incapacitated for work (the Act, s. 24(1)). In Espagne, all members of the Court accepted, although it was not necessary to the decision in the case, that the grant of an invalid pension in respect of permanent incapacity for work was not to be regarded in the assessment of damages. The reasoning of their Honours was not entirely uniform. Dixon C.J. [32] (with whom Fullagar J. agreed) put it on the basis that
An invalid pension is granted in the exercise of an administrative discretion, though doubtless a discretion exercisable on grounds which are not at large, and it is granted as a benefit to the person after a consideration of his general situation. McTiernan J. [33] relied on the causa causans test, a test which did not attract the support of the majority of the members of the Court. Menzies J. relied on the fact that the permanent incapacity merely qualified a person to receive a pension. The pension could then be granted or refused in the exercise of an administrative discretion [34] . Windeyer J. (with whose judgment Fullagar J. also agreed) said that the pension should be disregarded because of its discretionary nature and the fact that its grant, rate and continuance were all dependent on the value of the property that a claimant or pensioner has or may acquire [35] . There was no support for the distinction which Smith J. had drawn in the course of a trial in the Supreme Court of Victoria (Shuter v. Crosby [36] ) between invalid pension payments referable to permanent incapacity received prior to trial (which were not refundable) and the prospects of the pension being continued in the future. His Honour directed the jury to take the former into account but not the latter. 1. (1961) 105 C.L.R., at p. 574. 2. (1961) 105 C.L.R., at p. 576. 3. (1961) 105 C.L.R., at p. 580. 4. (1961) 105 C.L.R., at pp. 586, 600. 5. [1956] V.L.R. 47.
The appellant's case is that the Act has been amended in significant respects since the decision in Espagne and that invalid pensions payable in respect of permanent incapacity ought now to be characterized in a different way. Two matters in particular are relied upon. One is the repeal by Act No. 91 of 1974 of par. (a) of s. 25(1). That paragraph had precluded the grant of an invalid pension to a person "if he is not deserving of a pension". It is likely that it was this provision governing the grant of a pension which Dixon C.J. had principally in mind when he referred to the benefit as one which is granted to a person "after a consideration of his general situation" [37] . In drawing that inference I do not overlook the fact that s. 28(1), which remains unchanged in any relevant respect, confers on the Director-General a discretion to determine, subject to the prescribed maximum rate, a rate of pension "as being reasonable and sufficient, having regard to all the circumstances of the case". The Act draws a distinction between the grant of a pension and the determination of the rate and his Honour's reference to a grant is, I think, instructive. Nevertheless the continued provision of an administrative discretion in the Director-General by virtue both of s. 28(1) and s. 46(1) is a feature of the Act which will require to be considered in the process of characterizing the benefit. At this point I am merely examining the appellant's claim that the statutory basis for the opinions expressed in Espagne has materially changed.
The second matter upon which the appellant relies is the diminished significance of the value of any property possessed by the claimant or pensioner. At the time of the argument in Espagne, par. (f) of s. 25(1) imposed a property means test on the grant of a pension. The paragraph was repealed by Act No. 45 of 1960 which came into force before judgment was delivered, but the significance of the property of a non-blind pensioner was preserved by a new s. 28(2). Section 46 continued to refer to the value of the property of a pensioner, other than a pensioner who is permanently blind, as a factor which may be regarded by the Director-General in the exercise of a discretion to cancel or suspend, or vary the rate of, a pension. This reference, together with the provisions of s. 28(2), was removed from the Act by Act No. 111 of 1976, with the result that while an income means test remains relevant to the enjoyment of a pension by a person who is permanently incapacitated there is no longer any express significance attaching to a pensioner's ownership of property. In the light of these changes, it is no longer true to say, as Windeyer J. said in Espagne [38] :
The policy of the Act seems clearly enough to be that (except in the case of blind persons) grants of pensions, rates of pensions and continuance of pensions are, within the limits prescribed, dependent upon the value of the property that a claimant or pensioner has or may acquire, notwithstanding that the discretion which remains in the Director-General with respect to the rate and the continuance of the pension (ss. 28(1), 46(1)) may no doubt be exercised in the light of all the circumstances including the receipt by the pensioner of a substantial award of damages. 1. (1961) 105 C.L.R., at p. 586.
In my opinion, the appellant succeeds in freeing himself from the automatic application of the conclusions expressed in Espagne by Dixon C.J. and Windeyer J. in relation to the character of an invalid pension granted on the ground of permanent incapacity for work. It is a question now of taking the principles for which Espagne is authority and applying them to the Act as it presently stands. I turn now to this task, a task which is not free of difficulty. It must be understood that nothing I have said is intended to affect in any way the binding force of the decision in Espagne with respect to persons who receive a pension on account of permanent blindness.
There are some features of the benefit which the respondent has received which lead one naturally to ask why it should not be taken into account in the assessment of damages. There is a close correspondence between the occasion which gives rise to the payment of the benefit and that which attracts one element in the award of damages as compensation for the injury. In each case it is the state of being incapacitated for work and consequently being unable to earn wages. The invalid pension is not received as the fruits of a policy of accident insurance (Bradburn v. Great Western Railway Co. [39] ), nor is it in the nature of superannuation benefits payable consequent on disability or premature retirement (Graham v. Baker [40] ; Jones v. Gleeson [41] ; Parry v. Cleaver [42] ). It does not find its source in the springs of benevolence, whether of friends or relatives or of the public at large. All these have been held by the common law, in the pursuit of justice, reasonableness and public policy, to be irrelevant to the assessment of damages for personal injury arising from a tort. It is possible of course for public benevolence to find expression in a statute and no doubt the grant of a pension on account of permanent blindness is an example of such benevolence. It might properly be described as an act of bounty on the part of the Commonwealth because it is intended to be enjoyed regardless of the income or means of the recipient, although s. 25(1)(d) is relevant to its categorization. On the other hand there are some additional indications that the Act in qualifying a person who is permanently incapacitated for work to receive an invalid pension does not set out to benefit that person regardless of his or her need, as witness the stringent means test in relation to income coupled with the discretion accorded to the Director-General in ss. 28(1) and 46(1).
These considerations tend to the conclusion that the pension in question is to be characterized as a welfare payment payable to a person who is unable to work and who is not in receipt of any or any sufficient income. The fact that it is called a pension rather than, say, a permanent incapacity benefit is immaterial. Save for a distinction between permanent and temporary incapacity, it bears a striking resemblance to a sickness benefit payable in accordance with s. 108 of the Act. That benefit is payable in consideration of temporary incapacity for work by reason of sickness or accident coupled with a loss of salary, wages or other income and is subject to an income means test. The rate of benefit cannot exceed the rate of salary, wages or other income lost by reason of the incapacity (s. 113) and there is provision for recovery or adjustment of the benefit in the event of compensation being received by the beneficiary from any other source (s. 115). Similarly, some analogy may be drawn between the pension and an unemployment benefit payable pursuant to s. 107 of the Act in consideration of an inability to get work. In this case, the payment is again subject to an income means test but there is no provision in the Act for recovery or adjustment of the benefit if compensation is received from another source. In Evans v. Muller, the decision in which is to be delivered with the decision in the present case, I have come to the conclusion that payments of unemployment benefit are in essence moneys paid in lieu of wages and ought therefore to be taken into account when assessing the loss suffered by a plaintiff entitled to an award of damages.
The respondent relies on the provisions of s. 25(1)(d) and s. 115 as indications that the benefit is intended as a bounty and therefore is not to affect the assessment of damages. In Espagne, the former provision was held to have no relation to a claim for damages resulting from negligence [43] . The paragraph has remained unchanged since Espagne was decided, thereby evincing, so it is said, the intention of Parliament to accept as law the proposition that the existence of an enforceable claim for damages in tort is not to affect the grant of a pension.
In my opinion, the argument seeks to wring too much significance from an absence of reaction by the Parliament to a judgment of the Court. Certainly, Parliament could have put this vexed question to rest by a clear statement of legislative intent but its failure to do so simply leaves the Act to be interpreted as it is, though not without regard in case of ambiguity to its legislative and judicial history. Viewing the paragraph in another way and taking it as an express indication that in the circumstances to which it applies there was to be no double benefit arising from the grant of an invalid pension, the question might be asked as to whether such a clear legislative expression, although confined in the range of circumstances to which it applies, did not carry comparable implications to be applied by the courts when assessing the economic loss for which injured plaintiffs were to be compensated. It is difficult to discern any reason for drawing a distinction in principle between compensation for lost earning capacity received by way of damages for personal injury sustained as the result of a tort and the compensation to which the paragraph refers. There is naturally a degree of uncertainty attending the outcome of a common law claim for damages as compared with, say, a claim for workers' compensation. In the former case it probably is inappropriate to speak of "an enforceable claim" and this may supply a reason for the different legislative approach to the two forms of compensation.
Section 115 (since repealed and re-enacted as Pt VII, div. 3A) required that the rate of the sickness benefit to which a person would otherwise be entitled be reduced by the amount per week of any payment by way of compensation in respect of the same incapacity. The section also provided that in the event of the sickness benefit being paid without such a reduction being made the recipient should be liable to make an equivalent repayment to the Director-General. The respondent argues that the absence of a similar provision in relation to an invalid pension of the kind in question here is a clear indication of the intention of the legislature that the latter is to be enjoyed by way of bounty in addition to damages. The argument is not without its force. However, the liability to reduction or repayment of a benefit is not the only way in which the non-bounty character of the benefit may be revealed. The legislature may choose in one case to require a set-off of the compensation payment against the statutory benefit. In that event, it will be the revenue that will be protected. In another case, it may choose to rely upon the courts in the application of common law principles governing the assessment of damages to ensure that the plaintiff is not over-compensated. In such a case, the revenue will remain the poorer, but the award of damages will be less. As I have indicated, I regard the provisions of the Act relating to unemployment benefits as reflecting a legislative intention of this kind and the same may be true of the provisions with which we are concerned. It is no longer always correct to describe such a result as operating to the benefit of a wrongdoer. In these days when compulsory insurance covers the bulk of personal injury cases the reality is that there is a public policy significance attaching to the size of awards. The burden of payment of such damages is now borne largely by the premium-paying community as a whole: Lincoln v. Hayman [44] ; Atlas Tiles Ltd. v. Briers [45] ; Parry v. Cleaver [46] . I doubt whether it is helpful to seek from the Act an explanation of the differing procedures that attend different benefits; it may be pertinent, as counsel for the appellant suggests, to note the diverse legislative history of the benefits in question: Invalid and Old-Age Pensions Act 1908 Cth; Unemployment and Sickness Benefits Act 1944 Cth; Social Services Consolidation Act 1947 Cth. The discretion of the Director-General to require a refund, in whole or in part, of benefits paid where compensation has also been received in respect of the one incapacity is presently confined to sickness benefits. Whether or not the legislature should extend that discretion to encompass other pensions and benefits is a vexed question. The administrative complexities attending such a scheme could be very substantial. On the other hand, a clear expression of a legislative intent that a particular benefit is not intended to be by way of bounty, coupled with the existing discretions to control the grant and rate of benefit received after the making of an award of damages, would allow the courts when applying the common law principles governing compensation for injuries received to take account of any benefits received prior to the award.
The present case is concerned only with pension payments received by the respondent before trial. Construing the Act as it now stands, I conclude that it was not the legislature's intention to provide those payments as an act of bounty to be enjoyed by the respondent in addition to the damages which he has now been awarded. Those damages include an amount by way of compensation for lost earning capacity prior to trial measured by the wages he has lost. In making the assessment, the learned trial judge disregarded the pension. In my opinion, his Honour ought to have deducted the pension payments received prior to the trial from that amount in order to ensure that the plaintiff received full but not excessive compensation.
I have been influenced in coming to my conclusion by the fact that the grant of a pension is now, since the repeal of par. (a) of s. 25(1), virtually as of right. Furthermore, I do not think the continued existence in s. 28(1) of the discretion to determine a rate of pension which is reasonable and sufficient militates against the conclusion. The Director-General must determine what is reasonable and sufficient at the time the pension is granted. As in the present case, this determination will generally take place years before the trial of the action for damages. It is quite unrealistic to think that the Director-General will be in a position at that time to evaluate the likely outcome of the action and the amount of damages which a successful plaintiff may expect to receive. There may be the possibility of a successful allegation of contributory negligence. In any event, even if it were possible to forecast the eventual receipt of a substantial award of damages, the claimant for an invalid pension would still be entitled to a pension. The rate will be that which is reasonable and sufficient in all the circumstances as they exist at the time of the claim. Again, it is unrealistic to suppose that the Director-General would be justified in exercising the discretion accorded to him by s. 46(1) to vary or cancel a pension in anticipation of a damages award which has not yet been made or received. Nor indeed in most cases would he be capable of doing so because the necessary information would not be available. Of course, in the present case he did not do so but I am more concerned with the elucidation of the legislative intent expressed in the Act in order to characterize the pension payments in question consistently with the principles for which Espagne stands as authority.
As I have said, the present case is concerned only with pension payments received before trial. However, it may be of assistance to indicate the view which I think the Act requires courts to take of the prospects of a plaintiff receiving an invalid pension on account of permanent incapacity for work in the future. In my opinion, those prospects must be ignored. The Act furnishes the Director-General with discretions which will ensure that once made an award of damages will form part of the total circumstances of the pensioner or claimant to be taken into account in determining the rate of the pension (if any) or its cancellation (ss. 28(1), 46(1)). This distinction in the relevance which a pension has to the assessment of damages depending upon whether it is paid before or after trial is not derived from any change in the character of the benefit. That character remains constant. It is a benefit paid in consideration of permanent incapacity for work and, subject to the prescribed maximum, is tailored to the present needs of the recipient. It is not intended as an act of bounty to be enjoyed in addition to relevant compensation which may be received from any other source. If paid before trial, the Act by making no provision for recovery in effect declares its intention that the common law rules governing the assessment of damages will provide the safeguard against double compensation. After trial, the Act ensures that the Director-General is empowered to cancel the pension or reduce the rate by reason of the award.
I would allow the appeal, and give an affirmative answer to the question asked in the stated case.
I would allow the appeal, for the reasons given by Mason and Dawson JJ.
The judgments in National Insurance Co. of New Zealand Ltd. v. Espagne [47] express the relevant principles that govern the resolution of these two cases. There it was held that an invalid pension granted under Pt III of the Social Services Act 1947 Cth, now the Social Security Act 1947 Cth, does not go in diminution of a wrongdoer's liability in damages for the personal injury which qualifies the injured person to receive the invalid pension. Although the pension in that case had been granted to a permanently blind person, the ratio of the case applies with no less force to an invalid pension granted upon the grounds of permanent incapacity for work [48] . I agree in the reasons of the Chief Justice for holding that neither the amendments to the Act nor the cases decided since Espagne's Case warrant a departure from what was then decided.
If an invalid pension is not deductible, should an unemployment benefit granted under the Social Security Act be treated differently? I agree with the Chief Justice's reasons for holding that, consistently with the principles expressed in Espagne's Case, an unemployment benefit payable under the Act is not to be treated differently from an invalid pension; an unemployment benefit does not go in diminution of a wrongdoer's liability in damages for personal injury where that personal injury is a cause of the unemployment. However, I would state some reasons which have weighed with me in coming to that conclusion in addition to those expressed by the Chief Justice.
The pensions and benefits payable under the Act are designed to afford a measure of support for people who encounter certain vicissitudes of life that tend to destroy or erode financial security. Old age, invalidity, widowhood, sickness, unemployment, single parent responsibilities, care of a child with a physical or mental disability, or severe physical or mental disability in an adult may qualify a person to receive a pension or benefit. Generally speaking, the cause of the condition or circumstance that qualifies a person to receive a pension or benefit is immaterial. Age and residential qualifications apart, qualification depends upon the fact that a person suffers a prescribed disability or disadvantage howsoever arising. Where a person suffers a personal injury, the extent or consequence of that injury determines whether the person is qualified to receive a pension or benefit. A person who, having suffered a personal injury, becomes entitled to receive a particular pension or benefit, is paid that pension or benefit whether or not his injury was caused by a wrongdoer and whether or not he has or claims a right to recover damages from the wrongdoer.
If a person upon whom a personal injury is tortiously inflicted (whom I shall call hereafter "the plaintiff") suffers a loss of income from employment as the result of the injury, he or she may become qualified to receive a pension or benefit which will make up some or, in particular circumstances, all of the lost income. Thus, if the plaintiff is a man who has attained the age of 65 or is a woman who has attained the age of 60 or is a class A, class B or class C widow as defined in Pt IV of the Act, whose income from employment debars him or her from receipt of an aged pension or a widow's pension, or from receipt of a full aged or widow's pension, as the case may be, and if that person loses that income because of a personal injury, he or she may be able to reduce the net loss of income by applying for and receiving an aged or a widow's pension or a larger aged or widow's pension (see the income tests in ss. 28 and 63). Or, if the plaintiff is above the age of 16, is not receiving an age pension (s. 24(1)) or a widow's pension (s. 81(1)), and if personal injury renders him or her permanently blind or permanently incapacitated for work to a degree not less than 85 per cent, he or she is qualified to receive an invalid pension (ss. 23, 24) subject to an income test (s. 28). Or, if the plaintiff has attained the age of 16 but being a man has not attained the age of 65 or being a woman has not attained the age of 60, if he or she is not receiving a pension or a sheltered employment allowance and if he or she satisfies the Director-General of Social Security that the personal injury has incapacitated him or her for work during a particular period whereby some income has been lost and that the incapacity is of a temporary nature, he or she is qualified to receive a sickness benefit (s. 108) subject to an income test (s. 114). A sickness benefit may not exceed the beneficiary's lost salary, wages or other income (s. 113). Or, if the plaintiff's personal injury results in his losing his employment and if he, though willing and capable of undertaking suitable paid work, is unable to obtain such work after taking reasonable steps to do so, he is qualified to receive an unemployment benefit (s. 107) subject to an income test (s. 114). An invalid pensioner or a claimant for an invalid pension, who is likely to derive substantial benefit from treatment and training under Pt VIII, may be selected as a person eligible to receive such treatment and training as the Commonwealth provides (ss. 135(1)(a)(i), 135A(1)). Similarly, a person receiving or claiming an unemployment or sickness benefit who would be likely to become unemployable without that treatment and training may be selected as an eligible person (ss. 135(1)(a)(ii), 135A(1)). If a plaintiff is so disabled by his personal injury that he is qualified to receive an invalid pension or if the Director-General is of opinion that, without sheltered employment, he would become permanently incapacitated for work to a degree of not less than 85 per cent, he is qualified to receive a sheltered employment allowance (ss. 133C, 133E). "Sheltered employment" is paid employment for disabled persons provided by approved organizations (ss. 133C(1), 133D). Each of these pensions, benefits or allowances gives a measure of income security. Each is a benefit or subvention made available by the state to a person eligible to receive the particular pension or benefit, whether or not a wrongdoer has brought about the condition or circumstance which makes that person eligible.
If income is lost because of a personal injury tortiously inflicted, should a statutory pension or benefit available to a plaintiff be reduced because of the remedy in damages available against the wrongdoer, or should the damages for which the wrongdoer is otherwise liable be reduced because of the pension or benefit to the plaintiff, or should the plaintiff be entitled to receive without diminution and to retain both the damages and the pension or benefit? Except for some provisions relating to recoupment by the Commonwealth of certain classes of payments, to which reference will presently be made, the Act gives no express answer to these questions. Perhaps the absence of an express answer reflects the uncertainty of the goals and objectives of Australian health and welfare services to which the Senate Standing Committee on Social Welfare drew attention in their 1979 Report entitled, not inappropriately, "Through a Glass, Darkly" (Parliamentary Paper No. 71/1979). In the absence of an express statutory answer to these questions, it is necessary to refer to the common law principles governing the measure of a wrongdoer's liability in damages for personal injury.
The pensions and benefits payable under the Act are subventions available to people generally. The ordinary rule that applies to a general subvention that does not exhibit a "distinguishing characteristic" (to adopt the phrase of Dixon C.J. in Espagne's Case [49] ) is that financial loss is not to be calculated without regard to the subvention. Dixon C.J. stated the rule applicable to such subventions in this way [49] :
If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so. That is because damages for loss or diminution of earning capacity or for the creation of a new need for services are to be assessed according to the financial loss thereby produced (Graham v. Baker [50] ; Griffiths v. Kerkemeyer [51] ). But subventions which exhibit the relevant "distinguishing characteristic" fall outside the rule. They are exceptions to the rule ordinarily applied to subventions that are available to people generally. Windeyer J. in Espagne's Case stated the exception in these terms [52] : In assessing damages for personal injuries, benefits that a plaintiff has received or is to receive from any source other than the defendant are not to be regarded as mitigating his loss, if: (a) they were received or are to be received by him as a result of a contract he had made before the loss occurred and by the express or implied terms of that contract they were to be provided notwithstanding any rights of action he might have; or (b) they were given or promised to him by way of bounty, to the intent that he should enjoy them in addition to and not in diminution of any claim for damages. In both cases the decisive consideration is, not whether the benefit was received in consequence of, or as a result of the injury, but what was its character: and that is determined, in the one case by what under his contract the plaintiff had paid for, and in the other by the intent of the person conferring the benefit. The exception may be stated too widely here for it is doubtful whether the exception includes the case where the third party benefactor has an independent right of direct recourse against the wrongdoer to recover the amount of the benefit conferred (Treloar v. Wickham [53] ; Griffiths v. Kerkemeyer [54] ). However, that is not a matter for present consideration. The present enquiry is whether the intent of the person conferring the benefit - that is, the intent of the legislature - is that a plaintiff should enjoy payments by way of invalid pension or by way of unemployment benefit in addition to and not in diminution of damages. 1. (1960) 105 C.L.R., at p. 573. 2. (1960) 105 C.L.R., at p. 573. 3. (1961) 106 C.L.R. 340, at p. 347. 4. (1977) 139 C.L.R. 161, at p. 165. 5. (1960) 105 C.L.R., at pp. 599-600. 6. (1961) 105 C.L.R. 102, at p. 122. 7. (1977) 139 C.L.R., at p. 178.
The intention of the legislature is to be gleaned from such indicia as appear in the whole of the Act, however elusive or ambiguous those statutory indicia may be. Although the divining of the relevant legislative intention must be undertaken, the exercise is somewhat artificial for the diverse statutory origins of the several Parts of the Act and its frequent amendment obscure, if they do not deny the existence of, an intelligible policy relating to the effect on damages of the several pensions, benefits and allowances for which the Act provides. In some instances, however, the indicia of legislative intention are clear enough. Where, for example, the Act provides for recoupment of a benefit or allowance out of damages awarded to the person receiving the benefit or allowance, it may be taken that the legislature does not intend that damages should be diminished by receipt of the moneys to be recouped (cf. Batchelor v. Burke [55] , per Gibbs C.J.). Otherwise the receipt of a benefit or pension would result in a double deduction - once from the damages assessed and again in paying out the sum recouped by the Commonwealth. Section 115C provides for recoupment of an amount equal to a sickness benefit and therefore the receipt of a sickness benefit does not diminish a wrongdoer's liability; but there is no provision for the recoupment of any other pension or benefit. Some allowances may be recouped. Thus s. 135R provides for recoupment of training allowances and of the cost of treatment and training of a person by the Commonwealth Rehabilitation Service under Pt VIII of the Act.
It might be argued that, as all pensions and benefits other than sickness benefits are not subject to recoupment, all are deductible under the ordinary rule; but equally it might be argued that the legislature simply intended that all other pensions and benefits should be enjoyed and retained by their respective recipients simply because they are qualified to receive them, without affecting the damages recoverable from a wrongdoer. The former approach derives some support from the circumstance that pensions and benefits (apart from family benefits) provide payments by way of income security and the Act provides for retraining and sheltered workshop programmes to aid in restoring pensioners and beneficiaries (other than aged pensioners) to remunerative employment. As Margaret T. Lewis reported to the Commission of Inquiry into Poverty in her paper "Values in Australian Income Security Policies" (Australian Government Publishing Service, Canberra (1975)), p. 10:
The work ethic lies at the base of the Australian income security program. Inherent in the scheme has been the philosophy that people should work to maintain themselves by their own labour, and most of the contingencies provided for under the scheme are provided on the expectation that they preclude or inhibit a person being employed.
On this approach, pensions and benefits generally may be thought to have the character of a subvention to take the place of lost earnings during periods of unemployment, so that damages in respect of lost earning capacity are to be assessed in the light of the payments available to the plaintiff pensioner or beneficiary. The wrongdoer would have the advantage of the subvention except in a case where sickness benefits are paid to the plaintiff.
This approach led the Full Court of the Supreme Court of Victoria in Tuncel v. Renown Plate Co. Pty. Ltd. [56] to hold that unemployment benefits are deductible. Speaking for the Court, Gillard J. said [57] :
The unemployment benefits payable by the Commonwealth and the compensation payable by the tortfeasor are concerned with the same subject matter, namely payment for periods when the plaintiff was in fact not working. The actual amounts payable were arrived at by the same mode of calculation for both payments. Both are based directly on the precise periods the plaintiff was not working. They would be similarly calculated on a weekly rate. The difficulty with this approach is the absence of a sufficient ground to distinguish unemployment benefits from invalid pensions or sickness benefits. In Tuncel's Case the Full Court was able to distinguish Espagne's Case [58] only by construing what was said in the latter case as referable only to a blind pension that was unaffected by an income test [59] - a distinction which, in my respectful opinion, is not borne out by a reading of the judgments. Invalid pensions and sickness benefits, as well as unemployment benefits, are "concerned with the same subject matter" as compensation. There is no material distinction between the factors referred to in determining the statutory test of incapacity for work and the factors referred to in ascertaining the measure of damages in tort for destruction or impairment of earning capacity. In those provisions of the Act where invalidity or sickness or injury causing incapacity for work is specified as an element of qualification to receive a payment (ss. 23, 24(1) and 24A relating to invalid pension; s. 108(1)(c) relating to sickness benefit), the state of the labour market reasonably accessible to a claimant is an indispensable consideration in ascertaining his qualification. We were referred to a decision by the Administrative Appeals Tribunal (Re Panke and Director-General of Social Services [60] ) where the relevant provisions of the Act have been thus construed, and subsequent decisions of that Tribunal have confirmed the administrative direction then given. The same consideration applies when a court is assessing a plaintiff's damages in tort for destruction or impairment of earning capacity. 1. [1976] V.R. 501. 2. [1976] V.R., at p. 509. 3. (1961) 105 C.L.R. 569. 4. [1976] V.R., at p. 508. 5. (1981) 4 A.L.D. 179.
A factor which does distinguish the granting of a pension or benefit from the awarding of damages is the income test applicable to the particular pension or benefit. In that test may be found an indication of legislative intention. The test identifies the purpose of a pension or benefit to be relief of a claimant's need as distinct from compensation for a loss sustained. If the plaintiff recovers damages against the wrongdoer and derives income from the investment of those damages, the amount of that income (except in the case of a permanently blind pensioner) is taken into account by the income test applicable to the particular pension or benefit which the plaintiff receives or is qualified to receive from time to time. If pensions and benefits were to go in reduction of damages, the income which could be derived from their investment would also be reduced, and the extent of the plaintiff's dependence upon the statutory subvention would be increased correspondingly. The income tests applicable to the respective pensions and benefits define the extent to which public funds are relieved from payment of those pensions and benefits to qualified persons. It seems an unlikely intention to impute to the Parliament that statutory subventions should reduce the measure of the wrongdoer's liability and correspondingly increase the plaintiff's dependence upon public funds. A similar consideration was given some weight by Windeyer J. in Espagne's Case [61] .
Another indication of legislative intention may be gleaned from the flexibility in pensions and benefits provided by the Act. The particular pension or benefit which a plaintiff is qualified to receive or receives may change from time to time. For example, a sickness benefit may be discontinued and an invalid pension may be granted instead if the plaintiff's capacity for work deteriorates; or a sickness benefit may be discontinued and an unemployment benefit may be granted instead if his capacity for work improves. Indeed, s. 122 provides for a person in receipt of an unemployment benefit who becomes qualified to receive a sickness benefit to be paid a sickness benefit; and, conversely, for a person in receipt of a sickness benefit who becomes qualified to receive an unemployment benefit to be paid an unemployment benefit. Flexibility is an important aspect of the statutory scheme, especially as the several categories of pensions and benefits carry differing fringe benefits and allowances (see the 1981-1982 Annual Report of the Department of Social Security, pp. 29-34). It seems unlikely that Parliament would have intended the transfer of a plaintiff from one pension or benefit classification to another should affect the liability of a wrongdoer. As invalid pensions and sickness benefits do not go in reduction of that liability, it is unlikely that Parliament intended unemployment benefits to do so.
As a result either of statutory compulsion or accepted standards of business prudence, almost all defendants in actions for damages for personal injuries are insured. Given the spread of insurance, the ultimate burden of any liability to pay damages is, to some extent, cast upon the community generally through the direct and indirect burden of insurance premiums. It is the community generally, through direct and indirect taxes, which bears the ultimate burden of invalid pensions paid from consolidated revenue pursuant to the Social Security Act 1947 Cth ("the Act"). In these circumstances, I have difficulty in accepting that there is to be discerned in the provisions of the Act a legislative intent that a person, who is, in the relevant sense, an invalid by reason of an injury caused by the negligence of another and who has actually received payment of invalid pension in the period between injury and trial, should, in respect of that period, receive compensation for loss of earnings calculated on the same basis as if the payment of invalid pension had not been received.
It may be that the generalizations contained in the first paragraph of this judgment are more apparent now than in 1961 when National Insurance Co. of New Zealand Ltd. v. Espagne [62] was decided. By and large however, they were as true then as they are now. As has been stressed in argument in the first of the present appeals (Redding v. Lee), there are some differences between the Act in its present form and the Act in its 1961 form which make the existence of the legislative intent imputed to the Parliament more unlikely in that they reduce the discretionary element in entitlement to an invalid pension. If, however, that intent was properly to be discerned in the Act in its 1961 form, those differences cannot properly be seen as having removed it. In my view, the Full Court of the Supreme Court of South Australia was correct in concluding that the decision in Espagne precluded account being taken in Redding v. Lee of the fact that the plaintiff had received more than $6,000 by way of invalid pension for periods in respect of which he claimed full compensation for lost earnings which, if earned, would have precluded receipt of pension payments. It follows that the real question in the appeal in Redding v. Lee is whether the Court should decline to follow Espagne at least to the extent that it is authority for the proposition that payments of invalid pension which have actually been received at the date of trial should be disregarded in assessing damages for loss of earnings.
Espagne has now stood for more than twenty-one years. It has been referred to in many subsequent cases in this Court without challenge to its authority. It has been followed and applied as a matter of course in innumerable cases by courts responsible for assessing damages as compensation for personal injury in negligence cases. The double benefit which it establishes in cases where payments of invalid pension have actually been received at the time of trial has, no doubt, been accepted as part of the established social structure and as but another anomaly in a field (damages for personal injury) where the existence of an anomaly is far from anomalous. The Act has been amended on more than forty occasions since Espagne without any provision being introduced either to make clear that there should not be read into the Act an intention that receipt of invalid pension should be disregarded in assessing compensation for personal injury or to remove the double benefit by providing for the recoupment by consolidated revenue of payments of invalid pension which a successful plaintiff has received in the period between injury and trial. In the circumstances, it would be wrong for the Court to decline to follow Espagne at this stage.
I would dismiss the appeal in Redding v. Lee solely on the basis that the decision in Espagne is in point and should be followed. I would uphold the appeal in Evans v. Muller for the reasons given by Mason and Dawson JJ. Subject to what has been said above, I agree with the statement of general principle contained in the judgment of Mason and Dawson JJ.
One cannot but be conscious of the unfortunate aspects of a decision that payments received on account of unemployment benefits should be taken into account in the assessment of damages while payments received on account of invalid pensions are not. Quite apart from the obvious appearance of incongruity, the benefit to the insurer resulting from payment of unemployment benefits has almost as little to justify it as the double benefit to the plaintiff in the case of an invalid pension and is liable to constitute a further financial advantage to be obtained by an insurer from delay in the settlement or hearing of a claim. The obvious and commonsense solution - i.e. that payments on account of either invalid pension or unemployment benefits not be taken into account in the assessment of damages but, to the extent appropriate, be recouped to consolidated revenue in much the same manner as payments received on account of workers' compensation are recouped to the workers' compensation insurer - lies, however, in the hands of the Parliament and not of the Court.
High Court of Australia Gibbs C.J. Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ. Redding v Lee; Evans v Muller [1983] HCA 16