This is an accepted method for calculating a loss of superannuation benefits; see for example Rouse v Shepherd (1994) 35 NSWLR 250 at 262. It is not clear to me that the argument now advanced and based on Todorovic v Waller was put at trial. The RTA's expert, Mr Rossetto, stated "on the basis of Dr Cremona's level of income, we consider that this amount of contribution level is not unreasonable" and calculated superannuation based on $25,000 per annum contribution.
84 There was dispute about whether the average growth rate should be treated as 11 per cent or some other percentage, ie, 7 per cent. Geoffrey Ian McRae, a qualified actuary with 28 years experience in insurance and superannuation and a principal in William M Mercer Pty Limited, gave his opinion that Mr Ronan's report of 19 March 1999 seemed to provide a better estimate of what the actual loss of superannuation would have been.
85 In calculating Mrs Cremona's loss, Dr Cremona's assumed future contribution of $25,000 to a superannuation fund was deducted from his assumed future income. It was treated separately and differently as a contribution to superannuation which would produce a different benefit to him if he had survived and to Mrs Cremona as his wife dependent upon him. The product was a fund enhanced not only by regular annual contributions and the earnings on resultant investments but also by having the advantage of a tax regime less onerous on the earnings and designed to encourage such an investment. Mr Ronan said:
"Investments in superannuation have very significant tax benefits. There are several thresholds which entice people to invest in superannuation. There are thresholds for lump sums so you can receive up to an amount presented in the region of $98,000 which is tax free if you receive it by lump sum superannuation payment. Similarly if you decide to take a lump sum payment in concert with a pension there are also tax breaks for the pensions up to a certain degree."
86 Even so the RTA submitted that effectively it should be treated not as a contribution to a superannuation fund but as an annual amount of anticipated income from which Mrs Cremona might benefit.
87 Support for the RTA's submission was said to be found in Jongen v CSR Limited. In that case the plaintiff claimed damages for personal injuries sustained in the course of his employment with the defendants. The plaintiff voluntarily participated in a private superannuation scheme to the extent of an amount of his salary per annum. His employer contributed a further amount. Anderson J found that the plaintiff would have continued his contributions at the level stated until his retirement at the age of 70. By reason of his disability as a result of the injuries he sustained, his membership of the scheme was terminated. He claimed to be compensated for what was described as "loss of superannuation benefits". Anderson J observed:
"This item of claim was approached by counsel for both parties on the basis that there is as yet no conventional method of working it out. If this is so, it may be because the nature and the extent of the loss in any particular case will depend upon the features of the particular scheme." (61,711)
88 After referring to terms of the policy his Honour said at 61,712:
"In summary, where a policy of insurance is taken by the trustees in respect of a member, the proceeds of which are payable to the trustees upon disablement of that member, then if the employee is terminated by reason of that disability, the trustees are obliged to pay over the proceeds of the policy to the member in addition to all other benefits to which the member is entitled. This 'insured benefit' is plainly a benefit he would only receive on being forced to retire through disability.
What then is to be awarded to the plaintiff in this case by reason of the fact that he was deprived of the opportunity to continue in this scheme until his planned retirement in February 1998? On behalf of the plaintiff it is said that he is entitled to be compensated for the loss of what would have been the employer's contribution to the fund, net of tax, and discounted for present payment. Formulated in that way, it is not really a claim for 'loss of superannuation benefits'. Put thus, it is simply a claim for loss of a benefit in the nature of additional salary.
The defendant took a different approach, contending that it was necessary to compare the total benefits accruing to the plaintiff on early termination of his participation in the scheme (including the insurance payment) the total benefits that would have accrued to him had he continued in the scheme until 1998."
89 After reciting competing expert evidence at 61,713 Anderson J said:
"I think the preferable approach in this kind of case is to leave out of account altogether any consideration of the benefits likely to be received on maturity and actually received by the plaintiff on early termination and to have regard only for the value of what would be the employer's contribution if the disability had not occurred, appropriately discounted for tax and the fact that it is a payment to a privately administered fund rather than into the hands of the plaintiff.
This approach has the virtue of simplicity and, in regard to the exclusion from consideration of benefits actually received, such as in this case the 'insured benefit' of $9,326, iIt seems to me to accord with the rule in the National Insurance Co of New Zealand Limited v Espagne (1961) 105 CLR 569. I think it is more in accord with principle to regard the benefits actually received by the plaintiff due to early termination of the superannuation scheme as collateral benefits which do not go in mitigation of common law damages for loss of future earning capacity. Paff v Speed ( 1961) 105 CLR 539 per Menzies J at 536 .
It follows from what I have said above that I prefer (although with some modification) the general approach adopted on behalf of the plaintiff."
90 Anderson J emphasised the singularity of the circumstances of the case before him. No general principle can be derived from the conclusion he reached applicable to the facts of this case. The question here is to determine the value of Dr Cremona's accumulated superannuation fund at a future date, if he had not been killed, part of the benefit which Mrs Cremona would have enjoyed as a dependant. No expert suggested that that entitlement could be measured appropriately in the way the RTA suggests. Rather, the RTA argued that the method of calculation was dictated by the cases and referred to Todorovic v Waller.
91 In Todorovic v Waller the relevant question under consideration was how in an action for damages for personal injuries where there had been a loss of earning capacity likely to lead to financial loss in the future the present value of the future loss ought to be quantified. The answer to that question was obscured by considerations of the effect of inflation, future changes in rates of wages and prices and the impact of income tax not only on future salary but also on the investment of the lump sum awarded by way of damages as compensation for the loss. The High Court decided by a majority that in an action for damages for personal injuries, where there has been a loss of earning capacity which is likely to lead to financial loss in the future, or where the plaintiff's injuries will make it necessary to expend in the future money for the provision of goods and services for the plaintiff's health and comfort, the present value of the future loss ought to be quantified by adopting a discount rate of 3 per cent in all cases, subject to any relevant statutory provision. No further allowance should be made for inflation, the future changes in rates of wages or prices, or for tax upon income from investment of the sum awarded.
92 The Court of Appeal (Todorovic v Waller (1981) 1 NSWLR 97) had held at 102 that in personal injury cases in times of high inflation the fairest and simplest practice for courts to follow was to award compensation for future losses and future outgoings without any discount for the interest earning capacity of the product either in respect of losses and expenditure commencing immediately or for those deferred to a future time. The only discount required by law was that to be applied throughout the process of assessment to allow for the contingencies of life. In adopting a zero rate of discount the liability of the plaintiff to be assessed to tax on the invested lump sum was to be disregarded entirely.
93 Part of the claim was for loss of superannuation. At 104 the Court said:
"The calculation of the value of the respondent's lost superannuation benefits should proceed on the basis that upon retirement he would be earning the salary appropriate to a Grade 5 operator at the time of trial, and that for the appropriate period after his retirement in 2009 he would receive, during his life expectancy, a pension calculated upon that salary.
His Honour found, and the evidence establishes, that his pension would amount to 50.5 per cent of the salary of a Grade 5 operator ie $8,234. He would have had the further right of applying his accumulated contributions towards an additional pension amounting to 20 per cent of his actual salary. He had a number of alternatives which he might have adopted and, for the purposes of this calculation, we will assume this is the one he would have selected. This would bring his total pension to $11,495.
The life expectancy of an adult male aged sixty-five years is 12.33 years. If he enjoyed his pension, therefore, for his life expectancy he would receive a gross sum of $141,388. Although this represents compensation for the loss of benefits which would not have fallen due until long after the trial it is no longer necessary to discount them. But from the figures calculated the sum of $5,726 which the respondent received upon his retirement in 1978 must be deducted, leaving an amount of $135,662. This figure has in our opinion to be substantially discounted for vicissitudes. He may not have attained the age of sixty-five years. The discount has to be arbitrary, and we apply 33 1/3 per cent. On this basis the present loss of pension benefits amounts to $90,747."
94 The High Court held that the Court of Appeal had erred in adopting a zero rate of discount. In the judgment of Gibbs CJ and Wilson, with whose orders Mason, Aickin, and Brennan JJ agreed, there appears the following at 426-427:
"In calculating the value of the respondent's lost superannuation benefits, the Court of Appeal proceeded on the basis that the pension payable to the respondent on his retirement would be 50½ per cent of his gross salary at retirement which was $16,306 [which equals $8,234 in the Court of Appeal judgment]. They assumed that out of a number of alternatives open to him the respondent would have exercised the further right of applying his accumulated contributions towards an additional pension amounting to 20 per cent of his salary. That would have brought his pension to $11,495. They said that the life expectancy of a male aged sixty-five years is twelve and one-third years. Reference to tables of expectation of life shows that what the Court of Appeal has done is to consider what the expectation of life of the respondent would have been if he had survived until 2009, rather than what it was at the date of the trial. The Court of Appeal then held that if the respondent had enjoyed his pension for twelve and one-third years from the date of his retirement he would have received $141,388 [$11,495 x 12 1/3] from which had to be deducted an amount of $5,726 which he in fact received on his retirement. The resulting amount was $135,662. The Court of Appeal then made a deduction of 33 1/3 per cent in respect of the vicissitudes of life and thus arrived at the loss of $90,747. The deduction of 33 1/3 per cent cannot be criticized, particularly since the Court of Appeal favoured the respondent in taking twelve and one-third years as his expectation of life at a future date.
The calculation of the actuary shows that the present lump sum equivalent in value to the loss of a superannuation benefit of 70½ per cent of $16,306 [which equals the $11,495 in the Court of Appeal judgment] per annum for a period of twelve and one-third years, at a discount rate of 3 per cent, is $39,250. When a deduction of 33 1/3 per cent is made the resulting figure is $26,170. After deducting the $5,726 actually received the loss under this head of damage is seen to be $20,444. Again, since the appeal is limited to questions of principle, we are content to proceed on the basis of the calculations of the appellant's actuary without questioning the accuracy of their details, since we have no reason to believe that they operate unfairly to the respondent. If the figures of $198,450 and $20,444 are substituted for the amounts of $275,000 and $90,747 adopted by the Court of Appeal the resulting damages payable to the respondent total $300,490, plus $14,000 for interest to date of trial."