Supreme Court of NSW|1998-03-19|Before: Mason P, Meagher JA, Sheller JA, Per Mason P

State of New South Wales v Davies Matter No Ca 40747/96 [1998] NSWSC 51 (19 March 1998)

The Supreme Court of New South Wales Court of Appeal

JURISDICTION: District Court - Judge Murrell SC

* Appellant: I V Knight - State Crown Solicitor

**CATCHWORDS:**DAMAGES - non-deduction of benefits received when tortfeasor also in position of employer and insurer

The respondent was a member of the New South Wales Police Force who was badly injured while conducting a survival training course as part of his Police duties. He became entitled to statutory benefits from the Police Superannuation Fund (the Fund) as a result of his injuries. The Fund consisted of contributions from salary of office and appropriations from the Consolidated Revenue Fund.

The respondent sued the appellant in negligence to recover damages for his injuries. Murrell DCJ held that the respondent's injuries were caused by the appellant's negligent failure to provide safe training equipment. Her Honour refused to deduct the amounts paid by the respondent into the Fund when assessing damages for economic loss. The appellant's appeal was limited to Her Honour's refusal to deduct those contributions and to the question of the amount of interest that should be awarded for past economic loss if the deduction was rightly refused.

The appellant was in the position of employer, tortfeasor and provider of statutory benefits to the respondent. On this basis, the appellant argued that the principle of non-deduction that applies to benefits received or to be received should be limited to those received form sources other than the defendant. Therefore, it was argued, that those contributions made by the appellant to the Fund should be deducted from damages awarded for economic loss.

The appellant's second submission was that because the respondent had received benefits from the Fund he was not out of pocket due to waiting for judgment to receive damages for past economic loss. Therefore, it was argued, interest on past economic loss should not be awarded because there was no loss to compensate.

1. The fact that the appellant was in the triple position of employer, tortfeasor and insurer does not alter the principle of non-deduction of damages. The respondent was entitled to both the benefits flowing from the Fund and damages for economic loss.

2. The respondent was entitled to both the benefits and damages for past economic loss. Therefore, the respondent was out of pocket until damages were paid and interest should be paid to compensate for this loss.

3. Per Mason P: The legislation under which the respondent became entitled to benefits does not evince the requisite intention that these should be taken into account where the employer is in breach of its duty of care. If this result is thought to be unfair, Parliament is free to do something about it: Guy v Police Authority for Northern Ireland (unreported) 14 April 1989.

Batchelor v Burke [1981] HCA 30; (1981) 148 CLR 448

Bradburn v The Great Western Railway Company [1854] EngR 538; (1874) LR 10 Ex 1

Gee v Commonwealth of Australia (unreported) 13 September 1982

Grego v Mount Isa Mines Limited (1972) QWN 33

Guy v Police Authority for Northern Ireland (unreported) 14 April 1989

Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60

Hussain v New Taplow Paper Mills Limited [1988] AC 514

Parry v Cleaver[1969] UKHL 2; [1970] AC 1

Smoker v London Fire and Civil Defence Authority [1991] 2 AC 502

The National insurance Company of New Zealand v Espagne [1961] HCA 15; (1960) 105 CLR 569

The legislation under which the respondent became entitled to benefits when he was hurt on duty does not evince the requisite intention that these should be brought into account (in whole or in part) where the employer is found to be in breach of its duty of care. If that is thought to be unfair, Parliament is free to do something about it: see esp the unreported decision of MacDermott LJ in Guy v Police Authority for Northern Ireland to which Sheller JA refers.

SHELLER JA: This appeal raises once again the question whether a court in assessing the damages payable by a tortfeasor for past and future economic loss suffered by an injured plaintiff, in this case in the course of his duty as a policeman, should deduct any part of statutory benefits paid or payable to him as a result of his injury. The appellant State of New South Wales was at once employer, tortfeasor and provider in large measure of the statutory benefits under the Police Superannuation Fund (the Fund) established by the Police Regulation (Superannuation) Act 1906 (the Superannuation Act) in the form it took before the 1988 amendments which applied to the plaintiff who joined the police force in 1986.

On 9 July 1991 the plaintiff, Colin Howell Davies, was badly injured while conducting a survival training course as part of his duties as a member of the New South Wales Police Force. He brought proceedings against the State of New South Wales alleging that his injuries resulted from the defendant's negligence. Judge Murrell SC heard the proceedings in the District Court and on 11 November 1996 gave a verdict and judgment for the plaintiff in the sum of $874,863 which included $64,145 for past economic loss, $8,349 for interest on past economic loss and $393,763 for future economic loss. The interest was calculated on the plaintiff's loss of earnings from the date of his discharge from the police force to the date of judgment. In assessing damages for economic loss her Honour refused to deduct amounts paid or payable to the plaintiff by the Fund. The defendant's appeal is limited to her Honour's refusal to make such deduction and to the separate question of what interest on the amounts awarded for past economic loss should be allowed, even if the deduction was rightly refused.

The Fund was established by s3 (1) of the Superannuation Act and consisted, amongst other things, of deductions from salary of office made under s5 and amounts appropriated from the Consolidated Revenue Fund under s4. The State Authorities Superannuation Board (the Board) was obliged to pay out of the Fund the benefits provided by the Act. Section 4 provided that if at any time the amount at credit of the Fund was insufficient to meet the superannuation allowances and other amounts payable under the Act, the amount of the deficiency was a charge against the Consolidated Revenue Fund. Section 5 (1) provided that, subject to subs (2), which is not presently relevant, there should be deducted from the salary of office of each qualified person and paid to the Fund an amount equal to six per cent of that salary of office. The plaintiff was a qualified person and made the appropriate contribution to the Fund.

Part 4, Division 1 of the Act provided for superannuation allowances and gratuities. In particular s7 (1) provided for an annual superannuation allowance to members of the police force who had served for twenty years or more and retired upon or after attaining the age of sixty years. Subs (2) provided that an annual superannuation allowance under subs (1) should not be payable to a member of the police force to whom an annual superannuation allowance was payable under s10.

Section 10, so far as presently relevant, provided as follows:

(a) a member of the police force who is discharged after being certified, pursuant to section 10B (1), to be incapable, from a specified infirmity of body or mind, of discharging the duties of his office; or

(b) a former member of the police force who resigned or retired and who, according to a certificate given pursuant to section 10B (2) at any time after his resignation or retirement, would have been incapable, from an infirmity of body or mind, of discharging the duties of his office at the time of his resignation or retirement,

that infirmity being determined, pursuant to section 10B (3) or on appeal, to have been caused by the member being hurt on duty or the former member having been hurt on duty when he was a member of the police force, as the case may be;

`retired' includes discharged as referred to in section 7 or 14;

(a) in relation to a member of the police force who is discharged - his salary of office at the date of his discharge; or

(b) in relation to a former member of the police force who resigned or retired - his salary of office at the date of his resignation or retirement.

(1A) Subject to this section, the annual superannuation allowance for a disabled member of the police force is:

(a) an amount that is equal to 72.75 per cent of his salary of office;

(b) except where paragraph (c) applies, an additional amount that is:

(i) not more than 12.25 per cent of his salary of office; and

(ii) commensurate, in the opinion of the Board, with his incapacity for work outside the police force; and

(c) where the disabled member is totally incapacitated for work outside the police force and, in the opinion of the Board, he was hurt on duty because he was required to be exposed to risks to which members of the general workforce would normally not be required to be exposed in the course of their employment, an additional amount that is:

(i) not less than 12.25 per cent and not more than 27.25 per cent of his salary of office; and

(ii) commensurate, in the opinion of the Board, with the risks to which he was so required to be exposed."

"Hurt on duty" in relation to a member of the police force was defined in s1 (2) of the Superannuation Act to mean "injured in such circumstances as would, if he were a worker within the meaning of the Workers Compensation Act 1987, entitle him to compensation under that Act."

The evidence was that contributions from members financed approximately twenty-three per cent of the total pension fund and that the remaining seventy-seven per cent was employer financed, that is to say, a charge against the Consolidated Revenue Fund.

After the accident the plaintiff, in spite of his injuries, remained a member of the New South Wales Police Service until his discharge ("hurt on duty") on 11 August 1994. He continued to receive earnings from the Police Service to the date of his discharge. On 29 September 1994 the superannuation allowance began at the rate of 72.75 per cent of his salary as at the date of his discharge (see s10 (1A) (a) of the Superannuation Act). In April 1995 he was granted an increase to 80 per cent of his salary of office (see s10 (1A) (b)). In June 1995 he was granted an increase to 90 per cent of his salary of office (see s10 (1A) (c)). Both increases were back-dated to 29 September 1994. On 29 September 1995 and 27 September 1996 the superannuation allowance was increased by indexation based on movements in the consumer price index.

The plaintiff was born on 21 January 1956 and joined the Police Service on 10 November 1986. Accordingly, he would have been eligible to receive an annual superannuation allowance in accordance with s7 (1) on 21 January 2016.

The State of New South Wales challenged the trial Judge's failure to deduct from the allowance for past and future economic loss "the non-contributory element of sums received by the Plaintiff from the Defendant/tortfeasor consequent upon the injury for which the Plaintiff sues" and "her Honour's allowance of interest for past economic loss in respect of that element for which the plaintiff was never out-of-pocket."

The appellant did not claim that any deduction should be made on account of the annual allowance the plaintiff would have become entitled to receive under s7 (1) of the Superannuation Act after he turned sixty. The amount of $64,145 her Honour assessed as damages for past economic loss was the difference between what would have been the plaintiff's earnings but for the accident, $143,734, and his actual earnings prior to discharge hurt on duty, $79,589. The net after tax allowance received by the plaintiff under s10 of the Superannuation Act for the period up to 25 October 1996 was $57,849. If this amount were deducted, as the appellant said it should have been, the entitlement for past economic loss would be reduced to $6,296. Interest on this should have been assessed at $988.

Similarly, a deduction for allowances expected to be received under s10 during the period up to the plaintiff's sixtieth birthday would reduce the amount assessed for future economic loss by $59,910.

With respect to the interest award, the appellant said that, even if it otherwise failed on the appeal, interest should only be awarded on the amount in respect of which the plaintiff had been "in reality" out of pocket, namely, $6,296.

"The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed ..... Compensation is the cardinal concept. It is the `one principle that is absolutely firm, and which must control all else' ..... Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver [1969] UKHL 2; [1970] AC 1 at 13, as universal, that a plaintiff cannot recover more than he or she has lost."

(Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 at 63 per Mason CJ, Dawson, Toohey and Gaudron JJ).

However, although it might be seen to cut across the settled principle, as long ago as 1874, the Court of Exchequer in Bradburn v The Great Western Railway Company [1854] EngR 538; (1874) LR 10 Ex 1 held that in an action for injuries caused by the defendant railway company's negligence an amount the plaintiff received on account of the accident under an insurance policy could not be taken into account in reduction of damages. Bramwell B at 2 applied a principle laid down in an earlier case which decided:

".... that one who pays premiums for the purpose of insuring himself, pays on the footing that his right to be compensated when the event insured against happens is an equivalent for the premiums he has paid; it is a quid pro quo, larger if he gets it, on the chance that he will never get it at all."

"The plaintiff is entitled to recover the damages caused to him by the negligence of the defendants, and there is no reason or justice in setting off what the plaintiff has entitled himself to under a contract with third persons, by which he has bargained for the payment of a sum of money in the event of an accident happening to him. He does not receive that sum of money because of the accident, but because he has made a contract providing for the contingency; an accident must occur to entitle him to it, but it is not the accident, but his contract, which is the cause of his receiving it."

The principle behind this decision has been challenged and discussed in many cases in Australia and elsewhere. Various reasons have been advanced to explain it. Despite the submission to the contrary made by Mr Morrison SC, who appeared for the appellant, the decision in Bradburn stands. The only question is the extent to which it applies beyond its particular facts.

In The National Insurance Company of New Zealand v Espagne [1961] HCA 15; (1960) 105 CLR 569 at 573, the High Court discussed the principles on which pensions and other benefits received by the victim of a tort were to be taken into consideration in assessing damages. Dixon CJ spoke of an additional distinguishing characteristic which the advantages which accrue to the injured plaintiff, whether as a result of legislation or of contract or of benevolence, may have:

".....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. But for the reason given it does not follow that the negligent parties can treat the insurance as operating in relief of their liability. It was effected by the money of the plaintiff for his own benefit in the event of an accident, a benefit both independent of and cumulative of upon whatever right of redress against others might arise out of the circumstances of the accident."

Dixon CJ said at 574 that he agreed generally in the judgment of Windeyer J. At 588 Windeyer J said:

"The decision in Bradburn v Great Western Railway Co has stood too long and on too firm a foundation of policy and justice to be unsettled by demands for logical consistency. It does not depend upon general doctrines of subrogation; for accident policies are not contracts of indemnity and subrogation does not apply ...... although an accident policy may require that the insured in the interests of the insurer shall prosecute any claim for damages that he may have. How far then is the decision in Bradburn's case to be extended by analogy and what general principle is to be extracted from it? That is the question as I see it."

His Honour proceeded to examine a variety of formulae to explain and define the cases in which the "rule in Bradburn's Case" had been applied. At 598 Windeyer J said that the distinction made between contributory and non-contributory pension schemes that are incidents of contracts of service seemed unsound "for the right to have a pension or the chance of having a pension from his employer is part of what a servant earns by his labour." His Honour continued:

"The most satisfying of the reasons that have been given for refusing to diminish damages because of voluntary gifts is that they are given for the benefit of the sufferer and not for the benefit of the wrongdoer. That, it may be said, cuts across the principle that damages for negligence are compensatory and not punitive. It may be that, at all events since Bradburn's case, there are some limits to strictly logical applications of that principle. But I do not think the two propositions necessarily come into collision."

At 599-600 his Honour considered what emerged from his review of the law and asked whether there was any governing principle. He said:

"So far as any rules can be extracted, I think they may be stated, generally speaking, as follows: 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."

From the last passage which I have quoted Mr Morrison drew particular comfort. He submitted it limited non-deduction to benefits received or to be received from sources "other than the defendant". In addition, Mr Morrison stressed that in the present case, although the plaintiff had contributed to the Fund, the greater part of the benefit flowed from contributions made by the appellant. To take account of this on the appeal the appellant asked for a deduction only in respect of an amount which represented its contribution to the Fund.

On the same day that it decided The National Insurance Company of New Zealand Limited v Espagne, the High Court constituted by the same Justices, decided Paff v Speed [1961] HCA 14; (1961) 105 CLR 549. In that case, a former member of the New South Wales Police Force, who was compulsorily retired because of physical unfitness, brought an action for damages for personal injuries sustained by him, whilst a member of the force, as the result of the alleged negligent use of a motor vehicle. In all material respects the Superannuation Act was then in the same terms as those which applied to the plaintiff in this case. The plaintiff led evidence about the pension under the Superannuation Act which he might have expected to have received if he had remained in the force until the age of sixty. He relied upon this as part of the advantage of being a policeman which he said he had lost. Evidence was admitted that he was in receipt of a pension under the Act. On appeal, against the decision of the Full Court of the Supreme Court of New South Wales ordering a new trial on the basis that the verdict was excessive, the High Court held that having regard to the way in which the plaintiff had put his case the evidence was admissible. However, at 556, McTiernan J said:

"In my opinion money which has been paid to an injured party or to which he is entitled because he was injured cannot be availed of by the tortfeasor in the contest between him and the injured party as to the quantum of damages, unless the tortfeasor paid or made himself liable to pay such money in discharge of his liability to the injured party for the personal injury. The tortfeasor would seldom if ever be in that situation. He is certainly not as far as the pension in the present case is concerned."

"My examination of the provisions of the Act satisfies me that a pension granted thereunder to a member of the Police Force boarded out by reason of incapacity resulting from injuries received through the negligence of another ought not to be used to mitigate the damages payable by that other on account of the injuries caused ....."

In Manser v Spry [1994] HCA 50; (1994) 181 CLR 428 at 436, the High Court said that to ascertain whether a statutory benefit possesses the "distinguishing characteristic" that is to be enjoyed independently of, and cumulatively upon, the right to damages, the Court must endeavour to discover the intention of the legislature.

In her reasons for judgment the trial Judge quoted part of the passage from the judgment which followed at 436-7:

"There are three possible indicia of a relevant legislative intention: the financial source of the benefit, the presence of a provision which requires a repayment of a statutory benefit out of the damages awarded or paid and the nature of the benefit. If a scheme for provision of a benefit be funded by contributions made by employers and employee-beneficiaries as a kind of insurance against misfortune, the principle in Bradburn v Great Western Railway Co indicates that the benefit is to be enjoyed by a beneficiary who encounters the misfortune without reduction of the damages to which he or she is otherwise entitled. That view has been taken of benefits paid under contributory pension schemes created under statute: Parry v Cleaver [1969] UKHL 2; [1970] AC 1; Smoker v London Fire and Civil Defence Authority [1991] 2 AC 502; and see Redding v Lee (1983) 151 CLR at 138. If statute provides that a particular benefit is to be repaid out of damages, there is a clear indication that that benefit is not to go in reduction of the tortfeasor's liability. When such a provision relates only to one or some of the benefits provided under the statute, the non-repayable character of the other benefits may imply, according to the context, either that the legislature intended that the receipt and retention of the benefit should not be taken into account in the assessment of damages or that it had no such intention. see Hood Constructions Pty Limited v Nicholas (1987) 9 NSWLR 60 at 72. Whether an implication of such a legislative intention should be drawn depends largely on the nature of the benefit. Gibbs CJ said in Redding v Lee at 125:

`If the statute expressly provides (as some statutes relating to workers' compensation have done) that a plaintiff who has recovered damages shall repay the amount of the benefit it will be clear that the receipt of the benefit must be disregarded in the assessment. In many cases, however, the statute under which the benefit is provided will give no assistance of this kind. Then it will be necessary to consider closely the nature of the benefit itself. The conclusion that the benefit is intended for the plaintiff personally and not in reduction of the damages may more readily be drawn when it is seen that the receipt of the benefit is not dependent on the loss of wages or earning capacity ..... for which the plaintiff claims damages (cf Parry v Cleaver at 42, per Lord Wilberforce) and is not intended to replace the lost wages or remedy the loss of earning capacity.'

Finally, if all indicia of intent fail, the `settled principle governing the assessment of compensatory damages' which the majority stated in Haines v Bendall must be applied."

The Court cited, without any sign of disapproval, the decision of the House of Lords in Smoker v London Fire and Civil Defence Authority, a case which the trial Judge said was one of a number which expressly rejected the appellant's propositions.

Mr Morrison sought to draw comfort from what the Court said in Manser v Spry. With due respect, I think it provides him with none. The benefit the plaintiff received from the Fund was funded by contributions made by his employer and himself as an insurance against misfortune, namely, injury in the course of his employment. Accordingly, the principle in Bradburn indicates that the benefit is to be enjoyed by him without reduction of the damages to which he is otherwise entitled as compensation for the consequence of his employer's negligence.

In the passage quoted from Redding v Lee at 125, Gibbs CJ said that the conclusion that the benefit was intended for the plaintiff personally and not in reduction of damages might more readily be drawn when it is seen that the receipt of the benefit is not dependent on the loss of wages or earning capacity for which the plaintiff claims damages and is not intended to replace the lost wages or remedy the loss of earning capacity.

Under s10 of the Superannuation Act the primary condition of entitlement was that the plaintiff be discharged after being certified to be incapable, from a specified infirmity of body or mind caused by his being hurt on duty, of discharging the duties of his office. In short, at least directly, the entitlement was based upon the member's discharge from the force by reason of incapacity the result of a particular infirmity itself the result of a work injury and was unrelated at that stage to his earning capacity outside the police force. In this particular case, however, the plaintiff received an additional amount under subs (1A) (b) and (c), in one case commensurate "with his incapacity for work outside the police force" and in the other on the basis that he was totally incapacitated for work outside the police force and, in the opinion of the Board, he was hurt on duty because he was required to be exposed to risks to which members of the general work force would normally not be required to be exposed in the course of their employment. The extra benefit under (b) was related to incapacity for work. The extra benefit under (c) was not simply conditioned upon total incapacity for work but also upon the particular risks to which he was exposed when injured. It did not equate with damages for loss of earning capacity but was an allowance for total incapacity and the existence of a particular danger to which he was exposed when injured. I do not think that these additional benefits, related though they were to a greater or lesser extent to work incapacity, override the essential characteristic of the benefit the plaintiff received as one based on discharge from the police force for incapacity to discharge the duties of his office.

Finally, Mr Morrison submitted that the present case was distinguishable because the appellant was liable to pay to the plaintiff both damages for past and future economic loss as the result of his work injury and an annual allowance because the plaintiff was "hurt on duty". This was said to be double dipping. Mr Morrison called in aid that offence to one's sense of justice of which Lord Bridge spoke in Hussain v New Taplow Paper Mills Limited [1988] AC 514 at 532. It is to be observed that in that case the injured plaintiff was paid amounts indistinguishable in character from sick pay in lieu of wages under an insurance scheme, to the premiums of which he had made no contribution; compare Graham v Baker [1961] HCA 48; (1961) 106 CLR 340 at 345-6 and Redding v Lee at 139.

In Parry v Cleaver a majority in the House of Lords held that a police pension should be ignored in assessing the plaintiff's financial loss in a claim for damages for negligence. The majority members of the House advanced various reasons for reaching this conclusion which, despite reference to the judgments in Espagne, may not accord with the High Court's approach to the principle behind Bradburn's case. However, the result would seem to be unimpeachable and the majority judgments have been referred to by the High Court without apparent dissent; see for example Manser v Spry at 436-7.

In Smoker v London Fire and Civil Defence Authority the plaintiff was employed as a fireman. By his terms of employment he was a member of a pension scheme to which he contributed part of his wages. His employer contributed twice as much. While on duty he was disabled in an accident caused by his employer's negligence or breach of statutory duty. The question arose as to whether his claim for economic loss should be adjusted to take account of an amount received by way of ill health pension, injury gratuity and injury pension. In a second appeal heard at the same time the facts were not relevantly distinguishable. At 543-4 Lord Templeman said:

"In the present case counsel for the defendants sought to distinguish the decision of this House in Parry v Cleaver on the ground that the defendants are in the triple position of employers, tortfeasors and insurers. In my opinion this makes no difference to the principle that the plaintiff has bought his pension which is, in the words of Lord Reid, at page 16 `the fruit, through insurance, of all the money which was set aside in the past in respect of his past work.' The fruit cannot be appropriated by the tortfeasor."

Lord Lowry at 546-7 (the other members of the House agreed with Lord Templeman) referred to a judgment of MacDermott LJ, sitting as a trial judge, in Guy v Police Authority for Northern Island (unreported) 14 April 1989. Of that case his Lordship said:

"The defendant claimed that, against total damages assessed at [sterling]176,765, the plaintiff must give credit for the value of the ill-health and injury pensions in obedience to the principle that damages are intended to be compensatory, contended that neither of the recognised exceptions (typified by Bradburn v Great Western Railway Co and Redpath v Belfast and County Down Railway [1947] NI 167) applied and submitted that Parry v Cleaver should be distinguished on the ground that the defendant was the employer.

The trial judge, en route to rejecting these arguments, considered the effect on Parry v Cleaver of Hussain v New Taplow Paper Mills Limited and Hodgson v Trapp [1988] UKHL 9; [1989] AC 807, from which he cited a passage in the speech of my noble and learned friend, Lord Bridge of Harwich, at pp 819E-820D. Having referred to Parry v Cleaver, he continued:

`Having regard to the clearly expressed judicial hostility to `double recovery' as is apparent in the two recent cases, I have looked long and carefully at them to see if, albeit indirectly, Parry v Cleaver has been impugned or undermined. In my judgment it has survived.'

MacDermott LJ expressly rejected the distinction sought to be made on the ground that the employer and the tortfeasor were the same. Having referred to National Insurance Co of New Zealand Ltd v Espagne, he said: `For my part, I cannot see how any rational principle for the assessing of damages can depend on the identity of the defendant.' In conclusion MacDermott LJ said:

`It is easy to stigmatise such a result as unjust, unreasonable or contrary to public policy. But in my judgment it is the legal result that flows from Parry v Cleaver. I also consider it to be a fair result for it arises from the plaintiff's own providence in participating albeit compulsorily in an `insurance' scheme which aimed to give him protection on all kinds of `rainy days.' And it must not be forgotten that the plaintiff has paid out 11 per cent per annum of his wages for this cover. If Parliament considers this legal result to be anomalous or unjust it may choose to require all benefits to be brought into account. But if it does fairness requires that credit should be given for premiums paid. The view which was suggested by Professor A L Goodhart in an article in 83 LQR 492 is of interest. Unless and until legislation requires benefits such as those being enjoyed by the plaintiff to be taken into account no deduction can in law be made - at least until Parry v Cleaver is overruled or considered to be distinguishable, which I do not consider it to be.'

It is satisfactory to find that the reasoning of MacDermott LJ coincides so closely with that of the admirable judgment of Auld J delivered on 12 January 1990 as well as with that which, I understand, commends itself to your Lordships."

Mr Morrison submitted that what Lord Templeman said was wrong and that we should not follow it. Mr Morrison carefully analysed the decisions to which I have referred and others to submit that a distinction has been drawn, albeit obliquely, between payments of benefits made by a defendant and made by a third party. An example is in the passage in the judgment of Windeyer J in Espagne which I have quoted. His Honour spoke of benefits that a plaintiff had received or is to receive from any source "other than the defendant" as not to be regarded as mitigating his loss.

However, none of the cases to which reference was made required this particular problem to be addressed. Notably in Espagne, Dixon CJ at 571-2 said that he could find little guidance in the terms which many of the cases used in designating or describing the matters or the considerations which were to be excluded or the relation of the cause of action to them. He added that in the context terms like "res inter alios acta" as a description of the advantage to be disregarded told him nothing.

However, the precise point was considered by Kelly J in the Supreme Court of the Australian Capital Territory in Gee v The Commonwealth of Australia (unreported), 13 September 1982. At 28 Kelly J after referring to Grego v Mount Isa Mines Limited (1972) QWN 33, where Lucas J (as he then was) held that, where a pension was payable by a tortfeasor employer, it was not to be taken into account in reduction of the plaintiff employee's damages, said:

"It is logically difficult to see why a plaintiff who sues a tortfeasor not his employer and is in receipt of a pension from his employer on account of the disability suffered as a result of the tortfeasor's action should be in any different position from an employee who receives from his employer a pension, previously contracted for, as a result of a disability caused by his employer's tort."

His Honour regarded Lucas J's reasoning to that result as convincing. Thus the decision of the House of Lords in Smoker v London Fire Authority does not stand outside the tendency of Australian authority. Ultimately, one comes back to the indicia set out in Manser v Spry to which the trial Judge referred. With due respect to the careful argument which Mr Morrison put to us, I do not see how it can be suggested that these indicia point any less to the result that her Honour reached because the defendant was "in the triple position of employer(s), tortfeasor(s) and insurer(s)".

Under this head of appeal the question was not whether the s10 "hurt on duty" allowance received by the plaintiff should be deducted from the amount of his damages, but whether its receipt should be taken into account in deciding what interest should be awarded on the amount assessed for past economic loss. The appellant relied upon the High Court's decision in Batchelor v Burke [1981] HCA 30; (1981) 148 CLR 448. In that case, a plaintiff in an action for damages for personal injuries caused by the appellant's negligence, recovered damages for loss of earning capacity which included the estimated amount of wages lost up to the date of trial. The plaintiff had received at least that sum from his employer, who was not the defendant, as workers' compensation in respect of the injuries. The Judge allowed interest from the date of the writ but only on half of the amount on the ground that if the plaintiff had been able to continue to work he would have received his salary periodically and not in a lump sum. On appeal the South Australian Full Court held that it was right to allow interest on the loss of earnings undiminished by the amount received as workers compensation.

Gibbs CJ, with whose judgment three other members of the Court agreed, after reviewing the terms of the South Australian compensation legislation, pointed out at 454 that when a workman was paid damages by a third party he had to repay to the employer any compensation he had received to the extent that it did not exceed the amount of the damages. The intention of the legislation was to provide compensation to take the place of the earnings lost by the worker as a result of an injury suffered in certain circumstances, and to enable the employer who had paid the compensation to be recouped if the injured workman obtained damages. The fact that the lost earnings had been replaced by compensation paid under a statutory scheme whose very purpose was to provide money to take the place of the lost wages should be regarded when the court came to consider whether a plaintiff had suffered any practical detriment by the loss of the earnings.

"In those circumstances, when the plaintiff who has lost earnings has received compensation instead, he has not been out of pocket by reason of the failure to pay him damages, even though the compensation is repayable when the damages have been received. ..........

In accordance with the principle which has been accepted in this Court and in the Privy Council it would therefore not be right to award interest in respect of that portion of the award which represents damages for earnings lost before trial but replaced by payment of workers compensation ..... The interest is awarded to compensate the plaintiff for the detriment that he has suffered by being kept out of his money, and not to punish the defendant for having been dilatory in settling the plaintiff's claim."

Mr Morrison relied upon this authority to support his argument that in the present case the plaintiff was not out of pocket because he had to wait for judgment to receive damages for past economic loss since he had received annual payments under s10 of the Superannuation Act.

With respect, this argument overlooks the distinction already drawn between the amount received by way of damages for past economic loss and the amounts received under s10 of the Superannuation Act. The result of the decision of the earlier part of this appeal is that the plaintiff was entitled to both. It cannot be said, as the Chief Justice said in Batchelor v Burke, that the damages for earnings lost before trial were replaced by payment of some other amount such as workers compensation, which the plaintiff in that case was bound to repay to the employer when he was paid the damages. In the present case, the plaintiff was out of pocket by being kept out of his money and is entitled to compensation by way of interest for this.

Regulation (Superannuation) Act 1906

Compensation Act 1987

Regulation (Superannuation) Act 1906

Compensation Act 1987

State of New South Wales v Davies Matter No Ca 40747/96 [1998] NSWSC 51

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (104 paragraphs)

State of New South Wales v Davies Matter No Ca 40747/96 [1998] NSWSC 51 (19 March 1998)

Parties

Legislation Cited (4)

Cases Cited (8)