TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)

Damages - Measure and remoteness of damages in actions for tort - Measure of damages - Personal injuries - Method of assessment - Diminution of future earning capacity - Whether award of damages was excessive - Factors to be taken into account.

Malec v J C Hutton Proprietary Limited [1990] HCA 20; (1990) 169 CLR 638; Medlin v The State Government Insurance Commission (1994 - 1995) 182 CLR at 1, referred to.

Judgment Number: [2000] TASSC 126

1 I agree with the reasons and conclusions of Slicer J in this matter and have nothing to add. I would dismiss the appeal.

2 The appellant challenges an award of damages for $154,014 made following an accident which occurred whilst the respondent was employed as a utility officer at the Police Academy Rokeby. Liability was not disputed and the appellant at trial, through counsel, conceded that the respondent was an accurate and honest witness. The challenge is made to the component of $76,500 awarded for diminution of future earning capacity.

3 The accident occurred in December 1995 when the respondent was employed on a renewable contract basis. In June 1999, prior to trial, he was appointed, subject to a six months' probationary period, a permanent member of the State Service. In relation to the capacity of the respondent (an assessment which included pre-morbid personality, alcohol consumption, weight gain and residual physical disability) to complete the probationary period and continue in employment, the learned primary judge concluded in Clark v State of Tasmania [1999] TASSC 111 at pars40 - 46:

"... it is more probable than not that the plaintiff's present disability will persist indefinitely. There is a possibility that he will find the will, or obtain assistance to find the will, to stop drinking, lose weight and take a more positive view of his life, but the probable indications on the evidence are that the downward slide upon which the plaintiff finds himself will continue.

... the State Service is willing to make the plaintiff a permanent employee in the knowledge that he suffers from back pain, will need days off because of this condition and is only able to perform light duties."

4 The claim for loss of future earnings was made on four bases:

1 Risk of loss of regular employment and inability to find alternate employment due to the injury.

2 Loss of part-time work with a security firm claimed on a calculation of four to five hours per week.

3 Loss of income derived from casual work as a barman at the Academy.

5 The learned primary judge quantified the loss of future work as a security guard in the amount of $21,750, and allowed the last two items in a general but minor way. He awarded damages for lost earning capacity in the sum of $90,000, reduced for contingencies by 15 per cent to $76,500.

6 The appellant claims error on the following grounds:

"1 The Learned Trial Judge erred in law and in fact in that the award of damages was excessive insofar as it included $76,500.00 for diminution of earning capacity when such an award was:-

(d) contrary to or alternatively excessive in light of His Honour's express findings that:-

(i) the risk of the diminution of the plaintiff's earning capacity being productive of loss of income from the State Service was remote;

(ii) the plaintiff's loss of part-time work would be productive of a loss of $21,750.00 before discount (which figure itself was too high);

(iii) it was unlikely the plaintiff would have earned income as a barman in any event;

(iv) the plaintiff's loss of income due to his injuries from the date of his accident to trial was $5,100.00 (which figure itself was too high).

2 That His Honour the Trial Judge erred in law in that he failed to give any, or any adequate, reasons for awarding $76,500.00 for diminution of earning capacity.

3 That His Honour erred in law and in fact in failing to reduce the amount awarded earnings for diminution of earning capacity by more than 15% for the contingencies of life."

7 It is convenient to consider this ground first since any analysis of the reasoning process which resulted in the assessment will assist in the resolution of the remaining grounds. The Notice of Appeal seeks the following orders:

"1.2 That in lieu thereof there be judgment for the respondent against the appellant for $72,414.31 together with costs to be taxed.

1.3 That in the alternative to 1.2 there be judgment for the respondent against the appellant for such damages, less than $154,014.31, as assessed by this Honourable Court."

8 Those orders sought, illustrate the problem central to any assessment of damages. The appellant seeks reduction by the whole amount or some other unspecified sum. It does not identify an amount, which on the appellant's analysis, could be justified. The ground of appeal adds nothing to the critique. It asserts either that no reasons whatever were given, or that in some unspecified way they were inadequate. The written submissions refer to a statement of legal requirement (Pettitt v Dunkley [1971] 1 NSWLR 376) and make reference only to ground 1(d)(i), namely the risk to continued full-time employment. The material advanced by the appellant discloses a complaint but not a reasoning process in support of that complaint. Justification by the appellant on the basis that the absence of reasons does not permit a detailed analysis highlights the problems associated with any assessment of future risk and consequence. Future economic loss or risk of loss in many cases is incapable of quantification according to a mathematical formula (Malec v J C Hutton Proprietary Limited [1990] HCA 20; (1990) 169 CLR 638). There may exist certain points of reference, age, life expectancy, existing age rates and potential superannuation entitlements. But they are surrounded by variable factors such as perseverance, vagaries of health and promotion and future needs. Any analysis of the reasoning process which results in a quantification of an award requires examination of the whole of the judgment rather than discovery of the absence of a precise mathematical formula. The requirement to give reasons for judgment is as stated by Jordan CJ in Carlson v King (1947) 64 WN (NSW) 65 at 66:

"It has long been established that it is the duty of a Court of first instance, from which an appeal lies to a higher Court, to make, or cause to be made, a note of everything necessary to enable the case to be laid properly and sufficiently before the appellate Court if there should be an appeal. This includes not only the evidence, and the decision arrived at, but also the reasons for arriving at the decision. The duty is incumbent, not only upon magistrates, Ex parte Powter ; Re Powter, and District Courts, but also upon this Court, from which an appeal lies to the High Court and the Privy Council: Ex parte Reid ; Re Lynch."

The issue is whether an examination of the whole of the judgment reveals the justifiable conclusion reached by appropriate judicial methodology. To that extent the process differs from that of a jury award. Asprey JA stated in Pettitt v Dunkley (supra) at 383:

" ... where in a trial without a jury there are real and relevant issues of fact which are necessarily posed for judicial decision, or where there are substantial principles of law relevant to the determination of the case dependent for their application upon findings of fact in contention between the parties, and the mere recording of a verdict for one side or the other leaves an appellate tribunal in doubt as to how those various factual issues or principles have been resolved, then, in the absences of some strong compelling reason, the case is such that the judge's findings of fact and his reasons are essential for the purpose of enabling a proper understanding of the basis upon which the verdict entered has been reached, and the judge has a duty, as part of the exercise of his judicial office, to state the findings and the reasons for his decision adequately for that purpose. If he decides in such a case not to do so, he has made an error in that he has not properly fulfilled the function which the law calls upon him as a judicial person to exercise and such a decision on his part constitutes an error of law."

9 The respondent suffered from continuing back pain following the twisting and pinning of his leg by a bucket fitted to a trailer. The learned primary judge accepted that biochemical changes in the nerves caused pain messages to be sent to the brain despite the absence of physical cause. The respondent had lost time from work, was taking sleeping, tranquillising and anti-inflammatory drugs and using a powerful analgesic. There had been episodic occurrences of temporary but total incapacity. His condition was compounded by depression, weight increase and general unfitness, inappropriate use of alcohol and general limitation of movement. In an opinion shared by a specialist colleague, the respondent's treating physician considered:

" ... David's back pain to be chronic. I consider it to be long-lived and likely to be fairly long-lived. I consider that unless something extremely unusual happens, like a miracle, he will be prone to frequent relapses of his pain with exacerbations to such a level that normal daily functioning will be impossible."

10 The conclusion of the learned primary judge that the appellant's tortious conduct "had diminished the plaintiff's earning capacity" is not the subject of challenge. The duties of the respondent involved the maintenance of the grounds of the Academy. He was required to perform light duties and had an understanding with his immediate employer. However, when the respondent commenced his employment, he was but one of a number of utility officers, reduced to two at the time of trial. Whilst his immediate employer could be described as "tolerant and caring" he remains an employee of the State of Tasmania. He is susceptible to redundancy or retirement because of his medical condition and/or demand for a more productive worker. He was aged 45 at the date of trial and lacked advanced qualifications. On the basis of that material, the learned primary judge was entitled to make the following findings, at 46:

"The plaintiff's employer is so tolerant and caring that the risk of the diminution in his earning capacity being productive of loss of income from the State Service is remote. However, although the risk is remote, if it becomes a reality, the loss will be substantial for the plaintiff is unlikely to find alternative employment having regard to his age, limited skills, experience and disabilities. Upon this basis, damages for diminution of earning capacity cannot be assessed by mathematical calculation. It is a matter of judgment, bearing in mind that the plaintiff is now 45 years of age and is presently earning a nett weekly income of $382. In addition, his employer makes payments in accordance with the superannuation legislation and provides the plaintiff with breakfast and lunch at the Academy free of charge on most week days."

11 The loss of permanent employment, whilst remote, would be catastrophic to the respondent. A lesser risk of greater harm requires proper, not token, compensation. An examination of the other identified components of the award for diminution of future earnings assists in determining the basis and reasonableness of compensation for that risk. The award for loss of income derived from security work, $21,750, was made by reference to a known rate of hourly remuneration, a calculation of hours foregone and a superannuation component over a period of 12 years. In relation to the earnings as a bar attendant, the learned primary judge thought it unlikely that:

" ... the plaintiff would have been employed as a barman even if the accident had not intervened, except on a very few occasions each year."

12 A modest allowance calculated over 12 years with the application of the discount figure of, say, $2,500 would not be unreasonable. But neither would be a slightly different figure. The finding, at par55, in relation to the loss of such pay was that:

"I find that the plaintiff will continue to take days off work from time to time because of "flare-ups" in his back pain. At the date of trial the plaintiff had no entitlement to sick leave as he had used it all up. He will not be entitled to any further sick leave until 15 February 2000 when he will be credited with 44 days. Mr Read submitted that it was reasonable to assume that the plaintiff will require some, if not all, of his future sick leave for illness or injury not related to the accident which is the subject of this action and in consequence, the plaintiff is entitled to receive an award for days off that he will have to take due to exacerbations of his back pain."

"However, the plaintiff's evidence persuades me that there is a risk that in some years, he will use up all his sick leave entitlements and suffer loss of income by reason of days off due to exacerbations of back pain. This claim is a small one to be taken into account in the general assessment of damages for lost earning capacity."

would permit quantification of an amount in the vicinity of $2,000. Again it could vary without being wrong.

13 Accepting for the purpose of analysis the above figures, the amount remaining of $63,000 is attributable to loss of permanent employment. The claim of the respondent was based upon a net income of $372 per week, projected to age 65. No claim was made on the basis of promotion or anticipated higher remuneration. The formula, discounted, produces a figure of $212,747. The respondent's contribution to a benefit fund amounted to $32.50 per week which, discounted and projected to age 65, results in the amount of $18,587. Thus the notional award of between $60,000 and $65,000 must be compared with a maximum claim of $231,000, a percentage figure of between 26 per cent and 28 per cent. This calculation does not take into account the employer's contribution to superannuation or the provision of a meal, the effect of which would be to lessen the percentage figure since the notional income would be higher. This differs from the percentage figures advanced on behalf of the appellant. An alternate basis for examination would be to consider the amount assessed of $90,000 in terms of 20 years' loss of income which would equate with a figure of $160.87 per week, which in turn represents a percentage figure of 43 per cent of the actual anticipated salary. This sum was reduced for contingency by a further 15 per cent, making the actual award, in percentage terms, far less. The respondent might not agree with the conclusion and might challenge probability (Malec v J C Hutton Proprietary Limited (supra)), but the reasoning process is susceptible to examination and challenge. The conclusion is not such as to preclude a basis for review.

14 The learned primary judge was engaged in the assessment of future loss or its potential. That process involved a degree of speculation. The reasoning process and disclosure was in accordance with the principles stated by Brennan and Dawson JJ in their joint judgment in Malec v J C Hutton Proprietary Limited (supra) when they said, at 639 - 640:

"By contrast earning capacity can be assessed only upon the hypothesis that the plaintiff had not been tortiously injured: what would he have been able to earn if he had not been tortiously injured? To answer that question, the court must speculate to some extent. As the hypothesis is false - for the plaintiff has been injured - the ascertainment of earning capacity involves an evaluation of possibilities, not establishing a fact as a matter of history. Hypothetical situations of the past are analogous to future possibilities; in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past."

15 The method used by the learned primary judge accords with permitted judicial methodology. The factual material was analysed and findings permitted by the evidence made.

Award excessive and against the weight of evidence

16 The respondent had been employed in a number of unskilled or semi-skilled positions. He had been active in sport and prior to the accident had "enjoyed good health and sports". He was suited for outdoor and/or physical work. He had suffered significant impairment compounded by psychological effects, which in turn impacted on physical capacity and well being. The component of the award attributable to future employment was (dependent on age of retirement) based on a retained capacity for continued work of between 65 - 70 per cent. Such was permitted by the evidence, much of which was not challenged at trial. Whilst he had secure employment within the State Service, the loss of that employment would be catastrophic.

17 The award represented an allowance for loss of future earning capacity (Medlin v The State Government Insurance Commission (1994 - 1995) 182 CLR at 1). That capacity had been reduced and its loss could be productive of financial loss. There were a number of factors which impacted on capacity and made the prospect of future loss of secure employment a real possibility. Those factors included:

1 The respondent was employed, as of the date of trial, on light duties and had been for some time. He was not able to undertake the full range of his duties. Any reorganisation within his workplace or change of policy made him vulnerable to redundancy or termination.

2 The episodic nature of his back injury alone made him susceptible to future injury rendering him unfit to continue in employment.

3 The medical evidence supported the conclusion that his physical condition would not improve.

4 The respondent had shown that, as of the date of trial, he was unable to work in the security industry.

5 The presence of psychological sequela manifested in depression, lack of motivation, anger and alcohol consumption increased the risk of loss of employment.

6 The limited qualifications possessed by the respondent, and the limited scope of alternative future employment (Dunn v Unwin [1963] ALR 280).

18 The factors were cogent and required compensation for future risk. The employer might well have been understanding of the problems associated with the capacity and conditions of the respondent, but it was subject to policy decisions and guidelines in relation to future employment of a person with limited capacity and had no control over the future health of its employee. There remained a real risk that the respondent would suffer loss of employment and his reduced capacity would inhibit future prospects. There remained a real risk the episodic nature of the condition might render him unfit for future work. He was entitled to be compensated for the risk of the eventuality.

19 The calculations made in respect of the loss of employment as a security operator were permitted on the evidence, in particular that given by the prospective employer, Dennis O'Day, remained unaffected by cross-examination. It was not of itself, as claimed by the appellant, "too high".

20 The calculation had been reduced on the basis that such employment would not have lasted for the full working life of the respondent. The reduction for contingencies amounted to 40 per cent of the claim. A similar conclusion is reached in relation to the claim for loss of "bar work".

21 The allowance for anticipated loss of sick leave entitlement was permitted by authority (Graham v Baker [1961] HCA 48; (1961) 106 CLR 340). The amount awarded was, by implication, modest and was but a component of the general award.

22 It is for the appellant to show that the whole of the judgment was excessive (Wilson v Peisley (1976) 50 ALJR 207; The Motor Accidents Insurance Board v Richards A92/1991), and examination of the components does not necessarily indicate error. As Mason J said in Wilson (supra) at 214:

"The settled rule, then, is that an appellate court will not disturb a primary judge's award of damages for personal injury unless it is convinced that he has acted on a wrong principle of law or that he has misapprehended the facts or that the amount of damages awarded is so inordinately low or so inordinately high as to be a wholly erroneous estimate of the damage suffered."

23 In the circumstances of this case, neither the components or their sum disclose that the award was manifestly excessive. The findings made by the learned primary judge were permitted by the evidence and no error has been shown.

24 The learned primary judge had, in part, made deductions for contingencies in his primary findings. He had reduced the anticipated period of employment as a security operative from 20 years to 12. He had taken into account a reduction in the number of social functions expected to he held at the Academy. He had described the loss of sick pay entitlements as "small". He had taken into account the contribution of the employer of superannuation and meals and, by inference, their loss in the event of termination of employment. The effect of general health, alcohol consumption and nature of the injury related to the accident had likewise been taken into account in the conclusion that the risk of loss of future employment was remote. Those factors were secondary to the primary disability and their impact taken into account in the award. It is to that already reduced award made on an amount of 65 - 70 per cent retained capacity (depending on the age of retirement) that the contingency deduction ought be made. It provided for the ordinary contingencies of life, not those already taken into account. The calculation of a 15 per cent deduction for contingencies is not outside of the permitted judicial method. It might be that a figure of 20 per cent would not be susceptible to challenge by the respondent, but the appellate process is designed to correct error not re-determine the original case.

26 I have had the advantage of reading the Reasons for Judgment prepared by Slicer J and agree with them. The appeal should be dismissed.