WALL AND LAMBE v WALL No. SCGRG-98-1219 Judgment No. S7017 [1998] SASC 7017

Supreme Court of SA|1998-12-23|Before: Wicks JJ, Lander J, Prior J

On Appeal from DISTRICT COURT (HIS HONOUR JUDGE WILSON)

PRIOR J. I agree with the orders proposed by Lander J for the reasons given by him.

The respondent was born on 19 September 1941 and was fifty-two at the time of the accident. At the time that the matter was determined by the District Court Judge he was one month short of his fifty-seventh birthday.

The respondent is married with a wife and two adult children. Immediately before the accident he was employed as a social worker with the Department for Family and Community Services having joined that department in 1971. Before that time he had been a minister in the Methodist Church for a period of about seven years.

Not long before the accident, the department in which the respondent was employed was restructured. The result of the restructure was that the respondent, who had previously worked as a supervisor, was relegated to a position as a hands on social worker. He did not apply for the position of supervisor on the restructuring of the department but did apply for a job as a senior practitioner. He was unsuccessful.

In his new position as a hands on social worker, he mainly dealt with young children under the age of twelve. Most of those children had been removed from care or from their homes.

"A It was a stressful job, I've always believed that I've coped with that stress as well as anybody else, as well as my colleagues around me. I endeavoured not to take my work home with me, so I didn't write reports at home and I discovered very early in my time at Noarlunga that social work at Noarlunga was very much a nine to five operation, whereas in the country it was much more of a 24 hour service, because there were no alternatives. In the city Crisis Care provided after hours service for the department and the office shut at 5 and that was it, so in that regard the city appointment was less intrusive in one's family life. It did make some changes when I became a social worker. One of the first changes I noticed was that I no longer knew what was happening in the office. As a senior I was part of the management team and you had an overview of what was going on. Being one of the ranks it was incredible how little you knew about what was happening. That was a change I noticed, but the other obvious change was that instead of directing what a team of other social workers was doing you were doing it yourself, so you would walk out of the building with a baby's carry basket under your arm, heading for a car to go out and take a child on an access visit. It involved that hands on change."

In respect of his pre-accident circumstances, the learned District Court Judge found (AB 371):

"Before the accident the plaintiff found his occupation to be difficult and stressful, particularly following some restructuring in the Department as a result of which he found himself doing less work of a supervising nature and more hands on case work. However, he did cope with his work and he was in a relatively secure position, even though it was not as satisfying to him as it had been previously. His work made him vulnerable to the development of a psychiatric condition such as the one that did develop."

On my reading of the evidence there can be no quarrel whatsoever with those findings of the learned District Court Judge.

The accident occurred when the respondent was a passenger in a motor vehicle driven by his wife. Their vehicle collided head on with a vehicle being driven by the second appellant. At the time of the collision the respondent was looking at a piece of paper. He remembers looking up and seeing the other car coming straight towards the car in which he was travelling. He remembers the collision and thinking that they would not walk away from that. After the cars came to rest he could see that the windscreen was broken, there was glass everywhere, his wife appeared stunned. There was blood on her face and she appeared to be trapped within the car. He was particularly concerned for her well being. She was initially unable to move her legs and her eyes hurt and she appeared to be half unconscious. He could smell petrol and that concerned him more. He was, however, able to get her out of the car. His wife, in fact, suffered only very minor injuries with some minor cuts and a muscular injury to her shoulder.

The respondent also only suffered relatively minor physical injuries. Later that day he was aware of pain in the lower back and stiff shoulders and, as he described it, "that was the extent of my injuries". (AB 23)

He accompanied his wife to the Noarlunga Hospital but she was not admitted and they returned home that day. He took the rest of the week off because he was feeling a bit stiff and sore and confused. He returned to work a week later.

When he returned to work he could not settle in his work. He said he was confused and was unable to concentrate. Within a week he decided to take his long service leave and he remained on long service leave until May of that year.

His general practitioner's medical notes were tendered and they showed that the respondent reported to his general practitioner on the day following the accident complaining of lethargy, inability to sleep and some slight lower back pain. Three days later he attended again saying that the back pain had eased off and the pain had gone but there was still some stiffness. Again he complained of inability to concentrate and sleep. His general practitioner apparently spoke to him about the psychological impact of the accident upon the respondent and advised him that he should be better within a few days. At that stage the respondent advised his general practitioner that his wife was well except for her sore shoulder.

The learned District Court Judge found that there was evidence that the respondent's psychological injury began to develop within a few days of the accident. I think that is so and I think the general practitioner's case notes confirm that.

The respondent was off work on long service leave until May 1994 when he returned to work. His second return to work was also unsuccessful. He remained at work about a week or ten days but felt that he could not go on and could not do the work. He was not only "stressed out" at work, as he put it, he was also "stressed out" at home. He said he was told by his supervisor that he should see his doctor and he should not come back until he was well.

He made a claim for worker's compensation benefits including weekly income maintenance which was accepted, and he received worker's compensation payments.

In June 1994, at the request of his general practitioner, he was seen by Dr Shane Ryan, a psychiatrist. In August 1994, Dr Ryan diagnosed the respondent as suffering from post traumatic stress disorder relating to the motor vehicle accident on 14 February 1994. Dr Ryan thought then that the respondent would need a combination of therapy related both to his symptoms of anxiety, his depression and a working through of his intense emotional reaction to the accident. Dr Ryan believed that the nature and extent of the respondent's disability was then quite severe and that that was demonstrated by the unsuccessful attempt to recommence work in May 1994.

"This disability is consistent with a motor vehicle accident but there may be other factors contributing to the disability resulting from the accident. It appears that Mr Wall has been emotionally traumatised by the very demanding nature of his work as a social worker in Family and Community Services combined with his feeling of being devalued by the demotion some three years ago. It is possible that these have increased his susceptibility to this post traumatic response which has occurred."

Dr Ryan did not believe that the respondent would then be able to return to his former duties but that it was possible that he could do other work. In January 1995, the respondent was referred to another psychiatrist, Dr Chris Lloyd who took over his management.

On 28 July 1995, the respondent received a targeted voluntary separation package. The separation package consisted of a minimum payment of eight weeks pay for each year of service with a maximum pay out of 104 weeks pay if the target resigned up to four weeks after an offer was made. In addition to the targeted voluntary separation package, any employee who was a member of the contributory Superannuation Fund and who was then under the age of fifty-five years of age might be entitled to a new superannuation resignation benefit. That benefit, so the offer recites, consists of the employee superannuation contributions plus interest and an employer financed benefit based on 12 per cent of salary as per the Superannuation Act for each year of contributory service of the superannuation scheme up to 30 June 1992.

The superannuation resignation benefit for pension scheme members aged between fifty-five and sixty was a lump sum calculated on the basis that the employee had elected to commute 100 per cent of the pension entitlement. The respondent, at the time that the offer was made to him, was under the age of fifty-five so that the superannuation benefit was in accordance with a resignation benefit.

The respondent was a member of the State Superannuation Scheme which he had joined at the time of the commencement of his employment with the Department, I assume about 1971. He said, in his evidence which was given without objection, that in the event that he had worked through until retirement at age sixty he was entitled to two thirds of his final salary as a pension. He said that in accepting the package, which he did, his superannuation was paid out.

He said that he received two payments in relation to his superannuation, one representing his contributions and the other the employer's contributions. The two payments were $70,907.68 and $72,278.00. In respect of the first sum a tax instalment of $11,353.71 was deducted and in respect of the second payment a tax instalment of $637.16 was deducted.

I have assumed that the first payment represented the employer's superannuation contributions and the second payment represented his contributions. The first was subject to a tax liability of in the order of 15 per cent and the second was almost free of tax.

The targeted voluntary separation package advised the respondent that:

"The employer financed benefit may be "rolled-over" to an Approved Deposit Fund where you make the necessary arrangements with the TVSP Officer in the State Superannuation Office prior to or at the time your resignation takes effect."

I have assumed, and I think it to be the evidence, that the respondent did not attempt to roll over his superannuation entitlements. The respondent was only entitled to obtain his superannuation payments at the age he retired upon the basis that he was retiring from the work force.

However, before the respondent was involved in this accident, his wife had commenced a business distributing advertising material. He said that he became involved in the business after he resigned from the Department. He said that he did not work in the business before that time because he thought that it was inappropriate for him to be working whilst receiving Workcover payments. However, after his resignation, he took the opportunity to help her develop her job in the distribution of pamphlets and magazines. Her business required two persons to make it work. He worked behind the scenes doing paperwork and attending to the stock, carrying out the duties of a storeman and packer. Initially he only worked a few hours a day but subsequently he has worked fairly extensive hours. The respondent now works hard in the business working eight hours a day on average and probably fifty hours a week. He operates a computer for the purpose of the record keeping of the business.

The magazine part of his wife's business developed after he retired from his employment. He said his wife could not do the work by herself. As a result of the accident she will not drive on her own and he said they work together and they make a good team.

Clearly the business has developed over the years and there are now seven persons employed delivering magazines.

His evidence was that he and his wife acted as a partnership. Taxation returns for the financial years ended 1996 and 1997 confirm that the parties represented to the Taxation Department that they were in partnership.

For the year ended 30 June 1996 the partnership made a net income before tax of $10707 and there was a distribution to him of $5354.

The partnership return for the year ended 30 June 1997 is not included in the exhibits but his personal tax return shows that he received a distribution from the partnership of $13956. Presumably the total income of the partnership, after expenses but before distribution, was twice that amount.

The aim of the partnership has been to improve the gross income available to the partnership which has been achieved.

There is no reason to think that the respondent cannot continue to work in the partnership.

Three psychiatrists were called in the trial. Dr Ryan saw the respondent until early 1995 when he was referred to Dr Lloyd. Dr Ryan next saw him in January 1998.

When the respondent was first referred to him Dr Ryan was told:

"He has had long standing problems coping at work but a motor vehicle accident some four months ago seem (sic) to have brought things to a head."

Dr Ryan was of the opinion that between January 1995 and January 1998 there was significant improvement in his condition although he still had some symptoms of post traumatic stress disorder.

Dr Lloyd, in a report dated 7 April 1995, said of the respondent: (AB 248)

"Over the years he has also found that he has become under qualified compared to his younger peers. In the departmental restructuring he found that decisions whether or not to prosecute an individual parent or to remove a child were being taken away from senior practitioners and placed with immediate supervisors. Reapplying for his old position would have meant a far higher level of responsibility. He felt unable to cope with this responsibility, was unable to apply for one of the senior practitioner positions and so faced demotion to a base grade employee. As stated previously he found this process demoralising."

It was Dr Lloyd's opinion that there had been a gradual improvement in his symptoms since he took over management of his condition. In December 1995 Dr Lloyd wrote to Dr Ludlow, his general practitioner, advising him that he had no post traumatic symptoms at that stage.

Dr Lloyd was of the opinion that the respondent did not function well enough to return to his job as a social worker but that the flexibility in the arrangements with his wife allowed him to do the work he was presently doing. Dr Lloyd believed he would continue to improve.

Dr Blakemore, psychiatrist, agreed with that opinion. He believed that Mr Wall would continue to improve and ultimately not suffer any significant symptoms as a result of the accident.

He believed that the respondent was probably heading for a burn out in any event in his employment.

The learned Trial Judge preferred the evidence of Dr Ryan and Dr Lloyd to that of Dr Blakemore but noted the differences, if any, were largely in emphasis, in the mode of expression and in the assessment of the prognosis.

The learned Trial Judge accepted the evidence of the respondent and his witnesses. The respondent's daughter gave evidence but, curiously, not his wife.

The learned Trial Judge specifically found that the accident caused the plaintiff's psychological condition which the medical experts characterised as a post traumatic stress disorder. He also found:

"I am satisfied on the balance of probabilities that the premature termination of the plaintiff's public service appointment was the product of the plaintiff's relative earning capacity."

I think, by that, he means that he was satisfied that the respondent's termination of his public service appointment was, in fact, the product of the post traumatic stress disorder which was, itself, caused by the accident and as a result of which the respondent was entitled to damages for loss of earning capacity caused by that premature separation.

He found that, but for the accident, the respondent would have continued in his employment in the public service and would have worked until the age of sixty. He would then have retired on a full retirement pension for life.

He also found that the plaintiff would continue, as long as circumstances will allow, with his involvement in the partnership business. He said there was no reasonable prospect of the respondent obtaining employment in any other field.

The learned Trial Judge assessed the respondent's damages as follows:

The assessment of the loss of earning capacity was, as I have said, a two stage process. The loss of earning capacity to the date of trial was assessed at the behest of the respondent on the most complicated basis which I set out:

to - see s35A of Wrongs Act 1936 None Recoverable

to (long service leave used up) $8887.54 $11524.30 $8887.54

* (gross figures used, applying Fox v Wood [1981] HCA 41; (1981) 35 ALR 607)

** (applying Clay v Freda (1988) 144 LSJS 274 - see also Mr Stanley's "Summary" and his oral submissions at page 249)

I am not sure why the plaintiff sought an assessment of loss of earning capacity in such a complicated way.

I am not sure why the sum of $32000 being redemption under the Workers Rehabilitation and Compensation Act was brought to account in the assessment of loss of earning capacity.

It is apparent from the learned Trial Judge's calculations that he allowed the actual distribution from the partnership in the financial years ended 1996 and 1997 to be credited against the respondent's actual loss of wages from the Department. That would seem to be a correct approach.

For the first thirty-two weeks in the period 1 July 1997 to 30 June 1998 he allowed the sum of $268.38 per week to be credited against the actual loss of wages. The sum of $268.38 reflects as a weekly sum that which the respondent drew from the partnership during the period 1 July 1996 to 30 June 1997.

For the remainder of the financial year the learned Trial Judge has allowed only $100 per week apparently to reflect the respondent's earnings and therefore exercise of earning capacity to the date of trial.

His Honour has not made it clear in his reasons why he has proceeded upon the basis that the respondent's earnings in the last twenty weeks of the financial year were only $100.00 per week and why that sum represents the value of the respondent's earning capacity over that period. His Honour does not address that matter in his reasons. He does say in his reasons on the topic of future economic loss:

"The residual capacity of the plaintiff is not great; it is a capacity to work in the protected environment of a business such as the partnership business. The plaintiff's income from that business was as at the date of trial reduced to approximately $100 per week gross".

The plaintiff was recalled to give further evidence in relation to his wife's business. His evidence was that the previous night she had learnt that the company for which they distributed magazines had cancelled their distribution agency. He said that would mean a substantial reduction in their gross earnings and a consequential impact upon their net earnings. He said their gross earnings would halve and their earnings after expenses would be in the order of $10000 per annum. Clearly his Honour has accepted that evidence in concluding that he has a residual earning capacity of $100 per week.

In any event, no argument is raised in relation to the assessment of loss of earning capacity to trial. The appellant's notice of appeal only complained in that part of the assessment of damages relating to loss of future earning capacity.

The appellant's notice of appeal was in the following terms:

"AND the appellants seek an order allowing the appeal and in particular Orders as follows: (1) an Order reducing the allowance for damages for future loss of earning capacity; (2) an Order that the Respondent pay the Appellants' costs of the appeal. AND FURTHER the grounds of appeal are as follows: In assessing the Respondent's future loss of earning capacity the learned trial Judge erred in finding that: (1) The Respondent would have worked for the Department for Family and Community Services until reaching 60 years of age: (2) The Respondent would have retired from the Department for Family and Community Services on reaching 60 years of age on a full pension; (3) It was reasonable for the Respondent to accept a Voluntary Separation Package before reaching 60 years of age; (4) He should not take into account the benefits received by the Respondent upon accepting the Voluntary Separation Package. (5) The Respondent retained an earning capacity of only $100.00 per week; (6) The Respondent's loss was $170,000.00."

His Honour, however, did not assess loss of future earning capacity as a single item, although he professed to do so.

In relation to what he called "future economic loss", his Honour said this:

"Future economic loss I have decided that a global approach to the assessment of damages for future loss of earning capacity is called for. Consideration has been given to actuarial calculations merely as a check against gross error. The most important aspects of such an actuarial calculation are as follows: 1. But for the accident the plaintiff was likely to have rejected the offer of a separation package and was likely to have gone on working as a social worker earning from here on approximately $750 per week gross (for a little more than a further 3 years) till aged 60 and then to have retired on a full retirement pension for life. 2. The relevant actuarial multiplier for the present value of an annuity of $1 of net loss for a man aged 57 (the plaintiff will be 57 next month) till aged 60 is 143, and the relevant actuarial multiplier for the present value of an annuity of $1 of net loss for a man aged 60 till death is 564. 3. The residual capacity of the plaintiff is not great; it is a capacity to work in the protected environment of a business such as the partnership business. The plaintiff's income from that business was as at the date of trial reduced to approximately $100 per week gross. 4. The plaintiff's present weekly loss is in the order of $650 per week gross or $500 per week net. 5. A substantial allowance (discounted) for contingencies is appropriate. Contingencies would include the possibility of a decision to retire early in any event, the impact of his other health problems (especially his hip and knee and his hernia problem) and the effect upon him of trends within the wider community to bring about early retirement. The plaintiff became, as a result of the accident, at a disadvantage in the work force and remains so. It was not at all surprising that he decided to accept the separation package and that he continues in the relative security of the partnership business, difficult as that has become for him both in terms of his capacity to function in (and enjoy) it and in terms of the partnership being able to maintain expected income levels. In a sense, the plaintiff is an "odd lot" in the labour market. His actual earning incapacity is (and remains) very significant. I assess his future economic loss, in money terms, at the global sum of $170,000."

It is clear in his Honour's assessment of "future economic loss", which he has later described as "future loss of earning capacity", that he has allowed two components. He has allowed a component for the loss of future earning capacity, in this case for a period of three years from the age of fifty-seven to the age of sixty, and he must have allowed, although he has not clearly said so, a loss flowing from a loss of entitlements to superannuation benefits. I think that is inherent in the paragraph numbered 2 but it is also implicit in the award because otherwise the learned Trial Judge could not have reached a figure of $170000 for "future economic loss".

Neither party quarrelled with an assessment of loss of future earning capacity upon the assumption that the respondent would have worked until the age of sixty in the employment in which he was engaged at the time of the accident and earning in the order of $750 per week gross. Nor did either party challenge the finding that an appropriate assessment of the respondent's present earning capacity was in the sum of $100 per week gross. It was appropriate, therefore, for his Honour to assess the loss of earning capacity upon the basis of a loss in the order of $500 per week net which, using the multiplier identified by his Honour in paragraph number 2, gives rise to a gross figure of $71,500.

That gross figure assumes that there would have been no interruption to the respondent's earning capacity for any other reason apart from this accident. Whilst that was the probability at which his Honour arrived consideration had to be given to the question of contingencies or, as was said, in Malec v Hutton (1991) 69 CLR 638, the possibilities.

His Honour did consider contingencies and determined that a substantial deduction would need to be made for contingencies. He clearly took the view that any adverse contingencies outweighed the positive contingencies. In that respect, in my opinion, he was undoubtedly right.

The respondent was involved in a stressful job. He had suffered a number of disappointments. His Honour determined that the respondent found his occupation to be difficult and stressful, particularly following the restructuring which had taken place in the department.

There was always a possibility that because of the stress associated with the employment the respondent would not work until the age of sixty.

Moreover, the respondent's pre-accident health was not good. His general practitioner had commented that the respondent had longstanding problems coping at work. His pre-accident health predisposed him to the type of reaction that he displayed in relation to the accident which is the subject of these proceedings.

The possibility that he might be involved in a non compensable accident which might have interfered with his earning capacity could also not be overlooked.

For those reasons I agree with the learned Trial Judge that a substantial discount had to be made for contingencies. On the appeal, Mr Stanley, who appeared for the respondent recognised that the findings of fact necessitated a deduction for adverse contingencies. He suggested an appropriate reduction would be in the order of 25 per cent. Mr Walsh QC, who appeared for the appellant, suggested that the deduction for adverse contingencies should be somewhere between 25 and 49 per cent.

In my view, a deduction in the order of 25 per cent would appropriately reflect the adverse contingencies. Whilst the contingencies were very real the period over which the contingencies were to operate was, having regard to the respondent's age, only a period of some six years. Therefore, I think a reduction in the order of 25 per cent would be appropriate.

Allowing a reduction of 25 per cent from the gross figure of $71500 gives rise to an assessment of about $54000 for loss of future earning capacity. That figure seems to me to be appropriate to reflect the respondent's loss of future earning capacity.

However, the learned Trial Judge allowed a figure of $170000 for future economic loss. If he approached the assessment of damages in relation to loss of future earning capacity in the manner which I have suggested would be appropriate, then he must have allowed somewhere between $110000 and $120000 for the loss of the respondent's superannuation benefits.

The respondent was fortunate to have received any allowance whatsoever for any loss of superannuation benefits. No claim was made in the plaintiff's pleadings for any loss of that kind. Pursuant to r46.15 the appellant sought particulars of the respondent's claim for damages. That rule requires a plaintiff to give full details of a claim for loss of earning capacity. Although the loss of superannuation benefits is strictly not a claim for loss of earning capacity it is an economic loss consequent upon the injuries suffered by the respondent.

The respondent was under a duty, in my opinion, to give the appellant particulars of any alleged loss of superannuation benefits. The respondent did not do so.

Mr Stanley said that at the trial the respondent opened upon a claim for loss of superannuation benefits. Whilst that might be so a claim for a head of damages not pleaded or particularised first made in the opening is not appropriate notice to a defendant in a claim for personal injuries. Whilst the pleadings in any given case should not create an injustice to a plaintiff by keeping a plaintiff out of a legitimate claim for damages, at the same time a defendant is entitled to have full particulars of a plaintiff's claim for any economic loss said to be consequent upon any injuries suffered and fair notice of the case to be made against that defendant at trial. Otherwise the defendant will suffer an injustice.

In this case, because no notice of the claim had ever been given by the respondent, in my opinion the appellant would have been entitled to object to any evidence being led in relation to any claim for loss of superannuation benefits.

Not only did the respondent fail to plead this matter or particularise it when called upon so to do, the respondent failed to discover documents relevant to this aspect of his claim. That was another reason which would have allowed the appellant, in my opinion, to object to any evidence on this topic. If the learned Trial Judge thought it was appropriate that the respondent be entitled to lead the evidence notwithstanding the failure to plead this head of damage, or particularise the claim when called upon so to do, or to make discovery in respect of the claim, then the appellant must have been entitled, at least, to an adjournment to consider and investigate the matter.

In any event, it does not appear at trial that an application for an adjournment was made.

At trial the appellant said this in relation to the claim for loss of superannuation benefits: [AB 28]

"Q Were you a member of the State Superannuation Scheme. A Yes. Q Did you join that scheme when you commenced your employment with the department. A Yes, or soon afterwards. Q What was your entitlement, pursuant to that scheme, in the event that you had worked through until retirement age. A At aged 60 I was entitled to two thirds of my final salary. Q As a pension. A As a pension. Q In fact by reason of your acceptance of the TVSP were you paid out from the super scheme. A Yes. Q Looking at Exhibit P2, at the second page, which is a copy of the two group certificates, are they group certificates that evidence payment made to you from the superannuation scheme. A Yes. Q There were two separate payments made to you. A Yes. Q What do the two separate payments represent. A One is basically a refund of my own contributions and the other is to do with the employer's responsibility. Q The employer's contributions. A Yes."

The evidence, with respect, was unsatisfactory. The appellant, and of course the Court, was entitled to the primary evidence of the respondent's entitlement to superannuation; not secondary evidence of the respondent's belief as to his entitlement.

There is no doubt that his entitlements to superannuation benefits are governed by the Superannuation Act 1988. No effort was made at the trial to put before the learned Trial Judge the respondent's entitlement pursuant to that legislation.

It was rather assumed by the respondent, and perhaps even by the appellant, that the respondent was simply entitled to assert that he had an entitlement to two thirds of his final salary as a pension.

On appeal Mr Stanley acknowledged that the evidence was not as complete as it could have been. He accepted that the respondent's entitlement must have been provided for in the Superannuation Act 1988. He said, without opposition from Mr Walsh, that that Act did in fact provide for superannuation benefits to the respondent which would be in the order of two thirds of his final salary. I think in the end both the respondent and the appellant were prepared to proceed upon the basis that if the respondent had worked until the age of sixty, he would have been entitled to a pension which would be fixed at two thirds of his final salary. No evidence was given at the trial as to whether or not that salary was indexed. It was not suggested on appeal that that was the case and the Court was not referred to any legislation in relation to that matter.

In those circumstances I am not prepared to assume that the respondent was entitled to any indexation in relation to his final salary. In any event, indexation may not have been relevant if in fact the indexation was no more than inflation.

The respondent's wage at retirement, at the age of sixty, would have been in the order of $780 per week gross. That takes into account increases since his retirement which he would have enjoyed had he remained at work and a projected increase on 1 July 1999 which has been agreed as part of the Enterprise Bargaining Agreement. His wage would be about $780 gross. Two thirds of that wage is $520 gross. No allowance should be made in relation to his claim for loss of superannuation benefits for any residual earning capacity because that capacity could have been exercised in any event and is now not exercised for the purpose of replacing a loss of superannuation benefits. The multiplier was identified by the learned Trial Judge for a man aged sixty until death at $564. It is correct to postpone the award until the age of sixty. The sum of $520 gross has to be reduced to a net figure. A net figure of about $430 would appropriately reflect the benefit to which the respondent would be entitled from age sixty for the rest of his life. That sum must be calculated at a net present value. Using the multiplier of $564 the net present value of $430 per week from age sixty to death is $242,520.

That sum must also be reduced to reflect the contingencies. It seems to me that the contingencies which would have affected an assessment of his loss of future earning capacity are the same which ought to be brought to account in a consideration of the loss of superannuation benefits. The pension was only available to the respondent if he remained in employment until the age of sixty. If he did not and he resigned before the age of fifty-five he would have become entitled to the payment which he actually received. Between the age of fifty-five and sixty he was entitled to different and increased benefits but benefits which would have had less value to those benefits available to him if he had worked until the age of sixty. However, I do not think it is appropriate to reduce the gross figure. That is because the respondent would have been entitled to receive the superannuation benefit which he did receive in any event. The respondent received a significant sum by way of lump sum. If that has to be brought to account, which it does, it is the difference between the gross figure and the sum which he received which should be reduced to reflect contingencies. I think that approach is fairer to the respondent.

At the time that the respondent resigned he received three benefits. He received the sum of $32000 by way of redemption of his employer's liability to make future weekly payments pursuant to the Workers Rehabilitation and Compensation Act. He also received, as a gross figure, $54000 in respect of his targeted separation package. As I have previously recounted that separation package provided for a payment to reflect the eight weeks pay plus three weeks pay for each year of service with a maximum pay out of 104 weeks pay. Thirdly, he received two cheques in repayment of his superannuation benefits. He received one payment of $70907 from which was deducted $11353 for tax in repayment of his contributions. He received the further sum of $72278 from which was deducted $637 for tax being his employer's contribution to superannuation benefits over the years of his employment. The total net figure paid to the respondent at the time of his resignation was $131195 which can be rounded off to $130000.

Neither party suggested that the lump sum paid to the respondent by way of redemption of future weekly payments of workers' compensation should be brought to account in the assessment of his damages for economic loss arising out of injuries. The sum is repayable under the Workers Rehabilitation and Compensation Act and therefore should not be brought to account: Manser v Spry [1994] HCA 50; (1994) 181 CLR 428.

Mr Walsh, however, argued that both the sum of $54000 paid to the respondent by way of his separation package, and the sum of $130000 paid to the respondent in respect of his superannuation entitlements, should be brought to account in the assessment of his economic loss. The first figure, he argued, would mean that nothing should be awarded for loss of future earning capacity because the appellant had been compensated by reason of that payment and no more than $112000, which should be reduced for contingencies, should be allowed for the loss attributable to superannuation benefits. Therefore, he argued, the learned Trial Judge had clearly arrived at a wholly erroneous assessment of economic loss at a figure of $170000. Mr Stanley, on the other hand, argued that neither payment for the separation package nor the superannuation benefits should be brought to account and therefore it could not be said that the figure arrived at by the learned Trial Judge was in error.

I think that different principles apply to the different payments.

The respondent only became entitled to the targeted separation package because he elected not to exercise his earning capacity with his then employer. He made that election because, as the learned Trial Judge found, he was unable, because of the post traumatic stress disorder from which he was suffering, to carry on with his employment.

His illness, therefore, gave rise to his resignation or retirement and the resignation or retirement in turn gave rise to the benefit which he received of $54000.

It is not enough, however, for a defendant to establish that a plaintiff has received a benefit which he or she would not have received but for the injuries. The defendant must also establish that the benefit received must have been received for the purpose of replacing the earning capacity lost and in circumstances where the payment can be enjoyed independently of any right of action against the tort feasor.

It is the character and purpose of the particular financial benefit which must be explored.

In this case the voluntary separation package was made up of payments to reflect eight weeks employment into the future and three weeks pay for each year of service. None of the payments, in my opinion, were for the purpose of replacing the earning capacity lost by reason of the respondent's injuries and in that sense they were not payments which could be characterised as being conferred upon him independently of the existence of any right of redress against the appellant. The mere fact that the respondent received the benefit only because he chose not to exercise his earning capacity, which choice was imposed upon him by reason of his injuries, is not enough.

In Clay v Freda (1988) 144 LSJS 274 King CJ said this when talking of a redundancy payment which was made pursuant to an award:

"I think that it is plain from the evidence quoted that the redundancy payment was not in consequence of the appellant's injuries nor a substitute for earnings which he would have received if uninjured. It was in that sense unrelated to the appellant's injuries and incapacity. It was a payment made on termination of employment by reason of redundancy and in consequence of an entitlement under the award arising from his years of service. The fact that the redundancy was contributed to by the respondent's diminished working capacity, in that the employer could not provide work suited to that diminished working capacity, did not change the character of the entitlement to the redundancy payment irrespective of the nature of the factors which led to the appellant being "surplus to the company's requirements". The entitlement and payment were not referable, except in the indirect sense just mentioned, to his partial incapacity or loss of earnings. After termination of his employment he was free to take up any new employment he chose without effect upon his entitlement. The relationship between the appellant's incapacity and the redundancy payment is so tenuous and indirect that the payment cannot be regarded, in my opinion, as diminishing the loss resulting from the incapacity. It was paid in recognition of his previous service, not in substitution for earnings, and the entitlement was not dependent on the loss of earning capacity; Redding v Lee [1983] HCA 16; (1982) 151 CLR 117 per Gibbs CJ at 125 and Mason and Dawson JJ at 139. The relevant principles of law are considered in National Insurance Co Of New Zealand Ltd v Espagne [1961] HCA 15; (1961) 105 CLR 569 or Redding v Lee supra.

It was argued by Mr Walsh that Clay v Freda could be distinguished on the ground that the payment in that case was pursuant to an award, whilst the payment in this case was pursuant to a separation package. In my opinion that is not a point of distinction which would allow it to be said that the principles referred to by the Chief Justice are not applicable to this case.

In my opinion, the payment in this case was made for reasons quite unassociated with the respondent's diminished earning capacity and not in any way to replace it. In those circumstances the payment does not go in diminution of the appellant's obligation to replace that lost earning capacity.

I think, therefore, that it would be inappropriate to make any allowance for the receipt of the targeted separation package.

However, the repayment to the respondent of his superannuation contributions and the payment to him of his employer's contributions stand in a different light. The respondent's claim in relation to the loss of superannuation benefits is just that. He claims that he lost superannuation benefits he would have otherwise enjoyed if he had remained in his employment. To assess that loss one must have regard to any superannuation benefits he did receive at the time that he was obliged to retire by reason of his injuries. In my opinion, one must take into account the payments received by the respondent in relation to his superannuation: Paff v Speed (1961) 105 CLR at 549.

I would, therefore, in the assessment of the loss of superannuation benefits, offset the gross losses by the amount received by the respondent at the time of his resignation.

That would mean that his loss in relation to his superannuation benefits amounted to $112000. I would then reduce that figure by 25 per cent to reflect adverse contingencies. That would result in a figure of $84000.

His total "economic loss" therefore is about $140000. The calculations which I have carried out demonstrate that the learned Trial Judge must have made an error. If he had applied his findings to the appropriate principles he could not have arrived at a figure of $170000 for economic loss.

In my opinion, it would be appropriate therefore to set aside the award for economic loss arrived at by the learned Trial Judge and substitute a figure of $140000 reflecting the respondent's loss of earning capacity and the respondent's loss in relation to his superannuation entitlements.

I would therefore allow the appeal and set aside the judgment arrived at by the learned Trial Judge and in lieu thereof enter judgment for $293065.83. I would not make any adjustment to the award of interest because interest would not have been payable in respect of these future losses in any event.

2. Judgement of the learned Trial Judge set aside.

3. Substitute, therefore, an assessment of the respondent's damages at $285682.97.

4. Enter judgment for the respondent in the sum of $293065.83.

I would propose that the parties be heard in relation to the costs of trial and the costs on appeal.

WICKS J. I agree with the order proposed by Lander J for the reasons he gives.

At a glance

Court

Decision date

Before

Source

Judgment (128 paragraphs)

Parties

Cases Cited (7)