Redding v Lee

151 CLR 117
47 ALR 241

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(Judgment by: BRENNAN J)

Between: REDDING
And: LEE
Between: EVANS
And: MULLER

Court:

Judges: Gibbs C.J.
Mason J.
Murphy J.
Wilson J.

Brennan J.Deane J.
Dawson J.

Subject References:
Damages

Judgment date: 19 May 1983 NBERRA

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Judgment by:
BRENNAN J

The judgments in National Insurance Co. of New Zealand Ltd. v. Espagne (1961) 105 CLR 569 express the relevant principles that govern the resolution of these two cases. There it was held that an invalid pension granted under Pt 111 of the Social Services Act 1947 (Cth), now the Social Security Act 1947 (Cth), does not go in diminution of a wrongdoer's liability in damages for the personal injury which qualifies the injured person to receive the invalid pension. Although the pension in that case had been granted to a permanently blind person, the ratio of the case applies with no less force to an invalid pension granted upon the grounds of permanent incapacity for work (1961) 105 CLR, at pp 574, 580, 587. I agree in the reasons of the Chief Justice for holding that neither the amendments to the Act nor the cases decided since Espagne's Case warrant a departure from what was then decided.

If an invalid pension is not deductible, should an unemployment benefit granted under the Social Security Act be treated differently? I agree with the Chief Justice's reasons for holding that, consistently with the principles expressed in Espagne's Case, an unemployment benefit payable under the Act is not to be treated differently from an invalid pension; an unemployment benefit does not go in diminution of a wrongdoer's liability in damages for personal injury where that personal injury is a cause of the unemployment. However, I would state some reasons which have weighed with me in coming to that conclusion in addition to those expressed by the Chief Justice.

The pensions and benefits payable under the Act are designed to afford a measure of support for people who encounter certain vicissitudes of life that tend to destroy or erode financial security. Old age, invalidity, widowhood, sickness, unemployment, single parent responsibilities, care of a child with a physical or mental disability, or severe physical or mental disability in an adult may qualify a person to receive a pension or benefit. Generally speaking, the cause of the condition or circumstance that qualifies a person to receive a pension or benefit is immaterial. Age and residential qualifications apart, qualification depends upon the fact that a person suffers a prescribed disability or disadvantage howsoever arising. Where a person suffers a personal injury, the extent or consequence of that injury determines whether the person is qualified to receive a pension or benefit. A person who, having suffered a personal injury, becomes entitled to receive a particular pension or benefit, is paid that pension or benefit whether or not his injury was caused by a wrongdoer and whether or not he has or claims a right to recover damages from the wrongdoer.

If a person upon whom a personal injury is tortiously inflicted (whom I shall call hereafter "the plaintiff") suffers a loss of income from employment as the result of the injury, he or she may become qualified to receive a pension or benefit which will make up some or, in particular circumstances, all of the lost income. Thus, if the plaintiff is a man who has attained the age of 65 or is a woman who has attained the age of 60 or is a class A, class B or class C widow as defined in Pt IV of the Act, whose income from employment debars him or her from receipt of an aged pension or a widow's pension, or from receipt of a full aged or widow's pension, as the case may be, and if that person loses that income because of a personal injury, he or she may be able to reduce the net loss of income by applying for and receiving an aged or a widow's pension or a larger aged or widow's pension (see the income tests in ss. 28 and 63). Or, if the plaintiff is above the age of 16, is not receiving an age pension (s. 24(1)) or a widow's pension (s. 81(1)), and if personal injury renders him or her permanently blind or permanently incapacitated for work to a degree not less than 85 per cent, he or she is qualified to receive an invalid pension (ss. 23, 24) subject to an income test (s. 28). Or, if the plaintiff has attained the age of 16 but being a man has not attained the age of 65 or being a woman has not attained the age of 60, if he or she is not receiving a pension or a sheltered employment allowance and if he or she satisfies the Director-General of Social Security that the personal injury has incapacitated him or her for work during a particular period whereby some income has been lost and that the incapacity is of a temporary nature, he or she is qualified to receive a sickness benefit (s. 108) subject to an income test (s. 114). A sickness benefit may not exceed the beneficiary's lost salary, wages or other income (s. 113). Or, if the plaintiff's personal injury results in his losing his employment and if he, though willing and capable of undertaking suitable paid work, is unable to obtain such work after taking reasonable steps to do so, he is qualified to receive an unemployment benefit (s. 107) subject to an income test (s. 114). An invalid pensioner or a claimant for an invalid pension, who is likely to derive substantial benefit from treatment and training under Pt VIII, may be selected as a person eligible to receive such treatment and training as the Commonwealth provides (ss. 135(1)(a)(i), 135A(1)). Similarly, a person receiving or claiming an unemployment or sickness benefit who would be likely to become unemployable without that treatment and training may be selected as an eligible person (ss. 135(1)(a)(ii), 135A(1)). If a plaintiff is so disabled by his personal injury that he is qualified to receive an invalid pension or if the Director-General is of opinion that, without sheltered employment, he would become permanently incapacitated for work to a degree of not less than 85 per cent, he is qualified to receive a sheltered employment allowance (ss. 133C, 133E). "Sheltered employment" is paid employment for disabled persons provided by approved organizations (ss 133C(1), 133D). Each of these pensions, benefits or allowances gives a measure of income security. Each is a benefit or subvention made available by the state to a person eligible to receive the particular pension or benefit, whether or not a wrongdoer has brought about the condition or circumstance which makes that person eligible.

If income is lost because of a personal injury tortiously inflicted, should a statutory pension or benefit available to a plaintiff be reduced because of the remedy in damages available against the wrongdoer, or should the damages for which the wrongdoer is otherwise liable be reduced because of the pension or benefit to the plaintiff, or should the plaintiff be entitled to receive without diminution and to retain both the damages and the pension or benefit? Except for some provisions relating to recoupment by the Commonwealth of certain classes of payments, to which reference will presently be made, the Act gives no express answer to these questions. Perhaps the absence of an express answer reflects the uncertainty of the goals and objectives of Australian health and welfare services to which the Senate Standing Committee on Social Welfare drew attention in their 1979 Report entitled, not inappropriately, "Through a Glass, Darkly" (Parliamentary Paper No. 71/1979). In the absence of an express statutory answer to these questions, it is necessary to refer to the common law principles governing the measure of a wrongdoer's liability in damages for personal injury.

The pensions and benefits payable under the Act are subventions available to people generally. The ordinary rule that applies to a general subvention that does not exhibit a "distinguishing characteristic" (to adopt the phrase of Dixon C.J. in Espagne's Case (78)) is that financial loss is not to be calculated without regard to the subvention. Dixon C.J. stated the rule applicable to such subventions in this way (1960) 105 CLR, at p 573 :

"If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so."

That is because damages for loss or diminution of earning capacity or for the creation of a new need for services are to be assessed according to the financial loss thereby produced (Graham v. Baker (1961) 106 CLR 340 , at p 347 ; Griffiths v. Kerkemeyer (1977) 139 CLR 161 , at p 165 ). But subventions which exhibit the relevant "distinguishing characteristic" fall outside the rule. They are exceptions to the rule ordinarily applied to subventions that are available to people generally. Windeyer J. in Espagne's Case stated the exception in these terms (1960) 105 CLR, at pp 599-600 :

"In assessing damages for personal injuries, benefits that a plaintiff has received or is to receive from any source other than the defendant are not to be regarded as mitigating his loss, if:

(a)

they were received or are to be received by him as a result of a contract he had made before the loss occurred and by the express or implied terms of that contract they were to be provided notwithstanding any rights of action he might have; or

(b)

they were given or promised to him by way of bounty, to the intent that he should enjoy them in addition to and not in diminution of any claim for damages....

In both cases the decisive consideration is, not whether the benefit was received in consequence of, or as a result of the injury, but what was its character: and that is determined, in the one case by what under his contract the plaintiff had paid for, and in the other by the intent of the person conferring the benefit."

The exception may be stated too widely here for it is doubtful whether the exception includes the case where the third party benefactor has an independent right of direct recourse against the wrongdoer to recover the amount of the benefit conferred (Treloar v. Wickham (1961) 105 CLR 102 , at p 122 ; Griffiths v. Kerkemeyer (1977) 139 CLR, at p 178 ). However, that is not a matter for present consideration. The present enquiry is whether the intent of the person conferring the benefit - that is, the intent of the legislature - is that a plaintiff should enjoy payments by way of invalid pension or by way of unemployment benefit in addition to and not in diminution of damages.

The intention of the legislature is to be gleaned from such indicia as appear in the whole of the Act, however elusive or ambiguous those statutory indicia may be. Although the divining of the relevant legislative intention must be undertaken, the exercise is somewhat artificial for the diverse statutory origins of the several Parts of the Act and its frequent amendment obscure, if they do not deny the existence of, an intelligible policy relating to the effect on damages of the several pensions, benefits and allowances for which the Act provides. In some instances, however, the indicia of legislative intention are clear enough. Where, for example, the Act provides for recoupment of a benefit or allowance out of damages awarded to the person receiving the benefit or allowance, it may be taken that the legislature does not intend that damages should be diminished by receipt of the moneys to be recouped (cf. Batchelor v. Burke (1981) 148 CLR 438 , at pp 453-455 , per Gibbs C.J.). Otherwise the receipt of a benefit or pension would result in a double deduction - once from the damages assessed and again in paying out the sum recouped by the Commonwealth. Section 115C provides for recoupment of an amount equal to a sickness benefit and therefore the receipt of a sickness benefit does not diminish a wrongdoer's liability; but there is no provision for the recoupment of any other pension or benefit. Some allowances may be recouped. Thus s. 135R provides for recoupment of training allowances and of the cost of treatment and training of a person by the Commonwealth Rehabilitation Service under Pt VIII of the Act.

It might be argued that, as all pensions and benefits other than sickness benefits are not subject to recoupment, all are deductible under the ordinary rule; but equally it might be argued that the legislature simply intended that all other pensions and benefits should be enjoyed and retained by their respective recipients simply because they are qualified to receive them, without affecting the damages recoverable from a wrongdoer. The former approach derives some support from the circumstance that pensions and benefits (apart from family benefits) provide payments by way of income security and the Act provides for retraining and sheltered workshop programmes to aid in restoring pensioners and beneficiaries (other than aged pensioners) to remunerative employment. As Margaret T. Lewis reported to the Commission of Inquiry into Poverty in her paper "Values in Australian Income Security Policies" (Australian Government Publishing Service, Canberra (1975)), p 10:

"The work ethic lies at the base of the Australian income security program. Inherent in the scheme has been the philosophy that people should work to maintain themselves by their own labour, and most of the contingencies provided for under the scheme are provided on the expectation that they preclude or inhibit a person being employed."

On this approach, pensions and benefits generally may be thought to have the character of a subvention to take the place of lost earnings during periods of unemployment, so that damages in respect of lost earning capacity are to be assessed in the light of the payments available to the plaintiff pensioner or beneficiary. The wrongdoer would have the advantage of the subvention except in a case where sickness benefits are paid to the plaintiff.

This approach led the Full Court of the Supreme Court of Victoria in Tuncel v. Renown Plate Co. Pty. Ltd. (1976) VR 501 to hold that unemployment benefits are deductible. Speaking for the Court, Gillard J. said (1976) VR, at p 509 :

"The unemployment benefits payable by the Commonwealth and the compensation payable by the tortfeasor are concerned with the same subject matter, namely payment for periods when the plaintiff was in fact not working. The actual amounts payable were arrived at by the same mode of calculation for both payments. Both are based directly on the precise periods the plaintiff was not working. They would be similarly calculated on a weekly rate."

The difficulty with this approach is the absence of a sufficient ground to distinguish unemployment benefits from invalid pensions or sickness benefits. In Tuncel's Case the Full Court was able to distinguish Espagne's Case (1961) 105 CLR 569 only by construing what was said in the latter case as referable only to a blind pension that was unaffected by an income test (1976) VR, at p 508 - a distinction which, in my respectful opinion, is not borne out by a reading of the judgments. Invalid pensions and sickness benefits, as well as unemployment benefits, are "concerned with the same subject matter" as compensation. There is no material distinction between the factors referred to in determining the statutory test of incapacity for work and the factors referred to in ascertaining the measure of damages in tort for destruction or impairment of earning capacity. In those provisions of the Act where invalidity or sickness or injury causing incapacity for work is specified as an element of qualification to receive a payment (ss. 23, 24(1) and 24A relating to invalid pension; s. 108(1)(c) relating to sickness benefit), the state of the labour market reasonably accessible to a claimant is an indispensable consideration in ascertaining his qualification. We were referred to a decision by the Administrative Appeals Tribunal (Re Panke and Director-General of Social Services (1981) 4 ALD 179 ) where the relevant provisions of the Act have been thus construed, and subsequent decisions of that Tribunal have confirmed the administrative direction then given. The same consideration applies when a court is assessing a plaintiff's damages in tort for destruction or impairment of earning capacity.

A factor which does distinguish the granting of a pension or benefit from the awarding of damages is the income test applicable to the particular pension or benefit. In that test may be found an indication of legislative intention. The test identifies the purpose of a pension or benefit to be relief of a claimant's need as distinct from compensation for a loss sustained. If the plaintiff recovers damages against the wrongdoer and derives income from the investment of those damages, the amount of that income (except in the case of a permanently blind pensioner) is taken into account by the income test applicable to the particular pension or benefit which the plaintiff receives or is qualified to receive from time to time. If pensions and benefits were to go in reduction of damages, the income which could be derived from their investment would also be reduced, and the extent of the plaintiff's dependence upon the statutory subvention would be increased correspondingly. The income tests applicable to the respective pensions and benefits define the extent to which public funds are relieved from payment of those pensions and benefits to qualified persons. It seems an unlikely intention to impute to the Parliament that statutory subventions should reduce the measure of the wrongdoer's liability and correspondingly increase the plaintiff's dependence upon public funds. A similar consideration was given some weight by Windeyer J. in Espagne's Case (1961) 105 CLR, at pp 585-586.

Another indication of legislative intention may be gleaned from the flexibility in pensions and benefits provided by the Act. The particular pension or benefit which a plaintiff is qualified to receive or receives may change from time to time. For example, a sickness benefit may be discontinued and an invalid pension may be granted instead if the plaintiff's capacity for work deteriorates; or a sickness benefit may be discontinued and an unemployment benefit may be granted instead if his capacity for work improves. Indeed, s. 122 provides for a person in receipt of an unemployment benefit who becomes qualified to receive a sickness benefit to be paid a sickness benefit; and, conversely, for a person in receipt of a sickness benefit who becomes qualified to receive an unemployment benefit to be paid an unemployment benefit. Flexibility is an important aspect of the statutory scheme, especially as the several categories of pensions and benefits carry differing fringe benefits and allowances (see the 1981-1982 Annual Report of the Department of Social Security, pp. 29-34). It seems unlikely that Parliament would have intended the transfer of a plaintiff from one pension or benefit classification to another should affect the liability of a wrongdoer. As invalid pensions and sickness benefits do not go in reduction of that liability, it is unlikely that Parliament intended unemployment benefits to do so.

I would dismiss both appeals.