Between: O'Brien
And: McKean

Judges: Barwick CJ
McTiernan J
Taylor J
Menzies J

Windeyer J

Subject References:
Damages
Personal injuries
Loss of earning capacity
Future expenditure
Inflation

Adelaide

Judgment by:
Windeyer J

The learned trial judge in giving his judgment in this case said that in his assessment of damages to which the plaintiff was entitled he had "borne in mind the likelihood of the value of money decreasing in the future". The Full Court said of this that "to whatever extent his Honour's judgment allowed for future inflation it must be held in error. The figures given us show that the allowance for future inflation was probably considerable". In the last sentence their Honours were there referring to certain argumentative propositions and calculations which had been submitted to the trial judge. It seems therefore that his remark was not a merely casual and incidental observation, but that he meant that advertence to the likelihood of a decline in the purchasing power in the future of units of currency had substantially affected the conclusion at which he arrived.

I turn then to the question of the bearing which a declining purchasing power of money has on the assessment of damages for personal injuries.

In Parente v  Bell ^[F17] I stated my opinion on that. What I then said was quoted, approved and expressly adopted by the Full Court in this case. Was I right in the case last year? It was the trial of an action in the original jurisdiction of this Court. The question arose on an objection to evidence. I said what I said as soon as the hearing ended. This time the question arises on an appeal. I have had time to consider it afresh, and after the benefit of further argument. However, I remain of the opinion I expressed last year. I would leave the matter at that were it not that I am aware that what I then said had been taken to be inconsistent with some remarks I had earlier made, in Teubner v  Humble; ^[F18] and these I realize have been quoted and relied upon in other courts. I could perhaps now say only that I consider my second thoughts the better and that so far as the two statements are inconsistent I must recant the former. But there is more to it than that. The former statements occur in a passage in a judgment given in relation to the peculiar facts of the case then in hand. It was an appeal from a decision in an action tried in the Supreme Court of South Australia [Teubner v  Humble]. ^[F19] An actuary's report described as showing "loss of wages" had been produced at the trial. It stated a monetary value at the date of the trial of the action of wages which it was said the plaintiff could have earned in the future, if it had not been for the accident and he had lived to the age of sixty-five. This sum was calculated on the basis of wages prevailing at the date of the accident. But this was two years before the date of the trial; and in the interval there had been an increase in the award wages of employees of the grade of the plaintiff.

Counsel for the plaintiff had urged that the calculation should be accepted without any qualification or adjustment for "contingencies". Any such allowance, he suggested, would be offset by the increase in award wages since the accident and the possibility of further increases in the future. The learned trial judge rejected this arbitrary solution; and then in an arbitrary way discounted for "contingencies" the figure the plaintiff proposed. In doing so his Honour made some observations which appeared to me to be mistaken. I commented on them, using, I must confess, wide words which could be and have proved to be, as I think, misleading. I was concerned with the reasons his Honour had given for estimating a loss of earning capacity by reference to the rate of wages payable at the time the incapacity occurred rather than with the rate payable for the same work at the time when damages fell to be assessed, namely the date of the hearing. I considered that it was in the light of all facts then existing that the damages flowing from the tort should be measured. I was not concerned with the question which arises in this case or which arose in Parente v  Bell. ^[F20]

For myself I fully accept that, as a factor in assessing compensation for destruction or impairment of earning capacity, it is proper to have regard to the arithmetical value at the date of assessment of future weekly (or other periodical) loss of earnings resulting from the incapacity, this being calculated at some given percentage and by reference to a period of years taken as the term of working life which would have remained for the plaintiff if the accident had not occurred. Such a calculation is in itself purely arithmetical. It is a mistake to call it actuarial. And of course it is no more than a guide and a factor in estimation. And, obviously enough, adjustments and allowances must be made for other factors, usually called contingencies, which will affect it one way or the other: on the one hand, any probability of the assumed period of working life being interrupted, shortened or lengthened; on the other, any probability that the plaintiff might have advanced in skill and experience in his trade or calling and have thus earned wages or salary at a higher rate than before the accident. When actuarial considerations are added to purely arithmetical calculations, there is less room for discounting for adverse contingencies, simply because one contingency, earlier death, is already taken into account. But it is only taken into account by the averaged experience of the past as reflected in life and mortality tables. And it is not the average man but always a particular plaintiff whom the tribunal assessing damages must consider. Actuarial evidence based on past experience can thus be a useful guide, but it must be corrected by what appear to be the probabilities of the particular case in hand, remembering too that adverse possibilities other than death are to be taken into account.

In General Motors-Holden's Pty  Ltd  v  Moularas ^[F21] I stated with some care my view of the manner in which actuarial calculations can properly be used in assessing what is commonly called economic loss as an element in damages for personal injuries. I shall not repeat all that I said. If the present consequences of future periodic monetary earnings lost, or of future monetary expenses created, are to be determined and equated to a sum presently payable, the only sure starting point must, it seems to me, be the ascertainment of a present capital value, calculated at some rate of interest, of those receipts or outgoings. This, the way of arithmetic, has been the path taken by the law in fields other than personal injury cases: e.g., Yelland's Case. ^[F22] In personal injury cases the resultant of the computation is, at best, a factor which assists, but does not compel or conclude, the final assessment. That is not only because the calculation must be qualified and adjusted in the light of matters such as those I have already mentioned, but also because the final assessment is of a global sum for the total damage. In this sum economic loss is only an element. The final sum is assessed as compensation for the total harm tortiously done to the plaintiff. It is important to remember always that heads of damage conventionally described as for pain and suffering, economic loss and loss of amenities can overlap. Furthermore moneys provided to meet future needs may also overlap when they alleviate suffering and inconvenience, provide substituted amenities and facilitate remunerative work. If this be overlooked and the final sum be arrived at simply by adding separate sums there is a serious risk of duplication.

On top of all this is the important consideration that when loss of capacity to earn money is being assessed, the value of any calculations of the present loss of remuneration which might have been earned is entirely dependent on how far it is established that but for the tort the remuneration assumed to have been lost would have been earned. If a plaintiff was in steady employment at a regular wage when he was injured, or was then by the exercise of skill in his profession or trade regularly earning money at some ascertainable rate, no great difficulty arises as to one element of the calculation. But if that is not so, even the starting point is uncertain. The present case is a good illustration. The plaintiff is a young man who hoped to practise as a lawyer. But he had not qualified for admission to the profession. Any assumption as to what he might earn if he qualified, and as to how far this prospective earning capacity has been impaired by the accident was necessarily speculative. The learned trial judge was invited to estimate the damages for the plaintiff's loss of earning capacity. He was asked to do so on assumptions which, as he recognized, could not provide a sure basis for any exact method of computation. This merely emphasizes one aspect in which the present system of compensation for personal injuries for accidents in cases of this kind appears to me unsatisfactory. By the repetition, in high-sounding but to my mind inexact and specious sentences, of words such as "just", "fair", "reasonable", "moderate", or their opposites, awards which are idiosyncratic are supported or criticized. The only guide or criterion, ultimate but unacknowledged, seems to be harmony with awards in other cases assumed to be of a like kind.

"The common law says that damages due either for breach of contract or for tort are damages which, so far as money can compensate, will give the injured party reparation for the wrongful act and for all the natural and direct consequences of the wrongful act":

so said Lord Dundein in Admiralty Commissioners v  S.S. Susquehanna. ^[F23] But I am unable to accept the proposition that, from this and similar pronouncements, it follows that when, in assessing damages, regard must be had to the future an allowance must be made for a possible or probable decline in the purchasing power of money in the future. Without repeating all that I said in Parente v  Bell ^[F24] I would merely observe that when damages are given for the loss of a capacity to earn money, the moneys which might have been earned, the "loss of wages", are considered only as evidence of those damages. The aim of the law in such cases is not to replace week by week, or month by month, or year by year, whatever monetary sum the plaintiff might have received as wages or salary in that week, month or year had he not been injured. If that were so, very different considerations would apply. But that is not the way of our law.

It is true that in looking at actual amounts awarded for damages in the past it is always to be remembered that these were often awarded at times when the purchasing power of money was greater than today. In comparable circumstances larger monetary sums would now be awarded. But that does not bear directly on the present question.

As the true ground of damages for what is called economic loss is the destruction or impairment of earning capacity, it is, I think, indisputable that in measuring it regard should be had to what, but for the destruction or impairment of his capacity, a plaintiff might have earned had he not been injured. If it can be established that the rate of his earnings before the tort would have become greater in terms of money at predictable future times, regard may in my opinion properly be had to this fact. It would be so for example, if in his trade or occupation the wages scale under an award or agreement went up after a given number of years of service: it would be so too if promotion, or increased skill or qualifications, would result in a rise in his wages or salary, and if it were predictable, with reasonable certainty, that he would have been promoted or acquired that skill or those qualifications: it would be so too if, as in Teubner v  Humble ^[F25] award wages had actually risen after the tort and before damages had to be assessed.

As I have said, the present value, in terms of present money, of remuneration which might have been earned is part, but only part, of the evidentiary material for assessing damages for loss of earning capacity. Somewhat different considerations seem to me to apply to the element of damages for personal injury attributable to future expenses rendered necessary for the plaintiff by the tort. The distinction is that in the one case money which might have been earned is evidentiary of damage suffered by the loss of earning capacity: in the other case the expense which has to be incurred is itself the sum to be provided as damages. Nevertheless, from the point of view of a discounting to present values and an assessment accordingly, I can see little distinction in mere calculation between a present provision for a notional loss of future income and a present provision for actual future outgoings. In the one case what must first be established is the sum or sums which the plaintiff would have been entitled to receive or able to earn at predictable times in the future if he had not been injured. In the other case what must first be established is the sum or sums which he will because of his injury become liable to pay at predictable times in the future. Both can I think weigh in the estimation of damages. In each case a present sum is allowed on the basis that if invested it would provide the plaintiff with moneys to make good future losses or meet future needs.

But, to my mind, saying that is quite different from saying that an award of damages should be based on an assumption that money will continue to decline in terms of purchasing power. I do not think it necessary to consider how far that assumption is valid. In books on economics and economic history, tables may be found listing periods of rising prices and periods of falling prices. A perusal of these must create scepticism about the proposition that there will be a continuous and uniform decline in the value of money for an indefinite period in the future. But, even if that assumption were correct, it would not I think enlarge the sum presently payable as damages for the loss of some thing, in this case earning capacity, which would have been productive in the future. To do that would I think not be consistent with the way in which in other fields of law damages are assessed, for example for wrongful dismissal or deprivation of office, or for the compulsory acquisition of property producing rents and profits. In all cases of those sorts economic loss arises because gains which might have been had in the future will not be had. Yet in all of such cases the compensation which the law provides is a single lump sum, presently payable, measured in terms of present money values. The recipient can use what he gets as he wishes.

There is much in the judgments in Fletcher v  Autocar and Transporters Ltd in the Court of Appeal ^[F26] which is helpful and thought-provoking. But I do not think I need or should examine in detail what was said there. There is now a large body of Australian case law on the assessment of damages for personal injuries, relevant because related to Australian conditions. I mention the case, however, because of the remarks by Diplock L.J. about introducing monetary inflation as a factor in assessing damages. His Lordship said: ^[F27]

"One cannot isolate the factor of inflation from national income policy, tax rates and structure, and interest rates. All are inter-related."-and later-"I do not think it practicable for the courts to base awards of compensation upon speculation about general future or economic trends or about any single factor, such as inflation, which may or may not form part of them."

I agree, and gratefully put this alongside what I said in Skelton v  Collins ^[F28] of the law concerning damages that:

"... the backgrounds against which it operates are not the same in England and in Australia. Various circumstances, locally known as existing in any community, such as welfare services, pensions, hospital aid, sick pay, rates of wages and so forth, are taken into account directly or indirectly, deliberately or unconsciously, by judges and juries when assessing damages for personal injuries."

It seems to me highly probable that juries, and judges too, are well aware that the purchasing power of money has fallen in recent times and that probably they often are not unmoved, and cannot be expected to be unmoved, by this in assessing damages. It is a consideration which is the more likely to intrude the more courts of appeal instruct and admonish that the assessment of damages for personal injuries is not to be concluded by arithmetical additions and actuarial evidence but depends upon deciding what in the particular case is a fair and just total compensation: for that involves processes which cannot be checked step by step and item by item. Dicta in judgments in the House of Lords have recognized that a decline in the value of money is likely to be present to the minds of a jury and that they may legitimately consider this in assessing damages. And in this Court Dixon C.J. in Ketley v Roulstone ^[F29] said:

"Members of the jury are summoned from a community necessarily alive to the progressive loss of the value of money, to the standards of living that prevail among ordinary men and women, to the cost of maintaining them, and to the avenues of employment open to the maimed."

But general statements of that kind do not in my opinion justify a tribunal assessing damages to make deliberately a specific allowance and addition for a decline in the value of money in the future. The more distant the future which is in prospect the more speculative and inadmissible such an allowance becomes.

I recognize that this question is one on which differing judicial opinions have been strongly expressed after careful consideration. Competing views were stated forcefully in the recent Victorian case, Tzouvelis v  Victorian Railways Commissioners. ^[F30] And too there have been arguments in academical writings for a position different from that which the majority took there and which I take here. The day is fortunately gone when courts would not listen to the works of writers on law until they were dead. And it is because I appreciate the weight of contrary opinions, both judicial and academical, that I have taken so long to state that I adhere to what I said in Parente v  Bell. ^[F31] The question arises in a field of law ruled by abstract concepts such as fair and just compensation. Although money and personal injuries are to a large degree incommensurable and although fixed criteria are lacking, courts must try to find some methods of measuring which can be used in compensating an individual in money because he has years of maimed life to live. Neither mathematics nor logic offers a satisfactory answer; and the problem is the more difficult when commodity prices and costs of services are not stable. However, when damages presently payable are to be assessed as a single sum the method of law in this and other matters is I think to ignore fluctuations in purchasing power which the future may bring. I do not think that for legal purposes we need complicate the question by economic theory and the vocabulary of economics.

In my view the Full Court of the Supreme Court was right in setting aside the award of the trial judge. I do not think it necessary or desirable for this Court to consider closely the alternative assessment their Honours made. I do not question its validity. I would therefore dismiss the appeal.