Personal injury damages must not include any allowance for probable future depreciation in the purchasing power of money, whether in relation to loss of earning capacity or future expenditure on goods and services, and evidence directed to establishing future currency depreciation is inadmissible in relation to lost earning capacity.
Later decisions that cite O'Brien v McKean
Decisions cited by O'Brien v McKean
O'BRIEN v. McKEAN [1968] HCA 58; (1968) 118 CLR 540
Damages
High Court of Australia
Barwick C.J.(1), McTiernan(2), Taylor(3), Menzies(3) and Windeyer(4) JJ.
CATCHWORDS
Damages - Personal injuries - Loss of earning capacity - Future expenditure - Whether depreciation in purchasing power of money to be considered.
HEARING
Brisbane, 1968, May 27;DECISION
September 10."In fixing damages, I have borne in mind the factor of
vicissitudes of life, where applicable. I have borne in mind
the question of his ordinary maintenance. I have borne in
mind that income tax may be incurred for interest or dividends
he may receive from any investment of any part of the amount
awarded. And I have borne in mind the likelihood of the value
of money decreasing in the future." (at p542)
2. The respondent appealed to the Full Court of the Supreme Court against,
amongst other things, the award of general damages, generally
on the ground
that it was excessive but, particularly, on the ground that:
"the learned judge wrongly admitted evidence as to the
future decline in the value of money and wrongly took into
account the likelihood of the future decline in the value of
money." (at p542)
3. The Full Court allowed the appeal and reduced the award of general damages
to the sum of $100,000 and the total verdict to $110,186.20.
The appellant, by
this appeal, seeks the restoration of the trial judge's verdict. (at p542)
4. In giving judgment, the Full Court said:
"The learned trial judge has, in our view, stated the correct
principles upon which a judge should proceed in arriving at an
assessment of damages in such a case as this, with the
exception that he has borne in mind the likelihood of the
value of money decreasing in the future. As to this we
respectfully
adopt what was said by Windeyer J. in Parente v. Bell
(1967) 116 CLR 528, at pp 532 et seq
.
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." (at p542)
5. After discussing various aspects of the case, the Full Court came to the
conclusion
"that the assessment of general damages is so excessive asIt did so, with the result I have already mentioned. (at p542)
to be erroneous to the extent that this Court should substitute
its own assessment".
6. I agree with the Full Court that the initial award of $140,000 was excessive and am prepared to accept the amount of $100,000 for general damages as within the limits of a proper exercise of discretion. Being of this opinion, I would find no need for any discussion of the facts and circumstances of the case. But the appellant has pressed the view that the Full Court was in error in not taking into account as an augmenting factor when assessing general damages the likelihood of the further depreciation in the value of money over the years during which the appellant might normally have been expected to work and to earn income, and that the trial judge was right in doing so. Accordingly, the appellant submits that the trial judge's verdict should not have been disturbed. (at p543)
7. At the time of the receipt of his injuries, the appellant was nineteen years of age and according to the trial judge "of more than average scholastic ability . . . just entering the legal profession with a determination to succeed and with bright prospects of success . . . ". The Full Court does not seem to have been as impressed with the appellant's prospects as was the trial judge. But his Honour's estimate will suffice to indicate both the possible span of years during which the appellant might have been an earner and the nature of the possible source or sources of his income during that period. (at p543)
8. The experience over past years, particularly those more proximate to the present time, during which the purchasing power of the currency has been reduced, was put forward in evidence at the trial as the basis of a prognosis of continuing and progressive depreciation in the value of the currency in the future: and it is submitted that its occurrence is sufficiently probable and the broad limits of its extent sufficiently certain to warrant the increase in the damages which it appeared to the Full Court had been made by the trial judge to allow for the loss of purchasing power of money in the future. Whilst the whole of the reduction of the verdict by the Full Court is not due to its exclusion of this element in the assessment of the general damages, clearly the rejection of the appellant's submission by the Full Court was a major factor in bringing about that reduction. (at p543)
9. The question whether probable future decrease in the purchasing power of the currency is a proper factor to be considered in awarding damages for personal injury received in road and factory accidents has been canvassed by judges in different courts at various times, both within and beyond Australia and with differing results. Consequently, it would seem appropriate that this Court take this opportunity to rule definitively on the matter so far as concerns Australia. The judicial pronouncements which have so far been reported are collected in the judgments of Tzouvelis v. Victorian Railways Commissioners [1968] VicRp 13; (1968) VR 112 : to which should be added Fletcher v. Autocar and Transporters Ltd. (1968) 2 QB 322 , per Diplock L.J. (1968) 2 QB, at p 348 : see also Reid v. Comalco Aluminium Bell Bay Pty. Ltd. Crawford J.'s decision of 1ith December 1967 noted at (1968) ALMD par 696 , an unreported decision of the Supreme Court of Tasmania (Crawford J.) and the Tasmanian decisions to which reference is there made. Of the reported cases, the firstly mentioned case contains the fullest discussion of the matter of principle involved. I shall refer to aspects of the judgments in that case a little later, but otherwise I see no need to discuss the decisions which those judgments canvass. Suffice it to say that the matter is not covered by any authority binding on this Court. (at p544)
10. The elements of the general damages for personal injuries in relation to which it is said that allowance for depreciation in the value of money ought to be allowed, are the amounts intended to compensate for what is broadly referred to as the economic loss of the injured person. It is not suggested that any allowance should be made in respect of those aspects of such general damages as are intended to cover the injury itself, loss of amenities or pain and suffering. (at p544)
11. There are, in my opinion, two consequences of personal injuries caused by negligence which need to be distinguished and to be separately treated in connexion with the submission which has been made in this case as to the assessment of general damages; first, there is the destruction or diminution of earning capacity and, second, there is the need to expend money in the future because of the physical injuries received. I shall deal first with the question whether, assuming it can be established to the necessary degree, the expected decrease in the purchasing power of money ought to be reflected in the damages to compensate for loss of earning capacity. (at p544)
12. Before doing so, however, I should point out that the question whether allowance should be made for changes in the purchasing power of the currency really arises in two quite different connexions. There is, on the one hand, what I might call the accrued depreciation in the value of the currency as at the time of the assessment of the damages and there is, on the other hand, the possibility or probability of further depreciation after the assessment has been made and judgment entered. In my opinion, no difficulty arises in relation to the accrued depreciation of the currency when making an award of damages for personal injuries. The successful plaintiff in an action for such damages is to be compensated in the money of the day, if I may be permitted what might be thought to be a departure in expression from a strict nominalistic theory of money. So much, I think, is well established in English law: Sands v. Devan (1945) SC 380 ; Glasgow Corporation v. Kelly (1951) 1 TLR 345 . An illustration of an application of that principle is to be seen in Hart v. Griffiths-Jones (1948) 2 All ER 729 and in Pamment v. Pawelski [1949] HCA 43; (1949) 79 CLR 406, at p 411 . (at p545)
13. In the case of such personal injuries, though there may be something to be said logically for making the assessment of damages as at the date of the receipt of the injuries, the date of the verdict is, in my opinion, the proper date as at which to make the assessment. It may be that delay on the part of the injured person in bringing or prosecuting his claim could on this basis in some circumstances advantage the plaintiff, though, except in the case of some dramatic change in purchasing power, this possible advantage would be minimal and largely theoretical. However, even if in some case it became necessary to prevent a plaintiff obtaining a substantial advantage by his own dilatory conduct, the date as at which to make the assessment would not, in my opinion, be the date of the injuries but some later date, probably related to the time as at which a diligent plaintiff would have brought his proceedings to a verdict. (at p545)
14. The assessment will therefore in general be made in relation to the purchasing power of the currency at the date of the assessment of the damages. It is this recognition of the change in the purchasing power of the currency which has already occurred at the date of the verdict to which the authors Mann, The Legal Aspect of Money, 2nd ed. (1953), at pp. 64, 95 et seq. and Nussbaum, Money in the Law (rev. ed. 1950), at pp. 180 et seq. respectively refer. The cases listed in note 51 to p. 182 are cases of this kind and not cases which deal specifically with the problem raised by the probable further depreciation of the currency after judgment: see Mann (supra) Pt III for a general discussion and Nussbaum (supra) Ch. 2, s. 12. (at p545)
15. I turn now to that question, namely, whether any allowance for future changes in the purchasing power of the currency should be made when damages to compensate for loss of earning capacity are being considered. I have elsewhere pointed out in relation to this aspect of economic loss in cases of personal injury, that it is the loss of earning capacity which has occurred by reason of the accident which is to be the subject of compensation by an award of damages: it is not a case of replacing the wages which would have been earned in the future by a sum of money which represents the present value of the total of such wages: see Arthur Robinson (Grafton) Pty. Ltd. v. Carter [1968] HCA 9; (1968) 41 ALJR 327 . That loss of earning capacity has already occurred and is either permanent or likely to continue for some estimable time. The fair compensation for it is to be determined as a matter of judgment and not of calculation. But it is of course to be an informed judgment. Though the damages as I have said are not to be a replacement of the future wages, part of the relevant information for the purpose of forming a judgment as to the fair and reasonable compensation is a broad estimate of what that earning capacity before its destruction or diminution was capable of producing during such time as it would have been likely to be gainfully exercised. In obtaining such a conspectus, the vicissitudes of life, as it has been said, must not be lost sight of. Included in the matters so to be observed and acknowledged in the broad estimate to be made is the probability, if it exists, that the lost or diminished capacity would in the future have produced more in real terms than it has done or does at the current time. But what would be thus earned would be expressed in money terms and the increased money returns from the exercise of the earning capacity may be due either to an attempt to compensate for a reduction in the purchasing power of money or to an advancement in the real reward paid for work performed, or partly to each of these considerations. In my opinion, changes in the amounts which would have been paid for the exercise of the lost or impaired earning capacity and which would be due solely to changes in the purchasing power of money ought not to be considered as relevant to the assessment of compensation for the lost earning capacity. But it is otherwise with respect to real advances in remuneration due to an increase in the real reward for an increased or a better regarded exercise of that capacity if there is solid evidence upon which the probability of such an advance can be inferred. Thus the probability that the injured person's present capacity would in time lead to his advancement, so that he would earn more in real terms may be reflected in the compensation for the lost capacity: but the probability that the current reward will increase in nominal terms merely to keep pace with a lessening in the purchasing power of money should not be so regarded. The earning capacity which has been lost or diminished cannot, in my opinion, command any greater compensation because in future the purchasing power of the nominal sum it presently earns will be maintained by an increase in the nominal reward for its exercise. Indeed, if that were not likely to happen, the present capacity which has been lost should be worth much less because its effective return in terms of what it will purchase throughout the future would be a diminishing quantity. If the compensation is assessed on the footing that the present value of the wages commanded by the earning capacity prior to the injury would be maintained, and the compensation expressed in money appropriate to the date of the assessment, the plaintiff will, in my opinion, be justly compensated for the lost or diminished earning capacity in a case where there is no probability that the earnings it will produce will advance in real terms. Smith J. in Tzouvelis v. Victorian Railways Commissioners (1968) VR, at pp 137, 138 approached this aspect of the problem from a somewhat different point of view but reached the conclusion that to increase the award to reflect decreases in the value of the currency would result in an over compensation of the plaintiff. I respectfully agree with this conclusion and if one were making a mathematical calculation of the kind used in his Honour's analysis, I would also agree with his Honour's steps in reaching it. But, as I have said elsewhere, I do not favour any attempt to arrive directly at the amount of general damages by calculations of that kind. (at p547)
16. For the loss of a present capacity, with all its inherent probabilities, the injured person is to be presently compensated by an immediate payment of money. Upon the award being made, the successful plaintiff becomes entitled to that money free to do with it what he will. He can protect himself against the possibilities of continuing or increasing inflation to the same extent as any other citizen with an investible fund. The successful plaintiff has, as it were, exchanged an earning capacity for such a capital fund. In my opinion, neither possible nor probable changes in the purchasing power can be relevant to the assessment of the capital sum so to be paid. (at p547)
17. Smith J. reached this conclusion in Tzouvelis v. Victorian Railways Commissioners [1968] VicRp 13; (1968) VR 112 . However, I do not think the question concerns the discount rate which is commonly used in determining the present value of a periodic sum paid regularly over a period of years. In my opinion, so far as the lost or diminished capacity to earn is concerned, the exclusion of any consideration of further depreciation in the purchasing power of money in the future should be founded directly upon the reason that the injured person is being presently compensated for the loss which has already occurred by the payment of money which he is free to employ or invest in any way he may see fit. It would follow that, in my opinion, evidence directed to establishing the further decline in purchasing power of the currency in the future in relation to compensation for lost or dimished earning capacity is not admissible. (at p548)
18. I would pass now to the other aspect of compensation for economic loss consequential upon personal injuries, namely, the continuing necessity caused by the personal injuries to expend money for medical treatment, nursing and other physical assistance and the like. Here, the trial tribunal in assessing compensation is dealing in reality with the cost of goods and services in contrast to fixing compensation expressed in money for a lost or diminished earning capacity. The problem is to determine what is the fair sum to award an injured person to compensate him for the need to obtain goods and services rendered reasonably necessary for health and comfort by the nature and extent of physical or, in a proper case, mental injuries, caused by the other party's negligence. The award is to furnish the plaintiff with the financial ability to purchase the necessary goods and services throughout the time it is established on the probabilities that he will need to procure them. If it can be established that the cost of these goods and services will probably increase during that time, I can see no reason in principle why some allowance should not be made for such increase in cost - or as it may be expressed in connexion with the present discussion, for the diminished purchasing power of money. On that hypothesis, the injured person will have to expend more money in nominal terms to obtain these goods and services. Thus the sum presently paid to him to compensate him for the need to make this expenditure might well reflect the increasing cost of those goods and those services, if the probability of that increase is established. (at p548)
19. I shall deal in a moment with the question whether or no any solid grounds exists upon which to make any such allowance. But before doing so, I would point out that the total sum awarded a successful plaintiff which, amongst other items, covers compensation for having to make such reasonably necessary expenditures in the future, is presently payable in full. It is thus an investible fund until there is need in the future to use it. I have elsewhere referred to the unwisdom of using actuarial tables to compute or calculate an award of damages, even in the case of compensation for the need to expend money to procure goods and services. If the sum awarded is to be, as it should be, the result of an exercise of judgment, as distinct from attempted mathematical computation, its produce by investment, or use in some other aggrandizing manner, can be borne in mind when it is suggested that in connexion with the purchase of goods and services there is likely to be increases in cost. Though the injured person will need ready cash from time to time to purchase what his injuries have rendered necessary, the sum awarded remains at least for a considerable period of time investible in securities of a kind which could provide a hedge against future inflation. But I would observe in passing that, even if the assessment of compensation to cover the necessary expenditure were to be made by a mere mathematical computation, the reasoning of Smith J. in Tzouvelis v. Victorian Railways Commissioners [1968] VicRp 13; (1968) VR 112 would deny the propriety of using a different percentage for arriving at the present value of such payments, in order to allow for further depreciation in the currency. (at p549)
20. It is, of course, probable changes in the cost of the particular goods and services required by the particular plaintiff which must be considered and not the cost of goods and services generally, though it may be that in some cases a very broad but inexact guide to those costs can be derived from an overall picture of changing costs of goods and services generally. (at p549)
21. This brings me to the final question, namely, whether or not a firm basis can be found for the inclusion amongst the factors to be considered in deciding the proper global sum to be awarded for personal injuries of a figure to reflect the probability of rising costs of the particular goods and services. It can be conceded that in the past over a substantial period of time the purchasing power of the nominal unit of currency in general has declined. Indeed, it may be possible to express that decline in percentage terms of the nominal value of the unit of currency. This decline is not a new experience but an experience of mankind over centuries: but changes in purchasing power have not always been by way of decline nor has the decline been uniform. At times because of particular economic or social conditions in particular places the rate of decline may accelerate, or, for that matter, deceleate, or there may be occasions in the future as there have been in the past when the currency will appreciate. No doubt also there will be periods of greater inflation, such as the present generation has known. So many imponderables must, of course, enter into the causes of these fluctuations; for example, alterations in the mode of production or distribution of the particular community in question or of a representative commodity or commodities of which the cost is taken as a reference point for a general conclusion, or alterations in the social habits of the community creating or diminishing the demand for a commodity. But, notwithstanding these fluctuations, it is possible, by taking a long span of time, that a progressive decline in the purchasing power generally may be demonstrated, though it will not have been regular. But it seems to me that whatever the overall experience in relation to goods and services generally, nothing better in general than a speculation can be made as to the cost in the future of particular goods and services. There is no more room, in my opinion, in the determination of an award of damages, for acting upon a speculation than there is for doing so in the determination of liability. Solid proof, on the basis of probability, is required of all the elements which can properly be reflected in the award. Consequently, in my opinion, evidence which does no more than provide ground for speculation as to the future cost of the required goods and services is inadmissible. (at p550)
22. The question might also be approached in another way. Let it be supposed that although there are many imponderables involved, the long course of the history of money warrants the conclusion that it is probable that over a substantial period of time the purchasing power of money will decline and the cost of goods and services will in general increase. Yet it seems to me it could not be assumed that that decline over such period would probably be as much as three per cent per annum. As I have said, I do not think that such an assumed state of affairs would justify the conclusion that the cost of the required goods and services will increase to that or some such extent. But, even if that rate of increase in the cost of the particular goods and services were assumed, the rate of return on the investment of the money awarded by way of damages could very well exceed that rate of increase in their costs: or, if the amount of those damages had been directly based upon a capitalisation at a usual percentage, the actual rate of return upon the amount awarded might well exceed that percentage by the assumed rate of increase in the cost of the particular goods and services. To attempt to establish the probable increases over a substantial period of time of the cost of the particular goods and services and to compare that increase with the probable beneficial use of the money awarded as damages is in any case, in my opinion, far too sophisticated an exercise to be performed in the trial of action for personal injuries. Such a trial does not call for a scientific calculation but for broad estimates resulting from informed judgment. (at p550)
23. In my opinion, therefore, the factor of probably increasing cost of such goods and services should in general be ignored when the assessment is made of the fair and reasonable sum to compensate for the need to purchase such goods and services in the future. Where sound and precise evidence can be given as to the probable rate of increase in cost of some specific item becoming greater than the probable rate of benefit by the use of the capital sums to be awarded, the matter may possibly be different; though as at present advised I should consider such a possibility remote. In general the tribunal of fact, in my opinion, should ignore the question of the probable increase in cost of goods and services the purchase of which the injuries have made necessary. (at p551)
24. Thus, in the result I am of opinion that neither in relation to compensation for the loss of earning capacity, nor in relation to compensation for the necessity to make expenditures in the future because of injuries received should changes in the purchasing power of money in the future be considered when a judgment is being formed as to the proper global sum to award by way of damages for personal injuries. It follows that, in my opinion, the generalised evidence proffered in the instant case ought not to have been admitted. (at p551)
25. Before parting with the case, I would observe that the trial judge in the portion of his reasons for judgment which I have quoted included as an element in his assessment the circumstance that any income which the appellant would receive from the investment of the amount of the verdict, or of some part of it, would be subject in his hands to income tax. No point was taken by the respondent about this aspect of the trial judge's verdict either before the Full Court or before this Court. Consequently, I do not intend to express any view with respect to the propriety of including such an element in the assessment of general damages for personal injuries. No doubt, present existing authority would require that the injured person's net earnings after deduction of income tax be regarded when an estimate is being made of his former earning capacity (British Transport Commission v. Gourley [1955] UKHL 4; (1956) AC 185 ). But the reasons for this conclusion are not relevant to the question whether the liability of the income of the investment of the amount to be awarded should be an aggrandizing factor in the assessment of that award. That is a separate matter and would need careful consideration, to which some of the reasons which have been expressed by me in this case would, in my opinion, be relevant. (at p551)
26. In my opinion, the appeal should be dismissed. (at p552)
McTIERNAN J. I am of the opinion that the figure for general damages reached by the learned trial judge's award is too high. It is reasonable to think that the award is so very large, principally because in estimating compensation for prospective financial loss his Honour took into account, as he said he did, that the purchasing power of the currency would be likely to depreciate in the relevant period of years and on that basis increased considerably the compensation under that head of damage. He had before him actuarial calculations produced by an actuary called by the plaintiff which were done on the basis that the rate of depreciation would be three per cent. Depreciation of the currency is not of course a head of damage nor is an assumption that the currency will increase in purchasing power a head of set off in favour of the defendant to be taken into account in assessing compensation for prospective financial loss. I take the view that a forecast of the trend of the purchasing power of the currency up or down does not provide proper ground on which to make a judicial assessment of compensation for personal injury. The introduction of such an issue would, I think, encumber the assessment of damages, which is already a difficult task, with speculative and uncertain matter. (at p552)
2. The interference of the Full Court, as a court of appeal, with the award of general damages was justified by this error of principle into which the trial judge fell. On the whole I think that the figure substituted by the Full Court should stand as the amount of general damages which is warranted by the evidence. I have had the benefit of reading the reasons for judgment of the Chief Justice and I agree in general with his observations regarding the relation of change in the value of money to the assessment of compensation in a case like the present one. (at p552)
TAYLOR AND MENZIES JJ. We agree that this appeal should be dismissed because the Full Court was correct in regarding the award of damages made by the learned trial judge as excessive and because the sum awarded by the Full Court in lieu thereof falls within the limits of what is reasonable in all the circumstances. (at p552)
2. It does appear that the learned trial judge, in assessing damages as he did, was influenced by his acceptance of the contention that, in the sum to be awarded, there should be included some allowance because of the likelihood of a general and progressive fall in the purchasing value of money. Of this some evidence was admitted. The Full Court disagreed with the learned trial judge about this and before us the appellant sought to impugn the decision of the Full Court as having thereby proceeded upon an error of law. (at p552)
3. Smith J. said in Tzouvelis v. Victorian Railways Commissioners [1968] VicRp 13; (1968) VR
112, at p 137 :
"It is certainly true that for most purposes the law assumesWith this we respectfully agree and we also agree with that learned judge that the general principle is applicable to the assessment of damages for personal injury. What is to be awarded is a sum which, at the time of the award, will, in addition to covering special damages, provide an injured person with a lump sum by way of general damages constituting fair and reasonable compensation for loss suffered including pain and suffering, expected additional expenses, loss of earning capacity and loss of the amenities of life. Fletcher v. Autocar and Transporters Ltd. (1968) 2 QB 322 . The sum so assessed can be used by or on behalf of the person to whom it is awarded in all sorts of ways, and to try to assess damages on the footing that the award, or some part of the award, may be used in such a way that its real value will be increased or diminished by a rise or fall in purchasing power of money would be to make a wholly unwarrantable assumption which would complicate, by a refined speculation, an already sufficiently difficult task. Of course, if damages were to be awarded by way of an annuity instead of as a lump sum different considerations would apply. (at p553)
that the dollar or the pound is a unit of constant value and
disregards changes in its purchasing power."
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. (at p553)
2. 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. (at p553)
3. In Parente v. Bell (1967) 116 CLR 528 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 [1963] HCA 11; (1963) 108 CLR 491, at p 509 ; 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 (1962) SASR 117 ). 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 (1967) 116 CLR 528 . (at p555)
4. 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. (at p555)
5. In General Motors-Holden's Pty. Ltd. v. Moularas [1964] HCA 39; (1964) 111 CLR 234, at pp 257-259 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 (1867) LR 4 Eq 350 . 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 assesment 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. (at p556)
6. 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 forso said Lord Dundein in Admiralty Commissioners v. S.S. Susquehanna (1926) AC 655, at p 661 . 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 (1967) 116 CLR 528 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. (at p557)
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":
7. 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. (at p557)
8. 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 [1963] HCA 11; (1963) 108 CLR 491 award wages had actually risen after the tort and before damages had to be assessed. (at p558)
9. 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. (at p558)
10. 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. (at p559)
11. There is much in the judgments in Fletcher v. Autocar and Transporters
Ltd. in the Court of Appeal (1968) 2 QB 322 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 (1968) 2 QB, at p 348 :
"One cannot isolate the factor of inflation from nationalI agree, and gratefully put this alongside what I said in Skelton v. Collins [1966] HCA 14; (1966) 115 CLR 94, at pp 135, 136 of the law concerning damages that:
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."
" . . . 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." (at p559)
12. 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
(1961) 34 ALJR 495, at p 496 said:
"Members of the jury are summoned from a communityBut 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. (at p560)
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."
13. 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 [1968] VicRp 13; (1968) VR 112 . 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 (1967) 116 CLR 528 . 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. (at p561)
14. 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. (at p561)
ORDER
Appeal dismissed with costs.