Assessing Economic Loss of a Plaintiff with a Terminal Illness
ASBESTOS LITIGATION SEMINAR 12 SEPTEMBER 2014
- My paper will deal with the general legal principles concerning the assessment of economic loss of a plaintiff dying from a terminal illness, and how it is calculated before and after the person’s death. The components will be past and future loss of earning capacity, past and future superannuation losses and interest on past losses. I will deal with some cases by way of example.
- Often the assessment of economic loss arises when a plaintiff has contracted a terminal illness because of exposure to asbestos dust and fibres. On some occasions, a plaintiff may contract a terminal illness because of negligent medical treatment. I refer to common law legal principles.
- The introduction of the Civil Liability Act in 2002 brought in statutory modifications of the common law rules, which in some circumstances could apply, but does not impact on the assessment of economic loss.
General legal principles
- Skelton v Collins (1966) 115 CLR establishes that the primary calculation of the economic loss to the plaintiff must have regard to the total period during which the plaintiff could have been expected to earn if the lifespan had not been curtailed by the accident, but there is a set off against the primary calculation the saving of expenditure on the plaintiff’s maintenance during the “lost years”.
- Skelton v Collins was reaffirmed in Sharman v Evans (1977) 138 CLR 563 at 579, and Griffiths v Kerkemeyer (1977) 139 CLR 161, 185.
- In other words, the plaintiff is compensated on the basis of the likely lifespan that would have been enjoyed had a terminal illness not been contracted.
- In the period after the disease is contracted and before the death of the Plaintiff there is no deduction for living expenses, but from the date of death or projected death there is a deduction for the living expenses of the deceased which will not be incurred by the dying Plaintiff.
- In the period before the death, there could be a small deduction for expenses which will not be incurred in the course of working such as tools or travelling to and from work. In Skelton v Collins past loss of earnings was agreed with a small deduction the nature of which was not explained by the High Court. In my experience there is little or no deduction made against net past loss of earnings.
- Typically, the life expectancy is readily established by looking at the life expectancy tables derived from medium mortality rate assumptions used by the Australia Bureau of Statistics in “Population Projections 2006 – 2101”. The use of those tables was sanctioned in Golden Eagle International Trading Pty Ltd v Zhang  HCA and that the life expectancies allowed for mortality improvements.
- The fact that where a plaintiff receives an award of damages during his or her lifetime the possible danger of double compensation by a claim being made by the dependants of the plaintiff, is unlikely to occur since the recovery of judgment or settlement of an action within the lifetime of the person will make it unlikely the dependants have any claim for loss of dependency under the Law Reform (Miscellaneous Provisions) Act 1941 or the Fatal Accidents Act 1959: Fitch v Hyde-Cates (1982) 150 CLR 482 at 495.
- In assessing the loss during the “lost years” the true measure of the deceased’s loss is the amount of future earnings less probable living expenses necessary to enable the earning of future wages: Fitch v Hyde-Cates (1982) 150 CLR 482 at 498. Damages are for the lost capacity to earn income, not for the loss of earnings: Paff v Speed (1961) 105 CLR 549 at 566. The plaintiff’s capacity to earn money needs to be determined when assessing the loss of earning capacity: Cullen v Trappell (1980) 146 CLR 1 at 7.
- Pre-accident earnings are relevant and are a guide when calculating damages under this head: Paff v Speed (1961) Supra at 566.
- However, care needs to be taken to consider whether it was likely the deceased would earn a higher income from work or business activities had a terminal illness not been contracted.
- Care should also be taken to ascertain what other employment-related benefits the dying plaintiff will lose the benefit of, such as the provision of a car, housing, telephone or other types of allowances.
- The availability of work, the plaintiff’s physical and mental health prior to being diagnosed with a terminal illness could also have some bearing on their earning capacity: Medlin v State Government Insurance Commission (1995) 182 CLR 1.
- In taking instructions from a plaintiff with a terminal illness some care should be taken to ascertain their work history, their health and vitality prior to becoming ill and the period of time into the future they were likely to keep working.
- There seems to be a trend towards people working longer and government policy seems to be encouraging this trend in the workforce as willing or unwilling participants. Compulsory Employer Superannuation contributions have increased to 9.25% from 1 July 2013 and are legislated to increase.
- A claim for loss of earnings can be made even if at the time of injury the person was not working at full capacity or in the workforce on the basis that their earning capacity has been lost and they would have been able to work in the future but for the injury: Campbell v Wilson  1 NSWR 333 (CA).
- The amount to be deducted as expenditure for the support of the deceased during the lost years can be a contentious issue: GIO v Johnson  2 NSWLR 617 (CA) at 629.
- During the “lost years” the expenses which would have been incurred in producing the earnings but are not incurred after the contraction of the terminal illness, are to be deducted from the earnings to be used as the basis for the calculation of damages for lost earning capacity. The calculation of the loss is after tax and the plaintiff’s living expenses or maintenance is also to be deducted: Skelton v Collins (1966) 115 CLR 94; Fitch v Hyde-Cates (1982) 150 CLR 482
- There is some scope for disagreement as to the amounts to be deducted and what precisely is included in “living expenses”. The deduction to be made for living expenses is not confined to the basic necessities of life, such as food, clothing and shelter: Fitch v Hyde-Cates (1982) 150 CLR 482 at 498.
- The living expenses should be calculated at a standard which the plaintiff’s job and career prospects at the time of death indicated was reasonably likely to be achieved.
- The position in regard to the likely expenditure by the plaintiff will vary considerably, depending upon whether he is single or married, supporting his wife or children. Where there are dependent children, the plaintiff’s own expenditure on living expenses would be likely to increase after the children ceased to be dependant and an increased expenditure may have to be deducted: Foyster v Goynich  WAR 80 (FC).
- Assumptions should not be made about the amount of expenditure by the plaintiff on his own living expenses and it is important to obtain precise instructions. For instance, the plaintiff may support children well beyond the age of 18 years which would lower the amount to be deducted for his living expenses.
- The expenditure by the deceased on dependants is not deducted from the earnings in the years that remain before death or in the lost years when calculating the damages for lost earning capacity: Sharman v Evans (1997) 138 CLR 563 at 579-583; Fitch v Hyde-Cates (1982) 150 CLR 482, at 497-498.
- An issue could arise as to whether a deduction should be made for expenditure on persons who could become dependants of the dying plaintiff in the future, such as a spouse and children who are young, or unmarried plaintiff probably would have had.
- In Sharman v Evans Supra at 583, Gibbs and Stephen JJ considered that the uncertainty of the existence of any dependants when the lost years were in the distant future meant that there would be no significant difference in the assessment of damages.
- Such an approach has the potential to disadvantage the plaintiff if he was likely to marry and have dependants: Luntz Assessment of Damages for Personal Injury and Death (3rd Edition) Para [5.4.6].
- A surplus funds solution was propounded by Webster J in White v London Transport Executive (1982) 1 All ER 410. In that case the deceased was a single man, aged 25, living with his mother. He was killed in the course of his employment.
- Webster J at 418 explained that the loss which has to be measured is the amenity of earning more than is needed to live a reasonably satisfying and potentially enjoyable life, taking into account of each case the particular circumstances of life of the particular deceased person. That could include a short holiday, a modest amount of entertainment and social activity and a car.
- The amenity which is lost is the difference between what would be the cost of maintaining himself and providing those facilities, and the prospective net earnings.
- In the cost of maintaining himself, Webster J included the cost of housing, heating, food, clothing, necessary travelling and insurances and things of that kind, if relevant, although it seemed in some ways artificial to do so, it appears that he is to be treated for this purpose as an eternally single man, on the principle that the money he in fact spends on his family, if he has one, or if it is likely that he will have one, is money which would be available after making provision for all the matters referred to to be spend in other ways if he so desired. That is to say, if he were to prefer to spend it in other ways rather than to have a family.
- Webster J inferred that the available surplus would be one-third of the net income for 5 years until the plaintiff let home, and one-quarter for the remaining 10 years.
- The Court of Appeal in England in Harris v Empress Motors Limited  3 All ER 561 at 577 did not accept that an unmarried person is to be treated as forever single and held that allowance had to be made for the fact that the plaintiff might never have married, never supported anyone, and consequently would have spent most of the income for his or her own benefit, leaving a comparatively small (surplus) to be awarded by way of damages.
- The deduction of living expenses to be made in the case of a young unmarried man in the lost years is likely to be higher than in the case of an older married man because it is more easy to estimate the amount which should not be deducted from net earnings in the case of an older married man than in the case of a young unmarried man whose future is speculative.
Analysis of some of the decided cases
- I propose to refer to the decisions of Easther v Amaca Pty Ltd  WASC 328; McGilvray v Amaca  WASC 345: Misiani (as Executor of the Will of Misiani (dec)) v Welshpool Engineering Pty Ltd (in liq)  WASC 263; O’Gorman v Sydney Southwest Area Health Service (2008) NSWSC 1127.
Easther v Amaca Pty Ltd(formerly James Hardie & Coy Pty Ltd)  WASC 328
- Mr Easther took proceedings against Amaca Pty Ltd for negligence arising out of the supply of asbestos products which he used in the course of his employment in the construction industry. Liability was admitted and the matter proceeded to an assessment of damages. The plaintiff had retired at age 65 for about 3 months to access his superannuation payout and the Court accepted it was the plaintiff’s intention not to retire at that time but to work through until he reached the age of 70.
Past loss of earnings
- The claim for past loss of earnings from the date of diagnosis of the disease until the commencement of the trial was a period of 26 weeks. The plaintiff’s claim was based upon a gross income of $45,000 per annum with a net income of $38,065 per annum because he split his income with his wife through a partnership so as to gain a tax advantage. The judge applied Husher v Husher & Anor (1999) 197 CLR 138 which considered a similar tax-splitting partnership between a husband and wife where the income was derived from the husband’s physical work. The partnership income was produced by the exploitations of the husband’s earning capacity and the husband chose to apply that income to the partnership. The financial loss occasioned by the impairment of his earning capacity was the loss of his ability to control and dispose of the income he would have earned had there been no accident.
- The judge held that the partnership would have continued and the income splitting between the plaintiff and his wife would have continued in the same manner as it had in the past and the net income was calculated on that basis.
- The result was 6 months loss of earnings was allowed in full on that component of the plaintiff’s claim with an allowance for interest at 6%.
Loss of future earning capacity
- The claim that the plaintiff would have continued to earn income until the age of 70 was accepted. The judge accepted the plaintiff’s figures for future loss of earnings which included a 20 per cent deduction for personal expenses. However, the judge deducted from that figure a further 15 per cent for contingencies including the prospect that the plaintiff would have periods where remunerative work was not available to him.
McGilvray v Amaca Pty Ltd  WASC 345
- The plaintiff sued the defendant for negligence arising out of the supply of asbestos products and as a consequence of that use, the plaintiff contracted mesothelioma. Liability was admitted and the matter proceeded to an assessment of damages. The plaintiff was 54 years of age married with 3 children two sons aged 23 and 21 and an older daughter.
- He was in partnership with his wife, carrying out insurance repair work. The partnership was profitable and the parties reached agreement as to the average annual net profit earned by the partnership for a period of about 6 years up until the onset of mesothelioma.
- The trial judge accepted that the partnership would have continued to make at least the annual profit agreed until the plaintiff turned 65. The existence of the partnership resulted in the net profit being split between the plaintiff and his wife so that the burden of income tax was reduced. The net income of the partnership was $93,995.
- There was no formal partnership agreement. It was one which could be terminated on notice at any time. The plaintiff was the source of the partnership’s income and the trial judge found the income derived was derived from his capacity to earn income, was earned by the partnership, which was at all times under this control.
- The plaintiff’s lost earning capacity was the loss of his ability to control and dispose of income he would have earned if there had been no accident. It consisted of the net profit of the partnership and it would be wrong to make an award on the basis that his damages must be limited to his share only of the profits he would have received from the continuation of past partnership arrangements applying Husher v Husher (1999) 197 CLR 138.
- The defendant did not quarrel with the approach taken in Husher v Husher but argued, based on the decision in Spargo v Haden Engineering Pty Ltd (1993) 60 SAR 39, the plaintiff’s damages should be calculated by assuming that he earned all the partnership’s income and was taxed as though he were a sole trader. That would have resulted in a substantially greater liability for income tax.
- The plaintiff in Spargo’s case had conducted his business by way of a company which was a trustee for a discretionary family trust. The income from the trust was distributed among family members, and the total tax paid by the family was much less than would have been paid by the plaintiff if he had earned the total income.
- The Judge in Spargo indicated that if the plaintiff was to be given the benefit of aggregating the distributed income for the purposes of measuring his earning capacity, the allowance for income tax in determining the net earnings should approximately the amount which he might have paid on the gross earnings if they had been brought to account by him rather than by the family trust.
- In Husher v Husher (supra) in the joint judgment some obiter comments were made about the adjustments to be made for taxation. The question did not fall for decision in that case. Nevertheless, the Judge had posed the question whether any account should be taken of the taxation consequences of income splitting arrangements like those made in that case.
- Their Honours in the High Court explained that assessment of damages involved questions of judgment and estimation and the process can never be exact, and held the assessment of lost earning capacity requires some care in identifying (as best as one can) what net income the plaintiff would have had at his or her disposal, that may require some consideration of the taxation consequences of different arrangements.
- Their Honours then referred to Spargo’s case and the comments made by the Judge I have referred to, and added that an adjustment of the kind proposed by Perry J in Spargo’s case was not appropriate in Husher v Husher.
- Pullin J in McGilvray, took that as a clear indication that the judgment of Perry J in Spargo’s case is not to be applied as a rule in all cases. He referred to Easther v Amaca (supra), in which Scott J did not discuss Spargo’s case in his reasons for decision, but had decided against applying Spargo’s case.
- In McGilvray the trial judge declined to apply the reasoning in Spargo’s case. He found that the plaintiff and his wife would have continued to operate the partnership until he retired. In the trial judge’s view it was not appropriate to estimate past and future loss of earning capacity by arriving at an after tax figure which assumed that the plaintiff earned all of the income of the partnership as a sole trader.
- It was not necessarily the case that had the plaintiff earned all of the income because of his own personal exertion he would have paid a higher rate of tax than being in partnership. For example, if the partnership had been dissolved and the plaintiff earned all the income, he might have contributed a much higher amount into superannuation, which would have given him a substantial tax deduction. This showed, as did the cases, that the facts of the particular case are all important.
- There was a disagreement between the parties as to the amount to be deducted for living expenses which would not be incurred during the lost years. The plaintiff contended for a deduction of about $60 per week and the defendant contended for a deduction of 20 per cent from the amount calculated as lost earning capacity.
- The trial judge held that the living expenses saved were not confined to expenses associated with what might be called business-related living expenses. He rejected the plaintiff’s approach which assumed that the expenses to be deducted were only those associated with actually earning a living, and held the correct view was during the lost years the plaintiff will not have the expense of keeping himself alive in order that he may go out and work. The amount proposed by the plaintiff as a deduction of $3,290 per annum was an inadequate deduction or living expenses.
- On the other hand, the trial judge did accept the defendant’s suggestion that the deduction should be 25 per cent of the calculated figure for lost earning capacity. Counsel for the defendant had derived that figure from Table 9.1 at page 396 in Luntz, which had been referred to in D’Salles v Ingrilli (2000) 25 WAR 417. The table did not provide any guidance in the circumstances of a dying Plaintiff. It is a table suggesting a range of figures in relation to Fatal Accident claims. D’Salles’ case was a fatal accidents case concerned with a dependant’s claim.
- The plaintiff’s evidence provided some guidance as to the plaintiff’s living expenses but was held to be too low. The judge estimated the costs of living expenses for the plaintiff at $6,500 per annum. The assessment was a generous with living expenses representing 6.91% of net income.
- The defendant had suggested a deduction of 15 per cent for contingencies which was rejected as too high. The time period under consideration was relatively short, just over 10 years and this was a relevant consideration: Clark v Kramer (1986) WAR 54 at 62. The plaintiff was a non-smoker and had had no significant illnesses. He had always lived an active lifestyle.
- The assessment of contingencies involves a consideration of unfavourable contingencies and favourable ones. Applying Lawson v Flavell WASC 272, the trial judge held the general rule was that the standard rate of discount for contingencies is in a range between 2-6 per cent. The appropriate deduction was held to be 5 per cent.
Future loss of earning capacity
- At the date of trial the plaintiff was expected to live for another 6 months and his loss would have continued for just over 10 years. The loss of earnings for 6 months was allowed at $45,823, the further 10 years at an annual loss of $93,995, utilising the 6 per cent multiplier and deducting living expenses of $6,500 per annum with a 5 per cent discount for contingencies.
Misiani (as Executor of the Will of Misiani (dec)) v Welshpool Engineering Pty Ltd
- The trial judge assessed the loss of the deceased’s earning capacity before his death from mesothelioma. The deceased had been self-employed operating an engineering business in partnership with is brother-in-law. After the sale of the business he had continued in the business as a works manager under contract. The plaintiff had also operated a cattle stud. Prior to his death he had been working with another engineering firm on a salary of $75,000 per annum, full credit card facility for all fuel requirements associated with the running of his personal vehicle, and all costs and charges associated with one mobile phone account.
- The estimate of the deceased’s remuneration package was not less than $80,000 gross per annum which the trial judge accepted, but making the calculation over a period of about 40 weeks and allowing for income tax and Medicare, was the approach taken to calculate the loss while the plaintiff was alive and before he died. The plaintiff had had a period of time away from work following the death of his mother and there was evidence that the plaintiff would not have had the opportunity to resume employment.
- The evidence as to whether or not the deceased would have chosen to recommence work at all or on a full-time basis was not clear, and in the circumstances the trial judge considered some allowance should be made for the contingency that while the deceased in all likelihood would have resumed work after an appropriate period, he would have had a reduced workload so that he could operate the stud farm and earn sufficient remuneration to meet his and his wife’s continuing needs. A global deduction of 20 per cent was made in relation to the past loss.
- Interest was allowed at 6% on the past loss of earning capacity for 1.5 years.
Loss of benefit of deceased’s superannuation prior to death
- The claim for loss of superannuation should be pleaded and particularised: Luntz (4th Edition) [5.3.6]. That was not done in this case. Although the objection taken by the defendants had some force, the trial judge did not accept it and held the court will always do the best it can to assess loss where damage is proved. The deceased had been an employee. The claim for superannuation was assessed at 8 per cent of the gross income that would have been earned over a period of 40 weeks. The claim for past superannuation loss was also discounted on a global basis for the same contingencies referred to by 20 per cent.
- Future losses from the date of the deceased’s death to age his retirement in 10 years was assessed as a Fatal Accidents Act claim.
Lowes v Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd)  WASC 287
- Mr Lowe had contracted mesothelioma as a result of visiting Castledare’s Boys Home and riding on a train the railway line of which had been built on top of asbestos tailings.
Past loss of earnings
- Past economic loss was assessed over a period of 65 weeks based upon the loss of the plaintiff’s net income from his employment. The trial judge calculated past economic loss to the end of closing submissions at trial, unlike the plaintiff.
- The amount differed from the defendant’s submissions as the trial judge calculated the plaintiff’s past economic loss by reference to his income for the financial year, which he resigned from his employment due to illness, whereas the defendant proposed the loss be assessed by reference to an average income derived from the 5 years prior to resignation due to ill health.
Past loss of superannuation
- The compulsory employer superannuation contribution was 9 per cent and that was the figure applied to the gross weekly income for a period of 65 weeks. From that amount was to be deducted tax, administration expenses and other contingencies. The plaintiff contended that only a deduction of 15 per cent for tax should be made but the judge applied the “rough” approximation approach favoured by Anderson J in Villasevil v Pickering WASC 143, and he accepted the defendant’s submission that interest should not be awarded on that amount as the employer’s superannuation contribution did not represent money that would have been available for the use of the plaintiff during the period of 65 weeks with interest at 6% on that amount for 65 weeks.
Future loss of earning capacity and lost years
- Corboy J referred to his findings concerning the plaintiff’s work history. Issues relevant to assessing the plaintiff’s loss of future earning capacity on which findings remain to be made were:
(a) The plaintiff’s life expectancy;
(b) The likely age at which the plaintiff would have retired had he not contracted mesothelioma; and
(c) The extent of any discounts for personal expenses and contingencies.
- The evidence as to the period of time the plaintiff was likely to live ranged between 12 months and 2-3 years. The uncertainties as to the plaintiff’s life expectancy were obvious and the judge held it could do no more than fix a period which balances the evidence. He assessed damages on the basis that the plaintiff’s life expectancy was 3 years from the date of a peritonectomy and 2 years from completion of the trial.
- Neither party suggested that any allowance should be made for the possibility that the plaintiff’s income would have increased in the future through promotion or job changes which was considered to be appropriate having regard to the plaintiff’s work history. The judge assessed the plaintiff’s loss of future earning capacity by reference to the same income figures that were used to calculate his past loss and that was the approach adopted by the parties. The plaintiff accepted that there was to be a deduction from that amount for living expenses. The plaintiff suggested that a deduction of 10 per cent; the defendant 15 per cent. There was very little evidence of the plaintiff’s living expenses.
- Having regard to the observations of Pullin J in McGilvray v Amica Pty Ltd and noting His Honour’s apparent acceptance of the comment of Meagher JA in James Hardie & Coy Pty Ltd v Roberts  NSWCA 314, Corboy J accepted that the appropriate deduction was 10 per cent. No discount for contingencies was applied given the short time period over which the loss was assessed.
- The plaintiff submitted the lost years component of future loss should be assessed on the assumption that he would have remained in full-time employment until he reached the age of 80. The plaintiff gave no evidence as to his future intentions for working other than to reject the suggestion in cross-examination that he might retire sometime during his 50’s and that he did not know whether he might cease working as early as when he was 60 years old.
- The judge was not prepared to find on the evidence that the plaintiff would be likely to have remained in employment until he was 70 years old. His future loss capacity was assessed on the basis that he would cease employment at 65 years of age. The 6 per cent multiplier for 2 years was used and the deduction made of 10 per cent for personal living expenses. The plaintiff contended that a 10 per cent discount for contingencies should apply; the defendant 20 per cent. The plaintiff’s contention was primarily based on cases that have suggested that a contingency of more than 10 per cent is unusual; the defendant noted the plaintiff’s chequered work history and the possibility of fluctuations in the mining industry as negative contingencies.
- The comments of Pullin J in McGilvray were referred to, that the general rule is the standard rate of discount for contingencies is in a range between 2-6 per cent. There were some gaps in the plaintiff’s employment history. The possibility of future fluctuations in the mining industry affecting his ability to maintain employment was relevant but speculative. The plaintiff’s age was also a factor. The plaintiff emphasised that no allowance had been made for the possibility for promotions or other salary increases, but it was also possible that the plaintiff would have left the mining industry or taken less remunerative “off site” employment in the industry as he neared retirement age. There is a positive contingency from the assumption that has been made that the plaintiff would retire at 65 years of age.
- Corboy J considered that on the very limited evidence available, and having regard to the observations of Pullin J in McGilvray, and the authorities to which the plaintiff referred in his closing submissions, the appropriate discount for contingencies should be 12 per cent.
Future superannuation benefits
- The plaintiff’s future loss of superannuation benefit was calculated at 9 per cent of his gross weekly wage over a period of 2 years using the 6 per cent multiplier with a deduction of 30 per cent made from that amount, and the balance of the 22-year period, again, making a deduction of 30 per cent.
- It is submitted that was a higher level of deduction of 30% was too high and the deduction of 15 per cent proposed by the plaintiff is in line with authorities of the courts Reynolds v State of Western Australia [No 2] 2013 WADC 176 at . Future superannuation was allowed at 10.625% as the median rate between 1 July 2013 and 1 July 2019 when it is legislated to increase to 12%.
O’Gorman v Sydney Southwest Area Health Service (2008) NSWSC 1127
- The plaintiff brought proceedings against a breast-screening organisation in New South Wales for failing to recall her for further investigations following a mammogram as a result of which she was diagnosed with breast cancer which metastasised into her lungs and brain.
- The plaintiff was 57 years of age with one daughter he did not live with her. She had been in a defacto relationship with her partner. The plaintiff spent most of her working life as a secretary and clerk within the legal profession. It was not in dispute that had she not developed her illness she would have continued in employment until 65 and when she ceased work she was earning about $53,350 net per annum.
- In relation to damages, there was a considerable level of agreement on the issue of damages. One of the matters that remained in dispute was future loss of earning capacity. In relation to future loss of earning capacity, the dispute related to the amounts which were to be deduction for the plaintiff’s living expenses during the lost years.
- The parties agreed that the plaintiff’s life expectancy should be shortened by 10 years to take into account her history of smoking. The resulting figure was a period of 21.46 years. Annual net income was agreed, and also that without her illness the plaintiff would have worked to age 65 in 2016. Her estimated date of death was agreed at as 2008.
- In relation to what items were to be encompassed within the concept of “living expenses”, the defendant relied upon the unreported extract from the Court of Appeal in Commonwealth of Australia v McLean (NSWCA- 31/12/1996):
Deduction for living expenses
- Damages are recoverable for loss of earning capacity during the “lost years”. The full quote is set out in “O’Gorman v South Sydney West Health Service (Supra) at paragraph , only expenditure such as rent, food, clothes, fares, gas, electricity and other accommodation expenses should be deducted, not expenditure on personal pleasures, such as entertainment.
- The plaintiff was cross-examined as to her living expenses, and the defendant’s calculations were based on this evidence, except in two respects. The defendant challenged the plaintiff’s evidence that food for her and her partner amounted to $200 per week, being a cost which they shared, and submitted the real cost of their food would have been $350 per week. The judge rejected the defendant’s submission and found an accepted the estimate of the cost of food to be $100 per week.
- The other aspect of the plaintiff’s evidence that was challenged by the defendant was her estimate that she spent very little on clothes for herself. It was submitted that given the plaintiff’s job as a secretary in a law office and given her well-groomed appearance in court, some greater personal expenditure would have been needed for such items as clothes and shoes, and the judge agreed accepting the defendant’s submission that $75 per week should be taken into account for this type of expenditure.
- Another matter of principle on which the plaintiff and the defendant were at issue was how the plaintiff’s mortgage repayments should be treated. The defendant submitted that they should be taken into account as part of her living expenses, just like rent. The plaintiff submitted they should not be taken into account since they were a payment towards the accumulation of a capital asset. The plaintiff’s evidence was that she made the whole of the mortgage payments and that this was not shared. The judge was not successful in finding any authority on the question, other than the sort of general statement of principle set out above. Clearly, the plaintiff needed accommodation in order to enable her to attend work and earn her wages. The payment of the mortgage was analogous to the payment of rent in that it was a necessary payment in order to maintain that accommodation. Had the plaintiff ceased to make mortgage payments, she would have lost her accommodation.
- In the absence of any evidence as to what the cost of rent in the premises would have been, the only evidence which the court had as the cost of the plaintiff’s accommodation was her weekly mortgage payments of $364. That figure was taken into account as part of her living expenses.
- That meant the plaintiff’s claim for future loss of earning capacity for lost years was $276.41 per week, and since the period of time was relatively short, 7¼ years, it was held to be unfair to apply the conventional reduction of 15 per cent for vicissitudes. On the other hand, there was evidence that taking into account her breast cancer alone the plaintiff would have had an 81 per cent chance of achieving a 10-year survival rate, a reduction of 20 per cent was made.
- Compulsory superannuation contributions increased to 9.25 per cent with effect from the 1 July 2013. Between 1 July 2013 and 1 July 2019, the rate of compulsory superannuation payable will gradually increase. The current compulsory rate is 9.25 per cent. It will increase to 12 per cent in 2019. The future loss of superannuation could be calculated on the basis of the change rate each year, or as was done by Heron J, in Reynolds v The State of Western Australia [No. 2]  WADC 176, by adopting a median rate of 10.625 per cent.
- Dust Diseases Tribunal cases decided in New South Wales are a fertile source of information on how the assessments are being made in New South Wales where the awards of damages are considerably higher than in Western Australia; see for example Rogers v Amaca Pty Ltd  NSWDDT 1
Civil Liability Act 2002
- If the assessment of the damages arises as damages, to which the Workers Compensation of Injury Management Act 1981(IV) Division 2 applies and the class of damages to which s93B(3)(a) of that Act applies, then only s10A and Division IV of the Act apply, and Parts 1A (Liability for harm caused by the fault of a person), Part 1B (Mental harm), 1C (Liability relating to public function), 1D (Good Samaritans), 1E (Apologies), and 2 (Awards of personal injuries damages) other than s10A and Division IV do not apply.
- Section 10A relates to the determination of damages for non-pecuniary loss and allows the court to refer to earlier decisions of that or other courts for the purposes of establishing the appropriate award of damages.
- Division IV relates to structured settlements.