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Home , Damages, Fine (penalty), Loss of use, Pearson Commission

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L, a 262 Ch 10: Damages

Along the way it will be shown that the answers to these questions have changed over time, both because of the evolution of the and because of legislative interventions that over-ride judicially crafted solutions.

Lump sums v periodic payments

[10.20] The only form of compensation known to the common law is a lump sum award. As a corollary to the lump sum rule, the plaintiff must sue reasonably3 promptly (lest he run afoul of the ) “once and for all” for his entire loss: past and future. In the normal course, therefore, neither may he split his cause of action4by suing separately for different heads of damage nor can a subsequent action be brought by either plaintiff or 5defendant to increase or decrease the award in case the loss turns out to be greater or less than expected at the time of the trial or settlement. The lump sum rule should be contrasted with typical6 arrangements in social schemes, including workers’ compensation in which benefits are paid periodically (for example, monthly) and are often adjusted over time as the claimant’s condition changes. From the compensation perspective, where the amount of damages is determined once and for all, its payment may be spread over time to better match the receipt of damages to when the money is needed. This will reduce the risk that the victim might squander a lump sum and be left in dire financial straits. A more ambitious approach to periodic tort damages would be to leave them open ended in order to take into account future events that can often cause victims to need rather more or less compensation than can reasonably be predicted at the time of the trial or settlement. In this way, rather than making a speculative guess that may well result either in a windfall or in a denial of adequate redress to the plaintiff, periodic damages could better reflect what turns out to be the victim’s actual loss. By contrast, from the deterrence perspective, two arguments can be made in favour of lump sum awards even in ongoing serious injury cases. First, bringing home a clear and substantial amount of liability to defendants at the time of

3 Fourizie, l CNR [1927] AC 167 (PC). 4 Fitter ii Veal(1701) 12 Mod 542; 88 ER 1506. 5 In Canada (Cahoon i) Franks [1967) SCR 455) and most of the US (James & Hazard, , § 8811.11) he can sue only once for the same accident. In (Brunsden v Humphrey (1884) 14 QBD 141) and Australia (Marlborough v Charter Travel (1990) 18 NSWLR 223 (CA) and Linsley v Petrie [19981 1 VR 427 (CA), though Handley JA in Baltic Shipping Co v Merchant “Mikhail Lermontov” (1994) 36 NSWLR 361 at 370 stated that

the exception “ may nor survive a direct challenge in this Court” )it may be possible to split and , but this was doubted in Talbot v Berks CC [1994) QB 290 (CA). Some US cases, involving risk exposures that will only cause bodily harm in the future if at all, have allowed victims to sue for and win awards for “medical monitoring” expenses now and then to sue again later if the risk to which they were exposed turns out to injure them. For example, Friends For All Children, Inc v Lockheed Aircraft Corp 746 F2d 816 (DC Cir 1984). But US courts have also exercised caution, and have established some conditions on the award of monitoring expenses (for example, that monitoring is likely to help discover disease and that early is likely to help). See Borgeois v AP Green Indus Inc 716 So2d, 355 (La 1998). Moreover, if the plaintiff has incurred no detectable harm, recovery for medical monitoring expenses has been denied altogether. See Metro-

North Conz;nuter Railroad Co i’ Buckley 521 US 424 (1997). 6 Last minute reopening: Doherty v Liverpool Hospital (1991) 22 NSWLR 284 (CA), followed by Great Wall Resources Pty Ltd v O’Sullivan [2009] NSWCA 119; Gamser v Nominal Defendant (1977) 136 CLR 145; Mulholland v Mitchell [1971) AC 666.

common must

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imposed periodical payments was inappropriate absent legislative authority.’ Sincethen, however, several Canadian provinces have created such authority. In British Columbia, for example, in auto accident cases involving awards of more than $100,000, periodic payments are required when the court concludes that they are in the best interest of the 16plaintiff. In Manitoba, if either party requests it, a court may order periodic payment of a plaintiff’s award, including possible upward adjustments over 17time. And in Ontario, courts can order a periodic payment scheme whenever the claimant asks that his award take into account , or, in medical cases, there is an award for future care totalling over $250,000.18 In Australia a similar approach has been taken by New South for damages awarded for asbestos-related disease and for claims involving motor vehicle injuries) New South Wales workers’ compensation legislation permits courts to9 award damages according to a structured settlement even if only the plaintiff prefers °2this. Developments along these same lines have come into play in some Continental 21countries, and for cases in California where there is a substantial award for future 22care. A different strategy is to defer the final award of a lump sum pending substantial uncertainties, with periodic payments in the interim. This reform has been adopted in South 2Australia. Standard ofproof— all or nothing [10.30] Proof of past events, which either happened or did not happen, such as the defendant’s alleged or the plaintiff’s loss, must normally be demonstrated by a “balance of probability” (in contrast with burdens that may require the government to demonstrate the defendant’s responsibility “beyond a reasonable doubt”). Once the civil law burden of proof is met, however, the matter in question is then treated as a certainty. Many believe that this position undergirds the corrective justice perspective of tort law in which a trial definitively establishes “the truth”. Also, when the is contested and knowing of the “all-or-nothing” rule, the parties can choose to settle cases for appropriately discounted amounts when neither wants to take on the uncertain outcome risk.

15 Watkins t Olafson (1989) 2 SCR 750. 16 Insurance (Vehicle)Act, RSBC 1996, ci 231, s 99. 17 CourtofQueens BenchActSM 1988089,c14. CCSM,cl C280, amendments ss 88.1—88.9 (en SM 1993, ci 19, s 6). 18 Courts of justice Act, RSO 1990, ci C43, ss 116 and 116.1; Ontario Rules of Civil Procedure, RRO 1990, Reg 194, r 53.09. 19 DustDiseases TribtinalAct 1989 (NSW), s hA; MotorAccidentsAct 1988 (NSW), s 81 (for future economic loss other than loss of earning capacity). See also Motor Vehicles (Third Paitv Insurance) Act 1943 (WA), s 16(4) (apparently rarely used because courts insist on mutual agreement). For the Australian situation generally, see [14.40j of Sappideen et al, (2009). 20 Workers Compensation Act 1987 (NSW), s l5lQ(1). In the US, interestingly enough, although periodic payments are the norm in workers compensation, in many jurisdictions complex long-term disability cases are often compromised on a lump sum basis. 21 Fleming, ‘Damages: Capital or Rent” (1969) 19 U Tot U 295. This can only be done legislatively: Lim v Camden HA [1980] AC 174 at 183; Watkins v Olafson [1989] 2 SCR 750. Recommended in Tas (Report no 52, 1988). 22 California Civil Procedure Code, s 667.7. Under the California provision, the sums not used by the victim are eventually returned to the defendant. 23 Supreme Court Act 1935 (SA), s 30B. For example, Brown v South Australia (1984) 36 SASR 147. It was earlier recommended in England; Pearson, § 574-611.

Indemnity

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[10.50] The designations “general” and “special” damages in personal injury cases have had changing and differing meanings from jurisdiction to 42jurisdiction. Originally “general damage” reflected a rule, referring to a loss which was presumed to be the natural and probable consequence of the tort and therefore did not have to be pleaded with specificity. Only if the claim was unusual was notice of “special damage” required. Today, however, at least in Australia, “specials” refers to all items of damage capable of (more or less) precise quantification, comprising medical and other expenses as well as lost earnings up to the date of 43trial. Even if natural and probable, the defendant is entitled to notice because they are quantifiable and help him to evaluate the claim. “General damages”, on the other , comprise all non-pecuniary losses, past and future, as well as future earnings earning capacity). Yet, even with respect to general damages, the ( 44 overriding modern pleading rule is that a defendant is entitled to notice of any unusual circumstances affecting their 45assessment. In the United States, by contrast, the phrase “special damages” tends to refer to all pecuniary losses both past and future. Note, in turn, the importance of the distinction between “pecuniary” and “non-pecuniary” damages, in which the former focuses on lost income/earning capacity and victim expenses (both past and future) and the latter concerns itself with pain and suffering and the like. To complicate things further, some use the phrase “economic damages” to mean “pecuniary” damages, but others (especially those with a deterrence perspective) claim that “non-pecuniary” damages also compensate for “economic loss”. Finally, a still further distinction that is sometimes made is between “” damages which are sometimes equated with recovery for readily quantifiable past losses (“restitutio in integram”) and “compensatory” damages which are sometimes equated for these purposes with the remainder of tort 46damages. This distinction runs into a yet different common distinction made between “compensatory” damages and “exemplary” or “punitive” damages, a matter to be addressed below. So as to try to avoid some of these ambiguities, for purposes of analysis in this chapter, the issues addressed next will first follow the conventional distinction between pecuniary and non-pecuniary loss which cuts across the special/general damages distinction.

42 See Jolowicz, “The Changing Use of Special Damage” [19601 Cam U 214; Luntz (2006), pp 88-96; McGregor, pp 16-19. 43 PaffvSpeed (1961) 105 CLR549 at 558-559; Sticca ujouvelet [1988] VR 899 (FC). In New South Wales known as “out of pocket” . However, in CSR Ltd v Eddy (2005) 226 CLR 1, McHugh J noted at 38 that the introduction of Griffiths v Kerkemeyer damages has made the distinction “ blurred, if not rendered entirely redundant”. 44 Although the verdict results in a global sum, each item must stand on its own: Lai Wee v Singapore Bus [19841 AC 729 (PC). 45 Domsalla v Barr [1969) 1 WLR 630 (CA) (plaintiff’s plan to set up his own business); It)kOUiC1! Australian Iron and Steel Ltd [1963) SR (NSW) 598 (FC) (impairment of sexual capacity). 46 BTCv Gourle-v 119561AC 185 at208, 212.

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is is Personal Injury 271 tort award he receives. Furthermore, some find it repugnant to public morality for the tax collector to demand his cut out of the meagre compensation received by victims of 66misfortune. Yet, it remains the case that had the victim actually earned income, the victim would have paid tax on those earnings, and this leads many to conclude that the result of the no-tax rule is that the taxpayer makes a substantial contribution to the cost of accident compensation. Notice that this analysis all assumes that tort compensation for lost earnings/earning capacity is calculated on a pre-tax basis consistent with the deterrence perspective which would disfavour having the tortfeasor get the tax benefit with a lowered award. Yet, from the compensation perspective some argue for offsetting the non-taxability of the tort award by basins it on the plaintiff’s post-tax earnings. England adopted the latter 7rule,b and so did Australia after reconsideration. Canada traditionally followed the predominant American 68practice of assessing gross 69earnings, although there has been a retreat from the traditional American practice in some US 70cases. Moreover, Canadian courts and provincial legislatures and others have been struggling to work out a sensible solution to an approach that calls for “grossing up” of damage awards to account for 71tax. An obvious solution to this problem does not emerge merely by saying that it depends on “justice, reasonableness and public 72policy”. In favour of the English rule it is sometimes argued that the plaintiff must prove a real loss (not just a technical one), and that to ignore the tax component under modern conditions of high taxation, usually deducted at source, would confer on him an undeserved windfall. But others say that from the perspective of corrective justice, tort law should not take it upon itself to undo the non-taxability policy of the revenue 73code and that an “open-handed rather than a close-fisted approach” should be adopted which bases awards on pre-tax 74earnings, especially given the point already made that the victim will have to pay tax on the income earned on the lump sum he 75receives. Moreover, from an administrative perspective, there is the substantial problem of estimating what post-tax income would actually have been in the future since to calculate this requires predicting future tax rates that may well be different from current rates (higher or lower).

66 This argument has most force in the US because of the contingent fee: Fleming, Tort Process, pp 211-214. 67 BTC v Gourley [1956] AC 185 (personal injuries); Lewis v Daily Telegraph 1964j AC 234 (libel). 68 Cullen v Trappell (1980) 146 CLR 1 (banco). Anticipated by Wrongs Act 1979 (Vic), s 28A; Common Law PracticeAct 1978 (Qid), s 4 (now Supreme CourtAct 1995 (QId), s 15). 69 R t)Jeflfliflgs [1966) SCR 532. 70 A new direction may have been given to the American practice by the adoption of post-tax income for FELA actions in Norfolk & W Rly v Liepelt 444 US 490 (1980). 71 Watkins v Qlafson (1989) 2 SCR 750; Law Reform Commission of British Columbia, Report on Standardized Assumptions for Calculating Income Tax Gross-tip and Management Fees In Assess?ngDamages (1994); Ontario, Courts ofJustice Act, RSO 1990, cI C43. 72 Parry v Cleaver [1970j AC 1 at 13 per Lord Reid. 73 Moreover, the tortfeasor if self-insured will often claim tax exemption for the damages awarded against him: cf Strong v Woodifield [1906) AC 448. Generally: Bishop and Kay, “Taxation of Damages” (1987) 104 LQR 211. An acceptable formula could be found: for example, to tax damages as ordinary income in the years in which it would have been earned (minority recommendation of the Law Reform Commission (No 7, 1958)). 74 Cullen v Trappell (1980) 146 CLR 1. 75 Taylor v O’Connor [1971] AC 115; Watkins v Olafson [1989] 2 SCR 750 (future care).

272

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additional

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discount

affairs

idea required

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compensate

286.

Defendant

available

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least

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getting

(1972)

explanation:

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another

paid

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way

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arithmetical

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discount

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also

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expenditure (CA). of

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assumes

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cautiously:

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to

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stream

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charged

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inflation

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capacity

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rate

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aid,

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(1996)

729 victim

likely

140

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years

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one

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sum

adjustment

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future

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have

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abolished

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of

(comparing

at

(2005)

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to

assessed

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must capacity

“

actually

has

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on

186

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rate

death

evidence

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257.

for

falling

rather

“real”

to

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actual

ought

invest

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by

weekly

offset

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119641

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have

been

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safe

CLR and

fund

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not

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221 the

by

the

An

be

to

or

of

or

of as in Personal Injury 273 of gaining expert testimony at every trial on both sides of the coin. It has therefore achieved a wide following. of course, for this approach7 to be fair, one has to agree on what the real underlying interest rate on safe investments is. The English courts traditionally used a 4-5% discount rate, but in 1999 the House of Lords concluded that this rate implied that the victim would invest his award in securities that the Lords thought were unduly risky, and instead came down in favour of a 3% rate. Two years later the Lord Chancellor, under the power conferred to him 0 81 by Section 1(1) of the Damages Act of 1996, set a discount rate of 2.5 % This reduction from 4-5% to 2.5-3% makes an enormous difference in large awards that are meant to cover many years into the future. In Canada in the late 1970s the Supreme Court approved a 7% discount rate after factoring in an estimated long-term inflation rate of 3.5-4% and an estimated investment income rate of 1O%.82 But those were years of very high inflation and high investment returns. In response to scholarly criticism the Canadian Supreme Court later emphasised that the discount rate could adapt to changin times and later approved the use of a discount rate as low as 2.25%83 A number of provinces have set the discount rate by statute, for example, 2.5% in 84Ontario and in British Columbia 2.5% to future earnings and 3.5% to future care 85costs. Although the Australian High Court also prescribed a rate of 3%,86 by statute all Australian States have adopted a higher 87rate. Anything more than 3% has been criticised for short-changing 88plaintiffs. [10.90] The discussion so far has assumed that the tort victim was working at the time of the accident and indeed had something of a substantial earnings history that could at least plausibly be projected in terms of what he would have earned in the future had there been no tort, taking into account all of the matters already discussed. But, of course, not all tort victims were employed at the time of their injury.

79 US:Jones & Laughlin v Pfeifer 462 US 523 (1983). Brady, “Inflation, Productivity, and the Total Offset Method of Calculating Damages for Lost Future Earnings” (1982) 49 U Chi L Rev 1003. Canada: Arnold v Teno 11978] 2 SCR 287 (7%); Lewis ii Todd [19801 2 5CR 694 (4 /4% mmus 2% productivity factor); Rca, (1980) 58 Can B Rev 280; Pritchard V Cobden [1988j Fam 22 (CA). LC Rep No 224 recommended investment in Index-Linked Govt Stock (ILGS): see Kemp, “Discounting Damages for Future Loss” (1997) 113 LQR 195. 80 Wellsv Wells (1999) 1 AC 345. 81 See Damages (Personal Injury) Order 2001, SI 2001/2301. Technically, parties may present evidence that a different discount rate is more appropriate, Damages Act 1996, cl 48, s 1(2). But such deviations are rarely justified: Warriner v Warriner (2002) 1 WLR 1703; Page v Plymouth Hospital HNS Trust (2004) 2 All ER 367. 82 Andrews v Grand & Toy Alberta Ltd (1978) 2 SCR 229; Thornton v Prince George School District No 57 (1978) 2 SCR 267. 83 Lewis t’ Todd (1980) 2 SCR 694. 84 Rules of Civil Procedure, RRO, r 53.09(1). 85 Law and Equicy Act, RSBC 1996, cl 253, s 56. 86 Todorovic v Waller (1981) 150 CLR 402 (this includes the tax component on the notional investment income and future changes in wage rates and prices). See Davis, (1982) 56 AU 168; Sieper, (1980) 17 MULR 614 (economic analysis). 87 Civil Liability Act 2002 (NSW), s 14 (5%); Wrongs Act 1958 (Vic), s 281 (5%); Civil Liability Act 2003 (Qld), s 57 (5%); Civil Liability Act 1936 (SA), ss 3, 55 (5%); Latv Reform (Miscellaneous Provisions) Act 1941 (WA), s 5 (6%); Civil LiabilityAct 2002 (Tas), 5 28A (5%); Personal Injuries (Liabilities and Damages) Act (NT), s 22 (5%). 88 For example, Carter and Palmer, (1994) 22 Osg H U 197, advocating the offset rule.

274

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Similar problems arise in determining the value of the lost earning capacity of children and students who have no past work experience but probably would have gone into the paid labour force but for the accident or who would likely have been able to earn higher incomes than they are able to earn given the long term disabling condition caused by the tort. Also complicated, but not quite so much, is trying to sort out the value of the loss of future earning capacity of a past worker who is unemployed at the time of the tort, especially if he has been unemployed for some time. [10.1001 An additional issue that arises in connection with the award of compensation for both lost earnings and reasonable expenses is the matter of pre- and post-judgement interest. Most places at least add interest to any award running from the time of judgement so that if there are delays before the plaintiff actually receives the sum to which he or she is entitled, that delay will be compensated. More controversial is the matter of pre-judgment interest that would apply to past losses that are recouped through trial or settlement. In many jurisdictions even these sums carry interest calculated from the time that a victim paid for expenses and from the time that a victim’s earnings would have been received, as a way to discourage delays by 94defendants. Note too that even as to losses already incurred by the time of trial there is the matter of the reduced value of money owing to inflation between the time of the accident and the time of trial or settlement, and in some places that loss in taken into 93

The discussion so far has assumed that the goal is to provide a highly individualised award to the victim, especially for lost earnings, that, to the extent possible, puts him in precisely the same financial position he would have been had the tort not occurred. Trying to reach this goal has meant ever increasing complexity in the adjudication of tort claims and growing reliance on experts and 96computers. In the end, this search for precise corrective justice is often quixotic. In turn, a highly individualised calculation in each case tends to defeat the aims of predictability and uniformity so devoutly pursued especially by English 97courts.

114. Moreover some courts have gone even further, suggesting that damage awards should not reinforce social injustice, calling for the use of gender-neutral data. Cf MacCabe v Westlock Roman Catholic Separate School District No 110 (1998) 226 AR 1 (QB), rev’d in part (2001) 293 AR 41 (CA); Tucker (Public Trustee) v Asleson (1991) 86 DLR(4th) 73 (BCSC), rev’d in part (1993) 102 DLR(4tI) 518 (BCCA). 94 Thompson t’ Faraonio [19791 1 WLR 1157; 24 ALR 1 (PC); Wheeler v Page (1982) 31 SASR 1 (4%); Cookson v Knowles [1979] AC 556 (short-term investment rate); Civil Procedure Act 2005 (NSW), s 100; Suprenie Court Rules (ACT), 0 42A, r 1; Supreme CourtAct (NT), 5 84; Supreme CourtAct 1995 (Qid), s 47; Supreme CourtAct 1935 (SA), s 30C; Supreme Court Act 1986 (Vic), ss 58 — 60; Supreme Court Civil Procedure Act 1932 (Tas), s 34. In New South Wales, Queensland and the Northern Territory, interest is defined according to regulations refred to in legislation, or otherwise, the Commonwealths 10 year benchmark bond rate: Civil Liability Act 2002 (NSW), s 18(5); Civil Liability Act 2003 (Qid), s 60(3); Personal Injuries (Liabilities and Damages) Act (NT), s 30. In NSW interest is only exceptionally allowed in motor cases: Motor Accident Act 1988 (NSW), s 73; Motor Accidents Compensation Act 1999 (NSW), s 137; Motor Vehicles (Third Party Insurance) Act I 942 (NSW), s 35D. 95 Phillips v Ward 11956i 1 WLR 471 at 474; Johnson v Perez (1988) 166 CLR 351 passim; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663. 96 See McLachlan, “What Price Disability?” (1981) 59 Can B Rev 1. 97 For a striking illustration see Paul v Rendell (1981) 55 ALJR 371 (PC).

276

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(3 (3 Persona! Injury award of non-pecuniary damages is especially favoured by those with a deterrence perspective. This makes clear that the social goal in providing non-pecuniary damages is not retribution or punishment’° as in some other legal 106 The scale of non-pecuniary damages should not be underestimated since in many countries they account for more than half the total amount paid out under the present tort system. An even higher proportion of the sum paid out in the settlement of minor injuries is for non-pecuniary loss, in part because defendant insurers are eager to get these small claims off their books while keeping their administrative costs as low as possible, a reality that victim lawyers are well aware of and generally try to 07exploit) In the absence of any logical process for assessing such damages for “pain and suffering and loss of amenity (or faculty)”, jurisdictions have adopted differing approaches. In the United States, where are regularly used in the trial of torts cases, the matter is left entirely up to individual juries with no guidance from the courts as to outcomes in past cases. Jury awards are subject only to review by trial judges on the basis of hard-to-prove claims that individual juries acted on the basis of whim, bias or caprice. The result in America is that many believe that there is a great variation in the amount of non-pecuniary loss awarded in what appear to be essentially identical cases)° 8 contain and Courts (and sometimes legislatures) have taken steps both to standardise non-pecuniary loss awards, while also attempting to respond to what is “fair and equitable”.’° The resulting trend toward more or less standardised awards (“flexible judicial 110tariffs”) is reinforced by the great value those countries9 attach to predictability, which, it is hoped, promotes faster and less contested settlements and satisfies a sense of justice demanding equal treatment for equal cases. Uniformity is maintained by apellate control over awards” and by displacing juries from assessing damages’ 2 in favour of judges whose professionalism ensures adherence to prevailing judicially- imposed 11norms. More recently, statutory schemes have been adopted to

105 Punishment would not only he impermissible, but will also be frustrated because in most instances the award would be paid out of insurance premiums, not the defendant’s own pocket: Prather 1) Harnel (1976) 66 DLR (3d) 109 at 127.

106 See Stoll, “Penal Purposes of the Law of Tort” (1970) 18 Am J Comp L 3.

107 Pearson, S 382. In South Australia, 44%. 108 Blumstein, Bovbjerg and Sloan, “Beyond : Developing Better Tools for Assessing Damages for Personal Injury” (1991) 8 Yale J Reg 171; Diamond, “Juror Judgments About Liability and Damages: Sources ofVariability and Ways to Increase Consistency” (1998)48 DePaul L Rev 301. 109 For example, “admonitions such as that ‘compensation should aim to be fair rather than full or perfect”: Warren v King [1964] 1 WLR 1, passim, (CA). Censured by Edmund Davies U in Fowler 1) Grace, The Times, 20 Feb 1970. 110 Pickett v British Rail [1980) AC 136 at 168 (Lord Scarman). 111 Appellate €ourts have often more reason, but less authority, to interfere with awards by juries than by judges. A favoured formula is whether the award is so small or large as to shock the appellate tribunal as being Out of all proportion: Thatcher v Charles (1961) 104 CUR 57; Precision Plastics v Demir (1975) 132 CUR 362 (juries); Bratovich L) Mitchell [19681 VR 556 (judge). 112 The English CA firmly opposed discretionary allowance of a jury even when the injury is very unusual: H v Ministry ofDefence [1991] 2 QB 103 (unconsented penectomy); Ward v James [1966] 1 QB 273. See also Chapter 13 Procedure and Proof.

113 Such guidelines by the Court of Appeal were specifically endorsed in Wright v British Rlys [1983) 2 AC 773 at 784. Awards are regularly reported in Current Law (see also Judicial

278

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at if — Personal Injury 279 pounds. The Law Commission, however, argued that the limit was far too 1low and proposed a 200% increase in some 121situations. In 2001 in Heji v °12Rankin the Court of Appeal partially embraced the Law Commission recommendations, calling for substantial increases for the most serious injuries, moderate increases for less serious injuries but no increases for minor injurie5.’ A few years later the hihest award for quadriplegia or serious brain 2injuries reached 205,000 pounds. 1_4 In New South Wales, the maximum amount of recovery for non-pecuniary loss is $235,000 (indexed) for “a most extreme case”, such as quadriplegia, the award in any particular case being in proportion 25thereto.’ Analogous limitations have also been placed on non-pecuniary damages for work injuries against 126employers. Since 2007, New South Wales catastrophic injury 127legislation has established the Lifetime Care and Support Scheme for persons severely injured in motor accidents occurring in New South Wales. Eligibility for the scheme is determined by the LTCS Guidelines issued by the Lifetime Care and Support 128 Importantly, having received damages for future economic loss from “treatment and care needs” relating to the injury disqualifies one from the 29scheme.’ Persons under the scheme (a complete care model) thus must choose between its funding and damages. Victoria has imposed a cap on non-pecuniary damages of $305,250 for motor vehicle 13accidents. Indeed, there is an increasing legislative pattern in Australia after the tort reforms of 2002 to limit recovery for non-pecuniary damages in all° types of personal injury cases,’” creating both caps and thresholds for damages for non-pecuniary 32loss.’

120 Deakin, Johnston, and Markesinis, Tort Law (5th ed. 2003), p 829. 121 Law Corn No 257, Damages for Personal Injury: Non-Pecuniary Loss (HC 344, 1999). 122 Heil v Rankin (2001) QB 272. 123 Lewis, “Increasing the Price of Pain, Damages, the Law Commission and Heil v. Rankin”, 64 Mod I. Rev 100 (2001). 124 Markesinis, Coester, Alpa and Ulistein, Compensation for Personal Injury in English, German and Italian Law: A Comparative Outline (2005), p 16. 125 Civil Liability Act 2002, s 16; Motor Accidents Act 1988 (NSW), s 79. The model was an earlier South Australian statute, by which non-pecuniary damages are reduced to a maximum of $60,000 on a scale of 0 to 60. Wrongs Act 1936 (SA), s 35(a) (now Civil Liability Act 1936 (SA), s 52), later extended to train accidents. See Percario v Kordysz (1990) 54 SASR 259 (FC). See Southgate v Waterford (1990) 21 NSWLR 427 (CA), cited approvingly with regard to similar Western Australian legislation in Insurance Commission of Western Australia v Weatherall [2007] WASCA 264. Similar legislation exists in Western Australia: Motor Vehicle (Third Party Insurance) Act 1943. 126 Workers CompensationAct 1987 (NSW), s 151H. 127 Motor Accidents (Lifetime Care and Support) Act 2006 (NSW). 128 Motor Accidents (Lifetime Care and Support) Act 2006 (NSW), s 58. The Guidelines are available at http://www.lifetimecare.nsw.gov.au/. 129 MotorAccide?ts (Lifetime Care and Support) Act 2006 (NSW), s 7(3). There is an exception to this under Motor Accidents (Lifetime Care and Support) Amendment Act 2009 (NSW), Sch 1{3j. This Act, while passed, has not commenced, but will add an exception through a new 5 7A in the 2006 Act for those who have been awarded damages but who had their injury before the Scheme’s commencement. 130 And a limit of $686,840 on pecuniary loss, TransportAccidents Act 1986 (Vic), s 93(7). 131 Civil Liability Act 2002 (NSW); Civil Liability Act 2003 (Qld); Civil Liability Act 2002 (Tas); Wrongs Act 1958 (Vic); Civil Liability Act 2002 (WA); Civil Law (Wrongs) Act 2002 (ACT); Personal Injuries (Liabilities and Damages) Act (NT); Civil Liability Act I 936 (SA). 132 Civil Liability Act 2002 (NSW), s 16 (15% threshold; $350,000 cap); Civil Liability Act

280

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to a Personal Injury 281 compensab1e.’ By contrast, a third element, variously referred to as loss of “faculty”, of “capacity” or “amenities” — the inability to enjoy the normal 8activities and functions of life consequent, for example, upon loss of a limb has been traditionally viewed as at the heart of the non-pecuniary award especially in cases of permanent disability (whether partial or total). As noted above, however, recent strategies have tended to discount individualization of awards on these grounds by generally equating the physical loss with the amount of the award. Hence, in many jurisdictions a loss of, say, an eye is now treated largely the same regardless of how much that loss has compromised your ability to carry on with your previous activities and regardless of how painful that loss is to you. An amateur violin player generally gets the same award for a lost hand as does someone whose recreation was limited to watching 39television.’ In this sense, the more systematic approach to non-pecuniary loss may be termed more “objective” and less “subjective”. This is probably seen as appropriate to those who take either a deterrence or compensation view of tort damages, but perhaps not so by those who start with a corrective justice perspective.

[10.120] The use of what are, in effect, tariffs or schedules raises yet another thorny issue not yet discussed. Should all victims rendered paraplegic, for example, by their tortfeasor receive the same award, or should it matter at what age they were 140injured? A related matter concerns the question of whether all 25 year olds with the same injury should receive the same non-pecuniary loss award even if they had different life expectancies prior to the tort. When awarding lost earning power one’s predicted pre-tort work life generally matters. And a corrective justice perspective would appear to favour making adjustments based on this victim’s life expectancy before the injury rather than the life expectancy for the nation as a whole. Yet, moving in this direction can cause lawyers to offer evidence that many find troubling — including statistical measures of normal life expectancy based on gender and race or ethnicity. Two further hotly contested matters have also arisen with respect to the years of non-pecuniary loss that a victim suffers. First, what if the tort has caused a reduction in this victim’s life expectancy? What should be done about those “lost years”? One approach would be to base the non-pecuniary award on the number of years the victim had been expected to live before the tort happened. Yet, many victims might claim that the loss of three years of life is worse for them than three years of life with a disability and hence would claim to be under-compensated by such a solution. Defendants may that it seems odd to award money to victims to cover years when they will not be alive — although this may be met with the counter-argument that the victim should have more money to spend per year now that he has fewer years to live. Secondly, and even more puzzling, is what to do with someone who has been rendered effectivelyunconscious by a tort, but is projected to live a long time in that condition. What should be done about those “lost years” ?While this is, on the one hand, an enormous harm to the victim, from the compensation I

138 Kralj v McGrath [19861 1 All ER 54 at 61. Nor, as already noted, are distress or grief unless causing psychiatric injury or exacerbating physical injury. 139 This issue has not yet been explored in Australian cases discussing the assessment of damages under the civil liability regimes. 140 Comande, “Towards A Global Model for Adjudicating Personal Injury Damages: Bridging Europe and the United States” (2005) 19 Temple International and Comparative U 241 discusses the Italian practice of gearing such compensation to the age of the victim at the time of the injury.

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is a Persona! Injury 283 upon from the deterrence perspective. It has nonetheless gained verbal acceptance from the Supreme Court of Canada’ and from some judges both in 15England and 52Australia.’ °5 In contrast to the earlier described restrictions on the recovery of non pecuniary’ damages, this head of damages has also been expanded as more novel types of injury have also come to be recognised, such specifically as loss of enjoyment of sex153 or a 54holiday,’ depression unconnected with any physical or mental injury, even the effect of imprisonment for resulting from a personality 55change.’ Furthermore, note that the award of non-pecuniary damages, even in cases of long-lasting disability, is generally treated as a present loss, and therefore not notionally spread over the whole (future) period and discountable in the way lost earnings/earning power is 56treated.’ And it is assessed in monetary values prevailing at the time of 157as5essmeflt. In terms of international comparisons, there are huge variations among so-called developed economies. While tort damage awards for non-pecuniary loss for those suffering serious injuries in England, Australia, and Canada tend to be in the same broad range as those made, for example, in Ireland and Italy, they are dramatically higher than those made in, say, , Portugal, Greece and 58Denmark.’ Awards in the United States for non-pecuniary losses (in jurisdictions without statutory caps) tend on average to be enormously greater than those made to victims with similar serious injuries in England, Australia, and Canada. Yet, one should appreciate that this is perhaps a misleading comparison because victims in the United States must pay for their legal fees out of their awards, a sum typically amounting of one-third of their total recovery. That means that, in some cases, the net recovery in the United States may be no more, or even less than, the victim’s pecuniary loss — although, because of the

150 Andrews V Grand [1978j 2 SCR 229; Lindal v Lindal [1981] 2 SCR 629. Knutson v Farr (1984) 12 DLR (4th) 658 thought that this reversed R v Jennings [19661 SCR 532, which allowed damages to an unconscious plaintiff. 151 Lord Denning was a consistent advocate of the “need” criterion: from Fletcher v Autocar [1968j 2 QB 322 at 336 to Li,iz v Camden HA [1979j QB 196 at 216. 152 E.g. Windeyer J in Skelton ii Collins (1966) 115 CLR 94 at 131; Teubner v Humble (1963) 108 CLR 491 at 507. For a US view, see McDougald ii Garber, 533 NE2d 372 (NY 1989). 153 Hodges t) Harland & Wolffll96Sj 1 WLR 523; (1996) 4 TLR 253; also Cook v Kier [19701 1 WLR 556 (loss of taste or smell, and impotence). 154 Ichard v Frangoulis [1977j 1 WLR 556. 155 Meah v McCreamer [1985j 1 All ER 367. 156 Nor, therefore, may the award be increased for tax on income from any notional investment, as in the case of pecuniary loss. By statute prejudgment interest (from accident, except in Victoria, Northern Territory, Queensland and Tasmama: commencement of action: Supreme CourtAct 1986 (Vie)s 58(1); Supreme CourtAct (NT) s 84; Supreme CourtAct 1995 (Qld) 5 47; Supreme Court Civil ProcedureAct 1932 (Tas) s 34) is allowable, but only 4%: MBP (SA) v Gogic (1991) 171 CLR 657; Wright v British Rlys [1983] 2 AC 773 (2%). 157 MBP (SA) v Clogic(1991) 171 CLR 657 at 663; Andjelic v Marsland (1996) 158 CLR 20 at 27. Inflation thus being taken care of, the rate of interest should be less than the commercial rate. In New South Wales, in deference to a misleading dictum in Cullen v Trappell (1980) 146 CLR 1 at 21, for a time this was not recognised (Bryce v Tapalis (1989) ATR ¶21,302-4). However, MBP (SA) v Gogic (1991) 171 CLR 657 disapproved of Cullen v Trappell at 664. In New South Wales, and Queensland, interest is statutorily restricted including for non pecuniary loss: Civil LiabilityAct 2002 (NSW), s 18(1); Civil Liability Act 2003 (QId), 5 60(l). In Victoria, no interest whatever is allowed under motor vehicle legislation: Transport Accident Act 1986, s 175. 158 McIntosh and Holmes (eds), Personal Injury Awards in EU and EFTA Countries (2003).

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: • Additionally, or alternatively, exemplary damages are justified on deterrence

. .: grounds. We clearly do not want people to knowingly act in such socially unacceptable ways, and so we threaten them with additional financial costs if r they do so in hopes this will prevent such behaviour. Where the defendant has made a profit from his wrong exceeding the plaintiff’s injury, exemplary damages serve the cause of preventing unjust enrichment. Put differently, in 16 law unless exemplary damages are awarded such settings, tort winds up allowing defendants to engage in “takings”; that is, parties could choose to deliberately harm others so long as they are willing to pay the normal tort damage sum due for the harm done. Nonetheless, some believe that punishment is not properly part of tort law, and as exemplary damages are punitive, they disfavour allowing such awards. Indeed, some jurisdictions have prohibited exemplary damages from claims for personal injury or 166death. A narrower approach has been to bar exemplary damages in specific types of cases, such as motor accident and industrial injury cases, as has been done in New South 67Wales,’ 168Victoria and to some extent Q169ueensland and South 70Australia.’ In somewhat the same vein, in 1964 the House of Lords in ’ dramatically renounced exemplary damages as incompatible with the7 essentially compensatory nature of civil liability, except when expressly ’authorised by statute or against oppressive, arbitrary and unconstitutional acts of government servants or to prevent a tortfeasor reaping a calculated profit from his wrong. Although the types of claims for which exemplary damages

165 Intended to admonish that “tort does not pay”, the category has restitutionary implications, but awards are not precisely geared to profits. Restitutionary damages are a feature of proprietary torts, like and : see LC Consult Paper No 132, Pt VII; Berryrnan, “The Case for Restitutionary Damages, over ” (1994) 73 Can B Rev 320; Cane, pp 321-326. These must be distinguished from actions for unjust enrichment to recover the proceeds of a tort: see Gething, (1995) 3 Tort L Rev 123. 166 Competition and Consumer Act 2010 (Cth), s 87ZB (subject to s 87E); Civil Liability Act 2002 (NSW), s 21 (subject to s 3B); Civil Liability Act 2003 (Qld), s 52 (except where unlawful sexual misconduct was involved or where the personal injury was intentional); Personal Injuries (Liabilities and Damages) Act (NT), s 19 (applies to all personal injury claims, but subject to s 4). Also in some American states: Franklin, “Learning Curve: Lawyers Must Confront Impact of Changes on Litigation Strategies”, 81 ABA J 62 (Aug 1995). 167 MotorAccidentsAct 1988 (NSW), s 81A; MotorAccidents CompensationAct 1999 (NSW), 5 144; sXcvkers’ Compensation Act 1987 (NSW), s 1S1R. 168 Transport7 Accident Act 1986 (Vic), s 93(7); Accident Compensation Act 1985 (Vic), 5 135A(7)(c). 169 Can be awarded against the tortfeasor, hut no indemnity is available from the compulsory insurer: Motor Accident insurance Act 1994 (Qld), s 55; Workers’ Compensation and Rehabilitation Act 200.3 (Qld), s 309. 170 Insurers are excluded from aggravated, exemplary and punitive damages: Motor Vehicles Act 1959 (SA), s 113A. Also, exemplary and punitive damages have been prohibited for defamation inall Australian States. Defamation Act 2005 (NSW), s 37; Civil Law (Wrongs) Act 2002 (ACT), s 139H; Defamation Act (NT), s 34; Defamation Act 2005 (Qid), s 37; Defamation Act 2005 (SA), s 35; Defamation Act 2005 (Tas), s 37; Defamation Act 2005 (Vic),s 37; Defamation Act 2005 (WA), s 37. As a further example, exemplary damages are barred for personal injuries claims that are against deceased estates in certain jurisdictions. Administration and ProbateAct 1935 (Tas), s 27(3); Larv Reform (Miscellaneous Provisions) Act (NT), 5 6. 171 Rookes v Barnard [19641AC 1129. Category I is illustrated (perhaps) by the Copyright Act, category 2 by Holden v Chief Constable [1987] 1 QB 380, category 3 by Cassell v Broome [19721 AC 1027. For details see LC Consult Paper No 132, Part III (1993).

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Liability for exemplary damages is clearly appropriate against an employer who has ordered the commission of a 18tort; perhaps even in cases where he has not “condoned, encouraged or incited”’ it.184 More controversial is the imposition of exemplary damages on a corporation when the outrageous conduct in question was engaged in by a low level employee without the knowledge of management, and in the United States, states are split on the appropriate result in such 85case.’ Some jurisdictions prevent the Crown from being vicariously liable for exemplary damages for their police officers’ 186 The role of with respect to exemplary damages where they are awarded is a complicated one. Where insurance is permitted and the defendant has purchased coverage, the result is that, although the damage award will not really punish the wrongdoer, it will still serve to reflect the public’s indignation towards the wrongdoer’s 187conduct. In some jurisdictions that truly seek to punish defendants for outrageous conduct through the award of exemplary damages, it is forbidden to cover those damages through 188insurance. Note, too, that ordinary tort liability insurance frequently will not cover exemplary damages because, by , coverage is restricted to “accidental” harm. Indeed, where such insurance is in play, the victim may be ill-advised to claim exemplary damages because a successful case might well preclude gaining access to the defendant’s insurance for even the compensatory damages.

The discussion so far has assumed only two categories — exemplary (or punitive) damages and ordinary compensatory damages. However, in some jurisdictions it is permissible to award “aggravated” damages that might be seen as falling in between. Aggravated damages are said to compensate for intangible losses like injury to feelings and pride (historically largely ignored by the common 89law),’ and in that way aggravated damages protect important interests of personality. In NSW V Ibbett’ the High Court described aggravated damages as “a form of general °9damages, given by way of compensation for injury to the plaintiff, which may be intangible, resulting from the circumstances and manner of the

I 83 XL Petroleum v Caltex; cf Rest 2d, § 909. 184 Semble, Lancs CC ii Municipal Insurance [1996] 3 WLR 493 (CA) (liability insurance effectively covers such a case). Semble, contra: Canterbury Club v Rogers (1993) ATR ¶81-246 at 62,555. This question has been settled inAustralia: the High Court in New Sout1 Wales v Ibbett (2006) 229 CLR 638 approved (at 654) the approach of Adams v Kennedy (2000) 49 NSWLR 78. In the latter, Priestley JA said (at 87) that “ [tjhe amount [of exemplary damages] should also be such as to bring home to those officials of the State who are responsible for the overseeing of the police force that police officers must be trained and disciplined so that abuses of the kind that occurred in the present case do not happen”. 185 Rest2d, § 909; California Civil Code, s 3294(b). 186 Australian Federal Police Act I 979 (Cth), s 64B(3); Police Service Administration Act I 990 (QId), 5 10.5(2). 187 Lamb v Cotogpo (1987) 164 CLR I (assault by motor vehicle); the High Court refused to reopen the case in Gray z’ Motor Accident Commission (1998) 196 CLR 1. Dubitante: Dupont v Agnew [1987] LI Rep 585. Against intended injury, however, insurance is void. 188 For example, California Civil Code, s 1668 and California Insurance Code, s 533. American law is divided: 4 Harper, James & Gray, § 529. 189 Such injuries are recognised as items ofgeneral damages, for example, in defamation, hut are generally disallowed as being too trivial and difficult to assess: for example, Kralj v McGrath [1986] 1 All ER 54 (mother’s loss of child in birth) where it was questioned whether it was not restricted to dignatory torts, excluding personal injury. 190 NSWv Ibbett (2006) 229 CLR 638.

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that

1478.

about

2

(Mason

10

collateral or

§ the

although t’

s

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of

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52

Kars

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25.23;

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ultimate

NT:

right

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injured

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provider recovery);

economic

security

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of

ofNZ

action 1

of

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in

(1996)

and

of Personal

(accident

plaintiff’s

collateral

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which

a

Fleming,

his

the

exceedingly

losses.

program,

damages. 191

might

to

benefits

these

two

the

source,

Dawson

this

number

in

v

and

oppose

which

in

187

but

Espagne

policy

seek

1iability. 19

to

collateral

damage

of

relation

of

payments,

/ustice

Injuries

an

beneficiary

policy).

viewpoint

remaining

allows

“collateral

to this CLR

Fleming,

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insurance

both

benefits

to

clearly

the

the

also

try

the

“Collateral

JJ),

source.

own

accident

to

recovery

forbid

of

proceed.

the

or

to

double

(1961)

is

puzzle:

collateral

objectives 354

collateral

which

second

raises

154

complex,

recover

give

(Liabilities

caused

Accepted

is

different

to

ensure

on

the

private

XI

benefit;

collateral

at

not

oppose

and

one

(Wilson

This

once

Tnt

punitive 362

105

some

does

the

of

benefits”.’ 92

provider

solutions.

(that

Source

the

manage

the

by

the

recovery,

at

Alternatively,

Encycl

directly

or

in

is

the

that

CLR

(Dawson

and in

unlawful

source

benefit

and

insurance

provider

rule question

all

ways.

discussion

here. in

part first

the

other

J);

Australia

the

to

not

form

portion

replaces allowing

Rule

569;

part the

obvious

keep

Comp

Manser

source.

Damages)

damages

to

reduce

victim

is

applies

because not

third

obviously

J).

The

collateral

a

from

intentional

Speaking to

collateral

but

What

Redding

to

of

and

draw

because

right

his through

L,

of

cut

only

of

is

let r’

of

social

ch

most

does

now

is

Spry

Loss

The

how

lost

as

and

Act,

not

tort

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the

the

the

the

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off

to

11

for

on

of

of

to

is

v

a a Collateral benefits 289 income), accident insurance (that provides lump sums for certain accidentally caused impairments), and health insurance (in places where private health insurance exists either as a supplement to or substitute for government- provided national health benefits). Whether or not the tort victim winds up with what could be seen as double recovery depends first on whether, as a matter of law, the insurer is entitled to reimbursement from the tort victim and second, where that is not the case, what the insurance contract provides. Property insurance (for homes, vehicles, personal property and the like) has traditionally been viewed as giving the insurer a right of reimbursement as a matter of 194law. Moreover, contemporary property insurance typically provide for this result anyway by their terms. Hence in such cases, the tort victim does not obtain double recovery, and the victim’s insurer benefits from the payment made by the tortfeasor, whose liability, in effect, makes it unnecessary for the insurer to cover the loss. Life insurance is treated altogether differently. Not only is there no right of reimbursement as a matter of law, but also life insurance contracts do not provide for reimbursement. Indeed, such a provision might well be found in violation of public policy. Hence there is cumulative recovery by the tort victim or the victim’s survivors in a — both from the tortfeasor and from the insurance policy. This seems unquestionably correct with respect to life insurance policies that contain (as many do) a substantial “savings” feature. After all, no one would suggest that the tortfeasor should be relieved of liability if his victim has a substantial investment portfolio or that an insurer should be relieved of its obligation under such a policy if the victim happens to die from a tort. Even for term life insurance, there is probably a shared social understanding that, if the insured dies, the proceeds are meant to be added on top of whatever else is in the insured’s or payable to his survivors. Hence, either to reduce the tortfeasor’s liability by the amount of the term life policy or to require repayment of the life insurer from the tort award would be to undermine that social understanding — one that is re-enforced by the fact that the insured, after all, has paid the term life premiums. This result, which seems quite appropriate from both the corrective justice and deterrence perspectives, may even make sense from the compensation perspective if one agrees that such life insurance proceeds are bought with the purpose of being add-ons. For disability insurance, accident insurance, and health insurance, however, the case for double recovery is much weaker. People buy those insurance policies, not as add-ons, but in order to assure that payments are made if the insured suffers an accident or illness. Most of the claims on these policies will occur when there has been no tort at all. When it happens that there is a tort that brought on the victim’s injury, however, the idea that the victim should be able to collect from both the insurer and his tortfeasor (frequently the tortfeasor’s liability insurer) is far less compelling than with respect to life insurance. So long as the tort law rule is that private insurance is a collateral source that is tobe ignored, the only way to prevent double recovery is to treat these sorts of policies in the way that property insurance is treated. As a legal matter, however, the general rule is that for these sorts of policies the victim’s insurer does not have a right of reimbursement as a matter of law. Hence, this leaves it to contract to resolve the matter, and in practice many policies do not provide for reimbursement, especially disability and accident insurance policies

194 Jerry and Richmond, Understanding Insurance Law (2007), pp 676-68 1.

290

198

197

worker’s

makers The

tort 1

“fringe” tortfeasor compensation 195

Employment

different not

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extra-legal

conditional

or to

[

of

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96

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benefits

compensation places.

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solution

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[1963]

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sanctions.

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are

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nature

victim

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[1980)

directing

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CA).

197

of

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insurance

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outcome,

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239

32

pensions outset,

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accidents).

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597-598;

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employer, The

relief

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404-405.

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as

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on

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rule

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explanation

rests

by

even

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to form

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defective different services

ignored

of

employer) 98

is

tort

the of

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perspective,

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tort

v

are

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usually

in

wishes

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make

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into

benefits

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to property

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movement

rule

full

of

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compassionate

sources,

fact

victim where

reduced

and

the

perhaps

in

reduce

something

of

cash’ 96

in

and

the

clear

from

benefits.

might

Australia.

ways

whether

product

were

cash

a

(1991).

(1956)

the

damage:

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for

been

double

where

not

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has

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these

does

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to

or

in

or

be

in

3 a Collateral benefits 291

States, health insurance that pays for medical services in case of illness and accident. It is in this area that the great debate over collateral benefits came to be fought out amidst considerable fluctuations of doctrine, reflecting judicial perplexity and lack of direction. Even if one starts from principled opposition to double 199recovery, it is not obvious whether the proper solution is to allow the tortfeasor to reduce his liability by the amount of the employee benefit or to require the tort victim to repay his employer. In England, after an initial sentiment in favour of reduced tort liability, sentiment later swung sharply against 20set-off, only to lean once more towards the original starting 201point. ° With respect to employer-provided wage 202replacement and wage-alikes such as employer-provided disability 20benefits and unemployment 204benefits, there is considerable support for the idea that an employee who has these benefits does not actually suffer wage loss (or at least not a full wage loss) because of the tort. Hence, in Australia in Graham v Baker, the High Court treated such benefits in the way that free medical services provided by the national health insurance scheme are treated, thereby reducing the tortfeasor’s liability. The High Court was not deterred by the argument either that, in Australia, the loss is predominantly considered to be for earning capacity rather than earnings, or that the right to disability pay was in effect earned by the plaintiff and thus analogous to insurance benefits. What if the employer is not contractually bound to make such payments, but does so voluntarily? Are gifts or wages the appropriate analogy? On the one hand, having regard to the extinction-of-loss rationale, why should it matter that the payment was received as a bounty rather than as of right? On the other hand, set-off might discourage benevolence by the 205employer. The resolution of this dilemma remains 206unresolved.

199 The influence ofBTC v Gourley 11956]AC 185 was most evident in Browning t’ War Office [1963J 1 QB 750, the high-water mark ofthat theory. SeeMcGregor, “Compensation versus Punishment” (1965) 28 Mod L Rev 629. The Australian attitude was much more non-committal. 200 In Australia starting with National Insurance v Espagne (1961) 105 CLR 569, in England with Parry v Cleaver [1970j AC 1, in Canada with Boarelli v Flannigan (1973) 36 DLR (3d) 4 (Ont CA). None went as far as the American “collateral source rule” which treats all collateral benefits as res inter alios acta: see Fleming, Process, pp 206-2 11.

20 1 Hussain v Neu Taplow Paper Mills [19881 AC 514; Hodgson ii Trapp [19891 AC 807; Ratych v Bloomer [1990) 1 SCR 940 (though modified by Cunningham v Wheeler [1994) 1 5CR 359). 202 Graham v Baker (1961) 106 CLR 340; Medlin v State Government Insurance Commission (1995) 182 CLR 1. Parry v Cleaver [1970] AC 1; Ratych v Bloomer [19901 1 SCR 940 (except where subrogation). So also holiday pay: Bosch v Liebe [1976] VR 265 (FC); North 0 Thompson [1971] WAR 103 (FC). 203 Graham v Baker (1961) 106 CLR 340 at 351; North v Thompson [1971J WAR 103 (FC).

204 Westivood v Secretary ofState [19851 AC 20; Parsons v BNM [1964] 1 QB 95 (CA). 205 Juranovich v McMahon [1961j NSWR 190 (FC); Volpato ii Zachory [19711 SASR 166. See the extended scussion of this in Luntz (2002), pp 439-441 [8.3.1 1j-[8.3.12j. 206 Hobbelen v Nunn [1965j Qd R 105; Koremans v Sweeney [1966] QWN 46; Farmer & Co Ltd v Griffiths (1940) 63 CLR 603 at 614 (Evatt J);Dal Zotto v Bonnami (1980) 47 FLR 239 at 249 (FC); Evans v Port ofBrisbaneAuthority (1992) ATR ¶81-169 (Qld SC; affirmed without reference to this point in ¶81-181 (QId CA)) required set-off. Not so: Volpato v Zachory [1971j SASR 166; Szittner v Harriott [19671 1 NSWR 233 at 235 (CA); Boarelli v Flannigan (1973) 36 DLR (3d) 4 (Ont CA); cf Cunningham v Harrison [19731 QB 942

(pension). In assessing future loss of earnings, the prospect that the employer will, as of grace, retain the plaintiff despite his disability is a reducing factor: Ivkovic ii Al & S [1963] SR (NSW) 598 (CA); Murphy v Stone-Wallwork [1969] 1 WLR 1023 (HL) (passim).

292

210

209

208

207

insurance directly

refusing

reduced

legislation. 209

considering

such realistic

including

funds

indemnity

benevolence recover paid

thought

funded

Social

employer tortfeasor.

[10.180] paid

of reasonableness

a wages

receives

of

“It

savings

the

benefit insurance,

Ch

Mindful

sense

Yet,

Lords Private

10:

incapacity

positively

victim’s

Regulations

Act Social

Charges) Hodgson

as Harriott

support

Ltd

Hussain

Lord

accidents);

ii satisfaction

decided

out matter

( National

no

1965)

and

Harrison

Damages

required

motor

reimburse

while

out

welfare

that 207

welfare

to

1997,

in

[19611

insurance

that

to

of

Bridge’s

“earned”

tort

benefits

such

held

and

Security

Even

are

for

39

reduce

of

It so

pensions,

the

of

of

passirn

public

that

ask this:

[1967]

Regulations

v

v

the

Insurance

is

employment

c

would

ALJR

social pension

at Smoker

that

received

offends

NSWR

In Trapp

vehicle

{1973)

the

New

these the

that

his

SI

27;

to

that

as

aggregate

quite

and

liability

with

a

schemes,

speech

employee Samios

pains

if

the

Act

response, 1999/786.

reduction

tort

the

in

1

tortfeasor

that

the Road

the

net

work

neither this

premiums 258;

funds,

Taplow

it

NSWR

[19891

a QB

welfare by

considerations,

Espagne

259

v

public

1989,

seem

damages

regard

on

ti

liability

unrealistic.

London

health

was brought

plaintiff

liability

[one’sj

long-term

in

loss. award.

to

nor SI

not

have in

Espagiie

Traffic r’

942

the pensions

(FC).

Hodgson

1999/784

England

from the

Repatriation

distinguish

AC

cI

233

there

may

for

from

the

Paper

still

victim

as

(CA);

the

may

by

policy”,

Here

24,

(a

in

been

being

plaintiff,

Fire

are

807

service

to

personal

other

as

(NHS

at

“public

sense

Pensions,

insurance

social

will

courts

statute,

of

tort

(1961)

more

the

later

and

statutory

two

235

statutory

was

was

benefits

Mills

in

such,

that

v

&

at in

one

the

and

sickness

tort

the

is

provided

Trapp

Statutory

Canada

tortfeasor

Parry

823.

Cit’ilDefenceAuthority

ChaiTes)

plainly

in

liability.

revised

(CA);

security

defendant.

first

of

entitled hand,

and

the

no

injuries

analogous

Commission

different

Road

and unjust

employer

pensions 105

[1988)

source

analogy

benevolence”

most

for

defendants

should

justice

England

it

[1989]

broached

ii

justification

in

Peluchetti

House to

the

from

CLR

Guy

Cleat’er

the

into

was Traffic

long

intent

benefit

Act

have

effect,

pension)

based

benefits

which

in

to

AC

cases

to

Though

and

benefits

government

and offset

AC

same.” 205

t’

line

the

569

receive

that

1999,

the

of

keep

from Trizec

social sources,

The

not,

514

fumbled.

be

(NHS

of

to

in

[1960]

moved

[19701

been

Social 807

anomalous

with

v

to

are

at

private

come

on

but

all

the

plaintiff. 210

proportioned

Paff

and

Warringah

a

Lords

a

reimbursed

his

ci

at

573

but benefits

on

(below,

Eq

wage

plaintiff,

benefit

a

on

victim’s

for

treated earlier

vehicle

Charges)

a

received

full

are security

3.

instead

Security

AC

generally

532.

specifically

tortfeasor v

WAR

[1991]

fringe

liability

[1979]

philosophy

top

(Dixon

See

out

in

Speed

as

her

allowing

any

for wages

eventually

insurance 1

One

met

make—ups,

a

n

entitlement.

Even

statutory

also,

(where

of

Brick

219

of

224). 2AC

different where,

owners

derive

as

the (Reviews

employer

medical

2

benefit

(Recovery

(1961)

requiring

private

who view

any

CJ).

or

by

SCR

insurance might

by

a Road

more

in

for

under

at

during treated

&

to

502;

Dicta

form it

more

“wrongdoer”,

other

Jones

the

In

the

a tort

233;

reform

Pipe

was

756.

has

of

pre-accident 105

from

the

and

of

claimant

as

Australia,

contribute. Traffic

and

insisted

and

Cunningham

forceful

and

the

insurance.

amount

well of

direction, in

taxpayer,

need

noted

of

award

Works

here,

certainly Szittner

v

CLR

Nor

than a

them and

publicly

“justice,

Australia

Appeals)

welfare

Benefits)

pension

like

private

for

Gleeson

thus

earned

funds, period

public

House

social

(NHS

have

fatal

with

549,

and

is

was

Ptv

the

the

the

on life

an

to

to

he

in of

it v Collateral benefits 293

In Australia, the High Court had been on a different tack, in tenacious pursuit of a statutory intent whether the benefits were “conferred on [the plaintiff] not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right”. That there was a discretionary element in the grant of the benefit was interpreted as such a sign, as was the general hypothesis that it could not have been the statutory purpose to benefit the “wrongdoer”. In the result the plaintiff would keep both the benefit and the21award, with the exception of unemployment benefit as a substitute for 212wages. This outcome also had to be reversed by statutory amendments which compels’ reduction or repayment of certain social security benefits on receipt of any form of compensation for the injury.-. . ‘?13

Benefits from torifeasor [10.190] The case for crediting the tortfeasor for benefits with which he has himself furnished the plaintiff is perhaps strongest where the defendant is the plaintiffs employer and has, for example, provided and paid for sick pay for the injured 214employee. In recent decisions, the English Court of Appeal, overruling prior authority to the 215contrary, has now allowed a defendant employer to reduce his tort liability to an employee by the amount of ex-gratuita payments the employer had made to the 216claimant. More controversial is the situation where the defendant is a family member, such as the victim’s spouse, rendering nursing and other assistance in kind, a common occurrence in cases of motor accidents in the family car. The House of Lords earlier held that the value of such services was not recoverable from the defendant because it would oblige the defendant to pay for the plaintiff’s needs twice: once in kind, then in 217money. The reached the contrary 218conclusion, in the belief that it would “reduce the anomalies and absurdities” inherent in this vexing problem. It allowed the claim, emphasising that it measures to the full the victim’s need which is alone relevant, that it avoids a windfall to a compulsory statutory insurer that it recognises services rendered in a spirit of affection and dispenses with resort to fictitious contracts.

211 National Ins v Espagne (1961) 105 CLR 569 at 573 (Dixon CJ: pension for the blind involving a discretionary element, but should that matter?); Redding v Lee (1983) 151 CLR 117 (invalid pension; despite means test which is incompatible with its being intended as bounty, yet operates to relieve public funds if reduction of damages is denied); Pacific v Gill [19731 SCR 654 (Canada Pension Plan). 212 Evans r’ Muller (1983) 151 CLR 117 (4:3) (past benefits; for future see Bertram v

Kapodistrias [1984] VR 619). 2 13 Social Security Act 1991 (Crh), Pt 3. 14 for social security benefits paid during a “preclusion period” ; Halth & Other Services (Compensation) Act 1995 (Cth) for Medicare benefits. For the latter, however, Luntz (2002) notes at p 432 [8.23] that a question of statutory intent is still involved. See also Luntz (2002), P 455 [8.5.7j for social security benefits not affected by legislation and hence still governed by common law.

214 Hussain LI New Taplow Paper Mills [I 98 81AC 514. 215 McCamley jI Cammell Laird Shipbuildiers Ltd (1990) 1 WLR 963. 216 See Williams v BOC Gases Ltd (2000) PIQR Q253 and Gaca v Pirelli General plc (2004) 1 WLR 2683. 217 Hunt v Severs 11994i 2 AC 350. 218 Kars vKars(1996) 187 CLR 354.

294

226

225

224

223

222

221

220

219

expenses

plaintiff

he required. 225

mitigate

caused

existed Australia

allowance victim

or in

justice

deciding

that

mitigate

reasonable plaintiff’s

responsibility.

him

consequences

failure-to-mitigate

unreasonably disagreeable

defendant.

damages. 219

Reduced

[10.200]

The

Ch

the

Notice

or

While

should

10:

it

Dodd

20

Janiak

Matters

[1978) to postulates

Fazlic

100.

(PC); Moore Selvanayagarn

[1979]

Li

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is is Collateral benefits 295 wrong. Moreover, if the victim’s personal financial situation makes it 7necessary to spend more money to mitigate a loss than would reasonably have been spent by a financially better-off victim, the defendant will have to reimburse the full cost incurred by the impecunious 228claimant In some cases, even if the plaintiff unreasonably refuses to mitigate, he will not have to bear the entire loss. Suppose, for example, the recommended surgery that he refused had entailed only a 70% chance of success. The contingency should be discounted just like any future loss; for even if he had acted reasonably, he would have faced a 30% risk of failure for which he is entitled to 229compensation. Defendant-provided benefits [10.210] When the defendant’s wrongful conduct has provided the victim with a benefit, courts have struggled. The issue is well illustrated by the case of a physician who negligently fails to warn a patient that her sterilisation is not foolproof. In consequence, suppose she did not recognise that she was pregnant until an abortion was no longer practicable. First, while she may recover damages for the trouble of her pregnancy and childbirth, they may be reduced by the benefit not having to undergo an abortion. Secondly,while the joy (and benefit) of having the baby may offset the trouble and care of looking after it (both non-pecuniary matters), it may not offset the physician’s obligation to pay for the cost of the child’s upbringing and medical 2care. ° B while Yet, this benefit principle has its limits. Suppose A carelessly trips both are in line waiting to board their flight. B falls and breaks her leg, and because she requires immediate medical care, the plane takes off without her. Sadly, the plane crashes on take-off and all of the passengers are killed. Ironically, then, A has benefitted B since it is better to be alive with a broken leg than dead. Yet in B’s tort claim against A this benefit almost surely will not be allowed to be used by A to offset his obligation to pay for B’specuniary losses, and probably this benefit will also not preclude B from recovering for the pain and suffering she endured from the broken leg.

227 NZ Forest Products v O’Sullivan [1974] 2 NZLR 80; Tucker v Westfield Design (1993) 123 ALR 278; Sirnonitis Vischer & Co t’ Holt & Thompson [1979] 2 NSWLR 322 (CA); see also dicta of Brennan J in Fox v Wood (1981) 148 CLR 438 at 446-447. Even if the effort is abortive or the ultimate cost is greater than if no steps had been taken: Gardner i’ R [1933) NZLR 730; McGregor, § 243-244. Mitigation most probably assumes a complete ; thus not being available to recover the cost of neutralising risk before some damage has occurred: he Orjula [1995j 2 LI Rep 395. 228 Lagden v O’Connor [2003] UKHL 64; [2004] 1 AC 1067 (reversing the earlier position stated in The Lieshosch [1933] AC 449). 229 Janiak v Ippolito [19851 1 SCR 146; Newell v Lucas (1964) 82 WN (NSW) 265 (FC); Plenty vArgits [1975] WAR 155 (FC). 230 Thake v Maurice [1986) QB 644. Compare Cattanach v Melchior (2003) 215 CLR I and Harriton ii Stephens (2006) 226 CLR 52. Note that several jurisdictions in Australia passed legislation to prevent an award of damages for costs of rearing a child where the child’s birth was at issue: Civil Liability Act 2003 (QId), ss 49A, 49B; Civil Liability Act I 936 (SA) s 67; Civil Liability Act 2002 (NSW), s 71.

296

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a a Property damage 297

236market. On the other hand, a plaintiff may well be justified to insist on the costs to repair or rebuild, as in the case of a home to which the owner has become specially 27attached, or of a factory without any reasonable alternative for carrying on the business and retaining its labour 28force. If the plaintiff is entitled to replacement, it often happens that the old thing destroyed can only be replaced by one that is new. Must he then give credit for “betterment”, that is, the extent to which the new one is more valuable either because of a greater life span or efficiency?This was rejected in a case where a gutted factory was replaced by another of equivalent capacity but more modern design, on the ground that to demand a set-off would be equivalent to forcing the plaintiff to invest in modernisation of his 29plant. It is otherwise where the destroyed item (for example, a tractor) has only a very limited life and, although not intended to have been replaced, would have been sold for lessthan its replacement 240model. Lost profits from the damage to property

[1O.240j In case of damage or destruction of a profit-earning object, the plaintiff may claim either for loss of 24profits, or for the cost of a 242substitute pending repair or replacement. Thus when a dredger engaged on work for a harbour board was sunk, the owners’ recovered, in addition to the cost of a substitute, for the extra cost incurred by them (for example, interest on investments, penalties, etc) through the consequential delay in carrying out that 24contract. Damages may even include the loss of a future charter to

236 Public Trustee i’ Hermann (1968) WN (Pt 1) (NSW) 442; Jones v Perth S I19711 WAR 56 (trespass); Moss v Christchurch RC [1925] 2 KB 750 (); Mu;iiielly r’ Ca/con [1978] IR 387 (commercial). 237 Parramatta City Council v Lutz (1988) 12 NSWLR 293 (CA); Evans t’ Balog [19761 1 NSWLR 36 (CA); Ward ii Cannock DC [1986] Ch 546. Some older cases have taken a severer view. 238 Harbutt’s Plasticine v Wayne’s Tank [1970] 1 QB 447 (CA). The same criterion is applied to assessment of loss under fire insurance: Ivamy, Fire and Motor Insurance (1968), pp 166-167. 239 Harbutt’s Plasticine v Wayne’s Tank [1970] 1 QB 447 (CA); Anthoness t’ Bland S [19601 SR (NSW) 659 (rare car). But in such a case, it might be fair for the plaintiff to make some allowance for the interest on the accelerated expenditure: James Street Hardware v Spizzirt (1987) 43 CCLT 9 (Ont CA). See Berryman, “Betterment before Canadian Common Law Courts” (1993) 72 Can B Rev 54. 240 Hoad v Scone Motors [1977] 1 NSWLR 88 (CA); cited approvingly in Gagner Pty Ltd v Canton Corporation Pty Ltd [2009] NSWCA 413. 241 Lonie v Perugini (1977) 18 SASR201 (until replacement trees found); Glenmont investment Pty Ltd v O’Loughlin (No 2) (2000) 79 SASR 185. 242 AthabaskaAirways v Sask GoverninentAiru’ays (1957) 12 DLR (2d) 187 allowed recovery of the latter though it exceeded the former. 243 Liesbosch (Dredger) v The Edison [19331 AC 449. On the principle that a wrongdoer takes his victim as hi finds him, he is chargeable even for exceptionally high profits which the plaintiff would actually have earned (at 464); contra: The Naxos [1972j 1 Ll Rep 149 (average rate). Also for outstanding hire purchase balance though in excess of car’s value: Millar V Candy (1980) 39 ACTR 74. Yet the extra cost of having to hire rather than buy a substitute, because of impecuniosity, was disallowed in The Edison as “extrinsic” and too remote — a ruling suspect since the demise of Polemis and not followed in modern cases like A-G v Geothermal Produce [1987] 2 NZLR 348 (CA) (nuisance); Doyle LI Olby l1969i 2 QB 158 (deceit); Bevan v Blackhall (No 2) [1978] 2 NZLR 97 at 119 (architect’s negligence); Freedhoffv Pomalift (1970) 13 DLR (3d) 523 (impecuniosity caused by wrong); Phillips, (1982) 20 Osg HLJ 18; Wexler, (1987) 66 Can B Rev 129.

298

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251

250

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tortfeasor.

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of

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use,

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