Damages – Chapter 12 Torts PDF

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Damages – Chapter 12 pages 559 – QUESTION 2 IS BASED ON DAMAGES Compensatory and other damages  Compensation is the reparation of a civil wrong by provision of a sum of money awarded by a court  Losses arising from personal injury will normally be both financial and personal and the award of damages must take both into account  Clearly the value of personal losses such as pain and suffering, loss of enjoyment of life and diminished like expectancy cannot be calculated in monetary terms  examined under non economic loss  Courts do attempt to calculate monetary losses and in relation to specific past losses such as expenditure or lost income to the date of the trial this can be done with a high degree of accuracy  In relation to future losses such as loss of income and the costs of upkeep and treatment for an injured person, assumptions need to be made concerning the injured persons life had the tort not been committed as well as in relation to his or her future post-tort  On occasion courts will award damages for other purposes such as vindication, deterrence or punishment The four types of damages that may be awarded in a tort action are: 1. Nominal 2. Compensatory 3. Aggravated 4. Exemplary or punitive damages  Nominal damages – are small sums awarded in recognition that plaintiff’s rights have been invaded in a technical sense but no damage has been sustained.  Hence they are vindicatory  Cannot be awarded in negligence where damage is the gist of the action because personal injury always constitutes damage.  Wilton v Commonwealth of Aus (1990) 12 MVR 243.  Vindication, consolation and reparation are the conjoined purposes of defamation awards the vindicatory aspect being to restore the plaintiffs reputation in the eyes of the outside world  Vindication to particularly appropriate when a plaintiff suffers intangible harm such as injury to purpose.  At common law exemplary and aggravated damages may be awarded for commission of a tort in addition to basic compensatory damages Basic principles in compensatory damages awarded  Gibbs CJ & Wilson J in Todorovic v Waller (1981) 150 CLR 402  6. Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them. In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff. Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it. Fourthly, the burden lies on the plaintiff to prove the injury or loss for which he seeks damages. Restitutio in integrum or the compensatory principle  At common law it has ling been acceoted that the primary principle underlying damages is restitution in integrum that is plaintiffs are entitles to be restored to the position they would have been in but for the defendants wrongdoing  Tort damages are intended to provide ‘fair’ rather than ‘perfect’ compensation for the plaintiffs loss.  Lee Transport Co Ltd v Watson (1940)  Livingstone v Rawyards Coal Co (1880) Lord Blackburn referred to  the general rule that where any injury is to be compensated by damages in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured or who has suffered in the same position as he would have been in if he had not sustained the wrong for which he is not getting compensation or reparation  This mean that a plaintiff who earned $500,000 per annum before the accident and who can no longer work would have his or her future economic damages calculated at common law on the basis of a $500,000 loss per annum  A low skilled worker earning $25,000 per annum before the accident and who can no longer work would have damages assessed on the basis of a $25,000 loss per annum  Because of its individualized focus the common law has been seen as the ‘Rolls Royce’ of compensation systems, premised on corrective justice notions  Precise justice in this context is seen as being as importance in determining the quantum of damages as it is at the liability stage.

The ‘once and for all’ rule  In actions for negligence the cause of action arises when the damage is suffered  At common law the plaintiff recovers a single lump sum payment intended to compensate for all past and future losses relating to the action.  In Murphy v Stone Wallwork (Charlton) Ltd [1969] Lord Pearce said: Our courts have adopted the principle that damages are assessed at the trial once and for all. If later the plaintiff suffers greater loss from an accident that was anticipated at the trial he cannot come back for more. Nor can the defendant come back if the loss is less than was anticipated. Thus the assessment of damages for the future is necessarily compounded of prophecy and calculation. The court must do the best it can to reach what seems to be the right figure on a reasonable balance of probabilities avoiding undue optimism and undue pessimism.  According to one judge, what the court is being asked to do in the process is ‘to assess the assessable, to pronounce on the unpronounceable to judge the unjudgeable’  Mundy v Gov Insurance Office of NSW (unreported) (1995)  The inability to re-open assessments can give rise to serious hardship for injured plaintiffs as well as to unmerited windfalls for their estates in the event of earlier than anticipated deaths.  The evidence suggests that in the most serious cases plaintiffs are frequently under-compensated  In some Aus jurisdictions modifications of the ‘once and for all’ rule have been adopted or recommended in relation to certain types of actions.  In Murphy v Stone Wallwork (Charlton) Ltd [1969] Lord Pearce  said that although periodic payments and a right of recourse whenever circumstances change might seem an attractive solution to the difficulties imposed by ‘once and for all’ assessment they too have serious drawbacks such as the unending possibility of litigation.  Finality in judgments was seen as an important principle. Damages awarded unconditionally  Todorovic v Waller  the court has no concern in which the plaintiff uses the sum awarded to him… [He] is free to do what he likes with it. A system in need of reform?  Unlike social security, which is based on need and workers compensation, which depends on the employment relationship, damages in tort are normally fault-based both at common law and pursuant to civil liability legislation.  Many commentators, both judicial and academic have criticized the tort system of compensation  Professor Patrick Atiyah has been a strong critic, arguing that by definition many deserving victims of accidents are precluded from recovering compensation at all simply because they are unable to prove fault whereas others with identical injuries who can prove fault may recover large sums.  As close to a quarter of injuries requiring hospital treatment occur in the home where the accident is likely to be the plaintiffs own fault this is undeniable Atiyah says: the system is about as fair as a lottery. In fact it is not too much to say that is a lottery, a lottery by law. It is almost a matter of chance whether you can obtain damages for disabilities and injuries; it is almost a matter of change who will pay them it is almost a matter of chance how much you will get.  Atiyah attacks what he calls ‘stretching’ the law that is judicial extension of the boundaries of the system in favour of the plaintiffs for reasons of sympathy and he criticizes the restitution in integrum basis of compensation.  He says: the basic problem is that those who are compensated with damages are a tiny minority of all victims of accidents and disabilities and the more we squeeze into this category the less money is likely to be available for the great majority of victims. It is rather as though, faced with a hundred homeless people living on the street we picked out one or two and lodged them in the Ritz of out expense. If we stretch things a little more … perhaps we could afford to help one or two of the homeless and put them in Ritz too. But we shall then find that the bill from the Ritz is so large that we shall have little of nothing to spend on the remaining 96 sleeping on the street. So stretching here will actually have made things worse.  This is of course the other side of the “Rolls Royce” coin.  Sugarman argues that the ‘moral coin of inconsistent treatment of equals’ is higher in restitution systems of compensation  This raises the question whether it is fairer (more equal) to treat like with like or all alike  Many as very unjust would regard using the tort system of compensation to impose social leveling only upon a randomly selected group of accident victims in an otherwise unequal society.  Murphy J in the HC was a stringent critic of what he saw as judicial reluctance to award compensation that accurately reflected the true cost of injury.  Todorovic v Waller (1981) Murphy J said: Despite the paucity of statistics on extent of injuries and costs, it is clear that the direct social costs of industrial and road accidents greatly exceed the national defence budget. The problem is aggravated in financial terms because the advancement of medical science makes it possible to keep alive for many years persons who

previously would have died soon after accidents; the costs of doing so are enormous. With the present death and injury rates, awards based on full restitution may be an unacceptable burden upon the community, particularly upon vehicle owners and industrial concerns, through the insurance system. (at p453) 8. One way to reduce the burden is to transfer some or all of the social costs to the injured persons and their dependants. This has been the preferred judicial method, achieved (a) by unjustifiable discount rates (reaching even 8 per cent) applied to earnings and expected medical expenses which the courts pretend will not increase with inflation (b) by ignoring general increases in wages due not to inflation, but to increases in productivity, (c) by miserable awards for pain and suffering for catastrophic injuries, and perhaps the worst (d) by declining to implement the direction in compensation to relatives legislation to award damages proportioned to the injury (see Jacobs v. Varley (1976) 50 ALJR 519 ). For many years, but especially after Arthur Robinson (Grafton) Pty. Ltd. v. Carter (1968) 122 CLR 649 ; Chulcough v. Holley (1968) 41 ALJR 336 and up to Barrell, in serious personal injury cases the social function of the courts has been to depress damages. This has transferred much of the cost of serious road or industrial accidents (which would otherwise be borne by insurance companies and ultimately the public) to the injured person. The principle of restitution has been theory, not practice. Defendants' insurers often appealed, upon the ground of excessiveness, against awards which, in my opinion, were inadequate, and sometimes succeeded (as in Sharman v. Evans (1977) 138 CLR 563 ); sometimes not (as in Kaufmann v. Van Rymenant (1975) 49 ALJR 227 ). (at p453) Assessment of damages Date of assessment  The normal rule at common law is that a plaintiffs entitlement to damages arises when the cause of action is complete  In negligence the cause of action is complete when the harm is sustained so damages are calculated from this date.  An exception to this rule is made for personal injury, wrongful birth and wrongful death action  For these the date of assessment is the date of the verdict  This is fairer to plaintiffs in a ‘once and for all’ system especially where there are long delays in coming to trial since it allows the court to take account of known factors such as inflation, changes in wages and the vicissitudes of life.  Willis v The Commonwealth (1946)  Johnson v Perez (1988)  a construction worker instructed his solicitors to sue three separate employers for injuries sustained at work over a five-year period. The claims were eventually struck out for want of prosecution. Perez sued the solicitors for negligently allowing the claims to fail. In addition he claimed psychological injury arising from the workplace injuries, aggravated by the solicitors negligence. One of the issues considered was whether the date for assessment of damages was the original hearing date (assuming that the solicitors had not been negligent) the later date when the causes of action were struck our or the date of making the eventual award  The Supreme Court of Qld and the Full Court on appeal both assessed damages as at the date of the award.  The later date allows for greater accuracy in determining the personal circumstances of the plaintiff or vicissitudes of life  Baker v Willoughby [1970] HL – illustrates the complications that could arise. There the plaintiff was injured in the leg in a car accident with a prognosis of lasting disability. Prior to the motor vehicle case coming to trial he was shot is the same leg during a robbery at his workplace and his leg had to be amputated. The trial judge held that no account was to be taken of the shooting and amputation in the assessment of damages for the motor vehicle accident.  On appeal Lord Reid pointed out that: There is no doubt that it is proper to lead evidence at the trial as to any events or developments between the date of the accident and the date of the trial which are relevant for the proper assessment of damages … and it is always proper to take account of developments with regard to the injuries which were caused by the defendant’s torts: those developments may show that any assessment of damages that might have been made shortly after the accident can now be seen to be either small or too large.  In relation to a plaintiffs medical prognosis, the Privy Council said in Thompson v Faraonio (1979)  actual improvement or deterioration in the medical condition of the injured person is taken into account and it would be carrying theory to absurd lengths if such medical history had to be disregarded in favour of prognosis made immediately after the accident. Recoverable heads of loss  Australian courts no longer take a global approach to the assessment of personal injury damages instead preferring to itemize the award under various headings or ‘heads of loss’, to avoid double counting and omission.  Windeyer J identified the general areas of loss in Tabner v Humble (1963) saying  broadly speaking there are, it seems to me, three ways in which a personal injury can give raise to damage. First it may destroy or diminish, permanently or for a time an existing capacity, mental or physical. Secondly it may create needs that would not otherwise exist. Third it may produce physical pain and suffering.  The HC expanded on this in CSR Ltd v Eddy (2005) Glesson CJ, Gummow and Heydon JJ:

A plaintiff who has suffered negligently caused personal injury is traditionally seen as able to recover three types of loss. 29The first covers non-pecuniary losses such as pain and suffering, disfigurement, loss of limbs or organs, loss of the senses –sight, taste, hearing, smell and touch; and loss of the capacity to engage in hobbies, sport, work, marriage and child-bearing. Damages can be recovered in relation to these losses even if no actual financial loss is caused and even if the damage caused by them cannot be measured in money. The second type of loss is loss of earning capacity both before the trial and after it. Although the damages recoverable in relation to reduced future income are damages for loss of earning capacity, not damages for loss of earnings simpliciter, those damages are awardable only to the extent that the loss has been or may be productive of financial loss. Hence "the valuation of the loss of earning capacity involves the consideration of what moneys could have been produced by the exercise of the [plaintiff's] former earning capacity" The third type of recoverable loss is actual financial loss, for example, ambulance charges; charges for medical, hospital and professional nursing services; travel and accommodation expenses incurred in obtaining those services; the costs of rehabilitation needs, special clothing and special equipment; the costs of modifying houses; the costs of funds management; and the costs of professionally supplied home maintenance services.       

The common law separates losses into two categories  special and general damages. In older cases the term special (specifiable) damages refers to medical and associated costs and loss of earnings up to the date or trial (settlement) The plaintiff could recover as special damages those medical costs which had been paid or where they’re an existing legal obligation to pay. In contrast to general damages, special damages can be calculated or estimated with some accuracy  these have to be specifically pleaded. General damages are of their nature, incapable of mathematical calculation.  They are ‘at large’ in the sense that a judge or jury has in serious cases a wide discretion in assessing them. General damages may be assessed not with reference to any limited period but with reference to an indefinite time. General damages include those awarded for ‘pain’ and ‘suffering’ and such damages are assessable for past, present and future pain and suffering.

DAMAGES FOR ECONOMIC LOSS Past out of pocket expenses  All reasonable medical treatments and expenses relating to the injury are recoverable upon proof of payment or liability to pay by the plaintiff.  Medical expenses are both a new need arising from the defendant’s negligence and mitigation by the plaintiff.  Past expenses are recoverable under either analysis.  The decision in British Westinghouse Electric & Manufacturing co Ltd c Underground Electric Railways Co of London  established the plaintiffs in all types of actions have a duty to mitigate or minimise their losses.  Where the loss is personal injury, mitigation requires acceptance of reasonable medical or other treatment. Loss of earning capacity  The 2 main heads of economic loss are loss of earning and new economic needs created by the injury  Young plaintiffs who are permanently incapacitated for work but who may still have a long life expectancy can be awarded ver considerable sums under these two heads  Loss of earning capacity refers to income that the plaintiff would have earned but now cannot earn as a result of injury both past (between the date of the injury and the trial) and future.  Damages are awardable only to the extent that the loss of capacity has been or may be productive of financial loss  This distinction between loss of wages and loss of earning capacity is significant Cullen v Trappell (1980) Barwick CJ  in the first place the replacement of the capacity to earn money by damages was by the very statement of the problem not an exercise in replacing the wages which were currently being earned or which might be expected to be earned by the injured person … the problem is to value the capital asset of the injured person, namely his capacity to earn money. Whilst it is true what that capital asset by its exercise may produce in the form of money will quite properly be an element and perhaps in some cases a dominant element in the valuation, the exercise is not in my opinion one in which it is sought merely to replace the wages themselves.  The distinction is particularly significant for plaintiffs who are unemployed or under employed at the date of the accident or example part time or casual workers, students, children and unpaid domestic carers.

An analogy can be drawn with residential property available for lease.  the dwelling is the capital asset which has value even if temporarily untenanted.  The income is the rent produced when that asset is put to work (leased)  The amount of rent able to be achieved helps set the market value of the...