10

Damages

Personal Injury
[10.10] What remedy does (and should) the legal system provide to tort
victims? Although they may occasionally obtain injunctions intended to prevent
ongoing harm, almost all successful tort claimants obtain money damages. A
surprisingly large number of difficult and contested issues arise, however, in
determining just how much money should be awarded. This chapter explores
those issues.
Part of the problem is factual uncertainty, especially, but not only, with
respect to losses that will occur in the future, that is, after the trial or settlement
of the case. But, in addition, there are fundamental legal questions at issue that
centrally arise from disputes about the underlying reasons for awarding tort
damages in the first place; whether tort law is ultimately compensatory, a
deterrent or concerned with corrective justice is discussed in Chapter 1.
The focus of this chapter will be on damages for bodily injury (and death).
The material is organised in this way. First, the question of whether damages
should be paid in a lump sum or periodically is addressed. Secondly,
consideration is given to the strength of the proof plaintiffs must offer in order
successfully to claim their damages.
The focus then shifts to the specific types of recoveries that are allowed.
2 So,
thirdly, considerable attention is given to what are typically termed pecuniary
losses (a) expenses incurred (or to be incurred) because of the harm the
tortfeasor has imposed on the victim and (b) the victims lost income or lost
earning power. Fourthly, compensatory awards for non-pecuniary losses (for
example, pain and suffering) are explored. Fifthly, the possibility of receiving
exemplary damages (beyond what compensation would require) is examined.
Discussions of other especially contested issues follow. Sixthly, should
alternative sources of compensation received by victims impact the amount of
tort damages they obtain? Seventhly, when (else) should victims recover less
than their full losses? Finally, the chapter concludes with brief reference to tort
victims whose property has been damaged or destroyed.

1 The leading Xustralian work is Luntz, Assessment of Damages for Personal Injury and
Death: General Principles (4th ed, 2002) and the revised edition (2006); Canada: Cooper
Stephenson; Waddams; England: McGregor; Kemp & Kemp, Quantum ofDamages; Ogus,
Law ofDamages (1973); Street, Damages. Comparative: McGregor; XI mt Encyci Comp L,
ch 9 (Personal Injury and Death).
2 Because the terms special and general damages have both different meanings from one

legal system to another and changed meanings in some places over time, those terms will not
be employed here. So, too, for similar reasons, damages for economic loss will not be
used. Instead, damages will be described as compensating pecuniary and non-pecuniary
losses, and non-compensatory damages will be termed exemplary (or punitive).
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 common law 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.
3 As a corollary to the lump sum rule, the plaintiff must sue
reasonably promptly (lest he run afoul of the statute of limitations) once and
for all for his entire loss: past and future.
4 In the normal course, therefore,
neither may he split his cause of action by suing separately for different heads of
5 nor can a subsequent action be brought by either plaintiff or
damage
defendant 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.
6
The lump sum rule should be contrasted with typical arrangements in social
insurance schemes, including workers compensation in which benefits are paid
periodically (for example, monthly) and are often adjusted over time as the
claimants 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 victims 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, Civil
Procedure, 8811.11) he can sue only once for the same accident. In England (Brunsden v
Humphrey (1884) 14 QBD 141) and Australia (Marlborough v Charter Travel (1990) 18
NSWLR 223 (CA) and Linsley v Petrie [1 9981 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

personal injury and property damage, 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 discovery 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 OSullivan [2009] NSWCA 119; Gamser v
Nominal Defendant (1977) 136 CLR 145; Mulholland v Mitchell [1971) AC 666.
 Personal Injuiy 263

trial or settlement may better send a precaution-promoting message to potential

injurers generally. Secondly, periodic payments risk enticing victims to malinger,
whereas a lump sum payment then frees the victim from negative financial
consequences of a faster-than-expected full recovery
It is not obvious which solution best fits the corrective justice perspective,
although perhaps justice to defendants argues for fixing a specific liability
amount once and for all.
Opposition to any general mandatory scheme of variable periodic payments
remains strong.
7 Otherwise courts might have to become like administrative
agencies, adding on a substantial apparatus that would oversee those periodic
payments. Furthermore, lawyers (for both sides) as well as defendant insurers
will generally much prefer to have closed cases, rather than ones for which they
have ongoing obligations. Lawyers want their fees and to move on to new
disputes. Insurance companies foresee enormous costs in establishing reserves,
let alone in indexing benefits against inflation. Moreover, if periodic damages
were to be adjusted for changed circumstances this is likely to create some
ongoing litigation especially over whether a victims worsening condition is
really a result of the initial injury. To the counter-argument that victims may
squander a lump sum, this worry may be met by the purchase of indexed
annuities, which are being increasingly used in voluntary so-called structured
8 and all Australian States statutorily provide for the approval of
settlements,
structured settlements, in relation to personal injury claims, when both parties
consent .

Nevertheless, in several nations one sees a decided movement towards the

ordering of periodic payments at least in certain types of serious injury cases.
One way to reform the common law lump sum rule is to empower the court to
take a more active role in awarding periodic payments instead of a lump sum,
as has been done in England. Under the Courts Act 200310 and the Damages
(Variation of Periodical Payments) Order 2005,11 not only may courts order
that damages for future pecuniary losses be paid periodically, but also courts
are required to consider the appropriateness of such an award.
12 Moreover, in
structuring the payment of an award over time, the court may make the order
variable and subject to later review if there is a chance of significant future
deterioration or improvement in the victims condition. To be sure, the courts
must be satisfied that the payment of ongoing obligations is reasonably
secure. 14
Although voluntarily agreed-to structured settlements are increasingly
common in Canada, the Supreme Court of Canada concluded in 1989 that

7 See Veitch, Cosmetic Reform: Periodic Payments & Structured Settlements (1982) 7
U Tas L Rev I 36; Rea, Lump Sum versus Periodical Damage Awards ( 1 98 1 ) I 0 J Leg Stud
131 who stresses the moral hazard.
8 See Lewis, Structured Settlements (1994); LC No 224 (1994).
9 Civil Liability Act 2002 (NSW), ss 22-6; Wrongs Act 1958 (Vic), ss 28M 28N; Civil

Liability Act 2003 (Qld), ss 63 67; Supreme Court Act 1 935 (SA), s 3OBA; Civil Liabilit-i

Act 2002 (WA)rss 14 15; Civil Liability Act 2002 (Tas), ss 7A 8; Personal Injuries

(Liabilities and Damages) Act (NT), ss 32 33.

10 Cl 39, ss 100 101 (amending the Damages Act 1996).

11 SI 2005/841. Earlier on, Pearson, ch 14 recommended, by majority, variable and indexed

periodicals for cases involving death or serious and lasting injury.
12 Damages Act I 996, cl 48, s 2(1), as amended by the Courts Act 2003, s 100.
13 Damages Act 1996, cI 48, s 2(B), as amended by the Courts Act 2003, s 100, and Damages
(Variation of Periodical Payments) Order 2005.
14 DamagesAct 1996, cl 48, s 2(3).
264 Ch 10: Damages

imposed periodical payments was inappropriate absent legislative

authority. Since then, however, several Canadian provinces have created such
authority. In British Columbia, for example, in auto accident cases involving
awards of more than $ 1 00,000, periodic payments are required when the court
concludes that they are in the best interest of the plaintiff.
16 In Manitoba, if
either party requests it, a court may order periodic payment of a plaintiffs
award, including possible upward adjustments over time.
17 And in Ontario,
courts can order a periodic payment scheme whenever the claimant asks that
his award take into account taxes, or, in medical malpractice cases, there is an
award for future care totalling over $250,000.18
In Australia a similar approach has been taken by New South Wales for
damages awarded for asbestos-related disease and for claims involving motor
vehicle injuries)
9 New South Wales workers compensation legislation permits
courts to award damages according to a structured settlement even if only the
plaintiff prefers this.

2
Developments along these same lines have come into play in some
21 and for medical malpractice cases in California where
Continental countries,
there is a substantial award for future care.
22 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 Australia.
2

Standard ofproof all or nothing

[10.30] Proof of past events, which either happened or did not happen, such as
the defendants alleged negligence or the plaintiffs loss, must normally be
demonstrated by a balance of probability (in contrast with criminal law
burdens that may require the government to demonstrate the defendants
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
evidence 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 88.188.9
(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 1 943 (WA), s 1 6(4) (apparently rarely used because courts insist on
mutual agreement). For the Australian situation generally, see [14.40j of Sappideen et al,
Torts (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.
 Personal Injuiy 265

Awarding a lump sum of damages for future vicissitudes, however, does

not require quite the same all or nothing approach. Instead, the law is here
content to value the mere chance of ongoin or future injury provided it is a
realistic possibility, not merest speculation.
4 Thus, such possibilities as the
future onset of osteoarthritis or 25
y, or that the disability would have
6
epileps
been suffered in any event in the future,
2 are to be taken into account by basing
a portion of the lump sum award on a percentage corresponding to its simple
probability. Given the uncertainty of these future damages, it is generally
thought more equitable (and more in keeping with the deterrence perspective)
to base them on probabilities than either to deny them altogether or award
them in full.
This sensible practice has, in turn, caused some to doubt the wisdom of the
related way in which the common law has traditionally adopted a yes-no
approach to causation, discussed in Chapter 9.

Indemnity principle
[ 10.401 The overriding purpose of our law of damages is to compensate the
injured, not to punish the injurer: his or her degree of fault is irrelevant to
damages (except in cases involving contributory negligence). Punitive or
exemplary damages, over and above compensatory, are allowed (if at all)
only against defendants guilty of contumelious disregard of plaintiffs rights, as
in cases of deliberate libel or wanton physical attack.
27
Even in assessing compensatory damages, the law seeks at most to indemnify
the victim for the loss he has suffered, not to mulct the tortfeasor for the injury
he has caused. Hence the plaintiff must give credit for savings which minimised
particular loss items (for example, what he would have spent on food if he had
not been in hospital)
28 or for any reduction in the anticipated extent of the
injury due to subsequent events (like a widows remarriage,
29 the victims
death or a later accident
).
1
Finally, allowance may have to be made for benefits which offset losses. But
to warrant a set-off, the gain must be fairly closely linked to the loss, not

24 Davies v Taylor [1974] AC 207 at 212, 220 (Lord Reid: substantial rather than

speculative ; Lord Simon: substantial rather than fanciful or remote possibility).
Approved in Australia in Malec vi C Hutton Pty Ltd (1990) 169 CLR 638 at 643 (Deane,
Gaudron and McHugh JJ).
25 Callaghan v Lynch [19621 NSWR 871 (FC); Jones v Griffith [19691 1 WLR 795 (CA);
Schrump t Koot (1977) 82 DLR (3d) 553 (Ont CA).
26 Malec t J C Hutton Pt Ltd (1990) 169 CLR 638 (proof of what might or might not have
3
happened); Oiierla,zd Sydney t Piatti (1992) ATR 81-191 (reduction of 7.5% additional to
normal deduction of 15% for vicissitudes); Commonwealth v Elliot [20041 NSWCA 60
(reduction of 10% additional to existing deduction of 10% for past expenses, but since the
risk of the disability increased with time, a reduction of 20% additional to normal deduction
of 15% for vicissitudes for future economic loss). See also (1991) 69 Can B Rev 136, and
Gregg ii Scott [2005] 2 WLR 268.
27 Below [10.130j.
28 Preferably by deducting the domestic element from cost of medical care: Lou t Camden
HA [1980] AC 174 at 191. In lost years cases (see below) the more speculative criterion of
what the deceased would have spent on himself must perforce he used: ibid.
29 Below, [29.150]. Discounting for remarriage see De Sales i Ingrilli (2002) 212 CLR 338.
30 Zeppos v Pridue (1967) 86 WN (Pt 1) (NSW) 270 (CA); McCann v Sheppard [1973] 1 WLR
540 (CA); Leschke tiJeffs & Faulkner [19551 QWN 67 (imprisonment).
31 Above, Chapter 9. Even supervening events between trial and appeal may be admitted: see
Mulholland t Mitchell [1971) AC 666; Perry ii Phillips 11982] 1 WLR 1297 (CA); Wirr v
Santos [19731 1 NSWLR 432.
266 Ch 10: Damages

collateral or res inter alios acta:

32 for example, where loss of profits due to
inability to replace equipment was mitigated by a later opportunity to purchase
a replacement at a lower cost,33 or where the extra cost of replacing an old
tractor with a new one was reduced by reselling it after a short while when it
was no longer needed.
4 Those transactions were part of a continuous dealing
with the situation in which the plaintiff found himself
35 as the result of the
accident; in contrast to independent or disconnected events, for example, where
neighbouring land damaged by the blow-out of an oilwell increased in value
due to the discovery of oil
36 or where a surgeon left a swab in a patient albeit
the operation saved his life.
37 The distinction is well illustrated by the case of a
physician who failed to warn a patient that her sterilisation was not foolproof.
In consequence she did not recognise that she was pregnant until an abortion
was no longer practicable. Her damages for the trouble of her pregnancy and
childbirth were reduced by not having to undergo an abortion. Even more
fine-tuned was the holding that, while the joy of having the baby set off the
trouble and care of looking after it (both non-economic items), it did not reduce
the cost of its upbringing and medical care.
8
The indemnity ideal has not, however, been pursued with absolute rigour.
For example, the plaintiff need not bring into account many benefits accruing
to him from outside sources as the result of the accident and may, to that extent,
end up being overcompensated. But the problem of collateral benefits is
complex and will be discussed in a separate section.
9 In some instances, also,
the law has been prepared to compensate a plaintiff beyond his particular
needs, for example by awarding heavy damages for loss of the amenities of life
to an insentient (living death).
But against these excesses must be balanced
4
the fact that the plaintiffs indemnity is rarely complete because of the adverse
biases in calculating his loss (as we shall see) and the fact that he usually has to
bear some of his own legal expenses.
41 A tragic feature which belies the
indemnitory ideal is that the more serious and permanent the injury, the less
adequate will be the compensation in practice.

32 See Rest 2d, 920.

33 Bellinghani v Dhillon [1973] QB 304; dist Hussey v Eels [1990] 2 QB 227 (CA).
34 Hoad v Scone Motors [19771 1 NSWLR 88 (CA); see below, [10.2301.
35 12 Halsbury (4th ed), p 481.
36 Green v General Petroleum 205 Cal 328 at 336 (1928).
37 Male v Hopmans (1967) 64 DLR (2d) 105 at 116-117 (benefit not the direct result of the
injury).
38 Thake u Maurice [1986] QB 644; see above, [8.220]. Compare Cattanach v Melchior (2003)
215 CLR 1 and Harriton v 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 childs birth was at issue: Qid: Civil Liability Act 2003, ss 49A, 49B; SA: Civil
LiabilityAct 1936, s 67; NSW: Civil LiabilityAct 2002, s 71.
39 Below, [10.1401.
40 Below, [10.110].
41 Parry-and-party costs awarded to successful plaintiffs rarely meet their actual expenses. In
the US irhere they have to give up one third to one half of the award to their own lawyer,
pro-plaintiff rules (pre-tax earnings, award not taxable, collateral source rule) are usually
justified on this ground: see Fleming, The American Tort Process, ch 6.
 Personal Injury

Distinguishing types of damages special and general

[ 10.50] The designations general and special damages in personal injury
cases have had changing and differing meanings from jurisdiction to
42 Originally general damage reflected a pleading rule, referring
jurisdiction.
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 trial.
43 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 hand,
comprise all non-pecuniary losses, past and future, as well as future earnings
( earning capacity).
44 Yet, even with respect to general damages, the overriding
modern pleading rule is that a defendant is entitled to notice of any unusual
circumstances affecting their assessment.
45 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
restitution 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
46 This distinction runs into a yet different common distinction made
damages.
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) (plaintiffs plan to set up his own business);
It)kOUiC 1! Australian Iron and Steel Ltd [1963) SR (NSW) 598 (FC) (impairment of sexual
capacity).
46 BTCv Gourle-v 119561 AC 185 at208, 212.
268 Ch 10: Damages

Pecuniaiy loss
[ 10.60] Pecuniary loss consists of expenditures necessitated by the accident or
in diminution of earnings or earning capacity the first due to increased needs,

the second due to lost gains. Both are usually more susceptible to precise
calculation than non-pecuniary injury.
The most important item under the first head typically concerns hospital,
medical and nursing expenses, past and future. These are recoverable if
reasonably 47
necessary. In Australia and many other countries the value of
publicly funded medical and hospital services cannot be claimed because the
victim incurred and will incur no 48expense. This is not the rule in the United
States, however, where no comprehensive national health scheme exists
(although the United States solution applies as well to those Americans
receiving government paid-for health care).
49 The Australian approach seems
more in tune with the compensation perspective, whereas the United States
strategy seems to better fit the deterrence perspective, leaving open (to be
discussed below) whether tort victims who recover tort damages for otherwise
funded health care must turn this portion of their recovery over to their health
care providers.
What if a spouse or other relative cares for a victim and perhaps gives up a
paying job to do so? Under an older view, the value of those services could be
claimed as damages by the victim only if they were legally or at least morally
incurred by the victim, and not if the injured person received them free
as is
5
often the case. Some modern decisions have permitted the victim to recover the
value of such nursing and domestic servicesrovided by others, the test being
the victims need, not expenses incurred: These Griffiths v Kerkerneyer
damages, as they are called in Australia, may be seen to provide an indirect
means for reimbursing the dono?
2 and to prevent the tortfeasor from profiting
from this fortuity (thus serving both corrective justice and deterrence values).
And yet, more recently these recoveries have been severely limited by legislative
reform.
53

47 Australian courts are less forthcoming than Canadian regarding the standard of medical
care: cfSharman v Evans (1977) 138 CLR 563 with Andrews ii Grand 119781 2 SCR 229
on
future home versus institutional care for quadriplegics. Deductible is the domestic element

in order to preclude overlap in the award for lost earnings: Tim v Camden HA
119801 AC
174 at 191.
48 The Law Reform (Personal Injuries) Act 1 948 (UK) specifically allows a plaintiff to choose,
and claim the cost of, private treatment. Australian practice agrees: see, for example,
Wyld r
Bertram 119701 SASR 1.
49 Helfend ii Southern California Rapid Transit District 465 P2d 6 1 (Cal I 970). More
recently,
some US states have altered the common law collateral sources rule by statute, Sanders
&
Joyce, Offto the Races: The 1980s Tort Crisis and the Law Reform Process (1990)27
Hous L Rev 207.
50 For example, Blundell v Musgrave (1956) 96 CLR 73.
51 Griffiths v Kerkerneyer (1977) 139 CLR 161; Van Gervan t Fenton (1992) 175 CLR
327
(market value, not earnings foregone); Grmcelis ii House (2000) 201 CLR 321 (commercial
interest rate used); Hunt r Severs [1994] 2 AC 350. A plaintiff cannot recover for
his own
lost capacity to perform gratuitous work for anothers benefit: CSR Ltd v Eddy (2005)
226
CLR 1 reversed in New South Wales, see n 90.
52 But without obligation: Kars v Kars (1996) 187 CLR 354 (as inconsistent with the
loss being
the plaintiffs). In England, following the Scots statutory rule, in trust: Hunt t Severs
119941
2AC350.
53 Abolished in Tasmania (Common Lair (Miscellaneous Actions) Act 1 986, 5)
s and subject to
limits in Victoria (Transport Accident Act 1986, s 93; Accident Compensation Act
1985,
5 134AB(24)(b)); New South Wales (Motor Accidents
Act 1988, s 72; Motor Accidents
270 Ch 10: Damages

finalised before and after his death: before, he recovers for his own future loss
and he can dispose of the award as he likes; after, only dependants can claim
and for their own I

Then, there is the matter of how future contingencies so-called vicissitudes

might have impacted on what a victims future earnings would have been had
he not been injured. On the one hand, even someone with a substantial past
work history could have suffered in the future from ordinary vicissitudes such
as sickness, accident, unemployment and industrial disputes which could have
cut into earnings even without the tort having occurred. On the other hand
there are factors that could well have increased his earnings from current levels
had there been no tort, such as a developing career,
60 promotion, and general
economic prosperity.
61 In addition, there are vicissitudes peculiar to the
particular victim, which may include pre-accident health conditions which
probably would have eventually taken their toll in any event, such as a chronic
disease that likeiy would have reduced his career length as compared with the
average worker. 2
Expenses that would have been necessary for the realisation of earning
capacity, such as travelling, but are not incurred when earning capacity is
curtailed by the accident, also seem appropriately taken into account. The cost
of domestic help or child care that might be avoided because the tort-created
disability keeps the victim at home where he can provide that care (assuming
that is so) might be taken into account for the same reason, and yet perhaps
they should not be deducted from the lost earning capacity award on the
ground that they are expenditures for personal amenity that the victim
should still be entitled to incur.
6
[ 10.801 Taxation creates a further complication. The overwhelming rule is that
lump sum tort awards for personal injury are income tax free, even to the extent
that they seek to compensate for loss of earnings.
64 There are several possible
justifications for this. One rests on the view that what is being compensated is
the loss, not of earnings, but of earning capacity, a capital asset. Another is that
under a progressive income tax system it would be unfair to tax all of the tort
damages in the single year in which they are awarded.
65 Also, if the income tax
were only to apply to that portion of tort damages applicable to lost earnings,
this would create an incentive for victims to conspire with their defendants to
settle cases on terms that allocate most of the damages to non-taxable elements.
Besides, the victim will generally pay tax on the income earned on the lump sum

59 Below, 129.2001 . 743 But see Croke v Wiseinan 11982] 1 WLR 71 (denying damages for
p
lost years to a young man without dependants).
60 See Beasley v Marshall (1986) 40 SASR 544; Taylor ii Bristol Omnibus Co [1975j 1 WLR
1054 at 1059 (fathers position as starting point); Hughes v McKeown )19$5j 1 WLR 963
(girl s marriage prospects ignored).
61 While arbitrary deductions are supposedly improper, in practice deductions of 15% or so
generally prevail: see Koeck t Persic (1996) ATR 81-386. According to actuarial
calculations, a reduction of no more than 2-3% is justified (Traversi, Actuaries and the
Courts (1956) 29 AU 557), which would be balanced by the chance of earning beyond 65
(the usual cut-off point): Tzoutelis v Victorian Rhs 119681 VR 112 at 136.
62 Such discounts are also pertinent to non-pecuniary damages.
63 Wynn t NSW Insurance ( 1995) 184 CLR 485.
64 Australia: Atlas Tiles v B,iers (1978) 144 CLR 202; Finance Act 1965 (UK). s 27(8). But
interest in the award is taxable: Whitaker v FCT ( I 996) 140 A1R 257.
65 The award could be taxed on the basis of the present value of the future tax on the gross
income: Yoran, Tax Aspects in Tort Compensation (1987) 22 Isr L Rev 37. An alternative
division into capital and income is proposed by Bishop and Kay, Taxation and Damages:
The Rule in Gourleys Case (1987) 104 LQ R 211.
 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
66 Yet, it remains the case that had the victim actually
by victims of misfortune.
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 plaintiffs post-tax earnings.
England adopted the latter rule,b 7 and so did Australia after
68 Canada traditionally followed the predominant American
reconsideration.
69 although there has been a retreat from
practice of assessing gross earnings,
the traditional American practice in some US cases. 70 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 tax.
71
An obvious solution to this problem does not emerge merely by saying that it
depends on justice, reasonableness and public policy.72 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
73 and that an open-handed rather than a close-fisted
of the revenue code
approach should be adopted which bases awards on pre-tax
74 especially given the point already made that the victim will have to
earnings,
pay tax on the income earned on the lump sum he receives.75 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?ng Damages (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 OConnor [1971] AC 115; Watkins v Olafson [1989] 2 SCR 750 (future care).
272 Ch 10: Damages

Once one determines how much the loss in earning capacity is worth by
taking all of these matters into account, yet another important adjustment
remains. That is because the claimant will be getting a lump sum now, rather
than earning money over many future years. It would be a mistake therefore, to
award a lump sum which, once invested, would yield an income equal to the
lost earnings. Rather, the goal, as a general matter, is to award the sum which,
together with interest thereon, will yield the required replacement income and
be exhausted at the end.
76 In accounting parlance, the stream of future earnings
must be reduced to present value.
77 For example, assuming an interest rate of
5%, the present lump sum value of receiving $10,000 for 20 years is not
$200,000 but $124,600.78
But 5% is used here just an illustration. What discount rate should actually
be used? In an inflationfree economy, many would argue that the appropriate
discount rate would be the yield of the safest investments, that is, government
securities, whose interest rate, because of their reduced risk, is typically below
the market rate for securities generally. The idea here is that the victim ought
not to have to take market risks, but rather the victim should be able to invest
their sum in these safe securities and still earn sufficient interest to have his or
her lost earning capacity fully compensated.
But given the fact that we often have at least some inflation, it must be
further appreciated that even the interest rate paid on government securities
usually contains a portion that is meant to compensate for the likely falling
value of money over time. This argues for discounting by less than the actual
interest rate on government securities and to use instead the true or real
underlying interest rate on such securities. This all assumes that one has not
increased the amount of earnings it is projected that the victim would have
earned absent the tort on account of the fact that future inflation also likely
translates into higher wages. Because of the influence of inflation on wages and
the ability to earn more from a lump sum in times of inflation broadly offset
each other, many have concluded that in assessing earning capacity one should
ignore how much inflation would have increased wages that would have been
earned absent the tort and that one should discount the lost earning capacity
sum by only the amount of the real inflationignoring interest rate on safe
investments. This method has the added advantage of dispensing with the

76 A plaintiff directly disabled from attending to his affairs is also entitled to allowance for fund
management: Treonne v Shaheen (1988) 12 NSWLR 522 (CA). This has been abolished in
SA: Civil LiabilityAct 1936 (SA), s 57. Only the additional expenditure in fund management
caused by the disability can be awarded: Nominal Defendant v Gardikiotis (1996) 186 CLR
49. The High Court has defined what the amount available here as the amount assessed as
allowing for remuneration and expenditures properly charged or incurred by the
administrator of the fund during the intended life of the fund : Willett i Futcher (2005) 221
CLR 627 at 642.
77 Awards for future care are discountable in the same way as are awards for future loss of
earnings: Todorovic r Wailer (1981) 150 CLR 402.
78 See Prevett, Actuarial Assessment of Damages (1972) 35 Mod L Rev 140 at 257. An
annuity table, like that in (1959) 33 AU 28, computing the present value of various weekly
payments, may he handed to the jury with suitable explanation: Maroney z Christie 119641
VR 806 (FC); Litiitz (2002), ch 6; Lai Wee r Singapore Bus [1984] AC 729 (comparing
English use of multipliers). Beyond such purely arithmetical aid, actuarial evidence
relating to life expectancy according to sex, occupation, etc, or contingencies of death or
remarriage are also occasionally used in Australia, though cautiously: Wickens, Actuarial

Assistance in Assessing Damages (1974) 48 AU 286.

 Personal Injury 273

necessity of gaining expert testimony at every trial on both sides of the coin. It
has therefore achieved a wide following.
7
of course, for this approach 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%
0 Two years later the Lord Chancellor, under the power conferred to him
rate.
by Section 1( 1 ) of the Damages Act of 1 996, set a discount rate of 2.5 % 81 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 Ontario
84 and in British Columbia 2.5% to future earnings
and 3.5% to future care costs.
85
Although the Australian High Court also prescribed a rate of 3%,86 by
statute all Australian States have adopted a higher rate.
87 Anything more than
3% has been criticised for short-changing plaintiffs.
88
[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 Wells v 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 Ch 10: Damages

Take for example homemakers, who are still predominately women. In the
past, economic loss resulting from injury to a housewife was conceived
primarily claimable by the husbands action for loss of her services (a claim for
lost consortium). This archaism is gradually yielding to the recognition of her
own right to assert impairment of her housekeeping capacity, accompanied
either by the complete abolition of the husbands action or by its contraction to
a claim for non-pecuniary injury.
89
Assuming she would almost certainly not have gone into the paid labour
force absent the tort, the preferable basis for compensating her for her loss of
housekeeping capacity would seem to be what it would cost to hire replacement
services .

Today many homemakers were only temporarily out of the paid labour force
at the time the tort occurred and would likely have returned to work or gone
out to work later in their lives but for the tort. Merely compensating them for
the cost of replacement housekeeping services will often substantially under-
compensate for their loss of earning capacity.
91 But determining when and for
how long and at what rate of pay she would have been employed is not easy to
decide, and one might justly be concerned that basing any projections on what
women generally earn today unfairly incorporates into tort awards lingering
effects of employment discrimination against women that might well be
eliminated in the marketplace before too long. 92 Using national average
earnings as a minimum is one solution, although this will overcompensate some
and only gets at a part of the conundrum. Canadian courts have been especially
pressed with complaints that itis unfair to women to used gendered data that
draw on the current situation.
9

89 See Chapter 29.

90 A niggling hesitation in New South Wales was to disregard replacement services when
rendered in the ordinary course of family life and obligation. Kovac v Kozac [19821 1
NSWLR 656; however this has been disapproved: see, for example, Van Gertan v Fenton
( 1992) 175 CLR 327 at 338 (Mason CJ, Toohey and McHugh JJ) and Hanzic i Cabramatta
Comnzunity Centre Inc [19991 NSWSC 1205. See also, Hodges v Frost (1983) 53 ALR 373
(Fed CA); F,aiico v Wolfe ( 1974) 52 DLR (3d) 355 (Ont CA). However, in most Australian
jurisdictions, a housewife can only claim on this basis for services rendered to them because
she could not render it to herself, rather than because she could not render it to another: CSR
Ltd u Eddy (2005) 226 CLR I NSW allows damages for the latter: Civil Liability Act 2002
.

(NSW), 5 15B which reinserted them after CSR r Eddy was decided. As proposed in Burnicle
I, Cutelli [19821 2 NSWLR 26 (CA); Maiward v Doyle [1983j WAR
210. In Australia, this
appears to be the preferable basis on which to claim damages for loss of a capacity to
provide services that fall outside Griffiths v Kerkerneyer damages: Shellharbour City Council
1 Rigby (2006) 150 LGERA 11 (NSWCA).

91 See Graycar, Compensation for Loss of Capacity to Work in the Home (1985) 10
Syd L Rev 528; Riseley, Sex, Housework and the Law (1981) 7 Adel L Rev 121. ALRC
recommended valuation based on gross median weekly.
92 Graycar, Damaged Awards: Vicissitudes of Life as a Woman (1995) 3 TLJ 160; Cassels,
Damages for Lost Earning Capacity (1992) 71 Can B Rev 445. A less prejudicial attitude
prevailed in Wynn v NSW Insurance (1995) 184 CLR 485. See generally, Chamallas,

Questioning the Use of Race-Specific and Gender-Specific Economic Data in Tort
Litigation: A Constitutional Argument (1 994) 63 Fordham L Rev 73.
93 For example, in one British Columbia case statistics used at trial suggested that the projected
lifetime earnings of a male with some non-university post-secondary education would be
nearly double that of a female with the same level of education. Mullholland (Guardia;z ad
litein of) t Riley (1993) BCJ No 920 (SC), affd (1995) 12 BCLR(3d) 248 (CA). Nowadays,
most Canadian courts, even when using female statistics, adjust the damages figure upwards
to account for the societal trend toward a diminished gender gap in later years covered by
the claimants award. The Supreme Court of Canada seems to implicitly endorse this
approach in Toneguzzo-Norvell (Guardian ad litern of) v Burnaby Hospital 1 994) 1 SCR
(
 Personal Injury 75

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 victims earnings would have
been received, as a way to discourage delays by defendants.
94 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 computers.
96 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 courts.
97

1 14. 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), revd in
part (2001) 293 AR 41 (CA); Tucker (Public Trustee) v Asleson (1991) 86 DLR(4th) 73
(BCSC), revd 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 1 986 (Vic), ss 58 60; Supreme Court Civil Procedure Act 1 932 (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 Ch 10: Damages

Moreover, enormous efforts made at precision when it comes to lost

earnings sometimes feel foolish when this part of the award is combined with
the far more imprecise award of nonpecuniary damages that will soon be
examined 98
The individualistic criterion of full compensation, while understandable
from the perspectives of corrective justice and deterrence, has also been
questioned on more fundamental 9 grounds. High earners receive larger tort
awards than do modest earners for the same injuries. Yet, generally speaking,
all consumers pay the same price for the goods and services that wind up
incorporating the cost of tort awards. The result is that tort damage awards,
from the compensation perspective, are thought by some to be inappropriately
regressive a misguided redistribution from the working class and the poor to

the well-to-do. One alternative would be to link awards for lost income to all
victims either to average earnings or to social security benefits. A compromise
solution would be to cap the amount of lost earnings that tort law will
1 Indeed, this latter approach has been recently embraced by
replace.
Australian states which have tended to cap lost earnings replaced by tort law at
three times average 02earnings.
This discussion of lost earning power has assumed that the victim is alive and
is the one on whose behalf the lawsuit is brought. But what if the victim is killed
by the defendants tort? At common law, the death of the victim ended the
matter so far as tort law is concerned, and the defendant was dealt with, if at
all, via the criminal law. From the tort perspective this yielded the bizarre result
that injuring people could be expensive but killing them cost nothing. This
inconsistency was overcome by statutes now everywhere in place. These are
discussed in Chapter 29, [29.110].

Non-pecuniaiy loss
[ 10.110] Nonpecuniary loss poses an entirely different problem from
pecuniary loss. Money may compensate for loss of earnings and other
pecuniary loss, but can neither undo nor offer an equivalent for pain and
distress. For the victim, the most money can furnish is solace, by providing the
victim with the means of distraction and substitute activities, and bringing
about some satisfaction in the face of having been wronged (and hence
supported by those primarily concerned about corrective justice)) To be sure,
not all of the gold in the Bank of England can make good excruciating pain, loss
of sight or limb or cosmetic 04
injuries, but it may finance holidays, recreation
and extra comforts as form of substitute compensation. Moreover, since pain
and suffering are real and things that people would pay to avoid (if need be), the

98 See Pearson vol 2, Tables 107, 108. 4, 1.2.

99 See Luntz, Damages for Personal Injury: Rhetoric, Reality and Reform from an Australian
Perspective (1985) 38 Cur Leg Prob 29; also (1995) 3 TLJ 1.
100 For example, Luntz, 3 TLJ 1 (1995).
101 Pearson, 391 recommended limitation to five times average industrial earnings, 427
solatium to I
102 Civil Liability Act 2002 (NSW), s 12(2) (3 times); Ciiil Liability Act 2003 (Qld), s 54(2) (3
times); Civil Liabilit) Act 2002 (Tas), s 26(1) (3 times); V( rongs Act 1958 (Vie), s 28F(2) (3
7
times); Ciii! Liability Act 2002 (WA), s I 1 ) 1 ) (3 times); Civil Law (Wrongs) Act 2002 (ACT),
5 98(2) (3 times); Personal Injuries (Liabilities and Damages) Act (NT),
s 20 (3 times). There
is no South Australian equivalent.

103 For example, Skelton v Collins (1966) 115 CLR 94 at 131 (Windeyer
[1978) 2 SCR 229 at 262 (Dickson J).
J); Andrews v Grand
104 Raletiski i Diinovski (1986) 7 NSWLR 487 (same for men as for women).
 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
106
legal
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 exploit)
07
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 juries 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
8
cases)
Courts (and sometimes legislatures) have taken steps both to contain and
standardise non-pecuniary loss awards, while also attempting to respond to
9 The resulting trend toward more or less
what is fair and equitable.
110 is reinforced by the great
standardised awards (flexible judicial tariffs)
value those countries 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
2
over awards and by displacing juries from assessing damages in favour of
judges whose professionalism ensures adherence to prevailing judicially-
11 More recently, statutory schemes have been adopted to
imposed norms.

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 defendants 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 Tort Reform: 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.
1 13 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 Ch 10: Damages

further promote these same goals. In the United States most cases are settled,
and seasoned insurance adjustors and victim lawyers rely upon past settlements
to get their negotiations started in the same ballpark. Nonetheless, where only
the common law still applies, the amount of non-pecuniary damages obtained
by seriously injured tort claimants in the United States is, on average,
enormously greater than that obtained in other countries by those with similar
1 14 In response to these huge awards, some of the American states have
injuries.
imposed limits on damages for non-pecuniary loss, as discussed below.
Three types of restrictions are next addressed: thresholds, caps, and
schedules.
With respect to thresholds, some efforts have been made to bar completely
the recovery of non-pecuniary loss in small injury cases. For example, the
Pearson Commission (1978) recommended against awards for the first. New
South Wales allows common law damages for victims of motor vehicle
accidents, subject to the proviso that non-pecuniary damages are not allowed at
all unless the claimants ability to lead a normal life is significantly
impaired. More recent legislation in New South Wales, the Australian
5
Capital Territory, Northern Territory, Tasmania and Western Australia provides
that there is to be no recovery at all for non-pecuniary loss in any personal
injury case if the victims disability rating is less than a particular amount

15% in New South 16 Wales. Similarly, in at least two states in the United States
( Michigan and New York) non-pecuniary loss claims are barred in auto
accident claims where the victims injury is minor.
117
Some Canadian provinces have adopted quite a different approach to
non-pecuniary loss in minor injuries from auto accidents imposing a modest

cap rather than employing the threshold 1 approach. 18

As for caps on very serious injuries, in Canada, for example, in 1978 the
Canadian Supreme Court set a limit of $100,000h19 on the amount of
nOn-pecuniary damages that may be awarded in the most serious injury cases,
and has demanded that awards in less serious injury cases be appropriately
scaled down from that limit.
In 1985, the English Court ofAppeal set an upper limit of 75,000 pounds in
non-pecuniary damages for a tetraplegic, to which awards for all injuries were
to be oriented. By 1999, that maximum had reached about 100,000

Studies Board, Guidelines foiAssessrnent ofGeneral Damages in P1 Cases (1992) and may
be cited to a judge, but not a jury: Waldo;z t War Office 119561 1 WLR 51). The current scale
has been criticised as not keeping up with the rate of inflation: LC Consult Paper No 140
(1995).
114 388. For an even stronger attack on non-pecuniary loss damages, see Jaffe, Damages for
Personal Injury: The Impact of Insurance (1953) 18 Law & Contemporary Probs 210.
California bars an award for pain and suffering if the victim dies before judgment, see
Williamson v Plant Insulation Co 28 Cal Rptr 2d 751 (Cal App 1994).
115 Motor Accidents Compensation Act 1 999, s 131, threshold of 10%.
116 Civil Liability Act 2002, s 16. See also ACT: Civil Law (Wrongs) Act Act 2002, s 27, Tas
Civil Liability Act 2002, s 27; WA: Civil Liability Act 2002, ss 9 10.

117 New York Insurance Law, Article 51, as amended. Schwartz, Auto No-Fault and
First-Party Insurance: Advantages and Problems (2000) 73 S Cal L Rev 611.
118 $2500 in New Brunswick, Injury Regulation Insurance Act, (NB) Reg 2003-20, s 4; $2500

in Nova Scotia, Automobile Insurance Tort Recovery Limitation Regulations, (NS) Reg
182/2003, s 3; and $4000 in Alberta, Minor Injury Regulation, (ALTA) Reg 123/2004, s 6.
119 Andrews v Grand & Toy Alberta [1978] 2 SCR 229 ($100,000 for quadriplegic; since
adjusted for inflation (now about $200,000)). Juries should he instructed on upper limit if
damages are likely to fall into upper range: Ter Neuzen v Korn [1995] 3 SCR 674.
 Personal Injury 279

pounds. The Law Commission, however, argued that the limit was far too

1
low and proposed a 200% increase in some situations.
121 In 2001 in Heji v
12 the Court of Appeal partially embraced the Law Commission
Rankin
recommendations, calling for substantial increases for the most serious injuries,
moderate increases for less serious injuries but no increases for minor
2 A few years later the hihest award for quadriplegia or serious brain
injurie5.
1_4
injuries reached 205,000 pounds.
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 thereto.25 Analogous
limitations have also been placed on non-pecuniary damages for work injuries
against employers.
126
Since 2007, New South Wales catastrophic injury legislation127 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
29 Persons under the scheme (a complete care model) thus must choose
scheme.
between its funding and damages.
Victoria has imposed a cap on non-pecuniary damages of $305,250 for
Indeed, there is an increasing legislative pattern in
motor vehicle accidents.
13
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 loss.
32

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 Schemes 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 Ch 10: Damages

In the United States, a number of individua

legislative caps on non-pecuniary damages som l states have also imposed
etimes restricting those caps to
medical malpractice cases) But these caps

are very different. Rather than

serving as the appropriate sum for those who
are
basis for scaling down of awards for lesser injur most seriously injured and a
ies,
lop off higher awards for the most seriously injur the American caps merely
ed but in no way restrain the
amount awarded in cases where the injury
calls for an amount under the
cap.
34
Even if there is a target maximum award for
non-pecuniary damages in the
most serious injury cases and even if there is a
threshold below with no money
will be awarded for non-pecuniary loss, the prob
lem remains as to how to deal
with the vast ocean of claims falling in between.
In England, a quasi-public agency the Judicial
makes public past awards for a large number of

Studies Board collects and

fine-tuned types of harms. Trial

judges are clearly aware of these numbers and
are very strongly influenced by
them. In this way, consistency is strongly assu
red.
In Australia, an earlier categorical 13rejectio5 n
appellate courts considering the proper proportio gave way to the practice of
like losses but also of other losses, such as com nality to awards not only of
parison between defamation and
personal injuries or of paraplegia and 1 cancer.
6 Even more recently, Australian
States via legislation have adopted more presc
riptive
for example, injuries are now to be ranked in term rules. In New South Wales,
s of the percent disabled the
tort has caused the victim to be. That perc
ent, in turn, will presumptively
determine how much money any victim is to recei
ve for his non-pecuniary loss.
All of these mechanisms embraced in the
predictability tend to de-value the extent of the name of consistency and
harm that the specific victim has
suffered. One way to think about this issue is
to recognise that non-pecuniary
loss in fact contains several elements. First
is actual pain and suffering, an
entirely subjective sensation of conscious distr
ess that varies from victim to
vict7
1 im. Feelings of anger and indignation, as disti
stress, represent a second element, one that has nct from real anxiety and
traditionally been viewed as not

2003 (Qid), s 62 (no threshold, cap determ

ined by formula); Civil Liability Act 2002
5 27 (threshold determined
by formula, no cap); Wrongs Act 1958 (Vie), (Tas),
cap), s 28F1 (no threshold); Civil Liability s 28G ($371,380
Act 2002 (WA), ss 9, 10 (threshold and
determined by formula); Civil Law (Wron cap
gs) Act 2002 (ACT), s 139F (no thresho
$250,000 cap); Personal Injuries (Liabilities ld,
and Damages) Act (NT), ss 27, 28 (5%
threshold, cap determined by Minister); Civil
Liability Act 1936 (SA), s 52 (no threshold,
cap determined by formula).
133 For example, California Civil Code, s 3333.2
(non-pecuniary damages limited to $250,0
in medical malpractice cases); Colorado 00
Ret Stat,
damages normally limited to $250,000 in all cases). s 13-21-102.5(3)(a) (non-pecuniary
134 Studdert, Are Damages Caps Regressive?
A Study of Malpractice Jury Verdicts
California (2004) 23 Health Aff 54. in
135 Planet Fisheries t La Rosa (1968) 119 CLR
11 8 at 124. However, legislation in all States
except South Australia, the Northern Territory
and the Australian Capital Territory now
allows courts to refer to earlier awards in
the same or other courts: Competition and
ConsumerAct 2010 (Cth), s 87T;
Civil LiabilityAct 2002 (NSW), s 17A; Civil
2003 (QId), 5 61(1)(c)(ii); Civil Liability LiabilityAct
Act 2002 (Tas), s 28; Wrongs Act 1958
5 28HA; Civil Liability Act 2002
(WA), s 1OA. (Vie),
136 For example, Sullivan v Micallef(1994) ATR
81-308. A legislative guideline is advocated
Mullany, A New Approach to Compensation by
for Non-Pecuniary Loss in Australia (1990)
17 MeIb Ut. Rev 714.
137 But the plaintiffs tender age does not justify
substantial reduction: Del Poizte v Del Poiite
(1987) 11 NSWLR498 (CA).
 Personal Injury 281

compensab1e. By contrast, a third element, variously referred to as loss of

8
faculty, of capacity or amenities the inability to enjoy the normal

activities 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
39 In this sense, the more systematic approach to
limited to watching television.
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
140 A related matter concerns the question of whether all
age they were injured?
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 ones predicted pre-tort work life generally
matters. And a corrective justice perspective would appear to favour making
adjustments based on this victims 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 victims 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 reply 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 effectively unconscious 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.
282 Ch 10: Damages

perspective just what is the point of giving money to someo

completely incapable of making a decision as to how to spend ne who is
it? On the other
hand, from the deterrence and corrective justice viewpoints,
it
altogether wrong to award nothing to someone who has been would seem
put in such a
vegetative state.
Courts have, over time, treated those suffering permanent
unconsciousness
in different ways. Starting in the mid-1930s, English courts
first sought to
provide substantial non-pecuniary loss awards in such
cases. Their
141
enthusiasm, however, quickly waned, and the claim was first
frozen to a purely nominal 142 peremptorily
sum, and later abolished either 1 outri4 ght. Later
in England an approach 4 prevailed
4 though not without vigorous
dissent that calls for a substantial but not personalized
45
award in such
situations. 146
The opposing viewpoint, calling for the denial of recovery to
those rendered
totally unconscious, tended to rest on an analogy to those who
the tort, as they too (better, their estates) could not recover were killed by
for
wrongful death actions. This position, while perhaps too extrem lost years in
e for practical
politics, strongly influenced the Australian compromise that
treats the loss of
expectation of life as compensable, but at a much more
modes
when accompanied by full appreciation of the loss. For examp t level than
le, the High
Court approved an award of no more than $3,000 in 1966 for
a permanently
comatose plaintiff in comparison with 10 times and more
in comparable
English 47cases.
A yet third approach focuses instead on ways money could
plaintiffs distress by providing substitute satisfactions. The ameliorate the
mentally afflicted
plaintiff, for example, would be assessed in the light, not of his
the loss, hut of his capacity to benefit from compensation, such appreciation of
as having
149
While this comes closer to the compensation purpose of better
it could potentially create a disincentive to rehabilitation
damages
and thus be frowned
141 Rose v Ford 119371 AC 826; Morgan v Scoulding [1938] 1 KB
786.
142 Beizhain v Gambling [1941] AC 157 (fSOO); Sharinan v Ezaiz
s (1977) 138 CLR 563 at 584
($2,000).
143 Administration ofJusticeAct 1982.
144 West t Sheplard [1964j AC 326 (f17,500 to 41-year old
woman rendered virtually
insensate); Liin v Camden HA [19801 AC 174 at 188 (20,00
0). Currently up to 125,000
(top of scale). But though objective, the loss is affected by the
importance to the victim of
the particular faculty lost: a cripple would suffer less from loss
of a leg than an athlete; also
the relevant period is the victims post-accident life expectancy:
Andrews v Freeborough
[1967j 1 QB 1 (CA) (2,000 for eight-year old who never regaine
d consciousness and died
within one year).
145 For example, Lords Reid and Devlin in West v Shephard [1964]
AC 326. Also Pearson
389.
146 It would be lamentable if the trial of a personal injury
claim put a premium on
protestations of misery and a long face was the only safe
passport to a large award
(Lord Pearce in West t Shephard [1964j AC 326 at 369).
147 Slrelto,z t Collins (1966) 115 CLR 94. Of this, Taylor assume
was for loss of amenities, the rest being for loss of expectJ d that about $2000 of this
ation of life. There is an accepted
range of $5000-$20,000 for loss of expectation of life, Flanne
l! ii Amaca Pty Ltd [2006)
WASC 310 at [347]-[351] ($15,000 for 22 years of loss).
148 See ()gus, Damages for Lost Amenities: For a Foot, a Feeling
or a Function? (1972) 35
Iod F Rev 1.
149 This was the reason why Pearson, 389 disapproved the claim
of a completely insensate
plaintiff. Otherwise, a very young child or mentally afflicted victim
with no sense of loss but
some capacity to benefit. Comparative: Stolker, The Uncon
scious Plaintiff: Consciousness
as a Prerequisite for Compensation for Non-pecuniary Loss (1990)
39 ICLQ 82.
 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
5
in England
and Australia.
15 52
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 sex
153 or a holiday,
54 depression unconnected with any physical
or mental injury, even the effect of imprisonment for crimes resulting from a
personality change.
55
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 treated.
56 And it is assessed in monetary values
prevailing at the time of as5essmeflt.
157
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, Sweden, Portugal, Greece
and Denmark.
58 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 victims 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 1 986, s 175.
158 McIntosh and Holmes (eds), Personal Injury Awards in EU and EFTA Countries (2003).
284 Ch 10: Damages

variability from case to case, for some victims the United States non-pecuniary
loss award continues to be much greater than elsewhere even after taking
the
payment of legal fees into 159
account.
By way of conclusion to this section, it should he noted that the desire
to
restrict the award of non-pecuniary damages (and indeed of pecuniary damag
es
as well) is driven in part by the concern that insurers and corporate defendants
may find it increasingly difficult to shoulder catastrophic losses involv
ing
multiple victims which occur more frequently with growing technology.
One
solution is to impose a maximum monetary limit on liability for any one
disaster, as an international legislation on nuclear 16accidents and products

liability) In the last resort, extraordinary intervention by government
61
is
required to settle peculiarly costly 16
catastrophes.
2

Exemplary damages
[ 10.130] Exemplary or punitive damages focus not on injury to the
plaintiff but on outrageous conduct by the defendant, conduct that is
so
reprehensible as to warrant requiring the defendant to pay an additional
amount of tort 6 damages) These damages are explicitly outside the
compensation function of tort law. Instead, they
are sometimes justified in
terms of corrective justice the imposition of a penalty designed both to expres

s
the publics indignation and to satisfy the victims desire for retribution agains
t
someone who intentionally (or close to that) and wrongfully harmed him.
Exemplary damages may best serve as a mark of public censure against
egregious 64
misconduct, when, as a practical reality, the criminal law is not an
effective alternative. Hence, exemplary damages may provide an incentive for
private law enforcement where compensatory damages would not be sufficient.
A victim seeking exemplary damages need not have been targeted as an
individual. For example, it would suffice to prove that the manufacturer of
a
defective product deliberately disregarded the safety of potential users.

159 Sugarman, A Comparative Look at Pain and Suffering Awards (2006) 55

DePaul L Rev
399.
I 60 The Nuclear Installations Act 1 965 (UK) limits the liability of nuclear operators
to 5 mill,
and the Price-Anderson Act 1957 (US) to $560 mill. On the policy justifying
such
subventions see Green, Nuclear Power: Risk, Liability and Indemnity
(1973) 71
Mich L Rev 479.
161 For example, EC Directive (1985). Britain did not avail itself of this option.
162 This occurred in Britain and Germany over the Thalidomide disaster. See Fleming,
Mass
Torts 119881 Denning U 37. For the richAmerican experience with mass torts
see Fleming,
The A,izeiican Tort Process (1988), ch 7; Claims Resolution Facilities
and the Mass
Settlement of Mass Torts (1990) 53 (Pt 4) Law & Contemp Prob. With respect
to the US
compensatory response to the terrorist attacks Ofl September 1 1 200 1 see
, , Rabin, The
September 1 Ith Victim Compensation Fund: A Circumscribed Response or an
Auspicious
Model? (2003) 53 DePaul L Rev 769-8 03.
1 63 While frequently associated with malice, contumelious behaviour even short of
actual malice
is sufficient. But there must be intent to injure or at least recklessness in the sense
not merely
of aggravated negligence but of conduct showing a conscious and contumeliou
s disregard
of the plaintiffs rights. XL Petroleum (NSW v Caltex Oil (Aust) Pty Ltd
(1985) 155 CLR
448 at 471 (Brennan J); John v MGN [1996] 2 All ER 35 at 56-58.
164 Austialian Consolidated Press t Uren [19691 1 AC 590, affg Uren iJohn Fairfax
& Soiis Pt
Ltd (1966) 1 17 CLR I 18. NZ: Thilor v Bere [1982] 1 NZLR 81; surviving
the ACC:
Donselaar ii Donselaar [1982] 1 NZLR 97; Canada: Vorvis i ICBC
119891 1 SCR 1085. But
are precluded in personal injury cases in some jurisdictions: NSW: Civil
Liability Act 2002,
5 2 1 ; NT: Personal Inurzes (Liahilities and Daniages)
Act s 1 9; Qld: Civil Liability Act
,
2003, s 52 (but note these may be allowed if the damage was caused
by an unlawful
intentional act, for example, sexual assault).
 Personal Injury 285

: 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 plaintiffs injury, exemplary
16 Put differently,
damages serve the cause of preventing unjust enrichment.
unless exemplary damages are awarded in such settings, tort law 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
166 A narrower approach has been to bar exemplary
personal injury or death.
damages in specific types of cases, such as motor accident and industrial injury
67 Victoria
cases, as has been done in New South Wales, 168 and to some extent
Q 169
ueensland and South 70
Australia.
In somewhat the same vein, in 1964 the House of Lords in Rookes v
dramatically renounced exemplary damages as incompatible with
7
Barnard
the 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 trespass and conversion: see LC Consult Paper No 132, Pt VII;
Berryrnan, The Case for Restitutionary Damages, over Punitive Damages (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, 8 1 ABA J 62 (Aug
1995).
167 MotorAccidentsAct 1988 (NSW), s 81A; MotorAccidents CompensationAct 1999 (NSW),
5 144; sX cvkers Compensation Act 1987 (NSW), s 1S1R.
7
168 Transport 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 1 935 (Tas), s 27(3); Larv Reform (Miscellaneous Provisions)
Act (NT), 5 6.
171 Rookes v Barnard [19641 AC 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).
286 Ch 10: Damages

may be obtained remain quite restricted in England, the courts have been
grappling with how to set the 72 boundaries.
The Canadian Supreme Court has taken a somewhat more liberal approach
to exemplary damages, although it has recognised that, because of the lack of
procedural protections for the defendant (as compared with those available in
criminal cases) and the concern about giving plaintiff windfall recoveries,
caution must be 7 exercised.
Awards of exemplary damages must be kept within bounds, as American
awards have not always been, 174 lest the conventional safeguards against
excessive punishment are thrown to the winds. 175 The award should aim
exclusively to punish the 7 defendant, and only to the extent that the sum for
compensatory damages is itself seen as inadequate to do so.177 If the defendant
has been convicted of a crime and appropriately punished, that may make
exemplary damages 75 inappropriate. In setting the amount of the award, the
focus should be on how the defendants behaviour affected the particular
plaintiff, not its effect on others.
179 Moreover, the plaintiffs own conduct, such
as provocation, may reduce or negative an award.
The defendants wealth is
18
often seen as a relevant factor to assure that the punitive sting is felt.

18
On the one hand, if the outrageous conduct was not accompanied by
substantial injury, to restrict the award of exemplary damages by the amount of
compensatory damages would trivialise the sum of exemplary damages that
could be awarded and undermine the punishment and deterrence goals.
Nonetheless, because of concerns about runaway juries, the US Supreme Court
has concluded that America punitive damages ordinarily should not exceed the
amount of the compensatory damages and only in extraordinary cases should
exceed 10 times as much.
82

172 Compare AB v South West Water Services Ltd ( 1993) QB 507 with Kuddus
v Chief
Constable ofLeicestershire [2002] 2 AC 122 (IlL).
173 Whiten r Pilot Insurance Co (2002) 1 SCR 595.
174 See Fleming, TheAnierican Tort Process (1988),
pp 214-224; BMWv Gore (1995) 115 S Ct
932.
175 XL Petroleum (NSW) t Caltex Oil (Aust) Pt Ltd (1985) 155 CLR 448 (should be
3
moderate: verdict of $400,000 reduced to $150,000 against large corporate defendant).
More recently, see Backuell 1 AAA [ 1 997j I VR 1 82 (CA) and Landini ii New South
Wales
[2008j NSWSC 1280.
176 Vortis i ICBC [19891 1 SCR 1085 at 1106; Rookes r Barnard [1964] AC 1129 at 1227.
This
restriction is not the law ofAustralia: see, for example, Lamb v Cotogno (1987) 164
CLR 1
and 9; Gray t Motor Accident Commission (1998) 196 CLR 1 and 12.
177 Backwell vAAA (1996) ATR 81-387 (Vie CA) (medical negligence). But do they
not differ
in their function? Luntz notes at p 78, n 494 (2002) that in Australia, since unsuccessful
defendants must pay the plaintiffs party-and-party costs, and this must be considered
when
determining if further punishment is necessary.
178 For example, Walker v CFTO (1987) 39 CCLT 121 (Ont CA); Wilmington
v Marshall
(1994) 21 CCLT (2d) 198 (not necessarily sufficient); Gray t MotorAccident Commission
(1998) 196 CLR 1 at 14. In case ofseveral plaintiffs, their awards ofcompensatory
damages
should be aggregated and, if insufficient as a penalty, a sum should be added
to make it
sufficient and it should be divided equally among them: Riches v News Group
256 (CA). 119861 QB
179 The very high awards in the US are in part attributable to the deterrence rationale.
180 Fontin t Katapodis (1962) 108 CLR 177; Andary t Burford (1994) ATR 81-302
(SA).
181 Rookes i Barnard at 1228; XL Petroleum (NSW) v Caltex Oil (Aust) Pty Ltd 1
CLR 448 at 472 (Brennan J); Gray v MotorAccident Commission (1998) 196 CLR ( 985) 155
1 at 8.
I 82 State Fari;z Mutual Automobile Insurance Co v Campbell 538 US 408 (2003).
 Persona! Injury 287

Liability for exemplary damages is clearly appropriate against an employer

who has ordered the commission of a tort;
perhaps even in cases where he
18
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 case.
85 Some jurisdictions prevent the Crown from
being vicariously liable for exemplary damages for their police officers
186

The role of liability insurance 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
publics indignation towards the wrongdoers conduct.
187 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
188 Note, too, that ordinary tort liability insurance frequently will
insurance.
not cover exemplary damages because, by contract, 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 defendants 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 law),
89 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
9
general damages, 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).
1 86 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 [1 987] 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 (mothers 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.
288 Cii 10: DaJ?l1Is

wrongdoing. The Australian jurisdictions which forbid punitive damages for

personal injury also prohibit aggravated 19
damag1es.

Collateral benefits
F 10.140] Nowadays most persons injured in an accident manage to draw on
private insurance, an employee benefit program, or on some form of social
insurance for meeting part or all of their losses. This raises the question of
how
tort law should deal with the question of these collateral 92 benefits.
There are three main competing solutions to this puzzle: the first is to let
the
injured person enjoy the collateral benefit and both recover and keep
his tort
damages in full (that is, double recovery); the second is to reduce
the
tortfeasors liability by the amount of the collateral benefit; the third
is to
ignore the collateral source in the tort action but try to ensure that the
collateral
source and not the victim will be the economic beneficiary of the portion
of the
tort damages award that duplicates the collateral source.
The latter might be brought about in a number of different ways. The
most
obvious of these is to confer on the provider of the collateral source
a right of
recoupment from the tort victim. One might also give the provid
er of the
collateral source a right of subrogation which allows the provider
not only a
right of recoupment but also a right to seek recovery directl
y from
tortfeasor especially if the victim is disinclined to proceed. Alternatively the
, as a
partial solution, one might allow the provider of the collateral benefit
to cut off
the benefit, as by stopping social security payments, once the victim
has
achieved a successful tort recovery.
All of these solutions have found a place in relation to one or other collate
benefit. The overall position is therefore exceedingly complex, in part ral
because
of, the disparate nature of the various collateral benefits and in part
because of
the lack of consensus as to the ultimate policy objectives here.
Speaking
generally, the deterrence perspective would clearly oppose allowi
ng the
tortfeasor to obtain an offset, although this viewpoint does not
obviously
favour either double recovery or repayment to the collateral source
compensation perspective would normally oppose double recovery, but. The
not obviously prefer one of the other two remaining solutions. does
What is
appropriate from the perspective of corrective /ustice is not at all obviou
s and
may depend on the nature of the collateral source, to which the discus
sion now
turns.

Private insurance
[10.1501 It is generally the law that the plaintiffs own private insurance is not
available to the tortfeasor in relief of his 19
1iability. This rule applies to
property insurance, life insurance, disability insurance (that
replaces lost
I91 NS(7: Ciii! Liability Act 2002, s 2 1 ; NT: Personal Injuries (Liabilities
and Damages) Act,
S 19; Qid: Civil Liability Act 2003, s 52 (unless the damage is caused by
unlawful intentional
act or sexual assault).
192 See 2 Harper. James & Gray, 25.23; Fleming, Collateral
Source Rule and Loss
Allocation ( 1966) 54 Cal I. Rev 1478. Comparative: Fleming, XI Tnt
Encycl Comp L, ch 11
(Collateral Benefits).
193 Bradburn ii Gt W Ri, ( 1874) LR 10 Ex 1 (accident policy). Accepted
in Australia through
decisions such as National Insurance Co ofNZ v Espagne (1961) 105
CLR 569; Redding v
Lee (1983) 151 CLR 117 at 134 (Mason and Dawson
(1994) 181 CLR 428 at 436; Kars t Kars (1996) 187 CLR 354
JJ), 154 (Wilson J); Manser r Spry
at 362 (Dawson J).
 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 law. 194 Moreover, contemporary property insurance contracts
typically provide for this result anyway by their terms. Hence in such cases, the
tort victim does not obtain double recovery, and the victims 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 victims survivors in a wrongful death claim 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 insureds estate or payable to his survivors. Hence,
either to reduce the tortfeasors 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 victims injury, however, the idea that the victim should be
able to collect from both the insurer and his tortfeasor (frequently the
tortfeasors 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 victims
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 Ch 10: Damages

thus leaving the victim with double recovery. Of course, the tort rule might be
changed with respect to this type of insurance, but there is little movement in
that direction perhaps justified by a pervasive feeling that tort damages never

fully compensate for the enormity of personal injuries. Moreover, where these
insurance contracts are not pervasive and provide only modest benefits double
recovery can be more easily 95
tolerated.
Gifts
[10.160] If the victim obtains charitable aid, whether in the form of cash96 or
services like free nursing, the general rule is that those too are ignored in the tort
case and the tortfeasor must pay for the value of the nursing services and cover
what the cash gift has already covered. The common if curt explanation for this
result is simply that the donor intended to bestow a benefit on the donee, not on
the tortfeasor, which would be the result if the tortfeasor could reduce his
liability by taking these gifts into account. As with other collateral sources, this
result is congenial to the deterrence perspective and perhaps rests fundamentally
on a sense of corrective justice. Still, from the compensation perspective, why
should the victim wind up with money where there has not in fact been a
financial loss?
Perhaps the fairest solution would be to justify the tort rule as enabling the
victim/donee to repay the gift, bearing in mind that the donor is usually a kin or
friend. When this is the outcome, it, in a sense, converts the gift into something
of a contingent loan, which might well best reflect the donors wishes were he
to have thought about it. However, unless the donor were to make clear the
conditional nature of the transfer at the outset, the general rule is that whether
or not the tort victim repays his donor is for him to decide, subject perhaps to
extra-legal sanctions. 197

Employment benefits
[ 10.170] Workers compensation, the oldest form of social security, has
always been strictly handled with the goal of assuring that the tort victim does
not obtain double recovery. But this is brought about in different ways in
different places. Sometimes tort claims by an injured worker are reduced by
compensation already received; other times the worker recovers in full from the
tortfeasor and must repay the provider of the workers compensation benefit
s.
The latter solution seems especially apt in the United States where work-related
tort claims are almost always against third parties such as defective produc
t
makers and almost never allowed against the workers employer, and where
workers compensation insurance is privately paid for by the 98employer)
A common feature of modern employment is the provision of employee or
fringe benefits such as disability pay, pensions and, especially in the United

195 Atiyah, Collateral Benefits Again (1969) 32 Mod L Rev 397 at 404-405.
1 96 National insurance v Espagne ( 1 96 1 ) 1 05 CLR 569 at 580, 597-598;
Browning v War
Office [1963] 1 QB 750 at 770; see below, [29.1201 (fatal accidents). A gift
of cash will
reduce damages if the donors intent was to benefit the tortfeasor by reducing
the latters
liability for damages: Zheng v Cai (2009) 239 CLR 446. State relief of property
damage:
Wollingtoiz v SEC [1980) VR 91 (FC). The rule possibly applies even
to compassionate
bounty from employers.
197 A few older cases directing repayments have been consistently disavowed
in Australia.
Griffiths I Kerkemeyer (1977) 139 CLR 161 at 174-176, 193. The donor
himself has no
direct claim against the tortfeasor: The Amerika [19171 AC 38; Rawson v Kasman
(1956) 3
DLR (2d) 376 (Ont CA).
198 Kramer and Briffault, Workers Compensation: Strengthening the Social
Compact (1991).
 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
199 it is not obvious whether the proper solution is to allow
to double recovery,
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
only to lean once more towards the original starting
against set-off,
20
201
point.
With respect to employer-provided wage replacement
202 and wage-alikes
such as employer-provided disability benefits 20 and unemployment
204 there is considerable support for the idea that an employee who has
benefits,
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 tortfeasors
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 employer.
205 The resolution
of this dilemma remains unresolved.
206

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. See McGregor, 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 [1 9881 AC 5 14; Hodgson ii Trapp [1 9891 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 Ch 10: Damages

Private pensions, on the other hand, have been generally treated like life
insurance, so that neither may the tortfeasor offset his liability by the amount
of
the victims pension nor may the employer be reimbursed for the pensio
n
benefit out of the tort award. Pensions, in effect, are treated as a form of earned
savings that the employee victim is entitled to keep on top of any tort award he
receives 207
Yet, while at pains to distinguish pensions from wage makeups, the House
of Lords held that a long-term sickness benefit proportioned to pre-accident
wages required a reduction in tort liability. Though a fringe benefit and thus in
a sense earned by the plaintiff, it was not, on any view of justic
e,
reasonableness and public policy, analogous to a victims private insuran
ce.
It positively offends [onesj sense of justice that a plaintiff, who has certain
ly
paid no insurance premiums as such, should receive full wages during a period
of incapacity to work from two different sources, her employer and
the
tortfeasor. It would seem still more unjust and anomalous where, as here, the
employer and the tortfeasor are one and the same.
205

Social welfare
[10.180] Even with regard to benefits from social security or other public
ly
funded welfare schemes, the courts for long fumbled. One might well have
thought that social welfare being plainly based on a philosophy of need and
paid out of public funds, there was no justification for allowing a claimant
to
recover in the aggregate from that source and the tortfeasor more than an
indemnity for his net loss. Here the analogy of private insurance and private
benevolence is quite unrealistic. Statutory benefits are met by the taxpay
er,
including such as the plaintiff and defendant. The benefits derive from public
funds and are received not as public benevolence but as entitlement. Nor is it
realistic to ask if it was the statutory intent to benefit the wrongdoer,
considering that the damages will in most cases come out of insurance funds,
such as motor vehicle liability insurance to which all vehicle owners contrib
ute.
Mindful of these considerations, the House of Lords eventually insisted on
reduced tort liability for statutory benefits received under welfar
e
legislation.
20 9 In response, by statute, England moved in a different direction,
refusing to reduce the liability of tort defendants but instead requiring them
to
directly reimburse the health service and the government for medical and
social
insurance benefits that have been provided to the 210
plaintiff.

207 National Insurance ti Espagiie (1961) 105 CLR 569 at 573 (Dixon CJ).
In Australia, the
matter of employment pensions was first broached in Paff v Speed (1961)
105 CLR 549,
decided passirn in Espagne (a social security pension) and specifically in
Jones v Gleeson
( 1965) 39 ALJR 258; in England in Parry ii Cleater [19701 AC 1 (where it was noted with
satisfaction that this brought personal injuries in line with earlier statutory
reform for fatal
accidents); Smoker v London Fire & CitilDefenceAuthority [1991] 2AC
502; Cunningham
ii Harrison {1973) QB 942 (CA); in Canada
Guy t Trizec Eq [1979] 2 SCR 756.
208 Hussain v New Taplow Paper Mills [1988) AC 514 at 532. Even
more forceful was
Lord Bridges speech in Hodgson v Trapp [1989] AC 807 (below, n 224).
Dicta in Australia
support this: Samios r Repatriation Commission [1960] WAR 219 at
233; Szittner v
Harriott [1967] 1 NSWR 233 at 235 (CA); Peluchetti v Warringah Brick
& Pipe Works Ptv
Ltd [19611 NSWR 259 (FC).
209 Hodgson v Trapp [19891 AC 807 at 823.
210 Social Security Act 1989, cI 24, later revised into the Social Security (Recovery
of Benefits)
Act 1997, c 27; Road Traffic (NHS ChaiTes) Act 1999, ci 3. See also,
Road Traffic (NHS
Charges) Regulations SI 1999/784 and Road Traffic (NHS Charges) (Reviews
and Appeals)
Regulations SI 1999/786.
 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
In the result the
have been the statutory purpose to benefit the wrongdoer.
21
plaintiff would keep both the benefit and the award, with the exception of
212 This outcome also had to be
unemployment benefit as a substitute for wages.
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
214 In recent decisions, the English Court of Appeal,
the injured employee.
215 has now allowed a defendant
overruling prior authority to the contrary,
employer to reduce his tort liability to an employee by the amount of
ex-gratuita payments the employer had made to the claimant.
216
More controversial is the situation where the defendant is a family member,
such as the victims 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 plaintiffs needs
217 The High Court of Australia reached the
twice: once in kind, then in money.
contrary conclusion,
218 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 victims 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 [ 1 984] VR 619).
2 13 Social Security Act 1 991 (Crh), Pt 3. 14 for social security benefits paid during a preclusion
period ; Halth & Other Services (Compensation) Act 1 995 (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.
2 14 Hussain LI New Taplow Paper Mills [ I 98 81 AC 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 Ch 10: mages

Reduced awards
The duty to mitigate
[10.200] After the accident every claimant has a duty to mitigate
damag9
21 es. In making good his loss, he must not do it at the expense of the
defendant. For example, the victim might have to submit to surgery or other
disagreeable therapy
in order to alleviate his condition and, if he
22
unreasonably refuses to do so, he cannot unload upon the defendant the
consequences of his own stupidity or irrational 221 scruples. As a result, in
failure-to-mitigate cases, the victims tort recovery will not fully compensate
him for his loss because a portion of that loss is considered his own
responsibility. The burden is on the defendant, however, to prove that the
plaintiffs refusal to mitigate was 22 unreasonable2. The obligation to take
reasonable steps to mitigate ones loss is easily justified from the corrective
justice and deterrence perspectives.
While the standard applied in determining when a victim must take steps to
mitigate his loss is that of reasonableness, courts are appreciative of the fact
that it was the defendants wrong which put the plaintiff in this 22position. In
deciding what was reasonable, should the test be sternly objective as enunciated
in the older English cases, postulating a reasonable person of manly character,
or should it compassionately follow the analogy that a tortfeasor takes his
victim as he finds him? An acceptable compromise which has gained support in
Australia asks whether a reasonable person in the circumstances as they
existed for the plaintiff would have refused treatment, thereby making
allowance for his difficulty of understanding, even for an anxiety neurosis
caused by the accident 224
itself.
Notice that the plaintiff may be required to spend money or incur expense to
mitigate his or her damage, such as paying for treatment where that is
required. Yet the plaintiff is not ordinarily expected to lay out capital, nor is
225
he or she obliged to do something he cannot afford.--
.
6
On the other hand, if the
plaintiff does spend money to mitigate their own loss, reasonably incurred
expenses are recoverable by the plaintiff as part of the compensation for the

219 Contrast conduct unreasonably aggravating injury, which may justify apportionme
nt as
contributory negligence: see Commonwealth v McLean (1997) 41 NSWLR 389
(CA)
(application for special leave to HC dismissed: (1997) 4 Leg Rep SL 7).
220 For example, Clarke v Damiani (1973) 5 SASR 427 at 432 (wearing eye patch
to mitigate
double vision).
221 Watts v Rake (1960) 108 CLR 158 at 159; McAuley v London TransportExecutiie
[1957)2
Li Rep 500. US: 62 ALR 3d 9 at 70 (1975).
222 Janiak V Ippolito l1985i 1 SCR 146; Miince v Vinidex [1974] 2 NSWLR 235 (CA).
Contra:
Selvanayagarn i Uni WI [19831 1 WLR 585 (PC).
223 Moore ii DER Ltd [1971) 1 WLR 1476 (CA); Simonius Vischer & Co i Holt c Thompson
[1979] 2 NSWLR 322, 354 (CA).
224 Fazlic r Milingimbi C (1982) 150 CLR 345; Selvanayagam v Uni WI [1983] 1 WLR
585
(PC); Karabotsos r Plastex [19811 VR 675 (FC). ButJaniak L Tppolito [1985]
1 SCR 146
postulates that a pre-existing psychological infirmity must have deprived him of his
capacity
to make a reasonable choice. See further Luntz (2002),
pp 125-129 {1.1O.2]-[l.1O.41.
225 Matters v Baker & Fawcett [1951] SASR 91; Hoad ii Scone Motors [1977j 1 NSWLR
88 at
100.
226 Dodd Properties v Canterbury CC [1980) 1 WLR 433 (CA); Beian Blackhall
(No 2)
[1978) 2 NZLR 97 at 115-116. See Phillips, Losses Flowing from Impecuniosity
(1982)
20 Osg HLJ 18. See also Luntz (2002), pp 209-210 [2.7.9].
 Collateral benefits 295

wrong. Moreover, if the victims personal financial situation makes it

7
necessary 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 claimant
228
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
compensation.
entitled to 229
Defendant-provided benefits
[10.210] When the defendants 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 physicians obligation to
pay for the cost of the childs upbringing and medical care.
2
Yet, this benefit principle has its limits. Suppose A carelessly trips B while
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 Bs tort claim against A this benefit almost surely will not be
allowed to be used by A to offset his obligation to pay for Bs pecuniary 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 OSullivan [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 cause of
action; 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 OConnor [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 childs 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 Ch 10: Damages

Contributory negligence
[ 10.220] At the common law, a careless victim was completely barred from
recovery in a claim against a careless defendant. Statutory apportionment
regimes exist in most jurisdictions today so that damages are reduced in
proportion to the negligence of both plaintiff and 2
defendant.

Property damage
Damages for the harm to the property itself
[10.230] Recovery for damaged or destroyed property whether real property

or personal property presents relatively little controversy as compared with

personal injury. Simply put, the plaintiff is in the first instance entitled to
restitution for the loss of its value to him.
Yet, there are some difficult issues
2
lurking here as well. How is loss to be assessed? Is it loss of value or cost of
replacement or repair? There is no universal answer. Where replacement is
cheaper than repair, the owner must generally he content with the replacement
2 unless the property has unique qualities or legitimately sentimental
value
24 The same goes for landed property. Despite a widespread impression
vaIue.
favouring difference in value, there is in fact no categorical rule. The true test is
whether the plaintiffs desire to rebuild, refurbish or be reinstated was
reasonable although the cost of this would exceed the amount of
diminution. A plaintiff cannot recover a disproportionately high cost of
25
repair where the plaintiff was able to purchase a similar property in the open

231 See Chapter 12 Defences.

232 What date of assessment should he used for the property s value varies, being possibly at the
time ofthe tort, hut potentiallylater. In Scale t Pert) [1982j VR 193 at 204 LushJ favoured
the time of judgment where increase in value was due only to inflation. In Glenmont
Investment Pty Ltd ti C)Loughlin (No 2) (2000) 79 SASR I 85, the Court (at 278) stated that
when valuating property according to the replacement cost, this would usually be assessed
at the date of trial even if the cost of replacement later increases Caltex v Aquaheat I 983j
.

NZ Recent L 120 refused to allow for inflation with respect to past expenditures on repairs,
[
citing CA of Ontario and BC in 90 DLR (3d) 13; 27 OR (2d) 363.
233 Darb)sl2ire 1 \yLlllL?,l I I 963) 1 X
LR 1 067 (CA); Jansen t Deuhurst 1 969( VR 42 1; Van der
7
Wit ii Harris [ 1 96 1 1 WAR 124. Fully stated, the question is whether the cost of a comparable
car minus the salvage value of the old is less than the cost of repairs plus the use of a
substitute in the interval. In contrast to the preceding cases, in Bartlett t Small 1 967j NZLR
260 the second was the lesser. Cf Davidson v Gilbert [1986) 1 Qd R 1 (owner recovered
[
diminution in value exceeding cost of repair). In Australia, within the context of repairs of
damaged motor vehicles, Basten JA in Stocotaz ii Fztng [20071 NSWCA 199 emphasised at
[ 17] that reasonable costs may lie within a range, although it seems likely that the
liability of a defendant to pay something less than the actual costs of repair will turn on
evidence that the repairs could have been done at a lower cost and that the plaintiff acted
unreasonably in not obtaining an alternative quotation or further quotations, or in not
accepting a lower quotation.
234 As in A,ztl2oness t Bland Shire Council [19601 SR (NSW) 659 (FC(; OGrady L Westminster
I I 9621 2 Ll Rep 238; cited approvingly in Collin v Botany Fork & Crane Hire Pt) Ltd
(1993) 113 FLR 83 at 87. Ruxley Electronics z Forsyth [1996] AC 344 suggests a third
alternative of allowing no more than a sum for lost amenities This was applied to a
.

similar set of facts in Wilisbee v Westcourt Ltd [2008] WASC 18.

235 Evans t Balog [1976] 1 NSWLR 36 (CA). Not if the owner was going to pull the structure
down anyway, Fish Steam Laulidr) i Col Johnson Electrics [1992j 2 Qd R 585; Taylor v
Auto Trade [ 1972) NZLR 102; Taylor t Hepworths [1977] 1 WLR 659; Vf/aterloo t Strenco
Manufacturing (1975) 58 DLR (3d) 180. A similar rule applies to insurance
claims: Lucas i
NZ Ins [1983] VR 698.
 Property damage 297

market. On the other hand, a plaintiff may well be justified to insist on the
236
costs to repair or rebuild, as in the case of a home to which the owner has
27 or of a factory without any reasonable alternative
become specially attached,
for carrying on the business and retaining its labour force.
28
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
29 It is otherwise where the
the plaintiff to invest in modernisation of his plant.
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 less than
its replacement model.
240

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 profits, or for the cost of a
24
242 pending repair or replacement. Thus when a dredger engaged on
substitute
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
24 Damages may even include the loss of a future charter to
contract.

236 Public Trustee i Hermann (1968) WN (Pt 1) (NSW) 442; Jones v Perth S I 19711 WAR 56
(trespass); Moss v Christchurch RC [1925] 2 KB 750 (nuisance); 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 Harbutts Plasticine v Waynes 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 Harbutts Plasticine v Waynes 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 SASR 201 (until replacement trees found); Glenmont investment
Pty Ltd v OLoughlin (No 2) (2000) 79 SASR 185.
242 AthabaskaAirways v Sask GoverninentAiruays (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 cars 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 (architects
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 Ch 10: Damages

commence upon completion of the current 244 voyage. Also, extra delay due to a
strike while the ship was in dock under repair has been held to be a risk within
the defendants 24responsibility
5. Loss of a chance, provided it is substantial
and not entirely speculative, is compensable, as when a racehorse is injured and
loses its chance of winning prize 246 money. A plaintiff is also entitled to
reimbursement for any payment required by law (though not under a voluntary
agreement) for consequential damage to third parties, as when a ship disabled
by the defendant damaged an adjacent dock.
247
Since awards for lost profits are taxable, the majority view favours recovery
at the gross rate.
245

Is the plaintiff entitled to damages for loss of use in case of damage to a

non-profit earning object, like a pleasure craft or private car? The plaintiff is
clearly entitled to the reasonable cost of hiring a substitute during repairs if one
is actually hired.
249 But what if the plaintiff does not, or if it is lent by a friend
for free? The guiding principle, here as in the case of personal
250 should be that the plaintiffs loss is not the expend
injury,
iture incurred for a
substitute, but the plaintiffs need for it. Thus the plaintiff is entitled to
substantial general damages for loss of use, usually calculated as the interest on
the capital value of the damaged object at the time of the 25collision or (where

the plaintiff keeps a stand-by) the daily cost of maintaining it.
252
When the damaged (or destroyed) object is insured, the owner would
ordinarily in the first place claim from his insurance company rather than the
tortfeasor. If he does so, the former will be subrogated pro tanto to the victims

244 The Argentino (1889) 14 App Cas 519. Provided only that charter was an ordinary
engagement.
245 HMS London [1914j P 72. For a more recent case also giving defendant credit
for

betterment in calculating the amount of his liability, see Voaden v Champion, The Baltic
Surveyor (2002) 1 Lloyds Rep 623.
246 Although damages must be discounted according to the probability of success in gaining
those profits: Sellars v Adelaide Petroleum (1992) 179 CLR 332 at 355-356.
247 Esso Petroleum v Hall Russell [1989] AC 643.
248 Commissioner of Taxation (NSW) v Meeks ( 1915) 19 CLR 568 at 580. A more exact,
if
more complicated, alternative is to assess the net loss but add a supplement for the
tax
liability of the award. Williamson v Comm Rlys [19601 SR (NSW) 252 (CA); approved
by
Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979)
146
CLR 249 at 302. Robert v Colliers [1959] VR 280; Parsons v BNM Laboratories [1964)
1
QB 95 (CA); Bevan v Blackball (No 2) [1973) 2 NZLR 45.
249 Martindale v Duncan [1973) 1 WLR 574 (CA); Moore v DER Ltd [1971] 1 WLR 1476;
Penman z StJohn Toyota (1972) 30 DLR (3d) 88. See also Giles v Thompson [1994)
1 AC
142 (agreement with car-hire company not champertous).
250 Donnelly vjoyce [1974j QB 454 (CA); Anthanasopoulos v Moseley (2001) 52 NSWLR
262
(CA); followed in Australian Associated Motor Insurers Ltd v NRMA Insurance Ltd (2002)
124 FCR 518.
251 Millar t Candy (1981) 38 ALR 299; McAll t Brooks [19841 RTR 99. Also Nauru LGC v
NZ
Seamens Union [1986] 1 NZLR 466 (loss of non-profitable use). In Lahoud t Lahoud
[2009] NSWSC 623, Ward J rejected interest upon capital value as the basis of calculating
damages in favour of the rent of the property.
252 Admiralty Comm v SS Susquehanna [1926) AC 655 at 662; Birmingham Corp ii Sotvsben
(1969) 113 Sol J 877 (bus). The use of a stand-by is no longer recognised as neutralising
the
loss, though the plaintiff would most probably have allowed for this expense in his general
cost calculations. But should not the cost of hiring an outside substitute represent a ceiling?
 Property damage 299

tort claiiTl against the latter; but the victim may still retain a beneficial claim of
his own with respect to such consequential losses as the deductible or
forfeiture of a no-claim bonus.
25
Finally, allowance may have to be made for benefits which offset losses. But
to warrant a set-off, the gain must be fairly closely linked to the loss, not
collateral or res inter alios 254
acta: for example, where loss of profits due
to inability to replace equipment was mitigated by a later opportunity to
purchase a replacement at a lower cost, 255 or where the extra cost of replacing
an old tractor with a new one was reduced by reselling it after a short while
when it was no longer needed. 256 Those transactions were part of a
257 as
continuous dealing with the situation in which the plaintiff found himself
the result of the accident; in contrast to independent or disconnected events, for
example, where neighbouring land damaged by the blow-out of an oil well
increased in value due to the discovery of 258
oil.

Non-pecuniaiy loss arising from property damage

[ 10.250] Damages for foreseeable worry and anxiety, or physical
259 and
inconvenience are awarded in cases of negligently constructed homes,
and, at the least, for the
even business premises,
26 intentional shooting of
261

253 Patel v LT Executive 119811 RTR 29 (CA); contra: Millar v Candy (1981) 38 ALR 299,
based on wrong approach.
254 See Rest 2d, 920.
255 Bellingham v Dhillon 119731 QB 304; dist Hussey v Eels [1990) 2 QB 227 (CA).
256 Hoad v Scone Motors [1977] 1 NSWLR 88 (CA).
257 12 Haisbury (4th ed), p 481.
258 Green i Gener.l Petroleum 205 Cal 328 at 336 (1928).
259 Canipbelltown City Council t MacKay (1989) 15 NSWLR 501 (CA; substantial damages);
Clarke v Gisborne S 119841 VR 971 (but not mere inconvenience); Perry i Phillips [1982]
1 WLR 1297 (CA); Gaholinscy v Hamilton 119751 1 NZLR 150; Young v Tomlinson [19791
NZLR 441 at 462 (annoyance, frustration, discomfort and inconvenience).
260 Carll v Berry [1 98 1] 2 NZLR 76; Roulands v Callow [1 992] 1 NZLR 178 (defective
driveway).
261 Davies v Bennison (1927) 22 Tas LR 52; Borza v Banner (1975) 60 DLR (3d) 304
(aggravated damages); cfNewell jI CPA (1976) 74 DLR (3d) 574 (breach ofcontract: loss of
dog). US: 8 ALR 4th 1287 (1981).