An expansion of claims for loss of earning capacity.
The High Court of Australia has held that a superannuation pension can be included in the calculation of damages in a negligence action. [1]
The 71 year old plaintiff, Mr Latz, was diagnosed with terminal malignant mesothelioma, in October 2016. He issued proceedings against Amaca Pty Ltd (Amaca), the manufacturer of asbestos fencing that the plaintiff had cut and installed forty years earlier, alleging that exposure to asbestos had caused the development of mesothelioma.
At the time of commencing the action, Mr Latz had been retired for nine years. He was receiving a fortnightly payment from the State by way of superannuation. Mr Latz had made contributions to the South Australian Superannuation Fund during the period of his employment and upon his retirement at age 60, he became entitled to receive a fortnightly payment from the State by way of superannuation. Section 40 of the Superannuation Act 1988 (SA) conferred on Mr Latz, as a person entitled to a pension, the right to commit his superannuation entitlements so as to take its value in a lump sum. Mr Latz did not exercise that right. Mr Latz claimed the loss of his superannuation pension. In addition, Mr Latz claimed the loss of his age pension for the 16 years of lost life expectancy. But for the negligence of Amaca, Mr Latz argued that he would have continued to receive both the superannuation pension and the age pension for the remainder of his pre-illness life expectancy – around a further 16 years. Further, it was argued that notwithstanding on his death, his partner would be entitled to funds from his superannuation fund, known as a “reversionary pension” under Section 38(1) (a) of the Superannuation Act 1988 (SA), that the reversionary pension should not be deducted from any award of damages.
At first instance, the District Court of South Australia awarded Mr Latz damages, the sum of $1,062,000. Of that sum, $500,000 was for the loss of the full net present value of age pension and superannuation payments for the years between Mr Latz’ pre-illness life expectancy and his post-illness life expectancy, described as “future economic loss”. The trial judge concluded that there was no reason “as a matter of fairness and policy” to reduce Mr Latz’ damages by reason of the circumstances that Mr Latz’ partner, Ms Taplin, will receive two thirds of his superannuation pension upon his death. Rather, Mr Latz was entitled to be compensated fully for the loss of superannuation pension for the lost years. [2]
Amaca appealed to the Full Court the award of damages for economic loss. A majority of the Full Court held that the trial judge had not erred in awarding damages for the lost years for the age pension and superannuation payments, but had erred in not reducing the award of damages for the lost years of the superannuation pension by reference to Ms Taplin’s reversionary entitlement. Consequently, the Full Court reduced the damages awarded by the trial judge by reference to the value of the reversionary entitlement, and substituted judgment in Mr Latz’ favour in the amount of $864,174.
Amaca appealed to the High Court of Australia, the findings that both the superannuation and the age pension were compensable as part of the damages award to Mr Latz. In turn, Mr Latz appealed the finding that the amount of the reversionary pension, was to be deducted from any award of damages to him.
The majority of the High Court of Australia held that the Supreme Court of South Australia erred in assessing damages by including an allowance for the loss of expectation of receiving an age pension during Mr Latz’ “lost years” of life expectancy. The Court held that it was appropriate to deduct the entitlement of Ms Taplin, from the award of damages for the lost years for the superannuation pension. It did however find that the Court was correct to allow for the loss of a superannuation pension.
The Court reaffirmed the principle that an award of damages is intended to compensate a claimant for the loss of capacity to earn money from the use of personal skills. The Court also reaffirmed the principle that a claimant whose life expectancy is shortened as a result of negligence, is to be compensated for lost earning capacity during those years by which their life expectancy has been shortened, at least to the extent that they are years when they would otherwise have been earning income. But in this case, the Court had to grapple with whether to assess the claim for loss of earning capacity when the plaintiff had retired.
The Court highlighted, that on retirement, Mr Latz had access to the superannuation fund, and, but for his injury, he would have continued to receive the superannuation pension from that fund for the whole of his pre-illness life expectancy of a further 16 years. But because of his premature death, due to the negligence of Amaca, he will not now receive the superannuation pension for the full 16 years life expectancy. In these circumstances, the Court considered it reasonable to allow a sum for the loss of superannuation pension.
No sum was allowed by the Court for the loss of age pension benefits. The court distinguished an age pension from superannuation benefits, the latter being a capital asset linked to the plaintiff’s work remuneration or his capacity to earn. The court rejected Mr Latz’ submission that the age pension was a future income stream, to which he had a present or future right or entitlement.
The Honourable Chief Justice Kiefel and Justice Keane dissented. In a joint judgment they expressed opinion that the claim might be seen as a claim for the loss of amenities of life, of which only a modest conventional amount may be awarded under the first head of compensable loss identified in CSR Ltd v Eddy [3] for non-pecuniary loss being loss of the amenities of life. But Mr Latz’ claim was not advanced on that basis. They held the view that the liability which the decision of the majority of the Full Court upheld was novel and could not be supported as an incremental extension of the previous decisions. Keifel CJ and Keane J acknowledged that cases of mesothelioma present an unusual challenge because of the potentially long intervals between infection and the onset of serious disability. But, they stated that the possibility or even the reality, of such long intervals does not alter the nature of the loss when it has been sustained, and when a Court is required to determine whether, and what basis that loss is compensable. In their view, the common law has not accepted that the loss of the opportunity to enjoy one’s financial resources by reason of premature death, is a form of economic loss compensable as such. To accept that proposition would, it was stated, be to accept that the loss of the capacity to enjoy one’s financial resources may be given a different value depending on the value of the resources available to the plaintiff from whatever sources those resources may have been derived. That would be a departure from a position grounded in notions of equality before the law. A satisfactory basis for that departure had not, in their opinion, been demonstrated.[4]
Key Message
In summary, a loss of superannuation pension can form part of an assessment for a future loss of earning calculation, even for retirees, due to its intrinsic connection to earning capacity. By contrast, an age pension which is not linked to earning capacity, should not form part of the damages calculation. A reversionary pension which flows to the beneficiary upon the death of a claimant can be deducted from the sum allowed for loss of superannuation pension.
The practical impact of this decision is that when assessing claims, parties need to keep in mind the potential, even when a claimant is retired, for there to be entitlement to a claim for superannuation pension entitlements which would have been received in the remainder of pre-illness life expectancy, from which should be offset, any reversionary pension payable to the beneficiary of the fund, on the claimant’s death.
This Health Insight was written by Principal, Kellie Dell’Oro and Lawyer, Rosemary Blanden. Please content them if you have any questions or if you would like further information.
[1] Latz v Amaca Pty Ltd [2017] SADC 56 at [115].
[2] (2005) 226 CLR 1; See Amaca Pty Ltd v Latz; Latz v Amaca Pty Ltd [2018] HCA 22 at [6] Kiefel CJ and Keane J cited Gleeson CJ, Gummow and Heydon JJ, with whom Callinan J agreed, as describing the heads of loss that were traditionally seen as compensable for negligently inflicted personal injury as: (1) non-pecuniary loss being loss of the amenities of life; (2) loss of earning capacity; and (3) actual financial loss, being outgoings incurred by reason of the injury.
[3] Amaca Pty Ltd v Latz; Latz v Amaca Pty Ltd [2018] HCA 22 at [79].
[4] Amaca Pty Ltd v Latz; Latz v Amaca Pty Ltd [2018] HCA 22.
Disclaimer: This information is current as of September 2018. These articles do not constitute legal advice and do not give rise to any solicitor/client relationship between Meridian Lawyers and the reader. Professional legal advice should be sought before acting or relying upon the content of these articles.