TIPPER v WILLIAMS (No 2) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, MEAGHER and HANDLEY JJA 26 October 1993, 6 May 1994 [1994] NSWCA 312 DAMAGES — FUTURE' EARNING' CAPACITY — WORKERS' COMPENSATION ACT 1926 — CHOICE BETWEEN AMOUNT ON REDEMPTION OR DISCOUNTED ENTITLEMENT UNTIL RETIREMENT — VICISSITUDES — NOTIONAL DATE OF JUDGMENT FACTS: Appeal on quantum by a solicitor held to be liable for not prosecuting his client's damages claim within time. HELD: (1) Future entitlements under the Workers' Compensation Act, 1926 should have been taken into account, and to this extent the award was too high. (2) The amount which must be deducted in this case is the discounted value of weekly payments until retirement, not the lesser amount which would have been obtainable if the rights were redeemed under s15 of the Act. The latter would have required both employer and employee to agree upon a figure, and in the 15 years since injury this had not occurred. The figure, discounted for vicissitudes, is to be taken off lost future earning capacity, but the actual amount received in benefits between the notional date of calculation and judgment below must be added back, this amount being irrelevant if the notional date under the Act determines the division between past and future. CASES: >Todorovic v Waller (1981) 150 CLR 402. Scott & Ors v Echecaray [1991] Aust Tort Reports 69129. Clarke JA Following the delivery of judgment in this case the court received evidence on the outstanding issue, viz - What amount should be deducted from the damages awarded on account of the respondent's continuing Workers' compensation entitlement? In my judgment I observed that the appellant's counsel argued that the amount which should be deducted was $89,151 but that the respondent's counsel contended that the appropriate figure was the amount which would be likely to be received on a redemption of the respondent's Workers' compensation rights and that would be likely to be a much smaller figure. The evidence led on the further hearing was confined to the expressions of opinion of lawyers as to the likely redemption figure which would be received if the parties could agree to a redemption of the respondent's workers' compensation rights on the one hand and evidence applying a discounting procedure to the weekly sums of compensation received by the respondent, similar to that followed in the assessment of the respondent's impaired future earning capacity, on the other. Unfortunately, the dates adopted were in 1989 and as I will seek to explain they are irrelevant and provide little guidance on the question with which the Court is concerned. In his judgment the trial judge said that he thought it appropriate to assess the damages by reference to the loss at the date the cause of action became statute barred, namely 31 October 1985, but with regard to the damages which might 2 UNREPORTED JUDGMENTS have been expected to be recovered in May 1987. In applying that approach his Honour assessed future loss from 31 May 1987. For instance in assessing the compensation for future impairment of earning capacity his Honour took the comparable wage at 31 May 1987 and projected it forward for 21 years (or until the respondent was aged 65). In these circumstances it is my opinion that it is appropriate to adopt the same approach and to value the respondent's continuing workers' compensation rights as at that date. Before I embark upon that task I should mention that because the substantial point upon which the appellant succeeded was not raised clearly before his Honour a difficulty arose in dealing with the credit which should be allowed for past workers' compensation payments because those payments had been received before the notionally appropriate date (31 May 1987) and after that date. His Honour noted that the payments prior to 31 May 1987 were $17,352 and those following totalled $19,623 and deducted both from the damages. Insofar as the impairment of future earning capacity was calculated from 31 May 1987, and consequently the discounting procedure applied from that date, it was not in my view strictly correct for the judge to deduct the whole sum of $19,623 in respect of the Workers' compensation periods after the relevant date. What should have occurred was that the future rights should have been valued as at 31 May 1987 and a deduction made in respect of those future rights. That is consistent with the authorities and my earlier judgment. In these circumstances the respondent should be allowed a credit in the sum of $19,623 against the valuation of the rights as at May 1987. The determination of the value of the workers' compensation rights is not an easy matter in the circumstances of this case. As the trial judge pointed out the guiding principle in the assessment of damages is that a plaintiff should be given an amount of money that will, as nearly as money can, place him or her in the same position as if he or she had not suffered loss as a result of a defendant's breach of duty (Todorovic v Waller (1981) 150 CLR 402 at 412). Upon the findings of his Honour the respondent would, in the absence of the appellant's negligence, have received full compensation at common law for his employer's breach of duty in 1979 subject only to a deduction in respect of payments made under the Workers' Compensation Act 1926 prior to the date of trial (s63 s5). In addition, upon the entry of judgment his rights under the Workers' Compensation Act 1926 would have come to an end (s63(2)). Accordingly, his Honour was obliged, in order to put the respondent in the position he would have been in if he had proceeded to trial on the notional date, that is, 31 May 1987, to assess the damages he would probably have received and deduct from that the amount of benefits received and the value of the workers' compensation rights which were not brought to an end by the judgment against the appellant. This is what his Honour in fact did subject only to the fact that he deducted some workers' compensation payments made after the notional date of trial and failed to make any allowance for the respondent's continuing workers' compensation rights. It is necessary now to value those continuing rights in order to make an appropriate allowance so that the respondent is placed in the position he would have been in if the appellant had not breached his duty. Insofar as there is no question but that the rights would have continued until the respondent's death it is necessary in the valuation process to have regard to the period between the notional date of trial and his likely date of death which, on his Honour's calculation, was in the year 2016 (judgment of Wood J at p36). URJ TIPPER v WILLIAMS (No 2) (Clarke JA) 3 Mr Coombs QC, who appeared for the respondent, submitted that it was appropriate to adopt the figure which was likely to be received on a redemption under s15 of the Workers' Compensation Act 1926. That evidence established that that was between $50,000 and $60,000. In my view this is not an appropriate figure because, although it represents the amount which the respondent would receive if he were to agree on a redemption with his employer, no allowance is made in the redemption figure for the fact that if the respondent sought to continue to receive weekly payments for the rest of his life, or the employer was not prepared to redeem, his rights were, in a real sense, very much more valuable. The correct approach which I believe should be taken is that rights to receive weekly payments and other payments for the rest of the respondent's life should be valued in broadly the same way as the future impairment of his earning capacity subject only to one thing to which I will return in a moment. I recognise that there are fundamental differences between the concept of compensation for impaired earning capacity and the value of continuing workers' compensation rights. But insofar as the tables applied in valuing the former are concerned with the provision of a present day value for continuing weekly payments for various periods of time I think there is sufficient identity between the two to adopt the same procedures for both. I would accept, however, that the considerations which lead to a deduction on account of vicissitudes in the valuation of an impaired future earning capacity are different from those considerations which should lead to a deduction for vicissitudes in respect of future workers' compensation rights. Indeed, it would be quite wrong to suggest that a constant deduction should be made for vicissitudes when one is valuing future workers' compensation rights because the facts in individual cases could be so very different and what may be correct for one may be wholly erroneous for another. In this case there are particular difficulties which effect the valuation of the rights and the deduction for vicissitudes. For instance, the evidence concerning workers' compensation entitlements was sparse in the extreme. All that appears is that the respondent was receiving payments of $312 net per fortnight as at the date of trial (1 August 1989). According to the tables produced by the WorkCover Authority the gross weekly payment of compensation in respect of total incapacity at that time was $173.50. The evidence is silent as to whether an award under the Workers' Compensation Act had been made in the respondent's favour or whether the employer was voluntarily paying him that money. This is a complicating factor. For instance, if the employer had terminated payments and the respondent had been forced to make an application to the Compensation Court there is a possibility, at least, that on the evidence which was accepted by Wood J the judge hearing the compensation case may have found that the respondent was only partially incapacitated and awarded a lesser sum than $173.50. This was not a matter that was ventilated during the hearing before Wood J or the subject of any evidence at the further hearing before this Court. Further, it has often been said that there is a real difference between the benefit of a lump sum to a person in the position of the respondent and the benefit of periodical payments (see, for instance, Scoff & Ors v Echegaray [1991] Aust Tort Reports 69129 at 69137-8) and the fact that on a redemption a worker receives a much lesser sum than would be arrived at by the conventional discounting procedures followed in assessing common law damages is, to an extent, a recognition of this. 4 UNREPORTED JUDGMENTS In all these circumstances it seems to me that the appropriate course is, in the light of his Honour's findings and the manner in which he approached impairment of future earning capacity, to proceed upon the basis that the respondent was entitled to receive the appropriate weekly sum payable as at 31 May 1987 for 29 years and then to apply a discount for vicissitudes of the same percentage applied by Wood J. It will be recalled that Wood J took the view that while the respondent was partially incapacitated his chances of returning to the workforce were theoretical rather than real and his Honour applied a high discount of 30 per cent, partly, to take account of the possibility he might earn moneys from time to time. Likewise, I believe that a discount in the same percentage should be adopted to take account of the vicissitudes which apply in respect of the workers' compensation entitlements. Although the considerations may be different where there has been an award made by the Compensation Court, it seems to me appropriate to make a significant deduction for the vicissitudes in order adequately to give recognition to the uncertainties concerning the amount of workers' compensation payments which may be received in the future and the fact that if the respondent wished to obtain a lump sum it would be very much smaller than the amount arrived at by the valuation process I propose. In addition the prospect, which his Honour took into account in fixing an allowance for vicissitudes, that the respondent may find some work in the future should not be overlooked and if he did secure part-time, or even full-time, employment that could have a significant impact on the level of workers' compensation payments to which he could look forward. Although there is no evidence of the amount of weekly payments made in May 1987 the tables to which I earlier referred show that the appropriate gross amount was $159 per week. The deduction of tax reduces that amount to $144 per week. Accordingly, I would propose that the value of the continuing rights be determined by discounting, on the 3 per cent tables, the sum of $144 per week for 29 years and deducting 30 per cent from the figure thus arrived at. It should not be overlooked that the respondent was entitled to lump sum damages and that the amount of tax payable on the weekly payments could well have been considerably higher and that is an additional uncertainty. It is impossible, however, in a case in which the evidence is so sparse to reach a valuation which could be any more than very approximate. According to the tables (with no adjustment for mortality rates) the present value of $1 per week for 29 years at 3 per cent is $1,016 and the result of the appropriate discounting, after allowance for the deduction, is $102,413. It follows that this amount should be deducted from his Honour's verdict but the sum of $19, 623 to which I earlier referred should be added to it. The net adjustment to the verdict should, therefore, be $82,790 which when added to the reduction of $9,375 mentioned in the earlier judgment leads to an overall reduction of $92,165. In the result the judgment which should be entered against the appellant is in the sum of $275,486. I will not make final orders because the matter is somewhat complex and I do not think final judgment should be entered until the parties have had an opportunity of studying these reasons and bringing in short minutes. If these are agreed a consent order can be filed in the Registry. If necessary the matter may be mentioned before me (in the first instance) at 9.30am on a convenient date by arrangement with my Associate. URJ TIPPER v WILLIAMS (No 2) (Meagher JA) 5 Meagher JA The plaintiff, Mr Williams, suffered an injury at work on 31 October 1979 when he fell off a ladder. The Bellingen Shire Council was then his employer. He instructed his solicitor, a Mr Tipper, to sue the Council in order to recover damages. Mr Tipper had not done so by 31 October 1985, when the claim became statute barred. He then sued Mr Tipper in the present proceedings for negligence and breach of contract for not suing the Council. He was successful before Wood J, who on 30 November 1989 awarded him a verdict of $367,651.00. The present appeal is one by Mr Tipper against this verdict. The appeal was first heard by a Court consisting of Priestley JA, Clarke JA and myself, and (by majority) was allowed, but in substance only on one point concerning the calculation of future economic loss. One substantial component of the figure of $367,651.00 represented the plaintiff's future impairment of earning capacity attributable to the 1979 injury. This component was valued by his Honour at $171,360.00. This was based on a wage of $300.00 per week, which his Honour projected for 21 years on the 3% tables, and subject to a 30% discount. On this basis his Honour came to the figure of $171,360.00. His Honour did not deduct from that figure, as he should have, Mr Williams's continuing entitlement to workers' compensation payments. It was on this basis that the appeal succeeded. The Court ordered that the matter be restored to the list for the purpose of determining, on additional evidence, what suitable deduction should be made on account of workers' compensation. This has not proved entirely easy. One complicating factor was the question whether the deduction should be calculated on the assumption that Mr Williams would redeem his entitlements under the Workers' Compensation Act. Evidence was given as to its redemption value but I do not see why the Court should concern itself with this issue. There are obvious advantages in redeeming one's rights, and there are obvious disadvantages in doing so. There is no evidence that Mr Williams ever intended to redeem, nor do I see any circumstances from which we should infer he would do so. After all, it is now nearly fifteen years after the accident in question, and he has not endeavoured to do so during that period. One must therefore deduct from the figure for future economic loss found by his Honour the capital value of indefinite workers' compensation payments. Mr Williams was born on 14 March 1943 and was therefore aged forty four at 31 May 1987, the date his Honour determined as the appropriate nominative date from which damages were to be calculated in the normal way. I agree with my brother Clarke that in these circumstances it is appropriate that this Court should also adopt this date. His Honour found that the respondent had a life expectancy of twenty nine years, and was, as at the nominative date, entitled to a gross payment of workers' compensation of $159.00 per week, which is the equivalent of a net payment of $144.00 per week. On the 3% tables, this gives a figure of $146,304.00, which discounted by 30% amounts to $102,413.00. There was an agreed reduction in respect of interest in the figure of $9,375.00. The figure of $111,788.00 must therefore be deducted from $367,651.00, giving a figure of $255,863.00. There is also an amount of $19,623.00 representing workers compensation payments received by the appellant after 31 May 1987 and before judgment, which amount his Honour deducted from his verdict. This figure should be added to the figure of $255,863.00, giving Mr Williams a verdict of $275,486.00 against Mr Tipper. UNREPORTED JUDGMENTS Handley JA I agree with Clarke JA. (1) Short minutes to be handed up. Counsel for the Appellant: J Hislop QC/D Dey Counsel for the First Respondent: J S Coombs QC/I Roche Counsel for the Second Respondent: M W Robinson Solicitor for the Appellant: Phillips Fox Solicitor for the First Respondent: Taylor & Scott Solicitor for the Second Respondent: William & Scott