In Howard v Aikman [2015] ACTCA 64 (18 December 2015), the Australian Capital Territory Court of Appeal reviewed the principles which apply in assessing claims for loss of earning capacity.
Background
Dr Amos Aikman brought proceedings in the ACT Supreme Court seeking damages for injuries suffered in a motor vehicle accident which occurred in Canberra on 13 September 2006.
Dr Aikman was a motorcyclist struck by a vehicle driven by the defendant, and he sustained significant injuries to his right knee, ankle and back. He was 26 at the time of the accident and he was in his last six months of a PhD programme at the Australian National University. He alleged that, as a result of his injuries, he was precluded from pursuing a lucrative career as geologist.
Dr Aikman’s claim was heard by Master Harper of the ACT Supreme Court over a period of three days in October 2012 and, after reserving his decision for over 12 months, the Master handed down judgment in favour of Dr Aikman on 6 March 2014 in the sum of $1.232m plus costs – which judgment included an allowance for past loss of earning capacity of $495,000.00, and an allowance for future loss of earning capacity of $570,000.00.
In arriving at these figures, the Master was assisted by evidence called from Dr W who had completed his PhD in Earth Sciences from the ANU in December 2007, and had then obtained employment with a private company working as a geological consultant.
The insurer appealed the damages awarded for loss of earning capacity, and Dr Aikman cross appealed the adequacy of such awards.
The decision on Appeal
In a joint judgment, the ACT Court of Appeal (Refshauge, Penfold and Katzmann JJ) upheld the insurers appeal and substituted the figures of $112,800.00 and $350,000.00 for past and future loss of earning capacity respectively, reducing the judgment to a little over $631,000.00. The cross appeal was dismissed and Dr Aikman was ordered to pay the costs of the appeal.
In arriving at the decision, the Court was critical of the Master’s approach to assessing damages for loss of capacity, and found that Dr W was on no view of the evidence a true ‘comparable earner’. The Court also found that the Master was wrong in taking judicial notice that Dr Aikman could have supplemented his income as an academic by private or Government income.
The Court of Appeal re stated the relevant principles in assessing damages and claims for economic loss as follows:
- The purpose of an award of damages is to put the plaintiff in the position he or she would have been had it not been for the injury;
- Damages are not awarded for loss of earnings but for the diminution in the plaintiff’s earning capacity caused by the injury, to the extent that it is or may be productive of financial loss. This means it is necessary to identify the capacity that has been lost and the economic consequences that will or might flow from such loss;
- The evaluation of a loss of capacity to earn is of its nature more imprecise than the assessment of lost income – resting ‘… on the hypothesis – that the plaintiff will have undiminished capacity – which has been rendered false by events’;
- Where questions arise as to the hypothetical effects of an injury, the Court is required to determine the degree of probability of the occurrence of the associated future or hypothetical events and adjust the award up or down to reflect it; and
- In some cases, where the uncertainties are too great and the evidence too deficient, the Courts may award a ‘buffer’ or ‘cushion’ for lost earning capacity.
Implications
The decision is a timely reminder of the correct principles to be applied in assessing damages for economic loss.
It also emphasises the importance, when attempting to call evidence as to ‘comparable earners’, that such witnesses represent a ‘true comparison’ having regards to their qualifications, the sector and industry in which they work and their field of expertise or experience.
The decision also contains a discussion of s144 of the Evidence Act 2011 (Act), which relates to matters of common knowledge and the circumstances in which it is open for a court to take juridical notice of certain facts or matters.
This article was written by Richard Garnett, Partner and Rachael Law, Solicitor.