The Queensland case of Balnaves v Smith  QSC 192
is arguably one of the most important recent cases involving the
determination of future economic loss for high net worth
individuals who suffer personal injury.
Importantly, the case highlights some key implications for
personal injury insurers.
The executive chairman of Southern Star Group Ltd (SSG) was
awarded $250,000 for 'economic loss' arising from a
horrific boating accident. Mr Balnaves was out on the water when a
collision with another boat 'smashed' his right leg
into his abdomen and 'imploded' his pelvis. He had more
than 40 bones broken. It is important to note that the amount
awarded was significantly less than the $7.9 million that he
The case centred on economic loss arising from the sale of SSG
to Southern Cross Broadcasting Ltd (SCB). Mr Balnaves argued that
the sale of SSG would not have occurred if he had not been injured
in the accident. He made this argument despite the fact that during
the sale Mr Balnaves had performed in his role with enthusiasm and
the boards of both SSG and SCB wanted him to remain in charge of
SSG after the sale.
The Court's decision and reasoning
The Court found that there was only a small likelihood that Mr
Balnaves would not have accepted the takeover had the accident not
occurred, given that:
the offer was obviously attractive to shareholders
he would earn $3 million from the sale
he would receive a seat on the board of SCB and continue as
executive chairman of SSG for at least three more years
he was about to turn 60 and it was speculated that he would
retire at around 65 years of age.
The Court further found that SCB's bid was supported by
the other directors because SSG had no capacity for domestic growth
and, despite diligent investigation, no favourable alternative
opportunities for overseas acquisitions had been found.
Overall, Mr Balnaves' injuries and related restrictions
were found to be of no great influence in the decision to accept
the takeover. There was a very high degree of probability he would
have made the decision to embrace the takeover regardless of
The Court considered Mr Balnaves' future earning
capacity and commented that 'in principle, mere difficulty of
assessment of a loss is no impediment to an award of damages: the
Court must do the best it can'.
It further noted that assessment of damages for personal
injuries 'is not an exact science' and 'must be
governed by considerations of practical common sense in the context
of the facts of the particular case', citing Paul v
The Court found that:
Damages for loss of opportunity to retain a shareholding in SSG
were not too remote because it was 'foreseeable that personal
injury may adversely affect the value of shares in a corporate
vehicle, the fortunes of which depend, to an extent, on a
plaintiff's personal exertion'.
Mr Balnaves, nearing retirement at the time of loss, would have
retired at the age of 65 and in that time would have received an
income of around $1,050,000 per annum, which broadly accorded with
the remuneration paid to his successor and amounted to a total loss
of around $2.3 million.
There was roughly a one-in-10 chance that, had Mr Balnaves not
been injured, he would not have facilitated SCB's takeover
in 2004. Therefore under that assessment, the economic loss was
around $250,000 and the Court awarded this amount as future
Lessons for insurers
In an assessment of damages for personal injury claims involving
high net worth individuals engaged in business, careful
consideration must be given to the specific factors associated with
each claim for economic loss, which may include:
the degree of detriment to the individual, given their age and
stage of life, interests and other personal or business
key factors driving the decision-making processes
the economics and volatility of the marketplace for the
specific type of business.
For these particular individuals, a close examination of company
documents, including board reports, and an analysis by a forensic
accountant are essential.
Awards for future economic loss vary widely due to the unique
circumstances of each individual.
Insurers and insurance professionals are encouraged to seek
legal advice for an accurate evaluation of the weight and relevance
of factors and strategies for managing this type of claim.
Winner - EOWA Employer of Choice for Women Citation 2009, 2010
Winner - Australasian Law Awards Gold Employer of Choice 2011
Finalist - ALB Australasian Law Awards 2008, 2010 and 2011 (Best
Winner - BRW Client Choice Awards 2009 and 2010 - Best Australian
Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Whereas most insurance policies exclude liability arising under contract, insurers can
positively benefit where an insured has limited or excluded its liability under contract.
This usually arises where the insured's contract has a limitation or exclusion of liability clause in the insured's favour.