Allianz Australia Insurance Ltd v Elias [2009] NSWCA 123
In Brief
- Where a trial judge makes an award for past and future economic loss, the award must be supported by reasons, otherwise such an award is defective.
- The trial judge fell into error by failing to properly explain the basis upon which he calculated past and future economic loss and, in particular, by applying a single percentage discount to reflect both a greater residual capacity and a likelihood that that the plaintiff would not have been fully engaged, throughout the year, even in the absence of the accident.
Background
The NSW Court of Appeal handed down its decision in Allianz Australia Insurance Ltd v Elias on 29 May 2009.
The plaintiff was involved in a motor vehicle accident on 2 October 2001. The plaintiff sued the defendant for damages in relation to negligence in the District Court of New South Wales in December 2004, and a verdict was entered in favour of the defendant.
The plaintiff then brought a successful appeal in the Court of Appeal. A new trial was ordered, limited to the issue of damages.
At the new trial, the plaintiff was awarded damages in the sum of $323,929, comprised of, inter alia, past economic loss in the sum of $130,000 and future economic loss in the sum of $170,000.
The trial judge expressly stated that the sum allowed for past economic loss should be discounted to 60% of the full amount claimed. His Honour also expressly stated that he allowed 40% of the full amount claimed for future loss of earning capacity. No further reasons were given as to why these discounts were applied or how they were calculated.
The defendant brought an appeal limited to the assessment of past and future economic loss.
The plaintiff was born in Lebanon in 1974, and undertook studies which qualified him as an electrician. The plaintiff undertook employment in Lebanon as an electrician. He came to Australia in October 1999 and remained until 20 September 2000, when he returned to Lebanon.
The plaintiff returned to Australia on 22 June 2001 and undertook some limited electrical work as an employee or contractor prior to the motor vehicle accident which occurred some 3 months later.
The defendant challenged the plaintiff's entitlement to economic loss on two grounds;
1. The primary judge's conclusions as to the extent of the plaintiff's disabilities; and
2. The primary judge's conclusion that the plaintiff's disabilities resulted in the magnitude of economic loss reflected in the damages awarded
Court of Appeal
Extent of Restrictions
In relation to the defendant's first challenge to the plaintiff's entitlement to economic loss, the Court of Appeal held that the primary judge's findings as to the plaintiff's disabilities were correct based on the contemporaneous medical evidence available.
The more significant issue for determination by the Court of Appeal, was the second challenge brought by the defendant, that being the magnitude of economic loss reflected in the damages awarded.
Past economic loss
The Court of Appeal held that the trial judge's decision as to past economic loss was defective for want of reasons.
The Court of Appeal held that the trial judge erred in failing to explain why he allowed 60% of the sum claimed. It was unclear from his Honour's reasons whether the discount was applied in order to reflect a greater residual capacity than the sum conceded by the plaintiff or whether the discount was designed to reflect the likelihood that the plaintiff would not have secured work throughout the year even in the absence of the accident. Indeed, it was possible that the discount was intended to take into account each of these factors.
The Court of Appeal held that it was relevant that the plaintiff had returned to Lebanon and had limited opportunity to establish a working pattern in Australia prior to the motor vehicle accident. Furthermore, the plaintiff was (prior to the motor vehicle accident), able bodied and qualified to carry out electrical work under supervision.
The Court of Appeal held that based on common sense and knowledge of the economic climate during the relevant period, the plaintiff would have been able to obtain work for a substantial proportion of the year. Based on the trial judge's assessment of past economic loss, it was impossible to infer whether or not the trial judge had reduced the plaintiff's claim by reason of his residual capacity, or whether or not the plaintiff would have been able to obtain full-time work.
Ultimately, the Court of Appeal re-assessed the plaintiff's past economic loss by determining a net loss of $400 per week and the plaintiff being able to secure employment for 70% of the year, totaling $101,756.
Future economic loss
The Court of Appeal held that the trial judge's failure to give reasons was equally defective in relation to future loss of earning capacity. The allowance of 40% of the sum claimed by the plaintiff was not properly explained.
The Court of Appeal concluded that unlike the award for past economic loss, there was no basis to even infer that the trial judge's adjustment related to the proportion of the year the plaintiff could work, but that it was more likely based on a residual capacity to earn.
Once again, the Court of Appeal re-assessed future loss of earning capacity by substituting a net loss of $300 per week and the plaintiff being able to secure employment for 70% of the year.
As such the Court of Appeal allowed the appeal in part and reduced damages from $323,929 to approximately $273,000.
Implications
The major point of interest in Allianz Australia Insurance Ltd v Elias is the finding that when awarding damages for both past and future economic loss, the trial judge is required to give reasons as to how that award is calculated otherwise there is a risk that the award will be defective.
Without referring to the provision, the Court of Appeal has upheld the statutory requirement contained in s 126(3) of the Motor Accidents Compensation Act 1999 (NSW), which mandates that when a court makes an award for future economic loss it is required to state the assumptions upon which the award was based and the relevant percentage by which damages were adjusted.
The Court of Appeal applied a similar test in respect of past economic loss.
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