INSURANCE – CIVIL LIABILITY – QUANTUM – ECONOMIC LOSS – PRE-EXISTING CAPACITY
The question of pre-existing earning capacity in a case involving subsequent and/or multiple accidents – Coles Supermarkets Australia Pty Ltd v Fardous  NSWCA 82
AUTHOR: YEVGENI SHKURATOV, ASSOCIATE
DECISION DATE: 13 APRIL 2015
NEW SOUTH WALES COURT OF APPEAL
1. A court cannot make an award of damages for future economic loss unless the plaintiff first satisfies the court that the assumption about future earning capacity or other events on which the award is to be based accords with the plaintiff’s most likely future circumstances but for the subject injury.
2. An adjustment of damages is then required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events might have occurred but of the injury.
3. The court is required to state the assumptions on which the award was based and the relevant percentage by which the damages were adjusted.
4. The onus is on the plaintiff to adduce evidence that goes to his pre-existing earning capacity in the presence of any pre-existing condition(s)/injuries emerging from the plaintiff’s case that may have had an impact on his earning capacity at the time of injury. In the absence of any pre-exiting injury, the plaintiff still bears the onus of satisfying the court of the extent of the injury caused by the negligence.
5. Although it can be inferred, depending on the facts of the particular case and in the absence of express evidence, that if the plaintiff obtained employment that he or she would have derived at least a particular rate of pay, it is beneficial to adduce specific evidence in relation to this issue.
6. In our opinion, in cases of pre-existing and subsequent injuries medico legal experts (such as vocational and functional assessors) ought to be specifically asked to address the issue of the impact of the plaintiff’s pre-existing injury emerging form the plaintiff’s case rather than asking a generalised question that goes to the extent of the injury, which is the subject of the claim, and whether such injury is productive of economic loss as a whole.
On 10 July 2010, Mr Abrahim Fardous (“the respondent” to the appeal) slipped and fell at Coles Supermarket sustaining an injury to his back.
The respondent sued Coles Supermarkets Pty Ltd (“the appellant”) for damages for negligence. The respondent, following a hearing in the District Court before Sorby DCJ, succeeded on the issue of liability and was awarded damages in the total amount of $354,965.00.
The principal question on appeal, with the appellant not challenging a finding of liability, was whether the respondent had any earning capacity at the time of his injury, having regard to an earlier work related injury, which occurred on 27 September 2007, from which he suffered severe lower back pain extending into his left leg, and for which he required a hospital admission for five days and surgery under the care of Dr Mark Davies, Neurosurgeon and Spinal Surgeon, on 31 January 2008. Thus, the appellant challenged awards for past economic loss of $79,600.00, future economic loss of $219,640.00 and future out of pocket expenses of $25,725.00.
Section 13 of the Civil Liability Act 2002 (NSW)
Section 13 of the CLA provides:
“Future economic loss—claimant’s prospects and adjustments
(1) A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant’s most likely future circumstances but for the injury.
(2) When a court determines the amount of any such award of damages for future economic loss it is required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events might have occurred but for the injury.
(3) If the court makes an award for future economic loss, it is required to state the assumptions on which the award was based and the relevant percentage by which damages were adjusted.”
The Court of Appeal found that application of this section in a case where the extent of the plaintiff’s pre-accident earning capacity is in issue requires a statement of the court’s assumptions (that is, findings) about the extent to which, but for injury which is the subject of the claim, any earning capacity that the plaintiff had at the date of the subject injury would have been productive of income thereafter. This involves a finding of the percentage possibility of income of a certain level being earned.
The Court of Appeal further found that with respect to the assessment of earning capacity remaining after the injury that is the subject of the proceedings, there needs to be a “practical assessment” of the likelihood of the plaintiff having obtained employment.
District Court of New South Wales
The medical evidence before Sorby DCJ of the respondent’s medical examinations prior to the settlement of his claim arising out of the injuries that he sustained in the first accident on 27 September 2007 gave relatively weak support of the respondent obtaining employment. For example:
1. August 2008: Dr Bodel referred to only “minimal improvement” in the respondent’s condition in the 18 months period since he underwent surgery on 31 January 2008, with Dr Davis, the respondent’s treating neurosurgeon and spinal surgeon, also being doubtful of the respondent’s ability to obtain work.
2. June 2009: Dr Davis opined that, on the balance of probabilities, the respondent was unlikely to obtain employment.
3. September 2009: Dr Kafataris referred to the absence of improvement in the respondent’s condition, however contemplated that the respondent might be able to work up to 20 hours per week, and later even 40 hours per week. The 20 hours per week capacity was consistent with the contemplated capacity of the respondent’s General Practitioner in December 2009.
Following settlement of proceedings in March 2010 against his employer for his first accident, the respondent, as supported by his treating specialist Dr Davies, asserted that he had little pain. Sorby DCJ accepted that the respondent’s symptoms improved by March 2010, but concluded that he still had pain at the time. The respondent was awarded damages for past and future economic on the basis that his earning capacity before July 2010 was 20 hours per week at $20.00 per hour in a light sedentary job and that this had been lost due to the subject injury.
Court of Appeal of New South Wales
On appeal Mcfarlan JA (with Emmett JA and Simpson J agreeing), noted that:
1. A plaintiff, in the respondent’s position (i.e. with pre-existing injuries emerging from the claim), quoting from Morvatjou v Moradkhani, must prove:
“[firstly] the extent of his or her pre-accident earning capacity, [secondly] the extent to which that capacity would have been productive of income had the accident not happened, and [thirdly] the extent to which the compensable injuries have diminished his or her ability to exercise the pre-accident earning capacity.”
2. The defendant has the onus to raise the issue of, and adduce evidence that goes to, the plaintiff’s pre-excising condition and it’s impact on the plaintiff’s pre-accident earning capacity in the absence of any pre-existing condition(s) emerging form the plaintiff’s case. However, the plaintiff does have the legal onus, quoting from Purkes v Crittenden:
“upon the whole of the evidence to satisfy the tribunal of fact of the extent of the injury caused by the defendant’s negligence”
3. In cases involving plaintiffs with pre-existing injuries, whether any pre-subject accident, theoretical earning capacity of the plaintiff would have been productive of income:
“is a hypothetical question requiring consideration of what would or might have happened in the period up to and after the hearing at first instance if that accident had not occurred. That question is to be answered by determining the degree of probability or possibility that the earning capacity would have been productive of income.”
4. The issue is not one whether an event has or has not occurred, with the issue to be determined on the balance of probabilities and, quoting from Malec v JC Hutton Pty Ltd:
“if the probability of the event having occurred is greater than it not having occurred, the occurrence of that event is treated as certain…:
Having regard to the circumstances of this case, in particular the medical evidence in relation to the injury that the respondent sustained in his first accident on 27 September 2007, the opinion of Macfarlan JA (with Emmett JA and Simpson J agreeing) that it was by no means certain that the respondent, but for the subsequent injury of 10 July 2010, would have ever resumed gainful employment. However, his condition was improving and, on balance, the medical evidence supported a finding that the respondent had a 65% prospect of obtaining employment of 20 hours per week at $20 per hour.
Mcfarlen JA went on to say (with Emmett JA and Simpson J agreeing):
“ The appellant submitted that it was not open to the Court to conclude, in the absence of evidence, that $20 per hour would have been an achievable rate of pay. In my view the Court can however infer that if Mr Fardous obtained employment that it would have been at least at that modest rate of pay. Depending on the circumstances, the want of specific evidence on aspects of a damages claim does not prevent the court doing the best it can to address the plaintiff’s loss.”
The Court of Appeal found an error in Sorby DCJ’s assessment of past and future economic loss and ordered that the quantum of damages awarded to the respondent for past and future economic loss ought to be adjusted in accordance with the 65% finding above.. On the other hand, Sorby DCJ’s assessment of future out of pocket expenses was upheld with the appellant demonstrating no error in his Honour’s assessment.
This judgment is a reminder that in claims involving plaintiffs with multiple and/or subsequent injuries, both of which are productive of economic loss, although not explicitly necessary, proper preparation of the claim would mandate obtaining and adducing medico legal evidence that goes to the issue of the plaintiff’s pre-existing earning capacity, but for the subject injury, as well as any evidence as to what would have been achievable in the plaintiff’s circumstances, but for the injury. This is best addressed by way of the plaintiff undergoing vocational and functional assessments, with specific enquiry directed to the plaintiff’s pre-existing earning capacity and his or her options on the open employment market.
This may avoid the court inferring, doing the best it can, a lower rate of pay and a lower pre-existing earning capacity to address the plaintiff’s loss in order to reach finality in the absence of any such evidence.
  NSWCA 82, at .
  NSWCA 82, at . Also see Nominal Defendant v Livaja  NSWCA 121 at ; Mead v Kearney  NSWCA 215 at .
  NSWCA 82, at  and .
  NSWCA 82, at .
  NSWCA 82, at ,  and .
  NSWCA 157.
  NSWCA 157 at . Also see Coles Supermarkets Australia Pty Ltd v Fardous  NSWCA 82, at .
  NSWCA 82, at 
  HCA 34; 114 CLR 164
  HCA 34; 114 CLR 164 at 168; Coles Supermarkets Australia Pty Ltd v Fardous  NSWCA 82, at .
  NSWCA 82, at . Also see Malec v JC Hutton Pty Ltd  HCA 20; 169 CLR 638 at 642-643.
  NSWCA 82, at .
  NSWCA 82, at . Also see National Instruments Pty Ltd v Gilles (1975) 49 ALJR 349 at 350; JK Kealley v Jones  NSWLR 723 at 733-734; State of New South Wales v Moss  NSWCA 133; 54 NSWLR 536 at -.
  NSWCA 82, at  to .