Non-economic loss (NSW) vs. Non-pecuniary loss (UK)
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December 2, 2016
The rules in New South Wales relating to non-economic loss are drastically different to those adopted by the United Kingdom, in the context of personal injury claims arising from motor vehicle accidents. The name attributed to this form of loss is just one of the differences that distinguish between how non-economic losses will be compensated in each of these jurisdictions.
Tort law is often justified with the notion that the plaintiff should be returned to the position that they would have been in but for the defendant’s negligence. Negligence necessitates that the defendant did not carry the intention to cause the result. Consequently, the argument for punitive damages for negligence is often dismissed due to the absence of intentional fault; one should not be punished when they lack the requisite intention. I subscribe to the belief that damages should remain compensatory when awarding damages for injuries caused by negligence. But a question arises as to which system of non-economic damages, the system enforced in NSW or the UK, works best to provide an overall balance between compensating the plaintiff adequately and limiting the cost of tortious claims being litigated.
The Law Commission of the UK defines non-pecuniary loss (general damages) as ‘the award of damages for pain and suffering and other forms of non-pecuniary loss’; in essence, any loss that is not monetary. Clearly these definitions are remarkably similar, if not the same, so what is it that sets such a large distinction between the two?
Accessibility of non-economic loss:
Non-economic loss can add considerable value to a claim in personal injury, especially if there is little economic impact upon the plaintiff. Interestingly, a threshold is in place in NSW for non-economic loss when the plaintiff has been injured in a motor vehicle accident. In order to qualify for a claim of non-economic loss in these circumstances, the plaintiff must be medically assessed to have suffered injuries, which amount to greater than 10% whole person impairment. This is set out in section 131 of the Motor Accidents Compensation Act.
Over the last 15-20 years, Australia has seen a dramatic shift in the direction of its tort system. Previously, the system had been plaintiff orientated with a particular focus on fully compensating the claimant. However, this focus had somewhat adverse consequences on the insurance system as a whole. The Hon Chief Justice J Spigelman AC highlights that ‘at least indirectly in the case of judges, and overtly in the case of parliaments, the shift in attitude has been driven by the escalation of insurance premiums and… by the unavailability of insurance in important areas on any reasonable terms at all.’ This reveals how the pressures of economics and politics can have a profound affect on the direction of legislation.
In contrast, the system enforced in the UK allows for the automatic award of general damages in motor accident cases; this is to say that if you have suffered a recognised injury you will receive damages for any non-pecuniary loss. Accordingly, general damages can be nominal in nature if the non-monetary loss caused is marginal. The fact that nominal general damages may be awarded in the UK represents a marked difference with the threshold approach enforced in NSW. By nature the NSW threshold for non-economic loss means that damages will predominantly be substantial; the threshold dictates that injuries are generally of a serious nature warranting a significant award.
Calculation of non-economic loss:
The calculation of non-economic loss in motor accident cases also represents clear differences between the UK and NSW. The UK has adopted a guide in order to help determine the applicable award. This is known as the “Guidelines for the Assessment of General Damages in Personal Injury Cases” published by the Judicial College (JCG). This works by attaching a range of possible values that can be awarded for certain injuries, ergo a minimum and maximum figure will be provided. ‘For example, a minor hand injury receives general damages ranging from £737 to £3,509 under the JCG, while Claimants with quadriplegia can expect to receive between £262,350 and £326,700 depending on the age and former lifestyle of the Claimant.’ This guide therefore works by giving rough figures that are likely to be expected from each injury. At this point, other factors will come into play such as the severity of the injury/ pain and suffering, the age of the claimant and previous case law etc. This works to give the system some uniformity before the individuals of the case can be focused upon. However, it must be noted that ‘the Judicial College Guidelines are exactly that – a guide. Each case turns on its particular facts and appropriate medical evidence.’
In comparison, NSW has not adopted a guide or anything similar. The focus is upon how the injury has impacted the claimant’s life and how it has restricted their lifestyle. Consequently, each assessment is extremely subjective. The four factors, which are provided in the definition on non-economic loss provided above, will be considered. The result is that each assessment is very much isolated and this can make it more difficult to estimate the level of award. Interestingly, this means that higher ratings of whole person impairment do not automatically generate a higher award for non-economic loss; the whole person impairment becomes irrelevant when assessing non-economic loss. However, common principles are influential and should be considered. In this sense, case law can also influence the assessor or judge’s assessment. For example, the case of Reece v Reece is an important judgement that dictates that the age of the claimant is a relevant consideration. It should also be noted that there is a maximum amount of damages that can be awarded, which is $521,000 as at 1 October 2016.
The difference in how non-economic loss will be assessed is therefore meaningful for motor accident cases. NSW seems to have adopted a process, which offers a more subjective outlook on each case. In contrast, the UK has adopted guidelines that attempts to give some uniformity but that does still allow for the subjective elements of each case to be explored.
Clearly, damages for non-economic loss in motor accident cases are much more readily available in the UK being that there is no threshold in place. Arguably, this leads to a system in which the claimant is more likely to be fully compensated for their injuries. The Law Council of Australia is particularly critical of the reforms that have been seen all over Australia with thresholds having been introduced. They conclude that the ‘reforms which have occurred have robbed many seriously injured people of the right to seek fair compensation from the wrongdoer. In the meantime, perhaps the most vocal proponent of legislated tort law reform, the insurance industry, has experienced considerable financial gain.’ This leads to the allegation of an unjust system, which cannot adequately compensate the claimant.
On the other hand, the system enforced in the UK may ultimately disturb the balance between compensating the claimant and the cost of tortious claims if it were to be enforced in NSW. Whilst compensation should be an important factor in deciding the availability of damages for non-economic loss, outside factors such as the price of insurance premiums cannot be overlooked. This may be one of the factors in play that has resulted in the high cost of car insurance in the UK. Furthermore, ‘for people with serious injuries, general damages may offer no more than a token award. In many cases, the bulk of a personal injury claim is made up of special damages, particularly where the injury is life-changing.’ This indicates that the accessibility of non-pecuniary loss in the UK may not always result in adequate compensation for the claimant. It is conceivable that the trend of compensating everyone will result in generally lower awards, especially in more severe cases.
Ultimately, the two systems compared do show important differences in their accessibility and how damages will be calculated. However, the increased accessibility of non-pecuniary loss for motor vehicle accidents in the UK does not automatically mean that the claimant is adequately compensated. Therefore both systems are liable to under compensation, although, the threshold adopted in NSW may be viewed as overly harsh as many claimants are left with no recourse in regard to non-economic loss. As a result I find the accessibility of non-pecuniary loss in the UK preferable, even if it often results with token awards.
 Motor Accidents Compensation (Determination of Loss) Order 2009 as at 1 October 2016, Clause 4 Section 134
 Speech given by Tim Bugg, President-elect, Law Council of Australia, ‘Negligence and Damages – Personal Injury, Property Damage and Pure Economic Loss’ Fiji Law Society 50th Anniversary Convention (26 May 2006) 9
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