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Baigent, Louis; Wettenhall, Gabriella --- "Matters of life and death: Calculating damages during the lost years" [2022] PrecedentAULA 10; (2022) 168 Precedent 40

MATTERS OF LIFE AND DEATH

CALCULATING DAMAGES DURING THE LOST YEARS

By Louis Baigent and Gabriella Wettenhall

If a plaintiff’s life expectancy is shortened due to a tortious act, compensation for loss of earning capacity may still be recovered beyond their anticipated date of death. The period extending beyond the plaintiff’s anticipated date of death has come to be known as the ‘lost years’.^[1] However, lost years claims are only possible in circumstances where the curtailment of the plaintiff’s life expectancy is attributable to the defendant’s negligence.

In the introduction to this article, the authors describe the rationale behind lost years claims and the circumstances where they are likely to arise. The approach to calculating these claims is then discussed in three sections. The first section focuses on the evidence which ought to be obtained to support any underlying assumptions regarding an injured person’s life expectancy. The second section discusses the prospective earnings or income that can be compensated under a lost years claim. The third and final section explores the nature and extent of the deductions which are to be made in recognition of the living expenses that the plaintiff would have incurred during the lost years.

INTRODUCTION

The default position in personal injury claims is to assume that the plaintiff will enjoy an ordinary life expectancy. The relevant case law dictates that life expectancy in these circumstances is to be judged according to projected life tables published by the Australian Bureau of Statistics.^[2] These tables are not intended to reflect the average life expectancies of those with perfect or near-perfect health. They are based on age- and sex-specific ‘death rates’ across the general population, which include individuals with numerous comorbidities and risk factors for earlier than expected death.^[3]

However, there are limited circumstances where a plaintiff’s injury is so catastrophic that it impacts not only upon their quality of life, but also upon the quantity of life they are expected to enjoy. This may be seen in cases involving, for instance, significant brain injury or tetraplegia. The plaintiffs whose life expectancy tends to be most significantly impacted are those with terminal illnesses. While this scenario is most commonly seen in the dust diseases jurisdiction, it is by no means exclusive to dust disease claims. There are also instances where, due to delayed medical diagnosis and treatment, an otherwise curable disease is allowed to progress, uninhibited, beyond the point of curability.

There are, for example, many cancers which, if detected at an early stage, have a significant prospect of being cured without any identifiable impact on a patient’s life expectancy. However, in circumstances where those same cancers go undetected or untreated and are given the opportunity to grow and spread to other parts of the body, the statistical probability of long-term survival decreases significantly and life expectancy may be reduced to a matter of years or even months.

In these circumstances, the plaintiff is impacted not only in having their lifespan reduced but also in having their damages heavily restricted. It is by now well established that it is necessary to calculate future losses by reference to a plaintiff’s diminished post-injury life expectancy. As such, damages for pain and suffering, out-of-pocket expenses and care and assistance (whether gratuitous or paid) can only extend as far as the plaintiff’s expected date of death.

There is, however, an exception to this rule: damages for future loss of earning capacity. Injured persons are entitled to claim for the loss of their earning capacity over the entire period that they are likely to have continued working but for their injury. As noted above, this includes the lost years, which denote the period extending beyond the injured person’s anticipated date of death.^[4] However, beyond the ordinary discount for contingencies, the courts have determined that the loss of earning capacity during those lost years is to be discounted to reflect the living expenses that the injured person would have incurred had it not been for their premature demise.

LIFE EXPECTANCY EVIDENCE

In all personal injury claims, life expectancy is an important factor in the calculation of future losses. In the vast majority of claims, a plaintiff’s injury will not have any definable bearing on their mortality. Even in circumstances where life expectancy is impacted, it may not be reduced to the extent that the plaintiff’s working life is shortened.

The first step is therefore to determine whether the claim is one that requires a lost years calculation. In doing this, every effort should be made to avoid broad-brush assertions and speculation about life-expectancy issues. To depart from the ordinary projected life tables, there must be specific and compelling evidence as to why such a departure is appropriate in the circumstances. In other words, the plaintiff’s injury needs to fall within a category of conditions that is widely recognised as having a statistically significant impact on life expectancy.

Unless the condition in question is exceedingly rare, there is likely to be a body of literature which discusses the median survival rates of cohorts of patients with the same conditions as, or similar conditions to, the plaintiff. However, it cannot automatically be assumed that the plaintiff’s experiences will be identical to those within a given cohort or category. The literature must be applied to the plaintiff’s individual situation,^[5] which is an exercise that may require input from an appropriate medical specialist. As such, evidence of reduced life expectancy will regularly involve both statistical data and the clinical knowledge and experiences of a medical professional (an independent expert and/or the plaintiff’s own treating doctor).^[6]

It is not an uncommon practice for solicitors to instruct experts in general practice to comment on issues of life expectancy. However, it is difficult to envisage that evidence from such experts would be appropriate for determining, with any accuracy, the reduction to be applied to a plaintiff’s life expectancy. Diseases or injuries severe enough to impact on survival tend to require more specialised knowledge.

In a case involving metastatic prostate cancer, for example, the most compelling medical evidence is likely to be provided either by an oncologist with expertise in treating a variety of cancers at different stages, or a urologist with expertise in treating a variety of urological conditions, including prostate cancer specifically. It is questionable whether evidence from experts outside of these specialities would even meet the basic requirements to be considered admissible in such a case.^[7]

Whatever the situation, it is important to ensure that the opinion of the expert or treating specialist is underpinned by sound reasoning and data. In the recent case of Towers v Hevilift Ltd (No 2),^[8] the evidence of the defendant’s expert was largely rejected when the following became apparent:

1. The research on which he relied contained an anomaly whereby the plaintiff had a higher risk of dying than patients with a worse level of injury.

2. The expert could not offer a wholly reliable explanation for the anomaly.

3. The expert opined that the plaintiff’s life expectancy was even lower than that of the general cohort of patients with his condition, but failed to provide any scientific reasoning as to how he had quantified the further reduction in life expectancy.

PECUNIARY LOSSES

A plaintiff with a shortened life expectancy is still entitled to claim all categories of future economic loss which are typically compensable for an injured person whose earning capacity has been diminished. Therefore, loss of earning capacity for an employed plaintiff who expected to continue in their role during the lost years is compensable. So too are losses sustained by a plaintiff who is a business owner resulting from the plaintiff’s absence from the business.

The basic approach to assessing damages for remunerative work is largely uncontroversial; however, this is not so with other types of income. With the increasing wealth of the Australian population and advances in medicine, many retirees can expect to live for years without remunerative work, and instead receive other forms of income, such as the age pension or superannuation, or income from investments. Questions have recently arisen as to whether these categories of income are also compensable under a lost years claim.

In 2018, the High Court in Amaca Pty Ltd v Latz (Latz)^[9] considered whether a plaintiff could claim the superannuation pension and the age pension during the lost years. Mr Latz was terminally ill with malignant mesothelioma as a result of exposure to asbestos in products supplied by the defendant. He was 69 years old and retired at the time of his claim, and it was undisputed that his life expectancy was reduced by 16 years as a result of his illness. His future economic loss claim included the loss of the age pension and superannuation pension that he would have expected to receive had his life expectancy not been shortened.

The majority found that the loss of the age pension was not compensable, but the superannuation pension was compensable during the lost years on the basis that it was intrinsically linked to Mr Latz’s earning capacity. In a joint judgment, Bell, Gageler, Nettle, Gordon and Edelman JJ held that the superannuation pension was connected to Mr Latz’s capacity to earn money from the use of personal skills.^[10] Their Honours conceptualised Mr Latz’s rights under Part 5 of the Superannuation Act 1988 (SA) as ‘delayed remuneration for work that Mr Latz has carried out ... representing, as it does, a species of remuneration – financial rewards from work’.^[11]

The age pension, in contrast, was determined by the majority not to be linked to a person’s capacity to earn. As pointed out by Luntz and Harder, the age pension is available to every person who reaches the pension age, has been an Australian resident for a specified period of time, and meets the asset and income threshold criteria.^[12] The approach of the High Court in Latz suggests that the types of compensable income under lost years claims should be narrowed to those intrinsically linked to earning capacity. While a plaintiff’s premature demise may preclude them from receiving the same social security benefits as someone with an ordinary life expectancy following their retirement, there does not appear to be an entitlement to claim those losses.

Whether the loss of income from investments is compensable is yet to be tested in Australia. However, a recent decision of the UK Court of Appeal in Head v The Culver Heating Co Ltd (Head)^[13] provides some guidance. In that case, the plaintiff’s lost years claim included the loss of dividends on shares that he owned in his family company. The defendant sought to rely on the decision in Adsett v West,^[14] where it was found that, although the deceased was entitled to recover income arising from his lost capacity to earn, he was not entitled to claim income from capital which remained intact and which still had the capacity to produce investment income.^[15] The defendant in Head argued that the plaintiff’s shareholding would not diminish after his premature death, and the profits of the business would not be impacted.

This argument was dismissed by Bean LJ, who drew a distinction between income derived from passive investments and income from investments which the plaintiff had worked for and had some control over. In Head, the plaintiff was held to be the driving force behind the business and it was through his hard work and skill that the business had become successful.^[16] It was found by Bean LJ found that all of the income which the plaintiff received from the company was ‘the product of his hard work and flair, not a return on passive investment’.^[17] If the plaintiff had held no active role in the company at the time of his diagnosis then, according to His Honour, his shareholding income would not have been compensable because it would have been derived from a passive investment.^[18]

The decision in Head applies analogous reasoning to the majority of the High Court in Latz, in that both decisions rely heavily on the connection of the income claimed to the work performed by the plaintiff. It is therefore likely that the Australian judiciary would follow a similar approach to that of Bean LJ, and continue to draw a distinction between remunerative and non-remunerative income in assessing damages during the lost years.

DEDUCTION FOR LIVING EXPENSES

Once the total loss of earning capacity during the lost years has been calculated, the plaintiff must then deduct the living expenses they would have incurred during those years, being amounts that will be saved as a result of their premature passing.^[19] This does not mean, however, that the claim is confined only to the net savings or disposable income that would have remained to the plaintiff after accounting for all possible expenditure.^[20]

Australian courts have refrained from providing an exhaustive list of the living expenses that are to be deducted during the lost years, but have nonetheless provided guidance as to what should not be deducted. The High Court has made it clear that the deduction for living expenses must not include any expenditure on dependants.^[21] It has also been widely accepted that the cost of pleasures and recreation are not to be included as living expenses for the purpose of lost years claims.^[22]

The principal judgment of Mason J in Fitch v Hyde-Cates^[23] provides the overarching authoritative statement on living expenses in lost years claims. In that instance, His Honour characterised the deductible expenses as those which ‘should be regarded as an essential condition of the exercise of [the plaintiff’s] earning capacity’.^[24] In other words, the deduction is to be confined only to those expenses which are essential for the deceased to maintain their future earning capacity.

The categories of expenses which meet these criteria may differ between different individuals, depending, among other things, on the nature of their work and their individual circumstances. As Sheller JA pointed out in James Hardie & Coy Pty Ltd v Roberts & Anor (Hardie),^[25] the living expenses that would enable a rural worker to continue earning a salary are likely to be different to those incurred by the executive of a large company.

There are of course basic necessities that will be common to all plaintiffs, including the cost of food, accommodation, clothing and utilities.^[26] However, an assessment of living expenses should always be individualised to reflect the plaintiff’s own unique living arrangements and circumstances. Simply deducting a default percentage or lump sum amount may grossly exaggerate the proportion of income which the plaintiff actually spends on their personal maintenance. There have previously been cases where the deduction for personal living expenses has equated to 10 per cent or less of the plaintiff’s putative income.^[27]

It is therefore important that solicitors take detailed instructions before determining what might constitute an appropriate deduction in the circumstances.

While expenditure on dependants is not to be included in the deduction, it will be relevant to consider whether a plaintiff is single or married, or supporting any children.^[28] In the case of Foyster v Goynich [1984],^[29] it was found that the amount a plaintiff spent on himself would probably be lower during the period that his children remained dependent on him, and increase thereafter.

The proportion of any shared facilities (that is, accommodation and utilities) paid for by the plaintiff will also be relevant to the assessment of living expenses. In O’Gorman v Sydney Southwest Area Health Service,^[30] the plaintiff’s mortgage repayments on the home shared by her and her de facto partner were considered to be necessary for her to maintain her accommodation, which she needed so that she could attend work and earn wages.^[31]

Whatever the plaintiff’s circumstances, it is important to avoid the inclusion of any expenditure which is irrelevant to earning capacity.^[32] In Hardie,^[33] Sheller JA seemingly approved the trial judge’s categorisation of such expenditure as including: the money spent on purchasing and maintaining televisions, video cassette recorders and phonograph players; hiring videos; buying records; purchasing unnecessary clothes; payment for restaurant meals, a night’s entertainment with friends, or attendance at football games; and the money spent on taking holidays, feeding one’s dog and providing gifts to close family members.^[34]

CONCLUSION

The lost years claim is a unique phenomenon in personal injuries litigation, particularly outside of the dust diseases jurisdiction. Yet it is not all that far removed from ordinary claims for future economic loss, in so far as it will only compensate a plaintiff for losses which are intrinsically linked to the exercise of their earning capacity. The major difference is that, in addition to evidence regarding the plaintiff’s projected earning capacity, claims for the lost years are also based upon evidence of the plaintiff’s diminished life expectancy and their likely expenditure on personal maintenance.

The importance of obtaining accurate and carefully considered evidence on both of these issues cannot be underestimated, particularly in cases involving terminal illness where future economic loss both prior to and during the lost years may be the most substantial component of the claim.

Louis Baigent is an Associate in the medical negligence team at Maurice Blackburn Lawyers. PHONE (07) 3014 5068. EMAIL lbaigent@mauriceblackburn.com.au.

Gabriella Wettenhall is a paralegal and PLT student in the medical negligence team at Maurice Blackburn Lawyers. PHONE (07) 3014 5093. EMAIL gwettenhall@mauriceblackburn.com.au.

^[1] Skelton v Collins [1966] HCA 14; 115 CLR 94 (Skelton); Griffiths v Kerkemeyer [1977] HCA 45; 139 CLR 161 (Griffiths).

^[2] Golden Eagle International Trading Pty Ltd v Zhang (2007) HCA 15.

^[3] Australian Institute of Health and Welfare, Deaths in Australia (Report, 25 June 2021) <https://www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/contents/life-expectancy>.

^[4] Skelton, above note 1; Griffiths, above note 1.

^[5] G Diehm QC, ‘Life Expectancy: Statistical and Epidemiological Considerations’ (Presentation, Australian Lawyers Alliance Queensland Conference, 12 February 2021); Amaca Pty Ltd v Ellis; The State of South Australia v Ellis; Millennium Inorganic Chemicals Ltd v Ellis [2010] HCA 5, [62].

^[6] In Hills v State of Queensland [2006] QSC 244, [36] McMurdo J found that: ‘In principle, the estimate of [the plaintiff’s] likely survival ought not to be simply a statistical exercise but should involve also a clinical assessment of [the plaintiff’s] individual health and circumstances.’

^[7] See Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, 85 per Heydon JA – ‘... the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge.’

^[8] Towers v Hevilift Ltd (No 2) [2020] QSC 77.

^[9] Amaca Pty Ltd v Latz [2018] HCA 22; (2018) 264 CLR 505.

^[10] Ibid, [109].

^[11] Ibid, [104].

^[12] H Luntz and S Harder, Assessment of Damages for Personal Injury and Death, 5^th ed, LexisNexis, NSW, 2021, 653–4; Social Security Act 1991 (Cth), pts 1.2, 2.2.

^[13] Head v The Culver Heating Co Ltd [2021] EWCA Civ 34 (Head).

^[14] Adsett v West [1983] 2 ALL ER 985.

^[15] Ibid, [996].

^[16] Head, above note 13, [32].

^[17] Ibid, [33].

^[18] Ibid, [35].

^[19] Fitch v Hyde-Cates [1982] HCA 11 (Fitch); also see Skelton, above note 1.

^[20] Fitch, above note 19, [32].

^[21] Sharman v Evans [1977] HCA 8; 138 CLR 563.

^[22] In Commonwealth v McLean [1996] NSWSC 657; (1996) 41 NSWLR 389, the Court found that it was necessary to deduct only ordinary living expenses which did not include expenditure on personal pleasures such as entertainment. This was cited with approval in James Hardie & Coy Pty Ltd v Roberts & Anor (1999) 47 NSWCA 314 (Hardie) [43].

^[23] Fitch, above note 19.

^[24] Ibid, [498]; summarised in Hardie, above note 22, [84].

^[25] Hardie, above note 22, [84].

^[26] Luntz and Harder, above note 12, 654.

^[27] See Lowes v Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd) [2011] WASC 2087; and McGilvray v Amaca Pty Ltd [2001] WASC 345.

^[28] M Tedeschi, ‘Assessing Economic Loss of a Plaintiff with a Terminal Illness’, John Toohey Chambers online (12 September 2014) <https://www.johntooheychambers.net.au/news/articles/assessing-economic-loss-of-a-plaintiff-with-a-terminal-illness-asbestos-litigation-seminar-12-september-2014-by-marco-tedeschi-of-john-toohey-chambers-perth-western-australia>.

^[29] Foyster v Goynich [1984] WASC 231.

^[30] O’Gorman v Sydney South West Area Health Service [2008] NSWSC 1127.

^[31] Ibid, [172]–[173].

^[32] Hardie, above note 22, [15].

^[33] Hardie, above note 22.

^[34] Ibid, [44], [85].