Keywords: Contributory negligence and section 83 expenses | life expectancy | projected versus life tables.
Gummow, Kirby, Hayne, Callinan and Crennan JJ
Overview
A claimant’s life expectancy is to be determined by application of “projected” life expectancy tables rather than the previously utilised “historical” life expectancy tables. In an environment where life expectancy is increasing this will result in increases in damages referrable to life expectancy.
Paid section 83 expenses are to be deducted from a total judgment sum (exclusive of fund management) after apportionment of that sum for contributory negligence. The insurer therefore obtains the benefit of contributory negligence in relation to paid section 83 expenses.
Facts
Zhang was passenger in a vehicle whose driver lost control when tread separated from a tyre. He sued the vehicle’s owner and driver as well as a company that had serviced and certified the vehicle. The owner and driver admitted liability; the plaintiff was unsuccessful against the mechanic/certifier. The plaintiff was held to have been 30% contributorily negligent due to failure to wear a seatbelt.
The District Court entered judgment in the first instance. Balla DCJ, consistent with the court’s practice, calculated quantum on the basis of life expectancy derived from the ABS historical life tables. Also consistent with precedent she accounted within the judgment sum for section 45 (MAA) expenses paid by including such payments in the total damages allowed, then reducing that total sum by the contributory negligence apportionment. She then allowed a further sum for funds management and from the resulting aggregate amount deducted the section 45 expenses already paid.
The Court of Appeal overturned both of these methodologies. It determined that life expectancy ought to be estimated by reference to the ABS “projected” life tables. These tables differ from the historical life tables in that they make allowance for anticipated increases in life expectancy that will be attained by the relevant demographic as a whole during the course of the plaintiff’s future life span. The result is that an increased life span is obtained.
The Court of Appeal decided that Balla J’s method of accounting for expenses paid (section 45 in this matter, section 83 in Motor Accident Compensation Act matters) was incorrect. The method endorsed by the Court of Appeal determined that the amount of expenses already paid should be subtracted from the total damages payable before the reduction on account of contributory negligence. This would effectively mean that expenses paid by the insurer prior to the matter’s determination would not receive the benefit of any contributory negligence apportionment subsequently obtained.
High Court Judgment
Life Expectancy Tables
The High Court unanimously agreed with the Court of Appeal. It is now settled that in estimating life expectancy the projected life tables are to be used. The court held that these tables “were more likely to give an accurate estimate of future life expectancy than the historical tables”. This finding was simply a matter of the court deciding which piece of evidence was most appropriate.
Contributory Negligence and paid Section 83 Expenses
The court overturned the Court of Appeal’s findings 3:2 (Kirby & Hayne JJ dissenting).
These decisions essentially turned on construction of section 45 MAA; the arising observations relate equally to section 83 MACA.
The key issue is whether the amount of paid expenses should be removed from the damages calculation before or after the reduction on account of contributory negligence.
The majority decision observed that the Court of Appeal’s approach is potentially inconsistent with that applied by equivalent provisions of the Workers’ Compensation Act. It noted that the Court of Appeal’s construction, which effectively served to “immunise” section 45 payments from the effects of contributory negligence, would give the insurer credit for only a portion of payments made by it under section 45/section 83, “an apparently unjust result for the insurer and a windfall for the first respondent”. The Court of Appeal’s method would also create inconsistencies between treatment of payments by CTP insurers and payments by other third party payers, such as Medicare or Workers’ Compensation insurers, who receive the full and unreduced benefit of payments made. The majority found that the reference in section 45(4) MAA (now to be found in section 83(5) MACA) to a payment constituting a defence was enacted so as to eliminate the need for the plaintiff to prove, at the trial proper, that any such payments were reasonable and necessary and thus appropriate for integration into total damages.
The dissenting judgment concurred with the Court of Appeal. The judgment made reference to the Law Reform (Miscellaneous Provisions) Act 1965 that introduced the current contributory negligence apportionment scheme (as opposed to prior common law whereby contributory negligence defeated a claim) and noted that this Act required that “the damages recoverable” in respect of a wrong are to be reduced to the just and equitable extent. Their Honours held that section 45(4) MAA and section 83(5) MACA ought to be interpreted against this background and held that damages payable to the claimant, once paid, ought to be considered a defence and therefore no longer fell within the scope of “damages recoverable”.
Conclusion
This judgment is a mixed result for insurers and claimants alike. Damages referable to life expectancy will be increased as a consequence of reference to projected tables. In cases where substantial section 83 expenses have been paid an insurer will benefit from the majority’s finding.
In short, when assessing quantum: projected life tables ought to be used; section 83 expenses ought to be added to the total judgment sum, contributory negligence apportioned after this sum is computed in full, and expenses paid deducted thereafter.
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