CLA: loss of earning capacity in a minor soft tissue injury

Allianz Australia Insurance Limited v McCarthy [2012] QCA 312

White JA dissented in not allowing any lost earning capacity, whereas The President and Gotterson JA reduced the allowance modestly. However, White JA’s reasons have been reproduced because they well cover the authorities in the area and are instructive in the assessments which required to be made, especially in cases involving minor injuries.

[13] WHITE JA: The respondent was awarded damages of $59,448.67 for personal injury in the District Court at Brisbane on 16 December 2011.   Of that amount,

$40,000 was for loss of future earning capacity and $3,600 for lost superannuation benefits associated with that amount. The appellant, who was the second defendant below, appeals the judgment as being manifestly excessive insofar as it includes those sums. The appellant also contends, as a further ground, that the primary judge failed to comply with the direction in s 55(3) of the Civil Liability Act 2003 by not stating the methodology used in making that award.

[17] At about 8.15 am on 11 March 2008  the  respondent  was  walking  to  work  at North Point on North Quay in the city along the footpath near the Commonwealth Courts building. She was assisting a woman, who was a stranger to her, to carry some boxes of legal papers. A sedan motor car was stationary across the footpath waiting to pull into the heavy traffic on North Quay. As the respondent started to walk in front of the car (there was no room to walk behind it) the vehicle, without warning, drove forward and stopped on her right foot, remaining there for 10 to 15 seconds before driving off into the traffic. The injured respondent was assisted to a nearby bench.

[18] An ambulance was called by a bystander. The ambulance officers treated the respondent‟s foot with ice. Her employer, when contacted by telephone, sent a fellow employee to drive the respondent immediately to consult an orthopaedic specialist at Wickham  Terrace, Dr Jeff Peereboom.   He reported to her general practitioner that clinical examination, and x-ray and CT investigations showed the respondent had sustained a soft tissue injury to her foot with swelling over the first metatarsophalangeal (“MTP”) joint region on the plantar aspect of her foot. “She was tender in the medial sesamoid  and  on  the  dorsal aspect  of  the first metatarsal.”   Under the heading “Management” Dr Peereboom wrote:


“I think that Emma‟s major injury is soft tissue and she is going to have a crushing injury to her foot.


I think that she is going to require a couple of days off whilst her foot swells over the next day or two and then as her foot feels more comfortable she will be able to do more with it. I explained that her foot will feel stiff and tired for about four months as the scars increase in size and then diminish in size. I have organised to see her again if she has any further problems with her foot.  I‟ll let you know if I need to see her again.”14


[19]      The respondent did not see Dr Peereboom again or any other doctor.  She consulted a physiotherapist the following day on 12 March 2008. Subsequently in August 2008, when consulting a sports medicine clinic for right shoulder problems, she was prescribed an anti-inflammatory gel for her right foot which was tender and orthotics to place in her shoes.

(i)                     Loss of earning capacity


[46] The requirement to wear high heeled shoes for employment in event management was very much grounded in the respondent’s perception of what was required for a particular event in Melbourne. It is a truism to observe that fashion is fickle. It would be impossible to predict what would be seen as “smart” footwear in such an industry far into the future, at least post 2016. It may be for that reason, as well as the rather awkward fact that Dr Macauley castigated high heeled shoe wearing as damaging to feet and spine, that Mr Fleming QC for the respondent emphasised that the respondent was disadvantaged whatever she wore on her right foot if the job required her to be on her feet for any length of time.


[47]       Section 55 of the Civil Liability Act 2003 provides:


“(1) This section applies if a  court  is  considering making an award of damages for loss of earnings that are unable to be precisely calculated by reference to a defined weekly loss.


(2)                   The court may only award damages if it is satisfied that the person has suffered or will suffer loss having regard to the person‟s age, work history, actual loss of earnings, any permanent impairment and any other relevant matters.


(3)                   If the court awards damages, the court must state the assumptions on which the award is based and the methodology it used to arrive at the award. …”


While the primary judge’s assumptions upon which she proceeded to award a global sum are accepted by the appellant to be adequately identified, her Honour’s methodology is not.  Before considering that matter it is necessary to mention some relevant principles. Section 55(2) of the Civil Liability Act mandates that a court may only award damages if satisfied that the person injured will suffer loss of earnings.  In this, the provision does not alter the common law.


[48]       In Graham v Baker37 Dixon CJ, Kitto and Taylor JJ noted:


“… an injured plaintiff recovers not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss.”


That is, it must be demonstrated that the injured person’s impairment has resulted in loss in monetary terms. This statement of fundamental principal was restated in Medlin v State Government Insurance Commission:


“A plaintiff in an action in negligence is not entitled to recover damages for loss of earning capacity unless he or she establishes that two distinct but related requirements are satisfied. The first of those requirements is the predictable one that the plaintiff’s earning capacity has in fact been diminished by reason of the negligence-caused injury. The second requirement is also predictable once it is appreciated that damages for loss of earning capacity constitute ahead [sic] of damages for economic loss awarded in addition to general damages for pain, suffering and loss of enjoyment of life.  It is that „the diminution of … earning capacity

is or may be productive of financial loss.‟”


[49] In Nichols v Curtis41 Fraser JA, with whom the President and Chesterman JA agreed, observed of a finding by the primary judge that there was no evidence that the plaintiff had lost employment or, in seeking employment, had rejected work because of her injury:


“The effect of those findings was that the applicant did not merely fail to prove that it was more probable than not that she would have earned more money if she had not been injured; she failed to establish that there was any real prospect that that [sic] she would have earned more money. On that basis there was no room for the application of Malec v JC Hutton Pty Ltd.”


[50]       His Honour continued:


“Nor did the primary judge make the mistake of thinking that damages for economic loss were awarded for loss of earnings rather than for loss of earning capacity. Whilst damages are awarded for loss of earning capacity, they are awarded only to the extent that the loss produces or might produce financial loss. In Medlin v State Government Insurance Commission, Deane, Dawson, Toohey and Gaudron JJ held that a plaintiff in [an] action for negligence is not entitled to recover damages for loss of earning capacity unless the plaintiff establishes both that the plaintiff‟s earning capacity had been diminished by reason of the negligence-caused injury and that the diminution of earning capacity was or might be productive of financial loss.”


[51] What the respondent had to prove here, on the balance of probabilities, was that her earning capacity had been diminished because of the negligently-caused injury to her right foot. The evidence did not go so far. The respondent said her foot became “quite sore” if she had to stand on it for any length of time. The evidence of Dr McCauley was to the effect that arthritic change in the right foot would increase over the years. This would be productive of discomfort leading to pain but how that would impact upon the respondent’s earning  capacity  was  not  fully  explored. The respondent did not say that she had reluctantly decided that event management was a career she could no longer aspire to. To the contrary, the inference (and it seems it was accepted by the primary judge) was that she would put up with the discomfort/pain. Her heavy rowing training schedule and management of past injury suggested a high capacity for endurance. It is difficult to pin her case down but it did not seem to be that she would enter the field of event management and take days off from time to time above those allocated to sick leave when standing (or walking about) made her foot too painful; or leave a position because of the pain in her foot and be unemployed for a time. That scenario of time off would not sit well with a career in event management if it would avoid “the event” if the racing carnival experience were repeated.


[52] The respondent submitted that as a consequence of her injury the field of employment was narrowed which suggests she would not enter event management, or if she did, would not remain. Such a possibility does not mean that her earning capacity has been reduced because of the injury but that she may be precluded from entering into a career or employment which required significant standing rather than the sedentary occupation which she presently has.


[53] The second requirement for an award for future loss, as identified in Medlin, is that the injury will be productive of financial loss. At the trial the respondent was in what she described as a boring job. The assumption seems to have been that her future employment was event management with pain on prolonged standing or her present occupation  with  its  limited  remuneration  for  the  future.  However, the respondent was embarking on a tertiary degree in business. She had obtained some qualifications in finance in  the  past.  She  was  plainly  a  diligent  and hard working person when it came to pursuing her goals. There was no reason to suppose that when she ceased high level competitive rowing, or even before, she would not graduate from university with employable qualifications which would attract higher remuneration than her present employment.


[54] The respondent did not, in my view, demonstrate either that the injury to her foot reduced her earning capacity or, if it did, that it might be productive of financial loss.  The only evidence which was advanced on her behalf was the capacity to earn

$80,000 or even up to $100,000 per annum in event management compared to the approximately $42,000 which she presently earns but that evidence was insufficient to cross the thresholds discussed in Medlin. In those circumstances there was no basis for assessing damages in accordance with the principles in Malec v JC Hutton.


[55] If, on the other hand, it were concluded that the respondent has a reduced earning capacity because of her injury which is productive of financial loss, as identified by the primary judge, there were so many compounding qualifications as to reduce the chance to a very low percentage – little experience in the area; at the commencement of her studies; and at risk of other disability injury from her sport. Whether $40,000 was an appropriate estimate of that loss is discussed below.


[56] In my view the appropriate recognition of this aspect of the respondent’s claim for damages would have been an augmentation to her general damages. That this may be done is implicit in s 61(2) of the Civil Liability Act which provides:


“If a court assesses an injury scale value for a particular injury to be more or less than any injury scale value prescribed for or attributed to similar particular injuries under subsection (1)(c), the court must state the factors on which the assessment is based that justify the assessed injury scale value.”


Section 61(1)(c) requires the court in assessing the injury scale value to assess that value under provisions in the regulations and to have regard to the injury scale values given to similar injuries in previous proceedings.


[57] The parties did not proffer any augmented figure for general damages in their appeal submissions to take account of increased pain in pursuing a physically active job or disappointment at not having the opportunity to work in the chosen field. The court has power pursuant to r 766(6) of the UCPR to give any judgment and make any order which ought to have been made. McPherson JA said in MAM Mortgages Ltd (in liq) v Cameron Bros (a firm):


“That rule has been held to authorise the giving or making on appeal of the appropriate judgment, order or declaration that ought to have been made below …”


His Honour was there referring to the power to make an order where no notice of contention was filed by a respondent but the rule is drawn broadly enough to encompass any appropriate order.


[58]    In the absence of any comparable cases guidance might be obtained from Item 149 in Schedule 4 of the Civil Liability Regulation 2003 with an ISV of four to eight which gives as an example of the injury:


“A displaced metatarsal fracture causing permanent deformity, with ongoing symptoms of minor severity, for example, a limp that does not prevent the injured person engaging in most daily activities.”


Item 153 refers to the ISV for a moderate toe injury. The commentary describes the nature of the injury: “There will be permanent discomfort, pain or sensitive scarring.” Examples of the injury are a moderate injury to the great toe or a crush injury causing multiple fractures of two or more toes and a further comment:


“An ISV at or near the top of the range will be appropriate if there has been more than 1 unsuccessful operation, or there are persisting stabbing pains, impaired gait or similar effects.”


The ISV for Item 153 is four to seven, similar to Item 149 under which the respondent was compensated. It might, therefore, be appropriate to increase the ISV to seven from four making an award of $7,000 rather than $4,000




(ii)In Ba

Failure to   state the methodology


llesteros v Chidlow46 the President   said:

“… Section   55(3) must be read in the   context of the whole section.
The heading of the section   is When earnings can not be precisely
calculated.  Section 55(1)   makes plain that the section only applies
to “an award of damages for loss   of earnings that are unable to be
precisely calculated by reference to a defined weekly loss.     Whilst
[the trial   judge] could have chosen   to more fully state her method of
reaching an award of $20,000 for damages for future economic loss
including  future    superannuation    losses,  from    the  modesty of  that
award and the assumptions and facts stated previously in her reasons,
her Honour‟s methodology is plain enough…”47

[60]       Fryberg J, however, took a rather more structured approach observing:


“… “Assumptions” and “methodology” operate in tandem in the provision, and the one throws light on the other. Both words have overtones of at least quasi-mathematical meaning. “Assumptions” could, of course, refer to the facts found by the judge upon which the award is based. In my view that would be a most inappropriate use of the word, and it seems unlikely that it was intended in this context. Apart from anything else, the subsection would be unnecessary if that were the meaning, since judges must in any event state their findings of fact. In the context of making a global award where, ex hypothesi, precise calculation by reference to a defined loss is impossible, it is much more likely to have been intended to refer to assumed facts underlying one or more hypothetical calculations which a judge might use in order to get a general idea of what might constitute a suitable global figure; or to similar facts or sets of facts used by the judge to confirm or cross-check a global figure selected by making an experienced guess. That in turn suggests that “methodology” does not refer to anything too demanding. In this context, an experienced guess is a legitimate methodology, although if possible it should be dissected in a manner appropriate to the circumstances of the case in order to understand what it might imply in those circumstances and thereby to confirm that the figure is of an appropriate order of magnitude.”


[61]       His Honour suggested that the intention of a provision like s 55(3) was to promote intellectual rigour:


“If it is not complied with, a court of appeal will be obliged to scrutinise the award rather more closely than ordinarily it would do in such cases. After all, the purpose of requiring the assumptions and methodology to be stated must surely be to expose them clearly, including to a court on appeal.”


[62] In Reardon-Smith v Allianz Australia Insurance Ltd50 Keane JA, with whom Williams JA and Atkinson J agreed, observed:


“Section 55(3) of the Act is evidently concerned to ensure that the assessment of damages proceeds in a manner which is sufficiently transparent that the basis of the decision is apparent, both to the parties and to an appellate court. To this end, the provision requires that the methodology and assumptions on which the award is based be stated: it is clear, however, that it does not require an explicit statement of a calculation in which a formula is applied to factual findings.”


His Honour noted that if the statement of the methodology were insufficient to comply with the requirements of s 55(3), referring to State of New South Wales v Zerafa,52 the error would not of itself result in a new trial or reassessment on appeal. However, his Honour said:


“In some cases, a failure to comply with s 55(3) may result in a decision which is so opaque that the judgment should be set aside on the basis that the paucity of reasoning amounts to an error of law…”

[63] Mr Williams QC, for the appellant, sought to demonstrate that $40,000 was manifestly excessive by engaging in a notional “reverse engineering” exercise, deconstructing that sum. He contended that on the assumption that the respondent’s loss commenced in 2017 (after completing her degree and training for high end rowing competitions) at an annual income of $80,000 net (ignoring the three to five years experience mentioned in the report), if it be assumed that the respondent was deprived immediately of the whole of her earning capacity for the rest of her working life, the discounted sum (present value) using the tables for early receipt, but not contingencies, would be $807,422. A global award of $40,000 is just under (4.95) five per cent of the respondent‟s total potential loss of future earning capacity. Mr Williams suggested that would be about $60 per week for the whole of the respondent’s working life, or, approximately, one working day per month for the respondent’s working life, or two and a half weeks per year. Mr Williams posited that if the injury led to progressive arthritis and the loss occurred into the future, for example, in 15 or 20 years into an event management career at about the age of 45, $40,000 would become 13.5 per cent of a total potential loss and amounted to 32.4 days off work every year from the age of 46 to retirement. This, the  appellant  contended,  demonstrates  plainly  the  error  in  a  global  award  of



[64]       Mr Fleming, for the respondent, did not contradict those figures.


[65] The primary judge’s reasons do not reveal any basis at all for selecting $40,000 to compensate the respondent for loss of her earning capacity and should be set aside as constituting an error of law. However, the basis upon which the appeal should succeed is more fundamental. The primary judge identified the many imponderables which operated against anything other than a very small chance of loss in the Malec v JC Hutton Pty Ltd sense. But it was necessary, before making that assessment, to be satisfied that the negligently inflicted injury would lead to an impairment in the respondent’s earning capacity and, that that impairment would be productive of actual financial loss. As has been discussed above, the evidence did not permit of such satisfaction. The result is that no award ought to have been made for loss of future earning capacity. Instead, there ought to have been a modest augmentation of the injury scale value to reflect the loss of the satisfaction of engaging in her chosen career (“loss of amenities of life” in s 51(b)) or for additional pain and suffering experienced by virtue of persevering in that occupation rather than in a more sedentary one. I would propose an injury scale value of seven, that is, an extra $3,000.


Brisbane Barrister – David Cormack

NB: Allianz Australia Insurance Limited v McCarth [2012] QCA 331

Appeal decision in relation to costs, interest and indemnity certificate pursuant to s 15(1) of the Appeal Costs Fund Act 1973 (Qld).

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