Segelov, Tanya --- "Can you recover loss of a superannuation or age pension in terminal illness claims?" [2019] PrecedentAULA 21; (2019) 151 Precedent 24

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CAN YOU RECOVER LOSS OF A SUPERANNUATION OR AGE PENSION IN TERMINAL ILLNESS CLAIMS?

By Tanya Segelov

Calculating damages for people suffering from mesothelioma, a terminal cancer caused by exposure to asbestos, presents an ‘unusual challenge’. Mesothelioma has a long latency period, the average time from exposure to asbestos to diagnosis being 37 years. Consequently, most people suffering from mesothelioma are retired and, in many cases, in receipt of a pension; superannuation or age pension or, as in the case of the late Anthony Latz, both.

LATZ v AMACA PTY LTD – DISTRICT COURT OF SOUTH AUSTRALIA^[1]

Anthony Latz^[2] alleged that he contracted mesothelioma as a result of exposure to asbestos from products manufactured and supplied by James Hardie & Co Pty Ltd in a claim in the District Court of South Australia against Amaca Pty Ltd. He was 70 years of age at the time of his diagnosis and had been retired for 10 years. Prior to his retirement he had been a state public sector employee and was entitled to a public sector pension (or lump sum) upon his retirement. Mr Latz elected to receive a pension payable for the remainder of his life with his spouse, on his death, being entitled to a pension equal to two-thirds of his pension (reversionary pension). In addition to his superannuation pension, he received a partial age pension from Centrelink.

Mr Latz claimed damages for the loss of his superannuation pension and age pension for the lost years, in his case 16.71 years being his life expectancy but for his condition of mesothelioma.

Judge Gilchrist found for Mr Latz. In determining the quantum of damages, he allowed both pension claims.

Judge Gilchrist commenced his discussion of the claims by referring to the compensatory principle:

‘It is trite to say but the fundamental purpose of an award of damages in an action for tort is to place a victim of the tort, so far as money can achieve it, into the position that he or she would have been but for the tort. Nothing more, nothing less.’^[3]

Judge Gilchrist found that but for James Hardie’s tort, Mr Latz would have continued to receive his state pension and his age pension for the rest of his life.

An issue arose as to whether the entitlement of Mr Latz’s de facto spouse to receive two-thirds of his state pension following his death should be considered in assessing his loss. Judge Gilchrist declined to do so, noting that the claim was being brought by Mr Latz and not by his de facto. Judge Gilchrist noted that had Mr Latz taken out life insurance and named his de facto nominated beneficiary, there would be no reduction in his entitlement to damages.

Amaca appealed the decision to award damages for the loss of both pensions to the Full Court of the Supreme Court of South Australia.

DIB v AMACA PTY LTD AND LONDOS v AMACA PTY LTD – DUST DISEASES TRIBUNAL OF NEW SOUTH WALES

Prior to the decision of the Full Court, the question of whether the loss of an age pension could be recovered was considered by the Dust Diseases Tribunal of New South Wales in the matters of Dib v Amaca Pty Ltd^[4] and Londos v Amaca Pty Ltd.^[5] In each matter, Judge Russell declined to award damages for the loss of the age pension. While Judge Russell acknowledged the ‘compensatory principle’, he found it ‘applies to various heads of damages for which the law provides compensation’.^[6] He noted that there are three categories of such loss, referred to in earlier cases and reiterated in CSR Limited v Eddy:^[7]

(a) pain and suffering and loss of enjoyment of life (general damages);

(b) out-of-pocket expenses;^[8]

(c) loss of or interference with earning capacity which is or may be productive of financial loss.

Judge Russell concluded that the loss of an age pension did not fall within the above categories. Because it is received without reference to the ability of a person to earn income, or whether there has been any interference with the ability to earn income, it therefore cannot be classified as loss of earning capacity.

AMACA PTY LTD v LATZ – FULL COURT OF SOUTH AUSTRALIA^[9]

The Full Court of South Australia (Blue and Hinton JJ with Stanley J dissenting) dismissed Amaca’s appeal save for the failure of the trial judge to deduct the reversionary pension to be paid to Mr Latz’s partner upon his demise. Justice Hinton found that if the superannuation pension was compensable, he would not have reduced the award to take into account the revisionary pension.

Justice Blue noted that ‘The existence of particular rules and practices should not be allowed to obscure the compensatory principle which was described as “fundamental” ... and “cardinal” and “control[ling]”’.^[10]

He quoted Stephen J in Todorovic v Waller:^[11]

‘While there may be no one exclusive method of assessment appropriate to every circumstance, there is but one criterion by which the adequacy of any particular method may be judged; it is whether or not the result of the assessment fairly makes good the financial loss incurred ... It follows that, since the sole function of the process of assessment is to attain what the law has fixed as the proper measure of compensation, there can be no place in the process for fixed rules of law; instead the process must be capable of adjustment in the face of changes and the quality of the medium of compensation.’^[12]

Justice Blue rejected Amaca’s contention that CSR v Eddy stood for the proposition that the common law recognises only three types of compensable loss for tortuously inflicted personal injury, noting that the statement in Eddy was prefaced with the words ‘traditionally seen as being able to recover’^[13] and must be read in the context in which the statement was made; that is, where the High Court was considering a claim for damages for loss of ability to provide gratuitous services for another and not a claim for the recoverability of damages for actual financial loss, such as loss of a pension.^[14] Justice Blue further noted that a claim such as this one was relatively rare and therefore unlikely to have been included when different types of loss were ‘traditionally’ described.^[15]

Justice Blue, considering the matter from first principles, could not distinguish between financial loss of income by way of wages or from a profession or business, and financial loss of income by way of a superannuation or age pension.^[16] His Honour said that ‘In both cases, the compensation principle applies and the loss is recoverable in order to put the plaintiff in the same position as he or she would have been if the tort had not been committed.’^[17] Justice Blue rejected Amaca’s distinction between income actively earned and income passively earned, noting that there was no underlying rationale for making such distinction: ‘In both cases the plaintiff suffers actual financial loss caused by the defendant’s wrong.’^[18]

Similarly, Hinton J did not accept the argument that to be recoverable the loss of pension claim needed to fall within one of the types of losses identified in the joint decision in CSR v Eddy. In line with Blue J, Hinton J accepted that the controlling principle was the compensatory principle. His Honour said:

‘I do not understand the joint reasons in CSR v Eddy to modify the settled principle governing the assessment of compensatory damages – the compensatory principle ... The discussion in the joint reasons of the types of loss that are compensable where a plaintiff has sustained personal injury as a consequence of the defendant’s negligence is not, it seems to me, intended as an exhaustive statement, hence the topic is qualified when introduced by the non-exclusive descriptor of what is to follow as what a plaintiff is “traditionally seen as able to recover”. If the contrary were true, the compensatory principle would cease to be controlling.’^[19]

Both Blue and Hinton JJ noted that if they were wrong and damages were limited to those classified in CSR v Eddy, then Mr Latz’s claim was a claim for ‘actual financial loss’ and fell within the third category: ‘It is merely a financial loss of a different species, loss of earning capacity being another species of the genus financial loss.’^[20]

Justice Stanley, in his dissent, found the reasons in CSR v Eddy to be an ‘authoritative and exhaustive statement of the heads of damages for personal injury in Australian law’.^[21]

Justices Blue and Hinton allowed Amaca’s appeal in part, reducing the claim to take into account the reversionary pension that would be received by Mr Latz’s partner on his death. Justice Blue rejected the argument that the reversionary pension should be disregarded because it was being paid to Ms Taplin who is a non-party, finding that that the reversionary pension was the same pension that was the subject of the claim.^[22] Justice Hinton found the pension to be a benefit to which the second beneficiary becomes entitled only through the primary beneficiary. On his analysis, the primary beneficiary notionally continues after death to realise a benefit from the scheme through his dependant.^[23] Justice Stanley, while not accepting the claim for loss of a pension, noted that if such a claim was available he would not have reduced the claim to allow for the reversionary pension, as the reversionary pension was not payable to Mr Latz but to his partner and it would be erroneous to take into account any benefit or loss to a third party in assessing Mr Latz’s losses in a claim brought by him and concluded in his lifetime.^[24]

AMACA PTY LIMITED v LATZ; LATZ v AMACA PTY LIMITED – HIGH COURT OF AUSTRALIA^[25]

Both parties sought leave to appeal to the High Court; Amaca in relation to the award of loss of both pensions and Mr Latz in relation to the deduction of the reversionary pension. The majority (Bell, Gageler, Nettle, Gordon and Edelman JJ) allowed Amaca’s appeal in part on the ground that the Full Court of the Supreme Court of South Australia erred in assessing damages by including an allowance for the loss of expectation of receiving an age pension during the lost years. Chief Justice Kiefel and Keane J dissented, finding neither pension claim compensable.

The majority held that in assessing damages for negligently caused personal injury it was necessary firstly to identify the loss. Once the loss is identified then the question becomes whether that loss is ‘something for which the claimant should and reasonably can be compensated’.^[26] The Court restated the principles developed as a result of the compensatory principle, including the three heads or types of loss enunciated in CSR v Eddy.^[27] The Court clarified that in relation to the second category, ‘... damages recoverable in relation to reduced future income are damages for loss of earning capacity and not damages for loss of earnings simpliciter, and that those damages are awardable “only to the extent that the loss has been or may be productive of financial loss”’.^[28]

In determining whether the loss of superannuation pension fell into the second category, the Court discussed the nature of superannuation benefits. The Court held that ‘Superannuation benefits, like wages, are the product of the exploitation of the claimant’s capital asset.’^[29] They are part of remuneration^[30] and can be measured and awarded.^[31]

The Court noted that where a claimant suffered a negligently caused personal injury during their working life they would be able to recover the net present value of the future loss of superannuation benefits they have at the date of retirement but for the injury; that is, they would be able to recover the present value of a future right.^[32] The Court rejected Amaca’s argument that Mr Latz did not suffer a loss, the loss being suffered by his family after death. Rather, the Court accepted that Mr Latz had suffered a loss which had a present value which could be quantified.^[33] The Court characterised the loss as the net present value of the benefit of the converted capital asset for the remainder of his pre-illness life expectancy.^[34] It held that the converted capital asset is in effect a delayed remuneration for work.^[35] It said that this loss ‘... is intrinsically connected to earning capacity, representing, as it does, a species of remuneration – financial rewards from work’.^[36]

The Court could find no principled basis for denying Mr Latz compensation for his loss of superannuation benefits just because his injury became apparent after he had retired.^[37]

The Court noted that the approach to assessment of damages must take into account the quality of the medium of compensation and cited Stephen J in Todorovic v Waller. It noted that over the last 30 years significant changes have impacted the process of assessment, including the significance of superannuation and the late onset of diseases like mesothelioma.^[38] The Court concluded:

‘As Lord Wilberforce said in Pickett:

“if there is a choice between taking a view of the law which mitigates a clear and recognised injustice in cases of normal occurrence, at the cost of the possibility in fewer cases of excess payments being made, or leaving the law as it is, I think that our duty is clear. We should carry the judicial process of seeking a just principle as far as we can, confident that a wise legislator will correct resultant anomalies.”’^[39]

The Court saw in this case a ‘clear and recognised injustice’. As a result of his injury, Mr Latz would suffer an economic loss in respect of his superannuation pension, the loss being both certain and able to be measured. Moreover, the Court viewed the loss as distinct in nature and source from the non-receipt of other benefits such as legacies under a will or distribution under a discretionary trust.^[40]

The Court dismissed the claim for loss of the age pension in a five-and-a-half-line paragraph. It held that unlike the superannuation pension, the age pension is not part of remuneration, a capital asset, a result of or intrinsically connected to a person’s capacity to earn, a form of property nor a future income stream to which Mr Latz had any present or future right or entitlement.^[41] It therefore could not be categorised as loss of earning capacity.

As to the reversionary pension, the Court briefly noted that ‘valuing the loss just identified must give credit for the value of the right which the contributor acquired when they became a contributor to that scheme and which remains after their death – a two-thirds pension to the spouse’.^[42] There was no further elucidation as to why this must be so as a matter of principle.

The minority allowed Amaca’s appeal and dismissed Mr Latz’s appeal. The minority held that while the loss of opportunity to enjoy the benefits of financial resources accumulated at the end of a plaintiff’s working life had been established, it was necessary first to establish where the loss claimed was compensable as economic or financial loss.^[43] The compensatory principle, while well established, cannot be used to identify whether a particular head of damage is compensable.^[44] The heads of loss compensable in personal injury are as stated in CSR Ltd v Eddy^[45] and the claims for loss of a pension did not fall within these categories.

Unlike the majority, the minority did not draw a distinction between the claims for loss of superannuation or age pension but viewed both as ‘loss of enjoyment of economic benefits’^[46] which has not been accepted as a form of economic loss. The minority noted that ‘To accept the contrary view would be to accept that differences in wealth make the opportunity to enjoy what life has to offer more valuable to the rich than to the poor, a proposition which the common law of Australia has not accepted.’^[47]

Rather, the minority held that any claim for the loss of capacity to receive payments in the lost years formed part of a claim for loss of amenities of life, for which only a modest conventional amount may be awarded.^[48]

While the minority noted the injustice to Mr Latz, it said that the claim was novel and could not ‘be supported as an incremental extension of previous decisions in this country’.^[49]

CONCLUSION

In determining whether the loss of a superannuation or age pension is recoverable, the High Court has taken a narrow approach to assessing damages in cases of tortious injury in line with its approach in CSR v Eddy. To be compensable, damages must fall into one of the three categories specified in in CSR v Eddy (non-pecuniary loss, loss of earning capacity or actual financial loss) with the compensatory principle relegated to governing the assessment of the recognised heads of damages. The result leaves people such as the late Mr Latz in a financially worse position than they would have been had the tort not occurred. It remains to be seen whether the specified categories will be expanded incrementally given the increasingly outdated distinction between active and passive income in a changing economic environment.

Tanya Segelov is a principal lawyer at Segelov Taylor Lawyers and has acted for plaintiffs in dust diseases claims for over 20 years. PHONE [phone] EMAIL [e-mail].

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^[1] Latz v Amaca P/L (Formerly James Hardie & Co P/L) [2017] SADC 56 (Amaca SADC).

^[2] The late Mr Latz died subsequent to the decision of the High Court.

^[3] Amaca SADC, para 98.

^[4] [2017] NSWDDT 6.

^[5] [2017] NSWDDT 7.

^[6] Ibid, para 181.

^[7] [2005] HCA 64; 226 CLR 1.

^[8] In CSR v Eddy the category is ‘actual financial loss’.

^[9] [2017] SASCFC 145 (Amaca SASCFC).

^[10] Ibid, para 68.

^[11] [1981] HCA 72; (1981) 150 CLR 402, 412.

^[12] Amaca SASCFC, para 70.

^[13] Ibid, para 84.

^[14] Ibid, para 85.

^[15] Ibid, para 86.

^[16] Ibid, para 97.

^[17] Ibid, para 98.

^[18] Ibid, para 100.

^[19] Ibid, para 250.

^[20] Ibid, para 252.

^[21] Ibid, para 165.

^[22] Ibid, para 114.

^[23] Ibid, para 261.

^[24] Ibid, para 181.

^[25] [2018] HCA 22.

^[26] Ibid, para 84.

^[27] Ibid, paras 88-9.

^[28] Ibid, para 90.

^[29] Ibid, para 94.

^[30] Ibid, para 95.

^[31] Ibid, para 99.

^[32] Ibid, para 97.

^[33] Ibid, para 101.

^[34] Ibid, para 103.

^[35] Ibid, para 104.

^[36] Ibid, para 104.

^[37] Ibid, para 105.

^[38] Ibid, paras 106-7.

^[39] Ibid, para 108.

^[40] Ibid, para 109.

^[41] Ibid, para 115.

^[42] Ibid, para 112.

^[43] Ibid, para 10.

^[44] Ibid, para 41.

^[45] Ibid, para 42.

^[46] Ibid, para 51.

^[47] Ibid, para 52.

^[48] Ibid, para 78.

^[49] Ibid, para 78.