Discounting earning capacity for knowns and unknowns

Peebles v WorkCover Queensland [2021] QCA 21

Peebles v WorkCover Queensland [2020] QSC 106 (trial decision)

The plaintiff appealed the assessment of past economic loss and future lost earning capacity. It was admitted that the defective truck seat caused the plaintiff’s injury to his spine. The relevant medical evidence diverged as to when, if ever, the plaintiff’s pre-existing back incidents and degeneration would have affected his earning capacity as a truck driver.

The trial judge considered the evidence of Dr Lucina, who thought that a similar incapacity may have occurred in 5 years. However, it was uncertain and hypothetical. In contrast, Associate Professor Fearnside believed it may have never arisen:

[131] However, in my view, there was also a significant prospect that had the plaintiff not suffered the particular harms at late May 2014 and December 2014, he would have suffered from a similar disabling back condition at some time after those dates. I acknowledge that Dr Licina’s opinion of a five year horizon for that to occur is necessarily an assessment of an uncertain past or future hypothetical event, and that, as Associate Professor Fearnside explained, as the future played out the event may never have happened.

[133] In my view the probability that the event of the plaintiff suffering a similar disabling back condition to the harm that he did suffer as a result of the employer’s negligence is that it is as likely as not that he would have done so over the period of the losses he has and will have suffered as a result of the employer’s negligence. It is a reasonable inference from Dr Licina’s evidence that the longer the period from the date of the harms in fact suffered that is considered, the greater the likelihood that a similar disabling back condition would have been suffered. However, having regard to the methodology proposed in Malec, I do not consider it is incumbent upon the court or the correct approach to attempt to formulate a date by which a similar condition would have been suffered. The correct approach is to consider the percentage prospect overall of the event which would reduce the damage suffered from the defendant’s negligence and to decrease the amount of the award of damages accordingly.”

In settling on applying Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, the trial judge applied a 50% discount to both the past loss of income and future loss of earning capacity. As to the past loss of income, the trial judge adopted the agreed nett weekly loss of $1,300.00. However, in relation to future loss of earning capacity, the trial judge settled on $1,200.00 on the basis there was no evidence to support a higher amount. The plaintiff appealed the discount applied to both past loss of income and the future loss of earning capacity, together with the future weekly loss amount of $1,200.00.

McMurdo JA with whom Fraser and Mullins JA agreed, found that the 50% future discount incorporated the usual discount of 10 – 15% and hence, “…it can be seen that the extent of the discount, for that particular contingency, was not as high as 50 per cent, as the appellant’s argument at times seemed to suggest” [19].

McMurdo JA noted that the application of a discount is discretionary, and a range was open. The plaintiff was unable to specify the error in the discretion, save to submit applying Neall v Watson (1960) 34 ALJR 364 at 367-368 that the discount “was so unreasonable that the court should infer that an error has been made.” [20]. McMurdo JA was not prepared to find that inference was open.

Nevertheless, his Honour did find that the evidence was open to use a higher weekly figure, namely $1,300.00. Accordingly, the future loss of earning capacity and superannuation was increased from $1,200.00 net per week.

Turning to the same discount being applied to the past loss of income, McMurdo JA found that to be an error. The reasons were that it was known what happened in the past and the period of 5 years to trial as compared to the balance of the plaintiff’s working life (29 years) was considerably shorter. The appropriate discount rate was found to be 10%. Hence, the past loss of income and superannuation were adjusted.

The net result was the trial judgment was increased by $202,707.80 to $967,052.92.

Although not recorded in the judgment, costs were allowed on an indemnity basis.

David Cormack – Brisbane Barrister and Mediator

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