Assessing damages when there is no actual loss

People who sustain personal injury as a result of the fault or negligence of a third party, are often left with disabilities that cause impairment of their earning capacity. Sometimes the extent of that impairment and the calculation of the resulting loss of income is difficult when the loss is not for example a simple question of comparing a person’s income before and after an accident and calculating the difference.


Damages for past and future loss of income are awarded as compensation for the effect of an accident on an injured person’s ability to earn income. The exercise involves assessment of lost earning capacity and not loss of earnings. Lost capacity and the economic consequences of that loss must be identified. What was earned by the injured person in the past may be a useful guide to what might be earned in the future but it does not always provide certain guidance.


Where it is clear that a person’s income-earning capacity has been reduced but its extent is difficult to assess, the absence of precise evidence will not necessarily result in non-recovery of damages. In this case a Court will often resort to an award of a “cushion” or a “buffer”, being a global amount of damages to compensate a person for likely future economic incapacity. The Court still has to grapple with what the future was likely to hold in terms of economic activity had the injury not occurred.


The Court of Appeal recently considered a claim for damages by a man who sustained injuries when he fell from his motorcycle while avoiding a collision with a vehicle. A Judge of the District Court awarded damages, that included an award as a buffer for future economic loss. The appeal turned primarily on the District Court’s allowances for economic loss and future care. The injured person had suffered several injuries before the motorcycle accident. These included a prior motorcycle accident and an underground mining accident. The nature and extent of the earlier injuries and disabilities, and their impact upon the injured person’s earning capacity were considered at length by the District Court Judge. The injured person had previously been able to work as a self-employed electrician, running his own business until 2012 but at the time of the hearing in the District Court he had not worked for two years. He relied on evidence that he had been unable to commence employment in landscaping, due to injuries he sustained in the accident. These issues fed into his claim for future economic loss.


The District Court Judge found that due to injuries and disabilities that existed prior to the motorcycle accident, the injured person would have retired between the age of 60 and 63 and awarded a modest buffer of $125,000. What the District Court Judge however failed to do was take account of his own finding that the injured person would have continued to seek sporadic electrical contract jobs which did not require heavy activity and lifting such as work of a domestic or minor commercial nature or may have undertaken some electrical inspector and limited supervision duties, and therefore, that he retained an earning capacity prior to the motorcycle accident.


The Court of Appeal set aside the judgment of the District Court and awarded further damages for economic loss. The Court of Appeal held that the District Court Judge had erred in his finding that the injured person would have ceased work early, around the age of 60 or 63 due to his pre-existing injuries. Rather, this was an issue to be established by the negligent party if it were capable of doing so. The Court of Appeal determined that in the absence of a finding that the Appellant would have retired early, damages should be assessed on the basis that the Appellant would work to the age of 67. In setting aside, the award of the District Court Judge, the Court of Appeal awarded further damages of $50,000.