Crystal balls, buffers and intuition - assessing future losses in personal injury cases involving children

In brief - Recent decision in the NSW Court of Appeal demonstrates the Court's approach to assessment of damages for future economic loss for loss of earning capacity in the case of young children.

Often in cases involving personal injury, one of the most significant components of the damages award comprises compensation for future economic loss or future loss of earning capacity. This invariably involves some speculation, assumptions and is generally calculated by reference to actual earning capacity or notional income. This exercise is difficult and is made even more difficult when the injured plaintiff is a child whose youth and level of schooling provide limited clues as to future employment opportunities.

This recent Court of Appeal decision in Chen by her tutor Huang v Kmart Australia Ltd [2023] NSWCA 96, demonstrates the Court's approach in cases involving minors. In applying s 13 of the Civil Liability Act 2022 (NSW) which governs the assessment of future economic loss / loss of earning capacity, the Court has regard to the "most likely" future circumstances of the plaintiff.

Background

On 8 January 2020, the Plaintiff, Miss Cecilia Si Chen, was injured while shopping with a family member at a Kmart store.

The Plaintiff's injury consisted of a laceration of her right eyelid, following a collision with a clothing rack upon which Kmart’s employees displayed children’s clothing.

Post incident the Plaintiff underwent two remedial ophthalmic surgeries.

District Court Proceedings

The Plaintiff was six years old at the time of the incident and by her tutor commenced proceedings against Kmart in the District Court of New South Wales.

The Plaintiff claimed compensation including damages for future economic loss in the form of loss of earning capacity.

The medical evidence at trial disclosed that the Plaintiff had suffered a laceration of her eyelid that left her with mild facial scarring and a slight droop in her right eye. The expert psychiatric evidence adduced at the trial alternated on whether the Plaintiff had developed an adjustment disorder or somatic symptom disorder consequent to the incident.

The primary judge awarded the Plaintiff total damages of $59,929.36, the components of which included a buffer sum of $5,000 for future economic loss in the form of loss of earning capacity.

Court of Appeal

The Plaintiff appealed the primary judge's decision to the New South Wales Court of Appeal (White JA, Griffiths AJA and Weinstein J).

One of the Plaintiff's grounds of appeal was the reasonableness of the amount awarded for future economic loss for loss of earning capacity.

On the cross-appeal, Kmart argued that no sum should have been awarded for loss of earning capacity, in circumstances where the evidence did not establish, on the balance of probabilities, that the Plaintiff would suffer a diminution in earning capacity attributable to the physical and psychological sequelae of her injury.

Approach to assessment of loss of earning capacity

The Court said that the process for assessing the loss of earning capacity in the case of a very young child "is an exercise in intuition, for which no reasoned explanation generally can be given as to why one figure, rather than another, has been selected as a fair reflection of the loss suffered".

The Court said that in this case, it was "…extraordinarily difficult, one might say impossible" to estimate what future earnings the Plaintiff would have derived but for the incident or how her injuries may have affected those earnings.
The Court held that the primary judge's assessment of the possibilities that might affect the Plaintiff's earning capacity, including the development of social inhibition and rejection from others in the workplace, based in part on the expert psychiatric evidence adduced by the Plaintiff, must be understood in the context of the abovementioned approach.

The Court said that while the buffer sum awarded by the primary judge was low, it was not so low as to fall outside the reasonable range open to the primary judge.

Relevant to the issue of proof of loss of future earning capacity, the Court held that the Plaintiff had established that her injuries had reduced the Plaintiff's capacity for "some occupations" and the causal link between the Plaintiff's injuries and loss of some earning capacity had been established on the balance of probabilities. The Court placed significant weight on the expert psychiatric evidence adduced at the trial and had regard to the Plaintiff's school reports up to the date of trial that showed a level of academic achievement described as “beyond expectations”.

In reliance on the decision of Malec v JC Hutton Pty Ltd [1990] 169 CLR 638, the Court confirmed that whether an injury will or may be productive of financial loss is to be determined having regard to the possibilities.

Relevantly the Court placed significant weight on the inclusion of the words "most likely" in the wording of Section 13(1) of the CLA that relevantly provides "… A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant’s most likely future circumstances but for the injury".

Assessments and buffers

The decision helpfully clarifies the principles that courts will apply in assessing damages for future loss of earning capacity where the plaintiff is a young child.
The decision serves as a reminder to all litigants in personal injury and insurance litigation that in relevant cases involving young children:

• Judges have considerable discretion in awarding damages for future economic loss / loss of earning capacity in circumstances where the courts recognise that the task is a difficult one and involves the exercise of judicial intuition.
• Assessing future economic loss involves judicial assessment of the most likely possibilities that might affect a plaintiff's future earning capacity with reference to the evidence available at the time of the assessment.
• An award for damages for future economic loss is likely to be undisturbed on appeal unless a party can establish that the award is outside the reasonable range of damages that on the evidence was open to the primary judge to award - As White JA offered at [51] "[b]eing a matter of intuition, or guesswork, the scope for appellate intervention is limited".