Court of Appeal considers residual earning capacity, vicissitudes and future commercial care in relation to personal injury claims

In 2011 Mr Smith was injured when he was struck by a motor vehicle driven by Mr Alone. In District Court proceedings Mr Alone admitted liability. Mr Smith was ultimately awarded damages of $320,981.00. This article provides a summary of the case and outlines the key reminders from this trial for plaintiff, defendants, insurers and claims handlers when assessing damages in personal injury claims.

The Smith v Alone case is an important reminder for all stake holders in public liability claims of the following principles:

• It is necessary for the primary judge, guided by the evidence, to make a practical assessment of the likelihood that a plaintiff would be able to obtain and retain the jobs said to be suitable for him. The defendant has the evidentiary burden of providing evidence of what work the plaintiff is capable of performing and what jobs are open to the plaintiff. This is particularly so where residual earning capacity is contingent on the success of medical treatment.
• In some circumstances, a discount for vicissitudes greater than the usual 15% is appropriate when calculating future economic loss. The decision to allow a particular discount is an evaluative decision and so, in the absence of specific error, such a decision will not be reversed on appeal unless it is found to be “unreasonable or plainly unjust”. In Smith v Alone the Appeal Court was prepared to reverse the primary Judge's decision and reduce the discount rate.
• Consideration must be given to a plaintiff’s family circumstances when determining whether there is a need for future commercial care. Again, the Appeal Court found that the primary Judge did not properly take into account the plaintiff’s family circumstances.

A summary of the Trial Judge's findings in Smith v Alone

The Trial Judge found:

1. After the completion of a two year pain management treatment and treatment for substance abuse (both to occur in the future), that Mr Smith had a residual earing capacity of $250.00 per week for “some form of part time sedentary or unskilled work” (as distinct from his pre-accident work as an air conditioner installer), notwithstanding the injuries he suffered in the accident.
2. Applied a discount of 35% for vicissitudes, principally on the basis that Mr Smith historically had "a significant alcohol problem” which “has led to increasingly serious problems in relation to alcohol related criminal offending” including driving and drug offences and assault.
3. Made no award of damages for future domestic care and assistance, on the basis that Mr Smith's needs did not meet the threshold for the award of gratuitous care, being at least six hours per week for at least six months and he was not likely to need commercial care or assistance in the future.

Mr Smith appealed the above findings. His appeal was allowed, with the Court of Appeal making the following findings:

Future economic loss and residual earning capacity

The Trial Judge's decision regarding Mr Smith's residual earning capacity assumed that the pain management and substance abuse withdrawal treatment would be effective to overcome his present pain and his addiction to the drug Oxycontin.

However, this assumption was not supported by the evidence. In particular, no expert who had the expertise to validate this assumption (such as a pain management expert or drug addiction treatment expert), was called to give evidence. In these circumstances, the Trial Judge erred in holding that Mr Smith had a residual earning capacity and in reducing his damages for future economic loss accordingly.

Appropriate discount for vicissitudes

Based on the evidence, had the accident not occurred, Mr Smith would undoubtedly have faced increasing risks that were higher than those an average person faced. Nevertheless, the Court of Appeal held that these risks were not so high as to warrant a discount of 35% for vicissitudes. While the risks he faced in the future were undoubtedly higher, they should not be regarded as more than double those facing the average person. The discount adopted by the primary judge was unreasonable in the sense referred to in House v The King.

A discount of 25% would adequately account for the vicissitudes Mr Smith was likely to have encountered, but for the accident, taking into account the fact that he had been drinking alcohol heavily for some years prior to the accident, yet had been able to earn substantial income in most years.

Future domestic assistance for 4.5 hours per week

Mr Smith's primary carers are his two sisters, each of whom have full-time jobs and their own families, and both live at a distance from him.

Based on these circumstances, and on Mr Smith's evidence that he did not like to rely on his family to assist him, and that he would replace their services with those from commercial providers if he had the money to do so, the Court of Appeal found that he had established a need for future commercial care and assistance for 4.5 hours per week. Accordingly, the Trial Judge erred in declining to award damages amounting to the cost of such assistance.

When assessing damages, parties should be mindful that each case will be assessed on its individual facts and there are circumstances in which a greater than 15% discount for vicissitudes is appropriate. Parties should also ensure they serve expert medical evidence from appropriate medical specialists when heads of damage are contingent on the successful outcome of medical treatment.