AMACA PTY LIMITED v LATZ – SA COURT DECISION MAY BE CONTROVERSIAL

Legal Directions

On 30 October 2017, the Full Court of the Supreme Court of South Australia – by majority – rejected Amaca’s appeal from the decision of the District Court of South Australia awarding damages for loss of the Age Pension and loss of a State Superannuation Pension for the period after the plaintiff’s anticipated death as a consequence of mesothelioma.

Additionally, the court unanimously upheld a cross-appeal as to the quantum of exemplary damages, increasing those damages from the $30,000 awarded by the trial judge to $250,000.

The judgment in relation to the Age Pension is inconsistent with the judgment of Russell J of the Dust Diseases Tribunal of NSW in Dib v Amaca Pty Limited [which was the subject of another Legal Directions Stop Press  on 30 August 2017]. Bearing in mind the quantum of the damages involved and the impact on future cases in all aspects of personal injury involving premature death through disease, it seems likely that an application for special leave to appeal to the High Court will be made, either in this matter or in proceedings arising from analogous circumstances in the relatively near future. Indeed, Justice Stanley, in dissent, remarked that it was appropriate for the High Court to provide guidance on the recoverability of the pension claims.

Exemplary damages

Before discussing the pension loss, it is relevant to note that this case represents the first award of exemplary damages against Amaca under the South Australian legislation (which provides a rebuttable presumption that exemplary damages are payable). Awards of exemplary damages made to date have been modest and in the order of $20,000 to $30,000. However, it is evident that the Full Court considered awards of that measure were insufficient to express the appropriate punitive response to Amaca’s historical conduct in permitting exposure to asbestos dust emanating from its products without providing any or adequate warning to end users.

Bearing in mind the discretionary nature of quantification of the award – and taking into account Amaca generated extremely large profits out of the manufacture and sale of asbestos-containing products – it seems unlikely that the award of $250,000 will be the subject of further appeal and, if so, reduced.

The Full Court commented that its decision on the quantum of exemplary damages may be seen as something of a ‘one off’ such that future plaintiffs may not necessarily expect the same quantum of damages since the ‘punishment’ has been made in this case. In our view, it is difficult to see how this follows as, in principle, exemplary damages are personal to the individual, and it thus follows that each award will be made to punish the defendant for its contumelious disregard of the rights of an individual such that a compelling argument is available to future claimants that they each have an analogous entitlement.

In the event that awards of this magnitude become commonplace, it is also our view that it is likely that plaintiffs in other jurisdictions (although without the benefit of a statutory presumption), are likely to press for exemplary damages in cases against Amaca (and potentially, other ‘major players’ in the asbestos industry) with a resultant significant increase in the liabilities of those entities. That, in turn, may have a ‘flow on’ effect in increasing the share of liability payable by other tortfeasors, since Amaca is the most frequent defendant in asbestos litigation in Australia and comprises a fund with limited assets. Although a mechanism exists by which Amaca is entitled to further funding from the James Hardie Group, that funding arrangement is subject to the profitability of the Group and, as such, there is potential for Amaca to become impecunious. If that occurs, there is a risk that the contribution historically met by Amaca will not be available and, as such, other liable tortfeasors will be required to pay a higher proportion of the compensatory damages to plaintiffs.

Court’s decision on pension entitlements

Facts

The plaintiff was a married man who was retired at the time of the diagnosis of mesothelioma. He was in receipt of two classes of pension – the State Superannuation Pension and the Age Pension. His entitlement to the State Superannuation Pension had arisen as a consequence of his decision to make a financial contribution of 6% of his income during the course of his working life, which entitled him to receive a pension of two thirds of his salary at the time of retirement, indexed for CPI, for the balance of his life. Upon his death, two thirds of his pension entitlement would be payable to his widow for the balance of her life.

The plaintiff would die prematurely as the result of mesothelioma, which arose from the inhalation of dust to which he was exposed as a consequence of Amaca’s negligence. The plaintiff’s premature death resulted in him not receiving either the Age Pension or the State Superannuation Pension from the date of his death from mesothelioma until the anticipated date of his death, had he not developed that disease. The plaintiff’s wife was entitled to receive a revisionary payment of two thirds of the State Pension from the date of the plaintiff’s death from mesothelioma to the date of her death.

Issues ultimately arose as to whether:

  • The loss of the State Pension gave to rise to an entitlement to damages
  • If so, whether the revisionary payment made to the wife should be taken into account in assessing the quantum of the plaintiff’s loss
  • The loss of the Age Pension gave rise to an entitlement to damages.

It was uncontroversial that if the pension entitlements after the anticipated death from mesothelioma sounded in damages, it was appropriate to reduce the damages by the cost of the plaintiff’s personal maintenance on the basis he would have been required to spend that money to remain alive and consequently retain the entitlement to the pension. As such, for his personal maintenance, it was necessary to reduce the damages by the extent of that personal maintenance so as to avoid a double compensation.

Decision of the Trial Judge

The trial judge found that both the State Pension and the Age Pension gave rise to an entitlement to damages and that the reversionary pension payable to the wife did not operate to reduce the plaintiff’s entitlement to damages.

Amaca appealed, ultimately arguing that neither pension sounded in damages; however, if the Superannuation Pension did sound in damages, the net present value of the reversionary pension should be applied to reduce the entitlement to damages so as to avoid double compensation.

The plaintiff cross-appealed, seeking an increase in the award of exemplary damages.

The Decision on Appeal

In brief, Amaca argued that the State Superannuation and the Age Pension did not give rise to a recognised head of damage under Australian law.

Amaca asserted that neither pension constituted loss of economic capacity under Australian law and, relying on assessments made by the High Court in CSR Limited v Eddy, submitted that the pensions were not otherwise within the compensation principle recognised under Australian law.

The plaintiff argued that both classes of pensions are appropriately categorised as economic loss and, in any event, are financial loss as contemplated by the High Court in Eddy and as such were recoverable.

Also, the plaintiff argued that it was inappropriate to reduce the entitlement to damages by the present net value of the reversionary pension because that was not a payment giving rise to an entitlement in the plaintiff, but rather, was made to a third party (his wife), and as such should not operate to reduce the plaintiff’s entitlement to damages.

It is interesting to note that, contrary to the argument raised in the cases litigated by Amaca in NSW (Dib), it did not seek to distinguish the characterisation of a superannuation pension for which the plaintiff had made a financial contribution to secure the entitlement from the Age Pension where the entitlement arose on a more charitable basis and independent of the plaintiff having made contributions by way of taxation payments and similar.

Justices Blue and Hinton of the Full Court ultimately concluded that the entitlement to an annuity (which would have been received but for the premature death of the claimant as a consequence of the negligence of the defendant) did sound in damages and constituted a financial loss. As such, the awarding of damages for loss of the Superannuation and Age Pensions was consistent with the compensatory principle frequently quoted from the decision of the High Court in Todorovic v Waller and was not – in Their Honours’ view – inconsistent with the categories of entitlements to compensatory damages identified by the High Court in the later decision of Eddy. They did not consider there was any difference in principle between the entitlement to the Superannuation Pension and the Age Pension, both being financial losses arising as a consequence of the plaintiff’s premature death.

Furthermore, Justices Blue and Hinton concluded that, as a matter of practical reality, the full loss of the Superannuation Pension was not sustained by the plaintiff but rather, only one third of it, as two thirds would continue to be paid after his death. Thus the damages should be reduced by the current net value of the reversionary pension.

In dissent, Justice Stanley disagreed with the characterisation of either the Superannuation or Age Pensions as financial loss or economic loss within the categories of loss contemplated by the High Court in the earlier decisions, and consequently held that the loss of the pensions in the years after death did not sound in damages.

After coming to that conclusion, Justice Stanley also assessed whether, if wrong, it was appropriate to reduce the damages by the net present value of the reversionary pension. He ultimately concluded that it was not appropriate to reduce on that basis, because the loss being compensated in damages was the loss to the plaintiff and as such, the fact that the plaintiff’s contribution giving rise to the entitlement to the pension also provided an entitlement in certain circumstances to members of his family is irrelevant to the fact that the plaintiff has in fact suffered the loss.

On this particular point, it is our view there is significant force to the Court’s dissenting view on this aspect of the matter which, bearing in mind the size of the reduction, might result in an application for special leave by the plaintiff on this point alone.

Conclusion

Aside from an anticipated increase in the force with which plaintiffs will contend for exemplary damages, this case provides an entitlement to damages for loss of the Age Pension in cases where the claimant will prematurely die as a result of the defendant’s negligence. However, bearing in mind that there is a relatively modest difference between the quantum of the Age Pension and the personal maintenance costs, we anticipate the present net value of the loss is likely to be reasonably modest on a case by case basis.

The more significant issue which may be the subject of further appeal is whether the State Superannuation Pension sounds in damages, and if so, whether it is appropriate to reduce the damages awarded by the reversionary pension. To date, authorities throughout Australia have accepted that class of pension to sound in damages although Justice Stanley disagreed in principle. It may be that Amaca determines that this warrants consideration by the High Court, or the plaintiff decides to test the reduction of the claim by the present net value of the reversionary pension.

Authored by Stephen Taylor-Jones, Partner, Sydney


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