• Suite 23, Maylands Commercial Centre, 168 Guildford Road, Maylands WA 6051 | CALL NOW: 9371 5060

  • March 14, 2017

Plaintiff Awarded Loss Of Earning Capacity Inclusive Of Dividends

Plaintiff Awarded Loss Of Earning Capacity Inclusive Of Dividends

In the District Court case of Dunmall v Welsh [No 9] [2017] WADC 19 a Plaintiff was successful in being awarded damages for loss of earning capacity including of dividends due to him.

In 2004 the Plaintiff and his wife were at the home of friends when the Plaintiff proceeded to exit onto an upstairs balcony with two others people, when it collapsed causing the Plaintiff to fall three meters to the ground. Although the balcony had capacity to support fifty or more people it collapsed under the weight of three persons. As a result of the fall, the Plaintiff suffered a serious and life-changing injury to his left ankle.  He was 63 years old at the time of the accident. Prior to the accident, he had been a General Manager of a large and successful ceiling fixing business with a good income and no plans to retire.

He commenced proceedings against the builder of the balcony as well as the shire who had approved the relevant building plans. The matter proceeded to trial on the issue of liability only.  At the trial, in 2014, the Judge gave judgment and indicated that the builder and the shire were liable to compensate the Plaintiff for his proven injuries and determined the apportionment between the two to be 65% and 35%, respectively.

The matter later proceeded to the District Court for the determination of the quantum.  Having resolved and agreed on all other heads of damages the only issue to be determined at the trial was the sum to be awarded by way of the claim for economic loss as a result of his loss of earning capacity.

The general principles relating to a loss of earning capacity is that a Plaintiff is not entitled to recover his damages unless he establishes, firstly, that his earning capacity was diminished by the negligence–caused injuries and secondly, that the diminution of earning capacity was productive of such economic loss. In other words, what should be compensated is the loss or diminishment of earning capacity, not loss of earnings. Whether there is a link between the negligence–caused injury and the diminution of that earning capacity is a question of fact to be determined on the evidence at hand. If the effects of a Plaintiff’s injuries were on a common-sense approach, a material cause of his decision to retire early, then the financial loss has resulted from the loss of earning capacity and is connected to the Defendant’s negligence. If however the Plaintiff has resigned, by reason of the loss of earning capacity but he is fit to do the work, then the onus lies on him to, as part of his case to prove his earning capacity. Similarly, where an issue arises as to whether a Plaintiff could have obtained employment within his retained capacity, it is for the Plaintiff to prove that such employment is beyond his capacity.

After an analysis of the evidence provided, the Court was satisfied that the Plaintiff had no plans to retire early and, but for the accident, was likely to have worked past 65 years of age provided he enjoyed sufficient basic health to do so, and provided his employer was content for him to do so. The Court then went on to determine the Plaintiff’s likely retirement age and after taking into account his general state of health at the age of 74, which was his age at the time he testified at trial, the Court was satisfied on a balance of probabilities that he would have worked until 67 years of age, which is the extent of his claim.

In that regard the Court also went on to find that the Plaintiff’s capacity to work was almost utterly lost.  That loss was however not immediately productive of economic loss because he was kept at full pay with bonuses until approximately 2005. The Court found that the Plaintiff retained no capacity to return to his pre-accident employment on a full-time basis and that he could no longer work as a manager.

The Defendant argued that the Plaintiff failed to mitigate his loss by failing to apply for alternative employment, however the Court accepted the Plaintiff’s evidence that there was no point in applying for another job because he was not able to do the work anymore.  The Court found that the Plaintiff did not fail to mitigate his loss.

With regards to the assessment of loss of earnings, the relevant Western Australian Legislation provides that a Court must disregard earnings lost to the extent where it accrued at a rate of more than three times the average weekly earnings at the time of the award.

With regards to the dividends, ordinarily they would not amount to “earnings”, although they are income. However, in this case, although no income tax was payable on the dividends, the Court considered that the dividends which were received through the Plaintiff’s efforts at work and by virtue of his actions as General Manager amounted in substance (if not form) to something in the nature of a reward for past, present or future services as an employee.  In that regard the Court considered that the dividend amounted to “earnings” within  the meaning of the relevant Legislation.

After applying a 5% discount for contingencies and vicissitudes of life and taking into account that the Plaintiff was at reasonable health at the age of 74, it calculated the Plaintiff’s loss at $324 358.00 for loss of earning capacity. The Court further allowed the appropriate discount of 15% for taxes, administrative fees and contingencies, but added past and future superannuation, salary sacrifice bonuses and dividends to the loss of earning capacity above, culminating in the sum $505 327.00.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Leave a Reply