Compensating for the lost years13 June 2018
The High Court has this morning published its judgment in Amaca Pty Ltd v Latz; Latz v Amaca Pty Ltd  HCA 22, confirming that a reversionary benefit must be deducted from a plaintiff's damages for the loss of a superannuation pension and that the loss of the expectation of the age pension is not compensable. The decision of the High Court provides clarity for defendants in assessing claims for future economic loss in the "lost years".
Mr Latz commenced proceedings in the District Court of South Australia (District Court) alleging that he had developed terminal malignant mesothelioma as a result of exposure to asbestos dust and fibres emanating from products manufactured and supplied by James Hardie & Coy Pty Ltd (James Hardie) between 1976 and 1977. Mr Latz sued Amaca Pty Ltd (Amaca) as the successor to James Hardie.
It was not in issue that mesothelioma will shorten Mr Latz's normal life expectancy by 16 years.
At first instance, Justice Gilchrist of the District Court assessed Mr Latz's damages at $1,062,000. The award for damages included $30,000 for exemplary damages and $500,000 for future economic loss.
The award for future economic loss was based on the loss of pension benefits (an employment-based superannuation pension and the age pension) that Mr Latz would have expected to receive for his natural life expectancy had it not been for the contraction of mesothelioma (the lost years).
Appeal to Supreme Court of South Australia
Amaca appealed to the Full Court of the Supreme Court of South Australia (the Supreme Court) against the award for future economic loss contending that the loss of pension benefits during the lost years is not a recoverable head of loss and, in the alternative, that the trial judge erred in the assessment of damages for loss of pension benefits during the lost years in respect of the superannuation pension by not reducing the award for damages by reference to Mr Latz's spouse's reversionary entitlement (the lump sum payment to be made to the spouse on Mr Latz's death).
Mr Latz cross appealed against the award of exemplary damages on the basis that the award was manifestly inadequate. The full Court agreed and increased the award to $250,000.
The Full Court held by majority that the trial judge had not erred in awarding damages for both types of pension benefits. The majority concluded that such an award was valid and consistent with the compensatory principle and found that the pensions were both considered to be financial losses as a result of Mr Latz's anticipated premature death. The majority also found that the damages ought to be reduced by the current net value of the spouse's reversionary pension as the full loss of the superannuation benefit would not be sustained.
High Court Appeal
Both Amaca and Mr Latz were granted special leave to appeal to the High Court:
- Amaca submitted that the Supreme Court erred in assessing damages for future economic loss during the lost years by awarding damages for the superannuation pension and the age pension.
- Mr Latz submitted that the Supreme Court erred in reducing his damages for the loss of the superannuation pension by reference to the value of the reversionary pension.
Decision of the High Court
The matter was heard by the Full Court of the High Court of Australia on 17 April 2018.
The High Court unanimously dismissed Mr Latz's appeal and allowed Amaca's appeal in part on the ground that the Supreme Court erred in assessing damages by including an allowance for the loss of expectation of receiving the age pension during the lost years.
A majority of the High Court (Kiefel CJ and Keane J dissenting) held that the Supreme Court was correct to include in Mr Latz's damages an award for an allowance for the superannuation pension that he would have received for the remainder of his pre-mesothelioma life expectancy, less the reversionary entitlement payable to his spouse. The majority held that superannuation benefits, like wages, are "intrinsically connected to earning capacity" and therefore properly form part of an economic loss claim for the lost years.
Unlike an entitlement to a superannuation benefit, the High Court concluded that the loss of the expectation of receiving the age pension is not a compensable head of loss because "is not a result of, or intrinsically connected to, a person's capacity to earn".
The High Court has determined that a reversionary benefit must be deducted from a plaintiff's economic loss damages for the loss of a superannuation pension in the lost years. The High Court has also confirmed that the loss of the expectation of the age pension for the lost years is not compensable.
This decision will reduce entitlements for economic loss in the lost years where an aged pension or reversionary benefit is involved.
Claims for economic loss will continue to be determined based on the factual circumstances and result in substantial damages awards.
We recommend that you review your claims estimates and where applicable seek actuarial review of your provision for asbestos claims.
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