Damages for economic loss – A new COVID-19 normal? Court acknowledges uncertainties of post-pandemic world in assessing the risk of future economic loss
- Published 04.11.2020
This matter brings to light the inherently speculative nature of the assessment of Farlow damages for the risk of future loss of earning capacity, and the impact on such assessments by the current COVID-19 pandemic and associated future economic uncertainty.
Mr Coughlan, now 39, was formerly employed with United Precast (‘United’) as a rigger. On 12 February 2015 he was operating a gantry crane when he was struck in the face by a chain which was hoisting a load of steel.
As a result of his accident Mr Coughlan broke bones in his nose, cheek and jaw causing some bony protrusion into his frontal lobe. He required cranial surgery and spent approximately 12 days in hospital. Residual injuries included blindness in his left eye, lost sensation on the left side of his forehead and cheek, lost sense of smell and taste, memory impairment and mood effects.
Despite his injuries, Mr Coughlan resumed his pre-injury duties following a staged return to work over a three month period. However, he reportedly felt uncomfortable about his ongoing safety performing his usual role and as a result, took up a construction supervisor role elsewhere.
Mr Coughlan brought proceedings against United in the VSC in negligence, seeking damages for his injuries sustained in the accident. His current employer gave evidence at trial of Mr Coughlan’s ongoing restricted capacity.
In circumstances where United admitted liability for the accident, the primary issue for determination centred on an appropriate award of damages. The question was whether Mr Coughlan ought to be awarded damages for loss of future earning capacity, and if so, what is a fair and reasonable amount to compensate him in this regard? Specifically, the Court was asked to consider whether Mr Coughlan had entitlement to damages for future pecuniary loss in accordance with Victorian Stevedoring Pty Ltd v Farlow (VSC 1963), that is, whether he was entitled to an award of damages for the ‘mere chance or risk of future unemployment or less remunerative employment.’
Mr Coughlan argued that any assessment of damages for loss of chance ought to be determined in accordance with the HCA authority of Malec v Hutton (HCA 1990), and to adjust any award based on the Court’s assessment of the probability of stated future hypothetical events occurring. However, the Court determined that it was not possible to predict whether Mr Coughlan would lose his current job and/or experience financial hardship in the foreseeable future. The Court made reference to the uncertain economic situation which had arisen in response to the current COVID-19 pandemic and the implications of Government stimulus measures which made any forecast particularly difficult.
Whilst the Court did not believe Mr Coughlan was precluded from returning to any form of employment of the kind he had previously performed because of his injuries, and considered him to be both a motivated and adaptive individual, the Court accepted that his income-earning capacity had been reduced. It was also accepted that there was a risk that if his new employer was required to lay off its workforce, that Mr Coughlan may be selected to lose his position ahead of others.
Ultimately, the Court awarded Mr Coughlan the sum of $200,000 for loss of future earning capacity. In doing so, the Court departed from the principles in Malec, declining to assign a percentage figure for the risk that a future event might occur, namely whether Mr Coughlan would incur future periods of no income at the rate of his current earnings, in the current climate.
Instead, the Court adopted a more realistic assessment of future economic loss, based upon Farlow principles, accepting that there was a degree of risk that Mr Coughlan would face some periods of time without earnings, and some periods of reduced income, accepting that such a cycle could repeat more than once over the next 27 years.
With the fallout from COVID-19, the potential for future pandemics and the general economic uncertainty ahead, this case illustrates that the courts are perhaps now less inclined to adopt damages forecasting methods based upon historical patterns and numerical apportionment in favour of a more discretionary assessment.
Co-authored by: Victoria Pappas, Lawyer