Fox v Wood (1981) 148 CLR 438
- Appeal to the High Court.
- Decision delivered 7 August 1981.
Background
This appeal is from a judgment of the Full Court of the Supreme Court of South Australia.
The subject case relates to a plaintiff who sustained personal injuries as a result of the negligence of the defendant (the incident). As a consequence of the incident, the plaintiff was unable to work and suffered a loss of earnings. The plaintiff in the subject case then received workers’ compensation from his employer for the period in which he suffered a loss of earnings.
Special leave was granted to enable the High Court to determine the question of whether
the plaintiff’s earnings should be assessed on the basis of his net income (i.e., after tax
has been deducted), or on the basis of his gross income.
Gibbs C. J.
Chief Justice Gibbs, who formed part of the majority, referred to the authority of Cullen v Trappell (1980) 146 CLR 1, stating that:
‘…in assessing damages for loss of earning capacity the tax which a plaintiff would have paid on the earnings of which he has been deprived must be taken into account. To assess damages on the basis that the plaintiff has lost his gross earnings, when in fact the earnings would have been subject to tax, and the award of damages is not subject to tax, would give the plaintiff more than he had really lost, and would depart from the fundamental principle referred to in British Transport Commission v Gourley (1956) AC 185, at p 197, “that the tribunal should award the injured party such a sum of money as will put him in the same position as he would have been in if he had not sustained the injuries…’
Chief Justice Gibbs noted that, upon receiving compensation from the third party for loss of earnings, the plaintiff was required to repay the gross amount of workers’ compensation which she received (being $9,222). However, in the present case, the plaintiff only received, and had the benefit of, the net amount which remained after the deduction of tax (being $7,377.60). As a consequence, the plaintiff was worse off by $1,844.40.
It was submitted that the plaintiff’s loss was caused by her voluntary acceptance of the workers’ compensation. However, Chief Justice Gibbs found that the plaintiff’s conduct in accepting the workers’ compensation benefits was reasonably foreseeable, and that:
‘…the legislation provides that the worker may receive the compensation notwithstanding the existence of a right to damages, and generally speaking it would be imprudent of a worker not to accept it: for one thing, the claim for damages might fail. The receipt of the compensation was a natural and foreseeable consequence of the injuries, and the repayment is not, as was suggested in argument, a special loss due to the financial embarrassment of [the plaintiff]…’
With respect to Chapman v Hearse (1961) 106 CLR 112, Chief Justice Gibbs further notes that the ‘act of [the plaintiff] in accepting the payments was not a superseding cause of the respondent’s loss on repayment…’
On this basis, the Full Court took the view that an assessment of the plaintiff’s loss of earnings should determined by the gross earnings lost. Chief Justice Gibbs concurred with this view, however noted that the question is rather:
‘whether the receipt and repayment of the compensation increased [the plaintiff’s] loss, and if so whether that increased loss was caused by the appellant’s negligence and was not too remote to be taken into account.’
On the above reasoning, Chief Justice Gibbs found that the plaintiff should be compensated for ‘this additional loss’, and that ‘if it were not taken into account the damages would provide inadequate compensation for the consequences of [the plaintiff’s] injuries.’
Aickin J.
Justice Aickin agreed with Chief Justice Gibbs and that the appeal should be dismissed.
Brennan J.
Justice Brennan agreed with Chief Justice Gibbs and considered that the appeal should be dismissed with costs.
Order
The appeal was dismissed with costs.
Application in Practice
The amount of common law damages that is to be paid to the claimant is reduced by the weekly compensation or other benefits previously made by WorkCover. This is known as the WorkCover Queensland ‘refund’, and comprises the whole gross sum paid by WorkCover (including any tax withheld on weekly compensation payments to the claimant).
As the claimant’s weekly compensation payments are tax withheld (or net amounts), the claimant is therefore out of pocket the difference between the net amounts paid by WorkCover and the gross amounts owed to WorkCover.
Therefore, the decision of Fox v Wood has established that claimant’s have a right to recover the tax withheld component of the weekly compensation benefits paid to them by WorkCover.