CIVIL LIABILITY ACT EARNING CAPACITY CAPS
The Civil Liability Act 2002 (NSW), Section 12, forces a court, when making certain awards of damages, to limit the amount of money awarded to a plaintiff.
We assisted a student at the University of New England to explore the effect of the provision.
When does it apply?
The provision applies where a court has concluded that liability has been established, for example at the conclusion of a trial. It applies to any action for personal injury damages, whether brought in negligence, for breach of contract or for breach of a statutory provision: Civil Liability Act, section 11A. . The provision applies, according to section 12(1) to awards of damage:
(a) for past economic loss due to loss of earnings or the deprivation or impairment of earning capacity, or
(b) for future economic loss due to the deprivation or impairment of earning capacity, or
(c) for the loss of expectation of financial support.
What is the Court forced to do?
The Court, in making an award, must “disregard the amount (if any) by which the claimant’s gross weekly earnings would (but for the injury or death) have exceeded an amount that is 3 times the amount of average weekly earnings at the date of the award”.
By way of background, entitlement to amounts of money is bundled up into the process of analysis undertaken by a Court called ‘assessment of damages’. This is generally referred to as the ‘quantum’ component of the Court’s analysis of the merits of the plaintiff’s claim. This is the second stage of analysis which follows the component of analysis of whether liability actually exists, which is called the ‘liability’ component.
The common law contains stacks of previous cases, some forming binding authority on later Courts, about the specific situations in which damages for specific things have been found to be payable or found not to be payable.
The parliament has then taken the view that the common law is not enough. It identified a need for more rules about limits that should be placed on the assessment of damages. The parliament imposed these new rules and limits in the form of the Civil Liability Act which was passed by the New South Wales parliament in 2002.
The second reading speech for the Civil Liability Act explains:
“[Section 12] limits damages for lost earnings, loss of earning capacity or expectation of financial support. It requires the courts to disregard any amount claimed by the plaintiff that is greater than three times average weekly earnings. This will affect very high income earners only. The test of three times average weekly earnings has been adopted in preference to the dollar amount in the consultation draft of the bill. It is consistent with the test announced by the Queensland Government.”
The Civil Liability Act says that when the Courts are figuring out how much a person would probably make in the future if, for example, he wasn’t killed or injured, they have to stop at the amount that is 3 times the average wage. So if a multimillionaire is injured and sues for loss of earning capacity and he earns 5 times the average worker, the Courts will apply the cap and only use, for the purposes of their calculations, an amount that is 3 times average weekly earnings.
Average weekly earnings are located here.
The section would only affect a plaintiff if the person whose earning capacity is relevant to the assessment of damages (the deceased if the action is brought by their dependents, the injured if brought by them) was found to have a present or future capacity to earn above 3 times the average wage. Average weekly earnings in NSW are presently $1081.20. Three times this is $3243. Per annum, that is $168,636.00.