The Court of Appeal has approved the application of indexation in past economic loss damages assessments, marking a definitive development in the historical abuse (and more broadly, personal injury) space where previously there was no set precedent for or against the application of a 'with-indexation' approach.
Furthermore, the court more than halved the sum of damages awarded by the jury in the initial proceeding, citing issues with the plaintiff’s forensic accounting evidence, and labelling the jury’s determination of general damages 'far too high'.
In issue
In this case, the Victorian Court of Appeal:
- set aside the record high damages awarded by the jury in the Supreme Court proceeding, recalibrating the benchmark for general damages awards in historical abuse cases, and
- considered the issue of applying indexation to past economic loss, and ultimately found that whilst there was no precedent for or against this approach, it was appropriate in the circumstances, thus effectively giving it approval in all applicable cases moving forward.
The background
The plaintiff/respondent (plaintiff) was sexually abused as a child in the 1980s by Graeme Hobbs, a now-deceased volunteer of the defendant/applicant, the Footscray Football Club (Club).
The plaintiff commenced proceedings against the Club, and the case was tried in the Victorian Supreme Court before a Judge and jury of six in October and November 2023.
On 9 November 2023, the jury found that the Club was liable in negligence to the plaintiff and subsequently awarded $5,943,151 in damages against the Club. This award marked a record high in historical abuse cases across Australia, broken down as follows:
- $3,250,000 for general damages,
- $2,605,578 for past and future loss of earning capacity, and
- $87,573 for medical and related expenses.
The Club appealed the decision on four general grounds, in short, taking issue with the Judge’s directions to the jury, the fairness of the trial to the Club, and the reasonability of the jury’s damages awards including the application of a 'with-indexation' approach in assessing past economic loss.
The appeal decision
The Court of Appeal delivered a comprehensive 702-paragraph judgment considering each of the Club’s grounds, ultimately rejecting all but those against the jury’s verdict in favour of the plaintiff for general damages and economic loss damages.
In reaffirming its decision to approve the approach of applying indexation to past economic losses, the court noted that:
- whilst there was no specific authority supporting the assessment of past economic loss indexed for inflation, there was also no authority militating against such an approach,
- in light of the above, the court returned to first principles, with particular reference to the obiter of Barwick CJ in O’Brien v McKean [1968] HCA 58, as well as passages from the oft-cited book by Professor Harold Luntz, Assessment of Damages for Personal Injury and Death. The court considered that in a case where the period of past loss of earnings spans decades, and where historical wage rates were a fraction of current day wage rates, assessing past economic loss based on (unindexed) historical wage rates could not provide compensation in a sum which would put an injured party in the position they would have been had no tort been committed against them. As such, the court found that there was no error in the trial judge’s ruling that indexation should be applied to the plaintiff’s past loss of earnings to account for inflation, and
- against the argument that section 60 of the Supreme Court Act 1986 (Vic) precludes any application of indexation to past losses, the court determined that indexation of a plaintiff's loss from the date of injury as a method of calculation of their loss was a separate matter from an award of interest on damages.
The court ultimately considered that as a matter of practice, it was sensible to take indexation calculations as at the date of issue of the proceeding and then calculate interest from that date; effectively giving approval to the 'with-indexation' methodology for past economic loss assessments.
In relation to the jury’s general damages award, their Honours succinctly stated 'we cannot accept that a verdict of $3.25M is one that a jury, properly instructed, confining itself to relevant matters, could reasonably have arrived at… To put it bluntly, notwithstanding the devastating outcome for [the plaintiff] as a result of Hobbs’ abuse, an award of $3.25M is far too high and cannot stand.'
The court subsequently set aside the previous general damages award and replaced it with a figure of $850,000.
As for the jury’s economic loss damages award, the court considered that the evidence tendered in support of the plaintiff’s 'but for' loss of earnings scenarios as a carpenter or computer programmer was lacking. Again, employing the preface 'to put it bluntly', the court noted that 'the choice by [the plaintiff’s] lawyers as to various employment scenarios to premise a claim for [the plaintiff’s] lost earning capacity required an evidentiary foundation. There was none.'
The court instead preferred the scenario contemplated by the forensic accountant called by the Club, that being the ‘average earnings of a male educated to Year 12 level’ scenario. Subsequently, the court set aside the previous economic loss damages award of $2,605,578 and replaced it with a figure of $1,700,000.
Implications for you
This decision bookends a recent spate of historical abuse cases where juries have made exponentially increasing damages awards in favour of plaintiffs. Notwithstanding, this ebb of the tide leaves behind a new high watermark for general damages awards (albeit with a firm reality check from the bench) and gives the green light for indexation to be applied in past economic loss damages assessments in historical abuse cases.
