Date: Sun, 30 Nov 2003 22:08:23 +1100

From: Harold Luntz

Subject: Set-off of pecuniary and non-pecuniary benefits

The issue raised by Andrew Tettenborn, to which Lizzie Cooke and Jamie Edelman responded, is not a new one that is little explored in the law of damages. In Public Trustee v Zoanetti, in 1945 in the High Court of Australia, Dixon J said:

The contention upon which this appeal depends is that, in ascertaining the pecuniary loss resulting from her husband's death, the sum to which a widow becomes entitled by way of solatium must be treated as a benefit accruing from his death and taken into account by way of deduction from the amount which would otherwise be awarded to her in respect of the pecuniary loss she has sustained through his life being brought to a premature end.

I think that to state the proposition is enough to show that it must be wrong. ...

The two descriptions of injurious consequences represent two different interests of a wife, to take the example of a wife, in the life of her husband, the one founded upon the economic or pecuniary advantages of the marriage, the other founded upon the affections and feelings. The legislature has recognized them both, and in the case of each has treated the destruction of the interest as the proper subject of reparation sounding in money. Yet, according to the contention, the money sum representing the reparation or compensation for one of the interests is to be regarded as a gain and treated as if received in reduction of the loss sustained by the destruction of the other interest.

The rule under Lord Campbell's Act requiring that, in estimating the pecuniary injury caused by the death of the deceased, the benefits accruing must be considered as well as the benefits lost as a result of the death is no more than a specific application of a principle governing the ascertainment of loss arising from a given occurrence in every case of legal responsibility. But when there are two interests adversely affected you cannot treat recompense for one as a gain arising from the occurrence and operating in relief of the loss of or injury to the other interest.

Indeed, even when one of two separate interests is benefited in consequence of a wrongful act, the benefit cannot be set off against an injury to the other. "Damages resulting from an invasion of one interest are not diminished by showing that another interest has been benefited" (American Restatement of the Law Torts, vol. IV., s. 920). It is not immaterial to notice that in describing some of the various applications given to this principle the Restatement includes the proposition that damages to a husband for loss of consortium are not diminished by the fact that the husband is no longer under the expense of supporting the wife.

Similar issues have come before the Supreme Court of Canada twice this year: see MB v British Columbia 2003 SCC 53 (2 October 2003) and Gurniak v Nordquist 2003 SCC 59 (30 October 2003). For England, see Ballantine v Newalls Insulation Co Ltd [2001] ICR25; [2000] PIQR Q327. In Australia, a decision in James Hardie & Co Pty Ltd v Newton (1997) 42 NSWLR 729 (CA) that pecuniary benefits could be deducted from damages for non-pecuniary loss in mesothelioma cases was reversed by legislation, but that led to further issues relating to interest in Pacific Power v Royal (1999) 47 NSWLR 366 (CA).

John Fleming in his 1966 article 'The Collateral Source Rule and Loss Allocation in Tort' and in his chapter of International Encyclopaedia of Comparative Law discussed it in relation to the recovery of benefits paid to plaintiffs under statutory schemes. He called the principle one of 'equivalence'. It was overlooked when the UK Parliament enacted the Social Security Act 1989, which allowed the State to recover certain of the benefits it paid. This led to many cases which a Parliamentary Committee later described as 'revolting to the ordinary man's sense of justice'. Amendments were made to the legislation in consequence. However, Australian experience with similar legislation has shown that the equivalence doctrine can lead to evasion of recoupment provisions when settlements are reached. I tried to summarise some of this in 'The Collateral Source Rule Thirty Years On' in Peter Cane and Jane Stapleton (eds), The Law of Obligations: Essays in Celebration of John Fleming, Clarendon Press, Oxford, 1998, p 377.

Harold Luntz.

Professorial Fellow,
Law School,
The University of Melbourne,
Victoria, 3010,
AUSTRALIA.

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