In a landmark decision, the High Court has confirmed the extent to which pensions are recoverable for “lost” years as a result of personal injury which has reduced life expectancy – Amaca Pty Ltd v Latz  SASCFC 145. In short, the High Court held that the plaintiff is only entitled to recover the pension available to him under his superannuation arrangement, and not the age pension. Further, the amount recovered was to be reduced by the amount which would become payable to the plaintiff’s wife on his death.
Mr Latz, a 70 year old retiree, claimed damages from Amaca Pty Limited (Amaca) in respect of a negligently-inflicted personal injury that had reduced his life expectancy. The issue in dispute was whether Mr Latz was entitled to recover two future income streams for his “lost years” (the amount by which his life has been reduced):
- the age pension under the Social Security Act 1991 (Cth) (Age Pension); and
- benefits payable pursuant to the contributory pension scheme continued by the Superannuation Act 1988 (SA) (Super Pension).
Amaca submitted that Mr Latz was not entitled to be compensated for the “loss” of the above income streams. Alternatively, if the Court determined that Mr Latz was entitled to the Super Pension, Amaca submitted that the “reversionary pension” payable to Mr Latz’s spouse (upon Mr Latz’s death) under the statutory scheme should be deducted from any award of damages.
The High Court held that Mr Latz was only entitled to claim the loss of the Super Pension, from which the “reversionary pension” must be deducted. While the minority would have disallowed recovery for both the Age Pension and the Super Pension, majority found:
- A claimant is compensated if the diminution in earning capacity is productive of a financial loss.
- Superannuation benefits, like wages, are the product of the exploitation of Mr Latz’s capital assets because:
- Superannuation benefits are part of remuneration;
- those benefits are constituted by the body of rights which Mr Latz had as a result of both the national statutory requirements and Superannuation arrangements specific to Mr Latz;
- Mr Latz’s loss can be defined as the net present value of the benefit of the converted capital asset for the remainder of his pre-illness life expectancy;
- this asset is “intrinsically connected to earning capacity”, as it is a “species of remuneration or financial reward arising from work”; and
- Mr Latz must be put in the same position as if he had not sustained the injury.
- In valuing the loss, credit must be given to the value of the right Mr Latz acquired under the scheme, namely the “reversionary pension”. This is an offsetting or collateral benefit.
- The Age Pension stands in stark contrast. It is not part of remuneration. It is not a capital assets. It is not a result of, or intrinsically connected to Mr Latz’s capacity to earn nor is it a future income stream for which he has a present of future entitlement.
Mills Oakley acts for Amaca with respect to its NSW, VIC and WA product and public liability claims.
The judgment of the High Court can be accessed here.
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