How Is Loss of Earning Capacity Assessed?

For a wage earner, economic loss is often the largest head of damage; for a villager, it is the hardest to prove. The cases divide accordingly.

Past economic loss

Past loss is the income actually lost between the accident and the trial. It is proved by pay slips, employer’s evidence or tax records, and the courts use net figures: in MVIT v Tabanto [1995] PGSC 16; [1995] PNGLR 214 the Supreme Court accepted K77 per fortnight net as the basis because the Trust had never suggested at trial that it was a gross figure. In Etape v MVIT [1992] PGLawRp 587; [1992] PNGLR 191 the loss was K174 a fortnight for 47 fortnights, then the difference between old and new wages, plus the loss of company housing valued at K50 a fortnight. Where the employer kept paying during recovery, there is no loss for that period. A claimant with no earnings before the accident has no past economic loss: the Supreme Court in MVIL v Kol [2007] PGSC 38; SC902 set aside K19,257 awarded to a school student for that reason.

Future economic loss

Future loss is the present value of the reduction in earning capacity over the remaining working life. The method appears in the Supreme Court’s own calculation in MVIT v Etape [1994] PGSC 12; [1994] PNGLR 596: the proven diminution was K21 per fortnight; the claimant was 29 and would work to 55, so 25 years remained; applying the 3 per cent tables gave K9,681; a 10 per cent deduction for the vicissitudes of life produced K8,713. The Court replaced the trial judge’s K51,000, which had assumed the claimant would never regain comparable work, because there was no evidence for that assumption. The discount rate has varied: Koieba v MVIT [1984] PGLawRp 459; [1984] PNGLR 365 used 5 per cent, but 3 per cent has been standard since Pinzger v Bougainville Copper and is used in Etape, Guli and Moka.

What counts as earnings

Only cash in hand. Davis held that benefits which did not represent cash — accommodation, a car, airfares, school fees — could not be counted, although Etape valued lost company housing as part of the loss. Unemployment benefits received are deducted (Rundle v MVIT [1989] PGLawRp 67; [1988-89] PNGLR 618). Tax is taken into account (Kerr). Workers’ compensation received must be repaid and is not a windfall (Koieba).

Children and students

A child has no earnings to lose but may have a diminished future. Coady v MVIT [1987] PGSC 6; [1987] PNGLR 55 set the test: is there a substantial risk that the range of employment open to the child will be restricted; if so, the court must “assess and quantify the present value of the risk”, according to established practice rather than a conventional sum. For a student with a 80 to 100 per cent loss of use of a leg, Kol awarded a global K20,000 covering the risks of employment or unemployment and early death. In MVIL v Let [2005] PGSC 16; SC816 a global K30,000 for a student aged between 16 and 19 was upheld. In Kupo v MVIL [2002] PGNC 55; N2282 a young woman who lost the use of a foot but went on to university was awarded a quarter of the calculated future salary loss, K43,172, to reflect her prospects.

Mitigation

The claimant must take reasonable steps to reduce the loss. In MVIT v Pupune [1993] PGLawRp 537; [1993] PNGLR 370 the trial judge erred in ignoring the plaintiff’s failure to mitigate, and the loss of earning capacity was halved. In Moka v MVIL [2004] PGSC 38; SC729 the Supreme Court reduced future loss of K47,264 by one quarter for failure to mitigate and a further 5 per cent for contingencies.

When the arithmetic is impossible: global awards

Where there is no wage and no reliable figure, the courts do not refuse the head; they estimate. Yomo v The State and MVIT [1990] PGLawRp 315; [1990] PNGLR 554 awarded a paraplegic villager “a global sum of K10,000” for economic loss, following Nali Matabe; Yalao v MVIT [1996] PGLawRp 769; [1997] PNGLR 441 awarded “a nominal amount of K10,000 for economic loss generally” to a man who had almost lost the sight of an eye; Tuman v MVIL [2017] PGNC 375; N6923 awarded a global K12,000. The village cases are the subject of the next article.