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Unformatted text preview: Todorovic v Waller; Jetson v Hankin (1981) Gibbs CJ and Wilson J. thought that Lord
Scarman had "much force" in his first reason. Their Honours went on to say:
It is true that present indications suggest that inflation will continue into the foreseeable future,
but for how long and at what rate i will continue is not more than conjecture, and the rate at
which i will increase during any particular year a decade or so hence cannot even be conjectured. 79  AC. 115
A.C. 115 at pp. 129-130; Luntz 1990, p. 296.
 A .C. 174.
80 262 Evidence directed to these questions would be purely speculative, and would prolong and
complicate trials for no advantage. Moreover, even if the rate of inflation could be predicted
safely it is not of itself relevant. N o principle of compensation entitles a plaintiff to b e protected
generally from the effects of inflation. T he only relevance of inflation is that it will be likely to
increase the earnings that might have been m a d e had the plaintiff not been injured, and the cost of
the goods and services that his injuries have m a d e necessary for his future care: cf. Cookson v
Knowles83. W a g e s and costs will, of course, rise with inflation, but not necessarily at the same
rate, a nd this introduces another element of speculation into the topic. O f course, it is rightly said
that the courts take into account matters equally speculative w h e n they have regard to the
contingencies of life. [...] Such evidence as to future contingencies, like evidence as to what the
inflation rate will be a decade or so in the future, is no more than unverifiable surmise and
inadmissible.84 B y criticising inflationary calculations because they do not admit certainty the court
predisposed itself to dismissing an integral part of financial decision theory and to
contradict the views of accountants, financial analysts and actuaries. T hus, the history of
the judicial recognition of inflation d oes not lend itself to the view that the court readily
recognises the relevance of economic theory to its determinations. It would appear that the remarks of Gibbs CJ and Wilson J directly contradict the
principle of restitutio in integrum. If the plaintiffs position is to be restored to the
antecedent position existing at the time that the wrong w a s committed, it is manifestly
incongruent with the restitutionary principle that a lump s u m currency award set without
regard to the future inflation rate could possibly restore to a plaintiff the earning power
s/he had prior to the defendant's conduct. The nominal view of m o n e y with respect to
non-pecuniary losses, therefore is unlikely to ensure that damages awarded will  A C . 1 74 at 193.
 A .C. at 574,576. The reference and footnote are in the original.
Todorovic v Waller; Jetson v Hankin  150 C.L.R. 4 02 at 419 per Gibbs CJ and Wilson J. 263 c ompensate for a loss incurred. Instead, the quantitative view of m o n e y would more aptly
or satisfy the restitutionary purpose. The complication of inflation in setting truly restitutionary damages awards has been
more widely covered in the United States of America. The courts in that jurisdiction have
recognized a variety of ways to deal with the issue of inflation. In general, the courts
there have generally dealt with the speculative issues arising from consideration of
inflation with less conservatism than the High Court of Australia showed in Todorovic.
The courts in the USA attribute a risk-averse posture to plaintiffs when setting the
discount and interest rates. In Australia, the courts also assume risk-averse investment
characteristics, but this raises the question which of the two parties, plaintiff or
defendant, should bear the risk of the future. This question runs throughout the inflation
debate in damages awards, but the High Court, in Pennant Hills Restaurant v Barrell
Insurances Pty. Ltd. (1981), sidestepped this criticism to a degree by selecting a
discount rate sufficiently low that the risk was largely transferred to the defendant. Prior
to Pennant Hills the courts awarded damages with discount rates on future aspects of the
losses which did not realistically take into account the economic theory behind
investment real return rates depressed by significant inflation. The cases in the decade leading up to the landmark case of Hungerfords v Walker in
1989, show that the High Court of Australia was increasingly aware of the economic
theory of inflation and investment growth, and the resulting disparity between that theory 85 Luntz, H. 2002, Assessment of Damages for Personal Injury and Death, 4 edition, LexisNexis
Butterworths supports this view, at pp. 391-392.
Chesapeake and Ohio Railway v Kelly 241 U.S. 485, 490-1 (1916) cited Malone 1979, p. 511.
(1981) 145 C.L.R. 625; this case and the public policy behind the court's decision is covered in Chapter
Eight. 264 and court damages awards. This w a s all the more remarkable considering the attribu...
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