31 1980 a c 174 80 262 evidence directed to these

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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, t but for how long and at what rate i will continue is not more than conjecture, and the rate at t which i will increase during any particular year a decade or so hence cannot even be conjectured. 79 [1971] AC. 115 [1971]A.C. 115 at pp. 129-130; Luntz 1990, p. 296. 31 [1980] 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 [1980] A C . 1 74 at 193. [1979] A .C. at 574,576. The reference and footnote are in the original. Todorovic v Waller; Jetson v Hankin [1981] 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. 86 Chesapeake and Ohio Railway v Kelly 241 U.S. 485, 490-1 (1916) cited Malone 1979, p. 511. 87 (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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This note was uploaded on 09/03/2012 for the course LAW 1501 taught by Professor Garva during the Three '12 term at University of Adelaide.

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