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Unformatted text preview: amentalism, postmodernism, secular humanism are only a brief sample of the variety of the competing social worldviews which have adherents in Australian and western society. As Christianity is no longer the overwhelmingly prevalent social ethic, the future may bring open confrontation between competing social worldviews which have previously lay hidden. The momentous changes in damages awards, the subject of this thesis, is only an example of the changes which have altered the social atmosphere which surrounds the courts deciding the ability of plaintiffs to recover for consequential losses. The trend since 1976 has been for courts to accept economic principles into the curial decision paradigm, and this comprises only a part of the wider shift toward economic management of government in a corporate model. The reformation of courts, as an arm of government, based on a corporate service model potentially threatens the traditional view of courts as social arbiters of justice. The so 353 pressure to perform this fundamental shift, however, is not universally prevalent in common law jurisdictions and an increasing divergence can be seen between them, especially between the English House of Lords and the Australian High Court. The English House of Lords has not readily followed the example of the Australian High Court in recognizing a common law right of action for the loss of the use of money. In addition, the House of Lords has also narrowly interpreted the evidence which has been presented regarding inflation and plaintiffs' future losses. In Wells v Wells12 the court scrutinized the interest rate and discount rate attributable to future losses by injured victims of horrific tortuous accidents and seized upon the introduction of Index-Linked Government Securities13 (I.L.G.S.) to derive a discount rate which should be used in assessing future losses. Approving the dissenting judgment of Stephen J. in Todorovic v Waller14, the court wrestled with the discount rates to be applied. Throughout the judgment none of the Law Lords gave thought to inflation as an opportunity cost in its purest sense. Inflation is time-oriented, erodes the real buying power of the nominal sum of money, and accurate assessment of inflation clearly illumines an ordinal reference of the original buying power of a sum in contrast with the subsequent diminution of the buying power in later periods. The court clearly assumed a more conservative and traditional approach to the issue of inflation and economic theory, ignoring the opportunity to pronounce approval of the position and direction of the High Court of Australia in accepting economic principles in common law actions. The High Court's 12 [1999] 1 A.C. 345 These securities are issued by the British Government, and the interest associated with them is linked to the published consumer price index levels, thus creating a government-backed security which is secured from inflation and considered the closest instrument to a risk-free capital preservation security. They enjoy tax advantages if kept for a certain period and upon maturity, they never default. 14 (1981) 150 C.L.R. 402 1 3 354 recognition of opportunity cost has generated some interesting twists of characterization regarding the damages awards. It is interesting to portray the courts as having generated an artificial security over the time a plaintiff must wait for payment subject to the court's decision. In effect, the court generates a derivative based on the difference between 'what would have been', which is the plaintiffs position if the injury or loss had not occurred, and 'what actually is', comprising the plaintiffs position subsequent to the injury or loss. The security is derived through a damages award and particularly through an opportunity cost award. This is the same basic approach employed in futures markets where a derivative contract is bought or sold, the price of which is based upon the sale price of an underlying asset or commodity. The court-generated security is rewarded much the same as an index future generated between private parties, i.e. settled in cash as the difference between the plaintiffs two positions above. The role of the players in the curial derivative security is reversed from the market derivative. In a market security, the parties to the contract generate the security and it is regulated by the State. In contrast, the opportunity cost security is generated by the State (the court) and is regulated by the evidence presented in each case (the parties to the contract, i.e. litigation). The risk involved in the market security is market risk, but the risk involved in the court-generated security is litigation risk. The market derivative security is generated chronologically prior to any movement in the price of the underlying asset or commodity, and the value of the derivative is the difference between the strike price of the security and the market price of the underlying asset on or before expiry of the derivative contract when the derivative suffers dispositio...
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