Superannuation

The quantification of the loss of superannuation has a complex history.

Common law

In the common law, claims for lost superannuation have, in many cases, ceased being based on complex projections that consider the growth applicable to the lost contributions and have instead followed a rule of thumb approach.

In the Queensland Supreme Court, McMeekin J stated (Bell v. Mastermyne Pty Ltd [2008] QSC 331):

"It was long ago recognised that an accurate calculation of this head of loss involved considerations of assumed income and capital growth of a superannuation fund and the impact of concessional rates of taxation.[78] To avoid complicated calculations the rule of thumb of using nine per cent was adopted." [78] Jongen v CSR Ltd (1992) Aust Torts Reports 81-192; Cremona v Roads and Traffic Authority [2001] NSWCA 338

Statute

When NSW enacted the Civil Liability Act (2002), claims for superannuation damages under the act were governed by s15C. The purpose of s15C was interpreted by Basten JA as to "simplify calculations and not to impose an arbitrary cap on the amount allowed by way of superannuation entitlements" (Najdovski v Crnojlovic [2008] NSWCA 175).

In the aforementioned case, Najdovski v Crnojlovic, an issue determined was whether s15C should by interpreted to mean that a loss of superannuation is calculated at:

the rate prescribed by the Superannuation Guarantee (Administration) Act (1992), which as the time was 9%; or
11% "because damages are assessed by reference to earnings net of tax, the calculation is sometimes undertaken on the basis of 11% of net earnings" (Basten JA, at [53]).

Thus, Najdovski v Crnojlovic has since been used to justify grossing up the statutory rate (currently 9.5%) in NSW and other jurisdictions. Interestingly, in Najdovski v Crnojlovic Windeyer J dissented, saying the following:

"I am unable to accept that there is any ambiguity in the wording of s 15C of the Civil Liability Act 2002. This section is not intended to provide an arbitrary cap but rather, in my opinion, it is intended to provide a method of calculation of damages for loss of superannuation entitlements. I accept that the wording of the section may bring about an unintended result, but I do not consider that authorizes the court to construe the legislation against its literal meaning."

In Bell v. Mastermyne Pty Ltd McMeekin J agreed with Windeyer J and said:

"Thus there is no demonstration in that decision of why it is that 11 per cent of net earnings is a fairer calculation of this head of loss."

"The reasoning in Najdovski does not explain why that rule of thumb, long accepted in this jurisdiction, is erroneous."

Quantification

It is fair to say that Basten JA's judgment in Najdovski v Crnojlovic has made s15C of the Civil Liability Act (2002) somewhat more complicated that it was originally intended. As discussed in various papers (see multiple versions of Impacts of Superannuation Changes on Personal Injuries Damages by Michael Lee and Mark Thompson), courts have approached the issue of what rate to use when quantifying superannuation differently. The main area of certainty, however, appears to be that growth of the lost superannuation contributions is to be ignored, whereas uncertainty prevails regarding whether:

superannuation losses should be awarded after tax; and
future planned rises in the statutory superannuation rate should be taken into account.

Thus, multiple options for the quantification of superannuation losses arise, viz:

lost superannuable earnings x the statutory rate less taxation
lost superannuable earnings x the statutory rate ignoring taxation
lost superannuable earnings x the current and planned future statutory rates less taxation
lost superannuable earnings x the current and planned future statutory rates ignoring taxation