ON 11 AUGUST 1961, the High Court of Australia delivered Graham v Baker  HCA 48; (1961) 106 CLR 340 (11 August 1961).
In an action for negligence, the two requirements to be satisfied when recovering damages for loss of earning capacity are (1) “the plaintiff’s earning capacity has in fact been diminished by reason of the negligence-caused injury” and (2) “the diminution of his earning capacity is or may be productive of financial loss”: per Dixon CJ, Kitto and Taylor JJ at 347.
Receipt of wage related payments, such as sick leave or long service leave, are to be set off against a claim for financial loss (at 346). However, pensions are not to be taken into account as they are a contractual right in the plaintiff’s favour rather than compensation for his or her work (at 343).
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