AAG v IAG Limited
[2021] NSWPIC 57
•29 March 2021
| CERTIFICATE OF DETERMINATION OF MEMBER | |
| CITATION: | AAG v IAG Limited [2021] NSWPIC 57 |
| APPLICANT: | AAG |
| RESPONDENT: | IAG Limited |
| PRINCIPAL MEMBER: | John Harris |
| DATE OF DECISION: | 29 March 2021 |
| CATCHWORDS: | MOTOR ACCIDENTS- Claims assessment; dispute about the amount of damages to be paid to the applicant under section 7.36 of the Motor Accident Injuries Act 2017; riding a bicycle; insurer wholly admitted liability; multiple rib fractures, fracture through the right scapula, full thickness tear of the subscapularis tendon, torn hamstring tendon, severely affected psychologically; not able to cycle, had ceased almost all aspects of work and suffered from severe upper body restriction; crutches and a walking stick for about 12 months; working with restricted light duties in a sheltered environment; earning capacity assessment occupations not involving physical work; Deed of Agreement for the sale and purchase of shares in the business; assets of the business; Held- applicant entitled to non-economic loss damages and economic loss damages; both a director and employee of the business; loss in value of the shares of the company; no allowance made for sale of the motor vehicle. |
| DETERMINATIONS MADE: | 1. Under sub-sections 7.36 (3) and 7.36 (4) of the Motor Accident Injuries Act 2017 (the Act), the amount of damages for this claim are $344,218.89 after the deduction of statutory benefits. 2. The Claimant is entitled to his regulated costs and disbursements in accordance with the Reasons. In the event of any dispute, the parties have liberty to apply. |
Reasons for Decision
Issued under section 7.36(1) of the Motor Accident Injuries Act 2017
BACKGROUND
AAG (the Claimant) suffered injuries on 10 April 2018 whilst riding a bicycle on a designated bike lane along Anzac Parade, Maroubra.
The injuries arose from a motor vehicle accident when the insured made a right-hand turn and collided with the Claimant who was thrown from the bicycle.
This is an assessment of damages pursuant to s 7.36 of the Motor Accident Injuries Act 2017 (the Act). The Insurer wholly admitted liability for the claim for damages.
EVIDENCE
Nature of the Injuries and Medical Treatment
The Claimant was in excellent health prior to the motor vehicle accident and very active in several sporting pursuits. He was in full-time employment and the owner of
XXX Automotive Pty Ltd (the business).The ambulance medical record noted that the Claimant was initially unresponsive at the scene and in obvious discomfort and distress.
An x-ray dated 21 April 2018 showed multiple rib fractures. An x-ray dated 18 May 2018 referred to fractures of the right 2nd to 7th ribs, the 3rd rib fracture being moderately displaced and a mildly displaced transverse fracture through the right scapula.
A right shoulder ultrasound dated 26 April 2018 noted marked movement limitation since the motor vehicle accident and recorded a full thickness tear of the subscapularis tendon.
A CT scan of the cervical spine dated 4 September 2018 revealed multilevel degenerative changes.
An MRI scan of the left thigh revealed a torn hamstring tendon with a conjoint attachment of the semitendinosus/longhead of the biceps femoris. A subsequent MRI scan dated 2 November 2018 reported a left hamstring torn from the ischial tuberosity.
Dr Thomas provided a report dated 21 August 2019. He has been the Claimant’s general practitioner since 2002. The doctor noted that the Claimant was then not able to cycle, had ceased almost all aspects of work and suffered from severe upper body restriction.
Dr Broe, Orthopaedic Hip and Knee Surgeon provided a report dated 14 August 2018. The doctor then noted significant pain in the right shoulder and rib cage from a nasty scapula fracture and right shoulder soft tissue injury. In respect of the left hip pain,
Dr Broe referred to the MRI findings which revealed a tear of the ischial tuberosity with marked localised oedema. The doctor opined that surgery was a difficult proposition given the level of scar tissue formation, particularly around the sciatic nerve.In a further report dated 13 November 2018, Dr Broe noted a chronic hamstring rupture torn from the origin. He then recommended reattaching the torn retracted tendon.
Dr Wade Harper, Orthopaedic Surgeon, provided a report dated 7 May 2018. The doctor opined that there was no new shoulder pathology from the motor vehicle accident.
The Claimant described his first three months as “a complete nightmare”. He used crutches and a walking stick for about 12 months following the accident.
In his oral evidence the Claimant referred to ongoing pain, particularly in the left leg and right shoulder/neck region. He stated that he consumes approximately a box of Neurofen tablets each week due to the pain. The Claimant stated that his sleep was severely affected, and he frequently woke due to either leg cramps or pain.
The Claimant’s statement evidence referred to being frustrated, agitated, irritated and down. He found it difficult to accept his present restrictions. The Claimant mentioned some of these matters in his oral evidence.
The Claimant’s oral evidence was consistent with the statement evidence. None of these restrictions were challenged in cross-examination.
Qualified evidence
Dr Poplawski was qualified by the Claimant. He opined that the Claimant suffered injuries to ribs 2 to 7 on the right, injuries to the cervical spine, right shoulder and an avulsion of the left hamstring muscle from the left ischial tuberosity. In his second report the doctor accepted that it was plausible that the Claimant was suffering depression as a result of the accident and had ongoing substantially reduced capacity.
Dr Poplawski noted that the Claimant was working restricted light duties in a sheltered environment. The doctor opined that the Claimant was unfit for work if he had to compete on the open labour market undertaking mechanical work.
Professor Cumming was qualified by the Insurer and provided a report dated 20 August 2019.[1] The Doctor stated:
“Clearly AAG has been severely affected psychologically, if not psychiatrically, by this serious motor vehicle accident and its sequelae and these facets of his psychosocial problem are clearly evident in the consultation today. He found it difficult to answer questions which were put to him because of his severe distress that his life has been altered in such a negative manner by this horrible accident at his stage in life.”
[1] Reply, p 34.
Whilst some inconsistencies were observed, Professor Cumming accepted that the injuries presented to him were as a result of the motor vehicle accident. The doctor opined that further treatment was required, including by way of psychological assistance. He also opined that both the physical and psychological problems were affecting the Claimant’s return to work.
An earning capacity assessment dated 19 November 2020 was prepared by
Dr Mitchell and Ms Tyler, a vocational consultant.[2] It was accepted that the Claimant had “widespread musculoskeletal symptoms” which reduced the capacity for physical work. The authors opined that the Claimant could work on a full-time basis in a number of occupations not involving physical work such as an automotive estimator, store manager or sales representative.
The sale of the business
[2] Reply, p 46.
The business was incorporated on 23 November 1987. The business has two issued shares, one held by the Claimant and the other owned by the Claimant’s brother, AAG’s brother. In oral evidence the Claimant described his brother as a “silent partner”. The Claimant’s oral evidence was that the brother had a very minor, if any, role in the business.
The directors of the business are the Claimant, his wife, and since 7 April 2014,
SS.The Claimant was also employed by the business.
A Deed of Agreement for the sale and purchase of shares in the business is dated 29 May 2018. It is signed by the Claimant, AAG’s brother and SS. The relevant terms of the Deed are as follows:
· SS will pay $120,000 on or before 31 March 2016, $120,000 on or before 30 June 2018 and $110,000 on or before 31 December 2019.
· SS has paid the sum of $120,000 by 31 March 2016.
· AAG’s brother will transfer his one share to SS when the second payment is made.
· The Claimant will transfer his one share when the final payment is made (clauses 3.3 and clause 13(iii)).
· All three payments are to be made to the Claimant.
· The agreement created by the Deed is an entire agreement and merges all prior agreements between the parties.
· Any variation has no effect unless it is writing and signed by all parties to the Deed.
There is no reference in the Deed to how much of the price refers to goodwill and how much to the value of the physical assets of the business.
In his oral evidence SS stated that a draft agreement of the deed was prepared in 2016. He stated, and I accept as logical, that he would not pay a sum of money without having something in writing. That evidence appeared to catch the parties by some surprise as the Claimant did not refer to any draft agreement in his evidence.
The Insurer challenged SS’s evidence because it was inconsistent with the absence of evidence on this issue from the Claimant. In this regard I accept that a draft agreement was created at a time when a substantial deposit was paid is more likely than an absence of anything in writing. SS’s explanation that he wanted something in writing accords with ordinary human experience[3] given the large deposit paid by him. I have no hesitation in accepting this evidence.
[3] See G v H [1994] HCA 48; Rahman v Al-Maharmeh [2021] NSWCA 31 at [82].
I was otherwise advised by Counsel that SS then forwarded the draft agreement to the parties. No application was made to tender the document. The Insurer was clearly caught by surprise because this document had not been provided by the Claimant when documents were previously requested by the Insurer.
SS stated that the deed was executed following the motor accident to formalise the previous draft agreement.
At some unknown point but after the execution of the deed, the Claimant and
SS orally agreed that the second and final payments be deferred.In his oral evidence, the Claimant stated that the assets of the business were worth a “few hundreds of thousands of dollars”. He then stated that this meant “if new”. Some of these assets were leased when the business changed premises in 2014. The leases had now been paid out and the business retained ownership of the assets.
The Insurer noted that the records indicated that only an amount of $110,000 was paid by SS to the Claimant. The Claimant stated that he had invested that money.
The statement evidence is that the Claimant would assist SS in the transition of the business. SS stated:[4]
“We discussed and agreed that once I took full-ownership of the business, AAG would continue working with me on a part-time basis to assist me with mechanical work, to teach me how to take care of the administrative side of the business and to transition his customer base to me.”
[4] SS’s statement, paragraph 8.
SS stated that he had equity in his residential premises and that this was used to fund the first payment and was sufficient to cover the second payment of $120,000. His evidence was a little unclear as to whether he had express permission from the Bank to cover the second payment or whether there was some understanding to that effect. SS indicated that he had “plenty of equity” in his residential premises to make the second payment.
The Claimant stated the business dropped significantly following the accident and because of his absence, he was “forced to renegotiate the sale of the business”. When asked about this evidence and the figures provided by the accountant, the Claimant’s evidence was less than clear.
SS stated:[5]
“Following AAG’s accident, the business suffered as a result of AAG’s absence from the business and the business was not performing as well as it used too. This resulted in AAG and I renegotiating the terms of the sale of the business.”
[5] SS’s statement, paragraph 12.
In his oral evidence SS stated that this evidence was “poorly expressed”. He conceded that he was unaware whether the business revenue had gone down and did not dispute the figures provided by the accountant. Somewhat inconsistently,
SS otherwise stated that following the motor vehicle accident he worked 70-hour weeks to cover for the Claimant’s absence.At some further point in time the Claimant and SS renegotiated the sale of the business. The Claimant stated:
“Following the accident, business dropped significantly because of my absence from the business and I was forced to renegotiate the sale of the business.”
The Claimant stated that he agreed that SS was only required to make a further $60,000 “in full and final settlement”.
SS said that they tried to reach a “fair agreement” and finally agreed that a further $60,000 would be paid.[6]
[6] SS’s statement, paragraph 15.
Both SS and the Claimant gave evidence that they were awaiting the outcome of these proceedings in determining how the share transfer would proceed. Their evidence was unclear in this regard and SS’s evidence was somewhat cautious in his responses to this line of questioning.
Mr Matthew Gwynne, chartered accountant was qualified by the Insurer and provided a report dated 19 January 2021. Mr Gwynne concluded that earnings in the year of the accident increased and the business BAS “does not indicate any material declining trend in revenue post-Accident”.
The relevant earnings of the business in the 2018 financial year were $465,897 and in the 2019 financial year were $485,728. However, the cost of goods sold increased by $47,000 over that period.
NON-ECONOMIC LOSS DAMAGES
The Insurer conceded that the Claimant is entitled to non-economic loss damages and submitted that a figure of $180,000 was an appropriate award under this head. The Claimant submitted that the appropriate figure was $300,000. During submissions counsel accepted that a figure of $250,000 was “within the permissible range”.
The Claimant is presently 67 years of age and was 64 years at the time of the accident. Prior to the accident he went to the gym four days a week, swam three days a week over 1000 metres in a metre pool and cycled up to 100 kilometres per week.
I accept the Claimant’s evidence that prior to the accident he was in excellent health and extremely physically active.The Claimant’s wife and SS provided written statements on the Claimant’s ongoing physical disabilities. SS also referred to the Claimant’s restrictions in his oral evidence.
I accept the Claimant’s evidence that he continues to suffer from severe pain and this effects his sleep such that he has broken sleep. The extent of the Claimant’s pain is reflected in his ongoing use of pain medication.
Having heard the Claimant’s evidence, I accept the opinions of both Professor Cummins and Dr Poplawski that there is also an underlying psychological condition. Given that the Claimant is physically disabled and is unable to carry out his work to the extent that he was accustomed, it is logical that the Claimant feels frustrated and irritated by his ongoing disabilities.
I accept that the Claimant was severely disabled for a period of 12 months when he was using crutches and other walking aides. His condition has gradually improved where he has returned to some social activities, although not to the extent that he enjoyed prior to the accident.
The Claimant has not returned to his pre-injury role with the business. He is unfit to perform manual work and works two to three hours per day, two to three days per week performing administrative tasks for the business. He is not fit and able to return to his passion of repairing and restoring boutique cars.
I accept that the Claimant is devastated by his injuries and suffers a psychological injury by reason of the ongoing disabilities, the loss of his fitness and ability to undertake his pre-injury duties.
I award non-economic damages in the amount of $250,000.
ECONOMIC LOSS DAMAGES
Section 4.5(1) of the Act provides:
“(1) The only damages that may be awarded for economic loss are (subject to this Division) -
(a) damages for past or future economic loss due to loss of earnings or the deprivation or impairment of earning capacity, and
(b) damages for costs relating to accommodation or travel (not being the cost of treatment and care) of a kind prescribed by the regulations, and
(c) damages for the cost of the financial management of damages that are awarded, and
(d) damages by way of re-imbursement for income tax paid or payable on statutory benefits or workers compensation benefits arising from the injury that are required to be repaid on an award of damages to which this Part applies.”
Section 4.6 relevantly provides:
“(1) This section applies to an award of damages –
(a) for past or future economic loss due to loss of earnings or the deprivation or impairment of earning capacity, or
(b) for the loss of expectation of financial support.
(2) In the case of such an award, the amount (if any) by which the injured or deceased person's net weekly earnings would (but for the injury or death) have exceeded the maximum weekly statutory benefits amount under Division 3.3 is to be disregarded (even though that maximum weekly statutory benefits amount is a maximum gross earnings amount).”
The claim for economic loss falls under four distinct categories.
Past economic loss – loss of earnings
I refer to the findings on the nature of the Claimant’s injuries and ongoing disabilities.
The Insurer did not dispute the claim for past economic loss save that it put in issue the extent of the Claimant’s pre-injury earnings.
The Claimant stated that he was drawing $550 per week and the business paid all his “insurances, fuel and telephone charges”.[7] A claim for the past loss was made based on $550 as a net entitlement together with loss of superannuation.
[7] Claimant’s statement dated 27 May 2020, paragraph 28.
The Insurer relied on the assessment by Mr Gwynne that the Claimant’s total earnings from the business were $550 gross per week over the period from 2016 to 2018 and this included an allowance for superannuation.[8] The Insurer conceded in submissions that Mr Gwynne did not quantify other benefits that the Claimant may have received as outlined in his evidence. It otherwise submitted that the Claimant had not proved the extent of the value of these benefits.
[8] Insurer’s submissions, p 5
In his written submissions, the Claimant referred to Parker v Hill[9], Tsekouras v GIO[10]
(Tsekouras) and Husher v Husher[11] (Husher) in support of the submission that the Claimant should be able to recover the full value of their earning capacity. Indeed, in Tsekouras the Court of Appeal quantified the loss of earnings arising from tips earnt as a waiter in circumstances where the quantum of the tips was not accepted.[9] [2000] WASCA 272.
[10] [1994] NSWCA 323.
[11] [1999] HCA 47.
The Insurer accepted that in certain cases a loss of earning can amount to be a fringe benefits and can be recoverable. It submitted that the cases relied upon by the Claimant were situations where the plaintiffs were employees and in the circumstances of this case the Claimant was a director and shareholders of the company.
The Insurer otherwise submitted that the Claimant bears the onus in quantifying the alleged fringe benefits which were “not a straightforward exercise”.[12] There was no accountancy evidence to support the amount and the figure was not supported by
Mr Gwynne’s “careful analysis”.[13][12] Insurer’s Reply submissions, paragraph 7.
[13] Insurer’s Reply submissions, paragraph 7.
In his reply submissions the Claimant submitted that the distinction made by the Insurer was irrelevant and inconsistent with the principles discussed in Husher. In any event, the evidence was that he was both a director and employee of the business.
Despite the absence of direct evidence, the Claimant submitted that the amount claimed was conservative given the costs of running a car and a telephone. He otherwise referred to State of New South Wales v Moss[14] (Moss) where the Court of Appeal held that where a loss is established, in the absence of specific evidence a Court must do the best it can.
[14] [2000] NSWCA 133 at [66] and [69].
I accept the Claimant’s evidence that he received further benefits from the business in addition to his salary in the form of payment of insurances, fuel and telephone charges. Whilst it would have been preferable for the Claimant to lead “precise evidence” of the value of these benefits, the failure to lead that evidence does not mean that the assessment is nil or some other nominal amount[15]. I agree with the Claimant’s submission that the assessment of that portion of the other benefits provided by the business were both recoverable as “loss of earnings” and modestly assessed.
[15] Adopting the words in Moss at [66].
Despite the subsequent written submission, the Insurer previously conceded in oral submissions that Mr Gwynne had not considered this aspect of the claim. Whilst that of itself does not prove the amount, it contradicts the Insurer’s subsequent submission that there was a careful analysis on this issue.
I otherwise do not accept that the Insurer’s submission that the fringe benefit is not a loss of earnings because the Claimant was a director and shareholder of the company. The evidence clearly established that the Claimant was working in the busines performing physical and managerial work. I also agree with the Claimant’s submissions that Husher supports this aspect of his claim. The plurality then stated:[16]
“The financial loss occasioned by impairment of earning capacity is the loss of what (if there had been no accident) the injured plaintiff would (as opposed to could) have expected to have had under his or her control and at his or her disposal by exercising that capacity. We refer to "control" and "disposal" because what the plaintiff has lost are the financial rewards from work that are rewards the plaintiff would have been able to direct to whatever purpose or destination he or she chose.”
[16] At [18] per Gleeson CJ, Gummow, Kirby and Hayne JJ.
Consistent with the decisions of the Court of Appeal referred to below[17], the Claimant was in control of these rewards from the business and able to direct them to his choosing. The loss of these benefits are “loss of earnings” within the meaning of the Act.
[17] See at [97].
In those circumstances, I accept the Claimant’s submission that his pre-injury earnings are calculated at $550 net per week plus the compulsory superannuation contribution.
In its oral submissions the Insurer did not submit that the Claimant had received income during this period. For these reasons I allow the past economic loss, assessed at 154 weeks multiplied by $550 per week totalling $84,700.
The loss of superannuation is calculated at 11% of the net loss which totals $9,317.
The tax component of the statutory payments is agreed at $1,654.[18] This amount is an economic loss within the meaning of s 4.5(1)(d) of the Act.
[18] Insurer’s solicitors letter dated 23 March 2021.
I accept the Insurer’s submission that there should be no allowance for loss of business income. On the basis of the financial material, I do not accept that this head has been proved to the requisite onus.
Loss in value of the shares of the company
The Claimant alleged that the share agreement was renegotiated because the Claimant was unable to fulfil his post-contractual obligations to assist the business following the completion of the contract. That submission was inconsistent with the Claimant and SS‘s evidence that the price was renegotiated following what was described by the Claimant as a significant drop in business revenue.
The Claimant was unclear in his oral evidence as to the extent of the loss in business in circumstances where he was absent for a period of approximately six months.
SS gave evidence, which I accept, that he worked longer hours following the motor vehicle accident. He stated that he was working approximately 70-hour weeks during an unspecified period. That evidence supports the conclusion that the business was otherwise operating at a reasonable capacity.
SS otherwise accepted that the relevant portion of his written evidence[19] on this issue was “poorly worded”. He did not clarify how it should be worded.
[19] SS’s statement, paragraph 12. The evidence is set out at paragraph 38 herein.
The explanation given by the Claimant and SS as to why the sale price was renegotiated does not accord with the opinion evidence provided by Mr Gwynne that there was no material change in business income. In these circumstances, I do not accept the reason proffered by both the Claimant and SS as to why the sale price was renegotiated. I am not satisfied that there has been any material reduction in the business revenue following the motor vehicle accident.
The Claimant’s counsel submitted that the price was renegotiated because the Claimant could not perform the agreed obligations to work after the conclusion of the share transfer. That submission was pressed in his written submission in reply.[20]
I reject that argument for a number of reasons.[20] Claimant’s written submissions in reply, paragraph [20].
First, that was not the evidence of the Claimant and SS. Their evidence was that the share price was renegotiated because of a substantial change in earnings.[21]
[21] SS’s statement, paragraphs 12 and 13.
Secondly, this submission is inconsistent with the terms of the Deed that the document is an entire agreement. There is no provision within the Deed providing for a renegotiation in these circumstances.
Thirdly, there was no amendment of the Deed in accordance with the document. The Deed has not been amended in writing signed by all parties. Accordingly, the alleged variation is inconsistent with the terms of the Deed.
Fourthly, I do not accept that there was a concluded agreement as alleged. The brief written statements by SS and the Claimant otherwise do not provide any timeline for the duration and extent of the post contractual obligations. The evidence from SS was that any post contractual obligation was uncertain. He stated:[22]
“We had yet to agree on exactly how this would work, for example, the days AAG would work and what he would be paid, but there was a mutual understanding that AAG would continue working for me as an employee on a part-time basis.”
[22] SS’s statement, paragraph 9.
The Claimant’s written submissions suggested that the post-injury role was for a period of two years.[23] This was repeated in his reply submissions.[24] The evidence in support of that submission was not stated.
[23] Claimant’s submissions, paragraph 18(f).
[24] Claimant’s written submissions in reply, paragraph [30].
I do not accept the Claimant’s submission that there was any collateral agreement that the Claimant would work following the completion of the share transfer. Whilst I accept that there may have been discussions that some assistance would be provided, the nature and extent of that assistance had not been agreed.
Fifthly, I do not accept that the Claimant cannot perform supervisory and managerial work in the business. Whilst I accept that the Claimant could not perform manual work in the business, I do not accept that he is restricted in undertaking administrative duties and providing transition advice to SS. Whilst this is sheltered work, it has been established and it is not beyond the Claimant’s capacity to perform those activities on an ongoing part-time basis for the business.
The Claimant otherwise submitted that the change in the value of the share price was represented by the subsequent agreement made by SS and the Claimant. In his written submissions in reply, it was described as a “direct arm’s length agreement”.[25]
[25] Claimant’s written submissions in reply, paragraph [27].
I do not accept the Claimant’s submission that this was a market transaction. This was a private transaction between persons who were, as SS stated in his oral evidence, like “family” in circumstances where the Claimant is seeking to recover the difference from the Insurer. Indeed, the Claimant and SS indicated that the finalisation of the share transfer awaited the outcome of these proceedings. This does not provide a satisfactory basis or any real confidence that the renegotiated share price was a market transaction.
Furthermore, there is no basis to conclude that there was any change in the value of the business assets during this period. There is no evidence as to how that business was valued with any breakdown between the value of the goodwill and the assets.
SS stated that he spoke to someone in 2016 who orally advised him that the price was fair. The value of the assets did not change following the Claimant’s injury and any change in value could only be limited to the value of goodwill. The evidence is that the business had substantial assets which were part of the share transfer. I do not accept the Claimant’s reply submissions that the value of the machinery changed following the injury.[26] There is no basis or logic in why that would be the case.[26] Claimant’s written submissions in reply, paragraph [28].
The Insurer raised other defences including that the Claimant had failed to mitigate his loss by failing to pursue his legal entitlement to the totality of the agreed share price. Given the conclusions, I have not considered this defence.
I otherwise raised with the parties at the commencement of the hearing that the Deed had not been stamped in accordance with the Stamp Duties Act, 1920. No submissions were made seeking to redress that omission. The Deed is inadmissible until steps are taken to pay the duty.[27]
[27] Section 29 of the Stamp Duty Act, 1920.
Construction of s 4.5(1)(a)
The parties filed subsequent written submissions on whether any loss in value of the shares fell within the meaning of s 4.5(1)(a) of the Act.
The principles of statutory construction are well settled. As the plurality stated in Military Rehabilitation CommissionvMay[28], the “question of construction is determined by reference to the text, context and purpose of the Act”, citing Project Blue Sky Inc v Australian Broadcasting Authority[29] and Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue[30].
[28] [2016] HCA 19 at [10].
[29] [1998] HCA 28 at [69]-[71].
[30] [2009] HCA 41 (Alcan).
Section 4.6(2) applies to an award of damages for past or future economic loss due to loss of earnings or the deprivation or impairment of earning capacity. The sub-section provides that the net-weekly earnings above the maximum weekly statutory benefit is disregarded for the purpose of any award.
The Claimant noted that the words “damages for past or future economic loss due to loss of earnings or the deprivation or impairment of earning capacity” were used in
s 125 of the Motor Accidents Compensation Act, 1999 (the 1999 Act). He referred to the decisions of Kaplantzi v Pascoe[31] (Kaplantzi) and Fkiaras v Fkiaras[32] (Fkiaras).[31] [2003] NSWCA 386.
[32] [2010] NSWCA 116.
The Claimant submitted that the $170,000 loss should be amortised using the 5% tables over the 35 years prior to the accident which resulted in a past weekly loss of $194.15 per week.
The Insurer referred to settled legal principles as articulated by the plurality in Graham v Baker[33], by McHugh J in Medlin v State Government Insurance Commission[34] and in Husher.
[33] [1961] HCA 48.
[34] [1995] HCA 5 at [7].
The Insurer conceded that consistent with observations in Government Insurance Office v Johnson[35] and Kschammer v R W Piper & Sons Pty Ltd[36] a claim for loss of profits can equate to a compensation for loss of earning capacity. It submitted:[37]
“However, that is not what is being claimed in the current case. The facts in the current case involve the alleged loss of value in the shares of the subject business/company. Further, the evidence is silent on whether the alleged undiminished value of the shares are a product of any capital investment since incorporation as opposed to person exertion.”
[35] [1981] 2 NSWLR 617 at 627 per Hutley JA.
[36] [2003] WASCA 298 at [[152] (per Malcolm CJ, Murray Parker JJ agreeing).
[37] Insurer’s written submissions in Reply, [17].
It submitted that the Claimant has not proven what is being claimed is a loss of earning capacity as opposed to a capital loss.
The Insurer otherwise referred to its previous submissions that the claim had not been proved. It also submitted that any loss arose since the accident over a period of three years and not the period of 35 years as the Claimant submitted. It was asserted that the monies paid by SS in the past had exceeded the statutory maximum capacity and there was no further entitlement.
In Kaplantzi the Hodgson JA stated:[38]
“In so far as the financial loss of dependants derives from the loss of the capacity of the deceased to generate assets for their benefit, all contributions to those assets that would have occurred through the exercise of that capacity are properly considered as earnings; and in my opinion, in so far as those earnings, when calculated as a net weekly figure, exceed the figure specified pursuant to s.125, those earnings are to be disregarded.”
[38] At [32], McColl and Cripps JJA agreeing.
The Court accepted that a loss of capacity which affected an ability to “generate assets” fell within the meaning of “loss of earning capacity” but that was otherwise subject to the net weekly figure provided by s 125 of the 1998 Act.
The observations in Kaplantzi were referred to and seemingly approved in Fkiaras. After referring to the specific passage in Kaplantzi, Tobias JA observed in Fkiaras:[39]
“[I]t is clear from those parts which I have emphasised, that he was clearly construing the word “earnings” wherever appearing in s 125 as earnings which were the product of the exercise of a person’s earning capacity: that is, through the personal exertions or input of the injured person that results in a particular output although that output may take various forms.”
[39] At [39], Hodgson and Macfarlan JJA agreeing.
The meaning ascribed by Hodgson JA was to previous legislation repeated by Parliament in the Act. There is a presumption that the legislature has approved the meaning ascribed to a provision by a previous interpretation of a superior Court. In Ex parte Campbell[40]James LJ stated:
“Where once certain words in an Act of Parliament have received a judicial construction in one of the Superior Courts, and the Legislature has repeated them without any alteration in a subsequent statute, I conceive that the Legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given to them.”
[40] (1870) LR5 Ch App 703 at 706.
In Statutory Interpretation in Australia[41], the authors stated that the presumption referred to in Ex parte Campbell has been endorsed in Australia on numerous occasions including by a unanimous bench of seven justices in Re Alcan Australia Ltd; Ex parte Federation of Industrial, Manufacturing and Engineering Employees[42]. In Re Alcan the High Court unanimously stated:[43]
“There is abundant authority for the proposition that where the Parliament repeats words which have been judicially construed, it is taken to have intended the words to bear the meaning already "judicially attributed to (them).”
[41] eighth edition, Pearce and Geddes at [3.44].
[42] (1994) 181 CLR 96 at 107.
[43] Re Alcan at [20].
The principle was also discussed by the High Court in Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher[44]. These authorities were discussed by Snell DP in Pacific National Pty Ltd v Baldacchino[45]. An appeal against that decision to the Court of Appeal was dismissed.[46]
[44] [2015] HCA 10.
[45] [2018] NSWWCCPD 12 at [49]-[57].
[46] Pacific National Pty Ltd v Baldacchino [2018] NSWC 281.
There is a sound basis to apply the meaning ascribed by the Court of Appeal to the relevant words in s 4.5(1)(a). As the Claimant noted, the words are repeated in both the 1999 Act and the Act and appear in the same context, that is the assessment of past and future economic loss.
Some of the changes in s 4.5(1), such as the reimbursement of income tax paid under
s 4.5.1(d), were added because of the introduction of statutory benefits payable by Insurers in the Act. The slightly different contextual changes are not a basis for concluding that the Court of Appeal decisions on the equivalent sections of the 1999 Act are not binding.Consistent with the Court of Appeal decisions, I accept that a loss of earning capacity impacting on the value of the business involving the goodwill component could be recoverable under s 4.5(1)(a) of the Act. This is because a loss in value of the goodwill of the business caused by lost earning capacity could translate into a lower business valuation. However, for the reasons expressed earlier, I am not satisfied that the Claimant has proved this aspect of the claim.
I also observe that the statutory cap under s 4.6(2) would likely be met. Without determining this issue, I had reservations accepting the respective submissions. The loss is not the value of the share price over the pre-injury 35 years of the business as the Claimant alleged. The alleged loss has arisen in the three years since the accident. That loss is not the amount paid by SS (as the Insurer alleged), but the loss of that part of the share value said to be due to the Claimant’s lost earning capacity. That loss is said to be to be the reduction in the share price, some $170,000, over the past three years. Any loss would be added to the assessment for past economic loss for the purposes of determining whether the statutory cap had been met.
Sale of the motor vehicle
The Claimant’s oral evidence was that he sold the vehicle because he could not drive a manual vehicle. He said he did not want to sell the vehicle, but it was no longer useful given his injuries. The Claimant asserted the custom 1975 244 GLE Volvo was worth in the order of $45,000. This bare opinion is made in the absence of any suggested expertise and not based on comparative sales.
The Claimant stated that the vehicle had been “completely rebuilt some 20 years earlier”. That evidence does not adequately describe the vehicles’ current condition. A schedule of Volvo cars for sale admitted as a late document suggested a range of prices between $12,296 and $27,939. It is unknown, based on this evidence, whether any of the vehicles depicted in that document were comparative to the Claimant’s former vehicle.
The Claimant did not give evidence that it was a “forced sale” as suggested in the submissions and nothing is known about the manner of the sale. I assume in those circumstances that the sale of the vehicle was a regular market transaction.
I otherwise do not accept that it was a “forced” sale. The Claimant’s evidence is that he was in receipt of statutory benefits for his loss of income and in oral evidence referred to his substantial investments from which he was drawing upon.
The Claimant also referred to an Engineer’s report in his oral evidence. The cost of the report was said to be $3,000 and supposedly raised an inference about the potential value of the vehicle. That document was not mentioned in the submissions and does not appear in the voluminous material filed in the matter.
I am not satisfied to the requisite onus that the Claimant suffered any loss on the evidence before me. I find that the sale price reflected the market value in circumstances where the Claimant chose to sell the vehicle.
In these circumstances it is unnecessary to determine whether this head of damage falls within the meaning of s 4.5(1)(a) of the Act.
I observe that the Claimant submitted that the loss from a forced sale was “loss of earnings” but conceded in submissions that the “value” of the vehicle did not change following the accident. Whilst it is unnecessary to decide, it is difficult to accept that the loss in value of a capital asset from a “forced sale” falls within the meaning of s 4.5(1) of the Act.
I make no allowance for this claim.
Future economic loss
The Claimant’s sought damages under this head based on a loss estimated at $440 per week to aged 80 years with loss of superannuation quantified in the order of $255,000.[47] The claim for travel costs was abandoned at the hearing.
[47] Claimant’s submissions, paragraphs 21-23.
The Insurer accepted that there was a future loss based on a buffer and submitted that the sum of $25,000 was an appropriate allowance particularly as the Claimant’s evidence is that he would have been working part-time in any event following the sale of the business.
The Claimant stated that he would work till he was 80 years of age. He relied on his pre-injury excellent health, his passion for his work and his expertise in this boutique automotive restoration and repair industry. He also relied on the fact that his wife was 15 years younger and ran her own business. He said he had no interest in retiring in those circumstances.
The Claimant also gave evidence, consistent with the fact that he was selling his business, that he was then going to work part-time. He otherwise remains a carer for his seriously ill father.
I accept the Claimant’s evidence and the opinions of Professor Cummings and
Dr Poplawski that the Claimant has a restricted ability to work on the open labour market. He is fit to perform managerial and administrative work in the sheltered environment of the business in which he is the current owner.I accept that the Claimant would have great difficulties working on the open labour market. Having seen the Claimant and heard his evidence, I do not accept the opinion of Dr Mitchell that he could work full-time on the open labour market. The opinion fails to consider the Claimant’s psychological problems and the effects of the sleep deprivation. It also fails to consider that the work undertaken by the Claimant is in a sheltered environment where he elects to do the limited hours and days to his choosing.
In accordance with s 4.7 of the Act, the most likely future circumstances but for the injury is that the Claimant would have worked in the same industry in the current business on a part-time basis. He is presently 67 years of age. Given the nature of his ongoing disabilities, his future work is limited to performing managerial role in the current employment and he is otherwise unemployable on the open labour market. His ability to earn will be lessened when he is no longer the owner of the business because he will be reliant on the goodwill of any future owner.
I agree with the Insurer that the Claimant would have reduced his hours to part-time employment in any event. Had the accident not occurred, then, in accordance with the terms of the Deed, the Claimant would have already transitioned to part-time employment. It is also otherwise difficult, and I do not accept that the Claimant would have worked a further 13 years. I also take these findings into account as part of the “most likely future circumstances”.
I award a buffer of $60,000 for future economic loss. That sum includes the loss of superannuation.
This figure has been discontinued by 10% due to normal vicissitudes to reflect a percentage possibility that the events concerned might have occurred in any event but for the injury in accordance with s 4.7(2) of the Act. I have reduced the figure by only 10% as this reflects the Claimant’s excellent pre-injury health and to the extent that the award of future loss is limited to the near future.
ORDERS
It is agreed that the amount of $61,452.11[48] was paid as statutory benefits under Division 3.3 of the Act and is to be deducted from the overall damages figure of $405,671. The results in an assessment of damages in the sum of $344,218.89.
COSTS
[48] Letter from Insurer’s solicitors dated 23 March 2021.
The parties filed submissions regarding costs and disbursements. The Insurer did not oppose the Claimant’s claim for costs save for the amount claimed in respect of the report of Dr Orr and his file.
The Claimant then accepted the Insurer’s submission relating to the invoice of Dr Orr.[49]
[49] Claimant’s email; dated 26 March 2021.
In these circumstances there does not appear to be any dispute.
The Claimant is otherwise entitled to costs on the basis that the Insurer wholly admitted liability. The costs payable under Part 2 Schedule 1 of the Motor Accident Injuries Regulation 2017 (the Regulations) is after the deduction of statutory benefits.[50]
[50] See Part 2 cl 2(5) of Sch 1 of the Regulations.
If there is disagreement on the appropriate costs, then the parties have liberty to apply. If that liberty is exercised, then the parties will be required to provide a joint schedule of agreement and disagreement of any aspect of the entitlement to costs.
John Harris
Principal Member
Personal Injury Commission
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