Axiak v Pezzano

[2002] NSWCA 65

CITATION:	Axiak v Pezzano [2002] NSWCA 65
FILE NUMBER(S):	CA 40317/01
HEARING DATE(S):	15 February 2002
JUDGMENT DATE:	20 March 2002
PARTIES :	Stella Axiak - Appellant Josephine Pezzano - Respondent
JUDGMENT OF:	Sheller JA at 1; Mathews AJA at 2

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	8609/98
LOWER COURT JUDICIAL OFFICER :	Gibb DCJ

COUNSEL:	Mr M B Williams with Mr J Harris - Appellant Mr C Hoeben SC - Respondent
SOLICITORS:	Laurence & Laurence - Appellant Connery & Partners - Respondent
CATCHWORDS:	COMPENSATION TO RELATIVES - loss of income - whether trial judge adopted correct approach in assessing past loss - whether appropriate calculations made as to future loss - whether low dependency rate appropriate - loss of investment income need to be properly quantified and supported by evidence.
LEGISLATION CITED:	Compensation to Relatives Act 1897
CASES CITED:	Malec v JC Hutton Pty Limited (1990) 169 638 Todorovic v Waller (1981) CLR 402 Nguyen v Nguyen (1990) 169 CLR 245
DECISION:	See paragraph 89.

40317/01

SHELLER JA
MATHEWS AJA

20 March 2002

Stella AXIAK v Josephine PEZZANO

Judgment

1 SHELLER JA: I agree with Mathews AJA.

2 MATHEWS AJA: On 17 November 1995 Ivan Ternovy was killed in a motor vehicle accident. His widow, Ms Stella Axiak, commenced proceedings in the District Court of NSW under the Compensation to Relatives Act 1897 on behalf of herself and their young son Jordan. Liability was admitted, and the case was defended solely on the issue of quantum. An associated claim for damages for nervous shock was settled prior to hearing. On 21 May 2001 Gibb DCJ awarded damages in the sum of $981,911.53. $251,552.79 of this was apportioned for the benefit of Jordan. The defendant was ordered to pay the plaintiff’s costs.

3 Ms Axiak appealed from this decision, contending that the award for damages was manifestly inadequate. The notice of appeal takes issue with the trial judge’s findings in numerous respects which I shall detail shortly. In the meantime it is appropriate to say something of the background of Ms Axiak and Mr Ternovy.

4 Ms Axiak was born in July 1958. After completing her schooling she went to Sydney University where she obtained a Bachelor of Science and later a Master of Science, specialising in immunology. Since 1988 she has been employed by Merck Sharp and Dohne. She was initially involved in monitoring clinical trials, work which involved a great deal of travel. In 1994 she was promoted to a managerial role in the company. The severe grief reaction she suffered after Mr Ternovy’s death made it difficult for her to continue in this role, and she returned to monitoring clinical trials, a position which she retained at the date of hearing.

5 Ms Axiak had known Mr Ternovy for some time before an attachment developed between them. In 1991 they became engaged. They were married in June 1992. Jordan was born on 6 July 1993. As indicated, Mr Ternovy was killed on 27 November 1995.

6 Mr Ternovy was born on 1 January 1958. In 1982 he graduated from the University of New South Wales with a Bachelor of Science Degree in computer studies. Not surprisingly, he had high levels of expertise in relation to the technology and use of computers. The evidence indicates that he also had a firm understanding of business and administration principles, which enabled him to adapt his technological knowledge into a business setting.

7 When Mr Ternovy first became engaged to Ms Axiak he was employed by Westpac Banking Corporation. In May 1993 he left this employment and established his own consultancy through Bayline Pty Limited (‘Bayline’), a shelf company which he purchased for this purpose. He and Ms Axiak were the initial two shareholders. The shareholding was later extended to include Mr Ternovy’s close friend and associate, David Tassie and his wife. Mr Ternovy was Bayline’s only employee, and the company’s income depended upon his services.

8 In June 1993 Mr Ternovy obtained a consultancy with CSR Construction Materials NSW (‘CSR’) to design and install a new network in order to monitor CSR’s truck movements and distribution. This consultancy was secured through a company called MCS and Associates Pty Limited, (‘MCS’) which payed Bayline $65 to $70 per hour for Mr Ternovy’s services. In turn MCS charged CSR at the rate of $75 to $85 per hour for the same services. This information came from a letter written by Michael Gieck, a director of MCS, to the defendant’s investigators on 10 March 1999. This letter indicated that in May 1995 Mr Ternovy, through Bayline, started to contract directly with CSR without the intervention of MCS. Mr Gieck was unavailable to give evidence at the hearing and was not cross-examined on this material.

9 The evidence indicated that Mr Ternovy was significantly overqualified for his work with CSR. Peter Warren, who was then Information Services Manager for CSR, and who had been working in the information technology business for twenty-six years, described Mr Ternovy as the best IT consultant he had seen. He compared Mr Ternovy favourably with younger consultants who were employed through larger organisations such as Deloittes and Anderson Consulting, who were being paid between $150 and $300 per hour.

10 Mr Ternovy was not intending to remain with CSR on a long-term basis. He and his close friend, David Tassie, had been planning for some time to go into business together as information technology consultants. It was possible that a third partner, Trevor Tyne, might be brought in later.

11 Mr Ternovy and Mr Tassie had different but apparently complementary disciplines and skills. Mr Tassie had graduated with a Bachelor of Commerce degree. One of his major subjects had been “information systems”, which gave him some specialised knowledge in computer technology, but not to the same extent as Mr Ternovy. As Mr Tassie put it:

“1. Our specialized skills differed, for which reason alone the symbiosis we perceived for our planned venture was evident. We would have been equal partners reflecting the acknowledgment that his earning capacity was at least the equal of my own.
2. Our skills differed in the sense that Ivan for example could undertake an in depth communications project within the IT field whereas, he did not have the training or bent to implement a financial accounting system, such as for example an ERP (Enterprise Resource Planning) solution for a client’s business. This would be comfortably within my field, particularly with my major in accounting.
3. I have the skills to identify a business problem and the solution required, as did Mr Ternovy, but he could go to the next level of technical detail namely, to establish the most cost efficient way of arriving at the solution to the IT problem. He could prepare an accurately costed technology plan, as with the one he wrote for CSR.”

12 Bayline was to have been the corporate vehicle for the proposed joint enterprise. It was for this purpose that Mr Tassie became a director of the company. However by the time of Mr Ternovy’s death in November 1995 the project had been advanced no further than the preparation of a draft business plan.

13 It is appropriate here to say something about the property holdings of Ms Axiak and Mr Ternovy. Each of them owned homes before their marriage. Ms Axiak’s home was at Canada Bay. She and Mr Ternovy lived in it after their marriage, and she was still living in it with their son Jordan at the date of hearing. Mr Ternovy owned a house at Petersham which was rented out for most of their marriage. He was also half owner, with a Mr Bentley, of a property at Copmanhurst near Grafton. During their marriage, Ms Axiak and Mr Ternovy purchased one property together. That was an apartment in Glebe which they bought in 1994 for about $91,000. Ms Axiak also purchased a half share of a flat opposite her home in Canada Bay, the other half being owned by Mr Ternovy’s father.

14 Ms Axiak gave evidence before the trial judge that she and Mr Ternovy were planning to amass a substantial property portfolio, using Mr Ternovy’s skills in financial and property management as well as his handyman skills. The plan was that when the property and investment portfolio had reached a certain level, which Ms Axiak estimated at about the $4 million mark, Mr Ternovy would leave the information technology field and devote himself exclusively to managing his and Ms Axiak’s property.

Proceedings before the District Court

15 A number of heads of damages were claimed by Ms Axiak before the District Court. Those that remained in contention at the hearing were as follows:

• Past loss of income
• Loss of Future income
• Loss of superannuation benefits
• Loss of opportunity to build an increased investment and property portfolio
• Cost of childcare
• Boarding school fees
• Handyman expenses

16 In relation to each of these claims I shall recount the issues as they were raised before the trial judge, her findings in relation to them and the matters raised on appeal.

Past loss of income

17 The District Court hearing extended over several days in October and December 2000. By the time of judgment, in April 2001, nearly five and a half years had elapsed since Mr Ternovy’s death. There was evidence that after his death his consultancy position with CSR was taken over by a Mr Brown, who was still in that position at the date of hearing. Mr Brown’s hourly rate had remained virtually static during the intervening period. The defendant relied upon this as supporting the proposition that the allowance for past economic loss should be calculated by notionally extending Mr Ternovy’s net weekly income immediately before his death ($1344) throughout the period up to judgment, without allowing for any increase.

18 This was the approach which ultimately found favour with the trial judge. Not surprisingly it was not embraced by the plaintiff’s representatives. They relied upon a report submitted by Mr Paul Greenwood, an accountant of BKR Walker Wayland, to provide Mr Turnovy’s projected earnings for the years ended 30 June 1996 and 30 June 1997. The 30 June 1996 income was readily ascertainable by notionally extending to that date Mr Ternovy’s actual earnings between 1 July 1995 and the date of his death. As Mr Ternovy’s earnings had increased by 15 percent in his second year of consultancy (1995) and appeared set for a similar increase in 1996, Mr Greenwood assumed that there would be a further 15 percent increase for the year ended 30 June 1997, yielding a net income for that year of $92,567.

19 From 1 July 1997 to the date of hearing, the plaintiff relied on three alternative methods of calculation. The first was based on Mr Warren’s evidence that CSR was paying $150 to $300 per hour for IT consultants which it commissioned through Delloittes and Anderson Consulting. Mr Warren said that these consultants were not as skilled or experienced as Mr Ternovy. On the basis of this evidence, the plaintiff suggested that the top rate of $300 would have been appropriate for Mr Ternovy. Assuming that the hirer’s commission was much the same percentage as that charged by MCS, a net income of $6,051.46 per week would have been received by Mr Ternovy on this scenario. This was the amount claimed under the first hypothesis, with a small increase (to $6,113.20 per week) from 1 July 2000. The second scenario suggested by the plaintiff involved treating David Tassie as a comparable earner, and, with some modification, claiming his net income from 1 July 1997 to the date of hearing. The third scenario was to use David Tassie as a comparable earner up to 30 June 1998 and thereafter to apply the Morgan and Banks Technological Salary Scale for “general manager business systems”, which stipulated a salary of up to $240,000 each year.

20 The trial judge rejected each of these scenarios. She regarded Mr Greenwood’s evidence as lacking in credibility, and dismissed his assessment that Mr Ternovy’s income would be likely to have increased by 15 percent each year. She regarded it as unrealistic to equate Mr Ternovy with the Deloittes/Anderson Consulting consultants. After all, CSR was paying $150 to $300 per hour for their services at precisely the same time as it was paying $75 to $85 per hour for those of Mr Ternovy. In this regard, there was evidence that Mr Ternovy, or Mr Gieck on his behalf, had sought an increase in his hourly rate, but this had been rejected by CSR.

21 Her Honour similarly rejected the Morgan and Banks remuneration scale as having any relevance to Mr Ternovy. It had been suggested by Mr Tassie and Mr Gieck that Mr Ternovy’s skills and experience would place him within the classification of “general manager – business systems” which carried an estimated annual salary of $180,000 to $240,000. However there was no evidence before the trial judge as to what was comprised in this description and whether it was applicable to the work done by Mr Ternovy. The defendant had suggested that Mr Ternovy might fit the classification of a “project manager” in the Morgan and Banks scale, with a salary range of $100,000 to $140,000. However the trial judge was, for the same reasons, unable to determine whether this classification was appropriate in Mr Ternovy’s case.

22 Her Honour did not consider that Mr Tassie was a comparable earner. His qualifications and experience were different from those of Mr Ternovy. He had gone into private practice as a consultant in 1987, six years before Mr Ternovy, and his income was significantly higher than Mr Ternovy’s at the time of the latter’s death. To be precise, as her Honour noted, Mr Ternovy’s charge out rate, when averaged over the 1995 tax year, was 29.3 percent less than that of Mr Tassie.

23 Her Honour then proceeded to make a number of quite complicated calculations. These were partially based on Mr Tassie’s 2000 charge out rate ($220 per hour) to which her Honour applied a 29.3 percent deduction. She applied a further deduction of 15 to 20 percent in order to reflect evidence given by Mr Gieck that long term contracting rates were generally less than short term contracting rates by about that percentage. A further 15 percent deduction was made in order to take account of the MCS commission rate. Finally, her Honour estimated that Mr Tassie’s net income was less than 50 percent of his business income. She applied a corresponding deduction to Mr Ternovy’s notional income. At the end of all this she reached a figure which, as she commented, was “rather closer to the figure projected by the defendant’s expert than appears at first glance.” She therefore concluded that the defendant’s estimate of Mr Ternovy’s after-tax income was realistic. This allowed for an annual net salary of approximate $64,400 for each year prior to judgment, this being the amount he was receiving at the date of his death. On this basis her Honour awarded $353,587 for past loss of income as at the date of judgment, subject to an adjustment for dependency.

24 Mr Williams, who appeared for Ms Axiak on the appeal, criticised her Honour’s findings on a number of bases. However before discussing the issues raised on appeal, it is appropriate to describe the manner in which her Honour dealt with Ms Axiak’s claim for loss of future income. For in a claim under Compensation to Relatives Act, where both past and future economic loss can only be assessed by the application of probabilities, an arbitrary distinction cannot be drawn between them. They are both parts of the same continuum. Her Honour, as will be seen, erred in failing to adopt an approach which recognised this fact.

Loss of future earnings

25 Both parties suggested to her Honour various bases upon which they submitted that Ms Axiak’s claim for future economic loss should be assessed. Her Honour accepted none of them. She commented, rightly in my view, that they were all unrealistic. Nevertheless it is apposite to set out, albeit briefly, the bases upon which the parties contended that future economic loss should be assessed.

26 The submissions made by the plaintiff were, to a large extent, a continuation of her submissions relating to past economic loss. Four alternative bases were suggested for assessing future losses. The first adopted Mr Greenwood’s assessment that Mr Ternovy’s income would have increased by 15 percent (compound) each year. The second assumed a consultancy charge out rate of $300 per hour, with a deduction reflecting payment to an intermediate consultancy company. The third treated Mr Tassie as a comparable earner and sought his earnings during 2000, with appropriate discounts, to age sixty-five. The fourth calculation used the Morgan and Banks technology salary scale for “general manager business systems” and stipulated an annual salary package of $240,000 as a basis for the future.

27 The defendant submitted that Mr Ternovy’s net weekly income at the date of his death should, in effect, be extended into the future to his sixty-fifth birthday. It was proposed that a further amount of $150,000 should be awarded in order to allow for the possibility that he might have earned more than this amount. It was suggested in the defendant’s submissions that this was a generous approach.

28 Her Honour, as indicated, rejected all these submissions. She considered that the defendant’s expert had underestimated Mr Ternovy’s long term likely income by failing to build into his calculations any increase in his charge out rate. She did not consider that Mr Ternovy would have remained at CSR for “an open-ended period”. Her Honour found that it was likely that Mr Ternovy and Mr Tassie would have gone into business together, although she was unable to say when this would have happened. She was not prepared to regard Mr Tassie as a comparable earner to Mr Ternovy. However she considered that there was a 55 percent possibility that at the date of hearing, Mr Ternovy’s income would have reached the same level as Mr Tassie’s. She regarded this as “a realistic assessment of the possibility that the late Mr Ternovy’s income would have risen over time as his experience increased and his standing in the industry rose.” According to estimates made in November 2000, Mr Tassie’s weekly income at the time of hearing was $2,807.48. Her Honour proceeded to calculate 55 percent of that amount, which produced a figure of $1,544.11. This, as her Honour commented, compared favourably with the amount suggested by defendant’s expert which was $1,344, the amount Mr Ternovy was receiving at the date of his death.

Submissions on appeal as to loss of income

29 Mr Williams submitted that the trial judge’s allowances, both for past and future economic loss, were manifestly inadequate. As to the past, he suggested that it was unrealistic to assume that Mr Ternovy would have continued to work at the same rate in the five and a half years between his death and the date of judgment. During that period there had been an increase in amounts generally paid to information technology consultants, but her Honour paid no regard to this matter. Her Honour had used Mr Brown’s earnings as a guide to Mr Ternovy’s probable past earnings, but the evidence did not support that approach, as Mr Ternovy’s skills far exceeded those of Mr Brown. Moreover, as her Honour found (albeit in another context) it was unlikely that Mr Ternovy would have remained in his CSR consultancy for the whole of that period. Mr Williams submitted that a total of $707,210 should have been allowed for loss of income to the date of trial (13 October 2000), from which a deduction for dependency would need to be made. This figure was achieved by averaging the three alternative methods of calculation which the plaintiff had sought to urge upon the trial judge (see paragraph 18 above).

30 As to the future, Mr Williams submitted that the trial judge had erred in at least two respects. First, she was wrong in rejecting Mr Tassie as a comparable earner. Mr Tassie had described Mr Ternovy’s skills as being more productive than his own. Moreover in their planned joint venture they were to be equal partners with identical incomes. Accordingly Mr Tassie should have been treated as a comparable earner.

31 This was Mr William’s primary submission at the hearing before us. He no longer sought to rely on Mr Greenwood’s calculations. Although he did not completely resile from the Morgan and Bank’s assessments or from the notional $300 charge out rate, these were described as “fallbacks”.

32 Mr Williams also pointed out that, even if one were to accept her Honour’s assessment that, at the date of hearing, there was a 55 percent possibility that Mr Ternovy’s income would have reached the same level as Mr Tassie’s, the calculation she then undertook was a fallacious one which produced a much lower figure than was represented by this finding.

33 Mr Hoeben SC for the respondent submitted that the trial judge’s assessments as to past and future loss were consistent with the evidence and involved no error. His clients had filed a notice of contention setting out four respects in which it was suggested that her Honour’s judgment had been too generous to Ms Axiak. The respondent did not seek to have the judgment set aside on these grounds. Rather it relied upon them to support her Honour’s judgment and to offset any minor respects in which it might be found that the damages awarded by her Honour were inadequate.

34 Mr Hoeben took us through the various steps which her Honour had undertaken in order to reach her findings on loss of income. As he pointed out, these involved a series of detailed analyses and calculations. Mr Hoeben described her efforts in coming to grips with the minutiae of the evidence as “quite heroic”. In essence, he said, the trial judge had taken the realistic view that, notwithstanding the extent of Mr Ternovy’s skill and experience in information technology, this was a “cut-throat” field. The hourly rate he was able to command did not necessarily reflect his considerable skills and qualifications. It was necessary to consider not only the inherent value of his services but also the amount the market could bear.

35 Mr Hoeben suggested that, if we were to find error in her Honour’s findings, we should remit the matter for further hearing. However the Court is loath to adopt this approach unless it is clearly preferable to do so. In the present case, all the figures are available to enable us to make our own assessments. I therefore consider that if we find that the trial judge erred (and in my view she did) we should proceed to determine the matter ourselves.

Findings in relation to loss of income

36 In my view error has been shown in the trial judge’s assessment of Mr Ternovy’s likely loss of income both in the past and the future.

37 As to the past, it was accepted at the hearing that Mr Ternovy was highly skilled in information technology and in related business fields. He was a hardworking, enterprising and highly motivated man. To assume, as the trial judge did, that there would be no increase in his earnings in the five and a half years between his death and the date of judgment was, in my view, extremely unrealistic. Nor did this assumption, which underlay her Honour’s allowance for past loss, accord with other findings she made in the case. In particular, her conclusion that there was a 55 percent possibility that, by the date of hearing, Mr Ternovy’s income would have increased to the same level as that of Mr Tassie, was entirely inconsistent with her assumption, when assessing past loss, that his income would have been the same at the date of judgment as it was at the date of death. As mentioned earlier, in claims under the Compensation to Relatives Act, both past and future economic loss can only be assessed by reference to probabilities or likelihoods. The starting point, obviously, is the date of death. Thereafter the court assesses what the deceased’s earnings were likely to have been up to the time when he or she would probably have ceased producing income. In most cases the hearing will take place at some point during this period. When it does so, the court is required, for practical reasons, to assess past loss separately from future loss. The calculations are, of necessity, entirely different. But the line between the past and the future remains an unbroken one, which happens to be intersected by the hearing. In the normal course of events, it is difficult to see any justification for adopting a formula for assessing past losses which leads to a notional loss at the time of hearing which differs from the notional loss to be used as a starting point for the future.

38 It follows that the trial judge’s assessment for past loss, being loss to the date of her Honour’s judgment, will need to be re-assessed. How this is done will to some extent depend upon the basis which is adopted for assessing future loss, a matter to which I now turn.

39 It was the appellant’s primary contention before us that Mr Tassie should have been treated as a comparable earner and that his net income at the date of trial should have been adopted, with appropriate discounts, as the basis for accepting Ms Axiak’s likely future loss of income.

40 Mr Tassie commenced working as a consultant through his company Frank Hurly and Co. Pty Limited (‘Frank Hurly’) in 1987. His qualifications and skills were, as mentioned, different from Mr Ternovy’s, although there were numerous meeting points between them. In their projected joint venture, Mr Tassie was to be responsible for “consulting and sales” and Mr Ternovy for “technical services.” In the 1995-96 tax year Frank Hurly’s operating revenue was $146,323. Mr Tassie’s projected after tax income was $71,631. This was less than it would have been had Mr Ternovy not been killed, for after his death Mr Tassie was so distressed that he took several months off work. For the next three years his income rose gradually. By the 1998-99 tax year Frank Hurly’s operating revenue was $193,925 and Mr Tassie’s projected after tax income was $96,061. The company’s income increased very substantially in the year ended 30 June 2000. It must be assumed that Mr Tassie’s income increased commensurately, although it is very difficult to obtain reliable figures as to Mr Tassie’s after tax earnings. He was the sole income earner for Frank Hurly. The company’s profit and loss statement for the year ended 30 June 2000 showed a gross income (including investment income) of $411,966. The total business income was $379,118. After deducting expenses of $235,354, which were said to include taxes, a net income of $176,612 was derived. However amongst the expenses which were deducted was a salary component of $54,648 which was apparently paid to Mr Tassie himself, and upon which he would have been liable to pay tax.

41 I am unable to make much sense of all this material. However, it is apparent from her Honour’s judgment that the plaintiff submitted at trial that Mr Tassie’s net weekly income at the time of hearing was $2,807. This was said to be 1/52 of his company’s net income, together with the after tax salary and superannuation which had been paid to Mr Tassie. In the absence of any suggestion that this was incorrect, I propose to adopt it as accurate for present purposes. It was this figure which her Honour reduced by 45 percent in order to reach the weekly income of $1,544 which, subject to a further downward adjustment, her Honour used as a basis for calculating future loss.

42 In my view, both her Honour’s original calculation and the later downward adjustment were erroneously made. Dealing first with the downward adjustment: her Honour assumed that the figure of $1,544, (being 55 percent of Mr Tassie’s net weekly earnings), was receivable over forty-eight weeks of the year. She then proceeded to reduce it to $1,425 by spreading it over fifty-two weeks. But this deduction was unwarranted, as Mr Tassie’s net weekly income, from which the original figure was derived, was already spread over a fifty-two week year.

43 Even without this erroneous deduction, her Honour’s starting point was, in my view, too low. It led to an award of damages for future loss which was manifestly inadequate.

44 The error arose by reason of the calculation which her Honour adopted in attempting to translate her findings into figures. Had her Honour’s mathematical calculations accorded with her factual findings, this error would not have occurred. Her Honour, as indicated, considered that there was a 55 percent possibility that at the date of hearing Mr Ternovy’s income would have equalled that of Mr Tassie. Having reached this conclusion, she proceeded to assess Mr Ternovy’s notional income, at the date of judgment, as 55 percent of Mr Tassie’s. But there is a significant difference between a finding (which her Honour did not make) that Mr Ternovy’s income was likely to have been 55 percent of Mr Tassie’s, and the finding (which she did make), that there was a 55 percent chance that by the time of hearing Mr Ternovy’s income would have equalled Mr Tassie’s. This finding involved a conclusion that there was a 55 percent chance that by that time Mr Ternovy’s income would have increased from the amount he was previously earning up to the level of Mr Tassie’s earnings. This is consistent with the approach approved by the majority of the High Court in Malec v J C Hutton Pty Limited (1990) 169 CLR 638. In the present case it should have been expressed by a calculation which took into account Mr Ternovy’s earnings at the date of death, and added a figure which represented 55 percent of the difference between those earnings and Mr Tassie’s earnings. This calculation yields a figure which is significantly higher than that reached by merely allowing 55 percent of Mr Tassie’s net earnings at the date of hearing. In the present case, accepting Mr Tassie’s net weekly income at the time of hearing to be $2,807, and Mr Ternovy’s income at death to be $1,344, the amount of $2,148 is reached.

45 It is often advisable, in cases involving probabilities, to conduct what amounts to a reality check in relation to figures derived from calculations. For present purposes, an appropriate reality check is to project to the date of hearing the proportion which Mr Ternovy’s net income bore to that of Mr Tassie at the date of death. This was 70.7 percent. As mentioned, Mr Tassie’s net weekly income at the date of hearing was $2,807. 70.7 percent of this is $1,985. This is $163 less than the notional weekly income derived from the calculation made in the last paragraph. In my view, this gives weight to the reliability of that calculation. Her Honour’s finding, with which I agree, was that the proportion of Mr Ternovy’s income to that of Mr Tassie would probably have risen by the time of hearing. This increase is represented in the relatively modest figure of $163 per week.

46 This calculation also serves to illustrate the practical effect of the error made by her Honour. At the date of death, Mr Ternovy’s income was 70.7 percent that of Mr Tassie. Yet in spite of her Honour’s finding that there was a 55 percent chance that his income would have risen to equal Mr Tassie’s by the date of hearing, she applied a calculation which resulted in a 15.7 percent reduction in the proportion between the two incomes.

47 For all these reasons I consider that $2,148 is an appropriate net weekly income to use as a starting point for the assessment of future loss. As indicated, it represents the amount which would have been reached had her Honour’s factual findings been correctly reproduced into figures. In this regard, I consider that her Honour was entitled to reject the various bases upon which Ms Axiak’s representatives suggested that future calculations should be made. Her criticisms of Mr Greenwood’s projections were well founded, and there was good reason for her rejection of the Morgan and Banks scale. There was also sound reason for rejecting Mr Tassie as a comparable earner. Much of Mr Tassie’s income during the 2000 tax year was earned during overseas trips, particularly to the United States. It is not known whether these opportunities would have been available for Mr Ternovy. Even if they were, the evidence indicates an unlikelihood that he would have wanted to travel or been available to do so to the same extent as Mr Tassie.

48 Three questions remain to be answered in relation to loss of income:

1. how should past loss be re-assessed?

2. what should be the cut-off date for calculating loss of income?

3 what should be the dependency rate?

I shall deal with these in turn.

Assessment of past loss

49 Her Honour allowed a total of $353,587 for loss of income to the date of judgment (12 April 2001). This was derived by taking Mr Ternovy’s net weekly income at the date of death and multiplying it by 48 for each of the years between death and judgment.

50 On my finding, this award was patently inadequate in that it did not allow for any increase during that period. Her Honour’s findings as to Mr Ternovy’s likely income at the date of hearing, when correctly calculated, produced a net weekly income of $2,148. This, as I have mentioned, is an appropriate starting point for the future. It should also constitute the finishing point for the past. Calculated on the basis of a fifty-two week year (see earlier, at paragraph 41) this represents an annual net income of $111,696. Extended over the period between Mr Ternovy’s death and the date of judgment, a total figure of $607,018 is reached. On one view, an appropriate basis for assessing past loss might be to take the mid point between the total figure allowed by her Honour, (representing Mr Ternovy’s income at the date of death), and this figure, which represents his notional income at the date of judgment. This calculation produces an amount of $480,302. However I think that it would be unduly generous to Ms Axiak to adopt this approach. The evidence shows that Mr Tassie’s income during the 3½ years after Mr Ternovy’s death increased by relatively modest amounts. It was not until the 2000 tax year that there was a very significant increase. It is at least likely that Mr Ternovy’s income would have followed a similar path. Accordingly, a downward adjustment needs to be made. In this regard, one can only adopt a broad-brush approach. In my view, a deduction of approximately $60,000 is appropriate on this account. Accordingly I would allow a total of $420,000 for past loss of income as at the date of judgment. This is subject to a deduction for dependency, which I shall discuss shortly.

Future cut-off point

51 Her Honour estimated future loss of income on the basis that Mr Ternovy would continue to work until he turned sixty-seven. Mr Hoeben submitted that this was excessively generous to the appellant and that it was not supported by the evidence. He submitted that age sixty-five was the appropriate cut-off point. However I can no reason for disturbing her Honour’s finding on this matter. The age of sixty-five holds no magic for a person who is self-employed, as Mr Ternovy almost certainly would have been. It is clear that he derived a great deal of pleasure and satisfaction from his work. It was much more than a source of income for him. Accordingly I would not interfere with her Honour’s finding on this matter.

52 The period between judgment and Mr Ternovy’s sixty-seventh birthday would have been 23.8 years. Using the 5 percent multiplier of 734.4 upon a net weekly income of $2,148, a total of $1,577,491 is reached. This is subject to deductions for dependency and vicissitudes.

Dependency rate

53 Ms Axiak was herself a high earner. Indeed during their marriage her income exceeded Mr Ternovy’s. She told her Honour that they had reached an agreement whereby Ms Axiak’s salary was to be used to pay family expenses, and Mr Ternovy’s salary was to be used for investing in property. Mr Ternovy, she said, was a frugal man who spent very little upon himself. On this basis, Ms Axiak’s representatives suggested to her Honour that a high dependency rate should be adopted.

54 Her Honour noted that Ms Axiak’s evidence on this matter did not sit comfortably with the evidence relating to Mr Ternovy’s assets at death. Putting aside property acquired before marriage, Mr Ternovy at that stage had savings of less than $14,000, and a half share in an apartment in Glebe which he and Ms Axiak had purchased for $91,000. This was mortgaged to approximately 60 percent. As her Honour commented, it was difficult to reconcile these hard financial facts with Mr Axiak’s evidence as to Mr Ternovy’s frugality and the use to which his income was to be put.

55 Her Honour had regard to the standard table as to the percentage of dependency (see Luntz: Assessment of Damages for Personal Injury and Death). This provides a range for two adults and one child from 69 percent to 76 percent. With no dependent child the range is 65 to 69 percent. Her Honour concluded that the appropriate dependency rates in this case should be at the lower end of the range. She stipulated a dependency rate of 70 percent for the period of Jordan’s dependency, which she projected until December 2017 when he will be twenty-four and a half. Thereafter she stipulated a dependency rate of 65 percent.

56 Mr Williams submitted that these dependency rates were too low. There was no justification, he urged, for her Honour to select a rate in the lower end of the range, given the evidence as to Mr Ternovy’s lifestyle. Mr Hoeben, on the other hand, suggested that her Honour was unduly generous to Ms Axiak in extending Jordan’s notional dependency until he was in his mid-twenties.

57 In my opinion no error has been shown in her Honour’s approach to either of these matters. The range of dependency was obtained by her honour from the table which has become a standard reference point in these cases. This table was prepared in 1984. It assumes a household in which the husband was the primary or sole earner. The assumptions upon which the table was compiled do not sit easily with the evidence as to how the finances were managed in the Ternovy/Axiak household. In any event, as her Honour noted, Ms Axiak’s evidence that almost all of Mr Ternovy’s income was available for joint investment was not supported by the objective facts.

58 The determination of an appropriate dependency rate involves a discretionary judgment. Actual error needs to shown before such an assessment will be reversed on appeal. No error in my view has been shown in this case.

59 The same can be said about the trial judge’s assessment that Jordan would continue to be dependent until December 2017. This was based upon the evidence that he was an intelligent, high achieving student. Both his parents have tertiary degrees, and the very strong probability was that Jordan would also undergo tertiary education, which might well include studying for a higher degree. There was accordingly ample evidence to support her Honour’s finding on this matter.

Final calculations of loss of income

60 Finally it is necessary to calculate future loss of earnings by reference to these dependency rates, and to make an appropriate deduction for vicissitudes. In this respect her Honour made the normal allowance of 15 percent, and no criticism has been levelled at this approach.

61 The following calculations are based on the figures and the factual findings I have already made.

Period	Length	Total	Depen-dency	Sub-total	After Deduction for Vicissitudes
12/4/2001 to 31/12/2017	16.8 years	$1284,504.00	70%	$899,153.00	$764,280
1/1/2018 to 31/12/2024	7 years	$292,987	65%	$190,442	$161,875
$926,155.00

62 Finally it is necessary to apply the 70 percent dependency rate to the amount allowed for past loss of income, namely $420,000. The figure reached is $294,000.

63 Accordingly, I would set aside her Honour’s award for both past and future loss of income. In substitution, I would award a total of $1,220,155, of which $294,000 is attributable to past loss and $926,155 to the future.

64 I would apportion the sum of $352,760 of this award for the benefit of Jordan Ternovy. This is calculated by allowing him one third of the amount awarded for past and future loss until the end of his dependency.

Superannuation

65 Her Honour’s calculations relating to past and future economic loss assumed that Mr Ternovy would have remained self-employed during his working life. For this reason she declined to make an award for loss of superannuation. This gave rise to one of the grounds of appeal. However, little was said in support of this ground. This is not surprising as her Honour’s approach was patently correct. No amount should have been allowed under this head.

Lost investment opportunities.

66 Ms Axiak’s claim included an amount of $200,000 which was said to be a global assessment of the loss she suffered through being deprived of her opportunity, together with Mr Ternovy, to build an increased investment portfolio. As I understand it, this claim is based upon the proposition that, had Mr Ternovy survived, their combined incomes would have provided a basis for increased borrowing power which would have enabled them to make profitable investments, in turn calling on Mr Ternovy’s special knowledge about real estate and the share market.

67 Her Honour commented that there was an element of double counting in this claim. She considered that, pursuant to the principles enunciated in Todorovic v Waller (1981) 150 CLR 402, the claim was not maintainable in law. Moreover her Honour was not satisfied that there was any factual basis for the claim. During the three and a half years of their marriage there was very little increase in their joint investments. She therefore made no allowance under this head. The appellant claims that she was in error in this respect.

68 This matter can be dealt with shortly. Whether or not Todorovic applies so as to bar this claim as a matter of principle, no evidence was adduced to enable it to be assessed in any realistic way. If a claim of this nature is to be seriously pursued than it must be supported by evidence from which tangible findings can be made as to the quantification of the loss. No evidence of this nature was adduced before her Honour. In these circumstances her Honour’s finding was not only justified, but it was the only finding she could make.

Child care and boarding school

69 Ms Axiak made two separate claims relating to the cost of caring for Jordan. One was for the cost of past and future child care, and the other for the cost of sending him to boarding school. Her Honour awarded a total of $72,693 for child care, but declined to make any award for boarding school expenses. The appellant challenged both these findings. It was submitted that her Honour’s assessment for loss of child care services was inadequate and that she should have allowed the cost of Jordan attending boarding school.

70 Both these claims relate to Jordan’s care in his mother’s absence, and it is appropriate to deal with them together.

71 Jordan was only two and a half when his father died, and he had not yet started his schooling. He was cared for during the day by Ms Axiak’s mother. Ms Axiak would drop him at her mother’s home on her way to work and Mr Ternovy usually collected him in the evenings. Ms Axiak travelled extensively for her work during much of that time. When she was away for only short periods, Mr Ternovy would drop Jordan at her mother’s place and look after him overnight. When she was away for longer periods, Mr Ternovy’s mother would often come and stay at their Canada Bay home. She would look after Jordan during the day and assist Mr Ternovy in caring for him overnight.

72 After Mr Ternovy’s death, Jordan’s child minding arrangements continued much as before, at least while Ms Axiak was working in Sydney. She used to leave him at her mother’s home in the mornings and collect him in the evenings. After he started going to school, Ms Axiak’s mother collected him from school and Ms Axiak in turn collected him from her mother.

73 Ms Axiak’s employment, as previously indicated, involved quite extensive travel. Most trips were brief, involving at most an overnight stay. However on occasions she would travel overseas and be absent for a week or so. On these occasions Jordan would stay with her parents. Even when Ms Axiak was only away for only short periods, Jordan would need to stay with her parents. She usually dropped him there the night before her departure and collected him the day after her return. This meant that even day trips undertaken by Ms Axiak could lead to Jordan spending one or two nights with her parents.

74 Ms Axiak said that she had arranged for Jordan to be enrolled into St Josephs Boarding School because she was concerned about the time he was required to spend away from home while she was travelling. Her travel had increased since Mr Ternovy’s death. Before he died she had been working in a managerial position with Merck Sharp and Dohne. However her grief reaction after his death meant that she was unable to continue in that role. She had therefore returned to her previous job of clinical testing which entailed more extensive travel.

75 Ms Axiak gave evidence that Mr Ternovy spent between ten and twenty hours per week looking after Jordan. She claimed the cost of child care for fifteen hours per week at the agreed rate of $20 per hour. Her Honour regarded this as an excessive claim. She commented that it “reflects his (Jordan’s) current needs, rather than the services supplied by the late Mr Ternovy.” She awarded damages for past and future, until Jordan reaches fourteen, on the basis of seven hours of child care each week. The future award was reduced by 15 percent for vicissitudes.

76 As to the claim for boarding school fees, her Honour found that any need for Jordan to attend boarding school was caused by Ms Axiak’s grief reaction rather than by Mr Ternovy’s absence from the home. This, her Honour said, was because Ms Axiak’s grief reaction caused an alteration in her work patterns so that she was required to travel more frequently. This in turn created the need (if need there was) for Jordan to go to boarding school. As such, her Honour found that this was an incident of Ms Axiak’s claim for nervous shock, which claim had been settled prior to hearing. Accordingly, her Honour declined to make an award under this head.

77 Mr Williams, as indicated earlier, challenged both these findings. It was submitted that the allowance for child care expenses was manifestly inadequate and that her Honour should have awarded Jordan’s boarding school expenses.

78 Dealing first with the boarding school expenses. Ms Axiak’s evidence before her Honour was that the need for sending Jordan to boarding school was created, not by her increased travel, but by the fact that, after Mr Ternovy’s death, there was no one at home to look after Jordan when she was away. Mr Williams submitted that her Honour was wrong in concluding that the need for Jordan to attend boarding school was related to Ms Axiak’s grief reaction. Regardless of the amount of travel Ms Axiak might have undertaken, it was Mr Ternovy’s absence from the home which created the need to send Jordan to boarding school.

79 I am inclined to accept this submission. Had Mr Ternovy survived, I do not think that there would have been any question of sending Jordan to boarding school, no matter how much his mother was travelling. But that is by no means the end of the matter. For it is still incumbent upon the appellant to establish that, in the absence of Mr Ternovy from the home, there is good reason to send Jordan to boarding school. And I do not think that this has been established.

80 Ms Axiak’s evidence indicated that, as at the date of hearing, Jordan’s needs were being very well looked after by her family members, even when Ms Axiak was away for extended periods. As Ms Axiak herself commented, nothing lasts forever, and these child minding arrangements might well have finished at any time. But it is, in my view, a grossly excessive response to take the child out of the home entirely and place him into boarding school. The evidence on this matter would more appropriately lead to an increased allowance for loss of child care services. It does not justify the award for which the appellant contends.

81 Accordingly, I would not interfere with her Honour’s finding relating to boarding school fees.

82 As to the cost of child care, the judgments in Nguyen v Nguyen (1990) 169 CLR 245 make it clear that where a deceased has contributed his or her services, damages are recoverable for their loss whether or not they are to be replaced, provided that a pecuniary value can be placed upon them. In this case, the fact that the child care which would normally have been provided by Mr Ternovy has been provided gratuitously by Ms Axiak’s family members does not affect her entitlement to compensation for their loss.

83 Having regard to the extent of Ms Axiak’s travel, I consider that her Honour’s allowance of seven hours per week for child minding services was inadequate. An allowance of ten hours per week would, in my opinion, have been more appropriate to the circumstances. The cost of $20 per week was agreed between the parties.

84 Her Honour’s award for loss of child care services was, by necessity, calculated separately for the past and the future. The past allowance was easily calculated. Her Honour allowed $39,480 on the basis of seven hours ($140) per week over 282 weeks. Substituting ten hours per week in otherwise identical calculations, the amount up to judgment is increased to $56,400. As for the future, her Honour allowed child care until Jordan reached fourteen, upon the same hourly rate. This involved a period of 6.2 years from judgment, the appropriate multiplier being 279.1. This calculation yielded a figure of $39,074. Her Honour then proceeded to apply a 15 percent deduction for vicissitudes. The appellant challenged the making of any reduction for vicissitudes, given Jordan’s age and the short time involved. The respondent conceded that a reduction of 15 percent was unwarranted, although a smaller reduction might appropriately be made. In my view no reduction for vicissitudes should be made to this item. Using the same calculations as her Honour, but substituting ten hours per week, and without making any reduction for vicissitudes, a figure of $55,820 is reached.

85 Accordingly I would set aside her Honour’s award for the loss of past and future child care services and substitute an award which represents these findings. The total amount is $112,220.

Loss of handyman expenses

86 Mr Ternovy was, on all accounts, a skilled handyman. He had a well equipped toolshed and was skilled in welding, carpentry, electronics, renovating, painting and tiling. Ms Axiak said that he devoted one week in four to property maintenance. On this basis she claimed for loss of his handyman services for sixteen hours each month at the rate of $25 per hour.

87 Her Honour discussed the evidence on this subject in some detail. She did not accept that Mr Ternovy had committed the time or energy to home maintenance as Ms Axiak had described. Indeed her Honour was not satisfied that Mr Ternovy had put anything more than one hour per week into these activities. However the defendant had conceded that an allowance of two hours per week would be appropriate under this head. Accordingly her Honour awarded damages for loss of handyman services at $50 per week. This resulted in an award for past loss of $14,100. Future loss was allowed until Mr Ternovy’s sixty-fifth birthday, leading to a further allowance of $29,750.

88 The appellant submitted that her Honour’s award was inadequate having regard to the evidence of the handyman services provided by Mr Ternovy over the period of their marriage. Mr Williams also urged that sixty-five years was a premature cut-off date. Mr Ternovy’s father, a retired builder, was still doing extensive work around the house when he was well into his seventies.

89 Her Honour, as indicated, discussed this issue at considerable length. Her assessments were based on her impressions of the evidence, including the credibility of witnesses. I can find no reason to interfere with her findings. I accept that Mr Ternovy might well have continued to work productively around the house for some time after he reached sixty-five. However any increase on this account would be minimal, sounding in a few hundred dollars only, and I do not consider that the circumstances warrant making any adjustment on this basis. I would not interfere with her Honour’s finding under this head.

Conclusion

90 For the reasons given above I would set aside the damages awarded by her Honour. In lieu thereof I would award damages to the appellant in the sum of $1,379,500. Of this, I would apportion the sum of $352,760 for the benefit of Jordan Ternovy. The amount apportioned for the benefit of Jordan Ternovy is to be paid into court to be held in trust for him until he turns eighteen. I would order the respondent to pay the appellant’s costs.

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