Battunga Country Lions Club v Paues - [2021] SASCA 72

SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
BATTUNGA COUNTRY LIONS CLUB v PAUES
[2021] SASCA 72
Judgment of the Court of Appeal
(The Honourable President Kelly, the Honourable Justice Doyle and the Honourable Justice Bleby)
29 July 2021

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - EXCESSIVE OR INADEQUATE DAMAGES - GENERAL PRINCIPLES - PERSONAL INJURY OR DEATH CASES
The respondent and his family were spectators at a go-kart race organised by the appellant. During the course of the race, an out-of-control go-kart broke through the bunting at the edge of the racetrack and injured the respondent.
The respondent sued the appellant in negligence, claiming damages for the injuries he sustained by reason of the accident. Following a trial which, in light of admissions made by the appellant, was confined to the issues of causation and quantum, the trial judge entered a judgment in favour of the respondent for $478,617.23. This sum included an award for future loss of earning capacity of $330,000.
The appellant appeals the judgment entered in favour of the respondent. Its grounds of appeal are limited to a challenge to the allowance made by the trial judge for future loss of earning capacity, and essentially amount to a complaint of manifest excess. The appellant identifies three contended errors in the trial judge’s approach to this head of damages, namely in using a multiplier that assumed the respondent would work to 65 years of age; in confining the reduction for contingencies to 15 per cent; and in assuming a reduction of $532 per week (or 28 per cent) in earnings that would commence immediately following the trial and continue throughout the respondent’s working life.
Held, per the Court, allowing the appeal:
1. The trial judge did not make any error of principle or fact. However, given the trial judge’s findings that it was likely the respondent would have worked to age 60 and possibly slightly longer, and the likelihood that the respondent’s injury would not be productive of financial loss for at least a few years following trial, the use of a multiplier from the date of trial through to age 65, with a relatively standard reduction of 15 per cent for contingencies, has resulted in an award for future loss of earning capacity that is excessive in the relevant sense.
2. The judgment in favour of the respondent is set aside. An award of $250,000 for future loss of earning capacity is substituted, and a reduced judgment in favour of the respondent in the amount of $398,617 is entered.
Livingstone v Rawyards Coal Co (1880) 5 App Cas 25; CSR Ltd v Eddy (2005) 226 CLR 1; Amaca Pty Ltd v Latz (2018) 264 CLR 505; Graham v Baker (1961) 106 CLR 340; Husher v Husher (1999) 197 CLR 138; Medlin v State Government Insurance Commission (1995) 182 CLR 1; Todorovic v Waller (1981) 150 CLR 402; Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Eicas v Dawson [2016] SASCFC 124; Pitt v Commissioner for Consumer Affairs [2021] SASCA 24; McCartney v Orica Investments Pty Ltd [2011] NSWCA 337; Diamond v Simpson (No 1) [2003] NSWCA 67; Amaca Pty Ltd v Werfel [2020] SASCFC 125, considered.

BATTUNGA COUNTRY LIONS CLUB v PAUES
[2021] SASCA 72

Court of Appeal: Kelly P, Doyle and Bleby JJA

THE COURT: This is an appeal against an award of damages in negligence for personal injury made against the appellant (the Lions Club), in favour of the respondent (Mr Craig Paues). The appeal is confined to a challenge to the allowance made for future loss of earning capacity in the amount of $330,000.
Background
On 6 April 2014, the respondent, his wife and their three children were spectators at a go-kart race at the Macclesfield Gravity Festival. The appellant was an organiser of the Festival.
During the course of the Festival, an out-of-control go-kart broke through the bunting at the edge of the racetrack and collided with spectators. The respondent, his wife and two of their children were injured.
The respondent, together with his wife and the two injured children, sued the appellant and three other parties (the President of the appellant organisation, the local council and the driver of the kart). They sued in negligence, claiming damages for the injuries they sustained by reason of the accident.
At the commencement of the trial, the appellant admitted liability in respect of the claims made by the respondent’s two children, and consent orders were made as to their claims. The appellant also admitted liability in respect of the claims brought by the respondent and his wife, subject to them proving injury and consequential loss.
Upon these admissions of liability, the claims against the other three defendants were discontinued. The trial proceeded in respect of the claims made by the respondent and his wife, and was confined to the issues of causation and quantum.
The trial judge ultimately entered judgments in favour of the respondent for $478,617.23, and in favour of the respondent’s wife for $187,905.74. The award of damages in favour of the respondent was broken down as follows:
·pain and suffering and loss of amenity                 $   40,580
·past loss of earning capacity  $           0
·future loss of earning capacity  $ 330,000
·past gratuitous services  $           0
·future services  $   35,000
·equipment  $       850
·special damages  $     5,913
·future treatment and medical expenses                 $   65,000
·interest on past losses  $     1,274
·total  $ 478,617
The appellant originally appealed against both judgments. However, it subsequently confined its appeal to the judgment entered in favour of the respondent. It also confined its grounds of appeal to the allowance made by the trial judge in favour of the respondent for future loss of earning capacity. At trial, the appellant had made a significant attack upon the credit of the respondent. That attack was rejected by the trial judge, and the findings made by his Honour are not challenged upon appeal.
Relevantly to the assessment of damages for economic loss, at the time of the accident, the respondent was operating a commercial flooring business trading under the name ‘Lay It On Floors’. The trial judge declined to make any award for past loss of earning capacity, finding that although the respondent had suffered a diminution in his earning capacity by reason of the injuries he sustained in the accident, this had not been productive of financial loss in the period of about five years between the accident and the date of trial.
However, the trial judge held that it was nevertheless appropriate to make an award for future loss of earning capacity. His Honour approached his assessment of this head of damages on the basis that the respondent had suffered a reduction in his earning capacity “by something slightly under 30%”, ultimately using a figure of $532 per week (being 28 per cent of net earnings of $1,900). His Honour used a 5 per cent multiplier for a 41 year old male[1] through to the age of 65 years (being 738). This gave a capitalised sum of $392,616, to which the trial judge applied a discount of approximately 15 per cent for contingencies.
[1] This being the respondent’s age at trial.
The appellant’s essential complaint upon appeal is that the award of damages for future loss of earning capacity is manifestly excessive. In support of this complaint, the appellant identifies three contended errors in the trial judge’s approach to this head of damages. Before addressing the detail of the appellant’s contentions in this respect, it is convenient to summarise the trial judge’s findings as to the respondent’s injuries, his Honour’s other findings relevant to the assessment of the respondent’s loss of earning capacity, and his Honour’s reasons in support of the award of $330,000 for future loss of earning capacity. We will then identify and consider the errors that the appellant contends the trial judge made.
The trial judge’s findings
At the time of the accident, the respondent was 36 years of age. He was 41 at the time of trial, and 43 at the time of judgment. The trial judge used the date of the trial to delineate between the respondent’s past and future losses.
The trial judge found that, prior to his injuries the subject of these proceedings, the respondent was fit, strong, active and healthy. He had played football until the birth of his first son in 2008. He regularly attended the gym, and would run four to five kilometres up to five nights a week. He regularly participated in a range of water sports. He was an active and hands-on father.
The respondent had not previously experienced any difficulties with his right knee. He had had two prior injuries of note; one to his left foot and the other to his left knee. When he was about 17 he broke his left foot in three places when he came off a motorbike. His foot was put in plaster and he experienced no subsequent problems. In relation to his left knee, he had an arthroscopy and a lateral muscle adjustment following a football injury. He had no problems with his left knee afterwards, and continued to play football for a number of years thereafter.
The respondent’s right knee injuries
The trial judge found that as a result of the accident, the respondent suffered a permanent disability to his right knee. The injury to his right knee consisted of an extensive medial meniscal tear, a lateral meniscal tear and moderate to severe chondral thinning of the medial compartment.
The trial judge expressed his findings as to the nature and cause of the respondent’s injury to his right knee in the following terms:
[116]I find that the incident caused an extensive tear of the posterior horn of the medial meniscus of the first plaintiff’s right knee. That tear required an arthroscopic debridement as the tear was likely to progress, not heal. The surgery, comprising a chondroplasty and partial medial meniscectomy, went as expected. The trauma of the incident altered the biomechanics of the first plaintiff’s right knee. That traumatic alteration of the biomechanics of the knee caused, or materially contributed to, the rapid traumatic degeneration of the minor fraying in the lateral compartment shown on the 2014 MRI (regardless of whether that minor fraying pre-existed, or was the result of, the incident) into a complex lateral tear by the time of the 2015 MRI. Similarly, the traumatic alteration of the biomechanics of the knee caused, or materially contributed to, the rapid traumatic degeneration of the medial compartment, resulting in severe chondral thinning by the time of the 2015 MRI. I am satisfied that the damage observed on the 2015 MRI, to both the medial and lateral compartments of the right knee, was caused by the incident. I find that it is not possible to attribute the first plaintiff’s ongoing symptoms and disability to one compartment only. It is also not necessary to do so given my finding that the damage in both compartments has been caused by the incident. I am satisfied that, as a matter of common sense and logic, the damage to the first plaintiff’s knee and his ongoing symptoms were caused, or materially contributed to, by the incident. I am satisfied, on the balance of probabilities, that the defendant’s negligence caused the harm to the first plaintiff’s knee: s 34(1) of the Civil Liability Act1936.
The trial judge found that the respondent will continue to experience ongoing symptoms, including pain and restrictions, into the future. He is suffering from, and will continue to suffer from, increasing degenerative changes and may have to undergo further surgery (an arthroscopic debridement) and, eventually, a total right knee replacement.
The trial judge found that it was more likely than not that the respondent would need a right knee replacement, but did not find when this would occur. The expert evidence as to when this would occur varied from 15 to 20 years (Dr Bastian, senior consultant in rehabilitation), to 15 years (Dr D’Onise, occupational physician), to it not being possible to say (Dr Ling, orthopaedic surgeon and Dr Jackson, orthopaedic surgeon).
The respondent’s work prior to the accident
The respondent had a solid work history. After leaving school halfway through year 11, he was employed in various capacities, including as a baker’s assistant, a general hand at a timber supply yard, and in sales and management at a recycling business. He began working in flooring installation at Carpet Choice, where he worked from about 2002 to 2004.
In 2004, the respondent commenced operating his own commercial flooring business, ‘Lay It On Floors’. He was still operating this business as at the date of the accident. The business involved the installation of a range of different types of commercial flooring such as vinyl, vinyl planks, Marmoleum, carpet tiles and dual-bond carpet.
The respondent commenced the business as a sole trader, and initially did all the work associated with the business himself. Over time, the business grew. In about 2007, he engaged his brother-in-law (Mr Tansell) as a subcontractor. He later expanded his business by taking on more work, and another subcontractor (Mr Davies). By 2010, the respondent had commenced running the business through a partnership with his wife.
The change in the legal structure of the business from sole trader to partnership was motivated by tax reasons. The respondent’s wife performed the bookwork. However, the respondent ran the business, and the trial judge found that it was dependent upon him, and was in substance the respondent’s business notwithstanding that it was conducted by him through the legal structure of a partnership with his wife.
The trial judge found that, prior to the accident, the respondent “worked long hours; it was not unusual for him to work 12-16 hours a day, 80% of which was working on his knees.” The work involved heavy manual labour, loading and unloading materials and setting out, cutting and laying the floors. The business required the respondent’s personal input both by way of labour, and his physical presence to satisfy certain clients.
Impact of the respondent’s knee injury
The respondent’s knee injury resulted in him experiencing discomfort in a range of activities. He was not able to kneel without discomfort. He was restricted in his ability to engage in his usual recreational activities. While he continued to participate in some water sports with his children, he had had to modify the manner in which he participated in these family activities in terms of frequency, duration and technique (such as weight shifting). He needed to use painkillers to participate in these activities and, even so, would “pay the price” afterwards in terms of pain.
The respondent’s knee injury also restricted his capacity to work. He was restricted in maintaining continuous work of certain types, and his knee would from time to time give way. In particular, he was “restricted from very prolonged static standing, repetitive crouching and kneeling, repetitive access of stairs/ladders/inclines and heavy lifting from low levels.”
Notwithstanding his injury, the respondent returned to work shortly after the accident, and indeed worked essentially continuously from his return to work through to the date of trial. The only qualification to this was a period of a few weeks following the knee surgery he underwent in late 2014.
The respondent was a “stoic, committed and hard-working man”. He had “pushed himself to try and do as much as possible at work and with his family”. He was determined to push on.
However, the respondent was “self-medicating to get through”, and was working shorter days. He initially undertook smaller jobs, and “was not as productive as he could not do a lot of groundwork or work weekends”.
As time went by following the accident, the respondent had “reluctantly acknowledged the restrictions that he was facing and was likely to continue to face, in relation to his ability to undertake all the manual labour within the business … [and] he took steps to have other labourers, including his brother-in-law, assist where possible with manual labour in installation jobs.” Further, the respondent had attempted to move “more into the supply work, rather than simply install work, but … there were risks involved in doing that, in that he may lose his traditional install customers by competing with them for the supply work.”
The trial judge thus found that while the respondent had, since the accident, made a shift in his business to encompass both supplying and installing floor coverings, rather than just installing them, his ability to expand that supply work further was limited. There were also limits to the respondent’s ability to replace his labour with other subcontractors given the need to maintain his relationship with the clients and the cost of having others carry out some of the tasks that required greater skill or experience.
The trial judge found that since the accident, the respondent had worked hard and mitigated his loss. He had achieved this “by taking pain relief medication, modifying his work practices and reducing his participation in recreational activities”. However, at the time of the trial, he was working beyond capacity in a heavy and demanding physical occupation. He was doing more than he should in an effort to maintain his business and its profitability.
The Judge found that it was clear on the evidence that the respondent would not be able to sustain his level of work; that his earning capacity had been significantly reduced; and that although he may work through the pain and continue to adapt the way in which he works, his reduction in earning capacity would be permanent. The Judge was satisfied that the respondent’s knee will deteriorate, and that the rate of deterioration “in part, will depend on how much manual labour he continues to do.” His Honour found that the respondent’s “capacity for labour-intensive work will only diminish as time goes on”; he “will not be able to maintain his contribution to the business activities in the future to the level that he has done in the past”; and he will not be able to sustain the level of work that he has pushed himself to do up until the date of the trial.
The Judge mentioned the prospect that the respondent may undertake the further surgery that had been recommended, which would impact his future earnings. The likely requirement for at least one knee replacement at some point in the future was also relevant in this respect. The trial judge was satisfied that the respondent “will have a foreshortened working life” as a commercial floorer, and will thus have to endure the uncertainty of finding work within his experience and training.
Principles governing an assessment of damages
There is no dispute between the parties as to the principles governing the assessment of damages for personal injury, and in particular damages for loss of earning capacity. Nor is there any challenge to the trial judge’s articulation of those principles. However, as they are relevant to the appellant’s challenges to the trial judge’s application of those principles, it is appropriate to summarise those principles.
Damages for negligently caused personal injury are, of course, compensatory in nature. They are awarded to place the injured plaintiff in the same position he or she would have been in if he or she had not sustained the negligently caused injury.[2]
[2] Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39 (Lord Blackburn).

The damages recoverable by an injured plaintiff are often described as encompassing three types of loss:[3] (i) non-pecuniary losses (such as pain and suffering); (ii) loss of earning capacity; and (iii) actual financial loss (sometimes referred to as special damages, and relating to matters such as medical, accommodation and other rehabilitative expenses).
[3] CSR Ltd v Eddy (2005) 226 CLR 1 at [28]-[31] (Gleeson CJ, Gummow and Heydon JJ); Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [88] (Bell, Gageler, Nettle, Gordon and Edelman JJ).
Focussing upon damages for the loss of earning capacity, damages may be awarded to reflect the economic loss suffered by a plaintiff when his or her injuries interfere with his or her ability to earn income. While the award for economic loss is often divided for convenience into past and future loss of earning capacity, these are in reality just two components of the one head of loss. Both turn upon a consideration of whether the plaintiff has suffered a diminution of earning capacity that is productive of financial loss.[4]
[4] Graham v Baker (1961) 106 CLR 340 at 346-347 (Dixon CJ, Kitto and Taylor JJ).
As the plurality explained in Husher v Husher:[5]
… A person who is physically injured by the negligence of another may suffer damage in a number of ways. As has long been established, the damages to be awarded to the victim are “that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation”.[6] If the victim’s pursuit of gainful employment is interrupted or affected because of the negligent infliction of physical injury, the victim is to be compensated by an amount that reflects the financial consequences that follow from the impairment.
Since at least Graham v Barker[7] it has been recognised that it is convenient to assess an injured plaintiff’s economic loss “by reference to the actual loss of wages which occurs up to the time of trial and which can be more or less precisely ascertained and then, having regard to the plaintiff’s proved condition at the time of trial, to attempt some assessment of his future loss”.[8] But damages for both past loss and future loss are allowed to an injured plaintiff “because the diminution of his earning capacity is or may be productive of financial loss”.[9] Both elements are important. It is necessary to identify both what capacity has been lost and what economic consequences will probably flow from that loss. Only then will it be possible to assess what sum will put the plaintiff in the same position as he or she would have been in if injury had not been sustained.
[5]     Husher v Husher (1999) 197 CLR 138 at [6]-[7] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
[6]     Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39, per Lord Blackburn.
[7]     Graham v Baker (1961) 106 CLR 340.
[8]     Graham v Baker (1961) 106 CLR 340 at 346-347, per Dixon CJ, Kitto and Taylor JJ.
[9]     Graham v Baker (1961) 106 CLR 340 at 347, per Dixon CJ, Kitto and Taylor JJ. See also Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649 at 658, per Barwick CJ; Atiyah, “Loss of Earnings or Earnings Capacity?” Australian Law Journal, vol 45 (1971) 228.
As emphasised in the above passage, in order to recover damages for economic loss, whether past or future, the plaintiff must establish both that he or she has suffered a diminution in earning capacity, and that this is or may be productive of financial loss.[10] This second limb requires a comparison between what the plaintiff is likely to have earned if he or she had not suffered the injury, and what he or she is likely to earn in his or her injured condition.[11]
[10] See also Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 3 (Deane, Dawson, Toohey and Gaudron JJ); CSR Ltd v Eddy (2005) 226 CLR 1 at [30] (Gleeson CJ, Gummow and Heydon JJ); Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [90] (Bell, Gageler, Nettle, Gordon and Edelman JJ).
[11] Todorovic v Waller (1981) 150 CLR 402 at 412 (Gibbs CJ and Wilson J).
The burden lies on the plaintiff to prove the injury and loss for which he or she seeks damages.[12] At the same time, when determining and assessing the loss that has been suffered, the process does not usually permit of precise mathematical calculations. It will usually be one of judgment and estimation, rather than exactness. The Court must do the best it can to arrive at the estimate most likely to provide fair and reasonable compensation. In Todorovic v Waller,[13] Gibbs CJ and Wilson J described the task in the following terms:[14]
Although the aim of the court in awarding damages is to make good to the plaintiff, so far as money can do, the loss which he has suffered, it is obvious that it is impossible to assess damages for pain and suffering and loss of amenities of life by any process of arithmetical calculation. It may be less obvious, but is no less certain, that the assessment of damages for future pecuniary loss resulting from personal injuries can never be a mere matter of mathematics. It is true that as the assessment of damages has become more sophisticated, calculations are made in an attempt to achieve greater precision. Such calculations may sometimes give a false appearance of accuracy. Some of the figures on which they are based are the result of estimate or speculation. In the case of loss of earning capacity it is necessary to compare what the plaintiff might have earned if he had not suffered the injury with what he is likely to earn in his injured condition. In many cases this means that the court has to engage in “a double exercise in the art of prophesying”… Of course in some cases of serious injury it will be possible to say that the plaintiff is probably capable of earning nothing in the future. However, in no case can there be any solid basis on which to determine what the plaintiff would have earned if he had not received the injuries in respect of which he sues. Actuarial tables will show the average number of years which will be lived after a certain age by those alive at that age, but will not show that it is probable that the plaintiff, even if in good health, would have conformed to the average. No evidence can possibly indicate whether the plaintiff, had he not been injured, would have remained in good health, and continued to be employed at any particular rate of earnings. For these reasons, damages for financial loss likely to result from personal injury “can only be an estimate, often a very rough estimate, of the present value of his prospective loss”… Ultimately the process must always be one of judgment rather than calculation.
The difficulty inherent in the assessment of damages provides no reason for the courts to shirk the task of arriving at the estimate most likely to provide fair and reasonable compensation.
[12] Todorovic v Waller (1981) 150 CLR 402 at 412 (Gibbs CJ and Wilson J).
[13] Todorovic v Waller (1981) 150 CLR 402.
[14] Todorovic v Waller (1981) 150 CLR 402 at 412-413 (Gibbs CJ and Wilson J) (omitting citations); see also Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [92] (Bell, Gageler, Nettle, Gordon and Edelman JJ).
Further to the above, the need for a plaintiff to prove that he or she has suffered a diminution in earning capacity that “may” be productive of financial loss[15] is to be understood as requiring that the plaintiff establish that the diminution of earning capacity will, on the balance of probabilities, be productive of some financial loss.[16] However, consistently with authorities such as Malec v J.C. Hutton Pty Ltd[17] and Sellars v Adelaide Petroleum NL,[18] once the Court is satisfied on the balance of probabilities that the diminution of earning capacity will be productive of some financial loss, it must then assess the value of that loss by reference to the range of applicable possibilities and contingencies.
[15] Adopting the language from Graham v Baker (1961) 106 CLR 340 at 347, as applied in the passage from Husher v Husher (1999) 197 CLR 138 at [7] quoted above.
[16] Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [85] (Bell, Gageler, Nettle, Gordon and Edelman JJ); Husher v Husher (1999) 197 CLR 138 at [8], [15]-[22] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
[17] Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638.
[18] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.
In assessing the plaintiff’s loss of earning capacity, close attention must be paid to the facts of each case in determining what the plaintiff would have done and earned had the accident not occurred, and what the plaintiff is now likely to be able to do and earn. The question is not one to be resolved by focussing upon, or categorising the case by reference to, the legal structure through which the plaintiff would have generated his or her earnings. Rather, the focus must be upon what money the plaintiff would have had at his or her disposal. As the plurality said in Husher v Husher:[19]
Deciding what value is to be ascribed to the loss of future earning capacity of an injured plaintiff requires close attention to the facts of each case. The task is not one to be undertaken by seeking to classify cases as concerning “sole traders” or “partnerships” or “wage-earners” or “trading trusts”, and then attempting to deduce some rule of general application to all cases falling within the classification thus devised. Rather the inquiry is about what could the plaintiff have done in the workforce but for the accident and what sum of money would the plaintiff have had at his or her disposal. Only when those inquiries are pursued can a judgment be made about what capital sum to allow as damages for the impairment of the plaintiff’s earning capacity. In doing so, regard must be had, of course, to all those contingencies of life that might reasonably be expected to affect the course of events in the future.
[19] Husher v Husher (1999) 197 CLR 138 at [23] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
The above summary of the relevant principles reflects the approach applied by this Court in Eicas v Dawson.[20] While the common law principles summarised above are qualified in certain respects by the provisions of the Civil Liability Act 1936 (SA),[21] none of those qualifications are relevant to the outcome of this appeal.
[20] Eicas v Dawson [2016] SASCFC 124 at [103]-[114].
[21] In particular, ss 54 and 55 of the Civil Liability Act 1936 (SA).
Damages for past loss of earning capacity
The trial judge did not award the respondent any damages for past loss of earning capacity.
The trial judge’s reasons
The essence of the trial judge’s reasoning in support of this conclusion was that despite a reduction in the respondent’s earning capacity, this had not been productive of financial loss in the period prior to the trial. The respondent had managed to maintain the profitability of his business by shifting his business to extend it beyond just installation work to include some supply work, and by engaging some additional subcontractors to assist with the manual labour requirements of the business.
As the Judge explained:
[301]I have found that, based on an analysis of the invoices themselves, the change in the business from install to supply/install has not been significant and, in particular, has not been in the vicinity of 70-80%. I have, however, found the business records do support some shift in the first plaintiff’s business following the incident from install to supply/install. I consider that shift has come about because the first plaintiff has exercised an earning capacity (to supply product) that he had not fully exploited before the incident. However, there is a limit to that previously unexploited capacity. The shift to supply is complicated for a number of reasons, including that it involves the first plaintiff encroaching on the market of his best customers, competing with them and potentially jeopardising those ongoing customer relationships.
[302]As set out above, I am satisfied the first plaintiff has suffered a disability affecting his physical work capacity. There has been a reduction in his capacity to earn from his own personal labour in the business. I accept the first plaintiff’s submission that a discernible increase in the average cost of sales after the incident is supportive of a reduction in the first plaintiff’s personal labour input into the business. The shift in his business to supply/install has, in part, been necessitated by his reduced physical work capacity.
[303]The first plaintiff has mitigated his loss by making a shift in his business to supply/install and by continuing to work. I find that he has worked beyond his capacity. He has been able to do that by taking pain relief medication, modifying his work practices and reducing his participation in recreational activities (such as running). That is consistent with my finding that he is a stoic, committed and hard-working man, who is determined to push on.
[304]Such have been the first plaintiff’s efforts, that I do not consider that the diminution of his earning capacity has been productive of financial loss. I find that he has worked hard and mitigated his loss.
[305]I make no award for damages for past loss of earning capacity.
Diminution in earning capacity not productive of financial loss
As can be seen from the passage extracted above from the trial judge’s reasons, while his Honour accepted that there had been a diminution in the respondent’s earning capacity, he made no award of damages for past loss of earning capacity because it had not been productive of financial loss.
While the Judge did not make express reference to it in the above passage from his reasons (except, perhaps, through his reference to “modifying his work practices”[22] and the increase in the average cost of sales as a result of a reduction in his personal labour[23]), it seems that a significant consideration in his Honour’s conclusion as to the absence of past financial loss was the evidence as to the respondent’s use of a contractor (Mr Dunlevey) to assist him with some aspects of the work he would have otherwise undertaken. The Judge had recited this evidence earlier in his reasons, and because it is relevant to issues raised on the appeal it is convenient to set out the key aspects of that evidence.
[22] Although this may well have been a reference merely to the adjustments the respondent said he made to how he went about kneeling and squatting so as to lessen the weight upon his injured knee.
[23] The apparent implication being that the increase in cost was attributed to the cost of replacing his personal labour with that of a contractor.
We have already mentioned that as the respondent’s business grew, he engaged Mr Tansell (his brother-in-law) and Mr Davies as subcontractors. The respondent’s intention had been that Mr Tansell and Mr Davies would work as a two-man team, and that the respondent would take on another person to work with him. They would thus have two teams, which could come together on bigger jobs. However, that plan did not eventuate because Mr Davies left to start his own business. And by 2012 the respondent had ceased using Mr Tansell as a subcontractor on a regular basis.
After the accident, and once the respondent had come to appreciate the difficulty his knee injury was causing him, he commenced using Mr Dunlevey as an apprentice or assistant. Mr Dunlevey was only 17 years of age and inexperienced. As such, his labour was available at a much cheaper rate than the more experienced subcontractors the respondent had previously used.
The respondent’s evidence was that Mr Dunlevey undertook a significant amount of the work that was difficult for the respondent as a result of his knee injury and hence which he sought to avoid. Mr Dunlevey undertook a lot of the heavy lifting and other manual labour, leaving the respondent with more time to focus upon “the precision stuff”, such as pattern work, custom design, cutting and transferring the plan to the jobsite. The respondent estimated that he was receiving about 20 hours per week of additional assistance due to his restricted capacity.
The respondent said that in addition to Mr Dunlevey, he continued to occasionally call upon more experienced subcontractors, including Mr Tansell, depending upon the flow of work and the timeframes for certain jobs. While he had previously been required to do this, he said that he did so to a greater extent following the accident.
Despite this increased assistance, the evidence revealed that the respondent was able to maintain the profitability of his business. According to the partnership tax returns, the net income for the financial years ended 30 June 2010 through to 30 June 2018 was as follows:
·2010         $120,873
·2011         $159,908
·2012         $150,822
·2013         $104,452
·2014         $150,755
·2015         $164,314
·2016         $141,964
·2017         $136,080
·2018         $156,525
At first blush, it might seem surprising that the respondent was able to maintain the profitability of his business despite the need to use additional labour, and in particular Mr Dunlevey, to carry out work that he would previously have been able to carry out himself. However, it would seem that in fact the use of Mr Dunlevey, given the cheap rate at which his labour was available and their ability to work well together as a team, brought about an efficiency that essentially offset the cost of the additional labour.
Damages for future loss of earning capacity
Turning to damages for future loss of earning capacity, the nature of the issues raised on appeal requires close attention to the trial judge’s reasoning on this topic.
His Honour commenced by noting the principles to be drawn from the authorities, in terms consistent with the summary set out earlier in these reasons.
The trial judge then noted his earlier findings to the effect that the respondent had lost his ability to exploit his labour to the fullest extent. While he had been pushing himself to mitigate his loss, he was exceeding his capacity in a manner that was unsustainable. The Judge was satisfied that the respondent’s capacity for labour-intensive work will diminish as time goes on.
The trial judge referred to the appellant’s submission to the effect that any incapacity will not result in any financial loss to the business, because any reduction in the respondent’s labour could be met by engaging more subcontractors. But his Honour did not accept this submission.
The trial judge found that the respondent will not be able to maintain his contribution to the business activities in the future to the level he had done in the past. The respondent’s work was in the heavy to very heavy category, and his knee will deteriorate. The Judge also reiterated his earlier finding that the respondent’s ability to continue to expand into a supply and installation business will be limited for the reasons explained earlier.
His Honour then set out his method of assessing the loss of future earning capacity that he found the respondent had suffered:[24]
[24] Footnotes omitted.
[313]The first plaintiff put forward two alternative approaches to assessing the first plaintiff’s loss of earning capacity.
[314]Based on the income tax returns, I agree with the first plaintiff’s submission, that a conservative assessment of the first plaintiff’s uninjured earning capacity is $150,000 gross per annum, or $103,500 net per annum, or $1,990 net per week.
[315]The first plaintiff is now aged 43, but as at the date of trial, was 41. The first plaintiff approached the assessment by calculating the capitalised value of his uninjured earning capacity over his working life, namely $1,227,400 - $1,468,620.
[316]The first plaintiff submits he will likely require a total knee replacement within 15 years and if this occurs, he will not be able to work as a floorer. He also submits that his capacity for activities will reduce as time goes on. The first plaintiff submits that as a result of the accident, his earning capacity has reduced by one third, which in round terms, equates to a loss of between $400,000 - $485,000. Assuming contingencies of 15%, the capitalised loss is $340,000 - $415,000, with the ‘mid-range’ being $375,000.
[317]The first plaintiff submits that an alternative approach is to assess the loss by reference to the cost of replacement labour. The first plaintiff submits it is appropriate to calculate this loss by reference to 20 hours per week at an average cost of $500 (approximately half of the cost of a fulltime inexperienced subcontractor at $1,000 per week), using the same multipliers (to age 60 and 65), that produces a total of between $323,000 - $369,000. Assuming contingencies of 15%, the total loss on this approach is $289,000 - $313,000 with a mid-range in round terms of $300,000.
[318]If it had not been for the incident, I consider it likely the first plaintiff would have worked to the age of 60 and possibly slightly longer. Given his general health and fitness prior to the incident, I take into account the possible contingency that he may have worked to age 65.
[319]In light of his injury, I agree with the first plaintiff’s submissions, that he is likely to try and push on as long as possible, but he will have a foreshortened working life as a result. There is also the risk that the first plaintiff will undertake further surgery, meaning there will be a period of time when he is required to recuperate from such surgery, with resulting impact on his earnings.
[320]The first plaintiff submits the most suitable approach to the assessment is that the first plaintiff will work to age 65, but to allow a very generous reduction to take into account the various submissions made by the defendant. Those submissions include that, given the nature of the first plaintiff’s work, injury might have befallen the plaintiff and/or he may have required surgery or a knee replacement in any event.
[321]Having regard to the matters set out above, I consider it reasonable to assess the incident as having reduced the first plaintiff’s earning capacity, by something slightly under 30%; 28% of $1,900 is $532. The 5% multiplier, for a male aged 41, to age 65 is 738.
[322]The capitalised value of a loss of $532 per week to age 65, is $392,616. Reducing this by 15% for contingencies reduces it to $333,724.
[323]I allow the sum of $330,000 for future loss of earning capacity.

The trial judge’s approach may be summarised as having involved consideration of two hypotheses proffered by the respondent.
The first took as its starting point an uninjured earning capacity of $103,500 net per annum and $1,990 net per week. It involved the application to this figure of the 5 per cent multipliers for a 41 year old male through to ages 60 and 65 of 646 and 738, producing a range for the capitalised value of the respondent’s uninjured earning capacity over his working life of between $1,227,400 and $1,468,620.[25] Assuming a one-third reduction in this capacity on account of the respondent’s reduction in his activities over time, and his need for a knee replacement in say 15 years, and a reduction for contingencies of 15 per cent, gave a loss in future earning capacity in the range of between about $340,000 and $415,000, with a mid-range figure being $375,000.
[25] These figures appear to reflect a slip in the respondent’s trial submissions, with the lower figure in the range using a net weekly earnings of $1,900 and the higher figure in the range using a net weekly earnings of $1,990.
The second involved a focus upon the cost of replacement labour. It involved taking the respondent’s estimate at trial that he had been requiring about 20 hours per week of additional assistance, at an average cost of $500 per week (being half the cost of a full-time inexperienced subcontractor), and applying the same multipliers and reduction for contingencies, to arrive at a loss of future earning capacity in the range of between about $289,000[26] and $313,000, with a mid-range figure being $300,000.
[26] This lower figure appears to reflect a slip in the respondent’s trial submissions, reflecting an approximately 10 per cent reduction for contingencies rather than the stated 15 per cent reduction.
Having had regard to these two hypotheses, the trial judge concluded that it was reasonable to assess the respondent’s future economic loss on the basis that he had suffered a reduction in future earning capacity of slightly under 30 per cent. Having selected a figure for the reduction of 28 per cent, his Honour applied this to $1,900, giving a weekly sum of $532. Applying the 5 per cent multiplier for a 41 year old man through to age 65 of 738, and making a reduction for contingencies of 15 per cent, gave a figure for the loss of future earning capacity of slightly in excess of the rounded figure of $330,000 that his Honour ultimately awarded.
Appellate intervention
The principles governing appellate intervention were recently summarised by this Court in Pitt v Commissioner for Consumer Affairs[27] and need not be repeated.
[27] Pitt v Commissioner for Consumer Affairs [2021] SASCA 24 at [114]-[118].
However, it is important to bear in mind that the challenge in the present appeal is to the trial judge’s assessment of damages for future economic loss. As the parties accepted, this Court’s task is thus akin to that which applies in relation to appeals from discretionary decisions. The Court will only interfere where satisfied that the trial judge erred as a matter of principle, misapprehended the facts, or has otherwise made a wholly erroneous estimate of the damage suffered.[28]
[28] McCartney v Orica Investments Pty Ltd [2011] NSWCA 337 at [123]; Diamond v Simpson (No 1) [2003] NSWCA 67 at [15]-[18]; Amaca Pty Ltd v Werfel [2020] SASCFC 125 at [391] (in the context of an award of general damages).
The contended errors
In challenging the trial judge’s assessment of the respondent’s future loss of earning capacity, counsel for the appellant emphasised what he contended were three errors. In general terms, he contended that the trial judge erred:
·in using a multiplier that assumed the respondent would work to 65 years of age;
·in confining his reduction for contingencies to 15 per cent; and
·in assuming a reduction of $532 per week (or 28 per cent) in earnings that would commence immediately following the trial and continue throughout the respondent’s working life.
We propose to address each of these in turn. For the reasons we will develop, we are not persuaded that any of the contended ‘errors’ are individually sufficient to warrant this Court interfering. However, after taking into account the combined effect of the matters raised by the appellant’s counsel in support of these contended errors, we are satisfied that the award of damages for future loss of earning capacity was excessive in the relevant sense. We would thus set aside, and reassess, that component of the respondent’s damages.
Use of a multiplier that assumed the respondent would work to 65 years of age
The appellant complains that the trial judge erred in assessing the respondent’s damages for future loss of earning capacity on the assumption that the respondent would have worked until age 65 had it not been for the injuries he sustained in the accident. It was contended that this methodology was inconsistent with the trial judge’s finding (at [318]) that had it not been for the accident, it was “likely the [respondent] would have worked to the age of 60 and possibly slightly longer. Given his general health and fitness prior to the incident, I take into account the possible contingency that he may have worked to age 65.”
Generally speaking, an appellate court should resist the lawyer’s urge to parse and analyse too closely the precise words used by a trial judge in a context such as the present. The focus should be on the substance of the trial judge’s approach to the task of assessing loss, and the outcome of that approach, rather than the precise terms in which it is articulated.
Further, and related to this, an appellate court should be alive to the distinction between particular statements made by the trial judge in the course of setting out the various considerations to be taken into account in assessing a plaintiff’s damages, and the final outcome of the trial judge’s assessment. In the present case, for example, the trial judge stepped through the two hypotheses advanced by the respondent at trial; however, he appears to have done so merely as a means of identifying some ranges that assisted him in a general sense in arriving at the assessment he ultimately made, rather than providing any direct numerical basis for that assessment.
In some cases, the assessment ultimately made will quite appropriately appear simply as a number that reflects the outcome of the Judge’s synthesis of the relevant considerations, without the Judge exposing any particular calculation directly underpinning that figure. In other cases, the present being one, the Judge might expose a calculation or calculations that have been used in deriving the sum awarded. However, when that occurs, the appellate court should not lose sight of the fact that the calculation may be no more than a convenient way of expressing the Judge’s estimate of an appropriate award; that the Judge’s estimate may nevertheless have been informed by, and reflect, a range of considerations that are not explicitly reflected in that calculation; and that the focus should remain upon the appropriateness of the sum ultimately awarded as an estimate of the future loss of earning capacity, and not the precise articulation of its derivation.
All of that said, we accept that in the present case there is a tension between the trial judge’s reasoning at [318] and his Honour’s use of a 5 per cent multiplier for a male aged 41 years through to age 65 in arriving at the award for future loss of earning capacity. In our view, a fair reading of the trial judge’s reasoning at [318] is that his estimate of the age at which the respondent was most likely to have ceased working, were it not for the accident, was 60 years of age; and that his Honour regarded the prospect of the respondent working through to 65 years of age as a mere possibility. Indeed, given his Honour’s reference to the respondent working “possibly slightly longer” than 60 years of age, it would seem that his Honour considered it relatively unlikely that he would have worked all the way through to 65 years of age. This interpretation of the trial judge’s reasons is supported by the evidence at trial to the effect that commercial floor installers, or carpet layers, often struggle to work past their late 50s given the demands of the work on their bodies and in particular their knees.
In our view, when using a multiplier to assess damages it will usually be preferable to use the multiplier that best approximates the Judge’s view as to the most likely scenario, if for no other reason than to reduce the need for, and the scale of, the adjustments to be made, and hence to reduce the scope for the award to be distorted by the process of arriving at those adjustments. Applying that approach here, the preferable approach would have been to use the multiplier through to age 60. That would have given a starting point, before any reduction for contingencies, of close to $50,000[29] less than the starting point used by the trial judge. Adopting this approach, it may have been appropriate to include some (relatively modest) allowance for the possibility that the respondent would have worked beyond the age of 60, whether as part of a general allowance for contingencies or otherwise. That said, the prospect that the respondent might have ceased work prior to age 60 was also a matter to take into account.
[29] $343,672 (being $532 x 646), as opposed to $392,616 (being $532 x 738).
We accept that it was open to his Honour to use the multiplier to age 65, rather than the multiplier to age 60. But in adopting this approach it was necessary, as the respondent accepted at trial, that there be a “very generous reduction” to take account of his Honour’s findings that it was likely the respondent would have worked to age 60 and possibly slightly longer.
As developed in the next section of these reasons, the trial judge made a reduction of 15 per cent on account of contingencies. This percentage reduction represents a fairly standard or typical reduction for the ordinary vicissitudes of life, and was not accompanied by any express reference to it being intended to cater for other than what would be covered by a typical reduction. Even if it might be inferred, from his Honour’s earlier reference to the respondent’s concession that a “very generous reduction” was appropriate, that the trial judge did intend to include some component in this reduction for his earlier finding to which we have referred, we have some reservations as to the sufficiency of the reduction.
Reduction for contingencies of 15 per cent
The appellant’s counsel contended that, even accepting that the trial judge’s approach to the assessment of the respondent’s future loss of earning capacity was otherwise appropriate, the reduction of 15 per cent for contingencies was erroneously low.
There is some overlap between this contended error and the matters addressed under the previous heading. However, even putting those matters to one side for the moment, the appellant’s counsel contended that the Judge ought to have made a greater reduction for contingencies.
As the parties accepted, it is typical in assessing damages for future loss of earning capacity to make a reduction for the ordinary contingencies of life of between about 10 per cent and 15 per cent. Such reduction is intended to reflect the possibility that even if the plaintiff had not suffered the relevant injury, he or she may nevertheless have had their earning capacity affected by matters such as some other injury or sickness, or a period of unemployment or a downturn in trading conditions that affects their earnings.
The appellant contended that the present case is one which required a significant reduction for contingencies, even putting to one side the matters addressed under the previous heading. The appellant emphasised in this respect: the significant component of heavy manual labour involved in the respondent’s work, making him particularly vulnerable to injury; the fact that the respondent was operating his own business, which made his earnings vulnerable to changes in trading conditions and other economic forces; and the fact that the respondent had left school at the end of year 11 and did not have any formal qualifications to assist him in obtaining alternative employment had that been necessary.
We accept the general thrust of the appellant’s submission. While the Judge accepted that the respondent was a fit, active and healthy man prior to the accident, it would have been appropriate to make a significant allowance for the ordinary vicissitudes of life. But in addition to the ‘ordinary’ vicissitudes of life, the facts of the present case meant it was also necessary to make some allowance for the possibility that events might have differed from what the Judge had assumed in arriving at an appropriate award: for example, to reflect the possibility that the respondent might have worked longer or shorter than the Judge assumed, and to reflect the possibility that the contemplated further surgeries might have occurred sooner or later than assumed. Whilst the allowance needed to reflect both positive and negative contingencies, the facts in this case required a net reduction to take account of these matters.
Again, it is difficult to conclude that the trial judge’s reduction for contingencies, of itself, involved error. However, the matters canvassed above tend to reinforce our previously expressed reservations as to the sufficiency of the reduction that his Honour made for contingencies (given the assumptions underpinning the calculation of the sum to which that reduction was made).
Assumed reduction of $532 per week, or 28 per cent, in earnings
As outlined earlier, the trial judge based his assessment upon a calculation that assumed a reduction of $532 per week (or 28 per cent) in the respondent’s earnings, to commence immediately following the trial and to continue throughout the respondent’s working life.
In impugning the appropriateness of an assessment based upon this calculation, the appellant’s counsel challenged: (i) the finding that the respondent’s pre-accident earning capacity was $103,500 net per annum; (ii) the finding that the diminution in the respondent’s earning capacity was in the order of 28 per cent or $532 net per week; (iii) the apparent reliance upon the cost to the partnership of replacement labour in arriving at the estimated diminution; and (iv) the implicit assumption that any such diminution would commence immediately following the trial.
As to the first of these challenges, the appellant contended that the trial judge’s assumption of pre-accident earning capacity of $150,000 gross per annum, or $103,500 net per annum, was generous, if not unjustified. The appellant's counsel pointed to the pre-accident earnings of the partnership in the years ending 30 June 2010 through to 30 June 2013 of $120,873, $159,908, $150,822 and $104,452. He emphasised that the average of these figures was only $134,013, and that the earnings in the most recent of these years was significantly less than this average. Against this, it should be noted that the accident did not occur until April 2014, and the gross earnings for the year ended 30 June 2014 were $150,755.
The appellant contended that a more realistic assumption would have been to take the average of the earnings in the years ending 30 June 2010 to 30 June 2013 of $134,013 gross per annum. Using the trial judge’s assumption of net earnings of approximately 70 per cent of the gross figure, that would have given a reduced net figure of $93,809 per annum, and $1,804 per week. Even assuming the Judge’s approach of a 28 per cent reduction, that would have reduced the loss to approximately $315,000 (using a multiplier through to age 65 and a 15 per cent reduction for contingencies), or approximately $275,000 (using a multiplier through to age 60 and a 15 per cent reduction for contingencies).
In our view, there was no error in the figures adopted by the trial judge for the partnership earnings. That said, as the appellant’s submissions highlighted, the relatively low earnings for the year ending 30 June 2013 meant that there was a degree of uncertainty about those earnings that was relevant to the ultimate assessment of the respondent’s damages for future loss of earning capacity.
The appellant did not challenge the trial judge’s reliance upon the partnership earnings as an indicator of the respondent’s earning capacity, despite the income splitting that had been occurring between the partners (the respondent and his wife) prior to the accident. However, the appellant’s written submissions did include a challenge to the trial judge’s use of these earnings on the basis that they included earnings that were derived through the use of subcontractors. To the extent this challenge was pressed, we reject it. The figures used by the Judge were after-expenses figures that were reduced to take into account subcontractor expenses. While the partnership earnings were not all directly attributable to the respondent’s personal exertion, this is not to the point. It was appropriate in the circumstances of this case for the Judge to use business earnings as indicative of the respondent’s earning capacity.
As to the second and third challenges mentioned above, the appellant’s counsel contended that there was simply no basis in the evidence, nor indeed any identifiable rationale, for the trial judge’s assumption of a reduction in the respondent’s earning capacity of approximately 30 per cent; let alone the more precise figure of 28 per cent.
It is true that the trial judge did not identify any particular rationale for this assumed reduction. While it is likely that it was informed by the two hypotheses proffered by the respondent at trial (as outlined by his Honour), we do not think the figure was based directly upon either of those hypotheses. Rather, we think it was more in the nature of a general estimate based upon the Judge’s consideration of all of the matters set out in the relevant section of his reasons.
To the extent that the reduction was informed by the additional cost of replacement labour that the respondent had been incurring in the period leading up to trial, we accept that this additional cost was of limited significance. The reason it was of limited significance is that the evidence revealed that this additional cost had resulted in efficiencies within the business that had resulted in those costs being largely, if not entirely, absorbed. Put another way, it had not resulted in any significant reduction in the profitability of the business. But as it is not clear from the trial judge’s reasons that he did rely in any direct way upon these additional costs, we do not think this point takes the appellant very far.
The fourth and most fundamental challenge made by the appellant is related to the above. The appellant contends that even accepting, as it does, that the respondent suffered some diminution in future earning capacity that was likely to be productive of financial loss, there was no basis for concluding that this loss would commence immediately following the trial. The appellant contends that the trial judge’s approach, which involved assessing the loss on the basis of a calculation that implicitly assumed that the loss would be incurred at a steady rate for each and every week commencing immediately following the trial, was apt to result in a significant overstatement of the respondent’s loss.
We accept that it will often be appropriate to base an assessment of future loss of earning capacity upon a figure arrived at through the application of a multiplier to a weekly loss. However, care is needed in using such an approach in a case, such as the present, where the profile of the loss over time is likely to differ significantly from the straight-line assumption that underpins the use of a multiplier in this way. This care is required to ensure that the sum awarded is not distorted by reason of the impact of the time value of money.

In the present case, it was unlikely that the respondent would commence to suffer any significant financial loss until some years following the trial. To the contrary, it could be safely assumed that the respondent would, at least initially, continue to operate as he had prior to the trial. On the Judge’s findings, this would have enabled him to avoid any significant financial loss for a period following the trial. While it is impossible to be precise, it seems likely, on the Judge’s findings, that the respondent’s loss of earning capacity would not be productive of financial loss for at least a few years following trial. Indeed, on the evidence of Dr D’Onise (to the effect that even in 10 years time the respondent might need only about 10 hours of additional assistance each week with menial tasks), it may well be quite a few years before the respondent suffers any significant financial loss.
On the other hand, it is also likely that at some point in the future, the respondent’s loss of earning capacity will not only commence to be productive of financial loss, but also become increasingly so over time. This follows, in our view, from the Judge’s findings, as summarised below.
As detailed earlier, the respondent is suffering from a degenerative knee injury. As at the date of trial he was already suffering from significant pain and restrictions, and it follows from the Judge’s findings that the pain and restrictions will only increase over time. The respondent was already working beyond his capacity, and the rate at which his knee will degenerate is likely to be affected by the extent to which he continues to use, indeed overuse, that knee. It is thus plain that the respondent will at some point have to reduce his own input into the business activities further than he had had to do prior to the trial, and correspondingly require greater assistance to maintain the earnings of the partnership.
While the reduction in the respondent’s input prior to the trial has not resulted in any reduction in the partnership’s earnings, we do not think it follows that those earnings are likely to be sustained once his input is reduced further. We do not think it can be assumed, or inferred, that there is room for significant further efficiencies through relying upon additional replacement labour. We do not think it can be assumed that replacement labour would always be available at the low rates at which the respondent had been able to obtain it in the period leading up to trial. Presumably the subcontractor used by the respondent will continue to cost more as he becomes more experienced; and while it might be possible to hire further inexperienced assistance, we do not think it can be assumed that this could continue to occur to an increasing extent without any reduction in the earnings of the business.
In assessing the respondent’s loss of future earning capacity, it was thus necessary to take account of the likely delay in it being productive of financial loss, as well as the likelihood of it ultimately increasing over time.
In addition to the above, it was also necessary to take into account the trial judge’s finding that the respondent might have to undergo further surgery (an arthroscopic debridement) and eventually a total right knee replacement. If the latter did not, of itself, result in a foreshortening of the respondent’s working life, then there was also a risk of this occurring as a result of the deterioration in the respondent’s knee to the point where he was no longer able to operate the business.
In relation to the possibility of further surgery in the form of an arthroscopic debridement, the evidence did not permit a finding as to the extent of the interruption that any such surgery would have caused to the respondent’s business. Given his quick recovery from, and hence the limited impact upon his business of, his previous similar surgery, the evidence does not warrant more than a modest allowance for the prospect of this surgery.
However, the prospect of the respondent being required to undergo a full right knee replacement, and the consequential foreshortening of his working life, is a more significant matter. We have earlier noted that while the trial judge found that it was more likely than not that the respondent would need a right knee replacement, his Honour did not make any finding as to when this would occur. The expert evidence on this topic varied from 15 to 20 years (Dr Bastian), to 15 years (Dr D’Onise), to it not being possible to say (Dr Ling and Dr Jackson). Dr Bastian also gave evidence to the effect that knee replacements often do not last much more than about 15 years, such that people are generally encouraged to delay having one until they are at least 60 years of age so as to reduce the risk of them needing to undergo a second knee replacement later in life.
The evidence does not enable this Court to make any precise assessment of when the respondent is likely to undergo a knee replacement, or to otherwise be forced to cease operating his business. However, in assessing the reasonableness of the Judge’s award for future loss of earning capacity, it is useful to consider the financial consequence of the respondent ceasing to work at the age of say 56 years (being 15 years after the trial).
On the calculations provided to this Court by the parties, a four year foreshortening in the respondent’s working life (from 60 years of age to 56 years of age), assuming net weekly income of $1,900, and after a 15 per cent reduction for contingencies and discounting to reflect the deferral of that loss, would result in a loss of future earning capacity of slightly less than $150,000. On the other hand, if the respondent is not required to undergo a full knee replacement until he reaches 58 years of age, with the result that his working life was only foreshortened by two years, then this loss would be reduced to slightly less than $70,000. The midpoint of these figures, reflecting a three year foreshortening of the respondent’s working life, is $110,000.
It is possible that, even after a full knee replacement, the respondent might have some residual capacity to earn an income. However, the prospect of him earning any significant amount is fairly remote. Indeed, whatever separate (downward) adjustment might be made on this account might be offset by the prospect that had the respondent not been injured, he may have pursued some other source of earnings even after he was no longer able to play any active role in his commercial flooring business.
In summary, there is some force in the challenges made to the trial judge’s use of an assumed weekly loss of earnings of 28 per cent, or $532 net per week, throughout the period from trial to the end of the respondent’s working life. While we do not think the use of these figures was necessarily erroneous, it remains for us to address the combined effect of all of the matters that we have canvassed to this point.
Conclusion
We have mentioned earlier the restraint that an appellate court should exercise when considering whether to interfere with a trial judge’s assessment of damages.
We are not persuaded that the trial judge in the present case made any error of principle or fact. However, having regard to the combined effect of the various matters raised by the appellant in support of its challenge to his Honour’s assessment of the respondent’s future loss of earning capacity, we are satisfied that the sum awarded was excessive in the relevant sense. In our view, the use of a multiplier from the date of trial through to age 65, with a reduction of 15 per cent for contingencies, has resulted in an award for future loss of earning capacity that is too high. We would set aside this component of the trial judge’s assessment of damages and undertake a fresh assessment.
On the trial judge’s own findings, the profile of the loss to be suffered was such that there was likely to be a delay of several years after trial before the loss commenced to be productive of any significant financial loss. It is to be expected that that loss will then increase over subsequent years, with the respondent ultimately reaching the point where he is likely to have to cease working earlier than he would otherwise have done so.
On the basis that the best estimate of when the plaintiff would otherwise have ceased working was at 60 years of age, the loss flowing from this being brought forward by a period of four years (to a point about 15 years after the trial, when the respondent will be 56 years of age) would be approximately $150,000. We would reduce this to $110,000 (which corresponds to the loss referable to a three year foreshortening of the respondent’s working life) to reflect the prospect that the respondent will be able to defer having a knee replacement beyond this point in time.
In addition to this, we consider it appropriate to allow an amount of $180,000 on account of the loss to be suffered by the respondent ahead of that point in time. In arriving at that figure, we have not used any particular weekly rate or multiplier. Rather, we have assumed a delay of several years in the commencement of the loss, with the loss then increasing steadily over the period until the respondent requires a knee replacement or otherwise ceases to work. In arriving at a figure for this component of the respondent’s loss, we have of course had regard to the time value of money, and the consequential need to discount more heavily the greater losses suffered later in this period.
Adding these two components together to give a total of $290,000, and then reducing this figure by slightly less than 15 per cent on account of contingencies (both positive and negative), gives a sum of $250,000, instead of the trial judge’s figure of $330,000, for future loss of earning capacity. While we have earlier suggested that the trial judge’s reduction of 15 per cent for contingencies may not have been sufficient, we are satisfied that the reduction we have made is appropriate given the differing (and less favourable to the respondent) assumptions that underpin our assessment. More fundamentally, and bearing in mind the uncertainty and lack of precision inherent in the task, the ultimate figure of $250,000 reflects our judgment as to the extent to which the respondent’s injuries have resulted in a reduction of his future earning capacity that will be productive of financial loss.
Orders
For the reasons set out, we consider that the appellant has established error in the trial judge’s approach to the award of damages for future loss of earning capacity. We allow the appeal, and set aside the judgment in favour of the respondent. We substitute an award of $250,000 for future loss of earning capacity, and hence a reduced judgment in favour of the respondent in the amount of $398,617.
We will hear the parties in relation to costs.