Clyde Thomas Cole v Graham Sydney Ellis No. SCGRG 89/1074 Judgment No. 3931 Number of Pages 14 Damages

[1993] SASC 3931

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA MOHR(1), BOLLEN(2) AND MILLHOUSE(3) JJ

CWDS
Damages - Road accident - injury - assessment of damages - plaintiff was a diver for abalone - injury forced him to give up that work - he had conducted business in partnership with his wife and then by way of a Trust - he was the only person who earned income for partnership and Trust - others were employed to do "his" work after he sustained injury - HELD the base for assessment of damages for loss of capacity was IN THE CIRCUMSTANCES the full cost of substituted labour with deductions for the plaintiff's retained capacity to earn, tax and contingencies - HELD, too, the existence of 534 of the Wrongs Act did not IN THE CIRCUMSTANCES prevent assessment in the manner mentioned above
Wrongs Act 1936 (SA) s34. Zachopaulos v SGIC (1986) Aust Tort Reports 80-023; Dal Zotto v Bonnani and Ors (1980) 47 FLR 239; Spargo v Hadden Engineering Pty Ltd (Full Court (SA), 25 March 1993, unreported) and Andriolo v G and G Constructions Pty Ltd and Ors (1989) Aust Torts Reports 80-235, applied.
Lago v Lago (1983) 2 Qd R 27, distinguished.
Hay and Anor v Hughes (1975) 1 All ER 257, considered.

HRNG ADELAIDE, 8 and 13 April 1993 #DATE 15:5:1993
Counsel for appellant:     Mr K R McCarthy QC
   with Mr P W Eriksen
Solicitors for appellant:    Ross and McCarthy
Counsel for respondent:     Mr D E Clayton QC
   with Mr J S Roder
Solicitors for respondent: Tony Bassett and
   Partners

ORDER
Appeal dismissed.

JUDGE1 BOLLEN J The respondent was the plaintiff in the court below. He was injured in an accident on a road at Port Lincoln on 17th July 1985. He was driving a motor car. The appellant was driving another motor car. They collided. The respondent was injured. He brought this action claiming damages in negligence against the appellant. 2. The learned trial Judge found that the sole case of the accident and of the injury was the negligence of the appellant. The learned trial Judge found that the respondent had suffered loss and damage in respect of all the conventional categories of loss. He assessed damages thus:- " Past non economic loss $ 12,000.00 Future non economic loss $ 6,000.00 Special damages $ 2,664.55 Past economic loss $167,400.00 Future economic loss $ 40,000.00 $228,064.55 " 3. Prior to the accident the respondent was a diver for abalone. He tried to continue with that work after the accident. He was compelled to give up. The diver brings up abalone from the sea. He descends into the sea from a boat. A man on the boat removes the shell from the abalone. He is called a sheller. That is a heavy and difficult work. The respondent tried to do this work but he had to give that up. The learned trial Judge found that he had to give up both the jobs by reason of the sequelae of his injury. The respondent and his wife, carrying on as a partnership, purchased the "abalone licence" on 12th February 1981. They were in partnership as "C J and M C Cole". I will come back to refer to the partnership by quotation from the reasons from the learned trial Judge. 4. The respondent resumed or attempted to resume diving on 12th November 1985. He experienced pain and illness. He gave up diving on 1st June 1988. 5. The plaintiff was born on 10th July 1947. At the time of trial he was aged 45 years. 6. I will now quote passages from the reasons of the learned trial Judge. All facts mentioned in these passages are, in my opinion, well supported by adequate evidence. All findings of fact are, in my opinion, unassailable. These passages speak of the way in which the respondent carried on business, speak of his being driven to give up diving and shelling and why, speak of the establishment of a Trust, speak of what was done to replace the respondent's labour and bring to a point the issues before this Court. Those issues are issues touching the assessment of damages. There has been no appeal against the finding of negligence. Before I quote from these passages I mention that although the respondent had had injuries even prior to the accident he had always recovered from them. None caused lasting incapacity. At the time of the accident he was fit to do the work of a diver for abalone and, if put to it, the work of a sheller. 7. The learned trial Judge discussed the injury sustained by the plaintiff thus:-
    "I turn to the assessment of the plaintiff's damages. He
    sustained a whiplash type injury to his cervical spine. He was
    taken to the Port Lincoln Hospital shortly after the accident
    where he saw Dr. McGeoch. I accept the evidence of Dr. McGeoch
    that the plaintiff suffered 'quite a severe' soft tissue injury
    caused by the sudden and forceful flexion of his neck when the
    vehicles collided. Mr. Fletcher, a general surgeon who saw the
    plaintiff for medico-legal purposes in December 1988, described
    the plaintiff's injury as a 'fairly serious injury of the
    whiplash type.' Anti-inflammatory medication and physiotherapy
    was prescribed. The plaintiff was not admitted to hospital. He
    suffered a good deal of pain, restriction of movement in his
    neck and pain in his right shoulder and the right side of his
    head and has continued to suffer pain and discomfort to varying
    degrees from time to time ever since. He was a professional
    abalone diver at the time and lived an active life. He played
    competitive squash. Initially he was unable to drive or play
    squash due to his injury. Regular physiotherapy did not relieve
    his symptoms and a few weeks after the accident he commenced
    wearing a neck brace. He continued to do so, most of the time,
    for a period of about six weeks and, thereafter, for about
    another six weeks he wore the brace intermittently as required.
    The plaintiff did not return to diving until 12th November 1985.
    He had occasional physiotherapy and chiropractic treatment on
    his neck. With the passage of time the condition of his neck
    improved but he continued to suffer pain and discomfort
    periodically." 8. The learned trial Judge found that "a consequence of the injuries sustained in the accident is that the plaintiff had to give up his occupation of diving". His Honour then said:-
    "Assessment of the plaintiff's damages for economic loss, both
    past and future, poses some difficulty. The plaintiff is now
    aged 45 years. He has worked hard during his life and is a
    resourceful man. He married in 1969 and has two children,
    including a son who will attain the age of 21 years in 1994.
    The plaintiff acquired an abalone fishing licence in 1981 for
    which he paid $130,000. He worked as an abalone diver
    consistently and effectively until the accident. Before 1981 he
    conducted a fibreglassing business in partnership with his wife.
    The partnership continued after the acquisition of the licence
    and all the proceeds of the sale of abalone were paid into the
    partnership. There was no written partnership agreement but the
    accounts of the partnership reveal that the plaintiff and his
    wife shared equally in the profits. I accept that the plaintiff
    could have terminated the partership at will and that the
    partnership was formed and continued to minimize income taxation
    by the equal division of the net income from the abalone fishing
    business. The partnership owned the boat and other equipment.
    Due to the regulation of the fishing industry and the
    supervision of fishermen by the Fisheries Department, extensive
    records are available as to the fishing activities of the
    plaintiff over the years. Only 23 licences have been issued for
    the taking of abalone in the areas fished by the plaintiff. He
    has been very successful as a fisherman and has earned
    substantial profits consistently.
    Prior to the accident, the plaintiff worked as the diver and
    employed a person to shell the abalone. He took abalone from
    various depths and worked underwater for extensive periods at a
    time. As he collected the abalone, he placed it in a bag. When
    the bag was full, it was sent to the surface. The sheller
    retrieved the bag and then removed the meat from the shell, a
    process called 'shucking'. The meat was kept in cool containers
    and, at the end of the fishing and arrival on shore, was
    delivered to the place where it was sold. These activities
    involved the plaintiff and the sheller in travelling to various
    locations on the West Coast of South Australia. The sheller was
    paid 12% or 10% of the gross sale price of the catch depending
    upon whether the sheller was to contribute to expenses. Quotas
    for abalone licences were introduced on 1st September 1985.
    The plaintiff's son is a keen and proficient diver and wants to
    work as an abalone diver. The plaintiff holds the view that
    young men should not work in that occupation before attaining
    the age of 21 years. Since accepting that the son will be an
    abalone diver, the plaintiff has always intended to give up
    diving at that time, namely February 1994, and that the son
    should work the licence thereafter. His claim for damages for
    economic loss is based upon his incapacity to work as a diver.
    Consequently, his claim for future economic loss is limited to
    the period from trial until that time.
    I accept that the plaintiff was unable to resume diving until
    12th November 1985 due to the injuries he sustained in the
    accident. At that time the Department would not permit abalone
    divers to employ relief divers for more than six days each month
    and such divers could only be employed for good reason and with
    the permission of the Department. Eventually, the plaintiff
    obtained permission to employ Mr. Eldridge as a relief diver.
    He worked as the diver for six days in each of July, September
    and October 1985. The season is closed in August each year. He
    was paid $16,531.60 by the partnership for that work. After the
    defendant resumed diving, there were days when he did not dive
    due to his injuries. If the sea was rough, he could not
    tolerate the jarring of his neck and shoulder caused by the boat
    travelling to the location of the dive. There were occasions
    when, despite good weather, he was unable to dive due to pain
    and discomfort in his neck and shoulder. Also, there were
    occasions when he did not stay in the water for as long as had
    been the case before the accident due to his injury.
    Nevertheless, with these exceptions, he continued to dive and
    the proceeds of the catch were paid to the partnership until
    28th February 1987. At that time, on the advice of accountants,
    the plaintiff and his wife caused a discretionary family trust
    with the name The Cole Family Trust ('the Trust') to be formed
    with Tarakan Pty. Ltd. as the trustee ('the Trustee'). They
    have been the sole shareholders in, and directors of, the
    Trustee. The Trustee may allocate capital and distribute income
    to the beneficiaries of the Trust in the exercise of an
    unfettered discretion. The beneficiaries, who so far have
    received distributions of income, are the plaintiff, his wife,
    the two children and two companies: S.A. Abalone Developments
    Pty. Ltd. and Jonuta Pty. Ltd. in which the plaintiff has
    interests through the medium of the Trust. The assets of the
    partnership were transferred to the Trust. It was suggested
    during the trial that by the time that the Trust was formed,
    there had been a change in policy by the Fisheries Department so
    that an abalone licence no longer had to be held by a natural
    person but could be held by a company or trust which could
    employ a diver. The plaintiff appears to have believed that to
    be the case and that he transferred the abalone licence to the
    Trust. The relevant documentation suggests that he retained the
    licence but it has been treated as an asset of the Trust in the
    accounts of the Trust.
    After the Trust was formed the fishing activities continued as
    before. The total proceeds of the catch were received by the
    Trust which paid all of the expenses including the payments to
    the sheller. It was not established that the Trust employed the
    plaintiff as the diver. He was paid a salary by the Trust, as
    was Mrs. Cole, but he performed other duties for the Trust.
    The plaintiff continued to dive, as before, with restrictions
    and limitations.
    Due to the continuing problems with his neck and shoulders, he
    consulted Dr. Morton in July 1987 instead of Dr. McGeoch who had
    left Port Lincoln. Dr. Morton referred him to Dr. Gorman at the
    Royal Adelaide Hospital, who saw the plaintiff on 29th July
    1987. He is highly qualified with respect to diving problems.
    It is unnecessary to set out his extensive qualifications and
    experience. At present, he is a Reader in Anaesthesive and
    Intensive Care at the University of Adelaide and the Director of
    Occupational Diving in Hyperbaric Medicine for the Royal New
    Zealand Navy. From May 1986 to December 1989, he was the
    Director of the Hyperbaric Medicine Unit at the Royal Adelaide
    Hospital. I accept his evidence and his opinions. Having taken
    a history from the plaintiff and examining him, he concluded
    that the plaintiff's problems were due to either the whiplash
    injury being exacerbated by diving or that he had developed
    dysbaric osteonecrosis, a type of decompression illness causing
    death in long bones, which most commonly occurs in the shoulder.
    Pending investigation, Dr. Gorman certified that the plaintiff
    was temporarily unfit for diving for two months. He next saw
    Dr. Gorman on 15th September 1987 who decided that he could
    resume diving as he had not developed dysbaric osteonecrosis.
    During the period when the plaintiff was unable to dive, he
    secured the services of Mr. Culshaw to work as the diver. In
    order to overcome the then policy of only the holder of a
    licence being able to dive for abalone, he transferred the
    licence to Mr. Culshaw on 29th July 1987, on the basis that it
    was to be transferred back to him when the period specified in
    Dr. Gorman's certificate expired. Mr. Culshaw worked the
    licence. He received one-third of the gross proceeds of the
    catch and paid one-third of the expenses and received a net
    amount $10,032. The licence was transferred back to the
    plaintiff on 5th October and the plaintiff resumed as the diver.
    He arranged for a friend, Mr. Tidswell, who held an appropriate
    licence, to fish part of his quota. Mr. Tidswell was paid
    $6,416.24 being two-thirds of the proceeds of the catch less his
    scheme of the expenses. Although the plaintiff was
    incapacitated from diving during that period, he assisted the
    building of a new family home, although not by physical work,
    and travelled to America to investigate abalone agriculture.
    Due to the effects of the injury, the plaintiff was unable to
    fish all of his quota and he continued to experience pain and
    discomfort in his neck and shoulder on occasions whilst diving.
    On 6th February 1988 he was admitted to the Royal Adelaide
    Hospital. He had been diving with Mr. Dodd as his sheller and
    had suffered either carbon monoxide poisoning or decompression
    sickness. Dr. Gorman could not make a conclusive diagnosis. It
    was not a matter of significance to him because the treatment
    for both conditions is the same. The plaintiff recovered and
    returned to diving. He continued to experience the same
    problems with his neck and shoulder and again consulted Dr.
    Gorman in June 1988. He also suffered headache which, along
    with his other symptoms, abated if he took a few days off from
    diving. When he saw Dr. Gorman again in July 1988, he had not
    been diving and his symptoms had abated. Dr. Gorman reached the
    view that the plaintiff's neck condition was incompatible with
    abalone diving and advised him to cease diving permanently. I
    accept his opinion that the posture adopted by the plaintiff
    when diving and collecting abalone, common to all such divers,
    greatly aggravated his neck injury. As he had previously
    stopped diving on three occasions with improvement to his
    symptoms and it had been established that there was no dysbaric
    osteonecrosis, confirmed again on this occasion, continual
    diving would have made his condition worse and there was an
    increased risk of decompression illness due to the neck injury.
    In Dr. Gorman's opinion, the neck injury necessarily means that
    the plaintiff had suffered some entrapment or compression in the
    neck, within or near the spinal column, which would predispose
    him to decompression sickness. This predisposition is such that
    if decompression sickness occurs, it would be more severe than
    otherwise would be the case. Furthermore, it may compound the
    problem of accurate diagnosis of the cause of symptoms which
    would pose difficulties in treatment. The plaintiff followed
    this advice and ceased diving.
    The soundness of that advice is confirmed by Dr. Edmonds, a
    physician specializing in diving medicine, for the same reasons.
    He added that decompression sickness in a diver with the neck
    condition of the plaintiff could cause paraplegia or
    quadraplegia. Dr. Edmonds conducted a survey of abalone divers
    in 1984 and 1985, prior to the accident, during the course of
    which he saw the plaintiff. X-ray examination of the
    plaintiff's long bones revealed that he did not have dysbaric
    osteonecrosis. It is unnecessary to mention the detail of the
    evidence of Dr. Gorman and Dr. Edmonds. I accept their evidence
    and find that the injuries sustained by the plaintiff in the
    accident were the cause of his ceasing diving in July 1988." 9. We now know how the respondent conducted his business first in partnership then "through" the Trust. We know that he was forced to give up diving. We know that the injuries sustained in the accident were the cause of his giving up diving. Later in his reasons the learned trial Judge found on the evidence of the respondent that he could not work as a sheller due to his injury. The plaintiff tried for about three weeks but the pain in his neck and shoulder increased to a point where he could not carry on. The evidence proved that the work of a sheller is hard - heavy lifting, jarring in the rough weather and heavy work in the launching of a boat and retrieving it from the sea. 10. His Honour said, too -
    "Mr. Clarkson had been working with the plaintiff as the
    sheller. The plaintiff approached him and he agreed to work as
    the diver. The Trustee, the plaintiff and Mr. Clarkson entered
    into an agreement, the relevant terms and conditions of which,
    for present purposes, are that the plaintiff transferred the
    licence to Mr. Clarkson who has since held it upon trust for the
    Trustee. Mr. Clarkson is subject to direction by the Trustee in
    the use of the licence. Pursuant to this arrangement, Mr.
    Clarkson has since worked as the diver. All of the proceeds of
    the fishing are paid to the Trust which pays to Mr. Clarkson the
    amounts due to him, namely, one-third of the proceeds of the
    catch less one third of the expenses. Since the commencement of
    this arrangement, the Trust has paid to Mr. Clarkson the
    following amounts: $140,202.59 (1989), $122,850.57 (1990),
    $123,473.98 (1991), $116,396.82 (to May 1992), a total of
    $502,923.96.
    It is the plaintiff's case that the true measure of his past
    loss of earning capacity is the total of the amounts paid to Mr.
    Eldridge, Mr. Culshaw, Mr. Tidswell and Mr. Clarkson, namely
    $525,788.60. The defendant's case is that the measure of that
    loss is the diminution in the profits of the partnership shared
    by the plaintiff and any loss in his income from the Trust

    caused by the plaintiff's incapacity to work as a diver.
    It is appropriate to consider the contentions of the parties in
    two stages: when the partnership was in existence and during the
    period after the formation of the Trust.
    The only income of the partnership was the proceeds of the sale
    of abalone, except for a small amount of rental income in the
    year ending 30th June 1987 and interest and dividends on
    investments in the year ending 30th June 1987. Mrs. Cole did
    no work in the diving business. The plaintiff attended to all
    matters relating to that business and made all of the decisions.
    Mrs. Cole's work for the partnership was limited to providing
    all necessary financial records and information to the
    accountant each year for the preparation of the balance sheet,
    profit and loss statements and income tax returns. None of her
    work was productive of income and could as easily have been
    undertaken by the plaintiff." 11. The learned trial Judge was referred to a number of authorities touching the method of assessment when one member of a partnership is injured. 12. For the time when the partnership existed the learned trial Judge said and held as follows:-
    "All of these cases illustrate the need to consider the nature
    of the partnership arrangements and the extent to which the
    earning capacity of the injured partner had been committed to
    the business of the partnership. The plaintiff and his wife
    entered into the partnership for reasons common to persons in
    their situation, namely to share income in order to minimize
    income tax. The plaintiff committed his labour to the
    partnership which was the sole source of income to the
    partnership, except in the limited sense which I have mentioned.
    In the circumstances, the starting point in assessing damages
    for past loss of earning capacity is, in my view, the total cost
    of replacing him as the diver less the amount of income tax he
    would have paid and not the share of the profits from the
    partnership which, but for the accident, he would have
received." 13. After distinguishing Lago v Lago (1983) 2 Qd R 29 on sound grounds and discussing Andriolo v G and G Constructions Pty Ltd and Ors (1989) Aust Torts Reports 80-235 the learned trial Judge said:-
    "In my view, the approach adopted in the family partnership
    cases and by Miles CJ in Andriolo (supra) should be adopted in
    measuring the plaintiff's loss of past earning capacity during
    the years since the Trust was formed. Furthermore, it is
    consistent with the approach of Mayo J in Pick and Ors. v. Wynes
(1964) SASR 318. Consequently, the starting point is the cost
    of engaging the substitute divers to the extent of the diving
    which, but for the accident, would have been undertaken by the
    plaintiff." Of the whole time since the accident the learned
    trial Judge said:-
    "In my view, in conformity with the cases to which I have
    referred, I must value the plaintiff's earning capacity and
    measure its diminution, due to the accident, in the manner most
    suitable to the circumstances. That appropriate method is the
    cost of the substitute divers." 14. An accountant named Kennedy was called. He prepared various schedules on which he came to a conclusion about the loss. The learned trial Judge correctly rejected that approach. It was full of unsustainable or unsustained assumptions. 15. The learned trial Judge said (after rejecting the Professional Divers Award 1988 as the appropriate measure of the cost of substitute divers -
    "I accept that the payments made to Mr. Eldridge, Mr. Culshaw
    and Mr. Clarkson are a true measure of the past loss of earning
    capacity of the plaintiff. It was reasonable to employ them on
    the two-third/one-third basis.
    Each holder of an abalone fishing licence is required to
    complete a 'catch and effort' return each month and submit it to
    the Department of Fisheries. The returns contain information as
    to a variety of matters, including the number of hours and the
    quantity of abalone taken each day as well as the name of the
    diver and the sheller. These returns of the Department admitted
    into evidence establish that Mr. Eldridge was diving for only
    six days each month during the period of his engagement in
    conformity with the direction of the Department. But for the
    accident the plaintiff probably would have worked as the diver
    more than six days a month, weather and other conditions
    permitting. However, as the catch and effort returns of the
    plaintiff reveal that, prior to the accident, there were months
    when he worked as the diver only to that extent, i.e. not more
    than 6 days per month, it is reasonable not to allow any greater
    amount for the period when Mr. Eldridge was the diver. There is
    no suggestion in the evidence that Mr. Culshaw was diving more
    extensively than the plaintiff had been diving prior to the
    accident. I accept the plaintiff's evidence that his disability
    prevented him from catching his quota in 1987 and that his
    arrangement with Mr. Tidswell to catch part of the quota was a
    direct consequence of the injury. The records show that the
    plaintiff caught substantially less than his quota in that year
    and it is reasonable to allow the payment to Mr. Tidswell as
    what the plaintiff would have received had he not been injured.
    Mr. McCarthy contended that the evidence discloses that Mr.
    Clarkson was more enthusiastic than the plaintiff and dived more
    extensively and with greater return than the plaintiff would
    have done had he not been injured.
    According to Mr. Clarkson, who had previously acted as the
    sheller, the plaintiff appeared to be bored and was working
    shorter hours. He showed a lack of enthusiasm. The catch and
    effort returns embrace only four months when the plaintiff was
    diving and Mr. Clarkson was the sheller. During those months
    the plaintiff was diving for 6, 12, 9 and 10 days which is not
    inconsistent with the extent of his diving earlier. I accept
    Mr. Clarkson as an honest and reliable witness. The records, to
    which I shortly refer, do bear out his impression that the
    plaintiff was diving for less hours than Mr. Clarkson but they
    do not establish that he worked more effectively than the
    plaintiff. Mr. Kennedy prepared various schedules from records
    of the plaintiff, the partnership, the Trust and the Department
    from which comparisons may be made as to the extent of diving
    and the catch at various times both before and after the
    accident. Also Mr. McCarthy, as part of his address, provided a
    schedule prepared from information available to the Department,
    and admitted into evidence, which tends to suggest that the
    plaintiff's catch, since he commenced diving in 1981, was always
    less than the average of the catch of all divers. Records
    showing the annual catch of the plaintiff when he was diving
    suggest that he did not catch all that he could in each year.
    This evidence forms the basis of Mr. McCarthy's contention that
    Mr. Clarkson was much more active and productive than the
    plaintiff and therefore the payments to him are not a true
    measure of the plaintiff's past loss of earning capacity.
    In my view there are too many variables and unknown factors to
    make such a conclusion on this evidence. The best guide is the
    comparison of the extent of Mr. Clarkson's diving and his catch
    with that of the plaintiff. The defendant's solicitor prepared
    a schedule from the records admitted into evidence of the number
    of days and hours when Mr. Clarkson worked as the diver and the
    catch for each month. Unfortunately, there was no similar
    schedule with respect to the plaintiff. Nevertheless that
    information is contained in the plaintiff's catch and effort
    returns. Mr. Clarkson's diving in the years 1989, 1990 and 1991
    averaged a total of 433.58 hours per year with an average catch
    of 7898.3 kg. The catch and effort returns of the plaintiff
    reveal that whilst his average hours of diving were less than
    Mr. Clarkson's average, the average of the catch was greater,
    which may reflect the greater experience of the plaintiff. It
    has not been established that Mr. Clarskon was more productive
    than the plaintiff despite more extensive diving." 16. The total cost of employing substitute divers was $525,788. The learned trial Judge noted that the respondent had worked at jobs other than diving and shelling at times since the accident. He had not worked at his full capacity at any particular job in that time after he gave up diving and shelling. The learned trial Judge said:-
    "Applying a broad approach and drawing appropriate inferences
    from what has been proved, I would assess his residual capacity
    to earn income at about $30,000 per annum. I acknowledge that
    if he had continued to work as a diver his diving activities
    would not have exceeded 100 days a year and that he could decide
    when he would dive. Consequently, he would have been able to
    pursue the other activities to some extent even if diving.
    Nevertheless, I must assess his residual earning capacity in
    money terms. If he had attempted to work within his capacities
    to an extent which is reasonable in all the circumstances, he
    could have earned about $80,000 since he gave up diving, which
    is a reasonable measure of his residual earning capacity. That
    amount must be deducted from the amount of $525,788.60 which
    leaves an amount of $445,788.60, which I round off to $446,000.
    Whilst the partnership and the Trust have permitted income tax
    minimization, the basis for measuring his past economic loss
    should also be applied when considering the incidence of income
    tax. Rates of tax have varied over the relevant years. Despite
    his incapacity, the income of the plaintiff has been at such a
    level that any additional income would attract the maximum rate
    in each year. Although the maximum rate was 60 per cent when
    Mr. Eldridge was diving, it was a little less than 50 per cent
    during the years since the Trust was formed. It is reasonable
    to apply a rate of 50 per cent over all of the years which
    results in a net amount of $223,000.
    It remains to consider contingencies. The employment of the
    divers, all of whom were competent and efficient, establishes
    that there are no favourable contingencies. Abalone diving is a
    very hazardous occupation. The plaintiff experienced two
    incidents of compression sickness before the accident even
    though he was an experienced and competent diver. Although he
    recovered quickly, those incidents indicate that he could have
    suffered an episode which would have ended his diving before the
    accident. He was also subject to the possibility of carbon
    monoxide poisoning through the air system being exposed to the
    exhaust of the boat engines. Such an incident occurred after
    the accident. There are other well known perils of the sea
    which render the occupation of diving hazardous. Having regard
    to these contingencies as well as the other usual adverse
    contingencies, it is reasonable, in all the circumstances, to
    discount by 25% even after allowing for his not being
    compensated in current money value. I award $167,400 for past
    economic loss." 17. Thus on the basis of the full cost of substitute labour with appropriate deductions for retained capacity to earn, income tax and contingencies the learned trial Judge arrived at the sum of $167,400 for past economic loss. 18. As to future loss of earning capacity (future economic loss) the learned trial Judge said:-
    "Damages for future economic loss should also be awarded on the
    basis of the likely cost of engaging a substitute diver until
    early 1994 when the plaintiff intended to cease diving in any
    event. That is a period of about one year and four months. It
    is not possible to predict the payments which will be made to a
    replacement diver, probably Mr. Clarkson, during that period, as
    the extent and price of the catch are variable. However, it is
    reasonable to accept an amount of $125,000 per year which is
    within the range of payments made to Mr. Clarkson over the past
    three years. Applying the same approach as with respect to past
    economic loss, the starting point is the payments which are
    likely to be made to the replacement diver for a period of one
    year and four months, which I round off at $165,000. It is
    likely that the plaintiff will continue to work in the
    development of the abalone agriculture and in marketing abalone
    shell. In consequence of the recent increase in his hourly
    rate, I expect that over that period he will earn about $40,000
    from those activities. These earnings will attract the maximum
    rate of income tax in view of his income from the Trust. In the
    result, his likely future net loss is $62,500. As with past
    economic loss, there must be a significant reduction on account
    of the adverse contingencies which I have mentioned. I assess
    that reduction at 25%. Also there must be a further discount
    due to the accelerated payment of the future loss. For these
    reasons I assess the future economic loss of the plaintiff at
    $40,000." 19. So after all these words, all these quotations, we see revealed (not that it was ever hidden) the foundation of the assessment for lost capacity to earn in this case. It is full cost of substitute labour subject to appropriate deductions. It is not, as His Honour found, the share of one partner or one shareholder in the cost of substitute labour. 20. The appellant (the defendant below) appeals. The grounds of appeal in the Amended Notice of Appeal are:-
    "1. The Learned Trial Judge';s assessment of the plaintiff's
    loss of earning capacity was wholly erroneous in that:-
    (a) The Learned Trial Judge erred in law in finding that the
    starting point in assessing damages for loss of earning capacity
    was the total cost of replacing the plaintiff as a diver. In
    doing so the Learned Trial Judge made no allowance for the
    capital value of the abalone licence, the beneficial title to
    which was firstly held by the plaintiff and later by the
    partnership between the plaintiff and his wife and then by the
    plaintiff's family trust.
    (b) The Learned Trial Judge erred in law in finding that the
    plaintiff was entitled to the whole of the partnership loss
    (less deductions for taxation and contingencies) suffered from
    the time of the accident up until the time of the sale of the
    abalone licence from the partnership between the plaintiff and
    his wife to Tarakan Pty Ltd, the trustee of the Cole Family
    Trust ('the Trustee') on the 28th day of February 1987.
    (c) The Learned Trial Judge erred in law in rejecting the
    argument that Section 34 of the Wrongs Act 1936 (which enabled
    the plaintiff's spouse to claim her loss as a result of the
    plaintiff's incapacity to work in the partnership business)
    precluded the plaintiff from recovering, as damages, the whole
    of the partnership loss.
    (d) The Learned Trial Judge erred in law in finding that the
    amount of extra profit that the Trustee would have made, had the
    plaintiff been able to continue diving for abalone, was
    recoverable as damages by the plaintiff.
    (e) The Learned Trial Judge erred in law in measuring the
    plaintiff's loss of earning capacity during the years since the
    Trust was formed by equating it with the cost to the Trust of
    engaging substitute divers to carry out the work which the
    plaintiff had undertaken for the Trustee. If the Learned Trial
    Judge was correct in law in so equating the plaintiff's loss
    then the Learned Trial Judge ought only to have allowed one half
    of the said loss because of the equal loss incurred by the
    plaintiff's spouse for which she had a right to recover pursuant
    to Section 34 of the Wrongs Act 1936.
    (f) The Learned Trial Judge erred in allowing, as the
    plaintiff's damages, the amount earned by the substitute diver,
    which was a percentage of the catch allowed to be taken under
    the licence, rather than allowing as damages the value of the
    personal skill involved in so taking the abalone under the terms
    of the licence.
    (g) The Learned Trial Judge on the whole of the evidence should
    have found that the plaintiff could have worked as a sheller
    after the time that he became incapacitated from diving for
    abalone and adjusted the loss to the partnership and the Trust
    accordingly." 21. Full cost of substituted labour as the basis. Share of burden of cost of substitute labour as the basis. They are the rival claimants for the base on which assessment here should be founded. 22. I dispose of two grounds of appeal in a summary way but without disrespect to the earnest arguments addressed to those grounds. I begin with ground 1(a). I do not think that the capital value is to the point. We are concerned with diminution of capacity to earn caused by physical injury. Assume I have a valuable flute by the playing of which I can earn my income. The value of the flute is nothing to the point if I am incapacitated and cannot play. Nor is it to the point if my wife and I carry on in partnership deriving income solely from my playing of the flute. Nor is it to the point if a Trust owns the flute. 23. Nor do I think that s34 of the Wrongs Act is to the point in the circumstances of this case. Sometimes it would be. Mrs Cole made no claim. Section 34 confers a right on her but does not detract from the entitlement of the plaintiff (words of Mr Clayton QC in his Outline). The learned trial Judge correctly disposed of s34 of the Wrongs Act thus:-
    "In my view the purpose of the section is clear. It gives a
    right to compensation in the prescribed circumstances. It does
    not affect the rights of the injured spouse. Of course a
    wrongdoer cannot be required to pay compensation for the same
    loss twice. If both spouses make claims which overlap, the
    court would take care, in assessing compensation, to avoid that
    result. Here, there is only one claim before the court, the
    plaintiff's claim for past loss of earning capacity. The issue
    is how to measure that loss. Section 34 does not, in my view,
    bear upon that issue. The fact that Mrs. Cole may have a right
    to compensation cannot affect the right of the plaintiff. The
    section should not be interpreted as providing a limitation on
    the right to compensation by the plaintiff or to the way in
    which his loss of earning capacity is to be measured." 24. I respectfully agree. But I should here note the existence of a Counter Claim. 25. The respondent has not responded to the institution of the appeal by defence alone. He has attacked. The grounds of his appeal are:-
    "1. That on the whole of the evidence the learned trial judge's
    award of damages for past non-economic loss of $12,000 was
    manifestly inadequate.
    2. That on the whole of the evidence the learned trial judge's
    award of damages for future non-economic loss of $6,000 was
    manifestly inadequate.
    3. That the learned trial judge erred in not finding that the
    plaintiff had exercised some of his residual earning capacity
    since he gave up diving and in allowing a credit in respect of
    the income so earned against the value of the residual earning
    capacity deducted from the cost of the replacement divers and
    the payment to Tidswell.
    4. That the learned trial judge erred in discounting the
    assessment in respect of past economic loss by 25%.
    5. That the learned trial judge erred in discounting the
    assessment in respect of future economic loss for adverse
    contingencies by 25%." 26. Quite recently this Court has considered the principles to be followed in assessing damages for an injured partner where that injured partner was the husband of the other and was the one who produced income. That is what the respondent was here. Mrs Cole did book work. She was a scorer. The respondent was a player. The case to which I referred is Zachopoulos v SGIC

(1986) Aust Tort Reports 80-023. I do not propose to repeat the examination of authorities which I undertook in that case. I have considered them again but need not discuss them at length. That was a case in which the Court was asked to "declare the principles of assessment of this component of damages for South Australia" (p67-733). 27. I said:-
    "Despite something which I say later I think we should state
    the principles on which this Court should assess damages for
    pre-trial loss of capacity to earn in the case of a partner
    whose work in the partnership is replaced by paid substitute
    labour during his total or partial incapacity. The same
    principle would apply if no replacement labour were used and
    loss of profit or income was occasioned by the lack of work or
    lack of work at full bore by the one injured partner. Should
    the wrongdoer pay the parties by reference, as a starting point,
    to the whole loss suffered by the partnership or by reference to
    the injured partner's own loss? Should it be 'whole' or
    'proportionate'? I emphasise that it is the starting point which
    is the point of principle now being considered. No statement of
    principle could obviate the need to examine the nature of the
    partnership and the arrangement about distribution of work and
    income between partners.
    All agree that it is the loss to the plaintiff for which
    compensation is to be awarded. How is the loss to be assessed?
    With great respect to all other views, I find the reasoning of
    McGregor and Sheppard JJ in Dal Zotto v Bonnani (supra)
    compelling. I find the reasoning of those judges who have taken
    the same view in other cases compelling. I think that the
    reasoning of the Court of Appeal in Taroporewalla v Berkery
    consistent with the views of McGregor and Sheppard JJ. I
    respectfully adopt the reasoning of McGregor and Sheppard JJ and
    in its train the reasoning of other judges who have reached the
    same conclusion as did McGregor and Sheppard JJ. McGregor and
    Sheppard JJ emphasised by reference to Cullen v Trappell, Graham
    v Baker and Griffiths v Kerkemeyer that that it is loss or
    reduction of capacity to earn, which loss produces actual
    financial loss, which calls for compensation. It is always the
    loss to the plaintiff which is to be considered. It is he who
    is to be compensated for his loss, the loss produced by his
    incapacity. The injured partner's loss will be determined as a
    starting point by the reduced income which he receives if no
    replacement is engaged and less work is done or by his share of
    the cost of replacement labour if it is engaged. There may be
    (usually there will be) other loss to the partnership. But the
    claim before the Court is the plaintiff's claim. The Court must
    assess his loss. When it assesses that plaintiff's loss for
    pre-trial loss of capacity to earn, the Court should, in my
    opinion, commence to assess the loss caused to that plaintiff by
    the expense of replacement labour by deciding what proportion of
    that expense is or was borne by that plaintiff. As we have seen
    from Taroporewalla v Berkery (supra) that proportion may not be
    the same as the plaintiff's 'percentage' of profits as expressed
    in the partnership agreement. But that 'percentage' and the
    work and effort which the plaintiff put into the business are
    relevant. The partner who does all the work will no doubt be
    entitled to have the full cost of replacement labour taken as
    the starting point. I think that in general the starting point
    should be the proportion of the loss, ie the loss by reference
    to the plaintiff's share in the expense of substitute labour or
    in the loss sustained. But share does not encompass only 'share
    of income'. It is the loss to the plaintiff himself not the
    whole loss to the partnership which must be ascertained as a
    starting point. Sometimes the two will be the same, or nearly
    the same. In Taroporewalla v Berkery the plaintiff's
    contribution to the partnership was held in fact to be 80%
    despite his entitlement in the books of a partnership to 50% of
    the profits. If a man has an inactive partner who does no more
    than lend his name for tax purposes to the partnership then the
    active partner may well be entitled to the whole cost of
    replacement labour engaged during his incapacity. It may be,
    too, that on some occasions it can be shown that not only is a
    loss occasioned by the cost of engaging replacement labour but
    that there is some diminution of profit because the substitute
    labour works less vigorously or less skilfully or for a lesser
    time than did the injured partner. That can be taken into
    account." 28. I have underlined two passages which I think apposite here. We must always remember that we are to assess the loss to the plaintiff. But if be the only partner who works, who brings an income, then the whole cost (subject to appropriate deductions) of substituted labour should be the measure of his loss. Of course, one must always examine not only the nature of the partnership in the particular case but the way in which income was produced pursuant to the partnership agreement. This point was (if I may say so) admirably put by Jacobs J in Zachopoulos. At page 67723 His Honour said -
    "At the end of the day, each case will depend upon its own
    facts, and the relevant 'principles', if they can be so
    designated, are not in doubt. The plaintiff must receive, by
    way of damages, compensation for his loss of earning capacity,
    past and future. Whether, in the case of a plaintiff who was
    (or still is) in partnership with others, his pre-accident (or
    present) earning capacity is accurately reflected by, or is more
    or less than, his share of partnership profits will depend upon
    the nature of the partnership business, the relationship of the
    partners inter se (whether pursuant to a partnership agreement
    or otherwise) and the manner in which the partnership 'profits',
    in which the plaintiff shares, has been arrived at." 29. I think that the learned trial Judge here proceeded correctly. I think that Mr Clayton QC is correct in what he says in point 9 of his Outline and, of course, to which he spoke. I quote it and the cases there mentioned. I think those cases do support the submission made by Mr Clayton in that paragraph. So does the reasoning of the majority in Dal Zotto v Bonnani
(1980) 47 FLR 239 (Full Federal Court). Mr Clayton wrote:-
    "Where, as in this case, there is one active partner who does
    all the work and the other inactive partner does no more than
    lend his or her name to the partnership for tax purposes, the
    active partner should be entitled to the whole cost of
    replacement labour. Zachopoulos (supra) at p 67,733 - 67,734
Dahm v Harmer (1955) SASR 250,251 Bivone v Welfare and Anor
(1971) 1 SASR 431 Parker v Pahl (1975) 13 SASR 164 Taraporewalla
v Berkery (1983) 2 NSWLR 28 Batt v Wilkinson (1983) 2 QdR 619,
623-624." 30. I think, too, that the learned trial Judge was correct in treating the Trust as similar, indeed akin, to a family partnership. I think that finding is supported not only by the facts in this case but by the decision of this Court in Spargo v Hadden Engineering (unreported, 25th March 1993). See particularly Perry J at pp 13-15. Duggan J agreed with Perry J. I think, too, that it is supported by Andriolo v G and G Construction Pty Ltd (supra). 31. In all these circumstances I do not think that any ground of appeal is made out. I think that the reasoning of the learned trial Judge and the assessment which he made is in allrespects impeccable. It follows that I do not think either that any ground of the cross-appeal is made out. In my opinion, the assessment of $12,000 and $6,000 for non-economic loss past and future is well within the bounds of a reasonable assessment. I can find no fault in the extent to which the learned trial Judge discounted for contingencies. Nor can I find any fault in any process followed by the learned trial Judge in arriving at his award. 32. We have, of course, been concerned with principle in this matter. I find that the learned trial Judge proceeded at all times on a correct principle. That disposed of, in looking at the whole award we do well to remember the words of Lord Edmund Davies (apparently lent to the Court of Appeal in Hay v Hughes (1975) 1 All ER 257 at 268. His Lordship said:
    "But, having done his arithmetic, there comes a stage when the
    judge has to stand back and look at the result. When he does,
    he should bear in mind the wise words of Willmer LJ who said in
    the last-mentioned case: 'In what is essentially a jury question
    the overall picture is what matters. It is the wood that has to
    be looked at, and not the individual trees.'" 33. Here the question of "principle" having been disposed of it is well for this Court, too, to stand back and look at the result. In my opinion, on doing that I see an assessment of damages which is entirely reasonable and entirely proportionate to the loss and injury sustained by the respondent. 34. I would dismiss appeal and cross-appeal.

JUDGE2 MOHR J I agree with Bollen J in this matter.

JUDGE3 MILLHOUSE J I agree.