Davies v Gertig No. Scciv-99-462

DAVIES v GERTIG
[2001] SASC 290
Civil

PERRY J.
Background
The Accident Injuries
The Course of the Trial and Findings as to Credit
Sale of Business
Other Financial Dealings Post-Accident
Loss of Earning Capacity
(a) Pre-Judgment
(b) Future Loss of Earning Capacity
Voluntary Services
Special Damages
Non-Economic Loss
Conclusion
The plaintiff claims damages for injuries suffered by him in a road accident which occurred on 5 May 1996. The plaintiff was riding his motor cycle on the Greenock to Nuriootpa Road at Nuriootpa when it came into collision with an oncoming motor car. The defendant admitted liability, and the trial proceeded as an assessment of damages.
Background
The plaintiff, whose date of birth is 22 April 1967, was a little over 29 years of age when the accident occurred. He was born in England and came to Australia at the age of 7 years. The plaintiff’s family settled in Whyalla, where he attended primary school and high school. Before completing year 12 he took up an apprenticeship with an electrical contractor at Whyalla. The apprenticeship ran for four years, following which the plaintiff qualified as an A-Class electrician.
He then came to Adelaide and obtained a job with Wormald Fire Systems, installing fire detectors in buildings. After spending some time for that firm at Roxby Downs, he obtained another job in Adelaide with a firm which specialised in the installation of air conditioning systems. Following that he obtained a position as leading hand/foreman with Mayfields on the Myer site.
When that project finished, the plaintiff decided to branch out on his own. He purchased and fitted out his own van, and advertised for work on his own account. This was in about 1990. Thereafter he carried on business under the name “Davies Electrical”.
The plaintiff was hard working and quickly built the business up. At first, the main area of work was domestic, including re-wiring houses, installation of power points and the like. Eventually he attracted industrial work. BankSA became his main customer. The property department of the bank developed an arrangement with him whereby, more or less on call, he would attend at any of their branches to perform break-down and maintenance work. He had a similar relationship with a number of other business houses.
The plaintiff was prepared to put in long hours, and according to his evidence, the work “snowballed”.
As a sideline, the plaintiff became interested in buying properties to develop for re-sale. He first bought a property, with that in mind, at 17 King Street, Glandore, in October 1991. He lived in the house and embarked on major renovations which he largely performed himself. Within a year or two he was advised to form a family trust, and he held that, and eventually other properties, through the trust.
The major part of the renovation of the Glandore house was completed by the time of the accident.
Before the accident occurred, the plaintiff bought a second investment property, at 9 King Street, Glandore. His parents occupied that house while he renovated it.
As his electrical business expanded, he changed accountants and engaged Mr Leslie Jamieson. Initially, Mr Jamieson practised under the name Unité Accounting System, which later became Adelaide Accounting Services.
On Mr Jamieson’s advice, the plaintiff incorporated a proprietary company, Davies Electrical Pty Ltd, which conducted the electrical business and became trustee of the family trust.
The first accounts prepared by Mr Jamieson were for the financial year ending 30 June 1995. Mr Jamieson has been closely involved as the plaintiff’s financial business adviser and accountant ever since. Early in the piece, Mr Jamieson drew up a business plan, which set out goals and strategies to give expression to Mr Davies’ wish to expand the business.
In 1993 or 1994, the plaintiff took on an apprentice, Simon Butler.
In late 1994 or early 1995, the plaintiff contracted with an air conditioning company, Breeze-Air, to replace a faulty remote control system in evaporative air conditioning units installed throughout the State. This involved replacing components in some 1,500 units. To assist with that work, he engaged sub-contractors.
In about 1995, the plaintiff further expanded his business by buying out another, small electrical contractor, who had been trading as Allied Electrical.
The plaintiff had an interest in old cars and motor cycles. At the time of the accident he had restored a 1970 Corvette motor car. As well he owned several Harley Davidson motor cycles and a speed boat.
The plaintiff had a number of sporting interests, including football, and just before the accident had played two trial games with the Seaton Ramblers.
I have no doubt that his business was profitable, although his drawings tended to be somewhat unregulated and on the high side.
The accident occurred when the plaintiff was on a Sunday ride on one of his Harley Davidson motor cycles.
The Accident Injuries
The force of the collision was borne by the plaintiff on his right side. He was thrown from the bike and lay on the road until an ambulance came. He was in severe pain and barely conscious.
The plaintiff was first taken to Angaston Hospital where his condition was stabilised for about an hour, following which he was taken to the Royal Adelaide Hospital. There, he was diagnosed as having suffered the following main injuries:
1.comminuted fracture of the right elbow;
2.compound fracture of the right tibia;
3.closed fracture of the right femur;
4.compartment syndrome of the right leg.
This latter condition has been described by one of the plaintiff’s treating doctors, Dr Shimeld, as:
“... a condition arising from traumatically induced swelling of subcutaneous tissues, resulting in compromise of the circulation to distal tissues, necessitating surgical incision (fasciotomy) of the skin and underlying fascia to relieve the tissue pressure.”
At the Royal Adelaide Hospital, the plaintiff underwent surgery, including fasciotomies of his right calf and foot, open reduction and internal fixation of the right elbow using a longitudinal wire and a malleable plate, and intramedullar nailing of the right femur and separately of the right tibia.
Before his discharge, the plaintiff underwent further surgery. This took the form of delayed primary closure and split skin grafting to the right leg and foot.
His stay in hospital was marked by periods of intense pain, for which he required morphine. For much of the time he was fed by intravenous drip. The plaintiff was discharged from the Royal Adelaide Hospital on 24 May 1996.
On discharge the plaintiff was confined to an electric wheelchair, which he moved around in at home. His mother came to the house to cook his meals. He was confined to bed for about two weeks. As well as his mother, the plaintiff engaged help through a domestic employment service to attend to the household chores.
The plaintiff used a wheelchair for six to eight weeks after his return home, and then gravitated to crutches for about six months. Following that he took to a walking stick, which he used at least until February 1997.
From an early stage the plaintiff was taken for two days a week to a rehabilitation centre, where he was given physiotherapy and hydrotherapy.
In January 1997, the fixation screws were removed from his right leg, but he continued to wear a hinged upper limb splint on his right arm.
The injury to the elbow has more or less stabilised, although there is still a metal plate in place which may possibly be removed in the future.
An orthopaedic surgeon, Mr Michael Sandow, has largely been responsible for management of the elbow. In his opinion, the plaintiff is left with a permanent restriction in elbow movement which, based on an examination performed in August 2000, results in approximately 80º of pronation/supranation. He estimates a permanent residual impairment of the order of 20 per cent loss of function below the elbow.
Another orthopaedic surgeon, Mr Andrew Mintz, has largely been responsible for management of the leg injuries. When last seen by Mr Mintz in July 2000, Mr Mintz wrote in a report:
“He continues to have some troubles around his right hip with groin and lateral hip pain as well as pain and stiffness around his right ankle and objectively has lost the last 10º of rotation to his right hip, as well as having significant stiffness of his ankle and subtalar joint. He did have some problems with his left knee which is now completely settled.”
Mr Mintz went on to express the opinion that it is unlikely that ongoing physiotherapy or surgery to the plaintiff’s legs would be required. He estimated a permanent residual disability of 25 per cent loss of function of the right leg, taken as a whole.
Although, as I have explained, the screws were removed from the leg, rods are still in place. According to Mr Mintz, they are likely to be left in place for the foreseeable future. He is of the view that the presence of the rods should not cause any particular problem.
The plaintiff has been diligent and active in his efforts directed towards his rehabilitation. He attends a local gymnasium every morning, on average for about an hour. He follows a routine of pedalling on bikes, weight lifting and pushing, and arm, back and shoulder exercises. These exercises involve practically every part of the body. Although there is no pain in the arm, the plaintiff experiences pain between his lower knee and ankle. The pain is at its worst of an evening. Its severity seems to depend upon how hard he pushes himself at the gymnasium.
The plaintiff does very little around the house. He does not do any gardening, although this seems largely to be by choice. He gets others to do odd jobs around the place. He conceded in evidence:
“I don’t push myself to do those jobs.”
He has given up most of his recreational activities, although he drives his boat. He said in evidence that he could no longer water ski or knee-board.
He is left with severe scarring. I viewed the scarring in my chambers during the course of the trial.
There is a lengthy scar commencing 4 centimetres above the right elbow and running approximately 18 centimetres towards the wrist. The scar is reddened and is a little thicker at the commencement above the elbow, after which it becomes paler and narrower. At its widest it is about 5 millimetres.
There is another scar on the inner aspect of the right lower leg. This is a 25 centimetre, irregularly shaped scar, almost lamb chop shaped, with the wider part of it towards the knee. The wider part of the scarring comes out as a bulge in the muscle. The bulge is, in part, puckered with a degree of reddening which is fairly pale. The scar appears to be well healed. It is not discharging.
A further scar appears at what was identified as the skin graft donor site. This is partly on the outer but mainly on the inner aspect of the right thigh. There is a large area of skin, slightly pale in colour, but without any other disfigurement.
I also noted a scar on the upper part of the right foot, between the ankle and the toes. This is wide in the middle and tapers to a point at each end, the maximum width being about 2 centimetres, the length about 7 centimetres. The scar is slightly depressed and discoloured, but it appears to be well healed and is not discharging.
A further scar about 10 centimetres long and about 1 centimetre wide, runs from a point just below the right hip in the direction of the knee cap, on the outer aspect of the buttock. This is a clean, well healed scar, slightly red in colour, but with some punctuation marks on either side of it attributable to staples. This was identified as the scar where the pin in the thigh was inserted.
There are some other scars on the outer aspect of the right leg, on and just under the knee cap, a small scar on the outer aspect of the leg, about a third of the way down towards the ankle, and another on the outer aspect of the thigh, just above the knee cap.
The Course of the Trial and Findings as to Credit
The trial occupied some 25 sitting days. Much of the evidence which the plaintiff adduced in support of his claim was vigorously challenged by the defendant.
The central focus of the contest between the parties revolved around the plaintiff’s business activities, both before and after the accident.
The plaintiff’s income tax returns and financial statements to do with the business between 1992 and 1999 were tendered. They were the subject of intense scrutiny by the defendant.
Mr Jamieson was called to give evidence in support of the accounts which he had prepared, and to explain the nature of the advice which he had given to the plaintiff from time to time and the assistance which he had given to the plaintiff in taking over the books of the business after the accident.
The defendant asserted that the plaintiff had been selective in making pre-trial discovery, and a number of documents, particularly accounting documents, came to light only during the course of the trial.
It is unnecessary to go into the detail of the accusations and counter-accusations as to the reasons why various documents were not produced earlier. It is sufficient to observe that, in my view, the plaintiff had been less than forthcoming before trial in making discovery, and more particularly in giving access to accounting records held by Mr Jamieson, partly on computer disk.
The defendant, however, is partly to blame for some delays which occurred during the course of the trial while the parties and their advisers studied a large volume of documents which should have been produced during the pre-trial discovery process.
The most significant of the documents to which access was obtained during the course of the trial was a large bundle of records of BankSA. As will be seen, those documents result in critical findings which I will come to in due course with respect to the plaintiff’s earning capacity, more particularly the role which he has played in the electrical contracting business, both before and after the accident.
Eventually, the defendant engaged an independent accountant, Mr Kennedy, to make a detailed study of all of the accounting records to which he was able to obtain access, following which he furnished a detailed report which was accepted as part of his evidence in chief at the trial. Mr Kennedy was highly critical of the manner in which the accounts of the electrical business had been maintained, and as to other aspects of the plaintiff’s case on alleged economic loss, more particularly as to the genuineness of the transactions pursuant to which the plaintiff alleged that he had sold the electrical contracting business.
As well, Mr Kennedy tackled the rather daunting task of endeavouring to trace the source of substantial sums of money which had passed through the plaintiff’s hands and through the accounts of the electrical business since the date of the accident and which do not appear to have been satisfactorily accounted for. He eventually offered the opinion that there were substantial, unexplained sources of funds to which the plaintiff had had access during that period.
This brought Mr Kennedy into dispute with Mr Jamieson, who mounted an equally vigorous defence of his accounting records, of the genuineness of the sale of the business and of the disclosure by the plaintiff of his sources of income and access to money since the accident.
The defendant did not rest content with his attack on the veracity of the plaintiff’s accounting records.
Between November 1998 and December 2000, the defendant hired inquiry agents who were responsible for covert surveillance of the plaintiff, and the taking of a considerable footage of video film of him while he was engaged in various activities.
Having seen the whole of the video film, I must say that it does not assist me very much in my task. However, shots of the plaintiff while in a gymnasium lifting weights, mounting a walking/jogging machine and performing other exercises does satisfy me that he has, to his credit, made extraordinary efforts to regain his physical prowess. To the extent that the residual effects of his injuries will permit, he is able to move relatively freely, and despite his elbow injury, he can lift and carry reasonably heavy weights.
Many of his movements are, however, guarded, and I am wary of coming to any sweeping conclusions as to the range of physical activities of which the plaintiff is capable from the necessarily limited perspective of what can be seen on the video film.
Turning to findings as to credit, having observed the plaintiff under cross examination for an extended period of time, and having carefully considered his evidence in the context of the other evidence in the case, including the substantial volume of documentary evidence with which he was associated in one way or another, particularly the bank records of discussions with him, I have come to the view that I should not accept his credit on any issue of significance unless his evidence is intrinsically likely, or is supported by other credible evidence.
That view of the plaintiff’s credit should not be taken as an indication of any failure on my part to appreciate the significance of the serious physical injuries which he suffered in the accident. They were undoubtedly severe injuries, and he has been left with substantial disabilities, although his physical recovery has, if anything, been better than might otherwise have been expected.
The main area in which the adverse view which I take as to his credit hits home is with respect to the economic effects of the accident, more particularly as to his earning capacity.
Particular instances of areas in which I have rejected the plaintiff’s evidence on certain critical issues, and the reasons why, appear elsewhere in these reasons.
As for the other witnesses, I was not impressed with the evidence of the accountant, Mr Jamieson. I found him evasive at times, and his explanation as to how the plaintiff’s accounts had been structured in such a confusing and unsatisfactory way, was unconvincing. I found his explanation of the circumstances in which a set of accounts, described during the trial as “scenario” accounts, including a tax return for the 1998 year, stretched credulity.
Where there is a conflict between Mr Jamieson’s evidence and the evidence of Mr Kennedy, I prefer the latter’s evidence. I am satisfied that Mr Kennedy performed a conscientious and competent review of the plaintiff’s financial affairs, insofar as he was able to gain access to relevant documents. Although there are necessarily some limitations on his ability to reconstruct the financial figures, I am satisfied that most of the conclusions which he reached were sound.
The other accountant, Mr Macks, who gave evidence of calculations and projections of the plaintiff’s pre-judgment and post-judgment loss of earning capacity, is a highly qualified and impressive accountant. I have no reason to doubt his evidence. However, as will be seen, his evidence, in essence, amounted to a series of calculations on various assumptions which he was given. While he carried out the task assigned to him competently, I am not prepared to accept the critical assumptions upon which he proceeded. In those circumstances, at the end of the day, his calculations are of no great value in the process of assessment.
As will be seen, I am unable to accept the veracity of the witness Simon Butler, who was the plaintiff’s apprentice and is now a qualified electrician, where his evidence conflicts with other evidence which I am prepared to accept, more particularly the evidence of the witness Mr Hautop.
Sale of Business
The plaintiff’s case is that he is now permanently unfit to work as an electrical contractor. Certainly, there is much medical evidence to support the view that he is no longer capable of going up and down ladders and working in confined spaces, such as in roof areas, both of which activities are an essential part of an electrician’s work.

There is a separate question whether the plaintiff is capable of managing an electrical business, but I deal with that elsewhere.
In any event, there is no doubt that immediately following the accident and for some time thereafter while the plaintiff convalesced, he was incapable of fulfilling any role in the business.
In order to keep the business going, the accountant, Mr Jamieson, took over the work of invoicing and keeping up the day-to-day books of the business. Although Mr Butler was capable of doing the hands-on electrical work, he was not regarded by the plaintiff as having the ability to attend to quoting. Some friends of the plaintiff who were electricians were brought in to help with that aspect of the business, but this did not prove satisfactory and the plaintiff formed the view that the business was losing money.
He then employed another electrician to work full-time with Mr Butler. He worked for three months, but during that period he kept asking for more money and did not seem to be applying himself to the work. He quit, I suspect with some encouragement from the plaintiff.
The plaintiff discussed the future of the business with Mr Jamieson, and towards the end of 1996, according to the evidence of the plaintiff, he began to think about selling the business. Mr Jamieson eventually recommended that the plaintiff sell the business “while there was a business to sell”. Without the plaintiff’s hands-on involvement, he regarded the business as no longer viable.
At first, the plaintiff had in mind selling the business to another electrician who might keep Simon Butler on as an apprentice. He advertised in the press, but had only one or two inquiries, which he did not think were genuine. His evidence was that he did not receive any serious offers.
He then started to develop the idea that Simon Butler might take the business over. Mr Butler had already hinted that he would like to start his own business. Mr Jamieson spoke to him about the possibility that he might take over the business.
According to the plaintiff, when he had previously advertised the business for sale, his asking price was $300,000. In view of the poor response to that, he initially suggested to Mr Butler a purchase price of $200,000, but the latter was not interested in purchasing the business at that figure. The plaintiff’s evidence was that he then sat down with Mr Jamieson and made a list of all of the expenses which the plaintiff was committed to for the ensuing two years. These included his mortgage repayments, Mutual Community, car lease payments and other fixed expenses of that kind. Projected over the two years, the total was approximately $136,000. He offered to sell the business to Mr Butler for that amount, to be paid progressively as the various debts fell due during the two year period.
The period of two years was settled on as the plaintiff had been informed by his solicitor, Mr Bentley, that the “case [these proceedings] would go for another two years ... and it would be over”. So that in effect, according to the evidence of the plaintiff, the purchase price offered to Mr Butler for the business was based not so much on a valuation of the business but on the plaintiff’s commitments over the two year period.
A deal was struck on that basis. A deed evidencing the sale was drawn up and executed on 30 June 1997. The vendor was Davies Electrical Pty Ltd, as trustee of the M.J. Davies Family Trust. Mr Butler was named as purchaser in his own right, although the intention, according to Mr Butler and Mr Jamieson, was that Mr Butler would conduct the business through a family trust to be formed for his own benefit.
The plaintiff was a party to the deed. He was named in it as the principal director of Davies Electrical Pty Ltd. He signed a separate consultancy agreement in which he agreed to assist Mr Butler in the conduct of the business. The operative clause of the consultancy agreement, made on the same day as the deed of sale of the business, provided that the plaintiff would:
“5.1Advise and assist the Principal [Mr Butler] in the operation and maintenance of the business;
5.2Promote and manage the business;
as directed by the Principal from to time.”
In the deed of sale, Mr Davies covenanted not to inform anyone of the entry into the deed by Davies Electrical, or that Davies Electrical had sold the business. The plaintiff’s evidence was that the confidentiality clause was largely intended to maintain customer confidence, more particularly to retain as a customer BankSA.
The purchase price of $136,000 was payable by a combination of various fortnightly and monthly payments to various creditors of Mr Davies.
The defendant, through his counsel, Mr Trim QC, mounted a vigorous attack upon the genuineness of the sale. In effect, the defendant contended that the plaintiff continued to operate the business in much the same way as he had done prior to the accident; that the plaintiff continued to withdraw money from the business as though it was his own; and that the two year period was settled on in the expectation that with the court proceedings out of the way, he would then in all respects openly treat the business as his own.
There is much evidence to support the defendant’s case on this aspect of the matter.
In the first place, there is much to be said for the argument put forward by the defendant that it could hardly be the case that the business was not viable (as Mr Jamieson suggested) if it was regarded as capable of paying out $68,000 per annum for two years to the plaintiff and at the same time a living wage for Mr Butler. Certainly such an optimistic view of what the business was capable of producing is difficult to reconcile with the sales figures for the financial year ended 30 June 1997 as disclosed in the Davies Family Trust tax return. The sales figures for the 1997 year are shown in that return as $166,587, a figure which, on the defendant’s submission, was deliberately depressed in order to bolster the plaintiff’s claim for economic loss.
The financial records maintained by Mr Jamieson give me no confidence in the assertion by the plaintiff and by Mr Jamieson that the sale was genuine. After the sale Mr Jamieson did not set up a discrete set of accounts, and failed, he says by an oversight, to establish the Butler Family Trust until March 1999, which he then attempted to do retrospectively.
There is much to support the suggestion by the defendant that Mr Jamieson created an accounting shambles.
Mr Kennedy put forward a detailed report, following an extensive examination of the accounting records. In the course of his report he stated:
“The accounting records were maintained as though no change had occurred in the business. In other words, the records of the Davies Family Trust continued as though the business was not sold.”
As Mr Kennedy points out, Mr Butler did not become a director of Davies Electrical Pty Ltd until 10 July 1999, and the shareholding in the company was not transferred to him until 1 January 2001. Mr Kennedy details a number of accounting steps which he would have expected to have been taken if the sale had been appropriately implemented, and which were not taken.
I accept his evidence.
I accept also the evidence suggesting a high level of involvement by the plaintiff in the business following its purported sale. On that issue, I was particularly impressed with the evidence given by the witness Mr Hautop. I prefer his evidence where it conflicts with evidence of the plaintiff and Mr Butler.
In 1997, Mr Hautop was a young man studying as an electrician at Regency TAFE. He answered an advertisement offering employing by Davies Electrical. This was in about September of that year. When he rang in response to the advertisement, it was the plaintiff who answered the phone. The plaintiff offered a week of work experience, which Mr Hautop took up, working with Mr Butler. At the end of the first day, he had an interview with the plaintiff at the latter’s office in his King Street house, where the arrangements for the week of work experience were confirmed.
At the end of the week, it was the plaintiff who told Mr Hautop that he had done well, and that after they had employed some others to do some work experience, he would get back to him.
The plaintiff later contacted Mr Hautop and offered another week of work experience. Following that, it was the plaintiff who offered Mr Hautop a permanent position and discussed the terms of employment with him. The plaintiff personally signed the training contract. It was the plaintiff who signed the associated documentation undertaking to be personally responsible for Mr Hautop’s training.
In evidence, the plaintiff denied the truth of his confirmation in that documentation that he was working and available to supervise Mr Hautop’s training.
Conflicting evidence was given by the plaintiff on the one hand and Mr Butler on the other as to an alleged diversion of the fax number of Davies Electrical. The plaintiff’s evidence was that it was diverted to Mr Butler’s fax machine, but Mr Butler’s evidence was that it was diverted to the plaintiff’s parents. I do not accept the evidence of either the plaintiff or Mr Butler on this topic. I prefer the evidence of Mr Hautop on this topic.
I accept Mr Hautop’s evidence that it was the plaintiff who personally prepared quotations for some of the jobs while Mr Hautop was working for Davies Electrical. I accept his evidence also that work orders from Bank SA were faxed to the plaintiff’s office and that he and Mr Butler would attend to collect them from the plaintiff’s King Street address. I accept his evidence that work sheets or time sheets were handed in to the plaintiff at the end of the day, or left at Mr Davies’ home.
I accept Mr Hautop’s evidence also that it was the plaintiff who personally dealt with a complaint by Bank SA as to the manner in which a job had been carried out in the bank’s computer room, and that he was told by the plaintiff that the manner in which the work was done was “going to cost him (Mr Davies) money”.
Except for a period when the plaintiff was in Sydney, the circumstances of which I explain later, it was the plaintiff who signed Mr Hautop’s pay cheques and his group certificate. When Mr Hautop voluntarily terminated the employment, it was the plaintiff who then informed Mr Hautop that the latter owed the plaintiff money for holidays taken.
Given that the initial contact concerning Mr Hautop’s resignation was made between him and Mr Butler, I accept the defendant’s submission that the fact that it was the plaintiff who responded with a phone call is a telling indication of who was in control of the business.
I accept also the evidence of the plaintiff’s involvement in what was described in evidence as the Bramalco job.
Evidence of dealings with Bank SA are strongly confirmatory of the fact that after the purported sale, the plaintiff exercised a supervisory and controlling role in the business. Although the plaintiff’s evidence was that the bank knew “all about what was going on” and that he had given to the bank a copy of the deed and explained how Mr Butler was going to use the company cheque account to run the business, that evidence does not stand analysis against bank records.
The first relevant reference in the bank documents post 1 July 1997 is in a document headed “Statement of Position - Business” given to the bank by the plaintiff, dated 17 September 1997. The statement is “certified” by Mr Davies as containing details which are “true and correct”.
In the asset column, he states that he owns stock-in-trade and equipment valued at $8,000 and debtors of $15,000. If the business had been sold, he could not have owned either asset.
On the next day, that is, 18 September 1997, there is a diary note signed off by a bank officer, Mr McGrath, who describes himself as “Manager, Business Services Southern”. This note records an interview between Mr McGrath and Mr Davies in which the latter is recorded as having said, “Things were going well and tax of $7,000 was paid from cash flow”, which must be a reference to cash flow in the electrical business. There is then a reference to Mr Davies having incurred two major bad debts, clearly business related, and then the statement:
“Merv does work for BSA and is currently owed $8K ... Debtors, including BSA, currently total $14K to $16K.”
The entry proceeds:
“As Merv can no longer do electrical work, he is studying a real estate course and has been given a twelve months apprenticeship by L.J. Hooker, Glenelg. ... Longer term Merv will keep the electrical business running and work in real estate if he is successful. States he can manage and supervise the electrical business sufficiently on a part-time basis.”
In a number of bank documents headed “Credit Paper”, signed off by Mr McGrath, generated between 1995 and 2000, the customers to which it relates are listed as “Davies Electrical Pty Ltd ... as trustee for the M.J. Davies Family Trust, and Merfyn John Davies”. That is not a strong item of evidence, as the bank may simply have carried the heading forward.
In a list of the debtors of the business, BankSA is listed against a figure of $22,800. In the text which follows, Mr McGrath records:
“Confirmed with Steve Woodrow, BSA Property, that Davies has been doing extensive work for the bank and would be owed around that figure. Customer is still recovering from major motor cycle accident and no longer works directly in the business. Now provides overall management and employs two workers (one is an apprentice).
Customer has instead embarked on a career in real estate and recently started with L.J. Hooker, Glenelg. He has completed the R/E course.
Will in future juggle the two activities.
Financials for 96/97 provided and reflect a downturn following the accident.
Customer funded the loss by sale of surplus motor cycle and boat.
Customer is now in receipt of $300 pwk retainer (R/E), $300 pwk insurance and profits from business which is back up and running.
Customer will eventually receive a large compensation pay-out under compulsory third party insurance.” (emphasis added) [D66, Vol 2, 228]
The plaintiff conceded in evidence that the information contained in the document must have been provided by him to Mr McGrath, but he denied having given the impression that he was managing the business. I do not accept his evidence as to that. There is no reason to doubt that Mr McGrath recorded accurately the substance of the information given to him by the plaintiff.
On 28 October 1997, the plaintiff made an application to the bank for funding, to purchase a Statesman motor car. Within the written form supporting the application, under the heading “History of Applicant”, are set out details relating to the plaintiff, which I find were more likely than not based upon information supplied by him at about the time of the document. This part of the document reads:
“Electrical Contracting business established some 10+ years ago.
Mainly does work for larger corporates rather than domestic.
Major electrical contractor to BankSA for past 8 years.
Steve Woodrow, BSA Property, confirms prospects for continuing work good.
Other work for Builders, Property Managers etc.
Principal Merv Davies had a serious motorbike accident last year.
Restricted in his movement now, so manages business and does quoting etc.
Large pay-out likely from compulsory third party insurance.
Merv states he can adequately manage the business, and now has plenty of spare time.
Has studied for Real Estate license and now works for LJ Hooker, Glenelg.
Current motor vehicle dated and requires extensive work.
Upgrading to 1994 Statesman, ...
Vehicle used for company and Real Estate purposes, plus some personal.”
In his evidence, when questioned about this document, the plaintiff denied that he intended to use the vehicle in the business, and suggested that it would only be used for “real estate purposes and personal purposes”. I do not accept that evidence or his denials as to the other parts of the information set out in the document.
Other bank documents indicate similar representations being made to the bank over a considerable period of time. They may be summarised as follows:
*“Credit Paper” dated 12 December 1997 seeks finance to pay M. & M. Electrical Merchandising, a creditor of the electrical business. Recorded information includes:
“Merv does not work in a hands-on capacity any more he just manages electrical business”.
“Repayment ... will come from a collection of debtors ...”
*A Credit Paper dated 15 December 1997:
“Client going to Sydney to pursue work in realty. Has a job with L.J. Hooker, Coogee, but business will continue here.”
*And in a supporting document:
“... Merv now managing his company from Sydney ...”
*Credit Paper dated 17 September 1998:
“Customer has operated an electrical sub-contracting business for over ten years. ...
No longer able to work directly in the business so now has a F/T tradesperson and apprentice, with Merv handling quoting, admin and finance.
Merv now lives between Sydney and Adelaide and had a brief stint in real estate sales.”
*Under a document headed “Credit Narrative” dated 1 December 1998:
“Trading has returned to previous levels, with turnover close to previous high.
Gross profit improved from ‘labour’ but only work with Breezeair.”...
Merv draws 20.8K from Davies Electrical and receives 26K from an insurance relating to accident until he is paid out. Total of 46.8K.”
*Asset Purchase Application for Toyota Landcruiser dated 10 March 1999:
“Client requiring a vehicle more suitable for work.”
*Credit Approval Memorandum dated 13 September 1999:
“Davies elected to pursue an alternative career in real estate (Sydney) but soon returned to the electrical contracting business in a quoting/business admin capacity employing a Supervisor and Apprentice for the majority of ‘hands on work’.
.......
Following a disappointing 1997 as a result of Davies motor cycle accident, the trading performance of the electrical contracting business has returned good profits in 1998 & 1999.”
*The last-mentioned bank document includes a reference in these terms:
“Merv Davies has produced his 1999 tax return incorporating the P & L and B/S of M. J. Davies Family Trust for both 1998 & 1999.”
The profit and loss account for the year ended 30 June 1999 includes an inner column showing the 1998 figures. The figures are inflated, and bear no resemblance to the figures included in the tax returns. When challenged about the figures given to the bank, the plaintiff, supported by Mr Jamieson, suggested that they had been prepared simply as a “scenario” to illustrate what the position would be if he earned $100,000 more in the 1998 year, without any increased expenses. According to their evidence, the accounts given to the bank, which include the inflated “scenario” figures, had been supplied by mistake.
That evidence is completely implausible, and I do not accept it. I find that the relevant financial accounts given to the bank were deliberately inflated so as to overstate the profitability of the business in comparison with the actual tax returns. The true profitability remains obscure.
Even more importantly, the profit and loss account purports to set out the gross profit from trading under the heading “Electrical” and tabulates expenses clearly attributable to the electrical business. There can be no question but that the plain inference in the documents given to the bank by the plaintiff at that time was that the electrical contracting business was still his.
By and large, when he was challenged about the items of evidence which I have set out from the bank records, the plaintiff was less than candid, to the point of being evasive. I have no doubt that he represented to the bank that he was still conducting the electrical business.
He attempted to explain away the significance of the damaging entries in the bank’s records by suggesting at one stage:
“I didn’t come out and say Simon was buying the business because he was only a 20, 21 year old lad. ... We didn’t come straight out and say he was buying the business because of what was borrowed, he might lose the BankSA contract and hadn’t paid anything off the $136,000, so I gave him I was in the managerial part of it because Simon was still in the position he hadn’t paid it off.”

I accept that the confidentiality clause in the deed of sale might have operated as a curb on the plaintiff in disclosing to the bank the fact of the sale. But it could not justify the long series of misrepresentations to the bank that he was not only conducting the business but entitled to the profits of it.
In any event, I have already referred to the plaintiff’s evidence that he had in fact told the bank officer (Nash) about the sale.
A finding of conduct amounting to fraud with respect to the purported sale of the business is not a finding which should be made except on clear evidence. Furthermore, in this case, it would necessarily involve not only the plaintiff but also his accountant, Mr Jamieson, and possibly Simon Butler, unless the truth is that the latter was in the position of a young, gullible man of whom the plaintiff and his accountant took advantage.
At the end of the day, it is unnecessary for me to go so far as to make a specific finding that the purported sale of the business was a sham. What is important concerning the evidence to which I have referred surrounding this aspect of the matter is that it clearly demonstrates a consistent, close, ongoing involvement by the plaintiff in the business, more particularly as to quoting, supervising, dealing with customers and the like. As will be seen, this coincides with evidence of similar statements made by him to the bank before the accident in question.
Other Financial Dealings Post-Accident
Put shortly, the defendant’s case is that various financial dealings with which the plaintiff was involved after the accident can only be explained upon the basis that since the accident he has received income or had access to funds, from undisclosed sources.
I am satisfied, broadly speaking, that that assertion is correct.
In 1998, the plaintiff purchased another house property at 6 Hazelmere Road, Glengowrie, for $155,000.
This was purchased with the assistance of a mortgage to the bank. It is being tenanted by the plaintiff’s parents who are paying $170 per week rental. The difference between the rental and the amount necessary to service the mortgage has been met from the current account of Davies Electrical Pty Ltd, pursuant to the sale agreement.
In January 1999, the plaintiff purchased a property known as Willowbanks at Murray Bridge. This was a two-storey shack with a river frontage. Following its purchase, the plaintiff extended the main dwelling, upgraded the landscaping, installed a main bathroom with a spa, timber panelling, and a wall-mounted air conditioner. When inspected by a bank officer in April 2000, he noted that work still in progress included the excavation for and construction of a boatshed.
In October 1999, the plaintiff sold the property at 17 King Street, Glandore, for a price of $285,000. He put the proceeds of that sale towards the purchase, with his wife-to-be, Toni Pengilly, of a substantial house property at 79 Cross Road, Hawthorn. The purchase price of that property was $755,000.
That property was situated on a comparatively large allotment, but in May 2000, the plaintiff created the potential to enlarge it still further by the purchase of a house property at 2 William Street, Hawthorn, at a price of $205,000. William Street creates a junction with Cross Road, separated by one house property from No 79. No 2 William Street, however, extends back from William Street so as to be contiguous with the plaintiff’s Cross Road property.
At the time of trial, the property in William Street was being rented out. However, it appears that the plaintiff’s ultimate intention is to sell off the property to neighbours, but leaving a driveway down the middle of it so that the plaintiff will be able to have access to the back yard of his Cross Road property, from William Street.
While the acquisition of the various properties was in part financed by the sale of the King Street house property and by substantial loans from the bank, the source of funds for the improvements to the properties remains obscure.
When the plaintiff was asked what work he had done on the Cross Road property, he answered:
“Just redecorating, did some work in the back yard. Had a friend come through with his bob cat and clear the back yard ... I did some painting inside ... an old friend of the family come in and paint for us. ... He worked for about $50 a day.
Q.How much did you pay him in all.
A.Maybe a thousand dollars.
Q.What other work, generally.
A.Basically, I had a friend come through with his bob cat and clear the back yard for me because it was full of old trees and bushes and I basically wanted to open the block up. That is basically about it. I haven’t done much.” (emphasis added)
When further pressed in cross-examination about paving around the swimming pool in the back yard of the house, he said that friends had done it for nothing.
When shown photograph of the back yard of the Cross Road property taken from an elevated position nearby, the plaintiff admitted that it had been substantially concreted, and that this had been done before Christmas 2000. He admitted eventually that he had paid $4,000 for the concreting, stating that when giving his evidence earlier the “concrete work had slipped his mind”. He then admitted to paying $4,000 to $4,500 for some painting for two rooms and a hallway and some preparation work in another bedroom.
A rather different story is told by the bank documents. They include a statement by a valuer:
“At the date of inspection (17.1.01) the hallway and two main rooms at the front had been extensively upgraded, while work has also commenced on the other main rooms off the hallway, with work yet to be completed, including polishing floor boards, some internal painting and wallpapering.”
Further on in the valuation report, the author states:
“Apart from purchasing the land on William Street, the applicant advised that he has spent approximately $145,000 on renovations to date with budgeted estimated of the work yet to be completed, estimated to be in the order of $230,000. On top of this amount allowances also need to be made for the applicant’s own labour plus GST plus a contingency factor, which amounts to approximately $290,000.”
I accept the defendant’s contention that the plaintiff’s purported explanation for the figure of $145,000 recorded as “spent”, namely, that it was the value of work contributed by friends, is not credible. In his report, the valuer plainly drew a clear distinction between expenditure and work undertaken without charge.
Likewise, there was no satisfactory explanation given by the plaintiff as to the source of funds for the expenditure on the upgrading of the Willowbanks property.
Over the period since the accident, the plaintiff has bought, and in some instances sold, a number of vehicles. He purchased a Holden Statesman at a declared value, according to the Motor Vehicles Department’s records, of $28,000 in 1997. According to the records of the department, the declared value when it was sold in December 1998 was $24,250.
In April 1998, he purchased a Holden Senator sedan for $40,000, and in March 2000, another Holden Senator sedan for $56,000.
I should say that although I have attributed those purchases to him, the registration was effected in the name of either Davies Electrical Pty Ltd or M.J. Davies Enterprises Pty Ltd, a company which became the trustee of his family trust in substitution for Davies Electrical Pty Ltd.
Much evidence was given as to payments to and from Davies Electrical by or for the benefit of the plaintiff. The accountant, Mr Kennedy, prepared a table which shows a total of payments made from Davies Electrical accounts for the benefit of Mr Davies between July 1997 and February 2001 amounting to $452,000. In his evidence, Mr Kennedy confirmed that some amounts which appeared in his schedule should not have been there, but the adjustments necessary to give effect to those concessions would still leave the value of payments made for Mr Davies benefit over that period at a figure in excess of $400,000.
I find the various explanations given by the plaintiff to account for his ability to draw such large sums from what was, by all accounts, a relatively small electrical undertaking, unconvincing. It is not for me to speculate as to how the money which has not been satisfactorily accounted for has come into the hands of the plaintiff, or been applied for his benefit. Certainly, his suggestion that a number of friends had lent him money since the accident stretches credulity, and was not supported by any evidence from the people concerned. It may be, as the defendant suggests, that the figures for sales in the business have been artificially suppressed, but I am unable to make a finding as to that possible explanation.
It is sufficient to conclude that there were large sums of money of which the plaintiff has had the benefit since the accident the origin of which has been unexplained. At the very least, it points to other sources of income beyond those which he was prepared to disclose to the Court.
At the time of the accident the plaintiff was entitled to the benefit of an income protection policy of insurance taken out with Royal & Sun Alliance Insurance (“Royal & Sun Alliance”).
In July 1999, the plaintiff responded to requests by Royal & Sun Alliance for certain information. In his response to a request for taxation returns for 1997 and 1998, the plaintiff is recorded as having said that they were not done as his accountant would not do them because of outstanding fees of “approximately $15,000”. The note goes on to record:
“He said that all it would show would be what he has received from us.”
Those representations were plainly untrue. No account had been rendered by Mr Jamieson, and neither had the latter quantified what was due to him.
Furthermore, the total taxable income revealed in the plaintiff’s personal tax return shows a total taxable income of $104,460, which includes $10,107.00 salary as a “Real estate agency manager” and Capital Gains Income of $96,884.00.
On the question of the plaintiff’s post-accident financial dealings, the manner in which he dealt with two interim payments made by the defendant’s insurers is instructive.
The first payment was made on 22 July 1996 in the sum of $30,000.
By letter dated 21 April 1997 from the plaintiff’s solicitors to the defendant’s insurers, SGIC, a further interim payment was sought. Part of the letter reads as follows:
“Our client has endeavoured to keep his business open. He has felt a serious responsibility to his apprentice whom he has continued to employ. In an endeavour to keep the business running he also employed a full time electrician however as the volume of work into our client’s business dropped dramatically after this accident he was no longer able to afford the full time employee.
Our client’s only current employee is the apprentice.
Our client now realises that he is no longer able to run his own business. He has consulted with his accountant and the business has been placed for sale. It was advertised in last Saturday’s Advertiser.
Had this accident not occurred and had our client been able to maintain his level of income as appears in the 1996 financial year he would have been in the position to sell his business for a figure of at least $150,000.00.
The business is now in a loss situation and accordingly he will receive virtually nothing for good will but may receive somewhere in the vicinity of $30,000.00 for plant and equipment.
Our client has gone to enormous lengths to mitigate his position. The interim payment previously made by you was introduced into his business and this appears in the enclosed figures.
He has also sold two classic motor cars which he had for about $70,000.00. Once again that money was introduced into business in an effort to keep it running.
Our client now has a significant overdraft. The income coming into the business is minimal and in fact significantly less than the outgoings.
Our client instructs us that he will now proceed to sell his business at the best price obtainable.
He does however require an urgent injection of income into the business to assist in the proper and orderly winding down of the business, repayment of the overdraft and repayment of various creditors by whom he is presently being pressed.
We therefore respectfully request that you consider a further interim payment of, say, $50,000.00 Naturally this together with the previous interim payment will be taken into account in the overall assessment of our client’s entitlement to damages.”
It will be seen from the letter that, through his solicitors, the defendant was representing to the insurers that the first interim payment had been “introduced into his business”. But when cross-examined about the movements in his bank account, the plaintiff eventually conceded that he had applied the first interim payment of $30,000 towards the purchase of a red Corvette motor car.
Be that as it may, the defendant’s insurer responded favourably to the request for a further advance.
It will be seen from the letter of 21 April 1997 that the plaintiff represented to SGIC that the further interim payment would be used to “inject” into the business, to “assist in the proper and orderly winding of the business” and for “repayment of the overdraft and repayment of various creditors by whom he is presently being pressed”.
In the events which happened, the second interim payment of $30,000 made in response to the letter was deposited into the plaintiff’s bank account on 16 May 1997.
On 20 May 1997, the plaintiff made a cash withdrawal from it of $22,654. After initially denying that he had taken any holidays after the accident, he agreed that in about May 1997 he went to South-East Asia. He could not explain how he paid for that trip. The overwhelming probability is, and I so find, that the $22,654 cash withdrawal was used, at least in large measure, to finance an overseas holiday at a time when the plaintiff’s business was supposedly collapsing.
For convenience, I comment in this part of my judgment upon evidence of the plaintiff’s purchase of a substantial quantity of marijuana.
In about May of 1997, the plaintiff was arrested while he was passing through Sydney airport on a trip to Sydney. He was charged with possession of marijuana for sale The marijuana was found in his suitcase or bag. The weight was 2 kilograms. He said in evidence that he had bought the marijuana “for some thousands of dollars”, which he paid for with cash which he had in hand. He stated in evidence that he took the marijuana for medical reasons and smoked “maybe five or six joints” a day. He said in evidence that he was going through a “bad time”.
At that stage, about mid-1997, the plaintiff was travelling between Adelaide and Sydney about every two weeks. I find the plaintiff’s evidence that he wanted to take to Sydney what was some four months supply, having regard to his stated rate of use of marijuana, to say the least, surprising.
At all events, it appears that the plaintiff was acquitted of possessing the marijuana for sale, but was convicted of simple possession, upon which he received a $700 fine. As well as the $6,000 or $7,000 which he paid for the marijuana, he had the not inconsiderable expenses of representation by legal counsel in Sydney to pursue his defence of the charge.
The plaintiff’s evidence at trial was that he was still continuing to use marijuana for medical reasons, but that this does not cost any money. I upheld his objection to disclosing the source of the marijuana which he now consumes.
Loss of Earning Capacity
Broadly speaking, the plaintiff asserts that the accident injuries have destroyed his capacity to participate in the electrical contracting business; that so far he has been unable to retrain himself to gainfully employ whatever residual earning capacity remains; and that his future earning prospects are bleak.
I will first make some observations as to the evidence of the turnover in the business.
Going back to the 1995 year, in my view, the disclosed results were artificially high by reason of the fact that most of the Breeze-Air work was undertaken and paid for in that year, contrary to the evidence of the plaintiff.
Coming then to the 1996 year, the trading account for the electrical business records total sales of $293,437. In my opinion, that figure has been deliberately inflated in an attempt to accentuate and distort the supposed level of loss attributable to the accident as disclosed in subsequent years.
There is a surprising lack of evidence as to the invoices which could support sales of that figure. I found the evidence of the plaintiff and of Mr Jamieson as to the reasons why there was a lack of evidence as to the amount actually invoiced unconvincing.
The plaintiff was totally incapacitated for the last seven weeks of the 1996 financial year. There is evidence indicating that the amount invoiced to mid-February 1996 was $117,000. For sales to have totalled $293,000 for the year, $176,000 would necessarily have to have been billed in the last four and a half months; an unlikely result, having regard to that part of this period during which the plaintiff was incapacitated.
I accept, for the reasons put forward by Mr Trim QC, that the actual level of sales in the 1996 year is more likely to have been of the order of $211,000.
I am satisfied that by the time of the accident, the plaintiff had ceased to have a full-time, hands-on involvement in the electrical contracting business.
I have already referred to a number of entries in the records produced from BankSA. A record which pre-dates the accident is a highly significant item of evidence as an indication of the plaintiff’s role in the business prior to the accident.
In a “credit narrative” dated 23 September 1994 appears the following entry, which I am satisfied came from information given by the plaintiff to the bank:
“Mr Davies works mainly in a supervisory role. He employs one tradesman and an apprentice.
.........
Assets are of a fixed nature and remain unchanged over the last 2 years.
.........
Tradesperson works on a ‘Contract’ basis and is paid direct by Debtors.”
I accept the defendant’s contention that there is no reason to believe that this history is other than the truth. In the result, I am satisfied that by the time of the accident, and for some time beforehand, the plaintiff having worked hard to establish the electrical contracting business, was moving away from direct, hands-on involvement, to a supervisory role, which freed up his time so that he could apply himself to other activities which by then were attracting him, one such activity being the buying and renovating for re-sale of houses.
Another matter of significance, in my view, in determining the allowance to be made for pre-judgment loss of earning capacity is the evidence of the level of acquisition of assets by the plaintiff since the accident, particularly when viewed in the light of his unsatisfactory explanations for the sources of the money which clearly passed through his hands over that period.
The evidence leads me to the conclusion that before the accident, the plaintiff had assumed a supervisory role in the electrical business, while he was progressively opening up other business opportunities. That finding rather than any finding as to the genuineness of the purported sale of the business is a critical factor in the assessment of the amount to be allowed for loss of earning capacity.
One starts with the self-evident proposition that for an award to be made for loss of earning capacity the first requirement is:
“... that the plaintiff’s earning capacity has in fact been diminished by reason of the negligence-caused injury.”[1]
The second requirement is that:
“The diminution of .... earning capacity is or may be productive of financial loss.”[2]
[1] Medlin v SGIC (1994-1995) 182 CLR 1 per Deane, Dawson, Toohey and Gaudron JJ at 3.
[2] Ibid per Deane, Dawson, Toohey and Gaudron JJ at 3 citing Graham v Baker (1961) 106 CLR 340 per Dixon CJ, Kitto and Taylor JJ at 347.

Once those two requirements are satisfied, the measure of the award of damages for loss of earning capacity is the demonstrable financial loss caused by it.
This is not a case, unlike Medlin (supra), where the question of causation is an issue. Here, if the plaintiff has suffered a diminution of earning capacity after the accident, it is no doubt attributable to the defendant’s negligence.
However, in this case, the task of assessing damages for loss of earning capacity has been complicated by reference to the plaintiff’s efforts designed to inflate the award, and my inability to accept the plaintiff’s financial records, including the financial records of the electrical business, as accurate.
In those circumstances, the assessment of damages on this head becomes rather more speculative than it otherwise would be.
Despite the problems associated with the financial records, I am satisfied that the plaintiff’s injuries have incapacitated him from the ordinary work associated with his trade, that is, as an A-class electrician. I am satisfied that the accident injuries preclude him from sustained work involving use of ladders, working from heights, working in confined spaces and use of some tools such as screwdrivers.
I make that finding despite the level of physical activity displayed in the films taken by private investigators. While they confirm that the plaintiff has made a remarkably good recovery from serious injuries, he is still left with significant disabilities which disqualify him from work of the nature which I have described.
However, as I have found, prior to the accident the plaintiff had ceased to earn an income as a hands-on electrician. Insofar as he was engaged in administering the business and supervising work, in maintaining client contact and in quoting, once his recovery had stabilised, he remained capable of those tasks. That is with the qualification that some aspects of quoting which might involve entry into awkward spaces may be difficult for him. But substantially, the earning capacity which he was utilising prior to the accident remains intact.
It follows that, looking at the period before trial, first he stands to be compensated for the period during which he was unable to perform even a supervising role in the business. In my view, a generous period of time during which he might fairly have been regarded as incapable of performing that role would be a period of eighteen months.
But in assessing the extent to which this was productive of financial loss, the situation is obscured by reference to the fact that the business was in fact maintained largely through the efforts of Mr Butler, and the plaintiff continued to make substantial drawings which I am satisfied have not been satisfactorily accounted for.
The period of eighteen months to which I have referred would carry through until about the end of 1997.
That the plaintiff should be regarded as having by then regained a capacity at least to supervise the electrical contracting business is consistent with the fact that in about October 1997 he took up a traineeship with L.J. Hooker, the real estate agents, at their Glenelg office. The work involved a fair degree of walking and letter-box dropping. He found, though, that the market in Adelaide was very slow, and he made inquiries of the Sydney office of L.J. Hooker, as a result of which he formed the view that there were more prospects there.
His evidence was that he stayed in the traineeship at Glenelg for three months, which would have brought him to the end of 1997, and that he then was able to secure a transfer to the Maroubra office of L.J Hooker in Sydney. According to his evidence, he started working in Maroubra in January and finished in April 1998. He found the Sydney market to be less buoyant, or at least less accessible than he thought it might be, and he did not earn anything more than his retainer.
Despite finishing up with L.J. Hooker in Sydney in April 1998, he stayed on in Sydney for something over a year. When I say that, he appears to have been dividing his time between Sydney and Adelaide. His evidence is not quite consistent as to the timeframe, as elsewhere he indicated that he returned to Adelaide, presumably permanently, from Sydney at some time in 1998. After giving up the job with LJ. Hooker in Sydney in about April 1998, he did not look for any further work in Sydney, although he maintained his rehabilitation routine involving regular gym work, including swimming.
Insofar as it might have been suggested that the plaintiff has a capacity to earn as a real estate salesman, in my view, his failure to pursue a career in that industry is not to be held against him in the process of assessing damages. That is not an industry which everyone is cut out for, and the course of events with respect to the plaintiff’s employment by L.J. Hooker suggest to me that this is not an occupation to which he is suited.
There is a telling passage in the plaintiff’s examination-in-chief as to his activities with respect to further employment on his return to Adelaide from Sydney:
“Q.On your return to Adelaide what did you do about employment.
A.Still nothing for a while because I was under the impression that this case was going to finish sooner than later ......”
I am satisfied that the plaintiff did not attempt any other form of retraining by reason of a deliberate decision to maintain a situation where he presented in court, when his case was finally listed, as still being unemployed. In fact, for the reasons which I have explained, I am satisfied that effectively he was supervising the electrical contracting business, that he was receiving from that business by way of drawings much more than he is prepared to admit to, and that there were other sources of income which remain undisclosed.
I am satisfied also that, insofar as the plaintiff had a developing interest in and capacity for renovating houses, this remains substantially unimpaired by the accident injuries. To the extent that it is likely that the plaintiff will pursue that activity by hiring sub-contractors to do the work, I think that this would have been the case in any event, irrespective of the accident injuries.
Although he had a card printed “District Property Management Services” which he said that he intended to use in a property renovation business, I do not think that he has fully applied himself to the task of obtaining the necessary qualification to carry on such a business, even as a contractor employing sub-contractors to renovate houses. He made only a token effort at inquiring as to what qualifications were necessary. If he had been serious about acquiring the necessary trade certificate, he could easily have found out more than he did. He could have obtained an application form from the Office of Consumer and Business Affairs, which, upon completion and lodgement, would have resulted in an interview at which the steps that were thought necessary for him to take to obtain an appropriate licence would have been explained to him.
The plaintiff did not obtain the form or seek an interview.
The defendant called Mr Fuller, a course co-ordinator and lecturer in building, drafting and design courses at the Douglas Mawson Institute of TAFE. He has had approximately 16 years experience of teaching, and furthermore, has much to do with the Office of Consumer and Business Affairs, the licensing body in South Australia. In Mr Fuller’s opinion, having regard to the plaintiff’s existing qualifications and experience, the plaintiff has a very good chance of obtaining a building contractor’s licence, which is a licence to be able to build, and probably a building works supervisor’s registration, which would enable him to perform alterations and additions.
To obtain the licence qualification necessary to enable the plaintiff to employ contractors to attend to renovations and additions, the plaintiff would be obliged to undertake a course, either part-time or full-time, at the Douglas Mawson Institute of TAFE. The course takes one year full-time. According to Mr Fuller’s evidence, with the qualifications which the plaintiff already has, he would be “welcomed” into the course.
I do not suggest that the plaintiff should be criticised for being reluctant, to a degree, in undertaking further study. But it is clear that he is a man of considerable drive and application.
I think that it is likely that he has hung back from obtaining the necessary qualification to pursue his obvious interest in this area until completion of the litigation.
Elsewhere in his evidence the plaintiff stated that, following his marriage, he has developed an interest in opening a business with his wife. He has been looking at the classified advertisements in the newspapers at businesses being offered for sale. Part of his evidence in cross-examination was:
“Q.You thought it more important to buy a three-quarter million dollar property on Cross Road rather than resource your funds into a business.
A.Yes, I did, that’s personal.
Q.Do you remember telling Miss O’Connor [an employment consultant] you were confident you possessed the necessary skills and demonstrated capacity to establish and maintain a business.
A.From previous history with Davies Electrical, yes, I think so.
Q.And the sorts of businesses you were looking for in the classifieds are the sorts of businesses you think you would be quite able to handle.
A.I think I can handle any business if I put my mind to it.
.........
Q.You told Ms Locke - I’m asking really whether you recall that your aim was to buy another business with your payout [referring to the proceeds of this action].
A.That’s correct yes, work for myself.
............
Q.It comes back to the point what you were really waiting for is the proceeds of this action to enable you to buy an appropriate business with you and your wife.
A.Late it has, yes.” (emphasis added)
I am sure that the plaintiff has the capacity to perform well in a wide range of business ventures, if he was so minded.
Against the background of those findings, I proceed to the assessment of pre-judgment and post-judgment loss of earning capacity.
(a) Pre-Judgment Loss of Earning Capacity
As for the pre-judgment loss of earning capacity, through the accountant, Mr Peter Macks, the plaintiff offered a detailed estimate predicated upon the supposed maintenance of what was said to be the level of turnover for the tax year ended June 1996, during the intervening years. Mr Macks’ calculations were offered in tabular form.
The starting point of his calculations was an assumed income from the business, in an amount predicated on the assumption that the plaintiff had been able to carry it on at the same level as it was suggested was the case prior to the accident. On that footing, the expected annual income from the business in the tax years to 30 June 1997 through to 31 March 2001 (the date to which Mr Macks calculations were projected) was said to be $115,829, except for the last year, which was for nine months only, to March 2001, which was estimated at $86,872, a figure calculated at the same rate as the level of earnings in the previous years.
Against that starting point, Mr Macks made various adjustments, including a deduction for the actual income said to have been earned prior to the sale of the business and a small amount earned as a real estate salesman for L.J. Hooker. After allowing for tax, he then offered an estimation of the net income after tax which the plaintiff might have been expected to have earned if the business had continued post-accident. Proceeding on that basis, Mr Macks suggested that the total loss of earning capacity worked to 31 March 2001 amounted to $433,197 after tax.
In his final submission, Mr Harms, counsel for the plaintiff, started with that figure, but conceded that some allowance should be made for residual earning capacity, at least from the 1998-1999 financial year. After making an appropriate allowance on that score, he suggested that the pre-trial loss of earning capacity should be assessed at a figure of approximately $311,000.
There are a number of assumptions built into Mr Macks’ calculations, and Mr Harms’ refinement of those calculations, which have not been borne out by the evidence. As a result, I would not be prepared to approach the assessment of pre-trial earning capacity in that way.
In view of the fact that I am satisfied, for the reasons given, that the plaintiff has deliberately obscured the true position as to his actual level of earnings since the accident, and has deliberately refrained from fully utilising his residual earning capacity pending the conclusion of these proceedings, the process of assessment of the award for pre-judgment loss of earning capacity becomes more than usually speculative.
In all the circumstances, I would allow $100,000 for pre-judgment loss of earning capacity, together with a lump sum for interest of $15,000, a total of $115,000. In my assessment of this head of loss, I have not taken into account the two interim payments made by the defendant, each of $30,000, paid on 22 July 1996 and 16 May 1997, except as to the calculation of interest.
(b) Future Loss of Earning Capacity
For the reasons given, I am satisfied that the plaintiff remains capable of managing and supervising an electrical contracting business. It is nothing to the point that he has purported to sell off the business. What he is compensated for is proven loss of earning capacity. As I have observed earlier in this judgment, it does not matter whether the purported sale of the business was a sham or not. The extent to which the accident has deprived the plaintiff of relevant earning capacity remains the same.
He must, however, be compensated for the fact that if it had not been for the accident, even if he had gone into other occupations or callings, he might nonetheless have been obliged to fall back on his trade as a hands-on electrician in the event of failure in some other business in which he might have become engaged by reason of an economic downturn or other factors.
Also, he now lacks the physical agility necessary to do any heavy or awkward manual work, or work on heights, not necessarily limited to electrical work, in the event, as I think is likely, he obtains the necessary trade qualifications to renovate houses for resale, and contracts for house repairs and additions. He will now be obliged to utilise sub-contractors for the heavier aspects of any such work, whereas if the accident had not supervened, it is likely that he would have contributed some of his own labour.
For similar reasons, if he goes into some other business, he will need to rely on employees or sub-contractors for any particularly heavy work which might be involved.
In all the circumstances, I would assess the award for loss of future earning capacity at $225,000.
Voluntary Services
I have drawn attention to the assistance given by the plaintiff’s parents following the plaintiff’s discharge from hospital. Mr Harms has suggested a figure of $2,500 on this head. I think that that is an appropriate amount.
Special Damages
Most of the special damages have been paid.
It is agreed that unpaid special damages amount to $1,224.30.
Non-Economic Loss
Having regard to s 35A(1)(b) of the Wrongs Act, this falls to be assessed by assigning a number between 0-60.
In my opinion, it is appropriate to assign the number 20.[3] The multiplier has been agreed at $1,520. This means that the allowance for non-economic loss should be $30,400.
[3]    In arriving at this figure, I have had regard to the following cases, not because they are necessarily comparable, but as a guide to the approach to be taken: Devlin v Simcock (2000) 207 LSJS 416; Goonan v Fitzgerald (2000) 207 LSJS 14; Stewart v Jacobsen (No 1) (1999) 202 LSJS 492; O’Reilly v Wilkinson (1999) 201 LSJS 480; Hastings v Fanning (1998) 201 LSJS 26; Panagaris v Chinner (1997) 190 LSJS 336; Murray v Dawson (1995) 184 LSJS 213; Barraza v Birtwistle (1995) 183 LSJS 493; Laparidis v Yates (1994) 179 LSJS 347.
Conclusion
$
Non-Economic Loss  30,400.00
Economic Loss:
     Pre-judgment loss of earning capacity             115,000.00
     Post-judgment loss of earning capacity           225,000.00
Voluntary Services  2,500.00
Unpaid Special Damages  1,224.30
  ----------------
  $374,124.30
Counsel agree that the two advances,
each of $30,000 should be deducted  60,000.00
  ---------------
Net Judgment  $314,124.30
  =========
I assess damages including interest but less pre-payments in the total sum of $314,124.30, and direct that judgment be entered for the plaintiff against the defendant in that sum.
I will hear the parties as to costs.

[2001] SASC 290

23 August 2001