McKenzie v Kowald - [2002] WADC 61

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: MCKENZIE -v- KOWALD [2002] WADC 61

CORAM: MARTINO DCJ

HEARD: 5-8 MARCH 2002

DELIVERED : 28 MARCH 2002

FILE NO/S: CIV 3470 of 1999

BETWEEN: PETER WAYNE MCKENZIE
Plaintiff
AND
WARREN JAMES KOWALD
Defendant

Catchwords:

Torts - Negligence - Motor vehicle accident - Damages - Personal injuries

Legislation:

Nil

Result:

Damages assessed

Representation:

Counsel:

Plaintiff: Mr M E Herron
Defendant: Mr B C Sierakowski

Solicitors:

Plaintiff: Gibson & Gibson
Defendant: Brian Sierakowski

Case(s) referred to in judgment(s):

Husher v Husher (1999) 197 CLR 138

Case(s) also cited:

Cole v Ellis (1992) 60 SASR 481
Foodlands Association Ltd & Passarelli v Mosscrop [1985] WAR 215
Neal v CSR Ltd (1990) A Tort Rep 81-052
Quartermaine v Collins, unreported; DCt of WA; Library No 4119; 15 August 1994
Randall v Dul (1994) 13 WAR 205
Schick v Abbott [1976] WAR 54
Szittner v Harriott (1967) 85 W.N. (Pt 1) NSW 461
Taroporewalla v Berkery (1983) 3 NSWLR 28
Ward v Newalls Insulation Co Ltd [1998] 2 All ER 690
Zachopoulos v SGIC (1986) A Tort Rep 80-023

MARTINO DCJ:

Introduction

The plaintiff claims damages for personal injuries he alleges he suffered in a motor vehicle accident on 10 April 1997. The defendant admits that the accident occurred as a result of his negligent driving.

The plaintiff

The plaintiff was born on 4 July 1949. He received his school education in South Australia. He left school at age 16 and then worked in a variety of labouring and rural jobs often working at one job during the day and another in the evening. When he was aged 22 the plaintiff commenced a plumbing apprenticeship in Wyndham. He completed the apprenticeship with another principal in Perth. He was then aged 26. After completing his apprenticeship the plaintiff worked in Perth as a plumber for approximately a year, for most of that time as a foreman. In 1996 the plaintiff moved to Manjimup where he commenced his own plumbing business. When he arrived in Manjimup the plaintiff obtained work apple picking at an orchard and driving a forklift at a canning factory while he built up his plumbing business. After approximately a year the plaintiff had enough plumbing work to keep him busy full‑time.
The plaintiff's plumbing business grew. At the time of the accident the business was carried on by Yugaroo Pty Ltd as trustee for the Peter McKenzie Family Trust trading as McKenzie Plumbing. Yugaroo employed the plaintiff, his wife and four other employees. Its equipment included a backhoe, a bobcat and a truck. It carried out work on a wide variety of jobs in the South‑West. It operated from premises in Manjimup on which the plaintiff constructed five sheds. Yugaroo occupied one of the sheds and three others were let to commercial tenants.
The plaintiff also engaged in other commercial activities. The plaintiff and his wife lived on a 65 acre farm. The plaintiff and his wife had used the farm for rural activities which had included running sheep, cows and buffalo, a piggery and growing tulips. Those activities had either run at a loss or made small profits for the large amount of work involved. Before the accident they obtained authority from the local council to sub‑divide the farm into five acre lots. The plaintiff constructed bitumen roads to give access to the lots, provided power and phone line access and fenced the lots. The plaintiff physically performed much of that work himself. On the advice of lawyers the plaintiff decided to transfer ownership of the property to his company Freight Holdings Pty Ltd. Freight Holdings had previously operated two petrol stations. The petrol station businesses had not been successful.
The plaintiff had started an auction and salvage business in the town of Manjimup which he sold after approximately four years. Through another entity, Beechon Pty Ltd, the plaintiff also carried on a property development business which included buying medium size buildings, renovating them and selling strata units in the buildings.
The plaintiff was also active in the local community. Before the accident he decided to run for election on the local council with other members of the community on the same ticket. The election took place after the accident. The plaintiff was elected to the council.
At the time of the accident the plaintiff was married and had three adult children. He was a hard working plumber who had engaged in a variety of other activities. Some of his business activities had not been successful but the plaintiff had managed his setbacks and continued his successful plumbing business and various other activities.

The accident and its consequences

The plaintiff has no recollection of the accident. The circumstances of the accident set out in the statement of claim are admitted by the defendant. The plaintiff was driving along Muir Highway near Manjimup. The defendant was driving in the opposite direction on the same highway. The defendant drove his car onto the plaintiff's side of the road and the two cars collided.
The plaintiff was taken by ambulance to the Warren District Hospital where Dr James Bowie attended upon him. Dr Bowie was the plaintiff's general medical practitioner. He found the plaintiff had suffered an extremely extensive deep, dirty, laceration extending from below his right eyebrow through his nose into his upper lip. The fractured bones of his nose were exposed. The plaintiff also had a very deep laceration on his jaw and a fractured lower jaw. The injuries were so extensive that initially Dr Bowie did not recognise the plaintiff. Dr Bowie cleaned the plaintiff's wounds.
The plaintiff was taken by Royal Flying Doctor Service to Perth where he was admitted to Royal Perth Hospital. On 16 April 1997 the plaintiff was transferred to Royal Perth Rehabilitation Hospital where he came under the care of Dr Kim Fong, specialist in rehabilitation medicine. The injuries suffered by the plaintiff in the accident are described in Dr Fong's report of 28 May 1997 as follows:
"1.Traumatic brain injury with one week duration of post‑traumatic amnesia. His cranial CT scan showed up small areas of contusion in both parietal regions.
2.Fractured right mandible which was internally plated by the Plastic Surgery Team. Peter reports residual problems with an altered bite pattern and tenderness over the metal plate.
3.Fractured nasal septum which was treated by closed reduction. Peter reports a persisting nasal blockage on the right side.
4.Facial lacerations which were debrided and sutured. The main complaint is of some right labial numbness.
5.Injury of his right supraorbital nerve. He reports persisting headaches centred around this region."
The plaintiff received two weeks of intensive rehabilitation in Royal Perth Rehabilitation Hospital. He made good progress in recovering from his facial injuries but he continued to have difficulties with verbal and short‑term memory, abstract thought, rate of information processing and insight.
The plaintiff was discharged from the Rehabilitation Hospital on 30 April 1997 to receive outpatient occupational therapy. The plaintiff was discharged as an inpatient at the urging of his wife who was a very regular visitor at the hospital. She became concerned that the plaintiff was getting depressed in the hospital. The plaintiff's wife hoped that if the plaintiff and she went on a previously arranged holiday to the Kimberley with another couple his condition would improve.
The holiday in the Kimberley was not a success. There was a lot of driving on gravel roads. The husband of the other couple drove. He decided to drive on the incorrect side of the gravel roads where he found the corrugations made the trip less uncomfortable. Not surprisingly this caused great distress to the plaintiff after his motor vehicle accident. Apart from time spent in the motor vehicle the plaintiff spent most of his holiday sleeping.
Dr Fong reviewed the plaintiff on 28 May 1997. He found that the plaintiff had improved significantly. He was more appropriate and spontaneous in his manner and conversation. The plaintiff acknowledged to Dr Fong some reduction of his attention span and tiredness. His irritability seemed to be improving. The plaintiff reported hypersensitivity to noise. He was recovering physically apart from some mild high level balance difficulties and possibly some reduced arm co‑ordination.
Dr Fong told the plaintiff that he should not drive until he underwent neuropsychological testing and after EEG results were available to confirm that the plaintiff was at an acceptably low risk of epilepsy following his head injury. Dr Fong anticipated that despite the plaintiff's significant brain injury he would achieve a fairly early return to work and to driving motor vehicles.
Dr Fong saw the plaintiff again on 27 August 1997. At that time the plaintiff's main difficulties were frequent frontal headaches and mild difficulties with concentration and fatigue. Dr Fong was of the opinion that the plaintiff was ready to return to driving and make a graduated return to work with restrictions. Those restrictions included not working at heights and not using power tools with cutting edges because of the slight risk of post‑traumatic epilepsy.
Dr Fong continued to review the plaintiff until 5 November 1998. By that date the plaintiff's condition had gradually improved but Dr Fong felt that the plaintiff was still moderately affected by the severe brain injury he suffered in the accident. His main problems were related to poor motivation, fatigue, frequent cramps of his lower limbs, poor balance and reduced sense of smell. It appeared that the plaintiff's work productivity had been reduced from the accident. The plaintiff had some mild impairment of balance but his co‑ordination had returned to normal. It appeared to Dr Fong that the plaintiff may be suffering from depression, a diagnosis that Dr Fong had raised earlier. Dr Fong felt that there was little further that he had to offer the plaintiff. The plaintiff's symptoms were consistent with injury to the frontal lobe of the brain. Dr Fong felt that the only realistic option for the plaintiff was to try and work within his range of limitations and it was unlikely that the plaintiff would ever return to full productivity as a plumber.
On 18 December 2000 Dr Fong saw the plaintiff at the request of the plaintiff's solicitors to assess the extent of the plaintiff's residual disability. There had been very little improvement in the plaintiff's conditions. The main physical problem suffered by the plaintiff were difficulties with balance, frequent cramps in the hands and feet and frequent headaches at the front of his head. The plaintiff told Dr Fong that he continued to suffer problems of poor short term memory and poor judgment, planning and organisational skills. He also described emotional and behavioural difficulties which Dr Fong summarised as consisting of rigidity of thinking, distractibility, fatigue and lack of drive. These problems resulted in a significant reduction in the plaintiff's work productivity. On his examination of the plaintiff Dr Fong found a mild but noticeable reduction of high level balance. The rest of the physical examination was satisfactory including good preservation of limb strength, co‑ordination and sensation. In Dr Fong's opinion the plaintiff's cognitive difficulties appeared larger than the extent of his brain injury would justify. Dr Fong concluded that the plaintiff had suffered a significant reduction in self‑esteem, confidence and motivation and that the plaintiff had displayed clinical feature of moderate depression at various stages of his recovery which had compounded his reduced work efficiency.
Dr Fong arranged for an MRI scan on the plaintiff's brain. Dr Fong did not see the films of the scan, but he did see a report of the scan and he commented on the report in his own report dated 21 February 2002. The findings of that scan confirmed that the plaintiff had a diffuse brain injury. The extent of those changes was probably not as prominent as Dr Fong would have expected based upon the plaintiff's residual symptoms and disabilities. The degree of structural brain damage was relatively modest. The report added weight to Dr Fong's opinion that the plaintiff's residual personal, social and working difficulties are significantly psychologically based. The plaintiff appears to have adapted poorly to his condition and developed depression, loss of confidence and poor anger and stress management. Dr Fong was of the opinion that there was little prospect of any significant further improvement in the plaintiff's condition.
The plaintiff wore dentures before the accident. The fracture to his jaw altered the shape of his bottom jaw bone resulting in his original dentures no longer fitting. He was provided with replacement dentures by his dentist but he has found the replacement denture uncomfortable. His dentist, Dr Warren Slater, provided the plaintiff with soft liners. They have provided some improvement in the comfort of the dentures but the plaintiff continues to suffer discomfort with them. In addition the plaintiff will now require to replace his dentures more frequently than before the accident due to bone resorption particularly around the fracture area, whereas before the accident dentures would have lasted 15 to 20 years the plaintiff will now need to replace his dentures every five to six years and have them re‑lined every one to two years. The cost of replacing dentures is approximately $990 and the cost of re‑lining is $320.
Even with the benefit of new dentures and liners the plaintiff has considerable difficulty with dentures which he did not have before the accident. He finds it difficult to chew and he now has to be careful with what he eats. Due to damage to his jaw his dentures do not fit firmly.
Due to the injuries to the plaintiff's nose his breathing through his nose is restricted at times. It is something a plastic surgeon has told the plaintiff could be improved with surgery but the plaintiff is reluctant to undertake further surgery. The plaintiff's nose is bent as a result of the fracture a fact which the plaintiff said concerned his wife more than him but nevertheless is a cosmetic disability to the plaintiff himself.
The plaintiff also has scarring on his bottom right lip and his lip is numb in that area. Hot or cold drinks can leak from his lip in that area which can cause him embarrassment. The plaintiff also needs to be careful when shaving that numb area to ensure that he does not cut it.
The plaintiff suffers from tinnitus which varies in intensity. At times when he is tired or stressed the condition gets worse.
Upon his return to work the plaintiff gradually increased his workload and work responsibility. He has achieved a level of functioning which on the basis of his evidence and that of Dr Fong I conclude is likely to be the level for the remainder of his working life. He can manage some physical work but heavy physical work such as using a sledge hammer or hard digging is very fatiguing for him, causing him to feel nauseous and to suffer headaches which require him to lie down. The plaintiff attempts to manage that limitation by arranging those tasks for the end of the day. That is possible in some jobs but not on smaller jobs. The plaintiff works everyday and he estimates his work productivity at four to five hours a day, a reduction of one to two hours per day on his pre‑accident productivity. In my view based on the evidence of the plaintiff, his wife, Dr Fong, the plaintiff's former employees and customers this estimate of the reduction in the plaintiff's productivity is conservative.
The plaintiff suffers bad headaches after heavy work and when he returns home he is extremely tired by the end of each working day. He also develops cramps in his hands and feet. The cramps in his hands are brought on by physical work. The cramps in his feet are mainly at night. The plaintiff described himself as "bullet proof" before the accident, capable of sustained hard physical work. It is clear that the plaintiff's reduction in capacity to work hard has reduced significantly the plaintiff's enjoyment of life because it has reduced his self‑esteem. The plaintiff's memory and concentration has suffered and he finds it necessary to use a notebook constantly.
The plaintiff has reduced the size of McKenzie Plumbing so that it now has no employees other than himself and his wife. The business has disposed of the truck and the backhoe and if possible he would also like to dispose of the bobcat. The plaintiff described his current work level as "I'm flat out now. I mean, I've probably got two months work now. If I went home now and never got another job for two months, I'd still be busy" (T93‑94). However it is clear that there is a reduction in the quality of the plaintiff's work and so the quality of the work that his business is able to obtain. This applies at all levels of plumbing work. Dr Bowie, his general practitioner, used the plaintiff as his plumber before the accident. He recently asked the plaintiff to fix a leaking tap and then had to get somebody to come back the next day because the tap was still leaking. Dr Bowie described the plaintiff's work performance as not all like what it used to be. In other areas the plaintiff declines work because he no longer feels capable of meeting the high standards required. For example, before the accident, his business provided plumbing service to Mr Keith Russell, a builder of expensive holiday homes in the South‑West. Mr Russell described the plaintiff as very hard working and very reliable before the accident. The plaintiff has not sought any work from Mr Russell because he is not able to guarantee the high level of reliability that he provided before the accident.
After the accident McKenzie Plumbing benefited from assistance from members of the local community who got together on one weekend and worked on a busy bee to enable the company to do work that was required on a large job.
The role of the plaintiff's wife in the company has increased substantially as a result of the plaintiff's limitations. Before the accident the plaintiff's wife provided administrative and book‑keeping services to the company for which she was paid a wage. Following the accident the extent of her administrative work has increased significantly because she is obliged to attend to planning and administrative matters that the plaintiff previously attended to. To reflect this change in work responsibility the income of the plaintiff from the company has reduced and the income of the plaintiff's wife has increased. This change took place on the advice of the accountant to the business, Ms Sheryl Thompson. The income of the plaintiff and his wife by way of wages from the business in years before and after the accident is as follows:
PLAINTIFF
YEAR             GROSS             TAX                NET
94/95              $24,960             $5,278              $19,682
95/96              $24,960             $5,018              $19,942
96/97              $24,960             $5,018              $19,942
97/98              $24,960             $5,018              $19,942
98/99              $10,600             $   556              $10,044
99/00              $ 7,800             $   546              $ 7,254
00/01              $ 7,800             $   546              $ 7,254
PLAINTIFF'S WIFE
94/95              $14,976             $2,271              $12,705
95/96              $14,976             $2,215              $12,761
96/97              $14,976             $2,215              $12,761
97/98              $14,976             $2,215              $12,761
98/99              $32,754             $6,815              $25,939
99/00              $29,536             $6,687              $22,849
00/01              $29,536             $6,687              $22,849

The reason given by the accountant in evidence was as follows:
"Okay, Thank you. I just want to take you to briefly some of the documentation. After the accident the respective wages which were paid to Mr and Mrs McKenzie were altered, I think, in about 1999. Its that correct?---Yes.
The reason for that was what?---When we were able to we sat down and calculated the actual amount of work that Lyn was doing at that stage compared to Peter and it was based on, you know, the time spent and the efforts that Peter was available to do to put into the business compared to Lyn.
That figure has remained the same to now?---Yes, it hasn't been reviewed since. We reviewed it at 1 year and then it sort of stayed much the same each year and we didn't get back to readjusting it." (T253)
Counsel for the plaintiff submitted that the appropriate way to measure the loss of earning capacity of the plaintiff for the years since the accident was to look at the reduction in the adjusted business profit of Yugaroo Pty Ltd trustee for the Peter McKenzie Family Trust trading as McKenzie Plumbing. He referred to many authorities leading to Husher v Husher (1999) 197 CLR 138. However I do not consider that it is appropriate to look at that business profit to determine past loss. Whatever the loss that may have been suffered by Yugaroo as a result of the plaintiff's loss of earning capacity that is not the loss which the plaintiff has suffered as a result of his loss of earning capacity. Counsel for the defendant submitted that I should bear in mind that the combined income of the plaintiff and his wife has remained reasonably consistent since the accident. I do not regard that to be relevant on the facts as I have found them. As a result of his loss of earning capacity the work load of the plaintiff's wife has increased. Her income has increased accordingly. The plaintiff's work productivity has been reduced and his wage has been reduced accordingly. In my view therefore it is appropriate to look at the wages of the plaintiff before and after the accident as a measure of the extent to which his loss of earning capacity has been productive of economic loss to him.
In analysing the loss in this way I have not forgotten that in some family business structures arrangements for wages paid to family members are not always an accurate guide to the contribution of the family member to the business. However the evidence of the plaintiff was that wages paid to family members from the business have always been based upon work done by them. I accept his evidence and the evidence of Ms Thompson which I have quoted.
I therefore calculate the plaintiff's past loss of earning capacity as a plumber as being $9,898 in the year ended 30 June 1999 and thereafter as being $12,688 a year ($244 a week) in the subsequent years. The total past loss is therefore $44,790. Interest on that sum at 4 per cent per annum from 1 July 1998 is $6,705.
In addition the plaintiff received the benefit of superannuation contributions under the Superannuation Guarantee (Administration) Act 1992. The contribution not made on his behalf in the year ended 30 June 1999 was 7 per cent x ($24,960 ‑ $10,600) = $1,005. In the year ended 30 June 2000 it was 7 per cent x ($24,960 ‑ $7,800) = $1,201. In the subsequent period of 91 weeks, it has been 8 per cent x ($24,960 ‑ $7,800) = $1,374 per annum. The total figure is $4,610. A deduction of 30 per cent for fund management fees and taxes gives $3,227. Interest at 4 per cent is $483.
While the plaintiff's wife provided a valuable service to the McKenzie Plumbing business before the accident the major role was played by the plaintiff who managed the business and provided plumbing services. If not for the accident it is likely that the plaintiff would have continued to provide the management and plumbing service to the business, but that was his choice. What the plaintiff has suffered is a reduction in his capacity to use those management and plumbing skills. It is that loss for which the plaintiff is to be compensated: Husher v Husher (supra) at par 20.
The adjusted business profit of the business was arrived at by Ms Thompson by making a number of alterations to the recorded profit. One of these adjustments was to add back the wages earned by each of the plaintiff and Mrs McKenzie. This was to show profit earned before payment to the principals of the business.
In my view the amount of wages paid to Mrs McKenzie prior to the accident should not be added back to the profits of the business when analysing the plaintiff's earning capacity. That is because Mrs McKenzie provided valuable services to the business. If she had not done so it would have been necessary for the business to pay some other person for the services to be provided.
In the years following the accident the full amount of increased wages paid to Mrs McKenzie should not be added back, only the excess of the wage paid before the accident.
On this basis the adjusted business profit would be:
Year ended  Adjusted business profit
30.6.1994  $62,341
30.6.1995  $37,929
30.6.1996  $92,312
30.6.1997  $54,950
30.6.1998  $64,738
30.6.1999  $29,829
30.6.2000  $54,486
30.6.2001  $18,946
30.6.2002 (projected)  $ 8,040
It can be seen from these figures that the profit for the year ended 30 June 1998 was higher than for the year ended 30 June 1997, the year in which the plaintiff was injured. This was largely due to the fact that Mr James Craig remained employed by the business until approximately April 1998.
Mr Craig was an experienced plumber who had worked in the business for approximately 10 years. He left to set up his own plumbing business in Manjimup. I conclude that once Mr Craig left the loss of earning capacity became apparent in the profitability of McKenzie Plumbing. It is for that reason I have concluded that the financial performance in the year ended 30 June 1998 is not a guide to the reduction in the plaintiff's pre‑accident earning capacity.
The average adjusted business profit for the years ended 30 June 1995, 1996 and 1997 was $61,730. The average adjusted business profit for the years ended 30 June 2000, 2001 and projected for the year ended 30 June 2002 is $40,916. The difference is $20,814. In my view that is an approximate guide to the plaintiff's lost earning capacity as a plumber.
$20,814 a year is $400 a week. Tax on that sum would be $58 so the after tax figures would be $342.
There are 12.5 years until the plaintiff turns 65 and the appropriate multiplier is 463.1.
$342 x 461.1 = $157,662
Less 5% for contingencies = $149,779
In addition the plaintiff has suffered a reduction in his capacity to earn income from other activities of the type he engaged in before the accident. The plaintiff's difficulties in planning and organisation have effectively put an end to his capacity to earn income from activities such as property development. That reduction is likely to have been productive of economic loss in the past to be productive of economic loss in the future. It is not possible to assess that loss with any precision. I estimate the past and future loss at $60,000.

Non‑pecuniary loss

I have set out many of the ways that the accident has impacted on the plaintiff's life. In addition he has suffered a loss in his ability to communicate effectively and socially with people, including his wife. The impairments have restricted the plaintiff's capacity to contribute and derive satisfaction in a range of activities including social sport and the local council. In some ways the plaintiff cannot appreciate this loss. However because of the reduction in his capacity to interact socially he has suffered a loss of enjoyment of life, companionship and society he had before the accident. I assess the plaintiff's case at 30 per cent of the most extreme case, which equates to an award for non‑pecuniary loss of $69,600.

Summary of damages

In summary I assess the plaintiff's damages as:
Non‑pecuniary loss  $ 69,600
Past loss of earning capacity
as a plumber  $ 44,790
Interest  $    6,705
Past loss of superannuation  $    3,227
Interest  $      483
Future loss of earning capacity
as a plumber  $149,779
Past and future loss of
non‑plumbing earning capacity  $ 60,000
Agreed special damages  $      195
TOTAL  $334,779