Oldfield, Joanne v Dabrowski, Katherine Mary

[1982] FCA 172

Re: JOANNE OLDFIELD
And: KATHARINE MARY DABROWSKI
No. ACT G13 of 1981
Damages

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.
Kelly J.
Ellicott J.

CATCHWORDS

Damages -Assessment of damages suffered by widow and children of deceased - When appeal Court will interfere - Whether assumptions made as to future income, business expenditure, working life, and expenditure on family were realistic - Miscalculation of net disposable income - Assumption made as to likelihood of contribution from second husband - Discount rate to be applied.

Compensation (Fatal Injuries) Ordinance, 1968.

HEARING

SYDNEY

#DATE 20:8:1982

ORDER

1. The appeal and cross-appeal be allowed.

2. The judgment of the Supreme Court of the Australian Capital Territory be set aside and in lieu thereof there be judgment for the respondent in the sum of $805,000 apportioned as to the sum of $500,000 to the respondent, as to the sum of $90,000 to the child Nadya Katharine, as to the sum of $100,000 to the child Jan Alexander and as to the sum of $115,000 to the child Michal Alexander.

3. The appellant pay into the Supreme Court of the Australian Capital Territory the sum of $305,000 to be applied by that Court for the benefit of the said children in the above amounts in accordance with its Rules.

4. The appellant pay the respondent's costs of the action in the Supreme Court of the Australian Capital Territory.

5. The respondent pay the appellant's costs of the appeal.

6. The appellant pay the respondent's costs of the cross-appeal.

JUDGE1

The respondent as executrix of the will of her late husband, Dr Alexander Golski, brought proceedings against the appellant in the Supreme Court of the Australian Capital Territory under the Compensation (Fatal Injuries) Ordinance 1968 to recover damages on her own account and on account of the three children of her marriage to Dr. Golski. It is not now in dispute that Dr. Golski's death on 6 May 1978 came about as a result of the negligence of the appellant. Judgment was entered in favour of the respondent for $1,198,562.00 damages with costs. Of that sum $729,773.65 was apportioned to the respondent, $129,343.45 to the child Nadya Katharine, born 22 August 1967, $146,779.45 to the child Jan Alexander, born 11 November 1968 and $192,665.45 to the child Michal Alexander, born 13 October 1970.

The respondent was born on 21 September 1941. On 16 April 1966 she married Dr Golski who was born on 16 December 1937. On 29 January 1980, she married Wojciech Zbigniew Dabrowski and a child of that marriage, a boy, was born on 19 March 1981.

The appellant appealed, alleging in summary that his Honour the learned trial Judge erred:-

(a) in applying a discount rate of 4% in calculating the present value of prospective loss and in making an allowance for the incidence of income tax to be levied on the notional income to be derived from the investment of the lump sum made available by the verdict;

(b) in failing to take sufficient account of unfavourable prospective contingencies;

(c) in assessing the extent of the relevant dependency as 90% of the total net after tax income earned by Dr. Golski;

(d) in failing to take account of certain deductions in arriving at the net after tax income of Dr. Golski.

(e) in holding that there was evidence upon which he could make the findings he did concerning the earnings of Dr. Golski by reference to those of two comparably qualified and similarly aged surgeons carrying on a practice comparable with that of Dr. Golski;

(f) in holding that Dr. Golski would probably have continued in active full practice as an orthopaedic surgeon until aged about 65;

(g) in finding that the respondent's second husband's potential capacity to earn income was limited as found and that his contribution towards the support of the respondent would not exceed a figure of the order of $1,500 per annum; and

(h) by awarding excessive damages.

There is no question as to the credibility of the witnesses whose evidence the learned trial Judge used and this Court is in as good a position to draw inferences from that evidence as he was (Warren v. Coombes & Anor (1979) 142 C.L.R. 531).

Counsel for the appellant, in a comprehensive and detailed argument, challenged most of the assumptions made by the learned trial Judge, including those made as to Dr. Golski's future income, business expenditure, working life and expenditure on his family and as to the contribution likely to be made by the respondent's second husband. It was argued that the verdict was grossly excessive and should be substantially reduced.

As a general rule, the exercise of a discretion by a trial Judge in assessing damages in a case such as this should not be interfered with by this Court on appeal unless it is clear that he has adopted an erroneous approach to the assessment of damages or unless the assessment is itself so demonstrably disproportionate to the harm suffered that error is clear. A mere difference of opinion as to what ought to have been proper does not establish error. (See Introvigne v. Commonwealth (1980) 32 A.L.R. 251 at pp. 277-8). The principle is set out in the following passage from the judgment of Gibbs J. (as he then was) in Precision Plastics Pty. Limited v. Demir (1975) 132 C.L.R. 362 at p.369:-

"It is unnecessary to discuss at length the principles that govern an appellate court in the performance of its task when it is called upon to review an assessment of damages for personal injuries. Whether the assessment was made by a judge or a jury the court of appeal will not interfere simply because it would have awarded a different figure had it tried the case at first instance. Where the assessment was made by a judge, and it has not been shown that he acted on any error of principle or misapprehension of the facts, the appellate court will only intervene if satisfied that the judge has made a wholly erroneous estimate of the damages suffered. But where the award was made by a jury, the test is even more stringent."

In approaching this task it is important to have regard to the total amount of damages. Although it is permissible to have regard to individual items of damage and, in a case such as this, the damage suffered by the widow and children individually in arriving at the damages to be awarded, in the end it is the total figure assessed which must be shown to be excessive. As Aickin J. said in Holley & Ors v Debs (1976) 13 A.L.R. 99 at p.101:-

"No criticism was made in this court of the master in respect of his separate quantification of each item in order to arrive at the total sum awarded. It is still necessary to consider, however, whether that total has been demonstrated to be so excessive, or so disproportionate to the loss suffered, that it cannot stand. Demonstrable error in the determination of the individual items may, though not necessarily, assist the conclusion that the award in total was excessive."

In Watson v. Burley (1962) 108 C.L.R. 635 the High Court referred to the difficulty of precisely assessing damages in cases such as this. At pp. 639-40 the Court said:-

"We appreciate the distinction, on which Brereton J. insisted, between damages for personal injuries and damages under the Compensation to Relatives Act. But it is, we think, a mistake to regard the latter as always susceptible of precise mathematical calculation. In an action for personal injuries the plaintiff's pain and suffering, discomfort and deprivations have to be compensated for in money, although they are not really measurable in money. In a case under the Compensation to Relatives Act pecuniary loss only is to be compensated. But the difficulty is often to know what is the extent of that loss, that is to say, what would have been the pecuniary advantages that the dependants of the deceased man would have enjoyed had he not died when he did. To determine this involves some assumptions of what, in a financial sense, the future would have had in store for him. Because his future could not have been certainly predicted the damages to which his dependants are entitled cannot be precisely calculated."

Dr Golski was a busy, energetic and successful orthopaedic surgeon. He was a Fellow of the Royal College of Surgeons of England and he practised as a specialist orthopaedic surgeon in the Australian Capital Territory. In the period from 1 July 1977 to 6 May 1978 he had a gross income of $101,110.00 from fees as an orthopaedic surgeon.

Two orthopaedic surgeons gave evidence. Each is approximately the same age as Dr. Golski. Each practises the same specialty in the same geographical area. The average of their earnings for the year ended 30 June 1978 was $98,458.00.

The learned trial Judge found, on the evidence, that Dr Golski's likely gross income for the full year ended 1978 would have been approximately one-fifth more than the average of the incomes of the two other doctors. He adopted it as a formula to calculate losses between the date of death and the date of trial. He also regarded it as a reasonably rough guide as to what Dr Golski's future earnings would have been. He also made a number of other assumptions which he considered were supported by the evidence. Shortly stated they were as follows:-

1. That 90% of the net after tax family income would have been spent on the plaintiff and their three children and that after each child attained 21 the net amount spent on each child would thereafter have been spent on the plaintiff.

2. That had he lived he would probably have continued active full time practice as an orthopaedic surgeon until he was about 65 and would then have done consultancy and medico legal work and that his earnings over the next five years or so would have diminished to a degree that the trial Judge was not able to estimate.

3. That the respondent's present husband, Mr Dabrowski, would not make any substantial contribution to the plaintiff's support or to the support of any of the three children before the year 1985 when he was likely to obtain a doctorate. That thereafter it was unlikely that he would make any contribution in excess of $1500 per annum towards the support of plaintiff.

4. That in making allowances for contingencies, some allowance should be made for a possible increase in future support from Mr Dabrowski. He also thought there was a distinct possibility that Dr. Golski's earnings might have increased beyond those allowed for in the actuary's calculations. He thought that the marriage between the deceased and the plaintiff appeared to have been a stable and happy one and that he should pay very little regard to that factor. He also thought there was a possibility of sickness or accident that might have diminished future earnings. His Honour found it difficult to quantify either the favourable or unfavourable contingencies and in the event thought the least unsatisfactory course was to treat them as balancing one another out. This he did both for past and future losses.

5. That past losses should be apportioned as to the plaintiff 55% and as to each child 15%.

6. That a discount factor of 4% should be adopted. His Honour's judgment was given after the decision of the High Court in Barrell Insurances Pty. Ltd. v. Pennant Hills Restaurants Pty. Ltd. (1981) 34 A.L.R. 162 but before its decision in Todorovic & Anor v. Waller (1981) 37 A.L.R. 481.

The trial Judge approached the task by having regard to past and future losses based on projected earnings and by considering the circumstances of the deceased's dependants individually. This was a permissible approach but as indicated earlier, it led to his awarding total damages amounting to $1,198,562. This figure, admittedly reflected an erroneous figure in respect of future losses because that figure had been based on incorrect birth dates and a discount rate higher than that approved in Todorovic's Case. Appropriately adjusted for these errors, the amount of damages for future losses using the life tables adopted by his Honour would be $991,009. When added to the amount assessed for past losses ($193,903) the total verdict on this basis would be $1,184,912 apportioned as follows:-
Plaintiff $779,174.65
Nadya 120,332.45
Jan 133,117.45
Michal 152,287.45

No doubt when a medical practitioner who is in good health, a talented specialist in his field and a devoted and generous husband and father is killed in the prime of life and professional activity, as the result of the negligence of another, the damages which his relatives will suffer under the Act are bound to be large.

However, having considered the learned trial Judge's reasons and the relevant evidence, we are satisfied that an amount of $1,184,912 is clearly in excess of the loss suffered in this case and should not stand. It is not possible to be precise in assessing damages in a case such as this. However, having regard to the facts, we think that his Honour clearly erred in adopting the figure which we did. Although it is permissible to adopt the general approach taken by his Honour, of quantifying each item to get a total, he fell into error because, in our view, certain of the assumptions he made were not justified by the evidence. We shall identify these in dealing with the appellant's submissions.

Counsel for the appellant strongly attacked the learned trial Judge's assumption that Dr Golski's fee income would have approximated 120% of the fee income of Drs. Cairns and Coyle.

Although this approach was speculative, the task of assessing future income required assumptions to be made and, in our view, the learned trial Judge was justified on the evidence in adopting their earnings as a guide. He had before him the evidence that in the period from 1 July 1977 to the date of death, 6 May 1978, the deceased had a gross income from fees of $101,110.00. The average earnings for the year ended 30 June 1978 of the other two surgeons was $98,458.00. What was adopted was a formula based on the assumption that the deceased would have earned approximately one-fifth more than the average of the incomes of the two other surgeons.

When it is remembered that the earnings of the deceased were for a period approximately seven weeks less than a full year, this would appear to us to be a reasonable approach to adopt. His Honour did not regard it as a perfect formula but as a reasonably rough guide to what the deceased's earnings would have been. As to the evidence he said:-

"The evidence is, and it was not disputed, that if appropriate steps are taken to ascertain what Dr Golski's likely gross income would have been for the full year ended 30 June 1978, he would in fact have earned approximately one fifth more in gross takings than the average of the incomes of Doctors Cairns and Coyle."

The evidence established that he worked very long hours and was very busy in his practice. He was highly qualified and was engaged in a demanding specialty. We think that the appellant's attack on the judgment on this ground should fail.

Using this approach the estimated gross loss of fees for the year ended 30 June 1981 was calculated at $182,188.00. This was taken by his Honour as the key figure in estimating future loss.

It was also necessary to make assumptions as to expenditure. Mr Cumpston, an actuary called on behalf of the respondent whose evidence was adopted by his Honour was asked to make several assumptions which included the following relating to expenditure set out in his report:-

"3.4 Dr Golski's 77/78 tax return showed expenses of $45,768 for the period from 1/7/77 to 5/5/78. You have asked me to assume that the following amounts, totalling $18,003, were not directly related to Dr Golski's practice: 100% of $1320 for cleaning 90% of $1320 for entertainment i.e. $1188 90% of $1634.40 for motor vehicle expenses i.e. $1471 90% of $1158.50 for motor vehicle leasing i.e. $1043 90% of $1085.99 for motor vehicle repairs and maintenance i.e. $977 45% of $1073.91 for postage, printing and stationery i.e. $483 $4366 of rent $4400 of salary to Mrs Golski 50% of $285 for subscriptions i.e. $143 70% of $3731.63 for telephone i.e. $2612."

Mr Cumpston used as taxation rates those operating for the period ended 30 June 1981, i.e. no tax on the first $4,041 of income, 32% on the next $13,198, 46% on the next $17,239 and 60% thereafter, and stated without any eventual challenge that the Canberra Consumer Price Indexes for the December quarters of the years 1977/78, 1978/79, 1979/80 and 1980/81 were 231.9, 248.2, 274.3 and 301.8.

In paragraphs 4.1, 4.2 and 4.3 of his report Mr Cumpston said:-

"But for his death, Dr Golski's 80/81 . . . expenses for tax purposes might have been $70,358 ($45,768 by 365/309 by 301.8/231.9). At 80/81 tax rates. . . . the tax would have been $58,565. Mrs Golski's taxable income in 80/81 might have been about $11,877 ($7,726 by 365/309 by 301.8/231.9). Tax at 80/81 rates would have been $2508." "Expenses directly related to the practice in 80/81 may have been about $42,683 ($27,765 by 365/309 by 301.8/231.9). Combined income after expenses and taxes in 80/81 may thus have been about $78,432 ($182,188 less $42,683 less $58,565 less $2,508). Taking 90% and dividing by 52.18 gives $1,353 as an estimate of the weekly amount expended on Mrs Golski and her children. . . . "

The assumption which Mr Cumpston was asked to make, that $18,003 out of the total expenses claimed in his tax return for the year ended 30 June 1978 ($45,768) was not related to his practice, is a significant factor in the assessment of damages. We think the evidence of the respondent, the deceased's accountant and his secretary, obviously accepted by the learned trial Judge, clearly supported this assumption and we therefore do not propose to interfere with it.

However, although asked to make this assumption, Mr Cumpston did not deduct the amount of $18,003 from expenditure in calculating the tax which would have been payable by Dr. Golski or his wife. It seems to us that if this assumption is made two further assumptions should follow. First, to the extent of $18,003, it should be assumed that Dr. Golski would not have been entitled to claim allowable deductions in respect of his assessable income for the period from 1 July 1977 to 5 May 1978. His tax should therefore have been calculated on the basis of an expenditure of $27,765 for that period and this approach should have been adopted in making calculations of his net disposable income for subsequent years. Secondly because portion of the amount represented amounts paid to the respondent under the guise of rent and wages these items should be treated as payments to her in the nature of capital and not income and her income tax should therefore not be calculated on the basis of her having received these amounts as assessable income. The result of making these two further assumptions is that the net disposable income would have been significantly lower than that assessed by his Honour. We think these assumptions should have been made and to this extent we consider his Honour's assessment erroneous.

The learned trial Judge said that the evidence established to his satisfaction that Dr. Golski's tastes and habits were such that his personal needs were relatively modest and relatively inexpensive. He therefore felt justified, on the evidence, in making the assumption that only 10% of Dr. Golski's net after tax income would have been used for his own purposes or for expenditure on purposes that were referable solely to him. He therefore accepted the assumption which Mr Cumpston made that 90% of that net income would go to the respondent and the three children.

In our opinion his Honour clearly erred in making this assumption.

It is true that the evidence showed that Dr. Golski spent little on clothes. However, there is evidence that for the many years of his training he had little income to spend and that, in more recent years, having begun to earn a higher income, he was spending quite expansively. He was clearly a generous man. He was hospitable. For four nights out of seven up to ten people including his family would sit down to dinner. Expenditure on food was high, of the order of $300 per week. Expenditure on liquor was of the order of $30 per week. Making appropriate allowance for hospitality extended to friends of the respondent and her three children, it nevertheless seems clear that many of the household guests were invited largely on Dr. Golski's account.

The family engaged in downhill and cross country ski-ing. Dr. Golski and the respondent went to the theatre once a week. Dr. Golski himself engaged in the hobby of photography. The family used to ride horses. They owned one horse and rented others. All but the respondent had riding lessons. All of these activities can be expensive and the exclusive share of expenditure in respect of them which was attributable to Dr. Golski may well have been high. In January 1978 the family flew to North Queensland on holiday and there spent ten days travelling about by light aircraft and boat and going on tours. In about February 1978 Dr. Golski and the respondent holidayed in Indonesia for nearly two weeks. The respondent returned directly from Indonesia but Dr. Golski came home via Christmas Island where he did some work in connection with his profession. In March 1978 Dr. Golski and the respondent visited the Adelaide Festival.

We are unable to agree, when regard is had to all relevant matters, that the proportion of net disposable income expended exclusively on Dr. Golski would have been as low as 10%. A more accurate assessment, in our opinion, would be 20%. It is to be noted that Mr Cumpston did not, of his own accord, make the assumption that only 10% of the net disposable income of the family would be spent upon Dr Golski. He was asked to make it. Indeed, in the course of his cross-examination the following questions were put and answers given:-

"I suggest to you that a claim for a 90 per cent dependant, no matter how much money the man is making, is, as far as you understand the ordinary every day affairs of high income earning men, an unrealistic assumption?------Yes. And I suggest to you 85 per cent is unrealistic?----Yes."

We think that the finding made by the learned trial Judge on this matter was erroneous. A more realistic figure and one more truly supported by the evidence would in our opinion, be 80%.

The learned trial Judge apportioned the "past loss" as to 55% to the respondent and as to 15% to each of the three children. It is clear from the orders he made in respect of their losses from 24 April 1981 onwards that he allowed 20% of the 90% of disposable income to each of the children until she or he attained the age of 21 years, allowing 40% of the 90% of the net disposable income to the respondent while all the children were under 21. He assumed that, had Dr. Golski lived, he would have provided further for the respondent as each child reached the age of 21 by providing to her the share of his net disposable income that would have been allocated to that child before his or her 21st birthday. His Honour gave no reasons for apportioning the future losses to the children in this way but it seems, with respect, to have been a logical and sensible approach to allocate to the children a higher percentage of the disposable income during the period when the expenses in connection with their education and upbringing might be expected to be heaviest and to increase the respondent's share thereafter.

We are satisfied, however, that it was quite unrealistic to assume that the share of net disposable income expended on each child would, on that child attaining 21, have been wholly provided to the respondent. There are indications in the evidence that Dr. Golski's interests were wide and probably expanding. It is likely that his interests would have become more expensive as the years passed and that while some of the money formerly allocated to the upbringing of the children would have passed to the respondent for her expenditure and upkeep, a substantial amount would have been retained by him.

In our opinion, the learned trial Judge fell into error in assuming that as each child attained 21 the amount formerly expended on him or her would go to benefit the respondent. It is difficult to be precise about such a matter but we think it quite unrealistic to assume that Dr. Golski would have continued throughout his life to expend 90% of his after tax income on his dependants. We think it more realistic to assume that as each child attained 21, two thirds of the amount previously expended on that child would thereafter have been expended on the respondent. Such an assumption still substantially favours the respondent. It takes into account the evidence of Dr. Golski's admitted generosity towards his family.

The learned trial Judge also assumed that Dr. Golski would probably have continued in active full practice as an orthopaedic surgeon until aged about 65. There was evidence to support this assumption and we do not think it should be disturbed.

Similarly, there was evidence to support the learned trial Judge's view of contingencies, favourable and unfavourable As we understand him, he took into account the possibility that Dr. Golski might have earned more, not on the basis of expected inflation, but on the basis that the quality of his work might have resulted in higher fees. There was evidence from which, in our opinion, such a conclusion might properly be drawn. We do not think that in the result the view which his Honour took of contingencies was wrong and we would reject any challenge to it. It was a view which was open and based sufficiently upon the evidence.

As indicated earlier, his Honour did not consider that Mr Dabrowski would, before 1985, make any substantial contribution to the plaintiff's support or to the support of any of her three children. He also thought it unlikely that he would receive an income in excess of $13,000 gross per annum and that the contribution he would make after 1985 would be in the order of $1500 per annum.

These assumptions were made on the basis of evidence given by Mr Dabrowski and supported by expert witnesses including one professor, which evidence indicated that Mr Dabrowski was interested in anthropology and was more concerned about the pursuit of knowledge than the earning of income. His Honour had the advantage of assessing the genuineness of Mr Dabrowski's attitude and his likely future income. We are not convinced he fell into error and would not, in the circumstances, be prepared to interfere with his assumptions about these matters. The possibility of Mr Dabrowski earning more in the future was taken into account in dealing with contingencies.

It was conceded by the respondent, in the light of the subsequent decision of the High Court in Todorovic's Case, that a discount rate of 3% and not 4% should have been adopted. It was also conceded that an error had been made in relation to the birth dates of the children.

As already indicated we are satisfied that the award of approximately $1.2 million to the respondent and her family clearly exceeded what is reasonable. We have also indicated those assumptions which his Honour made which in our view, on the approach he adopted, led him into error. We have considered whether, in the light of these findings, we should order a new trial. The evidence relevant in a case such as this to the circumstances of Dr. Golski, the respondent and their children is, as we understand it, before us. There is no dispute as to the credibility of witnesses, only as to the inferences to be drawn from the evidence. We have therefore decided that this is a proper case in which to determine ourselves what damages should be awarded.

We have decided that the appropriate award for the learned trial Judge to have made on the evidence before him was a lump sum in the vicinity of $800,000. Such an amount would cover both past and future losses as at the date of the trial and would need to be apportioned between the respondent and her children.

We are confirmed in the view we have formed by the fact that if his Honour, in assessing damages, had made the assumptions we have indicated he should, in our view, have made, a lump sum figure for past and future losses of approximately $805,000 would have been the result. This is borne out by further calculations supplied to this Court at our request which take into account those assumptions. The figures we refer to were prepared by Mr Cumpston on behalf of the respondent. Calculations were also supplied on behalf of the appellant but in the circumstances we prefer to rely on those made by Mr Cumpston.

Having in mind the difficulty of being precise in cases such as this and having regard to the process of calculation adopted by his Honour modified as we think it should be, we are of the opinion that the appropriate amount to award is $805,000 apportioned as to $500,000 to the respondent, $90,000 to the child Nadya, $100,000 to the child Jan and $115,000 to the child Michael.

The respondent cross-appealed on the ground that the learned trial Judge erred in discounting by 4% the sum which he allowed for the loss sustained by Dr. Golski's dependants. The cross-appeal must succeed in view of the decision in Todorovic's Case. The effect of that decision has been taken into account in the conclusion we have reached.

We therefore propose to order that:-

1. The appeal and cross-appeal be allowed and that the judgment of the Supreme Court of the Australian Capital Territory be set aside.

2. In lieu thereof there be judgment for the respondent in the sum of $805,000 apportioned as to the sum of $500,000 to the respondent, as to the sum of $90,000 to the child Nadya Katharine, as to the sum of $100,000 to the child Jan Alexander and as to the sum of $115,000 to the child Michael Alexander.

3. The appellant pay into the Supreme Court of the Australian Capital Territory the sum of $305,000 to be applied by that Court for the benefit of the said children in the above amounts in accordance with its Rules.

4. The appellant pay the respondent's costs of the action in the Supreme Court of the Australian Capital Territory.

5. The respondent pay the appellant's costs of the appeal.

6. The appellant pay the respondent's costs of the cross-appeal.