Phillips v Brown
[2002] WASCA 148
•7 JUNE 2002
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: PHILLIPS -v- BROWN [2002] WASCA 148
CORAM: MURRAY J
STEYTLER J
MILLER J
HEARD: 12 MARCH 2002
DELIVERED : 7 JUNE 2002
FILE NO/S: FUL 97 of 2001
BETWEEN: RICHARD WAYNE PHILLIPS
Appellant
AND
EDWARD BROWN
Respondent
Catchwords:
Damages - Personal injury by accident - Plaintiff the operator of a cleaning business - Measure of damages for loss of earning capacity - Decline in business caused by appellant's injuries - Allowance for contingencies - Whether award should include a sum for economic loss sustained on the sale of the business
Legislation:
Nil
Result:
Appeal allowed
Award of damages increased
Category: A
Representation:
Counsel:
Appellant: Mr K J Bradford
Respondent: Mr B C Sierakowski
Solicitors:
Appellant: Bradford & Co
Respondent: Brian C Sierakowski
Case(s) referred to in judgment(s):
Bennett v Minister of Community Welfare (1992) 176 CLR 408
Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529
Chappel v Hart (1998) 195 CLR 232
Foodlands Association Ltd v Mosscrop [1985] WAR 215
Husher v Husher (1999) 197 CLR 138
March v Stramare Pty Ltd (1991) 171 CLR 506
Nominal Defendant v Gardikiotis (1996) 186 CLR 49
Perre v Arpand Pty Ltd (1999) 198 CLR 180
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
SGIC v Hitchcock, unreported; FCt SCt of WA; Library No 970089; 11 March 1997
State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 73 ALJR 306
Warren v Combes (1979) 142 CLR 531
Wright v Shire of Albany (1993) A Torts Rep 81‑239
Case(s) also cited:
Australian Coal and Shale Employees' Federation v The Commonwealth (1954) 94 CLR 621
Calder v Boyne Smelters Ltdd [1991] 1 Qd R 325
Gamser v The Nominal Defendant (1997) 136 CLR 145
Gavalas v Singh [2001] VSCA 23
Gronow v Gronow (1979) 144 CLR 513
Introvigne v Commonwealth of Australia & Ors (1980) 32 ALR 251
Kember v Thackroh [2000] WASCA 198
Keogh v Dom-Uie Pty Ltd, unreported; FCt SCt of WA; Library No 9506495; 29 November 1995
Malec v Hutton (1990) 169 CLR 638
Miller v Jennings (1954) 92 CLR 190
Planet Fisheries Pty Ltd v La Rosa (1968) 119 CLR 118
Purkess v Crittenden (1965) 114 CLR 164
Reynolds v Roche Bros Pty Ltd [1999] WASCA 141
Struthers v Harris [1982] WAR 123
Watts v Rake (1960) 108 CLR 158
Wilson v Peisley (1975) 50 ALJR 207
MURRAY J: On 8 July 1998 the appellant was riding his motorcycle in Fremantle when he collided with a motor vehicle driven by the respondent and was thrown onto the road. His left ankle was broken, as was his left arm involving the shoulder joint. Apart from the need to repair the break in the arm, he suffered rotator cuff muscle and tendon damage. The appellant has suffered some loss of mobility and function generally of the left ankle. There is a small chance that he might develop arthritis in the ankle at some time in the future. The major problem is severe limitation of movement of the left shoulder which is painful. There is a good chance that over the next 10 to 15 years the appellant will develop arthritis in the shoulder joint. Arthritic change in this joint or the ankle will not only increase pain, but require surgical intervention to deal with the problem. The appellant's physical injuries have produced psychological problems. He has been diagnosed with anxiety and depression and although consultation with a psychologist has led to considerable improvement in his condition, the process of counselling is ongoing.
The respondent admitted his liability in negligence and the action came before the District Court for the assessment of damages. The sum of $170,810 was awarded. The award may be broken up into its component parts as follows:
Summary of award
Non‑pecuniary loss $ 45,000.00
Past economic loss 9,240.00
Future loss of earning capacity 75,000.00
Loss of services 39,570.00
Special damages 2,000.00
$170,810.00
From that award the appellant appeals on various grounds, setting out the appellant's complaints at length. I will endeavour to summarise the effect of the grounds. Ground 1 is concerned with the fact that at the time of the accident the appellant conducted on his own account a cleaning business. The performance of the business therefore was highly relevant to establishing the pre‑accident earning capacity of the appellant. The trial Judge made the necessary findings of fact, the essence of which was his conclusion that the business was in fact in decline from the turnover established after its acquisition by the plaintiff. The trial Judge considered that the appellant did not have the experience or the managerial capacity to operate a commercial cleaning company of this size. His Honour found that after the accident the disabilities suffered by the appellant made a contribution to the continuing decline of the business which was ultimately sold at a considerable capital loss. The trial Judge considered that had it not been for the accident the appellant's business would have suffered a decline of the order of 40 per cent of its original turnover in any event. Ground 1 complains about that broadly expressed conclusion, that it was in error having regard to particular items of evidence which are detailed in the ground.
Ground 2 and ground 3 may be set out in their entirety. Ground 2 alleges that the component parts of the award for past and future loss of earning capacity were manifestly inadequate and ground 3 alleges error in the conclusion of the trial Judge that the award should reflect no component for the capital loss sustained on the sale of the business. These grounds are:
"2.The sums of $9,240.00 and $75,000.00 awarded by the learned trial Judge for past and future losses of earning capacity respectively were so manifestly inadequate and below the limits of a sound discretionary judgment as to constitute errors of fact and law:
(a)at the time of the accident, the Appellant's (Plaintiff's) earning capacity amounted to $900.00 net per week;
(b)prior to purchasing the cleaning business, the Appellant (Plaintiff) was a high income earner;
(c)the learned trial Judge deducted 40% for adverse contingencies from the time of the accident over the whole of the Appellant's (Plaintiff's) working life, solely related to the alleged decline of the Appellant's (Plaintiff's) business referred to in Ground 1 above;
(d)it could not reasonably be inferred from the evidence that the pre‑existing business performance was likely to affect the Appellant's (Plaintiff's) earning capacity by 40% over his working lifetime to age 65;
(e)in relation to past loss of earning capacity, the learned trial Judge failed to allow for positive contingencies as he was required in law to do, namely that:
(i)the Appellant (Plaintiff) lost the capacity to address any contract problems and to expand the business;
(ii)the Appellant (Plaintiff) lost the chance of retaining (as he was likely to do) the TVW 7 contract which increased from $25,000.00 to $90,000.00 after the accident;
(f)the learned trial Judge failed to award interest on past economic loss;
(g)in relation to future loss of earning capacity, the learned trial Judge failed to make sufficient allowance for the likelihood of deterioration in the Appellant's (Plaintiff's) condition gradually over a period of 10 to 15 years as a positive future contingency in relation to the calculation of loss of earning capacity;
(h)the learned trial Judge made no allowance for the chance of the Appellant (Plaintiff) losing his employment with his sympathetic employer in accordance with the principle in Wright v The Shire of Albany.
3.The learned trial Judge erred in fact and law in finding that the economic loss suffered by the Appellant (Plaintiff) in the form of a capital loss on the sale of the business was irrecoverable on the bases that:
(a)there did not exist between the Respondent (Defendant) and the Appellant (Plaintiff) a relationship of 'proximity' or 'neighbourhood';
(b)the Respondent (Defendant) did not know, or have the means of knowing, that the Appellant (Plaintiff) as an individual, and not merely as a member of an unascertained class, would be likely to suffer economic loss as a consequence of his negligence."
The first ground of appeal requires consideration of the correctness of findings of fact made by the trial Judge. This was not a case which depended particularly upon matters of witness credibility or "the subtle influence of demeanour". Where such is the case, the court will accord great weight to the decision of the trial Judge, recognising the advantage of the trial Judge to see and hear the witnesses, an advantage denied to the appellate court. In such cases, error in the fact finding process will rightly be difficult to establish: Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472.
In a case such as this the court will continue to accord respect to the advantage of the trial Judge who hears all the evidence. The appellate court will exercise caution before departing from the findings of fact made by the trial Judge but it must perform its task of evaluating the evidence to determine whether the findings of fact made by the trial Judge were reasonably open or whether the appellate court is compelled to reach a contrary conclusion. In such a case, the law remains that stated by the High Court in Warren v Combes (1979) 142 CLR 531 at 551. If, having given due respect to the conclusion of the trial Judge, the appellate court, having reviewed the evidence, feels that a different inference or conclusion of fact must flow from the evidence, then in the performance of its duty to conduct an appeal by way of rehearing, the appellate court will say so. A very useful discussion of these matters is to be found in the judgment of Kirby J in State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 73 ALJR 306 at 322 [72] – 332 [93].
I have reviewed the relevant evidence to which counsel drew our attention. I find myself unable to conclude that the findings of fact made by the trial Judge were not reasonably open upon the evidence as a whole. I do not propose to discuss that evidence in detail but to content myself with a reference to its general effect and the reasoning process employed by the trial Judge.
The question at issue was that of causation of the harm or damage suffered by the appellant; more specifically whether causes independent of the injuries sustained in the accident which resulted from the respondent's negligence operated to cause economic loss to the appellant, if so, to what extent and for how long that occurred, whether the injuries sustained in the accident took over from any such independently operating cause and were thereafter to be regarded as entirely responsible for the appellant's economic loss and loss of earning capacity, and whether, if not, the appellant's loss or damage was to be attributed to independently operating causes and the extent to which that was so.
I commence my consideration of these questions, which are relevant to both grounds 2 and 3, by setting out in summary form the objective facts, as they may be described, found by the trial Judge and supported by the evidence.
The appellant was born on 25 October 1948. As at the date of the accident on 8 July 1998, he was aged 49. He had been a bank officer in a relatively senior managerial position. In 1997 he accepted a redundancy package from his employer but, of course, at his then age he wished to be active in business and employment.
On 12 September 1997 he bought a business trading as Calypso Cleaning for the sum of $105,000. His intention, because he had no experience of operating a cleaning business, was not to seek to expand the business but for a period of 12 months to involve himself in the operational and managerial sides of the business so as to familiarise himself with it. It was a business of reasonable size with an estimated annual turnover, as it was described by the trial Judge, of $245,302. Having regard to the way in which his Honour uses the expression "turnover", I take that to be a reference to its capacity to generate gross income. At its highest the business employed 15 people, the appellant, a supervisor (a Mr Juncal) and 13 employees.
It seems that the estimate of the business's profitability, if I may put it in those terms, was accurate for the period from 1 October 1997 to 30 June 1998, a period of nine months. The gross income generated by the business was $184,803. It was therefore generating income at an annual rate of $246,404, very close to the estimate. The appellant's income, including in that concept all those business expenses the benefit of which he received, was found by the trial Judge for that period of nine months to be the sum of $50,319.70 which, by an arithmetical calculation, would translate into an annual gross income of $67,092.93. The trial Judge found that that equated with a net income over this short period prior to the accident of $900 per week.
It was proper in my view to regard this as a base figure in relation to the pre‑trial earning capacity although the actual amounts credited to the appellant as wages in respect of his involvement in the activities of Calypso Cleaning was a much smaller sum. His earning capacity pre‑accident equated to the sum which the appellant would have the ability to control and dispose of in the nature of income and so it mattered not that constituent parts of that sum were shown as being related to motor vehicle depreciation, superannuation contributions, a portion of telephone costs and the like: cfHusher v Husher (1999) 197 CLR 138.
For the period following the accident, demonstrably because of the physical incapacity and psychological incapacity resulting from the accident, the appellant was unable to involve himself properly in the operation and management of Calypso Cleaning and his income decreased dramatically. For the 1999 financial year the appellant earned a net income from the business of $12,470. The position was as bad in the 2000 financial year when for about nine months he earned a net income of $9,776. Ultimately, in March 2000, he sold the business to Mr Juncal, his former supervisor, for the price of $46,000, a business which, it will be recalled, the appellant had bought some two and a half years earlier for $105,000. Its gross income earning capacity had shrunk from about $245,000 to about $70,000.
On 13 March 2000 the appellant secured employment with an organisation known as VCS Products. The trial Judge found that this was work consistent with the appellant's physical limitations. He said it was "common cause" that the appellant retained a substantial capacity to do a wide range of work involving a minimum of physical activity and it appears that the evidence was that this new employment involved the appellant particularly in sales, an area in which he was a valued employee, displaying what the trial Judge found to be "an excellent attitude towards his work". As his Honour found, "Notwithstanding his physical limitations, his current employer is prepared to keep him in his employ indefinitely and offer him full‑time employment if his condition permits it." At the time of trial, that was employment for four days a week and his average income was found to be $400 net per week.
Subject to one aspect, the need to provide some element of compensation for the chance that this employment might be lost and at his age the appellant might in future be unable to secure similar employment from an equally sympathetic employer, the appellant's employment with VCS Products might be taken, and was accepted by the trial Judge to be, a reasonable base figure for the quantification of the appellant's retained earning capacity.
But the trial Judge did not accept that the appellant's pre‑accident earning capacity was properly quantified at the figure of $900 net per week, the figure derived from the capacity of Calypso Cleaning to generate income for the appellant. His Honour found that although the business was apparently generating income at about the same rate as it had been when the appellant acquired it, there was in truth a problem derived from the appellant's inexperience in running the business and his lack of relevant managerial capacity. The trial Judge noted that the profitability of the business depended very substantially upon some major cleaning contracts, all of which within the period shortly after the accident occurred, were lost. They were not replaced by new contracts of anything like the same value.
The first to go on the day of the accident or the day after was a contract with the Indiana Tea House valued at $40,000 per annum. The trial Judge found that that contract was lost because of dissatisfaction with the cleaning service provided by the appellant's business. He found that was the case also in respect of a contract with the Matilda Bay Restaurant, which survived only until August 1998. The loss of that contract represented $37,000 worth of income for the business per annum. Similarly, and as his Honour found for reasons concerned with the lack of proper performance of the contract by Calypso Cleaning, in December 1998 a contract with Clancy's Fish Pub was terminated. That represented a loss of between $22,000 and $25,000 per annum to the business. As his Honour found, in the loss of those three contracts, the business lost an income‑generating capacity of in the order of $90,000.
In addition, by January 1999, another major cleaning contract with TVW Channel 7 valued at $25,000 per annum was lost. In this case, however, as his Honour noted, there was not the same evidence of dissatisfaction prior to the accident with the services provided by the appellant's business.
Nonetheless, in the short period of about six months, the gross income‑generating capacity of Calypso Cleaning had been reduced by at least $90,000 from its capacity of about $245,000 at the time of its acquisition for reasons which his Honour found to be unconnected with the difficulties occasioned by the physical and psychological disabilities caused to the appellant in the accident on 8 July 1998. During the same period, staff numbers fell away from the maximum of 15 persons to just four and, as has been seen, by just over nine months after the accident, the business had contracts valued at about $70,000.
In the light of those conclusions of fact, the trial Judge took the view that had the accident not occurred, "The business was in decline and, at best, would have continued to operate at a substantially reduced rate of turnover." His Honour took the view that given the undoubted negative impact upon the business of the injuries to the appellant, some of the decline in the performance of the business had to be attributed to factors unconnected with the accident, the respondent's negligence and the injuries sustained by the appellant. The conclusion to which his Honour came was that the true worth of the business unaffected by the impact upon it of the injuries and disabilities caused to the appellant by the respondent's negligence was 60 per cent of the income‑generating capacity of the business when it was acquired.
His Honour appreciated that this was a rough and ready calculation. It appears to equate with the view that the true value of the business represented its capacity to generate income in the light of the loss of most of the major contracts discussed and having regard to the relatively minor nature of the contracts acquired. In other words, his Honour was saying that it had a capacity to generate a gross income at a rate of about 60 per cent of the sum of $245,000 estimated to be its capacity at the time of its acquisition and it had that capacity as at the date of the accident although the figures relative to the performance of the business did not then demonstrate it. As I have said, the evidence supported that conclusion of fact which translated into a base figure of 60 per cent of $900 per week, a figure of $540.
It should be said in passing that my recitation of his Honour's conclusion about the pre‑accident earning capacity is derived directly from that portion of his Honour's judgment in which he attributes to the respondent's negligence a loss calculated at 60 per cent of the net pre‑accident income of the appellant as his Honour found it to be. That clearly represents a conclusion that had there not been an accident, the appellant would have been able to continue to operate the business but it would have returned him 60 per cent of the pre‑accident income. That conclusion is not accurately stated by the trial Judge at par [36] of his Honour's judgment in which he declines to accept the submission of the respondent that the cleaning business was doomed to failure within a short time, even had there been no accident. His Honour held:
"I believe it is more probable the plaintiff, had he not been injured, would have been able to continue operating the business although on a turnover substantially less than what was earned at the end of the 1998 financial year. I am unable to calculate mathematically what the future earnings of the business would have been but I find that the declining level of performance would have accounted for 40 per cent of the business's downturn in turnover."
The later passages of the judgment and the calculations made show that his Honour meant that the profitability of the company would suffer a downturn of 40 per cent without the contribution of the accident.
As to past loss of earnings as at the date of trial, the trial Judge, by the calculation to which I have referred, concluded that the appellant's net income for the period of 147 weeks involved would have been $79,380 from which, after deducting the moneys actually earned and the sum advanced by the respondent to the appellant before trial in respect of past loss of earnings, a total of $70,140, the trial Judge derived an allowance under this head of the award of the amount of $9,240. Given my view about the trial Judge's conclusion about the appellant's pre‑accident earning capacity and that it was proper to apply that conclusion from the end of the 1998 financial year, the calculations made by the trial Judge seemed to me to be supportable.
However, it is clear that interest was not and should have been awarded on the amount of $9,240. It is accepted that interest should have been applied for a period of three years at 3 per cent per annum. The resulting figure is a sum of $831.60, but it would be necessary, of course, in considering the need to make any adjustment to the global award of damages on this account to bear in mind the nature of the task confronting an appellate court on an appeal against the inadequacy of an award of damages.
It is convenient by way of reminder to refer to the judgment of Ipp J, with whom Wallwork and White JJ agreed, in SGIC v Hitchcock, unreported; FCt SCt of WA; Library No 970089; 11 March 1997. At 13 – 14 after reviewing relevant authorities, his Honour referred to the proper approach to be taken by an appellate court where an award of damages is made up of several components in each of which, as is the case with an award for past economic loss, discretionary considerations come into play. His Honour said:
"In these circumstances there is considerable room for individual choice in regard to a multitude of factors. It may well be that in regard to certain particular components of the award, the appellate tribunal might consider that the trial Judge, without acting on a wrong principle of law or misapprehending the facts, has awarded too much or too little. Where errors falling into that category lead to relatively insignificant increases or reductions in the overall sum awarded, the appeal court will not normally interfere. In regard to issues of that kind the question is whether the total sum awarded is outside the limits of a sound discretionary judgment, and not whether some portion of that total sum standing alone would call for the court's intervention. On the other hand, it may be that a component of an award is held to be wrong, not because of discretionary matters, but because the trial Judge has acted upon some erroneous principle or upon some mistake of fact. Take for example an arithmetical error on the part of the trial Judge, or the making of an award for medical expenses which have been held to be unnecessary. In such event, it seems to me, the appellate tribunal should alter the award in order to correct the error. That would be necessary to prevent a party from benefiting otherwise than according to law and, generally, to prevent the administration of justice from falling into disrepute."
As to the loss of earning capacity for the future, the trial Judge again took as the pre‑accident base figure the sum of $540 net per week. He treated the $400 net per week the appellant was earning in his present employment as retained earning capacity. As at the date of trial and judgment on 23 May 2001, the appellant was aged 52. The appellant suggested that the appropriate period to be allowed for was a period of 12 years in respect of which, at the applicable rate of interest for capitalisation purposes, the multiplier was accepted to be 450.5. His Honour applied that multiplier to the difference between his assessment of the pre‑accident earning capacity and that post‑accident, as he found it to be, the sum of $140 net per week. The resultant figure was the sum of $63,070.
His Honour said that there were several contingencies which ought to be taken into account. In his judgment he did not enumerate them exhaustively. He said they included the likelihood of a major shoulder reconstruction in the next 10 to 15 years, although his Honour noted that by the time when that became a distinct possibility the probability was that the appellant would have almost reached the end of his working life. His Honour thought that upon the evidence given by the appellant it was unlikely that he would return to working a five‑day week. His Honour thought he might have to reduce the number of days on which he worked although his present employment was sedentary, permanent and he was a valued employee who would be permitted to work a full working week if he was able to do so.
The first contingency to which his Honour particularly referred is of a negative kind calculated to reduce the allowance made in the award of damages for loss of earning capacity. The second matter to which his Honour referred is a positive contingency, the allowance for which would be calculated to inflate the award under this head of damage, as would the prospect of loss of this employment if the appellant's capacity to work should decrease (a relatively remote prospect on the evidence, for which nonetheless allowance was to be made): cf Wright v Shire of Albany (1993) A Torts Rep 81‑239.
The trial Judge did not mention every matter which he had in mind as contingencies which ought to be taken into account over the relevant period of 12 years. He mentioned only what he thought to be the major matters which he said were "included" in the contingencies which ought to be taken into account. In the background of his Honour's discussion in this portion of his judgment were the ordinary, generally negative, vicissitudes of life for which an allowance had to be made. The discretionary judgment made by his Honour elevated the award from $63,070 to $75,000 under this head. That is an increase of just under 20 per cent as an allowance for positive and negative contingencies. I find myself quite unpersuaded that the exercise of discretion in this regard miscarried and that his Honour should have made a greater allowance of a positive kind.
The aspect of the assessment of pecuniary loss, particularly affecting future loss of earning capacity, which I have discussed at some length, the conclusion drawn by his Honour that the appellant's pre‑accident earning capacity was properly valued at 60 per cent of the base figure of $900 net per week advocated by the appellant, is wrongly described in ground 2 as a 40 per cent allowance for adverse contingencies for the rest of the appellant's anticipated working life.
The error involved in this approach is that it ignores the conclusion of fact about the value properly to be placed upon the appellant's pre‑accident earning capacity in the context of his stated intention of pursuing the contract cleaning business to which, with the support of the evidence, the trial Judge came. The trial Judge rightly treated the accident and the injuries sustained as a result of the respondent's negligence as being entirely destructive of the appellant's capacity to earn income in this way. In that context, when assessing damages for loss of earning capacity, if the trial Judge had adopted the appellant's figure of $900 net per week as the base figure of the pre‑accident earning capacity, there would certainly have been a need to make some allowance for the contingency that the appellant might suffer a downturn in the turnover of the business or, alternatively, that he might be able to achieve in time some increase in the level of the business activity.
Nevertheless, the proper view would be that the respondent's negligence was the entire cause of the loss which was found to have been generated. It would be a factor intervening in and overtaking the causal impact of other business factors affecting the appellant's capacity to earn income: see generally March v Stramare Pty Ltd (1991) 171 CLR 506, Bennett v Minister of Community Welfare (1992) 176 CLR 408 and Chappel v Hart (1998) 195 CLR 232. That was not the issue in this case. The question was how to measure the value of the loss. The only aspect of the matter raised by ground 2 of the appeal which seems to me to have merit is the minor matter of the failure to award interest on past economic loss.
I move on to ground 3 which is concerned with the loss made on the sale of the business, Calypso Cleaning. It will be recalled that the appellant paid $105,000 for it on 12 September 1997 when the business had an estimated annual turnover of about $245,000 by which, as I have said, I think in the context of the evidence is meant that that was about the annual value of the cleaning contracts possessed by the business and therefore represented its gross income‑earning capacity rather than its profitability. Of the sum of $105,000 there was allocated as to good will and licences the sum of $100,000, and as to plant and equipment the sum of $5,000. That was effectively a little over nine months before the accident.
About 20 months after the accident, by a contract dated 1 April 2000, the appellant sold the business to Mr Juncal, his former supervisor, and a relative, for $46,000 of which $38,000 was allocated to good will and licences, and $8,000 to plant and equipment. By that time, as I have said, the value of the contracts held by the business and therefore its gross income‑earning capacity had dropped to $70,000. There was, of course, no demonstrable loss in relation to the sale of the plant and equipment but there was a loss sustained in respect of good will in the sum of $62,000.
There appears to be no difficulty in concluding that at least a portion of this loss was caused by the defendant's negligence. At par [57] of his judgment, his Honour in fact referred to the diminution in the value of the good will of the business as being "due, not only to the plaintiff's injuries following the accident, but also to the loss of the major contracts I referred to earlier as a consequence of sub‑standard work." In the light of his Honour's other findings in this regard, it would seem that the trial Judge concluded that 60 per cent of this loss, or $37,200, was causally attributable to the respondent's negligence. That result would be broadly consistent with his Honour's apparent view that major contracts valued at about $90,000 per annum had been lost out of a book of work valued at about $245,000, as a result of the appellant's lack of managerial skills and experience in the context of the running of a cleaning business of this type.
However, the trial Judge made no award of damages under this head, neither the $62,000 loss claimed by the appellant, nor any portion of that loss. His Honour correctly saw this as a claim for pure economic loss and saw the problem as being one of remoteness of damage. He concluded:
"I am satisfied that this type of economic loss is not recoverable because the negligent defendant did not know, or have the means of knowing, that the plaintiff as an individual, and not merely as a member of an unascertained class, would be likely to suffer economic loss as a consequence of his negligence."
At trial, the parties did not approach the case from the point of view that the true question was whether the respondent owed the appellant a duty of care not only to preserve him from physical harm but also to preserve him from economic loss. The trial Judge did not deal with this head of claim upon the basis that any such question arose. The ground of appeal does not make any complaint about that area of the case and it would be inappropriate now to deal with the case upon the basis that any question arose that the respondent may not have been under a duty of the kind mentioned: cfPerre v Arpand Pty Ltd (1999) 198 CLR 180. I mention that because at one point, referring to the judgment of Kirby J in Perre, his Honour does say, "I cannot accept that there existed between the defendant and the plaintiff a relationship characterised by the law as one of 'proximity' or 'neighbourhood' ", considerations which may have a bearing upon the question of the existence of a duty of care.
I do not suggest that the case should have been fought on a different basis. The economic loss in question here was claimed by the appellant as being a consequence of the physical injuries and psychological harm inflicted upon him as a result of the respondent's negligence. Once that is appreciated, it seems to me, with respect, that his Honour's approach to the question of causation, which dealt with it upon the basis that the recoverable damages would be limited to those causally related to the injuries received as a result of the accident, is unassailable: Nominal Defendant v Gardikiotis (1996) 186 CLR 49. The case does not raise any problem of causation in respect of the deprivation of a commercial opportunity such as was addressed by the High Court in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, to which his Honour also referred.
In expressing his conclusion about this head of claim in the passage to which I have referred, the trial Judge relied upon the principle of remoteness in relation to the recovery of damages by way of economic loss stated by the High Court in Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529. But, in my respectful opinion, the case is not helpful in the present context. The decision is not concerned with a case such as this where the economic loss flows in a causally relevant way from physical damage or injury to the plaintiff or his property. It is concerned with the case where the claim is for pure economic loss beyond that situation, a class of case where the law remains in a state of development but where the courts have been traditionally concerned not to widen too extensively the categories of cases where recovery is permissible.
And so in Caltex Oil it was held that in such a case, even if the loss is of a kind which is reasonably foreseeable, damages by way of pure economic loss will not be recoverable and a duty of care will not be owed unless the defendant has a reasonable capacity to foresee that the plaintiff would be likely to suffer economic loss of the kind claimed as a result of the defendant's negligence, rather than merely that loss of that kind may be generally foreseeable, or foreseeable as occurring to members of an unascertained class which may or may not include the plaintiff. The case was not concerned to cut back a plaintiff's capacity to recover economic loss arising in a causally relevant way from harm negligently done to the person of the plaintiff or his property. See also Foodlands Association Ltd v Mosscrop [1985] WAR 215.
In this case, at least to the extent of 60 per cent of the loss claimed, it seems to me that it was of a generally foreseeable kind and flowed directly from the injuries both physically and psychologically caused to the appellant. In other words, to the extent that the reduction in the value of the business and the diminution of good will was not caused by inadequacies, as they were found to be, in the appellant's business and management skills, it was caused by his accident‑caused physical and
psychological incapacity to engage in the business so as to allow it at least to be held to the level of value it may be taken to have possessed at the time of the accident. The original values were established by an arm's length purchase by the appellant and it was proper, in my opinion, to accept that the diminution was established by the value attributed to good will on the resale to a person fully familiar with the business who wished to continue to carry it on on his own behalf in association with his relative who joined him in the acquisition.
For his Honour to make no award under this head of claim to my mind demonstrates that his discretion miscarried. It is necessary therefore for this Court to make the appropriate assessment and, in my opinion, an additional sum of $37,200 should be awarded for this loss. In those circumstances, it is proper that an additional sum should be awarded for the interest which was overlooked. I would round off the increase required to a total figure of $38,000. In my opinion, the appeal should be allowed and the award of damages made by the trial Judge varied by increasing it by $38,000 to the sum of $208,810.
STEYTLER J: I have had the advantage of reading the reasons for decision of Murray J. I agree with them and with the orders proposed by him. There is nothing I wish to add.
MILLER J: I have had the opportunity of reading in draft the reasons for judgment of Murray J. I agree with his Honour's reasons and the conclusion reached and I would accordingly allow the appeal and increase the award of damages to $208,810.00.
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