Smith v Zhong
[2015] WASCA 202
•5/10/15
SMITH -v- ZHONG [2015] WASCA 202
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASCA 202 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:54/2014 | 21 APRIL 2015 | |
| Coram: | BUSS JA NEWNES JA MURPHY JA | 5/10/15 | |
| 36 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed Cross-appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | JACQUELINE ROSEMARY SMITH QIAN HUA ZHONG |
Catchwords: | Damages Assessment of past and future loss of earning capacity Principles applicable Assessment of past and future economic loss where appellant was carrying on a business in partnership with her husband Appellant's injuries rendered her less capable of promoting business Appellant's reduced capacity to carry out administrative tasks for the business Replacement labour Damages Assessment of nonpecuniary loss Section 3C of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) Whether 30% of an amount awarded in a most extreme case within sound discretionary range |
Legislation: | Motor Vehicle (Third Party Insurance) Act 1943 (WA), s 3C |
Case References: | Batt v Wilkinson [1983] 2 Qd R 619 Circosta v Falzon [1999] NSWCA 308; (1999) 30 MVR 365 Cochrane v Hannaford [1999] NSWCA 37 Cole v Ellis (1992) Aust Torts Reports 81-186 Conley v Minehan [1999] NSWCA 432 Den Hoedt v Barwick [2006] WASCA 196; (2006) 46 MVR 30 Dunlany v Hunters Hill Bus Co Pty Ltd (Unreported, NSWCA, 12 May 1983) Elford v FAI General Insurance Co Ltd [1994] 1 Qd R 258 Future Look Landscaping Pty Ltd v Hanlon (Unreported, NSWSC, CA 40658-1997, 8 July 1998) Husher v Husher [1999] HCA 47; (1999) 197 CLR 138 Kschammer v RW Piper & Sons Pty Ltd [2003] WASCA 298 Mastaglia v Burns [2006] WASCA 190; (2006) 32 WAR 427 Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1 Montemaggiori v Wilson [2011] WASCA 177; (2011) 58 MVR 497 Morbatjou v Moradkhani [2013] NSWCA 157 Paff v Speed [1961] HCA 4; (1961) 105 CLR 549 Randall v Dul (1994) 13 WAR 205 Rauk v Transtate Pty Ltd [2000] NSWSC 1020; (2001) Aust Torts Reports 81-592 Smith v Zhong [2015] WADC 50 Spargo v Haden Engineering Pty Ltd (1993) 60 SASR 39 State Government Insurance Commission v Hitchcock (Unreported, WASC (FC), WA Library No 970089A, 11 March 1997) State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 Szittner v Harriot [1967] 1 NSWR 233 Taroporewalla v Berkery (1983) 3 NSWLR 28 Tibbett v Davidson (1976) WAR 24 Wainright v Barrick Gold of Australia Ltd [2014] WASCA 15; (2014) 46 WAR 219 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SMITH -v- ZHONG [2015] WASCA 202 CORAM : BUSS JA
- NEWNES JA
MURPHY JA
- Appellant
AND
QIAN HUA ZHONG
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : SLEIGHT DCJ
Citation : SMITH -v- ZHONG [2014] WADC 50
File No : CIV 1575 of 2011
Catchwords:
Damages - Assessment of past and future loss of earning capacity - Principles applicable - Assessment of past and future economic loss where appellant was carrying on a business in partnership with her husband - Appellant's injuries rendered her less capable of promoting business - Appellant's reduced capacity to carry out administrative tasks for the business - Replacement labour
Damages - Assessment of nonpecuniary loss - Section 3C of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) - Whether 30% of an amount awarded in a most extreme case within sound discretionary range
Legislation:
Motor Vehicle (Third Party Insurance) Act 1943 (WA), s 3C
Result:
Appeal dismissed
Cross-appeal dismissed
Category: A
Representation:
Counsel:
Appellant : Ms B A Mangan
Respondent : Mr P E Jarman
Solicitors:
Appellant : Kakulas Legal
Respondent : Jarman McKenna
Case(s) referred to in judgment(s):
Batt v Wilkinson [1983] 2 Qd R 619
Circosta v Falzon [1999] NSWCA 308; (1999) 30 MVR 365
Cochrane v Hannaford [1999] NSWCA 37
Cole v Ellis (1992) Aust Torts Reports 81-186
Conley v Minehan [1999] NSWCA 432
Den Hoedt v Barwick [2006] WASCA 196; (2006) 46 MVR 30
Dunlany v Hunters Hill Bus Co Pty Ltd (Unreported, NSWCA, 12 May 1983)
Elford v FAI General Insurance Co Ltd [1994] 1 Qd R 258
Future Look Landscaping Pty Ltd v Hanlon (Unreported, NSWSC, CA 40658-1997, 8 July 1998)
Husher v Husher [1999] HCA 47; (1999) 197 CLR 138
Kschammer v RW Piper & Sons Pty Ltd [2003] WASCA 298
Mastaglia v Burns [2006] WASCA 190; (2006) 32 WAR 427
Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1
Montemaggiori v Wilson [2011] WASCA 177; (2011) 58 MVR 497
Morbatjou v Moradkhani [2013] NSWCA 157
Paff v Speed [1961] HCA 4; (1961) 105 CLR 549
Randall v Dul (1994) 13 WAR 205
Rauk v Transtate Pty Ltd [2000] NSWSC 1020; (2001) Aust Torts Reports 81-592
Smith v Zhong [2015] WADC 50
Spargo v Haden Engineering Pty Ltd (1993) 60 SASR 39
State Government Insurance Commission v Hitchcock (Unreported, WASC (FC), WA Library No 970089A, 11 March 1997)
State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536
Szittner v Harriot [1967] 1 NSWR 233
Taroporewalla v Berkery (1983) 3 NSWLR 28
Tibbett v Davidson (1976) WAR 24
Wainright v Barrick Gold of Australia Ltd [2014] WASCA 15; (2014) 46 WAR 219
1 BUSS JA: The appeal and the cross-appeal should be dismissed.
2 As to the appeal, I agree with Murphy JA, for the reasons he gives, that grounds 1 and 2 fail. It is unnecessary, with respect, to express a view in relation to his Honour's analysis of Husher v Husher [1999] HCA 47; (1999) 197 CLR 139; Mastiglia v Burns [2006] WASCA 190; (2006) 32 WAR 427 and related decisions. It is sufficient, for the purpose of deciding the appeal, to note that Mrs Smith's contention that the trial judge misunderstood or misapplied Husher and Mastiglia cannot be accepted for the reasons stated by Murphy JA in [79] below.
3 As to the cross-appeal, I agree with Murphy JA, for the reasons he gives, that grounds 2 and 3 fail. In my opinion, the trial judge's assessment with respect to non-pecuniary loss, namely that Mrs Smith's entitlement to non-pecuniary loss was in effect 30% of a most extreme case, was high. It was not, however, outside the range open to his Honour on a proper exercise of his discretion. Ground 1 therefore fails.
4 NEWNES JA: I agree with Murphy JA, essentially for the reasons his Honour gives, that grounds 1 and 2 of the appeal, and grounds 2 and 3 of the cross-appeal, should be dismissed. I also consider that ground 1 of the cross-appeal should be dismissed, as in my view the finding of non-pecuniary loss of 30%, whilst high, did not exceed the bounds of a sound discretionary judgment.
MURPHY JA:
Introduction
5 On 29 July 2008, the appellant (Mrs Smith) was injured as a result of a motor vehicle collision in which the other driver was negligent. She sued in the primary court. Liability was not in issue. She was awarded damages of approximately $362,000. She appeals to this court on the basis that the award was too low. The respondent cross appeals on the basis that the award was too high.
6 The principal (but not single) issue in the appeal concerns the judge's findings on loss of earning capacity generally, and in particular, his assessment of lost earning capacity having regard to Mrs Smith's 50% interest in a family partnership in which she and her husband were and are partners.
Background1
Prior to the accident
7 Mrs Smith was born on 9 October 1968. At all material times she was a member of the Plymouth Brethren Christian Church (the Brethren).
8 She completed her TEE and left school at the age of 17. Her TEE subjects included accounting.
9 After leaving school she commenced employment with a Brethren business known as 'Nuroof'. She performed administrative and accounting tasks, including operating a manual Kalamazoo system of accounting.
10 In May 1996, Mrs Smith ceased employment with Nuroof, when she married Mr Smith.
11 Mr Smith completed Year 12 at school. His recollection was that he had failed both accounting and mathematics. On leaving school he worked in a furniture manufacturing business for 18 months, and then worked for about seven years with his father as a tree lopper. He later worked for a period of approximately 11 years as a factory hand, advancing to the position of factory manager.
12 In 2001, Mr Smith learned that his employer at the factory intended to sell the business. This led Mr Smith to consider starting up his own business in relation to the sale of safety tags and anodes in Australia. He discussed the idea with Mrs Smith and arranged for her to register the business names 'Tags & Tickets' and 'Anodes Australia'. Mr Smith subsequently resigned from his position of employment after the business was sold, and Mr and Mrs Smith commenced their own business in 2001.
13 The business struggled financially for a number of years. At the time of establishment of the business in 2001, Mr and Mrs Smith had three young children aged 5 years, 4 years and 6 months. To make ends meet, Mr Smith also did gardening work. After a few years their accountant advised them to close the business down, but they rejected his advice and pressed on.
14 Mr and Mrs Smith had two more children in 2003 and 2007 respectively. The former has Down Syndrome.
15 After a time, Mr and Mrs Smith concluded that the 'Tags & Tickets' business would best be operated if they concentrated on wholesale distribution, rather than retailing.
16 All major decisions of the business were made jointly by Mr and Mrs Smith pooling ideas. Mr Smith was responsible for conducting the sales to customers. Mrs Smith was responsible for the book work of the business and the marketing of the business, and, jointly with her husband, looking for ways of expanding and improving the business.
17 In the period 2003 - 2008, the partnership had no employees and paid no wages. Mrs Smith herself worked approximately 18 hours per week in the business in this period.
18 Although there were no employees, the business engaged on a subcontract basis an autistic person who operated an eyeleting machine, and engaged prisoners to attach string to safety tags. This ability to keep labour costs down was a part of Mr and Mrs Smith's acumen which enabled them to successfully convert a non-profitable business into a very profitable business. The nature and operation of the businesses, and the roles undertaken by Mr and Mrs Smith in them, are set out in detail later in these reasons.
19 Mrs Smith, in addition to working 18 hours per week in the businesses, lived a 'very busy life':2
(a) her days commenced at 6.00 am and she would not get to bed before midnight;
(b) she was caring for young children, providing nearly all of the domestic services in the household;
(c) the domestic burden was added to by reason of her son having Down Syndrome and the fact that she was breastfeeding the youngest child;
(d) in addition to domestic responsibilities she was a very active member of her church, which included attendances four nights per week in the metropolitan area and sometimes at more distant locations, such as Mundaring and Northam;
(e) she also attended church on Saturday mornings, and also on Sundays from 5.40 am to 10.30 am, following which there would be a lunch, and about once a month Mr and Mrs Smith would host the lunch with up to 20 people attending;
(f) Mrs Smith also provided voluntary services to other members of the Brethren; and
(g) she did cleaning for her mother and another member of the church on a weekly basis, and regularly cooked meals for other members of the church who became ill.
Mrs Smith's injuries and disabilities
20 The primary judge made the following findings:3
(a) Mrs Smith sustained a fracture to the right femur due to force applied through the knee;
(b) she suffered a right ankle injury and she continues to suffer pain and swelling in the right ankle; she finds exercise aggravates her symptoms, and when she does not exercise she experiences stiffness in her ankle; when placed under stress the pain in her ankle causes her to limp; her ankle will likely not improve;
(c) Mrs Smith suffered a knee injury, involving a structural injury to the knee, including damage to the cartilage and the condition in the knee is likely to continue to deteriorate with the probability that she will require operative treatment in the future, including the possibility of a knee replacement and hip replacement;
(d) Mrs Smith suffered a deep vein thrombosis in her right lower limb which continues to cause swelling and pain;
(e) Mrs Smith suffered an injury to the cervical, thoracic and lumbar spine, with associated pain;
(f) Mrs Smith suffered mental trauma, initially manifested by nightmares, and she subsequently developed post-traumatic stress disorder with symptoms of anxiety and depression;
(g) there is a real likelihood that there would be an improvement in Mrs Smith's mental state once the considerable worry of the litigation is resolved and that this will improve her ability to cope with her physical injuries; and
(h) Mrs Smith suffers a continuing cosmetic disability arising from damage in the form of an indentation in her central forehead, with a need for future treatment.
21 The judge also found4 that after the accident Mrs Smith ceased cleaning for other people and could barely cope with her own cleaning duties; she has been restricted in assisting her children in certain activities; her social life and her ability to engage in church activities has been restricted; she has been unable to carry out various domestic and gardening tasks; she finds shopping exhausting; when shopping she has to lean on a trolley and after about half an hour her leg hurts so much that she starts to drag it; and she has difficulties in washing her hair and manicuring her toenails. In addition, the judge effectively accepted the evidence of Dr Cooper, Dr Holthouse, Dr Kimberley and Dr Skerrit to the effect that Mrs Smith's injuries resulted in partial loss of earning capacity.
After the accident5
22 Following the accident on 29 July 2008, Mrs Smith spent four nights in hospital and was discharged on 2 August 2008.
23 In the next six months she was only capable of working three hours per week in the business.
24 After this six months period, ie, from about February 2009, Mrs Smith has only been able to work five to nine hours per week in the business as opposed to 18 hours per week prior to the accident.
25 On 4 November 2009, the partnership engaged an employee, Ms Denton, to carry out office work. She was paid $44,000 per year plus superannuation and holiday loading. She was also provided with a motor vehicle. Mrs Smith retained the task of paying creditors and preparing the financial records for the accountant. She also arranged payment of salaries.
26 Ms Denton was employed in the business until 2012. In 2012 she was replaced by another employee, Mr Gleeson. He resigned after six to seven months. He was replaced by another employee, Ms Black, who remained employed doing office work up until the date of trial.
27 In January 2012, the business also employed a person, Ms Squires, to perform telemarketing tasks. She remained employed for about six months and was replaced by another employee, Ms Sweeney, in that position. Ms Sweeney was employed for only two months. According to Mrs Smith, none of the employees could adequately perform the function of telemarketing, or marketing the business.
28 In 2013, the business suffered cash flow problems as a result of staff not diligently pursuing recovery of outstanding monies.
Trial judge's findings - loss of earning capacity
Past loss of earning capacity
29 In relation to past loss, the judge made the following findings:
(a) Mrs Smith's disability from the injury meant that instead of working 18 hours per week in the businesses, she could only work three hours per week in the first six months after the accident, and thereafter could only work between 5 and 9 hours per week.6
(b) In assessing past economic loss with respect to the second of the periods referred to in the preceding paragraph, the judge said he would use the 'top of the range' of the hours Mrs Smith was said to be disabled from working and, in effect, that he would assess her residual working capacity as six hours per week, ie, on the basis that her capacity to work in the businesses was reduced by 12 hours per week.7
(c) In the period 29 July 2008 (the date of accident) to 4 November 2009, the business suffered a loss of the marketing functions performed by Mrs Smith,8 for which his Honour allowed a separate sum of $25,000.
(d) But for the accident, the partnership would not have employed Ms Denton on 4 November 2009,9 although given the growth of the business, a clerical employee would have been required in any event by 4 November 2010.10 Accordingly, Mrs Smith should be awarded damages for the period 4 November 2009 - 4 November 2010 in respect of her diminished income from the business arising from the employment of Ms Denton. Ms Denton's salary was (approximately) $1,000 per week gross. His Honour allowed a period of 56 weeks ($56,000). He halved that on the basis that the partnership would share the expenses equally ($28,000) and deducted from that the tax that Mrs Smith would have paid on her additional income (at a rate of 38%) giving a figure of $17,360. His Honour reduced this to $15,000 on the basis that 'a further sum should be deducted to take into account that by employing a full time worker to replace the lost hours of Mrs Smith would have provided indirect benefits to the business'.11
(e) For the remaining period from 4 November 2010 to the date of judgment (a period of 180 weeks), if Mrs Smith had not been injured, the business might have been able to employ someone part time or more junior, rather than take on a full time employee like Ms Denton. Alternatively, they may have deferred, beyond 4 November 2010, the date for taking on clerical staff. His Honour considered that the appropriate calculation would be to assume that an employee would have been engaged on the basis of 12 hours per week. On the assumption that Ms Denton worked 38 hours a week, his Honour applied the formula of 12 (hours) divided by 38 (hours) x $1,000 per week, x 180 weeks divided by 2 (on account of the partnership) and deducted from that figure tax of 38%, giving a figure of $17,621.05.12
(f) The total damages for past loss of earning capacity were thus $32,621.05.13
Future loss of earning capacity
30 In relation to future loss of earning capacity, his Honour made the following findings:
(a) As the starting point, damages should again be assessed on the basis of the upper end of the range for reduced earning capacity, ie, on the basis of employing replacement labour for 12 hours per week, out of an ordinary 38 hour working week.14
(b) If Mrs Smith would have worked to the age of 67, ie, a further 22 years, the calculation of future loss would be 12 hours divided by 38 hours x $1,000 per week x 647 (multiplier) divided by 2 (on account of the partnership), less 38% tax gives $63,337.90.15 However, there were contingencies to take into account in that there was real uncertainty as to how long Mrs Smith would have remained actively in the business in any event, and, moreover, it is likely that Mrs Smith's earning capacity would improve after the finalisation of the litigation as her health improved. If it were assumed that but for the accident, Mrs Smith would have worked for only a further 10 years, the figure would be $38,700 (approximately).16
(c) Taking 'all factors into account' the appropriate allowance for future loss of earning capacity was $40,000.17
Loss of opportunity to expand the business
31 Mrs Smith claimed an amount for the loss of the opportunity to improve the income of the business due to her inability to devote time to marketing. The respondent contended that there should be no such award. His Honour concluded18 that an additional sum should be awarded for economic loss to the business as a result of the business not being as thoroughly promoted as would have occurred had Mrs Smith not been injured. His Honour said that in assessing such a loss, a conservative approach would be taken given the lack of any precise calculation which might provide assistance in assessing the loss. His Honour concluded that there was some lost opportunity to expand the businesses as a result of the accident. He awarded an additional after tax sum of $25,000 on this account. Although each step was not explicit, his Honour appears to have found that had the accident not occurred, there would have been an opportunity to expand the revenue and thereby the gross profits of the businesses by approximately $81,000. Assuming a tax rate of 38%, this would, in effect, leave approximately $50,000 to be shared between the two partners equally.
Total award for lost earning capacity
32 His Honour thereby awarded the total sum of $97,621.05 comprising:
(a) $32,621.05 for past loss;
(b) $40,000 for future loss; and
(c) an additional overall sum of $25,000 in respect of the lost opportunity to expand the businesses.
Future gratuitous services
33 The judge found that Mrs Smith would need to continue to avoid heavy lifting tasks and other tasks which placed a strain on her spine. Also, her knee, ankle and hip disabilities would continue to provide restrictions. He concluded that in such circumstances her future needs would be two hours per week for a period of 30 years, that is, until she reached the age of 75.19
Non-pecuniary loss
34 In relation to non-pecuniary loss, the primary judge referred to s 3C of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) and awarded a figure of $113,700, being 30% of the maximum amount allowable for this head of damage.20
Grounds of appeal and appellant's arguments
35 Mrs Smith's grounds of appeal (as amended) were to the effect that:
1. The judge erred in law in assessing Mrs Smith's damages for:
(a) past loss of earning capacity and future loss of earning capacity; and
(b) past and future loss as a result of the business not being promoted as would have occurred if Mrs Smith had not been injured;
with the result that the overall award of damages is too low and disproportionate to the income, prospects and opportunity that would have been generated by the exercise by Mrs Smith of her pre-accident earning capacity.
2. The judge erred in fact and in law in assessing Mrs Smith's damages for future gratuitous services on the basis that those services would be needed by her to the age of 75 years, when he ought to have found that she would have needed them for her entire life expectancy of 43 years.
36 In relation to ground 1, Mrs Smith's contentions were directed to the judge's award in respect of past loss, future loss and 'loss of opportunity'.
37 Mrs Smith's counsel, with leave, formulated certain particulars in relation to ground 1, which were formally recorded in a document provided to the court, dated 29 April 2015.21 Mrs Smith's particulars and arguments were to the following effect.
Past economic loss
38 In relation to past loss, a primary complaint was, in effect, that the judge erred in law in not assessing past economic loss on the basis that the whole cost of the labour that was engaged in substitution for the work Mrs Smith could no longer do (replacement labour) reflected Mrs Smith's loss of earning capacity. It was said, in effect, that the judge should not have treated replacement labour as a cost to be borne equally by the partners in the partnership in assessing Mrs Smith's past economic loss. It was also alleged that no deduction should have been made for tax.22
39 Mrs Smith contended23 that she was unable to work in the business for up to nine hours per week, and thus replacement labour was required for nine hours per week, or 25% of a full working week. Assuming a weekly labour cost of $1,000 per week, the replacement labour cost would be 25% of that figure, being $250 per week. The figure of $250 per week should be multiplied by 298 weeks, being the period from the date of the accident to date of judgment, giving a principal figure for past economic loss of $74,500, upon which interest was also claimed. This approach was said to be required having regard to Mastaglia v Burns,24 and Husher v Husher,25 and that the judge effectively misunderstood or misapplied those authorities.
40 There was a secondary species of complaint (presumably in the alternative to the primary complaint) that in any event, the judge had omitted damages for the period 29 July 2008 - 4 November 2009,26 and had also allegedly wrongly deducted approximately $2,000 on account of an indirect benefit to the businesses for which, Mrs Smith alleged, there was no evidence.27
Future economic loss
41 In relation to future economic loss, Mrs Smith again relied on the primary submission referred to above. Mrs Smith submitted that the proper calculation would be to take the figure of $250 per week and multiply it by the multiplier in respect of a future period of 22 years on the basis that Mrs Smith would have worked to the age of 67, giving a figure of $161,750. It is said that this should be discounted by 15% for the contingency that Mrs Smith may not have remained actively involved in the business. This would give a figure for future loss of $137,500.28
Lost opportunity to expand the businesses
42 It was alleged that the judge 'erred in failing to recognise the potential of the business'.29
43 In relation to this alleged loss of opportunity, Mrs Smith emphasised30 that Mr Smith's unchallenged evidence was that it would only take one new large customer to potentially double the size of the business. Mrs Smith submits that there should be an award for loss of opportunity as follows:
[G]lobal by reference to the loss of chance to double the size of the business for just one year $300,000, less 38% tax and share in this profit less 50% for Mr Smith's share of loss - $100,000.31
44 Mrs Smith contends that the sum awarded for economic loss generally should thus be increased by a further $75,000 to make the total figure for that item $100,000. It is not alleged that this sum is specifically referable either to past economic loss or future economic loss.
Future gratuitous services
45 In relation to ground 2, Mrs Smith asserts, without elaboration, that:
[The appellant's] future need will be for at least two hours per week for 43 years (that is, for her projected life expectancy).
Grounds of cross-appeal and respondent's arguments on cross-appeal
46 The respondent cross-appeals on the following grounds (as amended):
1. The judge erred in law in assessing Mrs Smith's non-pecuniary loss at 30% of the most extreme case.
2. The judge erred in fact and in law in failing to make a finding or, alternatively, applying the wrong test in assessing the direct contribution made by Mrs Smith and Mrs Smith's husband to the profitability of the business when assessing Mrs Smith's entitlement to damages for past and future lost earning capacity.
3. The judge erred in allowing an award of $25,000 for the loss of opportunity to expand the business when there was no evidence on which the allowance could have been made.
Ground 1 - non-pecuniary loss
47 In relation to ground 1, the respondent asserts, in effect, that on the judge's findings of fact, an assessment of 30% is outside of the range of a reasonable award, and that the figure should be 20%.32
Ground 2 - economic loss
48 In relation to ground 2, the respondent alleges, in effect, that the judge should have found that Mrs Smith's contribution to the net income of the businesses was 20%; that the judge should not have accepted (at [210] of the primary reasons) that Mrs Smith and Mr Smith were equal contributors to profit by reason only that they considered themselves to be so; and that the judge should have examined all relevant facts to determine Mrs Smith's direct contribution to the profit of the businesses.33 The respondent submitted that the judge should have made a finding of fact as to the 'value of the contribution' to the businesses by Mrs Smith and her husband, and that he should have found that the overall value of Mrs Smith's contribution to the businesses was 20% (or at most 30%). It was submitted that the judge thereby should have discounted the sum in respect of replacement labour costs not by 50%, but by 80%.34
49 In relation specifically to past economic loss, the respondent in his submissions also submits that the judge made certain errors which, although described as errors of law, are really alleged errors of fact:
(a) the judge should have made a further reduction because Mrs Smith continued to provide many of the services that she had provided prior to the accident, and that the judge erred in accepting that she was unable to work more than five to nine hours per week in the business,35 when he should have found that she was fit for pre-accident duties by April/May 2009;36 and
(b) the judge erred in finding that in November 2009, Mrs Smith and her husband had to finally accept that she would not be able to perform at her pre-accident capacity at work or at home.37
50 In relation to future economic loss, the respondent in his submissions also effectively alleged that the judge erred in fact in not finding that Mrs Smith had no continuing lack of earning capacity; in not rejecting Mrs Smith's 'convenient assertions at trial' that she would have continued working into the future; and in not finding that the real cost of replacement labour would have been only five hours per week, or at most 10 hours per week, for a maximum period of five years.38
51 The respondent then posited a number of 'scenarios' for the calculations he claimed that the judge should have adopted.
52 The first 'scenario' is that Mrs Smith had no significant earning capacity in any event and suffered no economic loss, either past or future.39
53 The respondent's 'scenario 2' proceeded on the basis of a cost of replacement labour for five hours per week. The resulting figures were divided by the appellant's 'contribution' of either 20% (or 30%), giving a total past loss of either $2,351 or $3,572.50.40 Under 'scenario 2' for future economic loss, the respondent contended for a 'modest' global sum of $20,000.41
54 Under 'scenario 3' for past economic loss, the cost of replacement labour is assumed to be 10 hours per week, but otherwise it is calculated on the same basis referred to under the second scenario. This is said to produce a loss of $4,702 (on a contribution of 20%), or $7,145 (on a contribution of 30%) for past economic loss.42
55 Under 'scenario 3' for future economic loss, the respondent contends for a loss of five hours per week for five or 10 years. The loss so calculated in regard to a five year multiplier is alleged to be $3,344 (on a contribution of 20%) or $5,016 (on a contribution of 30%). The loss so calculated in regard to a 10 year multiplier is alleged to be $5,845 (on a contribution of 20%), or $8,767 (on a contribution of 30%).43
56 In relation to ground 3, the respondent contends that the judge erred in law in awarding $25,000 for the loss of opportunity on the basis that it was a mere assertion and totally unsupported by any calculation of loss of profits, or expert evidence.
Legal principles: loss of earning capacity
57 In Australia, a plaintiff is compensated for loss of earning capacity, not loss of earnings: Medlin v State Government Insurance Commission.44 The correct question is whether, as a result of the accident, the plaintiff has been rendered less capable of earning income.45
58 The income earned before the injury is relevant, but only as an evidentiary aid in assessing damages for the loss of capacity to earn income: Paff v Speed;46State of New South Wales v Moss.47
59 In Husher v Husher,48 the plurality observed:49
A person who is physically injured by the negligence of another may suffer damage in a number of ways. As has long been established, the damages to be awarded to the victim are 'that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation'. If the victim's pursuit of gainful employment is interrupted or affected because of the negligent infliction of physical injury, the victim is to be compensated by an amount that reflects the financial consequences that follow from the impairment.
Since at least Graham v Baker it has been recognised that it is convenient to assess an injured plaintiff's economic loss 'by reference to the actual loss of wages which occurs up to the time of trial and which can be more or less precisely ascertained and then, having regard to the plaintiff's proved condition at the time of trial, to attempt some assessment of his future loss'. But damages for both past loss and future loss are allowed to an injured plaintiff 'because the diminution of his earning capacity is or may be productive of financial loss'. Both elements are important. It is necessary to identify both what capacity has been lost and what economic consequences will probably flow from that loss. Only then will it be possible to assess what sum will put the plaintiff in the same position as he or she would have been in if injury had not been sustained.
No doubt the past may provide important evidence about the plaintiff's earning capacity and what economic consequences will probably flow from what has happened. What a worker earned in the past may provide very useful guidance about what would have been earned if that worker had not been injured. But the inquiry is an inquiry about the likely course of future events and evidence of past events does not always provide certain guidance about the future. There may be many reasons why an injured plaintiff's past work history provides no assistance in deciding what that plaintiff has lost through diminution of future earning capacity. The student who is yet to enter the workforce is an obvious case of that kind. That student may have no history of paid work. Important as evidence of past events may be, that evidence is not determinative of an issue about loss of future earning capacity. (footnotes omitted)
60 In Husher, the injured plaintiff's capacity for earning was found to be in his capacity to utilise his training and skills as a block layer. The fact that he had prior to the accident chosen to exercise his earning capacity as a block layer through a family partnership, with the profits being shared equally with his wife, was not determinative of the economic consequences likely to flow from his incapacity to earn money as a block layer.50 That was because prior to the accident, the whole of the income from the partnership was derived from the efforts made by the plaintiff in exercising his earning capacity as a block layer; his wife's contribution to the income, 'as a practical reality', was 'negligible';51 and because the partnership was terminable at will. The plurality in Husher observed:52
So long as the partnership subsisted, the income derived by the appellant was limited to his share of the partnership profits. In this respect his fiscal position was different from that of a wage-earner who, having first derived income, then disposes of it in whole or in part. … The tax arrangements between the appellant and his wife therefore meant that the appellant did not derive the whole of the partnership income. Nevertheless, his capacity to terminate the partnership at will, and to bring an end to, or vary, the arrangements made with his wife concerning the manner in which income generated by his activities was derived, resulted in an effective control which is of critical significance in measuring his earning capacity and his financial loss. (emphasis added)
61 In the appeal to the High Court in Husher, the High Court overturned the decision below of the Queensland Court of Appeal. The Queensland Court of Appeal had dismissed an appeal by the plaintiff against the trial judge's award of damages in respect of, relevantly, economic loss. The trial judge assessed damages for, in particular, future economic loss on the basis, in effect, that as the plaintiff had prior to the accident deployed his earning capacity as a block layer in equal partnership with his wife, and would probably have continued to do so but for the accident, it was appropriate to limit the award (subject to contingencies) to a sum based on his half share of the profits.53
62 In the High Court in Husher, the parties agreed the relevant sum for damages in the event that the High Court determined (as it did) that the trial judge's approach was in error. It is not clear whether the agreed amount was calculated by reference to the whole of the profit that the partnership would have earned had the plaintiff not been injured, or the notional cost of engaging a block layer to do the work that the plaintiff would have done, and the earnings he would thereby have made and deployed for the benefit of the partnership, but for the accident.
63 In Husher, the court referred with apparent approval to an earlier decision of the Queensland Court of Appeal in Batt v Wilkinson.54 The High Court said that in that case, the damages for loss of future earning capacity had been 'calculated by reference to the whole of the net income of the partnership and not just the plaintiff's share of that net income'.55 However, the report of the decision in Batt indicates that in that case, the plaintiff was awarded a figure for future economic loss 'arrived at by reference to the full cost of the employment of substitute labour'.56
64 In the factual circumstances in Husher and Batt, the two approaches - ascribing to the plaintiff the whole of the partnership's net income or the whole of the cost of substitute labour - may, generally speaking, be expected to produce broadly similar results. Where the plaintiff is in a position to replace his labour in the business so as to produce the same net income that he would have earned had he not been injured, the cost of replacement labour is effectively a surrogate for what he would otherwise have earned had he not been injured.
65 Accordingly, in a number of cases involving claims made in the context of small family businesses where the plaintiff has, by his or her exertions, been effectively responsible for producing the whole of the income for the partnership, the price of replacement labour has been regarded as a reasonable guide upon which to base an assessment of damages, especially for future economic loss: Batt;57Cole v Ellis;58Dunlany v Hunters Hill Bus Co Pty Ltd;59Mastaglia v Burns.60 As Moffitt P observed in Dunlany:61
What it would cost to employ somebody else for the time he could not work or what he might earn if he had sought employment himself is capable of providing some guide as a basis from which an estimate of the loss to the business or to him can be made. Such a guide may be of particular assistance in assessing the award for a continuing diminution or loss of earning capacity because a future loss is not necessarily tied to a particular business. (emphasis added)
66 The observations of Moffitt P in Dunlany were cited with approval by Giles JA (Meagher JA & Hodgson CJ in Equity agreeing) in Circosta v Falzon.62 Wickham J observed in a similar vein in Tibbett v Davidson:63
Likewise it is not the case that future loss is measured by finding the loss to the partnership and allowing only the injured partner's share of that as his loss. The main reason for this is that such an approach does not take sufficient account of the chances.
67 The price of substitute labour on the open market may, however, provide an incomplete foundation for an assessment of the plaintiff's economic loss in such cases where the plaintiff has, prior to the accident, in addition to providing his or her labour, devoted considerable energy, long hours and a commitment to promoting the business, and the injury has incapacitated the plaintiff in those respects too.64 Rather than necessarily attempting to quantify separately the likely effect of that impairment on the business conducted by the plaintiff, the court may, again, in appropriate circumstances and with appropriate adjustments, treat substitute labour as a guide. Thus, instead of using, for example, the average weekly earnings of the plaintiff's trade or occupation, it may be appropriate to have the average weekly earnings 'factored up' to reflect the greater earnings that the plaintiff may otherwise have achieved through running a business, subject, of course, to an appropriate recognition of all relevant contingencies.65
68 The use of the price of substitute labour as a guide for assessing past economic loss (and not just future economic loss - with which Husher was specifically concerned) in what might loosely be described as 'partnership' cases where the plaintiff effectively earns the income for the partnership, has proved to be somewhat more controversial. However (and subject to the discussion below), the weight and trend of authority appears to be in favour of its application in appropriate circumstances to past economic loss as well as future economic loss.66
69 One area where there may be no real controversy in relation to past economic loss is where, as a result of the accident, the plaintiff is unable to work in the partnership business and the partnership agreement, in effect, obliges the plaintiff to continue to supply his or her labour to the partnership. In those circumstances, generally speaking, the full cost of replacement labour should be recoverable, whether the partnership actually hires replacement labour,67 or whether the other partners do the work which the plaintiff would otherwise have done.68 Those circumstances, however, are not the same as those considered in Husher, where the partnership was terminable at will and the plaintiff had complete and effective control of his earning capacity.
70 A further area where there appears to have been no real controversy in applying the underlying approach in Husher to past economic loss where the plaintiff has been the primary source of income for the family business, has been in the assessment of past loss for the period between the termination of the partnership (or other business structure) and the date of judgment.69 On the other hand, other cases have applied the underlying approach in Husher to past economic loss without differentiating between the period after the accident when the business continued to be operated by the plaintiff, and the period after the plaintiff had ceased operation of the business.70
71 The most recent decision of this court concerning the question of whether the full cost of substitute labour may be an appropriate guide in assessing past economic loss, is Mastaglia. One of the questions considered was whether the approach in Husher was applicable to past economic loss only in relation to the period after the partnership had been terminated.
72 In Mastaglia, there were claims for future economic loss and past economic loss. In relation to past economic loss, the plaintiff's claims effectively covered three periods:
(a) the first period after the accident, when the plaintiff could not work at all;
(b) a second period during which substitute labour was employed by the partnership; and
(c) a third period following the termination of the partnership.71
73 On appeal, the appellant (defendant) alleged that the trial judge erred by not halving the amount awarded for past and future economic loss. It was alleged that such a reduction was required by reason of the fact that the plaintiff, including in the period prior to trial during which the partnership subsisted, had shared the profits of the partnership equally with his wife.72
74 Martin CJ found, in effect, that the partnership's income had been essentially derived from the personal exertion of the plaintiff; that the partnership was terminable at will; and that there were no other restraints on the capacity of the plaintiff to deploy his earning capacity elsewhere.73 McLure JA (as her Honour then was) made assumptions to similar effect in favour of the plaintiff.74
75 In relation to the claim for future and past economic loss, Martin CJ found that the approach outlined in Husher was applicable, and the judge had not erred in not reducing the plaintiff's damages for economic loss (past or future) on the basis of the way in which the partnership had split profits.75 McLure JA agreed with Martin CJ in relation to future economic loss, and agreed with him in relation to past economic loss for the period after the date of termination of the partnership.76 However, her Honour considered that the approach in Husher was not applicable in that case in relation to past economic loss in the period prior to the time that the partnership was terminated.77
76 Buss JA considered that in cases where the factual circumstances were effectively the same as in Husher, the approach outlined in Husher is available with respect to assessments of both past and future economic loss.78 Buss JA, however, found, in effect, that on the facts in Mastaglia, the plaintiff had not established a claim for past economic loss beyond a claim based on a share of 50% of the profits of the partnership, in relation to the period prior to the termination of the partnership. In other words, his Honour in effect agreed with the result reached by McLure JA in respect of that period of past economic loss, but not with her Honour's reasoning.79
77 It should be observed that it is not necessary for this court, on this occasion, to express an opinion one way or another on the differences that emerged in Mastaglia on the question of past economic loss given that on the facts of this case, the personal exertions of Mrs Smith were not the primary source of income earned by the family businesses.
78 Finally and in any event, it should be recalled that in Husher the plurality emphasised that each case must be dealt with on its own facts.80 Amongst other things, their Honours said:81
In this case it was probable that the appellant would have exploited only his own earning capacity to generate net income of a particular amount and that he would have been able to control the destination of that net income as he chose. In those respects, this case differs from some other hypothetical examples mentioned in the course of argument. No true comparison can be made between this case and that of a person expected to remain a member of a partnership not terminable at will or a partnership in which persons other than the injured plaintiff contribute significantly to the firm's business activity, either by capital contribution or by contribution of skill and labour. In those cases other considerations intrude in deciding what is the loss occasioned by the impairment of the plaintiff's future earning capacity. In at least some cases of the kinds mentioned it may be that the plaintiff's probable exploitation of earning capacity to generate income over which the plaintiff would have had control would be limited to the amount of the benefits the plaintiff could have expected to receive under the partnership arrangements (for as long as those arrangements were likely to have persisted) but each case will turn on its own facts.
Appeal - disposition
Appeal ground 1
79 Mrs Smith's primary contention that the judge misunderstood or misapplied Husher and Mastaglia cannot be accepted. In Husher and Mastaglia, the income of the partnership was effectively derived through the exertions of the plaintiff. That case was not advanced or established by Mrs Smith here.
80 The first step is to identify what earning capacity was impaired or lost.82 Mrs Smith's case was, in effect, that prior to the accident her earning capacity was comprised of administrative (clerical and bookkeeping) skills, as well as marketing/managerial skills, and that this earning capacity was impaired by the accident.
81 Mrs Smith did not contend, and did not adduce evidence, to the effect that the combination of her administrative and managerial/marketing skills, had a value in the broader labour market, eg, as an office manager and/or marketing manager for small businesses. In other words, she did not contend or establish that her combination of skills would have commanded a certain level of remuneration in the labour market generally. Nor was her case to the effect that her marketing/managerial skills on their own, had a recognisable value in the broader labour market. Her administrative skills, no doubt, had some specific value in the broader labour market, but her case was essentially (in recognition of her personal circumstances - familial and religious) that the skills she had would probably be deployed within the partnership's businesses, and not elsewhere.83
82 On the revenue side of the businesses, her claim was to the effect that she was involved in the marketing of the businesses. However, she did not particularise or lead evidence as to what percentage of the revenue of the partnership, if any, prior to the accident was attributable to her personal exertions in those respects. There was certainly no claim, or evidence, to the effect that the whole of the income of the partnership was derived from her personal exertions.
83 In terms of the time devoted by Mrs Smith to the partnership's businesses prior to the accident, Mr and Mrs Smith both accepted that Mr Smith worked approximately 50 - 60 hours per week in the businesses. The judge found that Mrs Smith worked 18 hours per week. Adopting the mid-point between 50 and 60 hours in respect of Mr Smith's time devoted to the businesses (ie, 55 hours per week), Mr Smith contributed 75% of the hours worked in the businesses and Mrs Smith contributed 25% of the hours worked in the businesses. Mrs Smith did not give, but presumably could have given if it were the fact, direct evidence that the majority of her time was spent on marketing as opposed to administrative duties. The inference to be drawn from the evidence as a whole is that the majority of her time was spent on administrative duties.84
84 Nor was there any credible evidence that after the accident, there was a reduction in revenue as a result of Mrs Smith being unable to undertake marketing activities either at all, or as well as she did prior to the accident. As the judge found, turnover had in fact nearly doubled four years after the accident.85
85 In the absence of any positive, objective, evidence as to the degree to which Mrs Smith's marketing exertions contributed to the revenue of the businesses prior to the accident, and in light of the evidence that revenues grew substantially after the accident, it could not be inferred that Mrs Smith's pre-accident personal exertions resulted in a substantial contribution to the revenue of the businesses prior to the accident. Nor could it properly be inferred on the evidence as a whole that revenues would have markedly increased beyond that which they did after the accident had she not been injured. Having said that, however, it may be accepted, as the trial judge effectively did, that Mrs Smith had a degree of business acumen, had jointly established the businesses with her husband, and had been centrally involved in the decision-making of the businesses prior to the accident. Insofar as the accident rendered her less capable of devoting time and energy to the businesses, it is reasonable to infer that the accident had some negative effect on the promotion and thereby revenue of the businesses, albeit one incapable of any precise mathematical computation, in terms of revenue foregone. In this regard, the increases which occurred in revenue may have masked this negative effect.
86 On the expenses side of the businesses, Mrs Smith alleged, in effect, that she contributed to the profit by carrying out administrative duties such as typing, invoicing, filing, answering the telephone and doing the bookwork.
87 The performance of these administrative tasks no doubt reduced the cost to the partnership of doing business. Insofar as, and to the extent that, the partnership replaced Mrs Smith's labour in relation to those tasks, partnership profits were reduced and Mrs Smith suffered a loss in terms of her share of the reduced profits.
88 In the circumstances, there was no proper basis upon which to treat Mrs Smith's loss as represented by the whole of the cost of replacement labour. As was the position with respect to managerial/marketing skills, insofar as her earning capacity consisted of administrative skills and experience, her case essentially was that it would be deployed within the partnership. There was no partnership obligation which, in effect, required Mrs Smith to bear the whole of the costs of any replacement labour if she were injured. Rather, under the partnership, as the judge in effect found, labour costs, including replacement labour costs, would be shared equally.
89 On the other hand, it may be accepted that particularly with respect to future economic loss, Mrs Smith was financially vulnerable to creditors, including the bank, if the partnership businesses failed. In those circumstances, despite the personal factors which pointed to Mrs Smith only exercising her earning capacity through the partnership, Mrs Smith would have had no option but to exercise her earning capacity within the broader labour market. Whilst it may be accepted that she would probably be confined to administrative duties in the general labour market, her skills and experience from the partnership would, presumably, stand her in good stead and make her a valuable employee. As the children grew up, if the businesses failed and financial exigencies required Mrs Smith to deploy her earning capacity in the general labour market, she may have been forced to arrange her affairs and time in ways which allowed her to work up to 18 hours per week (as she did prior to the accident) in paid employment.
90 A submission along the preceding lines was evidently put to the trial judge, and his Honour addressed it as follows:86
Counsel for Mrs Smith also says an allowance should be made for future loss of earnings for the reduced capacity of Mrs Smith to obtain employment in the open market place in the event that her business with her husband should collapse and she needed to find employment elsewhere. That might occur, for example, should Mr Smith die. It is conceded by counsel for Mrs Smith that the allowance for this form of loss is, on the evidence before me, remote. I believe this is best taken into account as a contingency item. In relation to contingencies, I believe there is no need for further adjustment given the broad approach I have taken. (emphasis added)
91 There is no challenge by Mrs Smith to the findings in the last two sentences of the passage quoted above.
92 The matters discussed earlier in [79] - [89] above, in light of the absence of any challenge to the findings referred to in the preceding paragraph, indicate in my view that Mrs Smith's complaint that the full cost of substitute labour should have been used by the judge as a guide for the assessment of Mrs Smith's lost earning capacity, is without foundation on the facts of this case. It was also appropriate for the judge to assess the loss on the basis of Mrs Smith's position after tax.
93 In relation to the judge's alleged error in 'failing to recognise the potential of the business',87 the judge's reasoning was as follows:88
Mrs Smith claims an amount for loss of the opportunity to improve the income of the business due to Mrs Smith's inability to devote time to marketing. Of course, notwithstanding this alleged loss, the business has flourished since the accident and expanded its turnover and profit remarkably. The contention of Mr and Mrs Smith in their evidence was that due to Mrs Smith's disabilities she did not engage in marketing to the extent she was able to before the accident and this restriction prevented the business from gaining further new customers. … Counsel for the defendant submitted that no allowance should be made for the alleged loss of opportunity of promotion of the business. He submitted that Mrs Smith's methods were naive and outdated in terms of finding customers through the Yellow Pages and conducting other research and their promotional activities such as calendars were also outdated. Further, it is submitted on behalf of the defendant that no expert evidence has been called to support such a claim. However in my opinion the nature of Mr and Mrs Smith's business is such that expert evidence is unlikely to be helpful. Mr and Mrs Smith are the experts in the running of their business and I accept that they have a good sense of what can be done to expand the business. This has been proven to be the case in the past even to the point that they continued to pursue their goals despite early accounting advice that the businesses should be shut down. Although Mr and Mrs Smith's methodology might be considered by others as naïve, the expansion of the business speaks for itself. Mr Smith's evidence was that it only takes one new large customer to potentially double the size of the business.
I conclude that there should be an additional sum awarded for past and future loss to the business as a result of the business not being as thoroughly promoted as would have occurred had Mrs Smith not been injured. In assessing any such loss, I believe a conservative approach should be taken given the lack of any precise calculation which might provide assistance in assessing the loss. I also take into account that I have already made an allowance for past and future loss of earnings based upon the costs of replacement labour but I believe that the allowance based upon the costs of replacement labour does not adequately reflect the loss of opportunity to expand the business through promotional activities.
I conclude that an allowance of $50,000 (inclusive of interest and taking into account tax liability) should be allowed for this item reduced by 50% to take into account the interest of Mrs Smith in the business. This leaves a net amount of $25,000.
94 Mrs Smith says that the figure for this item should be $100,000 and not $25,000. Mrs Smith's figure of $100,000 is based on the proposition that post-accident revenues could have been $300,000 greater had Mrs Smith not been injured. In this regard, Mrs Smith emphasises that it would only take one new large customer to potentially double the size of the businesses.
95 The fact that turnover could be doubled if a new major customer were found points to the rewards potentially available in the product market in which the businesses operated. However, the judge expressly took that matter into account in his assessment.89 There is no reason to conclude, on the basis of Mrs Smith's pre-accident personal exertions, that the probabilities were such that had she not been injured, further market penetration would have yielded additional total revenues of approximately $300,000.
96 Further, as this court has observed on a number of occasions, the assessment of damages for past and future economic loss is not an exact science, and such an assessment has many of the characteristics of a discretionary judgment. An appellate court is not justified in setting aside the trial judge's assessment on the ground that the damages are excessive or inadequate, unless the amount assessed is outside of the limits of what a sound discretionary judgment could reasonably adopt.90 In my view, there is no basis upon which this court could conclude that the figure of $25,000 allowed by the trial judge is, in itself, outside a sound discretionary range on the evidence in this case, or that in the context of the other elements awarded for economic loss, the result is that the total award for past and future economic loss is outside a sound discretionary range.
97 As to the secondary species of complaints referred to in [40] above, counsel for Mrs Smith effectively accepted that if the other arguments failed, those matters would not, in themselves, establish manifest error in the total amount awarded for past economic loss by the primary judge.91 Further, the judge made an allowance for the period from the accident to 4 November 2009 for the loss of marketing functions performed by Mrs Smith.92 In addition, it may be observed that no substitute labour was obtained until the recruitment of Mrs Denton in November 2009.
98 I would dismiss ground 1 of the appeal.
Appeal ground 2
99 The judge's reasons in relation to the question of future gratuitous services included the following:93
The plaintiff makes a claim for future gratuitous services of [sic] based upon five hours per week for the rest of her life. … I conclude, as I indicated earlier in this decision, that Mrs Smith is likely to experience some improvement in her mental state as a result of the finalisation of the litigation and also an improvement in her spinal pain with the maintenance of an appropriate exercise programme as recommended by Mr Holthouse. However, I conclude that she will need to continue to avoid heavy lifting tasks and other tasks which place a strain on her spine (such as window cleaning or heavy scrubbing as described by Mr Hardcastle). Also her knee, ankle and hip disabilities will continue to provide restrictions. In such circumstances I assess her future needs to be two hours per week for a period of 30 years (that is, up to the age of 75).
100 It would appear that the judge inferred that after the age of 75, by dint of age, rather than as a result of the accident, Mrs Smith would require assistance with heavy lifting and other tasks which placed strain on her spine. As indicated earlier, Mrs Smith has not articulated any error with the judge's reasoning. No error having been shown, ground 2 should be dismissed.
Cross-appeal - disposition
Grounds 2 and 3
101 It is convenient to address grounds 2 and 3 of the cross-appeal concerning economic loss, before considering ground 1.
102 In relation to ground 2, the contention is that the judge erred in failing to make a finding as to, or erred in applying the wrong test in assessing, the direct contribution made by Mr and Mrs Smith to the 'profitability of the business' when assessing past and future lost earning capacity. The respondent contends, in effect, that the judge should have assessed Mrs Smith's pre-accident contribution to the profitability of the businesses at 20%, or at the most 30%.
103 The profit of a business involves revenue less expenditure. In some cases where the expenses are minimal, the profit of the business may, broadly speaking, be a reflection of its turnover. In other cases, the expenses of the business may be considerable, resulting in a relatively small profit as a percentage of turnover. Questions of whether the personal exertions of the plaintiff effectively produce the whole or some lesser identifiable percentage of the income of the business, or the extent to which they minimise the expenses of the business, are questions of fact. Depending upon the facts, it may be possible to make a meaningful assessment of the extent to which the plaintiff's pre-accident exertions contributed to the overall profitability of the business.
104 Of course, if the plaintiff's exertions are principally directed to saving expenditure that the business would otherwise incur, for example, by way of the saving of a fixed sum for wages, and if the revenue of the business were to grow over time without material contribution by the plaintiff, the plaintiff's percentage contribution to profitability would necessarily decrease over that time. Insofar as revenue contracted over time, the plaintiff's relative contribution to profitability would, conversely, increase.
105 Here, the plaintiff's pre-accident personal exertions were largely directed to the expenditure side of the business, but, it may be inferred, they also made some other than negligible contribution (albeit difficult to quantify) to the revenue of the business. In such a case, it will likely be unproductive to attempt to roll up the plaintiff's contributions to revenue and expenditure in an endeavour to arrive at a single global figure for contribution to profitability.
106 The respondent nevertheless points out that in this case, both Mr and Mrs Smith accepted in evidence that Mrs Smith's contribution to the Anodes Australia business prior to the accident was 10%. Also, the respondent points out that Mr Smith (but not Mrs Smith) accepted that Mr Smith's contribution to the pre-accident profitability of the Tags & Tickets business was greater than Mrs Smith's, but he would find it hard to 'put a figure on it'.94
107 Whilst Mr Smith, on whose evidence the respondent relied, could not 'put a figure on it', the respondent invites this court to put the figure at 20% for Mrs Smith's global contribution to the profitability of the businesses as a whole. The purpose of this submission is to lay the foundation for the submission that the judge's assessment was erroneous because instead of treating the parties as entitled to a 50/50 share of the profits after expenses, including the expense of replacement labour, he should have treated Mrs Smith as entitled to 20% of the profits after expenses, given that the 'true' contribution that she made to pre-accident profits was only 20%.
108 I am unable to accept the respondent's contentions for essentially three related reasons. First, in the particular circumstances of this case, there was no error in the primary judge addressing Mrs Smith's contribution to expenditure and revenue separately. Secondly, it is not to the point to argue, in effect, that Mrs Smith was entitled to 'too much' profit from the partnership because 'in truth' she had only historically contributed 20% to the profits of the partnership. The need for replacement labour (on the judge's findings) was as a result of Mrs Smith's accident. It was Mrs Smith's labour that required replacement. Mr Smith was not obliged under the partnership agreement, and did not, take over the work that Mrs Smith had done. The replacement labour was supplied to the partnership by a third party, and Mr Smith was entitled to no more than 50% of the profits of the partnership.
109 Thirdly, it is true (on the respondent's hypothesis) that Mr Smith was the principal contributor to the profits of the partnership, and as the partnership was terminable at will, Mr Smith could have terminated the partnership and deployed his skills elsewhere at any time, effectively leaving Mrs Smith without any source of income from the partnership. However, in relation to past economic loss, the prospects of that occurring in the period after the accident and prior to judgment, as subsequent events confirmed, was effectively nil.
110 Insofar as it might be said that in relation to future economic loss, an assessment based on the assumption that she would continue to receive 50% of partnership profits was too generous to Mrs Smith, that matter would need to be weighed against the countervailing consideration referred to earlier, that Mrs Smith was financially vulnerable if the partnership businesses failed. As noted earlier, the judge was of the view that no particular additional allowance for this latter consideration was required, given the 'broad approach' he had taken overall. In my view, when the judge's approach to economic loss is viewed as a whole, it cannot be said that there was any material error by the judge as alleged by the respondent in ground 2 of the cross-appeal.
111 As noted earlier, the respondent in his submissions has also sought to raise certain alleged errors of fact in relation to the judge's assessment of past and future economic loss. These alleged errors of fact are not raised in the grounds of cross-appeal, or in the particulars. They have not been the subject of compliance with practice direction 7.4, and there has been no application to amend the grounds of cross-appeal to incorporate them. Accordingly, it is unnecessary to deal with them. In any event, I am not persuaded that the findings of fact made by the judge were not open to him, particularly as he found Mrs Smith to be an honest witness,95 and Mr Smith to be 'a most impressive and reliable witness'.96 Further, his Honour was plainly entitled to accept the evidence of the medical practitioners to whom his Honour referred, for the purpose of making findings as to the degree of Mrs Smith's incapacity as a result of the accident.
112 Accordingly, in my opinion, ground 2 of the cross-appeal should be dismissed.
113 In relation to ground 3, essentially for the reasons given above and in relation to Mrs Smith's challenge to the judge's award of $25,000 for lost opportunity, ground 3 of the cross-appeal should also be dismissed.
Ground 1
114 Ground 1 of the cross-appeal challenges the judge's assessment with respect to non-pecuniary loss. Under s 3C of the Motor Vehicle (Third Party Insurance) Act 1943 (WA), a limit is imposed on the award of damages that can be made for non-pecuniary loss, ie, damages for pain and suffering and loss of enjoyment of life. Section 3C(2) provides, in effect that damages for non-pecuniary loss must be assessed as a proportion, determined according to the severity of the non-pecuniary loss, of the maximum amount that may be awarded. The term 'non-pecuniary loss' is defined in s 3C(1) to mean pain and suffering; loss of amenities of life; loss of enjoyment of life; curtailment of expectation of life; and bodily or mental harm. At the time of trial, the maximum amount was $379,000.97 Section 3C(3) provides that the maximum amount may only be awarded for a case that is assessed to be 'a most extreme case'.
115 In this regard, the judge said:98
A trial judge is required to undertake an assessment based upon the right proportion between a most extreme case and the case being assessed (see Hendrie v Rusli[2000] WASCA 249; De Blank v Stemberger; and Villasevil v Pickering). A most extreme case might be paraplegia, particularly of a young person (see Hendrie v Rusli). However, in Villasevil v Pickering Grove AJ stressed that the ceiling figure is a range of situations which could be described as 'a most extreme case' and is not to be considered against 'the most extreme case'. In making the assessment the court is not only required to take into account the disability from the time of the accident to the time of trial but the various future hypothetical events impacting upon the assessment of the disability (see Malec v JC Hutton Pty Ltd). Accordingly, in assessing general damages I should take into account the degree of probability of the plaintiff being able to make a recovery as I have outlined earlier in this judgment.
116 The respondent did not take issue with the judge's statement as to the approach he was required to take. It is broadly consistent with authority in this court, including Den Hoedt v Barwick.99
117 The primary judge, in assessing non-pecuniary loss, accepted that save for her ankle,100 Mrs Smith's condition would likely improve once the litigation was finalised and she undertook an exercise program recommended by Mr Holthouse in relation to her spinal injuries.101 His Honour concluded:102
Taking all factors into account, I assess that Mrs Smith's entitlement to non-pecuniary loss to be 30% of an extreme case and, accordingly, I will allow $113,700.00.
118 His Honour's reference to '30% of an extreme case' is unfortunate given that the relevant proportion was to be determined against the maximum amount that may be awarded 'only in a most extreme case'. Further, whilst it may be accepted that Mrs Smith's pain and suffering, loss of amenities and enjoyment of life, and bodily and mental harm have been considerable, on his Honour's findings referred to at [20] - [21] above, the figure of 30% is, in my view, beyond a sound discretionary range.
119 In my view, on the judge's findings, including his assessment that Mr and Mrs Smith were honest witnesses and findings to the effect that Mrs Smith tended to understate the degree of her pain and suffering and the effect of her injuries,103 a reasonable estimate for this component could reach, but could not exceed, 25% of a most extreme case. At 25%, which is reasonable in the circumstances when, in particular, full weight is given to the matters just mentioned, the relevant figure would be approximately $95,000.
120 However, the amount awarded for non-pecuniary loss is only one estimated component of an award which, in substance in this case, is the sum of a number of necessarily imprecise estimations. As Ipp J (Wallwork & White JJ agreeing) observed in State Government Insurance Commission v Hitchcock:104
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.
121 Similarly, in Elford v FAI General Insurance Co Ltd,105 the Full Court of Queensland observed:
[I]f a particular component of such an award is plainly an under-estimate or over-estimate and if substituting a proper figure for that component will substantially alter the total, then the substitution should be made; but if there is nothing more than a wrong estimate of one component which has no substantial effect on the total, the award stands. The pointing out of a relatively small error in one estimated component of a judgment which is in substance a sum of estimates does not necessarily make the judgment as a whole wrong.
122 In this case, if a substituted figure of 25% were used, the estimate for non-pecuniary loss would be reduced from $113,000 to $95,000. Such a reduction for this one component would, if it were made, reduce the total award by only $18,000, or 5% of the total award of $362,000. The total award, on the judge's findings of fact, is within the limits of a sound discretionary judgment and in these circumstances, appellate interference is not warranted on this account alone.106
Conclusion
123 For the foregoing reasons, I would dismiss the appeal and cross-appeal.
1 The background is taken from the unchallenged findings of fact made by the primary judge, in his reasons for judgment, unless otherwise indicated. See Smith v Zhong [2015] WADC 50 (primary reasons).
2 Primary reasons [10].
3 Primary reasons [146], [148] - [149], [151], [155] - [157], [160], [163] - [164], [167] - [168] (read with [120] - [121]).
4 Primary reasons [123] - [131].
5 Primary reasons [22] - [25], [171], [184] - [187], [204], [207], [209], [210.3].
6 Primary reasons [204].
7 Primary reasons [209], [210.3].
8 Primary reasons [209.1].
9 Primary reasons [208].
10 Primary reasons [209.2].
11 Primary reasons [210.2].
12 Primary reasons [210.3] - [211].
13 The sum of $15,000 in (d) and the sum of $17,621.05 in (e).
14 Primary reasons [216], read with [210.3].
15 Primary reasons [216].
16 Primary reasons [215], [217] - [218].
17 Primary reasons [219].
18 Primary reasons [221].
19 Primary reasons [230].
20 Primary reasons [269] - [271].
21 Appellant's Additional Particulars to ground 1 of appeal pursuant to orders made by the Court of Appeal on 21 April 2015 (Appellant's Appeal Particulars).
22 Appellant's Appeal Particulars, pars 2.1 - 2.2.
23 Appellant's written submissions, par 35, WB 13 read with par 25.3, WB 11.
24Mastaglia v Burns [2006] WASCA 190; (2006) 32 WAR 427 [110], [112].
25Husher v Husher [1999] HCA 47; (1999) 197 CLR 138.
26 Appellant's Appeal Particulars, par 1; see primary reasons [210.1].
27 Appellant's Appeal Particulars, par 2.3
28 Appellant's Appeal Particulars, par 3; appellant's written submissions, par 35, WB 13.
29 Appellant's Appeal Particulars, par 4.
30 See, eg, appellant's written submissions, par 34, WB 13.
31 Appellant written submissions, par 35, WB 13; Appellant's Appeal Particulars, par 4
32 Respondent's additional particulars filed 30 April 2015, pars 2 and 3.
33 Respondent's additional particulars filed 30 April 2015, pars 5, 6 and 7.
34 Amended respondent's submissions in the cross-appeal (respondent's cross-appeal submissions), pars 11 - 14.
35 Respondent's cross-appeal submissions, pars 13 and 18.
36 Respondent's cross-appeal submissions, pars 18 - 26.
37 Respondent's cross-appeal submissions, par 21.
38 Respondent's cross-appeal submissions, pars 46 - 48; 49; 50 - 51.
39 Respondent's cross-appeal submissions, pars 28 - 29, 55.
40 Respondent's cross-appeal submissions, pars 30 - 43.
41 Respondent's cross-appeal submissions, pars 56 - 58.
42 Respondent's cross-appeal submissions, pars 44 - 45.
43 Respondent's cross-appeal submissions, pars 59 - 62.
44Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1.
45Medlin (17).
46Paff v Speed [1961] HCA 4; (1961) 105 CLR 549, 566.
47State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 [71].
48Husher v Husher [1999] HCA 47; (1999) 197 CLR 138.
49Husher [6] - [8].
50Husher [17].
51Husher [20].
52Husher [21].
53Husher [4] - [5].
54Batt v Wilkinson [1983] 2 Qd R 619.
55Husher [10].
56Batt v Wilkinson [1983] 2 Qd R 619, 625.
57Batt v Wilkinson [1983] 2 Qd R 619.
58Cole v Ellis (1992) Aust Torts Reps 81-186, 61,641, 61, 646.
59Dunlany v Hunters Hill Bus Co Pty Ltd (Unreported, NSWCA, 12 May 1983).
60Mastaglia v Burns [2006] WASCA 190; (2006) 32 WAR 427.
61Dunlany v Hunters Hill Bus Co Pty Ltd (Unreported, NSWCA, 12 May 1983), 11 - 12.
62Circosta v Falzon [1999] NSWCA 308; (1999) 30 MVR 365 [28].
63Tibbett v Davidson (1976) WAR 24, 27.
64Dunlany (Moffitt P) (11), (13 - 14); Circosta [32] - [33].
65Circosta [33].
66 See Szittner v Harriot [1967] 1 NSWR 233, 235; Taroporewalla v Berkery (1983) 3 NSWLR 28, 35 - 39; Cole v Ellis (1992) Aust Torts Reports 81-186, 61, 637 - 61,646; Randall v Dul (1994) 13 WAR 205, 212 - 215, 224; Circosta [32]; Mastaglia [110] - [111]. See also Schick v Abbott [1976] WAR 54, 55 (Burt J). Contra, in particular, Dal Zotto v Bonnani (1980) 47 FLR 239, 247 - 251.
67Batt (624).
68Randall (213 - 214).
69Future Look Landscaping Pty Ltd v Hanlon (Unreported, NSWSC, CA 40658-1997, 8 July 1998); Conley v Minehan [1999] NSWCA 432 [44]; Rauk v Transtate Pty Ltd [2000] NSWSC 1020; (2001) Aust Torts Reports 81-592 [160]. See also Spargo v Haden Engineering Pty Ltd (1993) 60 SASR 39; Morbatjou v Moradkhani [2013] NSWCA 157 [72].
70Cochrane v Hannaford [1999] NSWCA 37 [83]; Kschammer v RW Piper & Sons Pty Ltd [2003] WASCA 298 [149] - [155]. See also Mastaglia.
71Mastaglia [54], [55], [137].
72Mastaglia [88].
73Mastaglia [89], [100] - [101].
74Mastaglia [146].
75Mastaglia [101] - [112], [114] - [115].
76Mastaglia [119], [147].
77Mastaglia [147].
78Mastaglia [165].
79Mastaglia [175] - [177].
80Husher [23].
81Husher [22].
82Husher [17].
83 Appeal ts 25 - 27.
84 See, in particular, Mrs Smith's evidence, ts 22 - 24, 28 - 30; Mr Smith's evidence, ts 406, 408 - 410. See also plaintiff's amended particulars of damages, pars (a), (g), (t), BB 84, 86.
85 Primary reasons [208].
86 Primary reasons [224].
87 Appellant's Appeal Particulars, par 4.
88 Primary reasons [221] - [223].
89 Primary reasons [221].
90Montemaggiori v Wilson [2011] WASCA 177; (2011) 58 MVR 497 [28] - [29]; Wainright v Barrick Gold of Australia Ltd [2014] WASCA 15; (2014) 46 WAR 219 [88].
91 Appeal ts 30 - 31; read with par 35 of appellant's written submissions.
92 Primary reasons [210.1], [223].
93 Primary reasons [230].
94 ts 490 - 491.
95 Primary reasons [137].
96 Primary reasons [139].
97 Western Australia, Government Gazette, No 76 (14 May 2013) 1973.
98 Primary reasons [268].
99Den Hoedt v Barwick [2006] WASCA 196; (2006) 46 MVR 30 [5], [7], [95] - [97]; see also Southgate v Waterford (1990) 21 NSWLR 427, 440 - 442.
100 Primary reasons [148].
101 Primary reasons [270].
102 Primary reasons [271].
103 Primary reasons [82], [137], [139], [204].
104State Government Insurance Commission v Hitchcock (Unreported, WASC (FC), WA Library No 970089A, 11 March 1997), 13 - 14.
105Elford v FAI General Insurance Co Ltd [1994] 1 Qd R 258, 265.
106 In this paragraph, the figures used are the subject of rounding.
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