The State of South Australia v Graetz No. Scciv-02-1344
[2003] SASC 150
•29 May 2003
THE STATE OF SOUTH AUSTRALIA V GRAETZ
[2003] SASC 150
Full Court: Duggan, Debelle and Lander JJ
DUGGAN J. I agree that the appeal should be allowed for the reasons given by Lander J. I also agree with the orders which he proposes.
DEBELLE J. I have read the reasons of Lander J. I agree with them and with the orders he proposes.
LANDER J. The appellant was the defendant in proceedings brought by the respondent (plaintiff) for damages for personal injuries arising out of an incident which occurred on 27 August 1996. It was agreed that liability should be apportioned upon the basis that the respondent recover 90 per cent of her damages to be assessed and the matter proceeded in the District Court as an assessment of damages.
The Trial Judge assessed damages:
Special Damages
$11,272.85
Interest on special damages
1,075.00
General damages - past
30,000.00
- future
40,000.00
Interest on past general damages
3,600.00
Future medical expenses
9,492.00
Past gratuitous services
14,310.00
Interest on past gratuitous services
3,005.00
Future gratuitous services
17,953.00
Future loss of earning capacity
158,000.00
TOTAL
$288,707.85
The Trial Judge entered judgment for the respondent for 90 per cent of her damages in the sum of $259,837.07.
The appellant now appeals against the award of damages but only against two aspects of the award namely the assessment of damages for general damages (i.e. non pecuniary losses) and the assessment of damages for future loss of earning capacity.
In respect of both of those heads the respondent asserts that the award was manifestly excessive and in respect of the second head further asserts that the manner in which the assessment proceeded was erroneous.
The respondent was born on 29 October 1958 and so was nearly 38 when the incident occurred and nearly 44 at trial. She has been married to her husband, a chartered accountant, for 22 years and has two children, a son aged 19 and a daughter aged 16.
Prior to the accident she had suffered from Raynaud’s disease which is a condition which causes swelling of the fingers the effects of which are aggravated by heat or cold. She suffered about one episode per week but the disease was more a nuisance than painful.
She was an active woman prior to the accident regularly involving herself in physical activity including gymnasium, circuit work and basketball.
The respondent was educated to Year 11 and thereafter at a Business College. She later undertook secretarial and reception work in an accounting office where she remained until her first child was born. She did not work between July 1983 and December 1985.
In 1989 she commenced working with her husband in his one man accounting practice which is mainly concerned with taxation. She carried out a range of secretarial duties and office duties. She worked between 10:00am and 3:00pm five days a week. She was paid a weekly salary which was related to the Clerks Award.
The respondent’s husband carries on what might be described as a modest accounting practice. He commenced his practice at Dover Gardens but then moved to Warradale. The present practice is on Diagonal Road at Warradale in offices which are owned by the respondent and her husband and which were purchased for $130,000 on mortgage finance.
The respondent’s husband’s practice has expanded. In 1989 gross fees were $35,000 but at trial had increased to $120,000. The respondent’s taxable income was in the vicinity of $40,000.
On 27 August 1996 the respondent went to her daughter’s school, the Glenelg Primary School, for the purpose of coaching Grades 5, 6 and 7 girls’ basketball. The school has a gymnasium in which a basketball ring and backboard are mounted on a retractable steel frame. When the ring is not in use the ring and the backboard are swivelled back from the court baseline to a position near the wall.
The assembly was put into the “play” position by placing two hooked poles into eyelets on the corners of the backboard. Whilst the respondent was attempting to pull the backboard and ring into the play position, one of the hooks which she was pulling upon became dislodged from the eyelet and as a consequence she fell backwards onto the gym floor, hitting her back, head and right shoulder. She lost consciousness for a short period of time.
She was taken to the Morphettville Medical Centre and advised by a general practitioner to go home and treat her injuries with cold packs and anti-inflammatory medication. She said that when she arrived home she could not move and was vomiting. She stayed in bed for a day.
She experienced pain in her neck, shoulder and lower back. She underwent a course of physiotherapy, manipulation and massage which continued over a period of some months. During that time she continued with the medication which had been prescribed.
Notwithstanding her treatment and medication she continued to suffer pain in the areas which I have already identified and, in addition, headaches which on occasion were so severe that they caused her to vomit. She also experienced tinnitus, blurred vision and giddiness.
Her symptoms remained the same throughout 1996 and did not improve much in 1997. Her symptoms were so bad over that period of time that she was unable to do much housework or gardening and was forced to abandon her basketball coaching.
It was necessary for her to obtain assistance from her mother, her mother-in-law and her husband in carrying out her home duties.
Her condition did not improve much after 1997 and before trial.
She has continued to suffer from neck and back pain.
Dr Morrison, an orthopaedic surgeon, was of the opinion that she had suffered a closed head injury with musculo-ligamentous sprain injuries to her cervical and lumbar-sacral spine. He believed by February 1998 that her condition was stable and that no further treatment was necessary. He believed that she would suffer ongoing pain and discomfort and a residual disability of 10 per cent of the cervical spine and five per cent of the lumbar-sacral spine. He saw the respondent again in June 2001 and found that there had been little change in her condition. On that occasion he assessed her permanent disability at 15 per cent of the function of the cervical spine and 10 per cent of the lumbar-sacral spine. More importantly, he was of the opinion that she was fit for light sedentary work of a part-time nature only.
She has also been seen by Dr Osti, who offered a similar opinion in relation to the disability existing in her cervical spine although he thought that she would benefit by further treatment in the nature of mobilisation and muscle strengthening. He recommended that she undergo facet joint block injections in her neck which she did. That apparently had little effect upon her except to grant her some temporary relief.
Dr Osti saw her again in June 2001 and considered that her condition was stable and that she was impaired to the extent of 10 per cent of the cervical spine and 10 per cent of the lumbar spine.
She has seen Dr Bastian, a consultant in rehabilitation medicine. He was of the opinion that she had a 15 per cent disability of her neck and cervical spine and a lumbar disability of 10 per cent. He thought she was partially incapacitated for employment because her condition precluded “prolonged static neck forward flexion or extension postures, no prolonged at or above shoulder height work, or prolonged static arm forward flexion postures, forceful pushing and pulling with the upper limbs, and no repetitive heavy lifting from low levels”.
A further report was tendered from Dr Champion, a consultant physician rheumatologist who expressed the opinion that her loss of function of the cervical spine was 10 per cent and that she had a loss of function in the right shoulder amounting to about five per cent and a five per cent disability of the lumbar spine.
Dr Hall, a neurologist, was of the opinion that her neck and shoulder aches were due to tension myalgia but would be alleviated by relaxation exercises and analgesics. He also thought her headaches were due to muscle contraction and tension-vascular mechanisms which also would respond to analgesics.
Apart from the musculo-ligamentous injuries to which I have referred the plaintiff also suffered symptoms of vertigo, dizziness and tinnitus and in July 1999 she was referred to an ENT surgeon, Dr Marzec. He was of the opinion that she suffered from “benign paroxysmal positional vertigo” and referred her to a physiotherapist, Professor Sharpe, for treatment. The physiotherapy was of no assistance and she continued to suffer dizziness. Further investigation showed that she had suffered an inner ear fistula and on Dr Marzec’s recommendation she underwent surgery in October 2000. The surgery has relieved her symptoms. Dr Marzec was of the opinion that her prognosis was excellent. She was also assessed by Dr Tomich, another ENT surgeon, who was also of the opinion that following upon the repair of the fistula there were no longer any residual otological disabilities except for some interference with taste.
The trial Judge made the following finding of permanent residual disability:
“(a)a 10-15 per cent loss of function of her cervical spine, including referred pain to her right shoulder;
(b)10 per cent loss of function of her lumbar spine;
(c)partial loss of tongue sensation and taste;
(d)continuing headaches, including occasional severe headaches resulting in nausea and vomiting.
In consequence of those disabilities, I find that the plaintiff is permanently disabled for full time office and clerical tasks and that she is fit only for part-time sedentary duties. Having regard to her previous work history, I am not persuaded that there are any other occupational tasks to which she might attend with greater frequency or reward.”
The appellant has not challenged those findings on appeal.
The trial Judge found further that the respondent was suffering from a level of low grade depression as a result of her needing to abandon an otherwise active outdoor, social and sporting life.
The respondent’s evidence was that she still works in her husband’s business between 10:00am and 3:00pm with a very brief lunch break. She would prefer to work longer but she is unable to do so. She probably now works only 20 hours per week as against her previous 25 hours per week. I think the trial Judge accepted that evidence although he did not say so expressly.
He made the following findings in relation to her working capacity:
“(1)that, at least for the immediate future, her loss of earning capacity will not be reflected in any financial loss;
(2)that her husband’s preference for a smaller business association, by way of merger or partnership, will leave open the prospect that she will remain able to bargain with him and any new entity for part-time employment and an income, either commensurate with the hours she can presently commit or greater;
(3)that there is nevertheless a risk that at some point in the future, her husband will enter into a new business venture which will be unsympathetic to the idea of employing a person with her limited earning capacity;
(4)that there is thus a risk that at some time in the future, she will find herself on the open labour market. Because of her disabilities, I am satisfied she will find it difficult, indeed, to access any work for which she is fitted. In that respect, her experience is in reception, clerical duties, office administration and bookkeeping work, and I accept there is a very restricted opportunity in the labour market for a person of her age and physical condition seeking to work a 25-hour week in those areas.”
His Honour did not comment upon her evidence that she worked 20 hours per week rather than the previous 25 hours per week. I think inferentially he has found that she works the same hours as she did before the accident. The important difference, of course, is that she would have worked longer hours but for the accident.
It was the combination of those findings which gave rise to the assessment of general damages for non pecuniary losses.
The appellant has argued on this appeal that the sum awarded for general damages was manifestly excessive.
The appellant argued that despite His Honour’s findings as to the respondent’s injuries and ongoing disabilities, those injuries and disabilities were not so great as to prevent her from continuing to work five hours per day. It was submitted that in those circumstances the figure of $70,000 for non-pecuniary loss is manifestly excessive.
Of course this assessment of damages related to personal injuries suffered other than in a motor vehicle accident and, in those circumstances, damages were to be assessed at common law.
It might be thought that the incident in which the respondent was involved would have been unlikely to have caused the sequelae of which the respondent complained.
However, the uncontroverted medical evidence was, as I have demonstrated, that the respondent did suffer significant musculo-ligamentous injury which is continuing to cause pain and thereby restrict her in her working capacity and general activity. Moreover, she suffered the inner ear fistula which necessitated operative treatment which itself has left her with a permanent disability.
She has already undergone six years of pain and suffering and on His Honour’s findings which, as I have said, are not challenged, is likely to suffer pain and suffering for the rest of her life.
I think the award is at the highest end of the scale for injuries of this kind but I am not able to say that the award is manifestly excessive. It is higher than I would have awarded but that is not the test of the appropriateness of the award. The question is whether it is within the range of damages which might have been awarded for injuries of this kind. As I say, I think it is within the range but at the highest end of that range.
I would dismiss the ground of appeal based upon the award of damages for non pecuniary loss.
It was conceded by the appellant that the respondent had suffered a loss of earning capacity since the date of the accident. Moreover, it was conceded that the loss of earning capacity was permanent.
His Honour’s assessment shows that he allowed nothing for the respondent’s loss of earning capacity to the date of trial. Whilst the respondent had experienced significant loss of earning capacity to the date of trial it had not been productive of any financial loss. During the whole of the time between the accident and the date of trial the respondent has continued to receive her regular weekly income. In those circumstances she did not seek any award for loss of earning capacity to the date of trial.
She did, however, seek damages for her loss of her future earning capacity.
It was the respondent’s case that at or about the time of trial she would have commenced working full time, i.e. an eight hour day. She said that her injuries now prevent her from working those sorts of hours.
The trial Judge has found that she would be able to work 25 hours per week compared with the 40 hours that she would have worked but for these injuries.
She is presently earning $396 per week which is the wage that she would earn if she worked eight hours per week. The present value of a weekly annuity of that amount, assuming an interest rate of three per cent, (which is appropriate) is $315,968.
Such a sum, however, would represent a complete destruction of her earning capacity.
At the moment she is able to exercise five eighths of her earning capacity but she is paid as if she were exercising the whole of it. At the moment, therefore, the loss of earning capacity is not productive of any loss of earnings. However, there is a prospect, as His Honour found, that her husband will enter into other business ventures which would not allow him to pay her a wage for work not done. Clearly that is a matter which had to be taken into account in the assessment of damages.
In the end result His Honour assessed damages at $157,984 to represent her future loss of earning capacity.
That award assumes three matters. First that the appropriate rate of interest to calculate the respondent’s loss of earning capacity is three per cent. That is undoubtedly correct; Todorovic v Waller (1981) 150 CLR 402. Secondly, that with her skills the respondent would be able to earn $396.00 per week. That was a finding open to the trial Judge. Thirdly that the respondent would work until the age of 65.
In my opinion, that last finding was not a finding open to the Trial Judge. The evidence was that if the respondent and her husband were financially independent they would retire earlier than age 60. The respondent’s husband’s intention was to retire at 55-60.In my opinion, on the whole of the evidence, the likelihood is that the respondent would retire at the same time as her husband.
I therefore agree with the appellant’s contention that there was no evidentiary basis for His Honour to proceed upon the basis that the respondent would have exercised her earning capacity to age 65.
The award further assumes the respondent’s earning capacity has been reduced as from the date of trial by 50 per cent.
In my opinion, it is clear that as from the date of trial her earning capacity had been reduced by 37.5 per cent, i.e. three eighths. She is now unable to work 40 hours per week but only 25 hours and that must sound in damages.
Because she has suffered these injuries and because she has restricted earning capacity, she would be at risk if she was thrown onto the general labour market and that must also be reflected in damages.
It would be appropriate, in my opinion, to assume that she has lost 50 per cent of her earning capacity into the future. An assumption that she has lost 50 per cent of earning capacity, in my opinion, reflects her shortened working hours and the risk of her being thrown onto the open market. However, that does not mean that her future loss of earning capacity ought to be assessed at one half of the whole of her earning capacity.
At present she has no loss of earnings at all and therefore it would be inappropriate to proceed upon the basis that the loss of half of her earning capacity is productive of loss of earnings from trial. Moreover, for the reasons I have already given it would be inappropriate to assume that she would work until the age of 65. A better assumption would be that she will work until she is aged between 55 and 60.
I think for those two reasons it must follow that the trial Judge’s assessment for future loss of earning capacity is based upon erroneous assumptions and is thereby manifestly excessive.
This is not the type of case which lends itself easily to an actuarial calculation. It is difficult to determine when and if the present loss of earning capacity will be productive of loss of earnings. Some allowance must be made for that possibility: Malec v J C Hutton Pty Ltd (1990) 169 CLR at 638.
Unfortunately the respondent did not tender any evidence from any actuary. Instead she relied upon reports of chartered accountants, Kennedy & Co. In my opinion, those reports are of marginal use. Assessments of damages in cases of this kind, if they are to proceed upon actuarial evidence, require evidence of the plaintiff’s wage and actuarial evidence showing the value of an annuity to different ages. Expert’s reports, such as those tendered in this trial, add nothing except cost to the proceedings. I have had regard to the schedules in the 4th edition of Luntz’s “Assessment Of Damages For Personal Injury And Death”[1] which sets out the appropriate actuarial rates.
[1] Luntz, H. Assessment of Damages For Personal Injury and Death (4th ed), Butterworths 2002
I think it should be assumed that the respondent would have worked until aged between 55 and 60. The interest rate should be 3 per cent. The present value of $1.00 per week for 11 years (to age 55) is $490 and for 16 years (to age 60) to $665. A fair allowance would be to assume an annuity at the mid point i.e. $577.
The total future earning capacity, assuming an income of $396 per week, can be valued at $228,600.
She has lost half of that earning capacity but retains the other half. Her loss of earning capacity, if it were productive of loss of earnings, would be $114,345.
For the reasons already given it would be inappropriate to award the whole of that sum because her loss of earning capacity is presently not reflected in any loss of earnings.
Indeed it may never be. However, for the reasons I have already given, the respondent is entitled to an award for her loss of earning capacity because there is a risk that she will be thrown onto the general labour market.
I would allow $75,000 for her future loss of earning capacity.
In my opinion, the trial Judge’s reasoning was based on erroneous assumptions.
The assessment of damages in relation to the loss of future earning capacity should be set aside. In lieu thereof an award of $75,000 should be made. The total award should be reduced by $83,000 to $205,707.85 to reflect the over award made by the trial Judge. The award must then be reduced by 10 per cent to a figure of $185,137.07 to reflect the respondent’s agreed contributory negligence. It follows therefore that the appeal should be allowed and the judgment in the District Court must be set aside and there be substituted a judgment for the plaintiff/respondent in the sum of $185,137.07.
0
3
0