Velkovski v Av 19 Pty Ltd
[2016] VCC 423
•15 April 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
| SERIOUS INJURY LIST |
Case No. CI-15-01828
| ANGEL VELKOVSKI | Plaintiff |
| v | |
| AV 19 PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE O'NEILL | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 April 2016 | |
DATE OF JUDGMENT: | 15 April 2016 | |
CASE MAY BE CITED AS: | Velkovski v AV 19 Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 423 | |
REASONS FOR JUDGMENT
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Subject: ACCIDENT COMPENSATION
Catchwords: Serious injury application – injury to lower spine – psychological reaction in the nature of Depressive Disorder – economic loss only – whether 40 per cent loss of earning capacity – income received before and after injury as director’s fees and dividends – meaning of “income from personal exertion”
Legislation Cited: Accident Compensation Act 1985
Cases Cited: Herald & Weekly Times Ltd and Victorian WorkCover Authority v Jessop [2014] VSCA 292; Meadows v Lichmore Pty Ltd [2013] VSCA 201
Judgment: Leave granted in respect of pain and suffering and loss of earning capacity damages.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms J Forbes QC with Ms R Boyce | Patrick Robinson & Co |
| For the Defendant | Mr D Oldfield | Wisewould Mahony |
HIS HONOUR:
Preliminary
1 The plaintiff is, and has been, a director and, with his wife, the owner of the defendant company, AV 19 Pty Ltd, (“AV 19”). It is a small family proprietary company which has, and continues to run a trucking business. Mr Velkovski drove one of the trucks used in the business.
2 On 8 April 2013, he was collecting steel bars from a delivery site. He suffered injury to his lower spine. He stopped work shortly afterwards, and has not resumed employment since.
3 Mr Velkovski has remained a director of AV 19, although I am satisfied from the evidence that he has played little active role in its affairs. He has continued to receive director’s fees, dividends, and a distribution from a family trust.
4 Mr Velkovski claims a range of domestic, recreational and social activities have been affected by his back injury. The treatment has been generally conservative and managed by his general practitioner and treating neurosurgeon.
5 This is an application for leave to bring proceedings pursuant to s134AB(16)(b) of the Accident Compensation Act 1985 (“the Act”) for injury suffered in the course of employment on 8 April 2013.
6 The body function said to be lost or impaired is the lower spine. In addition, Mr Velkovski claims to have suffered a permanent severe mental disorder in the nature of a Depressive Disorder. For the reasons which follow, it is unnecessary for me to examine this aspect of Mr Velkovski’s claim. Leave is sought in respect of both pain and suffering and loss of earning capacity although, sensibly, Mr Oldfield, for the defendant, conceded the plaintiff meets the relevant statutory test in relation to pain and suffering. The real issue for determination is whether, in accordance with the formula prescribed by s134AB(38)(e) and (f) of the Act, he meets the statutory test in relation to loss of earning capacity.
7 Mr Velkovski was the only witness called to give evidence and be cross-examined. In addition, an affidavit of himself and of his wife, Jovanka Velkovski, various medical and radiological reports and other material was tendered into evidence. Given the confined nature of the application, I shall not refer to all of this material in the course of this judgment, but rather those parts of the evidence and reports which appear to me to be most relevant and which I have relied upon in coming to the conclusions referred to in this judgment. The statutory scheme set forth in the Act which prescribes and regulates applications of this nature, and the principal authorities of the Court of Appeal are well known, and it is unnecessary for me to revisit the various relevant sections and those authorities.
Relevant background
8 Mr Velkovski is now fifty-one. He spent time in the military force in his home country before coming to Australia in 1987. He separated from his first wife in 2009.
9 In Australia, Mr Velkovski worked as a labourer, concreter and drove buses and later, trucks. He had a business with his former wife involving transport and, after the breakup of that marriage, started a trucking business which was conducted in AV 19’s name.
10 In about 2012, AV 19 had only one client, “Mesh & Bar”. That company is involved in the supply of steel and construction materials. AV 19 had three trucks and some other equipment. Each truck was assigned a driver who was an employee of AV 19. Those three trucks were used solely for the transport and delivery of Mesh & Bar products and materials. The trucks would remain at the Mesh & Bar premises, as AV 19 had no depot nor warehouse. AV 19 was run from Mr Velkovski’s home.
11 Mr Velkovski was one of the three truck drivers who drove the trucks. In evidence, he said about 50 hours of his time per week prior to the injury, was spent truck driving. The administration, bookwork and general management was handled by his wife. He was, obviously, involved in the major decisions of AV 19, including the purchase of trucks and materials, the appointment of drivers, communications with Mesh & Bar and general maintenance of the vehicles. Principally, however, his work was driving one of the trucks.
12 The corporate structure also involved a family discretionary trust, the “Angel Velkovski Family Trust” (“the Trust”). Although not clear from the evidence, I presume AV 19 was the trustee of the Trust.
13 Over the years before injury, the income in Mr Velkovski’s personal taxation return was a combination of director’s fees and dividends. Since injury, at least up until the end of the 2014 financial year, his income comprised a distribution from the Trust and an amount said to be “capital gain”. The amounts of gross income varied between $63,000 up to $95,000 over that period. Details are set forth in a document “Summary of Financial Information” provided by defendant’s counsel.
14 Mr Velkovski has two step-children with his second wife. He enjoyed fishing, which he said was “one of my great hobbies”. He enjoyed a range of domestic activities and was able to work in an unrestricted manner. In particular, he had no prior problems with his lower back.
The injury and its consequences
15 On 8 April 2013, Mr Velkovski was at a site delivering steel on behalf of Mesh & Bar. Some of the materials he was lifting weighed 30 kilograms. He felt a stabbing pain in his back which gradually became worse. He was able to complete the work for that day, but went to see his local doctor the next day. He was given some pain-relieving medication. He tried to return to work, but the attempt was short-lived. In essence, he has not worked since April 2013.
16 Eventually, he went for treatment with another general practitioner, Dr Ristevski, who has continued to treat him through to the present time. A CT scan of the lumbar spine taken in May 2013 showed:
“1 Degenerative changes as described with mild to moderate canal stenosis at L4-5 due to soft tissue and bony factors. No evidence of focal disc protrusion.
2 Compromise of the left neural exit foramen at L5-S1 due to bony osteophytes may involve the exiting left L5 nerve root.”[1]
[1]Plaintiffs Court Book (“PCB”) 47
17 An MRI scan was carried out on 19 January 2014 which concluded:
“Congenitally narrow canal with a smallish midline broadbased bulge at L4‑5 which probably contacts both budding L5 nerve roots but results in only mild further central canal narrowing. Slightly hypertrophic facet joints.”[2]
[2]PCB 49
18 Dr Ristevski referred Mr Velkovski for physiotherapy and hydrotherapy, which has continued intermittently to the present time. He was referred to Professor Richard Bittar, neurosurgeon, in December 2013 and again in March 2014. To that doctor, he gave a history of persistent low-back pain since the incident, and Professor Bittar noted that he had been prescribed Diazepam, Panadeine Forte, Aspirin, Voltaren and Celebrex. He reviewed the radiology, which he said demonstrated bulging and facet joint hypertrophy at L4-5 and L5-S1. He said that spinal surgery was not indicated, and referred him to a pain management program known as “Precision Ascend”. Mr Velkovski attended that program, but was able to remain only for four of the proposed six weeks. He said this was because the pain in his back made it difficult for him to undertake all the sessions and exercises, and further, that aspect of the program which dealt with pain management was already known to him through his time in the army.
19 Professor Bittar examined Mr Velkovski again in July 2015 at the request of his solicitors. On examination, he noted Mr Velkovski walked with a slow and slightly antalgic gait, although there was a good range of lumbar movement save for extension. By that time, he said that Mr Velkovski’s condition had deteriorated significantly, with continued complaint of low-back pain, radiating into both legs. He noted he had undertaken hydrotherapy which he had paid from his own pocket. Professor Bittar said:
“In my opinion he is currently totally incapacitated for work. This incapacity is permanent”[3]
[3]PCB 42
20 Professor Bittar suggested a further pain management program and said that the long-term prognosis was poor.
21 Because of associated depression and anxiety, Mr Velkovski was referred to Dr Wahr, psychiatrist, in March 2014. He complained of symptoms including poor memory, lack of sexual drive, weight gain and depressed affect. Dr Wahr prescribed anti-depressants, Lexotan and Remeron, which he has continued to use intermittently through to the present time.
22 In his most recent report of July 2015, Dr Ristevski said Mr Velkovski had no work capacity[4] and that his prognosis was poor. He continued to require medication and ongoing treatment.
[4]PCB 20
23 In a Certificate of Capacity dated 9 April 2016, Dr Ristevski assessed Mr Velkovski as having no work capacity as a result of his lower back condition, which he described as “lumbar strain, disc bulges, L4-5 canal stenosis”.[5] He noted the treatment at that time as –
“… analgesics, swimming/hydrotherapy; specialist-psychiatrist/neurosurgeon; physiotherapy; pain management program.”[6]
[5]PCB 22(a)
[6]PCB 22(b)
24 Mr Velkovski has not returned to work driving trucks for AV 19. He says his wife now undertakes all of the management of the company. She does the bookwork, administration and like duties. In evidence, Mr Velkovski said that once a month or so he might go to the premises of Mesh & Bar to sort out some problem. There are mechanics who the drivers know to take the trucks to if there is some mechanical issue. He is involved in the more major decisions concerning AV 19, but they are rare. He might make a telephone call each month or so about some issue.
25 Some short time after the injury, Mr Velkovski was referred to Nabenet, an organisation to assist people to return to work. In 2015, Nabenet suggested he undertake a number of training courses, including a computer course. This did not proceed as there were not enough students. He did not follow it up. Nabenet wrote to him in August 2015,[7] referring to a case conference which occurred on 26 August 2015. Dr Ristevski attended the conference. Various possible areas of employment were discussed. Dr Ristevski commented that, realistically, Mr Velkovski did not have any current work capacity. There was reference to Mr Velkovski attending a computer training course at Banksia Gardens in August 2015, but he was unable to remain because of increasing pain in the back.
[7]PCB 62-63
26 In evidence, Mr Velkovski said he had no particular computer skills. He was able to send emails but not much more. His wife has been helping him on the computer.
27 According to his affidavit, Mr Velkovski claims the following consequences of his lower back injury:
· He suffers constant pain in his lower back which varies in intensity and runs into his legs
· His sleep is affected and he is only able to get several hours’ sleep a night
· He has been unable to resume fishing, which he misses
· His physical relationship with his wife is affected
· He is limited to driving for up to 60 minutes and then needs to pull over
· He is unable to return to any involvement in AV 19, save in a limited capacity
· He has put on 15 to 20 kilograms since the injury
· Generally, his domestic and recreational activities have been significantly limited
· He has suffered a psychological reaction which has required treatment by a psychiatrist and anti-depressant medication.
28 Mr Velkovski’s wife, Jovanka Velkovski, provided an affidavit. She detailed her involvement in the business, including conducting its day-to-day affairs. She says the business generally runs on “autopilot”. She sometimes is involved in issues regarding mechanical faults with the trucks. The business has had to retain another full-time truck driver to take over the driving Mr Velkovski used to do. Her affidavit further confirms the consequences which Mr Velkovski claims have arisen because of the injury.
Consultant medical opinions
29 Dr Wahr, the treating psychiatrist, provided a report.[8] He noted Mr Velkovski’s memory was affected because of his physical problems and that he was depressed and anxious. He described him as suffering an “agitated depressive reaction to the injury and the pain he is experiencing”. He continues to prescribe anti-depressant medication.
[8]PCB 44
30 On behalf of the defendant, Mr Velkovski was examined by Mr Roy Carey, orthopaedic surgeon, in 2015 and again in 2016. In the first report, he noted a complaint of constant low back pain, varying in intensity. He agreed with Professor Bittar that Mr Velkovski had likely suffered an aggravation of lumbar spondylosis and in addition, a psychological reaction. He said there was no signs of radiculopathy nor neurological deficits.
31 In the second report of January this year, Mr Carey noted a complaint of “slight worsening” in the back, and leg problems. He said Mr Velkovski’s situation was largely unchanged, and noted he suffered constant and severe pain despite attempted relief via a pain management program. On this occasion, he detected non-organic signs in the nature of abnormal illness behaviour which made the physical diagnosis difficult. He thought the prognosis was poor, with disability extending into the foreseeable future.
32 Dr Michael Baynes, occupational physician, examined Mr Velkovski in 2015. He came to a similar conclusion to the other practitioners. He said Mr Velkovski “is suffering from a Chronic Pain Syndrome associated with chronic lower back pain associated with age-related degenerative change in the lumbar spine, particularly at L4/5 and L5/S1”. There was no objective evidence of radiculopathy on clinical examination. There was evidence of illness behaviour with positive Waddell’s signs. He thought Mr Velkovski had no work capacity at that time.
33 Dr Baynes was provided with a number of possible areas of employment suggested in a vocational assessment report.[9] These included radio operator/radio despatcher, car park attendant, vehicle rental officer, customer service representative/information officer, transport clerk/fleet controller, transport/logistics coordinator, trade sales assistant, general clerk and contact centre operator/team leader. He said Mr Velkovski did not have the capacity for any of these jobs. He said he did not think that incapacity was permanent and that “ultimately supervision or management type roles would be appropriate”.
[9]No such report was tendered into evidence
Conclusion
34 I found Mr Velkovski to be a straightforward witness giving a fair account of his circumstances and the effect upon him of the lower back injury. There were no significant credit issues put to him. I accept him as a witness of truth.
35 There is little difference in the medical assessments. The doctors all say that in the subject incident, he suffered an aggravation of underlying degenerative disease in his lower spine, in particular at L4-5 and L5-S1, and there is no prospect of surgery. His current treatment is conservative and managed by his general practitioner. It includes pain-relieving medication, physiotherapy and hydrotherapy. I accept his description of his current condition, in particular the constant pain in his lower back and its effect upon his recreational, domestic and social activities. I accept his evidence that his role in the business is now only very limited and in particular, he has been unable to return to truck driving in any shape or form.
36 Sensibly, in these circumstances, the defendant did not contest that the consequences to Mr Velkovski met the “very considerable” test the legislation prescribes.
37 The issue for determination is limited. It is whether, in the circumstances, Mr Velkovski meets the statutory test as for loss of earning capacity.
38 Mr Oldfield submitted I could not be satisfied from the evidence that Mr Velkovski had suffered a 40 per cent loss of earning capacity when assessed in accordance with s134AB(38)(e) and (f). He said the only material before the Court were the taxation returns for the years June 2010 to June 2014. It was clear from those returns that he received an income throughout those years, being either a director’s fee, dividend or distribution from the family trust. Thus, his essential employment, that is as a company director, had not changed.
39 Mr Oldfield said there were no company or personal taxation returns tendered for the June 2015 year, nor to date for the 2016 year. He said that he was a company director running the business before the injury, and that remained the situation after the injury.
40 Mr Oldfield said further, that all of the histories to the various practitioners were to the effect that Mr Velkovski was a truck driver, rather than a company director. The medical opinions were therefore flawed. He pointed to the evidence adduced in cross-examination that Mr Velkovski remained a director of AV 19 and wanted to ensure the company kept going as a viable entity.
41 Mr Oldfield further noted that in particular, Dr Baynes referred to the need for further pain management and retraining, and, were that to occur, there was the prospect of employment at some time in the future in a supervisory or management capacity. He referred to Herald & Weekly Times Ltd and Victorian WorkCover Authority v Jessop.[10]
[10][2014] VSCA 292
42 Section 134AB(38)(e) relevantly provides that where a worker seeks leave to bring proceedings in relation to loss of earning capacity, the worker must prove “loss of earning capacity of 40 per cent or more, measured … as set out in paragraph (f)”.
43 Section 134AB(38)(f) relevantly provides:
“(f)for the purposes of paragraph (e)(i), a worker’s loss of earning capacity is to be measured by comparing—
(i)the worker’s gross income from personal exertion (expressed at an annual rate) which the worker is—
(A) earning, whether in suitable employment or not; or
(B) capable of earning in suitable employment—
as at that date, whichever is the greater, and—
(ii)the gross income (expressed at an annual rate) that the worker was earning or was capable of earning from personal exertion … during that part of the period within 3 years before and 3 years after the injury as most fairly reflects the worker’s earning capacity had the injury not occurred;
… .”
(my emphasis).
44 The difficulty with Mr Oldfield’s submission is that it fails to take account of the phrase “income from personal exertion”. The income from personal exertion Mr Velkovski was able to earn, whether that income was described as director’s fees, dividends or distribution from the Trust, was principally from driving a truck. He spent 50 hours per week driving one of AV 19’s trucks. As a result of the injury, I am satisfied he has been unable to return to any involvement in AV 19 as a truck driver. His only involvement is an occasional telephone call or attendance at the client’s premises or a discussion about some aspect of the business with his wife. His “personal exertion” at the present time is thus very limited. AV 19 has survived and presumably continues to make a profit. But his absence has had to be covered by the appointment of another driver. The reality is that his injury has caused him to be unable to undertake anything other than modest personal exertion in the business, in particular to operate as a truck driver as he was able to do before.
45 Even setting aside his truck driving, if one were to accept he was the director of AV 19 before the injury, and afterwards has remained so, as is reflected in the continued payments to him in either director’s fess, dividends or Trust distribution, I am satisfied from the evidence that his involvement in AV 19 as a director has greatly diminished since injury. Now, he only goes to Mesh & Bar once a month or so and makes the odd telephone call. As his wife says, the business operates on “autopilot” and she does what is necessary to run it. The income he receives from “personal exertion” as a director must be modest and far removed from what it was, pre-injury.
46 In these circumstances, I am satisfied that Mr Velkovski has proved a 40 per cent loss of earning capacity when the statutory comparison is made.
47 There is reference in the medical reports to a psychological reaction to injury and abnormal illness behaviour. However, I am not satisfied that the consequences of which Mr Velkovski complains nor his incapacity to work are significantly related to that psychological injury. Primarily, it is the physical injury which is causing the consequences.[11] That accords with the opinions of the treating practitioners, Dr Ristevski and Professor Bittar.
[11]See Meadows v Lichmore Pty Ltd [2013] VSCA 201 at paragraphs [21] – [23]
48 While a further pain management or rehabilitation course has been suggested, and Dr Baynes is of the view there is some prospect of Mr Velkovski being able to undertake a supervisory role at some time in the future, I am not satisfied that that prospect is significant or realistic. He has already failed one pain management course. Both his treating practitioners say he has no work capacity. The reality is that his current condition is likely to persist for the foreseeable future.
49 In these circumstances, Mr Velkovski’s application succeeds, both as to pain and suffering and economic loss. I shall make consequent orders.
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