Watts v Turpin
[1999] WASCA 216
•22 OCTOBER 1999
WATTS -v- TURPIN & ORS [1999] WASCA 216
| (1999) 21 WAR 402 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASCA 216 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:178/1998 | 18 MAY 1999 | |
| Coram: | MALCOLM CJ IPP J STEYTLER J | 22/10/99 | |
| 33 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| PDF Version |
| Parties: | IAN ARTHUR WATTS MARGARET CHRISTINE TURPIN ARTHUR JAMES ATKINS INSURANCE COMMISSION OF WESTERN AUSTRALIA |
Catchwords: | Personal injuries Claim for loss of future earning capacity Trial Judge erred in finding that plaintiff had returned to pre-accident fitness before trial Erred in assessing medical evidence and other evidence of diminished capacity including disadvantage in labour market, inability to obtain full-time job or income insurance Damages based on 40 per cent reduction in earning capacity Personal injuries Causation Claim for loss of profits as a result of inability to fund replanting avocado orchard which inability resulted from injury related impecuniosity Deferment of profits is compensated by interest profits themselves not compensated Personal injuries Claim for past economic loss Trial Judge erred in adopting cut off date before trial on basis of finding that plaintiff had returned to pre-accident fitness Trial Judge erred in calculations by adopting a fixed income figure throughout the period from accident to trial Personal injuries Claim for interest Trial Judge erred in awarding a flat rate of interest on past economic loss Interest should ordinarily be awarded on a per annum basis |
Legislation: | Supreme Court Act 1935, s 32, s 142 Law Reform (Miscellaneous Provisions) Act 1941, s 5 |
Case References: | Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649 Attorney-General v Geothermal Produce NZ Ltd [1987] 2 NZLR 348 Barnes v Hay (1988) 2 NSWLR 337 Bennett v Jones [1977] 2 NSWLR 355 British Transport Commission v Gourley [1956] AC 185 Burns v NAM Automotive (Aust) Pty Ltd (1986) 161 CLR 653 Cole v Ellis (1992) ATR 81-186 Cullen v Trappell (1980) 146 CLR 1 Dodd v Weeks (1970) 16 FLR 205 Erceg-Hum v Hurn, unreported; FCt SCt of WA; Library No 7723; 23 June 1988 Forsberg v Maslin (1968) SASR 432 Gardner Bros & Perrott (WA) Pty Ltd v Seat, unreported; FCt SCt of WA; Library No 7318, 13 October 1988 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Government Insurance Office (NSW) v Johnson (1981) 2 NSWLR 617 Graham v Baker (1961) 106 CLR 340 Grant v Sun Shipping Co Ltd [1948] AC 549 Hall v Tarlington (1978) 19 ALR 501 House v The King (1936) 55 CLR 499 Jacka v Horsten (1980) 88 LSJS 419 Jenkins v Harrison [1964] VR 637 Jongen v CSR Ltd, unreported; SCt of WA; Library No 920325; 18 June 1992 Kalavrouziotis v Howel, unreported; FCt SCt of WA, Library No 980219, delivered 1 May 1998 Lamb v Camden LBC [1981] 1 QB 625 Leonie v Perugini (1977) 18 SASR 201 Malec v J C Hutton (1990) 169 CLR 638 Mann v Ellbourn (1974) 8 SASR 298 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 Medlin v State Government Insurance Commission (1995) 182 CLR 1 Moeliker v A Reyrolle & Co Ltd [1976] ICR 253 Nader v Urban Transport Authority (1985) 2 NSWLR 501 O’Brien v Dunsdon (1965) 39 ALJR 78 O'Brien v McKean (1968) 118 CLR 540 Overseas Tankship (UK) Ltd v Miller Steamship Co Ltd (The Wagon Mound (No 2)) [1967] AC 617 Paff v Speed (1961) 105 CLR 549 Paul v Rendell (1981) 34 ALR 569 Potter v SGIC, unreported; FCt SCt of WA; Library No 8115; 20 February 1990 Purkess v Crittenden (1965) 114 CLR 164 Pyne v Wilkenfeld (1981) 26 SASR 441 Riddle v McPherson (1995) 37 NSWLR 338 Ruby v Marsh (1975) 132 CLR 642 Sellas v Adelaide Petroleum NL (1994) 179 CLR 332 Shick v Abbott [1976] WAR 54 Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 Smith v Australian Iron & Steel Ltd (1960) 77 WN(NSW) 889 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] 1 QB 27 State Government Insurance Commission v Oakley (1990) Aust Tort Rep 67,574 Struthers v Harris [1983] WAR 123 Todorovic v Waller (1981) 150 CLR 402 Watts v Rake (1960) 108 CLR 158 Wyles v Wyles, Qld SCrt FC, 2 May 1986, 3882/82 Zielke v Voak [1961] Qd R 440 Newman v Nugent (1995) 12 WAR 119 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : WATTS -v- TURPIN & ORS [1999] WASCA 216 CORAM : MALCOLM CJ
- IPP J
STEYTLER J
- Appellant (Plaintiff)
AND
MARGARET CHRISTINE TURPIN
First Respondent (First Defendant)
ARTHUR JAMES ATKINS
Second Respondent (Second Defendant)
INSURANCE COMMISSION OF WESTERN AUSTRALIA
Third Respondent (Third Defendant)
Catchwords:
Personal injuries - Claim for loss of future earning capacity - Trial Judge erred in finding that plaintiff had returned to pre-accident fitness before trial - Erred in assessing medical evidence and other evidence of diminished capacity including disadvantage in labour market, inability to obtain full-time job or income insurance - Damages based on 40 per cent reduction in earning capacity
(Page 2)
Personal injuries - Causation - Claim for loss of profits as a result of inability to fund replanting avocado orchard which inability resulted from injury related impecuniosity - Deferment of profits is compensated by interest; profits themselves not compensated
Personal injuries - Claim for past economic loss - Trial Judge erred in adopting cut off date before trial on basis of finding that plaintiff had returned to pre-accident fitness - Trial Judge erred in calculations by adopting a fixed income figure throughout the period from accident to trial
Personal injuries - Claim for interest - Trial Judge erred in awarding a flat rate of interest on past economic loss - Interest should ordinarily be awarded on a per annum basis
Legislation:
Supreme Court Act 1935, s 32, s 142
Law Reform (Miscellaneous Provisions) Act 1941, s 5
Result:
Appeal allowed
Representation:
Counsel:
Appellant (Plaintiff) : Mr D Clyne
First Respondent (First Defendant) : Mr P R Momber
Second Respondent (Second Defendant) : Mr P R Momber
Third Respondent (Third Defendant) : Mr P R Momber
Solicitors:
Appellant (Plaintiff) : Friedman Lurie Singh
First Respondent (First Defendant) : Peter Momber
Second Respondent (Second Defendant) : Peter Momber
Third Respondent (Third Defendant) : Peter Momber
(Page 3)
Case(s) referred to in judgment(s):
Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602
Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649
Attorney-General v Geothermal Produce NZ Ltd [1987] 2 NZLR 348
Barnes v Hay (1988) 12 NSWLR 337
Bennett v Jones [1977] 2 NSWLR 355
British Transport Commission v Gourley [1956] AC 185
Burns v NAM Automotive (Aust) Pty Ltd (1986) 161 CLR 653
Cole v Ellis (1992) ATR 81-186
Cullen v Trappell (1980) 146 CLR 1
Dodd v Weeks (1970) 16 FLR 205
Erceg-Hum v Hurn, unreported; FCt SCt of WA; Library No 7723; 23 June 1988
Forsberg v Maslin (1968) SASR 432
Gardner Bros & Perrott (WA) Pty Ltd v Seat, unreported; FCt SCt of WA; Library No 7318, 13 October 1988
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Government Insurance Office (NSW) v Johnson (1981) 2 NSWLR 617
Graham v Baker (1961) 106 CLR 340
Grant v Sun Shipping Co Ltd [1948] AC 549
Hall v Tarlington (1978) 19 ALR 501
House v The King (1936) 55 CLR 499
Jacka v Horsten (1980) 88 LSJS 419
Jenkins v Harrison [1964] VR 637
Jongen v CSR Ltd, unreported; SCt of WA; Library No 920325; 18 June 1992
Kalavrouziotis v Howel, unreported; FCt SCt of WA, Library No 980219, delivered 1 May 1998
Lamb v Camden LBC [1981] 1 QB 625
Leonie v Perugini (1977) 18 SASR 201
Malec v J C Hutton (1990) 169 CLR 638
Mann v Ellbourn (1974) 8 SASR 298
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657
Medlin v State Government Insurance Commission (1995) 182 CLR 1
Moeliker v A Reyrolle & Co Ltd [1976] ICR 253
Nader v Urban Transport Authority (1985) 2 NSWLR 501
O’Brien v Dunsdon (1965) 39 ALJR 78
O'Brien v McKean (1968) 118 CLR 540
(Page 4)
Overseas Tankship (UK) Ltd v Miller Steamship Co Ltd (The Wagon Mound (No 2)) [1967] AC 617
Paff v Speed (1961) 105 CLR 549
Paul v Rendell (1981) 34 ALR 569
Potter v SGIC, unreported; FCt SCt of WA; Library No 8115; 20 February 1990
Purkess v Crittenden (1965) 114 CLR 164
Pyne v Wilkenfeld (1981) 26 SASR 441
Riddle v McPherson (1995) 37 NSWLR 338
Ruby v Marsh (1975) 132 CLR 642
Sellas v Adelaide Petroleum NL (1994) 179 CLR 332
Shick v Abbott [1976] WAR 54
Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322
Smith v Australian Iron & Steel Ltd (1960) 77 WN(NSW) 889
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] 1 QB 27
State Government Insurance Commission v Oakley (1990) Aust Tort Rep 67,574
Struthers v Harris [1983] WAR 123
Todorovic v Waller (1981) 150 CLR 402
Watts v Rake (1960) 108 CLR 158
Wyles v Wyles, Qld SCrt FC, 2 May 1986, 3882/82
Zielke v Voak [1961] Qd R 440
Case(s) also cited:
Newman v Nugent (1995) 12 WAR 119
(Page 5)
1 MALCOLM CJ: This is an appeal against the judgment of Muller DCJ in the District Court on 29 October 1998 whereby his Honour awarded the appellant ("Mr Watts") $110,505 damages for negligence in respect of losses and injuries he sustained as a result of a motor vehicle accident on 15 November 1994. That award comprised the following sums:
(a) Past economic loss $ 36,379
(b) Interest on past economic loss at 5 per cent $1,819
(c) Pain and suffering and loss of amenities $63,600
(d) Special damages $3,107
(d) Future medical expenses $5,000
(e) Travelling expenses $ 600
$110,505
2 The amounts awarded in (c) to (e) inclusive were not challenged on appeal. There was no award for loss of future earning capacity.
Issues
3 The issues for determination, corresponding with Mr Watts' grounds of appeal, are the proper assessment of his claims for:
(1) diminished future earning capacity,
(2) losses of profits sustained in relation to an orchard on French Island,
(3) compensation for past economic loss, and
(4) interest on damages.
Facts
4 Mr Watts was 51 years of age at the time of trial. He sued the first and second respondents for negligently causing the accident. The third respondent was a defendant by virtue of s 7(2) of the Motor Vehicle Act (Third Party Insurance) Act 1993.
5 The accident occurred when Mr Watts was in Perth to attend a Museum Council conference. He sustained severe abdominal injuries requiring several separate surgical operations. Following the accident he underwent a laparotomy in which three feet of his intestine were removed. After 23 days in Royal Perth Hospital he was transferred to Melbourne’s
(Page 6)
- St Francis Xavier Cabrini Hospital on 8 December 1994. There he underwent a cholecystectomy to remove a gangrenous gall bladder. He also had two operations to open and, three months later in April 1995, to close the colostomy. He was discharged from hospital with a colostomy in place on 14 January 1995. In the accident he also sustained fractures of the anterior elements of his mid-lumbar vertebrae necessitating a temporary brace. Mr Watts’ last surgery before trial was a hernia operation on 30 December 1996 in which a prolene mesh was inserted.
6 Four doctors’ reports, Mr Watts and his business partner and close friend, Mr Swanson, all described the ongoing effects of the injuries. It was said that Mr Watts suffered fatigue, diminished enthusiasm, some discomfort and pain, and bowel problems. He is required to take medication for the rest of his life. There was also reference to the potential need for, and danger of, further surgery.
7 Prior to the accident Mr Watts was active in the arts, education and museum world. He had an active social life, participated in sport, and was involved in house renovations in partnership with Mr Swanson. Since the accident he is unable to do these things. He is now easily fatigued and uncomfortable, and his bowel problems are troublesome. It was said he now spent much of his time at home resting. He also said he suffered loss of sleep which reduces his energy levels.
Work History and Earning Capacity
8 Mr Watts’ work experience was in the fields of education, museums and art galleries and partnership endeavours. The learned trial Judge gave the following summary:
"According to the plaintiff’s chronology of events (exhibit 12), he obtained a Primary Teacher’s Certificate in 1967 and began teaching in 1968 before returning to University in 1971 and graduating in 1975 with a degree of Bachelor of Fine Arts and English. After working as a music and art co-ordinator and completing post-graduate studies, the plaintiff began work in 1976 as an education officer with the National Gallery of Victoria where he remained in employment until 1990. During this period he obtained a post-graduate diploma in museum studies and was promoted to Principal Education Officer with the National Gallery. In 1991 he was employed as an Education Officer with the Ministry for the Arts and in 1992 accepted a voluntary separation package from the Ministry of Education
(Page 7)
- [sic Department of School Education]. By accepting this package he was precluded from working for any Victorian Government agency for a three year period commencing 31 December 1992. After accepting redundancy the plaintiff decided to have a vacation and then began restoration work on a terrace house he had purchased in Melbourne. Earlier in 1980 he had entered into a partnership with one Rex Anthony Swanson to purchase, restore and sell various properties. In July 1993 he and Swanson purchased a 146 acre farm on French Island, Western Port Bay. Each partner contributed half the capital required to purchase the farm with the intention of developing an avocado and stone fruit orchard of approximately 3,000 – 4,000 trees. Apart from providing some basic labour during the initial phase of the farming operation the plaintiff’s position was limited to that of a capital partner who was to inject further capital into the venture when the need arose.
In October/November 1994 the plaintiff applied for a position with Museums Australia as Programme Manager and Advocate. The position carried an annual income of $33,000. Before he could be interviewed for this position the plaintiff was injured in the motor vehicle accident on 15 November 1994. The interviewing process was delayed to give the plaintiff time to recover but on 4 January 1995 the plaintiff withdrew his application for the position because of his injuries.
Both before and after the accident the plaintiff also obtained several positions the most significant of which was with the Old Treasury Building in 1997, involving his having to prepare educational programmes and present those programmes to school children. This position initially involved 3 and a half days of work each week but was later reduced to 3 days a week at an annual income of $24,000 (exhibit 7). It is significant that in this period following the accident the plaintiff also tried to obtain additional consultancy work to supplement his income. He was offered a consultancy with the Post Master Gallery but was unable to take up the position because his application for income protection insurance was refused on medical grounds. He very recently applied for a managerial position with the National Gallery of Victoria at an annual salary of $58,000 [sic $56,822 - $79,551]. He was short listed for this position but was unsuccessful and the job went to another person who had previously been his subordinate while he was employed at the
(Page 8)
- National Gallery of Victoria. At the date of trial he was continuing to earn $24,000 per annum from his consultancy position with the Old Treasury Building."
Partnership Losses
9 When Mr Rex Swanson, Mr Watt’s business partner and close friend, first heard of the accident he came to Perth from French Island in the Western Port Bay in Victoria. He left in a dry spell a young avocado orchard that had been developed in partnership between the two men since late 1993. As a partner Mr Watts provided some help with the initial planting, but was mainly responsible for the ongoing capital requirements of the orchard. Mr Swanson provided the know-how and was responsible for the day to day supervision of the orchard. Mr Swanson gave evidence that he intended to be away from the orchard for only two or three days. When he arrived in Perth he discovered Mr Watts’ injuries were more serious than he had anticipated. He realised that he would be staying longer than he had initially thought. He telephoned a neighbour on French Island to ask him to irrigate the orchard while he was away.
10 Mr Swanson said he stayed in Perth to support Mr Watts whilst he was in a dire condition. He bought Mr Watts clothes and miscellaneous items for his stay in hospital. He kept relatives and friends in the Eastern States informed about Mr Watts’ condition. He managed his financial and legal affairs, including consulting a lawyer about Mr Watts’ situation. He also attended counselling sessions at the hospital with Mr Watts.
11 Mr Swanson said he was aware of the need to be at the orchard. Over the two weeks he was in Perth he booked and cancelled his return to French Island a number of times. Initially he delayed because Mr Watts’ condition was very serious and life threatening. He delayed further because Mr Watts asked him to stay. Then he delayed again because Mr Watts’ condition deteriorated as he became jaundiced. Another reason for delaying his return was that there was discussion with hospital staff about Mr Swanson accompanying Mr Watts back to Melbourne.
12 While Mr Swanson was in Perth, the neighbour on French Island failed to properly operate the irrigation pump with the result that some 800 – 900 of the 1260 avocado trees died for lack of water. There was said to have been a heat wave at the time.
(Page 9)
Ground 1: Loss of Future Earning Capacity
13 Ground 1 was as follows:
"The learned Trial Judge was wrong in fact and in law in not awarding the Appellant (Plaintiff) any amount at all for future loss of earning capacity. His Honour’s finding fails to:
(a) properly take account of the Appellant’s physical limitations arising from his injuries;
(b) properly consider the Appellant’s loss of experience and seniority occasioned by his time out of the workforce arising from his injuries;
(c) give any proper weight to the Appellant’s loss of enthusiasm and commitment arising from the accident and his injuries."
14 Ground 1 concerns damages for loss of future earning capacity, as distinct from direct recovery based on loss of past earnings (Medlin v State Government Insurance Commission (1995) 182 CLR 1 per Deane, Dawson, Toohey and Gaudron JJ at 4; and McHugh J at 16). The latter is the subject of ground 3.
15 Subject to the provisions for periodic payments in s 16 of the Motor Vehicle (Third Party Insurance) Act 1943, a plaintiff’s loss is indivisible and a defendant is liable for damages as a lump sum. However, for the purposes of assessment, damages are divided into "special" damages (out of pocket expenses, capable of quantification and attracting restitution) and "general" damages which are compensatory. A further distinction is made between non-pecuniary loss (eg. pain, suffering, loss of amenities) and pecuniary loss. Loss of earning capacity is a pecuniary loss divided into pre- and post-trial damages which are similarly but differently assessed, because by the time of trial there is evidence as to quantification of the pre-trial loss, such as receipts for expenses, tax returns, wage rises, inflation and realised contingencies, which is not certain for the future. The former attracts interest accruing from the time of the loss, whilst the latter attracts a statutory discount in accordance with the 6 per cent table of multipliers: Law Reform (Miscellaneous Provisions) Act 1941, s 5.
(Page 10)
The Trial Judge's Findings Based on Medical Evidence
16 The learned Trial Judge did not award any damages for loss of future earning capacity because he found:
"Notwithstanding the very serious, and clearly life threatening, injuries suffered by the plaintiff in the accident the medical practitioners responsible for his treatment and convalescence are all agreed that he has made a substantial, and almost complete, recovery."
17 None of the medical practitioners were called to give evidence. They were all located in Melbourne. Their reports were tendered by consent. Commenting on the reports the learned trial Judge said:
"The medical reports of the various medical practitioners who attended the plaintiff, which were introduced into evidence with the consent of the defendant, without exception refer to the significant recovery made by the plaintiff and to the absence of any permanent disability."
18 Counsel for the appellant submitted that the conclusions so expressed were inaccurate because Mr Watts was left with permanent disability and a reduced level of energy.
19 Mr William Johnson, the attending general surgeon, in a report dated 19 October 1996, reported two continuing problems. The first was an incisional hernia requiring further abdominal surgery. The second was continuing diarrhoea and abdominal discomfort related to loss of small intestine which was a consequence of treatment for traumatised gut following the road accident. That report concluded:
"I believe Mr Watts will make a full and complete recovery in respect of gastrointestinal function. I believe he will have continuing problems with loose stool, which may be controlled by medication, and continued abdominal discomfort. His abdominal wall has been permanently damaged but I believe will be stabilized. There is the consideration that any further abdominal surgery which may be required in the future will be made more difficult because of the extent of these past operations and will therefore carry an increased risk to Mr Watts.
(Page 11)
- I believe Mr Watts will require review from time to time over the next couple of years by a specialist. After that I suspect that he will be able to return for routine reviews only to his general practitioner.
It is my view that Mr Watts is fit for his previous employment with no significant disability in that regard."
20 There was further surgery for the repair of the incisional hernia on 30 December 1996. He was left with potential for ongoing gastrointestinal disturbances related to adhesions which could lead to bowel obstruction.
21 His Honour referred to a report of 11 August 1998 by Mr William Johnson which concluded that Mr Watts was fit and had no limitation on his activities, subject to some residual disabilities and risks. Increased bowel action and the potential for recurrent small bowel obstructions were associated with the loss of a large segment of Mr Watts’ intestine. Another risk was said to be inherent in the potential need for further laparotomy surgery and complications occasioned by the prolene mesh inserted in the hernia operation. Mr Johnson said that:
"Were he therefore to develop a problem which required surgery, this would make the surgery potentially more difficult and dangerous."
22 Notwithstanding those residual disabilities and risks, and although Mr Watts’ "life process" had "been significantly interfered with", Mr Johnson considered Mr Watts "to be a healthy individual with no limitations on his activities".
23 The learned trial Judge also referred to the reported view of Dr Vijay Karna that Mr Watts was fit for work in his pre-accident field. However, Dr Karna reported that: "Minor gastrointestinal sensitivity or irritability seems to be a major ongoing problem", and "Mr Watts describes a generally reduced stamina, tending to tire more easily."
24 Mr Warwick Wright, orthopaedic surgeon, put the residual disability somewhat more strongly:
"Mr Watts is able to work at part-time employment but unfortunately, significant ongoing lethargy and easy fatigability has prevented him returning to his previous high level of work productivity. He suffers fluid bowel motions and this causes
(Page 12)
- him considerable discomfort and inconvenience and limits his ability to enjoy normal social activities. …
His lumbar spinal movements are significantly restricted in range. His physical recovery is now stable, though he can expect a lifelong problem with loss of stamina, easy fatigability and ongoing bowel upset. He will be required to take medication in relation to his intestinal symptoms for the rest of his life. There is a significant risk that he may require further surgery in the form of release of adhesions for recurrent abdominal bowel obstructions and any settlement should be based on the need to cover significant ongoing medical expenses, both for the review and also the possibility of requiring recurrent abdominal surgery. His spinal impairment would prevent him from doing heavy physical work… although he should be able to return to some level of his previous work in the arts and education field. In my opinion, his abdominal symptoms would result in a Class 2 impairment, 20 per cent of the whole person, related to the upper digestive tract pathology. There is a further 10 per cent related to colonic impairment. His condition appears to have stabilised."
25 Dr Bruce Kinloch, a consultant physician specialising in rehabilitative medicine, in his report of 1 May 1998 also referred to the bowel problems and low energy levels. He concluded:
"Reference to the 4th edition of the AMA Guides to the Evaluation of Permanent Impairment would indicate that this man has a whole person impairment of approximately 20 per cent as a consequence of ongoing impairment of his bowel function, with persistent lowered energy levels. The condition is stabilised and little change is anticipated in the foreseeable future."
Evidence of Diminished Earning Capacity
26 In my opinion, the evidence justified a finding that Mr Watts has a reduced earning capacity as a result of his injuries. First, there was the medical evidence of four medical practitioners who said that Mr Watts had residual disabilities and was at risk of further disability, albeit opinion differed on the extent and degree of the disabilities. While his surgeon Mr Johnson and Dr Karna considered Mr Watts had substantially recovered to his pre-accident fitness with no significant disabilities, they
(Page 13)
- referred to residual difficulties of fatigue and bowel problems. In his report of 12 June 1997 Mr Johnson said:
"I believe that his disability would be measured at approximately 5 – 10 per cent of total body function on the basis of stiffness or limitation in relation to his abdominal wounds…. The question whether Mr Watts will require future medical treatment is open".
28 On the other hand, both Mr Wright and Dr Kinloch reported a 20 per cent impairment of total body function, with Mr Wright saying there was a further 10 per cent impairment related to colonic impairment.
29 It appears that the learned trial Judge did not give proper, or any, consideration to other factors which bear on the assessment of future economic loss. First, there was the evidence that Mr Watts suffered discomfort and lowered energy levels and enthusiasm. Mr Watts’ bowel problems interrupted his work, social life and sleep; he suffered discomfort in his abdomen and, particularly when sleeping, in his back; he was unable to do much physical exertion and this restricted his teaching and tour guide work; and he was not able to attend functions in the arts and museum world. These last activities formed not merely his social life, but also a significant part of his pre-accident vocation.
30 Secondly, there was Mr Watts’ absence from the working world. Inevitably this meant a loss of progression in skills, experience and seniority in the labour market for his fields of expertise. Mr Watts’ work history and qualifications reflect a progressive development until 1992 when he was made redundant on account of Victorian Government measures to counter a recession at that time. However, even if his potential for progression had levelled in 1992-1993, it can be assumed that the years lost after the accident would, but for the accident, have brought some increases in salary, skills and seniority.
31 The evidence at trial about Mr Watts’ earning capacity was somewhat ambivalent. On the one hand, Mr Watts said he believed he was "theoretically" ready for a senior or managerial position in his field. Accordingly, on 8 July 1998 he had made a confident application for the position of Manager, Education and Programmes with the National Gallery. The job carried an annual salary of $56,822 - $79,551. He
(Page 14)
- explained that such a position would require less physical exertion than his pre-accident work. He considered he was able to do the job competently on account of his work experience. Yet, although he was short-listed, he did not obtain that job. It went to a person who was previously his junior. Mr Watts explained the apparent contradiction, highlighted in cross examination by counsel for the respondents, that he was claiming reduced capacity whilst pursuing jobs at the same level as he would have had but for the accident. Mr Watts said that as a job seeker he was pursuing jobs to which he believed he was suited and putting his best foot forward in being confident and optimistic. He said this attitude was necessary to realistically seek a position. Mr Watts was, of course, obliged to use his best endeavours to mitigate any loss.
32 At the same time, Mr Watts was unable to exert himself physically and so he could not continue with walking gallery or museum tours, or undertaking physical labour in the partnership house renovations or the orchard. Despite efforts by Mr Watts to obtain other employment at a higher level of income, at the time of trial he was able to only work 3 days a week as a consultant with the Old Treasury Building. He began on a 3 and a half day week on 1 July 1997 with an annual income of $28,500. A letter dated 6 October 1997 from the Director of the Old Treasury Building said the full-time annual salary would have been $40,714. The learned trial judge found Mr Watts was working three days a week earning $24,000 at the time of trial, representing a 40 per cent reduction in what he would earn if he were able to work full-time. There was also evidence that Mr Watts, in the period following the accident, tried to obtain additional consultancy work to supplement his income as a consultant with the Old Treasury Building. He was offered a Consultancy with the Post Master Gallery, but was unable to take up the position because his application for income protection insurance was refused on medical grounds.
33 Loss or diminution of prospects of promotion and disadvantage in the labour market is compensable. In my opinion, Mr Watts is entitled to recover for the difficulty he has in securing employment which he would have been able to secure but for the accident: Moeliker v A Reyrolle & Co Ltd [1976] ICR 253; O’Brien v Dunsdon (1965) 39 ALJR 78; and Smith v Australian Iron & Steel Ltd (1960) 77 WN(NSW) 889.
(Page 15)
Assessment of Damages for Future Loss of Earning Capacity
34 The long established principles applicable to appellate review of a decision of a trial Judge were expressed in House v The King (1936) 55 CLR 499 at 504-505 by Dixon, Evatt and McTiernan J as follows:
"It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course…. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so."
35 In my opinion, there was sufficient evidence at the trial to establish diminished earning capacity. The trial Judge erred in assessing the significance of medical evidence and in failing to consider the evidence apart from the medical evidence. The medical evidence demonstrated that he had continuing disabilities. It was clear that this adversely affected his earning capacity.
36 It follows that ground 1 is made out and Mr Watts is entitled to damages for his future loss due to diminished earning capacity. The 40 per cent less that he was earning at the time of trial in part-time employment than what he would have earned if he were able to work full-time, is the clearest indication of the extent of the loss. Assessment of the loss, however, remains vulnerable to uncertainty because it is an assessment of the loss of the chance to earn. To an extent it involves what Lord Diplock referred to as "prophesying": Paul v Rendell(1981) 34 ALR 569, at 571. It is recognised that calculations of such loss cannot be an exact science. However, compensation must be adequate and "fair and reasonable" as between the parties: Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649, per Barwick CJ at 654-5.
37 Mr Watts worked full-time until he accepted a redundancy package in December 1992, after which he was partially employed. The Victorian State Government was reducing employment in the public sector at that time. A condition of his redundancy package proscribed Mr Watts from employment with Victorian Government bodies for 3 years. However, the respondent proffered no evidence that the depressed state of the Victorian economy in 1992 continued throughout the material time from 1994 to trial.
(Page 16)
38 It is impossible to say with certainty how Mr Watts’ earnings would have developed but for the accident. In Paff v Speed (1961) 105 CLR 549, at 588 Fullagar J said:
"Where the plaintiff has been employed at a fixed wage or salary, his loss of income can commonly be calculated with exactness. Where the plaintiff has not been employed, but is, for example, a professional man, his monetary loss can be estimated without difficulty by reference to his past earnings."
39 In Medlin at 16 - 17 McHugh J said:
"In practice, there is usually little difference in result irrespective of whether the damages are assessed by reference to loss of earning capacity or by reference to loss of earnings. That is because ‘an injured plaintiff recovers not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss’ [Graham v Baker (1961) 106 CLR 340 at 347]. Nevertheless, there is a difference between the two approaches, and the loss of earning capacity principle more accurately compensates a plaintiff for the effect of an accident on the plaintiff’s ability to earn income. Earning capacity is an intangible asset. Its value depends on what it is capable of producing…. The correct question was whether, as a result of the accident, the plaintiff had been rendered less capable of earning income."
40 By contrast it has been held that a plaintiff who was not fully utilising his or her earning capacity at the time of the injury, for example because the plaintiff was unemployed or partially employed, is only entitled to recover what the plaintiff would (not could) have earned: Graham v Baker (1961) 106 CLR 340 at 347 per Dixon CJ, Kitto and Taylor JJ; and Mann v Ellbourn (1974) 8 SASR 298 at 308 per Bright J, Zelling J concurring.
41 The capacity based approach was approved of by Bray CJ in Forsberg v Maslin(1968) SASR 432. His Honour applied the reasoning of Barwick CJ in Arthur Robinson (Grafton) Pty Ltd v Carter(1968) 122 CLR 649 at 658, that capacity to earn is an asset, and its loss is compensated as would be a capital asset. That approach was also applied in Struthers v Harris [1983] WAR 123, at 124 per Burt CJ; Government Insurance Office (NSW) v Johnson(1981) 2 NSWLR 617 at 627 per
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- Hutley JA; Dodd v Weeks(1970) 16 FLR 205; and Wyles v Wyles, Qld SCrt FC, 2 May 1986, 3882/82).
42 However, Bray CJ reluctantly abandoned this approach in Mann v Ellbourn. His Honour considered himself bound to do so by Graham v Baker. In Todorovic v Waller (1981) 150 CLR 402 at 412 Gibbs CJ and Wilson J said the assessment was to be based on what the plaintiff would probably have earned. Brennan J at 465 said the view of Barwick CJ in Arthur Robinson was no longer the law and that:
"It is now accepted that a calculation of the present value of lost net future earnings is an appropriate measure of damages for future earning capacity (see per Mason J in Griffiths v Kerkemeyer… at 188-189), and, if it were practicable to ascertain what the plaintiff would have earned during his working life, there is no reason why those amounts should not be taken to be 'the financial loss which he will probably suffer', and why the present value of those amounts should not be regarded as an appropriate assessment of damages for diminution of earning capacity."
43 In Mann v Ellbournat 309 Bright J attempted to resolve the difference between the authorities which adopt a capacity based approach which awarded compensation for what the plaintiff could earn, and those which based compensation on what the plaintiff wouldearn. He conceptually split the assessment, before arriving at one sum, into a compensation element for loss of the chance to exploit earning capacity and then damages calculated as a measure of the financial loss that would probably be sustained. Luntz, Assessment of Damages for Personal Injury and Death (1990) at 223 et seq suggests that the resolution of the difference in approach depends on an assessment of the facts of the case.
44 In Malec v J C Hutton (1990) 169 CLR 638 at 639-640, Brennan and Dawson JJ said:
"[T]he Full Court seem to overlook the difference between the fact that the plaintiff had not been working for some time before the trial and an evaluation of the plaintiff's earning capacity which was destroyed in consequence of the defendant's negligence. The fact that the plaintiff did not work is a matter of history, and facts of that kind are ascertained for the purposes of civil litigation on the balance of probabilities: if the court attains the required degree of satisfaction as to the occurrence of
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- an historical fact, that fact is accepted as having occurred. By contrast, earning capacity can be assessed only upon the hypothesis that the plaintiff not been tortiously injured: what would he have been able to earn if he had not been tortiously injured? To answer that question, the court must speculate to some extent. As the hypothesis is false – for the plaintiff has been injured – the ascertainment of earning capacity involves an evaluation of possibilities, not establishing a fact as a matter of history. Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past."
- See also Deane, Gaudron and McHugh JJ at 642 – 643, 645. Although the evaluation is necessarily hypothetical, it must be based on evidence and that evidence begins with income figures before the accident. This evaluation is also relevant to ground 3.
45 Before accepting a redundancy in December 1992, Mr Watts’ income from employment (leaving aside income from the partnership), as reflected in his annual tax returns, increased from $33,635 gross and $23,917 net in 1988 to $46,744 gross and $32,299 net in 1992. That is a 5.9 per cent net increase per annum over that period. In the 1993-4 tax year Mr Watts’ income was $75,748 which included a redundancy payment of $43,848. His income in that year was $31,900 net. In the 1994-5 tax year his income was $11,589.
46 The trial Judge based his calculation of past economic loss on the annual salary for the job for which Mr Watts applied shortly before the accident, namely $32,000-33,000 gross. At the hearing counsel for Mr Watts handed up a handwritten calculation on the basis of $33,000 net per year.
47 In my opinion, $33,000 grosswas a proper figure to adopt for 1994, because that is what Mr Watts would have earned if had secured the job he applied for before the accident. Compensation at the time of trial, however, must reflect usual increases over time in accord with the requirement that sums be assessed at the time the loss occurs: Struthers v Harris [1983] WAR 123 at 125 per Burt CJ; Zielke v Voak [1961] Qd R 440, at 447; and Jacka v Horsten (1980) 88 LSJS 419, at 424 per King CJ.
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48 In the absence of evidence showing such increases between 1994 and the time of trial, one approach would be to add to $33,000 the 5.9 per cent per annum net increases which occurred over 1988-1992 to estimate what Mr Watts’ earnings might have been at the time of trial. That gives a figure of $41,504 gross. An alternative approach would be to take the full time salary Mr Watts would have earned in his job at the time of trial ($40,714 gross) if he had been able to work in it full-time. The difference is only small. In my opinion the larger of the two is the appropriate figure on which to base the calculations.
49 I would make no deduction for negative contingencies because they are taken into account in the application of conservative projections: cf Hall v Tarlington (1978) 19 ALR 501. The projections are conservative for three reasons. First, Mr Watts was earning $46,744 gross in 1992. It is true that the lower adopted figure of $33,000 gross is what Mr Watts would have earned in 1994/1995 if he had begun the job he applied for before the accident, and that lower figure may be explained by the depressed Victorian economy at that time. However, what reference there was by the trial Judge to the poor state of the Victorian economy continuing thoughout the relevant period up to trial was not supported by evidence. Secondly, the evidence reveals that Mr Watts consistently obtained salary and seniority increases up to the time of his redundancy. This presumably would have continued but for the accident. Thirdly, no account was taken of loss of income by way of employer superannuation contributions (or partnership income), about which there was no evidence or argument: cfJongen v CSR Ltd, unreported; SCt of WA; Library No 920325; 18 June 1992; Jenkins v Harrison [1964] VR 637. For these reasons, any discount for contingencies would substantially increase the risk of under compensating the plaintiff.
50 The calculations should be based on estimated projections of net income after tax in 1998: British Transport Commission v Gourley [1956] AC 185; Cullen v Trappell (1980) 146 CLR 1. The projected gross income adopted above was $41,504 from which 29.7 per cent or $12,327 income tax is to be deducated giving a net figure of $29,177. In the absence of evidence to the contrary I will assume in the ordinary course of events Mr Watts would have retired at 65 years of age: Gardner Bros & Perrott (WA) Pty Ltd v Seat, unreported; FCt SCt of WA; Library No 7318, 13 October 1988, at 14 per Malcolm CJ. As from the date of the trial, Mr Watts had 14 earning years remaining.
51 The present value of the payment of $29,177 per year for 14 years is calculated by multiplying the 6 per cent weekly multiplier, which is 499.4,
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- and gives the figure of $280,211. In my opinion, Mr Watts is entitled to 40 per cent of that figure, namely $112,085 as damages for the diminution in his earning capacity.
Ground 2: Losses Relating to Loss of Avocado Trees
52 Ground 2 was as follows:
"The learned Trial Judge was wrong in failing to award the Appellant any amount for losses arising from damage to his avocado orchard. An award should have been made on the basis that the Appellant’s injuries were a direct cause of his inability to earn income so as to be able to pay for the repair and replanting of the avocado trees damaged at the time when his partner was in Perth assisting the Appellant with his injuries."
53 A Schedule of Farming Losses was tendered in evidence at the trial which set out a claim for $325,000 calculated as follows:
- A. Replacement costs for windbreak trees lost in nursery
Approx. 3000 trees @ $0.65 $2,000
B. Reinstatement costs for trees lost in orchard
Approx. 900 trees @ $18.50 incl. delivery and barge $17,000
Replanting labour… @ $10 per tree $9,000
Replanting fertilizer, chemicals, fuel @ $1.25 per tree $1,000
Aftercare labour for 5 years … @ $8.00 per tree x 5 $36,000
Aftercare & irrigation… for 5 years… @ $1.25 per tree x 5 $6,000
$69,000
C. Loss of income stream caused by death of orchard trees
(five years' potential production lost)
Gross cash flow projected on 5 trays per tree (60-80)
fruit sold Dec-Feb @ $18 per tray – 5 x $18 x 900 trees $81,000
Less cash outgoings… $16,000
NET CASH FLOW $65,000
For 5 years $325,000
54 It may be accepted that Mr Swanson would not have left the orchard and come to Perth if the accident had not occurred. The learned trial Judge said that the claim for the orchard losses depended on whether the actions of Mr Swanson in staying in Perth for about two weeks to attend to Mr Watts, and leaving the orchard unattended and making no more than a
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- phone call to a neighbour who agreed to water the orchard, was reasonable conduct in all the circumstances:
"If … Swanson’s conduct in remaining in Perth and attending to the plaintiff was reasonable, the loss of the avocado trees was a direct consequence of the plaintiff’s injuries which were the sole cause of Swanson having to leave the orchard."
"I do not believe that, given the demands of his avocado orchard, it was reasonable for him to delay his departure [from Perth] to the extent that he did. Although his presence may have been of comfort to the plaintiff it was not absolutely essential and knowing, as he said he did, that the orchard was in need of watering at the time of his departure, he ought reasonably to have returned at a much earlier point in time. Even if I am wrong in this finding, and there were reasonable grounds for Swanson remaining in Western Australia for as long as he did, he ought reasonably to have taken steps before he left French Island to ensure that the crop was watered by someone familiar with both the equipment and the task in hand."
56 His Honour also found that Mr Watts was not entitled to compensation for loss consequent on his inability to fund the replacement of the lost avocado trees. Counsel for Mr Watts conceded at the appeal that he could not recover for the loss of the trees, but submitted that the loss of profits resulting from his financial inability to replace them should be compensated. That is the claim for $325,000 in Part C of the Schedule of Farming Losses above. In my opinion, the concession made by counsel for the appellant was rightly made. However, in order to properly assess the merits of the claim for loss of profits the subject of Part C, it is necessary to examine the issue of causation both in relation to the loss of the avocado trees and their replacement.
Causation
57 The authorities indicate that, even if Mr Swanson’s or the neighbour’s acts or omissions were the actual cause of the loss, if their acts or omissions were themselves caused by the negligence of the defendant respondents, or occurred in combination with the negligence of
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- the respondents, then the loss may properly be said to be caused, at least in part, by the defendants.
58 In March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 Mason CJ at 509 said:
"Thus, at law, a person may be responsible for damage when his or her wrongful conduct is one of a number of conditions sufficient to produce damage."
59 At 513 Mason CJ referred to Grant v Sun Shipping Co Ltd [1948] AC 549 in which Lord du Parcq said:
"There is abundant authority for the proposition that the mere fact that a subsequent act of negligence has been the immediate cause of disaster does not exonerate the original offender."
60 In March v Stramare at 517 Mason CJ also said:
"Many examples may be given of a negligent act by A which sets the scene for a deliberate wrongful act by B who, fortuitously and on the spur of the moment, irresponsibly does something which transforms the outcome of A’s conduct into something of far greater consequence, a consequence not readily foreseeable by A. In such a situation, A’s act is not the cause of that consequence, though it is an essential condition of it. No doubt the explanation is that the voluntary intervention of B is, in the ultimate analysis, the true cause, A’s act being no more than an antecedent condition not amounting to a cause. … [But the] fact that the intervening action is deliberate or voluntary does not necessarily mean that the plaintiff’s injuries are not a consequence of the defendant’s negligent conduct. In some situations a defendant may come under a duty of care not to expose the plaintiff to a risk of injury arising from deliberate or voluntary conduct or even to guard against that risk: see Chomentowski v Red Garter Restaurant [(1970) 92 WN (NSW) 1070]. To deny recovery in these situations because the intervening action is deliberate or voluntary would be to deprive the duty of any content." [italics added]
- Mason CJ went on to say at 518:
"… it makes no sense to regard the negligence of the plaintiff or a third party as a superceding cause or novus actus interveniens when the defendant’s wrongful conduct has generated the very
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- risk of injury resulting from the negligence of the plaintiff or a third party and that injury occurs in the ordinary course of things." [italics added]
61 In Medlin at 6, Deane, Dawson, Toohey and Gaudron JJ said:
"The ultimate question must, however, always be whether, notwithstanding the intervention of the subsequent decision, the defendant’s wrongful act or omission is, as between the plaintiff and the defendant and as a matter of commonsense and experience, properly to be seen as having caused the relevant loss or damage. Indeed, in some cases, it may be potentially misleading to pose the question of causation in terms of whether an intervening act or decision has interrupted or broken a chain of causation which would otherwise have existed. An example of such a case is where the negligent act or omission was itself a direct or indirect contributing cause of the intervening act or decision." [italics added]
62 In Medlin the plaintiff retired prematurely because his injuries from the defendant’s negligence diminished his capacity to fulfill to his personal standard his responsibilities as Professor of the Discipline of Philosophy at Flinders University. He was not dismissed nor at risk of dismissal. But he suffered low level pain which became intense when exerting himself, fatigue, loss of intellectual energy and inability to combine research and teaching as he would have but for the accident. Although it was his decision to retire early and not one imposed on him by his employer, retiring was held to be caused by and was a reasonable response to his post accident condition: per Deane J et al at 12-13; McHugh J at 20, 21, 22-23.
63 In March v Stramare,supra, the High Court upheld an award of compensation to the extent of 30 per cent of the loss resulting from car accident injuries to the plaintiff, notwithstanding that he was drunk and driving recklessly when he crashed into the defendant’s negligently parked truck. It was held that although the accident had occurred largely as a result of the plaintiff’s own negligence – and hence the plaintiff was attributed with 70 per cent responsibility - the original negligence of the defendant was a pre-existing condition for the foreseeable event of a drunk driver crashing into the negligently parked truck.
64 The principle illustrated in these cases is that liability will be established if the independent intervening or superceding act or omission
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- (Swanson’s leaving the orchard and/or the neighbour’s omission) was caused by, or in response to, or occurs in combination with, the original negligence, to cause the injury or loss. If it was a voluntary response, that response must be reasonable. If it was an independent supervention, it must be the very thing likely to happen in the circumstances. Liability must be attributed, as a matter of common sense, for the practical consequences which flow from the negligence: Burns v NAM Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 658 per Gibbs CJ; Medlin at 6 per Deane, Dawson, Toohey and Gaudron JJ.
(a) Orchard Trees
65 With respect to the learned trial Judge, I do not consider it unreasonable for a friend and partner of over 19 years to react as Mr Swanson did. Not only was Mr Swanson dependant on Mr Watts as a business partner, but they shared homes, and demonstrated a strong relationship of care, trust and mutual dependence. They had power of attorney for each other. This is not to say Mr Swanson and Mr Watts could abandon all thought of their other responsibilities on account of Mr Watts' condition. As it was Mr Swanson asked a neighbour to irrigate the orchard and he believed that neighbour would do so. Mr Swanson made several attempts to return to the orchard and each time a reason related to Mr Watts’ critical condition pursuaded him to delay. Contrary to Mr Swanson’s assumption, the neighbour did not know how to properly operate the irrigation system, despite the fact that he had helped Mr Swanson install it, and operated his own irrigation system on his own property on the Island.
66 In my opinion, however, the neighbour’s failure to operate the irrigation system caused the deaths of the trees. That failure was an independent supervening cause of the loss of the trees, and in no sense in response to, or caused by, or a foreseeable consequence of, the accident. That it was not foreseeable is apparent from the fact that Mr Swanson did not foresee it. He believed the neighbour knew how to operate the irrigation and would do it. What Mr Swanson himself could not foresee could not be said to be reasonably foreseeable to the respondent: see Overseas Tankship (UK) Ltd v Miller Steamship Co Ltd (The Wagon Mound (No 2)) [1967] AC 617; Gates v City Mutual Life Assurance Society Ltd(1986) 160 CLR 1 at 12 per Mason, Wilson and Dawson JJ.
67 Thus, while it may be accepted that "but for" the negligence of the respondent, it would not have been necessary for Mr Swanson to recruit the assistance of the neighbour with the consequence that, as a result of
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- the negligence or inability of the neighbour to operate the irrigation system, the avocado trees were lost. It follows that the respondent's negligence was a necessary condition of the appellant's loss. As the cases, including Medlin, show, it does not follow that the respondent is liable for this particular head of loss. Had the irrigation system been properly operated by the neighbour there would have been no loss. An example given by Trindade & Cane, The Law of Torts in Australia (2nd Ed 1993) at 449 illustrates the point. A person "A" injured in an accident by the negligence of the defendant "B" was returning home after being treated from hospital when he was shot by a third party "C". He would not have been where he was "but for" the negligence of B, but C's action was an independent cause of the further injury to A. This is consistent with the common sense approach adopted by the High Court in March v Stramare and Medlin. In my view, as a matter of common sense, the present case stands on the same footing. The failure of the neighbour to properly operate the irrigation system was an independent intervening cause of loss to the appellant. To hold the respondent liable for the loss of the avocado trees would extend the scope of liability in a manner which would be inconsistent with policy considerations which limit the scope of damages to that which is reasonable in relation to the consequences for negligence. Voluntary human action tends to be treated as a cause. On this basis, the respondent's conduct could not be said to be a cause. It was the supervening independent inaction or inability of the neighbour which was the cause of the loss of the avocado trees. This was not reasonably foreseeable by the respondent: cfLamb v Camden LBC [1981] 1 QB 625; Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310; Nader v Urban Transport Authority (1985) 2 NSWLR 501; Barnes v Hay (1988) 12 NSWLR 337.
(b) Loss of Profits
68 One consequence of the accident was that Mr Watts was unable to contribute his share of the capital necessary to replace the avocado trees. This is not to say that the appellant's inability to contribute capital to replace the avocado trees was a consequence of their loss. The inability of the appellant to contribute was because of his inability to earn as a result of the accident. The damages for loss of earnings compensate for that loss. The partnership replaced the avocados with apricots, and there was some general evidence that these would generate 20 to 60 per cent less profit than would have been obtained from avocados. This was the basis of the claim by Mr Watts for damages for loss of profits. In my opinion the learned Judge rightly rejected this claim.
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69 In Leonie v Perugini (1977) 18 SASR 201 the plaintiffs recovered damages for loss of profits for the ten years it would take to regrow the fruit trees that had been destroyed by the negligent neighbour defendant’s fire. See also Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] 1 QB 27; Attorney-General v Geothermal Produce NZ Ltd [1987] 2 NZLR 348. By contrast, in the present case the loss of the avocados was caused by the failure of the neighbour to irrigate the orchard. Counsel for the appellant contended, however, that Mr Watts was entitled to recover for the loss of the income stream caused by his injury related impecuniosity. The claim was for loss of income for five years. It was contended that because Mr Watts was unable to work, he could not fund the replacement of the avocado trees. In my opinion that contention is sustained by the evidence. Between the date of the accident on 15 November 1994 and 30 June 1995 Mr Watts earned $1300; from 1 July 1995 to 30 June 1996 he earned $4654. The replacement costs would have been in the vicinity of at least $27,000. It is clear that Mr Watts was not in a position to fund the replacement until 1998.
70 Mr Swanson gave evidence that between October/November 1993 and April 1994, 1250 avocado trees were planted. The trees were one year old when planted so that by November 1994 quite a number of the trees were two years old. Avocado trees bear fruit within three to four years of age but the first commercial crop would be from five years of age. Thus, as at November 1994 they could expect a commercial crop in the period commencing from about November 1997.
71 As it happened the trees were lost. There was no money to replace them. They had still not been replaced as at the time of trial in September 1998. In the meantime Mr Swanson had planted 800 apricot trees in the winter of 1997 and another 800 in the winter of 1998. The total cost of these trees was $1200. Mr Swanson's evidence was that these had always been seen as a second crop. They were not a substitute for the avocados. This evidence was not contradicted. Hence, it would not be necessary to bring the apricot trees or any income derived from them into account.
72 Because Mr Watts could not afford to plant replacement trees immediately but had to wait four to five years until being awarded damages in November 1998, the loss suffered because of that inability was recoverable. It was submitted that, had they been able to replace the avocado trees immediately, they might only have lost two years. The total loss claimed was $325,000 over five years based on a total annual profit estimate of $65,000 per year. Mr Watts was entitled to a 50 per cent share
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- of this or $32,500: cfShick v Abbott [1976] WAR 54; and Cole v Ellis (1992) ATR 81-186 at 61,642 per Mulligan J.
73 Upon a proper analysis the claim was in fact in the nature of a claim for damages for the deferment of receipt of the income stream representing the profit from the avocado trees. As was pointed out during the course of argument of the appeal, deferment of receipt of the income from the avocado orchard operation would be compensated, if at all, by an award of interest. Had all gone according to plan, the income stream would have commenced two to three years earlier than would otherwise have been the case had Mr Watts been in a position to fund it. Counsel for Mr Watts invited the Court to adopt an interest rate of 3.75 per cent. Assuming a deferment of three years, the maximum claim would be:
Year 1 - interest on $32,500 at 3.75 per cent = $1218.75
Year 2 - interest on $65,000 at 3.75 per cent = $2437.50
Year 3 - interest on $97,500 at 3.75 per cent = $3656.25
$7312.50
74 In all the circumstances, I consider that, given that the deferment was for two to three years, the damages on this head should be discounted by reduction of six months' interest in year 3, namely $1825.12, leaving an amount of damages of $5484.37 which I would round up to $5500.
75 This damage was compensable. Notwithstanding that the loss of the trees was caused by the intervening act or omission of the neighbour, Mr Watts' inability to fund the replacement of the trees was caused by the accident. Thus the loss so sustained arose from an independent cause which increased the damage caused by the accident but did not arise out of it: cfPyne v Wilkenfeld (1981) 26 SASR 441 at 442 per Zelling J; Purkess v Crittenden (1965) 114 CLR 164 at 168 - 169 per Barwick CJ,, Kitto and Taylor JJ; and at 171 - 172 per Windeyer J; Watts v Rake (1960) 108 CLR 158 at 159 per Dixon CJ; and State Government Insurance Commission v Oakley (1990) Aust Tort Rep 67,574 at 67,577 per Malcolm CJ.
76 Counsel for the respondents sought to argue in the trial and in the appeal hearing that the avocado orchard was merely speculative and had limited prospects of success. However, in my opinion, the evidence of Mr Swanson demonstrated a detailed knowledge of the requirements of propagation of avocados and the lengths he had gone to in research, preparation, planting and protective measures to ensure their success. In my opinion the prospects of the avocados being successful were more
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- than merely speculative: Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 at 1609 - 1614 per Stuart-Smith LJ; at 1618 - 21 per Hobhouse LJ; Malec v J C Hutton Pty Ltd, supra, at 639 - 640, 642 - 645; Sellas v Adelaide Petroleum NL (1994) 179 CLR 332 at 335 per Mason CJ, Dawson, Toohey and Gaudron JJ.
Ground 3: Compensation for Past Economic Loss
77 Ground 3 was:
"The learned Trial Judge’s assessment of past economic loss is wrong in law and in fact in that:
(a) … assessment of past economic loss at the rate of $33,000 gross per annum is wrong and against the weight of the evidence. His Honour should have used a higher figure based on the Appellant’s actual earnings prior to him accepting a redundancy package. The figure was approximately $55,000 per annum;
(b) His Honour was wrong in using the date of 31 December 1996 as the date when the Appellant’s past economic loss ceased. Such a finding ignores the fact that the Appellant underwent surgery on 30 December 1996…;
(c) The failure … to award the Appellant any [damages for] loss of income after 31 December 1996 on the basis that he was then fit to return to his former occupation or work of a similar nature is wrong and ignores the fact that the Appellant did not then have permanent full time employment because he had been precluded by virtue of his injuries from seeking and obtaining same. There was no evidence before the Court that there was employment available to the Appellant. His Honour should have awarded the Appellant his total actual past economic loss so as to properly reflect all losses directly flowing from the injuries received in the accident. Further, the finding ignores the difficulties faced by the Appellant in finding employment due to his extended period out of the workforce … ;
(d) The finding by His Honour that the Appellant should not be awarded past economic loss after 31 December 1996
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- on the basis that he had substantially recovered from his injuries such as to be fit to return to his former occupation or work of a similar nature is wrong and ignores the fact the Appellant’s actual physical limitations arising from his injuries; his loss of experience and seniority occasioned by his time out of the workforce and fails to give any proper weight to the Appellant’s loss of enthusiasm and commitment arising from the accident and his injuries;
- (e) To the extent that His Honour found that the Appellant’s pre-trial ability to obtain employment was likely to be difficult due to the fact that the state of the Victorian economy was distinctly unhealthy was wrong, there being no evidence at all of that fact; it not being a matter of which judicial notice can be taken and wrong as a matter of fact."
78 The substance of these grounds has been dealt with above. Adopting a figure of $33,000 gross per annum, the learned trial Judge found that Mr Watts would have earned $49,400 net income up to 31 December 1996 but for the accident based on the following:
"15.04 (sic 11) .94 – 30.06.95 $12,350
01.07.95 – 30.06.96 $24,700
01.07.96 – 31.12.96 $12,350"
80 In my opinion, this calculation is wrong. The first error was the calculation for the period from the accident on 15 November 1994 to 30 June 1995. His Honour arrived at a figure of $12,350. This represents income for six months when in fact the relevant period was some seven and a half months. The second and more significant error was the adoption of $33,000 gross for the whole period 1994 to 1998. As has been seen, this ignored obvious projected, and after 1 July 1997, actual salary increases: Jacka v Horsten (1980) 88 LSJS 419 per King CJ at 424; Struthers v Harris [1983] WAR 123 at 125 per Burt CJ.
81 A third error was that Mr Watts was not compensated for his actual loss of income up to the time of trial because a cut-off date of 30 December 1996 was adopted. Mr Watts' loss of earning capacity did
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- not cease on that day. His last operation was on 30 December 1996. He was not fit to work the next day. Further, he had lost one job opportunity after being refused income insurance due to his injuries. Finally, at the time of trial his income was 40 per cent less as a part-timer than it would have been if he were able to work full-time.
82 In my opinion, ground 3 is made out and Mr Watts is entitled to damages for past economic loss calculated as follows:
15 November 1994 - 30 June 1995:
$33,000 gross per annum x 32 weeks = $20,308 less earnings of $1300, less tax: 20 per cent of each $1 over $5400 = $5520, ie, $20,308 - $6820 = $13,488.
1995 - 1996:
$33,000 plus 5.9 per cent = $34,947 gross per annum, less net earnings of $4654, less tax: $3060 + 34 per cent of each $1 over $20,700 = $7904, ie, $34,947 - $12,558 = $22,389.
1996 - 1997:
$34,947 plus 5.9 per cent = $37,009 gross per annum, less tax: $3060 + 34 per cent of each $1 over $20,700 = $8,605, ie, $37,009 - $8605 = $28,404.
1997 - 1998:
$40,714 (Full-time gross salary with Old Treasury as of 1 July 1997), less net earnings of $20,709, less tax: $8942 + 43 per cent of each $1 over $38,000 = $10,109, ie, $40,714 - $30,818 = $9,896.
July 1998 - 29 October 1998:
$40,714 gross per annum plus 5.9 per cent = $43,116 per annum x 18 weeks = $14,925, less earnings of $7,168, less tax: ($8942 + 43 per cent of each $1 over $38,000 = $11,142) / 52 x 18 weeks = $3857, ie, $14,925 - $11,025 = $3900.
The total of these amounts is $78,077.
83 Again, I would not make any deduction for negative contingencies because those calculations are conservative for the reasons mentioned under ground 1. In my opinion Mr Watts is entitled to damages in the amount of $78,077for past loss of earnings.
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Grounds 4 and 5: Interest
84 Grounds 4 and 5 were as follows:
"4. His Honour’s award of interest on past economic loss at a rate of 5 per cent flat is wrong. His Honour should have awarded interest on past economic loss at 4 per cent per annum.
5. His Honour was wrong in failing to award interest at 4 per cent per annum on special damages paid by the Appellant."
85 In the course of argument counsel for the appellant submitted that the correct rate of interest was 3.75 per cent. The trial Judge merely awarded a flat rate of 5 per cent on past economic loss. No reasons were given for the adoption of this.
86 In response to these grounds, counsel for the respondents contended that the claim for interest had not been pleaded in accordance with O 20 r 9(4). However, interest was pleaded in the plaintiff’s statement of claim, and, where the claim is made under statute, it is generally sufficient merely to mention the fact that interest is claimed. Courts have discretion to award interest on pre-trial pecuniary losses under s 32 of the Supreme Court Act 1935 and interest on the amount of the judgment under s 142 of the Act. The discretion is not unfettered but, unless cause is shown to do otherwise, a plaintiff is entitled to interest at the prevailing rates up to the limit in the enabling statute: Ruby v Marsh (1975) 132 CLR 642 at 644 per Barwick CJ.
87 The purpose of pre-judgment interest is to compensate the plaintiff for being kept out of, or deprived of, money to which he or she was entitled to over the relevant period, and to ensure the plaintiff receives a current equivalent of money's worth: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; and O'Brien v McKean (1968) 118 CLR 540, at 544-5 per Barwick CJ. In Kalavrouziotis v Howel, unreported; FCt SCt of WA, Library No 980219, delivered 1 May 1998, Wheeler J said at 19:
"[I]t is the case that interest should normally be awarded on a per annum basis: s 32, s 142 Supreme Court Act and O 36 r 20."
88 This is because interest on special damages accumulates from the time of incurring the loss or expenses and, runs to the entry of judgment: cfErceg-Hum v Hurn, unreported; FCt SCt of WA; Library No 7723;
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- 23 June 1988 at 17 per Brinsden J and at 18 per Seaman J; Potter v SGIC, unreported; FCt SCt of WA; Library No 8115; 20 February 1990; at 13 per the Court.
89 Order 36 r 20 provides that interest for the purposes of s 32 may be based on the interest rate fixed from time to time under s 142 of the Supreme Court Act in respect of judgment debts. The relevant rates were 8 per cent until 11 September 1997 and 6 per cent thereafter.
Calculating Interest on Past Losses of Earnings
90 Where the loss occurs over a period of time, as is the case with loss of earnings, an appropriate formula is: Interest = 1/2 Interest Rate x Principal x Time: Riddle v McPherson(1995) 37 NSWLR 338 at 342. If the interest rates have varied over that time it is appropriate to adopt an average, or it may be necessary to shift the ‘centre’ one way or the other: Bennett v Jones [1977] 2 NSWLR 355 at 370; Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 338; and Cullen v Trappell at 19 per Gibbs J. Applying that formula I would adopt an interest rate of 7.5 per cent as an average between 8 per cent and 6 per cent weighted toward the former because that was the rate for most of this period. The calculation is $78,077x 1/2 x 7.5 per cent x 1443/365 = $11,575.
Interest on Special Damages
91 The special damages, agreed by the parties in the sum of $3107, were incurred shortly after the accident and therefore should attract an interest rate of 7.5 per cent per annum giving a total of $921 interest.
92 It follows that grounds 4 and 5 are made out. I would award interest on damages for loss of income in the sum of $11,575 and on special damages in the sum of $921.
Orders
93 For these reasons I would allow the appeal, vary the judgment of the learned trial Judge by setting aside the awards of damages of $36,379 for past economic loss and $1819 interest thereon and in lieu thereof substitute damages in the sum of $112,085 for loss of future earning capacity and damages in the sum of $78,077 for past economic loss. I would also allow interest on such damages in the sum of $11,575 and interest on the special damages in the sum of $921. In addition, I would
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- allow as damages for deferment of profit from the avocado trees the sum of $5500.
94 The remaining amounts awarded by the learned trial Judge which were not challenged on appeal are to stand. As a consequence the amount of the judgment should be increased to $280,465 made up as follows:
(a) Past economic loss $78,077
(b) Interest on the above damages $11,575
(c) Loss of earning capacity $112,085
(d) Pain and suffering and loss of amenities $63,600
(e) Special damages $3,107
(f) Interest thereon $921
(g) Future medical expenses $5,000
(h) Travelling expenses $600
(i) Deferment of income from avocado trees $5,500
$280,465
95 IPP J: I have read the reasons to be published by Malcolm CJ. I agree with them and his Honour's conclusions. I have nothing further to add.
96 STEYTLER J: I have read the reasons to be delivered by Malcolm CJ. I agree with those reasons and have nothing further to add.
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