WILLIAMS v Barry
[2008] WADC 147
•30 SEPTEMBER 2008
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: WILLIAMS -v- BARRY [2008] WADC 147
CORAM: COMMISSIONER STAUDE
HEARD: 2-5 SEPTEMBER 2008
DELIVERED : 30 SEPTEMBER 2008
FILE NO/S: CIV 1290 of 2007
BETWEEN: ROBERT THOMAS WILLIAMS
Plaintiff
AND
JEAN MAUD BARRY
Defendant
Catchwords:
Damages for personal injuries - Motor vehicle accident - Foot and ankle injuries - Loss of earning capacity of self-employed carpenter/builder
Legislation:
Motor Vehicle (Third Party Insurance) Act 1943 s 3C
Result:
Damages assessed at $202,230.11
Representation:
Counsel:
Plaintiff: Mr B Bradley
Defendant: Mr J Brooksby
Solicitors:
Plaintiff: Bradley Bayly
Defendant: Greenland Brooksby
Case(s) referred to in judgment(s):
Adams v Ascot Iron Foundry Pty Ltd (1968) 72 SR (NSW) 120
Cohen v Ninkovic [2000] WASCA 169
Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658
Giorginis v Kastrati (1988) 49 SASR 371
Husher v Husher (1999) 197 CLR 138
Italiano v Vita, unreported; FCt SCt of WA; Library No 950109, 15 March 1995
McCracken v Melbourne Storm Rugby League Football Club Ltd (2007) Aust Tort Reports 81-925; [2007] NSWCA 353
Medlin v State Government Insurance Commission (1995) 182 CLR 1
Wylde v 'Arriaza (1997) 25 MVR 539
COMMISSIONER STAUDE:
Introduction
In this action the plaintiff claims damages for personal injuries suffered as a result of a motor vehicle accident on 20 June 2006 caused by the defendant's negligence, liability for which is admitted.
The accident occurred when the plaintiff was standing on a crate whilst rendering a column in the carpark of a library in York Street, Albany, when the defendant, driving a Toyota Corolla sedan, collided with the plaintiff crushing his left foot between the vehicle and the column.
The injuries
The plaintiff suffered a crush injury causing bruising, the partial avulsion of the second toenail and fractures to the bases of the second and third metatarsal bones. His recovery was complicated by cellulitis which was treated by antibiotics. In November 2006, some five months after the accident, the plaintiff was diagnosed with a minimally displaced fracture of the lateral malleolus. The course of his recovery and the nature and extent of his residual disability consequent upon these injuries will be addressed in the context of the medical evidence.
The issues
The main issues disclosed in the pleadings and in the submissions of the parties at trial are:
1.The nature and extent of the plaintiff's residual disability.
2.The effect of such residual disability on the plaintiff's capacity to work as a carpenter/builder.
3.The extent of any financial loss resulting from or likely to result from any incapacity.
The plaintiff's background
The plaintiff was born in Albany on 17 July 1957 and qualified as a carpenter/joiner in 1977 after completing an apprenticeship. He worked for about three years in the north-west and interstate before returning to Albany to work as a subcontract carpenter. Sometime in the early 1990s he registered the business name Havoc Builders and Renovators in order to obtain contract work from the Town of Albany (now City of Albany) which he has continued to do to the present day. In 2001 he incorporated Havoc Builders Pty Ltd ("Havoc") by which he has been employed as a working director.
The plaintiff ruptured his left Achilles tendon in February 2004. This was repaired surgically. The plaintiff was off work for some 3‑4 months and was able to resume full duties in July 2004.
Prior to the accident the plaintiff generally worked a 38 hour week doing building work, spending an hour each night and perhaps two every Sunday doing administrative work and also spending two hours every weekend sharpening his tools and cleaning his vehicle and toolboxes. As at the date of the accident Havoc was doing about 50 per cent of its work for the City of Albany. As well as regular maintenance and repair jobs Havoc was undertaking the replacement of the roof of the Albany Leisure and Aquatic Centre and was renovating the library where the accident occurred.
The plaintiff is married and has four adult children. His wife Ingrid is a driving instructor. The plaintiff's eldest children Daniel and Matthew are twins who were born in 1981. Daniel was apprenticed to the plaintiff from 2000, completing his apprenticeship in November 2003. He subsequently obtained his own ABN and from that time until April this year subcontracted his services to Havoc. Presently, Daniel works in the north-west. Matthew worked from time to time on a casual basis for Havoc prior to the accident and was formally apprenticed to the plaintiff in October 2006. That relationship continues.
Havoc has also engaged a Mr Ray Ralston from time to time as required. Mr Ralston described himself as a trade's assistant. He subcontracts to Havoc at an hourly rate.
The pleaded claim
It is necessary to say something about the way in which the plaintiff's claim was formulated. The statement of claim does not plead any specific economic loss. In response to a request by the defendant dated 26 July 2007 (and in any event as required by DCR 2005 r 45C) the plaintiff filed further and better particulars of statement of claim on 11 September 2007 pleading past and future loss on the basis that the plaintiff had been "largely incapacitated for physical work" since the accident and as a consequence had had to employ additional personnel to replace his labour. Specific reference was made to his son Matthew who, it was pleaded, was employed as an apprentice in the financial year ended 30 June 2007, to his son Daniel who had been employed as a subcontractor at the time of the accident, and to five other workers (unnamed) who were engaged "from time to time".
The plaintiff claimed $21,962 being Matthew's gross wages as an apprentice, and $21,105 for other additional labour in 2006-2007, total $43,067. On that basis past economic loss was claimed at an average weekly rate of $828 gross, $668 net. (The particulars did not disclose the basis upon which the net rate was calculated.)
Future loss was claimed on the basis that the plaintiff would:
(a)remain largely incapacitated for the work of a builder;
(b)be required to employ additional workers to replace his labour "in the business";
(c)suffer a loss of not less than $60,000 gross per annum to at least age 65.
Clearly, these particulars did not differentiate between the identities of the plaintiff and Havoc and, in fact, with respect to the cost of additional labour, treated the company's loss as the plaintiff's.
On 5 August 2008 the plaintiff filed an outline of submissions pursuant to DCR 2005 r 45H. With respect to the claim for damages for economic loss, the plaintiff contended that:
(a)he was the sole director and shareholder of Havoc;
(b)he had been unable to resume the normal work of a carpenter/builder and was limited to contract management, supervising and light tasks;
(c)Havoc had employed workers and subcontractors before and after the accident;
(d)the plaintiff's average working week had been reduced from 50 hours to 20 hours; and
(e)the prevailing rate for a carpenter in Albany was $35-$40 per hour.
The defendant's outline of submissions is dated 12 August 2008. It contains a number of complaints about the plaintiff's outline which are not relevant for present purposes. The defendant contended that the plaintiff had only earned $22,802 gross in the year prior to the accident, on average $438.50 per week gross, and pointed out that weekly payments of workers compensation were made at the rate of $480.77 per week for three months and thereafter at $408.65 per week until the plaintiff returned to work in February 2007 after which time he received partial payments up to $408.65 per week.
The defendant's submission argued that the plaintiff personally had suffered little or no economic loss to date. It foreshadowed expert forensic accounting evidence from Mr Alan Smit of RGL Forensic Accountants and Consultants. Upon his analysis of the books and records of Havoc and the plaintiff the company's contract income had increased since the accident. Accordingly, the company would have had to employ extra labour in any event. The defendant took issue with the plaintiff's contention that Havoc's loss was his own, submitting that the company could make its own claim for the cost of replacing his services by an action per quod servitium amisit. Furthermore, it was submitted that the plaintiff could not recover more than he would have earned had he not been injured, citing his history of modest personal income.
Prior to trial the plaintiff's solicitors filed a damages schedule dated 22 August 2008 and subsequently a substituted damages schedule dated 26 August 2008 which corrected an error in the calculation of future loss of earning capacity. The schedule set out a claim for economic loss on quite a different basis from that pleaded in the further and better particulars. The schedule based the claim on the premise that in the financial year 2005-2006 (at the very end of which the accident occurred) Havoc had paid the plaintiff wages of $23,500 and made a profit of $18,810. On that basis the plaintiff's earning capacity was said to be $43,310 (gross) in that year.
It was alleged that the plaintiff was totally incapacitated from the date of the accident until 31 January 2007 and lost $769 per week net in this period based on a pre-accident capacity to work 38 hours "on the tools" at $25 per hour. The claim for past loss from 1 February 2007 to 31 December 2007 was based on a loss of 23 hours per week at $30 per hour. For the period 1 January 2008 to 2 September 2008 the claim was for 18 hours per week at $35 per hour, $630 per week gross, $553 net.
With respect to future loss the schedule claimed that the plaintiff was incapacitated for work for more than 20 hours per week "on the tools". The plaintiff claimed $553 net per week for 13 years to age 65 to a total of $263,052, plus a further unspecified amount for the risk of increased incapacity in that time.
At the commencement of the trial counsel for the plaintiff handed up a proposed minute of substituted further and better particulars of statement of claim which reflected the approach to the calculation of economic loss taken in the schedule. Counsel for the defendant objected to the proposed substitution of the particulars. I took the view that the claim for economic loss put at trial should be pleaded (Dare v Pulham [1982] HCA 70; 148 CLR 658) and therefore gave leave to the plaintiff to substitute the previously filed further and better particulars of statement of claim with the proposed minute.
I acknowledged the defendant's submission that the substitution of the particulars involved a significant change in the complexion of the claim for economic loss and that the defendant may be disadvantaged in this respect, having commissioned its expert evidence (and otherwise prepared for trial) on the premise that the plaintiff's claim was based on the cost to him, through Havoc, of additional/substitute labour.
Although I indicated that I would be sympathetic to an application to adjourn the trial in the circumstances, that course was not taken and the trial proceeded with the plaintiff endeavouring to prove his loss by simply ascribing a commercial rate to the hours he said he could not work, and the defendant contending on the basis of an expert analysis of the relevant financial records of Havoc that the plaintiff's financial loss was actually, and in future likely to be, much less than claimed.
The plaintiff's evidence
The plaintiff said that he was working at the rear of the Albany Library rendering a concrete column when he was struck by the defendant's vehicle. He said he noticed instant pain in his left foot and lower leg. He was taken to Albany Regional Hospital where he was given painkillers. He underwent an x‑ray and his left lower leg was put in a plaster cast. His second toenail was "hanging off" and there was "a lot of blood". He subsequently developed an infection and was prescribed intravenous antibiotics, attending daily at the hospital for this purpose and to have his foot dressed. He had regular blood tests. He was unable to drive at this time and was taken to hospital by his wife.
He subsequently underwent physiotherapy treatment. He was seen by Dr Desmond Williams, orthopaedic consultant, in November 2006. Dr Williams had recommended beach walking and swimming. In the weeks and months following the accident the plaintiff said he had a lot of pain in his heel and ankle, across the top of his foot and behind his toes. This had improved over the last two years. He was off work for eight months during which time he was still able to do paperwork and organisational tasks at home. He would also occasionally do errands for his son, such as picking up a box of screws for him.
It was while the plaintiff was off work that he apprenticed his son Matthew to assist Daniel who continued to subcontract to Havoc.
The plaintiff said that he returned to work in February 2007 gradually increasing his hours to about five per day over a period of a couple of months. He described himself at that time as the "gopher", picking up materials and doing ground work. He assisted his sons if they were working on a roof by passing things to them. He was able to do some tool work, nailing and cutting timber. He was unable to resume roofing work involving erecting roof frames, cladding and climbing on battens and rafters. He said he could not do roofing work because he had no flexibility in his ankle.
The plaintiff said that he was now back to working about five hours per day "on the tools", sometimes doing an extra hour or so. He said that his foot was normally not bad in the morning but his foot ached and swelled as the day progressed such that he would normally take his boot off at lunchtime. He said he generally worked through until lunch and tried to return to work for an hour or so afterwards.
The plaintiff said that he thought he was productive for about three‑quarters of the time he spent at work and sometimes did not charge his client for all his time. He was able to do most of the maintenance and repair work required by the City of Albany provided it did not involve too much climbing or heavy work.
The plaintiff spent three to four hours per day supervising his son Matthew and his casual worker Mr Ralston. He said that if he was not injured he would be able to supervise them whilst doing his own work.
The plaintiff said that he was doing only about three hours per week of repair and maintenance work for the City of Albany at the time of trial and was presently working on a residential project. He said Matthew and Mr Ralston, who were working with him, would normally work 35‑38 hours per week. The plaintiff estimated that he would do about 20 hours per week of physical work but said he did very little of the work of a carpenter. He said he would cut timber and pass it to the others. He was doing more teaching but because of the soreness and stiffness in his ankle was unable to get on a roof to show them what to do.
He did his bookwork during the day rather than at night. He was still able to do his tool maintenance and cleaning activities on the weekend.
By way of treatment the plaintiff said that he sometimes iced his foot at night but normally used a cream called Flexil supplied by his physiotherapist. He had been prescribed a specially made insole by a podiatrist which he wore with work boots that covered his ankle. He said the boots caused him to become very sore in the heel quite quickly, but he said that he would persevere with them on the podiatrist's advice. (The plaintiff suggested that the orthotic insole had been prescribed quite recently.)
The plaintiff said that he was able to go up a ladder now and then. He was continuing to receive partial weekly payments of workers compensation through Havoc. He said that the building industry in Albany was very busy and it was very hard to find subcontractors. The hourly rate for a subcontractor was $40 including goods and services tax ("GST"). He was paying Mr Ralston, who was not a qualified carpenter, $27 per hour.
With respect to the annual financial statements of Havoc the plaintiff suggested that 2004 was atypical because the company made no money from an insurance repair contract at Tambellup. In carrying out this contract Havoc employed a number of subcontractors from different trades who were paid directly. The plaintiff acknowledged that in the two financial periods following the accident the contract income of Havoc had gone up substantially. He was asked:
"How's that occurred? How and why has that occurred? - The higher revenue?
Yes? - Well, trying to keep the work going for the boys, and using extra tradesman, and the costs of materials is much higher. The costs of materials has probably gone up 50 per cent in the last year, or two, with the boom, as it's called."
In cross‑examination by counsel for the defendant the plaintiff acknowledged that at the time of the accident his usual working week was 35 to 40 hours as stated by his wife in a report submitted to QBE Insurance for purposes of the workers compensation claim. Then, with reference to the initial assessment report dated 12 December 2006 of Konekt Australia Pty Ltd ("Konekt"), a rehabilitation provider appointed by QBE Insurance (Exhibit 5), the plaintiff acknowledged that he had correctly stated that he was employed full‑time for 40 hours per week and that his duties involved "providing quotes, accounts and invoicing, supervision of sites, writing contracts, renovation of bathrooms, building houses, general building maintenance and repair, roof construction, maintenance and tiling".
He admitted that he told Konekt that he was not limited in his ability to perform activities of daily living such as housework, cleaning, driving, self care and cooking and could sit for up to one hour, stand for up to two hours, walk for 45 minutes on a flat surface, and for 25 minutes on an uneven surface before experiencing a dull ache. He otherwise confirmed that the initial assessment report was correct.
The plaintiff acknowledged that in the financial year prior to the accident the financial statements of Havoc showed that he was paid wages of $23,500, amounting to $452 per week and that the company was initially paid weekly payments of workers compensation at the rate of $480 per week. Following his return to work in February 2007 the plaintiff said he would advise the insurer how many hours he had worked each fortnight. Workers compensation was paid for hours not worked up to 76 hours per fortnight. The plaintiff kept a work diary in which he recorded the hours he worked each day. This document had not been discovered but was produced by the plaintiff during his evidence. He acknowledged that the hours recorded in the diary were those he worked "on site" and for which he charged his clients.
The plaintiff said that prior to the accident he normally left home to go to work at 7-7.15 am and would work through to 3.30-4 pm, taking a break for lunch during which he would often pick up materials. Since the accident he has generally commenced at 7.20 am, breaking for lunch at midday, and then sometimes returning to work for an hour or two in the afternoon.
Counsel for the defendant put to him that on most days he was working 5.5‑6.5 hours. The plaintiff insisted, however, that he was not doing physical work during all of this time. He said he would often make work related telephone calls during the day and sometimes he would do his paperwork in the morning or afternoon, rather than in the evening as before. According to the plaintiff, he was on site for about 25 hours per week. He reported the hours he worked to the workers compensation insurer. When he took holidays he reported no hours worked.
Counsel for the defendant then took the plaintiff to 30 and 31 July and 1 August 2008 during which the plaintiff had been under surveillance whilst at work. On the first day the plaintiff was observed to leave home at 7.21 am and return home at 4.06 pm. On the second day he was seen to leave home at 7.30 am and to work until sometime after about 3.30 pm. On the third day he was seen to work until about midday, subsequently attending a medical examination at about 1.00 pm. It was put to the plaintiff that based on the observations made of him away from his home, he had worked about 18‑19 hours over a 2½ day period.
His diary, which was not tendered in evidence, but to which the plaintiff made reference in cross-examination, indicated that he had worked five hours on 30 July and six hours on 31 July. He had reported to QBE that he had worked those hours and also done two hours of quoting on each day. The diary confirmed that in the previous week the plaintiff had been in Broome on holiday. He agreed that he had credited QBE with 29 hours over the fortnight, all of which, I infer, were necessarily worked in one week. It was not put to the plaintiff that he was dishonest in reporting his hours, but the defendant's counsel did suggest that the plaintiff's subjective determination as to what constituted physical work from day to day appeared to be somewhat arbitrary.
The plaintiff was also questioned about the fortnight commencing 20 February 2008. According to his diary, over the eight days prior to the Labour Day public holiday the plaintiff recorded 49 hours of work representing a daily average of just over six hours per day. It was put to the plaintiff that in that period he was compensated for 50 hours of incapacity according to Exhibit 9, the QBE workers compensation claim summary, the suggestion being that he understated the hours actually worked. The plaintiff was unable to explain the apparent discrepancy. The matter was not taken further by counsel for the defendant and I was not asked to draw any adverse inferences from this evidence. I can, however, take notice of the fact that in the relevant period the plaintiff recorded an average of at least six hours chargeable work per day.
Two DVDs were shown to the plaintiff depicting his observed activities, the first (Exhibit 6) depicting activities on 10 February 2008 and the second (Exhibit 7) activities on 30 and 31 July and 1 August 2008. There was also tendered (by consent) a book of surveillance reports (Exhibit 8) which contained a narrative of the observations made by the surveillance operatives from time to time on the dates on which the video was taken.
The first DVD showed the plaintiff at the races over a period of about 5½ hours commencing at 12.30-1.00 pm when the plaintiff left home with his wife and drove to Albany racecourse. He was observed from time to time until he left the course with his wife at about 6.00 pm. The plaintiff identified himself as the subject of the DVD and acknowledged that he was licensed to accompany racehorses at the track. He acknowledged that he could stand for hours at a time as necessary and that he was able to work without any limp or sign of restriction.
In relation to the second DVD the plaintiff acknowledged that this depicted activities at a site in Burgoyne Street, Albany where he was carrying out a contract to build an extension to a residence. Prior to attending to this site he had taken his son Matthew to another job at Orion Street which was a roof job that the plaintiff could not do. The plaintiff acknowledged that the DVD depicted him shovelling sand, using power tools and carrying lengths of timber on a site that was on a steep incline. The plaintiff also acknowledged that the DVD depicted him going to the Amity Tavern at about 2.30 pm, climbing to the roof of the tavern by ladder, holding tools in his left hand as he did so, walking over the roof of the tavern and repairing the cap on the top of a flue. The plaintiff was then seen to kneel on the roof leaning back on his heels, and then to descend the ladder.
The plaintiff showed no sign of discomfort or difficulty in negotiating the ladder and the roof area, and in fact appeared quite practised. He said in answer to questions from counsel for the defendant that he did not regard what he did as "roof work" as the roof was quite flat. He acknowledged that he was wearing elastic sided work boots on the roof of the tavern. He said that he had changed his boots at lunchtime as his podiatrist told him to do if his foot became sore.
In relation to the work he was doing at Burgoyne Street, the plaintiff said that the area where he was observed to work was quite flat, but he admitted walking up and down the block from time to time without difficulty and to be able to kneel, squat, dig and lift reasonably heavy lengths of timber.
It was put to the plaintiff that he had told Dr John Kagi in the course of his examination on 1 August 2008 that he was not allowed to go on roofs. His response was "I don't class that as going on roofs". I will return to this aspect when I deal with Dr Kagi's evidence.
The plaintiff did not in any way suggest that the work activities he was observed to perform on 30 and 31 July 2008 were atypical or done at great expense to him in terms of resulting symptoms. However, the plaintiff pointed out that prior to the accident he would have worked all day "on the tools" and not even carry a telephone on him. He said before the accident he would leave his telephone in his vehicle and check it at lunchtime. Since the accident he carried it with him because he said his son may need to ring him.
At the end of the defendant's case, counsel for the plaintiff sought to tender by consent a book of invoices of Havoc dating from 23 November 2003 to 18 August 2008. This book of invoices which became Exhibit 15 was 350 pages. I suggested that it would be appropriate for the plaintiff to give further evidence in relation to the invoice. Leave to re‑open was granted and the plaintiff was recalled.
In the course of his further evidence the plaintiff said that he returned to tool work in February 2007. The work on the roof of the Albany Leisure and Aquatic Centre continued. It was carried out by Daniel, Matthew and Mr Ralston. Whilst they were working on the roof he was able to do other jobs. The plaintiff said he had to refuse some private work that he could not do, but he was able to do all the work required by the City of Albany. Havoc's contract had been renewed in June 2007 for two years. Under the contract two men were charged at $66 per hour and one man at $30. The plaintiff said that Havoc's profit from the labour of his sons and Mr Ralston was minimal.
Mrs Ingrid Williams
Mrs Williams gave evidence that she had done and continued to do the book‑keeping for the business of Havoc, preparing the cashbooks and doing the wages and the 3‑monthly business activity statements. She was not remunerated for her work.
She said that prior to his accident the plaintiff would generally leave for work at 7.15 am, return for lunch between 12.00 and 1.00 pm, and arrive home at 4.00-4.30 pm, depending on what he had to organise for the following day, such as materials. Since returning to work after the accident the plaintiff only worked 1-2 hours after lunch. She said the plaintiff was "struggling" by lunchtime most days. He would take his work boot off at lunch. In the evening he would elevate his foot. Sometimes he would use Flexil or ice on his foot. Mrs Williams was not cross-examined on these matters.
Medical evidence
Counsel for the plaintiff tendered a book of medical reports comprising two reports from Dr James Lie, general practitioner, dated 13 October 2006 and 30 July 2007, five reports from Dr Desmond Williams, orthopaedic consultant, dating from 29 November 2006, the most recent being dated 18 August 2008, and a report from Dr Nick Dale, radiologist, dated 13 August 2008 (Exhibit 11). Dr Williams gave viva voce evidence. The defendant's counsel tendered Dr Lie's workers compensation medical certificates (Exhibit 14) and called Dr Kagi whose reports became Exhibit 12.
Dr Lie treated the plaintiff in the emergency centre at Albany Regional Hospital on the day of the accident and saw him on a number of occasions subsequently. Initial examination revealed a very swollen and bruised foot with a partial avulsion of the second toenail and tenderness over the dorsum of the midfoot. An x-ray showed a fracture of the third and possibly second metatarsal bones, but also showed advanced degenerative arthropathy at the first metatarsal phalangeal and interphalangeal joints. The plaintiff's left foot was immobilised in a plaster of Paris cast. He suffered secondary cellulitis which was treated with intravenous antibiotics over a protracted period of time. Dr Lie noted that it was a difficult infection to control due to the site of the injury. Once the plaintiff was ambulatory he was referred for physiotherapy. In his first report Dr Lie indicated that it was too early to express a prognosis about the plaintiff's future working capacity. He noted that there was pre-existing arthritis in the toes and knuckle joints of the left foot.
In his second report Dr Lie noted that when seen on 4 July 2007 the plaintiff was limping but was able to walk on his heel. He was tender at the tip of the lateral malleolus but his ankle joint was quite free. He noted a tender Achilles tendon from a previous injury and that the left calf muscle was smaller and weaker than the right. He observed that the plaintiff's injuries were causing pain and discomfort and impacting on his ability to work in his previous full‑time capacity. He thought the plaintiff was permanently incapacitated for work as a roof carpenter. He thought it was likely that he would be left with at least stiffness and chronic pain in the left ankle.
I note that in his medical certificate dated 3 November 2006 Dr Lie observed as follows:
"His business is mainly roof building and repairs. It will be dangerous for him to return to his usual occupation at present. And it is also impossible to have a graduated return to work on a roofing job."
A further certificate dated 8 February 2007 indicates that the plaintiff was certified fit to return to modified duties from 9 February 2007. Dr Lie recorded in the certificate that the plaintiff could not get his work boots on, that his heel got sore and that he had pains going up his legs and below the knee. The work he was doing under a return to work program was causing pain. The last of the certificates dated 8 March 2007 noted that when the plaintiff had worked for one hour in his return to work program his ankle and foot swelled and became very painful.
Dr Williams gave evidence with reference to skeletal models of the foot on which he was able to demonstrate the site of the metatarsal fractures and the fracture of the lateral malleolus which was not diagnosed until he examined the plaintiff on 8 November 2006.
On this examination Dr Williams noted that the plaintiff's left foot showed collapse of the longitudinal arch on weight bearing. This was also the case on the right but more so on the left. There was swelling and mild tenderness of the midfoot and some limitation of left ankle movement. X‑rays taken on the day of his examination showed healed fractures of the bases of the second and third metatarsals and marked degeneration of the metaphalangeal joint and interphalangeal joint of the great toe consistent with a history of gout. Dr Williams said this area of arthropathy was asymptomatic, although the plaintiff's great toe was quite stiff. X-rays also showed a healing/fracture extending through the distal fibula at the level of the ankle joint. This is known as the lateral malleolus. There was only minimal displacement.
This injury had not been previously diagnosed, but was attributable to the accident. There were also generalised degenerative changes within the ankle joint. Dr Williams treated the malleolar fracture conservatively, although he said in evidence that if it had presented to him soon after the injury he would have considered internal fixation of the fracture.
At the time of his first examination Dr Williams recommended the use of an elbow crutch to assist the recovery of the left foot and ankle. He did not see any need for ongoing physiotherapy. He thought the plaintiff remained totally incapacitated for work due to the malleolar fracture which had caused persisting pain and stiffness. Dr Williams understood the plaintiff worked mainly as a roof carpenter. He thought he would have to look at working at ground level, avoiding stairs, ladders and irregular ground.
When he saw the plaintiff again on 7 March 2007 Dr Williams found that the x-ray taken that day indicated a united fracture of the malleolus. The plaintiff was not tender over that area but had persisting stiffness in the ankle. According to Dr Williams the x-ray report showed other degenerative changes in the left tibiotalar and talonavicular joints.
On examination the plaintiff's swelling was significantly reduced and he was able to walk without a significant limp. He had recommenced work on a part‑time basis and was using an ankle brace support. Dr Williams thought the plaintiff could gradually increase his work hours with comfort. He recommended daily swimming and exercise including beach walking. In terms of work he thought the plaintiff was still unfit to return to his pre-accident employment but noted that he was coping with part-time light duties.
Dr Williams examined the plaintiff again in May and June 2007 and finally on 13 August 2008. On the last occasion the plaintiff told him that he had limited capacity with regard to climbing ladders, although he did climb ladders to pass objects. He was only able to cope with a few flat roofs and generally did not attempt to cross rafters. I do not know whether by the time of that report the plaintiff was aware of the video surveillance evidence, but I note that his history to Dr Williams regarding his capacity to climb ladders and go on to roofs was quite different from that given to Dr Kagi on 1 August 2008.
Dr Williams found that the plaintiff had some limitation of movement in the left ankle. There was a lack of dorsiflexion and reduced plantar flexion. An MRI was done showing chronic tendonopathy of the left Achilles tendon. Dr Williams accepted that some of the restriction of movement could have been so related.
Dr Williams referred to evidence on MRI of ankle arthritis and arthritic change at the base of the second metatarsal where the more significant fracture was identified as well as across the other tarsometatarsal joints which he said was in keeping with the original diagnosis of a Lisfranc fracture dislocation of the midfoot. He said that the MRI confirmed the underlying arthritic status of the ankle and foot which he considered should be assessed separately in terms of residual disability.
He assessed a 20 per cent disability of the left leg below the knee as a result of pain and stiffness due to the displaced lateral malleolar fracture and 20 per cent disability of the left foot itself due to evidence of arthritis in the subtalar joint and talonavicular joint and in the tarsometatarsal joints, mainly at the second, together with the collapse of the longitudinal arch to a greater extent than on the right side. He predicted ongoing arthritic change increasing significantly over the next 5-10 years causing increasing limitation of functional capacity and increased pain.
It was Dr Williams' evidence that all of the degenerative changes in the plaintiff's foot and ankle, except those in the great toe, could be attributed directly or indirectly to his accident‑caused injuries, including degeneration in the metatarsal bones that were not fractured and in parts of the ankle other than the lateral malleolus. He attributed these changes to "some stress and force across those joints". He based his opinion on the fact that there appeared on MRI to be evidence of new damage to the chondral surfaces as reported by Dr Dale who described "early degenerative change".
In the course of Dr Kagi's evidence, criticism was made by him of Dr Williams' reports which he said were "all over the place". Dr Kagi's criticisms of Dr Williams in this and other respects were somewhat intemperate but his observation about Dr Williams' reports is understandable if one compares them with Dr Kagi's. Indeed, in the report of 18 August 2008 which is 12 pages long and has no subheadings, it is difficult to locate amidst a long and unstructured discussion the actual symptoms and clinical findings upon which the conclusions therein are based. (It does not help that the questions put to Dr Williams are not set out in the report and that the letter of instruction was not tendered with the report.)
At p 3 Dr Williams states that the plaintiff described ankle and hind foot pain (which I assume means heel) rated at 3‑4 out of 10 generally and at the end of a working day 6-7 out of 10. He further stated that the plaintiff had cramping in his calf which on cross-examination he accepted was probably due to the Achilles tendon injury. He said there was some pain in the midfoot area at the site of the fractures. He noted limitations in terms of running, using ladders and stairs and walking on irregular ground and on slopes. He noted that the plaintiff said he was satisfactory at the start of the working day, with problems increasing during the day.
Dr Williams' clinical findings are set out in one paragraph at p 4 of the report as follows:
"At clinical review his left ankle lacks dorsiflexion arc and reaches just virtually to the neutral and plantar flexion is a reduced arc of 20 degrees compared to the right side. There is stiffness in the subtalar joints. Both feet have flat foot collapse of the longitudinal arch, but the left foot has a more marked and significant longitudinal arch collapse."
These symptoms and findings are repeated in the report at pp 9 and 10.
There was no report obtained from Dr Williams with respect to the surveillance videos and he was not asked to comment on the videos in examination‑in‑chief, notwithstanding the fact that on 26 August 2008 Dr Kagi provided a report to the defendant's solicitors (which I presume was served timeously as its tender was not objected to) which commented on the videos and in particular an inconsistency, to Dr Kagi's mind, between the plaintiff climbing by ladder onto the roof of the Amity Tavern to carry out repairs to a flue, and his statement to Dr Kagi two days later that he could not do roofing work as he was "not allowed to climb".
In terms of the plaintiff's capacity for work Dr Williams was of the view that it would be dangerous for the plaintiff to attempt to walk across rafters as he thought he would not be able to maintain his balance in the event that he suffered pain and his foot gave way either in the midfoot or the ankle. Also he thought that as the plaintiff would have to work in boots which immobilised the ankle and foot he could not work on roofs because he understood that roof carpenters wore softer shoes. There was no evidence from the plaintiff to this effect and the plaintiff gave no evidence of his ankle ever giving way.
Dr Williams also said that the plaintiff could not kneel because he lacked dorsiflexion of the ankle. However, he agreed that with orthotics and ankle support boots he could work as a general carpenter. He said he could get up a ladder occasionally but not repeatedly. He thought there were general ways in which he could work using his carpentry skills. He thought that if he required a fusion of the ankle at some time his disability would be 30 per cent as opposed to 20 per cent. He envisaged that that could occur in 5-10 years but he did not give any estimation of the probability or chance of the plaintiff coming to a fusion procedure.
In cross‑examination Dr Williams said that he thought the plaintiff was fit to work a full day doing the lighter aspects of carpentry duty, but that this would need to be tested as the plaintiff complained of increasing pain over the course of a day. His prediction of progressive degeneration in 5‑10 years was based partly on the plaintiff's history and partly on the MRI evidence. He thought the plaintiff's functional capacity would be prolonged by regular swimming and other exercise, and using appropriate supports and orthotics.
Dr Kagi practised as an orthopaedic surgeon for many years, but now does medico‑legal work. He disagreed with Dr Williams in two main respects, first, his assessment of permanent disability in the ankle and foot that could be attributed to the accident caused injuries, and second, his opinion as to the extent of the plaintiff's incapacity for work.
Dr Kagi first saw the plaintiff on 16 November 2007 some 17 months after the accident. The history given to him was the plaintiff experienced pain on the outer side of the left ankle which was continuous and which worsened after a couple of hours on his feet. He also complained of soreness in the left forefoot, indicating the dorsum of the foot, which he said he experienced mainly when he walked with a heel/toe action as recommended by his physiotherapist. The plaintiff told Dr Kagi that his foot swelled by the end of a working day. He also experienced a fatigued feeling in his left calf associated with being on his feet. Dr Kagi recorded that the plaintiff told him that he worked four hours per day and was restricted in that he could not climb or work on roofs and could not lift more than 5 kilograms. Dr Kagi recorded that the plaintiff was doing small work such as changing locks and cutting and passing timber. He noted that he was "mainly the gopher".
Dr Kagi found that the fractures of the metatarsals and the lateral malleolus had united satisfactorily and that the avulsed second toenail had regrown. He did not consider that there had been any aggravation of the gouty arthritis of the left great toe or the early degenerative arthritis in the left ankle which was seen on x-ray and which the plaintiff said was asymptomatic before the accident.
In terms of his work capacity, Dr Kagi considered that the plaintiff should be able to extend his hours to a normal 38 hour week in the near future but he accepted that it would be unwise for him to work up ladders or on roofs considering that he had not regained normal proprioception in the left ankle which left him at risk of losing balance. He assessed a permanent disability of 20 per cent loss of function of the left leg below the knee.
Dr Kagi saw the plaintiff again for the purposes of an updated assessment on 1 August 2008 when he was told that the plaintiff was working 20 hours per week in light duties. In his report he stated:
"He said he cannot do roofing work as he is 'not allowed to climb'."
The plaintiff complained to him of soreness on the outer side of the left ankle in the area of the lateral malleolus and of pain in the left heel which worsened as the day progressed. He said this had occurred since he had been wearing new work boots and occurred in the region of the orthotics which he said had not helped. Dr Kagi said in evidence that the plaintiff made no complaint of pain in the forefoot.
On examination Dr Kagi found that the left ankle was slightly thicker around the lateral malleolus but he could not see any difference between his two feet. He reported that he was not tender around the lateral malleolus or in the forefoot or heel. In dorsiflexion the movement of the ankle was equal to that of the right, but plantar flexion was a good 20 degrees less and the resting position of the foot confirmed this reduction. The range of movement of the mid tarsal joint was slightly less than on the right but subtalar joint movements were equal. Dr Kagi found that the plaintiff walked without an obvious limp and could stand on his heels and toes and walk on heels and toes for a few steps. He reported that proprioceptive function of the left ankle was virtually the same as the right which he thought reflected the benefit of physiotherapy and home exercises.
Dr Kagi reached the view that the plaintiff could expect degenerative changes over a 15‑20 year time span. He thought the plaintiff's main symptoms related to his footwear and that the provision of orthotics did not appear to have changed his symptoms. Dr Kagi was of the view that the condition of the left ankle was contributed to in equal parts by pre‑existing degenerative changes and the fracture of the lateral malleolus. He was of the view that the plaintiff's improved proprioception meant that he could work at height, up ladders and on roofs. In evidence he said this was an opinion he was prepared to give knowing of the risk it created in terms of professional liability. He maintained his assessment of a 20 per cent disability of the left leg below the knee which he said took into account the likelihood of ongoing degenerative changes as a result of the malleolar fracture.
In a further report dated 1 September 2008 Dr Kagi commented on the MRI. It confirmed his diagnosis and opinion. He said it revealed some degenerative changes associated with the fracture of the second metatarsal which he said he had allowed for in his assessment of permanent disability. He also noted that there was evidence of subtle degenerative change in the other metatarsal joints which finding reinforced his opinion that the damage caused by the injury was confined to the fractures of the second and third metatarsals and did not extend into the rest of the tarsometatarsal joints which had changes consistent with age.
Dr Kagi was also asked to comment on the surveillance videos. He said the recording of the plaintiff climbing a ladder to the roof of the Amity Tavern and fixing a flue on 30 July 2008 was inconsistent with his statement that he "could not do roofing work as he was not allowed to climb". He thought the surveillance evidence showed this to be patently untrue. Dr Kagi said:
"I thought it was a superb demonstration of excellent function. His ability to climb a ladder, walk up and down the roof, stand around at the races all afternoon and shovel sand, pull bits of timber. Excellent functional demonstration. And to my mind, this confirmed the fact that he – that not only had he recovered well from his injuries but that they hadn't been all that severe."
Dr Kagi was also asked about his assessment of permanent disability having regard to the opinion of Dr Desmond Williams that the plaintiff had a 20 per cent disability of the left ankle and a similar disability in the left foot. Dr Kagi said that he thought that overall the plaintiff had a 20 per cent disability which took into account the injury to the left metatarsal region and the lateral malleolus. His assessment took into account "pain, stiffness and possibility of aggravated or increased post‑traumatic degenerative change in both the ankle and the foot".
In cross-examination Dr Kagi said that he disagreed with Dr Williams' opinion that the MRI confirmed post-traumatic osteo‑arthritic change in the ankle and foot. He said that it was too early for post-traumatic degenerative change to be appearing and that any degenerative change shown in the MRI pre‑existed the accident. He said that there were age related changes, which were not significant, in the lateral metatarsophalangeal‑tarsometatarsal joints. He thought it was arguable that with respect to the two injured metatarsal bones, the radiologist was describing anatomical incongruity of the fractures rather than post‑traumatic changes. He considered the changes on the medial side of the ankle, on the opposite side to the fracture site, to be pre‑existing. He disagreed strongly with Dr Williams' approach which, he thought, put undue reliance on the MRI report. Dr Kagi said:
"The proper order is to take a decent history, do a proper examination, record it accurately and sequentially, then carry out appropriate investigations, which start off with the simplest investigations and go on to the most complicated …"
Mr Steven Morgan
Mr Morgan is the accountant for Havoc and the plaintiff and has been for some years. He identified the financial statements of Havoc (Exhibit 1). In relation to the profit and loss statement for 30 June 2006 Mr Morgan said that the accounts showed a figure of $23,500 as director's wages paid to the plaintiff, from which PAYE tax would have been deducted, and a net profit of $18,810 which was not distributed as it was offset against losses carried forward from previous years. He explained that Havoc's accounts were done on a cash receipt basis so that they reflected income banked and expenses paid in the relevant period. He was not aware that Havoc carried over any significant amounts of materials from year to year.
In relation to the profit and loss statement for 30 June 2007, Mr Morgan confirmed that the plaintiff was in fact paid less in wages than the company received in workers compensation benefits and that the company made a net profit in that year of $1,432 on which it paid tax of $430 giving an after tax profit of $1,000 which was not distributed.
Mr Morgan was not examined at all with respect to the opinions expressed by the defendant's expert, Mr Smit. Moreover, nothing in Mr Morgan's evidence suggested that the plaintiff had derived any greater financial benefit through Havoc than was indicated in the company's financial statements.
Mr Raymond Ralston
Mr Ralston described himself as a trades assistant. He had worked with the plaintiff in the carpentry trade since about 1990 on what he described as a part-time permanent basis. Before 2003, when he bought a lawn mowing round, Mr Ralston had worked with the plaintiff on a number of projects. He said that the plaintiff had always worked alongside him, doing the same number of hours per day. He said that as a trades assistant he needed supervision unless the job was repetitive. He resumed working for Havoc in December 2006 after a working holiday. He worked by himself or with the plaintiff's sons. During 2007 he worked from time to time on the replacement of the roof of the Leisure and Aquatic Centre. The plaintiff did not participate in this work but came to the site from time to time. In recent times he had been working at the Burgoyne Road site with the plaintiff. He charged Havoc $27 per hour for his services.
Mr Alan Smit
Mr Smit is a chartered accountant. He is the manager of RGL Forensic Accountants and Consultants. He made three reports dated 13 May, 15 July and 21 August 2008 (Exhibit 13). In the introduction to his first report he said he was asked to analyse the financial documents of the plaintiff and to comment on his claim for loss of earnings. He analysed the profit and loss statements of Havoc for the financial years ended 30 June 2004‑2007 and the six months to 31 December 2007. He concluded that the business of the company had been affected by the plaintiff's accident in that net profit had not increased relative to contract income. On his analysis of the documents there was evidence of the plaintiff taking drawings from the company in addition to wages. Mr Smit said the drawings figures in his report were based on bank reconciliations. They did not appear in the financial statements of the company, although he assumed that they would affect the plaintiff's loan account which he was unable to reconcile.
Mr Smit identified drawings and director's wages as follows:
| For the year ended 30 June |
| Distribution | 2004 | 2005 | 2006 | 2007 |
| Drawings | 8,986 | 4,028 | 10,121 | 15,334 |
| Wages - Director | 16,445 | 22,500 | 23,500 | 10,451 |
| Total Distribution | 25,431 | 26,528 | 33,621 | 25,785 |
Mr Smit's evidence of the plaintiff's drawings from Havoc was not challenged. Nor was any evidence given by the plaintiff or his accountant Mr Morgan to the contrary. Clearly, this evidence shows a much more consistent level of income to the plaintiff from the company over the years, than the profit and loss statements would suggest.
In his first report Mr Smit concluded that the cost to Havoc of additional labour over the period of two and half years from the date of the plaintiff's injury based on the ratio of labour costs to contract income derived from the company's financial statements was $367 per week which amounted to a net loss to the plaintiff after tax of $293 per week. Accordingly, past loss was assessed at $29,756 and future loss at $143,715.
In his second report dated 15 July 2008 Mr Smit adjusted his calculations to reflect information given to him that the plaintiff had been off work for the first eight months of the 2006/2007 financial year and that the workers' compensation figures recorded as income in Havoc's financial statements related to the plaintiff's accident. Mr Smit averaged contract income and labour costs (excluding plaintiff) in the three financial periods prior the accident and arrived at a ratio of 37 per cent of labour costs to contract income. Havoc's accounts for 2007 showed a ratio of 53 per cent. By applying the pre‑accident average of 37 per cent Mr Smit concluded that but for the plaintiff's accident Havoc's wages and subcontractors' expenditure would have been $56,991 as opposed to the actual expenditure of $82,413, demonstrating a loss of $23,422.
Mr Smit then went on to note that in 2007 Havoc received $20,302 in workers compensation weekly payments and $8,000 by way of an apprentice bonus. He took the view that this income would not have been received but for the accident. The total of these figures exceeded his calculation of the actual cost of additional labour and he therefore concluded that no net loss had been suffered. He went on to conclude that the workers compensation payments were sufficient to fully compensate Havoc (and therefore the plaintiff) for the additional labour costs incurred in the 2007/2008 year. But for the receipt of workers compensation payments the cost of additional labour in the six months from July to December 2007 would have been $1,343 which he extrapolated over the balance of the plaintiff's working life to age 65, using the 6 per cent discount multiplier, at $18,358.
On p 9 of his second report Mr Smit offered an alternative calculation of loss based on statistical evidence that a fully qualified carpenter could expect to earn about $976 per week (38 hours at $25.68 per hour). On the basis that the plaintiff worked an average of 38 hours per week prior to the accident Mr Smit assumed that 75 per cent of his time (28.5 hours) was spent on productive and 25 per cent doing administrative work (9.5 hours). On this basis, if the plaintiff was only able to work 20 hours per week productively, his loss of income would be for 8.5 hours per week.
At the given rate ($25.68 per hour) this would amount to a loss of $40,684 in the period to 30 June 2008 as follows:
(a)July 2006-February 2007 (35 weeks)
28.5 hours @ $25.68 = $732
$732 x 35 weeks = $125,620
(b)March 2007-June 2007 (17 weeks)
8.5 hours @ $25.68 = $218
$218 x 17 weeks = $3,711
(c)July 2007-June 2008 (52 weeks)
$218 x 52 weeks = $11,352
This approximated the total of the workers compensation payments by QBE of $32,686 for that period and the apprentice bonus of $8,000.
On the basis of a loss of $218 per week future loss would be $77,587.
Mr Smit also made an analysis based on the assumption that the plaintiff's loss of physical capacity could be replaced by that of his son Matthew. Assuming that Matthew, as an apprentice, would take twice as long to perform a task as the plaintiff, then, at a cost of $22 per hour the cost to the company over the period would have been $35,210, again exceeded by the workers compensation weekly payments and the apprentice bonus. This approach resulted in a weekly loss of $189. Accordingly, future loss was calculated at $67,149.
Mr Smit accepted that in 2000 the plaintiff benefited from the company's earnings in terms of both wages ($23,500) and profit ($18,810). He also accepted that the profit and loss statement for 2007 showed that not all of the workers compensation payments to the company had been paid as wages to the plaintiff, thus indicating that without such payments the company would have made a loss, the profit for that year being only $1,432.
Mr Smit did not accept that Havoc had lost contract revenue as a consequence of the plaintiff's incapacity as he assumed that the company had employed substitute labour. He accepted, however, that the fact that contract income had increased did not mean that revenue had not been lost; it depended on Havoc's capacity. In this regard counsel for the plaintiff conceded that the plaintiff, through Havoc, operated at full capacity prior to the accident.
In relation to the averaging of the pre-accident financial data for Havoc, Mr Smit accepted that materials and subcontractor expenses could potentially inflate contract income in a particular year. He was unable to discern what proportion of the contract income from time to time included materials. He thought that because the accounts were done on a cash receipt basis the material costs from year to year would not necessarily be reflected in the corresponding income figure.
In other respects, including the accuracy of his calculations, Mr Smit's evidence was not challenged.
Mr Craig Olsen
Mr Olsen was the surveillance operative who made the video recordings of the plaintiff at work (Exhibits 6 and 7) and whose observations of the plaintiff were recorded in the surveillance reports (Exhibit 8). He gave evidence that he observed the plaintiff to perform the normal activities of a carpenter, "lifting planks, moving rocks and debris, shovelling, digging, doing general activities around a building site and supervising and instructing other workers". He said the Burgoyne Road site was on a steep incline. He saw the plaintiff walking up and down the slope and carrying planks.
Mr Olsen was not cross-examined.
Documentary evidence
A good deal of documentary material was tendered in evidence by or on behalf of the plaintiff. This included:
Exhibit 1:Financial statements of Havoc 2004-2008
Exhibit 2:Plaintiff's individual taxation returns 2000-2008
Exhibit 3:Weekly time and wages books of Havoc 1998‑2008
Exhibit 4:Subcontractor invoices of Havoc – 6 July 2004-31 July2007
Exhibit 10:Havoc 2003-2004 cashbook
Exhibit 15:Havoc invoices 23 November 2003 – 18 August 2008
In all approximately 900 pages of business records were tendered. Very little by way of analysis of this material was provided apart from a schedule prepared on behalf of the defendant which I received as an aide‑memoire which showed in percentage terms the ratio of the cost of materials to contract income over the period 2004-2008.
The analysis of the income and expenses of Havoc made by Mr Smit resulted in a predicted ratio of labour costs to contract income. The contract income included materials costs which vary from year to year. The evidence of the plaintiff and his wife was to the effect that the company did not carry over significant quantities of materials. Accordingly, I assume that material costs varied as a component of contract income from one job to another.
From my own reading of the documents I have prepared Annexure A to these reasons which summarises some of relevant data with respect to the income and expenditure on materials and labour of Havoc, the plaintiff's remuneration from the company and the company's profit in the period 2004‑2008. Annexure A also shows the ratio of labour costs to contract income (less cost of materials) as a percentage from year to year. In the two years before the accident the ratio was, on average, 40.5 per cent and in the two years following, 81 per cent. I consider that whatever benefit can be gained by analysing the financial evidence, it is likely to be enhanced if materials expenses are isolated, the reasons being that the materials costs varied from job to job, and, according to the plaintiff, increased significantly in the last year or two.
The QBE workers compensation claim summary (Exhibit 9) was tendered on behalf of the defendant and I was provided with a summary of workers compensation weekly payments for the period 6 February 2008‑5 August 2008 showing the amount paid and the hours worked and compensated per fortnight.
Exhibit 15 indicates that the company's invoices in 2005-2006 totalled about $145,000. Approximately 60 per cent of the total amount invoiced for the year was for City of Albany work. In 2006‑2007 the total amount invoiced was about $194,000 with about 30 per cent being for City of Albany work. In 2007‑2008 the company's invoices totalled approximately $303,000. Approximately 27 per cent of that sum was invoiced to the City of Albany. The invoices showed that the significant increase in the revenue of the company in 2007 and 2008 has been due to an increase in non-municipal work.
Havoc's subcontractor invoices (Exhibit 4) show that in 2006 Daniel Williams invoiced $25,868 and Mr Ralston $991 making a total of $26,859 out of a total annual subcontractors' expense as per the profit and loss statement of $30,775.
In 2007 the profit and loss statement showed subcontractors' expenses of $55,500 and wages (not including the plaintiff) of $26,913. The wages were paid to Matthew Williams. The subcontractor expenses included $30,639 paid to Daniel Williams and $13,200 to Mr Ralston.
In 2008 the profit and loss statement shows subcontractor expenses of $93,665 and wages (other than plaintiff) of $39,734. In that year it appears that Matthew was paid wages of $37,132. Daniel was paid $31,586 and Mr Ralston $19,959.
Exhibit 9 shows that in the period 6 February – 5 August 2008 QBE paid Havoc an average of $372.90 per fortnight ($186.45 per week) on the basis of the plaintiff's reported incapacity. The average number of hours compensated was 17.3 per week, about 2.5 hours per day. This average bears some relation to the pleaded claim which is based on a loss of capacity of 18 hours per week.
Exhibit 2, the plaintiff's individual tax returns, show that in the financial years 2000‑2008 his declared income from exertion has been as follows:
2000$18,614
2001$15,350
2002$19,650
2003$12,300
2004$16,445
2005$22,500
2006$23,500
2007$10,451
2008$21,982
From this information it may be observed that in the period of five years prior to the financial year ended 30 June 2004 the plaintiff earned an average of $352 gross per week from exertion. In the two financial periods prior to the accident being 2005 and 2006 the plaintiff earned an average weekly wage of $442 gross.
Findings
I find that prior to the accident the plaintiff was able to perform unrestricted work as a carpenter/builder, notwithstanding his Achilles tendon rupture in 2004, which caused some degree of residual tendinopathy as later revealed on MRI, and age-related arthritic degeneration in his left foot and ankle, including the great toe which had become very stiff.
His work as a contract carpenter/builder was carried out through Havoc of which he was the only director and shareholder and by which he was paid a regular wage of about $450 gross per week. In addition to wages the plaintiff took drawings from the company. Although the defendant's expert Mr Smit could not reconcile the director's loan account of Havoc in this respect, his evidence as to the extent of the plaintiff's income from wages and drawings was not disputed and showed that such income had been consistent over a three year period prior to the accident, averaging approximately $550 per week gross. The year after the accident the total amount of wages and drawings fell to $25,785, $496 per week, subsidised by workers compensation weekly payments of $20,302 gross.
On the available evidence I am unable to infer that the drawings identified by Mr Smit represented income earned from exertion. They appear to have been drawn against equity. The plaintiff's accountant Mr Morgan pointed out that although Havoc made a profit in the financial year ended 30 June 2006, this profit was not distributed and was in fact off-set against accumulated losses. In the circumstances I find that the plaintiff's income in the year prior to the accident was $450 gross per week. According to the weekly tax table applicable at that time his net earnings would have been approximately $380 per week. This was the highest average weekly income he had earned in the seven years of which evidence was given.
The plaintiff's convalescence from injury was slow and he was not able to attend to work until the beginning of February 2007. Although he conceded that he kept an eye on work done by his sons and Mr Ralston during that time and ran the odd errand, I accept that he did no gainful work which should be brought into account in the assessment of his financial loss.
I accept that over the period from 1 February 2007 to 31 December 2007 the plaintiff's earning capacity was gradually but not fully restored. Doing the best I can on the evidence I find that on average he was probably able to work for 20 hours per week on average, that is, four hours per day and that his labour was replaced by others to the extent of 3.5 hours per day, 17.5 hours per week. From 1 January 2008 I find that the plaintiff has been able to work productively for 4.5 hours in the morning and on average 1.5 hours in the afternoon such that his labour has been replaced by others for, on average, 7.5 hours per week. These findings take into account the plaintiff's limited ability to do roofing work and what he perceives to be his reduced productivity.
In arriving at these conclusions I take into account the evidence of the plaintiff and his wife, the surveillance evidence to which I have referred, the evidence of Mr Ralston and the financial records of Havoc and the significant changes in the plaintiff's role in the company which those records and the other evidence demonstrate.
I accept that the plaintiff does have an ongoing disability in his left foot and ankle due to the accident caused injuries. The extent of the disability lies somewhere between the assessments of Dr Kagi and Dr Williams, neither of whose opinions I am satisfied should be accepted in their entirety.
The plaintiff has progressive pre‑existing degeneration in his left foot and ankle. He has collapsed arches on both sides but the left is now more pronounced. His pre‑existing great toe stiffness and Achilles tendinopathy were not apparently symptomatic but compromised his left lower limb functioning, and pre‑existing aged related degeneration in the forefoot and ankle was likely, I accept, to have continued in any event.
The accident‑caused injuries, however, were severe and I accept the evidence of the plaintiff and his wife that even now the plaintiff has residual symptoms which become worse as the day progresses. These symptoms of soreness and swelling, however, are not as intrusive or limiting as the plaintiff's evidence would suggest. This much is clear from the plaintiff's observed activities at the Albany races and at work on 30 and 31 July and 1 August of this year.
I examined the video surveillance evidence with great care. Whilst I accept the plaintiff's explanation of the apparent inconsistency between what he told Dr Kagi of his inability to do roof work and his depicted activities on the roof of the Amity Tavern in July, which involved far less physical effort, then the work involved in erecting or cladding a roof, it was significant that the plaintiff was able to not only scale and descend a ladder with ease, using only one hand, but also to squat easily and to negotiate a low‑pitched roof in obviously blustery conditions without displaying any sign of apprehension or difficulty. These events occurred in the middle of the afternoon. Dr Kagi's reaction to the surveillance evidence, I find was quite understandable, having regard to the plaintiff's unqualified statement that he was "not allowed to climb".
Similarly, the activities depicted on the Burgoyne Street building site on 30 and 31 July included physical well work into the afternoon which was not wholly consistent with the plaintiff's professed inability to work more than "an hour or two" after lunch. I accept that the plaintiff now does more supervisory work and quoting than he did before the accident. I also accept that previously he tended to work all day on the tools and did administration type work at the end of the day or in the evening whereas now he tends to that work during normal working hours.
The nature of the plaintiff's business is changed. The amount of work Havoc does for the City of Albany has not diminished in value but is a much lower proportion of the company's overall building activity than it was beforehand. The increases in both contract income and subcontractor and wages expenses show that, whether as a result of the accident caused injuries or not, the plaintiff now does less work "on the tools", being assisted to a greater extent since the accident by his sons Daniel and Matthew and Mr Ralston.
It is submitted, and I accept, that the plaintiff does not have entrepreneurial skill. This is evident from his history of modest earnings for a good many years prior to the accident and from the fact that despite significantly increased turnover, the profits of Havoc, and its capacity to pay the plaintiff a reasonable wage have not increased proportionately. The evidence does not show, however, that the apparent failure of Havoc to show a decent profit or to be remunerate the plaintiff in wages, even with the benefit of workers compensation payments, is substantially due to the plaintiff's partial incapacity. Indeed, it remained a mystery at the end of the trial why Havoc's profits and the plaintiff's remuneration remained so low when its contract income had increased so markedly.
Whether or not the plaintiff would have employed Matthew as an apprentice in any event is unclear, but his increased reliance on his sons and Mr Ralston since the accident suggests that at least some of his labour has been substituted. Taking into account all of the evidence I am not satisfied that the plaintiff has lost 2½ hours productive capacity per day as claimed. I find that his current and likely future capacity for physical work is six hours per day.
Relevant principles
In Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 16 McHugh J summarised the essential principles governing compensation for loss of earning capacity as follows:
"In Australia, a plaintiff is compensated for the loss of earning capacity, not loss of earnings. 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 341 per Dixon, Kitto and Taylor JJ 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. Earnings are evidence of the value of earning capacity but they are not synonymous with its value. When loss of earnings rather than loss of capacity to earn is the criterion, the natural tendency is to compare the plaintiff's pre‑accident and post‑accident earnings. This sometimes means no attention is paid to that part of the plaintiff's capacity to earn that was not exploited before the accident. Further, there is a tendency to assume that if pre‑accident and post‑accident incomes are comparable, no loss has occurred."
In Husher v Husher (1999) 197 CLR 138 Gleeson CJ, Gummow, Kirby and Hayne JJ said at 147, [18]:
"The financial loss occasioned by impairment of earning capacity is the loss of what (if there had been no accident, the injured plaintiff would (as opposed to could) have expected to have had under his or her control and that his or her disposal by exercising that capacity. We refer to 'control' and 'disposal' because what the plaintiff has lost are the financial rewards from work that are rewards the plaintiff would have been able to direct to whatever purpose or destination he or she chose."
In Adams v Ascot Iron Foundry Pty Ltd (1968) 72 SR (NSW) 120, at 132‑3, Sugerman JA observed as follows:
"In many, if not most, cases of damages for personal injuries, damages are awarded in respect of a lost or diminished earning capacity for the plaintiff. In such cases loss of earnings in the past and prospective loss of earnings in the future furnish a guide to the measure of such damages. A plaintiff is frequently said by medical evidence to be unfit as a result of his injury for his former employment, but to be capable of doing other forms of work, e.g. light work with or without particular qualifications. If in such cases a question arises of the plaintiff's ability to find such other forms of work the problem is not one of mitigation of damages, it is really the plaintiff who is seeking to increase damages by establishing that he has been unable to obtain and in the future may not be able to obtain, or may only be able to obtain intermittently, work of the only kind of which he is capable. In this respect the onus of proof in the sense of the onus of satisfying the jury rests upon the plaintiff as part of the general burden which lies upon him of proving the extent of damage he has suffered by reason of the injury."
This statement was approved by McHugh J in Medlin at 21. In Giorginis v Kastrati (1988) 49 SASR 371 at 375, von Doussa J said:
"The burden of proof rests on the plaintiff. Where damages are claimed for loss of earning capacity, the plaintiff must prove the extent of his pre-accident earning capacity, the extent to which that capacity would have been productive of income had the accident not happened, and extent to which the compensable injuries have diminished his ability to exercise the pre‑accident earning capacity. It is necessary to emphasise that these matters cannot be satisfactorily proved by medical experts alone. There must also be evidence to prove the basic facts on which the medical opinion depends, and the circumstances of the plaintiff which are necessary to translate the medical opinion into findings of fact pertinent to the assessment of damages for loss of earning capacity. Medical opinion alone as to the plaintiff's pre‑accident and post-accident capacity for work cannot prove the extent to which the plaintiff's earning capacity has been exercised in the past, or the extent to which his earning capacity is likely to be exercised in the future. In a case like the present one, it is incumbent on the plaintiff to show how he has used his capacity for work both before and after the accident. The plaintiff would be well advised to produce the best evidence available."
Sometimes a loss of earning capacity may be found not to cause financial loss. One example is in the decision of the Full Court of the Supreme Court of Western Australia in Italiano v Vita (unreported; FCt SCt of WA; Library No 950109, 15 March 1995) a decision relied on by the defendant. In that case a limestone mason suffered a back injury which prevented him from continuing to work "on the tools", but he was able to mitigate and avoid financial loss by developing his business to an extent that he was able to engage subcontractors to do such work and thereby in fact increased his income.
Another example is McCracken v Melbourne Storm Rugby League Football Club Ltd (2007) Aust Tort Reports 81-925; [2007] NSWCA 353 where a talented rugby league player who suffered spinal injuries as a result of a wrongful tackle was found not to have suffered economic loss by reason of his incapacity to continue to play rugby because he was then able to devote his time to property development and had in fact earned profits far greater than his likely earnings as a rugby player.
Assessment
Non‑pecuniary loss
The assessment of damages for non‑pecuniary loss in this case is governed by s 3C of the Motor Vehicle (Third Party Insurance) Act 1943. Both counsel referred to the leading decision of Wylde v 'Arriaza (1997) 25 MVR 539 a decision of the Full Court of the Supreme Court of Western Australia in which the proportional severity of injury was assessed at 20 per cent of a most extreme case in the case of a roof plumber who had suffered lower leg injuries that were clearly more serious than those of the plaintiff in this case.
The submissions of counsel were frank and helpful in this regard. The defendant submitted that an appropriate range was between 8 per cent and 20 per cent of a most extreme case. Counsel for the plaintiff submitted 15 per cent. I accept the plaintiff's submission and accordingly award damages of $30,850 net of the statutory deductible in accordance with the method of assessment prescribed by the Act.
Past loss of earning capacity
The significance of the principle stated in Husher v Husher (supra) is important in this case because the plaintiff prior to the accident conducted his business through a corporate entity and continues to do so. It is necessary to assess his claimed financial loss in that context. I accept that in the circumstances of this case Havoc's loss is the plaintiff's.
It is the plaintiff's case that his earning capacity was fully exercised prior to the accident and he was able to work 38 hours per week "on the tools". His pre‑accident income, through Havoc, was modest and the plaintiff has not led evidence to show that but for the accident his income as a self employed carpenter/builder would have increased significantly. In my opinion the plaintiff should be compensated for loss of earning capacity on the basis of the cost to Havoc of replacing his labour, adjusted to reflect income tax and the Medicare levy.
In determining the amount of the cost of replacement labour I have had regard to the analysis of the defendant's expert, Mr Smit. Because I have reached the view that variable, and apparently escalating, materials costs should be isolated from the calculation of the labour costs/contract income ratio, I do not accept his methodology entirely. I have, nevertheless, been assisted by the various approaches to quantification of loss described in his reports. On my analysis the average pre-accident labour costs/contract income (less materials) ratio of 40.5 per cent when applied to the contract income figure for 2007 demonstrates a difference in subcontractor/wages costs, between actual and expected, of $32,544. Assuming that figure to be the plaintiff's loss, the net value after deduction of income tax and Medicare levy would be $26,884. This differential approach is justified by the fact that the contract income (including and excluding material costs) in the year after the accident was similar to that in the year prior.
On this basis, I would allow $739 for the period 20‑30 June 2006 and $26,884 for the 12‑month period thereafter which includes the period of total incapacity to February 2007 and the subsequent period of partial incapacity.
From 1 July to 31 December 2007 I have found that the plaintiff's labour was replaced for 3.5 hours per day on average. In this period the differential approach is not apposite as contract income in 2007‑8 increased to almost twice that of 2005-6. At the rate of $27 per hour, which I find to be a reasonable rate having regard to the hourly rates of Mr Ralston and Matthew Williams, the weekly cost would have been $472.50. I would reduce this amount by 16.5 per cent for income tax/Medicare levy to $395. For 26 weeks the net loss is $10,270.
For the period of 39 weeks from 1 January 2008 to date the cost of replacing the plaintiff's labour for 7.5 hours per week at $27, less 16.5 per cent for tax/Medicare levy is $169 per week, $6,591 in total.
I therefore assess past loss of earning capacity as follows:
20 June 2006 – 30 June 2006 $739.00
1 July 2006 – 30 June 2007 $26,884.00
1 July 2007 – 31 December 2007 $10,270.00
1 January 2008 – 30 September 2008-09-25 $6,591.00
Total $44,484.00
I do not consider that the apprentice bonus received by Havoc in respect of Matthew's employment should be taken into account in reducing this loss as Matthew may have been apprenticed in any event, as his brother had been, and the plaintiff's labour was replaced by that of Daniel and Mr Ralston as well as Matthew.
I have been informed by the parties that workers compensation weekly payments to the date of trial total $32,542. I would therefore add interest on the difference of $12,000 (in round terms) at the cumulative rate of 3 per cent for 2.25 years in the sum of $810.
Future loss of earning capacity
The plaintiff is able to work usefully for a full working day but is compromised, as I have found, to a degree that makes it reasonable to compensate him for the cost to him, through Havoc, of employing substitute labour for an average of 7.5 hours (equivalent to one day) per week.
I consider that future loss should be calculated at the rate of $31.80 per hour as submitted by the plaintiff, being the current rate, net of GST, for an experienced carpenter. At $31.80 per hour the loss is $238.50 per week, which sum represents income that, but for the accident, the plaintiff would expect to earn. Taking into account the relevant marginal rates of income tax and the Medicare levy, I would reduce this sum by 16.5 per cent to $200. I accept that this figure may seem high by comparison with his pre‑accident wages, but I believe it is a proper estimation of the loss. In this regard see Cohen v Ninkovic [2000] WASCA 169 at [19].
For 13 years (to age 65) the statutory 6 per cent discount multiplier is 475.7. Accordingly, I calculate future loss at $95,140, say, $95,000, which I consider to be a reasonable estimation of the capital value of the diminution in the plaintiff's future earning capacity. My assessment takes into account the plaintiff's limitation in terms of roof construction work and the chance of increased symptoms in future due to progressive degeneration.
Fox v Wood allowance
The parties have agreed a figure of $2,000 as reasonable compensation for tax paid on weekly payments of workers compensation.
Special damages
Special damages are agreed in the amount of $27,586.11 being the sum of the statutory allowances paid by the workers compensation insurer for medical and related treatment and rehabilitation, and other agreed expenses.
Future medical expenses
The evidence did not show that the plaintiff has any treatment requirements at present other than orthotic insoles, Flexil, and perhaps occasional physiotherapy. However, in future, the plaintiff is likely to suffer increasing symptoms with the progression of degenerative changes in his foot and ankle caused by his injuries, and may even come to a fusion of his arthritic ankle. The evidence does not permit precise findings to be made as to the likely cost of future treatment. The plaintiff has submitted a global amount of $2,500 which, absent any serious contest on this issue, I am prepared to allow.
Summary
Non-pecuniary loss $30,850.00
Past loss of earning capacity $44,484.00
Interest on past loss of earning capacity $810.00
Future loss of earning capacity $95,000.00
Fox v Wood allowance $2,000.00
Special damages $27,586.11
Future treatment $2,500.00
Total $202,230.11
Annexure A: Table of financial data of Havoc Builders Pty Ltd derived from Exhibit 1
| Year | Contract Income | Materials | Materials/ Contract Income | Contract income less materials | Wages and subcontractor expenses (excluding plaintiff) | Labour/Contract income less materials | Plaintiff's wages, bonus | Havoc profit/loss |
| 2004 | $179,506.00 | $51,230.00 | 29% | $129,776.00 | $91,234.00 | 71% | $16,445.00 | $(9,366.00) |
| 2005 | $124,395.00 | $57,665.00 | 46% | $66,730.00 | $27,360.00 | 41% | $22,500.00 | $(7,439.00) |
| 2006 | $141,982.00 | $30,775.00 | 22% | $111,207.00 | $44,572.00 | 40% | $23,500.00 | $18,810.00 |
| 2007 | $266,739.00 | $60,908.00 | 39% | $123,133.00 | $82,413.00 | 87% | $10,451.00 | $1,432.00 |
| 2008 | $279,626.00 | $100,532.00 | 36% | $190,935.00 | $133,399.00 | 75% | $21,982.00 | $365.00 |
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