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Alexander Robert Meldrum v David Morris McMullen

 

[1979] FC 20

IN THE SUPREME COURT OF QUEENSLAND

Appeal No. 28 of 1978

FULL COURT

BEFORE:

Mr. Justice Stable, S.P.J.

Mr. Justice W.B. Campbell

Mr. Justice Andrews

(Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter, Court Reporting Bureau.)

-------

BETWEEN:

ALEXANDER ROBERT MELDRUM

(Plaintiff) Appellant

-and-

DAVID MORRIS McMULLEN

(Defendant) Respondent

JUDGMENT

MR. JUSTICE STABLE: I consider that the appeal should be allowed with costs and the Judgment of the trial judge varied by substituting for the sum of $79,468.30 the sum of $107,218.30. I publish reasons.

I am authorised by my brother W.B. Campbell to state that he agrees with the reasons and conclusions which I have published and I am authorised further to publish his additional reasons, which I do.

MR. JUSTICE ANDREWS: I agree with the reasons published by both my brothers and with the orders proposed.

MR. JUSTICE STABLE: The order will be as I have indicated.

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Appeal No. 28 of 1978

ALEXANDER ROBERT HELDRUM

(PLAINTIFF) APPELLANT

-and-

DAVID MORRIS McHULLEN

(DEFENDANT) RESPONDENT

___________________________________

STABLE S.P.J.

W.B. CAMPBELL J.

ANDREWS J.

___________________________________

Judgment of Stable J. and W.B. Campbell J. delivered on the 30th March, 1979 Andrews J. concurring with reasons to both judgments

___________________________________

“THE APPEAL IS ALLOWED WITH COSTS AND THE JUDGMENT OF THE TRIAL JUDGE VARIED BY SUBSTITUTING FOR THE SUM OF $79,468.30 THE SUM OF $107,218.30.”

___________________________________

IN THE SUPREME COURT OF QUEENSLAND

Appeal No. 28 of 1978

BETWEEN:

ALEXANDER ROBERT MELDRUM

(Plaintiff) Appellant

AND:

DAVID MORRIS McMULLEN

(Defendant) Respondent

JUDGMENT - STABLE S.P.J.

The appellant plaintiff appeals against the claimed inadequacy of an award of damages for accidental bodily injury suffered by him on the 12th February, 1973, when he was a passenger in a motor vehicle which collided with a guidepost, left the roadway and crashed into a water course embankment. He sustained a transverse fracture of the shaft of the left femur, a fracture of the medial condyle of the left femur, a fracture of the left patella, and a crush fracture of the left lateral tibial condyle. Treatment included three surgical procedures with consequent scarring and shortening of the left leg, and severe limitation of the movement of the hip joint. The learned trial judge accepted further the opinion of the orthopaedic surgeon who reported, on 10th April, 1978, as follows:—

“There is no doubt that Mr. Meldrum has suffered a severe injury to this left limb which has left him with some external rotation of the leg and slight shortening as well as a lot of trouble around the left knee. He is having quite a lot (of) trouble with the vascular supply to the lower limb which is manifesting itself by means of swelling, induration and discolouration and also the night cramps and I believe he is seeing a vascular surgeon in this regard.

His main problem from an orthopaedic view is definitely the left knee which severely limits him particularly in his practice as a veterinary surgeon with a large animal practice and I have advised him that it is not only painful but dangerous for him to continue in this work. The prognosis is not good because of his bulk and I would feel that this knee will deteriorate over a period of time with degenerative changes, however the condition is stable at the moment. I don't think he would gain anything for any operative or conservative treatment at the moment and would be loath to predict any in the future. I would regard the loss of function of this leg as 50%.”

Defendant's counsel tendered a report by a specialist physician, dated 18th April, 1978, which the learned trial judge referred to in part. This doctor found the appellant to be grossly overweight at 20st. 7lbs, and to have diabetes mellitus. It was not suggested that the diabetic condition was related to the accident, but the physician reported:—

“There are two adverse factors in his general state of health, one is his marked obesity, and the second is his diabetes .... Diabetes, however, though well controlled, is an adverse factor in longevity, and one would anticipate at least statistically the reduction in longevity of approximately five years in a middleaged diabetic of moderate severity.”

At the date of the accident the appellant was two days short of his forty-third birthday.

The appellant was, and is, an able and successful veterinary surgeon. The trial judge found that he had carried on a practice in the Rockhampton region for fourteen years, and that he had become highly regarded in his work with large animals, particularly beef cattle and horses. He was tall and heavy. The trial judge expressed the impression the evidence regarding the appellant had upon him in the following terms:—

“Firstly the plaintiff was a man of prodigious energy with an almost inexhaustible capacity for work. Secondly, he pushed himself to such extremes, in adverse climatic conditions, in work that was physically taxing and highly dangerous (so) that it can fairly be said he had a very frail hold on full health and vigour. Both these matters, which emerge clearly from all the evidence, as well as from the dramatic events of 12th February 1973, are of considerable importance in assessing damages.”

The reference to dramatic events was brought forth by distance covered by the appellant in the course of his work on that date, culminating in his being piloted in very bad flying weather from Glen Prairie to Rockhampton where the airport was closed so that a landing had to be made at Emu Park. It was on the car journey from Emu Park to Rockhampton that the vehicle at speed hit water over the road and came to disaster. The appellant said his average working day would be from about 6 a.m. to 11 p.m. for five days a week, with rostored week-ends. Between the accident and March, 1975, he was unable to take any active part, except for general direction and supervision, in the conduct of his practice he had taken as partner a man of like energy. The partnership agreement was expressed to take effect from 1st February, 1973. So the practice did not die by reason of the appellant's long incapacity, he used some of the period to improve, as the judge found, his own knowledge and skills by attending courses.

The damages awarded at the trial were a total of $77,250 general damage, and agreed special damage of $2,218.30. The appellant appeals on the grounds that:—

  1. The award of general damages made by the learned trial judge in the sum of $77,250.00 is insufficient in that:—
  1. the assessment of the plaintiff's net loss of income until his return to work in March 1975 at $25,250.00 is insufficient.
  1. the assessment of the plaintiff's economic loss from March 1975 onwards at $30,000.00 is insufficient.
  1. The learned trial judge erred in not taking into account that, in respect of his earnings as a veterinerian, the plaintiff gained an advantage from tax deductions arising from his grazing activity.
  1. The learned trial judge erred, in fixing the loss of income of the plaintiff until his return to work in March 1975, by wrongly taking into account a reduction in the plaintiff's income arising out of his investing income in his grazing activity.

As appears from the grounds of appeal there was a rather unusual factor which was very much to the fore at the trial - the appellant's development and conduct of a grazing property which was useful from an income tax viewpoint. The learned judge said:—

“The issue which presents some difficulty in this case arises from the fact that in addition to his veterinary practice the plaintiff owned a grazing property. By careful use of the provisions of the Income Tax Assessment Act the plaintiff over a number of years had been able to keep his tax at a very low figure.”

He claimed that by his use of the law he had never paid more than 20 cents in the dollar taxation. To a great extent the trial was concerned with the effect of the appellant's injuries and their consequences upon his ability to avail himself of his tax advantage. In this context it is observed that for the two years during which he was unable to engage actively in his practice he had the benefit of some $300.00 per week for 104 weeks payable under an accident insurance policy. This is by way of narrative; it has no effect upon the question of quantum of damages.

Ever since it was decided British Transport Commissioner-v-Gourley (1956) A.C. 189 has had a profound influence upon the assessment of damages in bodily injury cases. In Queensland this was succinctly expressed by Gibbs J. in Groves -v- United Pacific Transport Pty. Ltd. and Thompson (1965) Qd.R. 62 at p. 65:—

“In determining what financial loss the plaintiff has probably suffered up to the date of trial by reason of the impairment of his earning capacity, as well as in considering what loss he is likely to suffer in future, I must therefore take his tax position into account.”

In the present case after a thorough consideration of the evidence the trial judge found that the appellant's gross loss of income from his practice from January 1973 to March 1975 was $60,000.00 apportioned

to 30 June 1973

$18,000.00

to 30 June 1974

$34,000.00

to 50 June 1975

$8,000.00

these figures being based on the evidence of two accountants. The appellant had claimed by amendment to the Statement of Claim loss of income to 3 March 1975 $65,000.00. This, of course, could not (as it was) be claimed as special damage. Be this as it may, the sum found is close to the claim.

After considering several statements in Gourley, and referring to consideration of that case by Moffitt P. in Beneke -v- Franklin (1975) 1 N.S.W.L.R. 571 the trial judge held that, “In summary, the total tax position of the plaintiff is relevant.” He referred, also, to Luntz on Assessment of Damages para. 5.714:—

“Evidence, if available, that the plaintiff would have adopted a tax avoidance scheme may be taken into account in the application of Gourley's case.”

There was an abundance of such evidence as to past and future in the present case. So, applying his understanding of the accountancy figures, His Honour reduced the $60,000.00 to $25,250.00 and allowed for the latter sum in his judgment. On appeal it was submitted strongly that upon proper consideration of the figures and the principles this sum should have been $43,800.00.

After the appeal was heard and decision reserved counsel invited our attention to Atlas Tiles Pty. Ltd. -v- Briers (1978) 52 A.L.J.R. 707, which was decided after we had heard argument. Though we gave considerable heed to what appears to have emerged from this majority decision discussion of it in Queensland is now irrelevant owing to the passing of the Common Law Practice Act Amendment Act 1978 which was assented to on 15 December 1978. Shortly, the effect of this enactment is expressed in section 4:—

Loss of earnings and Future Earnings Where in relation to a claim for damages for deprivation or impairment of earning capacity, for wrongful dismissal or for other personal injury it becomes material to assess such damages having regard to loss of earnings or future probable earnings there shall be taken into account in reduction of the sum assessed such amount as is reasonably considered to be the amount that would have been payable as income tax by reason of the receipt of such earnings by the person who has suffered loss of the same, had he received them.”

In effect with regard to cases not determined in the grey area between Atlas Tiles and the amending Act of 15 December 1978 Gourley remains the law in Queensland. The effect of this case was summarised by Gibbs J. in Atlas Tiles (52 A.L.J.R. at p. 714) thus

Gourley's case rested on two foundations. In the first place their Lordships re-affirmed the fundamental principle that damages awarded for personal injuries are compensatory. It would be unrcal to measure the loss of a plaintiff, who has been deprived of the ability to earn moneys which, when earned, would have been subject to tax, by having regard to his gross earnings, without taking tax into consideration. Secondly, they rejected the argument that taxation is something too remote to be taken into account in the assessment of damages - something merely collateral, res inter alios acta.”

The principle that loss or impairment of earning capacity is the subject for compensation remains untouched, and such capacity is affected from the time of the accident causing bodily injury. It may well be that in some cases (experience teaches that they are few and far between) a plaintiff comes to court with accountants who depose to what they consider the tax position should or would have been. In the present case there were such accountants to support the appellant's view that he, from a generous income, has so used the tax laws as to render himself liable to the payment of far less income tax than would have smitten a taxpayer less fortunate or astute. This evidence was to support the view that the respondent's negligence had deprived him of the capacity to continue to bask in that happy financial glow. In the light of these considerations I feel impelled to accept the submission, based upon the accountancy figures, that the net income lost after tax for the 1973 - 1975 period was of the order of $43,800.00.

As to the question of impairment of future earning capacity, the appellant has submitted that the estimate of $30,000.00 is inordinately low, and that in coming to it the learned trial judge must have, with an eye to Gourley, looked at the basis of net rather than gross earnings. In the context of considering the effect of the appellant's grazing business upon the appellant's income he said, inter alia, “It is not for me to determine whether all the expenditure was necessary or prudent. I am concerned with the plaintiff's loss of income.” With respect, the real question is the impairment of the plaintiff's earning capacity. Gourley having disposed of the tax problem, what does the evidence show the appellant's capacity to be after he resumed practice. He was then, and is, in partnership. He has severe disability to the extent of 50 per cent loss of function of the left leg, particularly severe in his case where his agility in dealing with large beasts - his specialty - is concerned. I say “is” and not “was” concerned because the appellant's evidence includes evidence that he still deals with large beasts. Having referred to the necessity of one dealing with such animals to be nimble on his feet (“It is simply the quick and the dead”) he said in chief:—

“I had a natural handling ability for animals prior to my accident, and I had no trouble in that respect. Now, I have lost none of my operative skill, but the restraining parts - I can still do the same operation in well-constructed, what we call cattle crushes - but in short I have to depend on someone to restrain the animal for me, whereas in the past I made my own arrangements in this respect.”

When he came to what he called his peak after the accident his speed was, he said, cut down. As an instance he mentioned the pregnancy test in cattle. Before the accident he could do some 600 a day, and, pushing himself, after the accident some 300 to 350 a day. He has no complaint about his small-animal practice in the surgery where he does two night clinics a week. He finds some operating situations awkward, as when he has to operate on an animal which is on the ground. But there is no such difficulty with small animals which are put on a table. Nevertheless, it appears from his evidence that he still works long hours, though he said he did not reach his peak until 1977. Asked in cross-examination what hours a day he now worked, he answered:—

“They vary whether we are doing outside work or not, but frequently we leave home at half past 6 by car to go somewhere and currently I am doing quite a lot of work around St. Lawrence and it is not uncommon to get back at 9 and 10 o'clock at night. As I said, if I am on evening clinic I have to come back earlier and I perform in my clinic from 7 o'clock onwards.”

Asked, “when you peaked 12 months ago how many hours a day could you work,” he answered:—

“There is no ceiling to that figure. If I have got a job I do it. I say that with no sense of gaining kudos. I am not a clock watcher. I could give you a specific example. While bleeding cattle at St. Lawrence three months ago we worked a 19 hour day from the time we left to the time we got back to the surgery. My leg was pretty painful that night but we did it.”

In his next answer he added that such a day decreases his efficiency on the next day. In the practice he has a partner and an assistant. Asked about there being enough work to keep the assistant active he said, “The partners are doing two men's work and the assistant is doing about half to three quarters of a man's work. An assistant is paid between $10,000.00 and $12,000.00 a year plus provision of a car and unspecified extras. From those (and other parts) of his evidence it is apparent that the appellant is by no means a spent force.

The learned trial judge approached the case, as it was conducted, by holding that “The plaintiff should be regarded as a veterinary surgeon and grazier, and his net income from both pursuits should be the measure of his loss of earning capacity.” He, of course, had the Gourley principle in mind. The trial judge found:—

“I am satisfied that the plaintiff has only a limited future working with large animals. I accept Dr. Champion's evidence about this and also the evidence of the plaintiff and his witnesses about the effect of the plaintiff's injuries upon his agility. I am satisfied that if the plaintiff has to concentrate on small animals this will reduce his income, and it will also affect his enjoyment of life.

However, on the whole of the evidence I am satisfied that the plaintiff will be able to continue to earn a substantial income because the partnership will continue to concentrate on large animals. It seems to me that so long as he lives, and so long as there are beef cattle and horses in the Rockhampton district his skills and knowledge will be sought after, even if he does have “to allow the ‘junior’ to do much of the physical work. Nonetheless this represents a drop in income, particularly if additional partners have to come into the business.”

It seems to me, with respect, that there may be an element of speculation in the last sentence. His Honour continued:—

“Also I have to take into account the possibility that the grazing property will provide a better income, oven if it is not actually profitable for some years. Also I have to take account of the risks the plaintiff exposed himself to before the accident, which could well have impaired his earning capacity.

Bearing all these matters in mind I assess the plaintiff's loss from March 1975 onwards at $30,000.00.”

It appears to me that one has to have regard simply to impairment of earning capacity from 1975 for a number of years purchase. On the material before us I consider that it would not be appropriate to take a period of less than 12 years at least. As to the impairment of earning capacity, I have quoted some of the appellant's evidence, and the judge's remarks. I am left with the satisfaction that the amount assessed in respect of impairment of prospective earning capacity is manifestly inadequate and therefore that the learned trial Judge has erred in that regard. This reopens the matter of assessment. Here, I feel, one has to be bold and take a rather arbitrary figure as a round annual sum, as the trial judge would on the evidence in all probability have done. Say $5,000.00 a year. Discounting this on the 8% table one reaches a figure of $37,650.00. But the use of actuarial tables is by way of a guide and will not generally lead to the adoption of precise figures. They are used as a basis for assessment of a global sum. There was no argument directed to assessment in respect of pain and suffering and loss of amenities which by deduction could be said to have been allowed at $22,000.00.

The amounts $43,800.00 and $22,000.00 referred to relate to general damages. The former should be subject to contingencies. The latter is not necessarily to be regarded as a constant. The amount may come in for adjustment in a process of assessment when other components are varied.

In the result, having regard to the usual principles, I consider that the assessment of general damage should be increased from $77,250.00 to $105,000.00. Special damage was agreed at $2,218.30. The appeal should therefore be allowed and the judgment varied by substituting for the sum of $79,468.30 the sum of $107,218.30. The respondent should pay the taxed costs of appeal.

IN THE SUPREME COURT OF QUEENSLAND

Appeal No. 28 of 1978

BETWEEN:

ALEXANDER ROBERT MELDRUM

(Plaintiff) Appellant

AND:

DAVID MORRIS McMULLEN

(Defendant) Respondent

JUDGMENT - W.B. CAMPBELL J.

I have had the benefit of reading the judgment of Stable J. and I agree with his reasons and his conclusions. I consider that the learned trial judge erred in holding that the appellant's nett loss of income from 12 February 1973 until March 1975 should be assessed as his nett income from both his avocations as a veterinary surgeon and a grazier. His Honour deducted the loss from the appellant's grazing activity (being the difference between the income from his property and the running expenses) from his estimate of what his gross income would have been from his profession over that period. (Indeed, His Honour included in the property's running expenses all the moneys spent on that activity including pasturing, clearing, and so on.) He then deducted a percentage factor for income tax and arrived at an estimated nett income of $25,250 from the date of accident until the plaintiff returned to work as a veterinary surgeon in March, 1975.

I consider that the sum of $30,000 to compensate the appellant for impairment of his earning capacity from March 1975 onwards is manifestly inadequate. It is probable that in making this assessment His Honour also had regard to the nett income from both the grazing property and the appellant's profession since, in this context, he said: “Also I have to take account of the possibility that the grazing property will provide a better income, even if it is not actually profitable for some years”. Such an approach does not properly reflect an assessment of the plaintiff's lost earning capacity. The plaintiff's expenditure on his grazing property of moneys which he may earn from his profession is not relevant to the effect his injuries may have on his diminished earning capacity as a veterinary surgeon. His capacity to earn as a professional man is not affected by his interest in the grazing business. His ordering of his affairs by investing some money and some of his spare the in a primary industry venture with the aims, inter alia, of reducing the incidence of income taxation, building up a capital asset and engaging in, what is to him, a pleasurable activity, seem to me to be irrelevant to the diminution of his earning capacity. I appreciate that, if a plaintiff earns income from each of two occupations in which he is engaged, this may be relevant in assessing damages for injuries which have impaired his earning capacity in both pursuits, but for present purposes this is not a material consideration.

The grazing property is a disposable item and, although it is relevant to consider the whole economic situation of a plaintiff when making a determination of the extent to which his earning capacity has been affected by his injuries, it seems to me to be incorrect to say, as did His Honour, that if over the years the plaintiff's “income has been low because he has lived modestly so as to acquire capital assets then this is his financial position as the defendant finds him.” A modest, or any other style of living, adopted by a plaintiff for the purpose of acquiring or of disposing of capital assets is not relevant to his earning capacity. A plaintiff's financial position need not, and in many cases would not, be a reflection of his earning capacity.

His Honour found that the plaintiff had only a limited future working with large animals and that, if he had to concentrate on small animals, his income would be reduced. He said that he was satisfied he would continue to earn a substantial income because the partnership would continue to concentrate on large animals, but that, even if he allowed a junior veterinary surgeon to do much of the physical work, it still represented a drop in income “particularly if additional partners have to come into the business”. His Honour rightly took into account the risks to which the plaintiff was exposed before the accident which could well have impaired his earning capacity. However, the figure of $30,000 is less than his annual income (before tax) from his profession at the time he received his injuries. In March 1975 the plaintiff was 45 years of age and could be expected to have had many years of active life as a veterinary surgeon ahead of him.

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Editorial Notes

  • Published Case Name:

    Alexander Robert Meldrum v David Morris McMullen

  • Shortened Case Name:

    Alexander Robert Meldrum v David Morris McMullen

  • MNC:

    [1979] FC 20

  • Court:

    QSC

  • Judge(s):

    Stable J., Campbell J., Andrews, J

  • Date:

    30 Mar 1979

Litigation History

No Litigation History

Appeal Status

No Status