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  • Unreported Judgment

Fail v Hutton

 

[2004] QCA 61

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING
COURT:


Supreme Court at Brisbane

DELIVERED ON:

12 March 2004

DELIVERED AT:

Brisbane

HEARING DATE:

1 March 2004

JUDGES:

Davies and Williams JJA and McMurdo J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS:

  1. That the appeal be dismissed
  2. That the appellants pay the respondent’s costs of the appeal to be assessed

CATCHWORDS:

DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – MEASURE OF DAMAGES – PERSONAL INJURIES – LOSS OF EARNINGS AND EARNING CAPACITY – PARTICULAR CIRCUMSTANCES – where the plaintiff’s earning capacity was changing – where plaintiff was making a transition from a sub-contractor to direct contractor

INTEREST – RECOVERABILITY OF INTEREST – IN GENERAL – whether payment under income protection insurance should be accounted for in calculating interest on past loss – whether defendant obliged to raise the issue at trial

New South Wales v Davies (1998) 43 NSWLR 182, considered

COUNSEL:

S C Williams QC for the appellants

M Grant-Taylor SC for the respondent

SOLICITORS:

Walsh Halligan Douglas for the appellants

Butler McDermott & Egan Solicitors (Nambour) for the respondent

[1]  DAVIES JA:  I agree with the reasons for judgment of McMurdo J and with the order he proposes.

[2] WILLIAMS JA:  I have had the advantage of reading the reasons for judgment of McMurdo J and there is nothing I wish to add thereto.  The appeal should be dismissed with costs.

[3]  McMURDO J:  This is a defendant’s appeal against the assessment of damages in a personal injuries claim.  The respondent sustained an acute muscular ligamentous strain of the cervical spine in an accident on 29 June 2000.  He was then a 27 year old self employed cabinet maker and kitchen installer.  His injuries have left him with a permanent disability which prevents him from performing that work.  He has obtained alternative work which is less remunerative.  He was given judgment against the appellants for $367,587.40.  The trial judge assessed his lost earning capacity by allowing $85,000 for the past and $200,000 for the future.  Each of those assessments is challenged upon this appeal.  There is also a challenge to the interest allowed upon that past loss.

[4] The trial judge found the respondent to be a credible witness not prone to exaggeration and doing his best to accommodate the restrictions caused by the injuries.  The appellants do not so say that his Honour should have rejected the respondent’s evidence in any respect.  According to his evidence, the respondent had been an employed cabinet maker until 1997 when he started his own business.  The performance of that business is shown by his tax returns for the 1998, 1999 and 2000 years.  For most of those three years, the respondent’s income came almost entirely from installing kitchen cabinets as a sub-contractor for builders, and one builder in particular.  He had more work than he could cope with and he was sometimes working 60 hours per week.  But in what the respondent described as the latter half of the 2000 year, he began to make and install kitchen cabinets as a head contractor.  As the trial judge found, and the appellants now accept, that work was more profitable than the respondent’s sub-contract work. 

[5] The trial judge found that, at the date of the accident, the respondent “was engaged in making the transition from (sub-contract work) to working as a direct contractor”.  The appellants challenge that finding, and submit that his Honour should have found that the transition was complete.  From that point, they argue that there was no prospect of an increase in the respondent’s earnings beyond those of the 2000 year, because the respondent’s business had already achieved its potential.  In my view the evidence well supported the finding that the respondent was still making this transition at the time of the accident.  The respondent’s evidence relevant to the present point was in response to a question as to why, by the date on which he was injured, he was not “maximising the profits that you were going to make from your business”, to which he answered:

“Because for [the] majority of that year, I was working as a subcontractor.  [It] was only the latter part of the year I actually started doing work for myself as a sole contractor which I derived a lot more profit from.”

This evidence far from shows that the transition was complete by the date of the accident.  What it does indicate is that the respondent’s earnings would have been higher had he been engaged for the whole of the 2000 year in doing the type of work that he was doing during the latter half of it.  Subject to the other considerations which will be discussed, his earnings for the 2000 year would be likely to somewhat understate his earning capacity by the date of the accident.

[6] The appellants argue that a more reliable indication of earning capacity would come from averaging the respondent’s income for the three years of the operation of his business.  His taxable income for 2000 was $47,975, but for 1998 it was $40,593 and for 1999 it was $33,846.  But it would seem inappropriate to measure his earning capacity by that process of averaging, because that would ignore the beneficial impact of the change from sub-contract work.  The appellants say that the 2000 year is not a reliable indication because of the high demand for building work to be performed in advance of the introduction of GST on 1 July 2000.  It was said that this was likely to have resulted in some corresponding decline in demand immediately after that date.  The trial judge found that the effect of the introduction of GST would have been “fairly transient”.  There was evidence from several witnesses involved in the building industry on the Sunshine Coast (where the respondent mainly worked) as to the impact or otherwise of GST upon demand.  Among these witnesses there was common ground to the effect that there was some decrease in demand within the few months after the introduction of GST but the work steadily increased thereafter.  Some witnesses said that their businesses were still working at effectively full capacity.  The trial judge was correct to identify the introduction of GST as a matter relevant to the assessment of earning capacity, but it did not make the earnings for the 2000 an unreliable indicator or require an averaging of the three years of income.

[7] The respondent called evidence from a forensic accountant who prepared a report which made various calculations of the respondent’s losses upon alternative assumptions.  One calculation proceeded on an assumption that the respondent’s income would have increased by 25% over that for the 2000 year.  The appellants criticised his evidence in several respects.  They challenged the basis for an assumption of that increase in earnings.  They also challenged the accountant’s calculation of the respondent’s likely nett income after taxation for the year ended 30 June 2001, because of the use made in those calculations of an amount in the nature of a negative gearing deduction.  On the assumption that there was no increase in earnings from the 2000 year, the accountant’s calculation of that income after tax for the 2001 year was $38,353, whereas the appellants say that the correct treatment of this negative gearing component would result in an amount of $36,452, a difference in after tax weekly earnings of about $37.

[8] It is unnecessary to resolve whether these criticisms of the accountant’s evidence are valid, because the trial judge did not adopt the accountant’s calculations, and nor was he obliged to do so.  He made some brief reference to the accountant’s report, and specifically to those calculations which had assumed a 25% increase in earnings from the 2000 year.  As to that assumption, the trial judge said that “This is a useful starting point but the 25% is essentially arbitrary on a matter of judgement”.  This comment was made in relation to past economic loss, and the accountant’s report was not mentioned in the course of the reasons dealing with future loss. 

[9] Being unable to work as a cabinet maker or kitchen installer, the respondent undertook a computing course, a course in computer-assisted drafting and a course in kitchen design before obtaining employment in June 2002 as an estimator with a cabinet making firm.  His actual earnings to trial were $12,675.65.  If that amount is deducted from the amount which he would have earned had his income remained as it was for the 2000 year, then the difference is approximately $85,000.  This demonstrates, the appellants argue, that the trial judge either accepted the forensic accountant’s assumption of a 25% increase in earnings from the 2000 year, or that his Honour failed to discount for the various contingencies.  In either case, it is said that the assessment of $85,000 is manifestly excessive.

[10] But the trial judge found that the respondent’s income would have increased as he did less sub-contract work.  This finding came from his Honour’s acceptance of the respondent’s evidence, rather than the adoption of the accountant’s assumption as to a 25% increase.  On that finding, the difference between expected and actual earnings was greater than $85,000, and his allowance of $85,000 shows the application of some discounting.  I conclude that there is no demonstrated error in the assessment of this component and that the amount is not shown to be excessive.

[11] As to future loss, the difference between the respondent’s earnings immediately prior to the accident and his earnings in his employment at the time of trial is approximately $200 per week.  The appellants point out that the amount of $200,000 allowed for future loss represents $228 per week for every week of the 35 years until the respondent turns 65.  From this it is argued that the allowance is plainly excessive.

[12] The appellants’ submissions overlook two matters which were important in his Honour’s view.  The first was that the injuries had the consequence that the respondent could no longer follow his trade.  The fact that he had found employment for the five months prior to the trial as an estimator did not show that he would always be in demand for that work to the extent which would have been likely had he been able to continue as a self employed tradesman.  Secondly, although the plaintiff was working full time at the time of trial, his Honour found that his future earning capacity was problematic because of the ongoing effects of his injuries.  His Honour concluded:

“As a result of the accident the plaintiff can no longer follow his trade.  He has retrained to acquire skills which allow him to work within his capabilities.  Even so he is unlikely to be able to use those skills to their full extent for the whole of his remaining working life.  He is disadvantaged on the open labour market.  He may not always be employed, he may spend periods as a self employed worker, he may not be able to work full time consistently. …”

Once account is taken of these matters, as his Honour correctly did, it is unrealistic to measure this component simply by comparison of his earnings at the accident and his earnings at trial.  In my view the assessment of this component for future loss was not affected by any demonstrated error and is not shown to be excessive.

[13] The remaining issue is as to the interest upon past economic loss.  The respondent received payments under income protection insurance.  It is common ground that these payments were not to be brought into account in the assessment of damages.  The appellants submit that they should be considered in the awarding of interest.  The appellants concede that consistently with authorities such as New South Wales v Davies (1998) 43 NSWLR 182, the payments would be relevant to the calculation of interest only if the respondent was obliged to repay them to the insurer upon recovering his damages.  The problem is that there is no evidence or finding as to that matter, because this point was not taken below.  In my view, it was incumbent upon the appellants to raise the point to enable any necessary facts to be found, if they were going to suggest that the respondent should be denied compensation by way of interest for being kept out of his damages.  Accordingly, this challenge to the judgment fails.

[14] It follows that the appeal should be dismissed and the appellants should be ordered to pay the respondent’s costs of the appeal to be assessed.

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Editorial Notes

  • Published Case Name:

    Fail v Hutton & Anor

  • Shortened Case Name:

    Fail v Hutton

  • MNC:

    [2004] QCA 61

  • Court:

    QCA

  • Judge(s):

    Davies JA, Williams JA, McMurdo J

  • Date:

    12 Mar 2004

Litigation History

No Litigation History

Appeal Status

No Status