AAI Limited & Anor v Marinkovic

This appeal was a challenge to an award of damages in a personal injuries case. The case considers and the below summary sets out the court’s consideration of, the extent to which evidence which was not held to be reliable had informed the trial judge’s consideration, the approach of the court to assessing loss of earning capacity in circumstances where there is an absence of business or tax records, the award of damages over that which was pleaded by the plaintiff or as contained in the Statement of Loss and Damage, and the trial judge’s assessment of an ISV in excess of 25% higher than the maximum dominant ISV.

Fraser and Morrison JJA and Mullins J

31 March 2017

The respondent commenced proceedings in negligence after he was injured in a car accident in 2010. [2]. At trial, the only issue was the quantum of damages. [3]. The respondent had been injured in an earlier accident in 2008.  The appellants contended that the injuries suffered in the second accident were largely the result of the first. [4]. The respondent was awarded $451,249 in damages, plus interest of $19,852. [5].

The appellants challenged the award of damages on the basis that the award was too high. [12]. They relied on two findings by the trial judge: (i) the respondent’s tax returns were “essentially works of fiction”; and (ii) the respondent was not a reliable witness. [12]. The specific grounds relied on were numerous (see [13]), and only those of note are dealt with here.

The trial judge made a number of findings concerning the credit and reliability of the respondent based on inconsistencies between his evidence and what was contained in his tax returns. [17]. In making those findings, the trial judge said “the most plausible explanation for the inconsistency …. is that the [tax returns] are a work of fiction”.

The appellants submitted that this was “tantamount to a finding of dishonesty” and should have led the trial judge to wholly reject the respondent’s evidence. [26]. The Court of Appeal disagreed. Morrison JA explained that the trial judge did not make a finding that the tax returns were a “work of fiction”; the finding was limited to the fact that the trial judge did not accept the tax returns as reliable. [29]. In any event, his Honour stated that “a finding that there has not been honest compliance with taxation laws does not inevitably mean that loss of earning capacity or economic loss cannot be made on other evidence”. [30]. The trial judge’s reasoning was unassailable in this respect.

Assessment of economic loss

The appellants challenged the trial judge’s assessment of the value of the respondent’s loss of earning capacity, inter alia, on the basis of the findings about the respondent’s tax returns and the unexplained absence of business or tax records (that might evidence wages and expenses). [59]. The appellants relied on a passage in Georginis v Kastrati (1988) 49 SASR 371, 375, in support of a submission that the findings “did not permit an approach to the assessment of damages for economic loss as undertaken by [the trial judge], and permitted only an assessment on a global basis”. [69]–[70]. This submission was rejected. Morrison JA said that:

“… Georginis v Kastrati is not authority for the proposition that a court cannot make an assessment of economic loss and lost earning capacity in all cases where records are absent and tax returns are unreliable. If there is sufficient evidence to form a judgment on those issues the court is entitled to do so.” [73].

His Honour explained that there is a difference between “loss of earning capacity, which is what an injured plaintiff is being compensated for, and loss of earnings”. [75]. Quoting from McHugh J in Medlin v State Government Insurance Commission (1995) 182 CLR 1, [7] his Honour explained that “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 the value of lost earnings”. [75].

The Court of Appeal also rejected a submission based on Georginis v Kastrati that damages should have been assessed on the basis of the income disclosed in the respondent’s tax return. [78]. Morrison JA noted that such an approach “imposes a form of curial punishment for actions taken out of court, and in that sense is a triumph of form over substance”. [79].

Award of damages over that pleaded or in the Statement of Loss and Damage

In respect of amounts awarded for general damages, past economic loss, and future expenses, the appellants complained that a different figure from that awarded was contained in either the Statement of Claim or the Statement of Loss and Damage. [89]. The appellants relied on the decision in Williams v Partridge [2009] QSC 278 for the proposition that “the pleading rules do not permit an award of damages in excess of what was pleaded”. [89].

Insofar as the Statement of Loss and Damage was concerned, Morrison JA distinguished Williams v Partridge because in that case the Statement of Loss and Damage was expressly used as particulars of the pleading. [98]. That was not the case here. [100]. As for the Statement of Claim, for reasons which are not material, “the error in framing the proper claim was the neglect of the client’s lawyer” and Morrison JA considered that “the client should not be punished for that”. [104].

Uplift higher than 25 per cent

The appellants also took issue with the learned trial judge’s assessment of the ISV in excess of 25% higher than the maximum dominant ISV. The learned trial judge conceded it was rarely done. [128]. But Morrison JA said it was clear from the trial judge’s reasoning why His Honour had assessed an uplift higher than 25 per cent.  As Morrison JA explained the “inability to separately assess for a psychiatric injury meant that there was a real risk of the award not reflecting the true extent of the injuries”. [129].

The Court also commented on whether there is a duty to refer the matter for appropriate investigation where there is tax fraud or tax evasion disclosed on the evidence. [153]–[155].

The appellants were largely unsuccessful in their challenge to the award of damages. The appeal was allowed, but only to substitute the correct interest figure for interest on past economic loss, which arose from the failure to deduct Centrelink benefits. [137]–[140], [156].

J English