NORTHERN RIVERINA COUNTY COUNCIL v PEARCE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS JA, CLARKE JA and MEAGHER JA 10, 11 and 12 September 1990, 21 December 1990 [1990] NSWCA 140 DAMAGES for financial loss — two stage calculation (from death to trial and from trial into the future) the approved method of assessment. ACCELERATED BENEFIT arising from deceased's death — query the rate of interest appropriate to employ in calculating present value (at deceased's death) of property to which plaintiff (widow) succeeds on account of death. WIDOW/PLAINTIFF AND DECEASED/HUSBAND PARTNERS IN RURAL ENTERPRISE — widow contributed no capital or significant labour to partnership — partnership profits separately distributed held the total distribution should be regarded as money generated by the deceased's efforts and provided by him for the benefit of the plaintiff and children — Malyon v Plummer (1964) 1 QB 330 and Di Battista v Molton (1971) VR 565 applied. Samuels AP I have had the benefit of reading in draft the judgment prepared byMeagher JA, and I need not therefore recapitulate the facts which he recites. It seems to me that McInerney J made at least two errors which require this Court's intervention. First of all, a purely mathematical error which would, however, increase the assessment, if one accepts the learned judge's figures, by some $18,000; and, secondly, his decision to increase the amount of the allowance for 'dependancy' accrued from death to judgment to allow for inflation. This he did by applying an annual increase of 4%, the plaintiff having sought a very much larger percentage than that. The second error is one of principle, and offends the rule established in O' Brien v McKean (1968) 118 CLR 540. It follows that the judgment below must be set aside, and the damages reassessed. It is not a case in which Robinson v Riley (1971) 1 NSWLR 403 applies, because there are, with respect, other flaws in the learned judge's calculations to which I will come. There is no credit issue in the case; the question of the extent of any allowance for the prospects of remarriage, which might ordinarily be illuminated by the opportunity to see the plaintiff, is well covered by his Honour's findings. Both parties consented to our reassessing rather than sending the case down for a new trial, and I feel that this Court is fully able to do so, the relevant requirements of s107 of the Supreme Court Act 1970 having been satisfied. I will use the words 'dependency' and 'dependant' to indicate the expectation of financial benefit lost by the deceased's death, and those who would have expected to receive it. In proof of that financial benefit the plaintiff produced three schedules at the trial, one of which was said to represent expenditure out of net income amounting to $360, and the second expenditure out of gross income in the sum of $115. The third, which was headed "Other Benefits", claimed $105. Accordingly, the total dependency claimed was the amount of $580 per week. Expenditure out of net income needs no further explanation. Expenditure out of gross income covered the various items paid out of the income of the farming partnership and of which the family took the benefit; but which were deductible 2 UNREPORTED JUDGMENTS items for the purpose of income tax. Accordingly, they were not integers in the taxable income of the partnership or of either partner, although they were properly to be taken into account in assessing the available financial benefits. The same may be said of the schedule of "Other Benefits" which included the use of the homestead and the consumption of meat and produce grown on the farm. His Honour criticised the plaintiff's explanation of these figures for its want of precision. He set out in the judgment what he regarded as the two principal claims for expenditure, first expenditure out of net income and then a conflation of expenditure out of gross income with what the plaintiff had called "Other Benefits". However, the first list in the judgment seems astray because it includes an item for "electrical and fuel" which properly belongs in the other list, and similarly doubles the claim in respect of telephone expenses. It also appears to omit the claim made for "general house appliances or furnishings", and his Honour's first list comes in at $415 or $55 more than the plaintiff's schedule; and when added to the other claim produces a total of $635 instead of $580. In particular, the learned judge shows $120 for food and groceries which he ultimately reduced by $20, although the plaintiff's schedule deducts $30 for the husband's share leaving a claim for $90. His Honour appears to have accepted the plaintiff's honesty and accuracy, being prepared to accept that in essence her calculations were correct, although requiring some adjustment. It does not seem to me that the amendments to the claim depended upon the learned judge's view of the plaintiff's credibility or demeanour, and are thus not protected by the relevant authorities, although the recent decision of the High Court in Abalos v Australian Postal Commission (15 November 1990, unreported) may have introduced "the subtle influence of demeanour" more widely. However, his Honour does not give any reasons for the adjustments he made to the first list, except for his reduction of the sum claimed for food to $100 per week because of the food items contained in the list "Other Benefits". He reduced the discounted total of $170 for food and clothing by a further $35 to allow for the deceased's share. The evidence, however, was that the plaintiff had not included the husband's clothing expenses in the figure of $80 which she had claimed. As far as the other items were concerned, his Honour reduced the total of $220 to $200 per week to allow for the deceased's use of the Honda vehicle "and the deceased's share in the other matters referred to in the list, most of which I believe would be unaltered as a result of the deceased's death." Although, as I have said, the learned judge criticised the plaintiff for the indefinite nature of some of the answers she gave about her expenditure, it seems that these figures were not merely estimates but were taken from her cheque butts. These were produced to counsel for the first defendant who did not use them to mount any substantial challenge in cross-examination. However, the figure of $515 per week at which his Honour assessed dependency was asserted, of course, by the plaintiff on the appeal, and accepted by the defendant, subject to the arguments to which I will come. I will therefore use that sum as the figure for pecuniary loss, both at the time of the death and, since there is no evidence which would justify any increase, at the time of trial. In my view, expenditure of that order is comfortably within the confines imposed by the accounts of the partnership up to the deceased's death. His Honour, as I have said, increased the figure for dependency annually by 4% between death and trial. Apart from its departure from principle that approach has no factual basis. The deceased's income was not formally linked to any index of inflation. In the present case there URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Samuels AP) 3 was no evidence which would have enabled the learned judge to say that the amount of money available to the plaintiff would have increased by 4% during the period in question. The fact that household expenditure would have increased does not necessarily mean that the fund available to meet it would have increased too. The disparity between expenditure and income produced by inflation to which effect is not at once given in wage levels is a very familiar incident of our times. In this case, when one is dealing with a farmer and not with someone employed in industry and governed by an award, it seems to me that inflationary factors cannot be used to increase the extent of the dependants' likely financial benefit. His Honour commenced by calculating the financial loss accrued from death to judgment, by taking his figure for dependency cumulatively increased each year by 4% and then deducting from the total the income which according to the accounts the plaintiff had received between death and trial. This two-stage method, first calculating loss accrued to judgment and then future loss, was strongly criticised by the defendant but is plainly correct and fully supported by authority: see Cookson v Knowles (1979) AC 556 especially at 568 and 577, and State Government Insurance Office (Queensland) v Biemann and anor (1984) 154 CLR 539 at 546-7 where Cookson was approved and applied. One reason for adopting a two stage approach to the assessment of pecuniary loss is that it enables the Court to examine the period which has elapsed at the date of trial with knowledge of the benefits which would have been available to the dependants up to that time (and, by extrapolation, to judgment if delivered later) which would otherwise have been lacking. Hence in many cases it will be possible for the Court to know that had the deceased lived he or she would have received increases in wages or salary or other income of which the dependants would have taken the benefit. But a court is confined to considering evidence of increases in income, and is not entitled merely to assume them by applying the extent to which inflationary factors have operated during the period. The CPI merely indicates the extent to which outgoings might have increased; it does not of itself entail the probability of any increase in the deceased's income unless his wages or salary were formally linked to some index of inflation. If so, then that index will produce an increase which the Court will take into account in estimating how much of the deceased's income would have been made available to the dependants. McInerney J deducted from his figure for dependancy the income which, according to the accounts, the plaintiff had received each year between death and trial from the lease of 'The Laurels' to the deceased's half share in which the plaintiff succeeded upon his death. That acquisition represented the acceleration of a benefit which the plaintiff would almost certainly have received many years later upon the deceased's death in the ordinary course. The calculation of the extent of that accelerated benefit (to which I will come in more detail in a moment) commences with the value of 'The Laurels' at the date of death, in which the rental value of the property may have been a factor. But however that value was assessed the plaintiff must give credit for it by means of a calculation which establishes the sum necessary to produce that figure if invested at 3% per annum over the period from actual death until the assumed death of the deceased, absent an earlier catastrophe. That period covers, of course, the period from death to trial (or judgment). Accordingly, if in addition to giving a capital credit for her enjoyment of the property during those years, she was compelled to account also 4 UNREPORTED JUDGMENTS for the income which it produced, she would be the victim of double counting. This conclusion is made clear by what was said in Carroll v Purcell (1961) 107 CLR 73 at 77: "First of all, it was not a profit in any real sense; if the plaintiff chose to let her cottage and live with her parents it by no means followed that the difference between what she paid her parents for accommodation and what she received in rent was a profit in any sense of the word. Secondly, the rent which she received for the cottage was not a profit which resulted from the death of her husband; as a result of his death she succeeded to his interest in the cottage and the benefit which thereby accrued to her was her accelerated succession to that interest. The value of this was, of course, precisely the same whether she lived in the cottage herself, or whether she let it or sold it and invested the proceeds. The rent was no more than a quid pro quo for the letting of her own property and was quite irrelevant in assessing damages." It follows that no deduction should be made during the period from death to trial (or judgment) for the rental derived from 'The Laurels'. However, the primary challenge to the judgment (and an argument to be taken into account on reassessment) was that McInerney J had completely overlooked the fact that, there being a partnership in existence by which the plaintiff and the deceased each was entitled to a one half share in the partnership income, only half of the dependency figure could be attributed to the efforts of the deceased. The other half was the plaintiff's own income. This argument, in my view, is unsound. In assessing damages under the Compensation to Relatives Act it is necessary to look at the realities of the situation. Clearly, the partnership and the consequential split of income was designed to produce a legitimate tax advantage. Although the plaintiff, so far as I know, contributed no capital to the partnership she did join with the deceased in making available "The Laurels', the property of which they were co-owners, for use by the partnership. The plaintiff did no work for the benefit of the partnership except to cook for the shearers and to help her husband very rarely in mustering stock. It appears that there was one bank account and one cheque book which was used for the payment of all domestic expenses; as far as I can tell from such evidence as there was on this topic, it seems to have been a joint account ie: "Q. You have already conceded what happened was when the accounts and bills came in you and your husband discussed them and you wrote the cheques? A. Not always. Q. He would do some and you would do some? A. That is right". Whether it was a partnership bank account or a separate joint account does not clearly appear. Nor, of course, is it possible to say with certainty from what source or sources moneys paid into the account were derived, but it would seem to be a reasonable inference that the deposits were from the moneys drawn on the partnership account because there is no evidence of any other income. The reality of the matter is, I think, that the whole of the income derived from the partnership, that is the aggregate of the deceased's drawings and the plaintiff's drawings - or, more precisely, perhaps, the total of the distribution made to them from partnership income - should be regarded as money generated by the husband's efforts and provided by him for the benefit of the plaintiff and the children: see Malyon v Plummer (1964) 1 QB 330 and Di Battista v Motton (1971) VR 565. As Pearson LJ said in Malyon, at 345-6, the income which the plaintiff derived in the instant case was derived from the relationship of husband URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Samuels AP) 5 and wife and not to some other and commercial relationship. It is hardly plausible to say in the present case that the plaintiff has lost her income from the partnership, which was dissolved upon the deceased's death, by reason of the death of her partner. "The fact is that she has lost her husband, who was the family breadwinner": Malyon loc cit. Of course, a deduction would need to be made for such amount as represents any real contribution which the plaintiff did make to the partnership business. It is extremely difficult to calculate this. It is true, as I have said, that the property, of which she and her husband were co-owners, was one of the properties used by the partnership and that she did a very small amount of work for the business. To my mind, any deduction would be small, and it is not unreasonable to ignore it. Accordingly, there is no deduction to be made from the figure of $515 per week which I take to be the amount of the pecuniary loss which the plaintiff suffered as the result of the deceased's death. From death on 16 March 1984 to judgment on 4 November 1988 is a period of 241 weeks, and the accrued loss is therefore $124,115. Interest on this sum at 7.8% per annum over the same period equals $44,532. I have already indicated the nature of the calculation required to produce the amount of the accelerated benefit which the plaintiff obtained by the early acquisition of her husband's share in 'The Laurels'. I assume that, in the ordinary course, he would have lived to the age of 70, a further 28 years from the date of his death. The evidence, which his Honour accepted, was that the value of 'The Laurels' at the date of death was $236,652. The amount, assuming investment at 3% per annum (a rate which was not challenged), necessary to provide the sum of $236,652 postponed for 28 years is $103,417. (I have taken a multiplier of 0.437). The marriage was a happy one. I see no reason to assume that there was any significant chance that the plaintiff would not have succeeded to the deceased's share. Hence no addition needs to be made to the accelerated value as calculated. As to the future, $515 for 24 years assuming investment at 3% per annum (the multiplier is 896.9) produces $461,904. From this the sum of $103,417 must be deducted, leaving $358,487. I, alike with the learned judge, would deduct 15% (or $53,773) for vicissitudes, leaving $304,714. I see no ground for departing in any respect from the learned judge's view of the plaintiff's prospects of remarriage, and I would also deduct 15% (or $45,707) on this account, leaving $259,007. The figures therefore come out as follows: Loss to judgment $124,115 Interest 44,532 168,647 Future loss 461,904 less acceleration 103,417 358,487 less 15% for vicissitudes 53,773 304,714 less 15% for prospects of remarriage 45,707 259,007 259,007 6 UNREPORTED JUDGMENTS 427,654 It was finally argued for the plaintiff that she was entitled to interest under s94 upon the damages awarded for future detriment. This submission is quite unsound and is disposed of by State Government Insurance Office (Queensland) v Beimann and anor (1984) 154 CLR 539. Out of the total of $427,654 I apportion $5500 to Cindy, $8500 to Shane and $13,500 to Toni. I therefore would allow the appeal, and set aside the judgment below. In lieu thereof I would substitute judgment for the plaintiff with costs in the sum of $427,654 to date from 4 November 1988. Of the amount of the judgment I would order that the sum of $27,500 be paid into Court to be paid out to the Public Trustee for investment on behalf of the three children of the plaintiff named below pursuant to the provisions of the Damages (Infants and Persons of Unsound Mind) Act 1929, to be apportioned as follows: (i) Cindy Pearce $5500 (ii) Shane Pearce 8500 (iii) Toni Pearce 13500 The appellant has succeeded upon one of its arguments, and failed on the others. The respondent/cross-appellant has made good two of its points. On the whole I think the appropriate course is to make no order for the costs of the appeal. Clarke JA Although I agree with the reasoning and orders of Samuels JA there are two matters on which I wish to express short observations. First, Mr McAlary QC, who appeared for the appellant, submitted that the judgment under appeal was vitiated by a fundamental error. That was the adoption of a two tiered approach. According to his submission it was necessary to disregard the fact that four years passed between death and trial and to calculate damages as though the trial was contemporaneous with the death. This submission is contrary to binding authority and established practice in New South Wales and should be rejected. Secondly, in calculating the value of the accelerated interest Samuels JA has used the 3 per cent tables. So, as I understand it, did McInerney J and it was not suggested in argument in this Court that his Honour erred in this respect. Accordingly, the question whether this approach is correct does not arise. I am not, however, sure that it is correct to apply the 3 per cent tables. The situation is markedly different to that in which the High Court in Todorovic v Waller, ISO CLR 402, decided that those tables were appropriate in personal injury cases (see Luntz, Assessment of Damages (3rd Ed) 9.5.31 (at 429) and this case should not be seen as authority for the proposition that the 3 per cent tables should be used to calculate the value of an accelerated interest. Meagher JA On 16 March 1984 a Mr Robert Eric Pearce was killed owing to the negligence of the appellants. His widow, Lynette Kay Pearce, then sued the appellants for damages under the Compensation to Relatives Act 1897, a descendant of Lord Campbell's Act. She sued on behalf of herself and her three children. She was born on 24 November 1949, and was thus 34 at the time of her husband's death. He was born on 18 October 1942, and was 42 at the time of his death. The three children were born in October 1973, September 1975 and April 1978, and were thus 10, 9 and 6 years old respectively on the date of their father's death. The plaintiff and her late husband were married in March 1969. It was agreed at the trial that Mrs Pearce and her three children were, at the date of the URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 7 deceased's death, dependent on him for their support. At the trial, McInerney J awarded the plaintiff a verdict of $356,883.00, of which $ 20,900.00 was in respect of the ehildren. The appellants have appealed on the ground that the verdict was too high, and Mrs Pearce has cross-appealed on the ground that it is too low. Primary facts, as found by his Honour, were fairly simple, and not seriously in dispute, although they have given rise to some very difficult problems. The deceased was a farmer and a grazier who lived in the Temora district. At the time of his death, he, his wife and children were living on a property in that district called "Trickettvale''. It was his father's property, and he had been born on it. The homestead had four bedrooms, a lounge-dining room, a bathroom and an indoor swimming pool. In addition, he worked on a nearby property called "The Laurels". One-third of this property was originally owned by his grandmother, but she made a gift of her share to him. He and the plaintiff subsequently acquired the remaining two-thirds in 1975 for $50.000.00. It was a property of some 987 acres. In 1975 his father retired and went to live on the North Coast; when this happened the deceased and his wife moved into "Trickettvale" and lived there. During his lifetime, the deceased often expressed the wish to acquire further land. The deceased and the plaintiff apparently entered into a partnership deed in September 1973. From 1975, when Mr Pearce senior retired, until 1984, when the deceased was killed, the partnership ran "Trickettvale", which was a grazing property fully stocked with sheep, and kept one-half of the net profits of that operation, and in addition used "The Laurels" for wheat and oat farming. The deceased, who at the date of death, was in good health, had done farming and grazing work all his life. in addition he had done contract work, such as clover harvestIng, crop spraying, hay baling and the like. He owned and piloted his own plane. He was a hard worker. During the partnership he did virtually all the work on "Trickettvale" and "The Laurels", although he sometimes hired casual labour. For some years he attended an Agricultural School. He improved "The Laurels" by doing fencing work and providing additional dams to supplement the water supply. In, addition, he provided his family's meat supply by killing his own stock, usually sheep but occasionally a steer; on occasion he killed pigs for home consumption; he kept fowls for eggs; and he maintained a vegetable garden. In addition, he did minor repairs to the house, and some repairs for the family vehicles. The plaintiff before marriage was a hairdresser who worKed in her parents' salon in Temora in that trade. She continued this occupation until her first child was born. Thereafter, she ceased remunerative work until after her husband's death. She did virtually no work for the partnership except cook for the shearers, answer the telephone, and occasionally perform an odd job of casual assistance. Her main occupation, like that of most wives, was directed to housekeeping and childminding. As his Honour said, no more could reasonably be required of her. At the trial evidence was given of the cash drawings of the plaintiff and her husband from the partnership for the financial years ending 20/6/1981, 30/6/1982 and 30/6/1983, and for the period from 1/7/83 to 16/3/1984 (the date of death). They are as follows: 30/6/81 Mr Pearce $17,450.00 Mrs Pearce $13,820.00 30/6/82 Mr Pearce $17,011.00 8 UNREPORTED JUDGMENTS Mrs Pearce $17,011.00 30/6/83 Mr Pearce $18,195.00 Mrs Pearce $18,195.00 16/3/84 Mr Pearce $18,920.00 Mrs Pearce $18,613.00 Thus, it will be seen that the deceased withdrew from the partnership over this period amounts ranging from $335.00 per week to $562.00 per week. Since the date of the deceased's death, the deceased's father has sold "Trickettvale", the matrimonial home, which was owned by him, and the plaintiff has gone to live in the township of Temora. Moreover, "The Laurels" has been leased to one Peter George Keen at a rental which has subsequently been altered. These were the bald facts on which his Honour was asked to compute the plaintiff's damages. It is to be regretted that counsel for the plaintiff did not provide his Honour with somewhat more assistance. For example, the ownership of "The Laurels" was never proved, although, bearing in mind that it was held under Torrens Title, one would have thought it was easy enough to do so. The only document in evidence relating to it would suggest that it was owned as to three-quarters by the plaintiff and one quarter by the deceased, but the trial proceeded on the basis that it was owned in equal shares. Again, although the evidence discloses that a partnership agreement was in existence, no copy of it was tendered. The trial seems to have proceeded on the basis that it was a partnership at will and was therefore dissolved on the death of the deceased. It also seems to have been assumed that the shares of the plaintiff and the deceased in the partnership were equal, and that their respective entitlements to income were equal. No evidence was tendered about the financial wisdom of employing a manager of "The Laurels" after the deceased's death. And, most remarkably, no direct evidence was ever tendered of the original rental payable under the lease of "The Laurels" or of the amount to which it was reduced, the terms on which it was reduced or the date of the reduction; and this despite the fact that Mr Keen gave oral evidence. Again, although it seems to have been assumed that the plaintiff inherited the deceased's entire estate, no copy of his will seems to have been tendered, although one would have thought that it was a simple enough matter to attend to. Further, some aspects of the case seem to have been neglected entirely. The deceased's father had permitted his son to remain on "Trickettvale" indefinitely; one cannot resist the thought that the deceased, if he had not been killed, would have inherited that property on his father's death (instead of it having been sold), and the plaintiff would in due course have succeeded to it: but these matters went unexplored. Assisted by this evidence, his Honour eventually calculated the plaintiff's verdict as follows: Past dependency (ie between death and trial) $50,000.00 Future loss: gross $395,400.00 Less 15% for contingencies $59,310.00 $336,090.00 Less 15% for remarriage $68,179.00 $267,911.00 Total nett future loss $267,911.00 URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 9 Plus interest on past dependency $18,072.00 Plus award for children $20,900.00 $356,833.00 At the outset, it is clear that the amount of the verdict is vitiated by a mathematical error. Fifteen per cent of $336,090.00 is not $68,179.00; and $336,090.00 reduced by 15% is $285,676.50 and not $267,911.00. On any view, that error at least, must be corrected. But the criticisms of Mr McAlary QC, senior counsel for the appellant, are more substantial than that. They ranged from broad criticisms of his Honour's methodology to detailed criticisms of individual findings. It will be noted that his Honour proceeded by a two-tiered enquiry: he calculated loss up to the date of trial, and then he calculated the future loss, adding the two together. Mr McAlary's primary submission was that his Honour's approach in this regard was fundamentally misguided; a plaintiff's case under Lord Campbell's Act must, he submitted, be estimated by a one-stage enquiry as at the date of death. That, he said, was the classic way it has always been done. There is no doubt that once it was certainly done that way and Mr McAlary remembers it from his petite enfance. But more recent events have overtaken this purism. In 1983, in his second edition of Assessment of Damages Professor Luntz felt able to say: "Until recently the damages were not divided between the period before the trial and thereafter, but now they usually are" (at 411). It is an approach that has been sanctioned by this Court: see, for example, Bennett v Jones (1977) 2 NSWLR 355, Tyson v Breen (unreported, 17 November 1975) and Gillett v The Nominal Defendant (unreported, 21 October 1974). And, more importantly, the House of Lords has pronounced that it is at least permissible and probably preferable to adopt a two-stage approach in Cookson v Knowles (1979) AC 556, a decision which was approved and applied by the High Court of Australia in SGIO (Qld) v Biemann (1983) 154 CLR 539. Mr McAlary's first submission must, therefore, fail. In order to appreciate the criticisms made of the details of his Honour's reasoning certain fundamental aspects of the case should be isolated and examined. They are, it seems to me, seven in number: (1) What was a true initial "dependency" figure? (2) Should that figure be indexed for inflation? (3) What figure should be offset against it? (4) What head of damages, other than dependency, should be taken into account? (5) Since one result of the deceased's death was to accelerate the plaintiff's acquisition of the deceased's half-share of "The Laurels", should that accelerated interest be brought in at full value or at some discounted value? (6) Should the partnership between the plaintiff and the deceased be disregarded? and (7) What was the deceased's income from | July 1986 until the date of trial? The first question concerns "dependency", and on this issue the evidence took a most curious turn. The plaintiff produced an initial list of allegedly "dependency" payments. That list was as follows: 10 UNREPORTED JUDGMENTS Food 120.00 and Groceries Clothing 80.00 5 | MBF 15.00 Electrical 30.00 and fuel 10 Telephone 20.00 Rates 15.00 Life 20.00 Insurance Chemist 20.00 15 | Personal 50.00 Expenses Pocket 15.00 Money for 20 | Children Holiday 30.00 415.00 In the course of the trial, counsel for the plaintiff agreed that, by elimination of certain items, that figure should be reduced from $415.00 per week to $360.00 per week. To that list the plaintiff added a second list which was in the following 30 form: Item Per Week Honda - registration, insurance and fuel 50.00 35 | Electricity and fuel 30.00 Telephone 20.00 Rates 15.00 Use of house on farm 40.00 40 Meat 30.00 Eggs and vegetables 15.00 House and motor vehicle maintenance 20.00 220.00 Co His Honour described this second list as comprising "items claimed in respect to a dependency not reflected in the nett income relating to dependency", a collocation of words to which I am unable to ascribe any meaning whatever. Why 50 it was thought necessary to produce two lists instead of one, or how the second list differs in quality (if at all) from the first list, I am unable to fathom. Be that URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 11 as it may, the plaintiff contended that the plaintiff's "dependency" on her deceased husband at the date of his death was a weekly figure constituted by the sum of these two lists, ie $580.00 (ie $360.00 and $220.00). Surprisingly, his Honour basically accepted this submission, although he reduced the $580.00 figure to $515.00 to pare away amounts which he considered exaggerated. But by definition a wife's "dependency" figure must refer to the amount of his income she is accustomed to receive from him, and neither the $580.00 figure nor the $515.00 figure could possibly fit that description. And the reason why I say his Honour's acceptance of the figure was surprising is twofold: in the first place, the amount of the deceased's income on which his wife was "dependent" could not possibly exceed his total amount of his income, which his Honour found to be $470.000 per week; and, in the second place, both lists reflect not dependency figures, but needs or outgoings. Mr McAlary QC conceded that the figure of $515.00 was beyond challenge as a figure for outgoings: in other words, he conceded that each week she spent that amount on current household needs. In light of that concession, we cannot disturb it. Since the deceased's only source of income was the partnership, and since the plaintiff's only source of income was the partnership, and since they were equal partners, I think the only fair inference is that that $515.00 came equally from their shares of the partnership income. Mr McAlary's submission that $515.00 is not a true "dependency" figure must be accepted. The true "dependency" figure should be $258.00. The next question is whether that true "dependency" figure (which I have estimated to be $258.00 per week) should be indexed to account for inflation. At the trial, counsel for the plaintiff submitted that it should be indexed by over 30%, the full amount of CPI increases. His Honour rejected that submission and it was not repeated before us. However, his Honour did allow an annual increase of 4%, although without explaining his reasons for doing so. In my view, his Honour was correct in making this allowance. His correctness in this regard is not altered by his Honour's mistaken assertion that counsel for the defendant agreed that some indexation should be made. The years which elapsed between death and trial were years of rampant inflation. The evidence is overwhelming that the deceased was content for his wife to receive whatever reasonable amount was necessary to support herself and her children, and the inference seems to me to be inescapable that had he lived he would have increased the amount he allowed her by at least the modest annual amount of 4%. Of course, that process of indexation can only apply until the date of trial. When one comes to compute that component of the verdict which relates to future losses, no account can be taken of inflation. That is the inexorable result of Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625. It is nothing to the point that the reasoning in that case is less than convincing. It is a case which we must apply, because it is a decision of the High Court of Australia. The third question is what figures one should set off against the weekly "dependency" figure. Mr McAlary's submission assumed that it was the total figure of the plaintiff's income. On principle, this must be incorrect. Her husband's death entailed the loss of $258.00 per week which he used to pay her; it also involved her receipt of the income from his assets which would otherwise have come to him. In other words, there should be set off against her dependency any income wh ch she derives from utilization of his one-half share of "The Laurels" and his one-half share of the partnership. Insofar as she continues to receive income from the one-half share of "The Laurels" which she always 12 UNREPORTED JUDGMENTS owned, and her one half share of the partnership which she always owned, she does not have to bring it into account. It is her independent income, the generation of which is not occasioned by her husband's death. On the head of damages relating to dependency, therefore, she is entitled to the capitalized amount of her dependency, partly indexed, less the income receivable by her which is attributable to the utilization of his assets which were acquired by her as a result of his death. Is there any other head of damages? It is necessarily implicit in the submissions which Mr McAlary made that, in the present case, there is not. If that be true, it is not because this is some general rule that a widow under Lord Campbell's Act is limited to compensation for loss of dependency payments. The statute gives a plaintiff under the Act the right to recover "damages in respect of... the act, neglect or default" which caused the death. These may include damages other than loss of support. For example, in Taylor v O'Connor (1971) AC 115 they extended to loss of an anticipated inheritance. In the present case, it seems to me, the plaintiff lost more from her husband's death than merely the support and maintenance he afforded her. She also lost the power to generate income from her own assets. Before her husband's death her only asset was her one-half share of "The Laurels". She lacked the ability to make it generate its maximum return. She lacked the knowledge to make it do so; and she probably lacked the physical strength to make it do so. The fact that it did so was solely due to her husband. In theory, she worked that asset in conjunction with her husband, but in practice she did not work on the land, beyond cooking for shearers once a year. After his death she had to lease it. The circumstances of the present case permit one to measure that loss in general, although doubtless not in precise, terms. For the year ending 30 June, 1984, her income (generated by the partnership) was $19,106.00. Part of this represents profit from the sale of sheep ($2,041.00), an activity attributable to "Trickettvale". Therefore, he income which can be attributed to her half share of "The Laurels" was $18,086.00 (ie $19,106.00 - 1/2 ($2,041.00)). In the next year, the financial year ending 30 June, 1985, her total income of "The Laurels" was the rent payable by Mr Keen, viz. $24,651.00, one-half share of which, $12,326.00, is attributable to her one-half share of the land. The difference between $18,086.00 and $12,326.00, or $5,760.00, is therefore a measure of the annual worth of the factor to which I have referred. The next question concerns the manner in which his Honour dealt with the partnership. In essence, Mr McAlary submitted, his Honour without expressly saying so disregarded the partnership; and he further submitted that his Honour should not have done so. It is, I think, totally clear that his Honour did treat the plaintiffs case as if her one-half of the partnership was a nullity. The closest his Honour came to making his reasons explicit on this issue is in the following passage: "T questioned him (Mr Watson, a chartered accountant) about his attitude to a partnership and he said this is permitted by the Taxation Department but to legally claim (sic) tax splitting in such a partnership you either had to have contributed capital to the business or do part of the work. The reality is that the plaintiff has done neither." But, with the greatest respect to his Honour, this does not justify him disregarding a legal regime which the parties put in place and actually operated. The Commissioner's attitude to the partnership does not matter a jot: the partnership was real enough, whether or not it was effective for tax minimizat_ion purposes. It was not put (and, on the pleadings and the evidence, URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 13 could not have been put,) that the partnership was a sham. Mr McAlary made a furtner criticism in most trenchant terms of his Honour's alleged errors in this regard. He submitted that his Honour's statement that the plaintiff had contributed nothing to the capital of the partnership was clearly erroneous because she had in fact contributed her one-half share of "The Laurels" to the partnership, and this was so whether she had acquired her one-half share of "the Laurels" with his or with her own money (on which question, like so many others, there was no evidence). However, this particular criticism is misconceived: neither "The Laurels" nor any share of it ever became part of the partnership property; in law what happened was that the co-owners of "The Laurels" simply made their share in that property available to the partnership for part of its purposes. The next question concerns the acceleration of his half-interest in "The Laurels". That some discount must be allowed in this respect is obvious enough. By her husband's ieath the plaintiff acquired his interest earlier than she would normally have done. His Honour took the valuation of his half interest ($236,652.00) and assumed that he would have lived until he was 70 years of age. He then computed the present value of that capital sum payable in 24 years time at $116,088.00, and concluded that the value of the acceleration was $120,000.00. But he then concluded that "In all the circumstances" (whatever this refers to) "I believe it would be wrong for me to deduct the full amount of the value of the acceleration. Doing the best I can, I think a proper and reasonable figure to allow for the benefit received by the plaintiff on the deceased's death would be a figure of $60,000.00." But, again with all due respect, this reasoning (or lack of it) cannot stand. As Mr McAlary submitted, ir death caused the benefit of acceleration to arise, the whole of that benefit must be deducted. Finally, there is the question of what was the plaintiff's income for the years ending 30 June, 1986, 30 June, 1387 and 30 June, 1988 and for the 18 weeks from | July, 1988 to 4 November, 1388, the date of judgment. Why it should be a problem in a properly conducted trial to ascertain 2 precise answer to this question I cannot imagine. Th only source of income was the rental of "The Laurels", but inexplicably - and I should have thought inexcusably - no proper attempt was made on behalf of the plaintiff to lead evidence of what that rental was. The tenant gave evidence, and deposed to a reduction in rental, but was never asked from what to what. The closest the plaintiff came to quantifying the figure was in the following question and answer: "Q. How much a week do you receive? A. Iam not sure about a week but it is $21.50 an acre or a hectare." His Honour, having expressed his entirely justified displeasure at the state of this evidence, then proceeded to calculate for himself what the plaintiff's witnesses should have done for him. He said: "The property in the probate documents is stated to be 986 acres. I assume it is per acre and, therefore, the gross return from that would be about $22,000.00 per annum. Out of that amount she would pay tax of approximately $3,676.00. One must also allow out of that figure the rates on the property and upkeep and maintenance. Mr Watson stated the rates on the property as at 30.6.83 were $1,083.00. I assume there would have been some increase, so allowing $1,200.00 for rates the nett income reduces to something in the order of $20,000.00 reducing the nett income to just over $16,000.00. Doing the best I can, I estimate the income as being approximately $15,000.00 per annum or $288.00 per week." 14 UNREPORTED JUDGMENTS Unfortunately, these remarks do not make any sense either grammatically or arithmetically. We know from one of the exhibits that initially the rent was $24,651.00 per annum. This was the amount paid in the years ending 30 June, 1985 and 30 June, 1986. It represents a figure slightly in excess of $25.00 per acre. His Honour was therefore correct in assuming the reduced figure of $21.50 was a per acre figure, not a per hectare figure. If this be so, his Honour was also correct in concluding that the annual rental, after the variation (which seems to have taken place at some unspecified time in 1987), went from $24,651.00 to $22,000.00. His Honour was probably also correct in his estimation of the tax ($3,676.00) and rates ($1,200.00) neither of which figures has been challenged. But if one deducts the aggregate of $3,676.00 and $1,200.0C from the figure of $22,000.00, one arrives at a figure of $17,124.00. not $15,000.00. Expressed in terms of a weekly figure, that amounts to $327.00 not 288.00. It follows from what I have said that, in my view, at numerous points his Honour fell into error and that his judgment therefore cannot stand. This Court must, as a result, calculate the verdict to which the plaintiff was entitled. But before essaying that task, I shall examine how his Honour arrived at the figure for loss of support up to the date of trial ($50,000.00) and at the figure for future loss ($267,911.00). On the former figure, his Honour's calculations can be set out schematically as follows: Year ending 30.6.1984 (15 weeks): Dependency 515.00 per week Income 367.00 per week Difference: 148.00 per week Amount owing 15 x $148.00 = $2,220.00 Year ending 30.6.1985: Dependency 515.00 + 4% = $535.00 per week Income 506.00 per week Difference 29.00 per week Amount owing 52 x $ 29.00 = $1,508.00 Year ending 30.6.1986: Dependency 535.00 + 4% = $547.00 per week Income 349.00 per week Difference 198.00 per week Amount owing 52 x $198.00 = $10,296.00 Year ending 30.6.1987: Dependency 547.00 + 4% = $568.00 per week Income 288.00 per week Difference 280.00 per week Amount owing 52 x $280.00 = $14,560.00 Year ending 30.6.1988: Dependency 568.00 + 4% = $590.00 Income 288.00 per week Difference 302.00 per week Amount owing 52 x $302.00 = $15,704.00 Period ending 4.11.1988 (18 weeks) Dependency 590.00 + 2% = $601.00 per week URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 15 Income Difference Amount Owing $288.00 per week $313,00 per week 18 x $313.00 = $ 5,643.00 $49,992.00 Say $50,000.00 This as I have said, is supposed to be a calculation of the value of the widow's loss of support from the date of death to the date of trial. If I am correct in the principles which I have enunciated, it is quite misguided as such a calculation. In particular, it is affected by three major errors: it takes as a "dependency" figure a figure which measures outgoings not dependency, and a true "dependency" would be one-half of the figures actually used; it offsets, in all periods from the years ending 30 June, 1985 onwards, the whole of the income derived from "The Laurels", whereas it should offset only one-half that sum; and the true (total) income figure for the year ending 30 June, 1987 onwards is $327.00 not $288.00. Re-calculating the figures to eliminate these errors will yield the following results: Year ending 30.6.1984 (15 weeks): Dependency 258.00 per week Income 367.00 per week Difference -$109.00 per week Amount owing -$1,635.00 Year ending 30.6.1985: Dependency 258.00 + 4% = $268.32 per week Income 253.00 per week Difference 15.32 per week Amount owing 796.64 Year ending 30.6.1985: Dependency 268.32 + 4% = $279.05 per week Income 175.00 per week Difference 104.05 per week Amount owing 5,410.60 Year ending 30.6.1987: Dependency 279.05 + 4% = $290.21 per week Income 163.50 per week Difference 126.71 per week Amount owing 6,588.92 Year ending 30.6.1988: Dependency 290.21 + 4% = $301.82 Income 163.50 per week Difference 138.32 per week Amount owing 7,192.64 Period ending 4.11.1988 (18 weeks): Dependency 301.82 + 2% = $307.85 16 UNREPORTED JUDGMENTS Income $163.50 per week Difference $144.35 per week Amount owing $2,598.30 Total Amount Owing $20,952.10 The true figure for the loss of support until the date of trial, before interest is added, should be $20,952.00. But to this figure must be added a further sum to compensate the plaintiff for loss of an income generator. This figure I have calculated at $5,760 per annum. Applying that figure to each of the four years ending 30 June 1985, 30 June 1986, 30 June 1987 and 30 June 1988, one gets an additional sum of $23,040.00. One must add to that a proportional figure for 15 weeks of the year ending 30 June 1984 ($1,661.00) and a proportional figure for the 18 weeks from 1 July 1988 to the date of trial ($1993.00). The addition of these figures to the figure for the loss of support ($20,952.10) yields a total of $47,646.00. To this figure one must add interest at the rate of 7.8% from the date of death to the date of trial. This will yield a figure of $17,224.00, making a total of $64,870.00. For future loss, one should assume a dependency of $308.00 per week and an income of $165.50, a difference of $142.50. That is the loss she will suffer from lack of support each and every week from trial until she reaches the age of 65. On the 3% tables, that gives a figure of $127,822.50 (say $130,000.00). To this one must add her loss of an income generator which, on the same tables, would be $99,567.00 (say $100,000.00). One must then make the two 15% discounts allowed for by his Honour, and subtract the whole of the value of the acceleration ($116,088). The figure for the future loss is thus: Future loss (gross) 230,000.00 Less 15% for contingencies 34,500.00 195,500.00 Less 15% for remarriage 29,325.00 166,175.00 Less value of acceleration 50,087.00 The total verdict to which the plaintiff is entitled, accordingly, as follows: Past loss (ie between death and trial) 47,646.00 Interest on past loss 17,224.00 Future loss (nett) 50,087.00 Award for children 20,900.00 Total 135,857.00 Only two of the submissions made by Mr Kenny QC, senior counsel for the respondent plaintiff, need be mentioned. One is that his Honour made a mathematical error in discounting for marriage. This has already been mentioned URJ NORTHERN RIVERINA COUNTY COUNCIL v PEARCE (Meagher JA) 17 and is clearly correct. The other was that the interest should have been awarded on the total verdict, not merely on that part of it which represents past loss. This is, equally clearly, not correct. The High Court has said so; SGIO (Qld) v Biemann (1983) 154 CLR 539. In view of the fact that the appellant has succeeded in part, but by no means wholly, in my view the appropriate order is not to disturb the costs order below but merely that the respondent pay the appellant's costs of appeal. In my opinion the orders which should be made are as follows: 1. Appeal allowed 2. Set aside order 1 of McInerney J, and in lieu thereof order that the first and second defendants pay to the plaintiff the sum of $135,857.00. Appeal allowed. The judgment below should be set aside and in lieu therof there should be substituted judgment for the plaintiff with costs in the sum of $427,654 to date from 4 November 1988. Of the amount of the judgment the sum of $27,500 should be paid into Court to be paid out to the Public Trustee for investment on behalf of the three children of the plaintiff named below pursuant to the provisions of the Damages (Infants and Persons of Unsound Mind) Act, 1929, to be apportioned as follows: (i) Cindy Pearce $5500; (ii)Shane Pearce $8500; (iii) Toni Pearce $13,500. There will be no order for the costs of the appeal. Counsel for the Appellant: I McAlary QC, J Poulos, RE Dubler Solicitors for the Appellant: Minter Ellison Counsel for the respondent: PJ Kenny QC and P Hennessy Solicitors for the respondent: Farrell Lusher