NSW INSURANCE MINISTERIAL CORPORATION vy CHALLITA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLY, MEAGHER and HANDLEY JJA 14 October 1994, 14 October 1994 [1994] NSWCA 224 DAMAGES — quantum — economic loss — no question of principle. DAMAGES — quantum — past and future economic loss — motor vehicle accident — respondent a partner and labourer in concreting business — whether award of economic loss excessive — held: it was — loss of capacity for work sounds in damages only to extent to which it is or may be productive of loss — respondent suffered no economic loss by being prevented from working as a concrete labourer since able otherwise to use his talents to advantage in the business. Baker v Graham (1961) 106 CLR 340 applied. ORDERS 1. Appeal allowed. 2. The judgment of his Honour Judge Solomon set aside except as to liability and costs. In lieu thereof there be substituted judgment for the plaintiff which would incorporate the amounts for out of pocket expenses and general damages which have not been disputed, the award for economic loss for the six months during which the plaintiff was totally incapacitated and the award made by his Honour for later economic loss up to 4 May 1989 and interest on those amounts as appropriate. 3. Set aside the balance of the award. 4. The appellant is to have the costs of the appeal. The respondent is to have a Suitors Fund certificate. The parties to bring in short minutes to reflect these reasons and a recalculation of the interest on past economic loss. Priestley JA I will ask his Honour Mr Justice Handley to give his reasons first. Handley JA This is an appeal from a decision of his Honour Judge Solomon given on 5 August 1993. His Honour was called upon to assess the damages payable to the plaintiff for injuries sustained by him in a motor vehicle accident which occurred on 4 May 1985. His Honour awarded $138,609.62 comprising out of pocket expenses, general damages of $35,000, past and future economic loss and interest on past economic loss. The appellant has challenged the awards for past and future economic loss. The plaintiff migrated to this country from Lebanon in 1962 and the evidence and findings demonstrate that he has taken full advantage of the economic opportunities available to him in this country. In 1966 he commenced to work as a concreting subcontractor and shortly afterwards formed a partnership with his wife. By 1969 he was employing five to six men on a regular but casual basis in the partnership business. In 1973 he obtained a builder's licence. The business that the plaintiff established and conducted in partnership with his wife was in general quite successful. He had married in 1965 and purchased his first home in Punchbowl in that year. By 1973 he was able to purchase a second house, also at Punchbowl. The business was subject to the vagaries of the building industry but the earnings from the partnership enabled the plaintiff and his wife to visit Lebanon for three months in 1981 and again for five weeks in 1984. 2 UNREPORTED JUDGMENTS The motor vehicle accident occurred on 4 May 1985. The plaintiffs principal injuries of some duration were to his back and neck. In due course his neck recovered but his back did not. The plaintiff, however, already had a back problem before this accident. The trial Judge found that the plaintiff was totally incapacitated for work for six months following the accident and thereafter was partially incapacitated, being unable any longer to perform the work of a concrete labourer. His Honour assessed this loss as equivalent to fifty per cent of the award wage for a concrete labourer. This has not been directly challenged by the appellant and, so far as it goes, it accurately reflects the fact that the plaintiff retained his pre-accident capacity to carry out the other work previously done by him such as obtaining contracts, submitting tenders, making costings, submitting and collecting accounts and organising and supervising the pouring of concrete. His Honour found that the plaintiff's pre-existing back condition was such that it would in any event have prevented him from undertaking labouring work after the age of fifty-five. The assessment of damages for economic loss is always a difficult problem where the injured plaintiff is a working partner. The relevant principles and the existing case law are sufficiently summarised in Luntz, Assessment of Damages for Personal Injury and Death, Third Edition at 249-253. The appellant has challenged his Honour's assessments for past and future economic loss principally on the basis of the material in the partnership tax returns. The results for the financial years ending 30 June 1985 through to 30 June 1992 are summarised in the schedule at 199 of the Appeal Book and in the written submissions of Mr Elkaim. These reveal that in the year in which the accident occurred, namely the financial year ended 30 June 1985, the partnership suffered a tax loss of $5,523. The plaintiff was totally incapacitated for work for approximately two months during this financial year. In the following financial year, in which the plaintiff was incapacitated for work for approximately four months, the partnership tax returns revealed a profit of $5,177, representing a turnaround on the previous year of some $10,700. Mr Elkaim has submitted that this and the evidence in the returns and accounts for later years demonstrated that his Honour's assessment of the plaintiff's economic loss lacked reality and called for the intervention of this Court. In short he submitted that the awards for economic loss represented a higher return for this injured plaintiff than he would have made if he had not been injured. However the net results from the partnership tax returns should not be taken at face value and used to assess the plaintiff's economic loss. The profit and loss accounts and balance sheets for the two years referred to and also for the later years disclose the existence of payments treated as business expenses of the partnership which in all probability included a substantial component which could properly be regarded as indirect remuneration for the partners. The evidence does not enable the Court to arrive at any precise quantification of the extent to which some of these payments represent indirect remuneration. However, by way of example, the profit and loss statement for the year ended 30 June 1987 includes an amount of $14,458 for interest but the balance sheet would indicate that in all probability some of this interest was payable in respect of the plaintiff's home. It is not possible to make a finding to that effect. Nevertheless the Court may be taken to know that at that time there were many advantages for a person who carried on business on his own account either through a partnership URJ NSW INSURANCE MINISTERIAL CORPORATION v CHALLITA (Handley JA) 3 or through a company. Other amounts of a similar kind include bank charges, general expenses, rates and taxes telephone and motor vehicle expenses. There is no doubt on the Judge's findings that the plaintiff suffered a significant diminution in his capacity for work as a result of the accident, and there has been no challenge to those findings. The established principle of law enunciated by the High Court in Baker v Graham (1961) 106 CLR 340 at 347 is that a loss of capacity for work sounds in damages only to the extent to which it is or may be productive of economic loss. Prior to his injury the plaintiff worked in a partnership business as both manager and labourer. His injuries prevented him from continuing to work as a labourer. The partnership compensated for this loss by employing additional casual labour. In my opinion the cost to the partnership of employing additional outside labour to provide the labouring work previously performed by the plaintiff was a fair measure of the plaintiff's loss in accordance with the principles summarised in Luntz. I would therefore not disturb the trial Judge's award for the first few years after the accident. At some time during the 1988 tax year the plaintiff's son Tony commenced to work in the business and in due course became an equal one-third partner. As his Honour found, "The partnership has flourished since the son has joined the partnership". This is demonstrated by the partnership accounts although no doubt they continue to include business expenses which to some extent represent indirect remuneration for the partners. The profit disclosed in the partnership accounts and tax returns for the year ended 30 June 1989 was $62,714, the following year $89,770, the following year $33,081 and the following year $103,124. His Honour's assessment has in my respectful opinion failed to take proper account of this evidence and of his own finding that the partnership has flourished since the son joined it. The evidence of the plaintiff and his son demonstrates that since the plaintiff has been relieved of physical work as a concrete labourer he has been able to use his talents, skills and experience to far greater advantage than he could when he was doing labouring work. I need not go into the details. The evidence, therefore, reveals that the plaintiff was not fully using his true economic capacity prior to the accident and that one effect of the accident has been to relieve him from the less well-paid and rewarded work within his skills and experience and to enable him to concentrate on other aspects of the business which are better rewarded and more profitable. This is one of the explanations for the partnership's increasing prosperity. In these circumstances I have concluded that the plaintiff has suffered no economic loss by being prevented from working as a concrete labourer in the partnership from about the time that the partnership became more profitable during the 1989 fiscal year. I would therefore propose to leave his Honour's award undisturbed for the period up to 4 May 1989 as set out in the schedule on page 109, but to set aside his Honour's award for the period from 4 May 1989 to the date of trial. I have not been able to work out the precise figures in the time available, but they can be readily worked out by the parties from the schedule on 109. It also follows of course that the award made by his Honour for future economic loss at the date of trial must also be set aside. I would therefore propose the following orders: 1. The appeal be allowed. 2. The judgment of his Honour Judge Solomon be set aside except as to liability and costs and that in lieu thereof there be substituted judgment for the plaintiff which would incorporate the amounts for out of pocket expenses and 4 UNREPORTED JUDGMENTS general damages which have not been disputed, the award for economic loss for the six months during which the plaintiff was totally incapacitated and the award made by his Honour for later economic loss up to 4 May 1989 and interest on those amounts as appropriate. 3. I would set aside the balance of the award. 4. The appellant is to have the costs of the appeal. The respondent is to have a Suitors Fund certificate and I would direct the parties to bring in short minutes to reflect these reasons and a recalculation of the interest on past economic loss, if possible this afternoon; if not, before a single Judge of this Court some time next week. Priestley JA: I agree. Meagher JA I also agree. (Discussion.) Priestley JA: The short minutes are to be brought to Mr Justice Handley on Monday at 9.30 am in private chambers. 1. Appeal allowed. 2. The judgment of his Honour Judge Solomon set aside except as to liability and costs. In lieu thereof there be substituted judgment for the plaintiff which would incorporate the amounts for out of pocket expenses and general damages which have not been disputed, the award for economic loss for the six months during which the plaintiff was totally incapacitated and the award made by his Honour for later economic loss up to 4 May 1989 and interest on those amounts as appropriate. Set aside the balance of the award. 4. The appellant is to have the costs of the appeal. The respondent is to have a Suitors Fund certificate. The parties to bring in short minutes to reflect these reasons and a recalculation of the interest on past economic loss. » Counsel for the appellant: M Elkaim Solicitors for the appellant: GM Meadows Counsel for the respondent: C Simpson Solicitors for the respondent: BM Salmon, Layton and Co