NEW SOUTH WALES INSURANCE MINISTERIAL CORPORATION v FLEISCHNER SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL KirBy P, COLE JA and ROLFE AJA 30 March 1995 [1995] NSWCA 332 DAMAGES — loss of economic capacity — past financial loss — loss of future economic capacity — pharmacist qualified as registered podiatrist — motor vehicle injury reduces capacity to perform podiatry — calculation of past and future economic loss — calculation by reference to the differential income derived from pharmacy and podiatry — calculation by reference to likely but-for-injury employment mix between pharmacy and podiatry — injured claimant states her intention was to move out of pharmacy into podiatry — objective evidence of rise in actual post-injury income — whether, for calculation of past financial loss and future economic loss, allowance must be made for larger probable increase in income but for injury — held: The provision made for past and future economic loss did not reveal error in the light of the injured party's stated intention (inferentially accepted by the primary judge) that, but for injury, she would have increasingly moved from pharmacy activities into the higher earning activities as a podiatrist — appeal dismissed. Malec v J C Hutton Pty Limited (1990) 169 CLR 638; Medlin v The State Government Insurance Commission, (1995) 127 ALR 180 (HC) referred to. Kirby P. Sinclair DCJ entered judgment in favour of Mrs Tracey Elizabeth Fleischner (the respondent) in the sum of $238,204. The New South Wales Insurance Ministerial Corporation (the appellant) initially contended that her proper judgment was $93,204. The two items in dispute between the parties in the appeal were: Past financial loss (and interest thereon): The appellant contended: $30,000 + $15,000 = $45,000 The respondent defended his Honour's award: $60,000 + $30,000 = $90,000 Future loss of earning capacity The appellant originally contended: Nil It ultimately conceded a possible 'cushion' of $70,000 The respondent defended his Honour's award of $100,000. Past and future financial loss — facts and estimates. The facts are stated by Rolfe AJA. The objective facts show a steady rise in the respondent's actual earnings, notwithstanding her injury on 26 July 1986 and its physical consequences. Thus the respondent's tax returns showed the following nett income for the succeeding income tax years: 'Year ended 30 June 1987 $14,460 Year ended 30 June 1988 $33,455 Year ended 30 June 1989 $49,250 Year ended 30 June 1990 $68,577 2 UNREPORTED JUDGMENTS Year ended 30 June 1991 $98,548 Year ended 30 June 1992 $97,997 Year ended 30 June 1993 $87,291' As well, the objective evidence demonstrated that, during the four financial years ended 30 June 1989, 1990, 1991 and 1992, the respondent's nett income from podiatry increased from $26,703 to $77,507. In these circumstances, the appellant urged that the allowance made by Sinclair DCJ for the actual financial loss prior to trial was excessive and that it should be reduced to $30,000. The attack of the appellant upon the allowance made by his Honour for future economic loss has been described by Rolfe AJA in his reasons. The appellant's principal submission was that, upon the footing of the objective economic evidence, the respondent's disabilities (although painful and inconvenient) were not reflected in economic loss and were not likely to be. Once again, the appellant pointed to the objective financial evidence of the past and the surest foundation for predicting the future on a basis better than guesswork. If the Court considered that a 'cushion' were required against the contingencies of the future, the appellant sought to test the allowance made by Sinclair DCJ by reference to the premises upon which his Honour had allowedfor past economic loss. Thus it took an hourly rate to reflect the loss of $11.71 per hour found by his Honour to be the difference between income as a podiatrist and in the pharmacy. It also took the eight hours weekly loss which Sinclair DCJ had found. $11.71 multiplied by 8 produced a nett weekly loss of $93.68. Assuming, as Sinclair DCJ had done, that the respondent would have worked to the then likely female retirement age of 65 years, this envisaged a further 34 years of work, given that the respondent was 31 years of age at the trial. Thus, the appellant argued, this Court should test the provision for loss of future economic capacity made by Sinclair DCJ (namely $100,000) against his earlier findings. Extending $93.68 (weekly loss) by the appropriate multiplier (865.9) a figure of $81,117.51 was produced. If this were reduced by the conventional discount of 15% for vicissitudes, it would produce a lump sum of $68,949 or, rounded, $70,000. Given that, in the present case, the discount for imponderables should be higher than the conventional 15%, the appellant urged that the foregoing approach represented one which, if anything, would be generous to the respondent. The award for loss of economic capacity in the future should be reduced. Applicable legal principles — valuing loss of possibilities. The applicable principles were not in doubt. The respondent was entitled to have the Court assess her damages, both for the past and future, by reference to its prediction of her past and future income earning activities adjusting the award of damages to reflect the assessment of the degree of probability. Proof of an exact sum is 'necessarily unobtainable'. A requirement that an injured person recover if he or she proves a 51% probability of certain things occurring but will fail altogether if the prediction has only a 49% probability of occurring, is manifestly unfair. It is not the law. See Malec v J C Hutton Pty Limited (1990) 169 CLR 638 , 643: The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the WHEW SOUTH WALES INSURANCE MINISTERIAL CORPORATION v FLEISCHNER (Kirb$ P) degree of probability of those events occurring. ... [U]nless the chance is so low as to be regarded as speculative — say less than | per cent — or so high as to be practically certain — say over 99 per cent — the Court will take that chance into account in assessing the damages. The mere loss of a capacity which is not reflected in actual financial consequences will not attract damages for past financial loss if none is shown although it may require provision against the imponderable uncertainties of the future. Graham v Baker (1961) 106 CLR 340 , 347; Medlin v The State Government Insurance Commission, (1995) 127 ALR 180 (HC) , 192f. Approaches to the evidence The expert accountant, Mr Turner, ealled on the respondent's behalf to assist in the ascertainment of her economic loss, provided certain figures which derived a loss very substantially greater than his Honour allowed. It was suggested that his Honour had discounted these calculations heavily and the product, $100,000, was the result of an already highly conservative approach. With respect, I find this argument unconvincing. Mr Turner's calculations worked from two hypotheses. The first was a nett weekly loss of $213.71 per week (producing a lump sum of $183,883). The second was a nett loss of $440 per week (producing a lump sum of $378,563). Sinclair DCJ accepted Mr Turner's 'more conservative estimate'. But, the appellant argued, the fallacy in doing this is that it represented a completely different basis of calculating the past nett weekly loss from that which his Honour had accepted. This had produced a nett weekly loss of only $93.68 per week. This was the loss whichhard figures, and actual financial data, had demonstrated. In my view, Mr Turner's estimates, although well intended and prudently presented to the trial court, did not adequately conform either to the evidence of the respondent's past financial loss or to his Honour's finding on that evidence. But in this case the past was not a necessarily effective guide to the future. According to the evidence, had she not been injured, the respondent would have reduced her hours in the pharmacy and turned increasingly to the higher earnings of podiatry. On this point, the respondent gave the following evidence: Q: From your research that you referred to and from your knowledge and experience as a podiatrist is it difficult to develop a practice as a podiatrist? A: No, it is not. Q: Why is that? A: Well podiatry does not appeal to a lot of people because, you know, you are treating people's feet and so there are not a great number of podiatrists and yet there a (sic) a lot of people that have problems with their feet so there is a great demand for podiatry treatment, yes. Q: You are working some more than 50 hours a week at that stage and six days apart from the Tuesday afternoon of the second week. Were you prepared to keep working those sorts of hours or more or less? A: Yes. I was thriving. It was just what I wanted to do and it was just what I imagined it to be. It was great. Q: Do you think that you would have continued on with the hourly rate jobs once your practice had developed? A: No, not at all. Q: So would you have ceased doing work for Jenny Thompson? A: Yes. 4 UNREPORTED JUDGMENTS Q: What was the position in relation to Pharmacy and your intentions for your developing skills in the future?A: Well I had decided that as they had been very good to me in giving me a lot of work while I was studying — Q: You are talking about Greenfield Park? A: Greenfield Park. That I would work for them for 12 months after I had finished my podiatry as sort of a thank you for what they had done but after that time I only planned to work as a podiatrist.' Sinclair DCJ generally considered the respondent to be an honest witness, although he was inclined to think that she had overstated the adverse effect of the consequences of her injury upon her capacity to carry out her practice as a podiatrist. Precisely what the respondent would have done, uninjured, can never be known. But there seems no reason to reject Sinclair DCJ's conclusion that she would probably have moved increasingly into full-time podiatry work. If this hypothesis is accepted, it demonstrates the error of the appellant's argument that the past financial loss was fixed by the mix of employment activities forced on the respondent by her injuries and that the future loss of economic capacity could be calculated merely by extending the actual losses suffered in the past. Those losses are premised upon an interaction between actual work in the pharmacy and work as a podiatrist. Once it is concluded that, but for injury, the respondent would have moved increasingly to the more remunerative activity of her speciality in podiatry, the approach which Mr Turner urged becomes more viable. Conclusion: award is high but not erroneous. I can understand the appellant's criticism of the lump sum of $100,000 which Sinclair DCJ found. The appellant complained that this sum was unsupported by calculation. It had only its round quality to commend it. Certainly, it would have been open to Sinclair DCJ to approach the calculation of the 'cushion' to be provided for future loss of economic capacity in the more precise way that the appellant urged. This Court is not concerned with thereasoning of the judge, as such. Its concern must be with the order which he made. Allowing that the 'cushion' for the future loss of economic capacity might properly make provision for the difference between the economic capacity of the respondent working in a pharmacy and as a full-time podiatrist, it has not been shown that the sum of $100,000 was wrong. I consider that such a 'cushion' was high. It was higher than I would have provided in the light of the objective evidence of past loss over the extended period which had elapsed between the injury and the trial. But it was not so high as to authorise this Court to disturb it. Moran v McMahon (1985) 3 NSWLR 700 (CA) , 720. Orders. Accordingly, I agree that the appeal should be dismissed with costs. Cole JA. I agree with Rolfe AJA. Rolfe AJA. The plaintiff/respondent, ('the respondent'), was born on 13 March 1962. She attained her Higher School Certificate in 1979 and the degree of Bachelor of Pharmacy in 1982. Thereafter she enrolled in a Podiatry Course, which she completed in 1985 and she became a registered podiatrist in January 1986. She married in March 1986. There are no children of the marriage and her evidence was that she is career oriented and does not intend to have any children. On 26 July 1986 she sustained personal injuries in a head-on collision between the motor vehicle she was driving and another motor vehicle and she sued to recover damages in respect of those injuries and the consequences thereof by proceedings instituted in the District Court on 24 December 1986. Liability was WAEW SOUTH WALES INSURANCE MINISTERIAL CORPORATION v FLEISCHNER (Rolf6 AJA) admitted by the appellant and his Honour Judge Sinclair QC determined, on 5 November 1993, that the respondent was entitled to a verdict in the sum of $238,204. The appellant challenges two of the components in that award as being excessive and against the weight of evidence. They are $60,000 for past economic loss and $100,000 for diminution 'in earning capacity in the future'. The respondent filed a Notice of Cross-Appeal, which was not pursued. At the time of the accident the respondent's intention was to develop her podiatry practice, for which she said there was a great demand, and gradually phase out her work as a pharmacist. His Honour noted the principal issues thus, AB368-369: The plaintiff asserts that as a result of continuing pain and disability, although she is able to do the full range of podiatry work, she has not been able to achieve the hours of work she was able to perform before the accident occurred. The substance of the plaintiff's claim for economic loss is alleged diminution in her capacity to follow her career as a podiatrist because of continuing disability in her neck and headaches which limit the type of podiatry work she can perform constantly and require her to limit her working hours and refrain from working on Fridays, more or less, after the heaviest day of her practice on Tuesdays. She continues working part-time in a pharmacy where her duties are less onerous .... The principal matters in issue are the extent of her continuing pain in the neck and headaches, the cause thereof and the financial consequences of such continuing disability. At AB376 his Honour found: Upon the medical evidence I am satisfied that the plaintiff sustained soft tissue, probably ligamentous, injury to her cervical spine from which she suffers periodic pain in her neck and headaches, probably postural induced and aggravated by her podiatry work; and some continuing minor disability andscarring of her left knee; and that such disabilities are likely to continue indefinitely. These findings were not challenged. His Honour continued: — The extent to which such continuing disabilities have and continue to adversely affect her earning capacity is difficult to determine. I accept her as an honest witness though I am inclined to the view that she tends to overstate the adverse effect of the consequences of her injury upon her capacity to carry out her practice as a podiatrist; and on some occasions, the hours she worked before and since the accident. The report of Mr Turner' (an accountant called on the respondent's behalf to try to assess economic loss) 'is a guide to the assessment to her past and future economic loss but the basis of his assessment must be considered with care.' It is at least implicit in his Honour's reasons that he accepted that the respondent did not intend to have children and did intend to pursue her professions until approximately the age of sixty five years, ie for a further period of thirty five years from the date of trial. The respondent appears to have made a reasonably quick recovery from the initial injuries she suffered, and she was discharged from hospital on 1 August 1986. At some time thereafter she returned to gainful employment and the extent of her success in this regard can be measured by a consideration of her subsequent earnings history. For the financial year ended 30 June 1986 her income, which his Honour described as 'her total nett income before tax', was $20,837. I take this to mean her income after the deduction of business expenses, but before the payment of income tax. His Honour then set out figures for the financial years ended 30 June 1987 to 1993, which I assume are calculated in the 6 UNREPORTED JUDGMENTS same way. For the financial year ended 30 June 1987, which was the financial year in which she was injured, her income was $14,460. Thereafter for the financial years 30 June 1988 to 1993 her income was $33,455, $49,250, $68,577, $98,548, $97,997 and $87,291 respectively. His Honour noted that during the four years ended 30 June 1989 to 1992 the respondent's nett income increased by approximately one hundred per cent and the podiatry component increased from $26,703 to $77,507. His Honour made it clear he was aware of the absence of contemporaneous records for a substantial part of the period corroborating the earnings loss, and that he considered diary entries, which were available, required 'careful consideration'. His Honour's reasons make it clear he approached the issue of damages with reservations and, in so doing, he noted various matters, which militated against an award on the higher basis for which the respondent contended. He recognised that the assessment of diminution in earning capacity was dependent upon the reliability of the respondent's evidence of hours lost to her podiatry practice: AB385. With these reservations in mind his Honour approached the question of damages. His Honour had determined 'taking a broad approach' that economic loss from the date of injury to the date of trial was $60,000. He came to this conclusion notwithstanding the conservative approach he took to the estimate of damages, and notwithstanding his appreciation of comments made by an accountant called on behalf of the appellant. These were that the respondent's income tax returns did not, in themselves, substantiate any loss of earnings following the accident, or at least after her return to work; that the growth of her income since 1987 had been spectacular; and that her records did not confirm the hours of work before the accident or since the accident. His Honour approached the matter on the basis that but for the injuries sustained in the accident the respondent would have worked longer hours. He accepted a loss of $8,440 in the financial year ended 30 June 1987, being the financial year in which she was injured. He also accepted that for the financial years ended 30 June 1988 to 1992 she lost each working week eight hoursproducing a further loss of $42,288. For the financial year ended 30 June 1993 and to date he was not satisfied any higher figure than eight hours per week should be accepted and this produced a figure of $10,852. These figures gave $61,580, which his Honour rounded at $60,000. Although prima facie the significant and continuing increase in the respondent's income indicates an absence of economic loss, there is no reason, in my opinion, on the evidence why a finding could not have been made that but for the injuries sustained in the accident the respondent would have worked even longer hours and thus earned more income. It seems to me this was a finding of fact committed to his Honour and, as I have said, he approached it in a conservative way and with a full appreciation of the deficiencies, to which he referred, in the records available and other evidence. In my opinion, the finding of an entitlement to $60,000 has not been demonstrated to be infected with error. The appellant does not submit that there should be a closed period for past economic loss ending some time during the 1987 financial year, whereafter there was no past economic loss. The appellant's submission is that the award in this regard 'was double the figure supported by the evidence' and that it should have been $30,000. The appellant does not seek to say why this is so. It therefore becomes, in my opinion, a question whether any basis has been made out for interfering with the trial Judge's assessment. In my view it has not. WAEW SOUTH WALES INSURANCE MINISTERIAL CORPORATION v FLEISCHNER (Rolfé AJA) At AB390 his Honour said, in considering loss of earning capacity: By these observations I do not intend to suggest that the plaintiff is a dishonest witness deliberately seeking to mislead the Court, but the totality of the evidence does suggest to me that her estimation of the hours she does work in podiatry is understated and certainly more than the figure adopted by Mr Turner as the basis of his calculation of hours worked and hours lost. Accordingly although I take into account the evidence of Mr Turner, whose estimates vary from $213.71 loss nett per week until she attains the age of sixty five, alump sum of $183,883 and in his "second situation" a nett loss of $440 a week until the age of sixty five which produces a lump sum of $378,563, subject of course to discount for the vicissitudes; and bearing in mind the not unreasonable approach taken by counsel for the plaintiff, I have come to the conclusion that the lump sum value of the diminution of the plaintiff's earning capacity should be assessed at $100,000. In assessing loss of future earning capacity his Honour proceeded on the more conservative estimate of Mr Turner, which produced a lump sum of $183,883 and, no doubt, had regard to the possibility that in the future she would have become more successful. A conventional discounting for loss of future earning capacity would be in the order of fifteen per cent to twenty per cent. As part of the vicissitudes in this case would have involved the possibility the respondent may have had a child and that she may not have worked to the age of sixty five I would have been inclined to apply a twenty per cent figure. That would have reduced the $183,883 to $147,106. However, consistently with the conservative approach his Honour took he reduced the figure by some forty five per cent. This was a heavy discount and, in my opinion, it has not been demonstrated to be in error. It was submitted on behalf of the appellant that future economic loss should be calculated on the basis of 8 hours per week at $11.71 per hour, $11.71 per hour being the amount his Honour found to be the difference between what the respondent would earn as a podiatrist and as a pharmacist: AB384. An adoption of this, with appropriate adjustments, for a period of thirty five years would have produced a figure of $70,000 in lieu of $100,000 which was awarded. The appellant submitted $70,000 should be substituted for $100,000. However the evidence was that the respondent intended to phase out her activities as a pharmacist and to do more work as a podiatrist, which was obviously a more highly paid rate. In these circumstances I consider his Honourwas entitled to take a higher figure than that for which the appellant submitted. While it has been submitted his Honour's figures lack precision, they are, in my opinion, clearly within the range the evidence would permit: Malec v J.C. Hutton Pty Limited (1990) 169 CLR 638. I would propose the appeal be dismissed with costs. Appeal dismissed with costs.