REEDY v HARRIS and ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HANDLEY and BEAZLEY JJA 23 July 1997, 17 September 1997 [1997] NSWCA 261 Motor vehicle accident — Damages — calculation of post-accident earnings — Lost earning capacity — Assessment of past economic loss — Factors relevant to assessment — Deductions. The appellant was injured in a motor vehicle accident in which he suffered a significant injury to his left knee. This greatly reduced his earning capacity. He appealed against three aspects of the award of damages by the trial judge: (1) the deduction of $5,000 in respect of post-accident earnings; (2) the determination of his lost earning capacity; and (3) the assessment of past economic loss. The finding that the appellant had failed to mitigate his damages was not challenged on appeal. Before the accident, the appellant was consistently employed. After the accident he was out of work for approximately five months. He was then employed sporadically by various employers. He left many of his jobs due to the pain in his left knee. The appeal to the Court of Appeal was by way of a rehearing (s75A of the Supreme Court Act 1970 (NSW)), and the Court undertook a reassessment of the damages which should have been awarded. In the assessment of the appellant's past economic loss, the trial judge found that the appellant was unemployable for a period of almost 70 weeks, and then would have regained a level of fitness for employment within 12 months of embarking on a Commonwealth Rehabilitation Service course. However, the trial judge failed to make allowance for loss of earning capacity during the period of rehabilitation. The Court of Appeal reassessed this, and treated 40 weeks of the 12 month period of rehabilitation as a period in which the appellant would not have earned income, and the balance of the 12 month period as one in which he would have regained his ability to earn income. The period of 70 weeks as found by the trial judge was therefore increased to 110 weeks by the Court. The trial judge had assessed the appellant as having a lost earning capacity of $425 per week, which was $75 less than what he would have been earning with his pre-accident employer. As the $75 was challenged on appeal, the questions for the Court became: (1) what the appellant's post-accident wages would have been but for the accident; and (2) what the appellant's past and future lost earning capacity was. The Court found it necessary to review the type of work performed by the appellant during the period, the wages he earned in that work and his capacity to perform the work. The Court found that most of the jobs the appellant undertook after the accident were unsuitable because of his knee. The Court nevertheless found that these jobs provided some guidance as to the wages which could be earned in unskilled or semi-skilled work. The Court found that as a consequence of the accident, the appellant was limited to light process work, which is not readily available, and that some allowance should be made for this. Taking all of this into account, the Court concluded that the appellant's post-accident work capacity was $275 per week. The Court further found that the amount that the appellant would have earned but for the accident was $500 per week, and that this was the appropriate figure upon which the base the assessment of future loss. The trial judge had also deducted $5,000 from past economic loss, describing this amount as what the appellant had earned after the accident. The Court ignored this figure, as it did not appear to be based on any particular evidence. Instead, the Court recognised 2 UNREPORTED JUDGMENTS that the appellant had earned a significant amount after the accident, and deducted this amount from the damages awarded for loss of past earning capacity. Handley JA I agree with Beazley JA. Beazley JA This is a plaintiff's appeal on quantum from a decision of the District Court. The appellant appeals against three aspects of the trial judge's award of damages: 1. The deduction of a sum of $5,000 in respect of post-accident earnings; 2. The trial judge's determination of the appellant's lost earning capacity; 3. The trial judge's assessment of past economic loss. At first instance, an important consideration in the determination of the second and third of these matters was the trial judge's finding that the appellant had failed to mitigate his damage. That finding was not challenged on appeal. Background Facts The appellant is presently aged 26 (being 19 at the time of the motor vehicle accident on 5 December 1989). In 1978 he lost the use of 95 per cent of the sight in his right eye. He left school in 1984 at the end of Year 8 with, his Honour found, poor literacy and numeracy skills. Apart from the injury to his eye, he enjoyed good health and led an active and vigorous social and recreational life. On 5 December 1989 the appellant was riding a motorcycle in Narrabeen when he collided with a motor car which emerged suddenly across his path. The appellant was thrown to the roadway and sustained a significant injury to his left knee. He was taken to Mona Vale Hospital and came under the care of Dr Coolican, Orthopaedic Surgeon. A fracture of his left patella was stabilised with K wires, and plaster of Paris was applied. The K wires were removed at Dilma Private Hospital on 10 May 1991. The appellant had not seen Dr Coolican for treatment since 1991 and only saw his general practitioner on a few occasions since, as he did not believe anything further could be done for his left leg. There was no issue, and his Honour found, that the appellant sustained a significant injury to his left knee and that this significantly reduced his earning capacity. After his accident, the appellant's personal life became less than satisfactory. He began to gamble, to binge drink alcohol, used marijuana for analgesic effect rather than take his prescribed or recommended medication and was often in debt. The trial judge held these matters were relevant to the issue of mitigation. Pre - and Post - Accident Work History Before the accident, despite his limited education, the appellant was consistently in employment. Between 198S and 1989 he worked as a washing machine mechanic, a process worker, and as an attendant at an ice rink, all within the northern beaches area of Sydney, the area in which he grew up. In March 1989, the appellant commenced as a garbage truck loader with Pacific Waste Management at their northern beaches depot, earning in excess of $500.00 per week net. His work involved shift work as a garbage truck offsider. In addition he helped out around the depot with manual work of a semi skilled nature, such as repairing machinery. After the accident the appellant was off work for approximately 5 months. In April 1990, he obtained a position performing manual work at the Narrabeen Ice Rink at a salary of $320.00 per week gross. He remained in that job until October URJ REEDY v HARRIS and ANOR (Beazley JA) 3 1990 when he obtained a position performing process work with Headway Helmets for approximately one month. He was unemployed until about April 1991 when he attempted builders labouring work with Chris Pet, a position he seems to have held until he entered hospital for the removal of the K-wires. It should be noted that the appellant had managed to hold these three positions at a time when his Honour found that he was totally incapacitated for work. He was then unemployed until about December 1991 when he worked for two weeks as a shelf packer with Big W at Macquarie Centre, Ryde. In June 1992, he commenced a rehabilitation program with the Commonwealth Rehabilitation Service, Dee Why Office (CRS). Through this program, he obtained work as a labourer with a garden and household tidying up business from September 1992 until December 1992. He was dismissed from that job after taking time off because of the pain in his knee. He remained unemployed until August 1993 when he commenced work as a washing machine mechanic, a position he held for a month until he was asked to perform secretarial and sales duties that he believed were outside his competence. In November 1993 he attempted to work as a kick press operator in a factory, but left the job after one week because of difficulties with his left knee. He remained unemployed until May 1994 when he commenced work as a gardener on a contract basis, at $75.00 per day, 2 days per week. He remained in that position until July 1994 when he left due to delays in payment. He remained unemployed until February 1995 when he again attempted work; as a process worker with Kembo Cuisenaire, Mona Vale, but he lasted there only two weeks as he had difficulty coping with standing. The appellant also worked for a period of 2 to 3 days per week as a tradesman's assistant with a friend, Tony Papa, who operates an electrical contracting business. The appellant was indebted to Papa at this time and his wages, of between $80.00 to $100.00 per day, were offset against his indebtedness. In 1992, the appellant underwent a Vocational Assessment arranged by CRS Brookvale to assess potential work options. Included amongst the list of "realistic employment options" which were assessed as being suitable for the appellant were: handyman, gardening/maintenance/mowing, carwrecker yardperson, assembly line worker, drill press operator, service station attendant. In 1995 a rehabilitation plan stated that: "Mr Reedy's limited education, training and physical restrictions greatly limit his work options. The occupations that meet Mr Reedy 's needs and preferences are generally in the paraprofessional/professional job categories; requiring quite high level skills and thus not of an equivalent level to his pre-injury employment. The unskilled and semiskilled work meeting Mr Reedy's physical requirements such as process worker, car park attendant and mail sorter are generally incompatible with his work personality profile. This has added significance given the indication by Mr Reedy's work history that he is unlikely to secure or maintain any employment that does not involve factors conducive to his job satisfaction." In October 1995 the appellant underwent a further vocational assessment with the CRS-Dee Why, which concluded that he was suitable for unskilled process type work, sales work and car detailing. There was some suggestion that he should improve his literacy skills. At the time of the commencement of the hearing, the appellant was attempting, through the CES, to join a program performing regeneration work at North Head and Scotland Island. 4 UNREPORTED JUDGMENTS On 8 March 1996, the first day of the hearing, and after the appellant had largely completed his evidence in chief, the trial judge expressed concerns about the extent of rehabilitation assistance provided to the appellant by the CTP insurer. The matter was adjourned on the basis the: it would be relisted after such assistance had been provided. Subsequently, on 24 June 1996 the appellant was assessed by David Martens, a social worker employed by the CRS at Dee Why, at the request of the NRMA, the CTP insurer. Towards the end of August 1996, a rehabilitation counsellor at that office, Jim Bloom, completed a vocational assessment of the appellant, which recommended that the appellant was best suited for light process work. In a current status report prepared at that time it was noted that a number of the possible work options identified in the initial assessment "may no longer be suitable." At about the same time the appellant's telephone was disconnected and he failed to contact the CRS office until January 1997, shortly before the matter was relisted for the further hearing of the matter on 10 February 1997. It is not clear, however, whether the appellant had been told to make contact with the CRS office after Mr Bloom's assessment. Notwithstanding, his Honour found that: "The plaintiff has failed to apply himself to seeking work in any areas suitable for his post operative condition and he has failed to take reasonable steps to equip himself with the necessary skills to be able to undertake other work which would be within his capacity. He has failed to co-operate with others who has sought to assist him to develop and to acquire those additional skills also." Assessment of Past Economic Loss The trial judge treated the appellant as having no earning capacity in the period from the accident until shortly after the removal of the K-wires - a period of approximately 70 weeks. His Honour thus awarded the appellant 70 weeks at his approximate pre-accident wage of $500.00 per week. His Honour then dealt with the period from 70 weeks after the accident to the date of trial, a period of 300 weeks. His Honour calculated the appellant's loss of earning capacity in this period at $75.00 per week, giving a total loss of $57,000.00, from which he deducted $5,000.00, for his post motor accident earnings. All three components of this calculation, that is, the 300 weeks, the $75.00 and the $5,000.00 deduction, are challenged. It is convenient to deal first with the 300 weeks. Having found that the appellant was unemployable for a period of almost 70 weeks, the trial judge found that he would have regained a level of fitness for employment within 12 months of embarking on a Commonwealth Rehabilitation Service course. However, his Honour made no allowance for loss of earning capacity during the period of rehabilitation, as clearly he should have. As his Honour did not deal with this period, there was no finding as to whether in this period, that is from the time of removal of the K-wires until a year after commencing a rehabilitation course, the appellant had any earning capacity. Clearly, during part of this period he would have had none. The question is whether, as submitted by counsel for the appellant, the appellant should be treated as having had no earning capacity during the whole of the 12 month period. There was no evidence which would assist in this determination. Given that neither party urged a retrial (counsel for the appellant faintly endorsed such a proposal at one stage), and an appeal to this Court is by way of a rehearing: s75A Supreme Court Act, 1970 (NSW); and as the Court ought to promote, to the extent it is appropriate, finality of litigation and should also act, again to the URJ REEDY v HARRIS and ANOR (Beazley JA) 5 extent appropriate, to minimise the costs to the parties, it is convenient that this Court reassess the damages which should have been awarded. That assessment must, of necessity in this case, be broad: see generally Jones v Schiffman (1971) 124 CLR 303; Callaghan v William C Lynch Pty Ltd [1962] NSWR 871 at 877; Biggin & Co v Permanite Ltd [1951] 1 KB 422. In the normal course of events, a person in the appellant's position, undertaking a course of rehabilitation over a lengthy period, would have no or little earning capacity at the beginning of the period and a greater earning capacity at the end. Again, in the normal course of events, the earning capacity at the end would be likely to represent the full extent of a person's post accident earning capacity, with a person's earning capacity gradually increasing in the intervening period. Rather than attempt to build into the calculation some gradation of loss, a task which would be unduly complicated in this case given the limited evidence available, a similar result can be obtained by treating approximately 10 months or 40 weeks of the 12 month period in which the appellant would have been undertaking rehabilitation as a period in which he would not have earned income and the balance of the period as one where he would have regained his ability to earn, having regard to his knee injury. Thus, the period of 70 weeks during which his Honour found the appellant to have been unemployable must be increased to 110 weeks, giving a total figure for this period of $55,000.00, in lieu of the trial judge's figure of $35,000.00. Assessment of Loss of Earning Capacity After the period of 70 weeks (now 110 on the approach above) the trial judge assessed the appellant as having a lost earning capacity of $75.00 per week less than he would have been earning with Pacific Waste Management, the appellant's pre-accident employer. His approximate net earnings with that employer were $500.00 per week. His Honour's finding as to loss of earning capacity attributed to the appellant a retained earning capacity of $425.00 per week. The amount of $75.00 per week was determined by his Honour against the background of a finding that his income earning capacity was "significantly reduced" by the injury to the left knee and its sequelae. His Honour stated that the evidence from which that loss could be quantified was "sadly lacking from the case". It is clear from his Honour's assessment of future economic loss that that loss was treated as being constant from then into the future. There is no dispute, and I should add no error, in his Honour's approach in that regard. The challenge is as to the assessment of $75.00. Before dealing with this challenge two matters should be noted about the trial judge's reasoning on this issue. His Honour made no mention of the appellant's post-accident employment earnings. It is impossible to know whether he failed to give these matters any consideration or whether he dismissed them as being an inappropriate measure of the appellant's post-accident earning capacity. Secondly, his Honour determined that the appellant's future earning capacity, but for the accident, would have been $400.00 per week - not the $500.00 he had accepted as appropriate to apply for the period immediately pre-trial. It was submitted that the finding of $75.00 per week was based on no evidence, when, in fact, there was evidence upon which the Court could act, namely the appellant's post-accident full time earnings. It was submitted, therefore, that the proper approach to the assessment of the appellant's past loss of earning capacity was to use those earnings as a guide to what he could earn, given the ongoing 6 UNREPORTED JUDGMENTS disability with his knee. It was submitted that that capacity should then have been assessed against the appellant's pre-accident earning capacity. This submission was based on the following premises: 1. No amount of rehabilitation would improve the appellant's physical capacity. 2. The effect of rehabilitation would convert the appellant from a person lacking in significant motivation to a person who wanted to maintain himself in full time employment. 3. Had he undertaken appropriate rehabilitation the appellant would have earned on a full time basis, the sum his physical capacity would have allowed him to earn. These premises are reasonable and are supported by the evidence. It was then submitted that the evidence of his post-accident employment and earnings supported a finding that the appellant's post-accident full time earning capacity was in the order of $300.00 net per week. That figure is also supported by the evidence. Before coming to any conclusion on this issue, it is necessary to consider his Honour's determination that, for the purposes of the assessment of the appellant's future loss of earning capacity, the appellant's pre-accident earning capacity, but for the injury, would have been $400.00 per week not the $500.00 he was in fact earning, and which sum his Honour had utilised for the purposes of calculating past loss of earning capacity. His Honour found that: "[E]ven without this motor vehicle accident, he would [not] have been a steady long term employee earning his regular $500.00 per week, week in and week out, year in and year out, indefinitely into the future. He was a casual employee only... with no sick leave entitlements. He had no holiday entitlements and presumably no other award perquisites either. He has demonstrated his susceptibility to excesses of gambling, alcohol and illicit drug use when under stress." His Honour therefore applied in the calculation of damages for future earning capacity, a "higher than usual percentage of vicissitudes" of 25 per cent. That assessment is not challenged. His Honour did not give any reasons, however, for his assessment that, but for the accident, the appellant would be earning approximately $400.00 per week. Presumably, the figure of $500.00 per week was reduced to $400.00 for the same reasons as his Honour assessed the reduction for vicissitudes as being at 25 per cent. If that is so, one wonders why, in respect of the period post-accident, his finding of $75.00 loss of earning capacity was assessed relative to his immediate pre-accident income of $500.00, as the same factors were operating in the period from the end of the notional rehabilitation period to the date of trial. There appears to be no logical reason for this inconsistency. This inconsistency is sufficient to demonstrate error in his Honour's reasoning process and this Court should reassess these heads of damages. The questions for this Court become therefore: 1. What would the appellant's post-accident wages have been but for the accident? 2. What was the appellant's loss of earning capacity both past and future? Immediately prior to the accident, the appellant had been a manual labourer working for a waste disposal company. Prior to that time he had worked consistently in a variety of unskilled or semi skilled jobs. He was both physically fit and active. He played competition ice hockey and engaged in other sports. He URJ REEDY v HARRIS and ANOR (Beazley JA) 7 said he worked hard and was keen to "make a good go" of his job with Pacific Waste Management "because in a recession you know the garbos never go broke and it was a good career I thought... because there 's always money to be made...". Mr Martens, the CRS Officer who had assessed the appellant in mid 1986, gave evidence that the appellant was only fit for light process work. He considered such work was available in the Dee Why region, but that "it is not as easy to find as other forms of work, but I believe its there". Mr Martens did not know the weekly wage that could be earned in that type of work. In order to determine whether the appellant's post-accident weekly earnings, approximately $300.00 per week, are an appropriate measure of the appellant's post-accident earning capacity, it is necessary to review the type of work he performed during the period, the wages he earned in that work, and his capacity to perform it. The first job was at the ice rink. Although the appellant could manage the work, the cold affected his knee. However, this was not the immediate reason for leaving the job. He left because his hourly rate of pay was about $5.00, which, not unreasonably, he considered to be inadequate. His next job was with Headway Helmets which involved process work. There was no evidence of his wage in this employment. He left because part of the job which involved operating a kick press whilst standing, affected his knee. The appellant was then employed as a builders' labourer and earned $330.00 per week. The work was unsuitable as it affected his knee. His next two jobs, the first as a packer with Big W, and next as a labourer at "Leprechauns in the Garden" were also unsuitable because they affected his knee. No evidence was given of his wage at Big W. He earned $99.00 per week at "Leprechauns in the Garden", presumably for part-time work. He was next employed by North Shore Washers for 7 weeks at $295.00 per week. The work was heavy and was unsuitable for both his knee and back condition. He earned $75.00 a day employed as a gardener at Australian Decorative Landscapes. However, the work was unsuitable for both his knee and back. Employment as a process worker with Kembo Cuisenaire was also unsuitable, involving standing 7 hours a day with constant pressure on the knee. He earned $337.00 a week in that employment. Likewise, his work with his friend Tony Papa as an electrician's assistant was also unsuitable on a full time basis, having regard to his knee condition. This brief review demonstrates that the jobs which the appellant found after the accident were unsuitable for him because of his knee (and at times also because of his back). They do, however, provide some guide, albeit a limited one, as to the wages which can be earned in unskilled or semi skilled manual work. The evidence further disclosed that the range of work suitable to the appellant post-accident was limited. As a result of his knee injury he is restricted to light process work, which is not necessarily readily available. Allowance should be made for this. Taking this factor into account, and his Honour's unchallenged finding that the appellant's earning capacity was significantly reduced by the injury to the knee, and having regard to his post accident earnings, I am of the opinion that the appellant should be considered to have a post-accident work capacity of $275.00 per week. 8 UNREPORTED JUDGMENTS That leaves for consideration whether the appellant's earning capacity, but for the accident, should be $400.00 as assessed by his Honour. Counsel for the appellant submitted that there was no basis for his Honour to assess the appellant's post-accident earning capacity other than in accordance with his immediate pre-accident earnings. It appears that in adopting the figure of $400.00 per week his Honour took into account the same factors that he considered relevant to the assessment of the "higher than usual percentage of vicissitudes" which he applied. These factors included his drinking and other habits, as well as the fact that the Pacific Waste Management job was casual employment without the usual perquisites of permanent employment. In this regard, it appears that his Honour assumed that the appellant's actual pre-accident earnings were higher than would be the case if he was in permanent, as opposed to casual employment. The consequence of the adoption of this higher figure was a reduction in the amount awarded for loss of future earning capacity. In my opinion, in utilising those same matters to determine the amount which the appellant would have been able to earn but for the accident, his Honour erred as he thereby applied a double discount or double reduction. In addition, his Honour failed to pay any regard to the fact that the figure of $500.00 a week was the amount the appellant earned with Pacific Waste Management during 1989, over 7 years before the hearing, and the appellant's expressed desire and demonstrated keenness to do the job well and to remain in that employment. Nor, as I have indicated earlier, is there any logical reason for using a different figure to that used as at the date of trial for the assessment of past loss of earning capacity as the factors relevant to the assessment of each were the same. Accordingly, I am of the opinion that the appropriate figure upon which to base the assessment of future loss is $500.00 per week. Deduction of $5000.00 from past economic loss His Honour deducted $5,000.00 from past economic loss, describing that amount as the amount the appellant had earned post accident. There is nothing in the judgment to indicate how that figure is armed at. It does not appear to be based on any particular evidence. It was submitted however that having regard to his Honour's approach to the assessment of loss for past economic loss, the deduction of this amount constituted a double deduction. This is clearly correct for the reasons submitted by senior counsel for the appellant. As the court has embarked upon the process of reassessment of damages, the figure of $5000.00 deducted by his Honour should be ignored. However, the fact is the appellant did earn a significant amount post accident and this should be deducted from the damages awarded for loss of past earning capacity. The evidence of actual earning between the date of accident and the date of trial lacked precision, but including the offset amounts whilst employed by Papa, amounted to approximately $30,000.00. That amount should be deducted from the damages otherwise payable for past economic loss. The appeal therefore should be allowed with costs. The parties are directed to bring in Short Minutes of Order in accordance with these reasons. Subsequent to those Short Minutes of Order, the orders I propose are: 1. Appeal allowed 2. Verdict and judgment in the District Court set aside. 3. Verdict for the appellant in the sum to be calculated in accordance with these orders URJ REEDY v HARRIS and ANOR (Beazley JA) 9 4. Judgment accordingly. 5. The respondent to pay the appellant's costs, but to have a certificate under the Suitors Fund Act if so entitled. 5 Counsel for the appellant: F McAlary QC, K Morrissey Solicitors for the appellant: G H Healey & Co Counsel for the respondent: H J Halligan 10 Solicitors for the respondent: Abbott Tout