QBE INSURANCE LTD v HUGGINS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SHELLER, BEAZLEY JJA and FITZGERALD AJA 5 November 1998, 23 December 1998 [1998] NSWCA 178 WORKERS Compensation — appeal by employer's insurer in relation to the calculation of past wage loss, interest on past wage loss, future wage loss and loss of superannuation — trial judge's approach defective. Sheller JA I agree with Fitzgerald AJA. Beazley JA I agree with Fitzgerald AJA. Fitzgerald AJA On 11 January 1984, when he was aged 37, the respondent suffered a very severe and debilitating injury to his dominant right hand when it became caught in the mechanism of a grain auger screw on a mobile seed grading machine which he was operating in the course of his employment. Liability was admitted, but the respondent's employer's insurer has appealed against a judgment in favour of the respondent in the sum of $644,524.50, which was given in the Common Law Division on 25 August 1997. The appellant challenges four components in the damages awarded, namely: "Past wage loss $213,121.00 Interest on past wage loss $213,232.00 Future wage loss $111,863.40 Loss of superannuation $ 14,045.80" The directly material parts of the judgment are as follows: "Past Wage Loss At the time of his injury the plaintiff's employment with the defendant was governed by the Engine Drivers etc General (State) Award (NSW). While initially a matter of dispute a letter form Alf Hannaford & Co Pty Ltd dated 15 March 1984 indicates that the plaintiff's award rate under the relevant New South Wales State award was $233 per week This coincides with advice from the relevant New South Wales department when the award rate for a Group 4 plant operator under the award I have referred to was in that sum. At the time of the injury the plaintiff was earning some 25 percent in excess of the relevant award rate. It seems in my view in assessing the plaintiffs earning capacity, uninjured, prior to trial, a correct approach to take is to look at the relevant award rates current from the date of injury to the date of trial and add 25 percent. Using this basis, an analysis carried out by Mr Norman Hilton, chartered accountant, in which he deducted any earnings revealed by the plaintiff's taxation returns during the period, gave rise to a net past loss of $213,121. I accept that Mr Hilton's approach is correct and I thus award the plaintiff that sum. 2 UNREPORTED JUDGMENTS Interest on Past Wage Loss Using a rate of 7.5 percent on this figure for 13.5 years a sum of $213,232 arises under this head and I award that sum. Future Wage Loss Uninjured and working in the same capacity as he was at the date of the accident and earning at the same rate that is 25 percent above the appropriate award rate, the plaintiff's net (after tax) wage would be $439 per week. During the period from the date of accident to the date of trial the highest the plaintiff's earnings have come in relation to a figure represented by the appropriate award rate plus 25 percent was equivalent to about 48 percent of that figure. In my view the plaintiff's earning capacity has been diminished as a consequence of his injuries by approximately one half. Using then a figure of $220 per week as representing a yard stick for the calculation of future economic loss and assuming that the plaintiff would have worked until he was sixty-five and using the 3 percent tables and deducting 15 percent for vicissitudes, a figure of $111,863.40 emerges under this head, which I award. Loss of Superannuation On past loss of earnings, Mr Hilton concluded that the plaintiff would have been entitled to receive $5,473 in superannuation contributions calculated upon the basis of 3 percent of his gross earnings. Assuming that the plaintiff's gross loss to be in the sum of $281 per week, a figure of $16.86 emerges as the plaintiff's present loss of weekly superannuation contributions. Using the 3 percent tables and projecting the plaintiff's loss through to the age of sixty-five and again deducting 15 percent for vicissitudes the sum of $8,575.80 emerges as the plaintiff's future loss of superannuation contributions. In all the plaintiff's total loss, past and present, under this head, is $14,045.80." The appellant's major complaints relate to past and future wage loss. It was correctly pointed out that, if the past wage loss is reduced, there will be a reduction in the interest awarded; otherwise, the interest on past wage loss will not alter. Some extra points were made in relation to the loss of superannuation, but these were limited in scope, are mentioned below. The principal submission with respect to future wage loss was that the trial judge should have found that, even if the respondent had not been injured, he would not have continued to work in employment and earn on the basis of his income preceding his injury. In addition to its contentions that the trial judge erred in his assessment of each of the four nominated components of damage, the appellant's grounds of appeal were as follows: "5. His Honour failed to state his reasons as to the rejection of the Appellant's submissions as to past economic loss, future economic loss and loss of superannuation entitlements. 6. His Honour failed to draw a Jones v Dunkel inference in the assessment of damages for past and future economic loss." Ground 5 will be dealt with in the course of the following general discussion of the issues before this Court. Ground 6 related to the respondent's omission to call his wife to support evidence which he gave which was accepted by the trial judge. In the circumstances it is sufficient to state that the ground 6 lacks obvious merit. However, there are undoubtedly major defects in the judgment below. The approaches adopted with respect to past and future wage loss respectively are difficult to reconcile, and the decision with respect to past wage loss, in particular, URJ QBE INSURANCE LTD v HUGGINS (Fitzgerald AJA) 3 is based directly on the patently flawed report of an expert, Mr Hilton, who was called by the respondent. It was obviously overlooked by the trial judge that Mr Hilton acknowledged in cross-examination that his report contained significant errors. The judgment under appeal cannot be supported on the basis of the trial judge's reasons. The respondent sought to support it on other bases. Some months after his injury, the respondent resumed light duties, but ceased that work later that year on what the trial judge held were reasonable "economic grounds". Thereafter, he earned what he could through a wide variety of activities. Although his injury had stabilised by sometime in 1990, the respondent was still earning income from his various activities when the trial took place in July 1997, thirteen and a half years after his accident. The trial judge regarded the respondent favourably, and made findings accordingly. For example, his Honour found that: (i) but for his injury, the respondent would have continued to be employed at the rate which he was earning at the time of his injury, which was the amount from time to time payable under the Engine Drivers etc General (State) Award (NSW) plus 25%;! (ii) because of his injury, the respondent was unable to obtain suitable work; (iii) the respondent was unable to perform most of his income-related activities without assistance; (iv) most of that assistance was provided by his third wife on the basis of a partnership involving an equal division of income; and (v) the respondent could not have earned more income by some other means. Although these findings were attacked by the appellant, and there was considerable force in some of its criticisms, including those criticisms which related to the lack of detail in the trial judge's reasons for his decision, I am not persuaded that the findings made were not open to his Honour on the evidence or that his findings were so lacking in detail that he failed to adequately perform his judicial function. With some hesitation, I have concluded that findings (i) to (v) above should not be disturbed. Nonetheless, some of the points raised by the appellant, particularly in relation to past wage loss, should be specifically considered. The appellant pointed out that, in assessing future wage loss, the trial judge held that the respondent's earning capacity "has been diminished as a consequence of his injuries by approximately one half'. That conclusion was based on the proposition that, for a comparatively small part of the period between the date of the accident and the date of trial, the respondent earned about 48% of the amount which he would have earned at "... the appropriate award rate plus 25%...", which was the respondent's earning rate at the time when he was injured, according to Mr Hilton. It is convenient to ignore for the moment that the fundamental premises on which his Honour proceeded with respect to the respondent's future wage loss were incorrect. That aside, the appellant submitted that, at least since 1990 when the respondent's injury stabilised, his past wage loss should have been calculated on the same basis as his future wage loss; ie, he should have been awarded only 50% of the income which he would have earned during that period, if he had continued in the same employment, notwithstanding that in fact he earned considerably less. While the appellant understandably sought to take advantage of the finding made by the trial judge in relation to future wage loss for the purpose of demonstrating error in his Honour's 1. This was an error. The correct formula was the award plus 32%. 4 UNREPORTED JUDGMENTS assessment of past wage loss, its argument ignores the findings which were specifically directed to past wage loss. If the trial judge's approaches in relation to past and future wage loss are inconsistent, the premise that the respondent had the capacity to earn half his previous income in the future because he was able to do so for a limited period in the past did not require the rejection of findings that his actual pre-trial income was the maximum which he could earn in that period. The respondent did not cross-appeal or give a notice of contention, and it is unnecessary to consider when the amount awarded to the respondent for his future wage loss was too low having regard to his pre-trial earnings history. The appellant made a number of complaints concerning the use of the respondent's partnership income as a measure of his earning capacity pre-trial. It was submitted that the respondent's activities were productive of more than 50% of the partnership earnings and that his past wage loss should be assessed on the footing that he had earned more than he received from the partnership. Reference was made to Taraporewalla v Berkery,? and Seymour v Gough.3 However, far from assisting the appellant, those decisions demonstrate that the particular circumstances must be considered, and the trial judge's findings of primary fact favoured the respondent. Another submission made by the appellant was that, even if the respondent had not been injured, he would have conducted similar activities to those which he in fact conducted post-injury, and that he would have done so in partnership with his wife. This submission effectively challenged the basic proposition that the respondent would have continued as an employee and earned at the applicable award rate plus 25% if he had not been injured. However, the respondent's evidence and the trial judge's findings were to the contrary. Another contention advanced by the appellant was that the respondent's domestic arrangements added to the costs which the partnership incurred in earning income, and thus reduced the income earned. The evidence did not bear this out. Another submission for the appellant, namely that the respondent's "self-employment", ie, conduct of activities in partnership with his wife, provided tax advantages which should be brought to account in the appellant's favour also lacked an evidentiary foundation. One element of the appellant's argument on this aspect of the matter was that a report prepared by an accountant which the appellant tendered was not referred to by the trial judge. However, that report is largely expressed in generalities, and provides no firm basis for the appellant's attacks on the trial judge's primary findings. In the circumstances, the trial judge's omission to refer to the report does not warrant a conclusion that his Honour failed to adequately explain the reasons for his decision. The respondent sought to justify his award for past wage loss on the basis that Mr Hilton had also made an error which favoured the appellant, which had been carried forward by the trial judge. It was pointed out that, in the 7 years prior to his injury, the respondent's average earnings had equalled 132%, not 125%, of the applicable award. Further, it was asserted that, in any event a figure of 150%, not 125% (or 132%), of the applicable award should have been used because of evidence that, during some periods prior to his injury, the amount of the respondent's earnings was equivalent to 150% of the award. As earlier noted, there was no cross - claim or notice of contention, and, at least in these 2. (1983) 3 NSWLR 28. 3. (1996) 1 QAR 89. URJ QBE INSURANCE LTD v HUGGINS (Fitzgerald AJA) 5 circumstances, the respondent's award for past wage loss should not be upheld on a basis different from that advanced below and found by the trial judge. The determination of the respondent's past wage loss required the deduction of the net income which he earned during the period between accident and trial from the net income which he would have earned but for his injury. As the respondent's lawyers should have perceived prior to trial, Mr Hilton's report, which dealt sometimes with gross figures and sometimes with nett figures and contained other errors, some mechanical and some arithmetical, did not provide a satisfactory foundation for such an exercise. While the appellant's expert report did not contain such blatant mistakes as Mr Hilton's report, it likewise provides no significant assistance for the purpose of calculating the respondent's pre-trial or future loss of wages. However, it seems to be common ground that the limited points on which the appellant has succeeded by reference to the errors in Mr Hilton's report would reduce the respondent's past wage loss by about $30,000, with a similar reduction to the interest on past wage loss. On the basis stated, some adjustment is required in respect of lost superannuation, but no adjustment is required in respect of future wage loss. Taking into account the patently erroneous context in which the trial judge made his extremely favourable findings to the advantage of the respondent, I consider that the most appropriate course is a global reduction in the damages of $65,000. The alternative would be to remit for retrial an action which relates to an accident which occurred early in 1984, almost fifteen years ago. The respondent, who is now aged about 52, is yet to receive any damages for an injury suffered when he was 37 in respect of which liability is not in issue. In such circumstances, a retrial should not be ordered, if it can be avoided. Accordingly, I would allow the appeal with costs, and reduce the damages awarded to the respondent by $65,000 to $579,524.50. If otherwise qualified, the respondent should have a certificate under the Suitors Fund Act. Appeal allowed with costs, the damages awarded to the respondent reduced by $65,000 to $579,524.50. Counsel for the appellant: J D Hislop QC/E G Romaniuk Solicitors for the appellant: Moray & Agnew Counsel for the respondent: H Shore Solicitors for the respondent: Thomas & Co