Northern Suburbs Rugby Football Club v Engel [2001] NSWCA 353

New South Wales Court of Appeal

CITATION : Northern Suburbs Rugby Football Club v Engel [2001] NSWCA 353 FILE NUMBER(S) : CA 40940/00 HEARING DATE(S) : 28 September 2001 JUDGMENT DATE : 16 October 2001

PARTIES : Northern Suburbs Rugby Football Club Bert Carl Engel JUDGMENT OF : Priestley JA at 1; Sperling J at 2

LOWER COURT JURISDICTION : District Court LOWER COURT 8430/98 FILE NUMBER(S) : LOWER COURT Dent DCJ JUDICIAL OFFICER :

COUNSEL : Mr P R Garling SC for the Appellant Mr I D Cullen for the Respondent SOLICITORS : Hunt & Hunt Lawyers for the Appellant Jones Staff & Co Solicitors for the Respondent CATCHWORDS : Assessment of Damages - economic loss - failure to give adequate reasons - no question of principles - ND CASES CITED: Fox v Wood (1981) 148 CLR 438 DECISION : (1) Appeal allowed; (2) Set aside the verdict and judgment for $634,895.52; (3) Direct the entry of judgment for damages to be assessed; (4) Order a new trial limited to damages; (5) Order the respondent to pay the appellant's costs of the appeal.

- 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Priestley JA Sperling J

Tuesday, 16 October 2001

40940/00 Northern Suburbs Football Club v Engel

Judgment 1 PRIESTLEY JA: I agree with Sperling J. 2 SPERLING J: The plaintiff, Bert Carl Engel, was born on 30 June 1949. On 4 January 1996, at the age of 46 he fell on the premises of the defendant, Northern Suburbs Rugby Football Club, injuring his left knee and back. 3 Following a hearing in the District Court, the trial judge, his Honour Judge Dent QC, found the defendant liable and assessed damages at $634,895.52. The defendant appeals to this court but only against the quantum of damages. 4 The trial judge found the relevant facts as follows. The plaintiff was a trained chef. At the time of the accident the plaintiff was the alter ego of a private company, Moschase Pty Ltd, which had a license to provide catering services on the club's premises. The license had commenced in June of 1995, some seven months before the accident. The plaintiff worked in the business as a chef as well as managing the business. 5 Prior to that, the company had other business interests in which the plaintiff was personally engaged. These activities included work for hotels such as designing of kitchens, planning menus, establishing lines of supply and procuring chefs. The company had also conducted a security business. For some 15 years before commencing business at the club, the plaintiff had not done active chef's work. 6 Concurrently with the club business, the plaintiff conducted another business, Engel Catering. 7 The plaintiff's partner in Moschase Pty Ltd was a Mr McLay. He had lent money to the company and also provided business advice. 8 According to the trial judge's findings, the plaintiff's business, conducted through Moschase Pty Ltd, was viable and improving at the time of the accident but was doomed by the accident, because the plaintiff could no longer work as a chef and his labour had to be replaced at a cost. Indeed, his Honour found that the plaintiff was permanently incapacitated by the accident for any of the various business activities which had previously been carried on by the company. 9 As his Honour found the facts, the business at the club was doubly doomed. Others, as his Honour found, were plotting to wrest the licence from the plaintiff and the intrigue would, as his Honour saw it, have succeeded within the span of a few years when the term of the license was expired. 10 The plaintiff kept the club business going until March 1998, by which time Mr McLay had been paid out. That business was then terminated. 11 His Honour rejected the quantification of economic loss by the respective accountants for each side, because they had assumed the plaintiff would have continued in the club business on the defendant's premises indefinitely but for the accident, whereas, as his Honour found the facts, that would not have occurred. In these circumstances, his Honour approached the assessment of economic loss on the basis of what the plaintiff could have earned as a chef in the open labour market but for the accident. During the period after the accident, a Mr Newton had been employed in the business as a chef. The trial judge took his earnings as a guide. 12 His Honour allowed a lump sum of $450,000 for impairment of earning capacity, that is, for loss of earnings to the date of trial and for the future. The following is the relevant extract from his Honour's judgment: Given the wages of the working chef demonstrated in evidence by Mr Newton's wages I think the fair devaluation of the earning capacity lost by the plaintiff should be seen as not less than $600.00 per week from the accident occurring for the remainder of his working life. Despite the views of Dr. Thompson for the defendant I do not accept his baleful view that the plaintiff would not have been able to work in his avocation beyond 55 years of age. The sort of wear and tear that his body carried is no more than one would find in active footballing men of his age, and the very nature of work for which the plaintiff was qualified in itself provided the compensating exercises for that wear and tear. Using the multiplier above referred to as a general guide and the 3% Tables and allowing 15% for the vicissitudes of the future, I award a rounded off sum of $450,000 as the proper present valuation of damages to the plaintiff's earning capacity. This being awarded in the fashion that I have awarded, it does not carry any interest factor in respect of the past. 13 His Honour allowed $140,000 for non-economic loss, plus interest on a past component of $40,000. With out of pocket expenses, a buffer for future medical expenses and a Fox v Wood allowance, the verdict was as I have mentioned. 14 His Honour dealt with the submissions made on behalf of the defendant in relation to damages in the following terms: The defence of the defendant is a petty, carping critical attack on the plaintiff, who in my judgement was a hardworking entrepreneur trying to run his business and enhance his reputation in such manner as he saw fit, and at such level of profitability as he saw fit. Having listened to the attacks made upon the plaintiff in this case, I was almost disappointed not to hear a witness come forward and say that he wasn't scrubbing the pots and pans clean enough at the end of a meal session. The unstated defence of the defendant seems to be that it did the plaintiff some sort of favour by crippling him, and thus easing him out of a business where he was bound to be a loser. This hardly rests easily against a background where it appears that it was the defendant who approached the plaintiff, after he was recommended to it, to establish the catering service of the defendant club. The reality of the state of affairs faced by the plaintiff as an entrepreneur when he through his corporate alter ego contracted with the defendant, was that whether or not the business was a success depended upon the level of patronage provided by the club, the level of acceptability of the service of the patrons of the club, and the inherent long hours and heavy overheads inevitably involved in providing the service at the time required by the club. The income into the business, of course, was the prices paid by patrons of the catering service for the meals and the income generated by payment from the defendant for the catering service catering for large occasions. Out of that income it was necessary for the plaintiff's alter ago to pay wages of the permanent and casuals employed by it, and the wages of the plaintiff himself. The plaintiff's corporate alter ego and the plaintiff had not even enjoyed a year of trading against these conditions when the subject accident occurred. The plaintiff, despite the severity of his symptoms, continued in attendance at the premises trying to achieve a viable business. A short time after the subject accident the business was in trouble, and the plaintiff's alter ego was liquidated, and the business transferred to another corporate identity. 15 The grounds of appeal include a challenge to the trial judge's assessment of damages for economic and for non-economic loss. They also include a ground that the trial judge failed to give adequate reasons for his decision. 16 The defendant asks this court to set aside the verdict and to substitute a verdict for $312,364.52. The figure is arrived at by reducing the allowance for non-economic loss from $140,000 to $80,000 and the allowance for economic loss from $450,000 to $35,700, for the past, and $152,566, for the future. These figures are calculated on the basis of a loss of $300 per week in lieu of $600 per week. Alternatively, the defendant asks for a new trial limited to damages. 17 In my view, the judgment must be set aside for failure on the part of the trial judge to give adequate reasons for the award of $450,000 for economic loss, and a new trial ordered limited to damages. My reasons for that conclusion are as follows. 18 His Honour did not sufficiently disclose how he arrived at the figure of $450,000. There was conflicting evidence in relation to the following questions. What were the plaintiff's actual earnings while the business at the club continued after the accident? How did that compare with what the plaintiff would have earned but for the accident? The same questions arose in relation to the Engel Catering business. What was the plaintiff's earning capacity after the accident? What business or other remunerative activity would the plaintiff have undertaken after the club license expired but for the accident, and with what reward? For how long would the plaintiff have worked but for the accident? 19 His Honour did not disclose whether he directed his mind to these questions or, necessarily, how he resolved them. He did not disclose how much he allowed for past economic loss and how much for future economic loss. He did not disclose what actual earnings, if any, he assumed while the plaintiff continued to conduct the catering business on the defendant's premises after the accident. He did not disclose how the figure of $600 per week was derived by reference to Mr Newton's earnings. He did not disclose over what period he had allowed future economic loss. It could not be demonstrated, at the hearing of the appeal, what findings, if any, his Honour had made and not disclosed in these respects or, alternatively, what other approach underlay the allowance made for economic loss. 20 In view of the unresolved factual issues to which I have referred, this court cannot reassess the damages without the advantage of seeing and hearing the witnesses including the plaintiff. It is, accordingly, necessary to order a new trial if there has been a miscarriage of justice. 21 Was there a miscarriage of justice? There were many ways in which such questions to which I have referred could have been answered on the evidence, with significant differences in the result. It is likely that, on a new trial, similar evidence would be given with similar potential for a range of possible results. The possibilities include a result less favourable to the plaintiff than the present assessment. That amounts to a miscarriage of justice in law. 22 The present situation is to be contrasted with a case where, despite error in the process, one can say that the result is nonetheless correct and that the outcome of a new trial, conducted according to law, would not be materially different. There is no miscarriage of justice in such a case, but that is not this case. 23 There should accordingly be a new trial. 24 There is no need, in these circumstances to consider other grounds of appeal since none of them could, if successful, lead to a different result. 25 The orders I propose are as follows: (1) Appeal allowed; (2) Set aside the verdict and judgment for $634,895.52; (3) Direct the entry of judgment for damages to be assessed; (4) Order a new trial limited to damages; (5) Order the respondent to pay the appellant's costs of the appeal. 26 The court is to be informed as to the position in relation to moneys paid under the judgment, in the expectation that this can be noted by the court. If there is not consensus in that regard, it will be necessary for the court to reconvene to decide what is to occur pending a new trial. -oOo-