Axiak v Pezzano [2002] NSWCA 65

New South Wales Court of Appeal

CITATION : Axiak v Pezzano [2002] NSWCA 65 FILE NUMBER(S) : CA 40317/01 HEARING DATE(S) : 15 February 2002 JUDGMENT DATE : 20 March 2002

PARTIES : Stella Axiak - Appellant Josephine Pezzano - Respondent JUDGMENT OF : Sheller JA at 1; Mathews AJA at 2

LOWER COURT JURISDICTION : District Court LOWER COURT 8609/98 FILE NUMBER(S) : LOWER COURT Gibb DCJ JUDICIAL OFFICER :

COUNSEL : Mr M B Williams with Mr J Harris - Appellant Mr C Hoeben SC - Respondent SOLICITORS : Laurence & Laurence - Appellant Connery & Partners - Respondent CATCHWORDS : COMPENSATION TO RELATIVES - loss of income - whether trial judge adopted correct approach in assessing past loss - whether appropriate calculations made as to future loss - whether low dependency rate appropriate - loss of investment income need to be properly quantified and supported by evidence. LEGISLATION CITED : Compensation to Relatives Act 1897 Malec v JC Hutton Pty Limited (1990) 169 638 CASES CITED: Todorovic v Waller (1981) CLR 402 Nguyen v Nguyen (1990) 169 CLR 245 DECISION : See paragraph 89.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40317/01

SHELLER JA MATHEWS AJA

20 March 2002 Stella AXIAK v Josephine PEZZANO Judgment 1 SHELLER JA: I agree with Mathews AJA. 2 MATHEWS AJA: On 17 November 1995 Ivan Ternovy was killed in a motor vehicle accident. His widow, Ms Stella Axiak, commenced proceedings in the District Court of NSW under the Compensation to Relatives Act 1897 on behalf of herself and their young son Jordan. Liability was admitted, and the case was defended solely on the issue of quantum. An associated claim for damages for nervous shock was settled prior to hearing. On 21 May 2001 Gibb DCJ awarded damages in the sum of $981,911.53. $251,552.79 of this was apportioned for the benefit of Jordan. The defendant was ordered to pay the plaintiff's costs. 3 Ms Axiak appealed from this decision, contending that the award for damages was manifestly inadequate. The notice of appeal takes issue with the trial judge's findings in numerous respects which I shall detail shortly. In the meantime it is appropriate to say something of the background of Ms Axiak and Mr Ternovy. 4 Ms Axiak was born in July 1958. After completing her schooling she went to Sydney University where she obtained a Bachelor of Science and later a Master of Science, specialising in immunology. Since 1988 she has been employed by Merck Sharp and Dohne. She was initially involved in monitoring clinical trials, work which involved a great deal of travel. In 1994 she was promoted to a managerial role in the company. The severe grief reaction she suffered after Mr Ternovy's death made it difficult for her to continue in this role, and she returned to monitoring clinical trials, a position which she retained at the date of hearing. 5 Ms Axiak had known Mr Ternovy for some time before an attachment developed between them. In 1991 they became engaged. They were married in June 1992. Jordan was born on 6 July 1993. As indicated, Mr Ternovy was killed on 27 November 1995. 6 Mr Ternovy was born on 1 January 1958. In 1982 he graduated from the University of New South Wales with a Bachelor of Science Degree in computer studies. Not surprisingly, he had high levels of expertise in relation to the technology and use of computers. The evidence indicates that he also had a firm understanding of business and administration principles, which enabled him to adapt his technological knowledge into a business setting. 7 When Mr Ternovy first became engaged to Ms Axiak he was employed by Westpac Banking Corporation. In May 1993 he left this employment and established his own consultancy through Bayline Pty Limited ('Bayline'), a shelf company which he purchased for this purpose. He and Ms Axiak were the initial two shareholders. The shareholding was later extended to include Mr Ternovy's close friend and associate, David Tassie and his wife. Mr Ternovy was Bayline's only employee, and the company's income depended upon his services. 8 In June 1993 Mr Ternovy obtained a consultancy with CSR Construction Materials NSW ('CSR') to design and install a new network in order to monitor CSR's truck movements and distribution. This consultancy was secured through a company called MCS and Associates Pty Limited, ('MCS') which payed Bayline $65 to $70 per hour for Mr Ternovy's services. In turn MCS charged CSR at the rate of $75 to $85 per hour for the same services. This information came from a letter written by Michael Gieck, a director of MCS, to the defendant's investigators on 10 March 1999. This letter indicated that in May 1995 Mr Ternovy, through Bayline, started to contract directly with CSR without the intervention of MCS. Mr Gieck was unavailable to give evidence at the hearing and was not cross-examined on this material. 9 The evidence indicated that Mr Ternovy was significantly overqualified for his work with CSR. Peter Warren, who was then Information Services Manager for CSR, and who had been working in the information technology business for twenty-six years, described Mr Ternovy as the best IT consultant he had seen. He compared Mr Ternovy favourably with younger consultants who were employed through larger organisations such as Deloittes and Anderson Consulting, who were being paid between $150 and $300 per hour. 10 Mr Ternovy was not intending to remain with CSR on a long-term basis. He and his close friend, David Tassie, had been planning for some time to go into business together as information technology consultants. It was possible that a third partner, Trevor Tyne, might be brought in later. 11 Mr Ternovy and Mr Tassie had different but apparently complementary disciplines and skills. Mr Tassie had graduated with a Bachelor of Commerce degree. One of his major subjects had been "information systems", which gave him some specialised knowledge in computer technology, but not to the same extent as Mr Ternovy. As Mr Tassie put it: "1. Our specialized skills differed, for which reason alone the symbiosis we perceived for our planned venture was evident. We would have been equal partners reflecting the acknowledgment that his earning capacity was at least the equal of my own. 2. Our skills differed in the sense that Ivan for example could undertake an in depth communications project within the IT field whereas, he did not have the training or bent to implement a financial accounting system, such as for example an ERP (Enterprise Resource Planning) solution for a client's business. This would be comfortably within my field, particularly with my major in accounting. 3. I have the skills to identify a business problem and the solution required, as did Mr Ternovy, but he could go to the next level of technical detail namely, to establish the most cost efficient way of arriving at the solution to the IT problem. He could prepare an accurately costed technology plan, as with the one he wrote for CSR." 12 Bayline was to have been the corporate vehicle for the proposed joint enterprise. It was for this purpose that Mr Tassie became a director of the company. However by the time of Mr Ternovy's death in November 1995 the project had been advanced no further than the preparation of a draft business plan. 13 It is appropriate here to say something about the property holdings of Ms Axiak and Mr Ternovy. Each of them owned homes before their marriage. Ms Axiak's home was at Canada Bay. She and Mr Ternovy lived in it after their marriage, and she was still living in it with their son Jordan at the date of hearing. Mr Ternovy owned a house at Petersham which was rented out for most of their marriage. He was also half owner, with a Mr Bentley, of a property at Copmanhurst near Grafton. During their marriage, Ms Axiak and Mr Ternovy purchased one property together. That was an apartment in Glebe which they bought in 1994 for about $91,000. Ms Axiak also purchased a half share of a flat opposite her home in Canada Bay, the other half being owned by Mr Ternovy's father. 14 Ms Axiak gave evidence before the trial judge that she and Mr Ternovy were planning to amass a substantial property portfolio, using Mr Ternovy's skills in financial and property management as well as his handyman skills. The plan was that when the property and investment portfolio had reached a certain level, which Ms Axiak estimated at about the $4 million mark, Mr Ternovy would leave the information technology field and devote himself exclusively to managing his and Ms Axiak's property.