New South Wales Court of Appeal CITATION : Donald v McKeown & Ors [2004] NSWCA 285 HEARING DATE(S) : 2 July 2004 JUDGMENT DATE : 25 August 2004 JUDGMENT OF : Hodgson JA at 1; Santow JA at 5 DECISION : (1) Appeal allowed to the extent of increasing future economic loss from $26,000 to $100,000 but not otherwise ; (2) The respondents to pay the appellant's costs. CATCHWORDS : DAMAGES - motor vehicle accident - at time of accident appellant employed as fire-fighter with Department of Defence - inadequacy of damages - failure to consider superannuation and rent concessions for purposes of calculating past and future economic loss - failure to take account of service allowance - failure to consider opportunity for civil employment with consequent higher wage than with Australian Army - whether past and future wage loss and loss of superannuation manifestly insufficient in particular for once appellant's career in Army over - need to take into account both positive and negative contingencies for purposes of assessing future economic loss. LEGISLATION CITED : Motor Accidents Act 1988 s79A(3) Supreme Court Rules Pt 9 r27 Foster v Tyne & Weir County Council [1986] 1 All ER 567 at 570 Giorginis v Kastrati (1998) 49 SASR 371 CASES CITED : Malec v. J.C. Hutton Pty. Ltd. (1990) 169 CLR 638 Minchin v Public Curator of Queensland [1965] ALR 91 Norris v. Blake (No.2) (1997) 41 NSWLR 49 State of New South Wales v Moss [2000] NSWCA 133, 31 May 2000, unreported Nicholas DONALD (Appellant) PARTIES : Jodie McKEOWN (First Respondent) THE NOMINAL DEFENDANT (Second Respondent) NEW SOUTH WALES POLICE SERVICE (Third Respondent) FILE NUMBER(S) : CA 40782/03 A LIDDEN/ E WELSH (Appellant) COUNSEL : D J RUSSELL, SC/ J SEWELL (First Respondent) Not appearing (Second, Third Respondents) SOLICITORS : Bryden's Law Office (Appellant) Moray & Agnew (First Respondent) LOWER COURT District Court JURISDICTION : LOWER COURT DC 12112/01 FILE NUMBER(S) : LOWER COURT Naughton DCJ JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40782/03 DC 12112/01 HODGSON JA SANTOW JA 25 AUGUST 2004 Nicholas Donald v Jodie McKEOWN & 2 Ors Judgment 1 HODGSON JA: I agree with the orders proposed by Santow JA, and subject to what I say below, substantially with his reasons. 2 For my part, I would give some weight to the evidence concerning the service allowance of $115 net per week, in relation to future economic loss. The circumstance that this allowance had never been returned for tax, and may properly be considered as an allowance for disturbance, does not in my opinion render it of no value; although its value should be considered as substantially less than its amount. 3 In my opinion also, the question whether the appellant would, but for the accident, have stayed in the army should not in this case have been decided on an all-or-nothing basis and then disregarded. The possibility that the appellant may have earned a higher income in civilian life should have been considered as a positive vicissitude, consistently with Malec v. J.C. Hutton Pty. Ltd. (1990) 169 CLR 638 and Norris v. Blake (No.2) (1997) 41 NSWLR 49. 4 The primary judge gave little weight to negative vicissitudes associated with the appellant's actual post-injury earnings; and the disproportion between past economic loss and future economic loss is also in this case indicative of error. 5 SANTOW JA: INTRODUCTION This appeal is on damages only, from a decision of Naughton DCJ for personal injuries suffered by the appellant, Nicholas Donald in a motor vehicle accident. Essentially the grounds are that damages were inadequate for the following reasons: (a) failure by the trial judge to consider superannuation and rent concessions in calculating a salary for the purposes of calculating past and future economic loss; (b) as raised in the appeal but not in the appellant's written submissions, failure to take account of service allowance, for purpose of that calculation; (c) failure to consider the potential for opportunity of employment in a civilian capacity as a fire-fighter at a potentially higher wage than in the Australian Army, with (d) the consequence that allowances for past and future wage loss and loss of superannuation were said to be manifestly insufficient, in particular for once the appellant's Army career was over. 6 As emerged in argument, the appellant's complaint is really best crystallised this way. No complaint is made about the award for non-economic loss of 30% of the maximum of $309,000. That, calculated in accordance with the statutory scaling, comes to $71,000. It was indeed on the generous side for what amounted in the end just to a shoulder injury, with good prospects of further amelioration by a second operation. Rather complaint is made that (a) in calculating future economic loss at $26,000, where the comparison is made between the hypothetical anticipated level of future earnings if uninjured in the army (within a range of $548 to $573 per week assuming promotion to a corporal) and the anticipated post-injury level of future earnings in a civilian position ($530 per week), the result is only a $22 per week difference; that resultant $26,000, after a discount of only 15% for vicissitudes, represents a reduction in earning capacity of only 3.5%; yet (b) in calculating past economic loss at $37,605 the loss allowed is disproportionately greater, namely around 30% to 40% of the plaintiff's earnings. 7 Thus the complaint is that in calculating future economic loss, it is assumed against the plaintiff that without injury (the hypothetical calculation) there would have been no positive upside to his earnings, in particular by changing over to a better earning position in civilian life. Whereas, in calculating his actual earning position with injury, his full civilian earnings are now taken into account, but with no greater than 15% allowance for negative vicissitudes. In particular nothing is allowed for the possibility of his having future employment difficulty because he is carrying an injury. SALIENT FACTS 8 Mr Donald was born on 4 May 1978, and commenced employment as a fire-fighter with the Department of Defence on 13 February 1996 on a four year contract. His father had also been a fire-fighter. 9 In August/September 1998, Mr Donald unsuccessfully sought discharge from the Army and investigated joining the fire service or police service in New Zealand (applying for recruitment packs) prompted by his mother's then plans, later abandoned, to move to New Zealand (Black, T, 21). He was however not a New Zealand citizen (Black T, 21) and his reason to leave the Army to move to New Zealand related only to his mother's plans and had thus ceased. It is submitted by the appellant that he intended to stay as a fire-fighter either in the Army or externally with the civilian option being a real one, and better paid. The appellant's evidence is however relatively clear that at the relevant time, being the date of the accident, he had no intention to leave the army (Black, T, 23). 10 Early in the morning of 1 January 1999, Mr Donald was a passenger in a motor vehicle driven by his then fiancée Jodie McKeown (now wife) which drove into a parked truck on Bardia Parade, Holsworthy NSW. The trial judge did not accept Mr Donald's version of how the accident happened, finding it inherently unlikely (Red, 54). Though the trial judge made no specific credit finding in relation to the damages, this finding would tend to indicate that the trial judge would not have been ready to accept at face value, without more, the appellant's assertions bearing on, for example, allowances. 11 As a result, Mr Donald suffered injury to his left shoulder and, in the first instance, lower back. He underwent a shoulder reconstruction on 28 May 1999. 12 On 16 April 2000, Mr Donald was discharged from the army medically unfit as a consequence of his ongoing disabilities. He obtained employment for three months as a plasterer's labourer, and then as a sales representative with Plasta-Masta and later on his own account. THE FIRST INSTANCE JUDGMENT Relevant findings of fact regarding injury 13 The trial judge carefully reviewed the evidence and issues in his judgment of 15 August 2003, where damages had been separately particularised (Red, 6). He concludes that the only serious injury sustained by Mr Donald was a ligamentous tear in his left shoulder. There is no significant lingering back problem (Red, 56U-Z). 14 Such an injury is likely to cause recurring spontaneously self-correcting dislocations for persons such as Mr Donald who regularly have to flex their shoulders and lift loads in the course of the work (Red, 58D-G). Mr Donald has in fact suffered these from June 2002 (Red, 62F). 15 Accepting the Dr Ellis' report (one of the appellant's medical experts), if Mr Donald has another operation to stabilise his shoulder, the chances of his left shoulder being significantly better will be "great" (Red, 62K), having regard to his generally good health and strength (Red, 63Y). Relevant findings of fact regarding work and employment 16 In April 1999, Mr Donald was downgraded from Class 1 medically fit to Class 3 because of his shoulder injury (Red, 58K-L). He was discharged from the Army on 17 April 2000 as unfit to do his pre-accident full manual duty work (Red, 60R). He had previously been a fire-fighter at the rank below Lance Corporal, namely Private, earning $33,462 (as compared to Lance Corporal of $34,793). 17 Mr Donald now works as a sales representative, part-time with Plasta-Masta (25-30 hours p.w.) and part time in his own employment (about 15 hours p.w.). Altogether he now works about 40 to 49 hours per week. (Red, 61U-62C). 18 Mr Donald has been able to work constantly since mid 2001, which although not "heavy" work was not work of the lightest kind as it did involve some lifting and carrying (Red, 63P-R). Principal relevant findings on damages 19 These are as follows: (a) Non-economic loss of 30% of the maximum of $309,000 = $71,000 (b) Past economic loss · Assume that Mr Donald would remain in the Army, with some elevation in rank (Red, 65D, 67I) · Insufficient evidence to justify an assumption that he would have left and pursued a career as a civilian fire-fighter (Red, 66G) = $37,695 · Net wages but for the accident after tax of $125,154 o Based on 1 ½ years as regular @ $483 p.w. net plus 3 years and six weeks as Lance Corporal @ $540 p.w., 2003 rates (Red, 67W-68F); o Actual wages of $87,459 (Red, 68J) (c) Future economic loss · Based on capitalising a net weekly loss of earnings of 5% ($22) for 40 years, discounted by 15% for vicissitudes (Red, 69S-V) · Calculation as follows will produce a just and proper valuation of loss in these circumstances (Red, 70I-P) o Net wages for Lance Corporal is $540 p.w. and for Corporal is $548.88 - $573, but with no evidence adduced as to likely, or possible, rank progression o Actual net wages was $530 p.w. = $26,000 o Difference between maximum net wage, if uninjured, of plaintiff as a corporal (about $573) compared to the plaintiff's actual net wage if injured ($530) is $43, so that "the mean" [meaning presumably the approximate mean], rounded up, is $22 o Thus: range of loss is $21.50 ($22) p.w. · Loss of future earning capacity of $17,157 plus $8,500 lump sum payment for 4 months off work before and after second operation Mr Donald should have (Red, 71D-L) · Takes into account that his business may do well and that he would not likely have made Sergeant by now, though maybe later (Red, 70Q-71C, 71Q-S). DISPOSITION OF APPEAL 20 In circumstances where the only serious injury sustained by Mr Donald was a ligamentous tear in his left shoulder with no significant lingering back problem, and where, though the injury is likely to cause recurring spontaneously self-correctly dislocations in the course of work but capable of being rendered significantly better by a stabilisation operation where his chances are "great", the trial judge had a range of possibilities within which to determine the severity of the plaintiff's non-economic loss. In fact the trial judge determined the proportion, according to the severity of the plaintiff's non-economic loss, of the maximum amount which may be awarded to the plaintiff for non-economic loss at as high as 30%. 21 That calculation is on the generous side. It is necessitated by the provisions of s79A(3) of the Motor Accidents Act 1988, which fixes the maximum amount which may be awarded at $309,000. The amount awarded for non-economic loss was calculated at $71,000, pursuant to the requirements of that Act. Ground 1 22 The appellant's first ground is to the effect that the value of deductions from his gross wage by way of superannuation and married quarter rent were not, but should have been, factored back into the calculation of his net earnings, nor otherwise taken into account. This is in calculating the appellant's earnings at the time of the accident in order to calculate both post and future economic loss. Thus the appellant's evidence concerning deductions made from his gross wage in the Army was given as follows (T, 33.20-.45): "Q. At the time you were involved in the motor accident can you remember what your net weekly wage was in the Army? A. Approximately 530 per week. Q. Were any deductions made from your gross wage in the Army apart from tax? A. Superannuation and married quarter rent. HIS HONOUR: Q. Which? A. Sorry, superannuation and married quarter rent, your Honour. WELSH: Q. Was some of that superannuation your own contribution? A. Yes it was, ma'am. Q. Are you able to say what your net income would have been if you put back in your superannuation contribution and the value of the rental benefit that you got? A. Approximately 600 I believe it would be. Q. Approximately 600 a week? A. Yes, putting those contributions in." 23 The net effect, according to the appellant's submissions, is that there should have been reinstated the deductions for superannuation and married quarter rent, as estimated by the appellant, to produce net earnings at the time of the accident not of $530 net per week but of $600 net per week. 24 However, as the respondent correctly points out, a separate allowance was made for both past and future superannuation by the trial judge being $3,016 for past superannuation and $1,755 for future superannuation (Red, 26). 25 Moreover, the appellant's evidence as to the alleged value of his superannuation contributions and rental benefits was at best an approximation based on a "belief"; see transcript above. There was no other evidence, or even an estimate, as to the individual value of each of those items. Thus no independent evidence was adduced by the appellant as to the value of married quarters rent. 26 Importantly, in the Plaintiff's Statement of Particulars, furnished under Pt 9 r27 Supreme Court Rules, under "Particulars of economic loss" it says at para 6: "He earned $530 net per week … A claim is made at the rate of $530 net per week." There is no mention at all of any claim to reinstate either of these items of superannuation or married quarter rent. On the final day of the hearing those Particulars at para 8 ("Particulars of additional loss of opportunity claim") were sought to be amended. The unamended first part of para 8 already claimed $55,000 gross per year ($786 net per week). This was on the basis of staying in the Army and being promoted to Warrant Officer, Class 2, as distinct from being promoted merely to Lance Corporal or Corporal (as the trial judge later proceeded (Red, 18N)). The trial judge allowed that amendment by adding a paragraph in the alternative; that the plaintiff would have pursued, but for his injuries, a civilian career as a fireman, so as to base a claim by reference to those Award rates. The allowance of that amendment was said to support the centrality of those particulars and that they had not been displaced by the way the case was argued. The amendment allowed, with the first part of para 8, reads as follows: "8. PARTICULARS OF ADDITIONAL LOSS OF OPPORTUNITY CLAIM The Plaintiff had intended to remain in the Army and accept promotion as it was offered to him. A claim is made for loss of that opportunity. The Plaintiff could have expected to earn higher incomes as he progressed through the ranks of Lance Corporal Fire Fighter to Warrant Officer Class 2. This position presenting returns approximately $55,000 gross per year to soldiers. In the alternative, the Plaintiff claims that on discharge from the army in August 2000, he would, but for his injuries, have pursued a career as a fireman. A claim is made by comparison to the Award rates of pay for firemen and the Plaintiff's actual earnings." 27 What was emphasised by the appellant in argument was "that the Plaintiff should have been promoted to a Lance Corporal soldier/ fire-fighter from December 1999" so earning an additional $60 net per week which is claimed from December 1999" [emphasis added]. 28 However, with respect to the calculation of past economic loss, the trial judge calculated this at a rate relatively favourable to the appellant for the period from 1 July 2000 to 15 August 2003. Thus with respect to the calculation of past economic loss, from the period 1 July 2000 to 15 August 2003 the trial judge assessed the potential wage of the appellant rather generously, in that the 2003 rates of a Lance Corporal were used for that entire period, when financial details for rates earlier than 2003 had not been provided; Judgment Red, 68E. 29 Taking those matters into account, I do not consider that there is on this ground sufficient basis for appellate intervention. 30 I should also briefly note and dismiss any suggestion, argued outside the Particulars, that there was any basis for adding back the net value of a service allowance, either for past or future economic loss, calculated at the net amount of $115 per week. Accepting that it was payable (Blue, 197 and cf Blue, 199 for the Airforce in similar terms), it had never been returned by the appellant for tax. That reinforces the conclusion that it simply reflected an allowance for the disturbance (or extra costs in uniform cleaning) that Army service imposed, not compensation over and above. Grounds 2-4 31 Grounds 2, 3, 4 and 5 essentially are based upon the complaint that award rates of pay for civilian firemen in New South Wales and Queensland, tendered as Exhibit P in the trial, should have been taken into account rather than the lower rates of pay applicable in the Army. 32 This is based on the premise that the appellant should have been able to take into account those higher rates, having regard to the fact that the appellant had sought a discharge from the Army and investigated joining the Fire Service and the Police Service in New Zealand in 1998; Black, T, 21.25-.35. He had indeed applied for and sent recruitment packages for those positions. 33 In cross-examination his evidence was that it was his intention to stay on as a fire-fighter whether in the Army or externally if he had got another position (T, 75.20). However, and highly relevant to this contention, the appellant in examination in chief gave this evidence of his thinking just before the accident: "Q. Before the accident had you thought about whether or not you'd stay in the Army once your four years was finished? A. I had given it some consideration, yes. Q. And what were you thinking, were you inclined to stay in the Army or were you thinking you'd leave or you hadn't made up your mind? A. At that stage, ma'am, I had no intention to leave apart from the discharge that I'd earlier submitted." 34 Indeed he then indicated that he had hopes of promotion, reinforcing the evidence that his intent at the time of the accident was to stay in the Army, that promotion being to Lance Corporal. 35 It is therefore clear that the evidence supported the basis upon which the trial judge approached and assessed economic loss and loss of earning capacity of the appellant. I agree with the respondents' submission that it is not the situation that the trial judge ignored the submissions and evidence tendered concerning the award rates of civilian fire-fighters. Rather the trial judge was of the view that the evidence was not sufficient to justify the assumptions put forward on behalf of the appellant in that regard; Judgment Red, 66E-U. He had, as I have said, not formed a favourable view of the appellant's credibility in his account of the accident. 36 Again I find no basis for appellate intervention in relation to the trial judge's conclusion on that matter. Ground 6-8 37 Grounds 6, 7 and 8 are essentially directed at the figure arrived at to compensate the appellant for future economic loss, being an earning rate difference of $22 per week as against the higher figure pressed by the appellant. Much of this is based upon the trial judge have adopted what was submitted to be an overly optimistic view of Dr Ellis' opinion of the appellant's chances of improved function in his left arm if he underwent an open repair of his left shoulder. The evidence, consistent with the trial judge's finding, led to the conclusion that the appellant as a result of his injuries would be restricted to relatively light duties (Judgment Red, 63N and Black T, 169.10 and 169.25). 38 As the respondent points out in its submissions, we are here dealing with the assessment of damages by reference to future or hypothetical events, described as "the process of estimation of possibility"; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 per Deane, Gaudron and McHugh JJ. This is necessarily an imprecise matter of estimation, carried out within broad parameters. I consider that there is in those circumstances only limited scope for interfering with a trial judge's assessment of loss of earning capacity; see Foster v Tyne & Weir County Council [1986] 1 All ER 567 at 570; State of New South Wales v Moss [2000] NSWCA 133, 31 May 2000, unreported. The factors militating against doing so are as follows. 39 First, the respondents' submissions demonstrate that the allowance actually made was generous in some respects. First, the trial judge did not apply any deferral multiplier by reference to the time of four months calculated as being off work for the open reduction shoulder stabilisation operation. However, that is a relatively small amount. 40 Second, while the evidence is that the appellant was at risk of recurrent dislocation of his shoulder, this was if it were again injured. Following operative surgery, according to Dr Ellis: "…. [T]he chances of him being significantly better are great" (Black, T, 154). Nonetheless the improvement is not certain, nor a complete cure. The fact remains that he remains, still carrying an injury, a factor which will also weigh against him should be need to seek employment. 41 In undertaking the assessment of loss of earning capacity, the trial judge stated that he took into account matters which included the following: (a) the appellant's current level of income was received from what was a recently commenced business; (b) the proposed operation upon the appellant's shoulder would significantly increase his future earning capacity; and (c) the appellant's own evidence was that, at the relevant time being the date of the accident, he did intend to remain in the Army. 42 As to (a) above, there are inevitably risks as to future continuity and (b) is subject to the qualification that I have earlier made. 43 While the trial judge specifically noted that the appellant may have progressed to the rank of sergeant and beyond, he noted the absence of any evidence on his likelihood of promotion; Judgment Red, 70X-71B. Where a plaintiff calls incomplete evidence on a matter bearing upon a lower award for earning capacity it is difficult for him to complain; Minchin v Public Curator of Queensland [1965] ALR 91 at 93; Giorginis v Kastrati (1998) 49 SASR 371 at 395; and State of NSW v Moss (supra). 44 It would not have been difficult for the appellant to provide by way of evidence, likely detail of his own potential promotability including as to how he was regarded by his relevant supervisor. There was no such evidence. 45 The respondent emphasises that the trial judge allowed more than the current "differential" between the appellant's current income and the income of a lance corporal, $10 being the difference between his current net income of $530 and the net income of a lance corporal of $540. The trial judge's assessment took into account the current income of a corporal at the date of judgment, where the maximum net weekly wage differential between the appellant's current net weekly wage and the current maximum net weekly wage of a corporal was $43. The trial judge allowed approximately one-half of such range, in allowing $22. That amount is over double the current differential between the appellant's present net weekly wage and the net weekly wage of a lance corporal. 46 Nonetheless, giving full weight to these factors, I consider that to allow so small a differential (3.5%) is appellably wrong, in calculating future economic loss at $26,000. It is assumed against the appellant that he would not have pursued civil employment at a higher wage in ignoring positive vicissitudes in the hypothetical calculation. Moreover, negative vicissitudes for the actual post-injury future earnings are ignored such as the chance of his shoulder not improving, or the possibility that future employment may be harder to get with his injury. Malec v J C Hutton Pty Ltd (supra); Norris v Blake (by his Tutor Porter) (No 2) (1997) 41 NSWLR 49 at 72-3 per Clarke JA require proper allowance in a balanced way for both positive and negative vicissitudes and that was lacking here. I would therefore increase the allowances for future economic loss from, $26,000 to $100,000 so as to do so. OVERALL CONCLUSION AND ORDERS 47 I conclude that no appellable error has been shown in the judgment of the trial judge save as regards future economic loss. I note that the respondents submit that the second and third respondents should not have been joined as parties to the appeal and that any costs incurred in that regard should be borne by the appellant but in the end this latter was not an issue. I would accordingly order as follows: (1) Appeal allowed to the extent of increasing future economic loss from $26,000 to $100,000 but not otherwise. (2) The respondents to pay the appellant's costs. ********** Last Modified: 08/27/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.