Dal Zotto, Siro v. Bonnani, Aldo & Ors [1980] FCA 120

Federal Court of Australia|1980-08-26|Before: Sheppard JJ, Jacobs J, Toohey J

Damages - loss of earning capacity - appellant member of partnership - substitute labour hired to perform work usually done by appellant - profits of partnership in consequence reduced - is appellant entitled to recover

more than his share of the reduction in the profits - award of damages also challenged on grounds that amounts awarded for loss of future earning capacity and loss of amenities of life insufficient - no question of principle involved -

SIRO DAL ZOTTO v. ALDO BONNANI, ENNIO BONNANI, BRUNO BONNANI, CARLO BONNANI trading as TENNANT CREEK BRICK COMPANY

NORTHERN TERRITORY DISTRICT REGISTRY No. NT G 20 of 1979 GENERAL DIVISION j

On appeal from the Supreme Court of the Northern Territory of Australia

: ALDO BONNANT, ENNIO BONNANI, BRUNO BONNANI, CARLO BONNANI Trading as TENNANT CREEK BRICK COMPANY Respondents

JUDGES MAKING ORDER: Toohey, McGregor and Sheppard Jd.

There be substituted for the amount of the judgment

The respondents pay the appellant's costs of the appeal

On appeal from the Supreme Court of the Northern Territory of Australia

ALDO BONNANI, ENNIO BONNANI, BRUNO BONNANI, CARLO BONNANI trading as TENNANT CREEK BRICK COMPANY

The appellant challenges the adequacy of damages ' awarded to'him by a judgment of the Supreme Court of the Northern Territory.

I have read and, save in one respect, agree with the reasons of McGregor and Sheppard JJ. That respect, to which I shall refer in more detail later, is the assessment of the appellant's loss of earning capacity

during the period before the hearing of his claim for

A description of the appellant's injuries and residual disabilities and of his work situation before and after the accident appears in the reasons of McGregor and Sheppard JJ. and to this description I have nothing

In short, the appellant suffered quite serious injuries which have left him with residual disabilities, particularly in the left leg and hip. These disabilities preclude him from resuming his pre-accident work as a bricklayer and concrete worker. Fortunately for the appellant, he was at the time of the accident and has continued to be a member of a partnership, consisting of himself, his wife and Mr. Bassett. While the partnership continues, his capacity to earn is relatively unaffected. But I agree with the other members of the Court that the learned trial judge's assessment of $25,000 for future loss of earning capacity was too low.

I agree also that the amount of $12,000 awarded for pain and suffering and loss of amenities of life was, in the circumstances, an inadequate reflection of the seriousness of the appellant's injuries, of their disabling effect and of the need for further treatment.

The amounts suggested by the other members of the Court are $40,000 and $20,000 with which I am in general agreement. There must be added $5000 for special damages

McGregor and Sheppard JJ. consider that his Honour's assessment of $5000 for past loss of earning capacity should stand. It is here that I differ with them and with the learned trial judge. His Honour arrived at the figure of $5000 by taking the cost of substitute contract labour hired by the partnership before the hearing, adopting one half of that sum and reducing the amount thus produced to allow for the impact of income tax. The mechanics by which this was done appear in the reasons of the other members of this Court.

If, as the appellant argued, he should have recovered the total paid for substitute labour, the sum of $5000 was insufficient. The amount is not great in the overall award but the principle involved is of some importance.

In several decisions the courts have discussed the basis of compensation for loss of partnership income as a result of personal injuries. They are mentioned in the reasons of McGregor and Sheppard JJ. It is not necessary to refer to all of them as only one or two are directly in point.

Szittner v. Harriott (1967) 1 N.S.W.R. 233 most directly bears on the matter. In upholding an assessment of damages which included the cost of substitute labour, Jacobs J.A., delivering the judgment

"The fact that the plaintiff was working in the partnership and that her work admittedly was worth some ~1506 - because that was the cost of the replacement labour - is in our view the cardinal fact".

In Schick v. Abbott (1976) W.A.R. 54, the respondent

was one of three partners in a professional practice. After his accident he continued to receive the usual drawings on account of profits, having agreed to repay them to the partnership Lf successful in recovering damages for loss

of salary and profit. In the view of the Full Court his damages should include the sum of $1400 which he continued to draw. The undertaking to repay was not crucial. In

the words of Burt J. (as he then was) at p.55: aan the respondent immediately before the

If applied in the present case, the statement of principle underlying both decisions requires that the appellant receive as part of his damages the entire cost of substitute labour, less an allowance made for income tax and overheads if appropriate. This approach is consistent with and required by the accepted concept that an injured plaintiff is to be compensated for loss

(Barwick C.J. in Cullen v. Trappell (1980) 29 A.L.R. 1 at p.5).

The proposition in Graham v. Baker (1961) 106 C.L.R. 340

at p.347, referred to by Gibbs J. in Griffiths v. Kerkemeyer

(1976-1977) 139 C.L.R. 161 at p.165, that an injured plaintif. recovers damages -

is not, I think, intended to measure compensation for loss of earning capacity.

Thus his Honour's statement in Griffiths v. Kerkemeyer:

not result in any loss" (at p.165) will apply during the payment of those wages. But it will not preclude an award of damages based on the proposition that the payment of wages may cease at some time or, more directly, that the plaintiff's injuries have prevented him from putting to a greater economic return his capacity to

Kerkemeyer concerned a plaintiff who was in employment. While passages in both decisions may be of wider application, the measurement of diminution of earning capacity in money terms requires a different approach when the plaintiff is

In the present case the respondent did not argue that the appellant had suffered no financial loss and was therefore entitled to no compensation for loss of earning capacity before trial. The submission was that, the partnership having borne the cost of engaging substitute labour, the appellant's loss could be no greater than the one half which the partnership agreement (as acknowledged by the parties) required him to bear.

In my view the appellant's loss of earning capacity is reflected by the entire cost of substitute labour since that is the true measure of the diminution of his earning capacity during the period before trial. It is neither necessary nor helpful to invoke the maxim res inter alios acta

how can he come within the word "alios"?" (Dixon C.J. in The National Insurance Co.

Rather, borrowing the language of Burt J. in Schick v. Abbott,

the financial loss suffered by the appellant before trial

was, as between himself and the respondent, the money he

did not earn because of his inability to do the work to

earn it. And that was the amount paid to engage substitute

labour. - Although this approach differs from that taken by

McGregor and Sheppard JJ., I am in general agreement with

the figures suggested by them. In the circumstances I

join with them in allowing the appeal and substituting

the sum of $70,000 for the amount awarded by the learned trial judge.

y - > tha wx a Wa Laie ~ 3 448 aciit thet = as re - ve sc oer yr se grew ef tre wypecctd.tt ¢ vos . ie - le oT el AL DO lee eee Snurens l.

IN THE FEDERAL COURT OF AUSTRALTA ) NORTHERN TERRITORY OF AUSTRALIA

On appeal from the Supreme Court of the Northern Territory of Australia

ALDO BONNANI, ENNIO BONNANI, BRUNO BONNANI, CARLO BONNANI trading as TENNANT CRERK BRICK

COMPANY Respondents CORAM: TOOHEY, McGREGOR and SHEPPARD JJ. REASONS FOR JUDGMENT McGREGOR and SHEPPARD JJ. OG Qing us (qvo

SIRO DAL ZOTTO (the Appellant) appeals against a decision given on 6 September 1979 by Gallop J. in an action brought against ALDO BONNANI, ENNIO BONNANI, BRUNO BONNANT and

CARLO BONNANI trading as TENNANT CREEK BRICK COMPANY (the Respondents). The cause of action was for damages for personal injuries said to have been suffered by the Appellant as a result of the negligent driving of a motor vehicle on

19 March 1978. The circumstances of this occurrence need

not be related since liability was admitted at the hearing and

the matter proceeded as one of assessment of damages only.

The amount of the judgment, $47,000, comprised the following items -

Future loss of earning capacity 25,000 Pain and suffering and general

The appeal is brought against what is said to be the inadequacy of this sum having regard to the injuries, disabilities' and effect upon the Appellant's life and earning capacity. In argument before us, it was not contended that any of his Honour's findings as to the Appellant's injuries or subsequent condition are incorrect. What is submitted is that nis Honour was in error in evaluating the effect of the Appellant's injuries, dis- abilities and their aftermath as a result of which the amount of the judgment was insufficient,

The Appellant was born near Treviso in Italy on 5 July 1944, He left school at the age of eleven, worked for a short time as a panel beater, then as a farm labourer and thereafter began to work with a bricklayer. About this time he went to a technical college and there learnt the trade of bricklaying and concreting and also something about tiling and plastering. Since then he has always worked either as a bricklayer, blocklayer or

a concreter., He has also done some work in the nature

The Appellant migrated to Australia in 1967 and came to live in the Alice Springs district on or about 22 November 1967 where he has since remained. There he followed, up to the time of the accident, the occupation of a bricklayer and concreter. He has usually worked in partnership. His partners have varied but each of his ventures has been moderately successful. He is a married man with three children, aged, at the time of the hearing, 9 years, 5 years and 15 months. He can speak and under- stand some Ermglish if those who speak it do not talk too fast. He can read a little bit, but not much English.

His Honour found his injuries were a central fracture dislocation of the left hip, a fracture of the left pubic ramus, a strain of the sacroiliac joint, con- cussion followed by loss of consciousness and some degree of amnesia, at least temporarily, 'damage to cranial nerves, the most serious effect of which has been to cause a degree of double vision.

His Honour traced the history of the Appellant since the injurye He was admitted on 19 March 1978 to the Alice Springs Hospital where he was treated by way of skeletal traction for six weeks. He was discharged on 4 May 1978 and was at first unable, in any real way, to move around. He used crutches for some months, then a walking stick. During this period he was treated with physiotherapy. He was provided with pain killing tablets

The Appellant's residual disabilities were found by his Honour as follows:

"Firstly, that he has a painful and degener~ atang left hip with a quarter-inch shortening of the left leg, 14 inch wasting of the left quadriceps muscles, with a mild restriction of movement in the left hip. He also has backache in the area of the sacroiliac joint. There is a boney prominence on the medial side of the left tibia, a 7.5 centimetre scar below and behind the left ankle, which is tender and numb, but which will resolve; numbness in the lower lip from about the mid-line to the left corner of the lip and in his tongue, and some double vision in the extremity of the right-hand side when he looks to the right-hand side, which on the evidence will resolve within about 6 months. The diplopia at present is assessed as ten per cent loss of visual function. He also has a scar on the left shoulder."

His Honour found that the Appellant had a general inability to resume his pre-accident work as a bricklayer and concrete worker because lifting and bending caused pain in the left hip and back. He continued:

"These disabilities are mostly terminable, because when he has the operation for total or partial replacement of the left hip, it will or should obliterate pain. I find that, on the probabilities, this will be necessary within the next five years and that the plaintiff will have the operation done, because the pain will to him be unendurable, but even then he will not be fit for heavy work and the operation would remove the pain only, not the other disabilities, He claims to have lost some of the amenities of life, mainly the pleasure that he got from indoor bowling. I think that there has been some loss of enjoyment in this respect, but it is hard to gauge how much. Nevertheless, I take account of some loss of that enjoyment, Likewise, his gardening activities, which never seem to have been very extensive, but he has lost some of that enjoyment and, also, some of the enjoyment of sexual intercourse with his wife, I take those matters into account, but it is hard to gauge just how great the loss has een."

His Honour found that the Appellant had been a very competent, well regarded tradesman, favourably known in the building industry and the Italian commmity in Alice Springs. It would appear, although no specific finding was made about it, that he was a man who enjoyed and obtained satisfaction from his work and the ability he displayed in it.

The criticism of the judgment is that it is seriously inadequate in respect of the amount allowed for pain and suffering and loss of amenities of life, including what was described by counsel as his loss of status because of his reduced physical capability, and in the provision made for the accident caused impairment of earning capacity.

It will be convenient to consider first that part of the judgment related to impairment of earning capacity. The Appellant from and including the year 1974 worked in partnership, firstly with a Mr. Lanserin, later with Mr. Muchino and finally with Mr. Bassett. His wife was a partner in each of these partnerships. She and the Appellant were each entitled to one quarter share of the profits, the other partner being entitled to the remain- ing one half share. It was agreed by counsel that the fact that the Appellant's wife had the interest she did in the partnerships was to be left out of account for the purpose of quantifying the Appellant's losses, In other words, the position was to be locked at as if the Appellant

himself was, along with the remaining partner, entitled to

one half share of the profits. That concession (if such it be) was made by counsel for the respondents notwith- standing that the wife did some work for the partnership such as taking messages from persons who would offer work and conveying them to the appellant at a work site. We have approached the task of reviewing his Honour's award accordingly. We express no view upon the question of whether the wife's interest in the partnership was rightly left out of account, other than to say that the concession which was made may well have been correctly made in view of the fact that the principal purpose of the wife's admission to the partnership was income splitting with her husband. If it were not for the skill and labour which the husband contributed to the partnership, the partnership would not have come into existence, We have said what we have, mindful of the fact that the wife did some work for the partnership.

At the time of the accident the appellant and his wife had been in partnership with Mr. Bassett since August 1977. Its business was principally that of bricklaying and con- creting. A small amount of building work was also done. The partnership was less than eight months old at the date of the accident but it had proved itself successful and profitable during that time.

After the accident a business decision was taken to change the nature of the work done by the partnership. His

hen the accident happened and the plaintiff was incapacitated a business decision was taken that the business of the partnership would change direction to light structural work and that is in fact what happened."

"So far as the future is concerned, I think that the plaintiff will do reasonably well in the changed direction of the business. I think that given time and the benefit of the operation, which I find on the probabilities will happen, the business of Dal Zotto and Bassett will be quite profitable, as indeed it was during the last financial year. However, I should bear in mind that, had it not been for the accident, the plaintiff, and his partner would probably not have changed the direction of the business and it may well be that their profitability would have been greater staying in the work that they were in prior to the accident. In short, I think the plaintiff has been precipitated into a line of the building industry which he may or may not have entered into in some years time.

I think,from the fact that the partners were contemplating the purchase of real estate, an industrial site here in Alice Springs at the date of the accident and from the fact that they have been able to be profitable in the light structural-type work rather than the hard physical labour themselves of concreting and bricklaying, that as the years went on it is likely that they would have leaned towards the building industry in such a way as not to involve their own personal hard physical labour. It is likely that this change of direction, or something like it, would have taken place some time in the future anyway."

Counsel for the Appellant challenged both the amount ($5,000) allowed for pre-trial loss of earning capacity and the amount (425,000) allowed for post-trial loss of earning

capacity. We consider first the amount of 45,000 awarded

The accident was on 19 March 1978. The Appellant was unable to return to any work until about October 1978. During that period the partnership continued to operate and is still on foot. Labour was hired during the Appellant's absence from work and thereafter (because of his reduced capacity) to provide the labour which the Appellant himself would have provided had he not been injured. The claim which the Appellant makes for pre-trial loss of capacity is the amount paid by the partnership for that labour. The claim was difficult to assess because the evidence established thet the partnership, even if the Appellant had been continually fit, would have needed to hire some additional labour.

His Honour found that the cost of additional contract labour hired by the partnership between the date of the accident and 30 June 1978 was %3,358. Because the amount was incurred by the partnership his Hanour took into account only one half of that sum and reduced the resultant figure in order to allow for income tax. For the period up to 30 June 1978 he allowed $1,000. His approach in respect of the period 1 July 1978 to the date of judgment was similar. He found the cost of contract labour hired by the partnership as a result of the Appellant's unfitness for work to be $9,000. His Honour continued:

"That amount has to be halved, because of the partnership arrangement, and a third has to come off that figure (to allow for income

tax) and that will produce a result of $3000 for that period. I bear in mind that if I

Sallow that sum of 33000, that would be supplementary to the gross taxable income

ended 30 June 1979 of s17,0COO ..... cove The plaintiff in that year has already

earned $17,000 after deducting all allowable expenses for taxation purposes. Adding the figure of $3000 to the previous figure of 41000, which was the figure that I provision- ally fixed for the period from 19 March to 30 June 1978, I would get a figure of $4000. That seems to me to be reviewable for some reason which is not too apparent to me at 'the moment, but doing the best I can, I propose to increase the addition of those two figures so as to make that figure for past economic loss the sum of $5000."

The principal challenge to the award of $5000 for pre-trial loss of earning capacity was that his Honour was in error in taking,as his starting point,only one half the amount incurred by the partnership for substitute labour.

It was submitted that he should have taken the whole amount, t was also submitted that the figure should have been higher because he had made no allowance for loss of earnings of tne partnership during a period when Mr. Bassett became run down and had to take some weeks off. It appears that his absence was due to overwork and strain because of the Appellant's being unable to carry out his usual duties. An amount of 6000 was said to be involved. This is not a matter mentioned in his Honour's gudgment no doubt because, as counsel for the Appellant frankly conceded, the matter had not been put to his Honour in this way. We are not persuaded that the allowance claimed should now be made. Each

of the partners would at some stage have needed a respite

from his labour. It may be that Mr. Bassett did not go off at the most opportune time but some loss would in any event have been incurred. His Honour did make an allowance of $1000 (2000 if the Avpellant's approach that the entirety of the cost of labour is recoverable be accepted). The claim was not, because it was not formulated at the hearing, the subject of express findings by his Honour. In all the circumstances we do not think that the submission should be accepted.

The next' question to be determined is whether the learned trial judge was correct in awarding damages for past economic loss calculated upon the Appellant's real loss rather than upon the total cost of substitute labour employed ty the partnership to make uo for his inability to contribute labour to the same extent as he had done before + his ingury. There are a number of dicta by Australian judges on the point. They are not all to the same effect. Some favour the view that it is only the plaintiff's actual loss which may be recovered. If his partner has agreed to have the cost of the additional labour deducted from the partnership income rather than its being provided for entirely by the injured partner (either actually or by reason of the overation of an agreement made in that behalf) there can be no recovery beyond the injured partner's proportion of the cost. Such a view was expressed by Ferguson J. in Carlon v. Allison (1964) N.S.W.R.946, Mitchell J. in Bavone v. Welfare (1971) 1 S.A.S.R.431 and Stable J. in Jacklin v.

O'Hara (1973) Qd.R.438. The judges (other than Ferguson J.) relied upon an obiter dictum of Denning L.J. (as he was) in Lee v. Sheard (1956) 1 Q.B.192. There the plaintiff was

a director of a lamited liability company. He held nearly half the share capital in the company. As a result of injuries suffered by him in an accident there was a sub- stantial diminution of the turnover and profits of the company. It was held that he could recover his actual loss, After reaching this conclusion Denning L.J. added (p.196): "So, too, a partner in a partnership would be entitled to recover his own real loss and no more",

To the same effect is the view expressed by Begg J. in Fitzgerald v. Williams (1970) 2 N.S.W.R.389. His Honour's views were expressed in the course of his endeavouring to distinguish the facts of the case being decided by him from those dealt with by the New South Wales Court of Appeal in Szittner v. Harriott (1967) 85 W.N.(Pt.1)(N.S.W.}461. The court in that case was constituted by Jacobs, Asprey and Holmes JJ.A. The judgment of the court was delivered by Jacobs J.A. (as he was). His Honour said (p.464) that the dictum of Denning L.J. in Lee v. Sheard earlier cited ought not to be followed "because ... ... it seems to take into account matters that are really matters between parties other than the parties to the litigation". His Honour centinued:

"The fact that the plaintiff was working in the partnership and that her work admittedly was worth

some £1,506 ~ because that was the cost of the replacement labour ~ is in our view the cardinal

"fact. If one then says that the amount should be reduced (this loss of earning capacity, because it must be borne in mind that loss of earning capacity is as much the test before a trial as it is in relation to economic loss after the trial) if that is taken to be the measure of loss of earning capacity, then what a third party, by arrangement, provides to mitigate that loss of earning capacity is not a proper subject for reduction of damages.

If an employer, ex gratia, continues to pay an employee his wages, that is not a proper subject for reduction of damages of the employee, except

in relation to that employer. Most of the cases have dealt with such a situation or with situetions where there has been an insurance of the plaintiff, or where he has been a member of some pension fund or similar fund, but the principle is that the arrangement of the plaintiff with third parties is

a res inter alios acta, It seems to us on analysis that the particular arrangement between the plaintiff and her partner was strictly res inter alios acta, If that had resulted in an unusual burden of loss to the plaintiff, the defendant could not have been held responsible, and so, if that resulted in a smaller burden of loss, by some private arrangement or by some private course adopted, then the defen- dant is not entitled, in our view, to that benefit."

In passing it should be noted that his Honour's statement that if an employer, ex gratia, continues to vay an employee his wages that is not a proper subgect for reduction of damages of the employee is not, unless it were intended to be qualified, a correct statement of the law; compare Graham 'v. Baker (1961) 106 C.L.R. 340 decided in 1961 shortly to be referred to. The method of approach to the problem adopted in Szittner's case was followed by the Full Court of the Supreme Court of Western Australia in Schick v. Abbott (1976) W.A.R. 54, Burt J. (as he then was) saying (p.55):

"But the financial loss suffered by him (the injured plaintiff) as a result of his inability

to work, as it seems to me, was as between himself and the defendant the money he did not earn, less

overheads, because during the veriod of his incapacity he was unable to do the work to earn it

"and not the consequential reduction in the profit which he received from the partner- ship: cf. Linke v. Howard (1967) S.A.S.R.83, particularly at 88, and Szittner v. Harriott (1967) 1 N.S.W.R, 233." Wallace J., with whom Jackson C.J. agreed, reached a similar conclusion (p.56).

As mentioned by Burt J. the same conclusion was reached in Linke v. Howard (1967) S.A.S.R.83. That was a decision of Hogarth J. who followed an earlier decision of Napier C.J. in Dahm v. Harmer (1955) S.A.S.R.250. It is to be noted that that latter decision was given prior to the dictum of Denning L.J.'in Lee v. Sheard to which reference has been made,

Since both Szittner's case and Schick's case are decisions of a court of appeal or full court of Supreme Courts of two of the States the preponderance of direct authority on the point favours the view that the entirety of the amount incurred by the partnership for labour as a result of the Appellant's inability to do his normal work is the true measure of his loss of earning capacity. That is so notwithstanding the weight which must be given to the dictum of Denning L.J. in Lee v. Sheard which is to the opposite effect.

None of the decisions cited is binding on this court. The matter must therefore be determined upon the basis of the principles to be applied, great attention being paid to

the authorities, particularly the decisions of the Court of

Appeal in New South Wales and the Full Court of the Supreme

Court of Western Australia. The fundamental princaple which must be applied is that, damages being compensatory,

a plaintiff may recover no more than his actual loss. But in giving effect to that principle it is necessary to keep well in mind what it is that the plaintiff in a given case

is being compensated for. It is not his actual loss of earnings nor his loss of profits in a partnership in which he works, It is his loss of earning capacity. Nevertheless, the authorities show that actual loss of earnings will often be a reliablé guide to or measure of the impairment of earn- ing capacity which has taken place. It is to the fact that damages are awarded for lost earning capacity that the judges in Szittner and Schick refer. So here, counsel for the Appellant submitted that the Appellant's loss was not to be ascertained by looking at the financial loss which he had suffered but rather at his loss of earning capacity. A correct measure of that loss was the cost of the labour which the partnersnip had had to engage to perform the work which he would otherwise have done.

That it is lost earning capacity which is the subject of the compensation to be awarded has been emphasised many times by the High Court, most recently in Cullen v. Trappell (1980) 29 A.L.R.1, particularly by the Chief Justice in his Gissenting judgment. He there refers (p.5) to the problem being that of valuing the capital asset of the injured

Notwithstanding that being the approach, it appears that lost earning capacity will not be compensated by a sum which exceeds what has in fact been lost financially. That 18 made clear in Graham v. Baker (supra) where, ina goint judgment, Dixon C.J., Kitto and Taylor JJ. said (pp.346-347):

it were possible in the ordinary course of things to obtain an assessment of his damages immediately it would be necessary to make an assessment of the probable economic loss which would result from his injuries, But for at least two obvious reasons it has been found convenient to assess an injured plaintiff's loss by reference to the actual loss or wages which occurs up to the time of trial and which can be more or less precisely ascertained and then, having regard to the plaintiff's proved condition at the time of trial to attempt some assessment of his future loss. We mention this matter because it has been suggested that since

an ingured plaintiff is entitled to recover damages for the impairment of his earning capacity, the fact that a totally incapacitated plaintiff has, during the period of his incapacity, received his ordinary wages is not a matter to be taken into consideration. To be more precise, however, an injured plaintiff recovers not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss. And if, notwith- standing such impairment, botn his contract of employment and his right to ordinary wages continue, how can it be said that his impairment has resulted in any loss so far as his earning capacity is concerned,"

The emphasis is ours. More recently, in Griffiths v. Kerkemeyer 139 C.L.R.161, Gibbs J. said (p.165): "eee where the injury has destroyed or diminished the plaintiff's earning capacity, or has created

needs for services that would not otherwise have existed, it is possible (although often difficult)

"to calculate or estimate what pecuniary loss has already resulted or is likely to result from the damage. It has been held in this Court that where the plaintiff has suffered a diminution of earning capacity he recovers damages 'not merely because his earning capacity has been diminished but because the diminution of his earning capacity is or may be productive of financial loss": Graham v. Baker. Accordingly if the plaintiff is rendered incapable of working but his employer continues to pay his ordinary wages in full, the impairment of his earning capacity does not result in any loss. Difficulty has arisen, in some cases, in deciding which of the benefits that a plaintiff hes received should be regarded as mitigating his loss, and which should not. However the discussion in cases such as National Insurance Co.of New Zeatand Ltd. v. pspagne (105 C.L.R. 469) and Parr Cleaver 1970) A.C,1) would have been pointless re damages could have been recovered for impazrment

of earning capacity without any resulting pecuniary pecuniary Toss."

The emphasis is again ours, We refer also to the joint judgment of Gibbs and Stephen JJ in Sharman v. Evans 138 C.L.R. 563 at p.577.

These two dicta lead, in our opinion, to the conclusion that the Appellant here is entitled to recover no more than his actual loss, that is half the cost of the labour employed by the partnership because of his injuries. In consequence we are of opinion that neither Szittner's case nor Schick's case ought to be followed by this Court. We would add that the references in Szittner's case to an arrangement between a pleintiff and a third party being a res inter alios acta seems to us to be a reference to decisions such as Espagne's case which was decided in 1961, more than five years before tne decision in Szittner. The distinction

between such cases and a case such as Graham v. Baker (and

we would add a case such as this) is plainly drawn by Gibbs J. in what he said in Griffiths v. Kerkemeyer.

For the reasons given we would not disturb the amount of $5000 awarded by his Honour for pre-trial earning capacity. vie turn to the challenge made to the award of $25,000 for loss of earning capacity arising after the date of trial.

It is plain from his Honour's judgment (the essential parts whereof we have earlier set out) that he thought that the partnership might continue indefinitely. He was prepared to take into account no more than there being a risk that the partnership might come to an end. This approach was based upon evidence given by Mr. Bassett who said:

"Before the accident we were a good team. We did not used to live in each other's pockets,

but we were not far off it. I like Siro. a knew him before as a partner anc I got to know him, not only work-wise, but personally. I got to know him anyway. He will do anything for

you. Sorry, he woule do anything for me and vice versa and I have had no reason to chuck

him out there. We can still operate. We are not going to make as much as what we did before."

He had earlier said that the partnership, no doubt because of its changed direction, was not at the time he gave evidence as profitable as would have been the case had the Aopellant not been ingured. The last sentence of the passage we have quoted is plainly a reference to that evidence.

We agree thet the learned trial judge was entitled to

take the view that the partnership would, for the time being,

continue to subsist. He was also entitled, indeed bound, to take the view that so long as it did, the Appellant's loss of earning capacity was properly measured and thus compensated by an award which in broad terms would represent his loss of vrofits in that partnership, both as a result of its being engaged in a different type of business and its having to hire labour that the Appellant himself would, but for his injuries, have provided. The learned judge was obliged, by reason of that approach, to take into aceount also the risk or possibility that the partnership would not continue. And he had, as well, to give effect to his finding that the Appellant would in a period of five years or so from the trial have the operation on his hip with a conseouent reduction of pain. If there were no more, his Honour's award of $25,000 for future loss of earning capacity could not be successfully challenged. The assumption underlying his Honour''s award is the continuation indefinitely of the partnership. If that assumption be not justified its substratum is gone. It was the submission of the Appellant that his Honour's assumption ought not to have been made. Rather, he should have taken the view that the probabilities were that the partnership would come to an end, if not in the next year or so then at some time in the not too distant future. ve agree with that submission, in reaching that conclusion we have taken into account a number of factors, Firstly, the evidence given by Mr. Bassett of the reason why he has

continued in partnership with the Appellant down to the date

of trial and intends so to continue on represenls very much his intentions for the immediate future. He did not give, and could hardly have given, evidence as to his intention for the entire balance of his working life ~ 25 or 50 years.

There can be no doubt but that his evidence indicates that he is, to a degree, carrying the Appellant. The question arises as to whether he will be prepared to continue doing so, That is particularly so in the light of the fact that the medical evidence establishes that the more strain the Appellant puts upon his hip the more quickly it will degenerate. It is true that this very circumstance will drive the Appellant to the operation which is likely to make him relatively pain free. But what must be understood is that the operation will not render him more physically capable than he now is. He will not have, as a result of the operation, any increased capacity for work. That is not the object of the operation. And if the Appellant, after the operation, puts undue strain on his hip, he may well have a breakdown leading to a situation where his capacity for work undergoes a further substantial reduction. Those are among the considerations which dissuade the doctors from advising the operation now rather than at a time when the Appellant can no longer tolerate the pain, say in about five years from now,

Then the distinct impression is left that his Honour considered the partnership at risk only because of termination

by some act of Mr. Bassett related to or influenced by the

Appellant's disability. But any number of reasons could bring about a dissolution. The Appellant's own history shows that from 1974 to 1979 he has had three different working partners. The partnership, therefore, would not, in the ordinary course of human affairs, be expected to continue indefinitely even if one were to leave out of account altogether the Appellant's physical condition.

If the partnership comes to an end the Appellant will lose not only the support of Mr. Bassett, but will also, in the language of O'Brien v. Dunsdon (1965) 39 A.L.J.R.78 at p.79 (cited by his Honour) "find himself most seriously handicapped in trying to engage in any other (business)", In fact, on the evidence at the trial anything requiring consistent hard physical effort such as he once managed without trouble will not only be beyond him but will cause additional pain and in a short space of time an even more reduced capacity. His lack of education and language dis~ advantage would severely restrict avenues of employment and thus his earning rate. This is not to overlook the fact that as he grew older harder physical work (assuming no injury) would have become less within his capabilities and he might have attempted to seek less strenuous, if not so well paid, work,

Of course, the building industry is notorious for its fluctuations, The Appellant, had he not been ingured, may have had years in which his earnings, or the profits from any partnership of which he was a member, were low. But

once one considers him as he is now, that is, severely

handicapped for employment in the building industry, it must be concluded that he is likely to be much more seriously affected by any downturn or recession in the industry than previously was the case.

In reaching his conclusion that $25,C00 was an appropriate sum to compensate the plaintiff for future loss of earning capacity his Honour considered that it was not a case in which hélp was to be derived from the use of actuarial tables. To the extent that he considered any weekly sum as constituting the Appellant's loss he was dealing in gross figures (that is without deduction of income tax); Atlas Tiles Limited v. Briers (1978) 52 A.L.d.R.° 707. We are obliged by the decision in Cullen v. Trappell to deal in net figures. However, this is not a case where the tables are of great assistance, The partnership still subsists and its profits are currently substantial, if less than those that might have been earned if the Appellant had not been injured. Although we take the view that the partnership will not last indefinitely it is impossible to say when it may come to an end or what it will be in the way of work that the Appellant will obtain after it does.

yhat must be done is to arrive at a fair but not inflated figure for the loss of earning capacity the Appellant has suffered bearing in mind the principle earlier referred to, that it must be a loss resulting or likely to result in

financial loss. Although his Honour makes it clear that

his figure of '$25,000 did not come from any tables, it is not unfair to test its sufficiency by reference to them. It in fact represents, no doubt amongst many other calcul- ations that could be made, the present value of. a little over 350 ver week for 15 years. The Appellant is now 36 years of age and has between 25 and 30 years of working life left to him - he was 35 years of age at the date of trial, If in, say, five years time he has the operation and the partnership then comes to an end or has already been dissolved, it is likely that it will be difficult for him to find work within his capacity and competence, If one projects the $50 per week for 25 years and, by reason of Cullen v. Trappell, uses the 5% tables, the resultant figure is $37,650. One might find many things wrong with such an exercise. On the one hand the Appellant's present net loss is probably not $50 per week; and against the fact that it might become very much greater than that in the years to come is the fact that the Appellant is receiving the benefit of the money now. If one could be precise, it would be necessary to calculate the present value of the much greater loss likely to arise in the future by resort to an appropriate multiplier derived by calculating the present value of a weekly sua the first payment of which was not due for, say, five years. The multiplier would depend on the rate of interest and period selected.

Having reflected upon the whole of the evidence and taken

anto account the many considerations which need to be weighed

in the resolution of what is undoubtedly a difficult matter, we have reached the conclusion that the award of $25,000 for future economic loss was too low and should be increased to $40,000.

We come finally to the amount awarded for pain and suffering and loss of amenities of life. The injuries were severe; their painful and disabling effect will continue to be felt for the balance of the Appellant's life. They will require further treatment. The Sppellant is a relatively young man whose total activities have been severely curtailed. In our view, whilst according due weight to the personal assessment made of the Appellant by the learned trial judge, the amount allowed was unreasonably low. We consider a sufficient sum could not be less than $20,000,

Our conclusions so far would result in the award being ancreased by $23,000 to a figure of $70,000. We think that that sum is an appropriate total award. We do not think that there is, in the awarding of that total figure, any overlapping of the areas intended to be compensated by the various components of the award. In our opinion the appeal ought to be allowed. There should be substituted for the amount of his Honour's Judgment the sum of $70,000.

The Respondents should pay the Appellant's costs of the

| carrify that this and the 20. : preceding pases are 2 tiue copy of the

bir, Jusuce MeGregor.ancd Mr Jushee She prucd , Raswl - D Wile '

At a glance

Court

Decision date

Before

Source

Judgment (161 paragraphs)

Cited By (2)