The appellants' submissions should be rejected
36 The principles with respect to the assessment of damages for economic loss under the general law are well established. Thus in Kallouf v Middis [2008] NSWCA 61 McColl JA summarised those principles relevantly as follows (omitting some citations):
"46. Damages for both past loss and future loss are allowed to an injured plaintiff 'because the diminution of his earning capacity is or may be productive of financial loss'…; As McHugh J said in Medlin v The State Government Insurance Commission 'the loss of earning capacity principle more accurately compensates a plaintiff for the effect of an accident on the plaintiff's ability to earn income'.
47. Although it is loss of earning capacity and not loss of earnings that is the subject of compensation, the rate of wages being earned and the rate of wage likely to be earned in the future afford a basis for assessing compensation for a loss of earning capacity …
48. It is necessary to identify both what capacity has been lost and what economic consequences will probably flow from that loss. Only then will it be possible to assess what sum will put the plaintiff in the same position he or she would have been in if the injury had not been sustained …"
37 Of course, these principles are subject in the case of a motor vehicle accident to the provisions of s 125. As the appellants correctly submitted, that section does not provide a cap on the award of past and future economic loss: it merely places a cap on the first component of the process which the primary judge identified at [142] of her reasons: see [18] above.
38 The appellants relied upon a passage from the judgment of Hodgson JA, with whom McColl JA and Cripps AJA agreed, in Kaplantzi v Pascoe [2003] NSWCA 386; (2003) 40 MVR 146 where, at [32], his Honour said:
"In my opinion, the Motor Accidents Compensation Act in general, and s.125 in particular, shows a clear legislative intention that there be an effective limit put on claims by dependants of persons whose efforts would have produced very high financial benefits to those dependants, irrespective of how the remuneration or financial gains of those persons is structured or how their wealth-creating capacity is exercised . In my opinion it would be inconsistent with this intention to give a narrow construction to 'net weekly earnings'. It is common for persons who generate great financial benefits that these benefits not be received weekly or monthly or even yearly, and that some of these benefits be received by way of capital gains rather than income. In so far as the financial loss of dependants derives from the loss of the capacity of the deceased to generate assets for their benefit, all contributions to those assets that would have occurred through the exercise of that capacity are properly considered as earnings; and in my opinion, in so far as those earnings, when calculated as a net weekly figure, exceed the figure specified pursuant to s.125, those earnings are to be disregarded." (Emphasis added)
39 Although the appellants relied upon this passage from his Honour's judgment in support of the proposition for which they contended, it is clear from those parts which I have emphasised, that he was clearly construing the word "earnings" wherever appearing in s 125 as earnings which were the product of the exercise of a person's earning capacity: that is, through the personal exertions or input of the injured person that results in a particular output although that output may take various forms.
40 Although the appellants also relied upon the decision of McMurdo J of the Supreme Court of Queensland in Doughty v Cassidy [2004] QSC 366 where his Honour was concerned with the Queensland equivalent of s 125, it is clear from that learned judge's reliance upon the judgment of Hodgson JA in Kaplantzi that he was not differing from the latter's construction of the New South Wales provision. Thus, at [33] McMurdo J observed that:
"[t]he assessment of damages for an impairment of earning capacity involves the evaluation of the capital asset of the injured person, which is his or her capacity to earn money. A person whose ability to work is affected by the injury is compensated for the loss of earning capacity, and not for the loss of earnings."
41 Further, his Honour recognised that the relevant section was engaged where the court is assessing damages at common law for the loss or impairment of earning capacity. In my view there is nothing in McMurdo J's decision that in any way supports the construction of s 125 for which the appellants contend.
42 In my view the fundamental flaw in the appellants' argument is that their submission depends upon acceptance of the proposition, which I would reject, that the effect of s 125(2) was to deprive the respondent of any award of damages for past or future economic loss where his "residual earnings", which I take to mean the earnings received by the respondent post-injury from whatever source, exceed the relevant cap and that this is so notwithstanding that as a consequence of his injuries, the respondent has been deprived of any residual earning capacity whatsoever.
43 When faced with the flaw in this proposition the appellants submitted that it was sufficient if the post-injury earnings of the respondent resulted from the exercise by him of his pre-injury earning capacity in that there was some causative link between the exercise of that capacity and his post-injury earnings. However, the difficulty with this contention is that although s 125(2) controls the maximum amount of the first of the components referred to at [18] above, it is silent with respect to the second. What the appellants seek to do is to fix the amount of the second component by reference to any post-accident earnings that can be traced back to the exercise of the respondent's earning capacity pre-accident. In my view there is no statutory warrant for such an approach.
44 A further difficulty with this proposition is that in a case such as the present, it is simply impossible to determine the extent to which, if at all, the exercise by the respondent of his pre-injury earning capacity contributed to the earnings that he received post-accident. Although one can accept for present purposes the evidence of the appellants' expert as to the actual earnings, or more accurately, income, received by the respondent post-accident as set out in the table which I have extracted at [21] above and that from and including the financial year 2006 the amount of that income exceeded $3,584 net per week, nevertheless there was no attempt made by the appellants' expert, or for that matter by the appellants, to determine what proportion, if any, of the respondent's weekly business income after tax in the years in question was contributed to by the respondent's exercise of his earning capacity in the years prior to the accident. No doubt the reason for this is that it would, as the primary judge recognised, be an impossible exercise given the nature of the respondent's contribution pre-accident to his business ventures and their ongoing operation.
45 Furthermore, no attempt was made, nor from a practical viewpoint could it have been, to determine the extent to which the respondent's weekly business income after tax set out in the table was contributed to by other external factors unrelated to the respondent's personal exertions in the years prior to him sustaining his injuries.
46 Once it is accepted, as in my opinion it should be, that the reference in s 125 to the word "earnings" is a reference to income earned by the exercise of the injured person's earning capacity, it follows that the appellants' construction of s 125(2) must be rejected. This section is concerned with the awarding of past or future economic loss due, relevantly, to the deprivation of the respondent's earning capacity as a consequence of his injuries. Post-accident, that earning capacity was nil. But for his injuries he had full earning capacity which if exercised would have earned him in excess of the cap the subject of s 125(2).
47 Accordingly, he was not entitled to be compensated for any loss of earnings on a weekly basis that exceeded that cap. But once it was determined that his post-injury incapacity was nil, it followed that he was entitled to an award of damages for past and future economic loss.
48 On the approach of the primary judge, which assumed a calculation based upon the cost of engaging another person to perform the work which would have been performed by the respondent had he not been injured, the cap fixed by s 125(2) became irrelevant. However, there was no challenge by the appellants to the method of calculation adopted by her Honour and no cross-appeal by the respondent suggesting that her Honour's assessment was inadequate.
49 In these circumstances her Honour's assessment of the respondent's past and future economic loss should be confirmed.