Hornsby Shire Council v Oberlechner

Economic loss

Mr Oberlechner had, until 2000 or 2001, worked in the IT industry but gave evidence that following a work injury, he was "diagnosed with major depression and anxiety, a classic case of 'burn-out' as it was described by the psychiatrist, followed by years of court battles for workers compensation, income protection, insurance and others". It is not necessary to summarise the events between 2001 and 2011, during which time Mr Oberlechner had been in receipt of workers compensation payments, and later a lump sum payment by way of settlement of a common law claim. He had not filed any income tax returns since 2000.
In the second half of 2010, Mr Oberlechner had been operating a gardening business, with the assistance of his wife. However, the primary judge found that prior to the accident, Mr Oberlechner had only "the capacity to work, on average, about half a week, but this work would only have been available for about 8 months a year": at [91]. His Honour also found that Mr Oberlechner would most likely have continued this work had it not been for the accident. No challenge is made to either of those findings of fact.
Mr Oberlechner did not submit an income tax return for the financial year ended 30 June 2011. His evidence was that, after the accident, "I just let everything go". His Honour found that the serious physical consequences of the accident meant that Mr Oberlechner was "practically incapacitated from anything more than [being] able to earn inconsequential sums": at [91].
At trial, the Council contended, consistently with its stance on appeal, that no damages should be awarded for past economic loss. Mr Oberlechner contended that damages should be assessed by reference to his potential earnings in the IT industry. The primary judge took an intermediate course. His Honour relied as a starting point upon male Average Weekly Earnings as determined by the Australian Bureau of Statistics. His Honour said at [92]-[93]: "In the absence of direct evidence, I think it is appropriate to calculate his economic loss by reference to male Average Weekly Earnings (rounded to the nearest dollar). As at 17 February 2012 this was $1233. I think that, accepting a measure of increase from 29 January 2011 at about 5 per cent, yields average weekly earnings of about $1170 (hence a capacity to earn about $585 a week as at the date of his accident). Subsequent figures are, as at 18.5.12, $1228, as at 16.11.12, $1265, as at 17.5.13, $1286, as 15.11.2013, $1307, as at 16.5.14, $1316, as at 21.11.14, $1320, as at 20.11.15, $1367 and as at 20.5.2016, $1386. For past economic loss I think the most reasonable calculation should be based on the average of AWE from the date of the accident to judgment, namely $1300, one half of which is $650, thus 209 weeks (the total reduced by one third to account for the four months each year not working) at $650 a week, giving $135,850."
Thus it may be seen that by reference to Average Weekly Earnings, his Honour derived a rough average weekly amount for the period from January 2011 until January 2017, divided that average by two (reflecting a pre-accident capacity of working about half a week) and then reduced the quotient by one third (on the basis that there would be four months each year when the plaintiff did not work). For a total period of just over six years, that produced the total of $135,850.
The Council complained that there was no proper basis for using male Average Weekly Earnings when Mr Oberlechner was not an employee but a self-employed contractor, that no account was made of the regular outgoings which would have been incurred in his business, and that past economic loss should be calculated on the basis of an after-tax figure.
In oral submissions, the Council observed that the particular weekly figures relied on by the primary judge could not, save for one, be derived from the Australian Bureau of Statistics figures as recorded in the Furzer Crestani tables. The exception was the November 2013 figure of $1307. For example, his Honour relied on amounts of $1316 for May 2014 and $1320 for November 2014, although the tables give amounts of $1331 and $1364 for those periods. This comes as no surprise, because that was not the course taken by his Honour. As his Honour said expressly, he took as a starting point what he said was the 17 February 2012 Average Weekly Earnings of $1233, and applied a rate of increase of 5%. However, and consistently with the understatements referred to above, in fact the Average Weekly Earnings for 17 February 2012 were $1285, rather than $1233. Had his Honour applied the figures in the Furzer Crestani tables, the result would in each case save one have produced a (slightly) higher value than the primary judge relied upon.
The first two submissions made by the Council are in effect a single complaint that it was wrong to use the ABS's determination of Average Weekly Earnings of male employees as an integer of the calculation of Mr Oberlechner's loss of net income derived from his former business as an independent contractor. There were other ways in which the primary judge could validly have calculated past economic loss, and, no differently from most calculations of this kind, there is an element of inaccuracy. On appeal, Council pointed to the minimum rate for employees covered by a Gardening and Landscaping award.
In New South Wales v Moss (2000) 54 NSWLR 536; [2000] NSWCA 133, Heydon JA collected authorities at [71] in support of the proposition that in some circumstances the process of estimation may be "an imprecise and indeterminate one" and may be formed on "slender materials". The primary judge expressly relied on that and other comparable passages: at [90]. As Heydon JA observed, again by reference to authority, in New South Wales v Moss at [72], difficulty in assessment of quantum of damages does not mean that a plaintiff is only entitled to a nominal sum,
Given the inevitable imprecision of the task, and the way in which the trial was conducted, we do not consider that there was appellable error in taking male Average Weekly Earnings as a starting point and discounting it in the way undertaken by the primary judge.
The Council's third submission is, with respect, misconceived. The Council claimed (by reference to a conversion table in the Furzer Crestani tables) that $650 per week gross equated to a net amount of $588 per week. That may be so, but the submission fails to have regard to the fact that the calculations and the tax thresholds are based on annual income, and the primary judge's calculations were based on an income of weekly amounts ranging from $650 over only eight months a year. Once it is appreciated that the calculations amounted to annual income of some $22,500, the effect of taxation is minimal. Over the whole of the period from 1 July 2012 to the time of judgment, no personal income tax was payable on the first $18,200 of income; for the first year and a half following his injury, the tax-free threshold was $6,000.
Thus Council's complaint turns on a failure to have regard to the effect of taxation which, in the case of the majority of the years in question, was some $800 per annum. In relation to the first full financial year, the year ended 30 June 2012, the tax would have been in the order of $2500.
The calculation of past economic loss in this case was necessarily highly approximate. It is to be recalled that what was being determined was not lost income, but loss of a capacity to earn income in a manner productive of financial loss: Graham v Baker (1961) 106 CLR 340 at 347. As it turns out, the weekly earnings relied upon by the primary judge were, for the most part, slightly lower than the actual amounts for the time periods (with the exception being the second half of 2013). It will be seen, by way of example, that the understatements of $15 and $40 per week for the first and second halves of 2014 exceed the tax which would have been payable for that year.
The Council maintained, nevertheless, that the calculations should have been reduced by reference to the tiny fraction of tax which would have been paid. We would reject that submission. Were it appropriate to descend to that level of detail, it would also be appropriate to apply the correct Average Weekly Earnings figures, and the result appears to be that the damages would be (slightly) higher. But there is no occasion for introducing a false precision into an inherently imprecise assessment of lost earning capacity by applying to a tiny fraction of the amounts the effect of the lowest marginal rate of income taxation.
The primary judge employed much the same approach in relation to future economic loss, save that, inconsistently with his Honour's approach to past economic loss, no discount of one third (by reason of working only eight months a year) was applied. There is error in that approach. It is, with respect, the sort of arithmetic calculation error which could and should have been pointed out to the primary judge under the slip rule or within the period prescribed by UCPR r 36.16, rather than raised on appeal: see for example Consolidated Lawyers Ltd v Abu-Mahmoud; Abu-Mahmoud v Consolidated Lawyers Ltd [2016] NSWCA 4 at [39] and Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106 at [74]-[77].
The final complaint advanced by the Council in writing was that the primary judge failed to take into account the respondent's unrelated diagnosis of idiopathic pulmonary fibrosis - made in December 2015 - and his need for treatment. Tragically, there is a significant possibility that Mr Oberlechner will die in the near future unless he obtains a successful lung transplant. No oral submissions were made in support of this ground, perhaps for the good reason that this was expressly taken into account in [95], and the primary judge accepted that the "respondent's life expectancy has been markedly reduced by a lethal condition". The primary judge expressly stated that the "plaintiff's life expectancy is relevant at this point because there is a real likelihood that he will not survive to work for as long as otherwise would have been the case, had the accident not occurred". The primary judge performed a series of calculations, resulting in the conclusion that there was only a 60% chance that he would have been able to continue working in the limited way he had been working. There is no appellable error in the determination of a 40% discount for that exigency.

Orders

For those reasons, the Council's appeal should be allowed in part, but only in respect of one aspect of the calculation of future economic loss. That amount should be two thirds of the amount awarded, which is to say, $65,390 as opposed to $98,085. The judgment obtained by Mr Oberlechner on 6 February 2017 in the amount of $380,640 should have been in the amount of $347,945.
Mr Oberlechner's application for leave to cross-appeal should be dismissed.
The Council has only succeeded in its appeal on a point which should have been raised before and in all probability corrected by the primary judge. Mr Oberlechner has failed in his application for leave to cross-appeal, but that took up relatively little time, and indeed the whole of the Council's written submissions on it were contained in two paragraphs occupying a single page. The appropriate order as to costs is that there be no order as to the parties' costs of the appeal and cross-appeal, with the intention that the parties bear their own costs. Having regard to the very limited success on the part of the Council, there is no occasion to alter the costs ordered by the primary judge in respect of the trial in favour of Mr Oberlechner.
At the conclusion of the hearing, Mr Oberlechner sought to tender three letters from his treating doctors, all of which post-dated the hearing before the primary judge. In relation to two of them, the Council had stated that it would object to their tender. The letters provide more recent reports as to the stability of Mr Oberlechner under his treatment for lung cancer, including his entry into a special access program for a drug which has not yet been listed on the Pharmaceutical Benefits Scheme. So far as they disclose, Mr Oberlechner has been doing well in the six months following delivery of judgment. However, in order for the letters to be admitted as evidence in the appeal, it is necessary, speaking generally, that there should be a sufficient probability that the evidence would produce a different result if there was a new trial: see for example Turco v HP Mercantile Pty Ltd; Marinelli v HP Mercantile Pty Ltd; Turco v HP Mercantile Pty Ltd (No 2) [2009] NSWCA 209 at [19]. The letters plainly do not provide any basis for altering the primary judge's findings as to the improbability of Mr Oberlechner returning to work in the IT industry. Nor in our view do they provide a sufficient basis for interfering in the appropriate discount applied by the primary judge to Mr Oberlechner's damages for future economic loss. For those reasons, the Court rejected their tender, stating that reasons would be provided at a later time.
For those reasons, the Court made the following orders at the conclusion of the hearing:
Appeal allowed in respect of ground 3(b), and otherwise dismissed.
Vary order 2 made on 6 February 2017 by deleting $380,640 and inserting in its place $347,945.
Dismiss the summons seeking leave to cross-appeal filed on 5 June 2017.
No order as to the costs of the appeal or the cross-appeal, on the basis that the parties bear their own costs.

At a glance

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Judgment (6 paragraphs)

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Legislation Cited (1)

Cases Cited (7)

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