K'Mart Australia Ltd v McCann

K'Mart Australia Ltd v McCann - [2004] NSWCA 283 - NSWCA 2004 case summary — Zoe

[16]

The respondent's background 6 The respondent is a solicitor who was aged 43 at the time of the accident. He was 47 at the time of the trial. Although the evidence is not entirely clear, it appears that, at the time of the accident, the respondent was conducting three practices. One was on his own account from his home at Menai; another was in partnership with G H Healey & Co at Blacktown, and yet another was as a locum for a solicitor in practice at Sutherland. The practices were principally concerned with litigation, and the respondent's evidence was that he carried out a great deal of work in the Local Court, both in his own matters and as agent for others. 7 In December 1999, the respondent acquired an interest (described as being as a "principal" rather than as a "partner") in three more of the G H Healey & Co practices, at Chatswood, Glebe and Ashfield. The work was principally personal injury litigation. 8 In carrying on practice as a solicitor, the respondent utilised a service company, called Roserace Pty Ltd, of which he and his wife were the directors and shareholders. Until 2003, the total of the income derived from his practice as a solicitor was paid into that company and the income from that company was distributed between the respondent and his wife as shareholders. 9 On 20 September 2000, the respondent suffered a serious stress attack and was hospitalised. I shall return to consider this aspect of his medical history. Suffice it to say for present purposes that he ceased to work at all for some 16 months thereafter. He gradually returned to work on his own account, practising from his home. His practice changed. He ceased to carry out litigious work and instead, on 21 January 2002, he accepted a retainer from a property development company to act as its solicitor. It appears, although it is not entirely clear, that the retainer permitted the respondent a right of private practice independent of his work for the property development company. It may be accepted for the purpose of assessment of damages (although, again, it is not entirely clear) that the respondent resumed full time practice on 21 January 2002. The work generated by the retainer and the private practice was the work in which the respondent was engaged at the time of the trial.

[17]

The respondent's medical history 10 The respondent did not seek medical treatment on the day of the accident, but on the following day, 4 June 1999, he consulted his general practitioner, Dr Tracey Bayliss. According to her report dated 29 August 2002, the respondent had complained to her of a headache and a sore neck on the left side. 11 The respondent consulted Dr Bayliss on four more occasions, on 22 June 1999, on 6 January 2000, on 7 July 2000 and on 1 September 2000. He complained of pain, had been prescribed anti-inflammatory medications and physiotherapy was recommended. He underwent some physiotherapy treatment over the period from August to October 2000. 12 Dr Bayliss stated in her report that: " I feel that he has been fit for work although he may have found sitting for long periods or bending uncomfortable". 13 The respondent did not cease to work after the accident, although there is a dispute about whether he carried on work substantially as he had done prior to the accident, or whether the nature of his practice changed. I shall return to consider this dispute. 14 Whilst at work at his Sutherland practice on 20 September 2000, the respondent suffered chest pain, difficulty in breathing, sweating and pain in his left arm. He went to Sutherland Hospital, and remained for six days in the coronary care unit at that hospital. This episode appears to have been the consequence of stress, and the respondent ceased working for about 16 months after it occurred. During his convalescence from the stress attack, the respondent was under the care of several health professionals who were assisting him with rehabilitation following his claim for workers compensation under Roserace's insurance policy and his claim under a personal income protection policy. Ultimately, the respondent began to resume work in gradual stages, until resuming full time practice on 21 January 2002. 15 The respondent does not claim damages in relation to the stress attack. Furthermore, it may be accepted that his physical condition consequent upon the stress attack has returned to normal; the respondent acknowledged as much in his examination in chief. The foundation for the respondent's claim in the present proceedings is the assertion that the accident caused permanent impairment in his physical condition, and that, as a consequence, he has suffered a diminution of earning capacity. 16 On 21 January 2003, Dr Vijay Maniam, an orthopaedic surgeon, examined the respondent. He furnished a report to the respondent's solicitors on 11 February 2003, in which he noted that the respondent had presented for assessment of chronic pain in the lumbar spine, and he set out the respondent's description of the accident (referring to its date, obviously in error, as "3/6/96"). Dr Maniam stated as follows: "… The plain rays demonstrate a moderate narrowing of the L5/S1 disc, but in the MRI scans, the lumbar discs show no evidence of any herniation or any nerve root impingement. There are degenerative changes at the L4/5 and L5/S1 levels and facet joint arthrosis at L5/S1. Hence, the diagnosis for this man's problems would appear to be that of a chronic lumbar spine sprain, with aggravation or precipitation of degenerative changes at the L4/5 and L5/S1 levels.

[22]

The basis for the respondent's claim for damages 20 The respondent claimed that he has suffered permanent injury in the accident, and that, as a consequence, he had to change his work practices. In response to a request for particulars, his solicitors informed the appellant's solicitors that he did not incur any specific economic loss after the accident, but he claimed "… a general diminution in his earning capacity." 21 The evidence establishes that the respondent's injury sustained in the accident is permanent. Dr Maniam's opinion was that there was functional loss and permanent pain. This is supported by Dr Bodel, who quantified his clinical condition as a 5% impairment of function of the neck, and a 5% impairment of function in the back. 22 As to the change in work practices, the respondent said that, after the accident, he had difficulty in sitting in one position for any length of time. This rendered difficult his journeys from Menai to Parramatta, and made advocacy work in the Local Court (involving standing for lengthy periods whilst examining in chief, cross-examining and making submissions) also very difficult. As a consequence, he began to turn away work in the Local Court, referring it to other solicitors, and he began to brief counsel in District and Supreme Court matters rather than doing the work himself. He stated in examination in chief that he could not " run around " from Local Court to Local Court, that he could no longer accept agency work in the Local Court, and that he could no longer undertake pleas in the Local Court which he had found to be a very efficient and quick way to generate income. 23 The respondent added that he is impeded in general domestic activities, such as mowing the lawn, and he cannot undertake the recreational activities that he formerly enjoyed, such as camping and bushwalking. 24 In cross-examination, the respondent was asked about the personal injury work he was carrying out between the date of the accident and the date of the stress attack and the changes in work practices he adopted after resuming full time practice. The following exchange took place: "Q. And you agree don't you that that change has nothing to do with any orthopaedic injuries you may have suffered? A. No that's primarily to avoid stress but I must say that I cannot for orthopaedic reasons do as I said earlier, run from Local Court to Local Court doing mentions and pleas as I did in '99. They didn't create stress, it was the horrific personal injury matters that created the stress and strain. The Local Court work, the frantic Local Court litigation and mentions is the work that the orthopaedic injuries impact on."

[37]

(4) the medical evidence establishes that he was fit for work during this first period. 40 In an endeavour to establish these propositions, Mr Cavanagh, appearing for the appellant, relied principally on two pieces of evidence. The first was the medical evidence. Dr Bayliss's opinion was that the respondent was fit for work, although she qualified that statement by reference to his difficulty in sitting for long periods or bending. The second was a report prepared by a clinical psychologist, Ms Kaisa Duncan-Watt, who interviewed the respondent in connection with his insurance claims approximately one month after the stress attack. The history that she recorded showed that the respondent had been working very hard up to the date of the stress attack - he had been conducting five practices, supervising 12 employees, working 50 to 60 hours per week, carrying a work load of about 800 to 1000 matters, and dealing with some "terrible matters" . Ms Duncan-Watt did not record any history of orthopaedic problems. Mr Cavanagh submitted that significant weight should be accorded to her report as a contemporaneous record. In his submission, both her report and that of Dr Bayliss establish that, after the accident, the respondent continued to work, was fit to do so, worked very hard, and did not change his work practices as a consequence of the accident. 41 However, in my opinion a number of difficulties stand in the way of accepting the appellant's case in relation to the first period. In the first place, Dr Bayliss's statement about the respondent's fitness for work was qualified, in that she referred to difficulties the respondent may have found in sitting for long periods or bending. Furthermore, Dr Bayliss recorded that the respondent had complained of back pain on each of the five visits he made to her, and exhibited tenderness and difficulty of movement on examination at each of those visits. Secondly, there was the respondent's clear assertion in cross-examination about the relative impacts of the accident and the stress attack which I have set out in par [24] above. He was firm in his assertion that his ceasing Local Court work was due to the accident, and that the stress attack resulted from the strain of personal injury work. Thirdly, when asked in cross-examination about the history said to have been given by him to Ms Duncan-Watt, the respondent pointed to statements recorded by her that were wrong. Fourthly, Ms Duncan-Watt was not called to give evidence. 42 It seems to me that the trial judge did not err in relation to the first period. He had to choose between the oral evidence of the respondent and a written report from a person not called as a witness and which report was indicated as being unreliable. Furthermore, a qualified medical report was in evidence. It was open to the trial judge in these circumstances to accept the respondent's evidence that he had changed his work practices as a consequence of injuries sustained in the accident. And the trial judge was presented with evidence that the gross fees derived from the respondent's practice subsequent to the accident were approximately $40,000 less than the gross fees he had derived prior to the accident. 43 For these reasons, I would not wish to disturb the trial judge's assessment of damages so far as they relate to the first period (being the period from 3 June 1999 to 20 September 2000). That assessment comprises past economic loss of $14,916.78 for the year ending 30 June 2000, and a loss calculated at $250 per week from 30 June 2000 to the date of the stress attack on 20 September 2000, a period of approximately 12 weeks, totalling $3,000.

[38]

The second period 44 The second period covers that time when the respondent did not work at all. Assisted by the rehabilitation health professionals, he returned to work in stages, but it does not appear to be the subject of dispute that he did not work at all from the time of the stress attack on 20 September 2000 until he entered into a retainer with the property development company on 21 January 2002. That was a period of 16 months. 45 The trial judge allowed an amount of $250 in respect of the respondent's loss of earning capacity for a period of 173 weeks commencing from 1 July 2000 until 29 October 2003 (the latter date being the commencement of the trial). In other words, his Honour did not take into his calculation the period of 16 months when the respondent did not work at all. The basis for ignoring the second period appears in the following passage from his judgment: "True it is he was off work for some time through stress related matters, but I'm satisfied that the evidence shows that he has suffered significant physical impairment as a result of this accident." 46 The issue, then, is whether or not some adjustment should have been made by the trial judge by reason of the fact that the respondent did not work at all for a period of 16 months by reason of a supervening event, that is, by reason of the stress attack, unrelated, as his Honour found, to the accident. The trial judge seems to have been aware of the appellant's stance on this issue because, when ruling on the admissibility of reports of the rehabilitation health professionals, the trial judge noted as follows: "The defence case is that any loss of earnings in this matter relate to another incident, or events leading up to another incident in September 2000, and any loss of earnings may be unrelated to the frank episode in this matter, being the injury sustained at K-Mart on 3 June '99." 47 It was submitted by the respondent's counsel on this appeal that the trial judge had in fact made an appropriate adjustment to take account of the supervening occurrence of the stress attack. That is to be seen, it was said, from the fact that the loss of earnings referrable to the first period, being an amount of $14,9196.78, amounts to $286.86 per week, yet the trial judge reduced the weekly amount to $250. It was said that the difference of about $36 was intended to be the appropriate adjustment. 48 The difficulty with this submission is that nowhere in his Honour's judgment does he refer to any such adjustment. It seems as though he simply selected the amount of $250 per week as reasonable in the calculation of past economic loss. 49 In my opinion, the trial judge erred in law in the approach that he took. It was held by the House of Lords in Jobling v Associated Dairies Ltd (1982) AC 794 that the court should not disregard supervening factors in arriving at just and sufficient but not excessive compensation. That was a case where the plaintiff had suffered an accident in the course of his employment. By reason of his employers' negligence, he sustained a back injury that reduced his earning capacity by 50 per cent. He later developed a condition, unrelated to the earlier injury, that rendered him totally unfit for work. The issue was whether the liability of the employers was limited to loss of earnings up to the time when the later condition resulted in total incapacity or whether the employers were liable to pay damages for loss of earnings for the period which, in the absence of the later condition, would have represented the balance of the plaintiff's working life. It was held that the later condition had to be taken into account which had the effect of rendering the employers liable for damages only up to the emergence of the later condition. Lord Bridge of Harwich put the principle in the following terms at p 820: "But when the supervening illness or injury which is the independent cause of loss of earning capacity has manifested itself before trial, the event has demonstrated that, even if the plaintiff had never sustained the tortious injury, his earning would now be reduced or extinguished." 50 Their Lordships were at pains to distinguish or at least question the earlier House of Lords decision of Baker v Willoughby (1970) AC 467. That was a case where the plaintiff had sustained a leg injury due to the driver's negligence in a motor vehicle accident. Before his trial for damages due to that injury, he was shot in the same leg during a robbery and that necessitated the amputation of the leg. At the trial, he was awarded damages for the continued disability in his left leg, despite the fact that the disability from the first injury had been obliterated by the amputation. At least one of the bases for their Lordships in Jobling v Associated Dairies departing from the earlier decision was the different facts. The earlier decision concerned a supervening injury as a consequence of a later tortious act; in Jobling v Associated Dairies, the supervening condition was a natural event and not the consequence of a tortious act. 51 In the present case, the facts are more analogous to those in Jobling v Associated Dairies than in Baker v Willoughby in that the respondent's stress attack was a supervening natural occurrence and not the consequence of any subsequent tortious act. To that extent at least, the decision in Baker v Willoughby may be put aside for present purposes. So much appears from the judgment of Lord Edmund-Davies in Jobling v Associated Dairies at p 809, where he said:

[41]

56 The basis upon which this claim was put was twofold. First, it was said, similarly to the appellant's claim in respect of the first period, that the evidence did not support a conclusion that the respondent's work practices changed as a consequence of the injuries received in the accident. Two pieces of evidence were relied upon. The first were the notes of a clinical psychologist, Ms Edwina Birch, recorded over a number of consultations with the respondent between November 2000 and December 2001 in relation to his rehabilitation after the stress attack. There is no reference in these notes to the accident or its consequences. The notes indicate, however, the difficulties that the respondent was expressing about resuming work and discussions about a change in work practices away from litigation to conveyancing or corporate work. It was said that these notes demonstrate that the respondent was seeking a change of work practices as a consequence of the stress attack, not as a consequence of the accident. The second piece of evidence was Dr Maniam's reports. It was said that these were unreliable, because they were inconsistent. In his first report, Dr Maniam noted that the respondent had not lost time from work as a result of the accident, and the opinion was expressed that there would be no loss of earning capacity. In the second report, Dr Maniam changed his view, and opined that the injuries sustained by the respondent would "… interfere with his work activity and with his day to day activity …" . 57 Neither Ms Birch nor Dr Maniam was called to give evidence. However, the respondent was, and he gave firm evidence that he abandoned Local Court related work as a consequence of the accident. In the light of this, it was open to the trial judge, in my opinion, to accept the respondent's evidence as reliable and to accept Dr Maniam's change of opinion. 58 The second basis for the appellant's challenge was that it was said that the trial judge had failed to apply s13 of the Civil Liability Act 2002. That section provides as follows: " Future economic loss-claimant's prospects and adjustments

[44]

(3) If the court makes an award for future economic loss, it is required to state the assumptions on which the award was based and the relevant percentage by which damages were adjusted". 59 The appellant contended that, in the application of s13, there was no evidence upon which the trial judge could properly have assessed the respondent's claim for future economic loss as based on $250 per week. The taxation returns that were in evidence did not furnish financial figures upon which future earning capacity could be determined. It was said that the most that the trial judge could have determined, on the available evidence, was a sum by way of a buffer. 60 The trial judge made no reference to s13. But it was submitted on behalf of the respondent that he nonetheless applied it. It was said that his Honour determined, conformably with s13(1), that the respondent would have continued the practice in the Local Court in which he had been engaged prior to the accident. According to this submission, that determination was in conformity with the requirements of s13(1). It was then said that the trial judge's allowance of 15% for vicissitudes was in conformity with s13(2) and s13(3). 61 I am of the opinion that the trial judge erred in calculating damages for future economic loss on the basis of $250 per week. The available evidence did not support such a basis. There was no doubt that the medical evidence (of Dr Maniam and Dr Bodel) supported the conclusion that the respondent had sustained a permanent impairment. But the evidence does not allow any assessment of the impact of that impairment on future earning capacity. In the months following the accident, the respondent changed his work practices. He continued to work but he abandoned Local Court work and took on personal injury work. The economic consequence of this as determined by the trial judge was that he sustained a loss in gross fees between 1999 (when the accident occurred) and 30 June 2000. The position after he returned to full time practice on 21 January 2002 was, however, different. As a consequence of the accident, he did not return to Local Court work, but, as a consequence of the stress attack, he did not return to personal injury work. He returned to practice largely on the basis of his retainer with the property development company but was also exercising a right of private practice. It is difficult to determine to what extent his gross fees of approximately $105,000 for the year ending 30 June 2003 reflect this position. 62 In my opinion, the proper assessment of damages relating to the respondent's future economic loss is the provision of a buffer. With respect, I would adopt the approach referred to in Penrith City Council v Parks [2004] NSWCA 201. In that case at [5] Giles JA said: "I consider that it is still open to assess damages by way of a so-called 'buffer'. The occasion for a buffer is when the impact of the injury upon the economic benefit from exercising earning capacity after injury is difficult to determine. There is still a comparison between the economic benefits, although the difference can not be determined otherwise than by the broad approach of a buffer. Section 13(1) can be fulfilled, and the assumptions as to exercising earning capacity before injury can be stated. Having determined damages for future economic loss by way of a buffer, because of the broad approach there is no question of percentage adjustment, and so in the application of s 13(2) the percentage adjustment is nil." 63 In the same case, McClellan AJA said at [58]: "With respect to an award for future economic loss in the nature of a buffer, I doubt whether the section (s 13) has any relevant impact. Although the section must be complied with, it will not lead to a conclusion which has any relevance to such an award. The court must determine the claimant's 'likely future circumstances' and identify the pre-injury percentage possibility of those events occurring, but the compensation awarded is not otherwise confined. A modest award as compensation for the chance that a claimant may be disadvantaged in the future because of the injury is not precluded by the section. All that the section is attempting to do is identify the pre-injury circumstances upon which any award of damages may be based, but it does not dictate the outcome in the event that part only of a claimant's earning capacity has been affected by the injury." 64 Doing the best I can on the evidence I would award the respondent a buffer of $30,000 for future economic loss.

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Judgment (54 paragraphs)

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Cases Cited (2)