Kay v Murray Irrigation Limited

Supreme Court of NSW|2009-10-09|Before: Fullerton J

The application of s 13 of the Civil Liability Act to assessing damages for future economic loss 81 In assessing damages for future economic loss in this case s 13 of the Civil Liability Act imposes the obligation on the plaintiff to satisfy me that the assumptions about future earning capacity, and other events upon which the award is based, accord with his most likely future circumstances were he not injured and to adjust the award by reference to the percentage possibility that the events might have occurred but for the injury. The percentage by which damages are adjusted, and which are to be stated as required by s13 (3), is a statutory implementation of the established practice of reducing an award of damages for future loss for vicissitudes. The significance of the pre-existing injury to the plaintiff's right knee

82 I have already made reference to the fact that the plaintiff suffered a debilitating injury to his knee in January 2002 from which he was slow to recover (see [20] above). The plaintiff was cross-examined about the nature, extent and duration of impairment referable to the injury to his knee, it being the defendant's case that these factors would have likely necessitated Arkae employing additional labour to assist in the plaintiff's rice farming business within eight years of the injury to his knee irrespective of the ankle injury and a very significant discount should be applied to any award of damages calculated in the ordinary way. The time frame of eight years is appointed referable to the date of the injury in 2002 and Dr Isbister's evidence that within ten years of sustaining the injury the condition of the plaintiff's knee was such that he would have had great difficulty undertaking hard physical farm work irrespective all of the injury to his ankle. 83 In support of that submission the defendant tendered a letter dated 7 May 2002 forwarded by the plaintiff's then treating doctor to the Transport Accident Commission of Victoria. In that letter it was Dr Holland's expectation that the plaintiff's condition would continue to improve. He did, however, express doubts about the stability of the knee joint in the long term and the impact of the injury upon the plaintiff's capacity to undertake employment involving "steps or uneven ground". 84 By letter dated 1 May 2003, after the plaintiff had ceased treatment under Dr Holland, the plaintiff wrote to his insurer in the course of a dispute concerning his claim under an income protection policy with that insurer in the course of which he said: "I consider myself to be far more than 10% disabled by this injury. I cannot walk properly, walk down stairs with confidence, kneel down, let alone run, ride my pushbike, play squash, kick the footy, walk my dogs as well as numerous other things that used to constitute my daily life." 85 Under cross-examination the plaintiff conceded that what he said to the insurer accurately reflected the ongoing impact of the injury to his knee 17 months after the motorcycle accident, and that he would not have written a letter unless he genuinely felt he had a significant disability. On the other hand the plaintiff gave evidence, supported by Ms Stoneham's evidence, that at the time of writing the letter he had already adjusted to rural life on Caringa and was attending to the multitude of physical tasks involved in both reconfiguring the property, cultivating and harvesting his first grain crop and developing a sheep breeding operation, all without incident or incapacitating pain by reason of his knee. 86 It is difficult to reconcile what the plaintiff said to the insurers (18 months before the ankle injury) and in his evidence before me in July 2009 (almost 5 years later) as to the impact of his knee injury on his general mobility and capacity before the ankle injury unless I am prepared to accept that both accounts have contextual truth. The defendant did not ask me to find that the plaintiff was a dishonest witness. To the contrary, I was invited to accept him as a truthful witness and a genuine claimant for damages for a compensable injury. What the defendant submitted was that because the plaintiff was not a person who was a "whinger" prone to exaggeration, his account to the insurers was more likely to be an accurate reflection of his self assessed incapacity when he commenced life as farmer than his evidence in the hearing before me. He also invited me to draw an inference adverse to the plaintiff because he did not call any treating doctors, and his claim to have had no recall of what doctors (if any) he had sought treatment from for his knee over the years was unconvincing. 87 After having heard the plaintiff give his evidence over the course of two days, and despite what Mr Cavanagh submitted were open concessions by the plaintiff under cross-examination about the extent of ongoing problems with his knee in 2003, I consider that the letter to the insurer in May 2003 was not written with a view to misleading the insurer or overstating his claim but in a frustrated attempt to impress on the insurer the legitimacy of his claim. 88 The defendant also relied upon a further letter forwarded to the Transport Accident Commission of Victoria in May 2007 in support of the plaintiff's claim against the third party insurer. This was a letter written by Dr Kirwan, an orthopaedic surgeon the plaintiff consulted in February 2007 where doctor reports as follows: "(The plaintiff) presented with 5 years of right instability, following a motorcycle accident…

Examination in February 2007 revealed bilateral valgus hyper-extending knees… The anterior cruciate ligament was deficient and there was soft crepitus in the medial compartment also. X-rays confirmed lowgrade osteoarthritis.

The current status of Mr Kay's right knee is consistent with both the wear and tear that occurs with age, compounded or accelerated by the damage which occurs as a result both of chronic instability and the initial injury which caused the ligament to tear and therefore caused this instability. …

I confirm that Mr Kay admitted to 5 years of intermittent instability in his right knee when I first met him in February 2007…" 89 In cross-examination the plaintiff confirmed the accuracy of Dr Kirwan's report that he had admitted to five years of intermittent instability in his right knee. However, in re-examination, he said that this did not cause him to fall or to be unable to negotiate uneven ground prior to the injury to his ankle. Dr Kirwan did not give evidence. His report does not make clear the extent to which the status of the plaintiff's right knee was accelerated by the injury to the ankle. In fact he makes no reference to the ankle injury at all. Dr Isbister, on the other hand, while conceding that the plaintiff would have suffered a permanent loss of the efficient use of his right lower limb over time because of the motorcycle injury, also gave unchallenged evidence that the ankle injury accelerated the osteoarthritic changes in the right knee because the plaintiff's right limb bears the greater part of his body weight to facilitate even ordinary perambulation because of the ankle injury.

90 The plaintiff submitted that the evidence favours a finding that despite the admitted intermittent instability in the plaintiff's knee, on a careful reading of Dr Isbister's evidence this was not likely to have incapacitated the plaintiff to the extent contended for by the defendant, as distinct from the injury becoming a likely source of persistent pain as osteopathic change in the structure of the knee became entrenched. In keeping with the demonstrated resilience of the plaintiff, it was submitted that he would likely deal with the pain in his right knee by simply adjusting his work practices, or increasing his use of pharmaceutical pain relief, rather than engaging additional labour, and that he would most likely have worked in this way well past the notional eight years the defendant calculated by reference to Dr Isbister's evidence. 91 The conflict in the evidence on this aspect of the case is not easily resolved by reference to the evidence or the arguments of counsel. In the result I consider that the plaintiff's claim for damages for future economic loss ought to be adjusted to take account of the pre-existing injury to the knee by 10 per cent in addition to the ordinary allowance of 15 per cent for vicissitudes. Since I have already discounted the plaintiff's claim for future economic loss by reference to the contingency associated with the climatic conditions to which Caringa is subject as a rural property. I propose to increase the ordinary allowance for vicissitudes of 15 per cent by a further 5 per cent. The significance of Arkae in the calculation of damages on the basis of replacement labour 92 I have already noted that Arkae is the Trustee company through which the farming enterprise at Caringa is operated and that for taxation purposes, the expenses involved in operating the farm, including the cost of maintaining the home on Caringa and the plaintiff's and Ms Stoneham's living expenses, have been met by Arkae from a dual income stream, namely the farming enterprise and the commercial real estate in Victoria. Because of the corporate structure underpinning the arrangement of the plaintiff's financial affairs, the defendant submitted that in calculating damages for the costs of replacement labour provision needs to be made for the fact that the actual cost of employing replacement labour does not equate to a loss the plaintiff will personally bear since it will be an expense borne by the company and the ultimate cost in financial terms is dependant upon various tax and accounting strategies that may be employed by the company's financial advisers in the future. Mr Roberts accepted that provision should be made for these contingencies. I propose to increase the 25 per cent deduction for vicissitudes by a further 5 per cent. 93 In accordance with the attached schedule the orders I propose are as follows:

Judgment in favour of the plaintiff in the amount of $359,815. 2. Costs are reserved. 3. Liberty to restore on three days notice.

Schedule of damages Head of damages Amount Damages for non economic loss (35% of most extreme case) $165,725 Past economic loss Out of pocket expenses (Agreed) $9,470 Gratuitous attendant care (21 hrs/pw until end of Jan '04, 6hrs/pw until end of June '04) at $20 p/hr $10,790 Economic loss associated with the 2004/2005 season $7,017 Rice $10,000 Wheat (Agreed) $10,000 Sheep (Agreed) Loss of contracting income 2004-2009 $15,000 TOTAL FOR PAST ECONOMIC LOSS $62,277 Future economic loss Future out of pocket expenses: $5,000 Medication (as per the plaintiff's schedule of damages) $2,460 Footwear (as per the plaintiff's schedule of damages) $22,100 Massage (at $50 per fortnight for 20 years less 15% for vicissitudes) Surgery and associated costs less 25% to allow for the potential that the plaintiff will resist surgery. $7,725 Cost of replacement labour (less 30% for vicissitudes) $94,528 TOTAL FOR FUTURE ECONOMIC LOSS $131,813 TOTAL DAMAGES $359,815

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Trade Practices Act 1974(Cth)

CITATION : Kay v Murray Irrigation Limited [2009] NSWSC 1411

Husher v Husher [1999] HCA 47; 197 CLR 138 Leichhardt Municipal Council v Montgomery [2005] NSWCA 432 Macarthur Districts Motor Cycle Sportsmen Inc v Ardizzone [2004] NSWCA 145 CASES CITED : Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 Penrith City Council v Parks [2004] NSWCA 201 State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536 Zreika v State of NSW [2009] NSWCA 99

Should the levels of government buy-back of water licences meet the intended targets then it is possible that the above allocation levels will increase and the relative prices for temporary water to decrease." 60 Finally, the plaintiff invited me to infer from a document identified by Mr Booth in the course of his evidence that was said to support the proposition that because the Commonwealth is actively engaged in buying back water entitlements from irrigators who have access to water in the river systems in New South Wales and Queensland but who no longer which to pursue irrigation farming, that there will be both more water to be allocated to those who do wish to pursue irrigation farming and less irrigators with whom the water needs to be shared. Mr Booth gave evidence that this not only enhanced the view expressed in his report that the plaintiff can expect to receive 40 per cent of his entitlement on average over the next 20 years but that future allocations in the area where Caringa is located were likely to be improved very dramatically. 61 The defendant submitted that the exercise the plaintiff urged upon me is fraught with the danger that any prediction as to when there will be a resumption of water allocations is so uncertain as to amount to pure speculation, and that I should conclude that there is no reasoned or reliable basis for projecting when there will be sufficient water within the 11 years before the plaintiff's retirement at age 65, much less whether the water will be allocated in sufficient quantities for irrigation farming over successive years throughout that same period. The defendant also pointed to a further range of imponderables in the assessment of future economic loss, in particular, questions as to how Caringa will be farmed in the future given the changing nature of market conditions for rice, the uncertainties associated with rice farming given the current persistence of drought conditions and the likelihood of problematic climatic conditions in the future. Given that on the plaintiff's case the return of water is the trigger for his future financial loss, the defendant emphasised that if I am unable to appoint a time (or appoint a time frame) during which the water will likely return, then I cannot proceed to an assessment of damages in accordance with the plaintiff's schedule of damages, since that assessment presumes the return of water before the cost of the replacement labour the plaintiff is unable to commit to rice farming because of his injury falls to be determined. 62 The defendant submitted that it is for all these reasons, in combination with the role of Arkae and the pre-existing injury to the plaintiff's right knee which would have necessitated him employing replacement labour for the cultivation of rice in any event, that I should award damages by reference to a buffer. The defendant did not specify a figure but submitted that in all the circumstances it would be a modest sum. 63 In keeping with the otherwise mandatory requirements of s 13 of the Civil Liability Act in the assessment of damages for future economic loss, in an appropriate case the use of a buffer has been an approach sanctioned by the Court (see Penrith City Council v Parks [2004] NSWCA 201 at [3]-[5]. See also Zreika v State of NSW [2009] NSWCA 99 at [30] where Ipp JA noted that the observations of Giles JA had been followed in several cases in the Court of Appeal). The question is whether this is such a case. 64 In Parks Giles JA said the occasion for the application of a buffer is when the impact of the injury upon the economic benefit from the plaintiff exercising earning capacity after injury, as compared to the economic benefit before the injury, is difficult to determine. As his Honour made clear, this does not mean that the comparative exercise under the statute does not have to be undertaken, or the assumptions about future earning capacity or the other events on which the award is based specified. It is simply that where the comparative difference cannot be determined a buffer is awarded to allow for the potential financial disadvantage to the plaintiff in the future because of the injury, most usually because there is considerable residual earning capacity or a risk that otherwise secure employment prospects may come to an end (see Leichhardt Municipal Council v Montgomery [2005] NSWCA 432 per Mason P at [2]). In these circumstances, the percentage by which damages are adjusted to take account of the assumptions about earning capacity do not need to be stated as required by s 13(3) of the Act. By way of example, in Parks the injury to the plaintiff's finger was relatively minor. Although the negative impact of the injury on her earning capacity was assessed as likely to occur at some time before her retirement from clerical duties within the remaining 15 years of her working life, even if only because of the risk that she may lose her employment at some time, the extent to which the injury diminished her earning capacity by reference to the loss of whole or part of her weekly wage was uncertain, and a modest buffer of $15,000 was awarded without any discount for vicissitudes.

65 Mr Roberts submitted that the defendant has exaggerated the difficulties involved in the assessment of the plaintiff's future loss and, in any event, that this is not a case where the awarding of a buffer in a modest amount will adequately compensate the plaintiff for loss he is likely to suffer in the future where, on the agreed evidence, he cannot undertake the manual tasks required of a rice farmer because of the injury to his ankle. Mr Roberts accepted the necessity to consider the interplay of the various issues to which the defendant refers in making a reasoned assessment as to when the water will return. He submitted, however, that even if I were not satisfied that the water would return next year, it is possible to specify a time frame within the next 11 years when there is likely to be sufficient water for rice cultivation (even if not over successive years) and, accordingly, that damages should be assessed in the conventional way under the statute. 66 By reference to what Heydon JA observed in State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536 Mr Roberts emphasised that an assessment of damages for loss of the capacity to earn income in the future in a manner productive of financial loss is by its nature an imprecise enquiry, being an exercise in the estimation of possibilities not proof of probabilities, and the mere fact that quantum is difficult to assess does not mean the plaintiff is entitled to only a nominal sum. This is entirely consistent with the observations of Bryson JA in Macarthur Districts Motor Cycle Sportsmen Inc v Ardizzone [2004] NSWCA 145 where his Honour observed at [55] in reference to s 13 of the Civil Liability Act that: "…Section 13 does not provide that if the assumptions referred to cannot be established in a clear and concrete manner there cannot be an award of damages for future economic loss. As recurringly happens when Courts are called upon to assess damages, it is necessary, and with the enactment of s 13 it remains necessary to make the best assessment the Courts can notwithstanding the indefinite nature of integers on which the assessment is based…"

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