Margriplis-Hampton v Spendwatt Pty Ltd [2022] VSCA 15

1 In 2014, Mr Margriplis-Hampton suffered an injury to his back in the course of his work as an electrician with Spendwatt Pty Ltd. He was born in August 1991 and so was under 26 years old at the time. He applied under s 335(2)(d) of the Workplace Injury Rehabilitation and Compensation Act 2013 for leave to commence proceedings for the recovery of damages. Spendwatt Pty Ltd did not oppose a grant of leave to commence proceedings for the recovery of damages for pain and suffering but did oppose the grant of leave to recover damages for loss of earning capacity.[1] In order to obtain leave to recover damages for loss of earning capacity, Mr Margriplis-Hampton was obliged to show that as at the date of the hearing he had a 'loss of earning capacity of 40 per cent or more'.[2] However, because he was under 26, his loss of earning capacity was not required to be measured 'as set out in paragraph (f)'. That paragraph, where it applies, requires the application of a statutory formula that differs from the common law approach to the assessment of loss of earning capacity.[3] The parties accepted that Mr Margriplis-Hampton's loss of earning capacity was to be assessed in accordance with the common law principles that apply to the assessment of damages for loss of earning capacity. Clearly enough, the requirement to establish a 40 per cent loss of earning capacity as at the date of the hearing required a consideration of Mr Margriplis-Hampton's residual earning capacity, and the earning capacity that he would have had had he not been injured.

2 By the time the matter came on for hearing, Mr Margriplis-Hampton had purchased, and remained the majority owner of, a business that provided maintenance including electrical and plumbing services to the owners of buildings. The business was run through a company called At Your Maintenance Pty Ltd. Mr Margriplis-Hampton did administrative work, rather than 'hands on' work, in that business. Prior to the COVID-19 virus, the business employed four staff who did the physical work. Mr Margriplis-Hampton's work included sales, 'relationship management', and managing the plumbers and electricians that were employed by the business. The business, to some extent, also engaged subcontractors when needed.

3 Spendwatt Pty Ltd submitted that Mr Margriplis-Hampton's current earning capacity should be assessed at $80,632, as that was his gross income as recorded in his 2020 personal tax return. Mr Margriplis-Hampton's counsel did not object to the assessment of current earning capacity by reference to Mr Margriplis-Hampton's personal tax returns, but submitted that there should be an average taken. The learned trial judge concluded that a fair assessment of Mr Margriplis-Hampton's current earning capacity was $74,349 per annum, which was the average of the taxable income recorded in Mr Margriplis-Hampton's previous three personal tax returns. In oral argument in this Court, counsel for Mr Margriplis-Hampton contended that the primary judge ought to have concluded Mr Margriplis-Hampton's current earning capacity was nil. We refer to this argument further in para 17 below. But for present purposes, $74,349 is 60 per cent of $123,915. The issue in the case, therefore, as it was presented below, became whether Mr Margriplis-Hampton, if he had not been injured, would have had at the time of the hearing an earning capacity of at least $123,915 per annum.

B. The way Mr Margriplis-Hampton put his case on without injury earning capacity to the primary judge

4 Mr Margriplis-Hampton had obtained a report from Ms Mandy Morgan, a human resources consultant with Flexi Personnel, that set out earnings for various electricians working on unionised commercial building and construction sites based on a 36-hour week including some allowances but excluding any overtime. There was no evidence as to the amount that such workers might receive in overtime or in other benefits. Based on the figures provided for employee electricians, and on the amounts that his own business paid to its employee electricians, Mr Margriplis-Hampton was unable to establish the required 40 per cent loss. No doubt because of this, Mr Margriplis-Hampton based his case below instead by reference to the earnings said to be available to subcontracting, rather than employee, electricians. Mr Margriplis-Hampton's case, as opened by his counsel, was:

Now, it seems to me that the issue between the parties is what would be the fair and reasonable earnings without injury, and in his affidavit the plaintiff says that the contractors that he uses in the business earn between 70 to $90 per hour. ... [T]he plaintiff's case is that he would have earned at least $70 an hour and annualised over the - on a per annum basis, that would earn him around 140, to 145,000.

5 Mr Margriplis-Hampton relied on a paragraph in one of his affidavits, in which he deposed:

I have had to subcontract out work to electricians. This work is subcontracted out at between $70 to $90 per hour. The client is charged somewhere in the order of $110 per hour for this work.

6 Mr Margriplis-Hampton did not lead any evidence from any subcontracting electricians or as to their earning capacity, or from any expert as to the amounts that subcontracting electricians were able to earn. Rather, the $145,000 figure was, clearly enough, based on a simple calculation of $70 per hour for 40 hours per week for 52 weeks per year.

7 In his final address, counsel for Mr Margriplis-Hampton enlarged the way in which the case was put to add, in the alternative, a submission in the following terms:

The second aspect is, if Your Honour doesn't look at it that way, but Your Honour looks at it from he's running a business, realistically ... what would he be earning in that business without the injury? And we would submit that he would be earning at least (indistinct) $145,000 a year because he would not need to engage an electrician, or other electrical subcontractors.

8 That is, as we understand it, counsel ultimately put two cases: the first was that if he had not been injured Mr Margriplis-Hampton would have been capable of earning $140,000 to $145,000 as a subcontracting electrician; and the second was that if he had not been injured Mr Margriplis-Hampton would have been capable of earning at least $145,000 in his current business by performing some or all of the electrical work himself (rather than having to pay a subcontractor to do that work). In this respect, we note that Mr Margriplis-Hampton also swore in his affidavit:

If I hadn't been injured, I would've been able to do work on job sites and bill for those jobs. Not being able to do it means lost revenue for my business. We subcontract out a little work if there is any additional work. If I hadn't been injured, this sort of work I could do myself.

9 The primary judge accepted that but for his injury Mr Margriplis-Hampton would have remained as a 'hands-on electrician in his own business', and would have worked both 'on the tools' as well as doing the administrative work required. However, his Honour went on to say:

On occasion he could bill the business for $70-$90 per hour or subcontract out at that rate but this could not be for 40 hours each week because there was still, on his evidence, the administrative side of the business to run. ... I am bound to the conclusion that he must have devoted some part of his working week to the administrative aspects of the business. How much is unclear ...

Neither does the evidence detail how many hours per week or on an annualised basis a subcontracting electrician makes. ... No affidavit material was tendered from a subcontracting electrician with comparable earnings.

... I therefore am unable to find, as the Plaintiff urges me to, that Mr Margriplis-Hampton would have been employed in the capacity of a subcontracting electrician earning $70 per hour for 40 hours per week resulting in average gross weekly wage of $2800 but for the injury.[4]

Turning aside from that proposition to consider the alternative ways that the Plaintiff put the case, that rather than starting his own business the Plaintiff remained an employed electrician as at June 2021.[5]

11 After referring to the Flexi Personnel report, the primary judge then concluded that Mr Margriplis-Hampton's earning capacity would be 'that which is associated with an electrician special class of $2,289 gross per week.' Despite this being the highest of the wage rates referred to in that report, it remained less than the $123,915 per annum required for Mr Margriplis-Hampton to establish the 40 per cent loss. Accordingly, Mr Margriplis-Hampton's application was dismissed.

C. The primary judge did not err in rejecting the arguments as put

12 In our view, his Honour was right to conclude that the evidence led by Mr Margriplis-Hampton did not establish the necessary 40 per cent loss.

13 We agree with his Honour's observation that it cannot simply be assumed, in the absence of evidence, or from the limited evidence set out above, that the earning capacity of a sub-contracting electrician, or of Mr Margriplis-Hampton were he engaged in that work, can be determined simply by reference to the hourly rate that a subcontracting electrician can charge. It cannot simply be assumed, in the absence of evidence, that the hourly rate can be achieved for 40 hours a week for 52 weeks a year. To take as an example, an electrician contracting out at $70 per hour for 35 hours a week for 48 weeks a year would receive $117,600 per annum, which would be insufficient for Mr Margriplis-Hampton's purposes. Further, on a 'common law' assessment the expenses of operating as a subcontracting electrician would have to be taken into account.[6] There was no evidence from Mr Margriplis-Hampton that, for example, had he not been injured he would have worked for 40 hours a week 'on the tools' for 52 weeks a year, and performed the necessary administrative and management duties in the evenings. It is noteworthy that Mr Margriplis-Hampton in his own business employed electricians and plumbers at the lower employee rate, and only subcontracted them at the higher rate, in his words, 'a little'. It was incumbent on Mr Margriplis-Hampton to lead some evidence on these points if he were to establish the required loss. He did not do so.

14 We also agree with his Honour that Mr Margriplis-Hampton did not lead sufficient evidence to establish that, had he not been injured, he would have had the capacity to generate earnings of more than $123,915 in the business he now owns and runs. An analysis of the effect on the business were he to perform some of the 'hands on' electrical work himself could not sensibly be undertaken without some evidence that allowed an assessment of the number of hours of work that was done by contractors that would otherwise have been done by Mr Margriplis-Hampton and how that change would have affected the business's earnings. The passages set out above from Mr Margriplis-Hampton's affidavit were insufficient. They did not quantify the extent of that lost revenue, or set out facts that could allow the extent of any lost revenue to be assessed.

15 The insufficiency of the evidence led is made manifest when the At Your Maintenance Pty Ltd's 2020 tax return is considered. That document was tendered by Spendwatt Pty Ltd, and was not referred to in final address by Mr Margriplis-Hampton's counsel. That document showed, among other things, a business turnover of $772,405 (or perhaps $837,211), a 'cost' of $52,860 for 'contractor, sub-contractor and commission expenses',[7] total salary and wage expenses of $360,396, 'payments to associated persons' of $170,094, and the payment of franked dividends of $20,300 to The Margriplis-Hampton Family Trust. These entries were, for the most part, unexplained. The only oral evidence that touched upon these matters was evidence from Mr Margriplis-Hampton, that was adduced in cross-examination, that his wife had previously been employed as a property manager and did little work in his business and was not on its payroll, and that he could not say to what the payments to 'associated persons' related. But significantly, no attempt was made to ascertain to what extent the $52,860 'contractor, sub-contractor and commission expenses' related to subcontracting work given to electricians (rather than plumbers or others) that Mr Margriplis-Hampton would have performed himself if healthy.

16 Counsel for Mr Margriplis-Hampton in this Court, citing State of New South Wales v Moss,[8] emphasised that an assessment of loss of earning capacity may often have to be made on the basis of imperfect evidence and may require broad assessments. So much may be accepted. But this was a case where two specific approaches were put to the primary judge, which the primary judge, correctly in our view, rejected. Counsel in this Court did not, and could not, point to any argument put below, beyond those referred to above, that he contended was wrongly rejected. Often, persuasive evidence as to what a young person would have done or earned if not injured, particularly over the years or decades to come, is very difficult to obtain or to assess. In a damages assessment, a figure will often have to be determined, doing the best that can be done in the circumstances. But where, as here, a party seeks to put forward a specific case based on how but for injury that party would, now, be working, or how that party would, now, be operating their own business differently, something more is required than was led here. All evidence is to be weighed according to the proof which it is in the power of one side to have produced and the power of the other to have contradicted.[9] Mr Margriplis-Hampton did not lead the evidence that he might have been expected to lead, based on his own knowledge of his own circumstances, to support his case as put. His Honour was entitled to conclude, without reaching a final figure himself, that the required 40 per cent loss had not been established. Even having regard to the principles set out in State of New South Wales v Moss, Mr Margriplis-Hampton was asking his Honour to engage in impermissible speculation.

17 Finally, as noted above, counsel in this Court also argued that the primary judge ought to have assessed Mr Margriplis-Hampton's current earning capacity at nil, on the basis that by reason of his injury he was unable to work as a 'hands on' electrician. This argument was not a ground of appeal. It was also inconsistent with the way the case was put below. More fundamentally, it is without merit. Mr Margriplis-Hampton was running a business with a significant turnover out of which he earned income. He, clearly, had a retained earning capacity, in that he had the capacity to earn an income by operating a business. The fact that he utilised different skills to do so from those that he might have utilised had he not been injured is not to the point.

D. The primary judge's finding that he could assess Mr Margriplis-Hampton's without injury earning capacity by reference to the earnings of an employed electrician

18 As noted in para 11 above, the primary judge expressed a conclusion that Mr Margriplis-Hampton's 'without injury earning capacity' was $2,289 gross per week being the amount paid to an employee electrician special class. Mr Margriplis-Hampton submitted it was an error to assess his without injury earning capacity on this basis, as the evidence was that he did not intend to work as an employee electrician. He submitted that there was 'no basis to confine the assessment of the possible loss to a calculation derived from a position in paid employment'.

19 There is, with respect, some ambiguity in the reasons on this point. The learned primary judge first stated in his reasons, immediately prior to the first passage set out in para 9 above, that but for the injury Mr Margriplis-Hampton would have worked as a hands-on electrician 'in his own business'. But then, after the passages set out in para 9 above, the learned primary judge said that 'Mr Margriplis-Hampton but for his injury would have remained employed as an electrician'. His Honour then listed the different rates of pay for different employee electricians, and 'found' that Mr Margriplis-Hampton's earnings would have been that of an electrician special class of $2,289 gross per week. Read fairly, we consider that the primary judge was here considering what he understood to be an alternative case put by Mr Margriplis-Hampton, based on him remaining as an employee electrician. So much is apparent from his Honour's statement (which is in the middle of the relevant paragraphs) that he was 'turning aside' to 'consider the alternative way that the Plaintiff put the case, that rather than starting his own business the plaintiff remained an employed electrician'. Contrary to Mr Margriplis-Hampton's submission, his Honour was not 'confining' himself to this analysis.

20 Accordingly, if there is an error, it is the error of considering a case that was not put and is therefore an error without consequence. If Mr Margriplis-Hampton did not put a case that he would have remained as an employee electrician, then the conclusion that such a case also failed does not matter. The primary judge's analysis of this argument did not undermine his earlier-expressed conclusions, with which we agree, that the arguments that were put should be rejected.

21 Leave to appeal should be granted, but the appeal dismissed.

[1] Cf Workplace Injury Rehabilitation and Compensation Act 2013 s 335(3).

[2] Workplace Injury Rehabilitation and Compensation Act 2013 s 325(2)(e)(i).

[3] See, eg, Barwon Spinners v Podolak [2005] VSCA 33; (2005) 14 VR 622, 635 [22]-[23] (Phillips JA); [2005] VSCA 33.

[6] The situation may be different under the statutory formula where an assessment has to be made of a worker's 'gross income from personal exertion' - see Nicholson v Victorian WorkCover Authority [2016] VSCA 146 (Osborn, Beach and McLeish JJA).

[7] As noted above, Mr Margriplis-Hampton's business engaged both plumbers and electricians, so the extent to which this expense related to subcontracted electricians could not be assumed.

[8] (2000) 54 NSWLR 536; [2000] NSWCA 133.

[9] Vetter v Lake Macquarie City Council (2001) 202 CLR 439, 454 [36] (Gleeson CJ, Gummow and Callinan JJ); [2001] HCA 12, citing Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63, 65 (Lord Mansfield); [1774] EngR 2; 98 ER 969, 970.