Nair-Smith v Perisher Blue Pty Ltd - [2013] NSWSC 1463 - NSWSC 2013 case summary — Zoe

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Nair-Smith v Perisher Blue Pty Ltd

[2013] NSWSC 1463

Supreme Court of NSW|2013-09-09|Before: Beech-Jones J

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Court

Supreme Court of NSW

Decision date

2013-09-09

Before

Beech-Jones J

Source

Original judgment source is linked above.

Judgment (22 paragraphs)

[1]

Judgment 1On 7 June 2013 I published my principal judgment in these proceedings (Nair-Smith v Perisher Blue Pty Ltd [2013] NSWSC 727). I upheld Dr Nair-Smith's claim in both negligence and for breach of a term implied into her contract with the defendant, Perisher Blue Pty Ltd ("Perisher"), by former s 74(1) of the Trade Practices Act 1974 (the "TPA"). 2In the principal judgment (at [356]) I identified a number of issues that the parties needed to address either because they concerned tentative conclusions that had not been fully canvassed during the hearing or because, in light of the findings I hade made, further calculations were required or both. In particular, amongst other matters, I concluded that it was arguable that the damages recoverable by Dr Nair-Smith for breach of the term implied by former s 74(1) of the TPA were not subject to the restrictions found within Part 2 of the Civil Liability Act 2002 (the "CLA") (at [124]). Thus it was necessary for the parties to address that issue and the quantum of her claim if it was not so restricted. 3After the principal judgment was published the parties were given the opportunity to provide further submissions in writing and then address the Court. As part of that process Dr Nair-Smith put forward a revised report from her accountant, Mr Katehos (marked "MFI 16"). Mr Katehos addressed the Court orally along with Counsel. In the absence of any formal application to reopen, I did not receive his report as evidence or treat his address as such. Instead I treated that material as submissions on matters of arithmetic directed to quantifying a verdict based on the existing evidence and findings. If further findings are necessary then they are to be based on the evidence led at the trial. Regrettably there were still substantial differences between the parties in their approach to determining economic loss. In the end result this has necessitated the Court having to undertake the various calculations.

[2]

[3]

Second issue: Do Parts 1A and 2 of the CLA apply to Dr Nair-Smith's claim for a breach of the term implied by s 74(1) of the former TPA? 5The next issue is of great importance to the parties' rights. In the principal judgment at [120] to [125] I noted that Dr Nair-Smith's cause of action for the breach of the term implied by former s 74(1) of the TPA arose prior to the introduction into the TPA of s 74(2A). I noted that the legislation introducing s 74(2A) did not purport to have retrospective effect (at [121]) and, in any event, by its terms it only applies to a contract made after the provision commenced. Subsection 74(2A) picked up and applied the limitations on damages found in Part 2 of the CLA (Insight at [155] per Sackville AJA). 6Thus the question arises as to whether the restrictions on damages found within Part 2 of the CLA applied to Dr Nair-Smith's claim for a breach of the term implied by s 74(1)? Similarly, does Part 1A of the CLA limit or regulate the means of establishing a breach of the implied term? Dr Nair-Smith submitted that the answer to both questions was "no". Perisher submitted that the answer to both questions was "yes". 7Critical to answering these questions is the High Court's judgment in Wallis v Downard-Pickford (North Queensland) Pty Ltd [1994] HCA 17; 179 CLR 388. In Wallis a carrier sought to rely on s 6(1) of the Carriage of Goods by Land (Carriers' Liabilities) Act 1967 (Qld) (the "Carriers' Liabilities Act"), which limited the monetary amount for which a carrier could be liable, in answer to claim for a breach of a term implied into the contract of carriage by s 74(1) of the TPA. Further, s 9(1) of Carriers' Liabilities Act deemed to be incorporated in every contract of carriage a clause to the effect of s 6(1). The appellant contended that his cause of action for a breach of the term implied by s 74(1) of the TPA was not governed or otherwise restricted by either of ss 6(1) or 9(1) of the Carriers' Liabilities Act. 8Toohey and Gaudron JJ upheld the appellant's argument, stating as follows (at 396 to 397): "... The essence of the [appellant's] submission was that the statutory creation of a contractual obligation is inherently accompanied by a full contractual remedy. Section 74, it was submitted, implies into relevant contracts a term which contains the primary obligation to take due care and skill and a secondary obligation to provide compensation for breach. In support of this submission, the appellant pointed to s 68(1)(c) which renders void any term of a contract that purports to modify a warranty imposed by, among other provisions, s 74. This provision was said to demonstrate the Trade Practices Act's concern with liability as well as the creation of rights. Such a provision was not necessary to override State legislation 'because section 109 does that work'. The appellant pointed also to ss 73 and 74B which deem a contractual liability to exist for breach of an implied warranty in the case of certain persons with whom the consumer does not have a direct contractual relationship. These submissions have force. It would indeed be extraordinary if non-contractual parties had greater rights to recovery than did a consumer who is party to a contract in relation to which s 74 operates. It follows that the warranty created by s 74 carries with it full contractual liability for breach. Section 6(1) of the Queensland Act purports to limit that liability. The consequence is that there is a conflict between the two statutes, a conflict which amounts to a direct inconsistency in the sense that the Queensland Act detracts from the full operation of a right granted by the Trade Practices Act (Clyde Engineering Co. Ltd. v. Cowburn [1926] HCA 6; (1926) 37 CLR 466 at 478 per Knox CJ and Gavan Duffy J; Victoria v. The Commonwealth [1937] HCA 82; (1937) 58 CLR 618 at 630 per Dixon J; Ansett Transport Industries (Operations) Pty. Ltd. v. Wardley [1980] HCA 8; (1980) 142 CLR 237 at 259-260 per Mason J). The limitation is therefore, to that extent, invalid by reason of s 109 of the Constitution." (emphasis added) 9Their Honours also addressed s 9 of the Carriers' Liabilities Act (at 398): "... Because s 6 is a term of relevant contracts of carriage, that term is rendered void in each case by the operation of s 68(1)(c). Further, s 9 itself is impugned in that it purports to imply into contracts exactly those terms that s 68 forbids. It can therefore be seen as inconsistent with s 68 for the purposes of s 109 of the Constitution. It is also the case that s 5 of the Queensland Act, which provides that the liability of a carrier shall be upon 'the bases prescribed by this Act and not otherwise', is invalid under s 109 of the Constitution to the extent that it purports to preclude the operation of ss 68 and 74 of the Trade Practices Act." 10Deane and Dawson JJ (at 393) and McHugh J (at 401) agreed with these aspects of Toohey and Gaudron JJ's judgment, although they expressed different reasons for concluding that former s 74(3) of the TPA had no application. That matter is irrelevant to these proceedings. 11Senior Counsel for Perisher, Mr Sexton SC, noted that the operation of former s 74(1) of the TPA was different to that of a number of other provisions in former Part V of the TPA (eg s 52) in that s 74(1) did not create a cause of action the remedies for which were to be found in the TPA. Instead the only cause of action is for breach of the term implied into the contract by s 74(1) (Arturi v Zupps Motors Pty Ltd [1980] FCA 164; 49 FLR 283, cited in Wallis at 398). Mr Sexton SC submitted that the regulation of the means of proving a breach of contract and the remedies for such a breach was generally a matter of state law subject to any express provision made to the contrary by Commonwealth law. Thus he contended that the source of law for a demonstrated breach of the term implied by s 74(1) was State law, which in this case included the restrictions on damages found within Part 2 of the CLA. 12Unconstrained by authority there is force in this argument. However it is directly inconsistent with the judgment of Toohey and Gaudron JJ in Wallis and, in particular, the reference by their Honours to "full contractual liability for breach" in the passage extracted above. Their Honours accepted the submission that the implication by federal law of the term provided for in s 74(1) necessarily carried with it a remedy of damages assessed at common law and that any attempt to limit that remedy created a "direct inconsistency" for the purposes of s 109 of the Constitution. I was not referred to any subsequent discussion of Wallis that affects this analysis. In the Court of Appeal in Insight Basten JA and Sackville JA discussed Wallis in these terms at [98] and [143] respectively. Spigelman CJ cited the supplementary explanatory memorandum to the legislation that introduced s 74(2A) which recorded an understanding on the part of the Commonwealth that Wallis had this effect. 13Even if it was thought that the approach to s 109 of the Constitution in the above passage from Wallis was reconsidered or superseded by that adopted in Momcilovic v R [2011] HCA 34; 245 CLR 1, and I doubt that it was, it would not affect the outcome of Wallis. In any event, this Court is still bound by Wallis. I am unable to discern any relevant distinction between s 6(1) of the Carriers' Liabilities Act and the restrictions found within Part 2 of the CLA. I am bound by the decision in Wallis to find that the damages that Dr Nair-Smith can recover for breach of the term implied by s 74(1) of the TPA are not subject to the limitations found within Part 2 of the CLA. 14I note three further points. 15First, Mr Sexton SC pointed to other aspects of State law that regulate the enforcement of contractual remedies such as limitation periods and submitted that Wallis is not authority for the proposition that they do not apply to actions for breach of a term implied into a contract by s 74(1) of the TPA. I accept that, as a consequence of Wallis, there maybe some uncertainty as to whether some aspect of State law is inconsistent with the "full contractual liability" that s 74(1) implies, but it need not be resolved in this case. 16Second, Mr Sexton SC also submitted that the reference to "full contractual liability" in the extract from Wallis at [7] needs to be considered with that part of the judgment that addressed the operation of s 9(1) of the Carriers' Liabilities Act (extracted at [9]). He submitted that s 9(1) was directly inconsistent with former ss 68(1) and 74(1) in that the former operated to imply a limitation on liability into the contract in the form provided for by s 6(1), whereas the latter operated to ensure that no such term of the contract could, inter alia, restrict or modify any liability for a breach of the term implied by s 74(1). While I accept that the passage extracted in [9] is to that effect, Toohey and Gaudron JJ's analysis of s 9 of the Carriers' Liabilities Act was additional to their finding that s 6(1) of that Act impaired the "full contractual liability" said to be conferred by s 74(1). 17Third, to this point the relevant limitations that have been considered are those provisions in Part 2 of the CLA that restrict the recovery of damages. As stated, I do not consider that there is any relevant distinction between those provisions and s 6(1) of the Carriers' Liabilities Act considered in Wallis. However, prima facie the regime of establishing liability for negligence found in Part 1A of the CLA is also applicable to a claim that there was a failure to comply with the term implied by s 74(1) (principal judgment at [82]). The regime in Part 1A includes numerous exceptions and exclusions, so that there may be circumstances in which the services will not be rendered with due care and skill, yet no liability attaches. For example, s 5L precludes liability for harm suffered from obvious risks of dangerous recreational activities (as defined). Clearly there can be a breach of the term implied by s 74(1) when services are supplied to a person who engages in such an activity. 18If Part 1A applies to claims for a breach of the term implied by s 74(1) then it would effectively rewrite the term. It would give rise to a direct inconsistency in that Part 1A would "alter, impair or detract from" s 74(1) (Victoria v The Commonwealth [1937] HCA 82; 58 CLR 618, "The Kakariki Case", at 630 per Dixon J). Consistent with Wallis, the regime of liability found in Part 1A of the CLA is also rendered inapplicable to actions for breach of the term implied by s 74(1) by the operation of s 109 of the Constitution. 19Accordingly the answer to both of the questions posed in [6] is "no".

[4]

General damages - common law 20At [312] of the principal judgment I assessed Dr Nair-Smith's level of non-economic loss, calculated pursuant to s 16 of the CLA, as being 25% of a most extreme case. This corresponds with 6.5% of the maximum amount of damages that can be awarded ($535,000), ie $34,775.00. At [313] I left open the question of the appropriate figure for general damages in the event that, as I have found, Dr Nair-Smith's breach of contract claim is not governed by Part 2 of the CLA. The parties addressed on the appropriate figure. 21Mr Sexton SC's submissions emphasised the contribution to Dr Nair-Smith's difficulties and inhibited function from her pre-existing lumbo-sacral difficulties. This was addressed in the principal judgment at [311] as follows: "In the end result, I am satisfied that Dr Nair-Smith suffered a significant soft tissue injury to her lumbar spine as a result of the accident as stated by Dr Giblin. Over time she has developed a pain disorder as referred to by Drs Clarke and McClure. The effect of the soft tissue injury was to aggravate a pre-existing level of discomfort in the lower lumbo-sacral region. Her further deterioration over the last few years is a result of the combination of the effect of the accident and degenerative changes in the lumbosacral region, however the accident remains an operative cause of that deterioration." 22The principal judgment also addressed the position of Dr Nair-Smith prior to the accident (at [215] to [218]) and her level of functioning and enjoyment of life after the accident (at [266] to [268], [277] to [279] and [283]). I will not repeat those findings here. Having regard to those findings, I consider the appropriate award for general damages is $135,000.00. Dr Nair-Smith is now aged 54. Bearing in mind the extreme discomfort and pain she experienced at the time of the accident and in its immediate aftermath, and my findings as to the contribution to her discomfort from her pre-existing lumbo-sacral difficulties, I attribute $55,000.00 of that figure to the past and $80,000.00 to the future. In attributing that amount to the future I bear in mind the matters addressed at [42] to [44] below. 23The difference in the amounts assessed for general damages under the CLA compared with the common law reflects the effect of the tapering that occurs in respect of assessments under s 16(3) of the CLA where the severity of the non-economic loss is less than 34% of a most extreme case.

[6]

Past economic loss - the CLA and common law 27Notwithstanding these findings, I was presented with two very different approaches to determining past economic loss under both the CLA and at common law. 28Perisher's approach involved calculating Dr Nair Smith's actual "earnings" by taking the net profit for Ghita Nair Smith Pty Ltd ("GNS") as recorded in Mr Katehos' reports as "a reasonable proxy for the plaintiff's actual net earning capacity before tax". Perisher then added the amount in the company's accounts recorded for her wages, her superannuation and family superannuation. It also added the rent received by her to her earnings in conformity with the finding at [342] of the principal judgment. In effect this was a net adjustment downward of the rental expense that led to the net profit of GNS. 29In addition Perisher has also added back her mother's wages as well as her children's wages. This aspect needs to be considered further. In the principal judgment at [332] I accepted that in calculating Dr Nair-Smith's hypothetical past earnings it would be appropriate to add back her mother's wages from 1 December 2008 on the basis that that expense would not have been incurred had the accident not happened. This would also require the deduction of an amount for the revenue she would not have earned. I also did not accept that there should be any add-back for wages paid to her children on the basis that there was no evidence that their engagement had anything to do with the accident. However, at this point I am calculating actual earnings in which case neither of these add-backs is appropriate. 30Although it is far from obvious, if one digs deep into the two sets of rival calculations then there are only four matters of dispute about past actual earnings. The first is the treatment of her family's wages which I have just addressed. The second is the payment of superannuation to them which follows from the first issue. The third concerns an amount of $18,929 received by Dr Nair-Smith in the financial year 2009/2010 from the trust that owns the building. There is no reason not to treat that as anything other rent as per the finding I made in the principal judgment at [342]. The fourth concerns certain workplace deductions that were claimed in Dr Nair-Smith's tax returns for the relevant year for motor vehicle, travel and uniform expenses. There is no reason to treat those items as anything other than legitimate expenses. 31The result is that the figures for actual earnings for the financial years 2003/2004 are as follows: Year: 03/04 04/05 05/06 06/07 07/08 GNS profit 4,354 -- (22,580) (13,027) (11,670) Wages 87,060 108,622 123,314 127,490 126,000 Plaintiff super 8,385 13,200 13,200 17,400 13,200 Rent received 17,185 15,433 16,729 17,813 17,347 Less deductions 4,099 4,152 5,089 8,030 8,224 TOTAL 112,885 133,103 125,574 141,646 136,653

[8]

32Dr Nair-Smith has not produced material for the financial years 2010/2011 onwards so that the amount for the year 2009/2010 will be taken as a proxy for those years. 33The next step is to determine Dr Nair-Smith's hypothetical past earnings for these years. Perisher suggested a method that involved grossing up its calculation of Dr Nair-Smith's income, as described in [28] to [29] above, to account for the findings as to her lost days of work. The difficulty with that method is that it is the gross income of GNS that should be grossed up and not the net income before tax received by Dr Nair-Smith. 34Dr Nair-Smith via Mr Katehos utilised a method that involved grossing up the fees of GNS to account for the days that Dr Nair-Smith would have worked but for the accident but did not (as per the findings in the principal judgment), deducting a proportion of the fees earned by her mother on the notional days she filled in her for daughter, making an allowance for the extra costs involved in Dr Nair Smith's mother working those extra days, and then adjusting the net profit of GNS by adding back a proportion of the wages paid to her mother as indicated in the principal judgment at [332]. 35This is the correct approach. The findings in the principal judgment reflect that the relevant loss occasioned to Dr Nair-Smith was the lost opportunity to earn fees on the days that she did not work as a result of the accident. The proper approach is to attempt to reconstruct GNS' accounts on the basis that fees were earned on those days and her mother was not employed in part to replace her. 36Mr Katehos determined the lost profit by grossing up the income and using a gross profit margin that was derived from the gross fees less the cost of medical supplies. By reference to the profit and loss statement for GNS he made an estimate of the proportion of the costs that were variable. Mr Sexton SC took issue with the items that were said to be variable, such as waiting room expenses. However, this overlooked the fact that this was a variation in his client's favour. If all of the costs were fixed costs then all of the lost revenue from Dr Nair-Smith not working due to the accident would represent lost earnings. I consider Mr Katehos' estimate of variable costs is too low because it overlooks the likelihood of the cost of medical supplies varying according to the number of patients, as well as possibly electricity. The figures suggested by Dr Nair-Smith via Mr Katehos yield a proportion of variable costs to gross business income of somewhere between 2.65% and 3.81% over the period 2003/2004 to 2009/2010. I will adopt a uniform figure of 4.5%, but otherwise will utilise the figures put forward by Dr Nair-Smith via Mr Katehos: Year: 03/04 04/05 05/06 06/07 07/08 (a) Loss in gross business income (including deduction of mother's income) 21,753 24,054 25,409 27,039 27,858 (b) Loss in gross profit 20,942 23,126 24,304 25,960 26,872 (c) Loss in net business income (deduct for variable costs calculated at 4.5% of gross income; i.e. (b) x 0.955) 19,996 22,085 23,210 24,791 25,662 (d) Add-back portion of mother's wages and super -- -- -- -- -- LOSS (c + d) 19,996 22,085 23,210 24,791 25,662

[14]

Future economic loss - common law 41The analysis above has yielded an annual net figure of $50,542 as the quantification of the ongoing loss suffered by Dr Nair-Smith, ie the fees lost on account of Dr Nair-Smith not working for one and half days a week. This equates to around $975 per week. The parties provided competing calculations projecting that figure going forward to an expected retirement age for Dr Nair-Smith. Perisher's submissions yielded a figure of around $325,000 working from a loss of earnings of $814 a week going forward to age 65 and deducting 15% for vicissitudes. Dr Nair-Smith via Mr Katehos put forward a figure of approximately $663,000 based on a weekly loss of around $1,021.96 projected to age 70 and before any deduction for vicissitudes. If a 15% deduction was applied that amount would become approximately $564,000. 42Two related issues arise in relation to this. The first is the likely age at which Dr Nair-Smith will retire. Her Counsel submitted that absent the accident she, like her mother, was likely to continue to work to an advanced age. Mr Sexton SC submitted that there was an absence of satisfactory evidence about this. The second was the deduction for vicissitudes. Although the figures put forward by Perisher at the resumed hearing only reflected a deduction of 15% for vicissitudes, in its written submissions Perisher contended: "30. The Judgment found a soft tissue injury aggravation of an underlying progressive degenerative state in the Plaintiff's lumbosacral skeletal structure and a degenerative knee. The progressive degenerative condition was not caused by the injury but has been found to expose the Plaintiff permanently to vulnerability, including exacerbation of pain and disability consequent on the bumps and strains of life. 31. The combination of the progression of the degenerative lumbosacral condition with the forecast improvement in adjustment to live with her disability consequent of psychological therapy for pain disorder indicates a discount for vicissitudes for future loss of 60%." 43This submission is not confined to future economic loss but extends to all forms of future loss, a matter I will address. In oral submissions Mr Sexton SC reminded the Court that the plaintiff's initial submission was that Dr Nair-Smith should recover some of the "buffer". In this context the adoption and determination of a "buffer" (otherwise known as a "cushion") is not limited by the need to comply with s 13 of the CLA (see the principal judgment at [336]). 44These submissions highlight the various contingencies surrounding the exercise of determining her level of future economic loss. Amongst other matters, the commencing figure of a loss of approximately $50,000 per annum has been arrived at by a process burdened by considerable uncertainty, not the least of which is the absence of evidence about the three years immediately prior to judgment. Further, while it is difficult to envisage Dr Nair-Smith ceasing all work at 65 or even 67, the more likely scenario is that, even absent further medical deterioration, she would have progressively reduced her working hours over time. Most importantly there remains the considerable uncertainty around the effect of the degenerative changes in her lumbo-sacral region (see principal judgment at [311] extracted above at [21]). Consistent with the submissions made by Perisher, there is a very real possibility that over time those degenerative changes will effectively overtake the effect of the accident. 45In my view, the adoption of a buffer that seeks to accommodate these uncertainties is the appropriate method for awarding an amount for future economic loss. I consider that a figure of $325,000 is appropriate.

[16]

Gratuitous assistance 49In the principal judgment at [349] I found that 40 hours a week of gratuitous domestic assistance was provided to Dr Nair-Smith by her family for three weeks immediately after the accident, with 7 hours per week thereafter. 50The figures produced by the parties differed in relation to the appropriate rate to be utilised. In relation to the CLA the relevant hourly rate is capped at one-fortieth of an amount calculated in accordance with s 15(4) of the CLA. For the period up to judgment this cap was agreed as being $23.04 per hour, and for the period after judgment it was agreed at $26.36 per hour. Dr Nair-Smith sought to invoke the cap as the relevant rate, whereas Perisher sought to take advantage of Ms Callas' rate of $14.58 per hour. 51I do not derive much assistance from Ms Callas' rate. Generally it seems to be low. It was not suggested that she would be willing to undertake the further work contemplated by my finding. I would not utilise it is a suitable rate for the value of the work that has been or will be provided by Dr Nair-Smith's family. Dr Nair-Smith's relies on a reference in a report from an occupational therapist, Ms Walters, who referred to "current Home care rates" of $35.00 per week for various forms of domestic assistance. Mr Sexton SC submitted that this reflected a rate applicable to nursing care. The description of the type of activities for which the rate was applicable generally corresponds to the type of activities contemplated by my finding. However, given the rate Ms Callas is prepared to work for and the level of average earnings, the rate of $35 seems high. I will allow the rate of $30 per hour. 52The result is that for the CLA I will adopt the maximum rate allowed. For the claim at common law I will utilise the rate of $30 per hour. Under the CLA this yields figures of $87,638.30 and $159,775.86 for the past and future respectively. At common law this yields figures of $114,112.50 and $235,032.00 for the past and future respectively. The future amounts will be reduced in accordance with the approach noted at [48].

Nair-Smith v Perisher Blue Pty Ltd

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