Nominal Defendant v Livaja

Judgment 1JUDGMENT of the COURT delivered by BASTEN JA : On the evening of Saturday, 7 October 2006 Mr Livaja (the respondent and the plaintiff at trial) was injured in a motor vehicle accident at Bonnyrigg, south west of Sydney. He brought proceedings in negligence against the Nominal Defendant (the appellant and the defendant at trial), and was successful with respect to issues of liability, obtaining a judgment in his favour for damages in an amount of $368,405. The largest individual item in that amount was a calculation for future loss of earning capacity, in an amount of $189,000. The sole challenge on the appeal is to his Honour's calculation of that amount. 2The basis of the challenge is somewhat unusual. The judgment with respect to damages was reserved for a period of one week, but was delivered orally and without the benefit of a transcript of the hearing. In what may be described, neutrally, as the first part of his judgment, the trial judge assessed future economic loss in an amount of $100,000 and stated that that amount, together with other items of loss, "would result in a verdict in favour of the plaintiff in the sum of $244,973": Tcpt, 25/11/09, p 16. 3Having reached that figure, counsel for the plaintiff suggested there had been a mistake in the calculation, as a result of which the amount for future economic loss had been inappropriately halved. His Honour rejected that suggestion and then asked whether there was "any reason why I shouldn't make the ordinary order for costs": Tcpt, p 16. He was advised that an offer of compromise had been made some two months earlier in an amount of $265,000. The defendant sought an order for indemnity costs from the date of the offer. That application having been made, his Honour expressed concern that he may have miscalculated the quantum of future economic loss and said he would check his notes over the luncheon adjournment. On return, he gave further reasons pursuant to which he acknowledged an error in his calculations announced before the adjournment and, remedying that error, gave judgment in an amount which was above the defendant's offer. 4The appellant raises the following challenges to that judgment, seeking: (1) reinstatement of the 'verdict' as initially pronounced, on the basis that - (a) in pronouncing a verdict in a specified amount, his Honour had given judgment; (b) once delivered orally in open court, the judgment was "entered" for the purpose of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") and could not be varied or set aside, or, (c) in the alternative, if the judgment had not been entered, it was nevertheless not open to the trial judge to recall the judgment and vary it in substance; (2) to have the judgment set aside, on the basis that in adjusting the amount his Honour had taken into account an irrelevant consideration, namely the amount of the offer of compromise; (3) to have this Court reassess the amount of the damages on the basis that they were in any event excessive and did not reflect the evidence, and (4) in the event that the Court found error but was not able, or thought it inappropriate, to reassess damages, to have the matter remitted to the District Court. 5Given the amount at stake, it was with some reluctance that the appellant raised the final possibility of remittal, and had, indeed, taken a firm position that this Court could deal with the matter to conclusion, until it was noted that this Court might be thought to suffer the same disadvantage as the trial judge, namely being aware of the amount of the offer of compromise. For reasons explained below, the trial judge did err in certain respects in quantifying future economic loss, but the errors do not require this Court to set aside the judgment.

Factual background 6The factual issues in dispute fell within a narrow compass. In particular, the areas of disagreement arose from the respective contributions to the plaintiff's disabilities caused by the 2006 accident (the motor vehicle accident) and an earlier work injury, which had occurred on 16 January 2003. The respondent's occupation, prior to January 2003, had been as a contractor handling gypsum plasterboard (commonly referred to, including throughout these proceedings, by the trade name "gyprock"). Following the 2003 accident, he suffered injuries to his back, neck and right shoulder, which caused him continuing pain thereafter. He continued to work, though less regularly than before and needed analgesics to control the pain. Although his Honour made no finding (and was not required to do so), it appears to have been accepted that when working in 2006, he was able to earn up to $2,000 per week (Ex J), although he could not work fulltime over an extended period. For the purposes of the trial, it appears to have been accepted that he was capable of earning approximately $1,000 per week before the 2003 accident (Tcpt, 18/11/09, p 101) and approximately $400 per week (after allowance for expenses and tax), until the motor vehicle accident. 7The motor vehicle accident had two immediate effects: first, it exacerbated his existing injuries and, secondly, it gave rise to additional injuries which left him unfit for work as a plasterboard fixer and capable, at best, of unskilled work in a sedentary occupation. 8The respondent (who it is convenient to call "the plaintiff" in relation to prejudgment activities) underwent medical assessments to determine the extent of his permanent impairment resulting from the motor accident, pursuant to the Motor Accidents Compensation Act 1999 (NSW). The assessments were psychiatric and orthopaedic. The psychiatric assessment, undertaken by Dr M C Prior, found he had symptoms of a pre-existing post-traumatic stress disorder arising from his experiences in Croatia during the civil war in the former Republic of Yugoslavia, together with anxiety and affective symptoms which pre-dated the motor vehicle accident. Dr Prior also diagnosed psychotic symptoms which were unrelated to the accident. Of direct relevance, he assessed the respondent as having "an Adjustment Disorder with Anxious and Depressed Mood as a result of the exacerbation of his pre-existing back and neck pain together with the motor vehicle accident itself". That condition was found to give rise to a degree of permanent impairment. 9More importantly for present purposes, the orthopaedic assessment by Dr W D Bye assessed a degree of whole person impairment resulting from the pre-existing injuries to his neck, spine and right shoulder at 18%, together with an additional level of impairment of 14% attributable to the injuries suffered in the motor vehicle accident, being injuries to the left shoulder, left knee, left foot and right hand. 10There was a dispute, both at trial and on the appeal, as to whether the respondent retained any residual earning capacity, a matter to which it will be necessary to return: see at [59]-[66] below. For present purposes, it may be assumed that his Honour found that there was no residual earning capacity and that, prior to the motor vehicle accident he had a capacity to earn $400 per week net. By contrast, his capacity to earn income, prior to the 2003 accident, had been in the order of $1,000 net per week. His Honour noted (Tcpt, p 12) that several doctors had taken the view that "his problems should be allocated fifty/fifty to each of the accidents 2003 and 2006." 11In order to understand what happened in reaching the initial figure, it is necessary to set out in full the passage in his Honour's judgment which dealt with future economic loss. He stated (p 14): "He is now forty-five going on forty-six years of age. If you would normally expect him to work to sixty-five years of age that is somewhere slightly under twenty years in the future. He has a loss of earning capacity in the vicinity of about $400 per week. If you multiply that out and then take away the fifteen per cent for vicissitudes of life and consider everything else you have got to build into it, you reach a figure in the vicinity of $200,000 and I believe that I should allow fifty per cent of that, being his future loss of earning capacity as a result of this accident, and therefore allow $100,000." 12After taking account of certain additional losses, his Honour concluded (p 16): "I think I have covered everything[;] that would result in a verdict in favour of the plaintiff in the sum of $244,973." 13There followed an exchange with counsel for the plaintiff in respect of certain expenses which was resolved on the basis that the issue had been fully covered in the reasons. Counsel then stated: "Your Honour, before you leave the judgment, it's unusual, but I'm trying to prevent your Honour from perhaps falling into error. Your Honour heard evidence that before the 2003 accident he was earning nearly $1,000 net per week. You then had evidence that as at the date of this accident he was, as you found, earning about $400 net per week. Your Honour has then, I believe, concluded that he's totally unfit for work, but your Honour's then taken half of the 400 and apportioned that to the past when in fact he's already lost the difference between 400 and 1,000 as a consequence of the first accident." 14The exchange which followed is critical to the complaint made in respect of the final judgment and needs to be set out in full. (Mr Taylor was counsel for the plaintiff at the trial and Ms Egan was the solicitor for the defendant who attended to take the judgment.) "HIS HONOUR: I think what I've concluded, to make it quite clear, was that prior to this accident he could earn $400 per week and that in my view any further disability should be assessed on the basis of half of that amount. I don't believe I'm falling into error. If there is a claim in relation to a much higher figure it can be no doubt within another case. TAYLOR: No, I'm not suggesting that, I just didn't want your Honour to fall into error in view of the pre-accident situation. HIS HONOUR: Thank you. Is there any reason why I shouldn't make the ordinary order for costs? EGAN: There is, your Honour. Might I hand up an offer of compromise of the defendant made on 16 October 2009. HIS HONOUR: What's the offer? ... TAYLOR: 265, your Honour. HIS HONOUR: What you seek then is? EGAN: Is an order for costs and for indemnity costs [from] the date of the offer. HIS HONOUR: From October 2009. Indemnity costs or just costs? Okay, what's the order you seek? That the defendant pay the plaintiff's cost up to and including 16 October 2009. EGAN: That's correct, and for the plaintiff to pay the defendant's costs on an indemnity basis thereafter. HIS HONOUR: I'm concerned now by those submissions you've made to me.* I'm not going to enter judgment in this case yet. I'll do it at 2 o'clock. I'm concerned I may have fallen into error reading from my notes as I was going along and I just want to check that before I enter judgment. I'm sorry, but I'll need a little time to reread that. I don't want to fall into error. I may not have, and I need to - I'll just keep this. I don't think there's any argument about that if the verdict comes in under that amount.** TAYLOR: The only argument I would make, your Honour, is that a lot of the evidence that the defendant relied upon was handed up at the trial, not served before. HIS HONOUR: Wasn't it? TAYLOR: Your Honour has the schedule. HIS HONOUR: All right, I'll hear that argument after 2 o'clock. I just need to reread to make sure that in reading my notes I have not fallen into error. It's always very difficult in these matters where you don't have transcripts and you've got to deal with them off your own notes, so I'll just reread that, and 2 o'clock I'll have a look at that. Thank you." 15(The reference to "another case" in the first passage set out in the preceding paragraph was probably to separate proceedings in relation to the 2003 accident. In the sentence marked *, the parties agreed his Honour was then addressing counsel for the plaintiff. In the sentence marked **, it appears that he was referring to costs.) When he returned to Court at 2pm, his Honour expressed the view that he had fallen into error in assessing loss of earning capacity. He continued: "I approached the plaintiff's loss of earning capacity on a certain basis. I had overlooked a matter and that was what the plaintiff's [earning capacity] was prior to the 2003 accident. I will then return to that part of my judgment relating to the loss of income. My judgment or reasons for judgment will appear exactly as I indicated them this morning and I will add this. I analysed what the plaintiff was earning prior to this accident in 2006 and formed the opinion that he was earning $400 net per week. Prior to the 2003 accident the plaintiff had been earning in the vicinity of $1,000 net per week. As a result of that accident and the injuries in that accident he had a significant loss of earning capacity. That is illustrated by the reduction in income from approximately a thousand dollars a week to $400 dollars. The evidence then before me was that after this accident he has not been fit for work. However several of his conditions which he aggravated in the 2006 accident have since returned to the position they were at shortly before that accident." 16His Honour then referred to some further aspects of the medical evidence and continued (p 20): "What I inadvertently did was to reduce twice the amount I would have awarded him, it having firstly been reduced substantially from the $1,000 he was earning down to the $400 he was earning at the time of this accident. I then inadvertently reduced it further. I therefore correct what I said before. I find the plaintiff is as a result of the motor vehicle accident unfit for the remaining portion of work which he was fit for and will remain unfit." 17His Honour then carried out some further calculations and inquired whether, before he entered judgment, there was any other reason why he should not do so: Tcpt, p 21. Counsel for the plaintiff made an inconsequential suggestion and then Mr Newton, a solicitor who had replaced Ms Egan for the defendant, stated: "[NEWTON]: Your Honour I don't expect that I'd be able to persuade you but going on the record, from the defendant's point of view I was instructed to oppose any alteration, any amendment on the basis that the application had been made and rejected after the verdict had been entered. HIS HONOUR: I don't think I rejected the application. [NEWTON]: As you know your Honour I wasn't here. HIS HONOUR: I was silent I believe. Mr Taylor? I was silent on the matter. TAYLOR: Your Honour was silent, declined to entertain it. HIS HONOUR: I was silent. [NEWTON]: That may be the case, in any event merely to go on the record. HIS HONOUR: Certainly you can put that on the record but the factual situation is I had not entered judgment. [NEWTON]: Okay. HIS HONOUR: It was drawn to my attention, I believe I was silent on the subject while I was thinking about it and at that stage I asked about costs, a letter was handed up to me and in any case I'd already decided in my own mind that I better go and have another look at this because I was obviously a little worried about it and that's what I've done. So it's all there, it's all on the judgment- [NEWTON]: It will be in the judgment, the transcript and all that. HIS HONOUR: --everything's there so if anyone wishes to challenge it it's all there. I regret having made that error, I don't believe I often do that. Therefore I will now enter judgment in favour of the plaintiff for $368,405 and I should just make the normal costs order. TAYLOR: Thank you your Honour. HIS HONOUR: Defendant to pay the plaintiff's legal costs."

Power to vary decision 18The starting point of the appellant's case was that judgment had been entered in the amount first calculated (despite his Honour's later indications that he had not entered judgment) and that any variation must be assessed in accordance with principles relevant to entered judgments. If the judgment had been entered when the first figure was identified, the appellant conceded that variation might still be possible on the basis it had been given or entered, or the order made, "irregularly" for the purposes of UCPR, r 36.15(1). The appellant also accepted that a judgment or order could be set aside or varied if a notice of motion to that effect was filed within 14 days of the judgment or order being entered: r 36.16(3A). However, there is an initial question as to whether judgment had been entered prior to the luncheon adjournment. 19The entry of judgments and orders is provided for by UCPR r 36.11. In a court with a computerised court record system, absent an order otherwise, the judgment or order is taken to be entered when it is recorded in that system: r 36.11(2). There was clearly no express order of the Court as to entry of any judgment or order. The first reference to entry of judgment was his Honour's comment, after hearing of the offer of compromise, that he was "not going to enter judgment in this case yet". Accordingly, the judgment was only entered if it had been recorded prior to the luncheon adjournment. Although there was no relevant evidence before this Court, it was accepted by the parties that the District Court then had a computerised record system, being part of the Justicelink computer system. That being so, it should have been possible for the appellant to establish whether or not any judgment or order was entered before his Honour stated that that would not take place. No evidence was put before this Court that any such entry took place. 20In practical terms, such an event was only likely if the judge or his associate had a computer in court and entered the orders as they were spoken. There was no evidence as to those matters. Further, the conditional manner in which his Honour expressed the conclusion as to the amount of the "verdict" was not in terms appropriate to a form of order to be entered. It was not clear that an order was then "given" for the purposes of r 36.3; cf Palmer v Clarke (1989) 19 NSWLR 158 at 168G, Kirby P holding that a statement that "[t]he verdict will be for the plaintiff for $37,000 with interest and costs in the action" did not constitute the pronouncement of judgment. Accordingly, the appellant failed to establish that any judgment or order was entered prior to the correction made after the luncheon adjournment. 21On the basis that no judgment or order had been entered, the appellant nevertheless submitted that it would be a "quite exceptional" case in which part of reasons which had been delivered would be withdrawn and varied, so as to change the final result: see State Rail Authority of New South Wales v Codelfa Constructions Pty Ltd (No 2) [1982] HCA 51; 150 CLR 29 at 38 (Mason and Wilson JJ); Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300 at 302-303 (Mason CJ); DJL v Central Authority [2000] HCA 17; 201 CLR 226 at [34] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ); Elliott v The Queen; Blessington v The Queen [2007] HCA 51; 234 CLR 38 at [31]-[32] (Gummow, Hayne, Heydon, Crennan and Kiefel JJ). Referring to the remarks of Mason CJ in Autodesk , the judgment of the Court in Elliott at [32] stated: "His Honour gave examples from jurisdictions in this country (including the New South Wales Court of Appeal) and the United Kingdom where the power to reopen had been exercised on grounds not limited to denial of a fair hearing, but went on: 'What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to reargue their cases.'" 22There was no suggestion in the present case that counsel for the plaintiff was seeking to reargue his case: rather, he was seeking to draw attention to an apparent misapprehension as to the correct manner to deal with the injuries and disabilities resulting from the 2003 accident. 23Further, it is helpful to distinguish between a case such as Autodesk , where the High Court believed it had delivered a final judgment, a case such as Brooker v Friend (No 2) [2008] NSWCA 129, where this Court delivered its reasons, with proposed final orders, but sought submissions in respect of the appropriate form of the orders, and a case such as the present, where a trial judge, without the benefit of transcript, is delivering an oral judgment from handwritten notes. It is also desirable to distinguish between cases where, perhaps because of the delivery of formal written reasons, the application to vary the judgment is delayed, as compared with the present case, where it was made immediately the calculation had been expressed. The reason why such distinctions are important is that the public interest in the finality of litigation carries far less weight in some circumstances than in others. Where an apparent error can readily be addressed without the need to resort to expensive and time-consuming appeal proceedings, that course should be permitted and encouraged. 24In the present case, the following factors weighed in favour of reconsideration by the trial judge: (a) the possible error was succinctly identified by counsel after orally delivered reasons; (b) whilst not an arithmetical error, the suggested mistake was readily addressed, and if accepted, corrected; (c) to the extent that it was founded on confusion or inconsistency within the reasons, it was an error best resolved by the trial judge, and (d) the complaint was plausible. If the complaint were correct, it would have promoted no legitimate forensic purpose to have it remain uncorrected. 25The only countervailing consideration was that, on one view, the error arose in part because neither party had formulated submissions in accordance with the governing statutory provision, namely s 126 of the Motor Accidents Compensation Act. This last consideration is not to be ignored, but it may have more weight as a factor relevant to costs, although both parties appear to have been at fault in this regard. It is, accordingly, appropriate to address the variation made by the trial judge on its merits, accepting that it was appropriate for his Honour to reconsider, and if persuaded of error, to rectify the mistake in his earlier reasons.

The offer of compromise: an irrelevant consideration? 26Before assessing the correctness of his Honour's acceptance that he had made an error in his initial reasons, it is necessary to address a separate ground on which the appellant challenged the outcome. That turned on the fact that the trial judge did not decide to reconsider his original reasons until after the parties revealed the existence and amount of an offer of compromise, which the plaintiff had failed to better on the judgment as originally delivered. To have varied a proposed judgment so as to avoid an adverse consequence to the plaintiff in relation to costs, as a result of his failure to accept an offer of compromise, might be characterised in a variety of ways: the appellant identified it as an impermissible (or irrelevant) consideration, reflecting the approach adopted by this Court in State Bank of New South Wales v White (1995) 36 NSWLR 622. In White, the trial judge had assessed the injuries suffered by the plaintiff in the course of her employment, for the purposes of compensation under the Workers Compensation Act 1987 (NSW), as being of the order of 20% of a most extreme case. However, upon realising that this assessment would not permit the plaintiff to recover compensation for pain and suffering, his Honour had varied the assessment to 25% of a most extreme case. As explained by Gleeson CJ (at p 628) it was common ground in that case that, in making an assessment of a proportion of a most extreme case, it was "irrelevant for a judge to have regard to the consequences of that judgment for the purposes of" the availability of damages for pain and suffering under the Act. The primary issue was whether the judge had in fact had regard to that irrelevant consideration. 27In addressing that issue in White , this Court ruled that evidence of what was said in the course of the hearing before the trial judge was admissible to determine whether he took an irrelevant consideration into account: at 627C-D (Mahoney JA). A second matter to be addressed was how the assessment of that material should be approached in a case where the trial judge had not expressly indicated that he was taking the forbidden course. Mahoney JA stated (627E): "It may be said parenthetically that where such is alleged and where inference is relied upon, the inference must be appropriately strong before the court will come to such a conclusion. It is important to bear in mind that in the course of the formulation of a judgment and in particular an ex tempore judgment given in circumstances such as the present, a judge's mind may vary or fluctuate: it may vary even during the course of the formulation of the judgment and the reducing of it to words. It is not readily to be inferred, from changes in verbiage or the like, that a judge has done what is here alleged." 28The Court was nevertheless satisfied that the judge was influenced by a factor outside the range of permissible considerations: at 627-628 (Mahoney JA). Gleeson CJ expressed his conclusion in the following terms (at 629B-C): "The terms of that exchange make it clear that the consideration, and the only consideration, that led the judge to alter the conclusion with respect to s 66 was a realisation that if he adhered to his original view he would deprive the applicant of an entitlement under s 67. It has thus been demonstrated that the trial judge took into account an irrelevant consideration." 29I do not read the Chief Justice as saying in that passage that it is necessary that the impermissible consideration be "the only consideration", but rather that, where it is shown on the evidence that it was the only consideration, the conclusion as to influence will be unavoidable. It is an inference as to influence of an impermissible factor which is the relevant test of error, as appears on the last sentence of the passage from the reasons of the Chief Justice set out above and which appears from the judgment of Mahoney JA (at 627-628), with which Clarke JA agreed. 30On the present appeal, the respondent sought to dismiss the appellant's reliance on White as misconceived: however, it is clear that the principle is available to the appellant. The impermissible consideration is different in the present case, being reliance upon an offer of compromise. Nevertheless, to say that such reliance would be impermissible is beyond argument. An offer of compromise under the UCPR is "taken to have been made without prejudice, unless the notice of offer otherwise provides": r 20.26(9). There was no suggestion that the notice of the offer did otherwise provide. Accordingly, the offer was subject to privilege and not disclosable for the purposes of the litigation, except in relation to costs. The offer was inadmissible during the course of the trial: Evidence Act 1995 (NSW), s 131: those restrictions on disclosure are expressly identified in the UCPR, at r 20.30. 31These conclusions do not, however, reveal the consequence of disclosure in the present case. The disclosure was not during the course of the trial and was assumed by the parties to have been made after the primary judge had completed his reasons for judgment. The fact of disclosure did not, of itself, preclude the trial judge from reconsidering those reasons, although, to do so on the basis of the offer, would have been erroneous. For present purposes, it is necessary for the appellant to satisfy the Court that his Honour's reconsideration of the calculation of future economic loss was influenced by his knowledge of the offer of compromise. As explained by Mahoney JA in White's case, such an inference will not be drawn incautiously from ambiguous or imprecise remarks. That is not to protect trial judges from findings of impropriety, but because the circumstances of delivering oral judgments, especially if not reserved, may lead to ambiguous and imprecise language and fluctuations of opinion: see generally, Maviglia v Maviglia [1999] NSWCA 188 at [1] (Mason P); Brisbane South Regional Health Authority v Taylor [1996] HCA 25; 186 CLR 541 at 570 (Kirby J). 32The appellant relies, in support of an inference of inappropriate reliance on the offer of compromise, on the timing of the trial judge's decision to reconsider and comments made on the transcript, which were before this Court without objection from the respondent. 33The timing by itself gives rise to no clear inference. It was common ground that his Honour's statement, following the application for indemnity costs by the defendant, was addressed to counsel for the plaintiff. The concern raised, while occurring after the disclosure of the offer of compromise, also followed within two minutes or so of counsel suggesting a basis of error. His Honour's immediate response to the suggestion of error had been to clarify precisely what he had said. It is by no means clear that he immediately appreciated the thrust of the complaint which had been raised. What then followed was not an arbitrary variation of a conclusion already reached, but acceptance of the fact that allowance for the disabilities flowing from the first accident may, mistakenly, have been made twice. No doubt the correction of the error would result in the offer of compromise becoming irrelevant, but it cannot be inferred that his Honour set out to correct an error in order to achieve that result. 34The second matter relied upon by the appellant was the manner in which his Honour dealt with the suggestion of error, once it arose. As already noted, his immediate response was to clarify what he had said and deny that he had fallen into error. The respondent, on the other hand, noted that apart from the clarification, his statement "I don't believe I'm falling into error", did not involve an unequivocal rejection of the suggestion of error. 35The third matter relied upon by the appellant was the exchange with the solicitor for the appellant (then defendant) following the revision of the calculation of future economic loss. The solicitor who then objected to the amendment of the reasons had not been present before the adjournment, but expressed the view that the application for amendment "had been made and rejected after the verdict had been entered". His Honour took issue with the proposition that he had earlier "rejected the application". He expressed the view that he had been "silent on the matter". Counsel for the plaintiff confirmed that he had been "silent, declined to entertain it". 36Reading the two relevant passages in the transcript together, it was not accurate to say that his Honour had been "silent" in response to the application, nor was it entirely accurate to say that he had not rejected it. It was true that he had not formally dismissed the application, but neither was there a formal application. Accepting there were infelicities of expression in the second exchange, they do not assist the appellant because they provide no clear basis for an inference that his Honour had been influenced by the disclosure of the offer of compromise in revising his judgment. The thrust of the later remarks of the solicitor for the appellant were that no variation could be made, in part because an application to amend had been rejected, and in part because judgment had been entered. The first point was not legally conclusive and the second has not been shown to be correct. His Honour's response may not have been entirely accurate, but that is beside the point. 37This material provides an inadequate basis upon which to draw an inference that the correction of error (assuming it was an error) in his Honour's judgment was the result of taking into consideration the disclosed offer of compromise. If the inference to be drawn were that the trial judge did not wish to deprive the plaintiff of a benefit to which he thought he was entitled, the suggestion of an erroneous calculation was entirely adequate to justify reconsidering the judgment as delivered, without reference to the offer of compromise. This ground of appeal must be rejected.

A correct assessment of future economic loss 38The assessment of future economic loss in a motor vehicle accident claim is governed by s 126 of the Motor Accidents Compensation Act . That section provides: " 126 Future economic loss-claimant's prospects and adjustments (1) A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant's most likely future circumstances but for the injury. (2) When a court determines the amount of any such award of damages it is required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury. (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." 39The assessment of future economic loss involves an hypothetical calculation, with the need to balance a number of variables: see the recent discussion in Amoud v Al Batat [2009] NSWCA 333 at [22]-[28]. One purpose of s 126 is to require a structured approach to such a calculation. Subsection (1) is expressed in terms which emphasise the need for the plaintiff to satisfy the Court as to certain "assumptions" in respect of future earning capacity. The Court must only act upon such assumptions as are established to its satisfaction on the balance of probabilities. Those assumptions must accord with the plaintiff's "most likely future circumstances" on the basis that the injury for which he or she seeks compensation had not occurred. There is nothing obscure about the nature of the findings so required: they must be sufficient to establish a baseline of earning capacity, extending into the future, from which diminution caused by the injury may be calculated: see State of New South Wales (NSW Police) v Nominal Defendant [2009] NSWCA 225 at [83]-[84] (Beazley JA, Allsop P and Macfarlan JA agreeing). Further, the assumptions must be stated and there is authority for the proposition that failure to do so would render the judgment invalid: sub-s (3); Zahra v Brown [2006] NSWCA 162 at [71] (Beazley JA, Santow JA agreeing). 40The purpose of sub-s (2) is less clear. There is a missing step between sub-ss (1) and (2). An essential part of the calculation is the assessment of the consequences for the claimant's earning capacity as a result of the injury. Subsection (2) requires adjustment of the amount of damages "by reference to the percentage possibility" that "the events concerned might have occurred but for the injury". Reference in sub-s (2) to "those assumptions" must be a reference to the assumptions about future earning capacity, absent the injury, referred to in sub-s (1). Subsection (1) refers to both assumptions and "other events": it might appear that the reference in sub-s (2) to "the events concerned" was intended to mirror the reference in sub-s (1) to "other events", although the language is somewhat obscure. 41The assumptions or events upon which a baseline may commonly be calculated include: (a) identification of the skills, training and experience of the plaintiff, as at the date of the accident; (b) the work he or she was undertaking immediately prior to the accident; (c) the likelihood that he or she would have continued in such employment, but for the accident; (d) the possibility that he or she might have obtained promotion or other benefits, but for the accident; (e) the age to which he or she was likely to have worked in that employment, and (f) the possibility that the employment would not have been continuous. 42Each of these factors is liable to variation, depending upon the circumstances of the case. For example, the likelihood of improved earning capacity for a skilled or professional person, who was at the beginning of a career when the accident occurred, may be high. The possibility of unemployment for periods may be low in some occupations and higher in others. It is common under the general law to allow a reduction in the order of 15% (depending on the circumstances) for "vicissitudes", to allow for the possibility that some event other than the injury would have adversely affected earning capacity. Assuming that length and continuity of employment are treated as "events concerned", for the purposes of sub-s (2), that provision may be seen as allowing for variation for such vicissitudes. 43There is no doubt in the present case that the trial judge sought to assess the earning capacity of the plaintiff immediately prior to the accident. That exercise was complicated by the pre-existing disabilities flowing from the workplace injury which had occurred some three and a half years earlier. However, the medical evidence permitted discrimination between those injuries which had arisen in 2003 and those which resulted from the accident in 2006. What proved more difficult was the assessment of diminution in earning capacity resulting from each set of injuries. It may have been open to his Honour to have used, as a baseline, the earning capacity of the plaintiff prior to the January 2003 workplace accident, assess the residual earning capacity after the motor vehicle accident and then apportion the diminution between the two causative elements. The alternative approach was to assess the reduced earning capacity as it stood immediately prior to the 2006 motor vehicle accident, assess any residual earning capacity and allow damages calculated by reference to the difference between those two assessments. If the latter course had been undertaken, it would have been necessary to make allowance for the fact that a further deterioration in earning capacity might have occurred but for the motor vehicle accident, as a result of the continuing effect of the injuries incurred in 2003. 44It might also have been open to the trial judge to undertake both exercises, using one as a check against the other. Unfortunately, what appears to have happened was that his Honour used each in combination, inappropriately. Once he accepted as his baseline the earning capacity assessed at $400 per week, immediately before the motor vehicle accident, he had already made allowance for the diminution in earning capacity resulting from the 2003 injuries. It was, indeed, a double reduction, to then reduce the loss of earning capacity resulting from the motor vehicle accident by one-half, as the proportion attributable to the 2003 injury. The result was that, instead of apportioning the effects of the injury as to 50% to each accident (as his Honour said - at p 14 - that he should) he effectively apportioned 75% to the earlier workplace accident and only 25% to the motor vehicle accident. This was the error correctly identified by counsel for the plaintiff at the conclusion of his Honour's original reasons and correctly modified by him in his further reasons. 45If, in his initial reasons, his Honour had followed the structure of s 126 it seems likely that the error would have been avoided. Of the alternative approaches set out above, it is apparent that his Honour adopted the latter, identifying a capacity to earn $400 per week immediately prior to the motor vehicle accident. He used the equal apportionment principle merely as a check on this calculation. Had he adopted the first approach he would have needed to make an express finding as to an undiminished earning capacity as at October 2006, ignoring the effect of the 2003 workplace injuries. That calculation would have required some adjustment to the actual earnings as at January 2003. That exercise was not undertaken. 46Importantly, having identified a baseline earning capacity as at October 2006, consistently with s 126 his Honour should have identified the age to which the plaintiff would have continued to work, but for the motor vehicle accident, and assessed a percentage possibility that he might nevertheless have ceased to work earlier because of the deleterious effects of the 2003 injuries, and the difficulty of working whilst sustaining considerable pain over many years. Had such an exercise been undertaken, because of the need to provide, in compliance with s 126(3), an express statement of the assumptions upon which the assessment was based and the percentage by which the damages were adjusted, the error would probably not have occurred. 47It follows that the initial reasons did indeed contain an error of the kind identified by counsel for the plaintiff at the conclusion of the initial reasons for judgment. It was open to his Honour and indeed appropriate, to correct the error, as his Honour did. Accordingly, the grounds of appeal directed to the variation of the reasons for judgment must be rejected.

Excessive award of damages 48The appellant further challenged the outcome on the basis that the award of damages was excessive. That challenge involved three limbs, namely: (a) the assessment of earning capacity at $400 per week, just prior to the motor vehicle accident, was too high; (b) the expectation that the plaintiff would have continued to work for a further 15 years, despite his existing disabilities, was erroneous, and (c) if his Honour determined that he had no residual earning capacity, that finding ignored the possibility of him undertaking sedentary work capable of providing an income of $112 per week. 49The assessment of $400 per week net earnings was equivalent to an annual income after tax of $20,800. That figure appears to have been derived by the trial judge from the income tax returns for 30 June 2005 and 30 June 2006 and invoices tendered by the plaintiff. In respect of the earlier year, the taxable income was $24,085. There was no notice of assessment in the material to which the Court was taken, but the tax return did reveal total tax withheld in an amount of $7,946. So far as the later year (2006) was concerned, the figures revealed a taxable income of $13,418, from which, the appellant contends, $3,761 should have been removed, being payments of government allowances. The income then revealed for the whole of that year, resulting from his plasterboard business, was $9,657. On the other hand, the return revealed business income of $17,967 and expenses of $8,310. For a sole contractor, the assessment of earning capacity should not necessarily be viewed by reference to income after reduction for business expenses allowable under income tax legislation. 50The plaintiff presented evidence at trial of invoices rendered by him between August and December 2005, showing average earnings a little in excess of $1,000 per week, and invoices for the period August-October 2006, showing average earnings of $2,300 per week. 51In reaching a figure of $400 net per week, his Honour made an assessment in the following manner (Reasons, p 13): "The way I see is if you add up the varying amounts, that is, the $12,072 and you add to that the $12,856, it shows a yearly income of about $25,000 which would seem to me to come out as an average of about $440 per week. After you take tax out of that it seems to me that what you would assess his pre-injury ability to earn at would be about $400 per week." 52With respect, this calculation is not entirely easy to follow. The invoices submitted by the plaintiff showed that he worked from July to December 2005, with gross earnings of $18,537. If these figures are reduced for expenses, they may have produced a taxable income in the order of $12,000, although the precise figure taken by his Honour of $12,072 is found neither in the invoices, nor in the tax return for that year. However, it appears that his Honour was taking a calculation from July 2005 to October 2006, to take account of the fact that he was not working continuously and was probably not able to work continuously. In undertaking that calculation, his Honour rejected the plaintiff's reliance solely on invoices for the period August-October 2006, which were said to average $2,300 per week. 53While I would accept that an assessment based purely on the income tax returns would produce a lower average weekly taxable income, I think that his Honour was entitled to use a combination of the invoices, the income tax returns and the evidence of the plaintiff to reach the figure of $400 per week. I see no error in that finding. 54The second issue raised by the appellant concerned the expected working life of the plaintiff, as at 7 October 2006. 55The plaintiff's assessment of damages at trial referred to the "statutory age of retirement" as 67 years and the age to which the plaintiff might be expected to work as 62 years. The document consequently sought to have future economic loss calculated over a period of 16.5 years, rather than 21.5 years. This was referred to as a "concession" of a five year reduction of the expected working life of the plaintiff, due to other factors. 56In his initial reasons, the primary judge made no reference to this calculation, although he appears to have accepted the plaintiff's concession. Because the concession was based upon a reduced working life expectancy arising from the 2003 accident, an express statement of the assumptions and how they were determined might have avoided this potential miscalculation. In his revised reasons, he undertook the following calculation (Tcpt, p 20-21): "If I accept that he is now just over forty-five years of age, in my view that would give him a further working life of twenty years. If that is reduced by five years it gives him a further working life for which he should be awarded his loss of income over a period of fifteen years.... From that I deduct fifteen percent for vicissitudes of life ...." 57On the basis of these calculations, it is apparent that his Honour treated the effects of the 2003 accident as reducing his ability to work continuously by some 50%, and as reducing his working life (if one accepts a retirement age of 65) by 25% or (if one accepts a retirement age of 67) by 30%. If, to that figure, one adds the 15% reduction for usual vicissitudes, there is a reduction of between 40% and 45%, in addition to the diminution resulting from the inability to work continuously. 58Although the appellant challenged this reduction as inadequate, the basis for that challenge remained obscure. Dr Elias Matalani, a consultant occupational physician, prepared a report for the plaintiff which estimated that each injury contributed 50% to his impaired earning capacity: Report, 4 March 2008, p 8. Dr Bye's medical assessment supported a similar result, based on his calculation of whole person impairment. Accordingly, his Honour's assessment in this respect was not erroneous. 59The third basis of challenge to the assessment of future economic loss depended upon a finding that the plaintiff had no residual earning capacity after the motor vehicle accident. The appellant contended that his Honour had made findings supportive of a residual earning capacity, although he had not identified the extent of it. It is true that there is a level of ambiguity in some aspects of his Honour's reasons prior to their revision. Thus, his Honour stated (p 11): "[T]here is a significant argument about it but there is no doubt that he is not fit for heavy lifting, excessive squatting, a lot of bending, and matters of that nature. He says I was fit to do quite a bit of work up to the time of this accident, and I am not fit now. He wants to be a supervisor, and I think if he could do that sort of work[;] he is very experienced and could fit in to that sort of area." 60In reviewing the evidence, his Honour noted at one stage a report from Dr Horace Ting, described as a "vocational and functional assessment report" which his Honour described as not being of great assistance: Tcpt, pp 11-12. Later, he noted that Dr Ting "seems to think he could potentially earn $112 per week now": p 12. Shortly thereafter, in assessing earning capacity, his Honour expressed satisfaction that "for the first twelve months [after the accident] he was unfit for work": p 13. He allowed the full amount of $400 per week for that year and continued: "After that I am satisfied the plaintiff continues to have a loss of earning capacity. However, part of that loss of earning capacity must be before and part after. It appears at the moment he cannot go back to work, there is nothing really suitable for him to do, and if I apportion that, as I think I should, fifty/fifty then I arrive at a loss of earning capacity at the present time and since, commencing from one year after the accident of $200 per week." 61The error in apportioning the loss has been addressed above; the relevance of this passage for present purpose is to explain the difference in approach between the period of 12 months immediately following the accident and the period thereafter. The allowance of the full amount of $400 per week only for the 12 months immediately following the accident, was said to give rise to an implication that thereafter there was some residual earning capacity, in his Honour's view. Rather, however, the allowance for that 12 month period reflects the attribution of the whole of the loss to the effect of the accident which, during that period, had caused an exacerbation of the pre-existing injuries, which had, by the end of that period, stabilized at their pre-accident levels. Accordingly, it followed from his calculations that his Honour had assessed the plaintiff as having no residual earning capacity since the motor vehicle accident. 62That conclusion is not inconsistent with his Honour's reference in the first passage set out above to the plaintiff wishing to be "a supervisor": [59]. That statement was expressed in a conditional sense ("if he could do that sort of work") and, as counsel for the respondent pointed out, was derived from the following brief exchange in the course of the cross-examination of the plaintiff (Tcpt, 18/11/09, p 90(5)): "Q. Okay, the question is in the future, if you had not had this motor vehicle accident, would you have worked in the same way? A. INTERPRETER: Yes, I would, I would and I had a target to achieve. Because I'm capable in my job and I would have become a foreman because young people that need education and they don't know to work." 63Properly understood, the respondent submitted, the comment in the judgment was a reflection of the plaintiff's evidence that he would have wished to become a foreman if he had been able to continue with the work. There was no indication that the job of foreman did not involve heavy manual labour, nor that it was presently available to the plaintiff. That reading is to be preferred. 64The point was clarified after the luncheon adjournment, his Honour stating (pp 19-20): "The combination of his chronic pain, physical and functional restrictions and the need to take pain killing medications will make him unfit to return to work as a gyprock fixer indefinitely. His restrictions are permanent. He is only fit for sedentary work. Due to the presence of chronic pain, sleep disturbance, poor English and lack of transferable skills he is currently virtually unemployable. ... Then [there is] the report of Horace Ting, Occupational Therapist, 23 October 2008 .... He says he does not demonstrate a capacity to work as a gyprocker or form worker and he may have a physical capacity to perform sedentary work three hours per day, five days per week. At this stage he has a physical capacity to perform light to sedentary work on reduced hours. He is on a disability pension and is medically unfit to work. He does not demonstrate any earning potential." 65There are distinctions to be drawn between injury and impairment or disability consequent upon injury, and between impairment or disability and diminished earning capacity. Because an individual has a physical and mental ability to undertake certain tasks, it does not necessarily follow that he has a significant residual earning capacity. Earning capacity must be measured by reference to the individual, when viewed with all his or her characteristics, in the labour market. When a person in middle age has spent all his or her life in a skilled or semi-skilled occupation which, as a result of injury, is no longer available, the identification of occupations which are theoretically available is only part of the task. There must also be a practical assessment of the likelihood of the individual obtaining employment in some such occupation. Thus, Dr Ting stated in his report: "The functional capacity evaluation results indicate that Mr Livaja has the physical capacity to perform sedentary work 3 hours per day, 5 days per week in a supportive work environment. He does not demonstrate a capacity to work as a Gyprocker or a Formwork labourer. The vocational assessment results suggest that Mr Livaja is not suitable for vocational retraining. Mr Livaja's residual work capacity and limited transferable skills have severely limited his vocational choices to non-skilled sedentary work. Suitable occupations under this category are highly competitive, and Mr Livaja is non-competitive for employment in this job category in the open labour market. At this stage, though he has a physical capacity to perform light to sedentary work on reduced hours, Mr Livaja is on a disability pension and is medically unfit to work. He does not demonstrate an earning potential. Should he ever be certified fit to work, Mr Livaja demonstrates an earning potential of $111.90 gross per week (average weekly wage $708.50; 15 hours/38 hours per week; 40% chance in gaining employment). ... Due to the severe nature of his injuries and the multitude of his disabilities, I envisage that Mr Livaja would have difficulty securing and maintaining any employment." 66There was no other assessment of residual earning capacity before the Court. That conclusion of Dr Ting, perhaps treated somewhat dismissively in the earlier reasons, was clearly relied upon in his Honour's later reasons. The analysis supports the view that, in a practical sense, the respondent lacks any residual earning capacity. His Honour's conclusion in that respect was not erroneous.

Conclusions 67Although there were errors in the approach adopted by the trial judge, they do not warrant upholding the present appeal. Once it is accepted that his Honour's original calculation of future economic loss was based upon a false premise, and that he was entitled to correct it, no error has been shown in the subsequent reasoning or conclusion. 68In the course of argument, a question arose as to whether, if the appellant objected to the trial judge concluding his judgment with knowledge of the offer of compromise, it would also object to this Court completing the exercise if that were found necessary. Because relevant error has not been identified, it is not necessary for this Court to consider whether, on a rehearing, it should reassess the respondent's damages. However, had that been necessary, it should not be assumed that the Court would have declined to undertake the task merely because it was aware of the content of the offer of compromise made prior to trial. Judicial officers often become aware of evidence which is inadmissible and which, if taken into account, might affect the outcome of a case, albeit impermissibly. It is common practice for judges to put such material out of consideration and, as senior counsel for the appellant in effect accepted, it would ultimately have been a matter for the Court as to whether it felt comfortable undertaking the exercise for itself with knowledge of the offer that had been made. 69There remains a question as to the costs of the appeal. Because the appeal is to be dismissed, the usual order would be that the appellant pay the respondent's costs in this Court. It seems likely that such an order will remain appropriate, but as the appellant sought an opportunity to make submissions in the light of the conclusion reached by the Court, it should have 14 days within which to make submissions as to why some other order should be made. In the absence of such submissions, the order as to costs should be as indicated. 70The Court makes the following orders: (1) Dismiss the appeal. (2) Subject to (3), order that the appellant pay the respondent's costs in this Court. (3) If either party seeks a variation of order (2): (a) it or he shall within 14 days of the date of this judgment provide the Registrar, with a copy to the Associate to each Judge and to the other party, a document setting out the order sought, any supporting material and reasons for such order; (b) the other party shall, within 14 days of receiving such material, respond in like manner. (4) The Registrar is directed: (a) that, if no document is received within 14 days in accordance with order (3)(a), he enter an order that the appellant pay the respondent's costs in this Court, or (b) otherwise, he enter such order as the Court shall direct.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 May 2011