Ryan & another v A F Concrete Pumping Pty Ltd & another

The claim by Reliance Pools International 187This claim per quod is brought separately from the plaintiff's claim. As referred to above, the plaintiff has specifically abandoned any loss of income occasioned by his inability to participate in the business to be conducted by Reliance International. 188It was common ground that, by reason of the accident, the plaintiff could not engage in the venture proposed to be undertaken by Reliance Pools International. It was not submitted that a per quod claim could not be made in the circumstances; nor was it submitted that a claim for damages that was wholly comprised of future, post-accident, loss could not be made. 189It was accepted, in accordance with Commissioner for Railways (NSW) v Scott [1959] HCA 29; (1959) 102 CLR 392 (Scott), Attorney-General for New South Wales v The Perpetual Trustee Company Ltd [1952] HCA 2; (1952) 85 CLR 237 (Perpetual) per Dixon J at [13], and Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571 (Marinovski), that a company whose general manager or executive director is disabled through another's negligence can recover as loss from a wrongdoer. 190The evidence establishes that at all material times the plaintiff was to be an integral part of the business affairs of Reliance Pools International and was personally responsible in very large measure for the reputation of Reliance Pools itself which Reliance Pools International proposed to exploit. That the proposed agreement between Gemco and Reliance Pools International made specific provision for the plaintiff to provide consultancy services is a powerful indication of the contribution it was considered the plaintiff would make to Reliance Pools International. 191EML, whose submissions on damages were adopted by AF Concrete, submitted that the loss, if any, to be suffered was speculative since no contract had been concluded and the lack of follow-up by the Qatari interests once Ms Suleiman "backed off" showed that they were not particularly committed to the venture.

Whether damages can as a matter of law be assessed on the basis of loss of profits 192EML submitted that a per quod claim cannot be based on loss of profits since damages for such a claim are limited to the cost of a replacement servant and associated expenses. EML adopted the analysis of Kiefel J in Barclay v Penberthy [2012] HCA 40; (2012) 86 ALJR 1206 at [156] - [164] (Barclay) and submitted that Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd (1972) 46 ALJR 432 (Argent) is not authority for the proposition that a claim for loss of profits can be made, because only the quantum of damages and not the basis on which they were awarded, was at issue in that decision. 193EML also submitted, in accordance with Kiefel J's analysis in Barclay, that the decision of the Court of Appeal in Marinovski, by which I am bound, effectively rests on the unstable foundation of Argent and is therefore of no assistance to Reliance International in the present claim. 194It referred to obiter statements of Fullagar J in Perpetual at [24]-[27] which were referred to by Dixon CJ and Taylor J in Scott at [8] and [4] respectively. It also referred to Leveridge v Witten (Court of Appeal, 14 September 1979, unreported) which was considered in Marinovski by Hutley JA at 575 in the following passage: The only other relevant authority is Leveridge v Witten (Court of Appeal, 14 September 1979, unreported), where Hope, Reynolds and Glass JJA said: "There is a paucity of authority on the principles by which damages are to be assessed in such a case and counsel were unable to make submissions which tended to establish a principle of useful application to the present facts. It seems to us that the proper approach to such a problem as the present is that in general damages should be limited to the loss proved to the company in respect of the period during which the company was obliged to pay money for services it did not receive and for such time as the company suffers loss while seeking a suitable substitute employee. It cannot be correct, as a general principle, to award damages to a company where a particular employee as the result of a tortious act has ceased to be employed and the company would throughout the period of the working life of that employee have received greater profits by the application of his particular skills, energy and intellect than is otherwise probable. We are unable to accept that the law would require a comparison between the effectiveness as a revenue producer of the injured employee and his substitute or successor." This does not exclude a company proving losses in the form of decline in profits or increase in losses from an accident to an employee, but the occasions would be rare. The judgment makes no reference to Argent's case and I find it difficult to reconcile with the last sentence as the very basis of the award of damages in Argent was that the companies were deprived of the services of Box, which loss, in turn, caused a fall in profits. It must follow that where an employee of unique capacity is lost and replaced by an inferior employee damages resulting from the proved loss will be recoverable. For example, a leader in a new field, such as biotechnology, may be literally irreplaceable and his injury destroy the company. There is no single test for the measure of damages recoverable by an employer for the loss of an employee. 195Kiefel J's conclusion appears relevantly in the following passage in Barclay at [164]: Consistency with the purpose and scope of the action per quod servitium amisit requires that damages be limited to the cost of substitute labour. In Cattanach, it was observed that the employer suffers damage only when it is forced to pay a salary or wages to its injured employee when it is, at the same time, deprived of the employee's services. To permit recovery on any wider basis, including for profits lost, would be to transform an exceptional remedy for a particular type of loss into a substantial exception to the general principles which have developed concerning recovery of economic loss in tort. In terms of the coherence of the law, that would be undesirable. 196Although the passage from Kiefel J's reasons supports the proposition for which EML contends- that loss of profits is not a true measure of damages for a per quod claim- the statements from Scott and Perpetual are less unequivocal. In any event I do not consider myself to be at liberty to depart from what the Court of Appeal said in Marinovski. Further, I consider the obiter statements of the majority in Barclay leave open the possibility of a claim based on loss of profits if it is established, as I consider it to have been in the instant case, that Mr Ryan was irreplaceable in the business structure.

Assessing the quantum of the claim 197I consider the claim by Reliance International ought be assessed as a claim for the loss of a chance which must be quantified as such, in accordance with the statements of principle contained in Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at [7] (Malec v Hutton). On this analysis it would, in my view, be unfair to the defendants and EML to treat as certain a prospect which might have had a 51% chance of coming to pass and unfair to Reliance Pools International to ignore the loss of the chance to exploit the reputation of Reliance Pools and the plaintiff's special skills and reputation if it were adjudged to have only a 49% chance of coming to pass. 198Although Reliance Pools International had not started trading at the time of the plaintiff's accident and never did, some groundwork had been done prior to the accident and further groundwork as set out above was done after the accident to cultivate its relationship with Gemco. It was suggested that I should be sceptical of the plaintiff's and Ms Suleiman's optimism in circumstances where no one from Gemco was called to say what its attitude to the deal was. I do not draw an adverse inference against Reliance Pools International on that ground. The email communications speak for themselves: Gemco appears to have been interested but no binding commitment had been made, although there had been some discussion about the terms of any eventual venture. 199Although no evidence was given about what, if any, follow up occurred after Ms Suleiman "backed off" it was not suggested to her in cross-examination that Gemco was not interested because they themselves had not followed up Ms Suleiman. 200There was undoubtedly uncertainty about the terms of Reliance Pools International's remuneration. At one stage a licence fee of $100,000 was proposed; however, in January 2009, there was mention of a fee of 10% of contract fees. The MOU referred to 15% of turnover. 201There was also a deal of uncertainty about the commencement of the venture and its probable duration. According to the MOU, entry into a Licence Agreement would be conditional upon a trial pool being completed. The trial pool, which had to be for a minimum contract value of $250,000, was to be commenced within 6 months of signing the MOU and completed within 9 months to a standard that satisfied Reliance Pools International. Failure to meet any of these criteria would give Reliance Pools International a right to terminate. The initial term was to be three years with an option to renew. According to the MOU, Gemco was only bound to use the Reliance Pools Qatar brand for pools worth $250,000 or more. 202Furthermore none of the pools that was designed for Reliance Pools was protected by intellectual property rights. Mr Garnett, the pool designer frequently engaged by Reliance Pools, said that it would not be uncommon in his experience for someone to copy their designs and said that there was nothing to stop someone from doing that. 203Further, it was submitted that Reliance Pools International had not proved what its actual loss would be as distinct from its loss of gross income since it did not establish what the plaintiff himself would have been paid by Reliance Pools International as a result of services performed for its benefit. 204Reliance Pools International must prove that it lost something of value and, if so, what its loss is likely to have been as a result of the unavailability of the plaintiff. 205Reliance Pools International relied on Dr Crouch's calculation of its gross annual income of $266,000 as comprising the following four elements: Licence fee $100,000 Consulting fee $45,000 Working drawings $25,000 Travel reimbursement $96,000 206Reliance Pools International properly conceded that if the amount for travel were truly a reimbursement it would not add to its income. It also properly conceded that it had made no allowance for the cost of the plaintiff's remuneration and that it was fair to allow that the plaintiff would earn at least the amount of $45,000 since this amount represents consulting fees which would be a direct result of his labour. Once these adjustments are made the gross income amounts to $125,000. 207EML contended that the amount referable to working drawings ought also to be disregarded because either the plaintiff would do them, in which case it was, like the $45,000 consultancy fees, properly to be regarded as monies generated by his personal exertion; or Reliance Pools International would have to pay someone to do them and this was not allowed for in the expenses (see below). I do not accept this submission since I consider that there was a real prospect that Reliance Pools International could earn a profit on working drawings and that the monies in the line items for "salary/ consulting" or "all other expenses" may represent payments to persons such as Mr Garnett for the preparation of such drawings. 208Dr Crouch estimated various expenses to be incurred by the company in the course of earning the gross income. The figures ultimately advanced in oral submissions were: Motor vehicle expense/ travel $5,000 Repairs and Maintenance $5,000 Salary/ consulting $30,000 All other expenses $10,000 Total $50,000 209On these figures, the net profit of Reliance International before tax would be $75,000. According to Dr Crouch, a tax margin of 30% is appropriate because of the corporate structure, giving rise, on these figures to a net after tax profit for Reliance Pools International in the order of $52,000 or $1,000 per week. 210Dr Crouch, in his report, considered that as the company had not traded the best that could be done to quantify future profitability is to use the proposed first year's trading figures. 211The timing of the negligence by AF Concrete has deprived Reliance Pools International of the opportunity of seeing this venture come to fruition. It has also made it difficult for Reliance Pools International to quantify its claim with any real precision. However, where a wrongdoer has deprived the injured party of the means of more exact proof, a Court will endeavour to assess damages on the material available: see the authorities referred to by Heydon JA in State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 at [72]. 212EML submitted that one approach might be to select a weekly net profit figure and then apply a 5% multiplier for 23 years, being 721.2, to give a starting figure in the order of $720,000 without any reduction for vicissitudes or uncertainty as to how the venture would proceed. EML submitted that I ought allow no more than 25% to 33% of that amount, having regard to the real issues of uncertainty and the need to take account of multiple layers of potential uncertainties as discussed in Malec v Hutton at [7] and [9]. If one adopted this method one would arrive at a figure in the order of $180,000 to $240,000. 213AF Concrete, which adopted EML's submissions on the per quod claim except as to the calculation of damages, proposed a different calculation which led to a significantly smaller total sum. These calculations, including my own, are necessarily speculative. I do not, however, consider AF Concrete's submissions to take adequate account of the value of the chance lost. 214Although there are attractions to the approach for which EML ultimately contended, I consider there to be a better chance that Reliance Pools International would gain most of its income from the venture in the first three year term and that thereafter Gemco would have the skills, expertise and reputation to continue without its association with Reliance Pools International or, for that matter, the plaintiff. On this assessment it is somewhat artificial to conceive of a venture that would last 23 years. It follows that the greater part of the loss of Reliance Pools International would already, but for the accident, be in the past. 215I am inclined to assess the past loss of Reliance Pools International for the period of three and a half years from the latter half of 2009 (being my estimate, and the plaintiff's concession, of when income would first be received) to the date of judgment at 50% of the net profits after tax of $52,000, being an amount in the order of $100,000, inclusive of interest under s 18 of the Act. 216As for the future, I allow a buffer of $100,000 to reflect the loss by Reliance Pools International of the opportunity to exploit the plaintiff's expertise to make a profit from providing assistance by way of technical knowledge and design skills to entities based in Qatar to construct swimming pools of a higher standard than is generally available there presently. The amount for the future takes account of my view that once the plaintiff had supervised sub-contractors on particular pools, there was a real prospect that his 'niche' would attract local competition. Reliance Pools International's competitive disadvantage because of the plaintiff's location in Australia and his unwillingness to relocate to the Middle East would, in my view, prevent it from making more substantial profits than those allowed for by the buffer. 217Accordingly I assess damages on the per quod claim in the amount of $200,000.

AF Concrete's cross-claim against EML 218In its cross-claim against EML, AF Concrete has claimed contribution or indemnity under the statutory workers compensation policy for any damages for which AF Concrete is liable either to the plaintiff or to Reliance Pools International in the following terms: The Cross-Claimant therefore says that in the event that it is determined that any part of and loss and/or damage suffered by the Plaintiffs, if any, was caused or contributed to by any negligence on the part of the Cross-Claimant (which the Cross-Claimant denies) that the Cross-Claimant in entitled to contribution and/or indemnity from the Cross-Defendant in relation to any verdict entered in favour of the Plaintiffs against the Cross-Claimant pursuant to Section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 as amended on the basis that as insurer of the first Plaintiff's employer it is directly liable to the Cross-Claimant pursuant to Section 601Aag of the Corporations Act 2001 for its insured's negligence. 219EML contended that AF Concrete's claim for contribution or indemnity relating to its liability to Reliance Pools International is not covered, as a matter of construction, by the statutory policy. 220Since EML's liability under AF Concrete's claim for contribution depends on a finding that Reliance Pools, the insured, was negligent, AF Concrete's claim for contribution and indemnity does not arise. 221It is therefore not necessary for me to determine whether EML's contention is correct.

EML's cross-claim against AF Concrete 222It follows from my findings that AF Concrete is liable in damages to the plaintiffs for negligence and that Reliance Pools was not negligent, that EML is entitled to succeed in its cross-claim against AF Concrete for reimbursement of workers compensation payments made to, and expenses paid for the benefit of, the plaintiff. 223EML also claims interest on these sums. AF Concrete resisted the claim for interest on the basis that reimbursement was first claimed by way of the cross-claim in the proceedings. EML submitted that this contention should not be accepted because whenever it was first claimed, the claim has always been defended and the monies would not have been reimbursed absent a judgment of the court. It also submitted that AF Concrete has had the benefit of the money in that it was liable to the plaintiff from the date of the accident. 224I consider it appropriate that interest be awarded on the amount of this cross-claim. The calculation of interest is difficult because the sums were paid over time. I direct the parties to calculate the interest payable on the principal sum referable to this cross-claim. 225Although the sum of the amounts paid is not in dispute and has been proved, I shall leave it to the parties to incorporate the judgment amount in short minutes in order to take account of any payments made between the end of the hearing and delivery of judgment.

Costs 226The parties have asked me to reserve the question of costs. However it may be useful if I set out my preliminary views on some aspects of costs, subject to hearing from the parties and in particular from AF Concrete. 227As the plaintiff and Reliance Pools International have succeeded against AF Concrete, they are entitled to their costs against AF Concrete. 228The plaintiffs alleged in [30] of the further amended statement of claim: The first defendant caused the pipes to be blown and cleared of concrete without securing its pipes to the swimming pool floor and without warning the first plaintiff the pipes were being blown 229In its amended defence to the plaintiffs' further amended statement of claim, AF Concrete alleged, in [12A]: 12A. The first defendant denies paragraph 30 of the said Statement of Claim and further says as follows: (a) C & J Concrete Sprayers Pty Ltd caused the pipes to be blown over the objection of the first defendant. (b) C & J Concrete Sprayers Pty Ltd failed to secure the pipes. (c) C & J concrete Sprayers Pty Ltd failed to warn the Plaintiff. 230It was, accordingly, in my preliminary view reasonable and necessary for the plaintiffs to sue both AF Concrete and C & J because they were not in a position to resolve the question of fact between the defendants and ought not be put at risk of suing the wrong defendant. My preliminary view is that AF Concrete ought pay the costs of C & J. 231EML has been wholly successful since it is entitled to reimbursement of workers compensation payments made to or for the benefit of the plaintiff from AF Concrete and is not liable since Reliance Pools would not, if sued, have been liable to the plaintiff. Accordingly, my preliminary view is that AF Concrete should also be liable to pay EML's costs.

Orders 232I make the following orders and directions: (1)Judgment for the first and second plaintiffs against the first defendant. (2)Judgment for the second defendant on the plaintiff's claim. (3)Judgment for EML in its cross-claim against the first defendant for amounts paid by way of workers compensation to or for the benefit of the first plaintiff, with interest. (4)All other cross-claims dismissed. (5)Direct the parties to bring in short minutes which calculate the amount of the judgments and cross-claims in accordance with these reasons within fourteen days. (6)Costs of the proceedings and of all cross-claims reserved. (7)Failing agreement on costs, direct the parties to approach my Associate within seven days for a hearing date for argument on costs.

Amendments 05 March 2013 - corrected numbering of orders Amended paragraphs: 232 15 December 2014 - Amended paragraphs: Cover page Case Title amended 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: 15 December 2014