State Transit Authority of NSW v Abzakh & Abzakh

Local Court of NSW|2001-05-02

CITATION: State Transit Authority of NSW v Abzakh & Abzakh [2005] NSWLC 24 JURISDICTION: Civil PARTIES: State Transit Authority of NSW Abzakh & Abzakh FILE NUMBER: PLACE OF HEARING: Downing Centre DATE OF DECISION: 09/08/2005 MAGISTRATE: Magistrate B Maloney CATCHWORDS: Loss of profits - non-profit making organisation - whether actual loss suffered LEGISLATION CITED: Admiralty Commissioners v SS Chekiang (1926) AC 637 Athanasopoulos v Moseley [2001] NSWCA 266 Chekiang [1926] AC 637 Fire and Associated Risks Insurance v Callinan (1978) 140 CLR 427 Giles v Thompson [1994] 1 AC 142 CASES CITED: Grincelis v House (2000) 201 CLR 321 Haines v Bendall (1991) 172 CLR 60 The Greta Holme [1897] AC 596J The Mapessa [1907] AC 241 The Northumbria (1869) LR 3 Ad of Ec 6 Screen Co Pty Ltd v R L Drew Pty Ltd [2003] NSWCA 319 Valeria [1922] 2 AC 242 REPRESENTATION: Mr. David O'Dowd, Counsel for the Plaintiff Mr. Keith Manion, Counsel for the Defendant ORDERS:

On 2 May 2001 a collision occurred between the plaintiff's vehicle, a Scania 95 passenger bus and the first defendant's vehicle on Anzac Parade, Kensington. The first defendant's vehicle was driven by Mrs Abzakh. It is not in dispute that the collision was the result of the negligence of the second defendant and it was agreed that repairs costs to the bus had been paid.

The accident occurred on route L94, a limited stop service running between La Perouse and the city. Other buses also service Anzac Parade on a similar route, being express and all stop services.

The bus involved in the accident was from the Port Botany depot, which is one of 13 owned and run by the State Transit Authority. There are 32 routes services from the Port Botany depot.

As a result of the accident, the Scania bus required specialist replacement spare parts and repairs. It was not available for service until 5 September 2001, 126 days after the accident, partly because specialist parts were required from the bus's overseas manufacturer.

As a result of this accident, the bus could not continue its scheduled services and the route is serviced by alternative buses. I note that the State Transit Authority is restricted in its ability to hire buses externally due to requirements set out under contract.

As a result of the accident the State Transit Authority was deprived of its vehicle between the period of 2 May 2001 to 5 September 2001.

Because the State Transit Authority operates a bus fleet it provided a substitute bus out of its own resources. The Plaintiff claims the cost of professional hire for a replacement bus at the rate of $150.07 per day or $18,908.82.

In the alternative the State Transit Authority claims damages calculated as interest on the value of its subject bus as at 2 May 2001, from that date to 5 September 2001 being the costs of having 1 bus in reserve at $3,043 per month or $12,597 for 126 days.

I would have been assisted by the party's compliance with the Court's direction to file a Statement of Agreed Facts and Issues 7 days prior to hearing.

By the Plaintiff's own expert report, a loss of profits could not be quantified. Further, nor could a loss of income be directly attributed to the accident. However, the Plaintiff contends that there was a financial loss to it due to the cost of having replacement buses.

This can be achieved on two bases, fixed cost and variable cost. The analysis was predicated on the State Transit Authority's management accounts for the year ended 30 June 2001. The total calculated annual cost was $61,755.000. The total calculated costs incurred due to the accident totalled $64,084,646. 1,755 buses were held in 2001, and the costs of holding those buses was $3,043 per month or $12,597 for the interruption period. Interest was a factor in quantifying fixed costs. Interest costs for a spare bus was $237,579 at 7.7% p.a. The total per bus including interest at the Treasury rate based on the original costs of a spare bus equates to $4,567 per month or $18,909 for 126 days.

State Transit Authority as a Profit Making Organisation

For the year ending 30 June 2001 a loss of $5.2 million was recorded (Exhibit 1) for Sydney Buses. The State Transit Authority at this time also incorporated Sydney Ferries, which has recorded, and even greater loss.

It was not disputed that buses and ferries always run at a loss notwithstanding attempts to corporatise them. The State Government provides funds as well as the public paying a contribution to use the service they choose.

The Defendant claims that the Plaintiff has failed to prove any actual loss suffered. The State Transit Authority has 10% of its fleet on standby in any event and the cost of maintaining that fleet has been amortised into its budget.

The Plaintiff on the other hand admits this particular bus is not a profit making chattel and further, income and profit have to be looked at in the same light. Insofar as non-profit making organisations are concerned the Plaintiff submits that the decision in Greta Holme has expanded the remedies for such organisations; thus the plaintiff poses the question: Why expand the law and then discriminate between (a) businesses which make a profit and (b) businesses which tied to make a profit but did not do so?

Counsel for the Defendant Mr. Manion referred me to Screen Co Pty Ltd v R L Drew Pty Ltd [2003] NSWCA 319. Here the Court of Appeal was asked to consider an award of interest on the capital value of a chattel's loss due to negligence of the Defendant in circumstances where the Plaintiff had not paid for the chattel. The principle question was whether the Plaintiff's loss was real or theoretical.

McClellan J, at first instance, declined to award interest on the award for special damages, because the Plaintiff's loss had not been real and practical. His Honour followed the principle stated in Fire and Associated Risks Insurance v Callinan (1978) 140 CLR 427 where at p432 in a joint judgment the five justices of the High Court said: "In the case of loss of earning capacity, interest should be allowed under that head which represents compensation for those detriments THE PRACTICAL IMPACT of which , in terms of economic loss ACTUALLY OCCURRED, has already at the date of judgment been experienced by the Plaintiff" . (emphasis added).

It is well settled as stated in Grincelis v House (2000) 201 CLR 321 applying Haines v Bendall (1991) 172 CLR 60, "that it is the award of damages, where appropriate, interest…. which allows the Plaintiff to be…. restored to the situation, as far as money can do, in which he or she would have been but for the Defendant's negligence".

The defendant contends that the Plaintiff has not suffered any financial deficit from a practical point of view. Put another way, damages should restore rather than improve the plaintiff's position. Hence as the Defendant has already compensated the Plaintiff for the cost of repairs to the Plaintiff's bus, any further amount would improve the Plaintiff's position. As the Plaintiff maintained a fleet of reserve buses and whether anyone of those buses were used to maintain public services during the 126 day period or allowed the same to sit in the shed for that period the relevant costs has been amortised in its budget. Thus no loss had been demonstrated from a practical point of view.

In collision cases involving the loss of a profit earning ship the Admiralty Court had developed principles for awards of interest on the value of the ship and for the loss of profits from its use. The leading case is The Northumbria (1869) LR 3 Ad of Ec 6, where Sir Robert Phillimore said: In the case of a vessel sunk with cargo on board the restitutio in integrum was affected by a calculation of a probable value of the ship at the end of her voyage, and of the freight which she would have earned, making the same deductions as to the expenses which the owners must have incurred in order to complete the voyage, and e converso, giving interest on the value if not paid until after the probable end of the voyage. In the event of a vessel sunk with no cargo the interest on the value of the ship from the day of collision was given, the reason being, that in the former case by giving freight you had really given the interest on the use of the vessel during the interval between the collision and the arrival at port; whereas in the case of… no cargo, there was no freight to represent the interest and it was therefore expressly given. So that in the first case, to have given interest as well as freight would have been to place the sufferer in a better position than he would have been but for the collision; and in the second case, to have refused him interest would have been to place him in a worse position on account of the collision that he would have otherwise have been".

On the basis that the Plaintiff's business was a non-profit earning chattel I turn to The Mapessa [1907] AC 241 and Chekiang [1926] AC 637 in which decisions interest on the depreciated value of non-profit earning ships was awarded as damages for loss of their use. However, in Valeria [1922] 2 AC 242 this line of authority was held to have no application to claims for the loss of or damage to profit-earning ships.

The decision in Giles v Thompson [1994] 1 AC 142 takes me closer to the point in issue in the case before me. The decision in Giles involved claims to recover hiring charges and replacement vehicles where the Plaintiff's vehicle was off the road for repair. Lord Mustill said at 166: "I now turn to the question whether the motorists… proved that they had suffered recoverable loss… The defendants say that they have not, because the cars were replaced by substitute vehicles which the motorists were able to use free of charge. In essence, it is said that the motorists have mitigated what would otherwise have been a claim for general damages reflecting their loss of the opportunity to make use of their own vehicle… This contention admits a very short answer. In my judgment the motorists do not obtain the replacing vehicle free of charge… In the light of this conclusion I find it unnecessary to discuss… what the position would have been if the use of the substitute vehicle really had been free…"

As I perceive the Defendant's case, it joins in the criticism by the Court of Appeal in Screenco of Lord Mustill in Giles v Thompson.

Handley JA criticised, if I may use that term, Lord Mustill in these terms: "Although His Lordship's (sic) argument seemed logical at first sight, it ignored the fact that the power to award interest is discretionary, and the exercise of this power should correspond with reality".

His Honour went on to say, effectively, that in both practical and legal terms w the financial position of the motorist has been wholly unaffected. Mr Manion for the Defendant contends likewise with State Transit Authority's position; spare buses had been budgeted for whether they were used or not. Thus to compensate the State Transit Authority for the amount claimed or any amount, as the pleadings are in the alternative, would improve the State Transit Authority's position rather that simply restore it.

In The Greta Holme Lord Halsbury stated the principle governing the right of recovery of damages in repair case in these terms: "It is a significantly familiar head of damages between individuals that, if one person injures the property of another, damages may be recovered, not only for the amount which may be necessary to spend on repairs, but also for the loss of the use of the article injured during the period that the repairing may occupy". "This public body has to pay money like other people for the conduct of it operations and if it is deprived of part its machinery, which deprivation delays or impairs the progress of its works, I know of no reason why they are not entitled to the ordinary rights, which other people possess for obtaining damages for the loss occasioned by the negligence of the wrongdoer".

A case were in point to the present is The Medina. Here was a lightship damaged by the "Mediana" and during the period of repair the owners used another lightship owned by it and maintained for the purpose of being a replacement ship in the case of such emergency.

Lord Halsbury applied his own principle enunciated in The Greta Holme and awarded damages accordingly. However in Mersey Docks v Owners of SS Marpessa whilst another steamship/dredge case their Lordships applied Greta Holmes but qualified its application saying that it did not lay down a rule of universal application for the ascertainment of damaged in each particular case.

To my mind, what Lord Summer held in Admiralty Commissioners v SS Chekiang (1926) AC 637, takes me closer to a decision in the present case when His Lordship said: "That a tort-sufferer is not to go short of compensation for damage at a tortfeasor's hands, merely because he does not trade for a profit…"

The "Chekiang" damaged the vessel "Cairo" and the owners in repairing the vessel took advantage of the time the vessel was out of service to effect its annual refit. Viscount Dunedin stated: "…the Admiralty were entitled to take advantage of the vessel being in dry dock without being called on to contribute to the expense of docking or to forego the payments in full to which they were entitled as for the loss of use of the vessel for the period of detention due to the collision during which the vessel was rendered unfit for her active service…".

Viscount Dunedin extended this principle to non-profit earning vessels, in Admiralty Commissioners v SS Susquehanna where he stated that the decision in Greta Holme laid down that damages were due for the period during which a ship was rendered useless, even though the ship was not a ship of the kind which could secure commercial employment and earn consequent reward.

Viscount Dunedin held that the owners were entitled to general damages for the loss of use of their vessel, notwithstanding they had suffered no pecuniary loss, and may have been able to "supply the gap made by the accident out of their own resources".

I am aided by the review of the law made by Handley J in Athanasopoulos v Moseley [2001] NSWCA 266.

There His Honour was dealing with a claim for the recovery of the cost of hire cars to the tort-sufferers supplied by their insurers by arrangement of which the tortfeasors had no knowledge. His Honour was asked, inter alia, whether the arrangement was one which is res inter alios acta, and if not, whether it is one which extinguished or does not extinguish the loss; viz. did it go towards mitigating the loss.

These questions do not concern me here. However Hadley J was of the view that the loss sufferers were entitled to damages for the loss of use of their vehicles based upon the settled authorities from Greta Holme through to Susquehanna.

I similarly form the same view. The State Transit Authority is not a profit- making authority, nor is the particular bus in question a profit-making chattel. Frankly, based on the foregoing authorities, it neither need be. I see no appreciable difference between the present case and the facts in The Mediana. There is similarity too with SS Marpessa. The bus earned nothing in money and costs a good deal, but did indispensable service.

The Plaintiff's loss is as pleaded in the alternative, the cost of having one bus in reserve for 126 days.

I enter a verdict for the Plaintiff in the sum of $12,597.00.

The Defendant is to pay that sum plus interest in accordance with s39A Local Court (Civil Claims) Act calculated by the Registrar at the various interest rates applicable since the date of filing the initiating process. There is also ordered any filing and service fees of that and any other process.

I order the defendant to pay the Plaintiff's professional costs in an amount as agreed or assessed.

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Judgment (43 paragraphs)

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Cases Cited (5)