Victorian WorkCover Authority v Papaconstantinou [2021] VSCA 145

1 The respondent is a 43 year old motor mechanic who has worked in a family automotive mechanic business since 1998.

2 On 6 September 2014, the respondent suffered a serious crush injury to the fingers of his left hand when it was caught in a rag and dragged between the fan belt and harmonic balancer of a motor car which he was repairing.

3 After hospital treatment involving three separate surgical repairs to his hand, the respondent returned to work doing manual light duties as a mechanic 30 per cent of his time and management work 70 per cent of his time.

4 In 2019, the respondent applied under s 335(2)(d) of the Workplace Injury Rehabilitation and Compensation Act 2013 ('WIRC Act') for leave to issue a proceeding for the recovery of damages in respect of the injury he had suffered at work.

5 The application was made both in respect of pain and suffering damages and pecuniary loss damages.

6 When the matter came on for hearing before the trial judge, the Authority conceded that leave should be granted in respect of pain and suffering damages but joined issue with the application for leave in respect of pecuniary loss damages.

7 As the trial judge recorded,[1] in order to establish the relevant level of consequences in respect of loss of earnings, the respondent had to show:

(a) the relevant loss satisfied the narrative test set out in ss 325(2)(b) and (c) of the WIRC Act, namely that the loss of earning capacity consequences when judged by comparison with other cases in the range of possible impairments or loss of bodily function were fairly described as being more than significant or marked and at least very considerable;

(b) the respondent had suffered a loss of earning capacity as required by s 325(2)(e)(i) equivalent to 40 per cent of gross earnings measured as set out in s 325(2)(f); and

(c) the respondent would, as required by s 325(2)(e)(ii) continue permanently to have a loss of earning capacity which would be productive of a financial loss of 40 per cent or more of the respondent's gross earnings.

8 Section 325(2)(f) provides for the calculation of the relevant loss of earning capacity:

(f) for the purposes of paragraph (e)(i), a worker's loss of earning capacity is to be measured by comparing -

(i) the worker's gross income from personal exertion (expressed at an annual rate) which the worker is -

(A) earning, whether in suitable employment or not; or

(B) capable of earning in suitable employment -

as at that date, whichever is the greater, and -

(ii) the gross income (expressed at an annual rate) that the worker was earning or was capable of earning from personal exertion or would have earned or would have been capable of earning from personal exertion during that part of the period within 3 years before and 3 years after the injury as most fairly reflects the worker's earning capacity had the injury not occurred;

(g) a worker does not establish the loss of earning capacity required by paragraph (b) if the worker, taking into account the worker's capacity for suitable employment after the injury and, where applicable, the reasonableness of the worker's attempts to participate in rehabilitation or retraining -

(i) has; or

(ii) after rehabilitation or retraining, would have -

a capacity for any employment including alternative employment or further or additional employment which, if exercised, would result in the worker earning more than 60 per cent of gross income from personal exertion as determined in accordance with paragraph (f) had the injury not occurred;

10 Section 335(5) provides that the Court must not grant leave unless it is satisfied on the balance of probabilities that the injury is a serious injury and, for the purposes of proving a loss of earning capacity in accordance with the s 325(2), the worker has an onus of proving:

(i) any inability to be retrained or rehabilitated or to undertake suitable employment or any employment including alternative or further or additional employment; and

(ii) the extent of that inability.

11 In the present case, the trial judge determined that:

(b) the figure of $88,200 gross earnt by the respondent prior to the workplace accident in the financial year ending in 2014 reflected the respondent's relevant pre-injury earning capacity;[3]

(c) at the date of the hearing the respondent's current gross earnings of $30,098 per annum for the 2019 financial year were a true reflection of his earning capacity;[4]

(d) the respondent's loss of earning capacity consequence was permanent;[5] and

(e) the respondent had a loss of earning capacity of more than 40 per cent and will continue permanently to have a loss of earning capacity which will be productive of a financial loss of more than 40 per cent.[6]

12 The Authority does not take issue with the conclusion that the respondent's pre-injury earning capacity was $88,200 gross per annum but now seeks leave to appeal on three proposed grounds:

1. In assessing the respondent's 'after-injury' earning capacity as required by section 325(2)(f)(i) of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic), the primary judge erred by:

(a) conflating sections 325(2)(f)(i)(A) and (B) of that Act;

(b) concluding that the respondent's gross annual earnings of $30,098 for the 2019 financial year were a true reflection of his earning capacity; and

(c) failing to consider what the respondent was capable of earning, and would in the future be capable of earning, in suitable employment.

1. The primary judge erred by failing to conclude that the respondent had not discharged the onus cast on him by section 335(5)(b) of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) of proving that he was incapable of earning $52,920 or more in suitable employment as at the date of the hearing and that he would continue permanently to be incapable of earning $52,920 or more in suitable employment after that date.
2. The primary judge failed to give adequate reasons for concluding (if he did so conclude) that the respondent's gross annual earnings of $30,098 for the 2019 financial year reflected the limit of his gross annual earning capacity in suitable employment as at the date of the hearing and that his gross annual earning capacity in suitable employment would continue permanently to be limited to $30,098 after that date.

13 As elaborated on the hearing of the application for leave to appeal, the proposed grounds raise three broad questions:

(a) did the respondent prove a 40 per cent loss of earning capacity would be suffered permanently, assuming the only suitable employment was his current job?

(b) should the trial judge have been satisfied that the respondent could not engage in suitable employment outside his current job productive of 60 per cent of his pre-injury earnings?

(c) enmeshed with the first two proposed grounds, were the trial judge's reasons with respect to these issues adequate?

14 For the reasons which follow we are of the view that:

(a) the primary judge did give adequate reasons for concluding that the respondent's gross annual earnings for the 2019 financial year reflected both his current and permanent loss of earning capacity;

(b) the primary judge did not err in concluding that the respondent had discharged the onus of proving both a present and ongoing loss of the capacity to earn more than $52,920 gross per annum in his current employment;

(c) the Authority's contentions concerning alternative employment raise a new argument which should not be entertained on appeal; and

(d) in any event, the evidence before the trial judge was sufficient to discharge the respondent's legal burden with respect to the issue of capacity to engage in alternative employment.

15 In the broad, the evidence before the Court comprised the affidavits sworn by the respondent and his oral evidence in cross-examination; medical reports from his general practitioner, Dr Mourad Alexander, and treating surgeon, Mr Anthony Berger, a medico-legal report from Dr Joseph Slesenger (a specialist occupational physician), and medico-legal reports from Mr John Buntine and Mr David Ireland, surgeons having expertise in hand surgery.

16 The respondent also produced tax returns relating to his employer, the Papas Family Trust, and to himself individually.

17 The respondent was the only witness to give oral evidence and be cross-examined.

18 There are three underlying aspects of the evidence which require some elaboration before turning to the trial judge's reasons concerning the matters on which the parties joined issue.

19 First, detailed evidence was presented as to the nature of the respondent's injury. The respondent suffered laceration to, and fractures of, his index and middle fingers, a partial amputation of his middle finger and a de-gloving injury to his ring finger.

20 Initial surgical repair was undertaken by Mr Julian Peters, a hand surgeon, involving Kirschner-wire fixation of the index and middle fingers, together with skin grafts and repair of soft tissue injury.

21 A second operation involving tenolysis and joint relaxation was undertaken by Mr Peters in May 2015. Following this, the respondent was left with a malformed index finger and loss of sensation and strength in both the index and middle fingers. A third operation was undertaken by Mr Anthony Berger in February 2017 involving corrective osteotomy of the index finger. This straightened the respondent's index finger but did not resolve continuing problems with loss of movement and strength.

Mr Papaconstantinou was last seen on 12 October 2017 ten months after the surgery. At this time the alignment of the finger was acceptable and Mr Papaconstantinou was back at work. His main problem however was one of stiffness with flexion of the proximal interphalangeal joint to only 35 degrees. This was causing some functional impairment and difficulty with fine activities. Further treatment was discussed with Mr Papaconstantinou including a joint release and tenolysis. He is going to consider these options and call back if he decides to proceed.

23 Mr John Buntine, a hand plastic and reconstructive surgeon who saw the respondent in February 2020 on behalf of the respondent for medico-legal purposes, summarised the respondent's condition as follows:

All of the fingers of the non-dominant left hand were severely injured as is described in detail above. The index finger has very poor flexion of its proximal interphalangeal joint while only the distal interphalangeal joint of the middle finger is stiff in flexion and sensation is poorest at the end of this finger. The ring and little fingers have been less severely affected.

24 He further stated that the prognosis is for no significant change to occur in the condition of the respondent's left hand.

25 Mr Damian Ireland, a hand surgeon who saw the respondent on behalf of the Authority for medico-legal purposes in October 2019, diagnosed dysfunction of the left hand following crush injury resulting in bone and soft tissue injuries to the index, middle and ring fingers. He further stated that the prognosis for any further improvement is poor and that there is no indication for any further treatment.

26 Secondly, we note the respondent's description in evidence of the ongoing consequences of his injuries. Because of his injuries the respondent cannot work manually. He has a loss of strength in and a variable capacity to grip with the fingers of his left hand and suffers pain when he overuses it. In consequence he can only perform limited parts of the work required of an automotive motor mechanic.

27 The trial judge summarised the respondent's evidence as follows:

During summer or when resting, the middle finger of the plaintiff's left hand is not always painful. It worsens in winter with more stiffening. It is painful when he grips things. Although right handed, he must use both hands as a mechanic. The tip of the middle finger is numb. If he touches it too hard, he gets a 'shock pain'. He cannot bend the index finger. He cannot make a fist.

The plaintiff now works 50 to 60 hours a week, dividing his time between 30 percent working as a mechanic and 70 percent on administrative duties. He does the lighter aspects of motor mechanic's work. Even though others can do it, he does most of the diagnostic work using a computer. He can do basic servicing of cars, but if he has to take off a heavy tyre he calls for help. Even with lighter tyres, he will not work with [sic] for extended periods. His work as a mechanic now includes the menial task of cleaning tools and benches. However, these tasks only occupy five to ten minutes daily.

His administrative or managerial work involves directing the business, answering and making phone calls, preparing quotations, ordering parts and preparing invoices. The financial side of the business is left to the book keeper.

His father does not work as a mechanic. He oversees the decisions the plaintiff makes and questions him about them.[7]

28 Thirdly, we note the medical opinion evidence as to the consequences of the respondent's injuries.

29 In a written report tendered in evidence, Mr Buntine expressed the following opinions in respect of questions asked of him:

1. Whether as a consequence of Andrew Papaconstantinou's injury on its own, and excluding any other physical conditions and/or any psychiatric condition, he is likely to be precluded or restricted in relation to employment or activities involving:

a) pushing, pulling or lifting

Pulling and lifting will remain restricted.

b) repetitive pushing, pulling or lifting

All repetitive tasks will remain restricted.

c) overhead activities

No significant effect.

d) gripping, holding, carrying

All will remain considerably restricted.

e) typing, writing, use of tools

All will remain considerably restricted.

f) any other physical functions or motions

Everything requiring fine manipulation or strength of grip will remain restricted.

and if so:

• The extent of the incapacity; and,

Moderately severe.

• Whether the incapacity will continue for the foreseeable future;

The incapacity will continue for the foreseeable future.

1. Whether as a consequence of Andrew Papaconstantinou's injury on its own, and excluding any other physical conditions and/or any psychiatric condition, he has the physical capacity to perform his pre-injury duties;
   1. If yes, please state whether on a part-time or full-time basis, and if part-time, please state the maximum number of hours he could work, as well as the specific physical limitations on him working more hours;

Mr Papaconstantinou has the capacity to continue to work full-time as an owner and supervisor of the service station.

1. If no, please outline the specific physical limitations that would prevent him performing these duties, as well as whether you consider this incapacity to be permanent, i.e. likely to last for the foreseeable future;

He does not have the capacity to work full-time 'on the tools' as an employed motor mechanic, which incapacity will be permanent.

30 Mr Ireland expressed the following view in a written report tendered in evidence:

11f. what kind of duties in his pre injury and current employment role can the worker not perform as a result of this accepted left hand injury?

The worker is not able to engage in work that requires him to lift weights in excess of 10 kg with his left hand. He is not able to engage in fine motor movements or dexterous activity that requires pulp pinch between the thumb, index and middle fingers. He is not able to work in situations that require lifting or use of his left hand when out of vision.

31 He answered a further series of specific questions as follows:

1b. the extent to which, and the capacity in which, the worker is currently working in the family repair/service business and/or any concurrent employment/business activity

As outlined above the worker is currently the manager of the family motor mechanic repair shop business. He works 6 days a week and between 50 and 60 hours per week. He states that 70% of his work is administrative office work and 30% is hands-on tool work. This hands-on tool work is light duties work as he states his left hand prevents him lifting heavy weights in excess of 15 kg [sic]. This heavier work he assigns to 1 of his 3 employee qualified motor mechanics. The hands-on tool work he does is confined to routine servicing of motor vehicles and auto electrician work in which he is experienced.

lc. details of any ordinary/pre injury duties that the worker is now not performing

As stated above, the worker does not do heavy motor mechanic work. As an example he states that he is not able to hold an alternator detached from the engine, in the palm of his left hand whilst using tools with his right dominant hand. He is not able to do this due to limited grip strength and discomfort in the left hand. This weakness is partly caused by inability of the stiff index finger to contribute to gripping and discomfort in the index and middle finger joints.

...

11a. does the worker have a capacity for other suitable employment

The worker is not able to engage in his normal preinjury work activities. He is restricted to the activities outlined in detail in the report above. He has a weight lifting capacity of 10 kg and is not able to use the left hand for fine motor movements or dexterous activities in confined spaces or when the left hand is out of view.

11b. if the worker was not working in the family business, does he have a capacity for other suitable employment

The worker is currently working in the family business as outlined in detail above.

32 Dr Joseph Slesenger, a specialist occupational physician, saw the respondent in February 2020 and expressed the following opinions in a written report tendered in evidence:

I recommend that, based on the left-hand impairment alone, Mr Papaconstantinou should:

• Avoid push, pull, carry and lift over 5 kg.

• Avoid prolonged gripping.

• Avoid turning, pushing and pulling with left-side.

• Avoid fine dextrous tasks.

• Avoid use of power tools.

I am of the opinion that Mr Papaconstantinou cannot return to his pre-injury duties. In support of this, I note the bimanual nature of the pre-injury tasks together, as well as the manual handling and the postural requirements. He could not return to this role.

I note that he is currently employed as a Director of the same company where he was working at the time of the injury. He is currently limited to performing administrative tasks including answering phones, HR management, stock control, invoicing and performing some light mechanical repairs. I note that he continues to work on a full-time basis, although 80% to 90% of his current tasks are administrative.

With regard to suitable alternative duties, this is a difficult question to answer. Mr Papaconstantinou is currently working in a supported environment in a family business, working on a full-time basis and I anticipate that he would be able to continue this role into the foreseeable future.

However, I also note that the business has had to be [sic] employ additional staff to cover most of his pre-injury role. I am also of the opinion that should he become job detached, he will have difficulty replicating the current work arrangements in an open job market.

I am of the opinion that the current tasks are likely to fit within his capacity limits, although I anticipate that there are duties currently being performed that could lie outside his capacity limits.

35 We interpolate that taken together the reports of Mr Buntine and Dr Slesenger identify and particularise very significant limitations in the potential use of the respondent's left hand in the course of employment. Moreover, it was plain from the opinion evidence as a whole that he could no longer work effectively 'on the tools'. Further, the evidence of Mr Ireland and Dr Slesenger supported the view that the respondent suffered significant restrictions with respect to alternative employment.

36 Because the trial judge's Reasons ultimately involved a synthesis of the circumstantial evidence as a whole, it is necessary to summarise those Reasons in some detail.

37 In introducing his Reasons, the trial judge recorded the fact of the injury to the respondent's hand in an accident on 6 September 2014, and stated the nature of the issue before him, namely whether leave should be granted with respect to pecuniary loss damages. He then set out a series of background matters relating to the business from which the respondent derived income, dealing with facts which we have already summarised.

38 After doing so, the trial judge summed up the respondent's before and after situation as follows:

Before the accident

The business comprised the plaintiff, his father and a mechanic called George. The plaintiff had assumed a larger management role in the business as his father was moving towards retirement. The greater management role required him to close a separate business he operated, AP Engine Mounts.

Most of the plaintiff's time was spent working as a mechanic even though his 2014 and 2015 tax returns described him as a manager. His salary increased in the 2014 financial year to compensate him for the closure of the business of AP Engine Mounts and his greater management role. He worked longer hours in the business.

The plaintiff became a director of the corporate trustee, namely, his employer. As his father headed for retirement, it was expected he would assume more of the managerial tasks of the business. He believes directorship was a recognition of his greater responsibility. He says he does not receive director's fees or dividends. In truth, none of the directors do, probably because the trustee is a bare trustee. He does receive a salary 'which represents the profitability of the business'. His salary after the accident included weekly payments of compensation. Between 15 September 2014 and 3 March 2017, he was paid $164,396 before tax by way of weekly payments.

After the accident

After the accident, the plaintiff was off work for a while, undergoing operations. In 2014 or 2015, another mechanic was employed to do the work he had done. The cost of this mechanic is about $75,000 in all.

Since the accident, the plaintiff has assumed more 'managerial' tasks. He describes them as directing the overall operation of the business, liaising with customers, making and taking phone calls, making bookings, preparing quotations, ordering parts, advertising (including through a website) and sponsoring sports clubs. The bookkeeping is done by the bookkeeper. He works 50 to 60 hours per week now, comprising about 70 percent administrative and about 30 percent mechanical work. The latter involves its lighter aspects, including servicing and auto-electronic work. He is able to do basic services of vehicles, remove lighter tyres, and clean tools and benches.[8]

39 His Honour then analysed the taxation records of the trust and the respondent for the years 2014 to 2018. In summary, he found as follows:

By the time of the hearing, the plaintiff had not lodged his 2019 income tax return. However, he produced a draft of that return. Although a draft, I accept its accuracy. He was paid $30,098. His main deduction again was the loss on the rental property. As in his previous returns, there were other deductions. There was some cross-examination as to whether the loss on this investment property is entirely his, as opposed to that of his wife or shared. Ultimately, it proved immaterial for the purposes of this application. The material figure is $30,098.

The high point is $88,200, received in 2014, being the financial year before the accident. Thereafter, there is a decline to $30,098. Between 18 September 2014 and 3 March 2017, he was paid weekly payments of compensation totalling $164,396. These payments were his major source of income. Although his rental property produced an income, this was overwhelmed by the losses incurred in producing it. His tax returns for 2015, 2016 and 2017 cannot be used to gauge his after injury income, for they consist largely of his weekly payments. These payments are calculated under a statutory formula which uses the concept of 'pre-injury average weekly earnings'. They provide no guidance as to the amount he could earn by personal exertion.

Despite the figure of $30,098, the plaintiff is not paid regularly in the sense of particular pay dates. He 'withdraws' whatever the business can afford towards payment of his living expenses. This is usually fortnightly. He estimates he receives $3,000 to $4,000 per month, which is an over-estimate. I would rely on the figure in the draft return, derived from figures supplied by the bookkeeper. As to emphasise his predicament, his parents help him financially, as do his brothers. He estimates his parents contribute $10,000 per year. I do not know the amount contributed by his brothers. The other source of income for the family is the amount received by his wife through the family tax benefit, about $26,000 per year. Once he was able to save, but no longer.

A central aspect of the plaintiff's application is the assertion the business needed another mechanic because of his impairment. Or put another way, without the impairment, the business would need one less mechanic.

There was some examination of the trust tax returns as to whether there was an extra mechanic. In 2014, salary and wages totalled $167,630 where the plaintiff received $88,200. In 2015, the corresponding figures were $148,761 and $73,092; in 2016, $143,554 and $58,608; in 2017, $155,016 and $47,859; and in 2018, $165,385 and $56,763. If one subtracts his wage from the total wages, then the amount remaining for wages, other than the plaintiff, are respectively $79,430, $75,669, $84,946, $107,157 and $108,622.

At some point, the plaintiff's father was not paid a wage. He continued to help administratively but was not paid. The new mechanic was paid less than the existing mechanic, George, because of the latter's experience and responsibility. Although in his first affidavit, he spoke of three mechanics apart from himself, that is a mistake. I am satisfied, after the accident, one more was employed and this is still the case. The figures cast doubt on the cost of that person, not his existence. I do not accept it is $75,000 per year (including expenses).[9]

40 The trial judge then turned to and summarised the medical evidence to which we have already referred and then summarised the respondent's evidence as to his current position.

41 The trial judge then set out the legal requirements which the respondent must satisfy to establish the relevant loss of earning capacity consequence.

42 He then addressed the financial evidence in the broad, observing that, whilst the gross income of the business had increased over the years, its profitability had not. This was due to two factors: the effect of the respondent's injuries and the move from rented premises to purchased premises. The respondent's injuries impacted the business because he could do less mechanical work and the business had been required to engage another mechanic.

43 His Honour then held that the respondent had satisfied the narrative test, finding that the 'true cumulative loss will be very large'.[10]

44 The trial judge then set out the bases on which the respondent's case as to the threshold test was put. It is sufficient for present purposes to say that this included as one alternative the proposition that the relevant loss of earning capacity could be inferred by comparing the respondent's current gross earnings of $30,098 per annum with the $88,200 per annum in the final year before the accident.

Looking at (b), since the trust pays the plaintiff and he is a trustee, then it is said the payments are not a proper measure of his earning capacity. This contention is supported by his hours of work and the broad description of his duties (manager/technician) being the same now as they were before the accident.

I accept the figure of $88,200 most fairly reflects his without injury earning capacity. The figures for the three financial years before the injury show an overall increase to $88,200. In 2012, he earned $52,715. It dipped to $42,325 in 2013 and jumped to $88,200 in 2014 after closing his other business and focussing entirely on the trust's business. The returns for 2010 and 2011 lend weight to the continuing increase in his income until 2014. I have already explained why no regard should be paid to the income in the three financial years after the injury. Accordingly, I will adopt $88,200.

There is no subtlety about the plaintiff. He has little knowledge of his or the trust's tax returns. He may well be an excellent mechanic, but he shows little aptitude for financial matters. I accept his evidence that what the trust can pay him is determined by the state of the business. He would like to receive $3,000 to $4,000 per month. Overall, he does not, but whatever he receives depends on the finances of the business and that means its cash flow. It is not strictly speaking 'profit' for, as the defendant pointed out, he was being paid even when the trust lost money.

This business cannot afford the plaintiff doing full-time administrative work or the combination he performs presently. It needs the plaintiff as an unimpaired mechanic, working full-time on mechanical duties. Any administrative duties would be added onto those mechanical duties. The restriction in his capacity as a mechanic translates into the decreased profitability of the business, primarily, through the need to employ an extra mechanic.

I consider the comparison caused by (b) is appropriate here. His gross earnings of $30,098 are a true reflection of his earning capacity.[11]

46 The trial judge went on to discreetly address the significance of the evidence as to the purchase of new premises,[12] workload,[13] and turnover.[14] He then stated his reasons in regard to the alternative hypothetical bases on which the respondent put his case, dismissing each of them.[15]

47 Finally, the trial judge summarised his conclusions as to the loss of earning capacity having regard to the evidence as a whole as follows:

Although Mr Berger and Dr Ireland express views about the usefulness of the plaintiff's hand, I accept his evidence of the restrictions and the accuracy of his description of the work he now performs as a result. In doing so, I am disregarding the fact that the defendant conceded the issue of pain and suffering consequence and what might flow from that concession. Similarly, his limited ingestion of medicines these days is of no moment.

Dr Slesenger placed significant restrictions on the use of his left hand such that he could not return to his pre-injury duties, which included unrestricted mechanical duties. Dr Slesenger spoke of a 'supportive' environment in the family business. I agree Dr Slesenger does not spell out why the plaintiff would have difficulty replicating his current work arrangement in the open job market, but he is an experienced specialist occupational physician. He combines medical expertise with an understanding of workplaces denied to other medical experts. I accept that opinion.

From what I know of the plaintiff, including listening to his evidence, I doubt he could leave this business and find employment in a purely administrative, non-mechanical, role. He has little understanding of the financial arrangements of the business. His present administrative duties involve directing the business, answering and making phone calls, ordering parts and preparing quotations and invoices. Directing this small business should be a straightforward task. He is directing himself and two mechanics. Even in this task, his father hovers, advising and supervising. I daresay his inability to dismantle vehicles would inhibit some aspects of the preparing of quotations.

The impairment to his hand is permanent. The plaintiff is not prepared to undergo further surgical treatment, which is understandable. On the material before me, the business is failing. If it fails, his future is bleak. The permanency of his loss of earning capacity consequence is established.

I am satisfied the plaintiff has now a loss of earning capacity of more than 40 per cent and will continue permanently to have a loss of earning capacity which will be productive of a financial loss of more than 40 per cent.[16]

Did the trial judge err in equating the respondent's actual current earnings with his capacity to earn?

48 The first question raised by the proposed grounds of appeal encapsulates an attack upon the trial judge's conclusion that the respondent's actual gross earnings of $30,098 in the financial year ending June 2019 reflected his present and ongoing earning capacity within the family business.

49 It was on this question that the parties joined issue at trial. Two principal submissions were advanced on behalf of the Authority.

50 First, it was submitted that the respondent's actual earnings did not reflect his earning capacity but were a function of the overall profitability of the business.

51 Secondly, it was submitted that, prior to the injury, the respondent was employed as a manager/mechanic and that he continued to be employed in the same capacity after the injury. All that changed was the proportions of the time he spent in these functions.

The plaintiff does not assert that he's paid a wage which is reflective of his earning capacity. Quite the contrary. He asserts that his wage is determined by the profitability of the business and his income need. It's for the plaintiff to prove that as at today's date the exercise of his work capacity as a manager technician on a full-time basis would be productive of a permanent loss of 40 per cent or more of his without-injury earnings and the evidence before the court is a long way short of what would be required to satisfy the court that he meets that test.

53 The trial judge's Reasons responded to these submissions but the central thrust of the Authority's case was re-agitated upon appeal.

54 In the first instance, attention was drawn to a summary table relied on by the Authority at trial:

• the trial judge erred in focussing on one year as the basis of his conclusion;
• the respondent's salary of $56,763 in the previous financial year demonstrated that it was unsafe to adopt the 2019 figure;
• the respondent's evidence demonstrated that the business had the capacity to expand and improve its profitability by undertaking roadworthiness tests and the trial judge's conclusion as to the overall trajectory of the business should be rejected;
• the trial judge's findings as to the respondent's limitations as a manager were unjustified because a distinction should be drawn between the respondent's limited understanding of financial and accounting matters on the one hand and the capacity to manage the conduct of an automotive repair business on the other.

56 The respondent submitted that the question of earning capacity was not to be resolved by way of a precise forensic calculation or a formulaic approach but on the basis of the evidence as a whole. The trial judge had the advantage of seeing the respondent give evidence in person and had the opportunity to assess his capacities having regard to the circumstantial evidence as a whole illuminated by the impression created by the respondent's evidence.

57 Further, the evidence demonstrated that the profitability of the business from which the respondent derived his income was in decline. The respondent was only able to withdraw limited amounts from the business in this context and he struggled to meet living expenses, relying on other members of the family for support. The trial judge was correct to assess the figures upon which the Authority relied in this context.

58 The trial judge's task was to apply a gateway provision which required a judgment as to relative incapacity falling to be resolved by consideration of the evidence as a whole.[17]

59 The judgment was required to be made as at the date of the hearing and concerned both loss of earning capacity at that date and in the foreseeable future.

60 The relevant principles were summarised by J Forrest J in Acir v Frosster Pty Ltd[18] when considering the analogous provisions of s 134AB(38)(f) of the Accident Compensation Act 1985. The relevant principles were subsequently endorsed by this Court in The Herald & Weekly Times Limited v Jessop[19] and in Yirga-Benbu v Victorian WorkCover Authority.[20]

First, and importantly, s 134AB(38)(f) is a gateway provision which either precludes or permits a worker to bring a claim for damages for loss of earning capacity. It is a part of the serious injury process, not that of assessment of damages. It does not involve any determination (interim or final) of actual loss of earning capacity sustained by the worker.

Second (and a corollary of the first proposition), in determining without injury earning capacity, the Court is not required to make an assessment, at this stage, of loss of earning capacity as in a claim for damages. Rather, it compares the worker's earning capacity, as defined, with the statutory formula for the assessment of after injury earnings (considered subsequently).

Third, the fixing of the gross income which most fairly reflects the earning capacity is a limited inquiry not to be confused with that made in a damages claim. It, I think, is confined to those matters which go to the practical exercise of that capacity, not its diminution by outside events. In that regard I have in mind those matters referred to by the Minister in the Second Reading Speech, namely, increases/decreases in wages and other employment opportunities. The exercise is not to determine loss of earning capacity - which is a damages issue, but, rather, to focus on earning capacity in a limited context.

Fourth, the sub-section does not mandate a mathematical assessment of without injury earnings, such as a formula based upon the earnings of the worker over a particular period prior to the injury or at the time of injury. Rather, it requires the Court to fix a figure which 'most fairly reflects the worker's earning capacity' without injury.[21]

61 In our view, the evidence as a whole comfortably justified the trial judge's conclusions that the respondent had suffered the required loss of earning capacity within the business in which he always worked:

• the combination of the medical evidence and the respondent's own evidence compelled the view that his capacity to undertake mechanical repairs was very materially limited;
• the combination of management and mechanical work he undertook at the date of the hearing was achieved in the context of a family business with the assistance and supervision of his father;
• the profitability of the business had been materially affected by the combination of the need to retain a replacement mechanic to do work formerly done by the respondent and the need to cover financing costs relating to the purchase of new premises;
• the trial judge was correct to doubt the extent of the respondent's management expertise and effectiveness, when regard is had to the whole of the evidence as to the hours he worked, the need for supervision from his father, and the nature of the ongoing conduct of the business as a whole;
• the limited nature of the respondent's earnings in 2018 was the product of a business in which he was optimally employed; and
• for the reasons explored by the trial judge, the prospects of improvement in those earnings were bleak.

62 We turn to the individual matters emphasised by the Authority.

63 First, there was no error in itself in basing a conclusion upon the most recent figure for annual earnings provided that figure was viewed against the context of the evidence as a whole.

64 The trial judge was correct to approach the matter by reference to the underlying profitability of the business and not by way of a superficial calculation. As was stated in Acir,[22] the statute does not mandate a mathematical assessment of without injury earnings - it requires the Court to fix a figure which 'most fairly reflects the worker's earning capacity' without injury.

65 If a simple mathematical approach were adopted, then the last three years of earnings average less than 60 per cent of the pre-injury figure in any event.

66 Read fairly, the trial judge's Reasons analysed the combination of circumstances producing the annual figure which he adopted, including a series of circumstances (such as the receipt of weekly compensation payments for three years) which no longer applied.

67 The fact that the respondent earned $56,763 in the preceding financial year was a relevant factor but did not, as the Authority submits, preclude the adoption of the 2019 figure. That figure was adopted in the context of an analysis of the evidence both as to the performance of the business as a whole and the earnings the respondent derived from it.

68 The finding by the trial judge[23] that the restriction in the respondent's capacity as a mechanic translated into the profitability of the business, accorded with the weight of the evidence. First, the evidence showed the respondent could not himself work effectively as a mechanic, and secondly, the business had been required to employ an extra mechanic to address the need created by his incapacity.

69 No specific ground of appeal is directed to the trial judge's finding of fact in this regard nor could it be. Whilst it is true that there was no forensic accounting evidence disaggregating the costs of the additional mechanic with precision, the overall picture was clear.

70 The respondent also disputed the adoption of the 2019 figure as the basis for an estimate of earning capacity on the grounds that there was a real prospect that the profitability of the business would improve if it undertook roadworthiness testing. Whilst it is correct that the respondent expressed his claim in part on one alternative basis by reference to figures extrapolated from estimates of possible returns from this source, the trial judge rejected such claim as speculative. In our view, little if any weight could be given to the prospect on which the Authority seeks to rely:

(a) the extended history of the proposal to undertake roadworthiness testing did not encourage the view that the respondent had the capacity to effectively implement it;

(b) the respondent himself could not undertake roadworthiness testing because the process required the tester to remove and re-fit mechanical parts;

(c) conversely, the prospect that an employee mechanic might become a licensed tester was, as the trial judge observed, problematic given that the respondent's evidence was that, in order to be authorised, the tester must be a principal of the business; and

(d) the cumulative assumptions involved in establishing a material prospect of increased profits were not established on the evidence.

71 Likewise, in our view, the trial judge's findings as to the respondent's limitations as a manager accord with the weight of the evidence. We do not accept that this view depended solely upon the inadequacy of the respondent's understanding of financial matters. It was supported by a combination of circumstances including the evidence as to hours worked, the limited nature of the business involved, the ongoing supervision of the respondent's father, the respondent's lack of overall acuity in evidence and the history of the roadworthiness testing proposal. It was also supported by Dr Slesenger's opinion.

72 The trial judge had the considerable advantage of seeing the respondent give evidence and the conclusion that it was improbable that the respondent could leave the business and find employment in a purely administrative role was well open to him.[24]

73 Once again, that finding of fact is not the subject of specific challenge, nor in our view, could it be.

74 None of the elements of the circumstantial case picked out by the Authority in submission is directly inconsistent with the trial judge's conclusions.

75 Further, when taken individually or together the circumstances relied on do not demonstrate the trial judge erred in the approach that he took in assessing the evidence as a whole or in his conclusion that the respondent satisfied the threshold test. In our view, the Authority has failed to demonstrate that the trial judge failed to fix a figure which most fairly reflects the respondent's earning capacity without injury.

Should the trial judge have been satisfied that the respondent could not engage in suitable alternative employment productive of 60 per cent of his pre-injury earnings?

76 The respondent has only ever worked in one trade with one employer albeit both as a mechanic and as a manager. His injury has effectively precluded him from working as a mechanic save in a very limited way, but it has allowed him to carry out managerial functions of the types he described.

77 At trial, the Authority contended first that his post-injury earning capacity could not be satisfactorily shown to be relevantly reduced by reference to his actual earnings in the business, and secondly, that he had substantial continuing earning capacity performing managerial duties.

78 The Authority's case was not put on the further basis that the respondent had not discharged the onus of showing that he did not have the capacity to earn $52,920 gross per annum in some alternative form of employment.

79 This is not surprising given the nature of the respondent's injuries and the evidence as to his limitations. Mr Ireland's report, tendered by the Authority, answered the questions 'Does the worker have a capacity for other suitable employment', and 'If the worker was not working in the family business, does he have a capacity for other suitable employment?', by reference to the respondent's current duties.

80 No suggestion was put to the respondent in cross-examination that he was fit for alternative employment capable of returning the relevant level of income.

81 No evidence was called in response to the opinion evidence of Dr Slesenger and no application was made to cross-examine him.

82 No submission was made in final address to the effect now made.

83 On the hearing of the appeal, it was suggested (without elaboration) that the respondent might be able to work as a despatch clerk. Such a suggestion was conspicuously absent at trial.

84 On the appeal, the Authority drew attention to the final submissions made on its behalf at trial with respect to Dr Slesenger's opinion that the respondent would have difficulty in replicating his current work arrangements in an open job market.

Dr Slesenger's opinion pays no heed to the necessity or inevitability of the plaintiff's performance of his current role within the business, either with or without injury. As I say, someone's got to do the organising and sorting out that's necessary around the business of working on the cars. And it was always going to be, in my submission, the plaintiff that did it. There's no basis proffered at all for the opinion that the plaintiff would have difficulty finding work in the open job market if he became job-detached. It's a pure statement without reasoning or basis.

There's no analysis of all the tasks that the plaintiff could do, of all the sorts of roles that the plaintiff might be able to [do] in the open job market, and then an assessment of why they would or would not be suitable, what he would or wouldn't earn, from performing those roles, in order to come to the ultimate conclusion that somehow he'd have limitations in the open job market. And in my submission the court ought to reject it.

85 Read in context, the submission is directed specifically to the respondent's capacity to undertake the variety of roles he currently undertakes within the open job market. It is not the submission the Authority now seeks to pursue.

86 Whilst this is an appeal by way of re-hearing, the issues are not at large. As the High Court stated in Coulton v Holcombe:

To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.

The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd; Bloemen v The Commonwealth.[25]

87 In the present case, the contention articulated in the respondent's written case that the Authority should not now be permitted to run what is in substance a new point should be accepted.

88 To do so would result in real unfairness when the point is one which might potentially have been answered by further evidence if raised at trial, and the trial judge's Reasons respond to the case as it was put on behalf of the parties at trial.

89 Lastly, and in any event, we are of the view that the detailed opinions of Mr Buntine and Dr Slesenger coupled with the respondent's oral evidence and the terms in which Dr Ireland addressed the relevant issue were sufficient to discharge the respondent's legal onus.

90 In turn, the attack on the trial judge's Reasons must fail. As counsel on the appeal put it, that attack is enmeshed in the substance of proposed grounds 1 and 2 and for the reasons we have given with respect to those grounds, it must also fail. We have set out the most pertinent parts of the trial judge's Reasons and they are coherent, articulate and comprehensive.

91 It follows from our reasons above that leave to appeal must be refused.

[1] Papaconstantinou v Victorian WorkCover Authority (County Court of Victoria, Judge Lauritsen, 14 July 2020), [38] ('Reasons').

[8] Ibid [14]-[18] (citation omitted).

[9] Ibid [23]-[28] (citation omitted).

[17] Yirga-Denbu v Victorian WorkCover Authority (2018) 57 VR 545, 573 [89].

[18] [2009] VSC 454 ('Acir').

[19] [2014] VSCA 292.

[20] [2018] 54 VR 545, 568-9 [71].

[21] Acir [2009] VSC 454, [171]-[174] (citations omitted) (emphasis in original).

[22] [2009] VSC 454.

[25] [1986] HCA 33; (1986) 162 CLR 1, 7-8 (citations omitted). See also See Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, 438, quoting Connecticut Fire Insurance Co v Kavanagh [1892] UKLawRpAC 39; [1892] AC 473, 480 (Lord Watson). This principle has been applied in Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594, 608; O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310, 319; Water Board v Moustakas (1988) 180 CLR 491, 497; Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279, 284; Whisprun v Dixon [2003] HCA 48; (2003) 200 ALR 447, 461 [51]; Botsman v Bolitho [2018] VSCA 278; (2018) 57 VR 68, 105 [167]; Commissioner of State Revenue v Mondous [2018] VSCA 185; (2018) 55 VR 643, 661-2 [77]-[79].