Henry Berenson v Tamsin Kelly [1997] ACTSC 34 (9 May 1997)

SUPREME COURT OF THE ACT

HENRY BERENSON v. TAMSIN KELLY
No. SC 844 OF 1995
Number of pages -
8
Damages

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

MASTER T CONNOLLY

CATCHWORDS

Damages - Assessment - Personal Injury - Motor Vehicle Accident - Whiplash injury to neck - Reduced personal earning capacity - Mitigation of Loss - Economic loss award reduced by Plaintiff mitigating financial loss.

Tuncel v Renown Plate Co Pty Ltd [1976] VR 501

GIO v Johnson [1981] 2 NSWLR 617

Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd (1972) 46 ALJR 432

Lee v Sheard [1956] 1 QB 192

Selby v The Commonwealth (1946) 47 SR (NSW) 150 (Full Court)

Stott v Paulin (unreported, Supreme Court of the ACT, Master T Connolly, 19 April 1996)

Paulin v Stott (unreported, Supreme Court of the ACT, Miles CJ, Gallop and Higgins JJ, 3 February 1997)

H McGregor, McGregor on Damages, 15th ed, 1988, Sweet & Maxwell Ltd

H Luntz, Assessment of Damages for Personal Injury and Death 3rd ed, 1990, Butterworths

HEARING

CANBERRA, 13 February and 21-22 April 1997 (hearing), 9 May 1997 (decision)

9:5:1997

Appearances

Counsel for the Plaintiff: Mr G Stretton

Instructing Solicitors: Snedden Hall & Gallop

Counsel for the Defendant: Mr R McIlwaine

Instructing Solicitors: Abbott Tout Harper Blain

ORDER

THE COURT ORDERS THAT:

1. Judgment be entered for the plaintiff in the sum of $76,454.20.

2. The defendant pay the plaintiff's costs.

DECISION

MASTER T CONNOLLY

This is a claim for personal injuries arising from a motor vehicle accident which occurred on 14 January 1993 at Lyneham in the Australian Capital Territory. Liability was not in dispute, and the matter proceeded by way of an assessment of damages only.

The plaintiff is a medical practitioner with a long established general practice at Macgregor in the Australian Capital Territory. He has continued to practice medicine, but has reduced the hours that he puts in at his surgery, and has retained the services of another general practitioner. His claim for damages is based on the economic value of his now reduced working hours. The principle argument for the defendant is that the plaintiff has, in taking on an additional doctor in the practice, in fact increased his real earnings, and as a result has substantially mitigated his damages, so that there should be only a modest award for future economic loss.

The plaintiff was born in Sydney in 1947, and completed his degrees in medicine at Sydney University in 1971. He worked at hospitals in Sydney and Perth before moving to Canberra in 1974, where he initially worked at the Royal Canberra Hospital before establishing his own medical practice at Macgregor in 1975. The plaintiff married in 1973, and he and his wife have two children, who are both now young adults.

Before the motor vehicle accident the plaintiff's health was excellent, and he engaged in a variety of vigorous outdoor recreational activities, including bushwalking, cross country skiing and canoeing. At the time of the accident he was the only doctor working in his practice, and he worked for 9 half day sessions each week, reserving Thursday afternoons for catching up on reports, hospital and home visits and the like.

The accident the subject of these proceedings occurred as the plaintiff was driving along Mouatt Street Lyneham towards Northbourne Avenue, where he was intending to turn right with a green arrow. The defendant's vehicle entered the intersection of Mouatt Street and Northbourne Avenue against a red light, and collided with the right hand side of the plaintiff's vehicle, despite the plaintiff attempting evasive action. The accident was of considerable force, involving some $12,000 worth of damage to the plaintiff's vehicle. The plaintiff recalls the door being thrust against his shoulder and being shaken. He said that he had a very uncomfortable neck. His car was driveable, and he proceeded to Woden Hospital to see a patient, and on his way back to his home he called on a colleague, Dr Main, to document the injury. Dr Main reported

"...some distress, cervical spine tenderness, right shoulder tenderness, with minimal spasm",

and diagnosed lateral whiplash injury. He prescribed physiotherapy, heat treatment and rest.

The accident occurred two days before Dr Berenson's planned leave, and he had arranged to have two weeks away from his surgery, with one week occupied by a bushwalking expedition to Tasmania, and one week with his family. He proceeded with the trip to Tasmania, but he had ongoing neck and back pains, as well as severe gastritis which he put down to a side effect of the anti inflammatories he was taking. He described the week as very uncomfortable, and on his return to Canberra he said that stiffness set in, and he spent that week resting. He continued with physiotherapy. Mr Runmore, his physiotherapist, was a friend of the plaintiff and had been one of the party involved in the bushwalking trip to Tasmania. Dr Berenson has continued to receive physiotherapy up to the date of hearing, and his evidence, supported by a report from Mr Runmore, is that he will continue to utilise physiotherapy, as well as his own regime of exercises, for the long term future.

The plaintiff complains of ongoing pain in the neck and left shoulder and arm. There is broad agreement in the specialist reports tendered in this matter that Dr Berenson has a degree of underlying degenerative change to his back and neck, consistent with a man of his age who had engaged in vigorous sporting pursuits. However, these had remained asymptomatic before the accident, and no doctor was able to predict when or whether these changes would have become symptomatic in the absence of the motor vehicle accident. Dr Blum, a neurosurgeon, has concluded that as a result of the accident Dr Berenson has damage to his facet joints in his neck and a degree of thoracic outlet syndrome. This is broadly consistent with the view of Dr Danta, a Canberra neurosurgeon whose report was also tendered in the plaintiff's case. Professor Mitchell, who is a Professor of Surgery of 30 years standing and who examined the plaintiff for the defendant, put his present condition down to an aggravation of a degenerative condition, and doubted the presence of thoracic outlet syndrome although he acknowledged that the absence of pathology was not conclusive on this diagnosis. Dr Basser, a consultant neurologist, has examined the plaintiff twice for the defendant, and says that while thoracic outlet syndrome is inconclusive,

"The evidence indicates that he suffered a jarring injury to his neck and back as a result of the accident on the 14th January 1993, and it is reasonable to accept that he has ongoing symptoms as a consequence of this accident."

Taking the whole of the medical evidence into account, I am satisfied that the plaintiff's present difficulties with his neck and shoulder, however described, are attributable to the accident. These injuries cause him a degree of ongoing discomfort, and are particularly troublesome when he must adopt difficult postures while performing various procedures which are necessary in conducting general practice. As a consequence of these difficulties, he has reduced his hours of work in his surgery.

Dr Berenson accepts, however, that he can still engage in a variety of quite vigorous activities. He found that the action in paddling his canoe was troubling his shoulder, but he has since changed to a kayak, which requires a different action, and he uses this regularly. He still bushwalks and engages in cross country skiing, but to a lesser degree than before the accident. Even so, on his evidence, this involves vigorous activity. He said that he often stays out for two or three days, involving two or three nights either in a tent or in a hut in the snow, with perhaps 30 or 40 kilometres covered. He said that, in the period since the accident, he goes down to the snow as often as he can during the season, which means every second or third weekend. He still bushwalks, but not as much as before the accident, although this can still involve carrying a 10 kilogram pack on a two day walk. He has taken up bicycle riding, which he did not engage in before the accident. Dr Berenson acknowledged the extent of his present activities, and made the point that, if he loses fitness, he suffers more.

The principles to be applied in determining compensation in personal injuries cases have recently been summarised by McHugh J in Nominal Defendant v Gardikiotis (1996) 1 CLR 49 where his Honour said (at 54):

"When a defendant has negligently injured a plaintiff, the common law requires the defendant to pay a money sum to the plaintiff to compensate that person for any damage that is causally connected to the defendant's negligence and that ought to have been reasonably foreseen by the defendant when the negligence occurred. The sum of money to be paid to the plaintiff is that sum which will put the plaintiff, so far as is possible, 'in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation'."

In relation to general damages, I assess the plaintiff on the basis of his injuries described above. These have had a genuine impact on the plaintiff's lifestyle, but he continues to pursue a range of vigorous outdoor activities. In this sense, the plaintiff must be assessed, not as a person who has lost their favoured recreational activities, but as a person whose ability to enjoy these activities has been modified. The plaintiff has re arranged his working hours as a result of these injuries. Whilst I have no doubt that this causes him some frustration and distress, I must also find that he now enjoys a range of social and recreational activities on the Fridays that he takes off work.

In respect of general damages, I find this to be at the low to moderate band of cases involving ongoing soft tissue injuries causing intermittent pain and inconvenience. I award the sum of $20,000, of which $10,000 is for past loss, generating interest of $860.

The plaintiff's case is that, in addition to general damages, he is entitled to damages to reflect the cost of certain equipment which he has purchased or otherwise obtained and which have made it easier for him to continue to practice medicine. These include special ergonomic couches and the like, as well as a spa which the plaintiff says affords him considerable relief.

The plaintiff's most substantial claim is for economic loss, and is based on the claim that, as a result of the accident caused injuries, he has both reduced his actual hours in the surgery, from 9 half day sessions to 7, and has reduced the number of patients seen per session by increasing the appointment time, leading to an ongoing loss of earning capacity. Material was tendered from the plaintiff's accountants which demonstrates that, using data from the Health Insurance Commission, the plaintiff has in fact reduced his number of billed occasions of service by some 25% since the accident, which Mr Lee, the managing partner of Bird Cameron Accountants, has calculated to amount to an ongoing loss of income to Dr Berenson of some $16,000 per annum. Ms Goodbody, an accountant with Price Waterhouse, who prepared an analysis of the plaintiff's finances for the defendant, did not disagree with these conclusions. However, Ms Goodbody demonstrated, and this fact is not denied by the plaintiff or contradicted by Mr Lee, that as a result of the practice taking on an additional doctor, the income which Dr Berenson has actually enjoyed has increased.

Dr Berenson gave evidence that he would have preferred to have remained in sole practice for his entire career (Transcript, p8), and that he only reluctantly decided to bring another doctor into the practice after the accident when it became apparent that he could not continue as he had before. This evidence was supported by his wife, who is the practice manager. She said that it was clear when Dr Berenson returned to work after the accident that he was having difficulties, and that this manifested itself in him becoming irritable and on occasions short with others, including his patients. This is of course an understandable consequence of a person persevering in a demanding job with ongoing pain, but Mrs Berenson said that this was, again understandably, distressing to patients, and it was affecting the practice. Mrs Berenson said that her husband at first refused point blank to consider bringing in another doctor, but that eventually

"I wore him down".

Dr Berenson did not bring in a partner. Rather, he has engaged the services of another doctor, Dr Lowe, who works from his surgery, but who is an independent contractor, and who utilises the services of the practice, which retains a percentage of her billed income. The arrangements involve Dr Lowe paying all her costs, like personal insurance and professional liability insurance. She retains 45% of billings, and the practice gets 55% of the billings.

Evidence was given of the financial arrangements of the Berenson medical practice, which must be referred to at this point. In accordance with normal practice, the plaintiff has taken professional advice in relation to his financial affairs. It was clear from his evidence that he concentrates on the medicine, and is not himself fully across these aspects of his practice. In response to a number of questions of detail, Dr Berenson said the question would have to be answered by his accountant or his wife. In any event, for some years the practice has been conducted by way of a company which provides medical services to the public, and which bills its clients and the Health Insurance Commission for these services. This company employs Dr Berenson, and pays him a salary. The company also purchases the other services needed to conduct a medical practice from a service company, which provides the premises and staff. All of these entities are controlled by the plaintiff and his family. The company provides the facilities for Dr Lowe to conduct her practice, and retains a percentage of her billings.

The evidence shows that the salary which Dr Berenson has drawn from the practice has remained unchanged from 1993. It also shows that, in addition to this salary, the plaintiff has, since 1993, begun to take superannuation contributions, which began at $2,500 in 1993, and grew to $12,500 in 1994, and $25,000 in 1995. A contribution of a similar order was made in 1996, but the evidence of Mr Lee was that it was in the order of $35,000 for both the plaintiff and his wife, being a combined sum greater than 1995, but that he was unable to recall how it was split. In any event, the evidence is uncontradicted that, while the plaintiff is in fact providing fewer hours and fewer occasions of service to the practice, for which the practice is receiving a lower income, he has in fact been able to increase his remuneration. This is possible because the practice now receives income both from Dr Berenson's own billings and from the proportion of billings which it retains from the services of Dr Lowe.

The defendant argues that, as a matter of law, the plaintiff is not entitled to damages for loss of income because Dr Berenson has rearranged his affairs as a consequence of the accident and as a result has fully mitigated his loss. It is an accepted principle of tort law, indeed of the law of damages in the civil law generally, that a person suing for a loss is under a duty to mitigate that loss. A statement of the law of mitigation that has received endorsement by the Full Court of the Supreme Court of Victoria in Tuncel v Renown Plate Co Pty Ltd [1976] VR 501 at 504 is that contained in McGregor on Damages, which, breaks the law into three rules which, in its present edition reads:

"(1) The first and most important rule is that the plaintiff must take all reasonable steps to mitigate the loss to him consequent upon the defendant's wrong and cannot recover damages for any such loss which he could have avoided but has failed, through unreasonable action or inaction, to avoid. Put shortly, the plaintiff cannot recover for avoidable loss.

(2) The second rule is the corollary of the first and is that, where the plaintiff does take reasonable steps to mitigate the loss to him consequent upon the defendant's wrong, he can recover for loss incurred in so doing, this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the plaintiff can recover for loss incurred in reasonable attempts to avoid loss.

(3) The third rule is that, where the plaintiff does take steps to mitigate the loss to him consequent upon the defendant's wrong and these steps are successful, the defendant is entitled to the benefit accruing from the plaintiff's action and is liable only for the loss as lessened; this is so even though the plaintiff would not have been debarred under the first rule from recovering the whole loss, which they would have accrued in the absence of his successful mitigating steps, by reason of these steps not being ones which were required of him under the first rule. Put shortly, the plaintiff cannot recover for avoided loss." (McGregor on Damages, Fifteenth Edition, 1988 paras 275-7).

Reported Australian decisions usually focus on the first two aspects of this rule, but this case turns on the third rule. The defendant meets the claim for lost income by saying that the plaintiff has taken steps to avoid the loss, which have been successful, and says that he cannot now recover that avoided loss.

In the present case the plaintiff has taken steps which, on the evidence of the plaintiff and his wife he would not otherwise have taken, to re organise his medical practice by taking on an additional doctor, and the additional income which this doctor earns the practice has resulted in the plaintiff's actual earnings increasing in the period since the accident, although his own billings and hours worked have declined. Counsel for the plaintiff argues that, as damages are awarded for loss of earning capacity rather than actual earnings, I should award the plaintiff damages on the basis of his now reduced individual earning capacity, that is the notional loss of some $16,000 per annum to date and until his normal retiring age. The plaintiff's wife indicated that it was their intention to retire at 60.

It is undeniably true that the proper basis of assessment of damages for future economic loss is to look at loss of earning capacity not earnings as such - Luntz, Assessment of Damages for Personal Injury and Death, third ed, Chapter 5.

But it is not, in my opinion, an answer to the principle of mitigation. In GIO v Johnson [1981] 2 NSWLR 617 Hutley JA stated that loss of earning capacity is the capital asset consisting of the personal capacity to earn money from the use of personal skills. He said by way of example that, where a millionaire rentier is killed, under circumstances giving rise to an action for damages, his loss of earning capacity is not the value of the interest he collects. He said

"Where a person has capital employed in a business, it is necessary to split his earning capacity from his income" (at 627).

In the present case the plaintiff receives a salary, which has remained unchanged, from the medical practice which he controls. He also now receives substantial superannuation benefits, which he did not receive before the accident. These can be paid because of the increased earnings of the practice as a result of the decision of the plaintiff, prompted by the accident, to bring in an additional doctor to the practice. I do not see this as simply income from his capital, in the sense of the example used by Hutley JA, but from his personal skills in conducting his practice, which he has successfully expanded to a two person operation.

In any event the law on mitigation is based on an accepted proven loss, which has been lessened by the plaintiff's action. It is no answer to a defence of mitigation to say that there is a reduction in earning capacity alone if the plaintiff's actions have had the effect of mitigating the financial loss produced initially by that reduced capacity.

I find that, while the plaintiff's injuries have reduced the plaintiff's ability to contribute his own professional labour to the practice, and that as a consequence his billings have declined $16,000 on an ongoing basis, the plaintiff has fully mitigated this loss by re arranging his practice in taking on an additional doctor, so that his actual earnings from his professional efforts in being the principal of a medical practice have increased. I thus decline to make an award for past or future loss on the basis of an ongoing loss of $16,000.

Counsel for the defendant did concede in argument that, if mitigation is established, it would remain appropriate for me to award a sum by way of a future buffer. This is, indeed, appropriate. The plaintiff has maintained and increased his earnings despite his reduced personal earning capacity, but the present practice arrangements could end, and the plaintiff would no doubt require a legitimate buffer against such eventualities. His wife gave evidence that their intention was to retire at 60. The plaintiff could thus expect another 10 years in practice, and for substantial periods he may find himself practising alone, until he has a chance to re establish his present structure. His wife gave evidence that it took some time to finalise the present arrangements with Dr Lowe, and similar breaks could be expected in the future. An award of $24,000, representing a year and a half of actual reduced earnings, seems to be a suitable buffer, and I award this.

The plaintiff claims for the cost of a range of ergonomic fittings acquired by his practice which, he says, have been necessary for him to continue working. As a matter of principle a plaintiff is, of course, entitled to recover expenses which have been incurred in mitigating their damages - the second aspect of the rule as set out in McGregor on Damages.

In this case the defendant's objection is that the costs of obtaining the ergonomic equipment were met by the corporate entities which make up the practice. These entities, while controlled by the plaintiff, are of course separate at law, and the defendant says that any claim which exists for the cost of these items is a claim which can only be brought in the name of the service company, and not the plaintiff himself.

The equipment under claim comprises two examination couches and a stool with a cost of $13,760 which were acquired in September 1993 on a lease basis with lease costs of $19,000 over four years. In addition, a further couch and chairs were purchased outright in September 1993 at a cost of $4,410.70.

The plaintiff accepts that the decision to purchase by lease has had certain taxation advantages, and that the purchased equipment has resulted in legitimate depreciation claims which have also had tax effects. Taking into account these tax advantages, the plaintiff's accountant has estimated that the "after tax" cost (to the practice company and the service trust) was $15,475.10.

I am not satisfied that, in all the circumstances of this case, I should preclude this claim because the expenditure has been made, not by the plaintiff directly, but by the corporate structures which the plaintiff has established to conduct his general practice.

My reading of the authorities leads me to the view that, while an action per quod servitium amsit may be open to a corporate body in such circumstances in Australia (Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd (1972) 46 ALJR 432 cf Lee v Sheard [1956] 1 QB 192), a plaintiff may bring a personal action. Luntz (Assessment of Damages for Personal Injury and Death, 3rd ed, para 5.5.6) states that, where an action is not brought by the company,

"...the victim ought to be able to recover the loss which he or she has sustained in reduced distributions from the company, provided such reduction can be shown to be due to the incapacity caused by the injury. In Selby v The Commonwealth (1946) 47 SR (NSW) 150 (FC) 152 Jordan CJ appears to have contemplated that the jury could have allowed the plaintiff any loss caused to him 'either directly, or indirectly through the medium of his company' which it was satisfied was due to his temporary disablement."

Counsel for the plaintiff urged me to find that the plaintiff could claim this loss, arguing that this was analogous to the principle that, in assessing the real loss of earning capacity of a person who conducted business through a partnership, it is appropriate to look beyond the taxable income of a plaintiff based on partnership income distribution to the real contribution of the plaintiff. I adopted this approach in Stott v Paulin (unreported, 19 April 1996) and this was approved by the Full Court (Paulin v Stott, unreported, 3 February 1997).

The fact that this claim arises under the principle of mitigation of damages reinforces my view, as it would seem to me to be unjust to deny the plaintiff the recovery of expenses which have been incurred in allowing him to continue to practice medicine, thus mitigating his potential loss, when the very fact of such mitigation forms such a major part of the defendant's case in this action, and has been the major factor in my finding on economic loss.

I award the plaintiff the sum of $15,475.10 being the actual after tax cost to the practice of obtaining the ergonomic equipment and thus the reduced distribution available to the practice to remunerate the plaintiff, which has allowed the plaintiff to continue in his business.

There is also a claim for $8,000 for a spa which has been installed at the plaintiff's home. This was not supported by detailed evidence as to the need for a particular style or brand of spa. Counsel for the defendant argued that, while the plaintiff no doubt obtained some relief, the claim seems high, and that to award the full sum would be inappropriate. I am not satisfied that the claim to the full amount is made out, and I award $4,000 as a discretionary sum, reflecting a finding that the injury has caused a need for this type of relief, but that there was insufficient evidence to justify the full cost claimed, and that the installation of a such a spa amounts to a capital improvement in the plaintiff's residence.

There is a claim for $410 for cruise control which the plaintiff had fitted to his car, which is owned by the practice company. The plaintiff says this allows him to move about while driving. I allow this claim.

The balance of out of pocket expenses were agreed at $6,709.10, which I award.

The plaintiff has incurred considerable ongoing costs in relation to physiotherapy. These have averaged about $1,200 per year to date. Mr Runmore's report states that this has been provided on a twice monthly basis, although at times there have been flare ups which require more frequent treatment. The plaintiff also undertakes his self administered exercise program. In assessing a claim for future physiotherapy I must take into account the medical evidence that suggests that the plaintiff's present condition is mostly attributable to an underlying degenerative condition. There is thus a considerable chance that future physiotherapy would have been required in any event. I award $5,000 by way of provision for future physiotherapy services.

This amounts to a total award of $76,454.20, which I consider to be appropriate in all the circumstances.