Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Mead v Kerney [2012] NSWCA 215
• Hearing dates: 28 March 2012
• Decision date: 23 July 2012
• Before: McColl JA at [1]; Macfarlan JA at [2]; Sackville AJA at [51]

Decision

The appeal and cross-appeal are dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: DAMAGES - personal injury - economic loss - theoretical earning capacity of no value where no reasonable prospect of obtaining work to utilise it - estimation of lost earnings by reference to those of comparable employee
• Cases Cited: Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13; 60 MVR 194; Jones v Dunkel [1959] HCA 8; 101 CLR 298; Kallouf v Middis [2008] NSWCA 61; Magnou v Australian Wool Testing Authority Ltd [2007] NSWCA 357; Nominal Defendant v Livaja [2011] NSWCA 121; State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536
• Texts Cited: Luntz, Assessment of Damages for Personal Injury and Death, 4th ed (2002), LexisNexis Butterworths
• Category: Principal judgment
• Parties: John Mead (First Appellant); Scott Staden-Gaffney (Second Appellant); Bruce Walter Edward Kerney (Respondent)
• Representation: Counsel: K P Rewell SC (Appellants); S Norton SC/M Campbell (Respondent); Solicitors: Sparke Helmore Lawyers (Appellants); Brydens (Respondent)
• File Number(s): CA 2009/297723

Decision under appeal

• Citation: Kerney v Mead & Anor [2011] NSWSC 518
• Date of Decision: 2011-06-03 00:00:00
• Before: Garling J
• File Number(s): SC 2009/297723

Judgment

1 McCOLL JA: I agree with Macfarlan JA.

2 MACFARLAN JA: On 25 November 2001 the respondent was severely injured in a motor vehicle accident that occurred at Bylong, New South Wales. A vehicle driven by the second appellant, and owned by the first appellant, was on the incorrect side of the road when it collided with a vehicle driven by the respondent. The respondent commenced proceedings against the appellants for damages and the appellants admitted liability.

3 By judgments dated 3 June and 5 July 2011, Garling J sitting in the Common Law Division of the Court assessed the respondent's damages at $1,756,219 and directed judgment accordingly.

4 On appeal, the appellants challenged only his Honour's assessment of economic loss. They contended that the primary judge erred in concluding that, although the respondent had a theoretical earning capacity of forty per cent, that capacity was of no value because there was no prospect of him obtaining work to utilise it. By a Notice of Contention, the respondent contended that the effect of the primary judge's reasoning, when considered as a whole, was that the respondent had no residual earning capacity.

5 By his Notice of Cross-Appeal, the respondent contended that the primary judge erred in:

• Finding that the respondent had any residual earning capacity at all.
• Using the rate of increase of the net earnings of a comparable employee to estimate the increases in the respondent's earnings that were likely to have occurred in the absence of his injury.
• Assuming a retirement age of 65 years, rather than 67, in calculating future economic loss.

6 For reasons that I give below, I consider that both the appeal and cross-appeal should be dismissed.

THE RESPONDENT PRIOR TO THE ACCIDENT

7 The respondent was aged 35 at the time of the accident and was 45 at the time of the damages hearing. He grew up on a property located near Bylong which is a small town situated about 60 kilometres north of Kandos, where the respondent lives. Kandos is about one hour's drive from Mudgee which has a population in the order of 8,700. The only other town of significance in the area is Rylstone.

8 At the time of his accident the respondent was employed by Telstra as a senior technician. His work was arduous and required him to travel throughout rural New South Wales. He was also principally responsible for managing his family's 1200-acre beef cattle property as well as an 800-acre property nearby that he had purchased himself.

9 The primary judge summarised his conclusions concerning the respondent's injuries and his condition at the time of the trial in May 2011, as follows:

"130 In his evidence, [the respondent] accepted that he had been attempting to undertake as wide a range of activities as he could but said that it was his injuries and disabilities which precluded him from undertaking any broader range of activities. He agreed that he had obtained various tickets or licences to operate a variety of equipment since the accident but said, which I accept, that he was unable to climb into some of the machines and to operate them for anything more than 15 or 20 minutes at a time.

131 He accepted that he had a reasonable level of literacy and numeracy skills and would be able to undertake light work if it could be obtained, particularly providing he did not either have to sit or stand for lengthy periods of time. He accepted that if it were available he would attempt to undertake sales work in an automotive area or a machine part selling area, and that he could, if work were available, obtain work assisting a real estate agent or perhaps even selling real estate.

...

138 In summary, Mr Kerney is a man with a serious ongoing permanent orthopaedic disability in his right leg, his right leg is shortened, he walks with a noticeable limp, and he has ongoing pain for which he avoids taking what would otherwise be appropriate medication. He has an ongoing chronic depressive disorder which fluctuates in its intensity and for which he has a need from time to time to consult with Dr Margaret Macleod. I am not satisfied he suffers from Post Traumatic Stress Disorder.

139 He is a man who prior to his accident had a full and active life, both physically and socially. Much of that has been taken from him. He is now largely reclusive, spends most of his time in and around the towns of Kandos and Rylstone, he has to care for his aged parents as best he can, and is unable to return to the work which he was undertaking. He has not felt able to obtain alternative employment, and to the extent that he has attempted so to do, has not been successful.

140 His orthopaedic and psychological conditions are static. They will continue to fluctuate and he will have good and bad days, but there will be no complete remission of either of the conditions. He is not able to return to his farming and outdoor activities and much of his enjoyment of life has been taken away from him."

THE RESPONDENT'S EARNING CAPACITY IN THE PERIOD BETWEEN THE ACCIDENT AND THE TRIAL

10 The appellants accepted at trial that the respondent was completely incapacitated for work from the date of the accident, 25 November 2001, until at least 30 June 2007 but contended that thereafter he had a capacity for work.

11 In his witness statement the respondent gave the following evidence concerning his attempts to obtain employment:

"94. I have been involved with the Commonwealth Rehabilitation Service and a rehabilitation provider named Recovre. I have not given up hope that there might be something for me to do so far as work is concerned in the future. Unfortunately the skills and experience which I had with Telstra are so specialised that they cannot be used anywhere else. The CRS tried to help me retrain myself or at least encourage me to do it into some area which would suit my problems. Unfortunately none of us can think of any.

95. I have done a course concerning the responsible service of alcohol as well as obtained a forklift drivers certificate. I did these things for myself. I have been looking through the newspapers and I have been looking on the internet for jobs but nothing has come up which would suit me. It is all very well saying that I can drive a forklift now but a forklift drivers [sic] job is not as simple as that. He has to get off the forklift and move things around. He has to be climbing into the vehicle and out of it all day long. I would need a very sympathetic employer even for straight forward simple tasks. Such employers seem thin on the ground.

...

105. I have continued to look for work in the Kandos area but there has been nothing available. For a long time I was receiving help from a rehabilitation provider called Recovre but it was unable to find me any work and that assistance has now stopped.

106. At one stage I was considering moving to Sydney to look for work. It was my idea to do that because I was desperate about my situation. When I actually sat down and thought about it however I realised that if I tried to move out of the area I would lose all the support network that I have. My psychologist is a person who lives in Kandos. I trust her and have a good relationship with her. My parents have also been a lot of support to me since the accident. I have a couple of friends locally. I have no ties at all to Sydney and I would be completely alone except for a couple of friends who live in widely separated areas in Sydney. I tried to get some financial assistance from the insurance company to obtain a school bus drivers licence. I am pretty sure there are part-time jobs for school bus drivers in my local area and that is something I would like to try to do because I know it is only a couple of hours in the morning and a couple of hours in the evening. Other than that I do not know whether I would be able to do any kind of office work. I have never ever done office work. Similarly I have never done an intensive computer work".

12 The following exchange occurred in the course of the respondent's cross-examination:

"Q. No doubt your parents are still of some emotional support to you and you to them but have you reconsidered the idea of moving to either Sydney or a larger rural centre where more work might be available?

A. No.

Q. What about Mudgee?

A. Not really, no.

Q. That is a bigger centre, isn't it?

A. It is.

Q. And there would be more work available there?

A. I assume so.

Q. Have not you given that any thought?

A. No.

Q. Why not?

A. Impractical.

Q. Why?

A. My dependency on my friends and where I live, I own my own house. I just have not considered it" (Transcript p 20).

13 At the request of the appellants' insurer, the respondent attended the Vocational Capacity Centre ("VCC") for evaluation of his functional and vocational capabilities. In a report dated 2 November 2005, the VCC concluded that the respondent had "a strong level of motivation to participate in work and is likely to be successful in securing a new job [provided] that he is given some support and advocacy in terms of job search". The VCC also predicted that the respondent would experience "some difficulty securing work due to his presentation as a person with an obvious limp. Hence he will benefit from placement assistance to re-enter the labour market".

14 In a subsequent report of 3 December 2008, the VCC observed that the respondent had "an overall positive attitude towards the future, including interest in exploring new opportunities" and that he is "now keen to improve his prospects of immediate employment through completion of short training courses, such as those in the operation of mobile construction plant leading to a licence". It identified various types of full-time jobs that it believed the respondent was capable of undertaking without formal training. These included jobs as a sales representative, sales assistant and excavator operator.

15 Neither side called evidence from the rehabilitation provider, Recovre, to which the respondent had been referred by the appellants' insurer. In the course of oral argument, counsel for the appellants accepted that whilst Recovre's head office is located in Sydney, it also has offices in regional areas such as Dubbo and Bathurst which are not too far from Kandos and Mudgee.

THE JUDGMENTS AT FIRST INSTANCE

16 The primary judge made the following observations regarding the onus of proof of loss of earning capacity and consequent financial loss:

"190 It is necessary for a plaintiff to prove the loss for which compensation is claimed: Todorovic v Waller (1981) 150 CLR 402 at 412-413, however conversely, it is not incumbent upon the injured plaintiff to prove what employment he or she "is not [in]capacitated from performing ". It is for a defendant who contends that the plaintiff has a residual earning capacity to adduce evidence of what the plaintiff is capable of doing and what jobs are open to such a person: Luntz, Assessment of Damages for Personal Injury and Death (4th ed) at [118 [1.9.20]].

191 This approach was referred to with approval in Magnou v Australian Wool Testing Authority Ltd [2007] NSWCA 357 at [20]. I will consider these questions with the question of onus in mind."

17 The primary judge expressed the following conclusions as to the respondent's loss of earning capacity:

"206 In my opinion, the extent of his injuries and disabilities means that Mr Kerney is fit to work part time in light or restricted duties, probably for no more than three hours a day, in a job which he can sit and stand as necessary, and in which he is not required to walk over rough or uneven ground or climb stairs.

207 In other words, his residual capacity for work from 1 September 2007, when he last saw Dr Harris and was discharged from his care, to date is in the order of 40 per cent.

208 The defendants tendered evidence, which was not challenged, that there were a range of occupations which with his skills and education, Mr Kerney could engage in.

209 These theoretically available positions included:

(a) Hire car or taxi radio dispatcher;

(b) Driving instructor;

(c) Bus driver;

(d) Desktop publishing operator;

(e) Sales representative;

(f) Excavator Operator; or

(g) Real estate property manager.

210 Mr Kerney agreed that some, but not all, of these occupations were within his physical capacity. I would add to that agreement these constraints, namely, providing he could work on a part time basis with a sufficiently flexible employer who would tolerate the unpredictability of his attendance.

211 Accordingly, the defendants had discharged by their evidence, the obligation to prove that there were occupations in which Mr Kerney was able to engage."

18 Having determined what he described as the respondent's "theoretical work capacity" (Judgment [219]), his Honour proceeded to determine whether the respondent could, as a practical matter, utilise that capacity to obtain work in the geographic area in which it was reasonable for him to seek work. This reflected the proper approach identified in Nominal Defendant v Livaja [2011] NSWCA 121 as follows:

" ... Because an individual has a physical and mental ability to undertake certain tasks, it does not necessarily follow that he has a significant residual earning capacity. Earning capacity must be measured by reference to the individual, when viewed with all his or her characteristics, in the labour market. When a person in middle age has spent all his or her life in a skilled or semi-skilled occupation which, as a result of injury, is no longer available, the identification of occupations which are theoretically available is only part of the task. There must also be a practical assessment of the likelihood of the individual obtaining employment in some such occupation ..." ([65]).

19 The primary judge's conclusions on this question were as follows:

"213 In my opinion, the following circumstances are relevant:

(a) At the time of his accident, Mr Kerney was in his mid 30s and is now aged about 45. His employment history was in one field with one employer;

(b) The field in which he was skilled, namely telecommunications, has in the period since his accident, undergone technological change to a marked extent. Without undergoing any retraining, work in the telecommunications industry would not be open to Mr Kerney;

(c) Mr Kerney has lived all of his life in Kandos, a small town northwest of Sydney. That is where his home is, it is where he went to school and where he grew up. His elderly parents who are in failing health live there, and it cannot be reasonably expected that in the foreseeable future, Mr Kerney should exercise his residual work capacity by moving away from Kandos;

(d) As a consequence, the places open to Mr Kerney to exercise his work capacity are those cities and towns within no more than one hour's drive of Kandos. In a practical sense, this means the towns of Kandos, Rylstone and Mudgee, as well as the environs of those towns;

(e) Although I have formed the view that Mr Kerney is capable of working three hours a day, there will be periods of time when Mr Kerney's physical injuries and disabilities mean that he cannot work every day in a working week and he may have to work part-time. In other words, he may be in a position of taking more sick leave than would an ordinary employee, or else having a less reliable attendance record.

214 There was no evidence of the state of the labour market in the Kandos and surrounding areas, by which I include Rylstone, Mudgee and their environs. I do not know whether there are more jobs on offer than there are applicants, nor do I know whether there are any employers in that region, who are sympathetic to employing men of Mr Kerney's age who have disabilities.

215 There is no evidence, even of a generally descriptive nature, about the types and numbers of employers, the industries in which they work or operate, and the levels of their operation in the area in which Mr Kerney is based.

216 In cross-examination, senior counsel for the defendants put to Mr Kerney that he was capable of doing a number of jobs in areas of skill which were identified to him. Mr Kerney readily agreed.

217 However, Senior Counsel did not put to Mr Kerney that there were any realistically available job opportunities in the relevant geographical areas. In fact, Senior Counsel's approach was to the contrary.

[There was then set out an exchange in cross-examination, the principal part of which is set out in [12] above].

218 The thrust of this cross-examination was to accept that the availability of work was very limited in Rylstone and Kandos, may have been better in Mudgee, but that Mr Kerney ought reasonably to have considered moving to Sydney to obtain employment.

219 The evidence does not enable me to be satisfied that, whatever the limited extent of Mr Kerney's theoretical work capacity is, that there is any practically achievable job which he can do on the open labour market in the general area in which he lives.

220 It is not reasonable to expect him to move from Kandos. I think it is practical for him to travel to Mudgee to obtain employment there, notwithstanding his evidence to the contrary. But there is simply no evidence that by going to Mudgee there would be any work which he could practically obtain."

20 The primary judge stated that his conclusions were supported by the appellants' failure to tender any evidence from the VCC or Recovre concerning jobs available to the respondent. He referred to Jones v Dunkel [1959] HCA 8; 101 CLR 298 and said that the VCC "seems an organisation which is entirely suitable to have undertaken such an exercise" (that is, to determine what jobs were available for the respondent) (Judgment [221]). Yet no such exercise occurred.

21 In light of these findings the primary judge concluded that the respondent's residual earning capacity had no value and he was therefore entitled "to the entirety of his Telstra earnings by way of economic loss from the time of the accident up to judgment" (Judgment [223]).

22 In relation to future economic loss, the primary judge reiterated his earlier conclusion that the respondent's theoretical residual earning capacity "does not result in any practically available work" and concluded that it "is unlikely in the future that he will be able to earn any money as a consequence of the conditions in which he presently is" (Judgment [228]). He therefore calculated the respondent's future loss by reference to the entirety of the net wages that he was likely to have earned, but for the accident, from his employment with Telstra, subject to the ordinary deduction of 15 per cent for adverse vicissitudes.

23 His Honour calculated the respondent's loss upon the basis that, but for the accident, he was likely to have worked for Telstra, or a similar employer, until ordinary retirement age which his Honour took to be 65 years (Judgment [227]).

RESOLUTION OF THE APPEAL

24 On the appeal, the appellants accepted the principle stated in Livaja to which I have referred earlier (see [18] above) that notwithstanding the plaintiff's theoretical ability to perform certain jobs, there must be a practical assessment of the likelihood of the plaintiff in fact obtaining such jobs.

25 The appellants also accepted that they bore an evidential onus concerning the issue of whether the respondent has a residual earning capacity that he is practically capable of exercising. This is the approach taken in Luntz, Assessment of Damages for Personal Injury and Death, 4th ed (2002), LexisNexis Butterworths at [1.9.20], referred to with approval by this Court in Magnou v Australian Wool Testing Authority Ltd [2007] NSWCA 357 at [20] and applied by the primary judge in this case (see [16] above).

26 The approach in Luntz was also accepted, by reference to Magnou, by McColl JA and Hall J in Kallouf v Middis [2008] NSWCA 61 at [50]. In Kallouf their Honours added:

"[52] In Arthur Robinson (at 657) Barwick CJ observed that lost earning capacity 'ought to be the subject of evidence and not of mere suggestion on the part of the judge or advocate', a remark interpreted by Malcolm CJ (Murray and Wheeler JJ agreeing) in Morgan v Costello [2004] WASCA 260 (at [99]) as supporting the proposition that 'the defendant who contends the plaintiff has a residual earning capacity has the evidentiary burden of adducing evidence of what work the plaintiff is capable of performing and what jobs are open to a person with such capacity.'" (Emphasis added).

27 Their Honours also referred (at [53]) to the observations of Glass JA in Linsell v Robson [1976] 1 NSWLR 249 concerning the defendant's need to adduce evidence "to show what sort of employment is within the residual capacity of an injured litigant, and what sum it is likely to produce" (at 254 - 5; emphasis added).

28 In the present case, the appellants claimed that as the primary judge deemed it reasonable for the respondent to travel daily to Mudgee for work, they had discharged their evidential onus by proving that the respondent was fit for the kinds of employment that could reasonably be expected to be available in Mudgee.

29 The first difficulty with this submission is that there was, as the submission implicitly recognised, no evidence from which an inference could be drawn about the availability of particular types of jobs in Mudgee.

30 Moreover, even if one could infer that there was likely to be some demand in Mudgee for people to perform jobs of the type listed by his Honour, one could not infer the same level of demand for an employee with the respondent's limitations. Work suitable for the respondent would have to bear the following characteristics:

• It would have to be part-time work, probably for no more than 3 hours a day (Judgment [206]).
• It would have to be confined to light or restricted duties (ibid).
• It could not involve the respondent having to sit or stand for lengthy periods of time (Judgment [131]).
• It would have to be with an employer who was prepared to tolerate the respondent occasionally missing work during the week, perhaps requiring more sick leave than would an ordinary employee and being unpredictable in his attendance (Judgment [210] and [213(e)]).

31 Even if an assumption could be made that there would be full-time sales representative, sales assistant and other jobs available in Mudgee, it cannot in my view also be assumed, in the absence of evidence, that there would be jobs fulfilling the criteria applicable to any employment of the respondent.

32 The evidence of what occurred in the period of almost four years prior to the trial strongly supported the primary judge's conclusion that there was, or was likely to be, no practically available work for which the respondent's theoretical residual earning capacity could be exercised. The respondent's evidence (see [11] above) was that he had unsuccessfully sought employment in that period. He had sought the assistance of the Commonwealth Rehabilitation Service and Recovre, had undertaken courses to obtain further qualifications, had scoured newspapers and the internet for job advertisements and had even attempted voluntary work at a garage in order to test his ability to work. He had learned to drive an excavator, a forklift, a bobcat and backhoe and also obtained a certificate for the Responsible Service of Alcohol (see Transcript pp 5, 8, 11).

33 The respondent had a long and satisfactory work history prior to the accident. After the accident, he was, as is evident from the VCC report, eager to obtain any available employment as soon as possible. The appellants did not contradict the respondent's evidence concerning his efforts to obtain employment in the period prior to the trial and did not put to him in cross-examination that the efforts were not genuine or that there were other practical steps he could have taken to obtain employment.

34 Moreover, the appellants did not plead that the respondent failed to take reasonable steps to mitigate his loss in the period prior to the trial. In the absence of such a plea and in light of the way that the case was conducted, the inevitable conclusion was that for almost four years prior to the trial the respondent had made bona fide and reasonable efforts, albeit unsuccessful, to find employment. His theoretical residual earning capacity was thus of no value to him in this period. Without evidence that the respondent's condition will improve or be accommodated by future employment markets, it cannot be concluded that his theoretical residual earning capacity will be of any use to him in the future. As observed in the State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536 at [64] and [71], Kallouf at [80] and Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13 at [24], evidence of the position between an accident and trial may be a good indicator of current and future earning potential.

35 The appellants submitted that even if it could not be concluded that the respondent would be able to utilise fully his residual earning capacity in the future, it did not follow that there was no significant prospect that he would be able to do so. Accordingly, the appellants submitted that a percentage lower than 40 per cent, say 25 per cent, should be adopted to reflect the prospect of the respondent utilising his earning capacity in the future.

36 The appellants relied in this connection upon the following passage in Kallouf and the statement in Ahmedi v Ahmedi (1991) 23 NSWLR 288 referred to in that passage.

"[49] Any assessment in respect of the impairment of future earning capacity necessarily involves a consideration of possibilities. In some cases, it would be an error in treating as certain the fact that a plaintiff would lose wages for a period of years from the date of trial. Where incapacity is established as at the date of trial, what is to be evaluated will be the extent of the possibility that the plaintiff may not work in the future or may lose time from work and determine the allowance of proper compensation in respect of that possibility. That evaluation will depend upon the evidence. Where there is no evidence to support a conclusion that, as a matter of certainty, an injured plaintiff would not earn monies from employment for a number of years post trial, then such a finding would involve an error of principle: Ahmedi v Ahmedi (1991) 23 NSWLR 288 (at 302) per Clarke JA, Handley JA agreeing" (see also Allianz v Kerr at [27]).

37 I do not accept this submission. As I have pointed out, the evidence demonstrated that the respondent had tried unsuccessfully to obtain employment for nearly four years prior to the trial. The evidence at the trial offered no reason to suggest that the position would be any different in the future. The appellants did not identify any practical job opportunities that were available to the respondent in the past of which he failed to avail himself, or any such opportunities that might arise in the future. In these circumstances, to attribute a percentage chance to the prospect of the respondent obtaining a job in the future would involve mere speculation. There was no tangible basis in the evidence for such an assessment.

38 For these reasons I consider that the appeal should be dismissed. I should however refer to two other matters.

39 The first is a challenge by the appellants to the primary judge's reliance upon Jones v Dunkel (see [20] above). As it appears that his Honour reached his conclusions independently of this point (on what I consider to have been sound bases) and referred to it merely for additional support, success on this point would not assist the appellants' appeal and it is unnecessary to refer further to it.

40 The other matter is a complaint by the appellants that the primary judge inaccurately described the thrust of their cross-examination of the respondent as the reasonable expectation that he would move to Sydney to obtain employment (see [12] above). This description of the appellants' cross-examination may not have been strictly accurate. However, counsel for the appellants did put to the respondent that it was obvious to him that employment opportunities would be significantly greater in Sydney than in Rylstone or Kandos. In any event the comment did not assume any importance in his Honour's reasoning process and the appellants' challenge to it does not assist their appeal. It is sufficient to note that the more general, and well-founded, point raised by his Honour was that the appellants did not put to the respondent in cross-examination that there were practical employment opportunities in his local area.

NOTICE OF CONTENTION

41 The sole point raised by the respondent's Notice of Contention was that the effect of the primary judge's reasoning, when considered as a whole, was that the respondent had no residual earning capacity. This is correct but I do not consider that it conflicts with the primary judge's judgment. In my view it was useful for his Honour to first identify the types of jobs that the respondent might be able to perform and secondly to consider whether the evidence established that that theoretical capacity represented an actual ability to obtain employment in the region in which it was considered reasonable for the respondent to seek work.

THE CROSS-APPEAL

Residual earning capacity

42 The respondent's first contention on the cross-appeal was that the primary judge erred in not finding that the respondent had no residual earning capacity at all. However, for reasons that I have explained, this was in fact the primary judge's ultimate finding. The determination that the respondent had a theoretical 40 per cent residual earning capacity was merely a step in his Honour's reasoning process. His ultimate conclusion that this capacity could not be utilised was effectively a finding that the respondent did not have any residual earning capacity at all.

Likely earnings of the respondent if uninjured

43 The parties agreed that if the respondent had not been injured he probably would have spent the remainder of his working life in the employment of Telstra, or a like enterprise. Further, the parties did not challenge on appeal the amount assessed by the primary judge as the respondent's net earnings if he had continued in full-time employment to July 2003. However, the parties were, and are, at issue concerning the factor that should be applied to estimate increases in the likely earnings of the respondent if he had not been injured.

44 The primary judge concluded that the appropriate indexation factor was the rate of increase in the net earnings of another Telstra employee, Mr Troy Wellington, who was identified as a comparable employee. His Honour considered that regard should be had to Mr Wellington's earnings exclusive of overtime as his overtime component significantly exceeded that of the respondent. This difference may have been because Mr Wellington was based in Sydney or simply due to individual differences.

45 The respondent complained on appeal of the primary judge's use of the rate of increase of Mr Wellington's base salary rather than that of his total earnings but I discern no error in this approach. The fact that Mr Wellington's total earnings (including overtime) increased at a much greater rate than did his base salary suggested an increase not only in his rate of pay, but also in the amount of overtime that he worked. Nothing in the evidence suggested that the respondent would have worked similarly increasing amounts of overtime. The rate of increase of Mr Wellington's base salary was therefore a better indicator of the likely rate of increase of the respondent's earnings if he had not been injured.

46 The respondent also submitted on appeal that the use of the rate of increase of Mr Wellington's earnings (whether net or total) was inappropriate because he was a less senior employee than the respondent had been. There was however little difference in their seniority and thus no reason to think that there would have been a significant difference in the rates of increase of their base salaries.

47 The respondent further submitted on appeal that instead of using Mr Wellington's earnings the primary judge should have used the movements in average weekly earnings between 2001 and 2011. The respondent's earnings were similar to average weekly earnings at the date of the respondent's accident but this was simply a coincidence.

48 The primary judge referred to the respondent's reliance upon the rate of increase in average weekly earnings but did not give reasons for rejecting that approach. It is clear however that his Honour took the view that the earnings of a substantially comparable colleague, Mr Wellington, at the date of the accident would be a better guide to the likely increases in the respondent's earnings if he had stayed at Telstra than the average increases in earnings of workers throughout the economy. Accordingly, his Honour did not err in taking this approach.

Retirement age

49 In light of the arduous physical nature of the respondent's pre-accident employment, I do not consider that any error has been shown in the primary judge's assumption in his calculations of a retirement age of 65, rather than the relevant statutory retirement age of 67.

ORDERS

50 For the reasons that I have given, both the appeal and cross-appeal should be dismissed with costs.

51 SACKVILLE AJA: I agree with Macfarlan JA.

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Decision last updated: 23 July 2012