Cullen v. Trappell.

Judges:
Barwick CJ
Gibbs J
Stephen J
Mason J
Murphy J
Aickin J
Wilson J

Court:
Full High Court

Judgment date: Judgment handed down 1 May 1980.

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Barwick C.J.

Since writing my reasons for judgment in
Atlas Tiles Ltd. v. Briers 78 ATC 4536 ; (1978) 52 A.L.J.R. 707 ( Atlas Tiles ) I have had the advantage of reading the written submissions of the parties in this case and of hearing the oral argument of counsel in elaboration of those submissions. I have also taken the opportunity of looking once again at the material that was available to me when writing the reasons in ( Atlas Tiles ) and of reading the reasons for judgment of those Justices who participated

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in the hearing of that case and also of those Justices who participated in the present appeal.

My reasons in Atlas Tiles covered the circumstances of this case in that I dealt almost primarily with the case of personal injury and the evaluation of the capacity to earn which by injury a person had either lost or had had impaired. I feel bound to say that nothing I have read or heard has caused me to alter the reasons which I gave for decision in Atlas Tiles . There are, however, one or two supplementary remarks which I desire to make.

I feel I ought at the outset to state explicitly the approach, which, in my opinion, this Court ought now to make to the decision of principles of the common law applicable in Australia. Long since the Court decided that it was not bound by the decisions of the Court of Appeal or of the House of Lords. For a considerable time, thinking uniformity of decision in matters of common law within the British Commonwealth, or at least as between the courts of the United Kingdom and this Court desirable, the Court made a considerable endeavour to maintain that uniformity even to the point of deferring to a decision of the English Court of Appeal rather than maintain one of its own: see Waghorn v. Waghorn (1941-42) 65 C.L.R. 289 at p. 292. But the maintenance of that uniformity could scarce survive the decision of the Privy Council in
Australian Consolidated Press Ltd. v. Uren (1969) 1 A.C. 590 ; (1967) 117 C.L.R. 221 .

Now, however, with the passage of the Privy Council (Limitation of Appeals) Act , 1968-1973 (Cth.), and the subsequent Privy Council (Appeals from the High Court) Act , 1975 (Cth.), the Court has ceased to be bound by decisions of the Privy Council. This Court has become the final court of appeal, not merely in matters of federal jurisdiction but as to the principles of the common law applicable throughout Australia. The Court has expressed itself in this sense in
Viro v. The Queen (1977) 18 A.L.R. 257 .

It is, of course, proper to acknowledge the tremendous advantage Australia has had by its inheritance of the common law. The capacity of the judiciary to declare the common law is a notable feature of the common law system itself. It is for the final court of appeal in each juristic unit administering the common law ultimately to declare what is the common law. This, in any case, is a very heavy responsibility, but even more so in the case of this Court which has become such a final court of appeal, long after the final court of appeal in the juristic unit of the United Kingdom has had an opportunity to declare the common law.

Whilst the courts have the responsibility of declaring what the common law is, that law exists apart from any such declaration. Thus, in the hands of a final court of appeal there remains a question whether any prior declaration of the common law has correctly expressed and declared that law. Where a decision binds in point of precedent no such question arises: but where there is no binding precedent, the question must, if a prior decision be challenged, be answered by the final court of appeal itself.

In
Mutual Life & Citizens' Assurance Co. Ltd. & Anor. v. Evatt (1968) 122 C.L.R. 556 at p. 563 , I had occasion to advert to the situation where, when this Court was asked to declare the common law, there was no relevant binding precedent. The situation now is that, when the Court is asked, particularly for the first time, to declare the common law, there are no precedents binding on this Court. Thus, what I then wrote has now a wider area of application.

What ought the approach of this Court to be when, for the first time, it is asked to declare the principles of the common law in some particular area of human activity? It seems to me the Court cannot act as if it were bound by declarations of the common law not made in its own juristic system. It must, in my opinion, itself closely examine the principles of the common law and determine for itself whether or not such prior declarations correctly declare the common law. If, of course, the Court itself concludes that the common law is in accordance with such declarations, then the Court should for itself make a like declaration for the purposes of the Australian people: the Court cannot alter the common law which it is satisfied has been correctly declared. Any such change must be left to the appropriate legislature. If, however, the Court is

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convinced on its examination of principle that the declaration already made is erroneous, then it seems to me the Court is bound to declare the common law for Australia in that sense which the Court thinks is correct.

It is an odd circumstance but a fact that the House of Lords in deciding
British Transport Commission v. Gourley (1956) A.C. 185 , (Gourley's case) took exactly this course. As I pointed out in my reasons in Atlas Tiles , there had been a long standing course of decision and practice running against the conclusion to which the House of Lords came in Gourley's case , but nonetheless the House declared the common law in the sense in which it is expressed in Gourley's case . This Court has here in this respect a less difficult task because, although there has been a long course of practice in Australia, it has all been founded without examination on the declaration of the common law made by the House of Lords in Gourley's case .

When writing my reasons in Atlas Tiles , I was convinced and I remain convinced that the decision of the House of Lords did not correctly declare the relevant common law. The errors, which in my respectful opinion were made, were fundamental.

In the first place, the replacement of the capacity to earn money by damages was, by the very statement of the problem, not an exercise in replacing the wages which were currently being earned or which might be expected to be earned by the injured person so that the assessment was of the value of an annuity for the balance of the working life in the amount of those wages, some discount being made to reflect the vicissitudes of life. The problem is to value the capital asset of the injured person, namely, his capacity to earn money. Whilst it is true that what that capital asset by its exercise may produce in the form of money will quite properly be an element and perhaps in some cases a dominant element in that valuation, the exercise is not, in my opinion, one in which it is sought merely to replace the wages themselves. I expressed myself on this matter in
Arthur Robinson (Grafton) Pty. Ltd. & Anor. v. Carter (1970) 122 C.L.R. 649 at p. 658 , and along with other Justices, in
Ruby v. Marsh (1975) 132 C.L.R. 642 .

The approach of the House of Lords to this aspect of the matter, in my opinion, infected its approach to and consideration of the place the liability to taxation might take in the assessment of damages for the injury received.

In the second place, a fundamental error in Gourley's case in my opinion, was the assessment of compensation not for that which was lost or impaired but of the ultimate benefit which the injured person might have derived from the exercise of the capacity to earn. What was thought to be the subject of compensation was the benefit which the injured person might have derived from the receipt of the product of his capacity to earn, at least in so far as that benefit was influenced by the obligation to pay income tax. That benefit, however, was legally, in my opinion, a remote or irrelevant fact or circumstance. Whilst the money produced by the exercise of the capacity to earn might be a measure or an item in the measure of the value of that capacity, the benefit to be derived from the receipt or possession of that money could not, in my opinion, be part of that measure. There is a radical difference between the use of salary or wages as an element in determining compensation for the loss of earning capacity and the use of the benefit which could be derived from the receipt of the salary or wages for that purpose. To attempt to assess damages on the basis of the benefit which the recipient of salary or wages derives from its receipt, is to my mind to introduce remote and irrelevant considerations. If one firmly retains the concept of compensation for loss of earning capacity, it seems to me quite logically impossible to enter upon an examination of what ultimate benefit might accrue to a person from the product of the exercise of his capacity to earn in order to ascertain what was the value which ought to be placed upon that for which compensation should be given, namely, the loss or diminution of capacity to earn money.

Much was made in Gourley's case of the universality of the obligation to pay income tax. But, assuming that it is the benefit derived from the receipt of salary or wages which is to be the measure of loss, there are other expenditures to be made out of salary or wages which are universal. One comes prominently to mind - travel. Few who earn salary or wages live on the job so as to have

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no necessity to travel. Yet the differing costs to travel to and from work affect quite significantly the benefit which the earner derives from the salary or wages received. Another instance is clothing. To earn salary or wages all must be dressed for work: and the cost of clothing - in some instances of specialised clothing - reduces the benefit derived from the receipt of the salary or wages. Differences in the requirements of the employer or of the nature of the work to be done may significantly affect the benefit derived from the receipt of salary or wages.

I cannot think that the universality of the obligation to pay income tax warrants such a departure from principle as, in my respectful opinion, Gourley's case involves. I gave various illustrations in my reasons in Atlas Tiles of the differing consequences of attempting to take account of the obligation to pay tax in individual circumstances: they can be multiplied many times.

In the third place, there is an air of apparent practical simplicity about an assessment of the value of earning capacity of a workman who is on a wage regulated by agreement or authority and who suffers a deduction by the employer of an amount in respect of income tax. The balance has come to be commonly called ``take home'' pay. It may very well be attractive to think that what he earns is the ``take home'' pay. But, in my opinion, that, in any case, is not what he earns. True, the benefit to him of what he earns may be diminished because of obligations he has to the community. But even this apparent simplicity has a degree of fallacy because ``take home'' pay does not represent the actual benefit derived by the worker by the receipt of his wages. If he has dependants he will at the end of the year become entitled to a refund. The amount deducted will have been in excess of what his obligation to the community really is. No doubt, if Gourley's case were accepted, due allowance could be made for those deductions to which the employee is presently entitled, but not to those to which he may become entitled in future. For he may develop dependants, or occasions for allowable deductions.

The other apparent practical attraction of using the ``take home'' pay as the factor on which to build the valuation of the capacity to earn is the assumption that income tax will remain for the balance of the working life at the same or at a greater level. But I doubt if it can any longer be said that that is a sound assumption. The community appears already to be aware that the level of income tax has become destructive of individual initiative and effort and, further, has had a tendency to undermine much of the sense of moral rectitude on which a community so much depends. Further, a movement in some places to substitute, or at least to place more emphasis upon, a tax on expenditure for a tax on income is apparent. An attempt in other places to place limitations on the government's power to exact a tax on income is also apparent. This may presently be no more than a cloud the size of a man's hand, yet the storm may ultimately come.

It seems to me, therefore, that to assess the value of the loss of earning capacity on the estimation of what benefit ultimately the employee derives from his salary or wages and, in doing so, to assume that the level of taxation will remain not lower than at present is to deprive the employee of a great part of the value of a capital asset which has been destroyed or impaired. No amount of practical convenience in the task of assessing the value of that asset can, in my opinion, justify the illogical step of valuing that asset not by what it will produce in money but by means of some estimation of what benefit the deprived party might ultimately have derived from the receipt of the money which the exercise of his capacity to earn will produce. Although not of legal consequence, this has not resulted in any benefit to the Revenue but only of benefit to the defendant.

In my opinion, the decision of this Court in Atlas Tiles as to the relevance of income taxation in the assessment of damages for loss of earning capacity ought to be regarded as a correct declaration of the principles of the common law. The appeal should be dismissed.

It follows from my reasons that I would dismiss the cross-appeal.