MEASURE OF ECONOMIC LOSS

In a previous article we dealt with the High Court decision in Husher v Husher. A recent NSW case has again dealt with the appropriate measure of loss of earning capacity and the reliance upon so-called "taxable income" as a measure of that lost capacity. The Court of Appeal in NSW in Conley v Minehan has considered the situation of a husband and wife who were equal shareholders and directors in a company which effectively distributed income for tax purposes on a fifty-fifty basis. The court has confirmed that such "tax treatment of income" was not conclusive of the injured person's earning capacity. The court referred to the High Court's comments in Husher v Husher in concluding that the compensable financial loss was the amount the injured person would have expected to have had under his control or at his disposal if not for the injuries. In other words, if, as a result of his personal exertions, the injured person could have had financial rewards from his work which may have been directed to whatever purpose or destination he chose, that should have been the focus for the investigation of his lost earning capacity.

This goes to show that the court will look behind the so-called corporate structures or partnership structures in other cases to look at the actual capacity of the injured person and, where appropriate, ignore any taxation structures which may be used to minimise tax payable on such earnings.

DISCLAIMER

These personal injury law articles were published with the express permission of Stacks/The Law Firm. Please note that the information was correct at the time of publication, but personal injury law is subject to legislation changes from time to time and thus it is recommended that you contact a Stacks/Goudkamp lawyer should you have any questions relating to any of the topics above.