AMP General Insurance Ltd. v. Kull & Anor. [2005] NSWCA 442
69 Mr. Russell submitted there was a number of errors in the judgment of the primary judge concerning economic loss. The income declared in the tax returns was $4,000.00, not $8,000.00. The other income totalled $30,000.00 or $32,000.00, not $35,000.00. The primary judge did not justify adding this amount to the declared amount. Furthermore, Mr. Russell submitted, Mr. Kull had said in evidence that the $4,000.00 shown in his tax return was correct; and there was no evidence as to how much of $30,000.00 or $32,000.00 was covered by parts or other matters in respect of Mr. Kull incurred expense. Furthemore, there was evidence that Mr. Kull had a residual capacity, and was earning money from helping in his son’s business, this not being allowed for at all in respect of past economic loss.
70 Mr. Watson supported these submissions. He referred to what was said in Giorginis v. Kastrati (1988) 48 SASR 371 at 375-6, per von Doussa J:
Where the plaintiff gives evidence that his income tax returns do not disclose the full extent of his earnings, a court will scrutinise the plaintiff’s evidence with special care. The want of honest compliance with the taxation laws is a matter that will reflect adversely on the plaintiffs credit and may lead to the rejection of his evidence as untrustworthy, at least about his earnings. In such a case the plaintiff has only himself to blame if damages are assessed in line with the pre-accident income actually disclosed to the revenue authority. However, where the fact of the receipt of other income is proved, then, in my view, the plaintiff is entitled to have that exercise of his earning capacity brought to account, although subject to reduction for the income tax which should have been paid, and subject to the question whether the plaintiff would have continued to exercise that capacity had he been required to pay tax on the additional income: see McIntosh v Williams [1976] 2 NSWLR 237 at 244, 252. Melino v Ken Eustice Motors (North Road) Pty Ltd (1984) 111 LSJS 296 at 308-310 is an example of a case where undisclosed income was proved and brought to account.
A failure to disclose income as required by s 161 of the Income Tax Assessment Act 1936, constitutes an offence which may attract heavy penalties: see s 223 of the Income Tax Assessment Act and ss 8C, 8K and 8P of the Taxation Administration Act 1953. Where a tax fraud or evasion of this kind is disclosed in evidence, it is the court's duty to draw the evidence to the attention of the executive branch of government for such action as may be appropriate: Petera Pty Ltd v EAJ Pty Ltd (1984) 7 FCR 375. A court should not, generally speaking, make a finding favourable to the plaintiff in a personal injury case that his income is otherwise than he has disclosed to the revenue authority unless the plaintiff admits the non- disclosure. A fortiori, such a finding should not be made where the plaintiff denies that he has failed to properly disclose his income. Unless the plaintiff admits the falsity of his income tax returns the court should not speculate in his favour, for example that his pre-accident earnings were probably higher than he has disclosed. Rather, the court should adopt the income figures actually disclosed and base the assessment of damages on them. Again, if this results in a low assessment, that is the consequence of the plaintiff adhering to the accuracy of his income tax returns.
That passage was emphatically endorsed by King CJ and Legoe J at 379.
71 Mr. Watson also pointed out that the Counsel for Mr. Kull below had asked for past economic loss calculated at $100.00 per week, and later agreed with submissions for the other parties that it was appropriate to provide a buffer for past and future economic loss, submitting however that their suggested figure of $10,000.00 to $15,000.00 was at the bottom of the range.
72 Ms. Norton SC for Mr. Kull submitted that the admission made by Mr. Kull was in respect of a figure in his income tax return which was probably taxable income, and his acceptance of that figure in effect was a concession that his accountant had worked correctly from the papers given to him. It had to be understood along with his evidence that he was paid for much of his work in cash. Furthermore, there was no attempt in the cross-examination to link the figure of $4,000.00 to net income before deductions such as work-related deductions that were of value for living, superannuation, losses on investments, charitable donations, etc. Ms. Norton also referred to Trajkovski v. Ken’s Painting & Decorating Services Pty. Ltd. [2002] NSWSC 568 (Dunford J) at [51]-[52], as follows:
52 In these circumstances, where I consider it likely that the plaintiff had some income beyond that disclosed in his taxation returns, although he has not directly admitted submitting false returns, I assess the plaintiff’s loss of income by reference to what has been disclosed together with something for the additional income discounted for the tax that should have been paid on it; but because of the paucity of the evidence, the assessment must be conservative and not over generous. As there has been no direct admission of the lodging of the false taxation returns no question arises about referring the matter to the relevant authorities. I reject the submission that in a case such as this it is appropriate to take Average Weekly Earnings or any similar table as a guide.
73 Ms. Norton also submitted that the primary judge was not incorrect in allowing for economic loss on the basis of evidence from customers as to what they had paid him.
Decision
74 In my opinion, the primary judge did make the errors identified by Mr. Russell. I agree with what was said in Giorginis v. Kastrati.
1 GILES JA: For the reasons given by Hodgson JA, whose judgment I have had the advantage of reading in draft, the verdict for Mr Kull against Mr Maloney should stand but with the damages reduced to $118,788. I qualify my agreement in this respect to the extent that I do not think it necessary, if Giorginis v Kastrati (1988) 48 SASR 371 so suggests, that a plaintiff admit tax evasion before earnings greater than those disclosed to tax authorities can be taken into account in assessing his damages. The Court must decide on the evidence before it. The evidence may warrant, indeed require, the conclusion that the plaintiffs earnings exceeded his declared income even if the plaintiff has not admitted non-disclosure of income. That is so in the present case, on the evidence of Dr Mayman and Mr McMurray called in Mr Kull's case.