#25 Lessons from the Courtroom – Personal Injury Assessments for ad-hoc earning individuals

Traditionally, one’s assessed lost income is calculated in two phases: ‘past loss’ and ‘future loss’.

‘Past loss’, as it seems, is the calculation of the lost income from the date of the accident up until an agreed date, usually approximate to the date of the report discounted to a present-day value.

‘Future loss’, as it seems, is the calculation of the lost income from the at which the past loss calculation ends until the expected retirement age of the individual.

Both the ‘past’ and ‘future’ losses rely on an element of ‘consistency’ when it comes to the earnings of the individual (i.e. an expected salary or profits from a business) for the period following the accident. The most appropriate indicator is usually the individual’s historical income (net of expenses).

However, how is one’s lost income calculated when that income is ad-hoc is nature and heavily reliant on consumer popularity?

This was the dilemma facing the Court in the matter of Farriss v Axford (No 3) [2022] NSWSC 20.

Mr TF, one of the founding members and lead guitarist in the band known as of INXS, sustained injuries to the fingers of his left hand in an accident on a boat on 24 January 2015.

This led to Mr TF seeking compensation from the owners of the boat for lost income.

So, let us dive into the issue facing the accounting experts in the matter, which was primarily:

• What, if any, was the past & future loss suffered by Mr TF?

Mr GL [accounting expert] acted for the Plaintiff and Mr K [accounting expert] for the Defendant, and according to the judgement, the Experts ‘did not agree on much’

The assessment period for the past loss was 24 January 2015 (the date of the accident) to 30 August 2021.

Both experts undertook vastly different assumptions in assessing the past loss with Mr GL assuming INXS’ would have undertaken three global tours and Mr K assuming a single tour.

The Plaintiff provided wide and varied oral evidence suggesting everything from his ‘original evidence about touring in around 2017. There may have been one smaller tour as well’ through to ‘[its] possible that instead of two large stadium tours, they would have undertaken five to six tours in smaller, though still significant, venues’.

As such, the quantification of the ‘income’ (or royalties) to be derived by Mr TF is highly subjective.

Further complicating this issue was the significant variance in income before tax derived by the Plaintiff during recent global tours [dating back to the mid 2000's] which ranged from in excess of $300,000 to as little as $90,000.

The historic ad-hoc nature of global tours undertaken by INXS was combined with the varied flow-on effects of records sales and (more recently) ‘Spotify hits’.

As such was the widespread nature of not only the Experts’ assessments of loss, but the Plaintiff’s claims regarding the intentions of the band. This was further complicated by a band member, Mr TF’s brother’ claiming in 2012 that the band would not undertake any further tours.

This highlights the importance of assumptions (both instructed and those undertaken by an Expert) are critical in forming a view as to the expected loss, however assumptions are only as functional as the supporting evidence on which they are based.

As such, the Judge formed a view (which was somewhere in the middle of the two experts’ views), allowing the loss for one large tour ($200k pre-tax) and one smaller tour ($80k per tax).

This case provides a perfect example of the difficulties that can face an Expert in the quantification of damages when the earnings of the injured are ad-hoc in nature and the activity required is one of personal exertion, such as as musicians, actors and performers alike.

For more information on the services we provide to personal injury, commercial litigation and dispute resolution lawyers, please contact myself or your local Grant Thornton Australia forensic accounting expert.