Supreme Court of New South Wales - Court of
A plaintiff's failure to make full disclosure of income
does not preclude recovery of damages based on what the plaintiff
truly earned, as opposed to what was disclosed in income tax
In accepting that a plaintiff's actual earnings are
distinct from what was disclosed, it is the duty of a Court to
refer the judgment to the Commissioner of Taxation for
The plaintiff, a self-employed taxi driver, was injured as a
result of a collision between the taxi he was driving and the
vehicle the defendant was driving.
Prior to the subject accident, the plaintiff earned income by
driving a taxi that he owned and leasing a second taxi plate.
Initially, when the plaintiff gave evidence he confirmed that all
of his income was disclosed in his tax returns. Later, he alleged
that his tax returns did not include the lease payments and that he
was only made aware of this when he spoke to his accountant. The
plaintiff's accountant gave evidence that when preparing the
plaintiff's tax returns he was unaware that the plaintiff owned
a second taxi plate.
Despite the evidence of the plaintiff and his accountant,
Delaney DCJ assessed the plaintiff's pre-accident earnings
based upon the figures in his income tax returns for the 3 years
preceding the subject accident. Delaney DCJ commented as
"in this case, where the
credibility of the plaintiff in relation to his taxation records is
in issue the court should not accept late attempts to change the
financial records when the plaintiff said in chief they included
all his income."
The primary issue for determination by the Court of Appeal was
whether the trial judge had erred in his findings as to the level
of the plaintiff's pre-injury earnings.
The Court of Appeal noted that it can only intervene in relation
to credit-based findings where the findings are contrary to
"incontrovertible facts" or "uncontested
testimony", or are "glaringly improbable" or
"contrary to compelling inferences."2
Having analysed evidence in respect of the usual annual gross
turnover of a taxi operator in addition to that of the plaintiff
himself, the Court of Appeal formed the view that it was
overwhelmingly probable that the plaintiff did not disclose the
lease payments for income tax purposes.
The Court of Appeal reiterated the principles enunciated in
Giorginis v Kastrati3 and decided that the
plaintiff was entitled to have his damages assessed according to
the full extent of the income he actually earned. To that extent,
the appeal was successful. However, it is the duty of the Court to
refer the judgment to the Commissioner of Taxation.
The case affirms that despite non-disclosure to the tax
authorities of all income, a plaintiff is entitled to recover
damages in respect of what was truly earned. However, this is
subject to a reduction for income tax which ought to be paid on
those earnings and subject to the question whether the plaintiff
would have continued to earn such income despite the requirement to
pay income tax on those earnings.
1 Beazley JA; Giles JA and Macfarlan JA
2 Fox v Percy  HCA 22; (2003) 214 CLR 118
at  and 
3 Giorginis v Kastrati  48 SASR 371;
 Aust Torts Reports 68,460
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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