Husher v Husher - Economic Loss in Partnerships

The High Court  in Husher v Husher (1999)  197 CLR 138 found that the plaintiff was entitled to recover the total profits of the partnership as being representative of his earning capacity.

The case involved a self-employed block layer operating through a 50/50 partnership with his wife. Although profits were split evenly for tax purposes, the court recognised that the plaintiff's exertion alone was responsible for generating the income. His wife’s contributions were limited to basic administrative support such as bookkeeping and taking messages.

Two Competing Views on Profit Entitlement

The case considered two interpretations:

1. That the plaintiff was only entitled to 50% of the partnership profits in line with the agreed tax structure.

2. That the plaintiff should receive 100% of the profits, adjusted only to reflect the minimal value of his wife’s contribution.

The High Court endorsed the second view. The key reasoning was that compensation in personal injury and economic loss claims concerns a person's lost earning capacity, not merely a strict analysis of profit entitlement under tax or business law structures.

Applying Husher v Husher Beyond Partnerships

The principles established in Husher v Husher are not limited to partnerships. They extend to companies, trusts, and other trading structures where profits are generated from a plaintiff’s personal efforts and expertise.

This is particularly relevant in industries like construction, where many individuals operate through company structures but still rely heavily on their own physical labour to generate income. Sub-contractors who structure their affairs through a Pty Ltd company but do all the work themselves are effectively in the same position as the plaintiff in Husher.

How to Apply Husher v Husher in Practice

To prepare an economic loss assessment in line with Husher v Husher, the following must be established:

1. Demonstrate the Plaintiff’s Labour Generated the Income

You must show that the company or partnership income was directly attributable to the plaintiff’s skill and effort. If two working shareholders (e.g. two bricklayers) each contribute labour, only the portion attributable to the plaintiff may be claimed.

Tip: To avoid disputes, consider structuring payments to shareholders based on hourly rates rather than profit shares.

2. Adjust for Contributions by Non-Essential Partners

If a spouse or silent partner makes minimal contributions (e.g. 2 hours per week of admin), the loss calculation must deduct a reasonable commercial wage for those hours. This ensures that only the plaintiff’s true labour value is included in the claim.

3. Consider the Nature of the Business

Where the business is a trading entity or involves significant capital (equipment, IP, inventory), the link between personal labour and profits becomes more complex. You must show that the profitability stems from the plaintiff’s personal input, not merely the investment or trading operation.

Real-World Application: Sub-Contractors in Construction

For sole directors and workers in construction companies, Husher v Husher has strong relevance. If your company’s income stops when you stop working, this is a strong indicator that your earning capacity equals the business’s profit. In injury or loss cases, this principle allows proper recovery beyond mere salary replacement.

Final Thoughts

Husher v Husher remains a vital precedent in assessing damages for loss of earning capacity in both personal injury and economic loss claims. It ensures that courts look beyond formal structures and tax arrangements to the real source of business income: human effort.

For accountants, lawyers and claimants involved in forensic analysis or court claims, understanding this case is crucial in ensuring fair and full compensation is achieved.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.