Blaxter v Commonwealth of Australia

[2008] NSWCA 87

New South Wales

Court of Appeal

CITATION:	BLAXTER v COMMONWEALTH OF AUSTRALIA [2008] NSWCA 87 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	1 April 2008
JUDGMENT DATE:	8 May 2008
JUDGMENT OF:	Mason P at 1; McColl JA at 2; Basten JA at 3
DECISION:	(1) Allow the appeal and set aside order 1 made by the trial judge and entered on 20 March 2007. (2) In lieu thereof give judgment for the plaintiff, Lawrence Gary Blaxter, in an amount of $942,163. (3) Dismiss the cross-appeal. (4) Order the respondent to pay the appellant’s costs of the appeal and cross-appeal. (5) Grant liberty to each party to file a note within 7 days as to any correction required to the calculations of the amount of the judgment.
CATCHWORDS:	DAMAGES – Melbourne/Voyager collision – psychiatric injury – alcohol abuse – whether economic loss a result of collision or voluntary conduct by appellant – intervening act - DAMAGES – predicting future events absent effects of tortious conduct – recovery for loss of a chance of promotion - REASONS – judgment delivered without making orders – further reasons – no breach of obligation to give reasons at time - TORT – continuation of event – conduct of officer of defendant on morning after accident – whether part of tortious conduct
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 (NSW), r 36.2
CATEGORY:	Principal judgment
CASES CITED:	Chapman v Hearse (1961) 106 CLR 112 Commonwealth v McLean (1996) 41 NSWLR 389 Commonwealth v Ryan [2002] NSWCA 372 Fleming v The Queen [1998] HCA 68; 197 CLR 250 Hirst v Nominal Defendant [2005] QCA 65; [2005] 2 QdR 133 Medlin v State Government Insurance Commission (1995) 182 CLR 1 Palmer v Clarke (1989) 19 NSWLR 158 Reynolds v Katoomba RSL All Services Club Ltd [2001] NSWCA 234; 53 NSWLR 43 Todorovic v Moussa [2001] NSWCA 419; 53 NSWLR 463
PARTIES:	Gary Lawrence Blaxter (Appellant) Commonwealth of Australia (Respondent)
FILE NUMBER(S):	CA 40199/07
COUNSEL:	A G Melick SC/ K Sant (Appellant) R E Williams QC/I McLachlan (Respondent)
SOLICITORS:	James Taylor & Co (Appellant) Australian Government Solicitor (Respondent)
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 20777/97
LOWER COURT JUDICIAL OFFICER:	Hidden J
LOWER COURT DATE OF DECISION:	20 September 2005; 18 August 2006; 16 February 2007
LOWER COURT MEDIUM NEUTRAL CITATION:	Blaxter v The Commonwealth [2005] NSWSC 941; [2006] NSWSC 744; [2007] NSWSC 88

CA 40199/07
SC 20777/97

MASON P
McCOLL JA
BASTEN JA

8 May 2008

BLAXTER v COMMONWEALTH OF AUSTRALIA

Headnote

The appellant, Mr Lawrence Gary Blaxter, was a seaman aboard HMAS Melbourne on the night of its collision with HMAS Voyager on 10 February 1964. The Commonwealth admitted negligence; the proceedings in the Common Law Division concerned the quantum of damages for which it was liable. Hidden J accepted that the appellant suffered a psychological injury as a result of the collision, but found that the injury did not cause the appellant to leave the Navy in 1967. His Honour found that a loss of earning capacity only had financial consequences for the period after the appellant left the Navy.

The appellant brought the present appeal, challenging the trial judge’s assessment of economic loss. The Commonwealth brought a cross-appeal contending that any economic loss suffered by the appellant was a result of alcohol abuse and rather than any psychological injury arising from the collision.

On the appeal, the issues for determination were:

(i) whether the Court can rely on reasons given by the trial judge in the second judgment with respect to issues determined by the first judgment;

(ii) whether the economic loss suffered by the appellant resulted from alcohol abuse rather than the collision;

(iii) whether the trial judge erred in finding that the collision did not lead to the appellant’s failure to re-enlist in the Navy;

(iv) whether the appellant should be awarded an amount for loss of chance of obtaining promotion to petty officer and chief petty officer;

(v) whether the trial judge awarded a manifestly inadequate sum for lost earnings in civilian life.

The Court held, allowing the appeal and dismissing the cross-appeal:

(per Basten JA, Mason P and McColl JA agreeing)

In relation to (i)

1. In the present case, no orders were pronounced at the time of the first reasons. There is no requirement that this Court disregard any additional reasons given by the trial judge in his second judgment: [12].

Palmer v Clarke (1989) 19 NSWLR 158; Todorovic v Moussa [2001] NSWCA 419; 53 NSWLR 463 distinguished.

In relation to (ii)

2. There is a significant difference between negligent conduct of a defendant which causes harm to a plaintiff and the creation by the defendant of opportunities for conduct which may be risky to participants, where the plaintiff voluntarily engaged in the risky pursuit. Where negligent conduct has given rise to a psychological or psychiatric condition, liability for the consequences will usually follow, where the consequence is reasonably foreseeable: [36]-[37].

Medlin v State Government Insurance Commission (1995) 182 CLR 1; Commonwealth v Ryan [2002] NSWCA 372; Hirst v Nominal Defendant [2005] QCA 65; [2005] 2 QdR 133, considered.

Commonwealth v McLean (1996) 41 NSWLR 389, distinguished.

3. There is a material distinction between a case where a plaintiff drinks to excess as a result of psychological consequences resulting from negligent conduct of the defendant and a case in which a plaintiff alleges a duty on the part of the defendant not to permit him or her to drink to excess: [49].

Cole v South Tweed Heads Rugby League Football Club Ltd [2004] HCA 29; 217 CLR 469; Reynolds v Katoomba RSL All Services Club Ltd [2001] NSWCA 234; 53 NSWLR 43, distinguished.

4. There was ample evidence to support the trial judge’s finding that the collision caused the appellant serious psychiatric injury. The award of general damages was within the range available to the trial judge in light of his findings: [63].

In relation to (iii)

5. There was inconsistency in the trial judge’s conclusion that although the appellant suffered a diminution of earning capacity as a result of the psychological effects of the collision, which continued to affect him after he left the Navy in 1967, that injury had no effect on him in the 3 years prior to his leaving the Navy: [8]

6. The trial judge erred in treating the incidents the morning after the collision as an independent event, rather than as a consequence of the collision. In a commonsense assessment, the events of the following morning were inextricable sequelae of the tortious act: [71]-[72].

Chapman v Hearse (1961) 106 CLR 112 applied.

In relation to (iv)

7. The material available indicated that the appellant had a better than average chance of staying in the Navy for 20 years, absent the collision and its sequelae. His loss of chance of a pension should be calculated as 30%: [84].

In relation to (v)

8. Given the fact that the appellant would have had limited skills, even assuming progression in the Navy, and given the possibility that he might have suffered other circumstances resulting in a diminution of earning capacity, there should be a further reduction by an amount of 25% for vicissitudes: [90].

CA 40199/07
SC 20777/97

MASON P
McCOLL JA
BASTEN JA

8 May 2008

BLAXTER v COMMONWEALTH OF AUSTRALIA

Judgment

1 MASON P: I agree with Basten JA.

2 McCOLL JA: I agree with Basten JA.

3 BASTEN JA: The appellant, Mr Lawrence Gary Blaxter, was a seaman on the HMAS Melbourne on the night of its collision with HMAS Voyager on 10 February 1964. Negligence was admitted by the Commonwealth: the issue requiring determination in the Common Law Division was the quantum of any damages recoverable from the Commonwealth. This question was dealt with in three judgments of Hidden J, dated 20 September 2005, 18 August 2006 and 6 February 2007: see Blaxter v The Commonwealth [2005] NSWSC 941; [2006] NSWSC 744 and [2007] NSWSC 88. It is convenient to refer to these as the first, second and third judgments respectively.

4 Although his Honour accepted that the appellant had suffered a psychological injury as a result of the collision, he found that that injury did not cause the appellant to leave the Navy at the completion of his then current enlistment in 1967, and did not cause the appellant’s failure to proceed with examinations which, if successfully completed, would have led to promotion. Rather, his Honour considered that a loss of earning capacity had financial consequences only for the period after he left the Navy in 1967. That loss was assessed “as a buffer” in an amount of $70,000: second Judgment, at [16]. The issues which arose on the appeal were therefore whether his Honour erred:

(a) in failing to allow an amount for the lost chance of remaining in the Navy for a period of 20 years so as to qualify for a pension;

(b) in failing to allow an amount for the lost chance of obtaining promotion to the ranks of petty officer and chief petty officer, and

(c) in awarding a manifestly inadequate sum in respect of lost earnings in civilian life.

5 His Honour awarded an amount of $160,000 on account of general damages: first Judgment at [54]. That award was challenged by the Commonwealth, by way of cross-appeal. Although his Honour stated that a duty of care and breach of duty were admitted – first Judgment at [2] – it seems that particulars of negligence were admitted but not liability, because the Commonwealth did not admit allegations of injury, loss and damage. On the cross-appeal, it sought to contend that the appellant had suffered no psychological injury as a result of the collision. There being no suggestion that he had suffered any other form of personal injury, the Commonwealth sought judgment in its favour.

6 It is convenient to deal first with the question of economic loss raised on the appeal.

Assessment of economic loss

7 At the heart of the appellant’s case were two apparent inconsistencies in the approach adopted by the trial judge to the assessment of economic loss. The first concerned his Honour’s acceptance that the appellant left the Navy at the end of his period of enlistment, in 1967, because of disillusionment with the Navy as a result of his treatment by a Naval doctor and a resulting charge of insubordination on the morning after the collision. The conduct raised by the Naval doctor was directly related to the events of the night before when the appellant had been the coxswain in a motor cutter responsible for rescuing a number of seamen from the Voyager who had found themselves in the water as a result of escaping from the Voyager before it sank. To treat that incident as an independent event, rather than as a consequence of the collision, it was contended, revealed error. That contention should be upheld, for reasons indicated below.

8 The second apparent inconsistency arose from his Honour’s conclusion that, although the appellant suffered a diminution in his earning capacity as a result of the psychological effects of the collision, which continued to affect him after he left the Navy in 1967, that injury had no effect on him whilst he remained for three years in the Navy. The challenge should also be upheld.

9 The result is that it becomes necessary to reassess both his Honour’s refusal to allow any amount resulting from his resignation from the Navy and also to reassess the calculation based on loss of earning capacity.

Reference to additional reasons

10 Before addressing those issues, it is necessary to deal with a complaint made by the appellant that, in his second judgment, the trial judge purported to give further reasons for the conclusions which had been arrived at in the first judgment. The appellant argued that the further reasons which appeared at [4]-[10] of the second judgment could not be relied upon in this Court as a basis for upholding his Honour’s conclusions with respect to issues determined by the first judgment.

11 His Honour’s reasoning in respect of the matters noted above was initially set out in his first judgment, at the conclusion of which he noted that the appellant had not presented an argument in respect of diminution of earning capacity in relation to civilian employment, in the event that there was no loss suffered during his period with the Navy. As a result, he adjourned the matter for further argument on that issue. In the course of further submissions, the issue of the relationship between the appellant’s psychological injury and his decision to leave the Navy was reagitated, although his Honour noted that that had not been his intention in seeking further submissions: second Judgment at [2]-[3]. Nevertheless, his Honour elaborated on his reasons for rejecting the causal connection in his second judgment, particularly at [4]-[5].

12 In written submissions on the appeal, the appellant contended that the additional reasons should be disregarded, because they were not given at the time of pronouncing judgment, as was required by the Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”), r 36.2. Reliance was also placed on categorical statements in support of the conclusion that reasons must be given at the time of judgment: see Palmer v Clarke (1989) 19 NSWLR 158 (Kirby P, Samuels and Priestley JJA). How strictly that rule is to be applied and whether there are any exceptions is not a matter which is of immediate concern. It is clear that the Court was dealing with a case where judgment was delivered when orders were pronounced. In the present case, no orders were pronounced at the time of the first reasons and there could be no complaint if his Honour gave further reasons after hearing further argument. (There are well-known examples of orders being made immediately, for example where the Court is satisfied that a conviction must be set aside and that the custody of the appellant should not be continued whilst the Court prepares proper reasons for its decisions: a recent example is Fleming v The Queen [1998] HCA 68; 197 CLR 250 at 252.) Reference was also made to the judgment of Beazley JA in Todorovic v Moussa [2001] NSWCA 419; 53 NSWLR 463 at [41]-[53]. Again, however, her Honour was dealing with the extent of possible revisions to reasons, after a judgment has been delivered, in the sense that orders have been made. There is no requirement that this Court disregard any additional reasons given by the trial judge in his second judgment.

13 In order to explain the force of the appellant’s submissions in respect of the causative link between the psychological injury and his decision to leave the Navy, it is necessary to set out in a little detail the evidence accepted by his Honour and the findings of fact which were made, based on that evidence. That exercise must commence with the evidence concerning the appellant, his intentions, conduct and character prior to the collision on 10 February 1964. That evidence was largely uncontroversial. The trial judge summarised his evidence, which he accepted, in the following terms (first Judgment at [4]):

“He joined the Navy in early 1958, at the age of seventeen. By 1964, the year in which the collision occurred, he had progressed to the rank of leading seaman and had undertaken courses qualifying him as a radar operator and a navigator’s yeoman. He had begun the course for progression to petty officer. He had signed on for nine years, but he said in evidence that he had enjoyed his experience of the Navy, had intended to make it his career and had wished to remain in it as long as possible. His aim was to attain the rank of chief petty officer.”

14 His Honour also noted that he had done well at school, had a good relationship with his peers and participated in a variety of sports: at [3]. He described himself as “a moderate drinker”, his Honour accepting that prior to the accident “his alcohol consumption was no more than average and … he did not have a drinking problem”: at [8]. These findings were supported not only by the appellant’s own evidence, but that of his first wife whom he had married at the end of 1964, but who had known him for some years prior to the accident and until they parted towards the end of 1969. Three other witnesses who knew him from his time in the Navy gave similar positive evidence as to his character, conduct and personality prior to the collision.

15 The circumstances of the collision and the role played by the appellant in its immediate aftermath were also not in dispute. Nevertheless, his active role in the rescue operation is directly relevant to his psychological injury. He was asked to recall his first awareness of the collision, at which time he was in the mess, sitting on his bunk: Tcpt, 31/05/04, p 19:

“There was a violent crunching, grinding noise. I was sort of thrown forward and off my bunk. … I knew that we had hit something, not knowing what it was. But almost immediately, as I recall, there was a pipe for people to go to their emergency stations, which meant that basically everybody had to get up to the flight deck, where emergency stations were. Because I was leading hand of that mess and it was my duty to make sure that everybody was out of the mess deck …. After we got out, the watertight hatch between five deck and four deck had to be docked down and secured.”

16 He then gave evidence of going to the flight deck adjacent to the “island”, on the port side of the ship and described what he saw there (Tcpt, p 20):

“When I – amid all of the confusion on the way up – when I got to the flight deck, the first thing I saw was the stern section of the Voyager floating down in the water. It had been illuminated by the monster signal lamp that they have up on the island on the Melbourne . So the light was shining on it and it was clear for everybody to see. … It looked 500 yards or more away from the Melbourne .”

17 He was asked as to his feelings at that time and responded:

“Well, I was shocked. I was shocked out of my pants. You can only imagine when you see half a bloody destroyer just floating in the water and knowing that there was about 300 people on it – there was no way that a lot of people hadn’t been killed. And perhaps not even if they had all been killed. It was horrible. It was awful. I was shocked to see it. And I thought of me two friends. Because I worked in the boats party I thought that the best thing I could do would be to go down to the deck where all of the boats are – that is down on three deck – and because I was an experienced boat driver and boat coxswain I would be most useful down there driving one of the boats, rescuing people.”

18 He then gave evidence of waiting until one of the motor cutters came back with survivors and noted that it was damaged and filling with water. The cutter was taken on board the Melbourne for repairs and then lowered for a further trip, at which stage the appellant took over from the coxswain who had taken the boat on the first trip. He took the cutter around the bow of the Melbourne towards the stern of the Voyager, searching for survivors. He described his view of the Melbourne from that position (Tcpt, p 21):

“Because we went around the bows, under the bows of the Melbourne , I was pretty close to the bows and I was shocked by the amount of damage that had been caused to the front of the Melbourne . I actually feared for myself because I thought my ship would sink as well because of the damage that it had sustained.”

19 The appellant then described further searches and the location of two life rafts with survivors in them, some of whom were injured and two of whom were unconscious. On discovering that the cutter was unable to tow the life rafts without dragging them under water, he described the process of unloading the people from the life rafts into the cutter, including manhandling the unconscious men onto stretchers and then to the cutter. He described the survivors in the following terms (Tcpt, p 23):

“They were all covered in oil. Most of them only had scant clothing on. I can remember seeing the whites of their eyes sort of – very predominantly the whites of their eyes. They were obviously in shock. Like, I’m not a doctor, but these people, to me, looked like they were obviously in shock, because they were just sitting there doing nothing, just sort of staring at me with these white eyes.”

20 After unloading the rescued men, he was asked by an officer to return to the stern section of the Voyager. He said that he refused to do it and would have said something to the effect:

“’I’m not going over there, because it might explode. And there’s nobody on it, you can see there is nobody on it.’ I just did not go over there. It was a simple as that. I wanted to carry on with the rescue, which I did.”

21 He continued the story in the following terms:

“Those 15 or 16 people that we had then – and the boat was taking water again. It was coming through the hull. So I returned to the Melbourne and I went alongside the ladder on the port side. I was about to secure the boat there and I was told to lay off, which means to go away, because the Melbourne was going to operate its engines to get it further – the Voyager and the Melbourne had sort of drifted together somewhat, and they went astern to get away from it. While they were doing that, … the officer asked me to go around under the bows of the Melbourne , when it eventually stopped. … And then he asked me again to take him over to the stern section of the Voyager , which I did. No, I’m sorry. I went over to the Voyager first and then I went back underneath the bows. But I did not go as close to it as he wanted to. I got as close to it as I thought was a safe distance from it. … I went back alongside, and those that were able to go up the ladder went up the ladder. I realised that the boat was taking water again and it would have had to have been hoisted to empty it out. So I went back around under the bows to the starboard side and the boat was hoisted back up and it was drained and whatever. Somebody attended to the patch in it. The injured fellow stayed in the boat and we got him off after the boat had been hoisted.”

22 The appellant also gave evidence that there was a male nurse or sick berth attendant in the cutter who helped with the injured. He saw him giving morphine to some of the injured. This detail was relevant to an incident on the following morning, which loomed large in the reasoning of the trial judge with respect to the appellant’s decision to leave the Navy. It is convenient to set out the appellant’s evidence in relation to that incident, which occurred on the morning following the collision (Tcpt, pp 29-30):

“There was a pipe for all of the – anybody that had been out in boats or involved in the rescue the night before to go to the aircraft hangar, which I did. When we all got up there, there were a fair few people there of course. … I thought we were going up there to get a pat on the back and some sort of recognition for the way that the rescue was carried out. … When we got there … we were confronted by the surgeon, the ship’s surgeon …. He wanted from us the names of people that had been administered morphine in the boats, in our boats, or in the life rafts the night before. … I though it was a bloody stupid question to ask, first off. I guess I laughed. I insubordinately laughed and probably laughed louder than anybody else and I was placed on a charge of insubordination for my effort.”

23 He was then asked how he felt about that and responded:

“I don’t know. I was dumbfounded. I could not believe that anybody could do such a thing or worry about – I was devastated. I was dumbfounded.”

24 He then gave evidence of parading before the captain to answer the charge, either later that day or the following day, and having the charge dismissed.

25 None of that evidence was disputed: rather, the Commonwealth sought to construct upon it a case that the appellant’s decision to leave the Navy resulted from the conduct of the ship’s surgeon, and not from any psychological consequence of the collision. The cross-examination of the appellant was thus to the following effect, based in large part upon the account of the event given to Professor Yellowlees, a consultant psychiatrist, in November 1997 and to Professor McFarlane, also a psychiatrist, in February 2004 (Tcpt, pp 68-71):

“Q. You then told him how the next morning there was a pipe for all people who had driven the boats to report to the Melbourne hangar and that you and the other boat drivers were expecting a pat on the back …?
A. Yes.
Q. And what you told him was instead of that happening, that is getting a pat on the back, one of the doctors on the Melbourne harangued you, harangued the group of you, and tried to find out who exactly had been given morphine on the boats. …?
A. That is right.
…
Q. You told him that on your boat there had been a sick bay attendant with you and he’d given morphine to any men who were obviously in pain or seriously wounded, but that you had no idea who had actually been given the morphine, what dosages or when, because the night-time conditions, the amount of oil, the difficulty distinguishing individuals in the dark made that impossible?
A. Correct.
Q. … You told him that your response to the requests from the doctor was to simply laugh out loud as it was a ridiculous request?
A. That’s right.
Q. And that none of the boat drivers had any idea who had been given morphine and who hadn’t, correct?
A. Correct.
Q. You said several other men also laughed with you, but you laughed the loudest and were promptly put on a [in]subordination charge and ended up the day after the accident on the foredeck of the Melbourne in front of Captain Robertson, correct?
A. That’s the way I remember it, yeah.
Q. You told him Captain Robertson promptly dismissed the charge, but that that incident led you to becoming totally disillusioned with the Navy; is that what you told him?
A. I suppose I must have.
…
Q. You told Dr Yellowlees … that you actually told Captain Robertson on that day that you were finished with the Navy and you felt you had been treated appallingly, correct?
A. Yep.
Q. And that was the fact, wasn’t it?
A. It was.
…
Q. What you told Professor McFarlane was that you had a hatred and loathing for the job, that is the Navy job, because of what happened with the Surgeon Commander. That is the chap who pulled you out and charged you; is that right?
A. Yes.
Q. And was that correct, you did have a hatred and loathing as a result of that incident?
A. I did.
…
Q. You made the decision on that day to leave because of the way you were treated?
A. I don’t think I actually made a decision to leave the Navy. I made a decision that I was finished with the Navy.
Q. What, there is a difference, Mr Blaxter?
A. I was finished as far as me career goes. I still had three years to go and I was in – half way advanced to being a petty officer, and I fully intended to continue in the Navy until I was – for as long as I could. But after the collision, I no longer had any ambition or trust in the Navy. And the nightmares that I was having over a period time, a short period of time, convinced me that when my time was up I was going to leave the Navy.”

26 In re-examination, he stated that his decision to leave the Navy, in the sense of not re-engaging when his current enlistment expired, was taken “probably a couple of months after the collision”: Tcpt, 02/06/04, p 171.

27 In his evidence in chief he had explained his feelings after the collision in the following terms (Tcpt, 31/05/04, p 38):

“Q. … At any stage after the collision, did you change your views about remaining in the Navy?
A. Yes, they were – I did.
Q. And are you able to put a precise time on that, or is it something that evolved over a period of time?
A. It – it was not straight away. The nightmares and the – when I got back to the ship, the ship was repaired and I went back to sea, and I realised that I had lost all faith and trust in my officers. And the confined spaces – I was still in the same mess deck on the Melbourne . It just came on me that I was finished in the Navy. I just did not – I was fearful of going back to sea. Every time the Melbourne went out, I became very anxious and agitated. I had said earlier that I used to love going to sea, but that was not so. It was not so anymore. And I had lost any desire to progress in the Navy ….”

28 He gave further evidence that although he had done an examination for promotion in November 1963, he undertook no further examination after the collision. He said that he did not attempt to leave the Navy at that stage because he understood that it was necessary to be caught “in an homosexual act or guilty of stealing” in order to be discharged: Tcpt, p 38-39. He left the Navy when his period of enlistment expired on 19 March 1967.

Psychological consequences of collision

29 Shortly after the collision, the HMAS Melbourne returned to Sydney and the appellant went on shore leave. He stayed with his then girlfriend and her sister in a flat at Summer Hill. On the night that he arrived, he described to both of them what had happened and as he did so “was crying and he tore a handkerchief into shreds”: first judgment, at [9]. He got drunk with a colleague at a nearby hotel and had nightmares, which both the women heard, and of which they gave evidence.

30 The nightmares were recurrent, as appeared from the evidence of the appellant and his first wife, now Mrs Hazel Saunders. The evidence was summarised by his Honour in the first judgment at [10] in the following terms:

“The plaintiff himself described a recurrent nightmare in which he was being pursued in a passageway of a ship, which became narrower as he ran. He said that he had never had a nightmare of that kind before the collision and that he had generally been a good sleeper. After the collision, quite apart from the nightmares, he tended to wake in the small hours and had trouble getting back to sleep. Mrs Saunders said that he did not have any sleep problems before the collision. She said that the nightmare which she had described occurred every night for several months after the collision. Thereafter, she said, as his drinking continued, ‘the nightmares and sleeping patterns sort of settled down.’ The frequency of the nightmares decreased until ‘there was none’.”

31 Following the collision, he began to drink regularly and very heavily. His Honour accepted the evidence of Mrs Saunders who “saw the aftermath of the collision as the start of ‘his heavy drinking problems’, saying that he was ‘always full’.” His Honour noted that she had said of him (at [11]):

“Where he was a gorgeous handsome man that I met, he had turned into a man that just went to drink.”

32 His Honour also accepted her evidence that he had turned into a very sad person, who had lost all enthusiasm and had become argumentative and introverted: at [12]. Although they married in December 1964, the marriage was not a success, a fact which Mrs Saunders ascribed to his heavy drinking and withdrawn behaviour: at [13] and [14].

33 His Honour accepted that, since, but not before, the collision his behaviour demonstrated a high level of anxiety, which manifested itself in a number of ways, evidence of which was given by Mrs Janice Blaxter, whom the appellant met in 1971 and whom he married on 19 April 1974. Incidents over the ensuing years were summarised by his Honour in the first judgment at [21]-[26]. In his second judgment, after referring to his civilian employment subsequent to leaving the Navy, which his Honour considered “had not been significantly impaired by his undoubted drinking problem”, his Honour continued, at [12]:

“Nevertheless, he gave evidence that he was unable to handle pressure and, for that reason, felt that he could not undertake positions of responsibility …. This was supported by the evidence of his wife …. I am satisfied that his earning capacity was reduced in that way and that, but for his psychological injury, he could have achieved more responsible and stimulating employment.”

34 It is convenient to deal first with the Commonwealth’s challenge to that conclusion, on which the moderate award of damages for past economic loss was based.

35 The Commonwealth accepted that the appellant suffered from an anxiety disorder at an early stage following the collision, but whilst still in the Navy. On the basis that any such disorder had resolved itself by the time he left the Navy, and was in any event referable to circumstances far removed from employment in civilian life, no economic loss had been demonstrated as a result of any such disorder. What remained thereafter, the Commonwealth contended, was the appellant’s abuse of alcohol, which was a voluntary choice of a man who had neither obtained nor sought medical treatment for any supposed psychiatric condition.

36 The Commonwealth sought to rely upon remarks of Hodgson JA in an earlier case involving a claim by a seaman on HMAS Melbourne, to the effect that a tortfeasor may not be liable “for the consequences of freely made choices” such as over-indulgence in alcohol and tobacco: see Commonwealth v Ryan [2002] NSWCA 372 at [82]. Hodgson JA noted that the law is “slow to recognise a duty to prevent self-inflicted loss”, referring to Reynolds v Katoomba RSL All Services Club Ltd [2001] NSWCA 234; 53 NSWLR 43 at [20]-[27] (Spigelman CJ). There is, however, a significant difference between negligent conduct of a defendant which causes harm to a plaintiff and the creation by the defendant of opportunities for conduct which may be risky to participants, whether a contact sport involving a risk of physical harm or gambling, giving rise to a risk of financial harm, where the plaintiff voluntarily engages in the risky pursuit. Further, Hodgson JA qualified his remarks in the following terms at [83]:

“Unless a psychological or psychiatric condition, or perhaps an addiction, is such as to deprive a plaintiff in a substantial way of the ability to make his or her own choices, it may be that, in order to recover damages for the consequences of choices, a plaintiff would need to prove that it was objectively reasonable in his or her own interests to make those choices, in the light of what he or she knew at the time.”

37 Where negligent conduct has given rise to a psychological or psychiatric condition, liability for the consequences will usually follow, where the consequence is reasonably foreseeable.

38 According to Handley and Beazley JJA in Commonwealth v McLean (1996) 41 NSWLR 389 at 410-411, a claim, also arising out of the collision between the Melbourne and the Voyager, in respect of the plaintiff’s throat cancer depended upon the plaintiff establishing that there was a significant increase in the consumption of alcohol and tobacco caused by the tort.

39 The discussion in McLean was concerned with specific directions given to a jury with respect to the cause of throat cancer. There was thus an additional step required in McLean beyond increased consumption of alcohol. In the present case, the chain of causation was directly from the negligently caused collision to misuse of alcohol which appears to have been, to some extent, incapacitating.

40 The contention that a defendant cannot be liable for loss flowing from the voluntary act of a plaintiff is inconsistent with the approach adopted by the High Court in Medlin v State Government Insurance Commission (1995) 182 CLR 1. In that case a professor of philosophy who was injured in a motor vehicle accident took early retirement in circumstances where, although he believed that the consequential pain and pain relief medication deprived him of sufficient energy to fulfil his duties adequately, there was no complaint as to his competence as a teacher and his fulfilment of his university responsibilities. The joint judgment (Deane, Dawson, Toohey and Gaudron JJ) stated the principle in the following terms at p 6:

“For the purposes of the law of negligence, the question whether the requisite causal connexion exists between a particular breach of duty and particular loss or damage is essentially one of fact to be resolved, on the probabilities, as a matter of commonsense and experience. And that remains so in a case such as the present where the question of the existence of the requisite causal connexion is complicated by the intervention of some act or decision of the plaintiff or a third party which constitutes a more immediate cause of the loss or damage. … Indeed, in some cases, it may be potentially misleading to pose the question of causation in terms of whether an intervening act or decision has interrupted or broken a chain of causation which would otherwise have existed. An example of such a case is where the negligent act or omission was itself a direct or indirect contributing cause of the intervening act or decision.”

41 The joint judgment applied the principle (at p 8) in the following terms:

“Clearly enough, the chronic and sometimes intense pain, the nightly disturbance of sleep and the associated loss of ‘intellectual energy’ which his Honour found resulted from the plaintiff's injuries had caused some diminution in his earning capacity. The plaintiff's evidence, if accepted, supported a conclusion that, accepting the findings of the trial judge, those effects of his injuries were a causative influence in the premature termination of his employment in two distinct ways. First, they were a contributing cause of his decision to retire in that their effect was to decrease his ability to discharge the duties of his appointment at what he saw as an acceptable standard. … Secondly, and more importantly for present purposes, they were also a contributing cause of what his Honour found to have been the ‘pre-eminent reason why the plaintiff decided to retire early’, namely, a desire ‘to devote as much time as possible to research and creative philosophy untroubled by the requirements of University life and in particular the administration and teaching duties required of him’.”

42 Their Honours then addressed the approach of the Full Court which treated the plaintiff’s failure to prove that he “could not have continued in his position” as requiring rejection of his claim for damages for loss of earning capacity. Their Honours stated (p 10):

“The basis of that approach would seem to be an assumption that the fact that an employer would not have dismissed an injured plaintiff who had not voluntarily retired, automatically means that the termination of that particular employment by such retirement cannot be seen as the product of an accident-caused loss of earning capacity. Such an assumption is mistaken. The necessary causation between a defendant's negligence and the termination of a plaintiff's employment, in the sense that the termination of the employment is the product of an accident-caused loss of earning capacity, can exist notwithstanding the fact that the immediate trigger of the termination of the employment was the plaintiff's own decision to retire prematurely.”

43 There remained a question as to how the decision to terminate employment should have been viewed. McHugh J, writing separately, held that the question was whether the termination was “not unreasonable”, the proof of unreasonableness resting upon the defendant: p 22. However, the joint judgment stated (p 11):

“In these circumstances, the relevant question was not whether the plaintiff ‘should’ have continued in his University post or whether his decision to retire was not ‘reasonable’ but whether, in the context of what was reasonable between the plaintiff and the defendant in determining the defendant's liability in damages, the premature termination of the plaintiff's employment was the product of the plaintiff's loss of earning capacity notwithstanding that it was brought about by his own decision to accept voluntary retirement.”

44 The joint judgment then adopted the reasoning and conclusion of McHugh J in that regard subject to a qualification expressed in the following terms (p 13):

“The qualification is that, as indicated, any question of reasonableness should be framed in terms of what is reasonable as between the plaintiff and the defendant in the context of assessing damages for negligence rather than as a question of whether the plaintiff acted reasonably or unreasonably in resigning his post.”

45 These principles were applied by the Queensland Court of Appeal in relation to a claim by a police officer injured during a high speed pursuit, in the course of which he collided with a vehicle coming in the other direction. His claim against the nominal defendant was based on the liability of the driver of the unidentified vehicle which was being pursued: Hirst v Nominal Defendant [2005] QCA 65; [2005] 2 QdR 133. At [29] Keane JA (with whom Jerrard JA and Douglas J agreed) stated:

“The reasoning in Medlin confirms the propositions that voluntary or deliberate or unusual conduct on the part of a plaintiff does not necessarily sever the causal nexus so as to relieve a negligent defendant from liability for loss suffered by a plaintiff; and that it is necessary to have regard to the extent to which the plaintiff’s voluntary conduct has been constrained by the defendant’s misconduct, and then to ask whether as between plaintiff and defendant it was reasonable of the plaintiff to make the choice which was the immediate cause of the loss.”

46 The Court of Appeal upheld Mr Hirst’s claim, although it also held that Mr Hirst acted “unreasonably in deciding to continue the pursuit and that this decision made a substantial contribution to the occurrence of the injury”, resulting in a substantial reduction on account of contributory negligence: at [47]; see also [56] (Douglas J).

47 The facts in the present case are somewhat removed from those considered in Medlin and in Hirst and it is not necessary to consider the precise nature of the distinction drawn in Medlin between the approach of McHugh J and that accepted in the joint judgment. In the course of his evidence, the appellant said that he did not experience nightmares that he could recall prior to the collision but that restless sleeping and nightmares followed the collision. He said that he had tried sleeping tablets but they made virtually no difference: Tcpt, 31/05/04, p 34. He said he used to drink a lot of beer in 1964, apparently in the absence of medication. The following exchange took place:

“Q. Why did you drink a lot of beer?
A. It used to calm my nerves and it also let me sleep, you know, just a little bit longer perhaps or … I still wake up at one or two o’clock in the morning if – but I’ve – I have always felt since the collision that alcohol helped me; drinking alcohol helped me, calmed my nerves and put me at ease.”

48 On the basis of this evidence, the Commonwealth accepted that there was a temporal connection with the accident, but treated the consumption of alcohol as a chosen course and hence not involuntary. Accordingly, it submitted that as a matter of policy, the general rule applied by which the law imposed responsibility for the consequences of a personal choice to consume alcohol on the consumer: see Cole v South Tweed Heads Rugby League Football Club Ltd [2004] HCA 29; 217 CLR 469 at [13] (Gleeson CJ).

49 There is, however, also a material distinction between a case where a plaintiff drinks to excess as a result of psychological consequences resulting from negligent conduct of the defendant and a case in which a plaintiff alleges a duty on the part of the defendant not to permit her to drink to excess. Cases such as Cole and Reynolds involve questions as to the imposition of a duty on a third party with respect to the plaintiff’s voluntary acts. Cases such as Medlin and the present case, are concerned with acts taken by a plaintiff in an attempt to alleviate the consequences of the defendant’s negligent conduct. Although it differs on its facts, the present case, like Medlin, involves a question of causation.

50 So understood, there was more than a temporal connection between the collision and the appellant’s excessive consumption of alcohol. The causal link between the collision and his failure to re-enlist nevertheless turned significantly on the appellant’s own evidence.

51 The Commonwealth challenged the appellant’s credibility on the basis of accounts given by him in an application to the Department of Veterans Affairs for a disability pension, made by him in August 1995. In order to obtain such a pension, he had to rely upon a disability which was related to “operational war service”. For that purpose, he had sought to relate his psychological state to his period of service in Vietnamese waters in 1965. The appellant’s first psychological assessment resulted from that application, when he was referred by his general practitioner to Dr Ian Hayes, psychiatrist, who prepared a report for the Department. Dr Hayes reported on 18 August 1997:

“My impression is that Mr Blaxter suffers from a mild PTSD directly related to his experiences on the Melbourne , and exacerbated by his time in the Far East. He has symptoms of over-arousal, avoidance, particularly by means of alcohol abuse, and intrusive memories. He also has symptoms of a mild generalised anxiety disorder with multiple symptoms of anxiety. He is alcohol dependant [sic], with features of increased intake despite social consequences, and daily intake with reduced repertoire. I did not feel he had a significant depression at this time. I believe that his PTSD is restricting his ability to socialise and take part in regular social activities, and that his alcohol dependence will be severely impairing both his psychological functioning, and in due course [his] physical health.”

52 Probably as a result of these investigations, the appellant’s solicitor referred him to Professor Peter Yellowlees at the University of Queensland Mental Health Centre, Royal Brisbane Hospital, for a report, which was provided on 11 November 1997. That report was tendered to demonstrate that when seeking to recover damages as a result of the collision, he attributed his psychological state to that event, but when seeking a pension, he attributed it to his service in Vietnamese waters.

53 In cross-examination, he sought to attribute responsibility for his statements in his pension claim to a member of the Vietnam Veterans Association of Australia, who had helped him complete the form. His Honour concluded that he should not be “permitted to take refuge” in that attribution and “must accept responsibility for the documents to which he put his name”. He concluded that the evidence of inconsistency was “damaging to the plaintiff’s credibility and, if it were not for the other evidence in the case, could well have jeopardised the present claim”: first judgment at [41]. The evidence of his change in character and behaviour at the time of the collision found, as his Honour noted, significant support in the evidence of his first and his current wife and three former colleagues in the Navy: at [42]. Further, the link between the psychological effects of the collision and his own subsequent behaviour relied to an extent on expert medical evidence.

54 There was a significant volume of psychiatric and psychological evidence relevant to the appellant’s condition. The Commonwealth obtained reports from two psychiatrists, Dr Jonathan Phillips and Dr Sydney Smith. Dr Smith, in his written report did not accept that the appellant “suffered any psychiatric illness as a result of his service in the Navy”: Report, 7 February 2004, p 13. Dr Phillips took a view more favourable to the appellant. In his report of 7 January 2000, he expressed the following opinions at pp 5-6. He commenced with the proposition that Mr Blaxter experienced “no more than middle range psychological stress at the time of the collision”, being somewhere between the stress experienced by sailors who took no part in the rescue operation and that experienced by those who suffered personal injury or fell into the water. He continued:

“Mr Blaxter’s initial symptoms were delayed and mild. They occurred after HMAS Melbourne docked in Sydney. He began to drink excessively at that time and he felt a degree of survivor guilt. He experienced slowly evolving symptoms later in this naval career …. He now has a chronic set of symptoms which include lack of trust in others, a disinclination to socialize, insomnia with nocturnal rumination and nightmares (the latter linked thematically with the naval collision), a tendency to become flustered under stress and a habit of compulsive checking (particularly when he leaves the house for an extended period). He continues to drink excessively.
It is difficult to piece together Mr Blaxter’s psychological symptoms. Whilst he now has a number of symptoms typically associated with post-traumatic stress disorder, he does not have the full hand of symptoms required for that diagnosis. Specifically he made no mention of hyper-vigilance which is a core symptom of the disorder. …
Whilst acknowledging Mr Blaxter’s current symptoms as being genuine and somewhat problematic from his point of view, I do not believe an unarguable link can be made between his experiences at the time of the naval collision and his now chronic symptoms. The causal relationship linking one with the other at best will be weak.
Mr Blaxter’s intake of alcohol increased following the naval collision (as was the case with numerous ex-HMAS Melbourne sailors) and he has continued to drink excessively since then. It could be said, on the balance of probabilities, that stress at the time of the collision had led him to alter his pattern of drinking from an acceptable pattern to a pathological pattern. The link between the naval collision and his drinking is more obvious than the link between that event and his other psychological symptoms.”

55 The main psychiatric evidence for the appellant came from Professor Alexander McFarlane, Department of Psychiatry at the University of Adelaide.

56 In a careful and detailed report, Professor McFarlane considered the particular aspects of the appellant’s activities and fears on the night in question. He was satisfied that the appellant had been exposed to a traumatic situation and had the symptoms of post-traumatic stress disorder. He concluded, in a report dated 9 March 2004 (at p 9):

“On the basis of the history I obtained, I diagnosed generalised anxiety disorder according to DSM-IV criteria.
… This anxiety was a significant cause of distress and impaired his social and occupational functioning. He described that it was not directly attributable to his alcohol consumption. It appears that he has intermittently suffered from alcohol abuse. This was an important cause of disruption of his marital relationship.
The question arose as to whether he suffered from a post-traumatic stress disorder. The HMAS “ Melbourne ” / ” Voyager ” disaster was an event of the type that leads to the onset of this condition. He experienced the emotions of fear and horror in the course of these events.”

57 Professor McFarlane’s assessment of the criteria for PTSD involved qualifications similar to those raised by Dr Phillips. Professor McFarlane concluded (p 11):

“In summary, these reports in general, confirm that Mr Blaxter has had only relatively mild symptoms and that there is some uncertainty about whether he does or does not suffer from a post-traumatic stress disorder. My assessment was that these symptoms are at a sub-clinical level and that his only pervasive symptoms relate to a generalised anxiety disorder.”

58 Professor McFarlane also gave separate consideration to the causative role played by the disaster in the onset of the appellant’s alcohol abuse. After referring to studies of Vietnam combat veterans, he concluded (p 12) “the combination of this exposure and his symptoms would suggest this has been an important contributing factor to his pattern of alcohol abuse in the immediate aftermath of the event”. Although there is some ambiguity in this conclusion, resulting from the reference to Vietnam, it appears that “the event” was intended to relate to the collision.

59 In his oral evidence, Professor McFarlane elaborated on the connection between alcohol misuse and psychiatric conditions. He described alcohol abuse as a “co-morbid disorder” which could occur in the context of PTSD, depression or generalised anxiety disorder. Such disorders “are indicative of the severity of the post-traumatic stress disorder”: Tcpt, 07/06/04, p 284. Similar evidence was given by Dr Sydney Smith who accepted in cross-examination that evidence of alcohol use given by the appellant’s wife suggested an alcohol dependence: Tcpt, 08/06/04, p 349. His evidence continued:

“Q. Would not a very strong indicator that the causative link have been [sic] the collision be [sic] the evidence I have already discussed, that he comes home after the accident two days later, commences to drink heavily and continues for years thereafter?
A. Yes.
Q. There can sometimes be a problem, can there not, of people having nightmares and alcohol abuse – abusing alcohol and having nightmares, where the nightmares are caused by the alcohol abuse?
A. Yes.
…
Q. But if when the alcohol intake increases the nightmares decrease, that would seem to suggest that the cause of the nightmares was unrelated to the alcohol?
A. Or that he was drinking so much that he was sedating himself.
Q. Yes. And that would suggest self-medication, would it not?
A. Yes.
…
Q. In fact it is recognised that if a person has post-traumatic stress disorder or depression that there is often a co-morbidity with alcohol abuse?
A. That is correct.”

Dr Smith accepted that alcohol abuse was a recognised psychiatric illness according to DSM-IV: Tcpt, p 351.

60 It is unnecessary to recount in detail the evidence given by the psychiatrists who were called at trial. His Honour noted in the first judgment at [47]:

“A fair measure of consensus emerged between the four psychiatrists who gave evidence when in the course of their oral evidence, they were taken to the testimony of Mrs Saunders, Mrs Blaxter and the other witnesses and asked to assume the facts as I have found them. They dealt with the issues of post-traumatic stress disorder (PTSD), generalised anxiety disorder, and alcohol abuse or dependence, all of these being recognised psychiatric disorders.”

61 At [51], his Honour continued:

“The psychiatrists agreed that alcohol abuse often goes hand in hand with PTSD and generalised anxiety disorder. … Professor McFarlane concluded that the plaintiff appears to have ‘satisfied the diagnostic criteria of PTSD’ at various times, noting that the symptoms of the condition can fluctuate. He found that he consistently satisfied the criteria for generalised anxiety disorder, a condition which often co-exists with PTSD. The other three psychiatrists variously saw in the history provided to them, including aspects of the evidence before me, symptoms of one or other of those conditions. … I am satisfied that all these symptoms are attributable to the collision.”

62 His Honour found it “unnecessary to determine which of those labels is best assigned to his problems at different times”: at [52]. He was, however, satisfied that “the collision caused him a serious psychological injury, which has abated over the years but has left him with the ongoing problems described by himself and his present wife”. These problems he identified as “nightmares, pervasive anxiety and excessive drinking”: at [53].

63 To the extent that the Commonwealth’s cross-appeal seeks to challenge the existence of a psychological injury resulting from the collision and the assessment of general damages, the cross-appeal must be rejected. There was ample evidence to support the findings which his Honour made and no error has been demonstrated in reaching those conclusions. The amount of the award was within the range available to his Honour, given that he was satisfied that the problems the appellant had endured for many years were likely to be with him for the rest of his life: at [53].

Failure to re-enlist

64 The two challenges raised by the appellant in relation to the assessment of economic loss are inter-related. Nevertheless, it is convenient to deal with them chronologically and consider first his Honour’s conclusion that his experiences in the collision did not lead to his failure to re-enlist and his failure to qualify for a pension.

65 As noted above, his Honour’s approach to the question of re-enlistment turned not on his assessment of the psychological injury suffered as a result of the collision, but on a distinction drawn between the psychological effect of the collision and the laying of a charge for insubordination resulting from his conduct on the following morning.

66 As his Honour noted at [55], the claim for economic loss had three limbs, namely:

(a) loss of income whilst he remained in the Navy;
(b) loss of the pension which would have been received had he served for 20 years, and
(c) loss of earnings in civilian life.

67 In relation to the first two elements, his Honour concluded that the claim was “not made out” apparently on the basis that the psychological injury which the appellant suffered as a result of the collision did not cause him to leave the Navy or to fail to progress in his last three years of service: at [56] and [57]. His Honour stated that the evidence fell short of “establishing that he left the Navy because of his psychological injury”. He then noted the many references, both in the medical histories, in statements to third parties and in his evidence, to his “disillusionment following his treatment by the naval doctor and the charge of insubordination laid against him on the morning after the collision, leading to his decision that he was finished with the Navy”. After referring in a summary way to this evidence his Honour concluded at [58]:

“To none of these experts did he say that his decision to see out his term and leave the Navy was the result of the psychological sequelae of the collision itself.”

68 As explained above, his Honour appears to have accepted the evidence (which was unchallenged) that the appellant was an enthusiastic seaman prior to the collision, and was pursuing a course to promotion. After the collision he lost all of that enthusiasm and abandoned any attempt at further promotion. Absent any other explanation, the temporal connection would appear to lead almost inexorably to satisfaction as to a causal link. No other explanation is given, except for the proposition that it was the treatment by the Naval doctor, rather than the collision itself, which led to disillusionment.

69 Although the argument was put in part on the basis of the proper application of Medlin principles, the distinction must arise not from any voluntary conduct on the part of the plaintiff, but from an intervening act, for which the defendant was undoubtedly responsible, but which did not itself constitute tortious conduct. Nevertheless, the causal connection is clear. First, the fact of the collision had rendered the appellant cynical about the competence and abilities of officers. Secondly, the appellant was still conducting himself in the context of the collision and its immediate aftermath and no doubt responding to events consistently with the immediate effects of the trauma; and, in a straightforward causal sense, the incident with the Naval doctor would not have occurred but for the circumstance of the rescue operations undertaken on the previous night.

70 In Chapman v Hearse (1961) 106 CLR 112, the High Court considered whether the driver of a car at fault in a two-car collision, which led to a bystander, Dr Cherry, going to the assistance of one of the injured parties, could be liable for the injuries sustained by Dr Cherry when hit by a third car. Because the circumstances in which Dr Cherry was fatally injured were not beyond the reasonably foreseeable circumstances resulting from the initial negligent driving, the Court accepted that the negligent driver in the first accident was responsible for the injury to Dr Cherry “notwithstanding the later intervention of an act of a third person which has more immediately caused the injuries of which the plaintiff complains”, following not dissimilar American authority: at p 121. The judgment of the Court continued:

“Such intervening acts may, of course, be culpable or not and since reasonable foreseeability is the test the fact that a later act is culpable does not necessarily preclude the conclusion that the earlier act was a ‘proximate’ or ‘legal’ cause.”

71 As the Court noted, this conclusion was entirely consistent with earlier authorities in analogous “rescue cases”: p 125. The present case was itself “a rescue case” and no one doubted that the psychological injury caused in the course of the rescue constituted part of the loss for which the Commonwealth was liable. However, it is artificial to say that the rescue was completed, and thus no further loss could eventuate, once the cutter was removed from the water. In a commonsense assessment, it should be accepted that the events of the following morning were part of the rescue operation. Indeed, one can envisage a range of further circumstances which might have arisen, including exposure to injured seamen and continuing fears as to the safety of the Melbourne. A commonsense approach does not permit any bright line to be drawn between the psychological effects of the previous evening and those resulting from the events of the morning after.

72 Nevertheless, it appears that his Honour drew such a distinction: in my view that approach was in error and, to the extent that the appellant’s disillusionment with the Navy followed from the events of the day following the collision, they were inextricable sequelae of the tortious act. Indeed, were it otherwise, there should logically have been a dissection of the psychological effects of the night of the collision from any effects attributable to the events of the following morning. No psychologist or psychiatrist sought to undertake this task, nor does it appear to have been proposed at the trial. Such an exercise would not only have been futile, but unnecessary.

73 It follows that the Commonwealth, absent any other intervening factor, must be liable for any diminution in earning capacity attributable to the appellant’s disillusionment with the Navy. That loss can properly be assessed by reference to his failure to seek further promotion and his failure to re-enlist at the end of his contracted period of service.

74 The only other basis for limiting the liability for such loss was the suggestion that the appellant had three years to reconsider his attitude and the lapse of time rendered his failure to re-enlist a consequence which could not be attributed to the collision.

75 The logic of that proposition is, with respect, faulty. It fails to recognise that the disillusionment with the Navy formed part of the psychological effect of the collision, which effect continued, as his Honour found, until well after 1967, with the result that he had a continuing diminution of earning capacity after he left the Navy.

76 It therefore follows that the appellant’s appeal in relation to economic loss should be allowed in relation to the first two elements of his claim so that the judgment must be increased to reflect the loss of income in the Navy and the loss of a pension.

Loss of a chance

77 It does not, however, follow that he should be compensated for the full amount of the pension. It is necessary to take into account the possibility that, absent the psychological effects of the collision, the appellant would in any event not have progressed as far as chief petty officer (being the proposed rank he would have expected to achieve by 1978) or would have left the Navy without re-enlisting for a further 11 year period.

78 In support of this approach, evidence was tendered as to the small proportion of seamen who enlisted around 1958 and who continued with the Navy for 20 years or more. Because his Honour rejected the appellant’s claims in relation to Naval service entirely, he did not need to consider that evidence. On the basis that such losses are recoverable, it becomes necessary to consider the hypothetical question as to what might have happened absent the collision.

79 The material tendered in respect of this question involved statistics prepared by the Navy in relation to the enlistments between 1957 and 1960. Information had been sought excluding those who served on HMAS Melbourne or HMAS Voyager, but the response from the Navy indicated that there was “no easy method of determining the number of sailors from this group who were not aboard” one of the ships on the night of the collision, although the statistics were said to exclude personnel “known to have been serving aboard” those ships. Beyond that, it can be said that the statistics are by no means self-explanatory. For example, it is not easy to know (and the Court was given no assistance in this regard) what were the chances of a seaman who had commenced on examinations for promotion, and been successful in his initial years, progressing to petty officer or chief petty officer. Similarly, there was no indication as to whether the likelihood of a seaman remaining in the Navy for periods between 12 and 20 years was increased by obtaining promotion. The Commonwealth contented itself with a submission that only some 15% of recruits who entered the non-commissioned ranks in the late 1950’s achieved 20 years of service. The relevance of that figure depended upon taking the appellant as an average member of the pool of 1,492 persons who enlisted in his year. An alternative approach would have been to consider the characteristics of the 224 who did achieve 20 years or more of service and inquire to what extent the appellant, prior to the collision, demonstrated features in common with those individuals.

80 At trial, the appellant tendered an actuarial report which sought to estimate the value, as at 31 May 2004, of earnings and superannuation that the appellant lost as a result of the collision on 10 February 1964. There were numerous assumptions built into those calculations. One assumption was that, but for the collision, he would have been promoted to petty officer on 7 July 1966 and to chief petty officer on 7 July 1972. The calculations also assumed that he would have retired to civilian life on 20 March 1978. The figures included interest throughout the period, although it was conceded by the appellant that interest was only calculable from 1 July 1972.

81 At the hearing of the appeal, some expectation was expressed that the parties might be able to agree on the value of the damages which would accrue under each head, if the appellant were successful.

82 There was some uncertainty on both sides of the record as to what course this Court should take if the appellant were in any degree successful. The final position for the appellant was that this Court should assess damages as best it could on the material before it. The Commonwealth sought a reference to compulsory mediation in the event that the appellant was successful. However, it provided neither evidence nor argument in support of such an order. In a general sense, the Commonwealth has had more than 40 years to consider a fair and reasonable mechanism for compensating seamen injured in the collision. In relation to this appellant, it is close to 10 years since the proceedings were commenced. If it is possible for this Court to determine the issue, as requested by the appellant, that course should be taken. There is no reason to suppose mediation would now be successful.

83 The Commonwealth does not say that the actuarial report should not be applied, although it does challenge certain factual assumptions. There is some complexity in the factual assumptions which make the ensuing calculations difficult, but the appropriate course for this Court to take is to identify the relevant assumptions and, to the extent that their application may be thought to give rise to arithmetical error, grant leave to the parties to indicate what if any corrections are required.

Calculation of loss

84 The first question is the assessment of the loss of chance of a pension, which in turn depends upon the likelihood that, absent the collision and its sequelae, the appellant would have stayed in the Navy for 20 years. The best that one can do on the material available is to say that his personal circumstances before the collision suggested a better than average chance of fulfilling that requirement. As the proportion of those who enlisted in 1958 (and the two succeeding years) and stayed for the relevant period was in each case approximately 15%, it is appropriate to double that chance for the appellant, thus providing him with a loss of chance of a pension calculated as 30%. The pension itself was assessed as a lump sum of $344,303, although it is not clear as to whether the pension would have been payable on a fortnightly basis or by way of lump sum on retirement. That question may affect the calculation of interest in due course. Taking that sum as the value of the lost chance, the amount to be allowed is $103,291.

85 The second part of the question concerns the calculation of loss of earning capacity following the collision. That appears to have been variable over time, but to the extent that he lost a chance to remain in the Navy, he also lost the chance for promotion to petty officer and chief petty officer. The third claim for loss of damages would require an assessment of his loss of earning capacity in civilian life, from 20 March 1978.

86 Addressing the claim for economic loss following his departure from the Navy in 1967, his Honour accepted that his earning capacity was reduced and that “but for his psychological injury, he could have achieved more responsible and stimulating employment”: second Judgment at [12]. His Honour was not inclined to allow any amount for future loss – at [13] – and no complaint is now made as to that conclusion. His Honour then stated that the evidence did not support any mathematical calculation based upon expected earnings in a particular occupation and therefore the best that could be done was to arrive at “a lump sum as a buffer or cushion”: at [14].

87 Despite the fact that the appellant put material before the trial judge in the form of the actuary’s report, providing a basis for a mathematical calculation, no complaint was directed at the global approach as such; rather, the complaint was that the amount of $70,000 awarded was manifestly inadequate. However, as was explored with counsel in the course of argument, manifest inadequacy can only be demonstrated by reference to relevant criteria. As a result, the appellant reverted to reliance upon the actuarial report in submissions filed after the hearing. That calculation assessed his likely after-tax earnings, but for the injury, in an amount of $833,853. From that was deducted actual after-tax earnings and a redundancy payment received in May 1991, to give a net figure of $489,640. That calculation was based upon an assumption that the appellant would have obtained the rank of chief petty officer whilst in the Navy and would have continued to earn income on a full-time basis after leaving the Navy, at the same rate with due allowance for increases in line with average weekly earnings.

88 The Commonwealth tendered a critique of the actuarial report prepared by a business known as Lexiq. One comment made in that critique was that the estimated annual income had risen above that which would have been expected had the appellant remained in the Navy. Thus, in the calculations now relied upon, he was expected to have had an annual income of approximately $66,000 in the 2004 financial year. According to Lexiq, the income of a chief petty officer in that year was $56,441. This suggests an accumulation, at least by the end of the period, of approximately 14.5% over the earnings of a chief petty officer. Precisely when the discrepancy began, and how it operated is not known. Nevertheless, in rough terms, it is appropriate to reduce the amount claimed by 14% to allow for some over-estimation in the calculation relied upon by the appellant.

89 Secondly, the appellant’s figures assume full-time employment until he turned 65 years of age. Given that, on the present hypothesis, the appellant would have enjoyed a Naval pension after retirement in 1978, there is a significant chance that he would not have worked full-time until the age of 65.

90 Given the fact that the appellant would have had limited skills, even assuming progression in the Navy, and given the possibility that he might have suffered other circumstances resulting in a diminution in earning capacity, I would apply a higher than usual percentage by way of vicissitudes. Although the figure is entirely impressionistic, a further reduction by an amount of 25% for vicissitudes is, in my view, appropriate. The result would be an allowance for lost wages in an amount, in round figures, of $316,000.

91 There remains a question of interest on these amounts.

92 The appellant claims an amount of interest on the pension loss calculated from 20 March 1978 until 20 March 2007 (a period of 29 years) at an average rate of 6%, being half the average rate prescribed under the rules over that period. As noted above, that calculation appears to depend on an assumption that the figure arrived at is that which would have been received as a lump sum on 20 March 1978. But that would be inconsistent with the adoption of an interest rate which suggests accrual over the whole period.

93 The appellant seeks to undertake a similar calculation in relation to lost wages. Each calculation assumes that the loss accrued steadily over the period and that the calculation of interest is therefore achieved by taking the total sum, multiplied by half the average interest rate, multiplied by the period of years. However, that approach appears to be misconceived in relation to both loss of income and the pension, which is calculated by reference to current wage rates. Thus, the total pension in the first 13 years of the calculation from 1978 to 2003 (as set out in the actuarial report at p 18) indicates that the amount of the pension was approximately one-half of the amount payable in the second period. One way of adjusting for this consideration would be to treat the sum as having been outstanding on average for one-third of the period. That could be done by allowing for an interest rate of 4% to be applied. In relation to lost income, the calculation would then be 316,000 x 34.75 x 0.04, being an amount of $439,240. Adopting the same approach in relation to the pension, the amount to be allowed by way of interest is 103,290 x 29 x 0.04, which gives a figure of $119,816.

94 On these calculations, the total award for loss of earning capacity is $559,056 and in respect of the pension, $223,107. To these figures must be added general damages allowed by the trial judge at $160,000.

Conclusions

95 Order 1 made by the trial judge gave judgment in favour of the appellant in an amount of $304,422.88. That order should be set aside and judgment be given in favour of the appellant in the amount of $942,163.

96 Orders 2 and 3 made by the trial judge related to costs and were not the subject of challenge in the course of the appeal.

97 The cross-appeal by the Commonwealth has been unsuccessful and should be dismissed.

98 The appellant should have his costs of the appeal and cross-appeal in this Court.

99 Accordingly, I would propose the following orders:

(1) Allow the appeal and set aside order 1 made by the trial judge and entered on 20 March 2007.

(2) In lieu thereof give judgment for the plaintiff, Lawrence Gary Blaxter, in an amount of $942,163.

(3) Dismiss the cross-appeal.

(4) Order the respondent to pay the appellant’s costs of the appeal and cross-appeal.

(5) Grant liberty to each party to file a note within 7 days as to any correction required to the above calculations.

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14/07/2008 - Spelling error "Priestly" to Priestley" - Paragraph(s) 12