Gray v Richards

Case [2014] HCA 40

HIGH COURT OF AUSTRALIA

FRENCH CJ,
HAYNE, BELL, GAGELER AND KEANE JJ

RHIANNON GRAY BY HER TUTOR KATHLEEN
ANNE GRAY  APPELLANT

AND

COREY RICHARDS  RESPONDENT

Gray v Richards

[2014] HCA 40

15 October 2014

S111/2014

ORDER

1.Appeal allowed in part.

2.Vary order 2 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 2 December 2013 by replacing the sum of $11,424,000 with the sum of $12,034,000.

3.The respondent pay interest to the appellant on the sum of $539,000 at the rate prescribed by the Uniform Civil Procedure Rules 2005 (NSW) from 16 December 2011.

4.The parties are to file written submissions within 14 days from the date of these orders in relation to costs both in this Court and in the courts below, such submissions to be limited to five pages.

On appeal from the Supreme Court of New South Wales

Representation

A S Morrison SC with I J McGillicuddy for the appellant (instructed by Beilby Poulden Costello)

P J Deakin QC with B A P Kelleher and K A James for the respondent (instructed by TL Lawyers)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Gray v Richards

Damages – Measure of damages in actions for tort – Appellant suffered brain damage as a result of respondent's negligence – Appellant incapable of managing own financial affairs – Administrator appointed to manage appellant's estate – Where requirement for management of funds arose as a direct result of respondent's negligence – Where administrator charged fees on all funds under management – Whether appellant entitled to recover costs associated with management of damages awarded for purpose of managing funds under management – Whether appellant entitled to recover costs associated with managing predicted future income of managed fund.

Words and phrases – "damages", "discount rate", "fund management".

Civil Procedure Act 2005 (NSW), ss 76, 77, 79.
Motor Accidents Compensation Act 1999 (NSW), s 127.
NSW Trustee and Guardian Act 2009 (NSW), s 41.

  1. FRENCH CJ, HAYNE, BELL, GAGELER AND KEANE JJ.   In Todorovic v Waller[1], Gibbs CJ and Wilson J summarised the principles which regulate the assessment of damages for personal injuries as follows:

    "In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries.  Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff.  Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it.  Fourthly, the burden lies on…

Continue reading Gray v Richards

Sign in free to access the full text

Details
AGLC
Gray v Richards [2014] HCA 40
Case
[2014] HCA 40
Decision Date

CaseChat Overview and Summary

The appeal concerned the assessment of damages for a plaintiff, Ms Gray, who suffered severe brain damage due to the respondent's negligence. As a consequence of her injuries, Ms Gray was incapable of managing her financial affairs, necessitating the appointment of an administrator to manage her estate. The dispute centred on whether Ms Gray was entitled to recover the costs associated with the management of the damages awarded to her, including the costs of managing the predicted future income of the managed fund.

The legal issues before the court were whether the appellant was entitled to recover the costs associated with the management of the damages awarded for the purpose of managing funds under management, and whether the appellant was entitled to recover the costs associated with managing the predicted future income of the managed fund. The Court of Appeal had answered both questions in the negative.

The High Court found that the Court of Appeal had erred in its answer to the first question but was correct in its answer to the second. The Court reasoned that the requirement for fund management arose directly from the respondent's negligence, and therefore, the costs associated with that management were a foreseeable consequence of the tort. The Court applied principles of assessing damages in tort, particularly concerning the recovery of expenses incurred as a direct result of the injury. The Court's approach to the first question involved determining whether the costs of managing the damages themselves were recoverable, while the second question concerned the recoverability of costs associated with managing the income generated by those damages.

The appeal was allowed in part. The Court varied the order of the Court of Appeal by increasing a sum awarded to the appellant and ordered the respondent to pay interest on a specific amount. The parties were directed to file written submissions regarding costs.

Orders

Orders of the court

1. Appeal allowed in part.

2. Vary order 2 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 2 December 2013 by replacing the sum of $11,424,000 with the sum of $12,034,000.

3. The respondent pay interest to the appellant on the sum of $539,000 at the rate prescribed by the Uniform Civil Procedure Rules 2005 (NSW) from 16 December 2011.

4. The parties are to file written submissions within 14 days from the date of these orders in relation to costs both in this Court and in the courts below, such submissions to be limited to five pages.

Background

Background to the litigation

Both these questions were answered in the negative by the Court of Appeal. For the reasons which follow, the Court of Appeal erred in its answer to the first question, but was correct in its answer to the second question. Background The appellant was born on 31 August 1992. On 22 August 2003, she sustained a traumatic brain injury when a motor vehicle driven by the respondent collided with a motor vehicle in which she was a passenger. As a result of her injury, she has been left with a significant intellectual impairment and requires constant care. She has no prospects of future remunerative employment. On 19 July 2006, the appellant commenced proceedings (through her mother as tutor) in the District Court of New South Wales claiming that the respondent was liable in negligence for her loss. On 3 August 2011, those proceedings were compromised on terms which obliged the respondent to pay the appellant $10 million ("the compromise monies"), plus an amount of damages, to be assessed at a later date, to cover expenses associated with managing the compromise monies ("the fund management damages")[7]. [7]Gray v Richards (2011) 59 MVR 85 at 86 [2]. Section 76 of the Civil Procedure Act 2005 (NSW) ("the CPA") requires that the compromise of proceedings involving a person under a legal incapacity must be approved by a court in order to be effective. The terms of the compromise were approved by the Supreme Court of New South Wales (Hoeben J)[8]. In that regard, the respondent conceded[9] that his negligence had rendered the appellant incapable of managing her own affairs and acknowledged[10] that the compromise monies and the fund management damages would, in due course, be paid to a fund manager in accordance with s 41 of the NSW Trustee and Guardian Act 2009 (NSW) ("the TGA") and ss 77 and 79 of the CPA. [8]Gray v Richards (2011) 59 MVR 85 at 86 [3].[9]Gray v Richards (2011) 59 MVR 85 at 86 [5].[10]Gray v Richards (2011) 59 MVR 85 at 86 [6]. Although it is necessary, for the purposes of these reasons, to distinguish between the compromise monies and the fund management damages, that distinction is possible in this case only because the parties settled only part of their litigation. They agreed on the amount to be allowed for all heads of damages except one: the amount to be allowed because, by his negligence, the respondent had rendered the appellant unable ever to manage her own financial affairs. The parties agreed to leave that latter amount for judicial determination. It would be wrong, in these circumstances, to treat the compromise monies as if that amount was the whole of the damages which should be allowed to the appellant on account of the respondent's negligence. The compromise amount was not, and is not to be treated as if it were, the amount in which a verdict or judgment would have been entered for the appellant. On 2 September 2011, the Supreme Court of New South Wales (White J) made orders, pursuant to s 41 of the TGA[11], declaring the appellant incapable of managing her own affairs and appointing The Trust Company Limited ("the Trust Company"), rather than the NSW Trustee and Guardian ("the NSW Trustee"), as manager of her estate. White J also made an order, pursuant to s 77 of the CPA[12], that the compromise monies, together with any fund management damages, be paid to the Trust Company in its capacity as manager of the appellant's estate. [11]Section 41 of the TGA provides, relevantly:"(1)If the Supreme Court is satisfied that a person is incapable of managing his or her affairs, the Court may:(a)declare that the person is incapable of managing his or her affairs and order that the estate of the person be subject to management under this Act, and(b)by order appoint a suitable person as manager of the estate of the person or commit the management of the estate of the person to the NSW Trustee." [12]Section 77 of the CPA provides, relevantly: "(1)This section applies to money recovered in any proceedings on behalf of ...(a) a person under legal incapacity,...pursuant to a compromise, settlement, judgment or order in any proceedings....(3)... the court may order that the whole or any part of such money not be paid into court but be paid instead to such person as the court may direct, including:(a)if the person is a minor, to the NSW Trustee and Guardian, or(b) if the person is a protected person, to the manager of the protected person's estate."The proceedings before the primary judge

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

FRENCH CJ, HAYNE, BELL, GAGELER AND KEANE JJ
The second question was whether the appellant was entitled to a component of the fund management damages to cover, not only the cost of managing the funds under management, but also the cost of managing the income predicted to be earned on, and reinvested as part of, the funds under management. This issue was referred to as the "fund management on fund income" issue.Decision of the primary judge The primary judge resolved both of these issues in favour of the appellant. In relation to the fund management damages issue, several matters were not in dispute. First, it was common ground that the Trust Company would charge the appellant fees for managing the fund, and that those fees would be calculated as a percentage of the total funds under management, ie, as a percentage of the compromise monies plus the fund management damages[13]. [13]Gray v Richards (2011) 59 MVR 85 at 87 [10]. The appellant's tutor negotiated with the Trust Company in relation to the fund management charges it required in order to accept appointment as fund manager. Ultimately, the Trust Company and the appellant's tutor agreed upon fund management expenses made up of an ongoing Estate Management Fee and Investment Platform Fee of 0.550 per cent per annum calculated on the total of the funds under management. No issue arose as to whether this fee arrangement was contrary to any statutory provision regulating such fees. Secondly, it was common ground that the amount that would be paid to the Trust Company in respect of the compromise monies was only $9,929,000, being the settlement of $10 million less payment of a Centrelink charge, a Medicare charge and an amount already paid by the respondent to the appellant to provide for her care. Accordingly, the starting point for the calculation of fund management damages was agreed to be $9,929,000[14]. [14]Richards v Gray (2013) Aust Torts Reports ¶82-153 at 66,854 [10]; cf Gray v Richards (2011) 59 MVR 85 at 87 [11]. Before the primary judge the starting point was $9,934,000, but that figure had been reduced by agreement by the time the matter reached the Court of Appeal. Finally, it was agreed for the purposes of calculating the fund management damages that the duration of the fund would be 66 or 67 years from the date of trial, representing the appellant's assumed life expectancy[15].[15]Gray v Richards (2011) 59 MVR 85 at 95 [53]. The primary judge explained[16] the logic of the appellant's claim by reference to the following illustration:"[I]f the cost of managing a damages award of $10m over the relevant term were, for example, $2m (20% of the corpus), the total verdict would be $12m, to be received today and managed over time. A plaintiff under incapacity would have no better ability to manage the additional $2m than the initial $10m. It follows that the award of a component for fund management would itself give rise to future management expenses in the order of $400,000 (assuming fees charged on that amount at the same rate of 20%). The additional $400,000 in turn would cost a further $80,000 to manage, which would cost a further $16,000, and so on."[16]Gray v Richards (2011) 59 MVR 85 at 88 [19].

Ratio Decidendi

Legal Principle Established

Established by: FRENCH CJ, HAYNE, BELL, GAGELER AND KEANE JJ

Full text does not contain this section.