Laws v GWS Machinery Pty Ltd & 2 Ors; Laws v GWS Machinery Pty Ltd

[2007] NSWSC 1249

CITATION:

Laws v GWS Machinery Pty Ltd & 2 Ors; Laws v GWS Machinery Pty Ltd & Anor (No 2) [2007] NSWSC 1249
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S):

13 July 2007

 
JUDGMENT DATE : 

2 November 2007

JURISDICTION:

Supreme Court

JUDGMENT OF:

Rothman J

DECISION:

The Court makes the following orders in each matter:

A. In 20084/2002, Thomas John Laws (Laws Senior):
The Court notes that the plaintiff elects, to the extent that such election is necessary, to obtain his remedy pursuant to section 75AD of the Trade Practices Act 1974 (Cth) as against the second defendant.
The Court Orders:
(i) Verdict and judgment for the plaintiff against the first and second defendant in the sum of $272,433.79.
(ii) Order (i) above, is intended to operate such that the liability of the first and second defendants to the plaintiff shall be borne equally inter se.
(iii) The first and second defendants pay the costs of the plaintiff of and incidental to these proceedings, as agreed or assessed.
(iv) The costs referred to in (iii) above be paid on a party and party basis up to and including 4 June 2006 and thereafter (on and from 5 June 2006) the costs be paid on an indemnity basis.
(v) To the extent necessary, I certify that it was appropriate to have two counsel and that fees should be assessed on the basis that the matter was properly and reasonably commenced in the Supreme Court.
(vi) Pursuant to UCPR 36.4(3) this judgment comes into effect on and from 1 June 2007.
(vii) Interest is to be paid in accordance with section 101 of the Civil Procedure Act 2005 (NSW).
(viii) Otherwise the proceedings and any and all cross-claims are dismissed.

B. In 20076/2002, John Rodney Laws (Laws Junior):
The Court notes that the plaintiff elects, to the extent necessary, to accept judgment based upon the negligence of the second defendant.
The Court Orders:
(i) Verdict and judgment for the plaintiff against the first and second defendants in the sum of $9,282,810.20.
(ii) Proceedings against the third defendant be dismissed with no order as to costs.
(iii) The first defendant’s cross-claim against the third defendant be dismissed with no order as to costs.
(iv) The first defendant’s cross-claim against the second defendant be dismissed with no order as to costs.
(v) The second defendant’s cross-claim against the third defendant be dismissed with no order as to costs.
(vi) The second defendant’s cross-claim against the first defendant be dismissed with no order as to costs.
(vii) The third defendant’s cross-claim against the first defendant be dismissed with no order as to costs.
(viii) The third defendant’s cross-claim against the second defendant be dismissed with no order as to costs.
(ix) Order (i) is intended to operate such that the liability of the first and second defendants to the plaintiff shall be borne equally.
(x) Direct that the first and second defendants pay the judgment sum into Court subject to any amounts properly paid in respect of past and out of pocket expenses and to the Department of Social Security, such sum to be held in Court pending further order as to the appointment of the trustee and manager on behalf of the plaintiff.
(xi) The first and second defendants to pay the plaintiff’s costs as agreed or assessed.
(xii) The plaintiff has liberty to apply on one week’s notice to the Court and each party for an order to increase the verdict herein by the amount of the costs of fund management once such costs are ascertained.
(xiii) Pursuant to UCPR 36.4(3) this judgment comes into effect on and from 1 June 2007.
(xiv) Interest is to be paid in accordance with section 101 of the Civil Procedure Act 2005 (NSW).
(xv) Otherwise the proceedings and any and all cross-claims are dismissed.

C. All parties to both matters have liberty to apply on these subsequent calculations and any special or extra order as to costs.

CATCHWORDS:	DAMAGES – 24-hour care – contingency – vicissitudes – calculations – orders made TRADE PRACTICES – indemnity to seller by manufacturer – limit to indemnity – indemnity not applicable
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Sale of Goods Act 1923 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	Campbell v Nangle (1985) 40 SASR 161 Chamberlain v FCT (1991) 28 FCR 21 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 54 Laws v GWS Machinery [2007] NSWSC 316 Nominal Defendant v Gardikiotis (1996) 186 CLR 49 Port of Melbourne Authority v Anshun (1987) 147 CLR 589 TNT v Christie (2003) 65 NSWLR 1 Todorovic v Waller (1981) 150 CLR 402 Willett v Futcher (2005) 221 CLR 627
PARTIES:	20076/2002 - P: LAWS, John Rodney D1: GWS Machinery Pty Ltd D2: Motokov Australia Pty Limited (in liquidation) / CGU Insurance Australia Limited D3: LAWS, Thomas John XC: LAWS, Thomas John XD: NRMA Insurance 20084/2002 - P: LAWS, Thomas John D1: GWS Machinery Pty Ltd D2: Motokov Australia Pty Limited (in liquidation) / CGU Insurance Australia Limited
FILE NUMBER(S):	SC 20076/2002; 20084/2002
COUNSEL:	20076/2002 - P: Mr D.A. Wheelahan QC with Mr P.J. Frame D1: Mr S.G. Campbell SC with Mr P.L. Perry D2: Mr R.A. Gray D3: Mr P.J. Doherty SC with Mr Morgan 20084/2002 - P: Mr P.J. Doherty SC with Mr Morgan D1: Mr S.G. Campbell SC with Mr P.L. Perry D2: Mr R.A. Gray
SOLICITORS:	20076/2002 - P: Mr S. Groves (Lamrocks Solicitors) D1: Mr P. Lederman (Moray & Agnew Solicitors) D2: Mr S. Kennedy (Curwoods Lawyers) D3: Mr P. Heath (Somerville & Co) 20084/2002 - P: Mr P. Heath (Somerville & Co) D1: Mr P. Lederman (Moray & Agnew Solicitors) D2: Mr S. Kennedy (Curwoods Lawyers)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ROTHMAN J

2 NOVEMBER 2007

20076/2002 John Rodney LAWS by his tutor Catherine Anne LAWS v GWS MACHINERY PTY LIMITED & ORS

20084/2002 Thomas LAWS v GWS MACHINERY PTY LIMITED & ORS

JUDGMENT

1 HIS HONOUR: GWS Machinery and Motokov are liable in damage to both Mr Thomas Laws and his son Mr John Laws. The liability is addressed in my Reasons for Judgment of 4 June 2007: Laws v GWS Machinery [2007] NSWSC 316 (the earlier judgment) with which these reasons need to be read.

2 In the earlier judgment, the Court proposed orders and requested the parties to address on the form of the orders, the proper implementation of the reasons and any calculation (or miscalculation) of interest or damage. Further the plaintiffs were given the opportunity to elect, to the extent relevant, between damages in negligence and under the Trade Practices Act 1974 (Cth): see Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at [130] per Gummow and Hayne JJ.

3 When the matter was re-listed three issues that may or may not arise from the above leave to apply were raised: first, an alleged double counting in the cost of 24 hour care calculated; secondly, the cost of fund management; and, thirdly, the non-allowance for vicissitudes in the calculation of damage for Mr John Laws. Further there still remained an issue relating to the claim by the first defendant for an indemnity by the second defendant.

4 The first and third additional issues arise from the leave to apply granted on 4 June. The second issue is in effect, an application to reopen Mr John Laws’ case to adduce further material and put further submissions. No party could point to any prejudice that would arise from the re-opening, no party opposed the course (although some did not formally consent) and I allowed it.

Funds Management

5 Mr John Laws tendered Exhibit CCC which was an application by summons to this Court in its Protective Division for the appointment of Australian Executor Trustees Limited as the manager of the estate of Mr John Laws.

6 The aforesaid summons seeks the payment of the net proceeds from these orders into Court and thereafter to the funds manager.

7 In the earlier judgment at [215], I did not allow the costs of funds management on the basis that I was not convinced that such a cost would be an expense borne by Mr John Laws.

8 Having heard the parties, and in particular counsel for Mr John Laws, and seen Exhibit CCC, I now conclude for the reasons that follow, that the costs of fund management must be allowed.

9 I deal first with the issue of principle. There is no doubt (although balance of probabilities will suffice) that Mr John Laws is incapable of managing his own affairs. He has conducted these proceedings through a tutor.

10 In such circumstances, and given that the incapacity was caused by the negligence of GWS and/or Motokov, damages must include the cost of managing the damages awarded, assessed on the basis of allowing for the remuneration and expenditure of an administrator of the fund throughout the life of the fund: Willett v Futcher (2005) 221 CLR 627.

11 Such costs ought not form part of the damage unless the plaintiff is incapable of managing his own affairs, and then only to the extent that such costs are directly referable to the impairment to capacity suffered as a result of the conduct of the defendants. However, even where a professional funds manager is not used, the time, effort and expertise of the person who is to manage the funds must be compensated: Todorovic v Waller (1981) 150 CLR 402 at 412; Nominal Defendant v Gardikiotis (1996) 186 CLR 49.

12 In Gardikiotis, McHugh J cited with approval the judgment of King CJ in Campbell v Nangle (1985) 40 SASR 161 at 192 in the following passage:

“King CJ said:
‘It seems to me that the principles of the law relating to damages for tort require the inclusion in an incapacitated plaintiff's damages of the amount which he will be required to pay to a manager by reason of his incapacity. A plaintiff is entitled to recover the loss caused by the tort. The fundamental principle upon which damages are assessed is the principle of compensation that the plaintiff is to be placed, so far as possible, in the same position financially as he would have been if he had not sustained the wrong for which he receives the damages. The capital sum awarded to him is computed upon the basis of an assumed real return from its investment. If the plaintiff has been rendered by the wrong for which he recovers damages incapable of managing his affairs so that the fund resulting from the damages must be managed for him, the fees payable to the manager will reduce the real return from its investment. Unless an amount is included in the damages to compensate for those fees, the plaintiff will not receive the full restitution to which the law entitles him. It seems to me that the liability for the fees is a loss flowing directly from the wrong and is recoverable as damages caused by the wrong. I should say for the sake of completeness that the same is true, in my opinion, where the plaintiff's incapacity to manage his affairs does not result from the wrong but is antecedent to it, being the result of legal disability or some other cause.’

The statement of principle by King CJ in my view correctly represents the law.” ( Gardikiotis , supra, at 67)

13 In this case, Exhibit CCC persuades me that my initial view was wrong. It is clear that the funds will be managed by a professional funds manager named in the summons. The question arises as to how to reflect that amount in the final order. The amount is estimated to be in excess of $2 million.

14 Counsel initially suggested that the judge exercising jurisdiction in the Protective Division would award the amount. It was suggested that this was the usual practice. I doubt that this is so. If it were, it would be wrong in principle as: the judge would not be exercising the jurisdiction in these proceedings; and, the defendants, who would be paying the amount, would not be parties to the Protective Division matter and would not be heard and, probably, not be bound by such an order.

15 Further, the task of setting an amount for funds management is difficult. This is because it is either or both the Protective Division judge and/or the funds manager that approves and/or pays the expenditures that are required initially (e.g. costs, payment for past care etc). The exact amount of the fund to be managed is uncertain. I shall give leave to approach the Court for the purpose of adducing evidence, once ascertained, of the costs actually incurred.

Indemnity under the Trade Practices Act

16 GWS submits that an order should be made that Motokov “indemnify” GWS for any damage for which it is liable. The “indemnity” is claimed under the provisions of section 74H of the Trade Practices Act.

17 Further GWS submits that the tyre provided by Motokov was, on the findings I have previously made, defective and/or in breach of warranties of fitness and quality implied by section 19 of the Sale of Goods Act 1923 (NSW). The breach was occasioned by the failure “to make the tyres fit for purposes and to render them merchantable” and that Motokov “ought to have provided information or warning by way of mould on the tyre, sticker on the tyre or leaflet inserted into the well of the tyre”.

18 GWS refers to and relies on the judgment of Mason P in TNT v Christie (2003) 65 NSWLR 1 at 20-22:

“[111] The rental agreement declared that TNT was the bailee of the jack and it did not purport to exclude any implied warranty as to fitness. TNT therefore submits that there was an implied warranty that the jack was free from defects including latent defects and reasonably fit for its intended purpose ( Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633); and that the said finding indicated that such warranty was breached (see also Clark v Esanda Ltd [1984] 3 NSWLR 1 at 9). The damages flowing from such breach were the entire verdict (including costs) awarded to the plaintiff against TNT ( Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 at 591, 598–599; Oxley County Council v Macdonald [1999] NSWCA 126).

[112] TNT also invokes the warranties of quality and fitness for purpose implied in contracts for work and materials ( Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 at 8, 9).”

19 Section 74H of the Trade Practices Act is in the following terms:

“[75H] Where:

(a) a person (in this section referred to as the seller ) is under a liability to another person (in this section referred to as the consumer ) in respect of loss or damage suffered by the consumer as a result of a breach of a condition or warranty implied by a provision of Division 2 in a contract for the supply of goods (whether or not the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption) by the seller to the consumer; and
(b) a third person (in this section referred to as the manufacturer ):
(i) is liable to compensate the consumer in respect of the same loss or damage by reason of a provision of this Division; or
(ii) in a case where the goods referred to in paragraph (a) are not of a kind ordinarily acquired for personal, domestic or household use or consumption--would, if the provisions of sections 74B, 74C, 74D and 74E applied in relation to those goods, be liable to compensate the consumer in respect of the same loss or damage by reason of any of those provisions;
the manufacturer is liable to indemnify the seller in respect of the liability of the seller to the consumer and the seller may, in respect of the manufacturer's liability to indemnify the seller, institute an action against the manufacturer in a court of competent jurisdiction for such legal or equitable relief as the seller could have obtained if the liability of the manufacturer to indemnify the seller had arisen under a contract of indemnity made between the manufacturer and the seller.”

20 Applying the principles adumbrated by Mason P does not assist GWS. The principles adumbrated by his Honour, assuming they are applicable, establish contractual duties between the parties to a contract (albeit under statutorily implied warranties) based upon the supply, to the other party to the contract, of goods that are not of merchantable quality. GWS submits that a warning should have been provided. The simple answer to this submission is that a warning was provided to GWS and GWS were aware of the danger of fitting the tyre inexpertly: see earlier judgment at [89], [187], [188]. GWS has not established the factual basis for this contractual indemnity.

21 The other bases argued to give rise to a lack of merchantable quality also fail:

(i) l ack of interchangeability with tyre size 11.2-28 : at [76(iv)] of the earlier judgment it is found that, if it were fitted by an expert, the tyre provided would have fitted the relevant rim; and

(ii) beading manufacture : at [76(x)] of the earlier judgment, it was held that the bead manufacture was not defective and did not cause the accident, although another bead may have made the explosion less likely.

22 The submission based on the Trade Practices Act has a different quality. The provisions of section 74H require a manufacturer, Motokov, to indemnify the retailer, GWS, for any loss or damage suffered by a consumer (Mr Thomas Laws), as a result of a breach of a warranty imposed by the Trade Practices Act, where the breach arises from the supply by the retailer of the manufacturer’s goods. That is the situation here.

23 It has been determined that the rear tractor tyres are not goods ordinarily acquired for personal, domestic or household use: earlier judgment at [160]. As such section 74L(1) limits the liability of the manufacturer to a liability to pay to the seller an amount equal to the lowest of: the cost of replacing the goods; the cost of obtaining equivalent goods; or the cost of repair of the goods. In this case, that is $530.

24 Section 74L(2) of the Trade Practices Act renders inapplicable the limit on the amount to be recovered if GWS were able to establish that such a limit would not be “fair or reasonable”. It has not established that.

25 I have found that an appropriate relative culpability in the damage suffered, as between GWS and Motokov, is equal responsibility. That ascertainment is sought to be explained in the earlier judgment. I would, were I required so to do, also consider that such a contribution from GWS and Motokov is fair and reasonable and that no greater contribution to the damages payable by GWS from Motokov would be fair and reasonable.

26 Further the $530 limit arising from the application of section 74L of the Trade Practices Act is not, in fact, on the evidence, payable. The amount is payable only as an indemnity and therefore only to the extent that GWS is liable in damages for that amount. No amount of the damages in this case relates to the cost of the goods supplied and probably, now, never will be: Chamberlain v FCT (1991) 28 FCR 21; Port of Melbourne Authority v Anshun (1987) 147 CLR 589.

Vicissitudes

27 By slip or omission in the calculation proposed in the earlier judgment, I allowed vicissitudes for Mr Thomas Laws, but not for Mr John Laws. Obviously, such a reduction must be applied to the damages, and the orders I make will reflect that allowance.

The Calculation of Cost of 24-Hour Care

28 The earlier judgment allows an amount of $3,250.48 per week total cost for the provision of 24-hour care. That was then assessed over the future 51 years to arrive at a total figure of $4,467,459.70. The basis of the $3,250.48 figure is challenged.

29 I accept that there is double counting in the amount of $3,250.48. It is explained at [335]-[337]. It was an attempt to compromise the likelihood that 24-hour shift care would be needed, with the possibility that it would not. Both the likelihood and the possibility are the results of the facts as I have determined them, based on the evidence before me.

30 The calculation of an exact cost with certainty, given the exigencies of the future (e.g. the possibility that the case management or the effect of activities will ameliorate the current problems) is impossible. As a consequence I took an unorthodox approach that allowed for a non-shift 24-hour care with an over-compensation of relief (i.e. deliberate double counting based on my assessment that if non-shift 24-hour care were implemented, additional relief would be required).

31 I accept that a more orthodox approach should be adopted. While I have found, on the evidence, that it is more likely than not that non-shift 24-hour care will be insufficient, I consider (and considered) that this calculation ought not be based on a certainty, which in turn is based on proof on the balance of probabilities. I will treat it as a contingency.

32 But a more in depth and orthodox approach to the damages shows up anomalies. In the earlier judgment, I suggested that there was an error in the schedule of fees presented by GWS ([335] of the earlier judgment) in that the fee for 24-hour care was described in the Schedule (Exhibit 34) as an hourly rate of $291.42 and it was appropriate to treat it as a daily rate. But on examination, after submission from the first defendant, that also is plainly wrong. If that were the case, 24-hour care would be cheaper than 12 hours’ per day, plus a 10 hour sleepover. Indeed, 24-hour care would be approximately the same cost as 8 hours per day of care.

33 On the other hand, if the rate displayed is an hourly rate it would cost over $55,000 per week for care (excluding public holidays). Each of the above comparisons are calculated on “low support need” rates, including GST. It seems the most likely position is that the rate displayed for “24-hour care” in Exhibit 34 is a rate for a 10 hour equivalent to the sleepover, to which must be added 14 hours’ care at the hourly rate. Even that has problems. It would mean that the hourly rate applicable to a person on shift at night is lower than having the same person during the day. (If the displayed rate were for a 24-hour period, the hourly rate is significantly less than one half the daily rate.)

34 If the weekly rate is derived from Exhibit 34 by using the 24-hour rate for a 10 hour period and adding a further 14 hours at the low support need hourly rate then, allowing 11 public holidays (i.e. deducting 11 weekday calculations and adding 11 public holiday rates from the yearly calculation), the rate is $6,391.77 per week. This rate is almost the same as the rate upon which Mr John Laws relied in his calculations (and derived from the evidence of Ms Shepherd, Occupational Therapist), which rate was $6,245.49. I shall use the lower of the two. Ms Shepherd was not seriously challenged on the amount.

35 Using Exhibit 34, 24-hour care with a sleepover (maximum of 1 hour’s work) and 14 hours at the hourly rate, then the weekly calculation (again using 11 public holidays) is $4,848.50.

36 On the basis of the above and the evidence before the Court, I will estimate the probability of the need for 3 shifts of care per day every day. I will allow 51% and also discount that weighted average for the possibility that in the future it may eventuate that no care at all is required (an extremely unlikely occurrence), or a reduced care scheme will eventuate. I will allow a further 25% reduction of the weighted average to allow for that eventuality. This allowance is a different allowance than that which I otherwise allow for the vicissitudes of life. I make it clear that I use the ratio of 51/49 because it is the most conservative monetary outcome. The probability that three shifts per day will be necessary is, on the evidence, much greater than 51%.

37 The weighted average of $6,245.49 (at 51%) and $4,848.50 (at 49%) reduced by 25% is a weekly rate of $4,170.73 for 24-hour care. That rate amounts to a cost for future attendant care ($4,170.73 x 1366) of $5,697,217.18 and reducing that for the vicissitudes of life gives rise to damages under that head of damage of $4,842,634.60. Otherwise I adopt the calculation most helpfully provided by counsel for GWS.

38 I make the following orders in each matter:

A. In 20084/2002, Thomas John Laws (Laws Senior):

The Court notes that the plaintiff elects, to the extent that such election is necessary, to obtain his remedy pursuant to section 75AD of the Trade Practices Act as against the second defendant.

The Court Orders :

(i) Verdict and judgment for the plaintiff against the first and second defendant in the sum of $272,433.79.
(ii) Order (i) above, is intended to operate such that the liability of the first and second defendants to the plaintiff shall be borne equally inter se.
(iii) The first and second defendants pay the costs of the plaintiff of and incidental to these proceedings, as agreed or assessed.
(iv) The costs referred to in (iii) above be paid on a party and party basis up to and including 4 June 2006 and thereafter (on and from 5 June 2006) the costs be paid on an indemnity basis.
(v) To the extent necessary, I certify that it was appropriate to have two counsel and that fees should be assessed on the basis that the matter was properly and reasonably commenced in the Supreme Court.
(vi) Pursuant to UCPR 36.4(3) this judgment comes into effect on and from 1 June 2007.
(vii) Interest is to be paid in accordance with section 101 of the Civil Procedure Act 2005 (NSW).
(viii) Otherwise the proceedings and any and all cross-claims are dismissed.


B. In 20076/2002, John Rodney Laws (Laws Junior):

The Court notes that the plaintiff elects, to the extent necessary, to accept judgment based upon the negligence of the second defendant.

The Court Orders :

(i) Verdict and judgment for the plaintiff against the first and second defendants in the sum of $9,282,810.20.
(ii) Proceedings against the third defendant be dismissed with no order as to costs.
(iii) The first defendant’s cross-claim against the third defendant be dismissed with no order as to costs.
(iv) The first defendant’s cross-claim against the second defendant be dismissed with no order as to costs.
(v) The second defendant’s cross-claim against the third defendant be dismissed with no order as to costs.
(vi) The second defendant’s cross-claim against the first defendant be dismissed with no order as to costs.
(vii) The third defendant’s cross-claim against the first defendant be dismissed with no order as to costs.
(viii) The third defendant’s cross-claim against the second defendant be dismissed with no order as to costs.
(ix) Order (i) is intended to operate such that the liability of the first and second defendants to the plaintiff shall be borne equally.
(x) Direct that the first and second defendants pay the judgment sum into Court subject to any amounts properly paid in respect of past and out of pocket expenses and to the Department of Social Security, such sum to be held in Court pending further order as to the appointment of the trustee and manager on behalf of the plaintiff.
(xi) The first and second defendants to pay the plaintiff’s costs as agreed or assessed.
(xii) The plaintiff has liberty to apply on one week’s notice to the Court and each party for an order to increase the verdict herein by the amount of the costs of fund management once such costs are ascertained.
(xiii) Pursuant to UCPR 36.4(3) this judgment comes into effect on and from 1 June 2007.
(xiv) Interest is to be paid in accordance with section 101 of the Civil Procedure Act 2005 (NSW).
(xv) Otherwise the proceedings and any and all cross-claims are dismissed.


C. All parties to both matters have liberty to apply on these subsequent calculations and any special or extra order as to costs.

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06/11/2007	-	Orders typo - Paragraph(s) Coversheet
21/12/2007	-	Judgment No 2 - Paragraph(s) Covereshee - Judgment citation