M,H v Children, Youth and WOMEN'S Health Service Incorporated

[2016] SADC 35

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

M,H AND ORS v CHILDREN, YOUTH AND WOMEN'S HEALTH SERVICE INCORPORATED AND ANOR

[2016] SADC 35

Judgment of His Honour Judge Tilmouth

5 April 2016

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS

Approval given for the Compromise of an action of a person under disability, without requiring the further 'independent' opinion of counsel.

Naso v Cottrell (1994) 11 WAR 475; Russell v J Hargreaves and Sons Pty Ltd (1956) 30 ALJR 533; Rose v MVIT (1974) 48 ALJR 352; Beasley v Marshall (1986) 40 SASR 544; Burford v Allan (1993) 60 SASR 428; Wynn v NSW Insurance Ministerial Corporation (1995) 184 CLR 485; Cullen v Trappell (1980) 146 CLR 1; Todorovic v Waller (1981) 150 CLR 402; District Court Rules 2006 DCR 6 R 257; Stephens-Sidebottom v Victoria (Department of Education and Early Childhood Development) [2011] FCA 893; Elliott v Diener (1978) 21 ACTR 21; Re Taylor's Application [18972] 2 QB 369; Re Wells [1903] 1 Ch 848; Clement v Basset (1987) 46 NTR 36; Fowler v Gray [1982] QD R 334; Hickey v Public Advocate [2012] FCA 1203; Bannister v State of Victoria [2012] FCA 1341; A (on behalf of B) v New South Wales (Dept of Education and Training) (No 2) [2013] FCA 551; Australian Securities and Investments Commission v Pigott Wood and Baker (a firm) [2015] FCA 18, referred to.
R v Birchall (1880) 16 Ch D 41; Gillespie v Alperstein [1964] VR 749; Wade (by his next friend Wade) v Victoria (Deptment of Education and Early Childhood Development) [2012] FCA 1080; Wade v State of Victoria (No 2) [2012] FCA 1080, applied.
Pfitzner v Sergeant [1941] SASR 286, discussed.

M,H AND ORS v CHILDREN, YOUTH AND WOMEN'S HEALTH SERVICE INCORPORATED AND ANOR
[2016] SADC 35

The issue

1. By Interlocutory Application filed 23 March 2016, the Court is asked to approve the Compromise of a damages claim by the plaintiff, a person under disability.  For the reasons to follow the Court sanctions the Compromise and makes orders substantially in terms of those agreed between the parties.

   Underlying cause of action

2. The underlying action is a claim for damages arising from severe personal injuries sustained in the negligent medical treatment of M,H on 26 March 1998.  Complications arose after she was diagnosed at the Women and Children’s Hospital in March 1998 with hypothyroidism, not long after her birth.  On 24 March 1998 she was referred for cranial and spinal ultrasound which disclosed a large infected dermoid cyst lying to the left of the spinal cord at the fifth cervical vertebra.  A neurosurgeon failed to remove the cyst in surgery undertaken on 26 March 1998.  Negligence is admitted on the basis of this omission.  There is no question of contribution.

   Brief procedural history

3. The trial of this action was set for hearing over four weeks commencing in early March 2016.  Late in the morning of the first day, the parties advised they had reached a Compromise settlement.  M,H is a person under disability by virtue of previous orders made by a Master of the Court appointing the Public Trustee as her Next Friend.  She turned 18 on 1 March 2016, that is, shortly before the trial.  Some payments on account of damages mostly with respect to past gratuitous services, past travelling and expenses and past medical expenses were paid by the defendant previously.  There were two failed mediations before trial.  The total award of damages is $2.75 million, in addition to amounts paid to date and in addition to party/party costs and disbursements.

4. The plaintiff’s claim is one at common law unencumbered by the limitations of the Civil Liability Act 1936 (SA). No limitation issue arises: s 45 Limitations of Actions Act 1936 (SA).  The proposed settlement covers the following heads of damage in the following amounts:

Pain and suffering
-     Past	$100,000
-    Future	$150,000
Interest on past pain and suffering	$36,000
Past Education & Extracurricular Activities	$75,000
Loss of earning capacity (including superannuation)	$600,000
Past Gratuitous Care	$120,000
Future Care	$800,000
Future Treatment & Professional Services	$30,000
Future Transport & Holidays	$50,000
Case Management	$30,000
Interest on past gratuitous services and past special damages	$45,000
Cost of Administration of Award	$750,000
TOTAL	$2,786,000
Amounts paid to date	$289,000

In addition the plaintiff has secured the significant entitlement to costs to be taxed or agreed on a party/party basis: Shanahan v Crack.[1]

[1] (1970) 55 LSJS 674, 677.

1. The Public Trustee has indicated approval of the settlement, ordinarily a necessary pre-condition to an application for approval: Naso v Cottrell.[2]  The plaintiff herself and her grandmother (who has principal care of M,H at the present time), agree with the proposed settlement.  Her mother is so unwell that her capacity to care for the plaintiff is compromised.  The strain and consequent anxiety and depression have aggravated her health but nevertheless she is aware of the proposal.  It was the pressure on these close family members, in particular the impending trial, which was a consideration in Counsel’s opinion recommending acceptance of the Compromise, in a lengthy, detailed and well reasoned opinion of the plaintiff’s senior and junior counsel, submitted in support of the application.  The question is whether the proposed settlement, taken as a whole is in the best interests and for the benefit of the plaintiff: R v Birchall,[3] Gillespie v Alperstein.[4]

   [2] (1994) 11WAR 475.

   [3] (1880) 16 Ch D 41, 43.

   [4] [1964] VR 749.

2. In light of the sums allocated to the heads of damage in the table reproduced above, there are only two issues calling for comment.

   Future earning capacity

3. The first relates to the allowance for loss of earning capacity of $600,000.  This covers a whole working life of upwards of 50 years, say $12,000 per annum.  At first sight this does not appear all that much.  The plaintiff is an only child.  Hence there is no sibling achievement by which to assess her likely occupation and for that matter her potential for earning capacity.  Even so a plaintiff in her position is entitled to a reasonable allowance for the undoubted loss of earning capacity:  Russell v J Hargreaves and Sons Pty Ltd.[5]

   [5] (1956) 30 ALJR 533

4. Usually in this situation attempts to assess the future from socio-economic background is made so as to consider whether it is likely above or below average earnings are appropriate reference points: Rose v MVIT,[6] Beasley v Marshall.[7]  It can be acknowledged that this is a very difficult exercise in the circumstances of this case.  M,H left school in 2013 before completing Year 10.  She suffers such cognitive defects that render her of borderline intellectual capacity, so that her earning capacity is arguably totally destroyed.  There is expert evidence on the plaintiff’s side that there is no realistic prospect of gaining employment in an open labour market.  The defendant’s expert witnesses suggest she is capable of achieving employment in a ‘sheltered workshop’ environment or in work of a simple repetitive nature, a prospect that cannot be discounted as there is evidence she completed a Certificate in cosmetics, so there is a (small) potential for retaining some capacity for work.

   [6] (1974) 48 ALJR 352.

   [7] (1986) 40 SASR 544.

5. Beginning with State Average Weekly Earnings as a benchmark, the plaintiff’s solicitors obtained the report of a forensic accountant who calculated the potential loss of earnings for the whole of her working life (including superannuation) at present day value, at approximately $1.25 million.  The agreed sum is obviously just under half this estimate.  From this commencing point counsel considered adverse contingencies, including the fact that the family history demonstrated ‘inconsistent employment’, the diagnosis of other difficulties unrelated to the negligence giving rise to the cause of action impinging on employment prospects giving rise to a ‘deferred factor of about 15 years’.  All in all the plaintiff’s counsel considered $600,000 was a reasonable estimate.

6. It must be borne in mind there is the necessity to allow for unexpected adverse contingencies and the ordinary vicissitudes of life: Wynn v NSW Insurance Ministerial Corporation,[8] Burford v Allan.[9]  And of course the incidence of taxation on projected income must be factored in: Cullen v Trappell,[10] Todorovic v Waller.[11]  On mature reflection and in light of the above considerations, the estimated loss of earning capacity cannot be seen to be outside an appropriate range of what might be awarded for loss of earning capacity at common law in the context of the overall proposal, taken as a whole.

   [8] (1995) 184 CLR 485.

   [9] (1993) 60 SASR 428.

   [10] (1980) 146 CLR 1.

   [11] (1981) 150 CLR 402.

   An independent opinion?

7. The second matter calling for comment arises from the necessity for the Court to approve settlements of claims by persons under disability, as required by DCR 6 R 257:

   257—Settlement requires Court's approval

   (1)A settlement of proceedings for the benefit of, or against the interests of, a person under a disability, or of a claim that might have formed the basis of such proceedings, is not binding on the person under a disability unless the Court approves the terms of the settlement.

   (2)An action for the Court's approval of a settlement may be brought under this rule even though no related proceeding has been commenced in the Court.

8. It is usual practice for a Court to give its approval pursuant to this Rule and its equivalent predecessors, upon receiving the opinion of ‘independent’ counsel.  This requirement is taken as meaning independent of the solicitor and the solicitor’s firm representing the person under disability: Pfitzner v Sergeant.[12]  More recently the requirement even when expressed as ‘an independent lawyer’ was interpreted as intending that an opinion be provided ‘in furthermore of the lawyer’s duty to assist the court and not in furthermore of any duty the lawyer may have to a party in the proceedings’: Wade v State of Victoria (No 2),[13] Hickey v Public Advocate,[14] Bannister v State of Victoria,[15] A (on behalf of B) v New South Wales (Dept of Education and Training) (No 2),[16] Australian Securities and Investments Commission v Pigott Wood & Baker (a firm).[17]

   [12] [1941] SASR 286, 2 and 7.

   [13] [2012] FCA 1080, [9].

   [14] [2012] FCA 1203, [10]-[11].

   [15] [2012] FCA 1341, [12].

   [16] [2013] FCA 551, [183].

   [17] [2015] FCA 18, [28].

9. Mr Eriksen and Ms Atkins are experienced personal injuries counsel at the independent bar. Their joint opinion recommending the settlement, is a significant consideration in the circumstances: Stephens-Sidebottom v Victoria (Dept of Education and Early Childhood Development).[18]Both counsel have long-standing and close personal interaction with the plaintiff, her mother and her grandmother.  They carefully considered the strain taken by intensive care over the years, and the stress involved should the action proceed to trial, when all three were to give evidence (assuming the plaintiff’s mother was well enough to do so), as a consideration in reaching the conclusion that acceptance of the Compromise was the preferable course: Elliott v Diener.[19] 

   [18] [2011] FCA 893, [12], applying Re Barbour's Settlement, [1974] 6 WLR 1198.

   [19] (1978) 21 ACTR 21.

10. Quite apart from the fact that DCR 6 R 257 does not expressly require the provision of an independent opinion of counsel, the additional costs and delay involved in obtaining an opinion from counsel not having the benefit of such close familiarity with the entire circumstances of the case as trial counsel, considerably outweigh the benefits of approval: Wade (by his next friend Wade) v Victoria (Dept of Education and Early Childhood Development).[20]Even then, to the extent that Murray CJ suggested an equivalent Rule of Court required counsel quite independent and in a position to consider the merits impartially: Pfitzner,[21] it is in the above circumstances entirely appropriate to dispense with that requirement in this instance, if necessary: Hickey (by his next friend Hickey) v Public Advocate (Victoria).[22]

    [20] [2012] FCA 1080.

    [21]   Above, 287.

    [22] [2012] FCA 1203, [11].

    Conclusion

11. In the above circumstances I considered it was in the clear best interests of the plaintiff, (as well as her immediate family who are affected by the offer of Compromise) and as a disabled person to settle the matter in the terms agreed: Re Taylor’s Application,[23] Re Wells,[24] Clement v Basset,[25] Fowler v Gray.[26] 

    [23] [1972] 2 QB 369.

    [24] [1903] 1 Ch 848.

    [25] (1987) 46 NTR 36.

    [26] [1982] QD R 334.

12. This approval thereby authorises the Public Trustee as Next Friend to enter into a formal Compromise: Necora v Talbot,[27] Drinkall v Whitwood.[28]

    [27] [1960] VR 537.

    [28] [2004] 1 WLR 462, [19].