Nikolaou v Papasavas, Phillips & Co

[1989] HCA 11

HIGH COURT OF AUSTRALIA

Mason C.J., Wilson, Brennan, Deane, Dawson, Toohey, and Gaudron JJ.

NIKOLAOU v. PAPASAVAS, PHILLIPS &Co.

(1989) 166 CLR 394

10 February 1989

Negligence—High Court

Negligence—Legal practitioner—Solicitor—Liability to client—Negligence in initiation and prosecution of proceedings—Time at which damages assessed—Consequential claims—Evidence of events occurring after date when original action should have been tried. High Court—Procedure—Appeal—Costs—Ordinary rule—Whether displaced.

Decisions

MASON C.J. The issue in this appeal, as in Johnson &Ors v. Perez and Creed v. Perez which were heard immediately before it, concerns the basis on which damages are to be assessed. As in the Perez matters, this appeal arises from an action against solicitors for having negligently caused the loss of a cause of action for personal injuries. In Perez I said that in a case such as this damages should be assessed as at the date judgment should have been obtained in the personal injury action. In this case the appellant's condition appears to have deteriorated since that date and if evidence concerning that deterioration were considered in the assessment of damages the appellant would obtain a larger award. In view of Perez the issue becomes whether evidence of that subsequent development should be part of the basis on which damages are assessed for the loss of the chance to recover on the cause of action for personal injuries.

2. In September 1976 the appellant, his wife and their daughter were involved in a car accident and the driver of the other car was never identified. It was agreed at trial that in an apportionment of responsibility the appellant would be 25 per cent to blame. The accident resulted in the death of the appellant's wife and in injuries to the appellant and his daughter. The daughter's injuries were slight. The appellant was cut on the head. He did not return to work for five weeks after the accident and has not worked since 1981, apparently because of a psychiatric disability. In May 1977 he consulted a solicitor who was a member of the respondent firm regarding the accident and in April 1978 a member of that firm filed on behalf of the appellant and his daughter a claim against the Incorporated Nominal Defendant under the Wrongs Act 1958 (Vict.). No claim was made for personal injuries. The Wrongs Act claim was settled and the appellant signed a release for any further claims.

3. In March 1983 the appellant filed a claim against the respondent firm alleging negligence in the failure to advise him that he had an arguable personal injury claim against the Incorporated Nominal Defendant, a claim which had become time-barred. Judge Harris in the County Court of Victoria found that the respondent firm was liable for negligently causing the loss of the personal injury action. He found that but for the negligence of members of the respondent firm the personal injury claim would have been heard in late 1979 or early 1980. In determining the value of the appellant's loss of the personal injury action, he ruled that the date of assessment should be the date of judgment in the professional negligence case rather than when the personal injury claim should have been heard. The date of assessment was important because in Judge Harris view it determined what evidence he could consider:
"(B)ack in 1980 there was at best only a
possibility that (the appellant) might cease work by reason of his nervous condition. Such a possibility would have been part of the relevant material for the jury to consider. In 1986 I have evidence that (the appellant) has not worked at all since mid-1981. What was a possibility originally has matured into a positive fact." The Full Court of the Supreme Court of Victoria (Young C.J., Kaye and Murphy JJ.) on appeal held that Harris J. improperly assessed the damages as at the date of the hearing on the claim against the respondent firm for professional negligence and that damages should have been assessed as at the date when the personal injuries action should have been heard. The Full Court then ordered that there be a new trial limited to the issue of damages.

4. For the reasons I gave in Perez, I think the appropriate date as at which damages should be assessed in a case such as this is the date the personal injury action should have been determined. But does that preclude the consideration of all subsequent events? Had the personal injury action been brought on for hearing by early 1980 but final judgment delayed until now because of an appeal, it would have been entirely appropriate to consider the facts revealing that the appellant had ceased working: Willis v. The Commonwealth (1946) 73 CLR 105, at p 109; Ruby v. Marsh (1975) 132 CLR 642, at pp 647, 667; Thompson v. Faraonio (1979) 54 ALJR 231, at p 233; 24 ALR 1, at p 7. But that would be a different case from this one. This is not an action for the appellant's personal injuries, where, in the words of Lord Reid, "it is always proper to take account of developments with regard to the injuries which were caused by the defendant's tort" (Baker v. Willoughby (1970) AC 467, at p 491). Rather it is an action for the loss of a chance to recover on a cause of action for those injuries. In Tutunkoff v. Thiele (1975) 11 SASR 148, Bray C.J. considered the assessment of damages in an action against a solicitor for negligently allowing a claim for personal injuries against an employer to become time-barred. In deciding what evidence he could include when evaluating the plaintiff's damages, Bray C.J. said (at pp 150-151):
"what I have to decide is what the plaintiff has
lost by the defendant's negligence and what he has lost is what a court would have awarded him in an action by him against his employer, not what I would award if the present action were an action against the employer ..."

5. In such a situation a court's goal is to determine what amount of money would put the plaintiff in the position he would have been in had the solicitor not been negligent. That inquiry requires that the court ascertain, as best it can, how large an award the plaintiff would have received in the underlying action. Toward that end it may well be appropriate to consider evidence that has emerged after a final judgment should have been obtained if that evidence speaks to the condition of the plaintiff at that time and would assist the court in evaluating the case that the plaintiff could have made: see Tutunkoff v. Thiele. That evidence would be useful in the historical task of determining just what the plaintiff has lost by the solicitor's negligence.

6. But evidence relating to the consequences of the personal injuries which would not have been apparent before final judgment by definition could not have been part of the basis on which damages would have been assessed. Although such evidence might be useful in ascertaining the true extent of the plaintiff's personal injuries, it would not assist in establishing what was known or could have been known at the time the personal injury action should have been heard. The issue, after all, is not what actually was the extent of the personal injuries but what would have appeared to have been the extent of those injuries on the basis of the then known or knowable facts. Therefore, evidence concerning developments occurring after the supposed judgment is not relevant to an analysis of what the plaintiff has lost as a result of the solicitor's negligence.

7. In this case the evidence concerning the appellant's post-1980 condition, specifically his work history, does not readily appear to be relevant for the proper purpose of establishing what he has lost by the respondent's negligence. That work history, as Judge Harris said, suggests that a consequence of the injuries (a psychiatric disability) which would have been thought to be a possibility in the personal injury action has become the reality. But that reality would not have been part of the basis on which damages would have been assessed in the personal injury action. The knowledge that the possibility of psychiatric disability would have become the reality would have resulted in a larger award in the personal injury action, but it cannot be fairly said that members of the respondent firm caused the loss of that additional amount. Accordingly, the evidence concerning the appellant's psychiatric disability after the time judgment should have been obtained should not be part of the basis on which damages are assessed for the loss of the chance to recover on the personal injury cause of action. To hold otherwise would be to force the respondent firm to compensate for more than the injury its members caused to the appellant.

8. This matter must, as the Full Court ordered, be remitted to the County Court for a proper assessment of damages. The court must ascertain the value of what the appellant lost as a result of the solicitors' negligence. It will need to determine what the appellant would have recovered but for that negligence and will need to discount that amount by the chance that he would not have been successful in that claim: see Kitchen v. Royal Air Force Association (1958) 1 WLR 563; 2 All ER 241.

9. The appeal should be dismissed.

WILSON, DAWSON, TOOHEY AND GAUDRON JJ. This appeal was heard immediately following the hearing of the appeals in Johnson v. Perez and Creed v. Perez in which judgment has just been delivered. It gives rise to the same basic question as was argued in those appeals, namely, the basis upon which and the date at which damages should be assessed in an action for negligence against a solicitor.

2. The other appeals concerned proceedings brought by the plaintiff against his solicitors by reason of the dismissal for want of prosecution of actions the plaintiff had earlier brought against his employers claiming damages for personal injuries as a result of their negligence. This appeal concerns an action for negligence against a firm of solicitors who allowed a claim for damages to become statute barred. It is necessary to say something of the facts.

3. On 4 September 1976 the appellant Mr. Nikolaou, his wife and their young daughter Marina were involved in a motor vehicle collision with a vehicle the driver of which was unidentified. Mrs. Nikolaou sustained head injuries and died the same night. Marina was injured but her injuries were minor. Mr. Nikolaou received a cut on the scalp which required stitches. He returned to work about five weeks after the accident. After changing jobs a number of times, he has not worked since July 1981. The appellant consulted the respondent on 6 May 1977. On 19 April 1978 the respondent issued proceedings against the Incorporated Nominal Defendant on behalf of both Mr. Nikolaou and Marina. The claim rested wholly upon Pt III of the Wrongs Act 1958 (Vic.); there was no claim for personal injuries by either Mr. Nikolaou or his daughter. That claim was settled, Mr. Nikolaou signing a release which rather curiously recited that the defendant would pay "the plaintiffs" the settlement figure and in which Mr. Nikolaou purported to release the defendant from all claims which "the plaintiffs" might have. No approval of the court to a compromise of any claim Marina might have was sought.

4. The ambiguity surrounding the settled claim was compounded when on 22 March 1983 the proceedings the subject of this appeal were begun. Both Mr. Nikolaou and his daughter were named as plaintiffs in the action but the particulars of negligence alleged failure by the respondent to advise Mr. Nikolaou that he had an arguable cause of action in negligence against the Incorporated Nominal Defendant for damages for personal injuries he sustained, failure to advise him of the Limitation of Actions Act 1958 (Vic.) and failure to advise him properly in connection with the Wrongs Act claim. Mr. Nikolaou's cause of action for personal injuries expired on 4 September 1979. As we read the judgment of the trial judge, his Honour Judge Harris in the County Court of Victoria, he concluded that it had not been shown that the settlement figure paid in respect of the Wrongs Act claim was inadequate. But in respect of the loss by Mr. Nikolaou of the right to prosecute his claim for damages for personal injuries, his Honour awarded the sum of $15,468.75 together with interest of $2,850 and costs. Both Mr. Nikolaou and Marina appealed to the Full Court from that judgment and the respondent cross-appealed but the matter was argued before this Court by reference only to the amount of damages awarded against the respondent in respect of Mr. Nikolaou's lost claim for damages for personal injuries.

5. His Honour Judge Harris approached the matter in this way. Although, in the period immediately following the accident, Mr. Nikolaou's injuries appeared to be only minor, the existence of a claim for those injuries should have been apparent to his solicitors. He added:

"However, since proceedings were being taken involving the Incorporated Nominal Defendant, another couple of paragraphs in the particulars of demand would have covered the injured head and such aspects of the nervous condition as might be claimed to go beyond grief and become a matter of loss due to the accident."

6. In the circumstances his Honour found that there was negligence on the part of the respondent, arising from "a faulty system of operations" that "allowed one partner to assume that his colleague would cover the whole ground of the client's problem, and allowed that colleague to assume that the initial interview had elicited the vital facts and so had defined the cause of action". That finding was not challenged on appeal. At trial there was an allegation of contributory negligence on the part of Mr. Nikolaou "in failing to communicate adequately to the solicitors relevant facts of his personal injury". That allegation was rejected and was not pursued on appeal.

7. His Honour then turned "to evaluate the loss of the right to take proceedings for personal injury". He held that authority, in particular Vulic v. Bilinsky (1983) 2 NSWLR 472 and Wendleman v. Worland (unreported decision of Beach J. in Supreme Court of Victoria, delivered 9 July 1985), required that the value of the right lost be assessed as at the date of judgment rather than when the personal injury claim, had it been pursued in conjunction with the Wrongs Act claim, would probably have been heard. His Honour fixed this last-mentioned time as the end of 1979 or early in 1980. His Honour regarded the significance of the date for assessment as considerable, particularly as in 1980 "there was at best only a possibility that Mr. Nikolaou might cease work by reason of his nervous condition". In the event, on the hearing of the claim against the respondent there was evidence that Mr. Nikolaou had not worked at all since the middle of 1981. In his Honour's words, "(w)hat was a possibility originally has matured into a positive fact".

8. The Full Court rejected the approach taken by the trial judge, that damages should be assessed as at the date of the hearing of the claim against the solicitors. Young C.J. stressed that the action giving rise to the appeal was "not an action for damages for personal injuries, but an action for damages for breach of duty as a solicitor, whether sounding in contract or in tort". Furthermore, said the Chief Justice, the loss which Mr. Nikolaou suffered by reason of the respondent's negligence "was not injury to his person, but the loss of a chance of recovering damages for the personal injuries alleged to have been sustained by him in the accident on 4th September 1976".

9. The assessment of the prospects of a successful claim by Mr. Nikolaou for personal injuries against the Incorporated Nominal Defendant was largely resolved by an agreement made at trial that the unidentified driver was responsible for the accident to the extent of seventy-five per cent and that Mr. Nikolaou was contributorily negligent to the extent of twenty-five per cent. Presumably this meant, and this seems to be the way in which the matter was approached both at trial and on appeal, that the assessment should assume that Mr. Nikolaou would have recovered seventy-five per cent of the damages to which he was otherwise entitled.

10. Young C.J. referred to evidence received at trial as to Mr. Nikolaou's position after 1980 and indeed up to the time of the hearing of the action. In his Honour's view:

"Evidence as to the first appellant's condition after the date of the supposed trial could not have been received for the purpose of estimating the damages which might have been awarded at such a trial. The principle earlier referred to whereby the law prefers facts to prophecies can have no application for what has to be assessed is the value as at 1979 or 1980 of the lost chance to litigate and the first appellant's condition after 1979 or 1980 is clearly irrelevant to that assessment. The evidence seems to have been received because it was assumed that the learned trial judge's task was to award the first appellant damages for his personal injuries assessed as at the date of the trial before him. At any rate no argument was addressed to us on the appeal to suggest any other basis for the receipt of the evidence."

11. Although the other members of the court, Kaye and Murphy JJ., joined with the Chief Justice in upholding the respondent's appeal on the ground that the trial judge had wrongly assessed damages as at the date of the hearing before him, it is not apparent that their Honours would have rejected in its entirety evidence concerning Mr. Nikolaou's condition from 1980 onwards. Furthermore, it is necessary to speak of the date when the cause of action against the solicitors arose rather than the notional date of trial of the action against the Incorporated Nominal Defendant because the damage flowing from the negligence of the solicitors crystallized at that date. What has to be assessed as at that date is the value of the claim which was lost by the negligence of the solicitors. In so far as that assessment has to pay regard to the injuries received by Mr. Nikolaou in the accident and their effect upon him, there is no reason why evidence relating to those matters, subject to their having been foreseeable as likely losses at the date when the cause of action against the solicitors arose, should be excluded by the trial judge. To borrow the words of Lord MacNaghten in Bwllfa and Merthyr Dare Steam Collieries (1891) v. Pontypridd Waterworks Company (1903) AC 426, at p 431:

"Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?"

The evidence would have been received for the purpose of assessing what the appellant had lost, not to determine the amount to which he was entitled had his claim against the respondent been for damages for personal injuries.

12. Nevertheless, the fact remains that the trial judge assessed damages on a wrong footing. For reasons which are set out in some detail in Johnson v. Perez and Creed v. Perez, his Honour should first have focused on Mr. Nikolaou's situation when his claim for damages for personal injuries became statute barred. He should have assessed damages by reference to the loss at that date of the right to claim damages. That loss would ordinarily be quantified by the trial judge taking a broad brush approach to the several matters that in a particular case may require to be resolved - the likely date when in the absence of the negligence of the solicitor the action would have come to trial, the evidence that would or should have been available to the plaintiff at that time, the relevant principles of law then governing the assessment of damages, the question of contributory negligence, and (an issue which would not be a problem in the present case) the prospects of any judgment given in favour of the plaintiff being satisfied - in order to arrive at a figure representing the loss suffered by the plaintiff when his action against the defendant was dismissed. In accordance with the reasons of Wilson, Toohey and Gaudron JJ. in Johnson v. Perez and Creed v. Perez, the assessment of that loss will have regard to the prospect that Mr. Nikolaou would have received statutory interest against the Incorporated Nominal Defendant for the period between the notional date of the issue of the writ against that body and the date on which the cause of action against the solicitors arose.

13. The particular circumstances of this case would then have required his Honour to consider whether to make an award in consideration of Mr. Nikolaou's claim to have suffered, by reason of the respondent's negligence, "inconvenience and discomfort and exacerbation, aggravation and acceleration of the psychiatric injuries suffered as a result of the happening of the said collision ...".

14. In the result, we think the Full Court was right to order a new trial limited to the question of damages. The appeal should be dismissed.

BRENNAN J. The facts of this case are set out in the preceding judgments. There is no doubt but that the appellant plaintiff would have succeeded if an action for damages for personal injuries had been brought. It was common ground that, allowing for the plaintiff's contributory negligence, he would have recovered 75% of the damages which would have been assessed had such an action been brought to trial. At the time when the plaintiff should have received compensation for his original injury (that is, in late 1979 or early 1980) it was foreseeable, but not probable, that the plaintiff might become disabled in the future by reason of a psychiatric condition caused by the accident. In the event, he became psychiatrically disabled, but not until 1981. He has not worked since that time. The amount of compensation which the plaintiff would have received but for the solicitors' negligence is the amount which would have been awarded if the action had been tried in late 1979 or early 1980. At that time, some allowance would have been made for the possibility of psychiatric disability but the allowance would have fallen short of the amount appropriate to compensate the plaintiff for the psychiatric disability which actually afflicted him in 1981. Evidence of what occurred after early 1980 is immaterial to the ascertainment of the amount of compensation which would have been assessed had an action for damages for personal injuries been tried or compromised in late 1979 or early 1980. In assessing damages for personal injury, a court may have regard to actual events which were mere contingencies when the cause of action accrued, but that principle has no application to the ascertainment of the amount which a court would have awarded if damages had been assessed before the event occurred.

2. For the reasons I have given in Johnson and Others v. Perez; Creed v. Perez, the assessment of damages against a negligent solicitor cannot leave out of account the effect on a plaintiff of delay in receiving compensation at the time when the plaintiff would have received it but for the solicitor's negligence. For the reasons given, it is possible in some cases to compensate the plaintiff for that delay by awarding an amount equal to a present assessment of his damages for personal injury. But that approach assumes that the earlier assessment would have allowed full compensation for events occurring after the postulated date of the earlier award. That assumption cannot be made in the present case. The onset of a totally disabling psychiatric condition would not have been foreseen and would not have been fully allowed for in an assessment made in late 1979 or early 1980. Therefore a present assessment of compensation for the plaintiff's personal injuries was an incorrect basis on which to assess the plaintiff's damages against the defendant solicitors. Yet the learned trial judge assessed the plaintiff's damages in an amount equal to a present assessment of his damages for personal injury, attributing the greater part of that amount to the psychiatric disability which befell the plaintiff after the time when an action for damages for personal injuries would have been tried.

3. If the total psychiatric disability had been caused by delay in bringing the plaintiff's claim for personal injuries to finality, the damages to be awarded against the solicitors for negligence would properly include an amount in respect of the disability caused by the delay. In that case, a present assessment might have yielded the appropriate global amount to be awarded in this action. That was the situation, as I saw it, in Johnson and Others v. Perez; Creed v. Perez. But it is not the situation here. The learned trial judge examined the possible causes of the disability presented by the evidence. Delay in the prosecution of a claim for compensation was not one of them.

4. As a present assessment was not a correct basis on which to assess the damages in this case, the Full Court was correct to order a retrial limited to assessment of damages. On the new trial, damages should be reassessed in accordance with the principles stated in Johnson and Others v. Perez; Creed v. Perez.

5. The appeal must be dismissed.

DEANE J. This appeal, like those in Johnson v. Perez and Creed v. Perez (unreported, December 1988), relates to the loss of a cause of action for damages for personal injury by reason of negligence on the part of the injured person's solicitor. In the Perez Cases, the actions against the original tortfeasors had been dismissed for want of prosecution. In this appeal, an action against the Incorporated Nominal Defendant for damages for personal injury sustained by the appellant as a result of the negligence of the unidentified driver of another motor vehicle was not commenced within the period allowed by the Limitation of Actions Act 1958 (Vic.). It is common ground that the appellant was guilty of contributory negligence and that responsibility for his injury should be apportioned between the unidentified driver and the appellant in the respective proportions of 75 per centum and 25 per centum.

2. The immediate question involved in the appeal is whether the learned trial judge (Judge Harris) was correct in assessing the value of the lost "right to take proceedings (against the Nominal Defendant) for personal injury" as at the date of the hearing before him rather than as at the date when the action for personal injury against the Nominal Defendant would probably have been heard if the respondent solicitors had acted with due diligence. In acting on that basis, his Honour acted in accordance with the views expressed by Miles J. in Vulic v. Bilinsky (1983) 2 NSWLR 472 and of Beach J. in Wendleman v. Worland (Supreme Court of Victoria, unreported, 9 July 1985). For the reasons given in my judgment in the Perez Cases, I consider that the approach adopted by Judge Harris at first instance was correct. It follows that I consider that the respondent's cross-appeal to the Full Court of the Supreme Court of Victoria should have been dismissed.

3. Accordingly, I would uphold the appeal and set aside the judgment and orders of the Full Court of the Supreme Court. In view of the appellant's submission that there are some outstanding matters raised by his appeal to the Full Court of the Supreme Court, I would order that the matter be remitted to that court for further hearing.

Orders

Appeal dismissed with costs.