Nominal Defendant v Gardikiotis

[1996] HCA 53

HIGH COURT OF AUSTRALIA

BRENNAN CJ, DAWSON, TOOHEY, GAUDRON, McHUGH, AND GUMMOW JJ

THE NOMINAL DEFENDANT v MARY GARDIKIOTIS

(1996) 186 CLR 49

24 April 1996

Damages—Claim for fund management fee—Causation—Principles of compensation for tortious conduct. Interest—Power to order interest under s 73 of Motor Accidents Act 1988 (NSW)—Damages awarded for non-economic loss under s 79 of Act—Whether commercial interest rates apply. Interest—Injury suffered before s 79 of Motor Accidents Act 1988 (NSW) came into force—Increase in maximum allowable damages—Date from which interest calculated. Motor Accidents Act 1988 (NSW), ss 73, 79, 80.

Headnote

Hearing

CANBERRA, 10 October 1995
#DATE 24:4:1996



Counsel for the Appellant C. T. Barry QC with
G. A. Laughton



Solicitor for the Appellant R J Walters, NSW Insurance
Ministerial Corporation



Counsel for the Respondent A. S. Morrison SC with
D. J. Hooke



Solicitors for the Respondent Stacks - The Law Firm
with Goudkamp Mahony

Orders

1. Appeal allowed.
2. Set aside paragraph 4 of the order of the New South Wales Court of Appeal.
3. Stand the matter over to enable the parties to file by consent orders giving effect to the judgment of this Court.
4. In default of the filing of consent orders within 28 days, remit the matter to the New South Wales Court of Appeal to proceed therein in accordance with the judgment of this Court.
5. The appellant pay the respondent's costs of this appeal.

Decisions

BRENNAN CJ, DAWSON, TOOHEY AND GAUDRON JJ The facts and the questions involved in this appeal are set out in the judgment of Gummow J. We agree with his Honour, substantially for the reasons he gives, that the respondent should not have been awarded damages for management of the fund constituted by the verdict which she obtained. We note that no claim was made that, as a result of her physical disabilities, the respondent will incur additional expense in managing her financial affairs. And as at present advised, we are of the view that any difficulties the respondent will experience in that regard are compensated for by the award of general damages.


2. As with the question whether an accident was the result of a defendant's negligence, the question whether a need results from an accident is essentially a question of common sense: it is not a question to be answered by application of the "but for" test(1). True it is that, but for the accident, the respondent would not have a verdict to invest and, thus, would not need assistance in its management. But it is contrary to common sense to speak of the accident causing a need for assistance in managing the fund constituted by her verdict moneys in circumstances where her intellectual abilities are not in any way impaired. It would be otherwise in the case of a plaintiff who is intellectually impaired as a result of a defendant's negligence or by reason of some pre-existing disability.


3. The other question involved in this appeal is the inclusion in the verdict of interest at commercial rates on the sum awarded pursuant to s 73 of the Motor Accidents Act 1988 (NSW) ("the Act"). As we explain in Andjelic v Marsland(2), interest should be allowed at commercial rates from the date at which the plaintiff became entitled to an award under s 79 which is usually the date of injury but which, in this case, was the date on which that section of the Act came into force(3). And as also explained in Andjelic, there should be deducted from that interest the difference between the amount awarded by the Court of Appeal under s 79 of the Act and the amount which would have been awarded immediately after the Act came into force, namely $32,000(4).


4. The appeal should be allowed. The matter should be stood over to enable the parties to agree as to the terms of the orders to be made to give effect to this judgment. If there is no agreement, the matter should be remitted to the Court of Appeal.

McHUGH J Two questions arise in this appeal:
1. Is a plaintiff entitled to damages to recover the cost of managing her verdict moneys where she lacks the capacity to manage those moneys but that lack of capacity is not the result of the defendant's negligence?
2. Did the Court of Appeal of New South Wales err in holding that the respondent "had almost a vested right to this interest (ie interest under s 73 of the Motor Accidents Act 1988 (NSW)) unless the (appellant's) last offer can be seen to be reasonable"?


The factual background
2. The respondent ("the plaintiff") was injured in a motor vehicle accident. That accident aggravated a pre-existing condition of multiple sclerosis which became incapacitating. The plaintiff obtained a verdict against the appellant ("the defendant") in the District Court of New South Wales. She successfully appealed (by cross-appeal) to the Court of Appeal against her award of damages. As a result, the plaintiff was awarded damages of $2,120,244 which included an amount of $87,926 to compensate her for fund management fees that she expects to pay to a major bank for the day-to-day management of her money.


3. The trial judge found that the "plaintiff is not brain damaged, she is a reasonably well educated girl and in fact a very impressive young lady who will not work and who will have ample time to invest her money and manage her interests". Consequently, he refused to award damages to compensate the plaintiff for the cost of fund management. But the Court of Appeal held that "where the incurring of (the) fee is a necessary, reasonable and foreseeable result of the negligence" of the defendant, the fee should be recoverable as a part of the plaintiff's damages. By "necessary", the learned judges of the Court of Appeal did not mean that the plaintiff's necessity should be the product of physical or mental disability caused by the defendant's negligence. They held that the plaintiff was entitled to damages for the cost of the service because she was not qualified "to invest such a fund without outside advice".


The first question
Principles
4. When a defendant has negligently injured a plaintiff, the common law requires the defendant to pay a money sum to the plaintiff to compensate that person for any damage that is causally connected to the defendant's negligence and that ought to have been reasonably foreseen by the defendant when the negligence occurred(5). The sum of money to be paid to the plaintiff is that sum which will put the plaintiff, so far as is possible, "in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation"(6). Consequently, when a plaintiff asserts that, but for the defendant's negligence, he or she would not have incurred a particular expense, questions of causation and reasonable foreseeability arise. Is the particular expense causally connected to the defendant's negligence? If so, ought the defendant to have reasonably foreseen that an expense of that kind might be incurred? Those questions arise in the present case. Is the expense of fund management causally connected to the negligence of the defendant? If so, was the incurring of the expense a reasonably foreseeable consequence of the defendant's negligence? If either of those questions is answered in the negative, the expense cannot be recovered from the defendant.


5. If a defendant's negligence results in the plaintiff being so mentally or physically incapacitated that she is unable to manage day-to-day tasks, the basic principles of compensation for tortious conduct entitle the plaintiff to damages both for the disability and the expense of managing those tasks. The expense is just as much a product of the defendant's negligence as is the disability. It is compensable therefore unless it is damage of a kind that a defendant could not reasonably foresee. Similarly, if a plaintiff can no longer manage her affairs with the same skill as before the accident, both the reduction in skill and any expense reasonably incurred in bringing the management of those affairs to the pre-accident level are compensable in damages. Likewise, if the defendant's negligence has aggravated a pre-existing incapacity, the plaintiff is entitled to be compensated to the extent that the aggravation has increased the incapacity and caused expense to the plaintiff.


6. Damages may therefore be awarded for the expense of managing a plaintiff's verdict moneys when the plaintiff's disabilities prevent him or her from managing those moneys and the disabilities are the foreseeable consequence of the defendant's negligence. Damages may also be awarded for the expense of investment advice where, as the result of the defendant's negligence, the plaintiff is no longer able to make adequate decisions concerning his or her own financial affairs. In both cases, damages are payable by the defendant because the expense is the necessary product of the defendant's negligence and is not the result of the free, informed and voluntary act of the plaintiff. The expenses have been brought about by the loss of the plaintiff's ability to do what that person was capable of doing before the occurrence of the tort which gives rise to the claim for compensation.


7. But a different area is reached when the plaintiff seeks damages, not for expense necessarily incurred as the result of a disability caused by the defendant's negligence, but for an expense arising merely from the size of an award of damages and the exercise of a choice by the plaintiff as to how to invest those damages. The expense of exercising that choice is not the consequence of the plaintiff's injury. It is the result of the plaintiff's decision to invest his or her money (usually in a professionally managed fund) rather than to spend it or to invest it in a fixed asset or some other form of investment. It is true that such an expense would not have been incurred but for the defendant's negligence. But the common law of Australia has rejected the "but for" test as the legal test of causation although, "applied as negative criterion of causation, (that test) has an important role to play in the resolution of the question"(7).


8. Under the common law theory of common sense causation, a free, informed and voluntary act of the plaintiff or a third party, which builds on a situation resulting from the defendant's tort and causes loss or damage to the plaintiff, negatives any causal connection between that tort and the loss or damage(8). That is so even though the act of the plaintiff or third party would not have occurred but for the defendant's tort. Consequently, unless a defendant's wrong has caused a disability that requires the plaintiff to obtain assistance in managing his or her verdict moneys, the cost of such assistance is not caused by the defendant's negligence and is not recoverable as damages from the defendant. Nor, as we shall see, is it a factor such as income tax(9) which must be taken into account if the plaintiff is to receive a full indemnity.


Previous cases
9. I have dealt with the matter as one of general principle. However, the issue is not one of first impression. Both Australian and overseas courts have awarded damages to plaintiffs to compensate them for the cost of managing verdict moneys. It is necessary, therefore, to examine the body of doctrine arising from this case law.


10. In Brindall v McDonald(10), the New South Wales Court of Appeal upheld an award of damages for the cost of fund management where the plaintiff was unable to manage her affairs as a direct result of the accident. The accident had reduced her previously low intelligence to "very low intelligence". In upholding the award, Hope JA, with whom the other members of the Court of Appeal agreed, said(11):
"There seems in principle no reason why some part at least of the costs of administering her affairs should not be included in her award. It appears that there has been such an award in South Australia and in my opinion one should be made here."


11. Brindall was extended in Chira v Savoulidis(12) where Master Allen said:
"(I)t is immaterial whether his lack of personal capacity to take advantage of the investment potential was caused by the accident".
Accordingly, Chira supported the awarding of damages for the cost of fund management whenever the plaintiff was incapable of managing his or her verdict moneys.


12. However, Chira was overruled in Treonne Wholesale Meats Pty Ltd v Shaheen(13) where the New South Wales Court of Appeal upheld an award of damages for a fee for fund management because the plaintiff had suffered brain damage and was "quite unable to manage his financial affairs". Clarke JA, with whose judgment Mahoney JA and myself agreed, applied Brindall. Clarke JA said the correct approach was(14):
"to include within the damages an allowance for fund management which reflects the probable difference between the expenditure likely to be incurred by a person who is unable to manage his affairs as a consequence of the accident in question and the expenses which as a matter of probability, would be incurred by a plaintiff whose intelligence is unimpaired and who seeks expert aid in the investment of the damages fund".
Clarke JA went on to say(15) that he was unable to accept the approach taken by Master Allen in Chira. His Honour left unresolved cases concerning persons who were "intellectually disabled prior to the accident"(16).


13. In GIO of NSW v Rosniak(17), where the plaintiff had suffered serious brain damage, the Court of Appeal allowed damages for the cost of fund management but held that there should have been no deduction by the trial judge for the expense that the plaintiff would probably have incurred in managing "so large a fund even if she was not, by reason of her brain damage, deprived of the capacity to manage it herself". The Court said(18) that the dictum of Clarke JA in Treonne "is wrong". I agreed with the judgment of Clarke JA in Treonne. But on reflection, I think that we erred in holding that the plaintiff should receive only the difference between the actual expense and the expense that would be incurred by a person "whose intelligence is unimpaired" ("the allowance").


14. The cost of fund management is not recoverable as damages from the defendant unless it is necessitated by disabilities resulting from the defendant's negligence. That being so, it must follow that if, as the result of the defendant's negligence, the plaintiff's money must be managed by others, no "allowance" should be deducted from the damages. In that situation, the plaintiff has no choice as to how he or she will use the verdict moneys. The fee for fund management is necessarily incurred as a consequence of the defendant's negligence. It is illogical, therefore, to make an "allowance" on the hypothesis that, if the plaintiff did not have the disability, he or she would or might have incurred expense in the management of verdict moneys which the plaintiff would not have had but for the disability(19). Consequently, GIO of NSW v Rosniak correctly overruled Treonne on this point.


15. In Campbell v Nangle(20), which was the South Australian case referred to by Hope JA in Brindall, the trial judge, Zelling J, stated the applicable principle as follows:
"If you injure a plaintiff so badly that he has permanent brain damage and he can neither manage the resulting fund for himself nor make any decision with regard to its management, then it is foreseeable that there is going to have to be a manager to do that for him and, with a large fund of this kind, a skilled manager whose fees must be paid for."


16. The plaintiff in that case had gross impairment of intellect, memory, sight and speech and was virtually confined to a wheelchair as the result of the accident. The Full Court of South Australia described the mental injury as "severe and permanent brain damage"(21) and upheld an award of damages for the fees payable to the Public Trustee(22) for managing the plaintiff's financial affairs. Neither the trial judge nor the Full Court, however, allowed any damages for the fees payable to an investment adviser because those expenses could be incurred by any injured plaintiff.


17. In Burford v Allan(23), the South Australian Full Court also upheld an award of damages that included a component for fund management. In that case the plaintiff was made quadriplegic by the accident, the degree of quadriplegia being described by the trial judge as "the most serious imaginable compatible with life"(24). He awarded damages of just over $5.75 million which included an amount of $230,000 for management of the verdict moneys. The defendant challenged the award on the ground that, although the plaintiff was physically disabled, she should receive an award for fund management fees payable only to the Public Trustee and only in the period before the plaintiff attained 18 years of age. On that basis, the amount for fund management would have been reduced to $92,000. The Full Court rejected this argument(25) on the ground that the plaintiff would still incur additional costs in managing the fund as a result of her disability. Whether these costs would still have resulted in an award of similar proportions to that awarded by the trial judge is not clear. But it is apparent that the Full Court accepted that an amount for fund management could be awarded only to the extent that the accident increased the cost of managing the award.


18. In Arnold v Teno(26), the Supreme Court of Canada upheld an award of damages for the expense of professional assistance in managing the verdict moneys. At the time of the accident, the plaintiff was four and a half years old. In delivering the principal judgment of the Supreme Court, Spence J said(27):
"Even if the infant plaintiff were adult and not disabled, she would need professional assistance in the management of such a large sum of money as is being awarded to her in this case. Although the management of that sum, until she is an adult, will be in the efficient hands of the Official Guardian for the Province of Ontario, she will have the whole burden of management so soon as she becomes an adult and at that time she will have to retain the services of skilled financial advisers. It is appropriate to allow an amount to cover the annual fee which will be entailed. It was Zuber JA's calculation that the award should be increased by an amount of $35,000 to provide a fund for the payment of such management fee and I am ready to accept that disposition."


19. However, it seems likely that the bulk, if not all, of this sum was needed to cover the expense of carrying out functions for the plaintiff that were necessary consequences of the defendant's negligence. In the judgment of Zuber JA to which Spence J referred, Zuber JA said(28):
"Subsequent to (the plaintiff turning 18 years old), however, the fund will have to be managed and advice sought and no doubt professional assistance will have to be engaged. At the very least someone will have to take charge of the funds and pay the attendants, housekeeper, rent, utilities, etc. Management fees of even $2,000 or $3,000 a year after (the plaintiff) reaches 18 years of age, would require a present capital sum of approximately $25,000 to $35,000."


20. In my view all the foregoing cases, except Chira and so much of Treonne as required the deduction of an "allowance", were correctly decided in accordance with the principles which I have set out in this judgment. These cases were determined on the basis that a defendant is liable in damages only for those expenses which are the consequence of the physical or mental harm that has resulted from that defendant's negligence.


21. More recently in Mandzuk v Viera; Insurance Corporation of British Columbia, Third Party(29), however, the Supreme Court of Canada in an unreserved judgment upheld an award of damages including an amount referred to as an amount for an "investment counselling fee" or a "management fee". Sopinka J, delivering the judgment of the Court, said(30):

"The issue in this appeal is whether or not in serious personal injury cases an amount for an investment counselling fee should be awarded to the plaintiff. This is essentially a question of fact in each case. The only principle that appears to be applicable is that the defendant must take the plaintiff as he finds him, including his state of intelligence. Whether this is low by reason of the injuries complained of or its natural state, a management fee or an investment counselling fee should be awarded if the plaintiff's level of intelligence is such that he is either unable to manage his affairs or lacks the acumen to invest funds awarded for future care so as to produce the requisite rate of return ...
The Court of Appeal found as a fact that the plaintiff (who was a paraplegic as a result of a motor vehicle accident but not mentally impaired) would require investment advice and awarded a figure of $40,000. While we are of the opinion that this might be somewhat high and may have included some management fee, it is not sufficiently high for this Court to interfere ...
A plaintiff seeking to recover either a management fee or an investment counselling fee should provide a factual basis to the trier of fact, including:
(i) evidence that management assistance is in fact necessary;
(ii) evidence that investment advice is in fact necessary in the circumstances;
(iii) evidence as to the cost of such services."


22. The Supreme Court appears to have drawn no distinction between investment counselling and management assistance. Nor did it draw any distinction between a plaintiff who needs advice or assistance as the direct consequence of his or her injuries and a plaintiff who does not. With great respect to the learned judges of the Supreme Court, the principle "that the defendant must take the plaintiff as he finds him" has no application in this particular branch of the law of damages. That principle applies when a court is assessing the effect of the negligence on the plaintiff's body, mind or interests; but it has nothing to say concerning how the plaintiff uses the damages that are awarded to him or her for the physical, mental and financial consequences of the defendant's negligence. Mandzuk should not be followed in this country in so far as it authorises an award of damages for the cost of managing a fund merely because the plaintiff is incapable of managing his or her verdict moneys.


The plaintiff's contention
23. The plaintiff contends that, because the law requires that the monetary value of future losses or expenses be discounted at an appropriate interest rate so as to reflect the present value of those losses or expenses, any expense involved in achieving that value must be taken into account. Consequently, the expense of fund management had to be taken into account in this case to ensure that the notional investment of her money produced a stream of income equal to the levels assumed by the Court in calculating damages. The plaintiff contends that, if the expense of fund management is not recoverable as damages, she will receive less damages than the discounting procedure assumes is fair compensation.


24. However, this contention misconceives the role of a court in awarding common law damages. Except in those cases where the plaintiff is under a legal disability, a court has no interest in what happens to the plaintiff's damages. It has a duty to assess fair compensation for all the effects, physical, mental and financial, that the defendant's negligence has had on the plaintiff. But at common law, compensation is given on a one off basis; there are no periodic payments of compensation. The court awards a single sum and enters judgment. Its role is then finished. To the inadequate extent that monetary compensation can compensate for the effects of personal injury, a court has done its duty when it makes its award of damages(31). What the plaintiff does with the verdict moneys is a matter entirely for the plaintiff.


25. In Todorovic v Waller(32), Gibbs CJ and Wilson J said:
"Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them. 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 the plaintiff to prove the injury or loss for which he seeks damages."


26. The courts make assumptions about long term interest rates and use those assumptions to determine the discount rate. The courts also make assumptions about the investment behaviour of rational investors in order to determine what present sum invested at the discount rate will fairly compensate a plaintiff for anticipated economic loss or expense. But there is no duty on a court to ensure that a plaintiff achieves a rate of interest corresponding to the discount rate or to ensure that the plaintiff invests his or her moneys in a manner that will result in the sum awarded being periodically reduced and finally exhausted at the end of the discount period. Use is made of a discount rate to assess the present value of future economic loss and expense because it is perceived to be the conceptual tool best suited to determine what is fair and reasonable compensation for that loss or expense. The discounting exercise is a hypothetical construct and does not attempt to reflect, anticipate or govern the future actions or intentions of the plaintiff. It simply attempts to determine what sum represents the present value of the anticipated losses or expenses of the plaintiff. When that sum is determined, then, subject to any allowance for the contingencies of life, the law will equate it with fair compensation for those losses or expenses, irrespective of what the plaintiff intends to do with that sum. If the plaintiff incurs expense in investing the moneys, that is the result of the plaintiff's choice. But that expense is incurred after the plaintiff has received the sum which represents fair compensation for his or her damage. The expense is therefore not a factor which must be taken into account if the plaintiff is to receive a full indemnity.


The fund management fee was not recoverable
27. The defendant's negligence has not affected the plaintiff's intellectual capacity to invest her moneys. Accordingly, the defendant is liable in damages for the expense of managing her financial affairs only to the extent, if any, that its negligence has caused expense to the plaintiff in carrying out those day-to-day financial functions that she could have performed herself but for the accident(33). The plaintiff has difficulty with her writing. She is also confined to a wheelchair. It seems likely therefore that she now incurs and will continue to incur expense in managing her financial affairs as the result of the defendant's negligence. The principles of just compensation require that she be indemnified for that expense in addition to any award of damages for her disabilities. The appeal should be allowed, but the matter should be remitted to the Court of Appeal to determine what amount of damages, if any, should be allowed for this expense.


The second question
28. The second question must be answered, Yes. For the reasons given by Gummow J and myself in Andjelic v Marsland(34), the Court of Appeal erred in holding that the respondent had almost a vested right to interest in this case unless the appellant's last offer was reasonable.


The order
29. I agree with the order proposed by Gummow J in this matter.

GUMMOW J This appeal from the New South Wales Court of Appeal was heard the same day as that in Andjelic v Marsland(35). It raises an issue as to the construction of s 73 of the Motor Accidents Act 1988 (NSW) which, it is accepted, should follow the outcome in the other appeal. In each case the same counsel appeared for the appellant and respondent respectively.


2. The trial judge (Garling DCJ) did not award interest under s 73 but a cross-appeal to the Court of Appeal was successful. The highest offer of settlement by the appellant had been $55,000. This offer had been made on the footing that the trauma suffered by the respondent had no effect on her existing condition of multiple sclerosis ("MS"), so that she could obtain no damages for aggravation to that condition. That premise proved to be false and the finding of the trial judge that the respondent was entitled to damages by reason of an exacerbation or aggravation of her pre-existing condition was upheld by the Court of Appeal (Priestley, Meagher and Sheller JJA).


3. In the Court of Appeal, the verdict in favour of the respondent of $1,531,543 was increased to $2,120,244. Order 4 of the Court of Appeal orders so provided.


4. The leading judgment in the Court of Appeal was delivered by Meagher JA. His Honour dealt with the cross-appeal against the refusal of the trial judge to award interest under s 73 by stating that, on the authorities, the respondent had "almost a vested right to this interest unless the (appellant's) last offer can be seen to be reasonable" and that the offer of $55,000 was reasonable if the premise on which it was put was sound. His Honour continued:
"But the premise was not sound, and the (appellant), being at the date of trial in possession of the (respondent's) medical evidence asserting a link between trauma and MS, should obviously have tailored an offer to suit that possibility. In my view the (respondent) should have the interest she seeks."


5. For the reasons McHugh J and I have given in the other appeal, it follows that, in my view, in reaching this conclusion, the Court of Appeal erred as to the construction and application of s 73. That aspect of this appeal should be dealt with in a corresponding manner to that in Andjelic.


6. There remains the other issue in respect of which special leave was granted. This issue is not duplicated in Andjelic. It concerns an award made in the Court of Appeal, on the respondent's cross-appeal against the refusal of the trial judge to make an allowance in assessing damages for a sum for what was identified as "fund management". Before further consideration of this aspect of the appeal, it is appropriate to say a little more concerning the facts.


7. The respondent was born on 1 June 1967. She left school in 1985 and at the time of the accident, on 25 July 1988, she was employed as a sales assistant. The trial judge found that, at that time, the respondent suffered to some degree from the condition of MS but that there was only a 30 per cent chance that her condition would have deteriorated to such an extent that she would have been confined to a wheelchair as a result of a natural progression of the disease. The accident caused the respondent to suffer an exacerbation or aggravation of her condition such that she has lost the use of her lower body to a great extent and will be confined to a wheelchair for the rest of her life.


8. The genesis of the issue with which this Court is concerned is found in the following passage of the reasons of the trial judge:
"The (respondent) claims fees for (a) financial management fund on the basis (that) she will need assistance managing a large sum of money. It is necessary for her to invest it to allow her to obtain the full benefit of these verdict moneys. The (respondent) is not brain damaged, she is a reasonably well educated girl and in fact a very impressive young lady who will not work and who will have ample time to invest her money and to manage her interests. There is some evidence she has some difficulty in writing but I cannot see how that is going to affect her management of the funds."


9. On the other hand, in the Court of Appeal Meagher JA said that the respondent would have "an enormous fund" which she would have to manage for her remaining 40 years, and continued:
"She is certainly not mentally incapacitated (although, equally, she is not a genius), but is hardly fit to invest such a fund without outside advice. She has selected a branch of Westpac (Banking Corporation) for that purpose. That, to me, seems quite reasonable. In principle, I cannot see why if a defendant's tort has generated a reasonable need in a plaintiff for fund management, and that need is reasonably foreseeable, the plaintiff is not entitled to recover a sum representing that need by way of damages. ... Westpac will charge $5,000.00 per year, and a capital sum representing such payments over forty years will be $87,926.00."
Meagher JA held that in the present circumstances the incurring of that fee was a "necessary, reasonable and foreseeable result of the negligence which led to the verdict". His Honour cited the decision of this Court in Mahony v J Kruschich (Demolitions) Pty Ltd(36). However, the Court there was dealing with the question whether the exacerbation of a tortiously inflicted injury by negligent medical treatment can be regarded as a foreseeable consequence for which the first tortfeasor is liable.


10. In this Court, the appellant challenges the proposition that the incurring of that management fee was a necessary, reasonable and foreseeable result of the negligence which led to the verdict in favour of the respondent. The appellant submits that it is a matter for the respondent to dispose of the verdict as she wishes, whether by preserving part as a capital fund to be invested and spending the rest, or investing the whole amount of the fund, or in pursuing some other course.


11. The basic question is whether an allowance of the type made by the Court of Appeal is requisite to put the respondent in the position in which she would have been if the tort had not been committed. If such an allowance was so requisite, then it would be necessary to consider, in the light of the evidence, the particular form it should take. In the view I take of this appeal, that stage is not reached.


12. A different view to that taken by the Court of Appeal in this case had been expressed earlier by Clarke JA in Treonne Wholesale Meats v Shaheen(37). With that judgment, Mahoney JA and McHugh JA had agreed. Later, in GIO of NSW v Rosniak(38), Mahoney JA referred to Treonne and continued:
"A plaintiff is to have the losses actually resulting, presently or in the future, from the defendant's default: in the relevant sense the plaintiff is to be put in the position in which she would have been had the default not occurred. Many, if not most, plaintiffs lack the appropriate skill to manage a large award. But that does not mean that, when the amount awarded is large, the management costs are to be seen as resulting from the defendant's negligence. Often, perhaps ordinarily, they will not. On the other hand, where the defendant's negligence produces a particular incapacity in the plaintiff such that, because of that capacity, her affairs must be managed for her, that I think will be usually sufficient."


13. In a line of cases in Canada, an allowance of the kind under discussion has been made where the plaintiff has been under the legal incapacity of infancy or sustained mental or physical impairment requiring management of his or her financial affairs.


14. A leading authority is the decision of the Supreme Court of Canada in Arnold v Teno(39). There the plaintiff was four years old at the date of the accident which caused a very considerable degree of mental impairment. The present respondent relies upon a statement in that case that, even if the infant plaintiff were an adult and not disabled, she would have needed professional assistance in the management of the large sum of money as was being awarded her(40).


15. However, in other Canadian decisions, the approach has been taken that, even in the case of a plaintiff suffering mental impairment by reason of the injury, an allowance for the employment of professional investment managers should not be made if the needs of the plaintiff are not complex, or advice would be available on a voluntary basis, or the award is not large, or the needs of the plaintiff might be met with the purchase of an annuity(41).


16. What, with respect, appears to have received insufficient consideration in some of these authorities is the need to find the necessary link between the need for provision of fund management costs and the negligent act of the defendant. Reference also should be made to the treatment of the subject by the Supreme Court of Canada in Mandzuk v Insurance Corporation of British Columbia(42). There, in giving the judgment of the Court, Sopinka J said:
"The issue in this appeal is whether or not in serious personal injury cases an amount for an investment counselling fee should be awarded to the plaintiff. This is essentially a question of fact in each case. The only principle that appears to be applicable is that the defendant must take the plaintiff as he finds him, including his state of intelligence. Whether this is low by reason of the injuries complained of or its natural state, a management fee or an investment counselling fee should be awarded if the plaintiff's level of intelligence is such that he is either unable to manage his affairs or lacks the acumen to invest funds awarded for future care so as to produce the requisite rate of return." (emphasis added)
I agree with what is said by McHugh J in his reasons for judgment in the present appeal as to the inapt use in this particular branch of the law of damages of the maxim that the defendant takes the plaintiff as found. Moreover, what was said in Mandzuk would not provide support for the decision reached by the Court of Appeal in this case. There has been no finding that the respondent is of such a low level of intelligence that she either is unable to manage her own affairs or that she lacks the acumen to invest the funds awarded to produce the requisite rate of return.


17. I turn now further to consider the earlier decisions in Australia.


18. In Campbell v Nangle(43), the relevant principles were stated by the trial judge (Zelling J) and in the Full Court of the South Australian Supreme Court by King CJ. Zelling J(44) referred to several unreported English decisions, including that of the Court of Appeal in Rialis v Mitchell(45), and continued(46):
"I would have thought, on general principles, that the decision of the Court of Appeal was correct. If you injure a plaintiff so badly that he has permanent brain damage and he can neither manage the resulting fund for himself nor make any decision with regard to its management, then it is foreseeable that there is going to have to be a manager to do that for him and, with a large fund of this kind, a skilled manager whose fees must be paid for."
King CJ said(47):
"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. It was not applied in the present case where the finding of the trial judge as to the capacities of the respondent to manage her affairs would leave her beyond the reach of the principle, and the Court of Appeal did not, on a fair reading of what was said, purport to differ from those findings.


19. However, the accident did aggravate her MS condition; she is confined to a wheelchair and suffers some difficulty in writing. To the significance of this I will return after brief reference to several previous decisions of the New South Wales Court of Appeal.


20. In Brindall v McDonald(48), the Court of Appeal (Hope, Samuels and McHugh JJA) was dealing with a plaintiff whose pre-injury intelligence "was of quite a low order". Her intelligence quotient after the accident and at the time of the trial was 72 or 73. Hope JA, with whom the other members of the Court agreed, said(49) that the occasion for the necessity to have someone administer her affairs was "the intellectual disability and possibly other disabilities which she suffers as a direct result of the injuries inflicted in the accident" and that there seemed in principle "no reason why some part at least of the costs of administering her affairs should not be included in her award".


21. Brindall was followed by the New South Wales Court of Appeal in Treonne Wholesale Meats v Shaheen(50). In that case, the tort caused both the intellectual disability of the plaintiff and the consequent need for assistance in the management of his affairs so that the expenditure flowing from the intellectual inability of the plaintiff to manage his affairs was a tortiously inflicted loss for which he was entitled to compensation. The judgment of the Court was delivered by Clarke JA. His Honour distinguished cases where the tortious act itself has not created the need for the cost of managing moneys recovered under the verdict. Clarke JA said, in a passage with which I respectfully agree(51):
"In that case nothing which has happened as a consequence of the accident created a need for fund management. What causes the need, if there is one, is the acquisition of a fund upon obtaining a verdict.
If a person whose capacity to manage a fund was not impaired in the accident thereafter expends moneys on the management of verdict moneys it is the verdict and not the accident which should be seen as the cause of that expenditure. To say that without the accident there would be no verdict and hence no need is, in my opinion, unhelpful for it disregards the principle that damages compensate for the losses flowing from the tort.
The principle that a defendant must take a plaintiff as he finds him extends to cover cases of aggravation of harm by a pre-existing abnormality (for example eggshell skull) and cases in which a plaintiff may have sustained an unexpectedly high loss which was difficult for the defendant to foresee: eg, the shabby millionaire - The Arpad(52). As Fleming(53) points out the two rules are distinct. One covers 'unexpected consequences' and the other 'the unexpectable cost of expected consequences': see also Nader v Urban Transit Authority(54).
But it has never been suggested that the principle operates in such a manner as to lead to the inclusion in a verdict of an amount to cover the cost of administering the fund resulting from that verdict where there was no accident caused need to incur that cost and where there was no suggestion of intellectual disability preceding the accident."


22. In GIO of NSW v Rosniak(55), Mahoney JA, in a passage part of which I have set out earlier in these reasons, followed Treonne. In Rosniak, the plaintiff was 11 years of age at the time of the tortious injury and she suffered traumatic brain damage which was irreversible. It was in those circumstances that Meagher JA(56) said that neither party challenged the correctness of the general principle that there was included as a head of damages recoverable by the plaintiff whatever reasonable fee would be paid to a manager of the damages recovered under the verdict, this being an inevitable consequence of the tortious conduct of the defendant. Rather, his Honour pointed out, the dispute between the parties concerned identification of the components of the award of damages which were to be treated as part of the "fund" which would require management. Likewise, Kirby P(57) identified the issue as being the manner of calculation of the costs of fund management, it being conceded, on the authority of Treonne, that an allowance must be made in the case for such costs.


23. In my view, neither Treonne nor Rosniak supplied authority or principle for the particular order made by the Court of Appeal in this case. Here there was no finding that the tortious act gave rise to the need to incur the cost of fund management and there was no suggestion of intellectual disability preceding or consequent upon the accident. Rather, those decisions, particularly Treonne, together with the decision of the Full Court of the South Australian Supreme Court in Campbell v Nangle(58), to which I have referred, state the applicable principles correctly and therefore with a result adverse to the respondent in the present case.


24. However, as McHugh J points out in his reasons for judgment, whilst the tortious injury has not affected the capacity of the respondent to invest her moneys, her physical state, with confinement to a wheelchair and difficulty in writing, makes it likely that some expense will be incurred, as a result of the tort, in managing her financial affairs. It is for the Court of Appeal, failing agreement by the parties, to determine what, if any, sum should be allowed for this expense.


25. The appeal should be allowed. Order 4 of the orders made by the Court of Appeal on 19 May 1994 should be set aside. However, the matter should be remitted to the Court of Appeal to determine what, if any, sum should be allowed for the expense to which I referred. It will be necessary also to implement the decision of this Court by fixing a sum in substitution for that specified in Order 4 of the orders made by the Court of Appeal.


26. The parties should have 28 days within which to bring in agreed orders to implement the decision of this Court. If this is not done, then at the expiration of that 28 days the matter should be remitted for reconsideration by the Court of Appeal in accordance with the reasons for judgment in this Court.


27. Special leave to appeal was granted by this Court upon the condition that the appellant pay the costs of the respondent in any event and that the appellant not seek to disturb the order for costs made in the Courts below.
1 March v Stramare (E and MH) Pty Ltd (1991) 171 CLR 506. See also Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 412-413, 418-419, 428; Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6, 20.
2 Unreported, High Court of Australia, 17 April 1996.
3 As with the plaintiff in Andjelic, the respondent was injured before the Act came into force.
4 At the date the Act came into force, s 79(3) set the maximum amount which might be awarded for non-economic loss at $180,000. Pursuant to s 80 of the Act, each year the Minister must make a declaration, published in the Gazette, of the amounts which are to apply for the purposes of s 79. The first such order took effect on 1 October 1990. At the date of the decision of the Court of Appeal (19 May 1994) the maximum amount recoverable was $212,000 (New South Wales Government Gazette No 104 of 24 September 1993 at 5917, effective from 1 October 1993).
5 Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound) (1961) AC 388 at 423, 425; Chapman v Hearse (1961) 106 CLR 112 at 122.
6 Livingstone v Rawyards Coal Company (1880) 5 App Cas 25 at 39.
7 March v Stramare (E and M H) Pty Ltd (1991) 171 CLR 506 at 515-516.
8 Hart and HonorE, Causation in the Law, 2nd ed (1985) at 136; Luntz, Assessment of Damages for Personal Injury and Death, 3rd ed (1990) at 121; Haber v Walker (1963) VR 339 at 358.
9 cf Williamson v Commissioner for Railways (1959) 76 WN (NSW) 648; Daniels v Anderson (1995) 37 NSWLR 438 at 581-586.
10 Unreported, 11 March 1985.
11 Brindall unreported, New South Wales Court of Appeal, 11 March 1985 at 14.
12 Unreported, Supreme Court of New South Wales, 19 November 1986 at i. (the pages of the judgment are lettered not numbered)
13 (1988) 12 NSWLR 522 at 529.
14 Treonne (1988) 12 NSWLR 522 at 528-529.
15 Treonne (1988) 12 NSWLR 522 at 529.
16 Treonne (1988) 12 NSWLR 522 at 530.
17 (1992) 27 NSWLR 665 at 695.
18 Rosniak (1992) 27 NSWLR 665 at 695.
19 Of course, a plaintiff might have received a very large verdict even if he or she had not sustained the injury or injuries that prevent the plaintiff from managing his or her affairs. But even in that class of case, it would be unjust to deduct an "allowance" when the defendant would not be required to compensate the plaintiff for the cost of the management fee if that person had not sustained the disability that made fund management a necessity.
20 (1984) 40 SASR 161 at 178.
21 Campbell (1985) 40 SASR 161 at 184.
22 Campbell (1985) 40 SASR 161 at 190-193, 200, 201.
23 (1993) 60 SASR 428.
24 Burford (1993) 60 SASR 428 at 429.
25 Burford (1993) 60 SASR 428 at 442-443.
26 (1978) 83 DLR (3d) 609.
27 Arnold (1978) 83 DLR (3d) 609 at 635-636.
28 Teno v Arnold (1976) 67 DLR (3d) 9 at 29.
29 (1988) 53 DLR (4th) 606.
30 (1988) 53 DLR (4th) 606 at 606-607.
31 See British Transport Commission v Gourley (1956) AC 185 at 197.
32 (1981) 150 CLR 402 at 412.
33 cf Campbell (1985) 40 SASR 161 at 179, 193.
34 Unreported, 17 April 1996.
35 Unreported, High Court of Australia, 17 April 1996.
36 (1985) 156 CLR 522.
37 (1988) 12 NSWLR 522 at 525.
38 (1992) 27 NSWLR 665 at 684-685.
39 (1978) 2 SCR 287; (1978) 83 DLR (3d) 609. See also Mandzuk v Insurance Corporation of British Columbia (1988) 2 SCR 650; (1988) 53 DLR (4th) 606; the decision of the Nova Scotia Supreme Court in Armstrong v Baker (1992) 111 NSR (2d) 239; and that of the Court of Appeal of British Columbia in Macdonald v Neufeld (1993) 85 BCLR (2d) 129.
40 (1978) 2 SCR 287 at 328; (1978) 83 DLR (3d) 609 at 635.
41 McLeod v Palardy (1981) 124 DLR (3d) 506, a decision of the Manitoba Court of Appeal; and Armstrong v Baker (1992) 111 NSR (2d) 239 at 254.
42 (1988) 2 SCR 650 at 650-651; (1988) 53 DLR (4th) 606 at 606-607.
43 (1984) 40 SASR 161.
44 (1984) 40 SASR 161 at 177.
45 The Times, July 17, 1984.
46 (1984) 40 SASR 161 at 178.
47 (1985) 40 SASR 161 at 192. Campbell v Nangle was followed in Mullins v Duck (1988) 2 Qd R 674, where the plaintiff was 14 months old at the time of the tortious injury causing gross permanent disabilities.
48 Unreported, New South Wales Court of Appeal, 11 March 1985 at 6.
49 Unreported, New South Wales Court of Appeal, 11 March 1985 at 14.
50 (1988) 12 NSWLR 522.
51 (1988) 12 NSWLR 522 at 529-530.
52 (1934) P 189 at 202 per Scrutton LJ.
53 The Law of Torts, 6th ed (1983) at 183.
54 (1985) 2 NSWLR 501 at 537 per McHugh JA.
55 (1992) 27 NSWLR 665 at 684-685.
56 (1992) 27 NSWLR 665 at 693-694.
57 (1992) 27 NSWLR 665 at 673.
58 (1985) 40 SASR 161.