Pettersen v Bacha

[1995] HCATrans 300

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S37 of 1995

B e t w e e n -

GINA THERESE PETTERSEN

Applicant

and

VINCENT BACHA by his tutor LILA BACHA

Respondent

Application for special leave to appeal

BRENNAN CJ
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 OCTOBER 1995, AT 12.28 PM

Copyright in the High Court of Australia

MR C.T. BARRY, QC:  May it please the Court, in this matter I appear with my learned friend, MR M.H. BAIRD, for the applicant.  (instructed by R.J. Walters, NSW Insurance Ministerial Corporation)

MR A.S. MORRISON, SC:   If your Honours please, I appear with my learned friend, MR D.J. HOOKE, for the respondent.  (instructed by Stacks ‑ the Law Firm, with Goudkamp Mahony)

BRENNAN CJ:   This was a case where there was a compromise agreement in relation to damages.

MR BARRY:   That is so.

BRENNAN CJ:   Not on the footing of contributory negligence but on, I take it, a compromise as to the risks of litigation.

MR BARRY:   Yes.  The amount of the compromise was 32 per cent.  The respondent was 21 months old at the time of the accident.  I was not in the case either at first instance or in the Court of Appeal but I understand that he was run over by a motor car near his home and there was a considerable issue on whether there was any liability in the defendant, and the parties agreed that the defendant be held liable but there be a reduction of 32 per cent to account for, as your Honour correctly puts it, the risks of litigation.

BRENNAN CJ:   The question then arises as to the meaning and operation of the terms of the compromise.

MR BARRY:   No, your Honour - I withdraw that.  That must, with respect, be right in part.

BRENNAN CJ:   What special leave point could possibly arise on that basis?

MR BARRY:   This, that the approach taken by the Court of Appeal was that the component for fund management should be dealt with without any reduction of the 32 per cent.

BRENNAN CJ:   That must depend upon the terms of the compromise.

MR BARRY:   The compromise was, as recorded, that whatever damages the respondent is entitled to be subject to a 32 per cent reduction.

BRENNAN CJ:   Well, that is a question of the terms of the compromise.  It has nothing to do with the Contributory Negligence Act.

MR BARRY:   No, there was no issue of contributory negligence in the case.

BRENNAN CJ:   How can this be a special leave case?

MR BARRY:   For this reason, that if the Court of Appeal is correct, then there never can be a discounting of the award for fund management.  That is always awarded on an undiscounted basis, whether the parties have agreed or whether the court makes a finding, for example, of contributory negligence or otherwise.

BRENNAN CJ:   That may depend upon the operation of the Contributory Negligence Act.

MR BARRY:   The operation of the Act is a reduction in accordance with Pennington v Norris, a percentage of the amount that is awarded.

BRENNAN CJ:   That is right, according to the degree of fault.  It does not arise in this case.

MR BARRY:   Our submission is that it does to the extent that the court has correctly recorded in the judgment what the agreement was between the parties.

BRENNAN CJ:   You can see the difficulties you face.

MR BARRY:   May I indicate, your Honours, that in my submission the trial at first instance and on appeal proceeded upon the basis identified in the first paragraph of the trial judge’s judgment which is at page 1 of the application book.  That simply records the mechanism by which there was an agreement, and no more.

McHUGH J:   I appreciate that, but it is not a case that gets off the ground.  It has nothing to do with contributory negligence or reduction for contributory negligence.

MR BARRY:   The point is not one that relates to contributory negligence.  The point is one that relates to whether or not the amount of an award for fund management ought to be discounted, as with all other heads of damage, or whether it ought to be treated as a separate category.

BRENNAN CJ:   The proposition must be this:  assuming that fund management is a head of damage, did this agreement require it to be discounted.

MR BARRY:   Yes, your Honour.

BRENNAN CJ:   That depends on ‑ ‑ ‑

MR BARRY:   Because - with respect, it must be circular, but the reason is because it is a head of damage.

GAUDRON J:   But may that not depend on how it is calculated.  If it is calculated by reference to the size of the fund to be managed then it is brought into account in any event, without further discount.  If it is not, if it is calculated, say, on a flat fee regardless, then that is a different question.

MR BARRY:   There are three possible ways in which it could be done.  The first is by treating it as an ordinary head of damage and assessing the whole of the damages, irrespective of whatever was agreed between the parties or, in the case of contributory negligence found, then applying the discount and producing a judgment based on that.  The second basis would be to quantify all the heads of damage, apply whatever the discount is, whether it be by agreement or contributory negligence, and then not discount the fund management figure, then calculate it on that or, the third would be to do the second exercise and then discount again by whatever the amount was that was agreed or found.  Our submission is that the first is the correct approach.

McHUGH J:   But surely this very special head of damages is to compensate the plaintiff for looking after the sum of money which the plaintiff is awarded and therefore you determine what the plaintiff is entitled to first and then you look at the management fee.  Could there be any other rational view of it?

MR BARRY:   If that view is adopted then there would then be, in our submission, a discounting of the result that is achieved when one comes to that head of damage.

McHUGH J:   Not at all.  It is a special head of damage which the court imposes on defendants because the defendant is obliged to pay other general and special damages.  It is sui generis.

MR BARRY:   That was the view that the Court of Appeal took and that was the approach that they took and our submission is that that is wrong, as a matter of principle, because that is not the nature of the award.  But, your Honours, there is nothing more that I can say in relation to that part of the application.

The second question relates to the correct approach to life expectancy.  Our point in relation to that is this, that the trial judge and the Court of Appeal treated the issue of life expectancy upon the basis that having heard conflicting opinions, the trial judge formed the view that the respondent would live until the age of 58, and then calculated all the damages up until that age.  That approach necessarily involves the treatment of that matter, that is future life expectancy, as a certainty whereas our submission is that Malec v Hutton establishes the principle that, in a matter such as that, the correct approach is for there to be a determination of the probabilities, then some percentage discounting on that figure to reflect the judge’s assessment of the likelihood of that event occurring. 

May I illustrate that by putting it this way:  what we say should have happened is that faced with ranges of life expectancy of a very short period of time in the case of the respondent, up until close to a normal life expectancy, the correct approach, in our submission, would have been for the trial judge and the Court of Appeal to have said, for example, “I think the probable life expectancy is X number of years but it is necessary, in accordance with the decision of the High Court in Malec v Hutton, to allow for the fact that he may not achieve that so I assess him as having 80 per cent prospect of achieving what I think would be the probable life expectancy”.  That, in our submission, is what the court was required to do and did not and for that reason our submission is that that approach contains an error of principle which ought to be corrected, it being a matter which, of course, frequently arises.  Those, your Honours, are our submissions.

BRENNAN CJ:   We need not trouble you, Mr Morrison.

Whatever may be the law governing the allowance in damages of a fee to manage a fund of money awarded in compensation for personal injury, this case - which arises from a compromise of the issue of liability whereby the defendant accepted 68 per cent of liability - is not a suitable vehicle for considering the question of the apportionment of that head of damage.

On the second question, that of vicissitudes, the finding of the trial judge was open on the evidence as a finding of fact and there are not sufficient prospects of success on appeal to justify a grant of special leave.  Accordingly special leave will be refused.

MR MORRISON:   We seek costs, your Honour.

MR BARRY:   Nothing to say, your Honour.

BRENNAN CJ:    Special leave will be refused with costs.

AT 12.41 PM THE MATTER WAS CONCLUDED