Roads and Traffic Authority v Cremona

[2002] HCATrans 358

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S6 of 2002

B e t w e e n -

ROADS AND TRAFFIC AUTHORITY

Applicant

and

MINNA MAARIT CREMONA

Respondent

Application for special leave to appeal

McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 SEPTEMBER 2002, AT 10.54 AM

Copyright in the High Court of Australia

MR B.J. GROSS, QC:   May it please the Court, I appear with MR A. PORTHOUSE for the applicant.  (instructed by the Crown Solicitor for the State of New South Wales)

MR B.M. TOOMEY, QC:   May it please your Honours, I appear with my learned friend, MS M.A. KUMAR, for the respondent.  (instructed by Riley Gray-Spencer)

McHUGH J:   Yes, Mr Gross.

MR GROSS:   Your Honours, can I hand up three copies of what Luntz, on Assessment of Damages, has to say on the point and also a very recent decision of the Western Australian Court of Appeal ‑ ‑ ‑

McHUGH J:   This is an application for special leave to appeal; we are not going to read all this on an application ‑ ‑ ‑

MR GROSS:   I am not asking your Honours to, but there is the Western Australian Court of Appeal in Villasevil v Pickering (2001) 33 MVR 477 ‑ ‑ ‑

GUMMOW J:   Yes, but what have they done?

MR GROSS:   They have taken the directly opposite approach; they have taken the Jongen approach, which is referred to in the Court of Appeal judgment.

GUMMOW J:   So you rely on this for conflicting decisions of intermediate courts?

MR GROSS:   Yes, we do and there is reference in the footnotes to the Queensland approach is, in effect, the Jongen approach, that is, you ignore the capacity of the superannuation fund to accumulate income on a compounding basis, you just concentrate on the value of the superannuation contributions when they were being made.

McHUGH J:   Well, can I just ask you one matter.  What worries me a little in this case is that the findings of the judge – I mean, it seems a remarkable finding by the judge that you would get 11 per cent return.  This 10‑year period must have been very specially selected.  What is it, taken through the longest bull run of a market in history?  If you had taken a 20‑year figure, I think you might have got a very different result.

MR GROSS:   Your Honour, what was taken was a 10‑year average ending December 1998, as I recall, and that certainly was a high period for the reasons your Honour has given.

McHUGH J:   I mean, the market itself, historically, has only returned 8 or 9 per cent and the general view is that fund managers cannot beat the market because, among other things, they have to pay broker’s commission and then they have to pay management fees on top of that.  I mean, this is a surprising finding.

MR GROSS:   Your Honour, the case which we are putting before your Honours for consideration does not depend upon choosing 7 or 6 per cent rather than 11 per cent

McHUGH J:   But it may and, if leave were granted, we might want a lot of material going to what I have called legislative facts, just as in Todorovic.  I mean the Court, in effect, legislated an interest rate, perhaps the same thing it has to do in this field.

MR GROSS:   Your Honour, the legal question was the one which the Court of Appeal sidestepped and should have dealt with for itself.  What it said was there was expert evidence on either side, the trial judge – and therefore we – can accept one lot of expert evidence rather than the other, that is, looking at 11 per cent as against 7 per cent.  But that was not a proper way to resolve the case because the issue posed was not a matter of prediction of market rates, but rather the correct method in law for dealing with the superannuation losses.

McHUGH J:   But sooner or later in these cases the Court is going to have to select a percentage rate, is it not?

MR GROSS:   Your Honour, with respect, the Court, we would submit, would identify the legal error first and then, having done that, send the matter back for further determination and calculation once that legal error is extirpated.  We do not ask the Court to review, as it were, the economic material and come out with its own percentage.

Your Honours, the error of law is this, that the New South Wales Court of Appeal and Justice Dowd said the proper method in law is to predict the final size of the superannuation fund at maturity, including the commercial investment at compound interest rates of 11 per cent per annum.  The Jongen approach – if your Honours would just go to page 134 of the book – as Justice Anderson said is – at line 30:

I think the preferable approach in this kind of case is to leave out of account altogether any consideration of the benefits likely to be

received on maturity and actually received by the plaintiff on early termination and to have regard only for the value of what would be the employer’s contribution if the disability had not occurred, appropriately discounted for tax . . . 

This approach has the virtue of simplicity –

So the real question is, your Honours – put aside the percentages and the economic evidence – whether you are looking at the value of the contribution as made, as it would have been made had the deceased survived or the injured person not been injured, and you really have to ask, do you value by reference to the capitalisation of that predicted benefit over time, or do you, in addition, put into the calculations an inflation loaded assumption based upon past investment rates that the contributions would grow over time and, of course, that the fund would be managed so as to produce a specified commercial rate of return?  What you are really looking at is, can you add to the losses the extra benefits that a person can make from having the money they have saved from earnings – it is self-earned money in a fund managed situation and, your Honour, that is the legal question.

McHUGH J:   Yes, we need not hear you any further.  Yes, Mr Toomey.

MR TOOMEY:   Your Honours, may I just point out to you what my learned friend is seeking.  He is not seeking in his application for special leave, nor on his draft notice of appeal, any reconsideration of the interest rate.  What he is seeking is, ultimately, a declaration from this Court that you do not have regard to the ultimate benefit which the widow would have received; what you do is you give her the contributions.

McHUGH J:   Yes, the argument against you is that she then gets that and she can do what she likes with it.  She could have done with it the same as the deceased would have done with it, on the judge’s findings, or she can spend it.

MR TOOMEY:   No, with great respect, your Honour, she cannot.  That is the very point.

McHUGH J:   Why not?

MR TOOMEY:   Because this is superannuation which has special tax benefits and special allowances.

McHUGH J:   Yes.

MR TOOMEY:   She cannot do with the money in her hand – my learned friend then says in his submissions, but she can go out and earn money and use the superannuation.  Carroll v Purcell in this Court says you take no regard to what a woman earns after death, because what she earns arises out of her efforts, not out of the efforts of the deceased.  So that cannot be right.  She cannot ‑ ‑ ‑

McHUGH J:   But why can a judge not give her the benefit of any savings of the deceased through tax and so on, plus the contributions, work out a sum and give it to her and then she can do what she likes with it?

MR TOOMEY:   Well, your Honour, my learned friend in his submissions has quoted from Wynn v Ministerial Corporation in the Court of Appeal.  It appears at page 195 of the application book.  If I could just take your Honours shortly to that because, in our respectful submission, their Honours in the Court of Appeal – and it was not referred to in the High Court in Wynn – were clearly right:

“The Appellant also challenged the inclusion of the employer’s superannuation contribution for the benefit of the Plaintiff which was . . . The Judge treated the loss of this contribution as part of the Plaintiff’s loss of earnings –

which, with great respect, is what your Honour Justice McHugh is really suggesting –

With respect this was clearly incorrect.  The Plaintiff has not lost her employer’s superannuation contributions as such because they were never part of her actual earnings.  What she lost was the superannuation benefits which she would ultimately have received, but for her injuries, following her normal retirement.

And what this lady has lost is not the contributions from week to week, which she would never have seen, but the ultimate benefits, and those ultimate benefits, having regard to the taxation structure in Australia, can only be realised, and she can only be justly compensated for the loss of her husband, by getting what would have come out of superannuation.

McHUGH J:   Well, you may be right, but there are intermediate courts of appeal decisions in conflict and that is almost always a ground for the grant of special leave.  What do you say about that point?

MR TOOMEY:   Well, what I say about that, your Honour, is that there may be a very interesting question but this Court does not give judicial advice and if it be the fact that what she was entitled to was what she had lost, then your Honours would not grant leave; you would have to see some error in what was done by the Court of Appeal.  Now, if the question of principle which we pose, is correct, that she is entitled to the ultimate benefit and she cannot receive that simply by being given the contributions ‑ ‑ ‑

McHUGH J:   But the very fact that intermediate courts of appeal in two other States have taken a different view to the New South Wales Court of Appeal seems to suggest that the argument against you is not without foundation.

MR TOOMEY:   Well, your Honour, with the greatest respect to those judges, we would say it clearly is without foundation.  Now, there may be a case that comes before your Honours where the person is in our position, who says, “All I was given was the contributions, where I should have been given the ultimate benefits.”  That then would be the case on which to grant special leave, but not this case. 

Your Honours, Todorovic v Waller at page 412 and at page 463 in the judgments of Chief Justice Gibbs and Justice Wilson and of Justice Brennan, as he then was, repeat the House of Lords in British Transport Commission v Gourley.  The plaintiff is entitled to be put in the position she would have been in had the accident not have happened – in this case, the death of ‑ ‑ ‑

GUMMOW J:   Now, that probably involves some consideration of the superannuation legislation, does it not, on superannuation questions?

MR TOOMEY:   Well, your Honour, can I say this ‑ ‑ ‑

GUMMOW J:   There is not any in the Court of Appeal judgment, I do not think.

MR TOOMEY:   Well, there are some because, your Honours ‑ ‑ ‑

GUMMOW J:   I mean, if we have learnt one thing in recent months, it is that that legislation is incredibly complex and it is very hard to generalise about it.

MR TOOMEY:   Of course, and, your Honours, may I say this, the question of fact of 11 per cent or 7 per cent was decided on evidence before the court and your Honour Justice McHugh says it much have been some particular period.  That was the ten‑year Intec survey of the average return on the 37 leading funds.

McHUGH J:   Yes, I know, but if you took your starting point as 1973, the market dropped 60 per cent and it was down 50 or 60 per cent on its 1973 levels for years.

MR TOOMEY:   Yes, your Honour.  If you had taken it over 15 years, there was evidence before the court on 15 years, and the return was 11.9 per cent and the 10‑year return now is 9 per cent.

McHUGH J:   Well, that is getting close to the historical average.

MR TOOMEY:   But surely it is a matter of fact in every case as to what the evidence before the court is.  If this is to be ‑ ‑ ‑

McHUGH J:   I am not sure about this, and then there is a question of whether or not there is not an inflation component in those amounts.

MR TOOMEY:   Your Honour, with the greatest respect, none of those questions are raised by this application.

McHUGH J:   Yes, but we have to deal with it as a matter of principle.

MR TOOMEY:   Well, the matter of principle, your Honour, and the only matter of principle raised by this application is, do you get only the contributions and you go away and do what you like with them, or do you get the loss of ultimate benefit?  That is the only point of principle and, in our respectful submission, there is only one possible answer.  You cannot say to a widow, “I will give you the contributions although you cannot use them in the particularly valuable way that would have been available to your husband.”  That is what is asked to be done and that must be wrong, and that is the only point before your Honours.

McHUGH J:   Well, I am not sure about that.  The other side of the coin is that she now gets the present value of that benefit and, if necessary, or if she wants to, she can then invest that at 11 per cent on your view ‑ ‑ ‑

MR TOOMEY:   No, your Honour, she cannot.  That is the superannuation return.  There was no evidence before the court of what the ordinary investment return would be.  The point was never fought.  It was fought solely on the superannuation return and whether you did the superannuation ‑ ‑ ‑

McHUGH J:   Let it be assumed she can only put it in an ordinary fund, she can get 7 per cent, let us say, on that.

MR TOOMEY:   Yes.

McHUGH J:   And, if it is not double-counting, it gets close to it.

MR TOOMEY:   With great respect, how, your Honour?

McHUGH J:   Well, if she is going to get the present value of money invested at 11 per cent over X number of years and she gets it today and she can then go and invest it again ‑ ‑ ‑

MR TOOMEY:   But that is Gardikiotis.  She gets what she has lost and, as your Honour said in Gardikiotis ‑ ‑ ‑

McHUGH J:   She can spend it how she likes.

MR TOOMEY:   ‑ ‑ ‑ what she does with it is nothing to do with the court whatsoever.

McHUGH J:   Well, that may be right as a general proposition.  I am not sure in this field whether that is right, but anyway.

MR TOOMEY:   Well, in that case, your Honour, it would seem to us, with great respect, that you are opening the door to every case of future loss, because in every case of future loss you can say, “Well, we give this person the $500,000 on the Todorovic v Waller computation, but we know they can go out and they can invest it at 7 per cent.”  Why is it any different here?

McHUGH J:   Because we are talking about money.

MR TOOMEY:   So was I, your Honour.  Well, I can see that your Honour is not interested in hearing my arguments obviously.

McHUGH J:   Mr Toomey, withdraw that please.  That is not right.

GUMMOW J:   That is not right.

MR TOOMEY:   No, I do not mean that.  I mean, I understand that your Honours are of the view that ‑ ‑ ‑

GUMMOW J:   You may sway us on the hearing of the appeal.  That is all that has been said to you.

McHUGH J:   It would not be the first time counsel have changed my views, both on special leave applications and on appeals.  It happens all the time.

MR TOOMEY:   Your Honour, can I summarise what we say.  We say that there were two questions fought on the trial:  one, whether or not you were entitled to the ultimate benefit, and my learned friend put against me at the trial, no, you are not.  All you are entitled to is you get the contributions multiplied out on the 3 per cent table as Todorovic mandated.  He said, if I fail on that, your percentage is too high.  They were the only two points that were argued.  The trial judge said, “I consider all the competing evidence on 11 and 7 per cent.  I say 11 per cent wins.”  And I might say there was no evidence, apart from an unsourced expert evidence, to say that 7 per cent was enough.  He said you get 11 per cent and the way you do it is you take the ultimate benefit, not simply the contributions.

The Court of Appeal said, that is right, you are entitled to the ultimate benefit, and his Honour accepted expert evidence which was available to him to accept.  My learned friend comes to this Court and says you do not get the ultimate benefit; you only get Todorovic v Waller.  That is all that is raised by the draft notice of appeal and, in our respectful submission, that cannot be right.  May it please, your Honours.

McHUGH J:   Thank you.  Yes, Mr Gross, what do you say?

MR GROSS:   Your Honours, on the question of the issues posed, we would point to page 33 of the application book where Justice Dowd at line 6 says:

I reject the contention of the RTA that the decision of Anderson J in Jongen v CSR Limited (1992) ATR 81-192 where it was held that the superannuation benefits should be based on present calculations . . . I can see no basis for omitting a return on investment as proposed by the RTA.

GUMMOW J:   It was not RTA, or was it?

MR GROSS:   Well, I am reading the judgment.  We were contending that his Honour should omit return on investment or projected return on investment.  The legal issue posed by the conflict between Jongen and this case of Cremona is one which involves a choice of law.  Your Honours, if I could just very briefly point your Honours to what Justice ‑ ‑ ‑

GUMMOW J:   But it is really put against you that it is not an appropriate vehicle because of these peculiarities of the way the trial was run.

MR GROSS:   We would submit there are no peculiarities.  My friend made the point of opening the door in every case.  Every case involving assessment of damages for personal injuries is now affected by the so‑called Cremona methodology or approach and the question is, are you going to go to a market assessment and a full‑scale economic inquiry into every case, every fund ‑ ‑ ‑

McHUGH J:   Well, that is what his Honour meant by this may not be a suitable vehicle, because it may be that before this Court starts formulating principles, it ought to do it in such a case as in Todorovic, where there was a tremendous amount of evidence mounted at the trial, to raise all the issues.  This is a very narrow ground that you bring the case up on and I am not sure that it is a suitable vehicle.

MR GROSS:   Well, your Honour, we would submit it is because we have to look at what is the choice in law and the choice in law, as was said in Villasevil at page 488 at the top of the page:

The choice that was presented to the court by the opposing actuaries in Jongen’s case was between:  (a) valuing the contributions which would have been made by the employer had the plaintiff been able to keep working; and (b) valuing the loss of the anticipated end benefits that the employee might have enjoyed had he continued as a member of a fund until retirement age –

So that you are either making as the basis in law of the calculations the contributions as they go in or a projected lump sum at maturity ‑ ‑ ‑

McHUGH J:   But there are other views.  There are questions of tax, as to whether or not there is an intermediate position, that the plaintiff is entitled to the benefit of contributions plus the tax benefits and so on.

MR GROSS:   Your Honour, we would submit – with your Honour’s leave if I could just respond to that ‑ ‑ ‑

McHUGH J:   Yes.

MR GROSS:   ‑ ‑ ‑ that the incidence of tax is something that is capable of separate calculation by a court reviewing the matter in the light of this Court’s analysis of the error of law.  You have to identify what the legal approach is first before you do the calculations, but that is a matter of mathematics giving effect to the Court’s decision ‑ ‑ ‑

McHUGH J:   Yes, but in this case we have no assistance from the Court of Appeal on the legislation.  We would have to start looking it ourselves at first instance ‑ ‑ ‑

MR GROSS:   Your Honours, we submit that it is not necessary to do that because the legal error is the same legal error as has been identified in other courts, where, for example, the English approach is you must ignore, in

effect, the capacity for earnings and therefore contributions to inflate at some rate.  You really have to start with what you have now rather than make that prediction based on either economists or, alternatively, past performance of a so-called average fund over a selected period of years.  In our submission, you have to put aside that more complex and variable approach to get back to the simple approach which, of course, does not require any major calculations and where, as your Honours can see from what has been done in the other courts in other States, it is an easy simply rule‑of‑thumb calculation with no cost, delay or inconvenience.

We submit that this is an appropriate vehicle and waiting creates, could I suggest, two complications:  one, the trial courts have to struggle until a case finds its way through the appellate courts back up to here; and, secondly, we have a problem that the RTA has a cross-claim over against Capelo, the other defendant, still to be resolved, and we run the risk that there might be one method of determination of superannuation in our case and a different method in their case when we get to fight the cross‑claim through the courts.  That would be a particular injustice in the given case, because it should be the same method for both defendants.

MR TOOMEY:   Your Honour, can I just be heard on that?

McHUGH J:   You need not on that matter.

The Court is of the view that given the issues that were litigated and that are proposed to be argued on an appeal, the matter is not a suitable vehicle for the grant of special leave.  Accordingly, the application is refused.

MR TOOMEY:   Can I be heard on costs, your Honour?

McHUGH J:   You cannot oppose an order for costs, can you, Mr Gross?

MR GROSS:   No, your Honour.

MR TOOMEY:   No, your Honour.  What we ask is for indemnity costs on the application.  A Calderbank letter was given on 9 September and there have earlier in this case been offers of compromise made in 1995 and in 2000, none of which have been responded to, and the plaintiff has always exceeded the offers of compromise.

McHUGH J:   Yes, thank you.  No, the application is dismissed with costs.  There will be no special order as to the costs. 

We will adjourn the Court to reconstitute.

AT 11.19 AM THE MATTER WAS CONCLUDED