Roads and Traffic Authority v Cremona - [2001] NSWCA 338

NEW SOUTH WALES COURT OF APPEAL

CITATION: RTA v CREMONA [2001] NSWCA 338

FILE NUMBER(S):
40652/00

HEARING DATE(S): 19 September 2001
20 September 2001

JUDGMENT DATE: 16/11/2001

PARTIES:
Roads and Traffic Authority - Appellant
Minna Maarit Cremona - Respondent

JUDGMENT OF: Priestley JA Sheller JA Stein JA

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): 75/94

LOWER COURT JUDICIAL OFFICER: Dowd J

COUNSEL:
C T Barry QC/A Porthouse - Appellant
B M J Toomey QC/M Kumar - Respondent

SOLICITORS:
I V Knight - State Crown Solicitor - Appellant
Riley, Gray-Spencer - Respondent

CATCHWORDS:
DAMAGES - Compensation to Relatives Act 1897 - high income medical practitioner - damages recoverable by wife and two children

LEGISLATION CITED:
Compensation to Relatives Act 1897
Compensation to Relatives (Amendment) Act 1928 Act No 8
Administration of Justice Act 1982
Fatal Accidents Act 1846 (UK)
Repatriation Act 1920 (Cth)
Supreme Court Act 1970
Income Tax Assessment Act 1936 (Cth)

DECISION:
1 Parties to file and serve written submissions on costs by 4 pm on 27 November 2001
2 Parties to bring in Short Minutes of the orders to be made in the appeal at 9.30 am on 30 November 2001
3 Stand over the further hearing of the appeal to 9.30 am on 30 November 2001 for orders to be made.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40652/00
CL 75/94

PRIESTLEY JA
SHELLER JA
STEIN JA

ROADS AND TRAFFIC AUTHORITY v CREMONA

The respondent is the widow of Dr Louis Cremona, who died as a result of a motor accident on 28 May 1993. Dr Cremona's car collided with a truck carrying spoil from road works being carried out by the RTA (the appellant). The respondent began proceedings under the Compensation to Relatives Act 1897 (the Act) on behalf of herself and the two young children of the marriage, to recover damages against the appellant. The respondent obtained a summary judgment against the appellant in relation to liability and was awarded damages of $5,091,601.

The trial Judge found that Dr Cremona was a very successful and hard working medical practitioner whose practice produced a high income for the family. He had engaged in substance abuse for three years before successful treatment. Issues at the trial included whether the marriage would have lasted, whether Dr Cremona would have relapsed into drug use, whether his practice would have continued to expand, whether he would have acquired a partner and whether he would have moved from bulk billing to a full charging practice. Other issues included whether the respondent would remarry, and whether she would return to the workforce.

The appellant challenged the trial Judge's findings as to the growth of the practice, the appropriate vicissitudes for Dr Cremona and the respondent and the application of Supreme Court interest to the past loss. The appellant also submitted that no amount was recoverable for loss of superannuation and if it was, that the method used to calculate that loss was erroneous. The respondent filed a cross appeal, in which she claimed that the trial Judge erred in setting her dependency at 63 per cent, and in failing to include an allowance for the contingency that Dr Cremona might have changed to a full charging practice. The respondent also argued that the trial Judge erred in deducting from the damages figure the sum paid as superannuation consequent on Dr Cremona's death, contrary to s3(3)(b) of the Act.

Held: per Sheller JA, Priestley and Stein JJA agreeing:
In relation to the appeal:

The trial Judge did take account of Dr Cremona's propensity for drug dependency when calculating the discount for contingencies.
Although the trial Judge was entitled to conclude that the probability was that the marriage would survive, he should, in accordance with Malec vHutton (1990) 169 CLR 638, have measured and brought into account the chance that it might not have survived.
Given the evidence as to the respondent's emotional and fiscal independence, the trial Judge's deduction of 2 per cent for the chance of the respondent remarrying was appropriate. However, the trial Judge erred in not also applying this discount to the superannuation claim.
The method of calculating the value of the lost superannuation benefits was based on expert evidence open to be accepted.
The chance that the marriage would not survive required that the discount factor on the amount awarded for loss of superannuation entitlements should be 9 per cent in relation to the respondent's fund.
The trial Judge did not err in awarding interest on past losses under s94 of the Supreme Court Act 1970 at the rate provided by the Supreme Court Rules. Given that reference was made to Whitaker v Federal Commissioner of Taxation (1998) 82 FCR 261, the trial Judge would not have thought that this interest would be part of the respondent's taxable income.
The appellant’s submission that s3(3)(b) of the Act operates to preclude a claim for lost superannuation entitlements from the assessment of damages is contrary to both the language and intention of that section.

In relation to the cross-appeal:

The trial Judge's conclusion was consistent with s3(3)(b) of the Act. Before any consideration of deductions is made, it is necessary to determine what benefits the widow has lost. The respondent's loss was of the benefit of the matured superannuation fund, but to the extent that the fund was reduced by payments made to her, she suffered no loss. The provision does not apply to prevent that payment being taken into account in assessing damages.
The chance that Dr Cremona would abandon bulk billing should have been taken into account on the Malec v Hutton principle.
The very low degree of dependency and the failure to refer to a number of relevant matters indicated an error. The degree of dependency should be adjusted to 71 per cent, as suggested by the respondent.
The 15 per cent deduction for vicissitudes in relation to Dr Cremona was appropriate, given his history of drug abuse and stress.

Legislation

Compensation to Relatives Act 1897
Compensation to Relatives (Amendment) Act 1928 Act No 8
Administration of Justice Act 1982
Fatal Accidents Act 1846 (UK)
Repatriation Act 1920 (Cth)
Supreme Court Act 1970
Income Tax Assessment Act 1936 (Cth)

Cases Cited

Dominish v Astill [1979] 2 NSWLR 368
Horton v Byrne (1956) 30 ALJ 583 at 585
Jones v Schiffmann (1971) 124 CLR 303
Malec v Hutton (1990) 169 CLR 638
Jongen v CSR Limited (1992) ATR 81-192
Todorovic v Waller (1981) 150 CLR 402
Davies v Powell Duffryn Associated Collieries Ltd [1942] AC 601
Carrol v Purcell [1961] 107 CLR 73
Watson v Dennis [1968] 88 WN (Pt 1) (NSW) 491
Nance v British Columbia Electric Railway Company Limited [1951] AC 601
Whitaker v Commissioner of Taxation (1998) 82 FCR 261
Halvorsen Boats Pty Limited v Robinson (1993) 31 NSWLR 1
Wynn v New South Wales Insurance Ministerial Corporation (1995) 184 CLR 485
Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649
Bresatz v Przibilla (1962) 108 CLR 541
Norris v Blake [No 2] [1997] 41 NSWLR 49
Chapman v Hearse (1961) 106 CLR 112
Williamson v John I Thornycroft & Co Ltd [1940] 2 KB 658
Willis v The Commonwealth (1946) 73CLR 105
National Insurance Co of New Zealand Limited v Espagne (1961) 105 CLR 569
Paff v Speed(1961) 105 CLR 539
Todorovic v Waller [1981] 1 NSWLR 97
Parry v Cleaver [1970] AC 1
Auty v National Coal Board (1985) 1 WLR 784
Cantwell v Criminal Injuries Compensation Board, a decision of the House of Lords of 5 July 2001
Livingstone v Rawyards Coal Co (1880) 7 R (HL) 1
Mangan v Cornish [1962] 80 WN (NSW) 143
Bradburn v Great Western Railway Co (1874) LR 10 Ex 1
Stanbury v Eden (1985) 38 SASR 437
Public Trustee (WA) v Nickisson (1964) 111 CLR 500
McIntosh v Williams [1979] 2 NSWLR 543
Moran v McMahon [1985] 3 NSWLR 700
Arthur Robinson (Grafton) Pty Limited v Carter (1968) 122 CLR 649
Haines v Bendall (1991) 172 CLR 60
Marsland v Andjelic (No 2) (1993) 32 NSWLR 649
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657
Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54
Commissioner of Taxation v Northumberland Development Co Pty Ltd (1995) 59 FCR 103

ORDERS

1.Parties to file and serve written submissions on costs by 4 pm on 27 November 2001.
2.Parties to bring in Short Minutes of the orders to be made in the appeal at 9.30 am on 30 November 2001.
3.Stand over the further hearing of the appeal to 9.30 am on 30 November 2001 for orders to be made.

*******

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40652/00
CL 75/94

PRIESTLEY JA
SHELLER JA
STEIN JA
Friday, 16 November 2001

ROADS AND TRAFFIC AUTHORITY v CREMONA
Judgment

PRIESTLEY JA: I have had the benefit of reading ShellerJA’s reasons in draft. I agree with them and see no need to say anything further. I also agree with the orders he proposes.
SHELLER JA
Introduction
Minna Maarit Cremona is the widow of the late Dr Louis Cremona who died on the night of 28 May 1993 as the result of a motor accident on the F6 expressway south of Wollongong. Mrs Cremona began proceedings under the Compensation to Relatives Act 1897 (the Act) on behalf of herself and the two children of the marriage, Sarah Louise Cremona, who was born on 20 July 1989 and Alex James Cremona, who was born on 21 April 1992, to recover damages from Jose Antonio Capelo, the driver at the time in question of a tip-truck engaged in carrying spoil from road works being carried out on the expressway, and the Roads and Traffic Authority (RTA) which was undertaking and had the care, control and management of the road works.
On 7 August 1998 Mrs Cremona obtained summary judgment against the RTA on liability. On 16 October 1998 Mrs Cremona was granted leave to discontinue the proceedings against Mr Capelo. Cross-claims by each defendant against the other for indemnity remained on foot.
On 22 March 1999 the hearing of Mrs Cremona’s claim against the RTA on damages began before Dowd J. On 16 April 1999 judgment was reserved. On 20 June 2000 Dowd J delivered reasons for judgment making findings about damages which were intended to provide a basis for calculations of an amount. Certain matters were stood over for further submission. Judgments were given on 19 July 2000 and 25 July 2000. In the result Mrs Cremona was awarded the sum of $5,091,601 to be divided in the following proportions:
(a)         Mrs Cremona $4,568,061
(b)         Sarah Cremona $278,695
(c)          Alex Cremona $245,445
Mrs Cremona was also awarded costs on a party/party basis to 25 July 1995 and indemnity costs from 26 July 1995.
The RTA has appealed from his Honour’s decision and Mrs Cremona has cross-appealed.
Judgment of 20 June 2000
The motor vehicle accident occurred when Dr Cremona’s car was travelling in a north-bound lane on the expressway. The car struck the rear of a large truck driven by Mr Capelo. At the time the RTA was carrying out road works on the south-bound carriage of the expressway. These works involved stripping the road surface and loading the spoilage into trucks, including Mr Capelo’s truck, for the spoilage to be taken away.
Dr Cremona was born in Malta on 9 September 1954 and Mrs Cremona in Finland on 20 April 1964. They were married on 10 September 1988. At the date of judgment, the first child of the marriage, Sarah, was attending the local Montessori School and was doing extremely well. The second child of the marriage, Alex, also attended the school and was progressing above his age level. He was a highly motivated and articulate child.
From the time he left the University of New South Wales with an honours degree in medicine at the end of 1978 Dr Cremona had practised as a general medical practitioner. On 1 October 1985 he began practice on his own at Dapto. He held various academic and professional positions and was regarded as one of the hardest working general practitioners in New South Wales. His Maltese background enabled him to expand his clientele in the Maltese community which is significantly represented in the Wollongong/Illawarra area. He carried on an extremely high level of community and medical activity. Dowd J described in some detail the various programmes that Dr Cremona was involved with.
His Honour accepted that Dr Cremona’s medical knowledge and ethical standards were very highly spoken of. He had a very high level of patient skills and community respect. He was popular, enjoyed the confidence of his patients and commanded a range of surgical and other medical skills. Dowd J said:
“15        The overriding nature of the practice however was that of a doctor who carried out vast numbers of consultations where such consultations were clearly much shorter than the average consultation but there is no evidence that he was any less skilful than a doctor that took longer in consultation. Dr Cremona worked from very early in the morning to very late in the afternoon. The evidence showed that his waiting room was almost always fairly full with patients waiting.
16          The evidence before me showed that his patient numbers increased to more than double in the period 1986-1993 notwithstanding that he already had a very high patient load and that during almost the same period his consultation rebate from Medicare also doubled. From 1985 to 1993 the number of distinct patients approximately doubled in number as did the number of services rendered. In his practice Dr Cremona was assisted from time to time by a number of locums and assistants from 1985 until May 1993.
17          Dr Cremona’s surgery in Bann Bann Street, Dapto comprised a very large waiting room off which were two consulting rooms, one used by Dr Cremona, the other used by any other doctor who worked in the practice and was otherwise used for persons having procedures such as an ECG or where someone was ill and needed to rest and lie down.
18          There was adequate provision on the premises for a partner or employed doctor to work with Dr Cremona. The subject building had other medical professionals that could provide related medical services for Dr Cremona’s practice. Dr Cremona had a bulk billing practice as did the sixteen other doctors that carried on general medical practice in Dapto.”
Since 1987, before his marriage, Dr Cremona had engaged in substance abuse. Initially this derived from a need to ease the pain of migraine headaches. The abuse progressed from the use of heavy pain killers such as Panadeine Forte to the use of pethidine and morphine, Schedule 8 drugs in the Poisons List (s8 of the Poisons & Therapeutic Goods Act 1966), which are issued to all approved prescribing doctors for the “Doctors Bag”. It was said that he did this on a recreational basis. Ultimately the receptionist found Dr Cremona in his surgery after he had injected himself with pethidine. In December 1990 he was admitted to Wandene Private Hospital at Kogarah for assessment and treatment. This was successful. He thereupon voluntarily relinquished his approved status to prescribe Schedule 8 drugs and came under the supervision of the impaired doctors scheme. Dowd J observed that the relinquishment may have in fact amounted to no more than accepting that inevitably approval to prescribe Schedule 8 drugs would have been revoked. Pharmacists generally are notified of a doctor’s inability to prescribe addictive drugs in Schedule 8. Dowd J said this made it very difficult for the doctor to obtain such drugs. Dr Cremona neither regained nor apparently sought to regain approval to prescribe such drugs, even though he was entitled to apply after two years. Later in his reasons Dowd J dealt with the likelihood of relapse.
Dr Cremona made arrangements to reduce the incidence of income tax and in particular had a superannuation arrangement with a fund known as Scottish Amicable. He set up a proprietary company “L J Cremona Pty Ltd” of which he and his mother were directors. Mrs Cremona became a director in the last year before Dr Cremona’s death as a result of a deterioration in the health of Dr Cremona’s mother. Dr Cremona set up another company “Caldety Pty Ltd” as trustee for the Cremona Family Trust, a trust designed to employ staff of the practice and to minimise the incidence of tax.
Dr and Mrs Cremona had previously jointly owned residential premises at Kieraville outside Wollongong and had bought three quarters of an acre at Cordeaux Heights which was closer to Dapto in what was described as the “treed” area in the foothills of Mount Kembla. After Christmas 1992 construction of a dwelling on this land began. By the end of May 1993 the first floor brickwork was complete. To do this work Dr and Mrs Cremona borrowed an amount in excess of $100,000 as bridging finance. On Dr Cremona’s death, Mrs Cremona acquired full ownership of the premises.
Not surprisingly Dowd J used actuarial calculations in assessing damages. The assessment began with a consideration of the credibility of Dr Cremona and of Mrs Cremona. One issue was the likelihood that their marriage would have survived. About Dr Cremona particular matters in issue were his future intentions had he lived, his likely career path and the effect of his propensity for drug abuse. The RTA submitted that at the time of Dr Cremona’s death he was suffering from stress and over-work, and that Mrs Cremona had significantly inflated the amount of additional work that he would have undertaken and income that he would have earned at a time when Dr Cremona was endeavouring to preserve his marriage and change his ways by cutting down on hours. About Mrs Cremona a particular matter in issue was her prospects of re-marrying. Much cross-examination was directed to her credit. Mrs Cremona was said to present as someone who was very conscious of the relevance of the prospects of remarriage to the amount of damages recoverable and her evidence reflected this. Dowd J said that Mrs Cremona appeared to be going to some trouble to emphasise the matters that assisted her claim such as Dr Cremona’s diligence and competence and how difficult she was and therefore how unlikely to remarry. His Honour said:
“Notwithstanding such emphasis I do however accept that the plaintiff had, in her evidence, a present intention not to marry.”
In some respects Dowd J found that Mrs Cremona was seeking to create a more rosy picture than the reality and endeavouring to cover up the fact that she had considered Dr Cremona was “very resourceful” in obtaining drug supplies. Dowd J said:
“I consider that the weight of the plaintiff’s evidence was at all time coloured by the consciousness of the significance of her evidence on matters such as likelihood of resumption of work and likelihood of remarriage.”
The RTA submitted that Dr Cremona had been abusing drug substances covertly during the whole period of his marriage and deceiving Mrs Cremona. Even when he was finally exposed he lied to her. However, Dowd J did not accept that, once Dr Cremona had surrendered his approved status to prescribe Schedule 8 drugs, in a relatively closed area such as Dapto he would have been able, without appropriate prescribing powers, to obtain pethidine or morphine or other such medication used for abuse without being detected by the pharmacists who had been notified of the withdrawal of those prescribing powers.
Under the heading “Heads of Damages” Dowd J dealt first with contingencies. His Honour said:
“41        The plaintiff’s submission is that if you examine the various factors going to make up the usual 15% contingencies and take out strikes, unemployment and the like, the chance of Dr Cremona having unemployment was virtually nil except for a slight chance of relapse into drug dependency but contends that excluding mortality and including the possibility of drug relapse the provision should be no more than 5% and it is submitted that this is supported by Dr Cremona’s excellent health.
42          The evidence in my view is to the contrary. There is evidence that notwithstanding a habit of having little sleep ….. Dr Cremona was working very long hours, a circumstance likely to create stresses that affect health. It is clear that Dr Cremona had difficulty coping with dying patients as deposed by his solicitor Michael Campbell that primarily being as a result of being emotionally close to patients.
43          The marriage was generative of stress and was likely to continue to do so notwithstanding the adjustments that had been made but the overriding concern that I have is that someone who generates a serious level of migraine and is a poly-substance abuser over a period of four years whilst building up his substantial medical practice has a risk factor which must be taken into account when assessing vicissitudes.
44          Dr Cremona was pushing himself in his work and was likely to be suffering psychologically and had shown a propensity for drug-dependency over a significant part of his life prior to discovery. He is statistically likely to relapse because of the stresses although I will deal specifically with that likelihood of relapse under another heading. I do consider that the vicissitudes contingency factor, which I would agree ought to be low for a self employed general medical practitioner in private practice is in the particular circumstances of Dr Cremona’s history [sic], it is proper to calculate a 15% contingency factor for vicissitudes.”

Next his Honour turned to consider Mrs Cremona and the submission that the only likely vicissitude was remarriage. Notwithstanding a serious medical problem she had recently dealt with, she was otherwise in good health. Dowd J said:
“46 I accept that it is proper for a reduction from the normal vicissitudes of 15% when taking into account the normal factors of an employee which is not her circumstance and since she has a fairly wide range of skills and I consider that the proper allowance for vicissitudes is 7.5% being half of the normal contingency factor. It is submitted by the plaintiff that the children’s contingency allowance should be minimal as mortality is the only real factor and that constitutes a very small percentage. It is put by the plaintiff that leaving home and severing connection with family would be a tiny contingency.
47 The excellent performance of both children academically to this stage coming from a family with a high achievement tradition makes it unlikely that the children would not follow through and remain dependent on the parents. [H]owever to adopt a one in fifty probability that something such as a child leaving home or dropping out of school that will happen is a fairly low order of probability and it seems to me that each child should have a contingency factor of 2%”
Dowd J next considered the strength of the marriage. The RTA submitted that there were poor prospects that it would have survived and suggested, as a fact, that one marriage in three ended in divorce. There were various apparent problems in the marriage. Mrs Cremona said that the movement to Wollongong was away from her social circle and she had to make sacrifices. Dr Cremona tended to place her second after his compulsive working activities. Another factor was the deceit over his drug abuse. Mr Sam Borenstein, a consultant clinical psychologist, whom the parties had consulted, had taken the view that they had a lot of issues to resolve because Dr Cremona was not likely to change his habits. The RTA relied on Mrs Cremona’s own self description as acrimonious and a “black and white person” and that she was not particularly happy. Dowd J accepted that she was very independent and did not cohabit very well. The marriage was not necessarily always congenial. Dowd J said:
“52        It is necessary, on the other hand, to look at the fact that the parties were successfully negotiating the acquisition of a very nice new home, that they would soon have it paid off and [would] not therefore be subject to the financial pressures that very much impinge upon matrimonial accord in our society. Dr Cremona had started to have increased social and recreational activity with the plaintiff and they were spending and organising holidays together and went bushwalking.
53          The significant evidence however is that the parties had been through a most cathartic episode in the discovery of the drug taking and the acknowledgment of the final admission of the extent of the problem. Also the way in which Dr Cremona, notwithstanding spending more time with his family, continued to operate on all the evidence very efficiently in his practice. Marriage[s] are more fragile at an earlier than at a later stage and the evidence in this case leads me to the view that Dr Cremona’s attitude towards the sanctity of marriage and the obsessive success orientation of both parties means that notwithstanding the difficulties that I have outlined, I find that on the evidence the marriage was likely to survive [sic].
54          Notwithstanding the plaintiff’s colouring of her evidence I nonetheless accept that, after the difficulties which they had, the parties were better able to cohabit. As submitted by Counsel for the plaintiff, I found Dr Cathy Allen, an impressive witness, I accept her view that the marriage difficulties had been resolved. I also accept the submission that Dr [sic] Borenstein’s opinion could be relied upon when he expressed the view that the plaintiff and Dr Cremona were determined to make the marriage work.”
About the chances of Mrs Cremona’s remarriage after her husband’s death, Dowd J said:
“55 The plaintiff is a difficult forthright determined and strong willed woman who would not make an easy marriage partner. I accept that she considers that she will not re-marry and that she is unwilling to enter into another matrimonial venture. It is submitted on behalf of the plaintiff that there is a low percentage chance of remarriage particularly in the light of the highly successful high performing doctor to whom she had been married. It is unlikely that she would find someone who is able to provide as he did.”
His Honour referred to long established authority that the revived capacity of a widow to marry again has been regarded as having some value in the assessment of damage in fatal accident cases but went on to comment that almost all of the authorities related to the “home maker-breadwinner” relationship and bore little similarity to the present proceedings. After referring to Dominish v Astill (1979) 2 NSWLR 368 Dowd J said:
“60 Notwithstanding the views expressed by the plaintiff and the fact that there were two young children of the marriage and the clear difficulties the plaintiff has in working in a marriage relationship, I find that there still exist a real prospect of remarriage which the court is obliged to take into account.
61 The difficulty in this particular case is that the relationship which the plaintiff and Dr Cremona had was of an exceptionally high income earning family where both parties have a capacity to earn substantial income. Most of the normal fiscal needs were being provided for the future, particularly superannuation.”
After references to Horton v Byrne (1956) 30 ALJ 583 at 585 and Jones v Schiffmann (1971) 124 CLR 303 the trial Judge continued:
“64 The plaintiff is now thirty six and if I may delicately say is neither young nor old. It seems to me that the prospect of remarriage would be to someone of professional standing and higher income as being more likely. Nonetheless the independence of the plaintiff in fiscal and personality terms means any contribution to her future support is likely to be relatively small. I consider that a proper provision is to provide a value on her prospect of remarriage at 2% but 2% only of the loss of future economic loss only, not of the total amount of damages, and excluding superannuation.”
The submissions on future economic loss were directed to the growth of Dr Cremona’s practice and its future development. While high growth was demonstrated in the financial years of 1988 to 1993 the RTA submitted that there was little capacity to increase the amount of hours spent by Dr Cremona and in light of the stresses which he manifested in his need for more holiday time and recreation time to spend with his family it was hard to see how much more income could be earned. Specifically Dowd J rejected a report of Dr Gadiel of 9 September 1996. His Honour described as nonsense the suggestion that Dr Cremona might on advice from the Housing Insurance Corporation Professional Services Division be obliged to reconstruct his modus operandi to conform with mainstream general practice behaviour. The Housing Insurance Corporation, on the evidence, had inspected the practice and was perfectly satisfied with the way in which it was being conducted. Dowd J concluded:
“69 Notwithstanding the intensive level of the plaintiff’s work, it is however difficult to see that the plaintiff would not continue some level of growth. Senior Counsel for the plaintiff reminds the Court that Dr Cremona saw 117 patients on his last day of practice. I consider that the period of five years nominated by the plaintiff that there continue to be growth initially at a higher percentage tapering off to the end of the period but that a proper assessment of the increase for that period would be to average growth at 2% until 30 June 1998. I consider that the practice would have thereafter plateaued until Dr Cremona was aged 65 and, in accordance with the evidence before me of the Reark Research Report 1994, as to the normal practice of general practitioners I consider that he would have worked part time for the years 65 to 70 and that a proper estimate of the income earned by him in that five years would be one third of his pre-existing practice income.”
Taking account of Medicare increases and the RTA’s agreement with the calculation of $345,283 as the annualised profit for the year ended 30 June 1993 less $25,000 for superannuation contribution, Dowd J said that that figure less tax should be used as the basis for calculating past and future loss of income. This would have to be discounted in accordance with the 3% tables.
Mrs Cremona submitted that Dr Cremona was considering changing from a bulk billing practice to a full charging practice. Dowd J said:
“73 In a fairly discreet [discrete] area such as Dapto with the other sixteen doctors continuing to bulk bill in a lower socio-economic area I think it is likely [my emphasis] notwithstanding that I accept the relative price insensitivity of a change from bulk billing to a full charging practice that Dr Cremona would have continued to bulk bill. The convenience of so doing as compared with the problems of collecting fees from patients has certain offsetting advantages to the increased gross profit that would come from the charging of AMA recommended rates.” [In the original form of the reasons for judgment the word ‘likely’ where emphasised above in this quotation was ‘unlikely’. Dowd J corrected this when it was brought to his attention].
Another question was whether Dr Cremona would take on a partner in the practice. His Honour said:
“74        ……The advertisement which was admitted in evidence for someone to work in the practice and the evidence of the various witnesses including the plaintiff lead me to the view that it is likely that Dr Cremona would eventually succeed in taking a partner into his practice.
75          The partner would enable him to ease his own workload but would give the advantages of sharing of costs of the practice would bring financial benefit demonstrated by the evidence [sic]. I do not however consider that a partner would come in on a small share such as thirty percent which would mean that Dr Cremona would be earning two and one third [more] than the other partner. It is likely ultimately that another partner would build up a share of the practice and would build up the number of patients to an extent, not approaching the level of Dr Cremona but nonetheless a substantial proportion.
76          I consider that it is likely that a substantial partner would acquire a forty percent share in the practice. It may be that this would initially be at a smaller percentage and later in life a somewhat higher percentage but I consider that a forty percentage sale is a proper basis for projecting the future of the practice.”
On 19 July 2000 Dowd J gave further reasons for judgment which included the following:
“Deceased’s income after sale of 40% of practice
5             The plaintiff’s written submissions calculate a continuation of increase Dr Cremona’s earning rate and eventual plateauing of income as I have indicated in my judgment of 20 June 2000 both before and after the period of the sale of 40% of the practice.
6             It is submitted by the defendant that the judgment requires clarification as it is suggested by the defendant that in paragraph 75 I intended to show that the ‘easing of his workload’ to which I referred would have resulted in a reduction of income for Dr Cremona.
7             In order to clarify this issue and to give further reasons for the findings I made, I wish to say in support of the finding of continued growth and potential of Dr Cremona’s income level that I had intended that he would ‘ease’ his pressure with the convenience of a partner who could see patients on any day or time that he wasn’t present and who would ultimately, in some cases, permit a sharing of the patients. I intended to make it clear that as the practice premises were designed for two practitioners and that Dr Cremona would have continued but with some little easing to his workload, in a similar work fashion to what he did previously, that the benefit of the partner would have been the sharing of existing expenses and the slight increase in those expenses which is projected by the plaintiff in her submissions as set out in Exhibit W, which increase in expenses I accept.
8             My intention was and it is my finding that the taking of a partner would have given Dr Cremona the convenience of a partnership with the sharing of expenses and the possibility of slightly reducing his workload. I did not envisage nor do I find that there would have merely been a sharing of the gross expenses. Clearly two medical practitioners operating in most cases at the same time where a patient has an option in some cases to take either partner permits the reduction of some of the pressure at the end of the work day and allows for greater flexibility.
9             Partners can share house and hospital calls in some cases and can ease the workload of the other. Coordination of activity and management of the practice would permit each to have more time off without significant reduction in income.
10          My finding as expressed in paragraphs 69 and 75 was to show the benefit of the sharing of expenses which would increase his net income and that he would therefore be able to slightly reduce his gross income by such amount as to maintain the existing income. It would mean that the overall gross income of the practice would substantially increase for the benefit of both partners. It is my view that Dr Cremona would have continued a heavy schedule, but easing slightly as I have indicated to spend more time with family and to relax more.
11          The evidence that I relied on is that of Mr Forde in his report of 25 September 1996 and particular page 12, table 4 and also the evidence of Mr Johnson of Deloitte Touche Tohmatsu in his report of 18 March 1999.”
In his judgment of 20 June 2000 Dowd J said that he considered it likely that Dr Cremona would have acquired a partner within three years of the end of the 1993 financial year and that a partner would have purchased a share by 30 June 1996. In a judgment of 25 July 2000 Dowd J said that he was of the view that Dr Cremona would take a partner from 1 July 1996 but that his income would continue to increase until 1998, being a continued growth of 2 per cent and the agreed increase in Medicare fees and the plateau would then commence from 30 June 1998.
In his judgment of 20 June 2000 Dowd J said that so far as past loss was concerned this should be calculated on the basis of Dr Cremona’s not abandoning bulk billing. Thereafter it should be on the basis that Dr Cremona and his partner would continue to bulk bill and that Dr Cremona’s share of 60 percent would be of a practice which was likely to increase in gross income and that there would be a significant reduction in the shared overheads. His Honour said that interest on past losses should be calculated as provided by the Supreme Court Rules to the date of final judgment.
Dowd J next addressed the likelihood of relapse to drug abuse. Evidence adduced by the RTA and statistical evidence provided showed that there was a high risk that Dr Cremona would revert to drug abuse. His Honour rejected the evidence adduced by the RTA to the effect that there were opportunities for Dr Cremona to continue his drug abuse. He said:
“80…..The suggestion that it is easy for a doctor to conceal drug abuse requires him to collaborate with someone else or abuse his Schedule 8 prescribing powers. Dr Cremona worked, as I have said in a discreet [discrete] area with pharmacists who all would have been notified of the limitation of his prescribing powers. The possibility of continuing to abuse drug consumption is inconsistent with the high level of work he continued to carry on and the expansion of his practice. It is inconsistent with someone who not only obtained marriage counselling from Dr Borenstein but continued to seek advice from him as to stress management. Effective continued abuse would require Schedule 8 prescribing powers. He neither had those powers or sought them.”
Dowd J said that Mrs Cremona’s contention that there was no resumption of drug abuse was supported by each of the witnesses she called on this issue. His Honour said he had no basis for rejecting that evidence. He considered Mrs Cremona had made a clear case that despite the pressures and the statistical probabilities of resumption of drug abuse Dr Cremona did not resume the drug abuse and that his rehabilitation was complete. His Honour said that Dr Cremona’s failure to attend at all of the narcotic anonymous and alcoholic anonymous meetings did not detract from the fact that he did attend some of those meetings. Mrs Cremona’s expertise in drug matters would also have allowed her a considerable measure of effective supervision. In his Honour’s opinion she would not tolerate Dr Cremona’s resumption. He did not accept Dr Mattick’s evidence as applying to Dr Cremona although he did accept his general statistical evidence as to the likelihood of recidivism with drug abuse.
His Honour saw it as difficult for someone with a high profile in the Wollongong area in general practice being able to carry out any covert drug abuse without detection. He accepted the opinion of Dr Gertler, a specialist psychiatrist, that Dr Cremona was not taking drugs. That view was corroborated “by the very impressive and highly qualified witness Dr Stella Dalton”. Dowd J said:
“86        I accept the submission of the plaintiff in making this finding that the Court should rely on Malec v Hutton (1990) 169 CLR 638 at 642:
‘When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain;   if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach.’
87          Thus, I find that Dr Cremona would not have reverted to drug abuse.”
Next, Dowd J came to the superannuation claim. Section 3 of the Act, so far as presently relevant, provides as follows:
“(1) Whensoever the death of a person is caused by a wrongful act, neglect, or default, and the act, neglect, or default is such as would (if death had not ensued) have entitled the party injured to maintain an action and recover damages in respect thereof, then and in every such case the person who would have been liable if death had not ensued shall be liable to an action for damages, notwithstanding the death of the person injured, and although the death has been caused under such circumstances as amount in law to felony.
…..
(3) In assessing damages in any such action there shall not be taken into account -
(a)any sum paid or payable on the death of the deceased under any contract of insurance; or
(b)any sum paid or payable out of any superannuation, provident, or like fund, or by way of benefit from a friendly society, benefit society, or trade union; or
(c)any sum paid or payable by way of pension under:
(i)the Widows’ Pension Act 1925-1942;
(ii)the Coal and Oil Shale Mine Workers (Pensions) Act 1941-1942;
(iii)the Australian Soldiers’ Repatriation Act 1920-1943 of the Parliament of the Commonwealth;
(iv)the Widows’ Pension Act 1942-1945 of the Parliament of the Commonwealth;
(v)the Invalid and Old-age Pensions Act 1908-1945 of the Parliament of the Commonwealth;
or under any Act (Commonwealth or State) amending or replacing any such Act.”
Section 4(1) provides that the action shall be for the benefit, relevantly, of the wife and children of the deceased and shall be brought in the name of his executor.

The RTA submitted that losses due to diminished superannuation rights should not be taken into account and relied on s3(3)(b) of the Act. His Honour said that it was clear that Mrs Cremona was entitled to include in her damages the total loss of benefit from superannuation and referred to Luntz “Assessment of Damages for Personal Injury and Death” 3rd ed, para 9.5.11. Mrs Cremona submitted calculations based on an annual superannuation contribution of $25,000 by Dr Cremona and earned interest rate of 11 per cent. She submitted that no account should be taken of the payment which she had already received of $163,780 which was the superannuation fund balance at the date of Dr Cremona’s death paid to her by way of a death benefit. Dowd J held that s3(3)(b) of the Act did not preclude an assessment of damages on the full superannuation entitlement. However, he also held that after that calculation had been made, $163,780 should be deducted from the damages “in order that the plaintiff not receive the same amount of $163,780 twice”. Dowd J said:
“92        Superannuation is not a normal investment which attracts a return in the nature of interest. In addition to its tax benefits, superannuation comprises a capital growth fund in addition to any return on the funds already invested. I accept that notwithstanding the fact that Dr Cremona had not used his full superannuation entitlement in the last financial year of his life that non-contribution was based on two factors: one, that monies were largely being used, as deposed by the plaintiff, to contribute to the house building and; two, that the non-performing Scottish Amicable Fund did not make the investment worthwhile and that Dr Cremona was proposing to change from the existing superannuation fund and was trying to reduce the penalty arising from that change.
93          I consider that the RTA contention that the interest should be earned factor of 7% which, as the plaintiff’s Counsel pointed out is less than the RTA’s own evidence of three years average, is too low. The 11% calculation takes into account capital growth and investment income.
94          I consider that the methodology proposed by Geoffrey McRae for calculating superannuation is correct, that is taking the gross future superannuation entitlement and that figure be reduced to present tax and thresholds and applying present tax and thresholds. The calculations should therefore be done ignoring the payment of $163,780 as at 30 June 1993 and should be calculated on an 11% investment return on the fund annual contributions of $25,000 per annum for Dr Cremona and $8,000 per annum for the plaintiff for the financial year ending 30 June 1994 and that both the plaintiff and Dr Cremona would retire on 9 September 2019 when Dr Cremona reached the age of sixty five years. I consider that after that calculation that the credit be given for the $163,780 payment already made.”
Dowd J rejected the RTA’s contention that “the superannuation benefits should be based on present calculations”; compare Jongen v CSR Limited (1992) ATR 81-192. He also rejected RTA’s submission in reliance on Todorovic v Waller (1981) 150 CLR 402 that no future allowance should be made for inflation. His Honour said Todorovic v Waller was a decision affecting the reduction of future losses using discount tables so as to calculate a figure for present day payment.
The next question for consideration was dependency. The RTA submitted that dependency should be 55 per cent. Mrs Cremona submitted that the appropriate dependency was 82 per cent comprising 71 per cent for her, 6 per cent for Sarah and 5 per cent for Alex. She proposed that the dependency should decrease by 3 per cent from 20 July 2012 being Sarah’s 23rd birthday and by a further 2.5 per cent on 21 April 2015, Alex’s 23rd birthday. She proposed that her dependency should reduce on 9 September 2019 being Dr Cremona’s 65th birthday.
Mrs Cremona said she had no current intention of returning to work.   She had however retained her capacity to practise as a pharmacist and was skilled in regulatory affairs within the pharmaceutical industry. Dowd J accepted that she would intend to do further study but would find that the further study would inevitably lead to her re-entering the workforce on a part time basis during the high school education years of the children and that she would return to work on a part time basis comprising most of the working week once both children had entered tertiary education. His Honour said:
“98        The plaintiff has worked very hard in the practice of Dr Cremona and indeed worked until an advanced stage of her pregnancy. The plaintiff is an intelligent educated woman who is likely to work for intellectual satisfaction as much as the financial rewards. I consider that she would have re-entered the workforce on the basis that I had proposed if Dr Cremona had been alive and I do not consider that Dr Cremona’s death would have made any change to that working proposal. He was likely to be fairly busy in his practice and the substantial drive of the plaintiff would have taken her into the workforce.
99          I consider that the discount factor in superannuation is appropriately 10% for vicissitudes relating to the deceased. Notwithstanding the potential vagaries of taxation and superannuation legislation I consider that the basis for normal vicissitudes of 15% is not an appropriate figure for superannuation. I therefore find that 10% is an appropriate figure. As I have already indicated that for the plaintiff alone a figure of 7.5% is appropriate, and this should apply to her superannuation.
100        Dependency is very difficult to estimate in a high income family, it is likely that the house that Dr Cremona and the plaintiff had built would have been paid for in a short period after its completion and the normal financial pressures of a domestic household would have been reduced. To some extent both the plaintiff and Dr Cremona would have had a large disposable income and Dr Cremona was likely, as an astute investor to make further money after maximising his superannuation entitlements. I consider that it is likely that the plaintiff would have continued her superannuation entitlement at about the figure of $8,000 which was being paid from her director’s fees.
101        The plaintiff was very much involved in Dr Cremona’s practice and would inevitably seek fulfilment in using her brain and skills. The figures in Professor Luntz’s book for dependency are largely predicated on the home maker/bread winner family and do not fit comfortably in the circumstances of the present calculation. Although it is noted above that a larger component of Dr Cremona’s income would be applied to savings or investments the plaintiff and her children are entitled to claim what the deceased would have saved and ultimately left to them: Davies v Powell Duffryn Associated Collieries Ltd [1942] AC 601.
102        I accept that no deduction should be made from earnings derived by the plaintiff after the deceased’s death as held in Carroll v Purcell [1961] 107 CLR 73 but as I have indicated I consider that the plaintiff would have gone back to work and that the death of Dr Cremona would have made no difference and therefore her dependency on her [sic] would have been reduced. I consider taking into account all of the above factors that a proper dependency for the plaintiff herself is 63% which is at the lowest range in the table on p369 of Professor Luntz’ book on damages that I have referred to.
103        In relation to the children I find that in a professional family it is likely that the children will complete a tertiary education and being children of a medical practitioner a period until their 23rd birthday of each of them is appropriate. They are progressing well at school and are obviously intelligent and apply themselves even at the young age at the time of the hearing. I consider that the dependency for Sarah should be 6% as submitted by the plaintiff and 5% for Alex. I consider however that the total family dependency which comprises 74% should decrease by 4% from 20 July 2012 being Sarah’s 23rd birthday and a further 3% on 21 April 2015 being Alex’s 23rd birthday. I consider that the dependency for Sarah and Alex should both then be 2.5% as it is likely that the children would have obtained benefits and assistance from Dr Cremona even after that time.”
In summary Dowd J anticipated that the parties would carry out calculations consequent upon his findings and would address on any issues that had arisen as a result of them.
Judgment of 25 July 2000
In reasons for judgment given on 25 July 2000 Dowd J referred to exhibit W in calculating economic loss. His Honour said:
“Economic Loss Calculations
11          In accordance with the calculations set out in Exhibit W [I] find the future economic loss of $3,545,797, less vicissitudes personal to deceased at $3,013,927, therefore the value of the future dependency from date of judgment is $2,176,327.
12          It is appropriate that the sum of $2,176,327 be apportioned between the three dependents in the proportions which each dependency percentage I found bears to the total sum of the three dependants. This means that the plaintiff at 63%, Sarah at 3% and Alex at 5% produces an apportionment of 85% to the plaintiff, 8% to Sarah and 7% to Alex.
The plaintiff  $1,898,774
Sarah  $   144,087
Alex  $ 133,465
Total  $2,176,326
13          This after deducting vicissitudes for the plaintiff at 9.5% and at 2% for each of Sarah and Alex produces the following amounts:
The plaintiff  $1,718,391
Sarah  $ 141,205
Alex  $ 130,796
Total  $1,990,392
14          I find that the amount to be awarded for past loss, excluding funeral costs and trustee management fees, should include growth at 2% plus the Medicare increase and interest. I therefore find for the apportionment of past dependency as follows:
The plaintiff  $1,271,795
Sarah  $ 121,123
Alex  $ 100,936
Total  $1,493,854
15          In accordance with the calculations set out in Exhibit W, I find that the sum to be allowed for the plaintiff in her own right taking into account the vicissitudes set out in Exhibit W is the sum of $1,732,492.
Other Heads of Claim
16          The remaining heads of claim by the plaintiff are as follows: the amount of $4,896 for funeral costs, $3,667 for interest on funeral costs to 25 July 2000, $9,240 for trustee management fees and $20,840 for future trustee management fees making a total of $38,643.
17          Accordingly the total sum total payable by the defendant is set out below:
Future Economic Loss  $1,990,392
Past Loss  $1,493,854
Loss of Superannuation                  $1,732,492
Other Heads of Claim  $    38,643
Total  $5,255,381
18          The plaintiff has received interim payments totalling $1,000,000 on which interest at Court rates from date of receipt of the two payments have been calculated at $155,364. The plaintiff has already received a superannuation payment in the sum of $163,780.
Apportionment of Damages
19          Damages are calculated for past economic loss at 85% for the plaintiff, 8% for Sarah and 7% for Alex. I apportion damages for past and future economic loss, past trustee management fees, future management trustee fees less the interim payment of one million and relation interest:
The plaintiff  $1,834,822
Sarah  $ 278,695
Alex  $ 245,445
Other heads of damage payable to the plaintiff
Superannuation less payment  $1,568,712
Funeral costs & interest  $     8,563”
Grounds of Appeal and Cross-Appeal
The RTA filed an amended notice of appeal. The grounds of appeal were as follows:
“1.         His Honour erred in failing adequately to take into account, in relation to (i) the likelihood of the deceased’s earnings continuing at the same high or higher levels, (ii) the likelihood of his marriage to the plaintiff continuing, (iii) his capacity and willingness to avoid relapsing into drug abuse and (iv) his capacity to remain in medical practice:
(a)the fact that excessive stresses at work and within his marriage had driven him originally into drug addiction, and such stresses were likely to continue;
(b)the fact that the deceased enjoyed the effects of morphine abuse;
(c)as his Honour found, the deceased’s ‘propensity for drug dependency’ over a significant part of his life prior to detection;
(d)as his Honour found ‘The statistical likelihood of relapses’;
(e)as his Honour found ‘The evidence adduced by the RTA and the statistical evidence show that there was a high risk of Dr Cremona reverting to drug abuse’;
(f)as his Honour found ‘The statistical probabilities of resumption of drug abuse’.
2.            His Honour made an inadequate allowance for the risk of the deceased relapsing into morphine or other drug addiction.
2A.         His Honour erred in law by basing a finding that the deceased would not have reverted to drug abuse upon a passage which his Honour quoted from the High Court decision in Malec v JC Hutton Pty Limited (1990) 169 CLR 638, 642 that when a Court which is assessing damages is approaching events which allegedly have occurred in the past, damages are assessed on an all or nothing approach in respect of events which have or have not occurred and if the probability of an event having occurred is less than it not having occurred, it is treated as not having occurred, in that:
(a)His Honour incorrectly treated this passage as being applicable not to the proposition of whether Dr Cremona had reverted to drug abuse prior to his death, but rather whether he would have reverted to drug abuse in the future;
(b)His Honour eliminated the chance that deceased, but for the accident, would have reverted to drug abuse, from the identification and quantification of the adverse vicissitudes which potentially affected, in the future, the deceased’s career prospects and earnings as a doctor, the survival of the deceased’s marriage to the plaintiff, and the level of support which could be derived by the plaintiff and the family from the deceased’s earnings.
3.            His Honour erred in basing his conclusion that the deceased has not covertly continued to abuse morphine upon wholly inadequate reasons, in particular what his Honour found was the deceased’s inability ‘in a relatively closed area such as Dapto that he would have been able without the appropriate prescribing powers to obtain the pethidine or morphine or other such medication used for abuse without being detected by the pharmacists’, in that pharmacists beyond the Dapto area, who would not recognise the deceased, were readily accessible by the deceased.
4.            In determining whether the deceased had returned prior to his death to drug addiction, and in assessing the likelihood of future relapse into drug addiction, his Honour erred in failing to take into account the deceased’s capacity, well established on the evidence, to deceive and lie in order to maintain and conceal his drug addiction.
5.            His Honour erred in basing his conclusion that the deceased has not covertly continued to abuse morphine on the failure of the plaintiff to detect such conduct in that the deceased had previously over a period of about four years successfully concealed such conduct from the plaintiff.
6.            His Honour made an inadequate reduction of the award of damages for all adverse vicissitudes, in reducing by 15% for adverse contingencies facing the deceased, 7.5% for adverse contingencies facing the plaintiff and 2% for adverse contingencies facing each child.
7.            In considering the prospects, but for the deceased’s death, of the marriage between the plaintiff and the deceased breaking down in any event:
(a)his Honour failed to make adequate or any allowance for the general rate of breakdown of marriages within the community;
(b)his Honour failed adequately to take into account and give effect to the evidence which supported a higher risk than usual of the breakdown of the marriage between the deceased and the plaintiff;
(c)his Honour failed to give effect to his own conclusion that ‘There was a high statistical likelihood on the evidence that the marriage was at risk’:
(d)his Honour erred in concluding that ‘On the evidence the marriage was likely to survive’ when that conclusion was based on stated reasons given by his Honour which were inadequate to support such conclusion, and led to his Honour, in any event, failing to determine, and to give effect to, the full extent of the risks that the marriage would not survive.
8.            In reducing the award of damages for the plaintiff’s prospects of remarriage:
(a)his Honour erred in finding there still exists ‘a real prospect of remarriage which the Court is obliged to take into account’, yet deducting only 2%, which was a wholly inadequate reduction in the circumstances;
(b)his Honour erred in finding that the prospect of remarriage would ‘lead to someone of professional standing and high income as more likely’, but then finding ‘the independence of the plaintiff in fiscal and personality terms means any contribution to her future support is likely to be relatively small’;
(c)his Honour erred in applying the percentage prospect of remarriage to future economic loss, yet excluding superannuation from his calculation.
9.            His Honour erred in assuming a practice growth of 2% per annum in light of:
(a)the excessive stresses upon the deceased which a lesser workload had imposed upon him, with consequences to his health, his marriage and drug addiction;
(b)the deceased’s professional intentions, as expressed to the plaintiff, his treating doctors, the Medical Board doctors, and his accountant, to cut down his workload in future in order to enjoy more family and recreational time.
10.         His Honour erred in calculating losses based upon the deceased’s involvement in superannuation saving and investment, in that:
(a)his Honour erred in law in failing to apply to this aspect of the alleged losses to the deceased’s relatives (ie the plaintiff and the children) the 3% per annum discount rate required by the High Court decision in Todorovic v Waller (1991) 150 CLR 402;
(b)his Honour applied over the entire period of future loss an excessive rate of return from superannuation investments;
(bb)his Honour made no allowance for the prospect that the deceased would not invest in superannuation at the maximum level, but instead rely on non-superannuation investment opportunities.
(c)his Honour erred in law in failing to disallow the entire claim for superannuation losses, by reason of the prohibition in the Compensation to Relatives Act, s3(3)(b);
(d)his Honour failed to take into account the plaintiff’s capacity, from the investment of her verdict, to obtain the same return through superannuation investments or other fund management, as would have been obtained by the deceased if he had survived;
(e)his Honour made an inadequate discount for vicissitudes of 10% in relation to the deceased’s superannuation;
(f)his Honour erred in making allowance in the plaintiff’s favour for superannuation which was applicable not to the deceased but to the plaintiff’s own earnings from working in the deceased’s medical practice;
(g)his Honour erred in relation to the superannuation applicable to the plaintiff, in failing to take into account her capacity to use superannuation investments or other fund management from both her investment of superannuation payments in respect of her own earnings in the workforce.
(h)his Honour erred in admitting the evidence of future predictions as to inflation and anticipated investment returns.
11.         His Honour erred in failing to take into account in the defendant’s favour:
(a)the plaintiff’s revived capacity, following the deceased’s death, to re-enter the workforce, particularly in the pharmaceutical industry from which she had come;
(b)the economic value of the capacity for work which the plaintiff performed in the deceased’s practice, when that capacity for work, after the deceased’s death, continued to have economic value which the plaintiff remained able to exploit.
12.         His Honour erred in allowing an excessive percentage dependency of the plaintiff and the children upon the deceased in that:
(a)his Honour failed to take into account the plaintiff’s past and likely future contribution of her own working activities and her earnings (as an assistant to the deceased’s practice, and in the future, even if the deceased had survived, on her return to the general workforce) to the pool of money from which the benefits were derived by all members of the family;
(b)his Honour failed to adopt a reduced percentage of dependency for the past and particularly the future, as was required by the NSW Court of Appeal decision in Halvorsen Boats Pty Limited v Robinson (1993) [31 NSWLR 1], in order to reflect the past fact and future possibility (and probability) of both the plaintiff and the deceased contributing to the family pool of income, from which the entire family derived benefits;
(c)his Honour failed to take into account the statistical fact that the percentage of dependency drops substantially when the major earner in a marriage is in a high earning bracket, and where the major asset, the family home, is fully paid off.
13.         His Honour erred in making excessive allowance in the plaintiff’s favour for benefits to her from accumulated savings, including superannuation, by failing to take into account the contingency that such benefits may not be enjoyed by the plaintiff if, but for the deceased’s death in the subject accident, she had died before the deceased, this being a possibility of which his Honour failed to take account in the defendant’s favour.
14.         His Honour made an excessive allowance for interest on past losses, as the rate of interest used failed to take into account the undue profit to the plaintiff which would be created by the fact that interest payable under s94 of the Supreme Court Act would, in light of the decision of the Full Bench of the Federal Court of Australia in Whitaker v Commissioner of Taxation (1998) 82 FCR 261, not be taxable in the plaintiff’s hands.
15.         The assessment of damages by his Honour was as a whole, manifestly excessive in the circumstances.”

Mrs Cremona filed a notice of cross-appeal. The grounds were:
“4. His Honour erred in deducting from the primary damages figure the sum of $163,780 paid as superannuation consequent upon the deceased’s death, contrary to the provisions of s3(3)(b) Compensation to Relatives Act 1897.
5. His Honour erred in limiting the damages award to the plaintiff on the basis of a dependency of only 63%.
6. His Honour erred in failing to include in his assessment of damages an allowance for the contingency that the deceased might have changed from a bulk billing practice to a full charging practice.”
Mrs Cremona sought to have the damages based on a 71 per cent dependency in accordance with Exhibit W. She also sought to have damages recalculated on the basis that Dr Cremona’s change from a bulk billing practice to a full charging practice after 28 May 1993 would result in an 8.5 per cent increase in his gross fee income calculated in accordance with Exhibit W. In the alternative, she sought to have the damages recalculated to reflect an appropriate positive contingency from 28 May 1993 to reflect the possibility of his changing from a bulk billing to a full charging practice after that date.
The main questions for determination on the appeal and cross-appeal were summarised as follows:
Appeal
1.            Keep 2% practice growth from 1993 to 1998?
2.            Increase Dr Cremona’s vicissitudes from 15%?
3.            Increase plaintiff’s vicissitudes from 9.5%?
4.            Allow Supreme Court Act interest on past loss of 4%?
5.            Reduce 11% superannuation earning rate?
The RTA also submitted that nothing should have been allowed for loss of superannuation and, if anything were allowed, it should have been calculated in the way prescribed in Todorovic v Waller.
Cross-Appeal
1.            Add back $163,780 to superannuation?
2.Increase plaintiff’s dependency from 63% by a figure up to 71%?
3.Allow as a vicissitude the prospect of Dr Cremona’s abandoning bulk billing (as a percentage of $507,000 total benefit which would have arisen from abandoning bulk billing from 1998).
Damages under the Compensation to Relatives Act
As an introduction to the determination of the issues the parties have raised on the appeal and cross-appeal it is useful shortly to re-state how damages are to be assessed under the Act. In Watson v Dennis (1968) 88 WN (Pt 1) (NSW) 491 at 495 Walsh JA, with whose judgment Holmes JA agreed, quoted from the decision of the Privy Council in Nance v British Columbia Electric Railway Company Limited [1951] AC 601 and said:
“All that means is this; that you seek to reach a value for benefits which the deceased would probably have applied for the maintenance of his wife and family if he had not been killed. But, in the absence of special provision, you also have to set off against that any payments or benefits which, because of the death, are received by the wife or family.”
See also Davies v Powell Duffryn Associated Collieries Limited at 611 and Halverson Boats Pty Ltd v Robinson at 11.
One matter for consideration is the extent to which the damages recoverable by the widow should be affected by her prospects of marrying again. Such prospects have to be taken into account; Carroll v Purcell. At 79 Dixon CJ, Kitto, Taylor and Windeyer JJ distinguished between the proposition that the death of a husband will free the wife from her marital obligations and thus enable her to marry again, which must be allowed for, and the proposition that she is freed from the obligation of managing her late husband’s domestic establishment if, in fact, she be freed from this task, which may not be taken into account. Their Honours said:
“The death of one spouse inevitably results in a revived capacity in the other to remarry. This, for what it is worth in any particular case, has so long been regarded as having some value in the assessment of damages in fatal accident cases that it is profitless to debate how far the established rule is justified. But the death of one spouse does not result in a revived capacity in the other to undertake gainful employment.”
The reason is that the widow’s ability to work is always there. Many exercise it during marriage, some do not. Choice should not be confused with lack of freedom. In Jones v Schiffmann (1971) 124 CLR 303 at 308-9 Menzies J said:
“The extent to which the prospect of a particular widow marrying again will reduce the damages recoverable by her is not, however, a matter which can be governed by rules, even by imprecise rules. It is a matter for the judgment of the assessor in the circumstances of the particular case. …. It cannot be said, however, that, on the mercenary level of economic advantage, a second husband is hardly worth having. Some unquestionably are. It is not difficult to imagine a case where a widow could reasonably recover but small damages when the death of a former ‘bread winner’ – to use an opprobrious description – has been quickly followed by marriage to a man who, from his wealth, can provide much more than bread.
More, I think, cannot be said in general than that, in the assessment of her damages, a widow’s prospects of marrying must be taken into account and given such consequence as the circumstances of the particular case seem to warrant.”
In his submissions, Mr Barry QC, who appeared for the RTA, relied upon a passage in the judgment of Barwick CJ, who dissented, at 306. His Honour said:
“The question, I think, is what is the value to this widowed plaintiff of her freedom to marry. Courts are required from time to time to value the destruction of the capacity to marry where man or woman is so damaged as to have lost that capacity physically or emotionally.
Such an estimation is difficult. To place a value on the widowed plaintiff’s regained freedom to marry is no more difficult, though the task in either is undeniably formidable.”
A significant argument on the cross-appeal was whether the percentage of dependency chosen to represent the value for benefits which Dr Cremona would have applied for the maintenance of Mrs Cremona and the children was adequate.
On the appeal a large part of the RTA’s argument was directed to the alleged inadequacy of the discounts for vicissitudes. In Wynn v New South Wales Insurance Ministerial Corporation (1995) 184 CLR 485 at 497-8 Dawson, Toohey, Gaudron and Gummow JJ said:
“It is necessary to say something as to contingencies or ‘vicissitudes’. Calculation of future economic loss must take account of the various possibilities which might otherwise have affected earning capacity. The principle and the relevant considerations were identified by Barwick CJ in Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649 at 659 as follows:
‘Ill health, unemployment, road or rail accidents, wars, changes in industrial emphasis, so that industries move their location, or are superseded by new and different techniques, the onset and effect of automation and the mere daily vicissitudes of life are not adequately reflected by merely – and blindly – taking some percentage reduction of a sum which ignores them.’
It is to be remembered that a discount for contingencies or ‘vicissitudes’ is to take account of matters which might otherwise adversely affect earning capacity and as Professor Luntz notes, death apart, ‘sickness, accident, unemployment and industrial disputes are the four major contingencies which expose employees to the risk of loss of income’. Positive considerations which might have resulted in advancement and increased earnings are also to be taken into account for, as Windeyer J pointed out in Bresatz v Przibilla (1962) 108 CLR 541 at 544, ‘[a]ll ‘contingencies’ are not adverse: all ‘vicissitudes’ are not harmful’. Finally, contingencies are to be considered in terms of their likely impact on the earning capacity of the person who has been injured, not by reference to the workforce generally. Even so, the practice in New South Wales is to proceed on the basis that a 15 per cent discount is generally appropriate, subject to adjustment up or down to take account of the plaintiff’s particular circumstances.”
See also Norris v Blake [No 2] (1997) 41 NSWLR 49 at 73 where this Court in considering what it was most likely a plaintiff would earn during the rest of his working life said that the adjustment of that assessment for contingencies should include the possibility that the plaintiff might have done far better.
I observe immediately that Dr Cremona was a successful self-employed medical practitioner whose earning capacity was unlikely, subject to the possibility of a relapse to drug abuse, to be adversely affected by unemployment or industrial disputes. In Chapman v Hearse (1961) 106 CLR 112 at 114 the High Court, allowing an appeal by the executor of a deceased doctor claiming damages for the benefit of the widow and four children of the deceased, held (see p114) that the initial capital sum assessed as damages should be discounted by no more than 12½ per cent in respect of contingencies such as a falling off in income and the possibility of remarriage. “The fact that Dr Cherry was a member of a partnership of four medical practitioners in the opinion of their Honours would operate to insulate him to a considerable extent from the financial effects of sickness or accident unless permanent capacity should result.” See also Luntz paras 6.4.8 and 6.4.15. Dowd J was correct to take account of the particular circumstances of Dr Cremona and of his wife and children.
In his reasons for judgment at para 86, which I have set out, Dowd J quoted the well-known passage from Malec v Hutton dealing with the Court’s approach to events which have occurred but did not set out or refer to the passage following in the joint judgment of Deane, Gaudron and McHugh JJ at 643 where their Honours said:
“But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. The questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99.9 per cent – or very low – 0.1 per cent. But unless the chance is so low as to be regarded as speculative – say less than 1 per cent – or so high as to be practically certain – say over 99 per cent – the Court will take that chance into account in assessing the damages.”
Ground 2A of the appellant’s appeal is directed to the question of whether Dowd J failed to apply this principle particularly when considering whether Dr Cremona would have reverted to drug abuse, his career prospects had he survived and whether the marriage would have survived. It is convenient to deal with the appeal and cross-appeal under subject headings.
Drug Abuse
Dowd J rejected the RTA’s contention that Dr Cremona had reverted to drug abuse before his death. On the appeal the RTA submitted that this finding was erroneous (grounds 3, 4 and 5). A particularly important feature of drug abuse, according to the RTA, was that a consequence of relapse would or might have led to Dr Cremona’s being deregistered and unable to practice. The RTA emphasised Mrs Cremona’s warning to those admitting Dr Cremona to Wandene Private Hospital on 6 December 1990 that he was “’very resourceful’ re acquiring medication”. He had concealed his abuse, which had begun before the marriage, from Mrs Cremona. There was no reason why he could not have continued this concealment of continued drug abuse up to the date of death. There was evidence that his attendances at Narcotics Anonymous were irregular. The pressure of work continued and must have increased if the practice continued to grow. Dr Mattick in his report for the RTA of 8 May 1996 remained unconvinced that Dr Cremona was drug-free, given the lack of objective information about drug use from random regular drug urine screens. Dr Mattick said that it was unlikely that he would have maintained his very intense workload, even ignoring his drug-dependence problems. Dr Mattick gave oral evidence and was cross-examined.
Dowd J did not accept this evidence of Dr Mattick; the RTA submitted upon inadequate reasons. His Honour preferred the evidence of Dr Gertler that Dr Cremona was not taking drugs which was corroborated by “the very impressive and highly qualified witness, Dr Stella Dalton”. Nothing persuasive was put to us to support a conclusion that Dowd J’s finding on there being no relapse before death was not open to him.
Dr Dalton, in a letter of 2 September 1996, addressed herself to the following questions:
“(a)the nature of the Impaired Doctor’s Programme (1990-1993);
(b)the significance of the fact that Dr Cremona’s Medical Board assessments, in 1992 and 1993 did not require urinalysis or hair analysis;
(c)what is your general experience with doctor patients withdrawn from drug use in relation to relapse? In most cases, when is relapse most likely to occur? How frequently does relapse occur several years after a patient has withdrawn from drug use?
(d)does any significance attach to the fact that Dr Cremona remained restricted from Schedule 8 prescribing rights 2½ years after receiving treatment for his substance use?
(e)in your opinion, what was Dr Cremona’s prognosis with respect to relapse?”
Addressing these questions, Dr Dalton said:
“1Nature of the Impaired Doctors Programme (1990-1993)
The aim of the programme is to enable doctors through early intervention to continue to practise medicine while receiving treatment. It is a therapeutic programme aimed at treatment and rehabilitation. Prior to the introduction of this programme the Medical Board exercised a purely disciplinary role vis a vis impaired doctors with the result that they refrained from seeking appropriate treatment for fear of coming to the Board’s notice and by the time they entered treatment they were addicted.
Opiate and especially pethidine use is a professional hazard of the medical profession, the prime factor being availability. Accordingly, availability together with physical or psychiatric distress might through self medication give rise to pethidine use. The doctor who enters the Impaired Physicians programme uses sporadically and although sometimes dependent is very rarely addicted to opiates. The Impaired Registrants Programme guarantees that the impaired doctor stay in treatment while retaining medical registration and thus in most cases total rehabilitation can be achieved.
Conditions imposed are relevant to the particular case and vary according to its severity. These may consist of 3 to 6 monthly assessment by a Board nominated psychiatrist; ongoing treatment by the psychiatrist of the doctors choice; withdrawal of power to prescribe Schedule 8 drugs; thrice weekly or random supervised urine testing; 3 to 6 monthly attendance at the Board; regular visits to the doctor’s GP etc.
2It would appear that Dr Cremona had progressed beyond the need for routine or random urinalysis. This is evidenced by Drs Wilson and Gertler’s Reports and by that of the Board’s Assessors.
3Usually relapse occurs within the first six months. I would like to point out that physicians who have become drug dependent during their medical career almost always refrain from obtaining opiates once their Schedule 8 prescribing rights have been relinquished. Such doctors are not prone to illicit acts and once their doctors bag supply is withdrawn they tend to remain opiate free. Relapse would be extremely unlikely to occur after several years of abstaining from opiate use.
4As stated above doctors are not prone to obtain opiates illegally, accordingly it is usual for Schedule 8 restrictions to stay in force for a number of years (3 to 4) so as to reinforce the doctor’s drug free lifestyle.
5In my opinion Dr Cremona’s prognosis with respect to relapse was excellent and had he lived I would expect him to have been discharged from the Impaired Registrants Programme within a relatively short time.
I should like to point out that I have specialised and been engaged in the treatment of both drug dependant and addicted doctors for many years both as Consultant Psychiatrist in the United Kingdom (London and Sussex) and as Director of Addiction Services for the Western Metropolitan Region Sydney.
In terms of academia Professor Mattick’s report is a good study of the available literature. However it lacks the insight and understanding that can only be attained through years of clinical experience.”
Dr Dalton also gave oral evidence and was cross-examined.
Dr Gertler, in a report of 2 March 1993 said that he felt it would be extremely unlikely for Dr Cremona to again abuse Schedule 8 drugs. “He has the ongoing support of his wife, attends regular meetings of AA and NA and has other supports which he knows that he can use should the necessity arise.” In a report of 7 August 1996 Dr Gertler said:
‘My experience with general patients who have withdrawn from drug use is that relapse is frequent and is most likely to occur within six months following withdrawal from the drug and generally in fact within the first three months. My experience has been drawn from my work with drug addicts over many years; I first treated drug addicts in the United States and subsequent to my return to Australia in 1972 was involved in establishing the first Methadone clinic in Sydney. Since that time I continue to be involved in the management of persons with problems of drug abuse or drug dependence.
It is quite uncommon for relapse to occur several years after a person has withdrawn from drugs. This is especially so if regular supervision has occurred since the withdrawal.
My experience with drug dependent medical practitioner patients has been that these patients are even less likely to relapse several years after withdrawal because of the increased supervision which is in force and which in my opinion is necessary because of their responsibilities for others. I have now been involved in both the assessment and management of medical practitioner patients through my involvement with the NSW Medical Board as an assessor. I was in fact asked to become involved with such patients because of my expertise in the area. At the present time I am involved in the management of several such patients.
Dr Cremona’s prognosis with respect to drug relapse, was in my opinion very good. This was because of the factors mentioned in my report such as the ongoing support of his wife, his regular involvement with self-help groups, the control which he had regained over his practice commitments and the overall increase in stability in his life.
The impression which I formed during my assessment, was that Dr Cremona was able to cope with the demands of his practice both at the time I saw him and for the foreseeable future. I did not believe that he would have to modify his practice in any significant way; he was not compulsive in his need to work as he had obviously been previously and had instigated regular breaks from his work, both in the form of holidays as well as other methods of relaxing.”
Dr Gertler gave oral evidence.
Dr Wilson, who first saw Dr Cremona in December 1990, in a report of 6 September 1996, said that he had regard to the clinical judgment of several named sources including his own, all of whom agreed that Dr Cremona’’s prognosis was good and that he was not taking opioids between 5 December 1990 and 23 April 1993 when he was last assessed. In his oral evidence Dr Wilson was asked whether he believed that it was likely that Dr Cremona could have successfully deceived all those people including himself to whose clinical judgment he had had regard. He said: “Certainly not. That it is likely. It’s possible I suppose, but most unlikely.”

Dowd J referred to Mrs Cremona’s submission that in looking at Dr Cremona’s future earning capacity there were reasons why the “usual” 15 per cent contingency discount should be reduced to no more than 5 per cent. Mrs Cremona submitted that the chance of Dr Cremona becoming unemployed was virtually nil except for a slight chance of relapse into drug dependency but contended that excluding mortality and including the possibility of drug relapse the provision should be no more than 5 per cent. Mrs Cremona submitted that this was supported by Dr Cremona’s excellent health. In his Honour’s view the evidence was to the contrary. There was evidence that notwithstanding a habit of having little sleep Dr Cremona was working very long hours, a circumstance likely to create stresses that affected health. Dr Cremona had difficulty coping with dying patients as a result of being emotionally close to patients. The marriage was generative of stress and was likely to continue so notwithstanding the adjustments that had been made. Dowd J said:
“….the overriding concern that I have is that someone who generates a serious level of migraine and is a poly-substance abuser over a period of 4 years whilst building up his substantial medical practice has a risk factor which must be taken into account when assessing vicissitudes.
Dr Cremona was pushing himself in his work and was likely to be suffering psychologically and had shown a propensity for drug dependency over a significant part of his life prior to discovery. He is statistically likely to relapse because of the stresses although I will deal specifically with that likelihood of relapse under another heading.”
His Honour agreed that the vicissitudes contingency factor ought to be low for a self-employed general medical practitioner in private practice. However, he considered that in the particular circumstances of Dr Cremona’s history it was proper to adopt a 15 per cent contingency factor for vicissitudes.
In Moran v McMahon (1985) 3 NSWLR 700 at 706 Kirby P, speaking of the conventional discount of 15 per cent for the vicissitudes of life said:
“Why there should be any conventional discount, and why it should be 15 per cent regardless of the infinite variety of chances which may befall an injured party, has never been adequately debated.”
In Arthur Robinson (Grafton) Pty Limited v Carter at 659 Barwick CJ said:
“that the vicissitudes of life are not adequately reflected by merely – and blindly – taking some percentage reduction of a sum which ignores them. The calculation of that sum has a disarming appearance of introducing some mathematic accuracy into the assessment of the compensation.”
A conventional deduction may bring some apparent certainty into the assessment of damages in personal injury cases but it is not sacred and Dowd J’s refusal simply to adopt it without further examination cannot be validly criticised. Had Dr Cremona indeed enjoyed excellent health it was well within Dowd J’s discretion in assessing damages to fix a percentage for vicissitudes well below 15 per cent. But the trial Judge brought into account the history of drug abuse and stress as elements each of which could exacerbate the potential of the other and alone or together undermine Dr Cremona’s health. Moreover, as the RTA pointed out in its submissions a return to drug abuse might have led to Dr Cremona being de-registered and losing the source of his substantial income. Dowd J found that Dr Cremona would not have reverted to drug abuse. The evidence which the trial Judge accepted, particularly of Dr Dalton, and of the lapse of time between December 1990 when he was admitted to Wandene Private Hospital and 28 May 1993 when he was killed, during which period there had been no relapse, leads to the conclusion that the chance of relapse was slight. Moreover, the knowledge that any relapse could lead to de-registration was a powerful incentive for a man dedicated to his profession and with a wife and two young children to resist any temptation.
Inevitably, once attention has been paid to the material matters to be taken into account the choice of the particular percentage discount is a matter for the trial Judge. Opinions as to the appropriate percentage will vary and it is no part of the function of this Court to impose its views unless some error has been shown in the trial Judge’s approach. In my opinion, the 15 per cent Dowd J selected was within an appropriate range and no ground has been shown for interfering with it.
For reasons which he then gave, Dowd J said that he considered that the only vicissitude likely for Mrs Cremona was re-marriage which he fixed at 2 per cent of the loss of future economic loss excluding superannuation. Separately his Honour thought it proper “for a reduction from the normal vicissitudes of 15 per cent when taking into account the normal factors of an employee which is not her circumstance and since she has a fairly wide range of skills” to allow 7.5 per cent for vicissitudes “being half of the normal contingency factor”. For each of the children he chose 2 per cent. However, nothing was allowed for the chance that the marriage might not have survived. As I have said, it was open for Dowd J to conclude, as he did, that “the marriage was likely to survive”. But what of the chance that it might not have survived?
A countervailing factor would be that if the marriage had not survived Mrs Cremona and her two children would have had claims upon Dr Cremona’s property. These claims could have been substantial though no doubt less than a claim based upon dependency under the Act. To my mind some discount should have been made for the chance that the marriage might have failed. Dowd J apparently did not bring this into account. I would increase the 7.5 per cent for general vicissitudes to 9 per cent to take account of the chance that the marriage would not have survived.
Finally, Dowd J considered that the discount factor on the amount awarded for loss of superannuation entitlements should be 10 per cent in relation to Dr Cremona’s fund and 7.5 per cent in relation to Mrs Cremona’s fund. In my opinion, the chance that the marriage would not survive requires that this percentage of 7.5 per cent also be increased to 9 per cent. The rate of dependency fixed for the children was not challenged.
Interest on Past Losses
Dowd J held, despite the RTA’s submission that the rate of 4 per cent would be appropriate, that interest on past losses should be calculated as provided by the Supreme Court Rules to date of judgment.
In Haines v Bendall (1991) 172 CLR 60 at 66-67 Mason CJ, Dawson, Toohey and Gaudron JJ said:
“The power to award interest and its exercise
The power to award interest on damages for the period between the date when the cause of action arose and the date on which a judgment takes effect is conferred by s94 of the Supreme Court Act. The section confers power on the Supreme Court to order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money between the date when the cause of action arose and the date when the judgment takes effect.
An award of interest up to the date of judgment is an award of interest in the nature of damages; Fire and All Risks Insurance Co Ltd (1978) 140 CLR at 431. This statement acknowledges that the award of interest is an integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained. Hence the award of interest is compensatory in character. While ‘[I]nterest should not be awarded as compensation for the damage done’ (emphasis added) (Jessord v Gee [1970] 2 QB 130 at 146), the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v Faraonio (1979) 54 ALRJ 231 at 233, the Privy Council stated that ‘[t]he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident’ (emphasis added): see also Batchelor v Burke (1981) 148 CLR at 455, per Gibbs CJ; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR at 663-665; cf Ruby v Marsh (1975) 132 CLR 642 at 652-653, per Barwick CJ. The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation: Pheeney v Doolan [1977] 1 NSWLR 601 at 613, per Reynolds JA. Thus, it is the award of damages and, where appropriate, interest awarded on damages for the period up until the judgment takes effect which allows the plaintiff to be placed in or restored to the situation, as far as money can do, in which he or she would have been but for the defendant’s negligence.
Section 94(1) of the Supreme Court Act confers a wide discretion on a court awarding interest. That discretion must, however, be exercised in accordance with legal principle: Cullen v Trappell (1980) 146 CLR at 17, per Gibbs J. That means that the discretion must be exercised in conformity with the general principles governing the award of damages so that an award of interest on damages for personal injury should do no more than assist in the restoration of a plaintiff to the position in which he or she would have been but for the defendant’s negligence.”
In Marsland v Andjelic (No 2) (1993) 32 NSWLR 649 at 652 Kirby P and Meagher JA said:
“The section [s73 of the Motor Accidents Act 1988] provides that, once the barriers erected by s73 are overcome, the court ‘may’ order the payment of interest. The use of the facultative verb obviously imports a discretion, but equally obviously that discretion must be exercised judicially: Bennett v Jones [1977] 2 NSWLR 355 at 375. In our view, the plaintiff’s submission that once the plaintiff has overcome his statutory hurdles ordinary principles apply is irresistible. By far the most important of these principles is that enunciated by Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall (1991) 172 CLR 60 at 66:
‘….The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation.’
Viewed in that light, it is difficult to see why a successful plaintiff has not got almost a vested right to an award of interest, so that circumstances have to be indeed exceptional before he or she can be deprived of it on any discretionary ground. This, it seems to us, is consistent with what this Court decided in Pickering v Brown [1993] Aust Torts Reports 62,124. Of course, it remains in every case for the Court to consider the circumstances and to exercise its discretion. No hard and fast rules can be laid down.
The plaintiff’s prima facie entitlement should be for the full period. It must follow that some of the decisions of judges at first instance cited to us are erroneous. Examples of such decisions are Dell v Dalton (Abadee J, 11 December 1990, unreported) where interest was granted from the date when the statement of particulars was filed under two weeks before judgment, and Richardson v Wagga Rent-a-Bus (Wood J, 23 July 1990, unreported) where interest was awarded as from the date when it was proper to offer to settle.
As to the rate of interest, prima facie it is whatever are the Supreme Court interest rates.”
In its written submissions the RTA conceded the common expectation that in ordering interest to be paid pursuant to s94 of the Supreme Court Act 1970 the Court uses “gross” rates of interest. It submitted that the assumption had been that the interest the plaintiff received was taxable. However, in Whitakerv Commissioner of Taxation the Full Federal Court held that such interest payments were not taxable in the plaintiff’s hands. Accordingly, it was submitted that Mrs Cremona has received a windfall by an order that interest be paid at Supreme Court rates. Dowd J rejected this argument.
In Whitaker Black CJ, on the issue of whether an amount included in an award of damages for personal injuries in accordance with an order for interest under s94(1) was income according to ordinary concepts and so should be included in the appellant’s assessable income under s25(1) of the Income Tax Assessment Act 1936 (Cth), agreed with the judgments of Lockhart J and Burchett J that the amount of the pre-judgment interest did not have the character of income but was a receipt of a capital nature. His Honour said at 263-4:
“It is well established that in actions for damages for personal injuries, the payment of what is called ‘interest’ in s94(1) of the Supreme Court Act and equivalent provisions in other jurisdictions is to compensate a plaintiff for the loss and detriment which he or she has suffered by being kept out of his or her money during the relevant period: see MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663 and Haines v Bendall at 63. In other contexts the characterisation of an amount ordered to be paid as ‘interest’ as compensation for the loss or detriment suffered by a person by being kept out of his or her money would point to an amount receivable as income rather than as capital. The present context is, however, of a special character since there is a broader and fundamental function involved, namely the compensation of an injured person by means of an award of damages for negligence and the amount of interest is an integral and essential element in the attainment of that object: see Haines v Bendall at 63. An amount ordered as interest in these circumstances takes its character from the award of damages for negligence and is of a capital nature.
I would add that the position here differs greatly from the commercial situation in which interest is payable as the price of being kept out of a specific or calculable principal sum. The entitlement to damages at the time of injury is entirely theoretical in a case such as the present and, at lease in respect of non-economic loss, there can be no fixed or objectively calculable ‘principal sum’ until damages are assessed.”
Lockhart J at 269 said:
“The primary purpose of an award of pre-judgment interest is to compensate a successful plaintiff for the loss of detriment which he or she has suffered by being kept out of his or her money during the relevant period; that is to compensate the plaintiff for having been deprived of the use of the money: Ruby v Marsh (1975) 132 CLR 642; Batchelor v Burke (1981) 148 CLR 448; and MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657. See PD Finn (ed), Essays on Damages (1st ed, 1992) and in particular the essay by J L R Davis, ‘Interest as Compensation’, p149-152.
There is a secondary purpose for awarding pre-judgment interest, namely, to provide a discouragement to defendants from delaying the conclusion or settlement of the proceeding: Ruby v Marsh per Barwick CJ at 652; with whose reasons for judgment McTiernan J agreed at 655. However, it is not a purpose of the award of pre-judgment interest to punish a defendant for having been dilatory in conducting the case or settling the plaintiff’s claim. As Gibbs CJ observed in Batchelor v Burke (at 455):
‘The interest is awarded to compensate the plaintiff for the detriment that he has suffered by being kept out of his money, and not to punish the defendant for having been dilatory in settling the plaintiff’s claim.’
Aickin, Wilson and Brennan JJ agreed with the reasons for judgment of Gibbs CJ.
This second purpose of awarding interest is less frequently referred to today than it used to be, doubtless because of the increasing role played by trial judges in case management which is designed to ensure greater control by the Court over the conduct of cases by the parties and to discourage any propensity for dilatoriness by parties.”
At 274 Lockhart J said:
“It should not be assumed that a successful plaintiff would have invested the money awarded in the judgment in such a way as to earn assessable income. The plaintiff may have done all manner of things with the amount of the award: purchased a home for himself or herself and family, or a car, or travelled overseas, or spent the money in any of the multifarious ways which are possible. In Tipper v Williams (unreported, Court of Appeal, NSW, Full Court, No 40034 of 1990, 12 May 1993) Priestley JA said (though in dissent) (at 2):
‘I do not see why the plaintiff should be treated as having invested the judgment moneys in such a way as to earn taxable interest; he might have bought a home to live in; he might have bought shares with fully franked dividends; he might have bought vacant land with a view to holding it as a gift for his children in twenty years time; the possibilities are endless, and not all have the same tax consequences.’
In Golec v Scott (1995) 38 NSWLR 168 Meagher JA, (though in Tipper v Williams he was one of the two judges in the majority) said (at 171) that he agreed with what was said by Priestley JA in Tipper v Williams on this point.
The views which I have expressed concern interest included in awards of damages in personal injury cases. The position would be different in some cases, especially where, for example, the claim is for loss of profits arising from a business in circumstances where it may be reasonably assumed that the award of damages, if available at the time of the accrual of the cause of action, would have been spent by the plaintiff for the derivation of further profits and this would be of an income nature, so would be interest.”
At 281 Burchett J referred to a passage in the judgment of this Court in Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54 at 56-57 to the effect that the notion that the recovery of the verdict turns the plaintiff into an investor has been effectively demolished. At 283 his Honour said:
“While the award of interest upon so much of the general damages as is apportioned to past pain and suffering and loss of the amenities of life provides the most obvious illustration of this point [it does not replace any actual income lost but is a guide to the determination of an appropriate amount of damages], I think the position is the same with reference to interest calculated upon past economic loss. It is not ordinary experience that the wage earner invests the whole, or even any substantial part, of his wages to earn interest. Wages are normally spent as they are earned. The amount added to the award is to compensate the plaintiff for being kept out of his money. It is a matter of common observation that, in many cases, needy plaintiffs, unable to work, have had to borrow from friends or relatives or from less generous lenders. They may have to make repayments with interest. They may have had to buy household requirements pursuant to deferred payment arrangements involving significant expense, or they may have had a motor car or appliance repossessed because no wages were coming in. Even if a particular plaintiff suffered no special difficulty, the loss of the opportunity to do what he wished with his own wages when they should have been received, and the loss in the value of the money over the period until receipt, require compensation. That compensation has nothing to do with a notional investment at interest. It is, in Lord Wright’s phrase, ‘estimated in terms of interest’, but interest it is not.
Indeed, the apportioned award itself of damages for loss of earning capacity for the past does not necessarily imply an imputed receipt by the plaintiff of a particular sum of wages which could be notionally invested. That may be the normal case, but in principle the award is for the loss of an earning capacity, not for particular wages.”
At 285 Burchett J referred to the dictum of Davies J in Commissioner of Taxation v Northumberland Development Co Pty Ltd (1995) 59 FCR 103 at 106 which he said was correct.
“A court in this country would be unlikely to hold that an award of pre-judgment interest, included in an award of damages for personal injury, constituted a receipt in the nature of income.”
Davies J added:
“The Court has indeed not been referred to any reported instance in Australia where pre-judgment interest has been assessed to tax as income.”

On this issue Burchett J concluded at 285:
“What I have said so far would justify upholding the appellant’s claim that the ‘interest’ allowed under s94 in respect of past economic loss, as well as that allowed in respect of past personal damages, does not have the character of income, even if included in an amount of damages assessed in respect of a claim based on inability to continue to earn in an employment held at the time of the injury.”
Having been referred to Whitaker there could have been no thought in the mind of Dowd J that the interest awarded under s94 would be part of Mrs Cremona’s taxable income. His Honour regarded it as an amount which appropriately compensated Mrs Cremona for being deprived of the use of her money and so, as was said in the passage I have quoted from Haines v Bendall, to place her or restore her to the situation, as far as money can do, in which she would have been but for the RTA’s negligence. No other ground is advanced to suggest that the award was so excessive that this Court should interfere and accordingly the ground of appeal should be rejected.
Conclusion
In my opinion, the RTA’s appeal succeeds to the extent that some adjustment needs to be made to account for the greater contingency percentage applicable to take account of the chance that the marriage would fail and to apply the contingency percentage discount to the loss of the superannuation benefit. In addition, though not part of any of the grounds of appeal, the damages for loss of the superannuation benefit need to be adjusted to take account of a dependency percentage of 71 per cent. The cross-appeal succeeds to the extent that the dependency percentage appropriate to allow for Mrs Cremona’s dependency should be increased from 63 per cent to 71 per cent. In my opinion, the Court having handed down its reasons, should adjourn the matter to allow the parties to put such submissions as they would wish about costs and to prepare short minutes of order.
Orders
I propose the following orders:
1.Parties to file and serve written submissions on costs by 4 pm on 27 November 2001.
2.Parties to bring in Short Minutes of the orders to be made in the appeal at 9.30 am on 30 November 2001.
3.Stand over the further hearing of the appeal to 9.30 am on 30 November 2001 for orders to be made.
STEIN JA: I agree with Sheller JA.

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LAST UPDATED: 16/11/2001