Terry Anne Downie v Jantom Company Pty Limited - [2013] ACTSC 171

TERRY ANNE DOWNIE & ANOR v JANTOM COMPANY PTY LIMITED & ANOR
[2013] ACTSC 171 (29 August 2013)

NEGLIGENCE – personal injury – plaintiff injured by breakage and collapse of office chair – claim against manufacturer and importer – previous returns of chairs with broken bases – defendant on notice of risk of breakage – breach of duty established.

DAMAGES – personal injury – collapse of office chair – low back injury – disc injury at
L4-5 – surgical fusion – severe permanent low back pain – depression and anxiety – substantial impairment of earning capacity.

CONTRACT – breach of contract – sale of office chair to employer – employer settling claim by injured employee – claim by employer against retailer of chair for settlement amount – rule in Hadley v Baxendale – loss too remote – not recoverable.

TRADE PRACTICES – claim under ss 74B and 74D of the former Trade Practices Act1974 (Cth) – Breakage and collapse of office chair causing personal injury – such claim limited to goods for personal, domestic or household use – office chair not covered – claim fails.

INSURANCE – product liability – office chair – breakage and collapse causing personal injury – policy covering manufacturer and importer – exclusion clause excluding claims arising from design of product – excluding claims arising from warranty implied by law – whether claim excluded by exclusion clause.

Civil Law (Wrongs) Act 2002 (ACT), ss 42, 43, 45, 206, 207, Ch 4
Corporations Act 2001 (Cth), ss 471B, 601AA, 601AD, 601AH, 601AG
Evidence Act 1995 (Cth), ss 59, 69
Sale Of Goods Act1954 (ACT), s 19
Trade Practices Act 1974 (Cth), ss 71, 74A, 74B, 74D, Div 2A, Pt V
Workers Compensation Act 1951 (ACT), ss 183

Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387
C Czarnikow Ltd v Koufos [1969] 1 AC 350
Chappel v Hart (1998) 195 CLR 232
Cullen v Trappell (1980) 146 CLR 1
Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450
Downie v Jantom Company Pty Ltd [2010] ACTSC 110
Downie v Jantom Company Pty Ltd [2011] ACTSC 135
Fox v Wood (1981) 148 CLR 438
Griffiths v Kerkemeyer (1977) 139 CLR 161
Hadley v Baxendale (1854) 9 Exch. 341
Manufacturers’ Mutual Insurance Ltd v New World Fabrications Pty Ltd (1987) 4 ANZ Insurance Cas par 60-775
National Insurance Co of New Zealand Limited v Hill [1964] NSWR 597
Territory Insurance Office v Adlington (1992) 84 NTR 7
Wenham v Ella (1972) 127 CLR 454

No. SC 707 of 2005
Judge: Master Harper
Supreme Court of the ACT

Date: 29 August 2013

IN THE SUPREME COURT OF THE     )
  )          No. SC 707 of 2005
AUSTRALIAN CAPITAL TERRITORY           )

BETWEEN:TERRY ANNE DOWNIE

First plaintiff

AND:COMMUNITY INFORMATION & REFERRAL SERVICE ACT INCORPORATED (ACN 216 655 407)

Second plaintiff

AND:JANTOM COMPANY PROPRIETRY LIMITED
(ACN 075 213 731)

First defendant

AND:EX-GOVERNMENT FURNITURE PROPRIETRY LIMITED
(ACN 053 669 766)

Second defendant

AND:GIO GENERAL INSURANCE LIMITED

Third defendant

ORDER

Judge:  Master Harper
Date:  29 August 2013
Place:  Canberra

THE COURT ORDERS THAT:

judgment be entered for the first plaintiff against the first and third defendants in the sum of $933,030.00.
judgment be entered for the second plaintiff against the first and third defendants in the sum of $441,911.90.
judgment be entered for the second defendant.

This action is brought by the first plaintiff seeking damages for personal injury, and by the second plaintiff seeking recovery of amounts paid to the first plaintiff for her benefit under a policy of workers’ compensation insurance. The claims arise from an incident on 11 October 2002, in which the first plaintiff was injured in the course of her employment with the second plaintiff. An office chair collapsed under her. The chair had been manufactured and imported from China by the first defendant, which had supplied it to the second defendant, an office furniture retailer, in kit form. The second defendant had assembled the chair before sale, and sold it to the second plaintiff.

Some of the history of the matter is set out in reasons for interlocutory decisions published prior to the trial of the action: Downie v Jantom Company Pty Ltd [2010] ACTSC 110; Downie v Jantom Company Pty Ltd [2011] ACTSC 135. In the latter of those two decisions I granted leave to the plaintiffs to add a third defendant, GIO General Limited, and to bring an action against that company under s 207 of the Civil Law (Wrongs) Act 2002. The third defendant was the insurer of the first defendant under a business policy. There is an issue as to whether the policy responds to the claims by the plaintiffs.

The workers’ compensation insurer of the second plaintiff made payments of compensation to the first plaintiff, and paid treatment expenses on her behalf. The insurer also paid for rehabilitation services provided to her. On 30 September 2005 the insurer settled the workers’ compensation claim, with a common law release, for a lump sum of $190,000.00 over and above the payments already made. The total amount paid by the insurer was $265,281.05. This included $651.20 which was deducted from periodical payments made to the first plaintiff and paid to the Australian Taxation Office.

The present action was commenced on 30 September 2005, the same day as payment of the settlement sum to the plaintiff. This was only a matter of days before expiry of the limitation period for the first plaintiff to commence proceedings for damages. The originating claim was accompanied by a statement of claim in which the first plaintiff claimed damages for negligence against the first defendant. The first plaintiff did not make any claim pursuant to the Trade Practices Act 1974 (Cth), nor did she make any claim against the second defendant.

The second plaintiff claimed the amount paid out by way of workers’ compensation. A claim was also foreshadowed for loss of servitium, but this was later dropped. The claim by the second plaintiff against the first defendant was put in three counts: one in negligence, one under ss 74B and 74D of the Trade Practices Act, and one under s 183 of the Workers Compensation Act 1951 (ACT) for indemnity. The claim by the second plaintiff against the second defendant was for damages for breach of contract.

The defendants exchanged notices claiming contribution or indemnity, and filed defences to the claims by the plaintiffs. There is no issue as to the quantum of the claim by the second plaintiff.

In October 2009 the solicitors for the parties signed and filed a certificate of readiness, following which the action was listed for hearing in September 2010. On the date fixed for the hearing to commence, I was informed that the first defendant company Jantom had been deregistered in February 2008. The solicitors on the record for the first defendant, instructed by its insurer, were unaware of this. It emerged that the company had been deregistered on its own application. This is permitted by s 601AA of the Corporations Act 2001 (Cth), but only where the company is not a party to any legal proceedings. The company falsely informed the Australian Securities and Investments Commission (ASIC) that it was not a party to any legal proceedings, and it was duly deregistered. On deregistration, a company loses legal personality and ceases to exist: Corporations Act, s 601AD.

The solicitors for the plaintiff made an application for an order that ASIC reinstate the registration of Jantom. Section 601AH provides that ASIC may reinstate the registration of a company if it is satisfied that the company should not have been deregistered, and further provides that the court may make an order that ASIC reinstate the registration of a company on application by a person aggrieved by the deregistration, if the court is satisfied that it is just that the registration be reinstated. If a company is reinstated, it is taken to have continued in existence as if it had not been deregistered: s 601AH(5).

I was also informed on the first day set aside for the hearing of the action that the second defendant Ex-Government Furniture Pty Ltd had been wound up by court order in August 2010. Section 471B of the Corporations Act provides that on the making up of a winding up order, a person cannot proceed in a proceeding in a court against a company without the leave of the court. On being informed by counsel for the second defendant that his instructions came not from the company but from its insurer, I granted that leave.

Counsel for the plaintiffs applied for leave to amend the statement of claim at that time. Leave was sought to amend so as to add a claim on behalf of the first plaintiff against the second defendant in negligence, and to add counts by the second plaintiff against the second defendant in negligence and under Division 2A of Part V of the Trade Practices Act. For reasons which I published on 17 September 2010, I refused the application to amend: Downie v Jantom Company Pty Ltd [2010] ACTSC 110.

In the course of submissions at that time, Mr Morris of senior counsel, instructed by the solicitors for the first defendant, informed the Court that the insurer from whom his instructions ultimately came had formed the view that the policy they had issued to Jantom did not respond to the claim.

On 26 November 2010 I ordered that ASIC reinstate the registration of Jantom, and heard an application by the plaintiffs to join what is now the third defendant, GIO General Limited, as a party. I also ordered that a fresh hearing date be fixed. The hearing was listed for October 2011.

In August 2011, for reasons which I published, I ordered that the third defendant be joined. I had assumed that the reinstatement order would be taken out for the solicitors for the plaintiff and served reasonably promptly on ASIC. This did not happen. It occurred to the solicitors that reinstatement might deprive the plaintiffs of their statutory entitlement to relief under s 601AG of the Corporations Act. That section provides as follows:

601AG Claims against insurers of deregistered company

A person may recover from an insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

The concern of the solicitors was that their claim might fail if Jantom was no longer deregistered by the time the plaintiff commenced proceedings against the insurer, now the third defendant. Hence they decided not to inform ASIC of the making of the order for reinstatement, and to ask the Court to stay the operation of the order until the application for joinder had been determined.

On 1 September 2011 the solicitors for the plaintiff filed an amended statement of claim, with the third defendant now included. The plaintiffs claimed against the third defendant under s 601AG of the Corporations Act, and also under ss 206 and 207 of the Civil Law (Wrongs) Act 2002 (ACT). The leave of the Court is required to make the latter claim. I granted that leave when granting leave to add the third defendant as a party. The relevant provisions of those sections are:

206 Amount of liability charge on insurance money payable against liability

(1) This section applies if –

(a) A person (the insured) has entered into a contract of insurance by which the insured is indemnified against liability to pay damages or compensation; and

(b) An event happens that gives rise to a claim against the insured for damages or compensation.

(2) On the happening of the event, the amount of the insured’s liability in relation to the event becomes a charge on all insurance money that is or may become payable in relation to the liability.

. . .

(4) A charge under this section has priority over all other charges affecting the insurance money.

. . .

Enforcement of charge on insurance money207

(1) A charge under s 206 is enforceable by an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured.

(2) The parties have, to the extent of the charge, the same rights and liabilities in relation to the action, and the judgment given in the action, as if the action were against the insured.

(3) The court has the same powers in the relation to the action, and the judgment given in the action, as if the action were against the insured.

. . .

The plaintiffs in the amended statement of claim further asserted that the third defendant was estopped from denying that its policy covered the liability of the first defendant to the plaintiffs. The estoppel arose from the fact that the third defendant had engaged solicitors to conduct the proceedings on behalf of the first defendant who had taken various specified steps in the matter, and had made a decision, which it attempted to notify to the first defendant, to indemnify the first defendant against the claim by the plaintiffs. It had initially instructed solicitors in October 2006. It had made and attempted to notify its decision about indemnity in November 2008. It was not until 2 September 2010 that it had informed the solicitors for the plaintiffs that it had changed its mind and decided not to indemnify.

On 21 September 2011 a defence was filed on behalf of the third defendant. The defence asserted that the first defendant company was no longer an incorporated company; denied that the chair in question had been manufactured by the first defendant or that the first defendant had been negligent; denied that the first defendant had any liability to the plaintiffs; and asserted that it was a term of the policy that the insurance was limited to an occurrence connected with the first defendant’s business, being the business described in the schedule to the policy. The business so described had been “dry wall plasterboard contractor”. The occurrence in respect of which the plaintiffs claimed was not connected with such a business.

The defence further said that the claim made by the second plaintiff was a claim for indemnity and not a claim for compensation for personal injury. Accordingly it was not covered by the policy.

The defence also relied on exclusion clauses in the policy, which did not cover damage due to a defect in or the harmful nature or unsuitability of the first defendant’s products; the harmful nature, condition or quality of those products where it resulted from the application of any design, formula, specification, plan or pattern; any error, omission in design, plan or specification or failure to design; or the failure of the first defendant’s products to meet the level of performance, quality, fitness or durability expressly warranted or represented by the first defendant or warranted by implication of law. The defence pleaded that to the extent that the first defendant was or would have been liable to either of the plaintiffs, that liability arose from the various aspects set out in the exemption clause.

As to the estoppel claim, the defence denied that either of the plaintiffs had relied on any representation made by the third defendant or its solicitors as to indemnity, or that either plaintiff had acted to its detriment in reliance on any such representation. The third defendant further said that any such representation could have constituted no more than a representation that the first defendant was insured by the third defendant subject to the terms and conditions of the policy of insurance.

On 30 September 2011 the registration of Jantom was reinstated by ASIC.

The evidence in relation to liability

The first plaintiff’s evidence was that she moved from Perth to Canberra early in 2001, and obtained employment with the second plaintiff, Community Information and Referral Service ACT Incorporated. This was a change of name for what had originally been the Canberra Citizens Advice Bureau. She worked for seventeen or eighteen hours a week in a job-sharing position. After a short time she was promoted to team leader, with longer working hours, and by the time of her injury she was working full time.

In June 2002 she went with the manager of the second plaintiff, Mr Elgar Starkis, to the premises of the second defendant, Ex-Government Furniture, at Fyshwick, to buy some office furniture, including a chair for her use. The premises of the employer were in the Griffin Centre in Canberra City, where some additional office space had become available on an upper floor. The first plaintiff and another employee were to move upstairs, and additional office furniture was needed. They were served by a male staff member. Her recollection was that the premises were a large warehouse with a lot of office furniture. She and her manager sat on a few chairs and looked at some desks. They wanted a new chair, not a second-hand one. They chose a chair, and bought it.

The first plaintiff was shown a chair in court, with a broken base, and identified it as the chair they had bought from Ex-Government Furniture that day. She could not recall whether they brought the chair back to their office, or whether it was delivered a day or two later, but shortly afterwards she began using it as her office chair every day.

On 11 October 2002 she was sitting on the chair at her desk, talking on the telephone, when the chair collapsed under her and she fell to the floor. She tried to get up but was unable to do so. She felt a sharp pain on the left side of her lower back. Mr Starkis was informed and came quickly to her office. A little later her husband arrived and took her home.

Although the first plaintiff was extensively cross-examined on matters going to quantum, there was no challenge to any of her evidence about the purchase of the chair or her fall and injury.

This evidence was confirmed by Ms Elizabeth Smith-Howarth, who worked with the first plaintiff and was sharing an office with her on the day of her injury. The first plaintiff was then senior to her but by the time of the hearing Ms Smith-Howarth was manager of the second plaintiff. She was in the room when the first plaintiff fell. She heard a loud crack and turned around to see that she had been flung from her chair to a corner of the room near the door, where she lay in an awkward position. Ms Smith-Howarth realised that the first plaintiff had been on the telephone, and picked up the receiver and terminated the call. She contacted Mr Starkis. He came upstairs to the office almost immediately. She identified the chair in court as the chair which had collapsed under the first plaintiff.

Mr Starkis had employed the first plaintiff. She was the successful applicant of more than one hundred applicants for her job. He recalled going with her in June 2002 to Ex-Government Furniture at Fyshwick. The company had bought a number of items of furniture there over the years. On this occasion they were served by a male salesman. They had sometimes bought second-hand furniture there but on this occasion they had decided to buy a new chair for the first plaintiff, who took ergonomics seriously. The salesman recommended a number of chairs for them to try. The first plaintiff sat on a few chairs. They selected one and bought it on behalf of the organisation. His recollection was that they took it back with them to the office, where it remained until the day of the accident.

On the day of the accident, Ms Howarth called him and he went straight upstairs to find the first plaintiff on the floor, obviously in pain and unable to move. They telephoned her husband who got her down to his car and took her home.

Mr Starkis identified the chair in court as looking very much like the one which had collapsed under the first plaintiff.

At some stage after the accident, Mr Starkis contacted Ex-Government Furniture and spoke to a male. He thought the first contact was by telephone and that there might have been some correspondence after that. He was concerned that the chair had been a brand new chair and should not have collapsed. The first plaintiff was not an unusually large person and had been using the chair normally when it collapsed. Mr Starkis said “So I wanted to find the information for possible future litigation, if you like”. He remembered being given the name of the manufacturer. He was shown a document which he identified as the source of that information, which he passed on to the first plaintiff.

Mr Starkis remembered telephoning Ex-Government Furniture and speaking to the man who had sold them the chair. He told him about the first plaintiff’s injury. He asked for information about the identity of the manufacturer. The salesman offered, as a goodwill gesture, a replacement chair, and subsequently supplied details of the manufacturer.

Mr Starkis gave a signed statement to an investigator acting on instructions from an insurer on 9 November 2002, within a month of the injury. He was asked some questions about this statement but it did not go into evidence.

Senior counsel for the plaintiffs tendered answers to interrogatories affirmed on 16 March 2009 by Sutao Zhai on behalf of Jantom, the first defendant. Ms Zhai stated that she was answering the interrogatories in her capacity as a director of the company. In fact by 2009 she was no longer a director and the company had been deregistered, so that at the time of her affirmation the company did not exist, although the effect of its subsequent reinstatement is that it is taken to have continued in existence as if it had not been deregistered.

A company search in evidence establishes that Ms Zhai was a director of Jantom from August 1998 to August 1999, from March 2000 to April 2001, and from February 2002 to July 2002. Thus it seems that she was a director at the time the chair was purchased from Ex-Government Furniture but not by the time of the first plaintiff’s injury. Other persons held office as directors in subsequent years: from November 2005 until the date of deregistration, there was a sole director, Gui Qin Chen, resident in Victoria, in office. The application to ASIC for voluntary deregistration of Jantom was signed by Gui Qin Chen in November 2007.

Neither Gui Qin Chen nor Ms Zhai gave evidence. It seems clear that Ms Zhai held herself out, at least to the solicitors on the record for Jantom, as a director as late as March 2009. She seems to have acted as though she were a director. I admitted the answers to interrogatories into evidence over the objection of counsel for the third defendant on the basis that I was satisfied that Ms Zhai was in a position to make admissions on behalf of Jantom at the time she affirmed the affidavit. The interrogatories and answers were as follows:

1. At any time during the year 2002, did you have a place of business at 8 East Street, Granville NSW?

1A. Yes

2. If yes, was that for the whole of 2002 or only part of it, specifying that part?

2A. The whole of 2002.

3. During any part of 2002 did you manufacture two types of office chairs, one slightly smaller than the other, being swivel chairs with a plastic base and five wheels?

3A. Yes

4. If yes, what weight restrictions if any, did you impose or recommend to persons using the said chairs?

4A. The recommended weight restriction was 120kg.

Senior counsel for the plaintiffs tendered, in the case against the second defendant Ex-Government Furniture only, answers to interrogatories sworn by Mr C Swinbank, a director of that company, in September 2008. The interrogatories had annexed two photographs of the damaged chair. Mr Swinbank said that he believed that chairs of the type shown in the photographs had been purchased by Ex-Government Furniture from Jantom. He was unable to determine what model the chair was. Chairs from Jantom had been delivered in knock-down form packed in boxes, and his company assembled them before sale. He had searched the computer records but could not find any record of a sale to the second plaintiff. Names of purchasers were not always recorded.

A colour brochure from Jantom was tendered in the plaintiffs’ case. It had been provided by a former employee of Jantom to the solicitors for the third defendant (the insurer). The brochure is undated. It has illustrations of a large number of chairs offered for sale by Jantom. There is one which is similar, and perhaps identical, to the chair which collapsed. It is identified as model JT102.

Also tendered were computer printouts of Ex-Government Furniture records of sales of Jantom chairs, one for the period from 1 July 2001 to 30 June 2003, and the other for the two months from 1 September to 31 October 2002. The sales during the periods show a large number of JT103 and JT105 chairs but no JT102 chairs. The brochure shows a JT105 chair, which looks generally the same as a JT102 but without arms. There is no representation of, or reference to, a JT103 chair in the brochure. It may simply be that the brochure relates to a different period.

Senior counsel for the third defendant objected to the tender of a printed form of facsimile message on Ex-Government Furniture letterhead, completed in handwriting. The body of the document read as follows:

Facsimile message

To: Elgar Starkis

From: Lockie Thomas

Subject:

Date: 24/10/02

Message

Re info on chair.

Jantom Company Pty Ltd

8 East St, Granville NSW

P 9682 3468 F 9682 3718

Email [email protected]

There was some other handwriting which it was agreed had been added later and was not part of the original message as sent or of the tender.

Mr Starkis was unable to remember or identify with any precision the document in his oral evidence. Mr Thomas did not give evidence and there was no explanation by any party about any attempts to locate him or serve him with a subpoena.

Senior counsel for the plaintiffs argued that the document was admissible as a business record of Ex-Government Furniture.

The document bore a single-line imprint at the top which establishes to my satisfaction that it was faxed from Ex-Government Furniture at Fyshwick on 24 October 2002. I am satisfied that it was faxed to, and received by, Mr Starkis at the office of the second plaintiff on that date.

Senior counsel for the third defendant submitted that the document was not a business record, and was inadmissible by reason of the hearsay rule, now found in s 59 of the Evidence Act 1995 (Cth), the applicable legislation at the time of the tender. For the purposes of that section, I accept that it can reasonably be supposed that in the document, Mr Thomas intended to assert a particular fact, namely that the chair which the second plaintiff had bought from Ex-Government Furniture in June 2002 had been a Jantom chair. Section 59(1) provides that evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation.

Section 69 provides an exception to the hearsay rule in respect of business records. The relevant subsections of s 69 are:

business records: 69 Exception

(1) This section applies to a document that:

(a) either:

(i) is or forms part of a record belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business; or

(ii) at any time was or formed part of such a record; and

(b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business.

(2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made:

(a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or

(b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact.

(3) Subsection (2) does not apply if the representation:

(a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding; or

. . .

(5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact).

It seems to me that the document formed part of the records of both Ex-Government Furniture and the second plaintiff. I am satisfied that Mr Thomas was more probably than not the salesman Mr Starkis and the first plaintiff had dealt with when they bought the chair, and that it is reasonable to suppose that he had personal knowledge of the wholesale supplier of the chair to the company where he worked. The fax was sent within two weeks of the sale and purchase of the chair and for that reason is likely to be reliable.

Senior counsel for the third defendant raised a secondary objection to the tender, that the exception in subs 69(3) applied in that the document had been prepared or obtained in contemplation of litigation. Certainly the evidence of Mr Starkis was that this was in his mind, on behalf of the first plaintiff rather than the employer. But the document was prepared by Mr Thomas, and there is no suggestion that he had any awareness that the document might have anything to do with litigation.

The commentary on s 69 contained in Uniform Evidence Law, Odgers, Thomson Reuters, makes it clear that the mischief to which the section is directed is the possibility that self-serving statements may be brought into being for use in evidence in expected litigation. The litigation must be likely or reasonably probable. There is no suggestion that there was anything self-serving about the document, in the mind of either Mr Thomas or Mr Starkis. I take the view that the representation contained in the document was not prepared or obtained for the purposes of, or in contemplation of, litigation.

I postponed dealing with the tender at the time and said that I would deal with it in my reasons for judgment. For the reasons I have expressed, the document, presently MFI 2, will be admitted into evidence and will become Exhibit U.

Senior counsel for the third defendant GIO General called a former employee of Jantom, Mr K L Jones, who lives in Sydney, to give evidence. Mr Jones was employed by Jantom from about July 2001 to July 2007 when he retired. He was sales manager for New South Wales and the Australian Capital Territory, and one of Jantom’s retailers was Ex-Government Furniture. His evidence was that Jantom did not have many customers when he joined the company. They did not have a high volume of sales. His task was to rectify this. He became familiar with the chairs they sold.

Prior to trial he was shown photographs of the damaged chair in evidence. He saw the chair physically for the first time on the day he gave evidence. He said that he had not seen that particular style of chair in the Jantom range. He was asked whether it was or was not a Jantom chair. He said that he could not say for certain, but it was not familiar to him as far as some of its components were concerned, and he did not recognise it as a Jantom chair. The grip on the height adjustment lever was a different shape, to his recollection, from the levers used by Jantom. The plastic base did not seem to him to have the finish he remembered on Jantom bases, which had a powdery or dusty look about them. He was not 100% certain that Jantom had used the fabric colour of the seat and back of the chair. He said that the base plate did not look like a Jantom base plate, and in fact looked stronger than the bases used by Jantom.

He said that there had been no sticker or label or marking on Jantom chairs to identify them as Jantom chairs. There was a similar chair in the Jantom range, which he recalled as the JT102. His recollection was that the JT103 and JT105 were different.

His evidence was that by 2006, when he made a trip to China for Jantom, they had a factory in China where they assembled chairs, but they never manufactured the bases.

In cross-examination, Mr Jones said that he first became aware during 2006 that someone had been injured when a chair failed, although he had been aware in earlier years that some Jantom chairs had suffered broken bases. He was aware that there had been some complaints from Ex-Government Furniture and that they had returned some Jantom chairs for replacement. He could not remember which model chair had created this problem. He had a vague recollection that at some point the JT101 or JT102 was changed in some way. He did not see the returned chairs or deal with the documentation about them. His role was confined to sales and distribution. He agreed that Jantom had supplied the chairs to retailers in flat pack form, for assembly by the staff of the retailer.

The expert reports about the chair

The plaintiffs rely on two expert reports, one obtained by their solicitors and the other by the solicitors for Ex-Government Furniture. The first report was prepared by Dr Lance Green, a senior lecturer in industrial design at the University of New South Wales. Dr Green has a degree in mechanical engineering, and both a master’s degree and a doctorate of philosophy in industrial design. He inspected the chair and prepared his report in December 2005. I am satisfied that he has extensive experience in relation to the design of commercial seating, including office chairs. He described the chair in question as of a rigid steel and plastic construction in three sections, being a base consisting of a single plastic moulding incorporating five feet or spokes with castors at their extremities; a central section including a pneumatic height-adjusting steel cylinder; and an upper section which included the seat and backrest.

He said that the base of the chair was a single injection moulding in a plastic material, acrylonitrile-butadiene-styrene (ABS). The plastic moulding had failed in a catastrophic manner. Two feet had broken away from the central boss. Dr Green said that base sections with five feet for office chairs were manufactured in steel, aluminium or plastic. The base section was subject to significant loads resulting from the downward weight of the occupant, and the forces associated with the occupant leaning against the backrest. The nature of the loads was complex, with overall bending of the structure acting down the central column, and applying torsion to the base. The base in question was hollow underneath with stiffening ribs incorporated to increase its strength and stiffness.

He said that ABS is a medium-cost tough and rigid plastic which was excellent for general purpose applications and had good impact strength. Its effectiveness as a material for a swivel-chair base depended on quality control of the injection moulding process, including the quality of drying of the plastic resin prior to moulding, temperature control, moulding parameters and consistent cooling. In addition, design factors such as reinforcement and avoidance of sharp corners was very important.

The central column was of metal with a tapered section at the lower end at an angle of about 2.5 degrees. The plastic hub had a corresponding taper and the components mated together. If both components were metal the fit would be self-locking. Because the base was made from ABS the components would not lock. The design of the chair in question incorporated an aluminium circlip which engaged into a groove at the bore of the hub, locking the column to the base. Dr Green said that this method of locking the column introduced considerable stresses to the plastic at the groove. The design seemed to him to be an afterthought, the circlip being incorporated when the taper connection failed to lock. This aspect of the design might have been a contributing factor to its failure.

If the occupant of the chair leant back against the backrest with some force, this would impose an additional load on the base. If the base was aligned so that two of the feet bore a combination of the downward and rearward loads, increased stress would be applied to the region where the base failed. Dr Green noted sharp corners between various sections of the central hub which he said would act as stress concentrators, amplifying the normal stress in the corners by a factor ranging between one and three. This had the potential to produce cracks and thus failure.

He said that when a base moulding is ejected from an injection mould die, it is normal for there to be differential temperatures in regions of the central hub. These differing temperatures were part of the process, caused by the proximity of cooling channels in the steel die to the respective sections of plastic and also due to the effect of different plastic thicknesses. The thin sections would cool more quickly, and the thick sections much more slowly. Differential shrinkage could occur, with various regions of the moulding pulling against each other, resulting in high localised residual stresses. It was possible that cracks could develop as a result of such shrinkage mechanisms at some time in the future, long after cooling had concluded.

When plastic was injected into the metal die, it could flow simultaneously in a number of directions at the same time. It could meet resistance, hesitate and then flow in another direction. This hesitation effect he described as disastrous in that it could lead to high residual stresses in critical sections of the moulding, causing regions of weakness referred to as weld faces or weld lines. These could exhibit dramatically reduced strength, particularly if air became trapped in the plastic between the weld faces.

A further point was that ABS is hygroscopic, that is, absorbing of water. It must be “dried” prior to injection moulding. If the drying process was not carried out efficiently this could have a major effect on impact strength.

For all of those reasons, ABS could at times perform poorly in relation to its theoretical strength. In those circumstances it could exhibit brittle behaviour.

There were other factors which might affect the strength of the plastic, associated with the injection moulding process. Stress could occur randomly due to changes in the parameters of the manufacturing process. In theory a moulding could be produced early in a manufacturing batch, during the “warm-up” period where optimum processing conditions had not yet been achieved.

It was Dr Green’s opinion that it was conceivable that the chair in question failed when its occupant leant to the rear while sitting on the chair, causing flexure of the base at a time when two of the five feet were bearing the stress of the weight, causing a significant level of stress in the plastic. Cracks could have been generated at some time much earlier in the history of use of the chair. Use over time might have produced microscopic cracks in critical regions of the plastic. The proprietor of the business could not have foreseen this event. Periodic inspection of the base to identify cracks might not have helped, as the cracks would probably not have been visible to the eye and might have occurred in regions where visual access was problematic.

The base of the chair, being subject to considerable loads, should be considered a structural component of the chair. In Dr Green’s opinion it should have been manufactured from steel or aluminium. Steel had twelve times the tensile strength and one hundred and fifty times the stiffness of ABS. Even aluminium had three times the tensile strength and fifty times the stiffness. A base designed in plastic should have been much deeper in section, and an engineering plastic should have been specified, for example nylon or polycarbonate resin, reinforced with glass fibres. These would have increased the strength and stiffness of the plastic considerably, and were usually incorporated into plastics where they replaced metals.

The second expert report in evidence was prepared by Ms Phillippa Carnemolla, an industrial designer, in September 2009. She had a master’s degree in design and lectured in that subject at the University of New South Wales. She had earlier worked as a designer in a range of industries including commercial furniture, sheet metal fabrication, interior fitout and recreational products. She also inspected the chair.

I found her report less helpful than that of Dr Green. She assumed that the base had been made of nylon filled with glass fibre. I prefer Dr Green’s opinion about its material. She thought that a metal ring should have been inserted in the centre of the base. She could see no faults in the moulding process, such as poor wall thickness or inconsistent density of material, and concluded that the problem was one of design or cost-cutting rather than quality control during manufacture. She agreed that there would have been nothing visible to indicate to sales staff that the base was likely to fail.

She went to Ex-Government Furniture where she spoke to an employee, Mr de Veau, who told her that he was familiar with Jantom chairs supplied during 2002 and had assembled them for delivery. He told her that in later years Jantom had included a metal ring insert in the star bases, probably in 2003 or 2004. He supplied her with some company records which showed that between September 2001 and July 2002 twenty-two Jantom chairs had been returned for repair or replacement. Eight of these had been for broken bases.

Senior counsel for the third defendant objected to what Mr de Veau said being taken as evidence of its truth. I limited its use to treating it as part of the assumptions made by the expert, so that it is not to be evidence of its truth. However, the records of returns for repair or replacement are in a different category, being business records, and I accept those as part of the evidence.

On the underside of the chair seat the date 04 02 had been hand etched. Mr de Veau said that this represented the month of assembly of the chair by Ex-Government Furniture, being April 2002. I do not regard what he said as part of the evidence in the case, but it seems a reasonable inference that the explanation is correct, having regard to the date of sale to the second plaintiff.

Ms Carnemolla was supplied by Ex-Government Furniture (presumably Mr de Veau) with a Jantom brochure, a copy of which is attached to her report. This is a photocopy of a single page, and the chair numbers are different from the other brochure in evidence. Again the document is undated. It shows a different address for Jantom, at Belfield, New South Wales. The chair is identified as an MB2 model chair. Again it seems that Jantom changed from time to time its descriptors for these chairs. Certainly the MB2 in the brochure looks the same, as far as I can detect, as the chair in evidence.

The Jantom insurance policy

The Court did not have the benefit of any oral evidence from anyone from Jantom or the insurer GIO General Limited, but a number of documents had been produced by the insurer which were tendered without objection. It emerges from the documents that Jantom lodged an insurance proposal with GIO in May 1997, giving its business as dry wall plasterboard contractors (gyprockers), having been in that business for a year. They were then operating from an address at Bexley in Sydney. A premium was set and insurance cover put in place.

A premium calculation sheet, which I take to be an internal GIO document, prepared in June or July 2000, showed a change of address and business description. By then the address was at Granville, the business description was furniture warehouse and the code description for policy purposes was hardware-warehouse/shop. An insurance proposal form completed in June 2000 and lodged in July 2000 listed the persons or companies to be insured as Jantom Company Pty Limited, Wen Jun Lu and Sutao Zhai. The type of business was described as furniture warehouse, office chair, furniture.

A property assessment report was prepared in April 2001, following an inspection by someone on behalf of GIO General of Jantom’s premises in March 2001. The business was described in the report as office furniture warehouse. The inspection was evidently regarded as satisfactory, and continued risk acceptance was recommended.

A document prepared in November 2001, the purpose and status of which is unclear to me, showed the insured as Jantom Company Pty Limited and the business as dry wall plasterboard contractor, with its business address being the Granville address. It seems unlikely that the business of the company had reverted to plasterboard contracting. A more likely explanation is that whoever prepared the document at GIO General went back to the first proposal on the file in 1997 and entered the business description from that document without checking for any subsequent changes.

A further document is headed as “policy schedule as at 4 May 2002” but states that it was issued on 2 September 2010. Again, its purpose and status is not clear. This document is addressed to W J Lu and S Zhai at a Chatswood address, and shows Lu and Zhai as the insured, with, again, the business activity as dry wall plasterboard contractor. There is no documentation to suggest that there was any request by Jantom or its officers for any change in the insured or the nature of the business.

On 7 June 2002 a request was lodged with GIO General by Jantom for some alteration in cover, and an extra premium notice was generated on 25 June 2002 in response to this, addressed to Jantom Company Pty Limited at the Granville address. Elsewhere in this documentation the business was again described as dry wall plasterboard contractor which again I have no doubt was a mistake based on the original business of Jantom when insurance commenced in 1997.

There can be no doubt that at the time of the sale of the chair by Ex-Government Furniture to the second plaintiff in June 2002, and at the time of the first plaintiff’s injury, there was a business insurance policy in place issued by GIO General in favour of Jantom Company in respect of its business as a dealer in office furniture.

There is also in evidence a copy of a trade insurance policy issued by GIO General. It is common ground that this was the policy wording in force at the relevant time.

The policy covered a number of risks. The relevant one for present purposes was described as public and products liability, dealt with in section 7 of the policy. This provided that the insurer covered the insured, subject to the terms of the policy, for any amount it might become legally liable to pay as compensation for personal injury happening during the period of insurance and caused by an occurrence connected with its business. “Business” was defined as the business or businesses shown on the schedule. Personal injury was defined to cover the plaintiff’s claim against Jantom. Compensation was defined as money payable because of a judgment awarded against the insured by a court, or any settlement of a claim negotiated by or agreed to by the insurer.

The policy provided for certain exclusions. The exclusion relied on by GIO General was as follows:

9 Products

The policy section does not insure liability arising directly or indirectly out of or in connection with, or for:

. . .

(b) the harmful nature, condition or quality of your products when that harmful nature, condition or quality has resulted from the application of any design, formula specification, plan or pattern;

. . .

(d) any error, omission in design, plan or specification or failure in design; or

(e) the failure of your products to meet the level of performance, quality, fitness or durability expressly warranted or represented by you or warranted by implication of law.

A definition of products clearly includes the chair which collapsed, if it was a Jantom chair.

It is the submission of senior counsel for the third defendant, GIO General, that it follows from the evidence, in particular that of Dr Green, that the chair which collapsed under the plaintiff failed because of a design fault, and further, that the collapse of the chair amounted to a failure to meet the level of fitness or durability warranted by implication of law.

I postponed dealing with a tender, with the agreement of senior counsel for the plaintiffs who tendered the document, and senior counsel for the third defendant who objected to the tender. The tender was of a letter from the third defendant in relation to the claim under the insurance policy by Jantom, following earlier letters not the subject of objection. The first of the earlier letters, of 11 October 2006, was addressed to Wen Jun Lu and Sutao Zhai, care of a Sydney firm of solicitors who I assume were acting for Jantom direct at that time. The letter was headed:

Re: Claim number CPL 0707152

Our insured: Wen Jun Lu and Sutao Zhai

Claimant: Terry Downie

Date of Loss: 11/10/2002

Your reference: Jantom Terry – ACT Supreme Court proceedings

The letter informed the recipients that the third defendant would handle their claim in accordance with the General Insurance Code of Practice. The letter went on to say that the insurer had not yet had the opportunity to investigate the claim fully and could not confirm whether indemnity would be granted. It was obtaining an investigation report and copies of relevant documents, and would communicate with the recipient again. The insured would be kept updated every three months. The insurer had appointed solicitors to represent its own interests and those of the insured pending a decision about indemnity. The appointment was without prejudice to the insurer’s rights under the policy and the law, and to the insurer’s right to decline indemnity.

It is apparent that the investigations took longer than anticipated. Similar letters were written, again making it clear that no final decision had been made about indemnity, to the same addressees in December 2006, March 2007 and May 2007.

The letter which is the subject of the objection was dated 7 November 2008. This letter was addressed to Jantom Companies, attention Rebecca Zhai at the Granville postal address of Jantom. I infer that Rebecca Zhai is the same person as Sutao Zhai. The letter was headed:

Policy number: SB2409700

Claim number: CPL 0707152/SL352

Claimant: Terry Anne Downie

Date of Loss: 11 October 2002

The letter opened by referring to the last letter of 11 May 2007 and stated that the investigations required to enable a decision on indemnity had now been completed. The letter went on:

Grant of Indemnity

We have decided that your Business Insurance covers this claim. Therefore, we grant indemnity to you in respect of the above claim under the policy covering the period 16 January 2002 to 16 January 2003. Indemnity is granted pursuant to the terms and conditions of the policy and on the basis of facts and circumstances known to us to date.

The letter noted that previous letters sent to keep the insured informed of progress had been returned. It is not clear whether this was a reference to the letters sent care of the Sydney solicitors, or to other letters sent to the Granville postal address. The letter informed the recipient that Moray & Agnew had been appointed to take over the legal proceedings and would be in contact. The letter contained no reservations about the grant of indemnity, or suggestion that indemnity might subsequently be withdrawn.

By the date of the letter, Jantom had been deregistered. Senior counsel for the third party tendered on the voir dire the original letter with its envelope, which had been endorsed “return to sender – left address/unknown”. The envelope had been returned on 10 November 2008 and received by the insurer on 12 November 2008. I am accordingly satisfied that the letter was not seen by Ms Zhai or anyone at Jantom, and did not succeed in its purpose of communicating its contents to the insured.

One thing that is apparent is that the insurer, notwithstanding the return of the letter, continued to instruct solicitors to act for Jantom as a party to the action. It seems likely that neither the solicitors nor the insurer realised that Jantom had been deregistered until served with an application by the solicitors for the plaintiffs asking for an order for reinstatement of its registration shortly before the hearing date in September 2010. It was not until shortly after that the insurer communicated its decision to withdraw indemnity. It seems to me that the letter the subject of objection is admissible against the third defendant as evidence of its decision to grant indemnity to Jantom without any stated reservations, notwithstanding that Jantom did not receive the letter. The letter, presently marked Exhibit VD1, will become Exhibit V.

Senior counsel for the plaintiff submits that the letter, and the conduct of the litigation generally by the insurer on behalf of Jantom, gives rise to an estoppel such that the insurer should not be permitted to rely on a defence that it is not obliged to indemnify Jantom.

Findings in relation to liability and insurance

There is an issue of substance as to whether the chair which failed was a Jantom chair or not. There are conflicts of evidence about this. Mr Jones casts doubt on whether it was a Jantom chair. I take account, however, of the fact that he was not told about the plaintiff’s injury until some four years after the event, and that by the time he gave evidence he had been retired for some four years. He was, I have no doubt, doing his best to remember accurately the identifying features of Jantom chairs. It was not clear from his evidence that he had much experience of the chairs supplied by other manufacturers to retailers like Ex-Government Furniture. His evidence was supportive of a conclusion that the chair might not have been a Jantom chair, but I was not persuaded by it.

I am more influenced by the fax sent by Mr Thomas within a couple of weeks of the plaintiff’s fall, in which he said, I am sure from his recollection at the time, that the chair he had sold to Ex-Government Furniture had been a Jantom chair.

Whilst the evidence is far from clear about it, I have come to the view that it is, if only slightly, more likely than not that the chair which Mr Starkis and the first plaintiff bought and took back to their office in June 2002 was a Jantom chair. I cannot be sure what model it was but it is not necessary for me to make a specific finding about this.

I generally accept the evidence contained in Dr Green’s expert report as to the cause of the fracture of the base of the chair. It seems to me more likely than not that Jantom had purchased the base from a manufacturer in China, and sold it on as part of a Jantom chair to Ex-Government Furniture. I accept Dr Green’s opinion that if the base had been of steel or aluminium it would have been very unlikely to have fractured during normal use. I am satisfied that the circumstances in which it did fracture could reasonably be described as normal use of the chair. It would have been much less likely to fracture if the material for the base had been of nylon combined with glass fibre. I think it likely that there were undetectable flaws in the base, due in part to the plastic material not being ideal for the purpose, and in part to the temperature differentials which probably occurred in the moulding process. There may well have been, and probably were, microscopic cracks in critical regions of the plastic base which could not have been detected on visual inspection, whether by a responsible retailer or employer.

There is an element of speculation about this, but I think it most likely that the failure of the chair base was due to a combination of less than ideal materials being used, and a less than ideal moulding process being adopted. There is no evidence that Jantom in China were or should have been aware of these defects when they purchased the base, no doubt along with a large number of other bases, from the manufacturer in China. Still less is there any basis for criticising Ex-Government Furniture for failing to detect any weakness when assembling the chair. I am satisfied that there was no reason for the second plaintiff, as employer of the first plaintiff, to suspect that there was any problem with the chair which might have caused its collapse, to the extent that that question may be raised.

This brings me to the exclusion clause in the insurance policy. Clearly there was a “harmful nature, condition or quality” of the chair. I am not satisfied that the harmful nature, condition or quality resulted from the application of any design, formula specification, plan or pattern. There is no evidence that there was anything wrong with the design of the base. On the contrary, the base seems to have been generally of the same appearance and kind of the bases of office chairs generally on the market and in use.

This leaves open the submission on behalf of the insurer that Jantom’s liability arose from the failure of its product to meet the level of fitness or durability warranted by implication of law.

The claim by the first plaintiff

I have previously said that the claim by the first plaintiff has been brought against the first defendant Jantom only, and that the only cause of action pleaded is in negligence. Since the amended statement of claim of 1 September 2011, there has been no change as between the first plaintiff and the first defendant, but the first plaintiff now also claims against the third defendant under ss 206 and 207 of the Civil Law (Wrongs) Act, and s 601AG of the Corporations Act. The claims by the first plaintiff against the third defendant are derivative claims and depend upon her succeeding against the first defendant in negligence.

Section 42 of the Civil Law (Wrongs) Act provides that the standard of care required of a defendant in negligence is that of a reasonable person in the defendant’s position who was in possession of all the information that the defendant either had or ought reasonably to have had at the time of the incident. Section 43 provides that the defendant is not negligent in failing to take precautions against a risk of harm unless the risk was foreseeable and not insignificant; and in the circumstances, a reasonable person in the defendant’s position would have taken those precautions.

There is evidence that between September 2001 and July 2002 eight Jantom chairs had been returned by Ex-Government Furniture for repair or replacement of broken bases: see [70] above. These returns were information which Jantom had at the time of the sale of the chair. This satisfies me that there was a foreseeable risk of the failure of the base of a Jantom office chair. A base was clearly far more likely to fail while someone was sitting on the chair than while it was not in use. Harm in the form of personal injury was accordingly likely and potentially serious. In these circumstances it was not enough for Jantom to stand ready to replace a chair in the event of breakage of a base. There is no evidence that an earlier base failure had caused personal injury but such a risk was clearly foreseeable. It is hardly a counsel of perfection to conclude that a reasonable person in the position of Jantom would have done something about the risk of future base failures, rather than simply continuing to sell the chairs in knockdown form and hoping for the best. Jantom as wholesaler of the chairs owed a duty of care to users of the chairs following sale, such as the first plaintiff.

Section 43 of the Civil Law (Wrongs) Act requires me to give consideration to the burden of taking precautions to avoid the risk of harm. Following a number of base breakages and returns, it seems to me that a reasonable person in the position of Jantom would have taken professional advice, for example from an expert like Dr Green, and taken steps, in the light of such advice, to substitute for the bases they were using, bases with a greatly reduced likelihood of fracture.

I have accordingly come to the view that Jantom committed a breach of its duty of care to the first plaintiff, causing her damage in the form of personal injury. The first plaintiff is entitled to succeed against Jantom in negligence under the general law as modified by Chapter 4 of the Civil Law (Wrongs) Act.

Jantom is of course no longer trading. Success for the first plaintiff against Jantom will be a pyrrhic victory unless she can also succeed against the third defendant GIO General.

For the reasons I have already given, I am persuaded that Jantom was insured under the policy issued by GIO General, subject to the exclusion clause.

I have also explained my reasons for finding against the insurer on the design exclusion. This leaves to be dealt with the argument that cover is excluded by the warranty by implication of law exclusion. GIO General argues that the injury to the first plaintiff arose out of the failure of the chair to meet the level of performance, quality, fitness or durability warranted by implication of law. There is no evidence of any express warranty or representation by Jantom about those matters.

Senior counsel for the third defendant, GIO General, acknowledged that the exclusion in paragraph (e) of clause 9 would arise only in relation to a claim against the insured based upon breach of a warranty which had arisen by implication of law. The claim by the first plaintiff against the first defendant was framed in negligence only. No statutory relief was sought. There might have been an argument available that the first plaintiff had a claim against the first defendant for breach of implied warranty as to merchantable quality under s 71 of the Trade Practices Act. However, no such claim was pleaded or notified by the solicitors for the plaintiffs by way of particulars. The plaintiffs did not rely in their claim against the first defendant on the breach of any warranty implied by law. Hence I need not consider the exclusion which arises under paragraph (e) of clause 9 of the policy.

In those circumstances, I do not strictly need to consider the submission made by senior counsel for the plaintiffs as to representational estoppel. It was argued on behalf of the plaintiffs that even if the insurer had been entitled to refuse indemnity, it should be estopped from doing so because of its decision, evidenced by its letter to Jantom of 7 November 2008, to grant indemnity, combined with its conduct of the proceedings on behalf of Jantom from that date until September 2010.

There is authority for the proposition that estoppel may prevail regardless of the true facts: see for example National Insurance Co of New Zealand Limited v Hill [1964] NSWR 597 at 599 per Herron CJ, Ferguson and Nagle JJ, where an insurer was held liable notwithstanding that on the true facts the policy was void or did not cover the risk.

In Manufacturers’ Mutual Insurance Limited v New World Fabrications Pty Ltd (1987) 4 ANZ Insurances Cases 60-775, MW Campbell J held an insurer estopped from refusing to indemnify a defendant where the plaintiff had been injured a day before the policy commenced, but where the insurer had conducted the litigation on behalf of the defendant in a manner which his Honour found was to the plaintiff’s detriment.

This decision was doubted and not followed by the Court of Appeal of the Supreme Court of the Northern Territory (Asche CJ, Martin and Mildren JJ) in Territory Insurance Office v Adlington (1992) 84 NTR 7, specifically on the issue of detriment. The Court of Appeal held that the detriment must be real and material, although not necessarily causative of pecuniary loss. In Adlington, the evidence did not establish any real detriment. The time for considering whether there had been detriment was the time when the insurer communicated its decision not to continue to extend indemnity.

I am satisfied that the detriment referred to may be to the insured or to someone else, for example the present first plaintiff. In the present case, it was in practical terms only the first plaintiff who was likely to be affected by the decision of the insurer not to indemnify. The question is whether, during the time when Jantom was represented by the insurer, or its representation was arranged by the insurer, the first plaintiff suffered detriment by comparison with the position which would have obtained if indemnity had been declined in November 2008. Despite the attraction of Campbell J’s view in New World Fabrications, I am bound to follow a decision of the Court of Appeal of another Territory, and find myself unable to distinguish Adlington on the facts. I would therefore not have been persuaded that the insurer was estopped from relying on its defence that the policy did not respond.

The claim by the second plaintiff

The second plaintiff claims against the first defendant damages for negligence, damages under ss 74B and 74D of the Trade Practices Act, and indemnity under s 183 of the Workers Compensation Act. The second plaintiff claims against the second defendant damages for breach of contract only. The second plaintiff also claims against the third defendant under ss 206 and 207 of the Civil Law (Wrongs) Act and

s 601AG of the Corporations Act.

The relevant portions of s 183 of the Workers Compensation Act are as follows:

183       Remedies against employer and stranger
(1)        If any injury in relation to which compensation is payable under this Act is        caused under circumstances that appear to create a legal liability in a person            other than the employer to pay damages in relation to the injury –
(a)        the worker may take a proceeding against the   person to recover damages and may also make a   claim against the employer under this Act; and
(b)        if the worker receives both amounts under this   Act and damages from the other person – the   worker must repay to the employer so much of   the amounts as does not exceed the amount of   the damages received from the person; and
(c)        on notice to the other person, the employer has   a first charge on money payable by the person   on the worker to the extent of any amounts that   the employer has paid to the worker under this   Act; and
(d)        if the worker has received amounts under this   Act, but no damages or less than the full amount   of the damages to which the worker is entitled –   the person liable to pay the damages must   indemnify the employer against so much of the   amounts paid to the worker as does not exceed   the damages for which that person is liable; and
(e)        payment of money by the other person to the   employer under paragraph (c) or (d) is, to the   extent of the amount paid, a satisfaction of the   liability of that person to the worker.

(2) If an amount of compensation is paid in relation to a lump sum claim, this section applies as if a reference to amounts paid under this Act by an employer to a worker included a reference to any legal costs as between party and party that the employer is liable to pay in relation to the claim.

I am satisfied that the injury to the first plaintiff was caused under circumstances which created a legal liability in the first defendant to pay damages in relation to the injury.

Accordingly the provisions of s 183 of the Workers Compensation Act gave the second plaintiff, as employer of the first plaintiff, a first charge on money payable by Jantom to the first plaintiff to the extent of the amounts paid by the employer under the Workers Compensation Act. The second plaintiff is therefore entitled to succeed against Jantom for the amount claimed.

The second plaintiff also relied on ss 74B and 74D of the Trade Practices Act in its claim against Jantom. The difficulty with these statutory counts is that they are limited to claims arising out of the supply of goods of a kind ordinarily acquired for personal, domestic or household use or consumption: s 74A(2)(a). I said in my reasons in Downie v Jantom Company Pty Ltd [2010] ACTSC 110 at [31] and following that the chair in question was an office chair purchased from a retailer of office equipment by a business. I said that I was prepared to take judicial notice that one might find such a chair in a study or home office in residential premises, but that I did not see it as an item of a kind ordinarily acquired for personal, domestic or household use or consumption.

The Federal Court came to a similar conclusion in a different context in Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450. The question was whether office furniture was liable to sales tax at the usual rate, or at a lower rate applicable to furniture of a kind ordinarily used for household purposes. The Court (French, Hill and Whitlam JJ) held that whilst the chairs might sometimes be used for household purposes, they were not of a kind ordinarily so used, and had been correctly taxed as office furniture rather than given the benefit of the exception in respect of household purposes. Accordingly the statutory claims under ss 74B and 74D of the Trade Practices Act are not available to the second plaintiff.

The second plaintiff also claimed against Jantom in negligence under the general law. It is strictly unnecessary for me to consider this count. If it had been the only count available, I would have had considerable reservations about concluding that it was appropriate for the scope of Jantom’s liability to extend to the harm in respect of which the second plaintiff claimed. This would have been a necessary element for me to find against the second defendant in negligence: Civil Law Wrongs Act, s 45(1)(b), (3).

The claim by the second plaintiff (the employer) against Jantom is a claim under s 83 of the Workers Compensation Act for recovery of workers’ compensation amounts paid to the first plaintiff and on her behalf. It is a claim which would not be available in the absence of that section. Neither Jantom nor its insurer would have any liability to the second plaintiff (other than for loss of servitium, which is not pursed) under the general law.

The policy provides that GIO General will insure Jantom “for any amount you become legally liable to pay as compensation for personal injury . . . happening during the period of insurance and caused by an occurrence connected with your business”. “Personal injury” is defined to mean, relevantly, death, bodily injury, illness, sickness, disease, disability, mental injury, nervous shock. “Compensation” is defined as money payable because of a judgment awarded against the insured by a court of law or because of any settlement of a claim negotiated by or agreed to by the insurer. The question is whether the amount recoverable by the second plaintiff against Jantom comes within the expression “compensation for personal injury”. Senior counsel for the third defendant submits that it does not, and that the claim by the second plaintiff is not a claim for compensation for personal injury, but a claim brought pursuant to a statutory entitlement by an employer to recover workers’ compensation amounts paid from a tortfeasor. Senior counsel for the plaintiff submits that, whilst the claim by the second plaintiff against Jantom is not strictly speaking a claim for damages for personal injury, it is in practical terms such a claim, and the policy was intended to cover it.

In theory the first plaintiff might have decided to rely on her workers’ compensation benefits, and not to pursue an action for damages. If this had happened, I can assume that the workers’ compensation insurer would have brought an action in the name of the employer against Jantom. The amount at issue would have been precisely the amount the first plaintiff would have been required to repay to the workers’ compensation insurer if she had recovered damages.

I take account of the fact that the policy was prepared by GIO General and is to be construed contra proferentem.

It seems to me that the policy should be read in such a way that the claim by the second plaintiff against Jantom is covered by it. The second plaintiff is thus entitled to succeed against the third defendant.

The claim by the second plaintiff against the second defendant Ex-Government Furniture is a claim limited to damages for breach of contract. I am satisfied that under the general law there was an implied term in the contract for sale of the chair by Ex-Government Furniture to the second plaintiff that it would be of merchantable quality and reasonably fit for its intended purpose as an office chair. Additionally, such a condition was implied by s 71 of the Trade Practices Act.

Senior counsel for the second defendant submitted that there might also have been such an implied warranty by virtue of the Sale Of Goods Act1954 (ACT). Section 19 of that Act deals with the question. There is no evidence that the second plaintiff as buyer of the chair relied on the skill or judgment of Ex-Government Furniture in purchasing the chair, and it does not seem to me that any implied warranty or condition arises under that Act.

Nevertheless, under the general law of contract, I am satisfied that the second defendant sold the chair to the second plaintiff with an implied condition of that sale being that the chair would be reasonably fit for its purpose as an office chair. In the event it proved not to be, despite the fact that it was used in precisely the manner one would expect an office chair to be used. This amounted to a breach of contract by the second defendant. This leaves open the question as to the measure of damages for breach of contract, and whether these can now be seen to extend to the amount paid out by the purchaser to its employee in satisfaction of her entitlements under the Workers Compensation Act.

The usual remedy for breach of contract is an award of damages calculated by reference to the loss caused by the breach. But not all loss which can be causally linked to the breach is compensable. Loss will not be the subject of an award of damages if it is too remote. What is often referred to as the rule in Hadley v Baxendale (1854) 9 Exch 341 at 354 is that a loss caused by a breach of contract will not be too remote if it:

. . . may be fairly and reasonably considered either [as] arising naturally, that is, accordingly to the usual course of things, from such breach of contact itself or . . . may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

The rule has been restated, in C Czarnikow Ltd v Koufos [1969] 1 AC 350 at 385, as requiring that:

. . . on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

This passage has been adopted in a number of decisions of the High Court of Australia, including Wenham v Ella (1972) 127 CLR 454 at 471-2 per Gibbs J.

There is no doubt that damages may be recoverable for personal injury caused by breach of contract – see for example Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387; Cullen v Trappell (1980) 146 CLR 1; Chappel v Hart (1998) 195 CLR 232. However, in all of the cases I have been able to identify, the personal injury for which damages were awarded was injury suffered by a party to the contract. Here the purchaser of the chair seeks to recover an amount it has had to pay to one of its employees under workers’ compensation legislation. I have not been taken to any authority where such a claim for damages for breach of contract has been successfully brought. It seems to me too far a stretch to hold that a loss of this kind should have been within the contemplation of either contracting party at the time of the sale of the chair, or even to hold that a reasonable person in the position of the second defendant would have realised that such a loss was likely to occur as a usual consequence of such a breach. It seems to me that the loss for which the second plaintiff claims is too remote, and that the second plaintiff is not entitled to recover the amount claimed by way of damages for breach of contract. As this is the only amount claimed by the second plaintiff against the second defendant, and breach of contract is the only cause of action, the second plaintiff’s claim against the second defendant must fail.

Liability – Summary

To summarise the position thus far, the first plaintiff is entitled to succeed against the first defendant in negligence, and against the third defendant under the Civil Law (Wrongs) Act and the Corporations Act.

The second plaintiff is entitled to succeed against the first defendant in its claim under the Workers Compensation Act and against the third defendant under the Civil Law (Wrongs) Act and the Corporations Act.

The only claim against the second defendant is by the second plaintiff in contract, and that claim fails.

Damages – The Oral Evidence

The first plaintiff was born in July 1962 in Brisbane. She left school at age 15 and worked for a number of employers. She married in 1984. Her husband was in the army. They moved to various army postings around Australia over the years. They had a son in 1987 with a disability following some brain damage at birth. After this the first plaintiff undertook some part-time study at Bendigo University in Business. In the early 1990s the family moved to Canberra for about three years. The first plaintiff enrolled in some subjects at Charles Sturt University. They moved to Perth for some years, then back to Canberra. In March 2000 the first plaintiff obtained employment with the second plaintiff. She started in a job-sharing position but by the time of the accident her duties had increased and she was working full-time.

On 11 October 2002 her office chair collapsed under her and she fell to the floor. She felt a sharp pain on the left side of her lower back. She was unable to get up for ten or fifteen minutes. Her husband came and collected her, and took her home. The day of the fall was a Friday, in the middle of the afternoon. Over that weekend the plaintiff took Panadol and Neurofen, and used heat packs and cold packs. She hoped that she would make a full recovery quickly, but did not. She went back to work on the following Monday. Some ten days after the fall she saw her general practitioner, Dr Turtle. He referred her for an MRI scan of the low back. He also referred her to a Chinese herbalist for treatment which included massage. After the MRI scan, he referred her to a physiotherapist who gave her traction. This aggravated her back pain and she had a week off work. She then had hydrotherapy in the form of exercises in a pool, which she said did not help. Dr Turtle prescribed medication, some of which gave her unpleasant side-effects. She had some osteopathic treatment but did not remember this being of assistance. She was referred for cortisone injections which she said were very painful. She was sent to another physiotherapist who gave her some relief.

She was referred to the Canberra Injury Management Centre under the supervision of Dr Eaton, occupational physician. She developed unpleasant symptoms in the legs which felt as though ants were crawling under her skin. She went to the Canberra Hospital where she was given an injection for this. The symptoms subsided but remained at a lower level permanently, managed by medication and the use of a hand- held massager. She was sent to see a neurosurgeon, Dr Fuller.

In May 2003 she changed to another general practitioner because of frustration that she was not getting any better and her existing doctor could not explain why. The new general practitioner, Dr Curtotti, referred her to a psychiatrist and prescribed an anti-depressant. She was also taking Endone, a strong painkiller, which she described as a terrible drug, numbing and dumbing her down and affecting her relationship with her husband so that she became a recluse. She thought about suicide. The psychiatrist was of some help to her, over a period of time. By the time of trial she was still spending days in bed from time to time. Her pain was always present, and she was continuously on strong pain medication. There were occasions when she still thought about suicide.

By the time of the trial her husband had left the army but was working in the Commonwealth Public Service in Canberra. On a normal day, he got up at about 4:30 am or 5:00 am, took the dog for a walk, and brought her breakfast in bed with her tablets before going to work. He attended to all of the ironing. After he left, the plaintiff would get up and have a shower, then would go back to bed for twenty minutes before getting up again and getting dressed. She would then drive herself to work. At the time of trial she was working for five to six hours a day in an office. She tried to get home before her husband, to spend some time with their son. She would take the dog for a short walk, and would generally go to bed for the night by about 6:00 pm. She no longer did any cooking. The family had prepared meals delivered once a week, which required only heating in the microwave oven. She went to bed early by reason of a combination of her pain and the effect of the medication, and most nights she had dinner in bed. They no longer had dinner together as a family.

In June 2003 the first plaintiff was referred to Dr Speldewinde, who gave her injections into her spine on three occasions. The first one was extremely painful, being administered without anaesthetic. The other or others were administered with a sedative. The effect was an immediate significant reduction in back pain, which lasted for a lengthy period. The plaintiff was able to go back to work in July 2003, starting at nine hours a week and gradually increasing over time, with the second plaintiff.

In December 2003 Dr Speldewinde performed a radio-frequency neurotomy to the lower back. Although a sedative was used, she described this as an extremely painful experience. It provided relief for some two months, but the pain came back almost overnight. The procedure was then carried out again with similar effect. She was able to increase her hours and reduce her dose of Oxycontin. She was referred to a psychologist for counselling.

In October 2004 Dr Speldewinde carried out a further neurotomy. The plaintiff said that this did not have the immediate effect of reducing her pain.

She undertook a rehabilitation program, which she paid for privately. She had become frustrated with the workers’ compensation insurance company, and with not being able to work. She talked to her husband about taking control of their lives and of her health.

Before the accident the first plaintiff had been fit, and engaged in sport. She had come third in a triathlon in Perth, which she described as a very positive experience. She and her husband had engaged two former Olympians as personal trainers on their return to Canberra in 2000.

The rehabilitation program in late 2004 produced an improvement in her condition, but it was short-lived. In January 2005 her hours had been increased to 20 hours per week but by the end of that month had been reduced to 15. She felt that she could not cope with the longer hours because of her back pain. Early in 2005 she saw a psychologist once a fortnight.

In March and April 2005 her pain became much worse, and she was certified early in April as unfit for work. During that month she had a problem with frequency of urination, needing to get up every night every half an hour, which affected her sleep badly.

She was referred by Dr Curtotti to Dr Pik, a neurosurgeon. He carried out a discogram in May 2005, a very painful procedure which involved the projection of a long needle into the spine without aesthetic or sedative. Following that procedure, Dr Pik recommended surgery.

At the end of June 2005 the second plaintiff terminated the first plaintiff’s employment because of her injury and inability to perform her duties.

In late July 2005 Dr Pik carried out surgery on her low back under general aesthetic. She was in hospital for about a week. When she came out of the anaesthetic she was in extreme pain. She recalled her time in hospital as very difficult. In hospital she contracted a throat infection and a urinary tract infection. She did her best to get up and walk about. When she got home her husband looked after her.

In August 2005 her workers’ compensation claim was listed for hearing at the Magistrates Court, and was settled. The settlement included a common law release of the employer.

A couple of months after the operation, the plaintiff found employment with Special Olympics Australia, where she had previously worked in a voluntarily capacity. She would have to do most of this work from home, in bed if necessary, by telephone and computer. She worked with Special Olympics until June 2006. The demands of the job changed and she could no longer cope with the new duties. She found work as a tutor at Queanbeyan High School, working ten to twelve hours a week for about five weeks. She then obtained employment with the Family Relationships Centre at Woden for 25 hours a week as an intake officer. In July-August 2007 she was promoted to Office Manager, her hours increasing to 30 and later 35 per week. She was given her own office. She was able to do exercises during the course of the day but required an increased dose of Oxycontin to manage her pain.

The plaintiff was sent by the solicitors then representing the first defendant (now the solicitors for the third defendant) to Dr Akkerman, a psychiatrist, for a report. This was a very negative experience for her. She said that she and her husband were there for about fifteen minutes. Dr Akkerman, she said, spoke mainly to her husband and was very aggressive towards her. She had the impression that he regarded her as a malingerer, and that he seemed angry with her. She said that at some point, in her husband’s absence, he likened her to an angry bitch. She was offended, hurt and annoyed that a defendant’s doctor could put her through the experience and treat her in such a way.

The first plaintiff gave evidence about tasks around the house she had attended to previously, now done by her husband. She referred to the washing, drying and ironing, and to preparation of meals. She thought that her husband spent eight to ten hours a week more than he had previously done on such tasks. By the time of trial the first plaintiff was working 30 hours a week as Office Manager at the Family Relationships Centre and was due to start in a new role, writing policies and procedures for the organisation, the month after trial.

In addition the first plaintiff had done some work for a friend she had met in Perth, Ms Hanson. The work was administrative in nature and she was able to do it from home.

She and her husband had had rails put in the bathroom, and made some other changes to the house. Partly because of her condition and partly for reasons associated with her son, they had moved the internal staircase in the house. They had also purchased a remote-control bed to make it easier for her to get up. They had converted three bedrooms into one to make life easier for her. By the time of trial she and her husband were considering engaging a house cleaner, probably for an average of about an hour a week, to look after the heavier aspects of cleaning.

She was continuing to take Oxycontin three times a day, and was also taking a sleeping tablet most nights. The Oxycontin required her to see her general practitioner every 28 days for renewal of the prescription.

In her oral evidence the first plaintiff described her pain as a core pain about the size of her fist in the lower left part of her back, radiating across or down the left leg. The pain was always there but varied in intensity. Bending made it worse, as did prolonged sitting, stranding or lying in the same position. She needed to lie down after taking the dog for a walk. They no longer drove, for example, to Sydney but now went by air if they needed to go there.

The first plaintiff said that if it had not been for the accident, by the time of trial she would have been working at Executive Level 1, full-time in the Commonwealth Public Service. She would have pursued her studies in aged care. She had no plans to retire at any particular age and would have continued working as long as she was able to.

The first plaintiff was cross-examined to some effect about the rearrangement of household tasks within the family and her work in employment, but was not challenged about the injuries or disabilities, including her complaints of pain and other symptoms, or about her treatment.

Her husband gave evidence generally supportive of her case and consistent with her own evidence. He explained that her son tended to be oblivious to her condition and quite demanding of her time and attention. He said that his wife was still able to walk with him and their dog at weekends, including walks of some five kilometres around the lake and bridges of central Canberra. There had been times when he had been away for periods of two to three weeks at a time in connection with his work. This had happened on probably eight or nine occasions since the plaintiff’s injury, so that the functioning of the house was the responsibility of his wife during those times.

I have previously mentioned that Ms Smith-Howarth gave oral evidence (at [28]). Her evidence also corroborated that of the first plaintiff and her husband, as to the apparent effect of the injury on the plaintiff. She had not seen the first plaintiff for about four years prior to trial.

Corroborative evidence was also given in the plaintiff’s case by Ms Winifred Hanson, who had met the plaintiff in Perth when their husbands were there with the army, and had remained friends over the years. She had engaged the first plaintiff to do some part-time work for her during 2011.

She said that the accident had had a significant effect on the first plaintiff psychologically. She had observed her soon after the injury, and described her as depressed, negative and anti-social. She recalled some talk of self-harm and wanting to die, and a pessimism about her future. Her outlook improved over time but there were depressive episodes over the years. She said that the first plaintiff had been in a good frame of mind during 2011 while she was doing work for her.

The Medical Reports

All of the medical evidence was tendered in report form. None of the doctors gave oral evidence.

There is no report from the general practitioner who first treated the plaintiff, Dr Turtle, although there are radiological reports which he obtained. An MRI of the lumbosacral spine on 28 October 2002, a short time after the injury, showed a disc bulge at L4-5, with the disc in contact with the L5 nerve root. The plaintiff was at that time complaining of pain in the low back. There were also complaints of pain in the neck with radiation to the left trapezius, and an MRI of the cervical spine on the same date showed some annular bulging at C3-4, C4-5 and C5-6. Investigations into the neck were not subsequently undertaken and I infer that the early neck symptoms cleared up reasonably quickly.

The plaintiff changed general practitioners in May 2003 and was thereafter under the care of Dr Curtotti. He prepared a long and detailed report to the solicitors for the plaintiffs in April 2007, noting that the first time he saw her she complained of severe pain in the low back accompanied by depression and lack of motivation. She had a sense of hopelessness and doubted whether she would improve. She occasionally wished she was dead. She said that she had not had any symptoms of depression for twenty years before her injury. She also complained of a feeling of ants crawling over her pelvis and legs. She had been taking the strong analgesic Endone since a visit to the Canberra Hospital Emergency Department about ten days before he saw her. She had tried various other medications but found Endone to be the most effective.

Dr Curtotti saw the first plaintiff on numerous occasions over the years up to the date of his report, for referrals to other practitioners, prescriptions and medical certificates for time off work. By the time of the report she was on Oxycontin. She continued to have symptoms of depression. Dr Curtotti thought that she would require continuing treatment including physiotherapy, and might require further surgery. His diagnosis was that she had suffered a rupture with disc bulge at L4-5, an injury to her left sacroiliac joint, and major depression, which was reasonably well controlled by medication. Her prognosis was guarded, with some prospect of improvement of stabilisation of symptoms in the future. She had returned to some work and her symptoms were at a lower level than in the early years after the injury. She seemed strongly motivated to continue to improve.

The workers’ compensation insurer referred her to Dr Ian Low, a specialist in occupational medicine, for assessment and report. Dr Low seems to have become involved to some extent in treatment also. He formed the view that she had suffered a mechanical derangement of the lower spine, and that the position was complicated by a disturbance in her emotional functioning which had led to some tightness in the spinal musculature. He recommended treatment by a physiotherapist and also referral to a psychologist.

Dr Low saw her again late in April 2003. She had by then been seeing a physiotherapist three times a week, and this had reduced her level of back pain and requirement for analgesics. She had, however, returned to work after the physiotherapy treatment and her back pain had become much worse. She had constant low back pain, mainly on the left side, with some pain into the left groin and down the left thigh.

Dr Low saw the plaintiff again in late May 2003, shortly after her change of general practitioner. She was very depressed, and had developed a sensation of ants crawling under her skin from slightly below the waist. She did not wish to continue with the physiotherapy. She was undergoing some traditional Chinese treatment. Dr Low repeated his recommendation of psychological counselling.

In June 2003 Dr John Fuller, neurosurgeon, saw the first plaintiff on referral by her general practitioner. He had the benefit of the MRI scan. He did not suggest any surgery but referred her to Dr Speldewinde, consultant in rehabilitation and pain medicine, to consider whether an injection into the sacroiliac joint might be helpful.

She saw Dr Speldewinde in June 2003. She was taking painkillers and also anti-depressant medication. He recommended a left lumbosacral diagnostic block and a trial of different medication including Oxycontin. He also set up an exercise program through his rehabilitation centre, and encouraged her to return to work for such hours as she could cope with.

Also in June 2003, she was seen by Dr Kumar, psychiatrist, on referral by her general practitioner. He diagnosed major depression in the context of pain, accompanied by anxiety and tearfulness. He regarded the depression as at the moderate to severe level.

Dr Speldewinde continued to supervise the first plaintiff’s progress. A number of his reports are in evidence, over a period of some eighteen months through to November 2004. Between August and October 2003 he carried out two blocks at L4-5 which, he said, gave complete relief of back pain.

Dr Low saw the first plaintiff again in October 2003 for a report to the workers’ compensation insurer. She was then working twelve hours a week. She continued to experience low back pain, with pain down both legs to the toes as though ants were crawling under her skin, and a sharp pain from time to time extending up her back to the lower end of the scapulae and down the front of the left leg to the knee. She was much improved since he had seen her six months earlier, but he thought that, subject to appropriate diagnosis, she might benefit further from treatment directed at the left L4-5 facet joint.

In December 2003 Dr Speldewinde conducted a further radio-frequency neurotomy to the facet joint which, he reported, gave significant relief.

In January 2004 he told the general practitioner that she continued to have troublesome left lower back pain, and continued with her need for Oxycontin. He recommended her for psychological treatment. The neurotomy relief, which he assessed at 70%, lasted for about six months but had worn off by about August 2004 leaving her with severe pain and confined to the house and to bed in great distress. He repeated the neurotomy in November 2004 and reported to her general practitioner that this led to instant relief (although the first plaintiff herself did not entirely agree with this). Dr Speldewinde continued to think that she would benefit from psychological or psychiatric intervention.

It appears that from about the end of 2004 the workers’ compensation insurer ceased payment for Dr Speldewinde’s involvement.

In May 2005 the general practitioner referred the first plaintiff to Dr Justin Pik, neurosurgeon. His impression was that she had mechanical low back pain consistent with a discogenic origin. He recommended a lumbar discogram to confirm, or otherwise, the L4-5 disc as the main cause of her problems. Following the discogram, which showed a pain response on injection at L4-5, Dr Pik recommended a fusion procedure at L4-5 which he thought had a 70-75% chance of relieving or at least improving her symptoms. This operation was performed on 28 July 2005 at National Capital Private Hospital under general anaesthetic. The operation was technically uneventful and successful. When Dr Pik saw the patient some nine weeks later, she had improved significantly. Her low back pain had decreased by at least

60%. She continued to complain of a degree of left leg pain but this had also improved. She had reduced her Oxycontin by about half and was able to walk for 30 minutes at a time on a treadmill.

Dr Pik saw the first plaintiff again in February 2006, seven months after her operation. Her low back pain had continued to improve. She assessed it as three out of ten by comparison of ten out of ten before surgery. There was some recurrence of left leg pain. A CT scan showed solid fusion at L4-5.

The solicitors for the plaintiffs had the first plaintiff examined for the purposes of the case by two medical specialists, Dr William Knox, psychiatrist, and Dr Graeme Griffith, consultant surgeon. Both saw her on two occasions, in 2007 and 2010, and provided two reports.

Dr Knox saw the first plaintiff for an hour and three-quarters in July 2007. She told him that although her back pain was less severe since the fusion operation in July 2005, she continued to be in severe pain with disturbed sleep. She was socially very avoidant, and less involved in family leisure activities. Her relationship with her husband was markedly altered, including as to sexual interest and capacity. Her return to work had been positive, distracting from her painful condition and allowing her some sense of worth. Dr Knox diagnosed her as suffering from chronic major depressive disorder of moderate severity which he thought was likely to continue. Her self-esteem was low, and there was considerable evidence that she held a hopeless outlook for the future. Her weight had increased from about 75 kilograms at the time of the injury to about 95 kilograms. She was gaining some benefit from treatment sessions with a clinical psychologist, June Staunton, and Dr Knox favoured her continuing to see Ms Staunton once a week, for another one to two years, after which she should be able to reduce the frequency of these sessions and perhaps cease them altogether.

Dr Knox reviewed the plaintiff in May 2010. He had available to him a number of reports including those of Dr Smith and Dr Akkerman.

The first plaintiff had continued to see Ms Staunton, with varying degrees of frequency, and was working as an office manager for sixty to sixty-five hours a fortnight. She was taking Oxycontin three times a day for pain relief. Dr Knox noted some improvement in her psychological condition since he had previously seen her. She seemed less helpless but still appeared tired and troubled, with poor capacity for pleasure. She told him that there were days when she was incredibly sad, and she felt guilty about her lack of participation in her marriage and family. Attempts at sex had failed because of her pain. Her sleep was poor. She had lost weight and was by then 85 kilograms.

Although she still met the criteria for a major depressive disorder, Dr Knox thought that a preferable diagnosis was minor depression/depression not otherwise specified. She would benefit from occasional supportive assistance from her psychologist. Her condition was broadly stable and would be likely to continue at that level for the foreseeable future.

The solicitors for the plaintiffs also sent her to Dr Graeme Griffith, a consultant surgeon with an extensive medico-legal practice. He saw her in August 2007 and again in May 2010. He noted that the fusion operation in 2005 had been technically successful but had not resulted in long-term reduction in pain. Rather, the first plaintiff said that the pain had become worse since the operation. On physical examination she displayed considerable restriction of flexion and extension of the lumbar spine.

Dr Griffith said that before injury there had probably been asymptomatic degeneration in the lower lumbar spine consistent with her age. There was evidence that she had suffered an L4-5 disc lesion which had been resolved by surgical fusion. She continued to suffer from sciatic pain on the left side. She had suffered a contusion to the left shoulder which periodically produced symptoms but was not a major focus of her complaints. She continued to suffer from persistent low back pain, accompanied by a chronic neuropathic pain state, and a chronic adjustment disorder with manifestations of depression and anxiety. She suffered from an associated condition of restless legs syndrome which had first presented after the injury and which Dr Griffith associated causally with the injury. Her ability to resume a normal life was severely curtailed in spite of technically successful surgery. She was able to work part-time and justified a need for some help in the home with cleaning and gardening.

On review in May 2010, Dr Griffith found that the plaintiff’s symptoms had continued since he first saw her. She displayed marked regional muscle spasm causing great difficulty in lifting the left leg. Psychologically she was not coping well.

Dr Griffith was provided with the reports of Dr Smith and Dr Akkerman. His physical findings were very different from those recorded by Dr Smith. He did not think that Dr Smith’s analysis of the first plaintiff’s condition could be sustained on a careful assessment of the information on file and the physical findings. Dr Griffith disagreed with Dr Smith’s finding of embellishment.

Dr Griffith also disagreed with Dr Akkerman’s conclusions. He said that since the first plaintiff’s pain had never been relieved, it was counterintuitive that she would suddenly have become euthymic at the time Dr Akkerman saw her.

Dr Griffith said that on examination the first plaintiff appeared in significant discomfort and was borderline tearful, indicating frustration. He found no evidence of embellishment or inappropriate behaviour. Movements of the lumbar spine remained restricted by pain. His diagnosis remained as before. He made some recommendations as to physical treatment but it is unclear whether these were conveyed to the treating doctors or whether they agreed with the suggestions. Dr Griffith said that the prognosis was guarded and that it was unrealistic to expect dramatic early relief. Other strategies were worth exploring in the hope of improvement. As to causation, Dr Griffith said that there was little doubt that the fall from the chair was responsible for the first plaintiff’s chronic sacroiliac sprain and possible instability. It was likely that the annular tear and bulging at L4-5 was the immediate result of the fall, although the condition was aggravated, with a major rupture due to the progression of the annular tear in April 2005.

Dr Anthony Smith, orthopaedic surgeon, saw the first plaintiff at the request of the solicitors now representing the third defendant, in November 2009. He took a detailed history, and had the benefit of a number of previous reports. His findings on physical examination were similar to those of Dr Griffith. Dr Smith accepted that the plaintiff suffered an injury in the form of what he described as an exacerbation to previously asymptomatic degenerative changes in the lumbar spine. She had psychological problems which were outside his field of expertise. Her prognosis was unpredictable. She might require further treatment at the levels above and below L4-5, the site of her fusion operation. He thought that the restrictions in movement which he found on physical examination were manufactured. He did not believe that she was as badly affected as she made out. He expected a resolution of her symptoms. He thought that she had not required any domestic assistance before her operation, and might have required some assistance for a period of four to six weeks thereafter.

Dr Akkermann, psychiatrist, saw the first plaintiff on 30 November 2009. He was also provided with background information including medical reports. He provided a brief report which I would describe as somewhat superficial. He described the first plaintiff as very frustrated and very angry, but with euthymic or normal mood. He did not arrive at a diagnosis of any psychiatric condition. He found that there were no restrictions on her domestic, social or recreational activities from a psychiatric point of view. Her prognosis depended on her physical condition.

Damages

As I have said, the first plaintiff was not challenged in her oral evidence as to her symptoms and complaints generally, but only as to her working capacity and need for assistance. I accepted her as an honest and truthful witness, generally doing her best to recall events accurately. Where she realised that she may have made a mistake or given an incorrect impression in earlier evidence she voluntarily corrected it. Where she could not remember dates or the precise order of events in years gone by she frankly said so. I did not gain the impression that she was embellishing her evidence about her physical or psychological condition, or the severity of her symptoms.

As to her physical injuries, I preferred the evidence of the doctors whose reports were tendered in her case to the opinion of Dr Smith. Events have not borne out his optimism that the first plaintiff would achieve a resolution of her physical symptoms. I reject his opinion that she was manufacturing physical signs when he saw her, and that she was not as badly affected as she made out.

There is no issue that prior to the fall the plaintiff had degenerative changes in the lumbar spine which were asymptomatic. There has been no suggestion that they were likely to begin to cause symptoms if the collapse of the chair had not occurred.

As to the first plaintiff’s psychological condition, I prefer the opinion of Dr Knox to that of Dr Akkerman. As I said earlier, I found Dr Akkerman’s report superficial. He had the benefit of a number of reports from the treating psychiatrist, Dr Kumar, as well as Dr Knox’s first report. All of these supported a diagnosis of major depression. Dr Akkerman did not really explain why he rejected their opinion. Where his evidence is inconsistent with that of Dr Knox, I prefer the latter.

It is now almost eleven years since the plaintiff’s injury. She has had considerable treatment, including a lumbar fusion which did not, as hoped, solve her problems. I accept that she has been left with permanent and often severe low back pain, and permanent sciatica down the left leg. I accept that the pain is debilitating and has caused a substantial interference with the plaintiff’s working life, home life and personal relationships.

She continues to suffer from depression and anxiety, and there is apparently not much room for optimism that she will ever recover from her psychological condition although some further improvement may be expected over time.

The first plaintiff is now 51 years of age. There is no evidence of any shortening in her life expectancy. She has many years ahead of her of pain and depression. Her life is very different to the life she could have expected if it had not been for her injury. Her enjoyment of life, and the kind of life she is able to lead, have been altered immeasurably.

Senior counsel for the plaintiffs submitted that an appropriate award of general damages for pain and suffering and loss of enjoyment of life would be $150,000.00. Senior counsel for the third defendant submitted that an appropriate award would be $100,000.00. Senior counsel for the second defendant adopted the submissions on behalf of the third defendant as to damages.

The lower figure put on behalf of the defendants reflects to some degree an expectation that I would accept the opinions of Dr Smith and Dr Akkerman, which I do not.

In my opinion the evidence calls for an award of a very substantial sum by way of general damages for pain and suffering and loss of enjoyment of life. I award $140,000.00.

It was accepted by counsel that the amount awarded for general damages should be apportioned half to the past and half to the future. The past component attracts interest at 4% per annum, calculated taking account of the fact that the award for the past is spread over the period since the injury, with some weighting towards the early period immediately after the accident. It is now, as I said, almost eleven years since the injury. For interest on the past component of general damages I award $16,000.00.

In respect of awards of interest, it will be necessary for the first plaintiff to give credit for the amount she received in settlement of her workers’ compensation claim. I shall return to this.

The past treatment expenses will be allowed as follows:

Paid by workers’ compensation insurer $20,958.78

Paid by first plaintiff to hearing $84,201.54

Paid by Medicare to hearing $3,686.30

Paid by Defence Health to hearing $807.00

Further expenses since hearing - say $2,300.00

________

$111,953.62

I round this figure to $112,000.00 and allow that amount.

The first plaintiff is entitled to interest on the amounts she has paid. Interest will be calculated on $86,000.00 at the commercial rate of 9% for the period of almost eleven years since the injury, halved to recognise that the amount has been paid over the whole of that period. The precise figure arrived at will be rounded to $40,000.00 which I allow.

In the course of his closing submissions, senior counsel for the plaintiffs handed up a calculation in respect of future out-of-pocket expenses, amounting to almost $340,000.00. The list included a number of items based on recommendations, for example, by Dr Griffith and Dr Knox, in the absence of any evidence from the first plaintiff that she intends to accept the recommendations and to spend the money suggested. Senior counsel for the third defendant submitted that allowance should be made only for visits to the general practitioner and prescribed medication. It seems to me that the preferable approach is to take an estimated figure to cover likely future expenses, and to apply the appropriate multiplier. The plaintiff is now 51 and the multiplier for the rest of her life is 1057. I adopt a figure of $30.00 per week as a reasonable likely average for her expenditure in the future, and reduce the resulting total by 15% to take account of vicissitudes. For future expenses I allow $27,000.00.

This brings me to loss of earning capacity. For past loss of earnings it is common ground that up to 31 August 2005 I should award an amount equal to the sum paid by the workers’ compensation insurer, $45,966.75. After that date, senior counsel for the plaintiffs relies on calculations which support a total claim for pass loss of the order of $180,000.00 calculated in a detailed fashion by reference to the difference between the amounts actually earned by the first plaintiff and what she could have earned assuming she had joined either the ACT Public Service or the Commonwealth Public Service and achieved promotions at assumed intervals.

Senior counsel for the third defendant submits that taking account of all of the variables in the case I should make a generalised allowance of $200.00 per week to represent the difference between what the plaintiff has earned and what she would probably have earned if it had not been for the injury. I prefer that approach in principle but the amount suggested seems to me a little parsimonious. On the evidence a reasonable figure to adopt as representing the average weekly loss over the period since August 2005 is in my view $250.00 after tax. I allow, for the period since 31 August 2005, that sum for the period of eight years, which comes to just on $104,000.00. I round the amount awarded for past loss of earning capacity to $150,000.00.

The first plaintiff is not entitled to interest on the component up to the end of August 2005 but is entitled to interest at the prescribed commercial rate of 9% per annum for the eight years since. I calculate that interest at $37,440.00.

For loss of earning capacity for the future, I adopt the same differential figure of $250.00 net per week, and a multiplier to age 65 of 584.5. I reduce the resulting figure by 15% for vicissitudes and round it to $125,000.00.

The Fox v Wood component is claimed at $7,000.00 and is not in contention. I award that sum.

By way of loss of superannuation benefits, I award 9% of the amount allowed for past loss earning capacity, $13,500.00, and 9% for the future, $11,250.00.

In does not seem to me that the claim for the commercial value of services provided by family members and others for the plaintiff lends itself to a mathematical approach. One is aware from general experience that the amount of time spent in this way varies from day to day and from week to week, and that tasks which attract these damages tend to be interspersed with other domestic and similar tasks which do not. I am satisfied on the evidence that it is reasonable to allow an average of ten hours per week for the past and the future to cover the first plaintiff’s need in this regard. I adopt a figure of $20.00 per hour as representing the commercial cost. For the past eleven years since the injury I allow $110,000.00.

This amount attracts interest at the prescribed commercial rate of 9% per annum. I round the resulting figure to $54,000.00.

For the future, I allow ten hours per week at $20.00 per hour. I adopt the whole-of-life multiplier of 1057, and reduce the resulting figure by 15% for vicissitudes.

I round the figure to $180,000.00.

I mentioned earlier that the first plaintiff will need to give credit against the awards for interest for the notional interest she has been able to achieve on the workers’ compensation settlement amount of $190,000.00 which she received on 30 September 2005. She should give a credit for the amount I have awarded by way of interest on general damages ($16,000.00), which was calculated on half of the general damages, that is $70,000.00. She should give credit on the balance at the prescribed commercial rate of 9%, a credit of $86,400.00. The total credit for interest will be $102,400.00.

The damages will therefore be calculated as follows:

General damages $140,000.00

Interest on past component $16,000.00

Past out-of-pocket expenses $112,000.00

Interest on expenses paid by first plaintiff $40,000.00

Future expenses $27,000.00

Loss of earning capacity – past $150,000.00

- interest $37,440.00

- future $125,000.00

Fox v Wood $7,000.00

Loss of superannuation benefits - past $13,500.00

- future $11,250.00

Griffiths v Kerkemeyer – past $110,000.00

- interest $54,000.00

- future $180,000.00

_________

$1,035,430.00

Less interest on $190,000.00 settlement $102,400.00

_________

$933,030.00

Upon consideration, that total seems to me to reflect properly the impact of the injury upon the first plaintiff.

The second plaintiff claims the total paid out by way of workers’ compensation, including the settlement amount, $256,925.53. That amount will attract interest, which I calculate from 30 September 2005, being the date the settlement sum was paid to the first plaintiff. I allow eight years’ interest which will go some way to recognise that some payments were made by the insurer earlier and attract interest from earlier dates, although I was not assisted by a calculation in that regard. The award of interest will be $184,986.37. The amount for which the second plaintiff is entitled to judgment is accordingly:

Workers’ compensation payback $256,925.53

Interest $184,986.37

__________

$441,911.90

There will be judgment for the first plaintiff against the first and third defendants for $933,030.00. There will be judgment for the second plaintiff against the first and third defendants for $441,911.90.

There will be judgment in favour of the second defendant.

I shall hear the parties about costs and about any orders which should be made in respect of the contribution claims between the defendants.

I certify that the preceding two hundred and twenty seven (227) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Master Harper.
Associate:
Date: 29 August 2013

Counsel for the plaintiffs:  Mr GA Stretton SC and Mr SA Goodman
Solicitors for the plaintiffs:  Sparke Helmore
Counsel for the second defendant:                Mr GJ Lunney SC
Solicitors for the second defendant               Dibbs Barker
Counsel for the third defendant:                   Mr PM Morris SC
Solicitors for the third defendant                  Moray & Agnew
Date of hearing:  17, 18, 19 October 2011

Date of judgment: 29 August 2013