Tilley v Lawless
[2007] VSC 103
•17 April 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 1010 of 2002
| ANTHONY GORDON DUDLEY TILLEY (A MINOR WHO BRINGS THIS PROCEEDING BY HIS LITIGATION GUARDIAN DUDLEY TILLEY) | Plaintiff |
| And | |
| GRAEME ROBERT LAWLESS & SANDRA LAWLESS | Defendants |
| And | |
| FRANCIS ALEXANDER BOULTON & DAWN MARY BOULTON & CGU INSURANCE LIMITED (ACN 004 478 371) | Third Parties |
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JUDGE: | Cavanough J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 27, 28 February, 1, 2 March 2007. Last written submission filed 8 March 2007 | |
DATE OF JUDGMENT: | 17 April 2007 | |
CASE MAY BE CITED AS: | Tilley (a minor) v Lawless & Ors | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 103 | |
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Insurance – Liability insurance – Policy covering farming business, including leasehold farm, taken out by farmer – Endorsement in favour of landlord of leasehold farm – Construction of policy and endorsement – Liability in connection with “your” business – Whether cover restricted to tenant’s farming business - Landlord negligently injures visitor while repairing fence on farm – Whether particular fencing work done in connection with tenant farmer’s business – Condition requiring insured to take reasonable precautions to prevent bodily injury – Construction of condition – Whether condition complied with – Subjective test – Onus of proof on insured – Onus discharged despite objectively dangerous mode of working - Damages – Assessment – Hand injury to 10 year old child – Pain and suffering and loss of enjoyment of life – Loss of earning capacity – No work history - Whether appropriate to take into account average weekly earnings – Variations from average.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J H Mighell SC With Mr J Goldberg | Slater & Gordon |
| For the Defendants | Mr P O’Dwyer QC With Mr A Larkin | Sullivan Braham Pty Ltd |
| For the First Third Party | Mr R N J Young | Stephen Phillips & Associates Pty Ltd |
| For the Second Third Party | Mr M Thompson SC With Mr A Donald | Norris Coates Lawyers |
HIS HONOUR:
The parties and the claims
On 2 July 2002 the first defendant, Graeme Lawless, was using a machine called a post-driver to put in fence posts on a farm property he owns at Talbots Road, The Heart, via Sale. Among those nearby at the time was his step-grandson, the plaintiff Anthony Tilley, who was then 10 years old. There was an accident. Anthony’s left hand became caught between the post-driver and a fence post, and part of his hand was severely crushed. Anthony lost his ring finger, his little finger and part of his palm and suffered other injuries to his left hand.
Anthony sues his step-grandfather in negligence. Mr Lawless now concedes negligence, in the sense that he failed to keep a proper lookout while operating the post-driver, but there is a contest, said to be relevant in relation to certain third party claims to which I will come, as to how Anthony came to be in a position where his hand could be caught and crushed.
Although Mr Lawless owns the farm property, since 1997 he has leased all of it, except the farmhouse and the immediate surrounds where he and his family live, to the first third parties, Frank and Dawn Boulton. By the lease the Boultons covenanted to effect a public risk policy indemnifying Mr Lawless against public liability. The Boultons already held a multi-risk insurance policy (called a “Country Classic Insurance Policy”) issued by the second third party, CGU Insurance Ltd (“CGU”), in relation to the Boultons’ farming business generally, which they carried on at various locations. The Boultons requested CGU to arrange the cover required by the lease. In response CGU endorsed the existing policy, noting Mr Lawless “for his respective [rights] and interests” under a section of the policy headed “Business Liability”.
Mr Lawless has issued a third party notice against CGU seeking indemnity against Anthony’s claim. CGU denies indemnity on two bases. It says, first, that the accident was not within the cover provided to Mr Lawless by the policy, because, it says, that cover only extended to liability incurred due to an occurrence in connection with the farming business of the Boultons and because, it says, the fencing work in the course of which the accident occurred was being done not in connection with the Boultons’ business but rather for the private purposes of Mr Lawless. Secondly, CGU denies indemnity on the basis that Mr Lawless was in breach of special conditions of the policy requiring him to take “all reasonable precautions” to prevent personal injury and to comply with “recognised standards” for the safety of persons.
If CGU is held entitled to refuse indemnity on the first of those bases, Mr Lawless, by a separate third party notice, seeks damages from the Boultons for allegedly failing to effect a policy which answered the description of a “public risk policy” indemnifying Mr Lawless against “public liability” as set out in the lease.
Sandra Lawless, who is Anthony’s grandmother and Graeme Lawless’ wife, was one of the other persons nearby at the time of the accident. She is not an owner of the property and so was not a party to the lease. She was originally sued as a business partner of Graeme Lawless and, independently, as being personally negligent in relation to the accident. She then claimed indemnity against CGU as a domestic partner of Graeme Lawless pursuant to certain provisions of the policy. The claim by the plaintiff against her as a business partner of Graeme Lawless was abandoned at the outset of the trial. Further, at the end of the trial, senior counsel for Anthony acknowledged that no real case of personal negligence had been run against her. Accordingly, the plaintiff’s claim against her will in due course be dismissed. In these circumstances, I do not think it is necessary to decide whether she herself would have been entitled to indemnity as against CGU.
The appropriate amount to be awarded by way of damages is not agreed as between the parties.
The issues
The following questions fall to be decided:
(a)Was the fencing work within the cover extended to Mr Lawless under the policy?
(b)Was the “reasonable precautions” condition complied with by Mr Lawless?
(c)What is the measure of damages?
In short, my answers to those questions will be:
(a)Yes.
(b)Yes.
(c)$540,000.
It follows that, save perhaps in relation to costs, I do not need to decide whether the cover arranged with CGU by the Boultons for Mr Lawless fully met the requirements set out in the lease. Even if it did not, there was no loss suffered by Mr Lawless on that account. I will return to the question of the costs of the third party notice against the Boultons in due course.
Background[1]
[1]Some of the “Background” material is derived from medical reports which were tendered by consent, rather than from sworn evidence.
In dealing with the issues in this case it is important to understand something of the background and general circumstances of the members of the families involved, especially Anthony Tilley and Graeme Lawless.
Anthony has grown up in difficult circumstances in various parts of Gippsland. His mother, Leannee Tilley, was one of a family of three children whose father died when she was eleven years old. She left school at the age of seventeen, having been in a relationship with Anthony’s father, Dudley Tilley, since she was about sixteen. She began living with Dudley Tilley when she was about twenty-one in 1989. He was working as a plant operator. He had two children from a previous marriage. Anthony’s brother Shannon was born in May 1991 and Anthony was born on 22 June 1992. A sister, Evelyn, was born in 1994 and Anthony’s parents married in 1996. Anthony’s father suffered a heart attack in 1998 at the age of fifty-seven and since then he has been unable to work and has received a disability support pension. More recently he has lost the use of his legs and has been confined to a wheelchair. Anthony’s mother and father separated in early 1999. She was then about thirty-one years old and has since received a supporting parent’s pension. She stayed with her children in a shelter in Bairnsdale for about two weeks after the separation and the children were in foster care for about a month. Anthony attended Bairnsdale Primary School while they were living at the shelter and then Omeo Primary School while he was in foster care. His mother then brought him and his siblings to live in a caravan park in Rosedale and they were there for about two weeks during July 1999. They then moved into a rented house in Rosedale. Anthony enrolled at Rosedale Primary School, and remained a student there until he completed Year 6 in 2005. In the meantime, his mother had had another child, Anthony’s brother Callum, who was born in 2000. Anthony and his brother Shannon would stay with their father from time to time, especially on weekends. In about November 2005 Anthony and all of his siblings were again placed in foster care, this time with the E.W. Tipping Foundation in Traralgon. Anthony remained in foster care until about December 2006, when he went to live with his father (and Shannon) in Sale. His two younger siblings are still in foster care. Anthony began his secondary education at Sale College last year and is now a Year 8 student there.
Graeme Lawless was born in 1951. He is by no means a well-educated or widely experienced person. Indeed he is entirely illiterate. He has lived his whole life in the house on the farm where the accident happened. The farm is a flat property of about 112 acres. Graeme’s own father had owned the property and had run it as a dairy farm. Graeme commenced helping his father with the farm chores, including tractor driving, as a small boy and continued to work there as he grew older. In 1988 Graeme’s father died and, after paying out certain relatives, Graeme inherited the property.
At about the same time, Sandra Lawless began living with Graeme at the property. She brought with her her daughter Donna, who is the sister of Anthony’s mother Leannee. Donna was about 13 years old at that stage. She is now about 32 years old. She has continued to live at the farm with her mother and step-father. She is epileptic and has received a disability pension for her epilepsy since about 1990.
Graeme and Sandra Lawless continued to run the property as a dairy farm until the mid-1990s. Then the Murray-Goulburn Co-operative stopped collecting milk from the farm and the dairying operations ceased. Mr Lawless was in debt. In 1997 he decided to lease the farm out to the Boultons, save for the farmhouse and its immediate surrounds. Under the lease he was paid a total lump sum of $17,000 in advance as the rental for a term of 16 years. This sum was enough to pay out his debts. From time to time, both before and after the cessation of the dairying operations, Mr Lawless worked as a fencing contractor in the district. He also did fencing work on his own property. He continued to do so from time to time after granting the lease to the Boultons. Indeed the lease contained an acknowledgment by Mr Lawless that the fencing on the property was in a poor state of repair and that the re-fencing of the property would remain the sole responsibility of Mr Lawless. The Boultons ran cattle on the leased area. Despite the terms of the lease, the Boultons informally permitted the Lawlesses (including Donna) to make use of a small part of the leased area (about ½-¾ of an acre) near the farmhouse for their own purposes. The Lawlesses kept fencing equipment there, together with a tractor, a chook shed, Donna’s pony and various other bits and pieces. They also kept a few cattle of their own there from time to time. Mr Lawless has been on unemployment benefits in recent years.
The first issue: Was the fencing work covered by the policy?
Evidence given by Mr Boulton and by a representative of CGU, Mr Spencer, called by the Boultons, establishes that the endorsement of the Boultons’ multi-risk policy was arranged following a request by Mr Boulton to Mr Spencer for insurance to be effected in accordance with the requirements of the lease. Mr Boulton actually left a copy of the relevant page of the lease with Mr Spencer for this purpose. Para 1(q)(ii) of the schedule to the lease reads:
“The Lessees shall effect during the term of this Lease a Public Risk Policy with a reputable Insurance Company indemnifying the Lessor and the Lessees against Public Liability, such policy to be in the sum of $5,000,000.”
However, only Section 7 of the policy, which is headed “Business Liability”, was made applicable to Mr Lawless by the endorsement.
The endorsement reads as follows:
“Effective July 1997 Mr Graeme Robert Lawless is noted for his respective rites [sic] and interests under section 7 of this policy in regards to the property at Talbots Rd The Heart 3850.”
These words have apparently been included on each renewal schedule of the policy.[2] CGU accepts that Mr Lawless has rights under the policy against CGU directly, notwithstanding the absence of privity of contract: Insurance Act 1984 (Cth) s 48; Trident General Insurance Co Ltd v McNiece Bros Proprietary Ltd[3].
[2]See, eg, page 7 of the latest renewal schedule (part of exhibit B1).
[3](1988) 165 CLR 107.
The operative provision of Section 7 of the policy reads:
“We will pay the amount you are legally liable to pay for personal injury or damage to property due to an occurrence in connection with your business.”[4]
[4]See page 36 of the policy. Emphasis in original.
The expressions in bold print in the policy are the subject of definitions. “Business” is defined to mean “farming, grazing, cropping or other like primary producing activities”. Under the heading “Who is insured under this policy”, the policy says (so far as relevant):
“The person, partnership or company whose name is set out on your schedule is insured.
The following people are also insured, as long as they normally live with you:
That person’s partner,
That person’s unmarried children,
…
In this policy all these people are called ‘you’ or ‘your’.”
The first sub-question is whether, under the policy, any cover for Mr Lawless (or for Sandra Lawless as his domestic partner) is confined to cover for liability due to an occurrence in connection with some “business” as defined. Whether or not the obligation under the lease was wider[5] (a matter I need not presently decide), I think that the cover actually obtained was very likely confined to business-related liability[6] (but, again, I need not decide that point finally either).
[5]Compare Enlayde Limited v Roberts [1917] 1 Ch 109; Upjohn v Hitchens [1918] 2 KB 46; QBE Insurance Company Ltd v Dean (1985) 3 ANZ Insurance Cases 60-658; Woodfall, Landlord and Tenant [11.094]; Redfern and Cassidy, Australian Tenancy Practice and Precedents [26100]; Jess, The Insurance of Commercial Risks: Law and Practice, 3rd edition, 2001, pp 162-163.
[6]See Derrington and Ashton, The Law of Liability Insurance, [8.235]-[8.240].
The second sub-question is whether, assuming that the cover is limited to business-related liability, the expression “your business” in the operative provision should be read as extending only to the business of the Boultons; or whether it also extends to the business (if any) of Mr Lawless. As mentioned above, CGU submits that the policy only covers Mr Lawless for liability due to an occurrence in connection with the farming business of the Boultons; and that the relevant liability was not due to such an occurrence.[7]
[7]CGU also submits that the policy does not cover Mrs Lawless at all, but it seems to me that that matter is no longer be of any significance.
It is common ground that the policy is a composite policy, not a joint policy.[8] So it includes cover for liabilities of Mr Lawless that are several (ie individual) as well as, and as distinct from, any joint liabilities of the Boultons and Mr Lawless. On the other hand, the present question is not necessarily to be answered by determining whether or not particular references in the policy to “you” or to “the insured” are, or include, references to Mr Lawless (or to Sandra Lawless). I am inclined to think that the policy should be read as envisaging that Mr Lawless would not be conducting any primary production activities on his own account on the leased land. Mr Lawless had no legal right to use any part of the leased land for primary production or for any other purposes of his own at all. In any event, although Mr Lawless did keep a few cows in the small area near the house (unbeknown to CGU), no serious attempt was made by Mr Lawless to establish that he was conducting a business in that regard.
[8]See CGU’s written submissions filed 6 March 2007 and see General Accident Fire and Life Assurance Corporation Ltd v Midland Bank Ltd (1940) 2 KB 388 at 404-405, referred to with approval in Federation Insurance Limited v Wasson (1987) 163 CLR 303 at 310.
It seems to me that the policy probably should be read as covering Mr Lawless only in relation to his role (as envisaged in the lease) with respect to the Boultons’ farming business.[9] Under the lease, only the Boultons had the legal right to use the land for business purposes. Hence I am inclined to think that “your business” in Section 7 means the Boultons’ business, and does not include any independent business of Mr Lawless. As CGU submits[10]:
“… common sense suggests that the intention of all parties was to ensure that Mr Lawless was covered for a liability that he may incur in respect of activities undertaken by him in connection with Mr Boulton’s farm. For example, in undertaking fencing work in Mr Boulton’s farmed area.”
Nevertheless, once again, it is unnecessary for me to rule finally on this question, because of my conclusion in relation to CGU’s next submission, namely its submission that the relevant liability was not due to an occurrence in connection with the farming business of the Boultons.
[9]As already mentioned, CGU was made aware of the lease before issuing the endorsement.
[10]Written submissions filed 6 March 2007.
CGU submits that, on the evidence, Mr Lawless was replacing the relevant fence wholly for his own family’s private purposes and that, therefore, he was not doing it “in connection with” the Boultons’ farming business. This submission in turn depends heavily on a submission that the Court should find, on the evidence, that Mr Boulton had actually instructed or requested Mr Lawless, before the accident, not to do any more fencing work on the property.
I do not accept CGU’s submission. The evidence is against it. I make the following findings.
The relevant fence-line was entirely within the leased area. It ran along one boundary of the small area which the Lawlesses used with the Boultons’ tacit permission. The Lawlesses did not have exclusive use even of that small area. Every two months or so, Mr Boulton would go through the area with a truck to take cattle down to the cattle yards. The Boultons’ cattle grazed in the paddock adjacent to the fence-line, as well as in other paddocks surrounding the small area. Before the relevant work began, the old fence was in poor condition. The Lawlesses’ cattle would go through it into the adjacent paddock; and sometimes the Boultons’ cattle would go through it into the small area used by the Lawlesses, notwithstanding that there was a paucity of grass in that small area. These matters were all common ground.
Under cross-examination by Mr O’Dwyer SC for the defendants, Mr Boulton acknowledged that the old fence was one that Mr Lawless was obliged by the lease to repair. He also acknowledged that there was a standing arrangement that the Boultons would supply the necessary materials for fence repairs on the property and that Mr Lawless would do the work. Mr Boulton agreed that this particular fence was done in accordance with that arrangement. As far as Mr Boulton was concerned, the fence in question was just another fence that Mr Lawless was doing and putting right on the farm. Indeed it was inconvenient to Mr Boulton that the Lawlesses’ cattle had been getting through the fence in question. Mr Boulton acknowledged that, to keep his farming activities intact, he would want that particular fence to be repaired. I accept Mr Boulton’s evidence in those respects.
There was a conflict of evidence between Graeme and Sandra Lawless, on the one hand, and Mr Boulton, on the other, as to whether Mr Boulton had expressly and specifically requested Mr Lawless to repair the particular fence in question. Graeme Lawless swore that Mr Boulton had repeatedly pestered him to repair it and Sandra Lawless swore that she had heard Mr Boulton doing so. In answer to Mr O’Dwyer SC, Mr Boulton denied that he had ever stipulated to Mr Lawless that this particular fence should be repaired. I do not need to resolve this conflict. In my view, it does not matter whether there was a specific request or not.
Mr Thompson SC, for CGU, cross-examined Mr Boulton after Mr O’Dwyer SC had done so. Mr Thompson SC had had a prior conference with the witness, with the assent of Mr Boulton’s legal representatives. It seems that there may have been some misunderstanding between Mr Thompson SC and Mr Boulton at the conference, because some of Mr Boulton’s answers during his evidence appeared to surprise Mr Thompson SC. Mr Boulton agreed with Mr Thompson SC that, prior to the accident, he had seen Mr Lawless and Donna Lawless doing fencing work with the post-driver, and had become concerned, from a safety perspective, about the number of people “hanging around” while the work was being done. It was not clear where Mr Boulton had seen Mr Lawless and Donna doing fencing work, but Mr Boulton agreed with Mr Thompson SC that, for safety reasons, he “eventually” stopped Mr Lawless doing fencing on what he first called “my” property. It was not clear whether this stopping occurred before or after the accident, but what did become clear was that the stopping was only in relation to contract fencing work previously done by Mr Lawless on Mr Boulton’s own farms (which were located in various places), as distinct from the repairing of fences on the land at The Heart which the Boultons leased from Mr Lawless. Indeed, when further cross-examined, by leave, by Mr O’Dwyer SC, Mr Boulton confirmed that he expected Mr Lawless to continue, pursuant to the lease, to repair and remake the fences on the leased land, and that the cessation of the arrangements concerning other fencing work had nothing to do with his continuing to do the fencing on the leased property, but only related to what Mr Boulton then referred to as “my own” property.
In fairness to Mr Thompson SC, the transcript of Mr Boulton’s evidence was not available at the time when he was making his oral submissions on the present point, and he may have been influenced in his submission by what he had apparently expected Mr Boulton to say. In fact, Mr Boulton’s evidence had destroyed the foundation for Mr Thompson’s submission that Mr Lawless “must” have been doing the fencing work exclusively for his own private purposes (eg to keep his own cattle in). That submission was fundamentally based on the proposition that Mr Boulton had told Mr Lawless, prior to the accident, not to do any more fencing on the leased farm. However the transcript confirms that Mr Boulton did not tell Mr Lawless any such thing.[11]
[11]See especially at p 219-220.
After the conclusion of the oral hearing, the parties made written submissions, by prior leave, as to whether the insurance policy was restricted to occurrences in connection with the farming business of the Boultons. CGU filed a substantial written submission arguing that the policy was so restricted. I can only assume that it did so because, notwithstanding that the transcript of Mr Boulton’s evidence had by then become available, CGU was persisting in the submission that, on the evidence, the fencing work was not being done in connection with the Boultons’ business. However that may be, the submission is unmaintainable. Mr Boulton’s evidence makes it quite clear that the fencing work was being done “in connection with”[12] the Boultons’ farming business.
[12]See Derrington and Ashton, op. cit at [3-122] and [8-248] and the cases referred to in those paragraphs.
It follows that CGU’s first objection to the defendants’ claim for indemnity fails; and that, putting aside legal costs, any failure on the part of the Boultons to arrange insurance cover in accordance with the requirements of the lease has not caused any loss or damage to Mr Lawless.
The second issue: the “reasonable precautions” condition
CGU submits that Mr Lawless is not entitled to be indemnified by it in relation to any liability he may have to the plaintiff, because, it submits, he is in breach of a special condition in the policy which (so far as it is relied upon) provides:
“You must:
·take all reasonable precautions to prevent:
- personal injury or damage to property.
·comply with, and ensure that your employees, servants and agents comply with, all laws, by-laws, regulations and recognised standards for the safety of persons or property.”
The pleaded particulars of this allegation, as amended at the hearing, are:
“The defendants removed a guard from the post driver in contravention of the contents of the Instructions Manual for the equipment and operated the machinery with contumelious disregard for the safety of others in breach of recognised safety standards.
Further, the Defendants operated the post driver knowing that the plaintiff was in the immediate vicinity thereof without any or any due regard for his personal safety.”
Conditions of the present kind have been the subject of considerable judicial attention. CGU, in its outline of submissions, asserted that the legal position was as follows. A condition of this type is a condition precedent to the liability of CGU to indemnify under the policy.[13] The insured bears the onus to prove compliance with the condition.[14] It is accepted that, for the condition to apply, there must be more than mere negligence. There must be recklessness, of a type outlined in the following cases: Fraser v B.N. Furman (Productions) Pty Ltd[15]; Legal and General Insurance Australia Limited v Eather[16]; Albion Insurance Co Ltd v Body Corporate Strata Plan No 4340[17]. The insured must prove that he did not perceive the existence of the danger or, if he did, that he took steps to try to avoid it and was not indifferent to it.[18] For an example of a case involving a machinery guard when the condition was breached, see Norwich Union Insurance Co Ltd v R & W Products Pty Ltd[19].
[13]Davis v Young [1986] VR 203, 210.
[14]Body Corporate Strata Plan No 4303 v Albion Insurance Co Ltd [1982] VR 699; Albion Insurance Company Limited v Body Corporate Strata Plan No 4303 [1983] 2 VR 339; Verna Trading Pty Ltd v New India Assurance Company Ltd [1991] 1 VR 129; Legal and General Insurance Australia Limited v Eather (1986) 6 NSWLR 390, 407.
[15][1967] 3 All ER 57.
[16](1986) 6 NSWLR 390.
[17][1983] 2 VR 339.
[18]Eather, supra, at 403 per Glass JA.
[19](1969) 90 WN Pt 1 (NSW) 554.
Onus of proof
Mr O’Dwyer SC, for the defendants, submitted that the insurer, rather than the insured, bears the onus of proof in relation to conditions of the present kind. He acknowledged that Kaye J had rejected a submission to that effect at first instance in Body Corporate Strata Plan No 4303 v Albion Insurance Co Ltd[20], but submitted that important authorities to the contrary from various jurisdictions had not been cited to Kaye J. He pointed out that the question had not been re-argued in the appeal to the Full Court in that matter. I would agree with Mr O’Dwyer SC that it is arguable that Albion Insurance was wrongly decided in relation to the onus of proof. It seems to me that there is force in the argument to that effect put forward by Sutton in Insurance Law in Australia (3rd edition)[21], to which Mr O’Dwyer SC referred me. However, I would only be justified in refusing to follow the decision of Kaye J if I considered it to be clearly wrong. I am not of that view. Moreover, in Verna Trading Pty Ltd v New India Assurance Ltd[22] Kaye J, with whom McGarvie J agreed[23], said[24]:
“It is established law in the states of Victoria and New South Wales that the burden of proving compliance with or fulfilment of a condition precedent under a policy of insurance is borne by the insured.”
[20]Supra.
[21]At 638-643.
[22][1991] 1 VR 129.
[23]At 156.
[24]At 148.
His Honour cited four cases in support, including his Honour’s own decision in Albion. It seems that Ormiston J (as his Honour then was) also agreed with Kaye J on this point[25], although it is not clear that there was any debate about it in Verna. In these circumstances I will proceed on the basis that the onus of proof of fulfilment of the relevant condition was on Mr Lawless.
[25]At 173. See also Eather, supra (1986) 6 NSWLR 390, 407.
Construction of the “reasonable precautions” condition
As mentioned above, CGU asserted in its written outline of submissions that “recklessness” on the part of the insured, of a type outlined in three specified cases, would bring about the application of the “reasonable precautions” condition, and that the insured “must prove that he did not perceive the existence of the danger or, if he did, that he took steps to avoid it and was not indifferent to it”. A passage in the judgment of Glass JA of the Court of Appeal of New South Wales in Eather, supra, was cited in support of this formulation.
In my opinion these submissions involved error in that they did not pay sufficient regard to the decision of the Victorian Full Court in Albion Insurance, supra, notwithstanding that Albion Insurance was referred to.
There is no suggestion that the “reasonable precautions” condition in the public liability policy under consideration in Albion Insurance was relevantly different in its wording, or that Albion Insurance is otherwise distinguishable for present purposes. The leading judgment in Albion Insurance was given by McGarvie J, with whom Anderson J agreed. Young CJ delivered a short concurring judgment. I am afraid that it is necessary to set out a lengthy passage from the judgment of McGarvie J, commencing with a paragraph in which his Honour was comparing the test adopted by Diplock LJ in Fraser v B N Furman (Productions) Pty Ltd[26] with the test which had been adopted by the trial judge, Kaye J, in Albion Insurance itself. McGarvie J said:[27]
[26][1967] 3 All ER 57.
[27](1983) 2 VR 339 at 343-346.
“Diplock, LJ stated in similar terms the test which he applied. It was whether the failure to take precautions, or the particular measure taken in altering the machine ‘was done recklessly, that is to say, with actual recognition of the danger to employees which was entailed, and not caring whether or not that danger was averted’: ([1967] 1 All ER) p. 907. Diplock, LJ held that there would have been no breach of the condition in that case because the employer had not recognised the danger.
The trial Judge held, and this was accepted by both parties on the appeal, that the knowledge, state of mind and actions of the managing agent of the body corporate, Mr. Wilson, were those of the body corporate.
The learned Judge held that the body corporate had complied with the condition, because Mr. Wilson's state of mind was not such that he did not care whether leaving the railing in its dangerous state might cause injury to be suffered by others. The test that was applied by Kaye, J. was applied by Roskill, J. in a similar way in W. and J. Lane v Spratt, [1970] 2 QB 480, at p. 493.
I consider that the principle of construction applied by Diplock, LJ in Fraser v B. N. Furman (Productions) Ltd. is the appropriate principle to be applied in this case. It is to be borne in mind that the task of this Court is not to apply a principle of law derived from that case. It is to determine the legal effect of the condition in the policy issued to the body corporate, by application of the appropriate principles of construction.
Under the policy, the insurer agreed to pay to or on behalf of the body corporate all sums to the extent of $500,000 which the body corporate should become legally liable to pay for compensation in respect of bodily injury.
The words used by the insurer in the condition in the policy ‘The Insured ... shall take all reasonable precautions to prevent bodily injury ...’ present difficulties of construction. The words by their ordinary meaning would require the insured to take such precautions as should reasonably be taken so as not to be negligent or in breach of duty as an occupier of premises, to a person sustaining bodily injury. That construction would be repugnant to the commercial purpose of the contract of insurance for the reasons advanced by Diplock, LJ. Another possible construction is that the condition requires the insured to take such precautions as the insured realizes should reasonably be taken to prevent bodily injury. That construction would also be repugnant to the commercial purpose of the contract. Frequently an occupier of premises recognizes a danger and resolves to take specific reasonable precautions but, through delay or neglect, has not done so before bodily injury occurs. It would cut a great swath from the practical adequacy of cover under a public liability policy if the condition deprived such an insured of the right to indemnity. If the purpose of the condition were to protect the insurer where the failure to take reasonable precautions was not due to causes such as delay or neglect, but due to a deliberate decision to expose himself to the risk of bodily injury occurring, because he did not care whether it occurred or not, that would be consistent with the commercial purpose of the insurance contract. An insurer, insuring an insured against liability for breach of duty causing bodily injury, naturally seeks to limit the indemnity to liability for the actions or inactions of the insured while the insured is motivated by the ordinary human desire to prevent bodily injury to others. The very existence of the insurance cover which removes from the insured the financial responsibility for paying damages, may lead a callous insured person to have no concern whether others sustain bodily injury. Diplock, LJ said that the purpose of the condition in the policy before him was ‘to ensure that the insured will not, because he is covered against loss by the policy refrain from taking precautions which he knows ought to be taken’: at ([1967] 1 WLR) p. 906; ([1967] 3 All ER) at p. 61. It would be consistent with the commercial purpose of the contract if such a condition also deprives of insurance cover an insured person who deliberately leaves a recognized danger in existence in the vindictive hope that someone who uses the premises will sustain bodily injury.
The words in the present condition were chosen by the insurer. As it is necessary to give them a construction other than their ordinary meaning, the ambiguity inherent in them is to be construed against the insurer. If there are several constructions which the words could be given and nothing to indicate that one of those constructions is the intended one, the construction least favourable to the party who prepared and presented the contractual document to the other party, is to be adopted.
Construed in accordance with these principles, the words require the insured to establish that it was not due to a lack of desire and concern to prevent bodily injury from a recognized danger, that it failed to take reasonable precautions to prevent the bodily injury which occurred. The insured is in breach of the condition if, through a lack of concern and desire to prevent bodily injury, he deliberately adopts a course of action or inaction which he realizes exposes him to the risk of someone being injured by the recognized danger. There are many possible ways of the insured establishing compliance with the condition. In a particular case the insured may establish compliance with the condition by showing one or more of the following things: that he did not recognize the danger or the extent of the danger of bodily injury; that particular precautions would not have been reasonable in the circumstances; or that he did not think of a particular precaution or did not regard it as reasonable or practicable in the circumstances. The insured may, as the body corporate did in this case, rely on the evidence of the circumstances and the steps taken, to show that whatever errors of judgment may have led to particular reasonable precautions not being taken, the failure to take the precautions was not due to a lack of desire and concern to prevent bodily injury. No doubt there are other ways of an insured showing compliance with the condition. Whether particular evidence establishes compliance with the condition will always depend on the circumstances of the case.
Diplock, LJ treated the insurer as bearing the onus of establishing breach of the condition. In this case it is common ground that the insured bears the onus of establishing compliance with the condition. Bearing that in mind, the construction which I have adopted is consistent with the principle of construction which Diplock, LJ applied. The test which Diplock, LJ propounded is not whether the insured who recognizes a danger, takes no measures or takes measures which he knows to be inadequate to avert it. The test is whether the insured deliberately courts the danger by refraining from taking any measures or by taking measures which he knows to be inadequate to avert it. The word ‘deliberately’ indicates intentional, considered action or inaction. The verb ‘court’ suggests action or inaction which invites the danger of accident. The test requires more than a recognition of the danger and failure to take any measures or any measures known to be adequate to avert it. It requires that this be due to a deliberate decision to court the danger.
With one exception, the construction I have adopted is consistent with the cases which have considered Fraser v B. N. Furman (Productions) Ltd. The exception is Roberts v State Insurance General Manager, [1974] 2 NZLR 312 where the condition in the policy required the insured to take all reasonable steps to safeguard a motor vehicle from loss or damage and to maintain it in efficient condition. Counsel for the parties agreed that the test was whether the insured had been reckless. McMullin, J. declined to follow Fraser v B. N. Furman (Productions) Ltd. He applied the meaning given by Megaw, J. to the word "recklessly" when it was used in a shipping contract. Megaw, J. held that a party who was grossly careless could act recklessly without actual recognition of the danger: Shawinigen Ltd. v Vokins and Co. Ltd., [1961] 1 WLR 1206; [1961] 3 All ER 396.
As Diplock, LJ defined what he meant by the word ‘reckless’ the use of the word added nothing to his reasons. A large part of the appellant's submissions on this appeal was based on the meaning to be given to that word. I consider, with respect, that the only ambiguity in the statement by Diplock, LJ of the principle of construction is introduced by the use of that word. The meaning given to the word does not correspond with what the House of Lords has recently decided to be its ordinary meaning: R v Caldwell, [1981] 2 WLR 509; [1981] 1 All ER 961; R v Lawrence, [1981] 2 WLR 524; [1981] 1 All ER 974. In my respectful opinion there is no place in the relevant principle of construction for either the word ‘reckless’ or the concept of recklessness.
The construction I have adopted is likely to correspond with the expectations of the parties to the contract of insurance. Such a condition gives efficacy to the transaction. Its most important function is to confine the indemnity to liability for breaches of duty by the insured which are not caused by the fact that the insured has insurance cover.
To show that it has complied with the condition the body corporate also has to establish that within the meaning of the condition it took all reasonable measures to keep the premises and fittings in a condition of proper maintenance and repair. It will establish this if it shows that it was not due to a lack of desire and concern to prevent bodily injury that it failed to take reasonable measures by way of maintenance and repair. In the circumstances of this case, this part of the condition does not need separate consideration. If the body corporate shows that it complied with the condition so far as taking all reasonable precautions is concerned it will thereby show that it complied with it so far as reasonable measures by way of maintenance and repair are concerned.
The construction of the condition which I have adopted renders ineffective the ground of appeal that on his findings of fact the trial Judge should have held that the conduct of the body corporate constituted recklessness.”
The judgment of Young CJ confirms that it is inappropriate and misleading to seize upon the word “reckless” used by Diplock LJ in Fraser so as to apply an objective test of gross carelessness. Rather, according to Young CJ, the test is “whether the insured deliberately courted a danger which he recognised by refraining from taking any measures to avert it”.[28] Diplock LJ had explained what he meant by “reckless”, namely “made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted”. In response to an argument that Kaye J had erred because the “not caring” phrase in Diplock LJ’s test should be taken to mean “indifferent to the consequences which may ensue having regard to the danger”, Young CJ said[29]:
“Even on that test I should have thought Kaye J would have reached the same conclusions, but be that as it may, the appellant’s argument in my opinion again tends to attempt the construction of Diplock LJ’s judgement as though it was a statute rather than look at the test as a whole and apply it to the condition in question.”
[28][1983] 2 VR 339 at 340.
[29][1983] 2 VR 339 at 341.
It is true that in Eather Glass JA said[30]:
[30](1986) 6 NSWLR 390, 497.
“The insured person will not be in breach if he shows either that he did not recognise a danger that existed or that perceiving its existence he took some action to avoid it and was not indifferent to whether the danger was averted or not [citing Fraser].”
However, this was but a brief paraphrase of Fraser at the end of a short concurring judgment the main thrust of which was to explain why Glass JA agreed with McHugh JA that the approach adopted in Fraser to the interpretation of a “reasonable precautions” condition in a public liability policy should also be adopted in relation to such a condition in a loss of property policy. The perils of paraphrase are well known. There is no reason to think that Glass JA intended to modify the approach adopted in Fraser, or indeed to depart from anything that was said in Albion. McHugh JA himself described Albion as being part of a “formidable line of authority”, his Honour having just said[31]:
“In Albion Insurance Co Ltd v Body Corporate Strata Plan No 4303 the Full Court of Victoria construed a condition in a policy which required the insured to ‘take all reasonable precautions to prevent bodily injury’ in accordance with the principle expounded by Diplock LJ in Fraser v B N Furman (Productions) Ltd. McGarvie J, with whose reasons Young CJ and Anderson J agreed, said (at 344-345) that an insured was in breach of the condition ‘if, through a lack of concern and desire to prevent bodily injury, he deliberately adopts a course of action or inaction which he realizes exposes him to the risk of someone being injured by the recognized danger’. His Honour went on (at 345) to give illustrations of possible ways in which an insured might establish compliance with the condition. Thus he might show:
‘... that he did not recognize the danger or the extent of the danger of bodily injury; that particular precautions would not have been reasonable in the circumstances; or that he did not think of a particular precaution or did not regard it as reasonable or practicable in the circumstances’.
His Honour held (at 347) that the state of mind of the relevant person ‘was not such that he did not care whether the railing in its dangerous state might cause bodily injury to others’. Accordingly, the condition was not breached.”
[31](1986) 6 NSWLR 390 at 406.
McHugh JA summarised his view of the matter as follows[32]:
“In my opinion the words ‘you are to take all reasonable precautions to avoid or minimise injury, loss or damage’ mean that the insured must be concerned to protect the property from loss or damage and must take such steps to protect the property as he thinks are reasonable having regard to dangers which he recognises.”
[32](1986) 6 NSWLR 390 at 407.
It is clear from the above that there are at least two substantial errors in CGU’s outline of submissions in relation to the construction of the “reasonable precautions” condition. First, as McGarvie J said[33], there is no place in the relevant principle of construction for either the word “reckless” or the concept of recklessness. The use of the word distracts attention from the true test which is wholly subjective, not objective, being a test whereby the insured is in breach of the condition if “through a lack of concern and desire to prevent bodily injury he deliberately adopts a course of action or inaction which he realises exposes him to the risk of someone being injured by the recognised danger”.[34] Second, on the proper construction of the condition, despite what Glass JA said in Eather, it is not the case that where the insured perceives the existence of the danger he or she must take steps to try to avoid it. As McGarvie J said[35]:
“The test which Diplock, LJ propounded is not whether the insured who recognizes a danger, takes no measures or takes measures which he knows to be inadequate to avert it. The test is whether the insured deliberately courts the danger by refraining from taking any measures or by taking measures which he knows to be inadequate to avert it. The word ‘deliberately’ indicates intentional, considered action or inaction. The verb ‘court’ suggests action or inaction which invites the danger of accident. The test requires more than a recognition of the danger and failure to take any measures or any measures known to be adequate to avert it. It requires that this be due to a deliberate decision to court the danger.” (My emphasis).
[33][1983] 2 VR 339 at 345-346.
[34][1983] 2 VR 339 at 344-345 per McGarvie J (my emphasis). See also Derrington and Ashton, op. cit. at [9.55] and the cases cited at footnote 213 thereto.
[35][1983] 2 VR 339 at 345.
In his closing address, senior counsel for CGU continued to rely on – indeed he repeatedly emphasised – what he described as the “test” outlined by Glass JA in the above-quoted passage at p 403 in Eather “as to what specifically an insured needs to prove”.[36] Indeed CGU’s whole approach to this case seems to have been much influenced by that passage. However, as I have said, the true test is not identified there. Nevertheless I need to consider whether, on the true test and on the evidence, Mr Lawless did or did not discharge the onus of proving that he complied with the “reasonable precautions” condition. CGU did not place any separate reliance on the “recognised standards” part of the special condition.
[36]Transcript 287-290.
Compliance with the condition: findings of fact
For the purposes of the Albion Insurance test, I am satisfied on the evidence that Mr Lawless did not recognise the relevant danger or, at least, the extent of it. Further and in any event, I have no hesitation in finding that it was not due to a lack of desire and concern on the part of Mr Lawless to prevent bodily injury that he failed to take reasonable precautions to prevent the injury to Anthony Tilley. Similarly, I am fully satisfied that he did not make a deliberate decision to court the danger to Anthony.
Some further history
To explain these conclusions, it is necessary to refer again to the matters set out above under “Background” (none of which was in dispute) and to add some further history based mainly on evidence given by Mr Lawless, and, to some extent, by Sandra and Donna Lawless. Although Mr Thompson SC made a major attack on Mr Lawless’ credit and also attacked the reliability of the evidence of Sandra and Donna, to all of which I will return, the particular matters about to be mentioned were not controversial save in one or two respects which will be indicated. As Mr O’Dwyer SC submitted, the history is important to show that particular farming activities, which may seem horrendously dangerous to visitors from the city, or even to some local people, may be viewed quite differently by the people involved.
As mentioned above, Mr Lawless has lived his whole life on the farm. He himself was driving tractors on the farm from the age of 7 years, an activity that some people might regard as highly dangerous for a child but which was apparently regarded with equanimity in his family circle. He has been involved in fencing work for decades. He did fencing work on the farm with his father. His brother Noel began work as a fencing contractor in the district at the age of 16, and from time to time Graeme went out fencing with him. Graeme then began to do contract fencing in his own right.
Until the 1970s post-drivers were unknown to Mr Lawless. Previously, he and other fencing contractors used post-hole diggers. These were power-driven augers, operated by means of a tractor. A post would be placed in the hole, and earth would be rammed into the post. Then post-drivers were invented. They too were power-driven. They were operated hydraulically by means of a tractor. They incorporated both an auger and a heavy mechanical hammer. A smaller hole could be drilled. The post would then be driven in tight with the hammer. There was no need to ram any dirt in. It was all done mechanically. This was a great boon to farmers and fencers. It meant that instead of taking half an hour for each post, it would only take a few minutes. Mr Lawless first used a post-driver in the early to mid 1970s. He would borrow it from a certain family friend when it was needed. This occurred a couple of times a year. Mr Lawless put in about 200 or 300 fence posts with it. It did not have any sort of guard or safety cage. To ensure that the post went in straight, it was necessary to hold and manoeuvre the post. So it was a two person job. Both the person operating the controls and the second person would manually hold the post while it was being driven in with the hammer. Mr Lawless had never had an accident with the borrowed post-driver and has never heard of anyone else having had an accident with it.
In the mid-1980s, Mr Lawless purchased a new post-driver of his own. It was different in some ways from the borrowed one. It was a “Lyco” brand. The original instruction manual for the machine is in evidence. It includes a photograph of the post-driver as it was when purchased. The photograph shows a large cage-like guard at the back of the machine below the raised hammer. It also shows a person operating the controls in one hand and holding a bar in the other. The bar is attached to a chain. The chain goes around the back of the fence post. The manual, the guard, the bar and the chain were all supplied with the post-driver. The hammer weighs 500 lbs.
Being illiterate, Mr Lawless was unable to read the manual, and no-one ever read any of it to him. However, there were plenty of similar machines in the district. He had watched another fencing contractor, one Neil Bristow, using one and had thus learned how they worked. The dealer who sold Mr Lawless the post-driver also told him all about it, and helped him fit it to his tractor. Mr Lawless brought the post-driver home to the farm that day (in the mid-1980s) and has continued to use the self-same machine ever since. Graeme’s brother Noel, the fencing contractor, also bought a Lyco post-driver shortly after Graeme did.
As soon as he purchased the post-driver, Mr Lawless removed the guard. He did so because he believed (and still believes) that it is not possible to operate the machine satisfactorily with the guard on. If the guard were on, the bar and chain would have to be used. They do not keep the fence post straight. The hammer will hit the post sideways and may split it. All the other fencing contractors of whom he knows have also taken off the guards, including his brother and Mr Bristow. Mr Lawless has continued to operate the machine without the guard ever since he acquired it in the mid-1980s. Mr Thompson SC put to Mr Lawless that the purpose of the guard was a safety purpose, namely to prevent people putting their body between the hammer and the fence post, but otherwise CGU did not challenge any of the propositions set out in this paragraph, and I accept them.
Mr Lawless said that between the mid-1980s and July 2002, he did an estimated seven or eight jobs per year as a fencing contractor. The jobs ranged between 50 and 200 fence posts each. This would work out at between 350 and 1600 fence posts per year, a total somewhere between approximately 5,000 and approximately 27,000 posts over the period of 15-17 years (but see below).
During that period, both his wife Sandra and his step-daughter Donna had assisted him with fencing, both on the farm and at outside jobs. No-one else had assisted him. The usual procedure was for Graeme to position the post with directions from Sandra, and then Donna would take over from Graeme and hold the post while Graeme backed the tractor up to the post. Graeme would then get out of the tractor and come around to where the control levers of the machine were. He would operate the control levers with one hand while using the other to help Donna hold the post straight. He would give it a “light tap” for a start, to make sure everything was alright. [He added, at this point, “ … and if there was anybody around I used to tell them to all stand back”.]. Then he proceeded to pull the hammer down and make sure it was hitting in the middle of the post. Next he would take it up about halfway and drive it down a little more and then take it right up to the top and let it go to “belt the post in”.
At this point of his evidence[37], Mr Lawless was asked directly by his counsel how many posts he had put in like this during the period prior to 2002. He answered “I suppose roughly around a thousand”. Obviously this figure is much less than even the minimum total figure of 5,000 mentioned above. I think that Mr Lawless is more likely to be right about the minimum job size (50). On that basis, even if on average he only did, say, four jobs per year rather then seven or eight, the total number of fence posts would be approximately 3,000. I am inclined to think that the true total figure is closer to 5,000 than to 1,000, and may be much higher than 5,000.
[37]Transcript, 155.
Mr Lawless said, and I accept, that before the accident he had never had any trouble with his post-driver. There had been no accidents and no-one had been hurt. Mr Lawless also said that he had never heard of anyone hurting themselves. He was later cross-examined by Mr Thompson SC to the effect that Mr Boulton had said to him on a number of occasions prior to the accident that he, Mr Boulton, was concerned that it was dangerous for Donna to be holding the fence-posts.[38] Mr Lawless denied hearing this from Mr Boulton. I prefer Mr Boulton’s emphatic evidence in this respect. Later, during cross-examination by Mr O’Dwyer SC, Mr Boulton testified that he himself had “heard of so many accidents”. The context of this statement indicates that he may have been intending to convey to the Court that he had mentioned this information to Mr Lawless as well. On the other hand, this was by no means clear, and, given that Mr Thompson SC (who had had the benefit of a prior conference with Mr Boulton) did not put to Mr Lawless that Mr Boulton had said anything to Mr Lawless about previous accidents, I accept Mr Lawless’ evidence that he had never heard of anyone hurting themselves with a post-driver. CGU had every opportunity to investigate whether there had in fact been prior accidents with post-drivers, and, if so, whether publicity had been given to such accidents, but it called no evidence of that kind.[39]
The circumstances of the accident
[38]Transcript, 175.
[39]Indeed, apart from putting in certain documents, CGU did not call any evidence at all.
I turn now to the circumstances and events leading up to the accident. Evidence about this was given principally by Anthony Tilley and Graeme Lawless, but also, to a lesser extent, by Shannon Tilley, Sandra Lawless and Donna Lawless.
In my view, both Anthony and his brother Shannon were truthful witnesses doing their best to be accurate. No party suggested the contrary. Mr O’Dwyer SC submitted that I should prefer the adults’ recollection over that of the boys, but for reasons I will explain I would put more weight on the boys’ evidence.
Based mainly on Anthony’s evidence, I make the following findings about the events surrounding the accident.
In the months before the accident, Anthony would visit his grandparents at the farm frequently. He used to stay there overnight on most weekends and would also go there during school holidays. He would help feed the chooks and the cows and would do other farming chores. He occasionally rode the pony. He would ride in the tractor with his grandfather. He liked rounding up the cows. He would help with mowing the lawn. He was a big, tall boy for his age.
Before the accident, Anthony was quite close to his grandparents. He enjoyed working on the farm and in particular he enjoyed working with his grandfather. He did jobs out there not because his grandparents made him do them but because he wanted to do them. He wanted to be helpful. He enjoyed riding on the tractor with his grandfather. He liked machinery. He felt that he was loved by his grandparents; that they were caring for him; that they were concerned about looking after him; and that they certainly would not do anything to hurt him.
Anthony had seen his grandfather operating the tractor and post-driver about two or three weeks prior to the accident. He came to the farm again a day or two before the accident. His brother Shannon was already there. The others there were his grandparents and his Aunt Donna. On the morning of 2 July, his grandfather got the tractor ready with the post-driver attached to the back of it. In the meantime, Anthony and Shannon carried a fence post up to where the fencing was being done. At least two fence posts were then put in without incident. The first of these was held steady by Sandra and Donna Lawless while Graeme operated the controls. Shannon stood somewhere nearby. The second post was held steady by Donna and Anthony while, again, Graeme Lawless operated the controls. They then turned to the third post. Again, both Donna and Anthony were holding it. They were facing the back of the tractor. Donna was standing to Anthony’s right and Graeme was standing to Donna’s right, operating the controls. Sandra and Shannon were nearby, but further away from the post-driver.
As a post is driven in, the top of the post naturally tends to get closer to the hand(s) of the persons holding it. Also, the hammer tends to “bounce” a little as it strikes the top of the post. On this occasion, on about its third descent onto the third post, the hammer bounced and Anthony’s left hand slipped into the space between it and the fence post. The hand became caught and was crushed.
Anthony looked at his hand. He noticed in particular that his little finger had been struck. His hand was bleeding. His grandparents obtained a cloth and put it around his hand. They took him straight Sale Hospital. Initially, Anthony was not so much in pain as in shock. The hospital records show that he underwent two operations and remained in hospital for six days, although Anthony felt that he had been there for about three weeks. (When he gave this evidence, he may have been thinking of his regular follow-up visits as an outpatient, which did occupy a further two weeks.) He was in a lot of pain in hospital. He does not remember much about it. His whole family visited him in hospital. His grandparents, Graeme and Sandra, came every day. I will come back to the nature of the injuries and their effects when I turn to the question of damages. Anthony has been back to visit his grandparents at the farm since the accident, but has not seen much of them.
It is true that, in answer to Mr O’Dwyer SC (putting his instructions from the Lawlesses), Anthony gave a number of non-committal responses concerning the circumstances of the accident. Among other things, he accepted that he could be wrong about the number of posts that had been put in that morning before the accident. It might have been seven rather than two. He said: “I can’t remember”.[40] Further, when it was put to him that he had not been holding any posts before the last one, he said: “I’m not sure”.[41] Again, when told that Graeme, Sandra and Donna would all say that they were unaware that he was holding the last post, he responded: “Not sure”.[42]
[40]Transcript p 69.
[41]Ibid.
[42]Transcript p 70.
However, when cross-examined subsequently by Mr Thompson SC, Anthony was quite firm in his recollection that he and Donna had held the last two posts. He agreed twice that he had a clear memory of this.[43] He was also able to say that it would take about 10 hits for a post to be driven in completely and that he recalled holding the second-last post for all of that time. He was able to remember other details, such as the distance between the posts. So far as the litigation is concerned, Anthony had no good reason to invent, or to stick by, what he said. Whether or not Anthony had held any posts, negligence on the part of Mr Lawless, at least in the sense of failing to keep a proper lookout, could never have been in any real doubt. Indeed, if anything, Anthony’s evidence about the lead up to the accident was potentially detrimental to the prospect that CGU would be required to stand behind any judgment that Anthony might obtain. Despite Anthony’s youth, the shock of his injury and his non-committal answers to Mr O’Dwyer SC on some points, I am satisfied that his recollection that he was holding both the second-last post and the last post is reliable.
[43]Transcript p 97, 99.
Further, Anthony’s evidence was supported to some extent by that of his brother Shannon. Shannon’s evidence was generally vague, but he did indicate that, just before the accident, Anthony was involved in trying to keep the last post straight.[44] He agreed that Anthony was usually very keen to get in and help. He indicated that Anthony was not alone in “pushing” the post, but was not sure whether it was Sandra or Donna or both who also took part. Shannon did not actually see the hammer come down on Anthony’s hand. However, he saw what had become of his brother’s hand and this caused him to scream.
[44]Transcript p 103.
Shannon was quite clear and definite in remembering that, before the accident, when he and Anthony got out to where the fencing work was being done, his grandfather had told him and Anthony to stand back out of the way. I accept that evidence. It accords with other evidence given by the Lawlesses. Anthony himself accepted that his grandfather could have said this, although he himself did not remember it.
To the extent that the evidence of Graeme, Sandra and Donna Lawless was in conflict with the account given by Anthony of the lead-up to the accident, I do not accept their evidence. Each of them said, in effect, that Graeme was operating the post-driver in the same way as he normally did, ie, with Donna, alone, helping by holding the posts. Each said that they did not see Anthony holding any post and that the first they knew of the injury was when Shannon screamed. Sandra said that Anthony must have darted around to the position in which he was injured without any of them noticing. In my view, this version of events is inherently unlikely. The fact is that Anthony’s hand was caught between the post-driver and a post. It is inherently more likely that his hand came to be there as a result of his holding the post, rather than as a random event.
I was not particularly impressed with Mr Lawless as a witness. Mr Thompson SC demonstrated that some of Mr Lawless’ evidence about the way in which he was operating the post-driver on the day in question was in conflict with what he had told an investigator from CGU some four years earlier. Under cross-examination, Mr Lawless appeared to be somewhat defensive and hostile. However it was difficult for Mr Lawless to do himself justice in the witness box because he had obvious difficulty in understanding some of the questions that were put to him and because he is quite inarticulate. As I have already mentioned, he is in fact illiterate. As indicated in more detail below, I accept that Mr and Mrs Lawless were close, loving grandparents to Anthony and Shannon. However it seems from the evidence that, since the accident, the boys’ parents have prevented them from having much contact with their grandparents and Donna. It would only be natural if Mr Lawless were greatly distressed by the serious injury to Anthony’s hand, by the knowledge that he had been involved in the events that led to the injury, by the loss of connection with his grandchildren and by the express or implied criticism that, I infer, has come his way from Anthony’s parents and perhaps others. One can understand that Mr Lawless might well have convinced himself that he could not have been responsible for what had happened. This, together with some lack of attention at the time, the suddenness and shock of the accident and the passage of time, may have clouded Graeme Lawless’ perceptions and recollections of the relevant events.
Sandra Lawless gave evidence fairly briefly and Donna’s evidence was especially brief. Apart from putting to them that their evidence was wrong and asking Sandra whether she had discussed her evidence with Graeme or Donna, Mr Thompson SC did not attack the credit of Sandra or Donna in cross-examination. However, in oral submissions, Mr Thompson SC attacked their evidence as unreliable. I would agree with Mr Thompson SC that neither of them gave evidence in an impressive way. Their demeanour was guarded and defensive. On the other hand, factors corresponding to those that may have clouded Mr Lawless’ perceptions and recollections may also have clouded theirs.
I do not think it necessary or appropriate to conclude that any of the Lawlesses told deliberate untruths in Court. However, to the extent that their evidence was out of line with the findings I have expressed, I do not accept it.
It follows that, in my view, Graeme Lawless must have been aware, prior to the accident, that Anthony was helping Donna to hold the posts. Although Graeme had previously told the boys to keep back with their grandmother out of the way, he must have relented on this instruction and permitted Anthony to take part. The Lawlesses may have convinced themselves that these things did not happen, but I find, on balance, that they did.
Nevertheless I consider that, prior to the accident, Mr Lawless did not truly appreciate the danger which was represented by his using the post-driver in the way he did, ie without the guard, with persons holding the posts with their hands, with the children nearby and with one of them (Anthony) actually participating in the holding of the posts. I find that Mr Lawless is a person of very limited perspicacity. I infer that he was quite convinced, by what he had seen and heard and experienced in relation to the use of post-drivers over the previous 25 years, that it was not dangerous, or at least not dangerous to any significant event, to operate them in the way he usually did, or even with this 10 year old child also taking part. He had put in at least a thousand posts, which had been held by his own wife, his own stepdaughter and himself, without incident. His stepdaughter, Donna, had commenced to help with fencing while she herself was still quite young, and under the disability of epilepsy, without incident.
I accept that Mr Boulton had told Mr Lawless that the way he operated the post-driver (ie, with Donna holding the posts) was too dangerous and that Mr Boulton stopped giving him contract fencing work on that basis. However, it may be a measure of the strength of Mr Lawless’ opinion to the contrary that, despite his impecuniosity, he was not prepared to modify the way he used the machine in order to continue to get fencing work from Mr Boulton.
I have considered whether the Court should infer from the fact that Mr Lawless told the children to stand back that he knew, at least, that there would be danger to the children if they came close. However Mr Thompson SC did not in terms put that proposition to Mr Lawless. Mr Lawless had said in evidence that he had asked the children to stand back because “I don’t want them under my feet when I’m using machinery”.[45] I accept Mr O’Dwyer’s submission that this was not an admission that he knew that having children around the operation was dangerous for them (at least to any sufficient extent), but rather it reflected his view that it was inappropriate to have them around when he was trying to operate machinery because he thought they would get in his way.[46]
[45]Transcript p 196.
[46]Transcript p 330.
There was one other piece of evidence given by Mr Lawless which for a time made me wonder whether perhaps he did recognise the danger, at least to some extent. In evidence in chief there was this exchange[47]:
“At any time prior to the accident, did you see Anthony holding the post? --- No.
If you had seen him holding the post, what would you have done? --- I would’ve stopped work straight away and made sure he got out of the way.”
[47]At p 170.
This exchange was not the subject of any particular mention by any party during final submissions. I presume Mr O’Dwyer SC would seek to deal with it in the same way he dealt with the evidence referred to in the previous paragraph (ie. by saying that Mr Lawless would have perceived only inconvenience to himself, not danger to Anthony). Since I have found that Mr Lawless must have seen Anthony holding posts before the accident, I cannot accept his answer that he would have stopped work straight away had he seen Anthony doing so. Mr Lawless did not stop in fact. On reflection, however, I do not think this adds anything of ultimate significance. I need to focus on the likely state of Mr Lawless’ mind as at the time shortly before the accident, not afterwards. Bearing in mind what I have already said about Mr Lawless as an individual, and about the factors that may have affected his recollection of the relevant events, the real issue is not much illuminated, in my view, by what he now says, with the powerful addition of hindsight, about what he “would” have done if he had seen Anthony holding the post.
In any event, it is not particularly helpful to ask whether Mr Lawless “recognised the danger” as a separate question. The elements of the Albion Insurance test are interrelated and cumulative, and must be applied sensibly to the facts of the particular case. In the present case, as Mr O’Dwyer SC pointed out, there was uncontested evidence (which I accept) that Graeme and Sandra Lawless are loving grandparents who have at all times cared deeply about Anthony.[48] There is no evidence that they requested Anthony to hold any post. They did not need his help. Indeed Mr Lawless had asked him to stay back. They were merely putting up a (single) fence. There were no budgets or other financial targets or financial constraints involved.[49] It seems to me that they simply succumbed to Anthony’s boyish insistence on becoming involved. In those circumstances, I find it impossible to conclude, or even to contemplate, that Anthony’s grandparents (or either of them) deliberately exposed him to a recognised danger, not caring[50] whether or not he suffered bodily injury. I reject CGU’s submission that “there was that level of indifference”.[51]
[48]Compare the industrial situation in Norwich Union Insurance Co Ltd v R & W Products (1969) 90 WN (NSW) 554, on which CGU relied.
[49]Again, compare Norwich, supra.
[50]If the test should be expressed in terms of “indifference”, the result is the same: cf Albion Insurance [1983] 2 VR 339 at 341 per Young CJ.
[51]Transcript p 301.
Further, this is not a case where it could be said, nor was it said by CGU, that the existence or perceived existence of insurance had eliminated, or reduced the level, of the Lawlesses’ concern about the safety of the children.[52]
[52]Compare Albion Insurance [1983] 2 VR 339 at 344.6, 346.1 per McGarvie J.
As the law in Victoria presently stands, it is true, as Mr Thompson SC frequently reminded me, that the onus was not on his client, but on Mr Lawless, to satisfy me that his state of mind met the relevant test. Mr Thompson SC submitted that the onus had not been discharged because, in fact, the situation was “perilously dangerous” and because Mr Lawless’ counsel did not actually ask him to say what was in his mind before the accident and Mr Lawless did not otherwise depose to that. I accept that, objectively, Mr Lawless’ mode of working was dangerous and I accept that the objective situation has evidentiary relevance, but the ultimate inquiry is as to the (subjective) state of Mr Lawless’ mind. I do not consider that direct evidence from Mr Lawless as to the state of his mind was essential. Indeed, any direct questions on this topic from Mr Lawless’ own counsel might well have been unhelpful to the Court, if not objectionable. It may have been very difficult to frame a proper, non-leading question on the matter. In any event, I accept Mr O’Dwyer SC’s submission that it was open to me to be satisfied by inferences drawn from the whole of the evidence, and from ordinary human experience, that Mr Lawless did not recognise the relevant danger or, at least, the extent of it; that it was not due to a lack of desire and concern on his part to prevent bodily injury that he failed to take reasonable precautions to prevent Anthony’s injury; and that he did not make a deliberate decision to invite or court the danger to Anthony. For the reasons already indicated, I do reach those conclusions.
Accordingly, Mr Lawless succeeds in his claim for indemnity against CGU.
It is unnecessary to determine whether Sandra Lawless was insured under the policy or, if so, whether she would have been entitled to an indemnity against Anthony’s original claim against her.
Assessment of damages
I turn now to an assessment of the damages payable by Graeme Lawless in respect of the injury to Anthony’s left hand and its consequences, being a liability in respect of which, in my view, Mr Lawless is entitled to an indemnity from CGU.
There is no claim for past medical expenses or other special damages relating to the past.
The claim made falls into two parts: a claim for past, present and future pain and suffering and loss of enjoyment of life due to the injury (non-economic loss); and a claim for loss of future earning capacity (economic loss).
All of the evidence relating to the nature and extent of Anthony’s injury and its consequences was evidence adduced by the plaintiff himself. No other party led any such evidence.
The injury
There was no dispute about the physical nature of the injury, nor was there any challenge to the contents of the medical reports of the Central Gippsland Health Service, Mr Daryl Page, Mr Rustomjee, Mr Epstein and Mr Anstee, all of which were tendered by consent.
The Central Gippsland Health Service reported that when Anthony was admitted to hospital on 2 July 2002 he was found to have a crushed fourth and fifth finger of his left hand together with crush injuries to the medial (small finger) side of the hand. That afternoon Mr Ian Farmer, Surgeon, undertook debridement of the injuries and amputation of the fourth and fifth digits in the region of the metacarpal heads (knuckles) of those digits. The wound was partially closed. Two days later Anthony was taken to theatre again where the gap in the closure of the wound was covered with full thickness skin taken from the left palm and forearm. Recovery was satisfactory and Anthony was discharged on 8 July 2002 after referral for follow up from physiotherapy and social work. Anthony returned for review and changes of dressings on 9, 10, 11, 16 and 22 July 2002. He was referred for further follow up to Mr Daryl Page, Surgeon.
In a report dated 24 January 2003, Mr Page notes that on 5 August 2002 the graft was found to be well healed and arrangements were made for Anthony to undergo a course of physiotherapy to regain normal full range of movement of extension and flexion of the residual digits. On 15 August 2002 Anthony was re-examined and found to have made a very satisfactory improvement in that regard and he was advised to continue with physiotherapy. Mr Page did not see Anthony again after the consultation on 15 August 2002.
The accident had happened at the beginning of the school holidays, and Anthony missed a week of schooling.
Anthony saw another surgeon, Mr Rustomjee on 15 May 2003 for a medical report requested by Anthony’s solicitors. He told Mr Rustomjee that he had a fair grip in the left hand but it was quite reduced compared to what it had been prior to the accident. Anthony also reported that when he tried to flex his left hand he experienced considerable grating in the knuckles of the index and middle fingers. He said that due to the lack of a ring and little finger, he found working on the computer difficult. He said also that he found riding a pony difficult because of the lack of grip in the left hand. Mr Rustomjee noted that Anthony was a “podgy lad” of 152.6 centimetres in height and 76 kg in weight. In addition to the amputations of the two fingers and part of the left palm, Mr Rustomjee noted a 6 cm scar on the median aspect of the hand due to the skin graft. Movements of the left thumb and index finger were full in all directions and painless. Flexion of the left middle finger was full at all the joints, but extension was limited by 20° at all joints of this finger. Whereas the grip in the right (dominant) hand was 25 kg, the grip in the left hand was 12 kg. Mr Rustomjee observed that the wounds had healed quite well but Anthony had been left with “considerable disability and disfigurement”. He concluded:
“It is difficult to estimate what impairment this disability, will impose, in his later lifestyle. At present however it is limiting his activities at school and during leisure time.
The bodily disfigurement which he suffers following this amputation is considerable, though he seems to have adjusted psychologically to his problem. However again, in later life, it is difficult to estimate what impairment this would cause him psychologically.
I do not feel that this boy needs any further surgical treatment or other treatment to his left hand.”
At the request of Anthony’s solicitors, Michael Epstein, Psychiatrist, saw Anthony and his mother (separately) on 11 August 2003 and provided a report dated 15 August 2003. Significant parts of the history taken by Mr Epstein (none of which was in dispute) are reflected in previous findings set out above, especially under “Background”. Further matters of significance, as reported to and by Mr Epstein, follow.
In her evidence in chief, Ms Angel said that a person seeking an apprenticeship as a diesel mechanic did not necessarily need to have completed Year 11 or Year 12. She confirmed that the amount set out for a Motor Mechanic in her report was the base award rate. Under cross-examination by Mr Larkin (for the Lawlesses), Ms Angel conceded that it was “probably desirable” that an applicant for an apprenticeship as a diesel mechanic go to Year 11 or Year 12, although there were exceptions. As to the overtime figures, she had not inquired how many of the diesel mechanics did overtime and she thought it depended on how busy the employer was. CGU’s counsel declined to ask Ms Angel any questions. In response to Mr Young, Ms Angel conceded that, these days, it is “long odds” to get an apprenticeship of any type without first passing VCE. She also said that “most mechanic work now is done with computers as well as [manually]”.
I return again to Mr O’Dwyer SC’s final submissions. He accepted that Ms Angel's evidence had not been disputed and he submitted that there was no contrary evidence in relation to this issue. He concluded by saying that there was very broad scope available to the Court in assessing both Anthony’s “without injury” capacity and his “with injury” capacity.
The submissions of Mr Young (for the Boultons) on future economic loss were brief. In addition to what he had said about the seriousness of Anthony’s injury (in the context of non-economic loss[68]), Mr Young submitted that it was obvious because of Anthony’s lack of intellectual ability that it was highly unlikely that Anthony, even without the injury, would have got a job as a diesel mechanic. Indeed, said Mr Young, because of Anthony’s disadvantaged background, it may have been difficult for him to carry on full time employment at all. However, the submission continued, most likely he would have done some work, of a manual nature, but not in a trade. Mr Young noted that across the Bar table it was acknowledged that Anthony appeared to be a pleasant and cooperative young man, and that that would stand him in good stead. Mr Young submitted that Anthony will work even now. Although there were obvious limitations on physical work, it should not be ruled out completely.
[68]See para 113 above.
Mr Thompson SC, for CGU, submitted that the Court should depart fundamentally from the mathematical approach which had been spoken of by Mr O’Dwyer SC and which was anticipated from Mr Mighell SC. This case was very different from that of a person injured when nearing the end of their working life, where a strict mathematical approach was plainly appropriate. With a child of Anthony’s age, there was a vast range of possibilities both before and after the accident. The Court could consider what may be handed up by way of figures “and perhaps take notice of them”, but ultimately it was a matter for the Court to work out the capital worth of the lost working capacity. True, the Court should not merely pluck a figure out of the air. However, the Court should come to an assessment with which it was “comfortable”. This would involve working out what was realistically likely to happen before and what is realistically likely to happen now and trying to work out the worth of the differential. The options were numerous and the parameters were wide.
Mr Thompson SC submitted that Anthony’s potential to be a diesel mechanic was latched on to unrealistically in this case. Due to a combination of factors, including his IQ, his organisational abilities and attitudes to certain subjects as evidenced by his school reports, and because of his social and other background, he most likely would have been employed in an unskilled or at best semi-skilled capacity, in an agricultural or labouring occupation. He would have been capable of doing a job that involved some ancillary paperwork or computer work, but it was unrealistic to assess his potential by reference to average weekly earnings or the earnings of a diesel mechanic. Average weekly earnings “includes lawyers and stockbrokers” and a diesel mechanic is relatively highly paid. These comparisons were unhelpful.
As to Anthony’s present situation, Mr Thompson SC submitted that Anthony presented to the psychologist, Mr Hodgson, as a likeable person who wanted to work and who was likely to try to overcome his problems to attain employment. Mr Thompson SC urged me to regard Mr Hodgson (a former teacher) as a person with a good working knowledge of apprenticeships and young people and with the theoretical training and skills to back this up. He submitted that I should give weight to Mr Hodgson’s evidence in this regard and that I should view the evidence of Mr Stapleton and Dr Sillcock as “unduly negative and pessimistic”.
Mr Thompson SC further submitted that, taking into account the assistance available for disabled people to enter the workforce, the type of work Anthony would be looking for and the Court’s impression of Anthony as an individual, the Court should presume that Anthony will be in employment for the bulk of his working life, despite the injury. Anthony retains abilities. It is just that he will have difficulty with particular tasks. Some employers are more accepting than others. Anthony is not like a paraplegic. Driving or delivery work is an option. Cleaning work, general farmhand work and semi-skilled labouring work are others. Dr Sillcock was too negative in her responses to these suggestions. Anthony is right-handed. He can write. He can use a computer to a reasonable degree. He could sell cars. He is not on the employment scrap heap at the age of 14.
Mr Thompson SC did not put up any calculations, except as follows. He submitted that it would be useful to note what return would be obtained at present interest rates (he suggested 5 per cent) on a particular lump sum. For example, he said, $250,000 invested at 5 per cent gives a per annum return of $12,500.[69] The Court might consider that that reflected a reasonable differential in potential jobs from time to time. Likewise, a lump sum for, say, ten years out of work over Anthony’s working life, at $25,000 per year, undiscounted, would give $250,000. These were merely suggested approaches. They led Mr Thompson SC to submit, finally, that the appropriate award under this head would be in the area of $250,000 or $260,000, being a capital sum which, he submitted, would be reflective of the situation in a realistic way.
[69]I note that such returns would be taxable as income.
The thrust of Mr Mighell SC’s submission for the plaintiff on this issue was that the injury had largely taken away the earning capacity that Anthony previously had. The evidence indicated a boy who would have followed a manual vocation. Anthony’s favourite subject at school was woodwork. He did not like the Information Technology subject he had done at school last year, and he was slow on computers. He did not read at home and the extent of his reading at school was four 15 minute sessions a week. Mr Mighell SC submitted that Anthony’s desire to pursue a vocation as a diesel mechanic was “consistent” with that picture, and that the experts, while stating that to have Year 11 or Year 12 would be preferable, did not say that this was essential for an apprenticeship.
As to Anthony’s post-injury position, Mr Mighell SC submitted that the extent of the destruction of Anthony’s earning capacity was much greater than it would have been for someone who had had a wide range of occupations open to them. Mr Mighell SC relied heavily on the evidence of Dr Sillcock and Mr Stapleton in this regard. However, he accepted that Anthony was not completely unemployable.
Mr Mighell SC acknowledged that the onus of proof of loss or damage lies with the plaintiff, but he drew my attention to a debate in the cases about whether the “evidentiary onus” in relation to “residual work capacity” rests with the defendant.[70] Mr Mighell SC noted that no party had called any evidence to suggest that there were particular types of vocation that Anthony could still pursue. However, I note that this is a case involving a child who has never worked and in which there are many imponderables, including as to the nature and extent (if any) of the plaintiff’s “without injury” earning capacity. It is therefore distinguishable, in my opinion, from the cases in which it has been said that where the plaintiff has proved he has lost his pre-accident earning capacity and has been unable to find alternative employment, an evidentiary burden is cast on the defendant to show what alternative opportunities were open, including the state of the labour market and likely earnings.[71] Mr Mighell SC acknowledged, naturally, that his opponents could rely on such limitations as the witnesses themselves expressed in their evidence-in-chief in relation to the extent of the plaintiff’s alleged loss of work capacity and on such concessions as they made in cross-examination in that regard. In any event, I am not obliged to accept all or any particular part of the evidence called by the plaintiff merely because no other party led any evidence about residual work capacity.[72] Ultimately, Mr Mighell SC said that he would not be submitting that the plaintiff was totally incapacitated or that he had no residual work capacity. Rather, he submitted that there had been “a substantial loss of the plaintiff’s earning capacity”.
[70]Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649 at 657; cf Bugge v REB Engineering Pty Ltd [1999] 2 Qd R 227 at [50]; Morgan v Costello [2004] WASCA 260 at [46], [99]; H. Luntz, Assessment of Damages for Personal Injury, 4th edition, 2000 at [1.9.20].
[71]Thomas v O’Shea (1989) A Tort Rep 80-251 at 68, 701; Morgan v Costello [2004] WASCA 260 at [46]. Compare State of New South Wales v Moss (2000) 54 NSWLR 536 at [66]-[71].
[72]Bugge v REB Engineering Pty Ltd [1999] 2 QB 227; Luntz, loc. cit.
Mr Mighell SC handed up a two page document headed “Plaintiff’s Submissions in relation to Loss of Earning Capacity”. It contained a table, drawn partly from undisputed actuarial material provided by Cumpston Serjeant Pty Ltd, and partly from the evidence of Kaye Angel, showing Australian Male Average Weekly Earnings, the earnings of a Motor Mechanic Level 6, the earnings of a Diesel Mechanic (Experienced 3-4 Years) with overtime, and the same without overtime. It also set out the agreed “deferred multiplier”, namely 801.4, which would be appropriate (if this approach were adopted) in relation to the period from Anthony’s 18th birthday until he turns 65. It gave a figure for “without injury” total earnings, discounted by applying the deferred multiplier, for each of the four specified levels of weekly earnings. It included a worked example for $800 net per week (being 90% of Average Weekly Earnings) discounted by the deferred multiplier (801.4), plus actuarially calculated superannuation, less 15% for vicissitudes. This produced a figure of $702,195.20. Examples of “with injury” loss of earning capacity were then given, being 66% of $702,195, namely $463,448 and 75% of $702,195, namely $526,646.
Mr Mighell SC acknowledged that the Court was not “shackled” to the figures for average weekly earnings. Those figures might or might not be found to be of assistance. The Court might prefer to use the earnings of diesel mechanics, which would be higher. Alternatively, the Court might think that the average was too high. Indeed, Mr Mighell SC said:
“In this case two relevant reasons that [the Court] might go down from the average are of course the geographical location of East Gippsland and secondly what we know of the plaintiff before the accident and since the accident concerning his IQ. [The Court] might well form the view and could that the sorts of employment he was going to go into, but for the accident, were not the more highly remunerated forms of employment”.[73]
[73]Transcript p 368-369.
However, Mr Mighell SC pointed out that in State of New South Wales v Moss[74], where the plaintiff, a female, had been injured as a 14 year old student, the Court of Appeal had proceeded on the basis that the use by the trial judge, as a starting point, of the average weekly earnings of females in New South Wales was appropriate. Mr Mighell SC also referred me to Walshe v Prest, a recent case involving a 4 year old child, in which Basten JA (with whom Giles JA agreed) said[75]:
[74](2000) 54 NSWLR 536, supra at [23]-[27], [89]-[91].
[75][2005] NSWCA 333 at [14]-[17].
“[14]The assessment of future economic loss in relation to a 10 year old child is an exercise which is fraught with difficulty and uncertainty. As explained by Heydon JA in State of New South Wales v Moss (2000) 54 NSWLR 536 at [71]:
‘Evaluation of the worth of a loss of capacity to earn – of a lost chance to earn – is of its nature a more imprecise inquiry than calculation of a lost income. It rests on the hypothesis – that the plaintiff will have undiminished capacity – which has been rendered false by events. It does not depend on calculating the income from a particular career which is no longer possible, but in calculating the damage to a capacity to carry on various careers. It is an exercise in estimation of possibilities, not proof of probabilities’.
It is, as his Honour noted, a calculation to be carried out in accordance with the principles set out in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638.
15.Heydon JA also made reference to the situation with young children, in terms which are apt to apply to the present case, at [84]:
‘An illustration of the court’s readiness to award damages for diminution of earning capacity arises when very young children are injured. Strictly speaking it would be impossible to prove that the child would have had an earning capacity as an adult or would have exploited it. But it is conventional to rely on the occupations, attitude to life and work histories of parents and other relatives …’.
His Honour further noted at [93]:
‘It is much harder to value a chance where, as here, the plaintiff was a school child and the source of income lost is a professional business, not income from labour which is governed by awards or capable of establishment by reference to market rates. But since the obligation to value it cannot be shirked, deficiencies in the materials advanced may be tolerated’.
16.Those difficulties are clearest in the case of a child who has not yet finished her schooling, or even her primary schooling at the date of trial. Those difficulties do not, of course, allow the Court to abandon the necessary assessment, nor did the Defendant suggest otherwise. They do, however, limit the scope for challenge on appeal, because of the imprecise boundaries of the permissible range of damages.
17.In the absence of any basis for variation from the average, the appropriate course is to adopt as a basis for calculation the average weekly earnings at the date of judgment: see Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 624 (Mason P, Meagher JA agreeing and Clarke AJA also agreeing and adding some further comments at 628).”
Notwithstanding these observations, Mr Mighell SC acknowledged that this Court, at least, was not obliged to have regard to average weekly earnings (or to some variation thereof) at all.
Determination as to Loss of Future Earning Capacity
Having considered the parties’ respective submissions, I think that it is appropriate to at least commence with the general approach suggested by both the plaintiff and the defendants, rather than just select some lump sum amount with which the Court is “comfortable”, as suggested by CGU.
In this regard I am conscious that in CSR Readymix (Australia) Pty Ltd v Payne[76] the Victorian Court of Appeal, in applying certain observations made by particular members of the High Court in earlier cases, held that the adoption by the trial judge of what he called a “global approach” and what the Court of Appeal characterised as an “intuitive approach” in relation to the amount of lost earning capacity was erroneous. The factual situation here is more amorphous than in Payne, but still I think that there is enough common ground and enough reliable evidence to warrant taking a somewhat structured approach, though I am mindful of the need to ensure that the taking of such an approach does not lead to over-compensation.[77] Mr Thompson SC himself acknowledged that the Court could “consider” and “take notice of” figures of the kind suggested by the plaintiff and the defendants, albeit, apparently, only as part of some unidentified process of arriving at a figure with which the Court was comfortable. In Loveday v Austin Hospital[78], net average weekly earnings for a female in the retail industry were used by Mandie J to calculate loss of past earnings (over a period of 19 years) for an injured woman who had worked mainly in shops before her accident. I note also the reference to average weekly earnings (as defined) in s 28F of the Wrongs Act 1958, although I acknowledge that that section is inapplicable to the present case because the writ was issued before it commenced.[79] On the other hand, in at least three not dissimilar interstate cases relating to injuries to young persons with little or no work history, namely Stone v Clarence Municipality[80], West v Gilliland[81], and Hanlon v Hanlon Enterprises Pty Ltd[82], the trial judge found it impossible to assess economic loss on a “mathematical” basis. Also, in SB v State of New South Wales[83], Redlich J (as his Honour then was) accepted that the multiplier approach should not be used in that case because the plaintiff’s claim was too speculative. However, while his Honour based that view in part on the fact that the plaintiff had been injured when she was a minor and had no employment history, he also took into account that she had a pre-existing psychiatric condition which impacted upon her capacity for any form of employment and that her present capacity to undertake employment was uncertain. Further, the plaintiff was 37 years old at the time of trial. The case is thus distinguishable. In any event, without using the multiplier, Redlich J did, for the purpose of assessing both past and future economic loss, have regard to average weekly earnings as set out in a forensic accountants’ report.[84] I am comforted in using the mathematical approach as a guide in the present case by the fact that the New South Wales Court of Appeal did the same in the three abovementioned cases relating to injured children, namely Rosniak v Government Insurance Office[85], State of New South Wales v Moss[86] and Walshe v Prest[87], and by the fact that I was told by Mr Mighell SC and Mr O’Dwyer SC (without contradiction from any other counsel) that I was not precluded by any Victorian or other authority from doing so.
[76][1998] 2 VR 505 at 508, 513-514.
[77]Compare Arthur Robinson (Grafton) Pty Ltd v Carter [1968] 122 CLR 649 at 658-659.
[78][1999] VSC 180.
[79]Wrongs Act 1958, s 28L(2)(a).
[80]Supreme Court of Tasmania, Wright J, 17 February 2003, unreported, BC9300181.
[81]Supreme Court of Queensland, Cullinane J, 18 October 2005, unreported.
[82][2004] NSWSC 930 at [121].
[83](2004) 13 VR 527 at 613.
[84]At 614, [625] and 615, [627].
[85](1997) 41 NSWLR 608.
[86](2000) 54 NSWLR 536.
[87][2005] NSWCA 333.
I note Mr Thompson SC’s assertion that average weekly earnings “includes lawyers and stockbrokers”, and I note that in Rosniak, supra, there was a discussion of certain statistical evidence which tended to show that there were many more people in the community who earned less than average weekly earnings than there were people who earned more than average weekly earnings. However, I will start with average weekly earnings rather than median weekly earnings, partly because there was evidence of the former but not of the latter and partly because in Rosniak it was held that without detailed expert evidence the Court should not switch from “average” to “median” as a starting point.
However, on the evidence in the present case, I think on balance that (even apart from “vicissitudes”) I should apply a fairly substantial discount to average weekly earnings in endeavouring to make a fair assessment of Anthony’s “uninjured” earning capacity. On the one hand, I accept that there was some slight prospect that Anthony might have become a diesel mechanic had he not been injured. But his school reports, his family circumstances and the evidence of Mr Hodgson and of Ms Angel suggest that this would have been quite unlikely. Mr Mighell SC did not submit with any vigour that I should find otherwise. However I put in the scales in Anthony’s favour the small chance that he might have entered this or a similar “high level” trade or some other highly remunerated occupation and so earned more than the average. Far more likely, in my view, is that Anthony would have left school without successfully completing VCE and would have looked for manual work of an unskilled or semi-skilled kind in the East Gippsland area, such as farm labouring or factory process work or basic mechanical work. There is no evidence about present levels of earnings for unskilled or semi-skilled workers in the local area or otherwise, except the evidence in Ms Angel’s report to the effect that the award rate for a base grade mechanic is $578.20 per week gross, which is agreed to represent $463.20 per week net, although it seemed to be common ground that wages in East Gippsland were generally lower than average. Anthony would have had some prospects of becoming at least a base grade mechanic had his hand not been injured. Further I think I can proceed on the basis that wage rates (including award rates based on classifications) generally tend to get higher for workers as they gain experience and skill.[88] The recent advent of the federal “Workchoices” legislation may well diminish the significance of awards, but the general proposition should hold true. Further, overtime may have been available to Anthony from time to time. Taking those matters into account, and allowing something for the chance that Anthony might have done much better, I would adopt the figure of $600 net per week for the purposes of the exercise, rather than average weekly earnings. Subject to the ordinary vicissitudes, there is no reason to think that Anthony would not have worked, or tried to work, at least from age 18 until 65 years of age.[89] Superannuation needs to be added. (The undisputed Cumpston Serjeant actuarial material included figures for superannuation based on future earnings of $600 net per week.) Having considered both “good” and “bad” contingencies, I would adopt a figure of 15%, by way of discount, for vicissitudes. Using the actuarial material, the resulting calculation for the present value of Anthony’s “uninjured” earning capacity would then be –
[88]See, eg, Papadopoulos v Fabian Trial Pty Ltd [1998] VSC 125 at [111].
[89]Compare Papadopoulos v Fabian Trial Pty Ltd [1998] VSC 125 at [118]; Hussan v Keppel Prince Engineering Pty Ltd [2006] VSC 412 at [142]. I was not invited to perform alternative calculations on the basis that Anthony would have entered the work force before the age of 18, but I take into account generally this possibility.
Multiplier 801.4
“But for” earnings - $600 per week x 801.4 =
$480,840
Plus superannuation
$137,840
$618,680
Less 15% for vicissitudes
$ 92,802
$523,778
Turning to the question of the extent to which Anthony’s earning capacity has been lost by reason of the injury, I accept Mr Mighell’s submission that Anthony has suffered a “substantial loss” of his earning capacity. I note Mr O’Dwyer SC’s perhaps even more pessimistic submissions in this regard. It was, I think, common ground that Anthony no longer has (if he ever had) any realistic prospect of becoming a diesel mechanic. However I consider that there is some merit in Mr Thompson SC’s submission that Anthony’s pleasant and cooperative attitude (together with the potential revealed by his surprisingly good Verbal Comprehension Index Score when tested by Mr Hodgson), may assist him to overcome, to some extent, the difficulties caused by his injury. I accept also that Mr Stapleton and Dr Sillcock were, to some degree, unduly negative and pessimistic, given Anthony’s own evidence about the effects of his injury, but I bear in mind that there was no medical evidence to the contrary of theirs. I also take into account that at present Anthony lacks confidence generally, a problem to which, in my view, the accident contributed and which may or may not resolve in the future. However I consider that from time to time Anthony will probably be able to obtain and perform work such as delivery or driving work or security work or farm or factory labouring work, but most likely on a casual or irregular basis and at rates of remuneration generally below what he might have achieved, over time, uninjured. I do not agree with Mr Thompson SC that I should proceed on the basis that, despite Anthony’s injury, he is likely to be in (full-time) employment for the bulk of his working life. It is possible that he will be, but in my view Anthony has been rendered quite vulnerable to unemployment and underemployment as a result of his injury.
All in all, I consider that a reasonable estimate is that he has lost about two-thirds of his “without injury” earning capacity.
Accordingly, on the suggested approach (which, I emphasise, I regard merely as a guide) damages for Anthony’s loss of earning capacity would be assessed at 2/3 x $523,778, ie at $349,185.33, rounded off to $350,000.
Taking a step back from the suggested approach, I have also asked myself, as a kind of check, whether a figure of $350,000 for Anthony’s loss of earning capacity seems appropriate, proportionate and fair to all parties in all of the circumstances. In doing so, I have taken into account the possible return on investment of that sum. Further, I have asked myself the same questions in relation to the total figure of $540,000 which would be produced by adding together the proposed amounts of damages for economic and non-economic loss.[90] The answer is yes in both cases.
[90]Compare Arthur Robinson (Grafton) Pty Ltd v Carter (1968) 122 CLR 649 at 657-661; Gamser v Nominal Defendant (1977) 136 CLR 145 at 149-150, 158-160. I have even taken into account the prospect of investment at a rate somewhat higher than the 5% posited by CGU.
Other heads of damages
Although Mr Hodgson had given some general evidence about the costs of professional psychological counselling and about the prospect that such counselling might be warranted for Anthony at some time in the future, Mr Mighell SC did not in final submissions mention any claim for compensation for counselling costs or for any other specific or special item of damages. I assume that any such claims have been abandoned.
The Third Party Notice to the Boultons
As indicated above, on my findings Mr Lawless’ third party notice to the Boultons falls to be dismissed. However, the parties may wish to be further heard as to the costs of that third party notice. I have not needed to make any finding as to whether the insurance cover arranged by the Boultons with CGU failed fully to match the requirements of the lease, as alleged by Mr Lawless. Further, I note that it was only on the first day of the hearing that the Boultons abandoned paragraphs 11 and 12 of their defence to the third party notice (the “reasonable precautions” point).
I understand from submissions made by Mr Young at the beginning of the trial[91] that the Boultons may wish to contend (either in this proceeding or elsewhere) that CGU should take some responsibility for the fact that the Boultons have been brought into this case. I note the evidence of Mr Spencer of CGU, called by the Boultons, to the effect that he told Mr Boulton that the cover did match the requirements of the lease. In any event I gather that it may be contended that the third party notice against the Boultons would not have been issued, or would have been discontinued, if CGU had not taken the point that the accident did not occur in connection with the Boultons’ business. I express no view at this stage as to whether, on any such basis or at all, CGU could be called upon to pay or contribute to any costs in respect of the third party notice to the Boultons.
[91]Transcript pp 17-18.
I simply note that there may be matters such as these on which the parties may wish to make further submissions if the question of the costs of the third party notice cannot otherwise be agreed.
Orders
Subject to any submissions from counsel as to the appropriate form of judgment or orders to give effect to these reasons, I propose to give judgment for the plaintiff against the first defendant, Graeme Lawless, for $540,000, comprising $190,000 for pain and suffering and loss of enjoyment of life and $350,000 for loss of future earning capacity. I propose to order CGU to indemnify Graeme Lawless accordingly. I will hear counsel as to any other appropriate orders, including orders to dispose of the claims against and by Sandra Lawless and the claim contained in the third party notice against the Boultons, and as to costs generally.
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