Treonne Wholesale Meat Pty Limited & Anor v Saheen

[1988] HCATrans 217

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S41 of 1988

Between-

TREONNE WHOLESALE MEAT PTY LIMITED

and THE NOMINAL DEFENDANT

Applicants

and

ANTHONY SHAHEEN by his Tutor THE

PROTECTIVE COMMISSIONER OF NEW

SOUTH WALES

Respondent

Application for special leave to

appeal

MASON CJ

WILSON J

Treonne

DEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 SEPTEMBER 1988, AT 10.19 AM

Copyright in the High Court of Australia

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MR R.J. ELLICOTT, QC:  Your Honour, I appear with MR A.R. ABADEE, QC

and MR N.F. FRANCEY for the appellants. (instructed

by G.E. Lazar)

MR B.M. TOOMEY, QC:  I appear with my learned friend,

MR P.J. DOHERTY, for the respondents.(instructed by

Bond & Bond)

MR ELLICOTT:  Your Honours, the short relevant facts for

Your Honours are these, that the respondent, then an

infant, was involved in a motor vehicle accident,

was severely brain damaged. By the time of the trial,

should it be relevant, that child had become an adult.

The effect of the brain damage was that the respondent would not be a person who would be able to manage their

own affairs.

MASON CJ:  Mr Ellicott, I do not want to cut you short, of

course, but we are aware of the facts and I think it

is possible that you might go directly to that aspect

of the judgment which seems to concern you, namely

that is the allowance in respect of costs of management

of the fund.

MR ELLICOTT:  Your Honours, the relevance of the facts are simply

that because the person is a person of unsound mind

and that was caused by the accident, that is significant

in terms of looking at the matter of principle.

It is our submission that this is clearly a

matter for special leave. The question as to whether

damages should be allowed as a separate head for the

cost of management of a fund is a new area of the law.

It has never been considered by this Court and in the

course of the last few years there has been a great

degree of debate within the Supreme Court of New

South Wales as to the - although the judges have

taken the view, broadly speaking, that some allowance should be made, contrary to submissions that we would

want to put, the basis upon which they have approached

that issue has varied somewhat.

There are also differences of approach between

the court in New South Wales and the Supreme Court

of South Australia and if one wants to go further,

there are differences of approach in the United Kingdom

and in Canada to this issue. It is an issue which,

of course, as Your Honours would be aware, can arise

not only in motor vehicle accidents but cases involving

medical negligence where, perhaps, a baby is affected

in a way - brain damaged, et cetera - and claims are
made.

Now, that being so, it being a new area, the Court not having considered it before, and because it

is a significant matter that could affect other cases,

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it is clearly a case for leave. The other ground is

that this Court needs to give a decision in order
to clear up the true disputation between the various

decisions of the Court of Appeal and between

judgments below and judgments in the Court of Appeal

and between the New South Wales court and the

supreme court.

MASON CJ: It is your basic proposition that costs should not

be allowed of managing funds at all?

MR ELLICOTT:	Our basic proposition is that the question of costs of management of a fund is subsumed, as it were,
in the 3 per cent discount rate that this Court
discussed and laid down in TODOROVIC V WALLER and
recently dealt with again in COMMONWEALTH V BLACKWELL.
It is our submission that that laid down a general
rule which was truly across the board and it was
designed to get rid of all these difficult questions. In the course of coming to that, the Court considered the question of the allowance of amounts for
investment advice and the like and that was in the context of working out the 3 per cent discount rate.
Because that is a matter of general application and because it subsumes this particular issue, it is
our submission that there should not be an allowance
for the cost of management at all.  The cost of
investment advice or cost of management is something
which the Court inevitably would have taken into
consideration in TODOROVIC V WALLER because it was
working out a basis upon which the allowance for
what had been lost in income would be made and on
that basis, because it was doing that, it inevitably
took into account that there would be, in the course
of the application of the fund, investment.
WILSON J:	But is there not a distinguishing feature in the case

of a mentally incompetent plaintiff?

MR ELLICOTT:  We would submit not because when the question of

investment arose in the course of TODOROVIC V WALLER

it necessarily took into account all types of

plaintiffs, that is to say those who were mentally

handicapped at the time of the accident, not because

of the accident, as well as those who were mentally

handicapped, in our submission, at the time of the

accident as well as because of the accident. It would

take into account the very intelligent; it would take

into account the investment adviser; so that in coming

to a decision and allowing the 3 per cent discount

rate it is our submission that, clearly enough, the

Court has made an allowance for people who fall into

the category of those who are mentally handicapped,

unable to manage their own affairs, and that has been

subsumed in the 3 per cent discount rate.

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That is an argument, we submit, of substance. I

do not have to satisfy the Court now that that is

so, but it is obviously, we would submit, a matter

of great importance in terms of the allowances that

are made, not only in this action but in other actions.

DEANE J: But do you not need to satisfy us that you have a

reasonable prospect of success in relation to it?

MR ELLICOTT:  Yes. Can I take Your Honours to TODOROVIC V

WALLER.

MASON CJ: Have you copies for us, Mr Ellicott?

MR ELLICOTT:  Yes, we do have them here, Your Honour.

It is a basic principle, Your Honours, I have no need

to tell Your Honours that the Court has asserted

again and again that it is not concerned about what

happens to the fund. It is not concerned about

investment of the fund; it does not care what happens

to it in the sense that it cannot control it and the

plaintiff may go away and waste it and do all sorts

of things with it. It will not necessarily invest it.

But can I take Your Honours to, first of all, page 442,

just to indicate that the question of investment

advice and management was taken into account. It is

the judgment of Your Honour the Chief Justice, in the

middle of the page:

First, as we have seen, investment in equities

as a hedge against inflation has not been

completely successful strategy; it entails

some risk of capital loss. A plaintiff injured

by a defendant's negligence should not be

expected to encounter that risk in a substantial

degree unless to take that risk appears to be
a reasonable course in order to participate in

the prospect of countervailing financial

advantages. There is no sound reason for saying

that the injured plaintiff is to be likened

for all relevant purposes to the citizen who

has to live on his capital. The task of the

court is to fairly and adequately compensate

the injured plaintiff by awarding him that

sum that, so far as is possible, will put him

in the position that he would have occupied

had he not been injured.	In the vast majority
of cases the injured plaintiff will be without	investment capacity or experience, he will be
dependent on others for advice and if he
obtains expert advice he will have to pay for it.
Now, in taking into account the income tax factor,

obviously the cost of investment advice would be a
deduction and it would be subsumed and taken into

account in the approach that the Court would have made

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in TODOROVIC V WALLER. It was those sorts of issues

that the Court was trying to put aside so that no

more would courts have to worry about them.

At pages 448 and 449 Your Honour dealt with it

again at the foot of the page of 448:

At the same time, it seems to me that we

should take account of the conditions now

prevailing in which an injured plaintiff who

receives a large award can invest in long

term government bonds with a maturity of

twenty to twenty-five years yielding 15 per

cent per annum, which is for Australia an

exceptionally high rate _of interest for

government securities. We should also take into account that semi-government securities

now yield 15 ..... The plaintiff who obtains a

large verdict is more likely to invest in a

range of investments, including bonds, debentures,

shares and real estate, in accordance with

professional advice, with a likely consequence

that his real return (including capital

appreciation) would be somewhat higher than
the yield on bonds, after allowing for the cost

of professional advice.

Of course, Your Honours, when you have a verdict of

$1.3 million, as there is here, where you have a very

substantial verdict, whether the plaintiff is

incompetent or whether the plaintiff is - whatever

the plaintiff's background - unless the plaintiff is

perhaps a skilled investment adviser, advice is going

to be sought and in the normal course, that particular

issue, we would submit, would have been taken into

account in the 3 per cent discount rate.

At page 465, in the judgment of Mr Justice Brennan,

in the middle of the page:

Next, attention has sometimes been diverted

from the present value of the plaintiff's lost

earning capacity to a different question,

namely, the effect of inflation upon the amount

awarded to a plaintiff, as thought the purpose

of the discount rate was to protect the plaintiff

after judgment. Barwick C.J. in O'BRIEN noted

that a plaintiff "can protect himself against

the possibilities of continuing or increasing
inflation ..... But the question for determination

is not how the plaintiff can preserve, much

less how he will go about preserving, his award.

A court is not concerned (except in cases of infancy or incapacity) to supervise the manner

in which the damages are expended or invested.

Nor is the court concerned to con:pare the plaintiff's

position as an investor with that of another investor.

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Now, those words in brackets, except in cases

of infancy or incapacity, of course, are designed to
deal with what happened here, namely that under the

law, it is necessary for the court to ensure that

where the person is either an infant or incapable,

that the verdict is dealt with by a person in a

custodial sense, and so it goes off to the protective

jurisdiction, and an order has been made here in

relation to that. But that is all that that particular

part in brackets is concerned with.

At pages 477 and 478, towards the bottom:

In selecting a discount rate to be used as

a practical operational took, I do not find it

possible to attribute a particular tax rate
to either earnings or yields, and I do not
find it necessary to attribute an hypothetical
rate of tax to the yield. The material
circumstance to be borne in mind is the

difference in the ireidence of tax upon earnings

and investment yields.

The second factor is the real but

unquantifiable advantages which present
possession of a discounted stream of net future
earnings confers upon a person whose earnings

would otherwise have been received over a period.

The advantages may be manifold. A particular

advantage is the saving in interest and borrowing

charges which might have been paid out of future

earnings to acquire a home, car or some other

asset. A plaintiff who might have appropriated

amounts out of his future net earnings to repay

the amount borrowed and to pay interest and

borrowing charges can buy the asset without

incurring a liability for interest and borrowing

charges. There is an advantage in being able to

do so, and some allowance should be made for it
and for other advantages which flow from

possession of a capital sum.

Now, that does not refer to the investment cost but

it is an indication of the broad perspective of
features which are taken into account and I think it
is fair to say that it is accepted in courts below,
and certainly in the Court of Appeal in the judgment
here, that in TODOROVIC V WALLER, the 3 per cent

discount rate does take into account the cost of

management.

At pages 421 and 422, in the judgment of

Chief Justice Gibbs and Mr Justice Wilson, towards

the bottom:

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The sum produced by the application of the

tables is the sum which, invested at the discount

rate, will provide the requisite weekly amounts

for the requisite period. The notional income

will be derived at 6 per cent, if, as in CULLEN

V TRAPPELL, the 6 per cent tables were taken.

It is that notional income that is assumed to

be subject to tax. It is perfectly true that

it is highly likely, or even certain, that the

plaintiff will not invest his damages in the

manner which the calculation postulates, but

the Court is not concerned with what the

plaintiff would or might do with his damages.

Now, just stopping there, Your Honours, another aspect

of this is we would want to submit that the cost of

management is not the result of the accident but is

the result of obtain~a verdict and that it is not

part of the foreseeable loss. And that is why I say

time and time again the Court has said we are not

concerned with what the plaintiff in fact will do but

we are engaged in this notional exercise of setting a

figure which will discount, take into account all other

factors, and leave a net sum which will compensate

the plaintiff for the loss of net future earnings.

WILSON J: Forgive me for coming back to it, Mr Ellicott, but

is not the cost of management - or the premise of

the judgment in the Court of Appeal that the cost of

management has been increased by reason of the injuries

suffered in the accident?

MR ELLICOTT:  Your Honour, we would submit not, for the reason

that the discount rate takes it into account and it

takes it into account for a broad perspective of

plaintiffs. The Court has laid down this general

approach and it has laid it down for people who are

not mentally capable and, I have to add, whether

caused by the injury or not. So that it is there

already and to compensate again is to double

compensate.	Now, that is our argument; that is our
argument on this aspect of it.

May I also say this, Your Honours, that if the

Court looking at the other issue, that is to say the question of how one assesses this compensation if it

is to be allowed,is to grapple with that, it will need

to consider what TODOROVIC V WALLER did. In other

words, I would submit that if it is going to look at

the second issue - this is an argument of last resort

but one which we would submit has effect - that if it

is going to look at the question of the basis upon

which this is going to be allowed, it might as well

look at the whole lot because it throws up	- when we
come to it, and I will come to it shortly -

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MASON CJ: You mean TODOROVIC V WALLER?

MR ELLICOTT:  No, the question - if one had a prima facie view

thatyai are going to allow cost of management, when you come to work out how you are going to allow it, there are so many permutations and combinations in

the judgments already - and I will come to them in a

moment - that in order to lay down proper principles

one needs to have some view about what TODOROVIC V
WALLER was deciding in relation to cost of management.

And all I am saying is that this whole area, if it is

going to be touched, needs to be grappled with at once

and it would include the question whether any allowance

should be made and, if so, whether it being so, it

should be allowed on particular bases.

So far as the question whether it should be

allowed is concerned, then it is our submission it
has not been answered simply by the rather plausible

proposition, I concede, that this has somehow been

caused by the accident, when the whole purpose of

TODOROVIC V WALLER, as reaffirmed in the recent case

of BLACKWELL, was to avoid having to go into these

difficult issues. When one tries to work out if one

is going to grant this amount, how it is to be

assessed, the Court will find it is right back in

TODOROVIC V WALLER again. That is why I say that the

two questions are intertwined but that is not our

main argument-

MASON CJ:  I thought you were inviting us to refuse the

application.

WILSON.J: In ter.rorem.

MR ELLICOTT:  No, I am asking Your Honours to grant the

application but if, as often ¥our Honours do, you feel that there is one matter of significance that

you ought to look at, I am saying, as an argument of

last resort, that you should look at the whole field,

because the second aspect of it is so full of

difficulties that the only reason why this Court would

refuse leave would be that it did not want to get

caught up in the difficulties. That is what the

Court is here for in terms of application for special leave.

MASON CJ: That is quite a good reason sometimes.

MR ELLICOTT:  Can I take Your Honours to this other issue, that

is to say if some compensation is to be allowed in

brain damage cases, on what basis? And there are

a number of choices that have come out of the

decisions already. One is: should it only be allowed

in relation to the future care component of damages.

Now, there:are some decisions overseas and here which

suggest that it only should come out of that area,

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it only should relate to that much of the verdict

which covers future care. In this case, the future

care component was, I think, $700,000. Or should it

only be confined to the loss of earnings component

or should it relate to both or should it incorporate

the general damages component management as well, and

there is conflict in relation to that.

Should any allowance be made for the fact that

to an extent it is already taken into account in the

3 per cent discount rate in TODOROVIC V WALLER and,

if so, how do you calculate it? Does that not throw

one back into TODOROVIC V WALLER?	But that is a
question which arises on this judgment.	Now, if you

do, does it not lead you back immediately to the

proposition that already included in the 3 per cent

discount rate is an allowance for the cost of

management for a person who is mentally incapacitated,

albeit on the hypothesis of this case, not caused by

the accident.

What do you do about a family's contribution,

a voluntary contribution in terms of GRIFFITHS V

KIRKEMEYER? What do you do in relation to that? Do

you make any allowance for that? That is a legitimate

argument and question to ask. If it is, as it would

appear, deductible for tax, how do you consider it in

the exercise? How do you take it into account? Do

you take into account that the amount itself, although

it is calculated by reference to these other lump

sums - or one lump sum, or two of them - do you take

into account that it can be invested to earn income?

Another question that arises is should it include establishment costs? An amount of $16,000 was allowed

here because the protective commissioner would say

that on taking it over, $16,000 is needed in order to

establish it in various investments, a capital amount.

Now, Your Honours, those are questions which I

have not dreamed up, I tell Your Honours.

MASON CJ: They sound like questions you might have.

MR ELLICOTT:  Yes, well Your Honour, strangely enough, they are

not. They come out of the cases and if I may, in the

time we have, Your Honours, take - - -

MASON CJ: It was only a short point, was it not?

MR ELLICOTT:	No, this is a long point, this one, Your Honour, and this is fundamentally an issue which drives one
back to asking, well, really, was it ever intended
that this amount should be allowed at all? Now -
MASON CJ:	Mr Ellicott, I think a reading of the judgments,
including the earlier judgment of the Court of Appeal

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does demonstrate that at least a number of the

questions that you have identified have been raised

in previous decisions so that unless you want to get

some further advantage by going to those decisions,

I would not think it was necessary to take us to them.

MR ELLICOTT:  Your Honour, can I just take Your Honours to the

conflict in the Court of 1'ppeal itself?

MASON CJ: Yes.

MR ELLICOTT:  BRINDALL V McDONALD, and particularly at

page 61 and 62.	BRINDALL V McDONALD is set out in
the book.	Mr Justice Hope, in this matter, said that
it should be allowed.	He does not say strictly how

it should be calculated but he says, at page 62, line 7:

I do not think that the sum awarded for

general damages should be included in the

capital sum the cost of management of

which should be included in the award, but

future economic loss including the amount for

future domestic and medical care should be

included, that is, the sum of $100,000 for

future economic loss and the sum of $50,000

for domestic and medical care for the future,
should be the subject of an award as to the

cost of administration.

Now, Mr Justice Clarke at page 23 - - -

MASON CJ: In the present case?

MR ELLICOTT:  Yes:

In my opinion the proper approach is

to include within the damages an allowance

for fund management which reflects the

probable difference between the expenditure

likely to be incurred by a person who is

unable to manage his affairs as a consequence

of the accident in question and the expenses

which as a matter of probability, would be incurred by a plaintiff whose intelligence

is unimpaired and who seeks expert aid in

the investment of the damages fund.

Now, there is an error in that, in our submission,

because it does not take into account the fact that

TODOROVIC V WALLER does take into account such people,

that is to say those whose intelligence was impaired

not resulting from the accident.

Whilst no inflexible rule can be laid down

for every case it would seem to me that in the case of a very large judgment it would

be appropriate to approach the matter in

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two stages. First the court should assess

the cost of the management of the fund which

flows from the judgment -

so that is the whole fund, not just the approach of

Mr Justice Hope, but the whole fund -

and then make an adjustment to the resulting

figure to cater for the cost of expert advice

which would probably have been incurred by

the plaintiff even if he had not suffered

intellectual impairment in the accident.

So that throws you back, in our submission, into

the TODOROVIC V WALLER dilemma and one can repeat -

and I will not - the submissions I have already made

in relation to that.

Now, the approach adopted by Mr Justice Finlay

is referred to at page 27 and Your Honours will see

that he did not apply a discount rate; he assumed an

interest rate of 16 per cent -

reducing by 1 per cent per annum each year

for six years and thereafter remaining at

10 per cent.

Now, that is a collection of thoughts which may or

may not be, under this judgment of the Court of

Appeal, appropriate or not. It shows how uncertain the various choices are that can be made in getting

TS to the final figure. At page 31:

Before considering the appropriateness of the actual allowance I would wish to make two

observations concerning the assessment of

this component of a damages award. The

first is that there are so many imponderables

encountered in endeavouring to determine the

likely cost of fund administration over a

must be taken ..... . lengthy period that a very broad approach The actuary in this case proceeded -

et cetera.

The second observation is that Finlay, J

allowed only for the cost of the investment of the economic loss. He expressly excluded that portion ..... constituted by general damages.

He took the view, quite properly, that this

was the proper course in the light of

BRINDALL.

His Honour goes on at line 15;

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It seems to me to follow that the cost

of the management of that portion of the

fund was directly caused by the tort and

I would, in the light of the particular

evidence in this case, be disposed to the

view that there is no reason to exclude

the general damages in ascertaining the

cost of management.

If one goes back to the facts of BRINDALL V McDONALD

the same thing could have been said. There is no real

basis for distinguishing BRINDALL V McDONALD on the
basis of fact, so there was a failure in this
judgment to come to grips with the intellectual
reasoning which leads to that conclusion. Indeed,

there is a complete failure, although Mr Justice Clarke -

and it is agreed in with the other justices - lays	down this proposition, as I referred to earlier,
nevertheless he does not go on and tell you how to do it. He just ends up by saying, oh well, 80,000 was allowed and that just seems to be fair enough and I
will not intervene.
Now, I am not saying that is a way out. It is a way out for a Court of Appeal but it is not, with
great respect, the way out for a court that is sitting
to lay down principles that can be applied in numerous cases. A reference is made in the judgment - and I will quickly give Your Honours the references to
those from the judgments in CAMPBELL V NANGLE,
which is a South Australian case, Can I just quickly
say this:  in England they have allowed it but
allowed it on the basis of the costs of the protective jurisdiction after the age of 18, that is to say, the fees that would be charged by the whatever he is
called there, whether it is the Master in Lunacy or
whatever and that is a nominal sum. That is referred
to in this case in the judgment of Mr Justice Zelling
at page 177.

MASON CJ: Does that go to the whole of the verdict?
MR ELLICOTT: That went to the whole of the verdict.	The

verdict was 350,000 pounds and the amount allowed was

5000 pounds and it is not too clear how that was

arrived at, except that it was the amount that was

going to be charged by the court of protection.

His Honour adopted that in principle. At the foot

of page 178 he says:

Figures were put before me as to the

cost of managing such a fund whether by an

accountant or by Public Trustee. I do not
think that in the result there is much

difference in the cost, but I think that in

a case of an award as large as this it would

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be proper to have a skilled accountant

looking after the fund. I think that the

figures referred to by Mr. Hill, an

accountant with considerable experience in

this field, are reasonable and should be

adopted by me. His figures were: for an

accountant to look after the fund, $3,120.00

per year by way of work done on investments

and $3,300.00 per year for what he called

domestic or housekeeping functions.

Now, His Honour then went on:

As far as the administration of the

investment portfolio is concerned, namely

the first two figures, I do not think that the plaintiff should be given an allowance

in damages for this purpose. Every plaintiff

with an award as large as this would need

to take constant advice as to investment.

So he does not allow the first.

The second, however, in my opinion, is recoverable as damages. A plaintiff who

did not have brain damage would be able to

make his own decisions assisted by the

advice of an expert adviser. This plaintiff
cannot. Accordingly I think that the amount

of $3,300.00 per year for the second category
of expenses is a proper head of damage.

Now, one can assume from that, we would submit, that what he is talking about are the ordinary day to day

expenses that a person has to undertake in the

nature of rent, food, et cetera; the ordinary family

domestic housekeeping function expenses. He is not

talking about investment advice as such. He then goes

on to indicate the amount would be deductible for

tax and he allows an amount of $50,000.

The Chief Justice on appeal - the relevant part

of his judgment is from page 190 through. The

Supreme Court of Canada, Mr Justice Spence, at the

top of page 191:

"The last topic with which I must deal is that

mentioned for the first time in the reasons

in the Court of Appeal for Ontario although

I am sure that Keith J. had it in mind when

fixing the global award. Even if the infant

plaintiff were adult and not disabled, she

would need professional assistance in the

management of such a large sum of money as is

being awarded to her in this case.

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Just stopping there, in some cases, Your Honours, it

has been said, indeed Mr Justice Allen has so held,

that whether the person is rendered incapable as a

result of the accident or not they should have an

allowance for this head of damage. And this is the

approach taken by the court in Canada which is

different to the approach taken by the Court of Appeal.

And may I say, as we come to it, this is the approach

that the Chief Justice in South Australia took. Although the management of that sum, until

she is an adult, will be in the efficient

hands of the Official Guardian for the Province

of Ontario, she will have the whole burden of

management so soon as she becomes an adult

and at that time she will have to retain the

services of skilled financial advisers. It

is appropriate to allow an amount to cover the

annual fee which will be entailed."

There is then a reference to TODOROVIC V WALLER and over

the page there is a passage which shows up this

conflict:

It seems to me that the principles of the

law relating to damages for tort require the

inclusion in an incapacitated plaintiff's

damages of the amount which he will be required to

pay to a manager by reason of his incapacity.

A plaintiff is entitled to recover the loss

caused by the tort. The fundamental principle

upon which damages are assessed is the principle
of compensation that the plaintiff is to be

placed, so far as possible ...... The capital

sum awarded to him is computed upon the basis

of an assumed real return from its investment.

If the plaintiff has been rendered by the wrong for which he recovers damages incapable of

managing his affairs so that the fund resulting

from the damages must be managed for him,

the fees payable to the manager will reduce

the real return from its investment.

And we say that is taken into account anyhow.

Unless an amount is included in the damages

to compensate for those fees, the plaintiff
will not receive the full restitution to which

the law entitles him. It seems to me that the

liability for the fees is a loss flowing
directly from the wrong and is recoverable as

damages caused by the wrong. I should say

for the sake of completeness that the same is
true, in my opinion, where the plaintiff's
incapacity to manage his affairs does not

result from the wrong but is antecedent to

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it, being the result of legal disability or

some other cause. A wrongdoer must take the

person he injures as he finds him. If the

person is under a legal disability or is

otherwise incapable of managing his affairs, his position is the same as regards the head of damages under discussion.

Then His Honour goes on and he ultimately says that

the amount is reasonble. He does think aloud in

terms of figures on page 193, but there is no

discernible principle that comes out of that judgment

as to how you get to the figure of $50,000 and it

throws one back again, we say, into TODOROVIC V WALLER.

So there is abundant difference of approach, both in

the court here in New South Wales and between the

Court here and the court in South Australia and

between the Australian court and the courts in Canada.

So this is an area of the law, in ourrespectful

submission, which needs clarification. The submission

that we put initially, that TODOROVIC V WALLER subsumes

it, is one that we would submit is worthy of

consideration by this Court because it is a matter of

considerable substance and will affect a great variety

of cases.

The other matter relating to the principles,

if you are going to allow it, then we submit it is

clearly a case for special leave on that ground

because there is so much turning on the issue as to
what are the correct principles to apply in assessing

the cost of management if you are going to allow it.

If the Court pleases.

MASON CJ: Thank you, Mr Ellicott. Yes, Mr Toomey.

MR TOOMEY:	Your Honours, we concede that the case is one of general importance in that it would affect the
damages allowed to every incapable person but we
dispute that there is a point to be argued. The
matter has been decided by nine judges of the
Supreme Court of Canada, three judges of the Ontario Court of Appeal, three judges of the English Court
of Appeal, three judges of the South Australian Court
of Appeal, three judges of the New South Wales Court
of Appeal and every judge at first instance who has
had to deal with it, in favour of the - - -
MR ELLICOTT:	None of those can hold a candle to this Court.
MR TOOMEY:	My learned friend's flatterings of course will not

affect Your Honours.

MASON CJ: Well, they can produce the same disparity of opinion,

anyhow, Mr Toomey.

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MR TOOMEY:  Yes, indeed, Your Honour. With respect, Your

Honours, we submit that it is plain beyond argument that in principle the allowance ought be made. The

question of just how it is to be made and just what

steps ought be taken in deducting from it what would

already be incurred by a plaintiff in managing his

affairs because of, in the ordinary case, lack of

investment skills is a matter not for the High Court

of Australia but for the intermediate courts as a
matter of governing the procedures in their own courts.

So far as my learned friend's argument is that

there ought be no allowance made, we say there is
simply no basis for it, nor could there be. If one

looks at TODOROVIC V WALLER, what Your Honours were

considering there was the appropriate discount rate to make allowance for the incidence of taxation and the incidence of inflation. It is true that

Your Honour Mr Justice Mason, at page 449, in considering

whether there ought be special consideration of the
incidence of taxation in every case or whether it should
be covered by a general allowance stressed the
importance of simplifying the assessment of damages.

But, Your Honours, that really is not a matter to be

taken into account when one is considering, as here,

whether a head of damages arises at all.

MASON CJ: In any event, there is a problem about that judgment

because it favoured a 2 per cent discount rate.

MR TOOMEY: That is so, Your Honour.

MASON CJ: At the end, of course, there was a compromise to

accept the 3 per cent.

MR TOOMEY: That is so, Your Honour. That is, with respect,

exactly so. But, Your Honours, the question of

whether it ought be allowed on general damages has

only been raised anywhere in BRINDALL V McDONALD.

In none of the other cases was there any suggestion

that it should be allowed on anything except the whole

fund. There has been no limitation of the fund, the

general damages, the damages for the future, the

damages for the past, because what has happened is

that the fund has come into the hands of the persons

who are caring for the plaintiff, as it would have

come into the hands of the plaintiff, at the time of

judgment. It has not been incurred before the trial

and the costs of managing the whole fund must be met,

and they must be met when, as in this case, the tort

itself causes the incapacity which raises the cost.

Now, we would not seek to support the statements

made obiter by the learned Chief Justice of South
Australia to suggest that such an allowance ought be
made in the case of incapacity not arising from the tort

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because we would concede that there any moneys

received by the plaintiff would have been pressed

with the necessity for that care in any event. But

that is not the case here. We are coming to Court

for a plaintiff who would have been capable of looking
after his affairs and who is not capable by reason of

the tort. And that matter was stressed by

Mr Justice Clarke at page 22 of the appeal book at

line 16 where His Honour said - he referred to the

recognition especially by Your Honour the Chief Justice

in TODOROVIC of the fact that:

some expert financial assistance in the

management of sums of money as large as the

sum involved in this case -

would in any event be incurred, and then, at line 17,

he goes on to say:

But this does not mean that there should

not be an allowance included within the damages
for moneys which a plaintiff, who has
suffered intellectual impairment as a result

of the tort, has to expend as a result of

his inability to manage his financial affairs -

that is "who has suffered intellectual impairment

as a result of the tort". It is our respectful

submission that there is really no respectable

argument to be put against it.

Nowhere in TODOROVIC, apart from the recognition

that there may be some cost involved in investment,

is there any mention of this because it had never

been raised in an Australian court at that time.

The first report of such a decision in Australia is

in ( 1985) SASR and that is CAMPBELL V NANGLE. The

Canadian decision of ARNOLD V TENO was a 1976 case

but of course was not referred to in TODOROVIC V WALLER.

Your Honours, the distinction which must be

made - and it is really a social distinction as well

as a legal distinction - is that the court in this

case was dealing with a person whose funds are
compulsorily managed by reason of the community

imposing a duty on itself to make sure that he is

properly looked after. It is not a matter of choice

and it is a matter which is raised, as we say, by the

very tort.

May it please Your Honours.

MASON CJ: Yes, Mr Ellicott.

MR ELLICOTT:  Your Honours, that application was made by the

respondent themselves. It is not a matter that the

cormnunity forced upon them. I just wanted to submit

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this, that this is not a matter for the intermediate

courts.	My friend was saying it is a matter for
the intermediate court.	The intermediate courts have

been proven to be incapable, with great respect, of
laying down a clear principle for guidance to the
courts below in order to assess this difficult head

of damages if it is going to be allowed.

The second thing is that Your Honour

the Chief Justice said there was a difficulty about

Your Honour's judgment in TODOROVIC V WALLER.	We
perceive no difficulty, with great respect.	We would

submit that what Your Honour said in relation to

investment was implicit in the other judgments and

in the approach of the Court and whatever other

difficulties there may be because Your Honour wanted

to adopt a 2 per cent instead of a 3 per cent, it was

not because of the fact that the judgment appeared,

as it has appeared not only to us but,with respect,

to the courts below - - -

MASON CJ:  But the point I am really making is that having

regard to the special character of the judgment because

it ended up, as it were, in favour of a slightly different conclusion and result, you are really driven to

establish, as indeed you endeavoured to do, that the

approach explicit in the judgment is implicit in the

other judgments.

MR ELLICOTT:  Yes, well we submit it is, and if it is explicit

in Your Honour's judgment, it is explicit not because

of the 2 per cent but because of the principle and

that approach, we would say, has recently been adopted

by the Court in BLACKWELL's case. And clearly enough,

the basis of the approach by Mr Justice Clarke at

page 23 is the concept that TODOROVIC V WALLER does
make an allowance for the cost of management and one

would suspect, with great respect, that that is taken

rather fundamentally from Your Honour's judgment,

thought to be implicit in the other judgments of the

Court. But if that is not implicit in the other judgments of the Court, then there is an error afoot	that is affecting the legal analysis of that judgment
and that ought to be clarified. And that, we would
submit, is another reason why the Court should grapple
anew with the question - I do not mean the 3 per cent
discount - but grapple anew with the question of
whether cost of management should be allowed and, if
so, in what cases.

MASON CJ: You just mentioned BLACKWELL. Does BLACKWELL make

this any more explicit? Do not take us to BLACKWELL

unless it does specifically.

MR ELLICOTT: All it does really is to emphasize that it is a -

it refers, as Your Honours will recall, to the

statement made by the Court beforehand and indicates

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that it was done in order to simplify the assessment

of damages and that that was immensely desirable and

that is what the discount rate achieved. But the

only thing I would like to refer to Your Honours is

the statement which was read by the Court:

In an action for damages for personal injuries

evidence as to the likely course of inflation

..... possible is inadmissible, whether it has

been a loss of earning capacity which is likely

to lead to financial loss in the future or

where the plaintiff's injuries will make it

necessary to expend in the future money to provide medical or other services or goods necessary for the plaintiff's health or

comfort. The present value of the future

loss ought to be quantified by adopting a

discount rate of 3 per cent in all cases,
subject of course to any relevant statutory
provisions. This rate is intended to make
the appropriate allowance for inflation,for
future changes in rates of wages generally

or prices and for tax, either actual or

notional, upon income from investment of

the sum awarded. No further allowance should

be made for these matters.

And_when it is said, "upon income from investment of

the sum awarded",tax upon that, needless to say

one does not have to be a brilliant tax lawyer to

know that that is the taxable income, that is the

amount after deducting the cost of management or the

cost of investment advice. And therefore, in that

we say is implicit the notion that this Court was

saying there is a component for the cost of management.

On that basis we would say, Your Honours, that

is another ground why this Court should now

reconsider the element of cost of management that was

implicit in TODOROVIC V WALLER.

MASON CJ: Thank you, Mr Ellicott. The Court will announce its

decision in this application after the adjournment.

AT 11.12 AM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

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UPON RESUMING AT 2.23 PM:

MASON CJ:  The decision of the Court of Appeal in relation to

expenses and fund management does not go so far as did

the judgment of Chief Justice King in CAMPBELL V NANGLE

in the South Australian State Reports. The difference

between the two approaches does not, however, really

arise here since Mr Toomey, QC, for the respondent has
made it clear that he does not wish to attack the

decision of the Court of Appeal on the basis that it

does not go far enough.

In this context we do not think that the actual

decision of the court below is attended with sufficient

doubt to justify the grant of special leave to appeal.

The application is therefore refused with costs.

AT 2.24 PM THE MATTER WAS ADJOURNED SINE DIE

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