KEATES v NELSON SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, MAHONEY and Cripps JJA 16 April 1992 [1992] NSWCA 122 INTEREST — calculation of — damages for personal injuries calculation at commercial rates — defendant suggests reduction for delay by plaintiff in prosecuting appeal — trial judge (Allen J) refuses reduction of interest on the basis of delay by reference to the fact that the defendant was insured by the GIO, an institutional insurer which had put out its funds at commercial rates of investment — held: (Kirby P, Mahoney and Cripps JJA concurring): The considerations were legally irrelevant; the discretionary exercise had to that extent miscarried; the discretion should therefore be re-exercised by the Court of Appeal by reference to the statements of the law made since the trial in MBP (SA) Pty Ltd v Gogic (1990) 171 CLR 657; Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54 (CA). DAMAGES — allowance for special boots — evidence exists to sustain trial judge's decision. Kirby P Before the Court is an appeal against the judgment for damages entered by Allen J sitting alone. Mr Mark Nelson (the respondent) sued Mr Adrian Keates (the appellant) in respect of the latter's alleged negligence in driving a motor vehicle on 12 February 1982. Motor vehicle collision: Issues in the appeal On that day, the respondent was proceeding on his motorcycle. At about 4.30 pm the appellant's vehicle appeared to cross the centre line and came straight at the respondent. A collision ensued, the full details of which it is unnecessary to record. The respondent was injured. There was a sharp dispute at the trial about the circumstances of the collision. The appellant denied negligence and alleged contributory negligence. Each of these contests was resolved by the trial Judge in favour of the respondent. originally the notice of appeal raised issues going to the liability of the appellant to the respondent. However, today the Court gave leave to the appellant to amend his notice of appeal. The respondent objected to the amendment on the ground that the notice of appeal, as reframed, raised issues which were not in contest at the trial. The Court decided to allow the amendments to the record in order that the record would be in proper form to reflect the arguments of the parties before the Court. Obviously, to the extent that matters in contest now were not contested at the trial the appellant would have great difficulty in advancing those arguments successfully in this Court considering our duty to observe the requirements of procedural fairness. See Coulton and Others v Holcombe and Others (1986) 162 CLR 1, 7. However, the result of one amendment, which was not contested, is that there is now no issue relating to liability. Nor were most of the components of the damages which were allowed by Allen J in contest. His Honour entered judgment in favour of the respondent in the sum of $143,981.39. The issues which have finally been argued today are essentially four: 2 UNREPORTED JUDGMENTS First, that there was no evidence to support the award which Allen J made of $3,854 for the purchase of footwear by the respondent. Secondly, that if, contrary to 1, there was such evidence, the calculation of the allowance for such footwear involved error, upon the basis that Allen J allowed a provision for such footwear for 44 years (being the respondent's life expectancy on life tables) rather than 36 years (being the time left in the respondent's working life from trial to his suggested ordinary retirement at the age of 65 years). Thirdly, that the trial Judge had insufficiently discounted the allowance for special footwear, upon the basis that it was possible that such expenditure would not be needed or used in fact; and Fourthly, there was a contest relating to the allowance which was made for interest. Contested allowance for footwear So far as the findings by Allen J in relation to footwear are concerned, his Honour said this: "T make no specific allowance for future medication or surgery, treating those rather as risks which are more appropriately reflected in the general damages than as a specific head of damages. The exception which I make is as to the working boots which, clearly, he should now have. I do not accept that he has been guilty of any want of care for himself in not having had them to the present stage. I note that the defendant's own specialist refers to them as a future need. I prefer, however, the evidence of Dr Kendall that they are a present need. It is better to have the built-up shoes now in order to try and retard the onset of the arthritis than to wait until it hurts sufficiently to require the precaution of wearing the built-up boots. However, I do not allow two pairs a year at $150 a week as the measure. They, after all, take the place of other working boots. What I allow is an additional cost of $3 per week on average for the balance of his expectation of life which is at 44 years. I allow the present value of $3 per week at 3 per cent per annum, which is $3,854." The respondent was not wearing special footwear before or at the date of the trial. He had been 21 years of age at the date of injury and he was 29 at trial. His principal injuries in the collision were to his right femur and to the left forearm. He also suffered multiple bruises. An x-ray taken at the Royal North Shore Hospital immediately following the accident showed that he had sustained a serious oblique fracture at the juncture of the mid and lower thirds of the right femur and a fracture of the left ulnar styloid process and distal radius. His right leg was placed in traction for three weeks. Steinmann pins were inserted and traction reapplied. The pins were later removed. The respondent was discharged on crutches for three months after the accident. Thereafter he suffered aches and pains in the right lower leg, knee and in the thigh. Despite the fact that the fracture united, early degenerative changes were apparent. The respondent also suffered loss of flexion to the right leg. Dr Grahame Mahoney on 17 June 1988 stated that the respondent had a shortening of the right leg which would be permanent and which would require him to wear built up shoes. He found a 25 per cent loss of function in the right lower limb. The respondent's pre-injury work was as a carpenter. He worked in his father's business which involved building. However, his disabilities clearly reduced his agility and his ability to work, particularly at heights. All of these disabilities are described by Allen J in his reasons. The disabilities were accepted by his Honour. URJ KEATES v NELSON (Kirby P) 3 Dr Peter Kendall, who was qualified to give evidence for the respondent, in a report of 26 February 1989, found a 2.2 centimetre shortening of the right leg with bowing. He said this: "He users joggers in his work and in his private life and I had to advise him to use more elaborate footwear which would lend itself to building up of the heel if not sole as well. The less he exerts himself, the slower the progression of arthritic change, but I think by the time he reaches 45 to 50, his disability will have risen to between 30 and 35 per cent. There is not much that can be done to slow down the process except for wearing built-up shoes. Ordinary street shoes are not safe for a building carpenter and his joggers cannot be built up. He requires proper light working boots with a builtin raise, will probably require two pairs per annum at an estimated cost of $150 each and this will continue indefinitely." Allen J accepted the opinion as expressed by Dr Kendall. Similar views were expressed by Dr Ireland who had also been qualified for the respondent. He suggested that there would be a need for footwear in "later life". In his oral evidence at the trial, the respondent indicated a reluctance to wear such special footwear. However, he was cross examined on behalf of counsel then appearing for the appellant to suggest that he should be wearing built up shoes and that his failure to do so involved a failure, on his part, to mitigate his damage. I turn to the suggested lack of evidence of the need for, and utility of, special footwear. It is true that the respondent appeared reluctant, as I said, to wear such footwear. However, it was clearly open to Allen J to conclude that he would need to do so before too long and would accept that need. There was certainly evidence before his Honour, as I have recounted, to sustain such a conclusion. It was never put to the respondent that he would not wear such footwear. To the contrary, as I have said, it was put to him for the appellant that he should be wearing it; that his failure to do so was occasioning the pain; and that, to do so, would ease the pain thereby reducing his entitlement to damages. Allen J referred to the footwear as "working boots". However, the consensus of medical opinion was plain. It was that the respondent needed to wear footwear to retard the likely onset of the arthritis which was occasioned by the subject injuries. The need was related to pain and arthritis not only to the respondent's work. Accordingly, in my view it was open to Allen J to find, as he did, that the footwear was needed and that the onset of pain and symptoms would very soon force the respondent, even against his obvious reluctance, to accept the unanimous medical evidence that he should wear such footwear and that he would do so. This is the view to which the trial Judge came. In my opinion it would not be open to this Court to disturb that conclusion. In reaching this conclusion I leave aside the fact that the amount which is involved is a very small component of a substantial verdict and that it was an amount which his Honour reached, having considered carefully the evidence which plainly supported it. Duration of allowance for footwear There is, secondly, the argument that the allowance should have been made by his Honour only for the employment expectancy as against the life expectancy of the respondent. There is no merit whatever in this argument. It doubtless originates out of the use by his Honour of the words "work boots". However, it is plain from the evidence upon which the need for such work boots rested that 4 UNREPORTED JUDGMENTS the purpose of them was to reduce the speed of the onset of osteoarthritis. That was a problem which will remain with the respondent outside, and beyond, his working life. Accordingly, it was entirely proper for his Honour to have regard to the life expectancy tables. No error is shown in his having done so. Discount for refusal to wear special footwear There is, thirdly, the question of the adequacy of the discount allowed for the possibility that, in the face of the medical opinion and his own best interests, the respondent would, in fact, refuse (as he had to the date of the trial) to wear the special footwear. In my opinion Allen J sufficiently allowed against this possibility. He declined what was, apparently, the argument for the respondent at the trial. He did not allow the full cost of two pairs of boots each at $150 per annum. Instead, he provided damages at about half of that allowance, allowing an amount of $3 per week, ie about $150 per annum. This amounted to an appropriate discount which it was open to Allen J to allow. No error is shown in that allowance. Although it was faintly argued that there was some double compensation in the amount allowed for general damages and for the allowance for special footwear I see no evidence of that. His Honour carefully distinguished between these two components of the respondent's damages. No separate ground of appeal is raised in respect of the allowance made for general damages. The third argument should therefore likewise be dismissed. Allowance for interest on past damages That leaves the final argument which relates to the allowance which Allen J made for interest. I remind myself that his Honour's judgment was delivered in December 1989. Since that time, both in the High Court of Australia and in this Court the law relating to the way in which the interest discretion is to be exercised has been clarified, if not altered. In MBP (SA) Proprietary Ltd v Gogic (1990) 171 CLR 657 the High Court of Australia retreated from what it had earlier laid down in Cullen v Trappell (1990) 146 CLR 1. It made it plain that the ordinary rate of interest to be awarded on damages verdicts, such as that recovered by the respondent here, is four per cent overall, or an effective two per cent. That decision was followed by this Court in Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54 (CA). Every week, in appeals to this Court in damages cases, following the decision in Gogic as clarified by the decision in Williams, this Court has applied the new rate, so long as to do so involves no procedural unfairness to the parties to the appeal. The appellant, argued a special reason why recalculation should be performed in the present case. It was suggested that, even upon the basis of the law as it was formerly understood for the calculation of interest on damages awards, Allen J had fallen into error. The error was said to have occurred in the following passage in his Honour's reasons: "I come finally to interest. Of the general damages I apportion $30,000 to the past and allow interest from the midpoint of the period which has elapsed since the accident. Having regard to the Practice Note No 55 I calculate interest at the rate of 15.5 per cent per annum interest which, so calculated, is $18,135. Ihave not overlooked the length of time which has elapsed since the accident. On the other hand I take into account that damages will be paid by the Government Insurance Office, which is an institutional defendant and which no doubt has been placing his money out at valuable rates during the years which have elapsed since the accident." URJ KEATES v NELSON (Kirby P) 5 The error complained of by the appellant is that, in calculating the amount of interest, and in determining whether any discount should be provided from the amount allowed pursuant to the Practice Note then obtaining, Allen J had erred in the exercise of his discretion in relation to the lapse of time which had occurred between the date of the accident and the date of trial. Conventionally, such protraction of time has been regarded as a reason for reducing the amount of interest where it is shown that the delay during the period for which interest was claimed has not been occasioned by the ordinary incidents of litigation or delay on the part of a defendant but delay on the part of a plaintiff himself or herself. Allen J took into account, in determining whether to make a reduction upon the basis of the delay (which it was conceded was greater in his case than in the ordinary case) the fact that the damages were to be paid by the Government Insurance Office. He held that it was relevant to take into account the fact that there was an institutional defendant, and that that corporation had doubtless placed its money out at valuable rates during the years which had elapsed since the accident. The appellant argued that there were considerations irrelevant to the determination of that part of the interest discretion as concerned any discount proper for the respondent's delay in prosecuting his claim. Accordingly, so it was said, the interest discretion had miscarried. For that ground alone interest should be recalculated according to proper principles, including those now laid down by High Court in Gogic. In my opinion there is substance in this argument. It is true that the Government Insurance Office stood behind the appellant. It is also true that this would have been commonly known to everyone involved in this litigation. Further, it is true that the right to indemnity derives from a statute which for fifty years has provided for a compulsory scheme of insurance for negligent drivers of motor vehicles. However, by the theory of our law the provision of a statutory insurer to indemnify the motor vehicle driver or owner is irrelevant to the issues before the court. Those issues are fought out, or were at least at the time of this litigation, as between the parties themselves. The right to indemnity - even by statute - did not authorise the learned trial judge to lift the veil and treat the litigation as being really between the plaintiff and the defendant's insurer. This might, in part involve something of a charade. But it is one to which the law in Australia has steadfastly adhered. See eg Lamb v Cotogno (1987) 164 CLR 1, 7, 11. Therefore, the reference to the suggested special position of the Government Insurance Office and to the value of the investments which it might, or might not, have made would seem to me to have been irrelevant to the exercise of discretion which his Honour had before him. That discretion was concerned, pertinently, only with the provision of interest as part damages and consideration of whether any interest so provided should be reduced by virtue of the respondent's delay in prosecuting this claim, and that alone. This being the case and, without the need to consider whether the decision of the Court in Williams, of itself, would require a recalculation in a live appeal, following Gogic the appellant has, in my view, made out the complaint which he makes. The respondent's interest was calculated by reference to a consideration with a component which was irrelevant. The award of interest must therefore be set aside. Accordingly, it falls to this Court to recalculate the interest. 6 UNREPORTED JUDGMENTS It was agreed between the parties that if the interest were recalculated according to the rule in Gogic, the amount of interest which was allowed by Allen J, $13,935, would have to be deducted from the judgment which was entered in favour of the respondent. It will be necessary to hear counsel separately on the question of costs having regard to the way in which this appeal started as a general challenge to the judgment and narrowed significantly and having regard to the failure of the appellant upon all but one matter in contest. ORDER Leaving to one side for the moment the question of costs, the orders which I would propose are: 1. Appeal allowed. 2. Set aside the judgment of Allen J in favour of the respondent in the sum of $143,981.39. 3. In lieu thereof, enter judgment in favour of the respondent in the sum of $130,046.39 together with his costs of the trial. 4. Costs in this Court reserved for further argument. Mahoney JA I agree. Cripps JA I agree. KIRBY P: They then are the orders of the Court. (Counsel argued costs) KIRBY P: Having heard submissions from counsel on the question of costs, the order which the Court makes in that regard is that the respondent pay the appellant's costs of the appeal in relation only to that matter upon which the appellant has succeeded in the appeal. Such costs do not include the costs of the issues which were either abandoned or upon which the respondent succeeded. They do not include the costs of the amendment of the Notice of Appeal. In respect of such costs as the respondent must pay he is to have a certificate under the Suitors Fund Act 1951. The orders of the Court are, accordingly, as I have provided, with that additional order as to costs. Counsel: Appellant: CT Barry / B McRae Respondent: A Lidden Solicitors: Appellant: Government Insurance Office of New South Wales (O Voukidis) Respondent: Stacks