NEW SOUTH WALES INSURANCE MINISTERIAL CORPORATION (formerly GOVERNMENT INSURANCE OFFICE of NEW SOUTH WALES) v REES SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, HANDLEY and SHELLER JJA 2 March 1994, 2 March 1994 [1994] NSWCA 226 DAMAGES — economic loss, vicissitudes of life and proper discount therefor; discount for a likely change of attitude leading to recovery; general damages; whether outside the range of sound discretionary judgment Sheller JA The respondent, Brian Rees, sued the New South Wales Insurance Ministerial Corporation to recover damages for injuries he suffered as the result of a motor vehicle accident which occurred on 25 June 1986. Liability was admitted. The assessment of damages came on for hearing before his Honour Judge McCredie who gave judgment on 9 October 1992. His Honour awarded the respondent damages in a total amount of $375,960 which comprised out-of-pocket expenses of $13,065; past wage loss including interest of $114,330; the Fox v Wood component of $11,262; future economic loss rounded off at $150,000; loss of superannuation $9255; and future pharmaceutical and medical expenses $10,000; and general damages of $70,000. The award for superannuation was subsequently discounted and rounded off to $7,000. The Corporation appealed against this verdict but when the matter came on for hearing today in this Court the appeal was abandoned and was dismissed. The respondent, Mr Rees, filed a Notice of Cross-Appeal limited in effect to two grounds; that the amount awarded for economic loss was inadequate, and the amount awarded for general damages was inadequate. In its written submissions a number of other grounds of appeal were raised. Objection was taken on behalf of the Corporation to those grounds being used without being referred to in the Notice of Cross-Appeal and the respondent was given leave to amend its Notice of Cross-Appeal to accord with the written submissions. The heads of cross-appeal in the amended form involve an attack upon the amount of general damages as being inadequate and upon the amount allowed for future economic loss directed to the discount for vicissitudes. The respondent also cross-appealed against his Honour's failure to include in the out-of-pocket expenses an amount of $22,939.40 by way of hospital, medical and pharmaceutical expenses paid by the respondent's employers worker's compensation insurer. There was also a cross-appeal against alleged inadequacy of the amounts allowed for superannuation benefits and future medical and pharmaceutical expenses. In a careful judgment the trial judge set out the respondent's background; the evidence given of his health and lifestyle prior to the accident; the nature of the injuries that he suffered; and the competing expert views as to the nature of his injuries. 2 UNREPORTED JUDGMENTS I am satisfied that his Honour's findings on these various matters were correct and it is unnecessary for me to go through them in great detail. Suffice it to say, that the respondent's claim was that he suffered a significant injury to his back and was thereby totally and permanently incapacitated. His case was put on a combined basis of orthopaedic type injuries to the thoracic and lumbo sacral spine combined with a psychological problem described in some of the reports as "abnormal illness behaviour." At the time of his accident the respondent was forty years of age. He had a good work record over many years and since 1981 had been employed by the Sydney County Council. There was evidence that in 1984 he had suffered some injury to his right elbow and in consequence was on light duties at the time of his accident in 1986. After the accident he returned to work in August 1986 and finally ceased work on 11 February 1988. His employment was formally terminated in May of that year. He had not worked thereafter up to the time of trial. His evidence was that prior to the accident he had been in good health. He said he went back to work because he wanted to keep his job but found his back got steadily worse. He gave evidence that prior to the accident he had been a keen fisherman and had done a great deal of work in his spare time on cars and on engines. Since the accident he had been virtually unable to go back to any of those activities. His Honour set out in detail in his judgment the effect that the respondent said that the accident had had upon him. He had to stand for long periods of time, he smoked, he took great quantities of medication and so on. It was put to him during the trial that there was little, if anything, wrong with him which he vehemently denied. He maintained he had major disabilities in his back. Various witnesses were called who supported the plaintiffs description of his pre-accident lifestyle. His Honour considered those witnesses to be impressive. There was a considerable dispute as to the extent, if any, and degree of orthopaedic injury that the respondent had suffered. Having gone through the evidence, his Honour said that in particular he did not accept the evidence called on behalf of the respondent that the car accident caused any disc protrusion or any situation that would require surgery. He said that there was some evidence of back problems of a comparatively minor nature consistent with the respondent getting back to work within a short period of time after the accident. The major question in his Honour's view was the respondent's psychological condition. As to this, there was evidence which his Honour accepted that the respondent suffered from a condition called abnormal illness behaviour. This involved his assuming a role and assuming being an invalid and what was described as an inappropriate response indicative of a fragile personality. Ultimately his Honour took the view that the symptoms revealed in the medical reports did not mean that the respondent was deliberately fabricating his condition. The respondent believed he had major back problems. His Honour was not satisfied, however, that there were major back problems of an orthopaedic nature. He found there was reasonably significant soft tissue injury to the back. He quoted from a report prepared by Dr Ditton, who is a specialist in pain management, that the muscle pain associated with the respondent's inappropriate spinal function significantly masked over clinical findings and responding to pain using avoidance techniques and abnormal postures in the long term created significant residual symptoms which were the major cause of the respondent's current pain and disability. Dr Ditton concluded that the respondent appeared to WAEW =SOUTH WALES INSURANCE MINISTERIAL CORPORATION (formerlg GOVERNMENT INSURANCE OFFICE of NEW SOUTH WALES) v REES (Sheller JA) be unfit for his pre-injury occupation but improvement in function would only occur if he were convinced to work and return to normal posture and function, despite episodes of pain associated with those activities. His Honour found that as a result of the accident the respondent had some soft tissue injury to the back that had led to the prominent pain behaviour or abnormal illness behaviour described by Dr Eikens, who was called on the respondent's behalf. His Honour went on to say that for present purposes on the balance of probabilities that injury caused the respondent to be unable to work after he finished work in 1988. His Honour said that the probabilities of the situation were that unless there was some change of attitude that would be a continuing situation. In consequence, his Honour assessed the matter along those lines, but also took into account that hopefully there was some significant possibility that there would be a change in attitude. His Honour then came to deal with the components of damages to be awarded. When he came to deal with the future economic loss claim he found on the probabilities that because of the abnormal illness behaviour reaction there would be substantial total loss of capacity. He thought this should be discounted in a number of areas. There was the possibility of change of attitude and of rehabilitation. In this regard his Honour referred to the respondent's vulnerable personality. He noted that the respondent's right elbow problem had continued for some considerable time before. His Honour took this into account and said that it seemed to him that the claim that the respondent would have worked on a total full-time basis at top figures until age sixty-five needed to be substantially discounted. For assessment purposes he used the net award figure of $373 per week. Bearing in mind the respondent was forty-six years old at the time of judgment he calculated future economic loss on a period of fourteen years using the five per cent tables and applied a twenty per-cent discount factor for the matters he referred to. He rounded off the amount to $150,000. The respondent challenges this figure on the basis that it resulted in a forty-per cent discount which was too great. The forty-per cent discount was calculated by combining the twenty-per cent discount used by his Honour with the continued expected sixteen year work period which would have taken the respondent to the age of sixty. This showed that forty per cent was discounted from what otherwise would have been achieved on the $373 weekly figure for a total period of employment of nineteen years up to the age of sixty-five. A number of matters are relied upon by the respondent. Reference is made to the relatively secure employment enjoyed by him with the Sydney County Council and to the traditional discount of fifteen per cent. It was put that even in normal circumstances this was too great a discount. Reference was made to a passage in Dr Luntz' well-known book on damages. For my part nothing put persuades me to depart from the traditional fifteen per cent as an appropriate discount to allow for normal vicissitudes of life where a plaintiff was in the work force prior to an accident and in ordinary good health. The question is whether the combination of fifteen per cent and an expected continued work period to the age of sixty produced too great a discount. In my opinion that has not been demonstrated. Quite clearly his Honour was entitled to take into account the possibility of a change of attitude. He was also entitled to take into account that the respondent was a person of a vulnerable type who had already suffered an injury which had put him at the time of the hearing into light work and which persisted in terms of its consequences to the respondent up to the time of the accident and was continuing thereafter. 4 UNREPORTED JUDGMENTS Taking account of these circumstances, and also the considerations that are mentioned in the written submissions made on behalf of the Corporation, I consider that the approach taken by his Honour in reducing the accepted future working life of the respondent to the age of sixty and then discounting that amount by twenty percent was appropriate. I think this part of the cross-appellant's cross-appeal against future economic loss fails. His Honour in his judgment then went on to deal with the claim for superannuation and referred to the loss of benefit calculated by the actuary in respect of this at $9255. His Honour accepted a submission that this should be discounted to allow for the reduced normal expectancy of working life. The respondent challenges this discount but, in the light of what I have said about future economic loss, it seems to me that on the same basis this challenge to the superannuation benefit also fails. His Honour then dealt with future medical and related figures. He said that he was unimpressed with the evidence of the chiropractor. He then said there had been no reason why the Corporation should be paying for any continuing claims of that nature. He said that the respondent continued with an enormous number of drugs and other treatment and there will be some ongoing costs at least for a period until hopefully the conclusion of the litigation when they will diminish. So far as all future claims for pharmaceutical and medically related expenses he allowed a figure of $10,000. This figure is challenged. Reference was made to the material before his Honour as to the future medical requirements and it is submitted on behalf of the respondent that at least $20 per week should have been allowed for those expenses. This was all material that was before his Honour in coming to the conclusion he did and for my part, taking account of the reasons his Honour gave, I see no reason to interfere with this part of his Honour's award. This brings me to the $70,000 his Honour awarded for general damages. The respondent claims that it was too little. It submitted that the effect of the respondent's psychological illness was that after the accident he behaved like an invalid. He did nothing around the house. He made significant complaints of pain. He had been using a stick and needed help to dry his feet, and put on his shoes and socks. His wife and a neighbour mowed the lawn. He no longer did any maintenance work around the house or household duties. There had been a significant change in the quality of his life and a significant diminution in sexual activity. Reference was made to other matters that his Honour took into account, such as his fishing and his hobby of working on motor vehicles. I have given careful consideration to the amount awarded by his Honour for general damages and the submissions that have been put on the respondent's behalf. However, I do not think that it has been shown that the award of general damages made by his Honour was outside the range of a sound discretionary judgment. Indeed, for my part, having reviewed the evidence, I think the amount awarded by his Honour was appropriate. This ground of appeal in my view also fails. This leaves the question of out-of-pocket expenses which his Honour awarded, including an allowance for the chiropractor, in the amount of $13,065. The particulars of out-of-pocket expenses in the respondent's amended Statement of Particulars pursuant to Pt12 shows a sum of $22,939.40 being hospital, medical and pharmaceutical expenses paid on behalf of the respondent as of 9 December 1990 and particularised in a schedule. The schedule has been handed up in Court. No material has been provided vouching those particulars. It is said that this WARE =SOUTH WALES INSURANCE MINISTERIAL CORPORATION (formerly GOVERNMENT INSURANCE OFFICE of NEW SOUTH WALES) v REES (Handley JA) amount may have been overlooked by his Honour when he took account of another item which was apparently part of the amended particulars of out-of-pocket expenses and ignored this particular amount. That may or may not be so. There is nothing in the transcript to suggest that the out-of-pocket expenses were agreed between the parties. Nothing was said at the time his Honour delivered his reasons for judgment and no application was made to his Honour under the slip rule. Accordingly, it does not seem to me that the Court at this stage can properly deal with a submission that this amount should have been allowed. If indeed that amount was paid on the respondent's behalf by the employer's worker's compensation insurer and has to be paid back out of the verdict, it seems fair that an opportunity should now be given to the respondent to put material before the Court to support this claim or hopefully obtain some agreement with the Corporation as to an appropriate amount. Accordingly the matter should be stood over for a period of forty-eight hours for that to be done and then further submissions made if necessary to the Court about that. Accordingly, subject to that, in my opinion the cross-appeal should otherwise be dismissed. The question of costs of both the appeal and the cross-appeal should be reserved to abide any further submissions that are made about the out-of-pocket expenses. Clarke JA I agree except insofar as I think that the matter should be adjourned to 10.15 am on Friday. Handley JA I also agree. Clarke JA: There will be no formal order at the present moment. The matter will be adjourned to 10.15 am on Friday. On Friday, 4 March 1994 the parties handed up Short Minutes of Orders in the following terms: 1. The appeal is dismissed. 2. The cross appeal is allowed. 3. The judgment in the court below is varied by increasing the award for out of pocket expenses by $22,939.40 to $36,004.40 and in lieu of the judgment in the court below judgment should be entered for the plaintiff in the sum of $398,596.40. 4. Each party is to pay its own costs of the appeal and of the cross appeal. Counsel for the Appellant: H J Mater Counsel for the Respondent: G B Hall QC/A G Todd Solicitor for the Appellant: G M Meadows Solicitor for the Respondent: Anthony Ziade & Associates