Hatzigeorgiou v Baker [1999] NSWSC 134

New South Wales Supreme Court CITATION : Hatzigeorgiou v Baker [1999] NSWSC 134 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 11670/90 HEARING DATE(S) : 15 February 1999-24 February 1999 JUDGMENT DATE : 3 March 1999

PARTIES : Milton Hatzigeorgiou and Elias Hatzigeorgiou, Executors in the Estate of the Late Con Hatzigeorgiou (Plaintiffs) Warwick Baker (Defendant) JUDGMENT OF : Studdert J

COUNSEL : A. Howen/K. Hawes (Plaintiffs) R. Kaye (Defendant) SOLICITORS : Photios Vouroudis & Co (Plaintiffs) Mallesons Stephen Jaques (Defendant) CATCHWORDS : NEGLIGENCE; solicitor and client; Alternative rights of client to sue at common law and to recover workers' compensation benefits; limit to common law damages insurance cover under statutory workers' compensation policy; whether appropriate advice given; whether client would have acted on further advice; responsibility for delay.; DAMAGES; assessment by reference to delay. Law Reform (Miscellaneous Provisions) Act 1944 ACTS CITED : Workers' Compensation Act Legal Services Commission Act Supreme Court Act DECISION : See para 110

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

STUDDERT J

Wednesday 3 March 1999

11670/90 MILTON HATZIGEORGIOU AND ELIAS HATZIGEORGIOU, EXECUTORS IN THE ESTATE OF THE LATE CON HATZIGEORGIOU v WARWICK BAKER

JUDGMENT 1 HIS HONOUR: In proceedings commenced in 1990 the late Con Hatzigeorgiou (to whom I shall refer in this judgment as "the deceased") sued Warwick Baker. During his lifetime the deceased engaged the services of the defendant as his solicitor, and the defendant acted for him for some twelve years up until November 1989. Central to the cause now before this Court is the allegation that the defendant failed to exercise due care in the discharge of his professional responsibilities towards the deceased. 2 When he began these proceedings the deceased was unrepresented. Apparently he prepared the statement of claim which was filed and this document was plainly defective in many respects. Following the death of the deceased on 3 November 1993, the plaintiffs Elias Hatzigeorgiou and Milton Hatzigeorgiou assumed the conduct of the cause as plaintiffs. The statement of claim, even in its amended form, is defective and it contains no assertion to this effect, but presumably the claim has been pursued by the plaintiffs as executors of the estate of the deceased and pursuant to the Law Reform (Miscellaneous Provisions) Act, 1944. No point was taken by the defendant as to the form of the pleading before this Court and the hearing proceeded upon the basis I have indicated. 3 The amended statement of claim filed by the solicitors for the executors recast the allegations of negligence to be relied upon and when the hearing began Mr Howen of counsel, for the plaintiffs, presented yet further amended particulars of negligence and these were the focus of the trial as it proceeded. The deceased sustains injury at work 4 As at 8 August 1977 the deceased was employed as an apprentice panel beater by Nickolas Koumandakis and Nickolasi Petrou, trading as KNP Smash Repairs ("the employers"). On that date the deceased sustained burn injuries at the employers' panel beating shop after paint thinners were spilt on him and his clothing was ignited with a cigarette lighter. The injuries were serious and the deceased was admitted to hospital. The employers invited the deceased to complete a claim form for workers' compensation benefits which contained a false account as to the circumstances in which the burns had been sustained. It appears that the employers were concerned that the true account of those circumstances may have lead their workers' compensation insurer to decline liability under the statutory form of policy which they had. The employers' report of injury (Exhibit 2) contained the following description of injury: "The injured was welding under a car, he had a bit of paint on his overalls from the previous day, that probably caused the hole [sic] fire." 5 The true position, as eventually found by Allen J, was that "what was intended by all concerned to be no more than harmless horseplay" occurred, during the course of which the contents of a bucket that included paint thinners was tipped on the deceased and afterwards one of the employers lit his cigarette lighter near the deceased's clothing. The clothing then ignited. 6 The deceased was admitted to hospital for treatment and remained there for approximately six weeks. The deceased consults the defendant 7 The defendant gave evidence as to the circumstances in which he was instructed, as to the advice he gave the deceased, and as to the instructions of the deceased. Whilst the plaintiffs were not able to challenge the defendant's evidence on those matters by direct evidence, Mr Howen submitted that I should not accept the defendant's account as to those matters and indeed generally, particularly where there was absent any file note or written advice of a confirmatory nature. 8 The defendant was in the witness box for best part of four days and in that period he was subjected to very searching cross examination. Throughout this experience the defendant conducted himself with calm and dignity. I was impressed with him as a witness and I formed the assessment not only that he was an honest witness but that he was essentially a reliable one. 9 I accept as reliable the defendant's account as to the advice he gave to the deceased and as to the instructions the deceased gave him. I shall proceed to summarise the defendant's evidence as it bears upon those matters. 10 The defendant was first approached about the deceased's work injury by the latter's then de facto wife. There is no need to dwell on that meeting but subsequently the defendant saw the deceased for the first time in his office in York Street in September 1977. The deceased told the defendant that he had been burned at work by having thinners spilled on him and that the thinners were then set alight. The deceased explained there had been some skylarking going on. The deceased handed the defendant an insurance form, presumably that to which I have already referred. The deceased said that was not the way the accident had happened and the defendant advised the deceased not to submit a claim form with the wrong version. The defendant advised the deceased he would have a claim either for workers' compensation benefits or for damages and the deceased told the defendant that he had not been paid by his employers since the date of injury. The defendant advised the deceased to fill in a Legal Aid claim form. 11 The claim form was duly obtained and the defendant met the deceased in his office once again. On this occasion the defendant said the deceased gave him a more detailed explanation as to the circumstances in which he had been injured and the defendant said that he gave the deceased advice as follows: "I said to him it sounded as though he might have a damages claim against Koumandakis personally, but that it didn't sound like an ordinary workers' compensation claim because it sounded to me more like an assault with intention that he be set on fire. I said it also sounded as though it was the sort of activity that might not be covered by an ordinary workers' compensation policy because there was not only skylarking going on, but it seemed to be to me that the activity that had been going on might have been outside the normal work situation or outside the sort of work activities that might have been covered by the employer's policy. I said we'd have to make a lot more inquiries but we'd have to take statements from all the witnesses we could lay hands on. I suggested to him that we ought to make a workers' compensation claim for his lost income to test the water to see what sort of a reaction we got when the claim was brought against the insurer, and shortly, during the course of that discussion he spoke to me about some plans that he had and that he said he was looking to go back to work. That's all that was said at that stage about employment. And I then said, 'Well, give me some instructions to bring a workers' compensation claim and we'll see what that produces.' He gave me instructions to bring a workers' compensation claim." 12 There was a later meeting just before the defendant filed an Application for Determination in the Workers' Compensation Commission. At that meeting the deceased informed the defendant that he had a position at La Parisienne restaurant and that he was earning more than he would have been in his pre-injury employment. Hence the Application for Determination was for a closed period only. 13 Then early in 1978 the defendant described a long conference with the deceased in which he gave advice as follows: "… I told him that workers' compensation was a mean system because people who were injured at work generally only got weekly workers' compensation and they didn't get any more than that. That the system was designed to give them weekly compensation to replace wages when they couldn't work or to give them a top up if they were able to, if they were earning less than they had been formerly. It didn't give them at that stage anything in the nature of a large sum at one go for injuries they'd suffered or for wounds and burns that he had suffered. I told him that it depended. He had to be injured in the course of his job to get that benefit and that he had to be disabled or incapacitated at that stage, but he had to be unable to work or to be partly unable to work in order to get weekly compensation payments. I told him that we had seen, by that stage we had spoken to a large number of witnesses. We had a much clearer idea of what had happened than in our earlier meetings. That I thought the situation was very risky for him at that stage because it was still fairly clear that his remedies were against his employers personally as opposed to the employers' insurer and my recollection is that I told him that we'd already had some sort of hint from some source that the workers' compensation insurer wasn't going to pay his wages. He asked me about getting a large sum of money and I said to him that that came from proceedings in either the Supreme Court or the District Court and I said that was damages and that that in turn was very dangerous and that's where I started, that's where I said to him, 'Look, litigation or starting case claims in the District Court or the Supreme Court is a bit like getting on a tiger. Once you get on it's very difficult to get off without being bitten.' Now, I explained to him, I said to him that common law damages would give him large compensation for his injuries and that he wouldn't get any lump sum compensation through the workers' compensation system. I said he ought to be very careful before he started anything in common law because you shouldn't start common law proceedings unless you are fairly confident that there was an insurance company going to pick up the tab. And at that stage I was very unconfident that there was any chance of the insurer being a party to any claim in the District Court or the Supreme Court. Q. Did you tell him why you held that view? A. Yes, because I explained to him that it was the same, likely to be the same insurer that he sued as in the Workers' Compensation Commission but that was under a different hat. Q. And did you then proceed to say anything to him about why the insurance company might not have to pay? A. I said to him that from the way he and others had described the way he was burned it seemed to me then that his employer had stepped outside the insurance policy that was going to provide cover for his injuries. I also talked about the attempted fraud and that the impact that that might have on the insurance company's response to the claim for compensation and possibly also if he brought a claim for damages. I told him at that stage that both of those situations were unclear in outcome for him because of what we'd heard from - my recollection is now it was from the solicitors for the insurer. At that stage I suggested that he didn't start common law proceedings and that we should run the workers' compensation proceedings just to see what the result was. He asked me more about the workers' compensation and I said to him at that stage that - Oh, at that stage I think he told me that he was running the possibility of having to go, have more surgery for skin rafts. He told me that somewhat earlier in the meeting, that meeting or the earlier meeting, that when that happened the advice I gave to him was that what I saw in workers' compensation was possibly a string of individual claims for short term periods of compensation whether it was total or partial because he was then back at work and that I expected that if his claim was against either the workers' compensation insurer or his employers ultimately, if they weren't covered by the policy, that there'd be an argument about paying his compensation or at least an argument was possible when he put a claim in. I said it all depended very much on how he, what sort of recovery he made and whether his injuries became stable. Q. Was there any discussion either emanating from you or him inquiring as to the relationship between benefits under the workers' compensation legislation and any remedies in common law proceedings? A. Yes. I sought to explain the difference between the two. Q. Could you tell us as best you can what you said please? A. I said something along the lines that workers' compensation gave weekly benefits and paid his medical bills for treatment, but that it was different from damages in the District Court or the Supreme Court because that gave you an one off settlement and that it compensated you or gave you lost wages both in the past and in the future and it gave you compensation on one occasion for the injury you'd suffered, pain and suffering and that also that once you got a judgment in the District Court or the Supreme Court that was an end to your workers' compensation. You couldn't go back after you got the judgment because it stood in place of your workers' compensation entitlement. I also told him about the principle of not being able to have more than one bite of the cherry and that's when I told him about, that if social security benefits you received if you had them while you were waiting for your judgment. You had to pay back your medical bills and you had to pay back any workers' compensation you'd received before the judgment was handed down." 14 According to the defendant, the deceased rejected the prospect of making a succession of claims in the Workers' Compensation Commission and said: "'I don't want to have anything more to do with the two Nicks. The less I come into contact with them or have anything at all to do with them, the better. I don't want to be involved with them in making claims for weekly compensation from time to time if I am not well or something very similar to that.' Q. Did he elaborate on that at all? A. Not that I can recall. He spoke about the common law possibility. Q. Yes. Could you tell us what he said please? A. He said, 'I want my compensation all in one go. I don't want to be - I don't want to come backwards and forwards.'" The proceedings in the Workers' Compensation Commission 15 On the return date in the Workers' Compensation Commission when the application first became before the Commission in June 1978, the proceedings were adjourned until September of that year. By that time the employers had filed no answer but the insurer was represented on the adjourned date, having declined liability under the policy. The proceedings were further adjourned to enable the employers to obtain legal advice because of their potential personal liability to the deceased. 16 On this September 1978 date there was a further discussion about the deceased's workers' compensation rights in which the deceased, the defendant and Mr Neale of counsel, who was then appearing for the deceased, participated. The defendant said that he explained to the deceased, or Mr Neale did, that the deceased had a compensation claim "that looked as though he would have a remedy for a long time, if not forever, in the Compensation Court if he was ever disabled again". However it was further explained that the present claim was a closed period claim. The deceased responded to this advice in words to this effect: "I am not really interested in these short claims in this court.". 17 Eventually the claim in the Workers' Compensation Commission was heard by the then Chairman, Judge Langsworth QC, and resulted in an award in the deceased's favour on 14 February 1979. That award was for a closed period from 8 August 1977 until 31 October 1977. The insurer resisted payment but the defendant made representations to the Commission and eventually the insurer satisfied the award. 18 However it does not appear that in doing so the insurer made any admission and the proceedings before the Workers' Compensation Commission left open the issue as to the insurer's obligation to indemnify the employers in respect of future claims presented by the deceased and in particular in relation to the claim he embarked upon at common law. The proceedings against the employers at common law 19 The defendant gave advice to the deceased about his prospects at common law in words to the following effect: "I think you will win in a claim against your employers, but because of the way your injuries occurred you may not get anything from the insurance company. You may have to go against your employers themselves. We don't know whether they have the money to pay him or not." 20 In giving instructions to proceed at common law the deceased said to the defendant: "I want a lump sum." 21 So it was that counsel was briefed to draw a statement of claim which was filed in the Supreme Court on 5 May 1978. The deceased in the statement of claim pleaded his case against the defendants in negligence and he also sued the first defendant, Koumandakis, in assault since that defendant allegedly ignited his clothing. Each of the defendants was apparently separately represented and the workers' compensation insurer was joined as a cross defendant. That insurer denied any liability to indemnify the defendants. 22 A trial in these proceedings did not take place until 1989, some eleven years after the statement of claim was filed, and it is necessary to trace the history of these proceedings in some detail. 23 The defendant failed to appear at several directions hearings in 1980 and 1981 but his evidence satisfies me that this led to no appreciable delay, because he was not in a position to take a date for trial at the time of those directions hearings. This was because the deceased had not given him the particulars of earnings necessary to permit of the preparation of proper particulars under Practice Note 19. (The deceased had a large number of employers after the end of 1977.) 24 Eventually a hearing date was fixed for 9 June 1982 and the matter was prepared for trial. Senior counsel briefed in the matter returned his brief shortly before the trial date and senior counsel who replaced him advised that the deceased's wife, from whom the deceased was by then estranged, was an essential witness. Mrs Hatzigeorgiou was not available because of her then advanced state of pregnancy and on the plaintiff's application the trial date was vacated. The terms upon which the date was vacated were that the deceased could seek a new date on two days notice, and it was the defendant's understanding, expressed in this Court, that a trial date approximately two months thereafter could have been allocated. 25 Senior counsel in advising of the need to call Mrs Hatzigeorgiou also advised of the need for expert evidence concerning the paint thinners and the quantity that had burnt the skivvy the deceased had been wearing at the time of the fire. This contemplated expert evidence called for scientific examination of the remnants of the cotton skivvy. To qualify an appropriate expert took an extraordinary time, and it was not until 4 February 1986 that the expert's report became available. 26 Even then the defendant did not seek a hearing date, and it was not until December 1987 that he filed a notice to set down for hearing and fresh Pt 33 particulars. In filing the notice at this time the defendant overlooked the order that had been made in June 1982 which would have permitted him to apply for a hearing date on two days notice to the other parties. 27 The cause was set down for hearing on 19 September 1988 when there was a further adjournment because the defendant Koumandakis was not legally represented. He was afforded an opportunity to apply for legal aid. The matter was adjourned yet again on 21 October 1988 at which time consideration was being given to a separate trial on the issue between the defendants and the insurer as to the formers' right to indemnity under the statutory policy. 28 Eventually the cause proceeded to hearing before Allen J in April 1989 and his Honour delivered judgment in favour of the deceased against the defendants on 6 September 1989, awarding damages, inclusive of interest, in the sum of $324,872. His Honour also ordered that the insurer indemnify the defendants in respect of their liability to the extent of the cover afforded to them under the statutory policy in the sum of $100,000. His Honour ordered the defendants to pay the deceased's costs and there were other orders made to which it is unnecessary to refer for present purposes. 29 Neither defendant had assets against which the judgment could be enforced and the only money made available to the deceased to satisfy the judgment was the sum of $100,000 under the statutory policy. The deceased had enjoyed a grant of legal aid and was called upon to account to the statutory authority out of that sum. Eventually, after a dispute as to quantum, the legal aid authority agreed to accept $25,125 in satisfaction of its claim. This left a balance of $74,875 available to the deceased. The deceased refused to accept that sum, apparently by reason of concern that receipt would prejudice his pursuit of the balance of the judgment debt, but eventually the nett proceeds of the policy payment were received by his estate. The admissibility of expert evidence 30 In the course of the presentation of the plaintiffs' case, Mr Howen introduced two witnesses to give expert evidence. The first of those was Mr Stephen O'Halloran, a solicitor of this court with lengthy experience in the field with which this cause is concerned. Mr Kaye raised no objection to his qualifications nor as to the relevant evidence which Mr Howen sought to introduce and did introduce. Mr O'Halloran's report was tendered in evidence as Exhibit D and he was also asked questions directed to the further amended particulars of negligence presented when the hearing began. 31 Mr Howen also sought to introduce evidence from the former Chief Judge of the Compensation Court, Mr Frank Roland McGrath, OBE. Mr Kaye objected to the introduction of the evidence of this witness, but it was received subject to objection, and on the basis I would rule upon its admissibility in the course of this judgment. Having regard to the conclusions I have reached on factual issues critical to my approach to this case, the issue of the admissibility of Mr McGrath's evidence does not assume practical significance. Nevertheless for completion, I address the issue. 32 The evidence of the former judge was contained essentially in his report, Exhibit F. This report dealt largely with the same subject matter as that addressed by Mr O'Halloran. Where Mr McGrath differed from Mr O'Halloran was in the evidence he gave concerning what, in his opinion, ought to have been done at the time instructions were first received by the defendant. Mr McGrath considered that the defendant should, at the outset, have made inquiries to ascertain the insurance cover enjoyed by the employers. 33 The authorities make it plain that expert evidence may be called to prove what is common practice amongst solicitors of good repute. Mr O'Halloran gave evidence that fell within that principle when he addressed the issue as to when inquiry about insurance first became warranted. 34 Mr Kaye however submitted that Mr McGrath was not qualified to give evidence as to that matter. As the former judge acknowledged, he practised as a solicitor only for a period of eighteen months before his admission to the Bar in 1951 and the pursuit of his distinguished career as a barrister and subsequently as a judge. 35 For relevant purposes the particular expertise of Mr McGrath is, in my opinion, to be distinguished from that of Mr O'Halloran. I do not consider the former judge to be qualified, in strictness, to give evidence as to what was common practice amongst solicitors of good repute either in 1978 or subsequently. Indeed the witness acknowledged this himself when in cross examination, and having been directed to the evidence of Mr O'Halloran, Mr McGrath said, referring to evidence as to the practice in 1977 and 1978: "Well at that stage I couldn't say whether it was general practice because I was not in practice at that stage myself." 36 I conclude that the evidence that Mr McGrath gave as to what ought to have been done by the defendant upon receipt of instructions was not admissible and I cannot act upon that evidence in this case. 37 There is often a fine line to be drawn between what is and what is not admissible in the nature of expert evidence. Mr McGrath unquestionably had a wealth of experience upon which to draw in expressing the conclusions he did express in his report, but the content of the report in large part addresses matters that I must determine and which are not appropriate issues for expert evidence. However persuasive I might consider Mr McGrath's opinions, heeding my regard for his experience in the law, it does not seem to me that I should treat their expression as evidence in this case. 38 I do not intend to convey that a former judge of a court could never be qualified to give expert evidence. Indeed the contrary was recognised in Scott v Echegary (1991) ATR 81-120, 69,129 at 69,133 where Mahoney JA, with whose judgment Gleeson CJ and Kirby P agreed, observed in a case that required a determination of the measure of damages in common law proceedings at a particular time in the past, and the value of workers' compensation rights at the same time, that expert evidence would ordinarily be required as to those matters absent a contrary agreement between the parties to the litigation. See also Williams & Ors v Bodewes (unreported, Court of Appeal, 1 October 1997). 39 It seems to me that in the present case the former judge was qualified to quantify past entitlements to workers' compensation benefits given particular assumptions, although it would be for this Court to find whether such assumptions were established on the evidence. Through Mr McGrath a schedule of rates of payments was properly introduced, as was the "Jamberoo Schedule", to which resort was apparently had in the Compensation Court in awarding interest in respect of awards in that court. The defendant's duty of care and the alleged breaches of duty considered 40 By reason of the solicitor/client relationship the defendant owed to the deceased a duty to exercise reasonable care in the pursuit of the deceased's instructions. The defendant's responsibility was to do that which the reasonable competent practitioner would do having regard to the standards normally adopted in his profession: see Midland Bank v Hett Stubbs and Kemp [1979] 1 Ch 384 at 403. 41 In the present case it is submitted that the defendant was in breach of his duty of care in a number of ways. I set out the particulars of negligence in their ultimate amended form: a. The Defendant failed to advise the deceased of the consequences of electing to commence proceedings for common law damages compared to the Defendant's rights under the Workers Compensation Act 1926.