New South Wales Supreme Court CITATION : Pellow v NRMA & Anor; Pellow v NRMA & Anor [2004] NSWSC 152 HEARING DATE(S) : 10 March 2004 JUDGMENT DATE : 18 March 2004 JURISDICTION: Common Law Division JUDGMENT OF : Studdert J DECISION : Each plaintiff is entitled to have included in her assessment the reasonable cost of fund management until the cessation of her legal disability at the age of eighteen years. CATCHWORDS : Fund management LEGISLATION CITED : Damages (Infants and Persons of Unsound Mind) Act CASES CITED : Nominal Defendant v Gardikiotis (1995-96) 186 CLR 49 Ren v Mukerjee (1996) ACT SC 1199 Jessica Lee Pellow by her tutor Philip Scott Pellow (Plaintiff) NRMA Insurance Limited (1st Defendant) PARTIES : Robert Lloyd Harris (2nd Defendant) Ashlea Kate Pellow by her tutor Philip Scott Pellow (Plaintiff) NRMA Insurance Limited (1st Defendant) Robert Lloyd Harris (2nd Defendant) FILE NUMBER(S) : SC 20074/02; 20075/02 B. Toomey QC/I. Roberts SC/A. Black (Plaintiff) COUNSEL : R. Bartlett SC/B. Kelleher (1st Defendant) A. Hewitt SC/E. Cox (2nd Defendant) Walsh & Blair (Plaintiff) SOLICITORS : Sparke Helmore (1st Defendant) Curwood & Partners (2nd Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION STUDDERT J Thursday 18 March 2004 20074/02 JESSICA LEE PELLOW by her tutor PHILIP SCOTT PELLOW v NRMA INSURANCE LIMITED & ANOR 20075/02 ASHLEA KATE PELLOW by her tutor PHILIP SCOTT PELLOW v NRMA INSURANCE LIMITED & ANOR JUDGMENT (Fund management) 1 HIS HONOUR: In each of these matters I was asked to determine whether the plaintiff was entitled to recover the cost of fund management on the verdict sum. Jessica is presently ten years of age, and Ashlea is now seven years old. I held that this cost is recoverable, and I publish my reasons for that ruling. 2 In each case Mr Toomey of Queen's Counsel, on behalf of the plaintiff, contended that the plaintiff is entitled to management costs until the plaintiff attains the age of eighteen years. Mr Bartlett submitted to the contrary. The point is an important one which does not appear to have arisen directly in the past. 3 Under s 4 of the Damages (Infants and Persons of Unsound Mind) Act damages awarded to an infant plaintiff have to be paid into court and "shall, unless the court otherwise directs, be paid out to the Public Trustee." 4 Section 5 of the same statute provides that the Public Trustee shall hold and apply the money received "for the maintenance and education or otherwise for the benefit of the minor." 5 The Court's attention was directed to the decision of the High Court in Nominal Defendant v Gardikiotis (1995-96) 186 CLR 49. This was a case concerning an injured motorist involved in an accident and the injury sustained aggravated a pre-existing condition of multiple sclerosis. The aggravation resulted in very significant physical disability including an inability to write adequately but no mental impairment or disability was caused. The trial judge had found that: "The plaintiff is not brain damaged, she is a reasonably well educated girl and in fact a very impressive young lady who will not work and who will have ample time to invest her money and manage her interests." 6 In allowing her damages for the cost of fund management, the Court of Appeal considered the incurring of the management fee was "a necessary, reasonable and foreseeable result of the negligence" of the defendant and was thus recoverable. It was considered that the plaintiff was entitled to damages for the cost of the service because the plaintiff was not qualified to invest such a fund without outside advice. 7 The High Court allowed the subsequent appeal. In their joint judgment Brennan CJ, Dawson, Toohey and Gaudron JJ indicated their agreement with the decision of Gummow J. Their Honours said at p 52: "The facts and the questions involved in this appeal are set out in the judgment of Gummow J. We agree with his Honour, substantially for the reasons he gives, that the respondent should not have been awarded damages for management of the fund constituted by the verdict which she obtained. We note that no claim was made that, as a result of her physical disabilities, the respondent will incur additional expense in managing her financial affairs. And as at present advised, we are of the view that any difficulties the respondent will experience in that regard are compensated for by the award of general damages. As with the question whether an accident was the result of a defendant's negligence, the question whether a need results from an accident is essentially a question of common sense: it is not a question to be answered by application of the "but for" test. True it is that, but for the accident, the respondent would not have a verdict to invest and, thus, would not need assistance in its management. But it is contrary to common sense to speak of the accident causing a need for assistance in managing the fund constituted by her verdict moneys in circumstances where her intellectual abilities are not in any way impaired. It would be otherwise in the case of a plaintiff who is intellectually impaired as a result of a defendant's negligence or by reason of some pre-existing disability. " (Emphasis added) 8 Gummow J reviewed authority here and in Canada. Of particular significance in the present context is his Honour's reference to Campbell v Nangle (1985) 40 SASR 161 and his Honour's remarks immediately following such reference: "In Campbell v Nangle, the relevant principles were stated by the trial judge (Zelling J) and in the Full Court of the South Australian Supreme Court by King CJ. Zelling J referred to several unreported English decisions, including that of the Court of Appeal in Rialis v Mitchell (The Times, 17 July 1984), and continued: 'I would have thought on general principles, that the decision of the Court of Appeal was correct. If you injure a plaintiff so badly that he has permanent brain damage and he can neither manage the resulting fund for himself nor make any decision with regard to its management, then it is foreseeable that there is going to have to be a manager to do that for him and, with a large fund of this kind, a skilled manager whose fees must be paid for.' King CJ said: '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, in the same position financially as he would have been if he had not sustained the wrong for which he receives the damages. 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. 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 it, being the result of legal disability or some other cause. ' The statement of principle by King CJ in my view correctly represents the law." (I have emphasised the concluding sentence in the extract from the judgment of King CJ.) 9 McHugh J, in the course of his judgment, said (at p 54): "Consequently, when a plaintiff asserts that, but for the defendant's negligence, he or she would not have incurred a particular expense, questions of causation and reasonable foreseeability arise. Is the particular expense causally connected to the defendant's negligence? If so, ought the defendant to have reasonably foreseen that an expense of that kind might be incurred? Those questions arise in the present case. Is the expense of fund management causally connected to the negligence of the defendant? If so, was the incurring of the expense a reasonably foreseeable consequence of the defendant's negligence? If either of those questions is answered in the negative, the expense cannot be recovered from the defendant." 10 Later (at p 55) his Honour said: "Under the common law theory of common sense causation, a free, informed and voluntary act of the plaintiff or a third party, which builds on a situation resulting from the defendant's tort and causes loss or damage to the plaintiff, negatives any causal connection between that tort and the loss or damage. That is so even though the act of the plaintiff or third party would not have occurred but for the defendant's tort. Consequently, unless a defendant's wrong has caused a disability that requires the plaintiff to obtain assistance in managing his or her verdict moneys, the cost of such assistance is not caused by the defendant's negligence and is not recoverable as damages from the defendant." 11 His Honour did not directly address the situation where the injured plaintiff had some pre-existing disability not caused or aggravated by the injury giving rise to action, but it is to be observed that a decision taken on behalf of these infant plaintiffs to incur the cost of fund management is not a decision which is "free" or "voluntary". 12 The decision in Gardikiotis is, of course, not directly in point and those passages from the joint judgment of Brennan CJ, Dawson, Toohey and Gaudron JJ and from the judgment of Gummow J set out above were strictly obiter dicta. However, they do support Mr Toomey's submission and what distinguishes the present case from Gardikiotis is that each plaintiff before this Court is under a disability, albeit a legal one, which compels the investment of any judgment fund: see the provisions of the Damages (Infants and Persons of Unsound Mind) Act set out above. Not only are there the dicta in Gardikiotis but there are also the dicta of King CJ in Campbell which Gummow J regarded as being a correct statement of principle. 13 In Ren v Mukerjee (1996) ACT SC 1199 Miles CJ, in assessing damages, made provision for management costs where the need to have the fund managed did not arise from incapacity attributable to injury but by reason of the plaintiff being an infant. His Honour referred to Gardikiotis and to those passages in the joint judgment and in the judgment of Gummow J which I have set out above. In determining that it was proper to make allowance for the costs of administering the fund in the assessment of damages, his Honour said (at para 227): "The claim in the present case is a modest one and does not seek to go beyond the age of eighteen years when the plaintiff will achieve legal capacity. The need to have the fund management during the interim period does not arise from any incapacity on the part of the plaintiff attributable to his injury but is recoverable in accordance with the dicta in Gardikiotis." 14 Mr Bartlett submitted that if Mr Toomey's contention is correct then it would be proper in every infant case to make provision for the cost of fund management. The Damages (Infants and Persons of Unsound Mind) Act does not address this issue and Mr Bartlett submitted that the legislature would have specifically addressed the issue if it intended that the management cost should be recoverable as a head of damage. 15 Counsel were not able to refer me to any case in which a similar claim to that now advanced by Mr Toomey has been considered by this court. The only decision directly in point appears to be that in Ren (supra). 16 I find what was said in the High Court in Gardikiotis, both in the joint judgment and in the judgment of Gummow J, and by King CJ in Campbell to be most persuasive. 17 Neither of these plaintiffs suffer from a mental disability caused by the defendants' negligence and the position would be altogether different if the plaintiffs, not having suffered mental disability because of the defendants' tort, had a choice as to whether to invest the verdict monies for themselves. However, neither plaintiff has a choice because of her infancy. Neither plaintiff has a capacity to manage a large fund, and the law determines that each plaintiff will remain disabled until she attains the age of eighteen years. 18 Whilst the "but for" test is not the test of causation, the issue of causation is essentially a common sense issue: see the dicta from the joint judgment in Gardikiotis previously cited. The necessity of fund management was a reasonably foreseeable consequence of negligently causing harm to each of these infant plaintiffs because of the long settled legal disability the law imposes upon each child. The expense of fund management necessarily attends damages awarded for the physical harm caused by the defendants' tort, and having considered the above authorities I am satisfied that the test of causation has been satisfied. It follows that each plaintiff is entitled to have included in her assessment the reasonable cost of fund management until the cessation of her legal disability at the age of eighteen years. ********** Last Modified: 03/23/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.