New South Wales Supreme Court CITATION : ARNOLD v HANCOCK (DAMAGES 2) [2007] NSWSC 659 HEARING DATE(S) : 23 November 2006 JUDGMENT DATE : 28 June 2007 JUDGMENT OF : Hulme J at 1 DECISION : No order PARTIES : Jason ARNOLD Ken HANCOCK, Hancock Alldis FILE NUMBER(S) : SC 20397/02 Plaintiff: M Elkaim SC, T Boyd COUNSEL : Defendant: GM Watson SC Cross Defendant: M Windsor Herbert Weller SOLICITORS : Ebsworth & Ebsworth Minter Ellison - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HULME J Thursday, 28 June 2007 20397/02 Jason ARNOLD v Ken HANCOCK, Practising as HANCOCK ALLDIS & ORS JUDGMENT 1 HULME J: In these proceedings, a claim against a firm of solicitors for negligence and breach of contract and a cross claim by the solicitors against a barrister they had retained, I published reasons on 24 March 2006. In those reasons I dealt with the issue of liability (subject to one possible qualification) and most of the issues as to damages. The parties were unable to reach agreement as to the outstanding issues and to the extent I felt able on the information available I sought to deal with these in reasons published on 8 September 2006. The parties remain apart and hence these reasons. 2 I held that the Plaintiff, who was injured in falling into the hopper of a concrete pumping truck, had had a good cause of action against his then employer, that negligence and breach of retainer on the part of the Defendant led to the Plaintiff losing this cause of action, that a barrister the Defendant had retained was also negligent and that the Defendant was entitled to succeed in a Cross-Claim against the barrister to the extent of 15% of the amount for which the Defendant was liable to the Plaintiff. (The Plaintiff had not himself sued the Cross-Defendant.) 3 Not having pursued his Common Law claim against his employer, the Plaintiff retained rights to Workers Compensation. It was the contention of the Defendant and Cross-Defendant that the value of these exceeded what the Plaintiff would have recovered in any Common Law action against his employer and hence he could not succeed in this claim against the Defendant. In this connection it was contended and not disputed that, as I said at [64] of my reasons of September, in valuing the Workers Compensation rights account could be taken of events occurring after any Common Law proceedings against the Plaintiff's employer would have come to trial. 4 Following the delivery of my reasons on 8 September 2006, the matter came before me again on 15 September and 23 November 2006. Remarks made on those occasions indicated that from time to time those acting on behalf of the Plaintiff have also taken the view that the consequences of my earlier reasons and calculations of the parties do or might lead to the conclusion that the value of the Workers Compensation rights exceeded the value of the Plaintiff's Common Law claim determined in accordance with my reasons with the result that the Plaintiff failed in his action. It was suggested that I could not or should not go behind these concessions. 5 Given the circumstances in which the concessions were made - in argument of a case which has not concluded, or made during the course of what were difficult calculations and debate as to the final result of reasons previously delivered or in part in giving inadequate weight to findings I had made - and because I can see no relevant prejudice which would justify any type of estoppel, I do not regard the concessions as justifying or entitling me to do other than give effect to my own conclusion as to the proper outcome of the litigation. 6 In a document that became Exhibit 30, the parties sought to set out the figures they respectively deduced from my findings as to the damages the Plaintiff would have received had a Common Law trial proceeded at the notional date of 28 February 2000 referred to in my previous reasons. Counsel for the Plaintiff ultimately accepted the Defendant's figures set out in that document. This is apparent in written submissions made on behalf of the Plaintiff and dated 20 November 2006 and the subject of other indications of being common ground at the time of the last hearing. Those figures totalled $1,704,025 made up as follows:- Non-economic loss $163,800.00 Future earning capacity 457,730.00 Future superannuation 62,950.00 Past earning capacity 181,426.00 Past superannuation 15,086.00 Fox v Wood 20,632.00 Past medical expenses 73,024.00 Future prosthetic expenses 734,377.00 Future medical expenses 10,000.00 Future travelling expenses 42,149.00 $1,761,174.00 Less future travelling expenses (paragraph 93 of judgment) 42,149.00 Less solicitor and client costs 15,000.00 TOTAL $1,704,025.00 7 From this sum deductions on account of Workers Compensation payments prior to the notional trial date would have been made, yielding a balance of $1,344,644 calculated as follows:- Total as per preceding paragraph $1,704.025.00 Less: Weekly payments to 29.2.02 $123,311.00 Lump sum 163,046.00 Past medicals 73,024.00 359,381.00 TOTAL $1,344,644.00 8 (As provided to me, the 3 items listed had been incorrectly added to a sum of $354,644.) 9 There remain three areas for decision. The first is whether an allowance should be made in the Plaintiff's favour for the value of the benefit of receiving, as inherent in any Common Law verdict, a lump sum rather than the weekly and other occasional benefits involved in a Workers Compensation entitlement. The second is whether an allowance for, or in the nature of, interest should be made to reflect that fact that the Plaintiff did not receive the Common Law verdict when, but for the Defendant's negligence, he would have. 10 The third matter at issue, and which it is agreed will have a bearing on the interest question, is the value of remaining Workers Compensation rights which fall to be deducted from whatever is the result of the above. As I have said, at times the Plaintiff seems to have conceded that this value exceeds the figure of $1,349,644 but given the totality of what was said on this issue, I am not satisfied that there was in fact any final agreement. Furthermore, the figures advanced, and to which I am about to refer, are affected by a number of errors. 11 In a document which became Exhibit U but which was conceded to be of no evidentiary weight, the Plaintiff propounded a number of figures as the capital value of the retained rights. These were:- 1 Capitalisation of weekly entitlements (as per schedule attached) $493,597.00 2 Capitalisation of Workers Compensation rights for future prosthetic expenses $729,572.00 3 Future medical expenses $11,280.00 4 Future travel expenses NIL 5 Future technological advances in prosthesis NIL 6 Solicitor/client costs $15,000.00 TOTAL $1,249,449.00 12 At pages 3 and 4 of the transcript of 15 September 2006, the Defendant's counsel agreed with all of these except the first and sixth, saying that the sixth amounted to double counting in his client's favour. That seemed to be accepted and I may put it aside. The first item remained in dispute. 13 At page 24 of the transcript on 23 November 2006, the Defendant tendered a document which became Exhibit 31, contending that the amounts to be deducted were:- Compensation payments to date $729,202.00 Future compensation payments $382,759.00 Future prosthetic expenses $729,572.00 Future medical expenses $11,280.00 Future travelling expenses NIL Technological advances in prosthetics NIL __________ TOTAL $1,852,813.00 14 On behalf of the Plaintiff it was agreed that the figure of $382,759 should replace the figure of $493,597 in Exhibit U. The occasion for the reduction seems to be the fact that the higher figure included amounts for 2000 to 2006 (discounted for vicissitudes). Given that actual payments during this period were also being deducted, such an adjustment was necessary to prevent double counting. 15 The figures of $729,572 and $11,280 in Exhibit 31 echo figures in Exhibit U. The remaining amount of $729,202 comes from Exhibit V which records it as the total of the Workers Compensation payments of $290,923.91 (weekly payments) and $438,278.41 (other payments) to 30 October 2006. 16 I have a number of difficulties with these figures. Firstly, the amount of $729,202 includes the sum of $359,381.00 taken into account above as paid prior to the date of the notional trial. That sum should clearly not be deducted twice. 17 Secondly, the sum of $729,202 includes payments made in the period between the delivery of my reasons on 24 March 2006 and 30 October 2006, the date of Exhibit V. If it is appropriate to make calculations at the present time rather than as at 2000 that is not necessarily inappropriate, but a corollary of that course is that periods, and calculations dependent thereon, mentioned in my reasons should, absent some other factors operating, have been adjusted accordingly. They were not. 18 One item which would appear to require adjustment in this respect is the period during which periodic Workers Compensation payments were calculated. At [386] of the 24 March reasons I indicated that these should continue until the Plaintiff turned 66. He was born on 16 March 1971. The calculations of future periodic payments contained in Exhibit U (and adjusted as mentioned above) extend over a period of 27 years, i.e., if counted from 30 October 2006 to 30 October 2033, 6½ months too long. 19 The Capitalisation of the Workers' Compensation rights for future prosthetic expenses also made no allowance for this change in period. At [390] of my March reasons I indicated that the Plaintiff's life expectancy was 44.4 years and the corresponding 3% multiplier was about 1290. In the September 2006 reasons I altered the multiplier to a 5% one and this has been reflected in Exhibit U. However, the actual multiplier that was used is 950, one which corresponds to a period of 45 years, not 6 months or thereabouts less than the 44.4 years to which I had referred. (A further adjustment to take account of the period from October 2006 to the time of judgment may also be required.) 20 Furthermore, Exhibits S (dated 23 May 2005), 29 (dated 23 June 2006) and V (dated 30 October 2006) show the following expenditure on prosthetic expenses:- Exhibit S $131,855 Exhibit 29 $160,085 Exhibit V $194,811 21 The calculation of the credit the Defendant is entitled to in respect of this topic included high expenditure at periodic – 3 yearly - intervals. The above figures suggest that one or more of these incidents of high expenditure occurred in the periods reflected in these exhibits. If so, and assuming the basis of calculation is otherwise appropriate, some downward adjustment to the credit the Defendant is entitled to for the future seems likely to be required. 22 The figure of $382,759, as I have said, seems to be derived from calculations set out in Exhibit U but omitting a sub-total for 2000 to 2006. If so, the figure also seems to contain error. Each of the 6 sub-totals that remain in the calculation reflect a sum of $100 per week on account of the Plaintiff's residual capacity, albeit this sum is reduced on account of tax. I see no basis upon which a calculation of credits to which the Defendant is entitled should include this sum. 23 (It may be that this error arises in consequence of the terms of [79] of my reasons of 8 September 2006. Whether or not I expressed myself accurately, there I sought to convey that the net rate of compensation should be determined on the basis that the Plaintiff's income included the $100 per week (thus affecting the tax rate and possibly the compensation payable), not that the Defendant should receive credit for moneys the Workers Compensation insurer would never pay.) 24 However, there is a more fundamental error in all of the calculations of the Plaintiff's Workers Compensation entitlement. It is that while the notional verdict has been valued at the date of the notional Common Law trial, February 2000, the deductions for events thereafter that the Defendant is entitled to have been valued at various dates between 2000 and 2006 as Workers Compensation payments were made and, in the case of future Workers Compensation payments, as at 2006. It is elementary that both verdict and deductions must be valued at the same date or some adjustment to take account of different dates made. 25 In my reasons of September 2006, I said:- "There is no doubt that in my principal reasons I contemplated that the value of the Workers Compensation rights that the Plaintiff retained, but would have lost had Common Law proceedings been successfully brought, would be valued as at the time of the trial before me and not as at February 2000, the notional time of trial of the Common Law proceedings – see [385] et seq, c.f. [353]. The Plaintiff submits that Tipper v Williams (No 2) (Unreported, NSWCA, 6 May 1994) decides that such a view is erroneous and that the valuation of these rights should be made as at February 2000." 26 At paragraphs [393 – 397] of those principal reasons I also indicated that the Plaintiff was entitled to interest on the notional verdict as compensation for being deprived of the use of those moneys which, but for the Defendant's negligence, he would have received. That approach would have had the effect of valuing the Plaintiff's verdict as at the time of trial before me and thus consistent with using actual payments of Worker's Compensation to the present and the present value of future entitlement. 27 Contrary to the submissions of the Defendant (and concession by the Plaintiff), it would only have been if the sum of the notional Common Law verdict plus interest was less than the Workers Compensation entitlement assessed in accordance with the preceding paragraph that the Defendant was entitled to succeed. The Defendant's negligence deprived the Plaintiff not only of the verdict but also of the use of the moneys that verdict would have produced. This use is also part of the Plaintiff's loss and, if one were assessing the matter as at the present, has to be valued. Until the full worth to the Plaintiff of Common Law damages is determined, one cannot know whether it was exceeded by the value of the retained Workers Compensation rights. The Defendant's submission, which was to the effect that no interest was payable if the Workers Compensation entitlement (as presently valued) exceeded the notional Common Law verdict (effectively valued as at February 2000), was erroneous. 28 However, at the time of the hearing that led to my reasons of September 2006, the Plaintiff in written submissions urged that the Worker's Compensation rights be valued at the notional trial date. The Defendant urged the contrary. It seems clear from the content of those submissions that each of the parties was influenced by what it saw, based on calculations that had then been done, as the result of the respective approaches. Although re-reading leads to the view that my reasons are not as clear as I would have wished, it seems to me that in paragraphs 62 to 64 I acquiesced in the submissions of the Plaintiff to follow the approach adopted in Tipper v Williams (No 2). It follows that the value of the Workers Compensation rights retained should be valued as at 29 February 2000. (If elsewhere in those reasons, multiplier or other references suggest an approach inconsistent with this, that approach should be disregarded.) 29 (I should perhaps add that, implicit in this approach is the assumption that there are no insuperable difficulties in adopting it. The object is the assessment of damages and the course I originally proposed remains a way of effecting this.) 30 Valuation of the Worker's Compensation rights as at February 2000 will have a major impact on the figure of $382,759. Because some 6 different periods seem to have been used in the calculation of that sum 6 different calculations need to be done to reflect a discount back to February 2000. However, a rough calculation of discounting that sum back merely 6 years (but ignoring other possible errors) indicates the likely figure will be of the order of $100,000 less. 31 Counsel for the Defendant asserted that there was other error in the calculation of the figure of $382,759 and if the Plaintiff was allowed to claim for more than the items so far mentioned the Defendant was prejudiced and should be allowed to revisit this item. Clearly, given the remarks I have made, the Defendant should have this opportunity. 32 Consistently with Tipper v Williams (No 2) and a decision to effect valuations as at 29 February 2000, the actual amounts of Workers Compensation payments made between February 2000 and October 2006 should be ignored and a calculation done on the basis of the Plaintiff's entitlement. As has been indicated subsequent events such as increases in the number of dependant children or rates of payment will need to be taken into account but the calculation should be done as at February 2000 and payments or entitlements thereafter discounted back to that date. (It may be that the result of that calculation will be little different from discounting $369,821 ($729,202 less $359,381) at an assumed or average rate but further calculations or knowledge or analysis as to the rate at which the $374,821 accrued would be necessary before this could be known. Even adopting as an average a 3 year discount on the 5% tables, yielding a multiplier of 0.864, the figure of $374,821 would reduce to $323,845.) 33 The figure of $729,572 for future prosthetic expenses will also need revision if, as I anticipate, that sum was calculated as at 2006. I am not conscious of any factors needed for that calculation which I have not dealt with either in calculating the amount to be included on this account in the Plaintiff's notional Common Law damages or in calculating the credit to which the Defendant was entitled. 34 I turn then to the Plaintiff's claim that there should be included in his damages in these proceedings an amount to reflect the fact that had he received a Common Law verdict, he would have had the advantage of a lump sum with all the flexibility such a sum affords. The topic was referred to by me in paragraph 100 of my reasons of 8 September and, albeit in somewhat different context, in paragraph 275 of the reasons of 24 March. 35 That there is a difference in the inherent values of a lump sum and periodical payments has been recognised - see Tipper v Williams (No 2) citing Scott & Ors v Echegaray [1991] Aust Torts Reports 69129 at 69137-8. 36 In this connection, on 23 November last, application was made on behalf of the Plaintiff to re-open his case to adduce additional evidence. As recorded at page 15 of the transcript, that application was refused although, taking the view that proceedings were not complete and the Defendant would not be relevantly prejudiced, I did permit counsel to argue the matter in an attempt to persuade me that "my preliminary view … that in the circumstances of this case, the amount to be allowed in this regard would be likely to be of a fairly nominal value, particularly in light of the fairly quick expenditure, if not dissipation, of the Workers Compensation lump sum awards the Plaintiff received" was wrong. 37 In support of the submissions Mr Elkaim SC pointed out that the Plaintiff's expenditure of the Workers Compensation capital sums occurred against the background of the likely continuation of Workers Compensation payments and submitted that that situation provided no basis for concluding that the Plaintiff would have been as profligate with the whole verdict in a situation where that lump sum was all he could receive and he would have known that Workers Compensation payments would not continue. 38 During Mr Elkaim's submissions, I had floated the idea that, putting aside the evidence that may suggest the Plaintiff may have dissipated any verdict, there was no evidence he would have put any lump sum to profitable use, e.g., buying a house as opposed to blowing it on "wine, women, song and cars", and that in that situation there was difficulty in seeing that the Plaintiff could recover more than $50,000. While not embracing that or any other specific figure, Mr Elkaim submitted that it should be substantial. 39 Counsel for the Defendant (whose submissions were adopted on behalf of the Cross-Defendant), properly, did not seek to argue against the proposition that a lump sum had some inherent value. He said that he would not go to war against the sum of $50,000 but suggested that aggravated damages are often awarded in an amount of $20,000 and this would be a more appropriate sum. 40 Although Mr Elkaim has persuaded me that the differences in circumstances do require some alteration from my previously expressed stance, I remain of the view that the allowance to the Plaintiff on this account should be appreciably less than it would have been had the evidence revealed a more careful attitude on the part of the Plaintiff to money. Nevertheless, the opportunities presented to someone who in 2000 received a lump sum of well over $1M are such that the allowance on this account should still be substantial. Precision is impossible but I regard the sum of $50,000 I previously mentioned as appropriate. 41 Counsel for the Plaintiff submitted that any allowance on this account should be treated differently from other components in the assessment of damages and any excess of Workers Compensation entitlement over the notional Common Law verdict could not be set off against the allowance. I disagree. If in fact there is such an excess of $50,000 or more (valued as I have indicated as at February 2000), the Plaintiff has not suffered loss in being deprived of a Common Law verdict. 42 I turn to the topic of an allowance for, or in the nature of, interest. The topic was referred to in paragraphs 393 – 397 of my reasons of 24 March 2006 and page 99 of my reasons of 8 September 2006, the tenor of those remarks being that the Plaintiff was entitled to interest on the notional verdict as compensation for being deprived of the use of those moneys which, but for the Defendant's negligence, he would have received. The decision to value both the notional verdict and the retained Workers Compensation rights as at 29 February 2000 means that interest should only be allowed on the difference, assuming that difference is in the Plaintiff's favour. If there is such a difference, it is not liable to reduction by reason of Workers Compensation payments received since. 43 Notwithstanding the passage of time since this case began, it seems to me that I should afford both parties a further opportunity of addressing the calculation of damages. Both parties have erred in not seeking to assess both sides of the calculation on the same date and, as I have said, the Defendant wishes to contend that the Workers Compensation payments made do not accurately reflect the Plaintiff's entitlement. In these circumstances I propose to publish these reasons, and stand the matter over for mention in 2 or 3 weeks time so as to enable the parties to consider them and decide what they wish to do. 44 Some incidental matters should be mentioned. The Plaintiff claimed also in contract. My findings meant that the Defendant breached that contract. The Plaintiff is entitled at least to nominal damages for that breach – McGregor on Damages, 17th ed., para 10-002 et seq.; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286. Whether the damages should be more than nominal will depend on the result of the calculations to which I have referred. 45 In the above I have tended to confine attention to the Plaintiff and Defendant, whose counsel made most of the running so far as the issues presently dealt with are concerned. I am not conscious of any differences or additional matters raised by counsel for the Cross-Defendant. ********** 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.