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[1996] HCA 55
High Court of Australia
1996-04-17
Brennan CJ, Gummow JJ, Gaudron JJ, Sch J
Original judgment source is linked above.
High Court of Australia Brennan CJ Dawson, Toohey, Gaudron, McHugh and Gummow JJ Andjelic v Marsland (FC 96/011) [1996] HCA 55
17 April 1996 Brennan CJ, Dawson, Toohey and Gaudron JJ.
The facts are set out in the judgment of McHugh and Gummow JJ. It is in the context of those facts that a question arises as to the nature of the power to "order the payment of interest" conferred by s 73(2) of the Motor Accidents Act 1988 NSW (the Act). The combined effect of the arguments put in this Court and a condition attached to the grant of special leave to appeal [1] is to confine that question to the power to order interest on damages awarded under s 79 of the Act for non-economic loss. However, s 73 does not distinguish between that and other heads of damage.
It is common ground that the outcome of this appeal depends on the provisions of Pt 6 of the Act as it stood when the matter was considered by the New South Wales Court of Appeal. The relevant provisions of s 73 were then as follows:
(1) Except as provided by this section, a court shall not, in relation to an award of damages, order the payment of interest, and no interest shall be payable, on an amount of damages in respect of the period from the date of the injury to the person in respect of whom the award is made to the date of the award.
(a) if the defendant has not taken such steps (if any) as may be reasonable and appropriate to assess the merits of the plaintiff's claim and liability of the defendant in respect of the claim; or
(b) if, where it would be appropriate to do so, the defendant has not made an offer of settlement; or
(i) the defendant has made an offer of settlement; and
(ii) the amount awarded by the court (without the addition of interest) is more than 20 per cent higher than the highest amount offered in settlement by the defendant; and
(iii) the court is satisfied that the highest amount offered by the defendant was not reasonable having regard to the information available to the defendant at the time the offer was made.
(5) Except as provided by this section, nothing in this section affects any other law relating to the payment of interest on an amount of damages.
It is also common ground that the Court of Appeal had power to order the payment of interest by reason that each of the conditions set out in s 73(2)(c) was satisfied. The parties differ as to the effect of s 73(5).
The Court of Appeal allowed interest on the damages awarded under s 79 in the present case at Supreme Court rates which were equal to, or approximated, the commercial rates prevailing from time to time [2] . The appellant contends that commercial interest rates should not have been allowed because the effect of s 73(5) is to subject interest on damages awarded under s 79 of the Act to the rule adopted in MBP (SA) Pty Ltd v Gogic [3] with respect to the pre-trial component of common law damages for non-economic loss. In that case, the reason for allowing interest was identified as the "depriv[ation] of the use [by a plaintiff] of his or her money", not the fact that "he or she has forgone investment opportunities" [4] . It was held that, because "[d]amages for pre-trial non-economic loss are assessed in accordance with the value of money as at the time of the award" [5] , a plaintiff does not suffer loss by reason of inflationary factors and, accordingly, interest should not be calculated at commercial rates but at a rate, somewhat arbitrarily fixed at 4 per cent [6] , reflecting "the difference between the prevailing rate for secure investments and the rate of inflation" [7] .
To the extent that damages payable under the Act can fairly be equated with damages at common law or some head of common law damages, s 73(5) is apt to pick up and apply the law as it relates to interest on common law damages. At least that is so in the absence of some other and more specific provision in the Act. There are, however, difficulties in equating common law damages for non-economic loss with damages awarded under s 79 of the Act.
(1) No damages shall be awarded for the non-economic loss of an injured person as a consequence of a motor accident unless the injured person's ability to lead a normal life is significantly impaired by the injury suffered in the accident.
(2) The amount of damages to be awarded for non-economic loss shall be a proportion, determined according to the severity of the non-economic loss, of the maximum amount which may be awarded.
(3) The maximum amount which may be awarded for non-economic loss is $180,000, but the maximum amount shall be awarded only in a most extreme case.
(4) If the amount of non-economic loss is assessed to be $15,000 or less, no damages for non-economic loss shall be awarded.
(5) If the amount of damages to be awarded for non-economic loss in accordance with subsections (1)-(3) is more than $15,000 but less than $55,000, the following deductions shall be made from that amount:
(a) if the amount of damages is less than $40,000 - the amount to be deducted is $15,000;
(b) if the amount of damages is not less than $40,000 - the amount to be deducted is $15,000, or $15,000 reduced by $1,000 for every $1,000 by which the amount of damages exceeds $40,000.
The majority in the Court of Appeal distinguished between damages under s 79 and common law damages for non-economic loss on the basis that s 79 imposes "arbitrary and artificial" limits and, hence, damages awarded under that section "can hardly be said to be ascertained in terms of the money value of the time of judgment" [8] . That, however, is a distinction that is not entirely justified. Pursuant to s 80 of the Act, the amounts specified in s 79 are effectively adjusted in October of each year "by the percentage change in the amounts estimated by the Australian Statistician of the average weekly total earnings of full-time adults in New South Wales over the [preceding] 4 quarters" [9] . Thus an index of inflation is applied to arrive at an annual increase in the maximum amount that can be awarded for non-economic loss.
Section 79 is expressed in terms of damages for "non-economic loss", which is defined in s 68 of the Act to comprehend the various matters which are taken into account in the assessment of common law damages for non-economic loss, namely, pain and suffering, loss of amenities of life, loss of expectation of life, and disfigurement. However, there is a fundamental difference between common law damages for non-economic loss and damages awarded under s 79. Section 79 is not concerned with compensating for the various matters comprehended in the definition of "non-economic loss". Rather, it operates to provide a measure of compensation for significant impairment of the ability to lead a normal life when that impairment results from one or more of those matters. And it provides a measure of compensation that cannot in any relevant sense be equated with common law damages: not only is there a ceiling on the highest amount that can be awarded, but the effect of sub-ss (4) and (5) of s 79 is that, in cases at the lower end of the scale, damages are either reduced or are simply not available.
The limits set by s 79 serve to distinguish the damages payable under that section from common law damages for non-economic loss in another important respect. They quantify the maximum and minimum that may be awarded at any given time and do so in a context where an individual's entitlement is, subject to those limits, to be assessed on the basis of the proportional severity of his or her loss to that of a most extreme case. Although there may be subjective elements involved in questions of proportional severity, s 79 is concerned to quantify compensation by reference to fixed limits, excluding awards of damages as they are ordinarily understood. The reason for restricting interest on damages for non-economic loss as stated in Gogic [10] has no application to compensation quantified in accordance with s 79. An amount calculated in accordance with s 79 is not an assessment of common law damages awarded to a plaintiff as full compensation for the loss caused by the defendant's tort. In the case of damages for personal injury, a plaintiff is kept out of the damages assessed under the various headings from the date of injury until the date of judgment. Therefore interest can be awarded from the date of injury to the date of judgment but, as Gogic [11] held, as damages for non-economic loss are assessed in the "dollars of the day" as at the date of judgment, the rate cannot reflect that component of interest which is attributable to the inflation that has occurred between the date of injury and the date of judgment. On the other hand, if those damages were assessed in the "dollars of the day" as at the date of injury or as at a date between the date of injury and the date of judgment, it would be permissible to allow interest at a full commercial rate.
It is necessary to determine the date from which interest might be allowed on an award under s 73 in respect of non-economic loss. Mahoney JA in the Court of Appeal was of the opinion that s 73(2) was intended to allow an award of interest "only if and to the extent that the exceptions established by s 73(2) warranted" [12] . His Honour was of the view that interest should be ordered only "to the extent that it was necessary to do so to correct or take account of the default of the defendant" [13] as referred to in s 73(2). There are two difficulties with this approach. The first arises from the text of s 73. Sub-section (1) directed that "no interest shall be payable, on an amount of damages in respect of the period from the date of the death of or injury to the person in respect of whom the award is made to the date of the award" except as provided otherwise by that section. The exceptions are prescribed by pars (a), (b) and (c) of sub-s (2). When any of those exceptions is made out, the court is authorised to order the payment of interest. The interest which sub-s (1) prohibits - that is, interest from the date of death or injury to the date of the award - is within the scope of the authority conferred by sub-s (2). The second difficulty which the view of Mahoney JA encounters is that the exceptions prescribed by pars (a) and (b) of sub-s (2) are not exceptions to which a particular date can be assigned. Indeed, it is possible that, at different times between the date of injury and the date of trial, different answers might be given to the question whether the criteria prescribed by pars (a) and (b) are satisfied. As the plaintiff's case is developed by the unfolding of events and the production of expert medical and other reports on the plaintiff's condition, the answer to the question whether the steps taken by the defendant to assess the merits of the plaintiff's claim are reasonable and appropriate (par (a)) or the question whether an offer of settlement is appropriate (par (b)) may change from time to time. The difficulties inherent in endeavouring to ascertain a period corresponding with "the default of the defendant" who fails to satisfy any of the tests in sub-s (2) militates in favour of the construction of that sub-section which simply restores to the court the power to allow interest from the date of injury or death where any of those tests is satisfied.
But if it be right to treat interest as the price which the defendant is required to pay for keeping the plaintiff out of the money to which the plaintiff is entitled, it would be wrong to award interest on the amount of damages assessed after the increases in the maximum amount prescribed by s 79 have been taken into account. If the maximum allowable under s 79 was $X at the date of the injury or death and $X + $Y at the date when the award is made, the amount which the plaintiff has been kept out of from the date of the injury or death is only $X (or the relevant proportion of $X awarded at the trial). That is the only amount on which interest at commercial rates could logically be allowed. If, pursuant to s 79, the plaintiff is awarded $X + $Y (or the relevant proportion of that sum), $Y (or the relevant proportion of $Y) must be deducted from the interest allowed so as to eliminate a duplication of the benefit which the passage of time has conferred on the plaintiff.
The plaintiff was injured before s 79 came into force [14] and his entitlement under that section only arose at that time [15] . On the view we take of interest, namely, that it is the price to be paid for keeping a plaintiff out of money to which he or she is entitled, neither s 94 of the Supreme Court Act 1970 NSW nor s 73 of the Act can authorise interest from the date of injury in this case: it is only from the date on which s 79 of the Act came into force that the plaintiff can be said to have been kept out of damages to which he was entitled. And the maximum amount which could then be awarded was $180,000 [16] .
When the present matter was decided at first instance by Master Malpass, the maximum amount that could be awarded under s 79 of the Act was $198,000 [17] . It had increased to $211,000 when the Court of Appeal published its reasons for allowing an appeal from the Master's decision [18] , holding, amongst other things, that the maximum amount allowable should be awarded for the respondent's non-economic loss, rather than 85 per cent of the maximum as awarded by the Master [19] . The judgment of the Court of Appeal specifies $211,000 for non-economic loss [20] , though counsel informed this Court that the maximum applicable at the time when the order was made ($212,000 [21] ) was the amount actually awarded. That approach has not been challenged.
Interest was calculated on the award of $212,000, from the date of the injury up until the date of the Master's order. It should have been calculated on $180,000 from the date when s 79 came into force and then reduced by $32,000, being the difference between the amount awarded under s 79 and the amount which would have been awarded at the earliest time after the date of injury.
The appeal should be allowed. The matter should be stood over to enable the parties to agree as to the terms of the orders necessary to give effect to this judgment. If there is no agreement, the matter should be remitted to the New South Wales Court of Appeal.
This appeal involves consideration of the decision, as to the award of interest upon damages for pre-trial non-economic loss, by this Court in an appeal from the Supreme Court of South Australia, MBP (SA) Pty Ltd v Gogic [22] . The immediate significance of Gogic is its applicability to the regime established for New South Wales in certain cases by the Motor Accidents Act 1988 NSW (the Act).
In particular, the appeal involves the construction of s 73 of the Act. This deals with the power of the Court to order the payment of interest, in respect of the period between death or injury and the date of the award of damages.
Gogic was concerned with s 30c(1) of the Supreme Court Act 1935 SA (the SA Act). This empowered the Supreme Court to award interest on judgments and sub-s (2) thereof provided that the interest was to be calculated at such rate as may be fixed by the Court and, where judgment was given upon an unliquidated claim, from the date of the commencement of the proceedings to the date of the judgment. In Gogic, the respondent had recovered against the appellant damages at common law for personal injury. The award included interest. This interest component contained interest on damages for pre-trial pain and suffering which was calculated at a commercial rate. On appeal to this Court, it was held in a joint judgment by all members of the Court that interest on damages for non-economic loss sustained before the trial should not have been calculated at current commercial interest rates or the "real" rate of interest which would have been available to the plaintiff in a relevant period. Rather, interest should have been calculated at a rate representing the difference between the prevailing rate for secured investments and the rate of inflation. Further, the rate which ought to be adopted in such circumstances, though said by this Court to be somewhat arbitrary, was 4 per cent per annum.
After observing that damages for pre-trial non-economic loss are assessed in accordance with the value of money as at the time of the award, the Court in Gogic [23] proceeded:
In no way is any loss which a plaintiff incurs by reason of being deprived of his or her damages for pre-trial non-economic loss brought about by inflationary factors. In those circumstances, to award interest on damages for non-economic loss during the pretrial period by reference to commercial rates is to compensate the plaintiff for a "loss" which he or she has not sustained. 1. (1991) 171 CLR 657 at 663-664.
The relevant facts in the present appeal are within a short compass. The respondent, Mr Marsland, was born in 1970. On 15 July 1987, whilst travelling in New South Wales as a passenger in a motor car driven by the appellant, Mr Marsland suffered severe injuries by reason of an accident caused by the negligence of the appellant. On 11 December 1989, Mr Marsland instituted his action in the Supreme Court of New South Wales. Liability was admitted and the action proceeded for assessment of damages. With effect on 4 May 1992, Master Malpass directed entry of judgment in favour of Mr Marsland for $2,025,259. On 30 July 1993, the Court of Appeal increased the damages recovered to $2,438,336 [24] . In particular, the Court of Appeal increased the award of damages for non-economic loss from $168,300 to the maximum then permitted by the Act, namely $211,000 [25] .
The Court of Appeal reserved to the parties the right to make submissions regarding interest and costs. The parties did so, and on 24 December 1993 the Court of Appeal delivered further reasons for judgment [26] . In the course of those reasons, the Court (Kirby P and Meagher JA, Mahoney JA dissenting) differed as to the construction of s 73 of the Act. On 31 May 1994, orders were entered to give effect to the judgments of the Court of Appeal. In the result, judgment was entered for Mr Marsland in the sum of $2,648,054. Paragraph 8 of the orders is in the following terms:
The judgment sum is comprised of the following amounts:
(ii) Interest on non-economic loss in the sum of $178,451.00;
(iii) Interest on past economic loss in the sum of $2,807.00;
(iv) Interest on paid out of pocket expenses in the sum of $507.00; and
(v) Interest on past gratuitous assistance in the sum of $27,953.00.
Special leave was granted by this Court to test the construction of s 73 which was adopted by the majority of the Court of Appeal in so far as it produced component (ii) of the final judgment sum. This was $178,451, being interest in respect of damages for non-economic loss (including damages for pre-trial pain and suffering) and calculated as to the whole of that interest at what was described as the "full rate", that is to say a commercial rate rather than at that rate indicated by Gogic.
The majority of the Court of Appeal rejected the proposition that the principle enunciated in Gogic should apply. They said [27] :
At least since Ruby v Marsh [28] it must be regarded as well-established that general damages are awarded in an unrestricted manner in the money value [at] the time of judgment, not the time of injury. What MBP (SA) Pty Ltd v Gogic establishes is that, since the Ruby v Marsh principle contains a built-in inflationary factor, it would be a conceptual absurdity to award full interest on general damages as so awarded. In our view that reasoning can have no application in cases like the present, where the amount awarded for "non-economic loss" can hardly be said to be ascertained in terms of the money value [at] the time of judgment, but is subject to an arbitrary and artificial statutory limit. Their Honours also said that: where the quantum of "non-economic" loss is arbitrarily restricted, we would be disposed not to apportion between the past and the future, as to do so would involve carrying artificiality to an extreme It follows that the plaintiff is entitled to interest on this component in full from the date of injury to the date of judgment. 1. Marsland [No 2] (1993) 32 NSWLR 649 at 653. 2. (1975) 132 CLR 642.
Earlier in their reasons, the majority had said [29] that, once what they described as "the barriers erected by s 73" were overcome, "ordinary principles" applied, namely that there should be the fair legal measure of compensation represented by an award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment. Their Honours continued [30] :
Viewed in that light, it is difficult to see why a successful plaintiff has not got almost a vested right to an award of interest, so that circumstances have to be indeed exceptional before he or she can be deprived of it on any discretionary ground. 1. Marsland [No 2] (1993) 32 NSWLR 649 at 652. 2. Marsland [No 2] (1993) 32 NSWLR 649 at 652.
In these passages are found two strands from which the appeal to this Court has been fashioned. First, there is the question whether s 73 of the Act is to be construed in a way which involves the application of "ordinary principles" to the award of interest once the plaintiff has overcome the "hurdles" presented by the section, so that the successful plaintiff has almost a vested right to an award of interest. The second question is whether those "ordinary principles" which are imported into s 73 require or permit an award calculated at a rate and in a manner more generous than that applied in Gogic. The majority of the Court of Appeal went beyond Gogic on the footing that the Act did not leave to the general law the assessment of the damages in respect of which the interest award was made, but, rather, subjected recovery for non-economic loss to what their Honours described as "an arbitrary and artificial statutory limit". In that connection it will be necessary to refer to ss 79 and 80 of the Act.
To s 73 and related provisions of the Act we now turn. It should be noted that the text of s 73 has changed during the course of the relevant events. A new s 73 was substituted, with effect from 17 June 1994, by the Motor Accidents (Amendment) Act 1994 NSW. Nothing, for the purposes of this appeal, turns upon s 73 in its new form.
As we have indicated, the accident which injured Mr Marsland occurred on 15 July 1987. With effect from 1 July 1987, common law rights in respect of actions such as the present case had been abolished by the Transport Accidents Compensation Act 1987 NSW (the Transport Accidents Act). However, in the next year the Act was passed. Section 5 of the Act repealed the Transport Accidents Act.
The effect of ss 6 and 7 of the Act upon the rights of Mr Marsland was to restore the law to the state it would have been in if the Transport Accidents Act had not been passed, but then to subject his rights to recover damages to the provisions of Pt 6. This was achieved by s 7 which deemed Pt 6 to have applied from and including 1 July 1987. Part 6 of the Act (headed " Awarding of Damages ") comprised ss 68-82. It will be necessary to refer further to s 7 later in these reasons.
The restoration of common law rights was not unconditional; rather, it was qualified and limited by the provisions of Pt 6 [31] . Section 70 stated that a court was not to award damages to a person in respect of a motor accident contrary to Pt 6. "Non-economic loss" was defined in s 68 as meaning pain and suffering, loss of amenities of life, loss of expectation of life, and disfigurement. Section 79 imposed restrictions upon the award of damages for non-economic loss. Sub-section (2) stipulated that the amount of damages for non-economic loss was to be a proportion, determined according to the severity of that loss, of the maximum amount which might be awarded. Sub-section (3) stated:
The maximum amount which may be awarded for non-economic loss is $180,000 (or the maximum amount declared for the time being under section 80), but the maximum amount shall be awarded only in a most extreme case. (Emphasis added.) The words from this sub-section which we have emphasised were omitted by the Motor Accidents (Amendment) Act 1989 NSW (the 1989 Act). The 1989 Act also omitted s 80 and inserted a new s 80. This provided for periodic adjustment in the amount specified in s 79. At the time of the assessment of damages in this case by the Master, the "ceiling" was fixed at $192,600 and, when the matter was before the Court of Appeal, it was $211,000. Counsel informed this Court that the sum awarded for non-economic loss included in the judgment entered by the Court of Appeal on 31 May 1994 was $212,000 [32] . 1. Southgate v Waterford (1990) 21 NSWLR 427 at 438. 2. New South Wales Government Gazette, No 104, 24 September 1993 at p 5917, effective from 1 October 1993.
The limit of $211,000 had been fixed from 1 October 1992 [33] and the Court of Appeal proceeded on the footing that it applied to injuries suffered before as well as after that date [34] . There is no dispute before us as to this course [35] .
Section 79 was construed by the Court of Appeal in Southgate v Waterford [36] . The Court held that the amount recovered for non-economic loss was not to be calculated in accordance with ordinary common law principles up to the statutory maximum, so that the plaintiff recovered a proportion of the common law damages representing the ratio between those damages and the maximum amount fixed by the legislation. Rather, the Court determined that it was appropriate for the trial judge (i) to make findings on those elements in the evidence which were relevant to non-economic loss as a head of damage formerly considered at common law; (ii) to conceive a most extreme case (not the most extreme case); and (iii) to award a sum somewhere between nil and the "ceiling", in a ratio fixed by keeping in mind that this statutory maximum was imposed for a most extreme case.
It will be apparent from this construction of s 79 that in Southgate v Waterford the Court of Appeal was not denying the applicability of the underlying rationale in Gogic, namely, that the sum awarded for pretrial non-economic loss still was to be assessed in accordance with the value of money as at the time of the award, albeit in a lesser sum than would have been recovered at common law. Their Honours said [37] :
It is clear that one reason which lay behind the fixing of a "cap" on the recovery of damages for non-economic loss was an estimation of what the community could afford. The provision so determined was to be increased regularly. When this is seen as a purpose of the legislature, the procedure adopted by s 79(2) and s 79(3) is far from irrational or capricious. Arguably, it is perfectly rational and justifiable as providing equity between injured persons claiming such damages in circumstances where the maximum amount recoverable is limited. 1. Southgate (1990) 21 NSWLR 427 at 439.
Section 73 of the Act dealt with payment of interest. It was not confined to interest in respect of an amount of damages for pre-trial non-economic loss but, as we have indicated, it is with that particular application of the section that this appeal is concerned. The respondent supports the determination of the majority of the Court of Appeal that, consistently with s 73, the relevant interest component might be assessed at a commercial or "full" rate rather than that adopted in Gogic in respect of the award of damages under the South Australian legislation. The appellant submits that the reasoning in Gogic should have been applied by the Court of Appeal.
(1) Except as provided by this section, a court shall not, in relation to an award of damages, order the payment of interest, and no interest shall be payable, on an amount of damages in respect of the period from the date of the death of or injury to the person in respect of whom the award is made to the date of the award.
(a) if the defendant has not taken such steps (if any) as may be reasonable and appropriate to assess the merits of the plaintiff's claim and liability of the defendant in respect of the claim; or
(b) if, where it would be appropriate to do so, the defendant has not made an offer of settlement; or
(c) if the defendant has made an offer of settlement but the amount awarded by the court (without the addition of interest) is more than 20 per cent higher than the highest amount offered in settlement by the defendant.
(3) An offer of settlement is not to be regarded as an offer of settlement for the purposes of this section unless it is made in writing.
(4) Rules of court may be made for or with respect to ordering the payment of interest in accordance with the principles set out in this section.
(5) Except as provided by this section, nothing in this section affects any other law relating to the payment of interest on an amount of damages. (Emphasis added.)
Paragraph (c) of s 73(2) was omitted by the 1989 Act. A new par (c) was inserted in the following terms:
(i) the defendant has made an offer of settlement; and
(ii) the amount awarded by the court (without the addition of interest) is more than 20 per cent higher than the highest amount offered in settlement by the defendant; and
(iii) the court is satisfied that the highest amount offered by the defendant was not reasonable having regard to the information available to the defendant at the time the offer was made.
The effect of s 2 of the 1989 Act is that the provisions making these changes commenced on 16 May 1989. That was before the institution by Mr Marsland of his action in the Supreme Court. The proceeding in the Court of Appeal appears to have been conducted on the footing that s 73 applied to the case not in its original form but as it stood after the amendment, being an amendment effective before the institution of the action.
It is unnecessary to determine whether this assumption was correctly made. This is because the facts satisfied par (c) in both of its formulations. On 18 March 1991, Mr Marsland made an offer of compromise to accept $2 million plus costs. The highest offer of the defendant was made on 25 March 1991. This was for $1.8 million with costs. Thus the $2,438,336 damages awarded by the Court of Appeal (excluding interest and costs) was more than 20 per cent higher than the highest offer of the defendant. This meant that par (c) in its original form was satisfied. It also meant that the condition in sub-par (ii) of par (c) in its amended form was met, together with sub-par (i). Further, the majority of the Court of Appeal was satisfied [38] as to sub-par (iii), saying that there had been a "wholly inaccurate estimate" of the result of the case if regard were had to the medical reports available to the defendant at the time of the offer.
It followed, and it is not contested, that an order for the payment of interest might be made. What is in dispute is the consequences of that state of affairs and, in particular, the further operation of s 73.
Before turning to consider these issues of construction, five threshold points should be made. The first point is that submissions to this Court referred to "common law rights" in respect of the award of interest on damages in an action of this nature. The suggestion was that s 73(1) abrogated common law rights to which the plaintiff otherwise was entitled. It is true that the position in equity [39] and in admiralty [40] differs from that at common law. But at common law there is no power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court determines to be the appropriate measure of damages in tort or for breach of contract. The position is explained as follows by Brennan and Deane JJ in Hungerfords v Walker [41] :
There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired. On the other hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. Their Honours went on to point out that, in an appropriate case, the ordinary principles governing the recovery of common law damages might entitle a plaintiff to an award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money which the wrongful act of the defendant caused to be paid away or withheld. But that is not the present case. 1. The Commonwealth v Huon Transport Pty Ltd (1945) 70 CLR 293 at 309; Hermann v Charny [1976] 1 NSWLR 261 at 270; Hungerfords v Walker (1989) 171 CLR 125 at 148. 2. The Aizkarai Mendi [1938] P 263 at 279-280; Hungerfords v Walker (1989) 171 CLR 125 at 148. 3. (1989) 171 CLR 125 at 152.
The second point is that statutory authority of the type referred to by Brennan and Deane JJ in the above passage exists throughout Australia. We have referred earlier in these reasons to s 30c of the SA Act. In New South Wales, provision of this nature is made by s 94 of the Supreme Court Act 1970 NSW [42] .
Prior to its amendment, effective 1 November 1991, by the Courts Legislation (Civil Procedure) Amendment Act 1991 NSW (the 1991 Act), s 94 stated [43] :
(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.
(a) proceedings have been commenced for the recovery of a debt or liquidated damages; and
(b) payment of the whole or a part of the debt or damages is made during the currency of the proceedings and prior to or without judgment being given in respect of the debt or damages,
the Court may order that interest be paid at such rate as it thinks fit on the whole or any part of the money paid for the whole or any part of the period between the date when the cause of action arose and the date of the payment.
(a) authorise the giving of interest upon interest;
(b) apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or
(c) affect the damages recoverable for the dishonour of a bill of exchange.
The amendment by the 1991 Act added a further sub-section as follows:
(3) In any proceedings for the recovery of damages, the Court may not order the payment of interest under subsection (1) if:
(a) the defendant has made an offer of settlement; and
(b) the sum for which judgment is given (without the addition of interest) does not exceed by more than 10 per cent the highest sum offered in settlement by the defendant,
unless the special circumstances of the case warrant the making of such an order.
The result is that, from 1 November 1991, that is to say after the institution by Mr Marsland of his action but before the orders of the Master and of the Court of Appeal, s 94 of the Supreme Court Act made provision encouraging the making by defendants, and acceptance by plaintiffs, of reasonable offers of settlement. Section 94 did so by denying to the plaintiff what otherwise might be an order for the payment of interest where the defendant made an unaccepted offer of settlement which matched or nearly matched the amount of damages ultimately awarded by the court.
The third point concerns the submission made to this Court that s 73 of the Act is not, in the relevant sense, a "free-standing" provision and that, rather, it is yoked to s 94 of the Supreme Court Act, so that the phrase in s 73(2) that a "court may order the payment of interest" is to be understood as if the provision read "may, under s 94, order the payment of interest". This is an unlikely reading of s 73 given that, since the amendment of s 94 by the 1991 Act, s 94 has contained its own provision designed to encourage the making and acceptance of settlement offers.
The form of s 73 itself also tends against such a construction. Section 73(4) provides for the making of Rules of Court "for or with respect to" ordering the payment of interest "in accordance with the principles set out in this section". That suggests that the relevant principles appear from s 73 itself, not by a process which involves "picking up" s 94.
Supreme Court Rules (Amendment No 289) 1994, made by the Rule Committee on 21 November 1994, amends the Supreme Court Rules in apparent exercise of the power in s 73(4). In particular, an originating process must now specifically claim, but without claiming any amount, an order for interest under s 73 of the Act (Pt 7, r 1(5)). Where the Court gives judgment for the payment of money and makes an order under s 73 for payment of interest, interest shall, unless the order otherwise provides, be payable only on so much of the money as is from time to time unpaid (Pt 40, r 7(1)). Further, from time to time, the Chief Justice of New South Wales has issued Practice Notes stating that, when computing interest for the purposes of s 73, and subject to any evidence adduced, it may be taken that the yearly rates of interest specified in the Practice Note are appropriate to guide the Court. At the time of the decision in the present case, both at first instance and in the Court of Appeal, the relevant Practice Note was No 73 issued 21 February 1992. This referred to the table set out in Sch J to the Supreme Court Rules.
The fourth point is that the majority in the Court of Appeal observed in the present case, with reference to Bennett v Jones [44] , that the use of the facultative verb may in s 73(2) imports a discretion but this is one which must be, as it was put, "exercised judicially". Section 94 of the Supreme Court Act also uses the expression "the Court may order". On the other hand, s 30c of the SA Act, considered in Gogic [45] , uses the expression "the court shall" but conditions it by the expression "[u]nless good cause is shown to the contrary".
In Bennett v Jones [46] , the New South Wales Court of Appeal described s 94 as conferring a power to award interest. This is the preferable method of construing s 73, as it is s 94 of the Supreme Court Act. A provision granting power of this nature to a court should not be read narrowly by making implications or imposing limitations [47] . Rather, the content of the power conferred by s 73 is to be ascertained by having regard to the nature, scope and purpose of the legislation.
The fifth point is that made by Mahoney JA in his dissenting judgment in the present case. It is that s 73 is to be read having in mind the state of previous authority upon s 94 of the Supreme Court Act.
In Bennett v Jones , the Court of Appeal had held that the power under s 94 should be regarded as entirely compensatory so as to do no more than that which is fair in a pecuniary sense between the parties and that the power should not be used to penalise either party for delay or failure to observe Court procedures. The Court also held that, taking the date of the trial as the dividing point between past and future, (i) there was power under s 94 to award interest upon those component parts of the total award of damages which constituted past losses or detriments and, consistently with the reasoning in Ruby v Marsh [48] , to do so during the period for which they had been outstanding, that is to say since they accrued, (ii) there was no power under s 94 to award interest upon those components of such an award which related to future elements with respect to which the date of trial provided the base date for discount; this was because, at the date of trial, these matters had not been quantified and therefore had not been outstanding, and (iii) because, in relation to an award of damages for personal injury, an analogy could and should be drawn (as to past and future components as referred to above) between the personal and economic elements in the award, interest might be awarded on that part which derived from past pain and suffering and loss of the amenities of life but not on that part which related to future detriment of that kind.
The Court of Appeal suggested in Bennett v Jones [49] that interest might not be awarded under s 94 and might be refused or allowed only in respect of a limited period if there had been deliberate delay by the plaintiff causing detriment to the defendant. Nevertheless, the general effect of the decision was to treat as irrelevant delay due to the actions or defaults of either party and to disregard the reasonableness or otherwise of what the parties had done to bring the proceedings to a conclusion, by settlement or otherwise.
Furthermore, as Mahoney JA observed in the present case [50] , between the adoption of the reasoning in Ruby v Marsh [51] by the New South Wales courts in 1977, and 1988 when the Act was introduced, amounts awarded as interest greatly increased, so much so that interest was often one of the largest components of personal injury awards.
Against that background, Mahoney JA discerned from the Act, and from s 73 in particular, a twofold legislative intention, namely [52] :
[I]t [was] intended to establish that the entitlement to interest was not to be based upon the concept that a plaintiff is entitled to damages from the date of injury and that interest is in principle to run from that date; and it [was] intended that, in the cases where, by way of exception, interest could be awarded, it was to be awarded only if and to the extent that the exceptions established by s 73(2) warranted. 1. Marsland [No 2] (1993) 32 NSWLR 649 at 658.
The end of s 73 supplied its starting point. Sub-section (5) provided that, except as stated in s 73, nothing in s 73 "affects any other law relating to the payment of interest on an amount of damages". This left otherwise intact the general law on the subject, to which we have referred, and other State legislation such as s 94 of the Supreme Court Act. To the extent that there was any inconsistency with a law of the Commonwealth, the latter would have prevailed in any event [53] .
The first sub-section of s 73 also commenced with the phrase "[e]xcept as provided by this section". Section 73(1) went on to impose a prohibition, with two limbs to it, in respect of the payment of interest on an amount of damages for the period between the date of death or injury and the date of the award of damages. In relation to that award of damages, a court was not to order the payment of interest. Nor was interest to be payable. Thus, the courts were enjoined from making an order for the payment of interest where in the past they might have done so, for example, in pursuance of powers conferred by s 94 of the Supreme Court Act. Further, s 73(1) dealt with the situation where, by default or otherwise, such an order was made. Of its own force, s 73(1) prevented that order giving rise to a judgment debt and it did so by stating, "no interest shall be payable".
In this way, s 73(1) operated to deny what otherwise would be the operation of any other statutory provision, in particular s 94 of the Supreme Court Act, to authorise the making of an order for the payment of interest on an award of damages in respect of a motor accident, for the period from the date of death or injury to the date of the award. What followed in s 73(2) were exceptions to that general denial. Interest might be awarded if, and to the extent that, an exception was established in terms of s 73(2). In this way, s 73 supplied an incentive to prompt settlement of claims.
Accordingly, in our view, the majority of the Court of Appeal was in error in approaching s 73 on the footing that a successful plaintiff would have thereby obtained "almost a vested right to an award of interest", so that it was merely a question of seeing which of the barriers in s 73(2) the plaintiff surmounted. In the present case the common law did not endow the plaintiff with any relevant common law right to interest on the damages award. It was not a question of restoring those or any other rights to the plaintiff once the plaintiff had overcome "statutory hurdles".
Section 73(2) empowered the court to "order the payment of interest" if one of three conditions set out in pars (a), (b) and (c) was satisfied. We have used the term "condition" to encompass the circumstance that, in some cases, what was involved was the ascertainment of a basic matter of fact, for example the amount of the highest offer of settlement (par (c)(ii)), and in others it was the satisfaction of the court, for example as to the reasonableness of the highest amount offered (par (c)(iii)).
The phrase in s 73(2) "may order the payment of interest" is to be read with the statement in s 73(1) of that which the court was otherwise not to order, namely the payment of interest on damages "in respect of the period from the date of the death or injury to the date of the award". But the power of the court conferred by s 73(2) is not to be read in any narrow or restrictive fashion. In our view, the power conferred by s 73(2) was exercisable by an order in respect of the whole or part only of that period. In particular, the temporal limitation of the reach of an order made under s 73(2) might properly reflect the view taken by the court of the effect upon the interests of the parties of the relevant failure or failures of the defendant which, in terms of par (a), (b) or (c), was established by the plaintiff as a necessary step to enliven the exercise of the power of the court under s 73(2).
The broad legislative measures taken in the Act created some temporal difficulties. For example, the requirement of the Act that a claim made under it be made within six months after the date of the motor accident to which the claim related (s 43(1)) led to doubts about the requirements of notice for accidents occurring before the commencement of the Act [54] .
Part 6 of the Act, which includes both ss 73 and 79, commenced on 1 July 1989. Mr Marsland's accident occurred on 15 July 1987. At first sight it might seem that Mr Marsland had no legislative entitlement to damages for non-economic loss under s 79 and that no interest could be awarded under s 73, from the date of the accident to the date of the commencement of the Act.
Such a conclusion rests upon the application of the presumption against retrospectivity. Dixon CJ formulated the classic statement of the law in Maxwell v Murphy [55] :
The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events. That rule was recently expressed in the joint judgment in Rodway v The Queen [56] as follows: The rule at common law is that a statute ought not be given a retrospective operation where to do so would affect an existing right or obligation unless the language of the statute expressly or by necessary implication requires such construction. 1. (1957) 96 CLR 261 at 267. 2. (1990) 169 CLR 515 at 518.
The issue in the present case should be approached in two stages. First, it must be considered whether the Act operates upon causes of action accruing prior to the commencement of the Act. Closer perusal of the Act shows the clear intention that key parts of the Act were to apply to events preceding the commencement of the Act. Once this is determined the question is, to adopt the words of Sir Owen Dixon, whether it appears "with reasonable certainty" from the Act that there is a power to award interest for the period between the cause of action arising and the commencement of the Act. In other words, can the presumption against retrospectivity be rebutted in relation to the power to award interest? In our view it can be so rebutted. Section 73 is expressed in terms wide enough expressly to allow the payment of interest for any period after the cause of action arises.
The statement of claim filed on 11 December 1989 pleaded that the "plaintiff's cause of action is brought pursuant to the Motor Accidents Act 1988 (as amended)". The proceeding continued, before both the Master and the Court of Appeal, on the basis that this was correct and that the Act did apply to Mr Marsland's cause of action. This was so despite the fact that the cause of action arose before the commencement of the Act. The tortuous path of legislative amendment demonstrates that this was the correct basis on which to decide the case.
Section 7 of the Act (which also commenced on 1 July 1989) provides as follows:
On the commencement of this Part, Part 6 shall be taken to have applied, during the period from and including 1 July 1987 to that commencement, to a transport accident within the meaning of the [Transport Accidents Act] occurring on or after 1 July 1987. Mr Marsland's accident was a "transport accident" within the meaning of s 4 of the Transport Accidents Act. Accordingly, Pt 6 "shall be taken to have applied on or after 1 July 1987". This reading of the application of Pt 6 finds support from the provisions in Pt 10.
Part 10 of the Act (ss 138-150) is headed " Funding and Administration of Previous Schemes ". Part 10 commenced on 1 July 1989 [57] . Part 10 indicates that Pt 6 was designed to apply to accidents occurring prior to the commencement of the Act. Section 138 established a category of "intermediate transport accident[s]" which occurred on or after 1 July 1987 and before the date of commencement of Pt 2 (ie, 1 July 1989). In relation to these accidents, of which Mr Marsland's was clearly one, further provision was made.
Part 5 (Claims and court proceedings to enforce claims) applies to and in respect of a claim relating to an intermediate transport accident in the same way as it applies to a claim within the meaning of that Part, subject to this section. Compliance with Pt 5 may have brought into operation sequential provisions including those of Pt 6. However, any doubt was removed by the amendment of s 146(1) by Sch 1(19) to the Motor Accidents (Amendment) Act 1990 NSW. This amendment is to be taken to have commenced on 1 July 1989 (s 2(4)). As we have indicated, s 146 commenced on that day and it preceded the institution of Mr Marsland's action.
Parts 4, 4A, 5, 6, 9 and 10 apply to and in respect of a claim relating to an intermediate transport accident in the same way as they apply to a claim within the meaning of Part 5, subject to this section. The result is that the legislation makes it clear that Pt 6 of the Act, including the power to award interest, extends to causes of action arising before the date of the commencement of the Act and back to 1 July 1987, before the date of Mr Marsland's injury.
The second stage of the question is now reached. It is whether the application of Pt 6 to Mr Marsland's accident carries with it a power to award interest under s 73 for the period between the cause of action arising and the commencement of the Act. The presumption against retrospectivity is a rule of construction, and as such must give way to legislative provision to the contrary. Such contrary legislative provision must, however, appear with "reasonable certainty". In our view, the terms of s 73(1) prescribe the power of a court to award interest under sub-s (2) "from the date of the death or injury to the person". It is this date which is expressed to be the outer temporal limit of the power to award interest, rather than the date of the commencement of the Act. If that view as to the combined operation of sub-ss (1) and (2) were not accepted, that would leave an even more broadly expressed power to award interest. Sub-section (2) simply says "[a] court may order the payment of interest". The expression of the power is certainly broad enough, when read with the other parts of the Act applying Pt 6 back in time, to show with reasonable certainty that the power to award interest was intended to be retrospective.
This construction is consistent with authority. In Simonius Vischer & Co v Holt & Thompson [58] , the New South Wales Court of Appeal considered an argument as to the retrospective operation of the interest provision in s 94 of the Supreme Court Act. That Act came into operation in July 1972. In Simonius Vischer the cause of action had arisen in 1964 and the action was commenced in April 1966. Until the commencement of the Supreme Court Act there was no right or discretionary right to receive interest in relation to such a cause of action.
We have earlier adverted to s 94 which empowered the Court to award interest. It provides for interest "for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect". Section 16(1) of the Supreme Court Act provided that "[s]ubject to the rules, and unless the Court otherwise orders, this Act does not apply to any proceedings commenced in the Court before the commencement of this Act". Thus, the Supreme Court Act dealt expressly with retrospective application so far as the past event was the commencement of proceedings. In Simonius Vischer there had been an order made under s 16(1) and the Court had to determine whether the admitted application of s 94 allowed the payment of interest for the period between the cause of action arising and the commencement of the Act. It was held that s 94 indicated with sufficient certainty that the power to award interest extended to the period between the time when the cause of action arose and the time when the Supreme Court Act commenced. Moffitt P said [59] :
I think the preferred construction of s 94(1), particularly when taken with s 16(1), is that, when s 94(1) is expressly applied to a cause of action accrued in the past, these provisions indicate a legislative intent with certainty that, either by the operation of the Act, or rules, or by an order made under the Act, the power provided by s 94(1) shall operate according to its terms so as to encompass within the power of the court, any part of the period from "the date when the cause of action arose". 1. Simonius Vischer [1979] 2 NSWLR 322 at 337.
Close statutory analysis reveals the present case to be one where the same result is reached. Section 7 and s 146 of the Act indicate that Pt 6 is to apply to causes of action arising during the period between 1 July 1987 and 1 July 1989. The power to award interest on damages for such causes of action exists for the period "from the date of the death or injury to the date of the award". Thus, it appears with sufficient certainty that a retrospective power was intended. It becomes a question of discretion whether or not the power should be exercised in the instant case.
The Court of Appeal in Simonius Vischer held that such a power must be read according to its terms subject only to discretionary considerations whereby unfairness may be avoided. Thus, Moffitt P noted [60] that "the substantive nature of an award, and ordinary principles of fairness, make it difficult to contemplate that the discretion would ever be exercised in respect of the period prior to the commencement of the Act". This difficulty in contemplation applies to the instant case.
The view of the court of the effect upon the interests of the parties of the relevant failure of the defendant in terms of pars (a), (b) and (c) of s 73(2) would be influenced by the circumstance that the accident in question preceded the date of the commencement of the Act. In this way there may be avoided prejudice to a defendant who failed to make an offer or an offer at an appropriate level, when the defendant did not know, because there could have been no means of knowing, of the legislative importance later to be attached to the making of such an offer.
The Court has not had the benefit of submissions as to the application of these considerations to the facts of the present case. What is plain is the Court of Appeal approached the matter upon the wrong footing.
It follows that we would, with respect, disagree with the statement in the majority judgment in the Court of Appeal in the present case [61] :
The plaintiff's prima facie entitlement should be for the full period. It must follow that some of the decisions of judges at first instance cited to us are erroneous. Examples of such decisions are Dell v Dalton [62] where interest was granted from the date when the statement of particulars was filed until two weeks before judgment, and Richardson v Wagga Rent-a-Bus [63] where interest was awarded as from the date when it was proper to offer to settle. On the contrary, to construe s 73(2) as conferring a power exercisable in the manner indicated in these unreported decisions is to construe s 73 in a fashion responsive both to the mischief to the alleviation of which the legislation is directed and to the circumstances of the particular case. 1. Marsland [No 2] (1993) 32 NSWLR 649 at 652. 2. Unreported; Abadee J, 11 December 1990. 3. Unreported; Wood J, 23 July 1990.
The order for the payment of interest may, as in the present case, include a component in respect of what otherwise would be damages at general law for pre-trial non-economic loss. In the present case, the ceiling for damages for non-economic loss which was fixed by operation of ss 79 and 80, had been reached. But that is not to say that the sum then awarded for damages, including damages for pre-trial non-economic loss, albeit constrained by the requirements of s 79 as interpreted in Southgate v Waterford [64] , did not reflect the present value of money at the time of the award. That being so, the reasoning in Gogic [65] became material for the exercise by the court of its power to award interest under s 73 in respect of the past non-economic loss element in the award of damages.
To take the opposite view, as was done by the majority of the Court of Appeal, was to act upon a wrong principle in the exercise of the power conferred by s 73(2). The Act, particularly s 79, limits the amount which otherwise might be recoverable as damages for non-economic loss. One operation of s 73 is partially to complement s 79, by making special, and qualified, statutory provision for the award of interest. It would be an odd result in such a case if the legislation operated, in comparison with the position which otherwise would apply, by limiting the amount that might be recovered as damages but by augmenting the amount of interest which might properly be awarded upon that diminished sum.
It follows that the appeal should be allowed. In the amended notice of appeal the appellant seeks orders which would have the effect of limiting the interest on so much of the amount awarded for non-economic loss as can reasonably be attributed to past non-economic loss. However, at the hearing of the appeal there was a joint submission that, if the appeal was to be allowed, the parties should have a short time within which they might agree the necessary orders to give effect to that result and thereby avoid the need for the remission of the matter for further consideration by the New South Wales Court of Appeal.
Accordingly, the parties should have twenty-eight days within which to bring in agreed orders to implement the decision of this Court. If that is not done, then, at the expiration of that twenty-eight days, the matter is to be remitted for reconsideration by the Court of Appeal in accordance with the reasons for judgment of this Court.
Special leave in this matter was granted upon the condition that the appellant pay the costs of the respondent in any event and that the appellant not seek to disturb the orders for costs made in the courts below.
The Deputy Registrar certifies that he holds a consent signed by the solicitors for the parties in these proceedings to a variation of the order of this Court made on 17 April 1996. In accordance with that certificate it is ordered by consent that the order of that date be varied by deleting from par 4 thereof the words "twenty-eight days" and inserting in lieu thereof "fifty-eight days". The order of the Court is:
On 8 August 1996, Brennan CJ pronounced the following: -
The Deputy Registrar certifies that he holds a consent duly signed by the solicitors for the parties in this matter to the making of an order in the following terms:
The consent has been produced and the order is made accordingly.
Andjelic
Marsland
(1991) 171 CLR 657
(1982) 31 SASR 1
(1993) 32 NSWLR 649
(1993) 31 NSWLR 162
(1975) 132 CLR 642
(1990) 21 NSWLR 427
(1972) 123 CLR 673
(1945) 70 CLR 293
(1989) 171 CLR 125
(1995) 184 CLR 301
(1989) 94 FLR 339
(1990) 11 MVR 88
(1957) 96 CLR 261
(1990) 169 CLR 515