Buckman v M & K Napier Constructions Pty Limited [2005] NSWSC 546 | Case summary

JUDGMENT 1 The plaintiff was gravely injured, so as to suffer (inter alia) severe and permanent brain damage which destroyed his ability to manage his own affairs, while carrying out work at Redfern railway station on 10 July 1999. On 28 February 2000, the plaintiff's estate was subjected to management under the Protected Estates Act 1983 and committed to the Protective Commissioner by order of the Guardianship Tribunal. That management continues and will probably continue for the life of the plaintiff who has a slightly reduced life expectancy of a further 26 years. 2 In proceedings brought in this Court against the first, second and third defendants, as well as a fourth defendant, a settlement was approved by the court under which the first defendant agreed to forego any claim to repayment of worker's compensation payments made to the plaintiff and the second and third defendants accepted liability in negligence with no reduction for contributory negligence. The amount agreed, and approved by the court, represented a verdict of $3,906,961.94 plus one further item plus costs. The further item, which the court has to assess and add to the sum mentioned, is the cost of fund management as determined by the court. 3 The evidence on which the plaintiff relies, to establish the amount it is claimed will reasonably be incurred as the cost of fund management over the life of the fund, is the affidavit of the Protective Commissioner of New South Wales, Mr Gabb. He deposes that the fees he may charge for the management of the plaintiff's estate are prescribed by the Protected Estates Regulation 2003, and that it is his intention to charge fees in this case in accordance with that regulation. 4 The Protected Estates Regulation 2003 is authorized by s8 of the Protected Estates Act 1983, which provides: 8 Fees (1) Fees (whether by way of percentage or otherwise) may, from time to time, be prescribed for the purposes of this section. (2) There shall be charged in respect of the exercise of the functions of the Protective Commissioner such fees as may be prescribed for the purposes of this section. (3) Such fees as may be prescribed for the purposes of this section shall be charged upon and payable out of the estate of a protected person … whether or not, before payment, the management under this Act of the estate of the person has terminated. (4) Where it appears to the Protective Commissioner to be just and reasonable to do so, the Protective Commissioner may, at the discretion of the Protective Commissioner, waive, remit or reduce any of the fees chargeable under this section. 5 Clause 4(1)(a)(ii) of the Regulation provides for an annual fee "for the management of a protected person's estate" of "1.1% of the value of the estate"; and cl 4(1)(b) provides, in addition, "for the management of an investment for a protected person … in an investment fund 0.5% per annum of the value of the investment". There is provision for other charges, but these were the items the subject of dispute, and the court was informed by Senior Counsel that, if a ruling were made upon them, appropriate calculations would be prepared by the parties to enable a final order to be made. 6 In the present case, the parties are agreed that the amount on which these percentages will be calculated is to be ascertained by deducting from the sum of $3,906,961.94 so much as will not be received in cash together with the amount of money to be expended in the provision of a suitable living environment for the plaintiff assessed at $500,000, so as to leave a sum in round figures of $ 2,700,000. For the plaintiff, it was put that:

(b) when an appropriate amount has been calculated representing the capital sum needed to provide for the annual cost described in (a), that amount should itself be added to the sum of $ 2,700,000 and a final calculation of the reasonable cost of fund management should be made on the basis that it will be the augmented fund which will be managed. 7 Both the steps envisaged on behalf of the plaintiff were challenged by the second and third defendants (whom I shall call "the defendants"). 8 As to step (a) the defendants accepted the reasonableness of the figure of 1.1% per annum; it was the additional 0.5% that was disputed. The argument was the fees prescribed in the Regulation exhibited mere duplication and, to the extent something additional was involved, this was not a cost of fund management proper to be included in an assessment of damages, but an excessive cost of advice on investment such as any person with an asset might choose to seek. The difficulty with these contentions seems to me to be that it was as a direct consequence of his injury caused by the defendants' negligence that the plaintiff both required the compensatory sum and at the same time lost the ability to make any meaningful choices as to its use. Both the charges described in (a) and (b) will be incurred as a result. 9 The principle upon which the court, in an appropriate case, allows a plaintiff the cost of fund management was considered by the High Court of Australia in The Nominal Defendant v Gardikiotis (1996) 186 CLR 49. In the joint majority judgment of Brennan CJ, Dawson, Toohey and Gaudron JJ it is stated (at 52) that "the question whether a need results from an accident is essentially a question of common sense", and their Honours made it plain an allowance should be made "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". McHugh J, in a separate judgment, held (at 57) that it was the full cost of fund management "necessitated by disabilities resulting from the defendant's negligence", so that "the plaintiff's money must be managed by others", the plaintiff having "no choice as to how he or she will use the verdict moneys", that should be allowed. For Gummow J, also in a separate judgment, quoting (at 67) King CJ in Campbell v Nangle (1985) 40 SASR 161, what is required is an allowance of "the amount which [the plaintiff] will be required to pay to a manager by reason of his incapacity". 10 In my opinion, in a case such as the present where the fees are fixed by regulation and the evidence is they will be charged, the court should, in the absence of cross-examination or evidence to the contrary, accept the regulation as imposing reasonable fees which the plaintiff will in fact have to bear. The defendants' criticism of the formulation of the charges by the language of the regulation does not alter the reality that these amounts will have to borne. 11 For the defendants, reference was made to the decision of the Queensland Court of Appeal in Willett v Futcher [2004] QCA 30. There a verdict had created a fund of $3,250,000 and the question was what amount should be added for fund management. The fund was to be managed, not by an official such as the Protective Commissioner of New South Wales, but by a private trustee company, which had quoted to provide a range of investment services for various separate fees. The court ruled, in para [26] of its joint judgment, that the "question [was] whether all of the services for which fees are claimed will be necessary to enable [the trustee company] to perform its obligations". It then held it was open to the trial judge to find a number of these services were unnecessary. Special leave to appeal to the High Court was granted, and an appeal has been heard but not yet determined. 12 In my opinion, Willett v Futcher is distinguishable from the present case on the facts; for I hold that the Protective Commissioner will need to perform the services for which the relevant charges will be made in order to manage properly the plaintiff's fund. 13 I turn to the second question, that raised by the plaintiff's contention to the effect I should add the amount required to meet the cost of fund management to the fund, and recalculate what is required, because any amount allowed will swell the fund and therefore be reflected in the charges ultimately made. Theoretically, this process could go on forever, although the plaintiff's counsel do not push the point so far. It is, indeed, a point reminiscent of the ancient mathematical fallacy of the hare and the tortoise: if, it was said, the hare can run ten times as fast as the tortoise, which has a ten yards start, while the hare runs the ten yards, the tortoise will go one, and while the hare runs that, the tortoise will go one tenth and so on, so the hare will never quite catch the tortoise! But, in my opinion, there is a simpler answer to the plaintiff's contention, which is not fallacious. The calculation of damages is not mathematically exact. It involves estimations. To strive for the precision the argument seeks in respect of the cost of the management of a fund components of which are themselves broad assessments of reasonable sums that are beyond calculation, such as damages for pain and suffering and the loss of the amenities of life, would just be incongruous. Furthermore, while a calculation utilising the figure of $ 2,700,000 in some way seems inescapable, it must be recognized, as McHugh J pointed out during the argument in Willett V Futcher, that even that basic step will lack precision, since a change in market conditions (a steep rise or fall in the share market, for instance) could, within a little time, change greatly the figure to which the Protective Commissioner's percentages will be applied, or, it may be added, a change in the regulation itself may intervene during the life expectancy of the plaintiff. It is, and must be, all a question of reasonable estimate which will determine the amount to be allowed. In my opinion, a sum calculated in the manner I have already indicated is the reasonable amount to allow in the present case. 14 Accordingly, I decide question (a) in favour of the plaintiff and question (b) in favour of the defendants, and I direct the plaintiff to bring in, on a date to be fixed, short minutes of orders appropriate to be made in the light of these reasons. ********** I certify that this and the preceding 5 pages are a true copy of the reasons for Judgment herein of The Honourable Acting Justice Burchett ………………………………… Associate Date………………………..

Buckman v M & K Napier Constructions Pty Limited

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Judgment (15 paragraphs)

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