Leichhardt Council v Serratore

Leichhardt Council - Appellant PARTIES: Rosy Serratore - Respondent

R Sheldon - Appellant COUNSEL: L King SC & P Regattieri - Respondent

Phillips Fox - Appellant SOLICITORS: Doherty Partners - Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41172/04 DC 24/03

GILES JA HODGSON JA IPP JA THURSDAY, 24 NOVEMBER 2005 LEICHHARDT COUNCIL v SERRATORE Judgment 1 GILES JA: The respondent was injured when she fell on the footpath in Norton Street, Leichhardt, adjacent to the Italian Forum shopping complex. The appellant had the care and control of the footpath. 2 The Italian Forum had been recently completed, the work including marble paving of the footpath out to the kerb and blocks of sandstone forming the kerb. It was found that the respondent fell when her right foot caught on the end of the new sandstone block abutting the existing footpath, the sandstone standing proud of the old and sunken sandstone kerb of the existing footpath. It was held that the appellant was liable in negligence to the respondent, and her damages were assessed at $140,996.22. The respondent had served an offer of compromise, which was not accepted and which this bettered, and the appellant was ordered to pay her costs on a solicitor/client basis. 3 The appellant appealed on liability, quantum and costs.

Liability 4 The appellant challenged the finding that the respondent had caught her foot on the end of the sandstone block. It submitted that there was no direct evidence that the particular defect had caused her to fall, that she might equally have stumbled on one of the other irregularities in the existing footpath or fallen because she had inadvertently stepped from the footpath, and that the judge's reasons did not recognise the extent to which the evidence of the respondent and her husband were a reconstruction of how she had come to fall or the possible alternative causes for the respondent's fall. 5 The judge's reasons for finding as she did were well founded in the evidence. The respondent and her husband described what had occurred; their statements, beyond the descriptions, that the respondent caught her foot on the end of the sandstone block did involve some reconstruction, as will often be the case in these circumstances, but were explained and explored. I do not accept that in finding to the same effect the judge failed to pay regard to the nature of their evidence or other occasions for the fall. There is no basis for displacing her Honour's finding on appeal. 6 The appellant then submitted that the appellant was not in breach of its duty of care in failing to rectify the difference in level at the kerb, because a pedestrian would ordinarily approach the kerb at right angles when crossing the road and would not normally walk alone the footpath at the kerb, and because in any event to a pedestrian on the footpath the trip hazard (the appellant acknowledged that it was a trip hazard) was obvious. The appellant said that a reasonable response, according to the so-called Shirt calculus (Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-8) was to do nothing. 7 The difference in level was quite pronounced. The bitumen surface of the existing footpath fell slightly below the marble paving where they abutted as it went from the building alignment to the kerb, and near the kerb fell quite sharply so that at the kerb the end of the new sandstone block stood proud of the bitumen surface and the old sandstone kerb by about 110 mm. The judge accepted that to a pedestrian alone on the footpath it would have been obvious. 8 But at the time, on the evening of 27 August 2000, the Italian Forum was busy, and people were spilling out of its entrance. The respondent and her husband were weaving their way through the crowd; the respondent described it as not bumping into people "but there was a lot of touching, sort of stopping and weaving through the traffic". The judge considered that in those circumstances, when negotiating a footpath impeded by the crowd and with a need to keep an eye on the other pedestrians, the difference in level was not obvious to a pedestrian exercising care for his or her safety. She found that the appellant had permitted the construction of the Italian Forum and had inspected the footpath after the work upon it, and that the trip hazard must have been obvious to it at the time of inspection. She considered that a reasonable person in the appellant's position must have foreseen the risk to those going to the Italian Forum and the crowded conditions, and that the reasonable response to the risk was to rectify the difference in level. 9 For reasons next appearing, the judge correctly regarded the trip hazard as obvious to the appellant upon inspection. The appellant's reasonable response had to pay regard to the busy shopping complex and the crowded pedestrian conditions which would come about, as on this evening, and to the likelihood that pedestrians would walk along the footpath at the kerb. It was a footpath, not a point of arrival when crossing the road, and in crowded conditions all its width was likely to be utilised, including at the kerb. I do not accept the submission that the appellant could expect that, in crowded conditions, a pedestrian would stop and wait for the crowd to clear rather than diverge towards the kerb. In my opinion, her Honour was correct in her finding as to the reasonable response. 10 The appellant then submitted - and this was perhaps its primary submission - that it fell within s 45 of the Civil Liability Act 2002, which provides - " 45 Special non-feasance protection for roads authorities

(1) A roads authority is not liable in proceedings for civil liability to which this Part applies for harm arising from a failure of the authority to carry out road work, or to consider carrying out road work, unless at the time of the alleged failure the authority had actual knowledge of the particular risk the materialisation of which resulted in the harm.

(2) This section does not operate: (a) to create a duty of care in respect of a risk merely because a roads authority has actual knowledge of the risk, or

(b) to affect any standard of care that would otherwise be applicable in respect of a risk. (3) In this section: carry out road work means carry out any activity in connection with the construction, erection, installation, maintenance, inspection, repair, removal or replacement of a road work within the meaning of the Roads Act 1993.

roads authority has the same meaning as in the Roads Act 1993."

The appellant submitted that it did not have "actual knowledge" of the trip hazard which brought the respondent's injury. 11 The judge found - · that a condition of the building approval for the Italian Forum was that the developer have the footpath made good; · that the appellant provided the developer with engineers' details and specifications and requirements for the footpath paving; · that the specifications provided for the appellant to inspect the work before commencement and after excavation and placement of formwork and reinforcement, and to undertake a final inspection after work had been completed; · that the work was commenced on 29 October 1999, and had been completed shortly before the respondent's fall; · that a letter from the appellant in October 2002 stated that "a check of records has revealed that acceptance of the works and subsequent responsibility for the footpath was taken by Council prior to the alleged incident on 27 August 2000". 12 Her Honour inferred that the appellant inspected the footpath as the specifications provided, and that the trip hazard would have been obvious at the time and (as I have earlier noted) must have been obvious to the appellant. She said, in specific reference to s 45 - "For the reasons already given, I am satisfied that the defendant had inspected the footpath before the plaintiff's fall. It accordingly had actual knowledge of the particular risk and is not protected by the section." 13 The appellant said that it had a right to inspect the footpath, but not an obligation, and that the inference that it had inspected the footpath was not available. In my opinion, it could readily be reasoned that the appellant inspected the footpath before accepting the works and taking responsibility for the footpath. The appellant suggested, perhaps faintly, that it could equally have been reasoned that it did not inspect the footpath because, if it had, it would not have accepted the works with the obvious trip hazard. However, there was nothing wrong with the works, the problem lying in the degraded condition of the existing footpath and particularly the old and sunken sandstone kerb, and it is far from clear that the appellant could have called on the developer to rectify the difference in level. No officer of the appellant was called to say what had or had not been done, and inspection without action to remove the trip hazard is in my view more likely than manifestly uncommercial acceptance without inspection. 14 The appellant said also that, even if it inspected the footpath, inspection which could have brought knowledge of the trip hazard was less than actual knowledge of the trip hazard. It made the rather remarkable submission that there could be no presumption of competence in the inspection sufficient to entitle an inference that the inspection would have brought the trip hazard to the knowledge of the inspector, and again suggested that acceptance without requiring the developer to rectify the difference in level indicated that it did not come to the knowledge of the inspector. To repeat, the problem was not in the work but in the condition of the existing footpath, so that the marble paving and the new sandstone blocks did not marry with the existing bitumen surface and old sandstone kerb. It is far from clear that the appellant could have called on the developer to rectify the difference in level: the appellant called no evidence on the matter, and in my opinion it was well open to the judge to infer that there was actual knowledge of the trip hazard. 15 It will often be the case that a plaintiff does not have direct evidence of a road authority's knowledge of a risk. Like all facts, knowledge can be inferred from other facts, and if the inference is fairly available and the road authority calls no evidence to rebut it the Court can comfortably find knowledge.

Damages 16 The damages included non-economic loss of $26,000 on the basis of 25 per cent of a most extreme case, past economic loss of $37,934 and future economic loss of $52,644.75. 17 The appellant submitted that 25 per cent of a most extreme case was beyond a sound exercise of the judge's essentially discretionary assessment, and that no more than 10 per cent was warranted. If that were so, the respondent would not be entitled to any non-economic loss. 18 The respondent was aged 29 at the time of her fall. She fell heavily onto her right side and hit her head. She had a laceration on the eyelid and a black eye and bruising on the left knee, all of which resolved. She fractured the neck of the radius on her right arm, and the judge found that low back pain which developed about three weeks after the fall when she returned to work was due to soft tissue injury and aggravation of disc degeneration and was caused by the fall. 19 The respondent had worked for Ronitas from about June 1999. She returned to her work after the fall, but could not continue because the work included packing and sending orders with lifting of weights up to 10 to 12 kilograms and a lot of standing. She worked reduced hours, then left her work in July 2001. From November 2001 she helped her husband in his restaurant business, being paid $50 per night, but with decreasing hours because of back soreness until she was working only two nights a week. 20 The judge found that the respondent's right arm troubled her, principally only in periods of cold weather, with intermittent throbbing pains in the elbow. She had pain in the knee in cold weather, and back pain exacerbated by walking, sitting, standing and driving. 21 The judge said - "I accept that the plaintiff has ongoing symptoms in the low back and, to a lesser extent, in the right knee and right arm. The overall picture is one of improvement since the date of accident. There is no suggestion of any significant underlying objective cause, even in the low back. I am accordingly satisfied that there is a real prospect that her symptoms will continue to improve over time. I accept that in the period after the accident the plaintiff had severe symptoms which restricted both her activities of daily living and work capacity. She still has symptoms severe enough to require regular medication. It is not likely that her symptoms will completely resolve in the near future. I assess non economic loss at 25% of a most extreme case." 22 Her Honour did not elaborate on the restriction in activities of daily living. There was little evidence given. A medical report recorded that the respondent could no longer go horseriding or dancing. The respondent's husband gave evidence that she found it hard to vacuum and took breaks while vacuuming, that she found it "more difficult" to bend down to pick up the washing when hanging it out, and that she would not carry as much of the shopping in from the car. Nor did her Honour elaborate on the severity of symptoms, which was not greatly described by the respondent and was rather variably recorded in the medical reports; the judge did note that Dr Beer assessed a 10 per cent impairment of the back in January 2004. 23 Acknowledging, that the judge's assessment was essentially discretionary (Dell v Dalton (1991) 23 NSWLR 528), in my opinion severity of the respondent's non-economic loss at 25 per cent of a most extreme case was so excessive as to fall outside a sound exercise of the discretion. The respondent's condition had improved since her fall, and there was a real prospect that her symptoms would continue to improve. Without belittling her pain and suffering and the effect on her life, I do not think it could be regarded as 25 per cent of the severity of that of (say) a quadriplegic. 24 The appellant then submitted that the judge had failed to give adequate reasons for her assessment of past economic loss. Judgment was given on 17 December 2004, so the period in question was a little over 4 years from 27 August 2000. 25 The judge said - "In 1998 the plaintiff married and left the work force for 18 months. She resumed working in June 1999. The plaintiff claims for all of the periods off work since the date of accident. While the total claimed is $25,082, the calculation relied on by counsel for the plaintiff does not take into account the period after 31 July 2002. I am satisfied that there are restrictions on the plaintiff's earning capacity. It would not be advisable for her to work in any job requiring heavy lifting. She will have back and knee pain if she has to stand for long periods. However I take into account that there is no evidence of the plaintiff looking for work in the period 1 July 2001 to November 2001. In addition the plaintiff has been only working for 2 nights a week which I do not consider fully exercises her residual earning capacity. I allow the amounts claimed to 28 February 2002 ($16,184) and $150 per week thereafter (145 weeks) ($21,750) being $37,934.00." 26 The reasons are sparse, although the parties would have understood them in the light of the submissions. 27 The respondent was asked in chief what she was earning per week after tax before the fall, and she said $454. This must have been working at Ronitas. In cross-examination she agreed that her income tax returns showed taxable income of $7,402 for the 1998-99 year, $12,375 for the 1999-2000 year and $22,173 for the 2000-2001 year, followed by the question "So in fact your taxable income has improved over that period?" to which she answered yes. The appellant later tendered the copy income tax returns, from which net wage income could be derived of $7,001.60, $10,980 and $19,141.10. The cross-examiner took pre-injury earnings no further, nor was the matter taken up in re-examination. 28 The respondent's written submissions before the judge included the calculation to which the judge referred. It was based on pre-injury net earnings of $454 per week. The appellant's written submissions referred to the figures for taxable income, asserted that the respondent had admitted that her income had increased after the accident (I think this is a misunderstanding of the question earlier set out), and said that any recovery for economic loss "should be extremely modest". We do not know what oral submissions were made, if any, in amplification; economic loss appears to have been dealt with in a perfunctory manner. 29 If the income tax returns were correct, the respondent could not have been earing $454 per week after tax before the fall. Although the conflicting positions had not been properly addressed in the evidence, the submissions required that the judge resolve the conflict. Her Honour resolved it in favour of $454, but the reasons do not recognise the conflict or explain why she found those pre-injury net earnings. This is a matter of some significance, not only for the money result but because special considerations may apply if undisclosed income is to be the basis for damages for reduction in earning capacity: see Giorginis v Kastrali (1988) 48 SASR 371 at 375-6; Trajkovski v Ken's Painting & Decorating Services Pty Ltd [2002] NSWSC 568 at [51]-[52]. 30 Difficulties with the reasons go beyond the unexplained finding of $454. It is evident that the judge considered that from 28 February 2002 the respondent had a residual earning capacity of ($454-$150) $304 per week. Precision in periods and figures is illusory, but if it was thought relevant that the respondent was not looking for work in the period 1 July 2001 to November 2001, why did she recover at $454 per week until 28 February 2002 and, when the respondent's evidence was that she could only work two nights a week, on what basis did the judge find a greater residual earning capacity and arrive at the $150? This is material also to non-economic loss. If her Honour did not fully accept the respondent's evidence in this respect, what effect (if any) did that have on her assessment of 25 per cent of a most extreme case so far as founded on restriction on the respondent's work capacity? 31 At least so far as appears from the written submissions, the appellant did not provide worthwhile assistance to the judge. It was nonetheless necessary that her Honour deal with the conflict as to pre-injury net earnings notwithstanding that it had regrettably not been followed through or taken up to in re-examination, and make better known her reasoning to the past economic loss. 32 The appellant then submitted that the judge failed to give adequate reasons for her assessment of future economic loss, and had not complied with s 13 of the Civil Liability Act. 33 The judge set out s 13, and said - "Counsel for the defendant submitted that the plaintiff should either be awarded $175.00 per week for the remainder of the plaintiff's working life or a buffer. Counsel for the defendant submitted that I should reduce this claim on the basis that the plaintiff's pre-accident employment required her to lift weights up to 10 kg and that it is accordingly likely that the plaintiff would have incurred damage to her back as the result of her employment. I do not understand section 13 of the Civil Liability Act 2002 to have altered the common law position. This places the onus on the defendant to establish that this would have been likely to occur in the absence of the injury which is the subject of these proceedings. I am not persuaded that there is evidence on which I could make such a finding. Counsel for the defendant then submitted that, in the circumstances of the plaintiff's employment, she would not have worked until age 65. Again I am not persuaded that there is any evidence on which I could make such a finding. The evidence before me establishes on the balance of probabilities that the plaintiff, but for the accident, would have continued to have been employed either by her pre-accident employer or in similar work. I do not consider that there is any evidence of a possibility that the plaintiff's disabilities might have occurred but for the injury, other than by making the usual allowance for vicissitudes. I assess the impairment in the plaintiff's earning capacity at $150 net per week for 10 years on the 5% tables (section 14) less 15% for vicissitudes." 34 Compliance with s 13 can be seen, although not as plainly as might have been. The assumptions to which s 13(1) refers were stated in the fifth paragraph above, and the percentage to which s 13(2) refers was the 15 per cent for vicissitudes. That the respondent would have been employed until 65 or some other age was not expressly stated, but it was implicit that she would have been employed for at least the 10 years on which the damages were calculated. Implicit in employment by the pre-accident employer or in similar work was the $454 earlier mentioned, see also the use of $150 as a measure of the lost earning capacity. 35 The assessment suffered, however, from the unexplained finding of $454 underlying the $150 and uncertainty in how the judge arrived at the $150. Further, it was not explained why $150 net per week for 10 years was used. The $150 no doubt is the same measure of lost earning capacity as was used for past economic loss, but why was it used for the 10 years? It may be that the judge considered that the combination was a suitable reflection of future improvement in the respondent's symptoms and the loss which would be produced by their effect on her earning capacity, but that is not said. As well, although the appellant did not raise it with the respondent in cross-examination and appears regrettably not to have adverted to it in submissions, one of the respondent's medical reports recorded her concern that time was running out for starting a family, a decision she had delayed waiting for her back pain to get better, so time off work by reason of childbearing called for consideration. 36 Where there could not be precision and the evidence was relatively confined, the judge had to do the best she could and was entitled to make broad judgments. But the finding of $454 had to be explained, and I have reluctantly concluded that the reasons in other respects do not adequately explain the assessments of economic loss. 37 This Court is not in a position to reassess economic loss. Nor in my opinion should it substitute a percentage of a most extreme case, first because the evidence at a new trial going to economic loss would inevitably bear upon non-economic loss and there should not be assessments on different evidence, and secondly because, in the manner I have indicated, there is a question as to the judge not fully accepting the respondent's evidence in relation to ability to work only two nights a week and the effect of that on the assessment of non-economic loss. In my opinion, there must be a new trial as to damages. I would not expect past and future out of pocket expenses to be controversial, and the new trial should extend to them.

Costs 38 The new trial as to damages may or may not make the offer of compromise of no significance. If it is of significance, the question for decision on appeal will remain. I consider it appropriate to decide it. 39 The respondent commenced her proceedings on 3 June 2003. There had been a history of attempted negotiation to arrive at agreed compensation. On 1 June 2003, concurrently with service of the statement of claim, the respondent served an offer of compromise of $50,000 plus costs. It was not accepted. 40 The judge said - "In relation to the Offer of Compromise, counsel for the defendant submitted that this was a matter in which the ordinary consequences of Part 39A rule 25(4) should not be applied. The defendant relies on the late service of an expert report. It says that until this was served on 13 April 2004 the defendant could not fully appreciate the plaintiff's case. I do not accept this submission. In the circumstances of this case the obviousness of the danger, if the plaintiff's description of her injury was accepted, should have been apparent to the defendant, at least for the purposes of settlement negotiations. I am not persuaded that this is a case in which it would be appropriate to displace the Rule which can only be done in 'an exceptional case and for the avoidance of substantial injustice'. This means that the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made on a solicitor/client basis in addition to the plaintiff's costs incurred before that time on a party/party basis. The submissions do not clarify the date on which the Offer of Compromise was received by the defendant." 41 In due course an order was made that the appellant pay the respondent's costs of the proceedings on a solicitor/client basis; presumably it was thought appropriate that the few early days of the proceedings should be caught up in the solicitor/client costs. 42 Part 39A r 25(4) of the District Court Rules provided for the special costs order "unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders". The appellant submitted that the judge should have otherwise ordered because at the time of the offer of compromise the respondent had been in possession of an expert's report of Mr Porman dated 12 December 2000, which it did not serve until 13 April 2004, and because after service of the offer of compromise the respondent served medical reports of Dr Hamad dated 19 August 2003 and 10 May 2004, Dr Schatz of 7 January 2004 and Dr Beer of 1 December 2003 and 12 January 2004. It said that the late service of the expert's report was of itself unreasonable conduct sufficient for an order otherwise, and that the service of all this material and particularly the report of Mr Porman after the offer of compromise - " … provides an adequate basis for concluding that the circumstances of the case altered significantly from the time of the making of the offer of compromise until the judgment of the court such that the making of the offer of compromise did not reflect the true circumstances of the case as at the time it was made, as known to the defendant." 43 The judge did not accept a like submission as to the report of Dr Porman. There was no explanation for the late service of the report, but the late service did not of itself provide a basis for an order otherwise. It must be asked what effect the report had on the appellant's assessment of its prospects in the proceedings, a matter on which the appellant gave no evidence. The appellant submitted that the report was important because the expert recorded a demonstration by the respondent of the path she walked and the point of impact of her foot, but there is no reason to think that the appellant was unaware of the manner in which and point at which it was alleged she fell. The photographs on which, in the report, the point of impact of her foot were marked were provided by the respondent's solicitor to the appellant in July 2001, and the difference in level at the kerb was their focus. The appellant was plainly aware of the respondent's case: in a letter to the respondent's solicitor in October 2002, it referred to "the section of sandstone kerbing outside the Italian Forum on Norton Street at which you client allegedly fell … ". The judge was not persuaded that the late service warranted an order otherwise, and her discretion has not been shown to have miscarried. 44 A like submission as to the medical reports was made to the judge, but was not expressly dealt with. This is understandable. On 22 January 2002 the respondent's solicitor had provided to the appellant a report of Dr Hamad, who was the respondent's GP, dated 7 December 2001; on 18 April 2002 it had provided two reports of Dr Beer dated 8 and 9 April 2002. These reports plainly indicated the respondent's injuries and their consequences of which the respondent complained. Before commencing proceedings the respondent's solicitor invited, if not urged, discussions to arrive at agreed compensation, for some time without any response and ultimately with an unhelpful response. The later medical reports were essentially confirmatory of what the appellant already knew. I do not think there was any warrant for an order otherwise.

Other matters 45 The appeal fails as to liability and costs and succeeds as to damages. In my opinion, the appellant should be ordered to pay one half of the respondent's costs of the appeal. The costs of the trial should be as ordered by the judge conducting the new trial as to damages. 46 A new trial as to damages will mean disruption, anxiety and expense. While important to the parties, the amount at stake is not large. The parties should attempt to agree upon damages, perhaps with the assistance of a mediator. The Registrar of the Court of Appeal is available to act as mediator in appropriate cases, and the parties' lawyers will be aware of the Court of Appeal Mediation Pilot Scheme, under which a subsidy may be paid towards a mediator's fees; the Registrar administers the Scheme. Before there are made the orders disposing of the appeal, the parties should be given the opportunity to agree upon damages, if necessary and subject to hearing the parties with an order for mediation.

Orders 47 I propose the orders - 1. Grant leave to the appellant to amend the notice of appeal by the addition of grounds 1(c)(vii), 1(d) and 2AA as set out in the document "Additional grounds relied on".

3. Set aside the judgment for $140,996.22 and the order for costs and in lieu thereof judgment for the respondent for damages to be assessed.

4. Remit the proceedings to the District Court for a new trial as to damages.

5. Appellant pay one half the respondent's costs of the appeal, and the respondent to have a certificate under the Suitor's Fund Act if otherwise eligible.

48 These orders should not be made now. I propose as the order now made that the appeal be listed before the Registrar on 15 December 2005 for the Court to be informed in relation to agreement upon damages. If there is agreement, or if a question of an order for mediation arises, by arrangement through my associate the appeal can be listed before me at short notice.

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