Nominal Defendant v Gardikiotis

The genesis of the issue with which this Court is concerned is found in the following passage of the reasons of the trial judge:

The [respondent] claims fees for [a] financial management fund on the basis [that] she will need assistance managing a large sum of money. It is necessary for her to invest it to allow her to obtain the full benefit of these verdict moneys. The [respondent] is not brain damaged, she is a reasonably well educated girl and in fact a very impressive young lady who will not work and who will have ample time to invest her money and to manage her interests. There is some evidence she has some difficulty in writing but I cannot see how that is going to affect her management of the funds.

On the other hand, in the Court of Appeal, Meagher JA said that the respondent would have "an enormous fund" which she would have to manage for her remaining forty years, and continued:

She is certainly not mentally incapacitated (although, equally, she is not a genius), but is hardly fit to invest such a fund without outside advice. She has selected a branch of Westpac [Banking Corporation] for that purpose. That, to me, seems quite reasonable. In principle, I cannot see why if a defendant's tort has generated a reasonable need in a plaintiff for fund management, and that need is reasonably foreseeable, the plaintiff is not entitled to recover a sum representing that need by way of damages Westpac will charge $5,000.00 per year, and a capital sum representing such payments over forty years will be $87,926.00. Meagher JA held that in the present circumstances the incurring of that fee was a "necessary, reasonable and foreseeable result of the negligence which led to the verdict". His Honour cited the decision of this Court in Mahony v J Kruschich (Demolitions) Pty Ltd [36] . However, the Court there was dealing with the question whether the exacerbation of a tortiously inflicted injury by negligent medical treatment can be regarded as a foreseeable consequence for which the first tortfeasor is liable. 1. (1985) 156 CLR 522.

In this Court, the appellant challenges the proposition that the incurring of that management fee was a necessary, reasonable and foreseeable result of the negligence which led to the verdict in favour of the respondent. The appellant submits that it is a matter for the respondent to dispose of the verdict as she wishes, whether by preserving part as a capital fund to be invested and spending the rest, or investing the whole amount of the fund, or in pursuing some other course.

The basic question is whether an allowance of the type made by the Court of Appeal is requisite to put the respondent in the position in which she would have been if the tort had not been committed. If such an allowance was so requisite, then it would be necessary to consider, in the light of the evidence, the particular form it should take. In the view I take of this appeal, that stage is not reached.

A different view to that taken by the Court of Appeal in this case had been expressed earlier by Clarke JA in Treonne Wholesale Meats Pty Ltd v Shaheen [37] . With that judgment, Mahoney JA and McHugh JA had agreed. Later, in GIO of NSW v Rosniak [38] , Mahoney JA referred to Treonne and continued:

A plaintiff is to have the losses actually resulting, presently or in the future, from the defendant's default: in the relevant sense the plaintiff is to be put in the position in which she would have been had the default not occurred. Many, if not most, plaintiffs lack the appropriate skill to manage a large award. But that does not mean that, when the amount awarded is large, the management costs are to be seen as resulting from the defendant's negligence. Often, perhaps ordinarily, they will not. On the other hand, where the defendant's negligence produces a particular incapacity in the plaintiff such that, because of that capacity, her affairs must be managed for her, that I think will be usually sufficient. 1. (1988) 12 NSWLR 522 at 525. 2. (1992) 27 NSWLR 665 at 684-685.

In a line of cases in Canada, an allowance of the kind under discussion has been made where the plaintiff has been under the legal incapacity of infancy or sustained mental or physical impairment requiring management of his or her financial affairs.

A leading authority is the decision of the Supreme Court of Canada in Teno v Arnold [39] . There the plaintiff was four years old at the date of the accident which caused a very considerable degree of mental impairment. The present respondent relies upon a statement in that case that, even if the infant plaintiff were an adult and not disabled, she would have needed professional assistance in the management of the large sum of money as was being awarded her [40] .

1. [1978] 2 SCR 287; (1978) 83 DLR (3d) 609. See also Insurance Corporation of British Columbia v Mandzuk [1988] 2 SCR 650; (1988) 53 DLR (4th) 606 at 606-607; the decision of the Nova Scotia Supreme Court in Armstrong v Baker (1992) 111 NSR (2d) 239; and that of the Court of Appeal of British Columbia in Macdonald v Neufeld (1993) 85 BCLR (2d) 129. 2. Teno v Arnold [1978] 2 SCR 287 at 328; (1978) 83 DLR (3d) 609 at 635-636.

However, in other Canadian decisions, the approach has been taken that, even in the case of a plaintiff suffering mental impairment by reason of the injury, an allowance for the employment of professional investment managers should not be made if the needs of the plaintiff are not complex, or advice would be available on a voluntary basis, or the award is not large, or the needs of the plaintiff might be met with the purchase of an annuity [41] .

1. McLeod v Palardy (1981) 124 DLR (3d) 506, a decision of the Manitoba Court of Appeal; and Armstrong v Baker (1992) 111 NSR (2d) 239 at 254.

What, with respect, appears to have received insufficient consideration in some of these authorities is the need to find the necessary link between the need for provision of fund management costs and the negligent act of the defendant. Reference also should be made to the treatment of the subject by the Supreme Court of Canada in Insurance Corporation of British Columbia v Mandzuk [42] . There, in giving the judgment of the Court, Sopinka J said:

The issue in this appeal is whether or not in serious personal injury cases an amount for an investment counselling fee should be awarded to the plaintiff. This is essentially a question of fact in each case. The only principle that appears to be applicable is that the defendant must take the plaintiff as he finds him, including his state of intelligence. Whether this is low by reason of the injuries complained of or its natural state, a management fee or an investment counselling fee should be awarded if the plaintiff's level of intelligence is such that he is either unable to manage his affairs or lacks the acumen to invest funds awarded for future care so as to produce the requisite rate of return. (Emphasis added.) I agree with what is said by McHugh J in his reasons for judgment in the present appeal as to the inapt use in this particular branch of the law of damages of the maxim that the defendant takes the plaintiff as found. Moreover, what was said in Mandzuk would not provide support for the decision reached by the Court of Appeal in this case. There has been no finding that the respondent is of such a low level of intelligence that she either is unable to manage her own affairs or that she lacks the acumen to invest the funds awarded to produce the requisite rate of return. 1. [1988] 2 SCR 650 at 650-651; (1988) 53 DLR (4th) 606 at 606-607.

I turn now further to consider the earlier decisions in Australia.

In Campbell v Nangle [43] , the relevant principles were stated by the trial judge (Zelling J) and in the Full Court of the South Australian Supreme Court by King CJ. Zelling J [44] referred to several unreported English decisions, including that of the Court of Appeal in Rialis v Mitchell [45] , and continued [46] :

I would have thought, on general principles, that the decision of the Court of Appeal was correct. If you injure a plaintiff so badly that he has permanent brain damage and he can neither manage the resulting fund for himself nor make any decision with regard to its management, then it is foreseeable that there is going to have to be a manager to do that for him and, with a large fund of this kind, a skilled manager whose fees must be paid for. King CJ said [47] : It seems to me that the principles of the law relating to damages for tort require the inclusion in an incapacitated plaintiff's damages of the amount which he will be required to pay to a manager by reason of his incapacity. A plaintiff is entitled to recover the loss caused by the tort. The fundamental principle upon which damages are assessed is the principle of compensation that the plaintiff is to be placed, so far as possible, in the same position financially as he would have been if he had not sustained the wrong for which he receives the damages. The capital sum awarded to him is computed upon the basis of an assumed real return from its investment. If the plaintiff has been rendered by the wrong for which he recovers damages incapable of managing his affairs so that the fund resulting from the damages must be managed for him, the fees payable to the manager will reduce the real return from its investment. Unless an amount is included in the damages to compensate for those fees, the plaintiff will not receive the full restitution to which the law entitles him. It seems to me that the liability for the fees is a loss flowing directly from the wrong and is recoverable as damages caused by the wrong. I should say for the sake of completeness that the same is true, in my opinion, where the plaintiff's incapacity to manage his affairs does not result from the wrong but is antecedent to it, being the result of legal disability or some other cause. The statement of principle by King CJ in my view correctly represents the law. It was not applied in the present case where the finding of the trial judge as to the capacities of the respondent to manage her affairs would leave her beyond the reach of the principle, and the Court of Appeal did not, on a fair reading of what was said, purport to differ from those findings. 1. (1985) 40 SASR 161. 2. Campbell v Nangle (1985) 40 SASR 161 at 177. 3. The Times; 17 July, 1984. 4. Campbell v Nangle (1985) 40 SASR 161 at 178. 5. Campbell (1985) 40 SASR 161 at 192. Campbell v Nangle was followed in Mullins v Duck [1988] 2 Qd R 674, where the plaintiff was fourteen months old at the time of the tortious injury causing gross permanent disabilities.

However, the accident did aggravate her MS condition; she is confined to a wheelchair and suffers some difficulty in writing. To the significance of this I will return after brief reference to several previous decisions of the New South Wales Court of Appeal.

In Brindall v McDonald [48] , the Court of Appeal (Hope, Samuels and McHugh JJA) was dealing with a plaintiff whose pre-injury intelligence "was of quite a low order". Her intelligence quotient after the accident and at the time of the trial was 72 or 73. Hope JA, with whom the other members of the Court agreed, said [49] that the occasion for the necessity to have someone administer her affairs was "the intellectual disability and possibly other disabilities which she suffers as a direct result of the injuries inflicted in the accident" and that there seemed in principle "no reason why some part at least of the costs of administering her affairs should not be included in her award".

1. Unreported; NSW Court of Appeal; 11 March 1985, at p 6. 2. Brindall (unreported; NSW Court of Appeal; 11 March 1985), at p 14.

Brindall was followed by the New South Wales Court of Appeal in Treonne Wholesale Meats v Shaheen [50] . In that case, the tort caused both the intellectual disability of the plaintiff and the consequent need for assistance in the management of his affairs so that the expenditure flowing from the intellectual inability of the plaintiff to manage his affairs was a tortiously inflicted loss for which he was entitled to compensation. The judgment of the Court was delivered by Clarke JA. His Honour distinguished cases where the tortious act itself has not created the need for the cost of managing moneys recovered under the verdict. Clarke JA said, in a passage with which I respectfully agree [51] :

In that case nothing which has happened as a consequence of the accident created a need for fund management. What causes the need, if there is one, is the acquisition of a fund upon obtaining a verdict.

If a person whose capacity to manage a fund was not impaired in the accident thereafter expends moneys on the management of verdict moneys it is the verdict and not the accident which should be seen as the cause of that expenditure. To say that without the accident there would be no verdict and hence no need is, in my opinion, unhelpful for it disregards the principle that damages compensate for the losses flowing from the tort.

The principle that a defendant must take a plaintiff as he finds him extends to cover cases of aggravation of harm by a pre-existing abnormality (eg, eggshell skull) and cases in which a plaintiff may have sustained an unexpectedly high loss which was difficult for the defendant to foresee: eg, the shabby millionaire [52] . As Fleming [53] points out the two rules are distinct. One covers "unexpected consequences" and the other "the unexpectable cost of expected consequences": see also Nader v Urban Transit Authority [54] .

1. The Arpad [1934] P 189 at 202, per Scrutton LJ. 2. Law of Torts, 6th ed (1983), p 183. 3. (1985) 2 NSWLR 501 at 537, per McHugh JA.

But it has never been suggested that the principle operates in such a manner as to lead to the inclusion in a verdict of an amount to cover the cost of administering the fund resulting from that verdict where there was no accident caused need to incur that cost and where there was no suggestion of intellectual disability preceding the accident.

1. (1988) 12 NSWLR 522. 2. Treonne (1988) 12 NSWLR 522 at 529-530. 3. The Arpad [1934] P 189 at 202, per Scrutton LJ. 4. Law of Torts, 6th ed (1983), p 183. 5. (1985) 2 NSWLR 501 at 537, per McHugh JA.

In GIO of NSW v Rosniak [55] , Mahoney JA, in a passage part of which I have set out earlier in these reasons, followed Treonne . In Rosniak , the plaintiff was eleven years of age at the time of the tortious injury and she suffered traumatic brain damage which was irreversible. It was in those circumstances that Meagher JA [56] said that neither party challenged the correctness of the general principle that there was included as a head of damages recoverable by the plaintiff whatever reasonable fee would be paid to a manager of the damages recovered under the verdict, this being an inevitable consequence of the tortious conduct of the defendant. Rather, his Honour pointed out, the dispute between the parties concerned identification of the components of the award of damages which were to be treated as part of the "fund" which would require management. Likewise, Kirby P [57] identified the issue as being the manner of calculation of the costs of fund management, it being conceded, on the authority of Treonne , that an allowance must be made in the case for such costs.

1. (1992) 27 NSWLR 665 at 684-685. 2. GIO of NSW v Rosniak (1992) 27 NSWLR 665 at 693-694. 3. GIO of NSW v Rosniak (1992) 27 NSWLR 665 at 673.

In my view, neither Treonne nor Rosniak supplied authority or principle for the particular order made by the Court of Appeal in this case. Here there was no finding that the tortious act gave rise to the need to incur the cost of fund management and there was no suggestion of intellectual disability preceding or consequent upon the accident. Rather, those decisions, particularly Treonne , together with the decision of the Full Court of the South Australian Supreme Court in Campbell v Nangle [58] , to which I have referred, state the applicable principles correctly and therefore with a result adverse to the respondent in the present case.

However, as McHugh J points out in his reasons for judgment, whilst the tortious injury has not affected the capacity of the respondent to invest her moneys, her physical state, with confinement to a wheelchair and difficulty in writing, makes it likely that some expense will be incurred, as a result of the tort, in managing her financial affairs. It is for the Court of Appeal, failing agreement by the parties, to determine what, if any, sum should be allowed for this expense.

The appeal should be allowed. Order 4 of the orders made by the Court of Appeal on 19 May 1994 should be set aside. However, the matter should be remitted to the Court of Appeal to determine what, if any, sum should be allowed for the expense to which I referred. It will be necessary also to implement the decision of this Court by fixing a sum in substitution for that specified in Order 4 of the orders made by the Court of Appeal.

The parties should have twenty-eight days within which to bring in agreed orders to implement the decision of this Court. If this is not done, then at the expiration of that twenty-eight days the matter should be remitted for reconsideration by the Court of Appeal in accordance with the reasons for judgment in this Court.

Special leave to appeal was granted by this Court upon the condition that the appellant pay the costs of the respondent in any event and that the appellant not seek to disturb the order for costs made in the Courts below.