Peak v Dunleavy

District Court of NSW|2008-10-24

CITATION: Peak v Dunleavy (No 2) [2008] NSWDC 240

I assess future funds management charges in the sum of $727,035. DECISION: 2. I enter a judgment in favour of the Plaintiff in the sum of $3,977,035. 3. I order the Defendant to pay the Plaintiff's costs on the ordinary basis up to 10 July 2008 and on an indemnity basis from 11 July 2008

CATCHWORDS: Funds management charges - added to verdict monies for fund management costs likely to be incurred by the Plaintiff over her remaining lifetime - Costs - Plaintiff's costs of trial awarded on an indemnity basis

LEGISLATION CITED: Uniform Civil Procedure Rules 2005 r 42.14

Commonwealth of Australia v Gretton [2008] NSWCA 117 Golden Eagle International Trading Pty Ltd v Zhang [2007] HCA 15 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 CASES CITED: Morgan v Johnson (1998) 44 NSWLR 578 South Eastern Area Health Service & Anor v King [2006] NSWCA 2 Vale v Eggins (No 2) [2007] NSWCA 12 Willets v Futcher (2005) 221 CLR 627

PARTIES: Rachelle Suzanne Peak by her Tutor Doreen Peak (Plaintiff) Leonie Dunleavy (Defendant)

COUNSEL: Mr RS McIlwaine SC and Mr CP Locke (Plaintiff) Mr SG Campbell SC and Mr SE McCarthy (Defendant)

SOLICITORS: Velleley & Associates (Plaintiff) McLachlan Chilton (Defendants)

Consequent upon the findings published in this matter on 10 October 2008, Peak -v- Dunleavy (No 1) [2008] NSWDC 232, as previously foreshadowed, the Plaintiff has made an application for damages to be assessed for future funds management charges. The Plaintiff has also made an application for indemnity costs.

During the course of the trial the Plaintiff's entitlement to damages was agreed in the sum of $5,000,000. After apportionment for contributory negligence, which I assessed at 35%, this resulted in a verdict for the Plaintiff in the sum of $3,250,000.

On 24 October 2008, after noting corrections to the judgment under the Slip Rule, which had no bearing on the issues that now arise for determination, further evidence and argument was received on the issue of the Plaintiff's entitlement to damages for funds management charges and her claimed entitlement to an order for indemnity costs.

The issues that now arise for determination are: (a) What underlying assumption should be made concerning the Plaintiff's probable survival as a basis for the assessment of damages for the likely cost of future funds management;

(b) What sum should be allowed for the cost of future funds management;

(c) Is the Plaintiff entitled to an order that the Defendant pay her costs on an indemnity basis and if so, from what date should such an order operate?

The parties prepared written submissions on these issues and these were supplemented by oral submissions.

Mr McIlwaine SC submits that for the purposes of assessing damages for funds management charges the Plaintiff's probable survival should be accepted to be a further 55 years in line with the assumptions made when quantum was settled.

At the trial the issue of the Plaintiff's probable survival was not formally decided as the parties had agreed on the quantum of damages. For the purposes of obtaining approval of the reasonableness of the agreement on quantum the Plaintiff demonstrated calculations based on a 55 year future survival assumption. After reviewing the relevant medical evidence in Exhibit "J" which was tendered in support of the proposed agreement, I approved the agreement. The evidence tendered on behalf of the Plaintiff that underpinned the approval of the agreement on quantum did not include any opinions that were decremental to the Plaintiff's survival.

Mr Campbell SC submits that the Defendant is not bound by the analysis adopted by the Plaintiff in the course of obtaining approval of the agreement. Accordingly, it is necessary to consider the medical evidence the Defendant has tendered on this issue.

The Defendant relied upon a report dated 3 July 2008 from Associate Professor Richard Jones in MFI "10" which has now become Exhibit "N" in which the author states: "I acknowledge receipt of your letter 1 July 2008 in the matter of Rachelle Peak received by facsimile transmission and seeking my view as to Ms. Peak's life expectancy or impairment to her normal life expectancy. … With respect to her life expectancy there were no substantial issues that would suggest a significant reduction in life expectancy for example, there was no history of recurrent urinary tract infections, respiratory infections, decubitus ulcers of the skin or the onset of vascular disease or diabetes. Her bladder and bowel functions would seem to have been within normal limits.

Her relative immobility would compromise her life expectancy and there may be a discount from her previously expected life years of between 5 and 10. That discount would be based upon the risk of vascular disease and other complications of a sedentary lifestyle.

There is no scientifically proven method by which I can make a more accurate assessment based upon the information provided to me for the consultations and on my findings on physical examination. " (Emphasis added by Associate Professor Jones)

The earlier reports of Associate Professor Richard Jones were identified as being dated 29 March 2007 and 13 December 2007. These reports did not deal with survival or life expectancy issues.

The term life expectancy is a statistical concept which estimates the average remaining years of survival of a cohort group. The determination of the issue of the probable survival of the Plaintiff is a different concept which includes positive and negative allowances for factors that would impact on survival in a particular case including the factors adverted to by Associate Professor Jones in Exhibit "N". In my view, counter-balanced against such factors are the life sustaining benefits flowing from the provision of good care that would be enabled by an award of substantial damages which would in turn tend to promote longevity. Whilst there is no direct evidence of such matters it is a commonsense analysis that I cannot ignore.

The Plaintiff was born on 22 January 1975 and, being aged 33 at trial had, on the prospective or projected life tables, a statistics based life expectancy of 55.26 years. Golden Eagle International Trading Pty Ltd -v- Zhang [2007] HCA 15.

I find Associate Professor Jones' report dated 3 July 2008 raises what I consider to be speculative possibilities only concerning the risk of vascular disease and other possible complicated of a sedentary lifestyle. These are matters already factored into the life tables in any event. He addresses this as a potential decrement to an already discounted estimate of "expected life years of between 5 and 10". In my view the reasoning process for that opinion has not been adequately exposed and to the extent that my reasons behind that opinion have been exposed, I find such reasons represent an inadequate basis for such a reduced survival prediction. Makita (Australia) Pty Ltd -v- Sprowles (2001) 52 NSWLR 705. I reject the opinions set out in the report of Associate Professor Jones dated 3 July 2008 which now comprises Exhibit "N".

In my view, in the absence of focussed and reasoned medical evidence dealing with risks to survival and the counter balancing factors that would tend to promote longevity, no sound reason has been propounded to justify a reduction in the population based cohort survival prediction of 55.26 years to be found in the prospective life tables. I round this off at 55 years.

On the issue of funds management charges the Plaintiff relied upon the Affidavit of her solicitor, David Stephen Velleley, sworn on 22 October 2008, which identified the residual portion of the funds for investment in the sum of $2,580,000 after payment of immediately anticipated expenditure. The Plaintiff also relied upon the two letters from the Perpetual Trustee Company Ltd respectively dated 14 October 2008 and 23 October 2008. The author of those letters, Mr Stanley Rickert, who is a senior financial planner and an officer of Perpetual, gave oral evidence.

The Defendant tendered reports from Vincents Chartered Accountants respectively dated 21 and 22 October 2008.

The Defendant does not contest that the Plaintiff will never be capable of managing her own financial affairs. Nor is it in issue that this circumstance has arisen as a direct consequence of the injuries suffered by the Plaintiff. I find therefore that it is appropriate to make an allowance for the future cost of funds management charges in accordance with well established principles and I propose to include that allowance in my assessment of the Plaintiff's entitlement for damages. Willets -v- Futcher [2005] 221 CLR 627.

On the assumption that the Plaintiff will probably survive for a further 55 years, Mr Rickert, on behalf of Perpetual, has undertaken the task of calculating the present value of funds management charges on an initial projected investment of a balance of $2,580,000 over a projected lifetime of 55 further years. This sum has been identified in Exhibit "L" in the sum of $727,035 using the 5% discount tables.

The evidence discloses that this sum is calculated in accordance with the principles in Willets and includes the factor of management expense ratio in line with that authority. The calculations assume that the fund will not be taxed as the investment that is proposed will not attract taxation because under the superannuation laws, as a disabled person, the Plaintiff is entitled to a tax free pension from such fund as a consequence of the regime propounded by Perpetual. The Vincent report tendered by the Defendant sought to argue matters of tax and management expense ratios which are therefore inappropriate to the circumstances. I prefer and accept Mr Rickert's analysis.

I therefore assess the Plaintiff's entitlement to future funds management charges in the sum of $727,035.

On 10 July 2008 the Plaintiff made an Offer of Compromise in the sum of $1,000,000 plus costs. The Defendant concedes that such an offer was made in accordance with the Rules. That offer lapsed without acceptance. The application for indemnity costs is made because the Plaintiff has received damages for an amount in excess of the amount of that offer.

Consequent upon the verdict entered on 10 October 2008 the Defendant bears the onus of displacing the Plaintiff's presumptive entitlement to indemnity costs from 11 October 2008: Caine -v- Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [33].

On behalf of the Defendant, Mr Campbell SC submitted that the circumstances do not justify the order for indemnity costs as sought by the Plaintiff.

The Defendant relied upon the affidavit of the Defendant's solicitor, Mr Andrew Christopoulos which was sworn on 22 October 2008 which attached material tending to show that a pivotal fact which was not known to the Defendant until the trial had commenced was instrumental in determining the outcome of the litigation against the interests of the Defendant.

The basis of the Defendant's submission is the observation of Mrs Ginnbert, a witness at the trial, concerning the operation of the Plaintiff's right indicator light, which was pivotal to the litigation being determined in the Plaintiff's favour, only came to the Defendant's attention during the course of Mrs Ginnbert's evidence. Mr Campbell SC argued that since that fact was only discovered by the Plaintiff the day before the trial when Mrs Ginnbert was interviewed by the Plaintiff's representatives, no special costs order should be made in the circumstances. I do not accept that submission for a number of reasons.

Firstly, the Defendant could have also readily ascertained this detail of Mrs Ginnbert's recollection in advance of the trial if Mrs Ginnbert had also been interviewed by representatives of the Defendant and if the relevant question had been asked. Secondly, on a broader view, the vagaries and exigencies of litigation are well known by litigants, including the insurers of litigants. It is common experience that such exigencies include circumstances in which witnesses variously, come up to proof, do not come up to proof, have their recollection improved or even traduced during the course of litigation. This factor is well appreciated by all involved in litigation and it operates as an incentive to a party, in this case the Defendant, to settle when confronted with a genuine compromise, to avoid a potentially more disadvantageous outcome. Thirdly, the policy underlying r 42.14 of the Uniform Civil Procedure Rules 2005 is to promote settlement rather than to chance the result of litigation: Morgan -v- Johnson (1998) 44 NSWLR 578 per Mason P at 582.

I find that in this case, the Plaintiff's Offer of Compromise was a genuine attempt to settle her case at a significantly discounted sum. In my view the Defendant made a tactical decision to decline to accept the Plaintiff's Offer of Compromise with the result that the litigation took its course. The Defendant clearly sought to defeat the Plaintiff's claim or at least tried to achieve a verdict for an amount less than $1,000,000 in the expectation of a higher apportionment against the Plaintiff on account of contributory negligence. The Defendant must have known that it was possible for the Plaintiff's claim to succeed such that the Plaintiff could obtain a more favourable outcome than $1,000,000. It is not necessary to analyse whether the actual basis upon which the Plaintiff's case succeeded was a matter the Defendant ought to have reasonably had within contemplation and foreseen when declining to avail itself of the opportunity for settlement offered by the Plaintiff. It is therefore inappropriate, after the event, in this case, to now revisit the tactical decision not to accept the Plaintiff's offer and to attempt a deconstruction and reconstruction of the relevant events so as to avoid the effect of r 42.14.

The parties submit that since the decision in Commonwealth of Australia -v- Gretton [2008] NSWCA 117 is primarily concerned with Calderbank offers it is not necessary to look further than the requirements of the Rules as they have been applied to Offers of Compromise in accordance with r 42.14 of the Uniform Civil Procedure Rules 2005. I will follow that course.

The Defendant submits that the decision to decline the Plaintiff's offer was not unreasonable on the information available at the time the offer was open for consideration, along the lines of the analysis in Vale -v- Eggins (No 2) [2007] NSWCA 12 per Beazley JA at [10] to [15] and South Eastern Area Health Service & Anor -v- King [2006] NSWCA 2 at [82] to [87].

In my view that submission would have had greater force if the evidence on the costs argument in this case had disclosed that the Defendant's representatives had in fact interviewed Mrs Ginnbert before the trial and had obtained confirmation from her that the Plaintiff's vehicle was not showing an illuminated right indicator at the time Mrs Ginnbert made her other observations of the Plaintiff's vehicle immediately before the collision. The evidence did not disclose whether the Defendant's representatives had in fact conducted an interview with Mrs Ginnbert.

In my view, in these circumstances, the Plaintiff is entitled to indemnity costs from the date of expiry of her offer.

I order that: (a) After allowing for the addition of funds management charges in the sum of $727,035 to the already apportioned amount of the Plaintiff's verdict of $3,250,000 I direct the entry of judgment in the Plaintiff's favour in the sum of $3,977,035;

(b) I order the Defendant to pay the amount of the judgment into Court within 28 days less any due deductions required by the provisions of the Health and Other Services (Compensation) Act, 1995 (Cwth) and I order that the balance of such sum be invested in an interest bearing account for the benefit of the Plaintiff pending the further order of either this Court or the Supreme Court in its Protective Division;

(c) I order the Defendant to pay the Plaintiff's costs on the ordinary basis to 10 July 2008 and on an indemnity basis from 11 July 2008;

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

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Judgment (47 paragraphs)

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Cases Cited (9)