Richards v Gray

HEADNOTE [This headnote is not to be read as part of the judgment] In 2003 the respondent suffered severe injuries including a traumatic brain injury as a result of a motor vehicle accident. The respondent, as a consequence of the accident, is a person who has significant disabilities and requires constant care. Through her mother as tutor, the respondent brought proceedings against the appellant claiming his negligence was the cause of her injuries. The proceedings were compromised and a judgment in the sum of $10 million with an amount for the costs of administering the verdict sum was awarded to the respondent. The proceedings the subject of the appeal concerned the amount to be awarded to the respondent for the costs of managing the judgment sum of $10 million. It was not in dispute before the primary judge that the amount awarded to the respondent should include an allowance for fees incurred in managing the award of damages. However, the parties disagreed in respect of four issues that were relevant to the quantum of the amount awarded for fund management fees: first, whether in calculating fund management fees an allowance should be made not only in respect of the fees necessary to manage the $10 million verdict, but also a further amount to manage the funds set aside for that purpose. This was referred to as "fund management on fund management"; second, whether the fund management fees should not only include an amount to manage the capital of the fund, but also a further amount to manage income derived from the fund. This was referred to as "fund management on fund income"; third, whether components of the verdict should not be accounted for when calculating the fund management fees on the basis they would be paid out early in the life of the fund. These amounts were for additional solicitor and client costs, past Griffiths v Kerkemeyer (1977) 139 CLR 161 damages, and house modification and swimming pool costs; and fourth, whether fund management fees should be based on rates charged by The Trust Company Limited or the lower fees charged by the NSW Trustee and Guardian. The primary judge found in favour of the respondent in relation to all four issues. The primary judge gave a further judgment in relation to applications as to costs. Both the appellant and the respondent by cross-appeal challenged this judgment. The issues for determination on the appeal were: (i) whether the amount awarded for fund management expenses should include an amount for fund management on fund management; (ii) whether the amount awarded for fund management expenses should include an amount for fund management on fund income; (iii) when calculating the amount awarded for fund management expenses, whether certain components should be deducted from the corpus of the verdict; (iv) whether fund management expenses at the rates of The Trust Company or the rates of the NSW Trustee were reasonable, the latter being lower; and (v) the issue of costs, both in the proceedings below and on the appeal. The Court held, allowing the appeal in part: In relation to (i):

1. It is not appropriate to extend the principle by which fund management expenses are awarded to a plaintiff who is incapable of managing his or her award of damages by reason of their injuries to in turn cover fees for managing that fund. Additional amounts should not be awarded on the assumption that fees will also be paid on the amount set aside for fund management expenses or on the basis that fund management expenses will also need to be managed: [145]-[146] (Bathurst CJ); [162] (Beazley P); [163] (McColl JA); [200] (Basten JA); [241] (Meagher JA).
2. The calculation of the amount for fund management on fund management involves speculation and it is not for the court to speculate as to every possible circumstance but rather to give fair compensation: [147] (Bathurst CJ); [162] (Beazley P); [163] (McColl JA); [241] (Meagher JA). Government Insurance Office of New South Wales v Rosniak (1992) 27 NSWLR 665 considered. In relation to (ii):
3. The claim for fund management on fund income should not be allowed. The claim appears contrary to s 127 of the Motor Accidents Compensation Act 1999 as the discount rate assumes a rate of return that accounts for the costs of earning income; consideration of income earned on a fund will require reference to matters for which use of a discount rate was intended to avoid; there will be income tax consequences; and, it cannot be said with certainty that the exclusion of an award for fund management on fund income will operate unfairly: [138]-[143] (Bathurst CJ); [162] (Beazley P); [163] (McColl JA); [241] (Meagher JA). Government Insurance Office of New South Wales v Rosniak (1992) 27 NSWLR 665; Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49; Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd [1981] HCA 3; (1981) 145 CLR 625; Commonwealth v Blackwell [1987] HCA 44; (1987) 163 CLR 428 considered. Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 applied.
4. Although the result may underestimate the likely cost of fund management, the disadvantage of engaging in such speculative exercises, as an exception to general principle, means that it should not be adopted: [202]-[206] (Basten JA). In relation to (iii):
5. It is not appropriate to make any deduction from the fund for the purpose of calculating fund management expenses as there is no reason to suggest that the whole of the fund would not initially be available for investment and, further, the timing of the relevant payments remains a matter of speculation: [127]-[134] (Bathurst CJ); [162] (Beazley P); [163] (McColl JA); [241] (Meagher JA). Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49 considered.
6. The principle with respect to calculating the corpus is to reduce the amount of the damages awarded by the amount of existing legal liabilities. In the present case there should have been a reduction of $200,000 for solicitor/client costs incurred at the time of approval of the settlement: [208]-[213] (Basten JA). Government Insurance Office of New South Wales v Rosniak (1992) 27 NSWLR 665 considered. In relation to (iv):

Background 1The facts underlying this appeal are relatively straightforward, although the issues raised are of some complexity. 2Ms Rhiannon Gray (the respondent) suffered severe injuries including a traumatic brain injury as a result of a car accident in which she was involved in 2003. As a result of her injuries she has a significant intellectual disability and requires constant care. 3The respondent, through her mother as tutor, brought proceedings against the appellant claiming his negligence was the cause of the loss suffered by her. The proceedings were compromised and a judgment in the sum of $10 million (the verdict) together with an amount to be determined for the costs of administering the verdict was entered in favour of the respondent. The proceedings the subject of this appeal relate to the amount to be awarded to the respondent for the costs of administering the verdict. 4It was not in dispute that having regard to the respondent's disabilities the verdict after payment of certain out of pocket expenses was to be paid to a manager to be held as part of a protected estate. Section 77 of the Civil Procedure Act 2005 empowers the court to order that the whole or any part of the verdict be paid to such person as a court may direct, including if the person is a protected person, to the manager of that person's estate. Section 79 of that Act requires the manager to hold and apply such funds as part of that person's estate. Section 41 of the NSW Trustee and Guardian Act 2009 (Guardian Act) empowers the Supreme Court to declare that a person is incapable of managing his or her affairs and by order appoint a suitable person as manager of the estate or commit the management of the estate to the NSW Trustee and Guardian (NSW Trustee). 5On the application of the respondent's mother, White J sitting in the Protective List of the Equity Division made orders pursuant to s 41 appointing The Trust Company Limited as manager of the respondent's estate and that the proceeds of the settlement and the amount of any judgment in respect of fund management costs be paid to The Trust Company. 6It was common ground between the parties that the damages to be awarded to the respondent should include an allowance for fees incurred in managing the verdict (the fund management fees). However, the parties were in dispute in respect of four issues which were relevant to the quantum of the fund management fees. 7The first issue was whether in calculating the fund management fees an allowance should be made not only in respect of fees calculated as necessary to manage the verdict but also an amount to manage the funds set aside for that purpose. It was not disputed by the appellant that any funds awarded for fund management fees would also require management. However, the appellant disputed that an additional allowance should be made for this fact. This was described in the proceedings as the "fund management on fund management" issue. For convenience I will refer to it in the same fashion. 8The second issue was whether the fund management fees should include not only an amount to manage such of the capital of the fund as existed from time to time, but also an amount required to manage the income derived from the fund during its existence. This issue was referred to in the proceedings as "fund management on fund income". 9Contrary to the appellant's contention, the primary judge found that an allowance should be made both for fund management on fund management and for fund management on fund income. 10The third issue was whether an amount of $650,000 of the verdict should not be taken into account for the purpose of calculating fund management fees. It was common ground that the amount which would be paid to The Trust Company was $9,929,000. However, the appellant contended that in calculating the allowance for fund management fees, $650,000 of this amount should not be included. The amount comprised first, $200,000 for additional solicitor and client costs; second, $200,000 being past Griffiths v Kerkemeyer (1977) 139 CLR 161 damages which the judge who approved the settlement stated he would be prepared to recommend be paid out to the respondent's mother; and third, $250,000 for the costs of house modification and a swimming pool. The appellant submitted before the primary judge that these amounts should be excluded as they would be paid out early in the life of the fund and therefore would not be subject to ongoing fund management fees. The primary judge rejected this submission. 11The fourth issue was whether the calculation of fund management fees should be based on the rates charged by The Trust Company or those charged by the NSW Trustee which were somewhat lower. The appellant contended for the latter, the respondent the former. The primary judge found in favour of the respondent on this issue. 12The appellant contends in this appeal that the primary judge erred in her conclusion on all four issues.

The reasoning of the primary judge 13The primary judge considered the matter in two judgments. The first dealt with the fund management on fund management and fund management on fund income issues. The second, delivered after White J had made his orders in the Protective List, dealt with the remaining two issues. 14The primary judge expressed the opinion that it was difficult to fault the logic of the respondent's claim for an allowance for fund management on fund management, as the award for fund management fees would of itself give rise to future fund management expenses. 15Her Honour also concluded that since the fund management fees must be discounted to present value at the statutory rate of 5%, it followed that the sum would have to be invested to ensure a net return approximating the discount rate. 16The primary judge referred to the statement of Meagher JA in Government Insurance Office of New South Wales v Rosniak (1992) 27 NSWLR 665 at 698 (Rosniak (No 1)) to the effect that an award in respect of such an amount would constitute unwarranted double counting. She stated that this was incorrect as s 79 of the Civil Procedure Act requires that the proceeds of the verdict be held on trust by the manager and applied as part of the protected estate with the manager being paid periodically. She stated that she did not consider herself bound by what was said by Meagher JA as the matter was not addressed in the judgments of the other members of the Court. 17Her Honour considered a number of conflicting first instance judgments in relation to the issue. In Bacha v Pettersen (Supreme Court of New South Wales, 20 September 1994, unreported) fund management on fund management expenses were allowed, whereas in Buckman v M & K Napier Constructions Pty Ltd [2005] NSWSC 546, followed in Haywood v Collaroy Services Beach Club Limited [2006] NSWSC 566 and Lewis v Bundrock [2008] QSC 189; [2009] 1 Qd R 524, such claims were rejected. Her Honour preferred the reasoning of Hunter J in Bacha to the other authorities. 18It was critical to her Honour's reasoning that having regard to the intellectual disabilities suffered by the respondent, the cost of fund management was a recognised head of future loss. She considered that in these circumstances it was difficult to see why the repetitive and ever-diminishing nature of the calculation of an allowance for fund management on fund management should preclude the grant of such an award. 19So far as fund management on fund income was concerned, the primary judge stated that the claim relied on what she described as five uncontroversial propositions. First, the common law requirement that damages be quantified as a lump sum representing compensation once and for all; second, the need in that context to have regard to the time value of money; third, that the rate at which a future loss is discounted to find its present value reflects a prediction as to earnings over time; fourth, the imposition in the assessment of damages for personal injuries of a fixed discount rate in lieu of an entitlement to adduce evidence of the actual rate appropriate in the particular case; and fifth, that earnings will be required to be returned to the manager and applied as part of the estate. 20The appellant submitted before the primary judge that the approach mandated by Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 (Todorovic v Waller) was that as damages are assessed on a once and for all basis and the court generally speaking is not concerned with what a plaintiff does with his or her award, it was not appropriate to take into account what might be earned on the fund in calculating the fund management fees. The appellant also submitted before the primary judge that taking one matter into account, namely any increase in the fund as a result of interest received, ignored a host of other variables which could affect the capital amount and if all such variables were taken into account the purposes of s 127 of the Motor Accidents Compensation Act 1999 (the Act) would be subverted. 21The primary judge rejected this submission, stating that the respondent's argument rested on the existence of a mandatory discount rate which quelled uncertainty by the device of a statutory assumption as to future earnings. Her Honour stated that to take such income into account did not subvert s 127 of the Act, but rather invoked the very assumption implicit in the discount rate. She stated that in her opinion the real question was not whether income should be taken into account in the calculation of fund management fees, but whether the appropriate method of doing so was to adopt what she described as that "assumption", namely, the rate of interest of 5% which she concluded was implicit in the fixed discount rate. 22The primary judge expressed the view that the capacity of the fund to earn income was critical to its adequacy. In these circumstances she accepted that the income would become part of the managed fund and, accordingly, would also incur fund management fees. She accepted the proposition that it must follow that if income was excluded from the calculation of such fees, there would be a shortfall in damages allowed on that account and consequently insufficient money to manage the respondent's damages. 23In reaching this conclusion her Honour declined to follow the decision of Hislop J in Rottenbury v Rottenbury [2007] NSWSC 215. She suggested that the arguments accepted by Hislop J misapprehended what is denoted in a fixed discount rate and overlooked the fact that income would be earned and added to the fund. 24In these circumstances the primary judge concluded that it was logical and consistent to undertake the calculation of fund management fees on fund income by reference to an assumed earning rate of 5%. She stated that was governed by two principles. The first was that even if some part of the award represented past loss and general damages, the fiction of uniform drawings was the appropriate assumption. The second was that a consistent approach should be adopted in the calculation of all components of damages. Her Honour stated that a consistent approach found support in the judgment of Clarke JA in Treonne Wholesale Meats v Shaheen (1988) 12 NSWLR 522. She recognised that a majority of the Court of Appeal adopted a different approach in Rosniak (No 1), but said that the decision was an example of a case in which the principle of consistency "was rejected as potentially operating unfairly to the plaintiff". In the result she concluded that the claim for fund management on fund income should be allowed on the basis of an assumed earning rate of 5%. 25In her second judgment the primary judge rejected the appellant's contention that fees for management of fund income should be deducted on a post-tax basis as inconsistent with the reasoning in Todorovic v Waller. 26The remaining two issues were dealt with by the primary judge in her second judgment. By that time The Trust Company had been appointed the manager of the respondent's estate. 27In considering whether or not it was reasonable for the respondent to recover fund management fees on the basis of fees charged by The Trust Company rather than the NSW Trustee, her Honour dealt with the evidence of Mr Corey Plover, an actuary engaged by the respondent. Mr Plover concluded that the level of uncertainty surrounding the fee of the NSW Trustee was so high that it would be unreasonable to use them in calculating long term management fees. Mr Plover based his view on a report of the Independent Pricing and Regulatory Tribunal (IPART) of September 2008, which recommended that a more cost-reflective fee structure should be considered in a future review. Mr Plover also based his view on the respondent's circumstances, namely, that she had a high degree of impairment and was likely to have higher than average service needs; that any removal of the fee cap would have a substantial effect on her costs of management; and, that under the concept of affordable funding, her large award was likely to preclude her from benefiting from current and future government subsidies. 28Mr Bernard Farrell, the Director of Finance and Client Funds Management for NSW Trustee, deposed that the NSW Trustee's fees could only be changed as a result of the government accepting a recommendation of the IPART. He said there was no expectation of a review until 2014. Mr Farrell also rejected Mr Plover's contention that there were hidden charges in the NSW Trustee fee structure and stated that since the merger of the Office of the Protective Commissioner and the Public Trustee to form the NSW Trustee, "the current level of government subsidies is sufficient for the [NSW Trustee] to maintain the current fee structure for a good number of years". 29It should be noted that the IPART Report of September 2008 related to the Office of the Protective Commissioner which in 2009 was merged with the Public Trustee to form the NSW Trustee. 30The conclusion of the primary judge on this evidence was as follows: "[67] It is critical to the determination of this issue to note that the positions of Mr Plover and Mr Farrell are not mutually exclusive. It may well be that the funds currently available are sufficient for the Trustee to maintain the current structure for 'a good number of years'; it may also be that a recommendation for increased fees will be made and implemented at some point after 2014. Mr Farrell expressly places his confidence as to the present structure, in part, on the availability of funds from the Interest Suspense Account. It does not seem inherently unlikely that the IPART would, at some point in the not too distant future, consider a more cost-reflective structure to be more appropriate. In my view, the concerns identified by Mr Plover on that issue are substantiated by cogent reasoning and accord with common sense. Based on the evidence of Mr Farrell, I accept that possibility is probably small but I do not consider it to be 'utterly speculative' in all the circumstances. 31In the result, her Honour concluded that the evidence showed there was a small but appreciable risk that the appellant's assumption that the existing fee structure of the NSW Trustee would continue for 67 years would produce an underestimate of the true future costs of funds management by that entity. She said that to "a small degree" this finding informed her ultimate conclusion that it was appropriate to assess fund management fees on the basis of fees charged by The Trust Company as distinct from the lower fees charged by the NSW Trustee. 32The primary judge emphasised that while it was plainly relevant, she did not think the fact that The Trust Company had been appointed as manager was determinative of the issue. 33In an affidavit filed in the Protective List proceedings the respondent's mother deposed that difficulties she had had with the NSW Trustee in the past was the reason she sought an order that a private trustee be engaged as the manager of her daughter's affairs. Her Honour accepted this evidence. Her conclusion on this issue was in the following terms: "[86] That said, each case must be considered on its own facts. The plaintiff's disability falls at the high end of the range. She is extremely disabled and has a lengthy life expectancy. Her mother's reasons for choosing the more personalised services of a private manager are compelling. The Equity Division of this Court has endorsed that choice. Mrs Gray's prior experience of the Office of the NSW Trustee further demonstrates that it was reasonable of her not to accede to the cheaper alternative offered by the State." 34In these circumstances she said the claim for fund management based on the fees of The Trust Company was reasonable and should be allowed. 35In relation to the quantum of the fund, her Honour noted that the whole of the initial fund was to be paid to The Trust Company. She seemed to accept the submission that the manager would not permit the outgoings sought to be deducted if the total of any deductions for the fund in a given year exceed $500,000. This figure was based on Mr Plover's notional amount of drawings on the fiction of uniform drawings over the life of the fund. Her Honour said that in these circumstances it was speculative as to when such payments would be made. She therefore declined to make any deduction from the fund for the purpose of calculating fund management fees.

The submissions on appeal 36As I indicated the appellant challenged the conclusion of the primary judge on each of the four issues referred to above. 37It is not necessary to set out the grounds of appeal. Further, as both the grounds of appeal and the submissions on the additional allowances for fund management on fund management and fund management on fund income to some extent overlap, it is convenient to deal with them together.

(a) The parties' submissions on the first and second issues - The additional allowances in respect of fund management fees 38The appellant submitted that the fundamental error which infected the reasoning of the primary judge was that she equated the prescribed discount rate with income which might be earned from investment of the verdict. He submitted that there was no justification to be found in the Act for this course and that it was inconsistent with Todorovic v Waller. He referred to the public statement made by the High Court at the time it gave its judgment in that case to the effect that the discount rate is intended to make appropriate allowances for inflation, for changes in rates of wages generally or of prices and for tax either actual or notional on income from investment of the sum awarded. The appellant also emphasised that the damages awarded were awarded on a once and for all basis. 39The appellant noted that this approach had been consistently followed by the courts, referring in particular to Commonwealth v Blackwell [1987] HCA 44; (1987) 163 CLR 428, Rosniak v Government Insurance Office (1997) 41 NSWLR 608 (Rosniak (No 3)) and Rottenbury supra, the latter two cases involving claims for fund management expenses. He submitted that in these circumstances there was no justification for her Honour's doubts as to "whether the High Court's statements in Todorovic were intended to be construed as prohibiting the consideration of future earnings in an appropriate case". He submitted there was no justification for treating fund management expenses as falling into a different category from other future expenses as a result of the respondent's injuries. In this context the appellant referred in particular to what was said by McHugh J in Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49 at 61. 40The appellant submitted that it was erroneous for the primary judge to adopt the approach of Mr Plover in calculating the income on which fund management expenses were to be assessed. He referred to Mr Plover's admission that the purpose of his calculations was to unwind the discount rate and submitted that the approach adopted by the primary judge wrongly nullified the discount rate laid down by Parliament. 41The appellant submitted that the discount rate was intended to be of general application to all personal injuries cases where a lump sum calculation of future losses was required, and further, that the discount rate was intended to take into account a number of factors incapable of precise calculation including inflation, changes in wages and prices and tax upon income generated by the notional investment of the sum awarded. He submitted that no further allowance should be made for these factors, contending that the fact that the fund was able to generate earnings was taken into account in the calculation of the discount rate. 42In relation to fund management on fund management, the appellant relied on the statement of McHugh J in Nominal Defendant v Gardikiotis supra at 61-62, to the effect that if the plaintiff incurs expenses in investing monies that is the plaintiff's choice; as it occurs after the plaintiff has received fair compensation, it is not a factor to take into account if the plaintiff is to receive a full indemnity. 43The appellant submitted that this approach was consistent with that of Meagher JA in Rosniak (No 1). He pointed out that when the matter was referred back to Badgery-Parker J his Honour applied Meagher JA's approach, and further, that the amount awarded by Badgery-Parker J was affirmed on appeal in Rosniak (No 3). The appellant submitted that her Honour was bound to follow this approach and erred in declining to do so. 44The appellant also submitted that as a matter of statutory construction the terms of s 127 were clear in requiring the discount rate to be applied and in implicitly prohibiting any attempt to circumvent or unwind it, which he submitted the respondent's expert and the primary judge purported to do. 45Finally in his written submissions, the appellant submitted that if the Court was entitled to take income derived from the fund into account in calculating the fund management allowance, it should take into account the tax deductions which would be received in respect of such payments. 46Senior counsel for the appellant submitted at the hearing that the experts accepted that the correct approach was that once the amount of the corpus is determined it is assumed that for the rest of the injured person's life there will be a regular annual drawdown out of the corpus to provide funds, and further, that the allowance made each year will reduce the fund to zero at the end of the person's life expectancy. He accepted there was artificiality in this approach but submitted that it was mandated by Rosniak (No 1). 47Senior counsel for the appellant submitted by reference to a table provided by Mr Plover that if an assumed rate of earnings is taken into account the annual drawings available to the appellant increase from $150,000 to $504,000, submitting that "the moneys available to her are exponentially increased". He pointed out there would still be $9 million available to the respondent after 25 years. He stated that in these circumstances the respondent would receive fund management expenses on a gross figure of $33 million which was wrong in principle. He submitted it produced an uplift to the respondent which could not have been intended when Parliament introduced the 5% discount. 48Senior counsel for the appellant also submitted that even if as a matter of principle fund management on fund income could be allowed, there was no evidence to assess the rate of earnings which would be obtained and what offsets would be available. 49It was also submitted on behalf of the appellant at the hearing that apart from varying the discount rate to 5%, s 127 of the Act did not alter the principles laid down in Todorovic v Waller. It was submitted there was nothing in the statute to justify the conclusion of the primary judge that there was a statutory assumption that the fund would earn income at the rate of 5% per annum. It was put that if that submission was accepted there was nothing to justify the primary judge assuming that rate of earnings and there was no evidence to support a finding that the fund would in fact earn income at a constant rate of 5%. 50Senior counsel for the appellant also submitted that the discount rate took into account income as well as inflation and tax on income. He submitted that income thus being taken into account in that fashion, it was inappropriate to make an additional allowance for the cost of earning it. 51In relation to fund management on fund management, senior counsel for the appellant placed considerable reliance on what was said by Meagher JA in Rosniak (No 1). However, he was unable to explain why Meagher JA said that the inclusion of this amount constituted double counting. 52The respondent submitted that the primary judge was correct in acknowledging that the discount rate represented the net earning capacity of the fund over time. She submitted that the 5% discount rate is based upon notional real interest and earnings over the life of the fund taking into account the effect of investment return, notional taxes, inflation and other expenses. 53The respondent submitted that the primary judge was correct in concluding that the amount for fund management itself would need to be invested to earn a net return approximating the discount rate and therefore would also need to be managed and as a result would incur management fees. 54In relation to fund management on fund management, the respondent submitted that the primary judge was correct in observing that The Trust Company was not allowed to remove the amount awarded for fund management from the funds under management and treat it as an upfront payment. She noted that the appellant conceded at first instance that the portion of damages identified as fund management costs should be included in the total amount as part of the funds under management. The concession in fact was that the primary judge was bound to proceed on that assumption. 55The respondent noted that Mr David Watt, an expert accountant engaged by the appellant, agreed that unless fund management fees were calculated on the head of damage allowed for fund management, there would be a shortfall and the fund would not have the projected 67 year life expectancy of the respondent. She also noted that Mr Watt had acknowledged that the calculation was not difficult. 56The respondent submitted that Todorovic v Waller was not a case about funds management. The respondent accepted that other amounts payable in respect of future losses should be calculated at the "statutory" discount rate but emphasised that the costs of funds management was a component of future loss. In these circumstances she submitted that the discount rate did not include the costs of fund management. She submitted that once it was accepted that this head of loss needed to be managed it followed that an allowance should be made for the costs of management. 57In relation to fund management on fund income, the respondent submitted that it was necessary to identify the total capital on which such fees would be levied. She submitted that once it was accepted that management fees would be charged on income, it was appropriate to include such fees in the amount of damages. 58The respondent submitted that Todorovic v Waller established that the discount rate equals the earnings rate after deductions and that in the absence of a clear intention to the contrary, the earnings rate should equal the discount rate. The respondent submitted that this was consistent with the approach in Rosniak (No 1), in which Meagher JA noted at 698 that a rate of 5% ought be chosen in all cases as the appropriate figure for calculating the investment return. The respondent submitted that there was no challenge to the reasoning of Meagher JA on this point. 59So far as Meagher JA's comment on double counting in Rosniak (No 1) was concerned, the respondent submitted that it only related to fund management on fund management. Further, she submitted his Honour's reference to double counting was incorrect and should not be followed. 60The respondent also submitted that it was inappropriate to take tax into account as it had already been taken into account in both the discount rate and the investment rate. She said that further consideration of taxation would in fact involve double counting. 61At the hearing senior counsel for the respondent acknowledged that the discount rate assumed a rate of a return on the funds after tax and inflation but submitted that it did not include the cost of fund management. He also submitted the costs of managing the fund set aside for the purpose of meeting fund management costs had itself been discounted. He submitted that in those circumstances allowance had to be made for management of that fund to produce the 5% return said to be implicit in the discount rate otherwise there would be a shortfall. 62In relation to fund management on fund income, senior counsel for the respondent again submitted that if allowance was not made there would be a shortfall. He submitted that that was inevitable when the bulk of the fee was calculated on annual rests.

(b) The parties' submissions on the third issue - Deductions from the fund prior to calculation of fund management fees 63The appellant submitted that in calculating fund management fees the Court's task was to calculate the fund at the commencement of its investment. He submitted the amounts for solicitor and client costs, Griffiths v Kerkemeyer damages and the house and swimming pool modifications referred to in a schedule of damages should be deducted as in all likelihood they would be paid out prior to investment of the fund. 64The appellant referred to the statement by the trial judge who approved the settlement that he would recommend at least $200,000 be paid to the respondent's mother as Griffiths v Kerkemeyer damages, as forming the basis on which this Court could confidently conclude that the amount would in all likelihood be paid out prior to the investment of the fund. He made similar submissions in relation to the other claimed deductions. 65At the hearing senior counsel for the appellant referred to the statement of Mahoney JA in Rosniak (No 1) at 688 to the effect that the court must initially determine whether any components of the judgment should not be included in the fund, which will depend on whether any of the amounts would not be available for investment by the Protective Commissioner and so available to derive income. 66Senior counsel for the appellant was unable to point to any evidence that the fund would not be available for investment, stating that the amounts in question might be there for a year or two years but would not be available for the life of the fund. 67The respondent pointed to the fact that The Trust Company and the NSW Trustee both charge an annual management fee on the capital sum of the fund. She submitted that the fee would be charged on the whole amount paid in. 68The respondent referred to the fact that Mahoney JA in Rosniak (No 1) pointed to the responsibility of the Protective Commissioner to maintain the fund to satisfy its purpose and that there was no basis to be satisfied in the present case that any major components would be expended totally or substantially before investment. 69The respondent submitted that solicitor and client costs can only be determined after finalisation of the litigation when party and party costs can be assessed. She pointed out that this was yet to occur. She also pointed out that although Hoeben J who approved the settlement said he would make a recommendation in respect of Griffiths v Kerkemeyer damages, that should be considered with regard to the manager's obligation to maintain the fund. Finally she submitted that there was no evidence when any money would be allocated for house modification or a swimming pool.

(c) The parties' submissions on the fourth issue - The choice of manager 70The appellant's submissions on this issue were based on the assumption that the primary judge was correct in her conclusion on the three issues to which I have referred above. In these circumstances he pointed out that the difference in fees was $865,000, The Trust Company's fees comprising 21.7% of the fund and the NSW Trustee's 12.9% of the fund. 71The appellant contended that the primary judge erred in two respects. First, in reliance on the evidence of Mr Plover and second, having regard to the significant differential, it would be unreasonable to impose the burden of The Trust Company's fees on the appellant. 72Mr Plover gave evidence as to the likelihood of the fee structure of the NSW Trustee remaining the same and, in particular, of the likelihood of the cap on fees charged by that organisation remaining in place. The appellant submitted that Mr Plover's evidence in this respect should not have been admitted as he had no personal knowledge of the workings of the NSW Trustee, and further, that his opinions were not wholly or substantially based on his expertise in circumstances where he was attempting to predict the current and future operations of that organisation. 73So far as the question of fees was concerned, the appellant submitted that what the respondent was entitled to receive from the appellant by way of funds management fees was not what was ideal for satisfying her needs but what was reasonable for such purposes. He submitted that whilst the respondent might be entitled to choose her fund manager, she could not be entitled to be indemnified for the costs of a private fund manager in circumstances where the NSW Trustee's fees were significantly lower. 74At the hearing senior counsel for the appellant submitted that there was nothing to suggest that the services of The Trust Company and the NSW Trustee were not comparable. He acknowledged that the reasons given by the respondent's mother for preferring The Trust Company were not challenged but stated that otherwise there was no material difference in the service provided. He submitted in these circumstances that reasonable costs should be assessed by reference to the capped fee of the NSW Trustee. He submitted that the position was not affected by the fact that The Trust Company had been appointed by White J sitting in the Protective List of the Equity Division, pointing out that the appellant was not entitled to be heard at the hearing of those proceedings. 75In relation to the evidence of Mr Plover, senior counsel for the appellant submitted that even if it was admissible it was contradicted by the unchallenged evidence of Mr Farrell to which I have referred above. 76The respondent pointed out that r 38 of the NSW Trustee and Guardian Regulation 2008 provided for the following fees: "The prescribed fees payable to the NSW Trustee in respect of the management of estates of managed persons are as follows: (a) for the management of an estate: (i) for the first year - 2.1% of the value of the estate, and (ii) for every subsequent year - 1.1% of the value of the estate, (b) for the management of an investment for a managed person in a common fund - 0.5% per annum of the value of the investment..." 77The respondent accepted that the NSW Trustee's management fees are currently capped but pointed out that that cap is not prescribed by the Regulation. She submitted that without the cap the management fee based on the Regulation would total $3,728,000, well in excess of that charged by The Trust Company. 78The responded pointed to the evidence of Mr Plover to which I have referred above. In particular she referred to the fact that the NSW Trustee operated with the benefit of government subsidies, that the IPART had concluded in its 2008 Report that the current level of government subsidies was unsustainable and had recommended a fee for service structure, but that it should be deferred until the Office of the Protective Commissioner had enhanced its accounting and management systems. She submitted that this was in the process of occurring with the formation of the NSW Trustee following the merger of the operations of the Office of the Protective Commissioner and the Public Trustee. 79The respondent also placed particular reliance on the opinion of Mr Plover to the effect that her higher than average needs could not be serviced within the temporary capped management fee of the NSW Trustee, that the removal of the cap would involve a substantial increase in her management fee and her large awarded sum would likely preclude her from the benefit of government subsidies under the concept of affordable funding. She submitted that in those circumstances it was open to the primary judge to accept that there was an element of uncertainty in applying the current fee structure of the NSW Trustee to the respondent's life expectancy of 67 years. 80Further, the respondent submitted that The Trust Company's fees were reasonable as they were in the same range as other private trustees and managers. 81The respondent also submitted that the appellant's approach overlooked the critical needs of a catastrophically brain-injured person. Reference was made to the evidence of the respondent's mother as to her belief that the NSW Trustee could not provide the appropriate level of service. It was submitted the evidence of the respondent's mother was not challenged. 82At the hearing senior counsel for the respondent also relied on the affidavit of the respondent's solicitor, Ms Kate Henderson, in support of the proposition that it was reasonable to engage the services of The Trust Company in the circumstances of the present case.

Consideration 83The experts retained by the parties reached agreement on the amount needed for fund management fees assuming an initial fund of $9,929,000 lasting for a period of 67 years. The agreement is as follows: (a)Fees on initial sum only: Trust Company $1,495,000 15.1% of the Fund; NSW Trustee $1,014,000 10.2% of the Fund. (b)Fees on initial sum and earnings (fund management fees on income): Trust Company $1,825,000 18.4% of the Fund; NSW Trustee $1,184,000 11.9% of the Fund. (c)Fees on initial sum and fees on fees (fund management on fund income): Trust Company $2,034,000 20.5% of the Fund; NSW Trustee $1,196,000 12% of the Fund. (d)Fees on initial sum and fees on earnings and fees on fees: Trust Company $2,151,000 21.7% of the Fund: NSW Trustee $1,286,000 12.9% of the Fund.

(a) The basis of the calculations 84Notwithstanding the agreement between the experts, it is important in considering the issues to understand the basis upon which they reached their conclusions. 85Unlike the usual position in which future losses and expenses are calculated and then discounted back to what might loosely be described as a present day value, it was necessary in the present case to work back from the discounted figure which was the subject of the verdict. The manner in which that was done can be shown from the three tables I have annexed to this judgment. The first two tables were annexed to a report of Mr Plover of 5 August 2011 which was tendered in the proceedings. Table 1 shows calculations for the amounts required in respect of management fees for The Trust Company on the basis that fees are allowed only in respect of the verdict. Table 2 shows calculations for The Trust Company in circumstances where fees for fund management on fund income are also allowed. The figures in the tables do not reflect the amounts ultimately arrived at by the experts on this issue as they start from a different base ($9,934,000 as distinct from $9,929,000), assume The Trust Company fees on a different basis to that ultimately agreed upon and assume the fact that the fund will be exhausted in 66 years rather than 67 years. Nonetheless they demonstrate the methodology. 86The first column in Table 1 assumes the fund will be depleted by equal amounts in current dollar terms over the period in question. It is implicit in that assumption that the return on the fund over the period of its existence will be sufficient to make those payments at current dollar values over the life of the fund. The second block in Table 1 under the heading "Fees" sets out the total management fees. The management fees and the MER (the management expense ratio), again expressed in current dollar terms, are based on the capital standing to the credit of the fund from time to time. The supervision fee is a fee charged by the NSW Trustee at a rate of 4% of the gross annual investment income of the fund. However, the supervision fee is capped at $2,000 and thus it is only in years 60-66 inclusive that it is necessary for the purpose of this calculation to take account of interest. It can be seen from the figures that the rate of interest is 5% taken from the midpoint of the year in question. 87The third block in Table 1 represents the discounting of the fees so calculated. The net present value factor represents the discounted value of a current year dollar in future years at a discounted rate of 5%. The method of calculation of the discounted amount does not need to be dealt with in any detail (the discounted amount is calculated on the assumption that fees are payable over the year in question and calculated by reference to a formula 1÷(1+r)n, where r is the discount rate or rate of return and n is the year for which the calculation is being undertaken). 88It has to be borne in mind that it is inherently unlikely that what is assumed in this table will in fact occur. It is unlikely that the fund will be diminished at a regular rate, much less that the rates of interest and rate of return from the fund will remain constant. What is effectively assumed in the adoption of such a discount rate is that over time the return that is inherent in it will be achieved. 89Table 2 contains a calculation on the assumption that management fees on earnings (fund management on fund income) is included. The amount available at the commencement of the fund is the same as in Table 1. It also assumes that the fund including interest will be completely expended over the period of 66 years. Interest is calculated at the rate of 5% on the fund, the assumption used as the basis of calculation is that the drawings are spread over a year. The fund management fee is calculated on the amount standing to the credit of the fund from time to time, taking into account accretions to it by way of income earned. The management fee is again discounted at a rate of 5%. 90Once again the table is unlikely to reflect reality. It assumes that drawings on the fund will occur at a constant rate, which is inherently unlikely. As Basten JA pointed out in argument, it is probable that in the early life of the fund income will accumulate and the fund in dollar terms may increase in value until the demands on it and the effects of inflation lead to its diminution. On the other hand, there could be an early diminution of the fund which would lead to it being necessary to attempt to manage the fund so that it does in fact last its projected lifespan. 91Equally it is inherently unlikely that the fund would earn a constant rate of 5%. Interest rates and yields on safe investments will vary from time to time having regard to the rate of inflation. Although the discount rate is applied on an annual basis to produce the present value of future losses and expenses, it does not follow in fact that the rate of return inherent in the discount rate will be earned on a constant annual basis. 92It was in this sense that Mr Plover stated in par 3.2 of his report of 5 August 2011 that the additional amount of management fees provided for on this scenario did not arise as a result of "reinvestment of investment earnings", but rather, as an "unwinding of the discount rate implicit in the assessment of the initial capital sum and emerges independently of any presumed investment rate of return". Contrary to the appellant's submission, it does not seem to me that in those circumstances the concept of unwinding the discount rate referred to by Mr Plover means that it is being ignored or subverted. Rather, the same discount rate is simply being applied to a different figure. The question in issue is whether it is appropriate to include income in that fashion to produce the figure from which the discounted amount is calculated. 93As Mr Plover did not prepare a separate table showing calculations for fund management on fund management fees alone, it is convenient to use a table annexed to the report of Mr Watt of 27 June 2011 to demonstrate the methodology adopted in this calculation. Schedule 11 to that report, which is produced as Table 3 to this judgment, is a calculation of the additional amount necessary to cover fund management fees on damages awarded for fund management costs based on an initial fund of $10 million and the NSW Trustee's rates. I emphasise this is only an example used for explaining the method of calculation. As Mr Watt explained in section 5 of his report, the schedule is based on his calculation of fund management costs on the amount awarded for fund management by rerunning his calculation of damages for funds management using multiple iterations. Mr Watt stated in his report that the ability to rerun the calculation multiple times enabled him to calculate the amount of damages that would provide the respondent with fund management fees on damages awarded for fund management costs (that being fund management on fund management). 94The opening figure in Table 3 of $11,082,830 is comprised of the initial assumed amount of the fund being $10 million, together with the amount of $1,082,830 shown at the conclusion of Table 3 as being the net present value of total fund management fees. Although the model which Mr Watt used to produce this calculation was not in evidence, this figure was presumably derived from the multiple iteration process to which he referred. The fund is assumed to be reduced at a constant rate, management fees are calculated on the decreasing balance and then discounted. The same comments can be made in relation to this table as I made in respect of both Tables 1 and 2.

(b) The relevant principles 95Because at least the first three issues raised in the appeal depend on the principles to be applied in assessing the appropriate measure of damages for future economic loss and expenses, it is convenient to deal with these principles prior to addressing the specific questions that have been raised. 96The starting point is s 127 of the Act which provides as follows: "(1) Where an award of damages is to include compensation, assessed as a lump sum, in respect of damages for future economic loss which is referable to: (a) deprivation or impairment of earning capacity, or (b) loss of expectation of financial support, or (c) the value of future services of a domestic nature or services relating to nursing and attendance, or (d) a liability to incur expenditure in the future, the present value of the future economic loss is to be qualified by adopting the prescribed discount rate. (2) The prescribed discount rate is: (a) a discount rate of the percentage prescribed by the regulations, or (b) if no percentage is so prescribed-a discount rate of 5%. (3) Except as provided by this section, nothing in this section affects any other law relating to the discounting of sums awarded as damages." 97The provisions of s 127 relevantly provide damages referable to loss of earning capacity or a liability for future expenses to be discounted at the prescribed rate. In that context the issue which arises for consideration is whether or not fund management on fund income and fund management on fund management can be classified as a liability to be incurred in the future, their present value to be calculated by reference to the proscribed discount rate or, alternatively, are in fact costs which are taken into account in discounting the sum awarded for fund management fees. 98It does not seem that s 127 alters the common law so far as recovery of damages is concerned, apart from varying the 3% discount rate laid down by the High Court in Todorovic v Waller to a rate of 5%. So much was made clear by the Second Reading Speech to the Motor Vehicles (Third Party Insurance) Amendment Act 1984 that introduced the predecessor to s 127 of the Act, which stated as follows: "...Another amendment in this legislation is the provision to restore the discount rate applied by courts in the third party accident claims to the level operating in New South Wales prior to the High Court's decision in Barrell Insurance v. Pennant Hills Restaurant. In the decision Todorovic v. Waller the High Court recognized that the amount of damages paid in the present for losses to be incurred in the future, must be discounted to prevent the plaintiff from being over-compensated. There are real advantages which the present possession of a lump sum award confer upon a person whose earnings would otherwise have been received over a period. The discount rate is the formula applied by the courts to take into account factors such as the ability to earn interest on the lump sum by prudent investment. As honourable members may be aware, the principle behind compensation for negligently inflicted injuries is that the injured party should receive compensation in a sum which, so far as money can do, will put him in the same position as he would have been if the tort had not been committed. The court awards such a sum as will, so far as possible, make good to the injured person the financial loss which he or she has suffered, and probably will suffer, as a result of the wrong done for which the defendant is responsible. Before the Barrell case, the New South Wales Court of Appeal applied discount rates of between 5 per cent and 7 per cent to awards of loss of future earnings and sums awarded, to cover likely future payments for medical and other services. In the Barrell case the High Court was divided as to the most appropriate discount rate to be applied in these cases, and it was not until the matter had been further argued in the case of Todorovic v. Waller that a rate was determined. In that case, the members of the High Court were divided as to the appropriate discount rate to be applied, with certain justices favouring a figure of 5 per cent. However, in the interest of securing uniformity in this important area of the law, the court reached a compromise, making an arbitrary ruling regarding discount rates and selected the figure of 3 per cent. Two of the justices indicated that the law relating to the assessment of damages for personal injury is far from satisfactory, and that the direction for reform depends on views as to social policy that can be formed only by the legislatures. This legislation will operate to restore the position to that previously accepted in this State as being the most appropriate in all the circumstances. If, in future, the rate of inflation or the rates of interest available on investments change to such an extent that the statutory discount rate is no longer appropriate, provision has been made for an alteration by regulation. In this way, the Government will be able to ensure that the discount rate maintains a direct relevance with the circumstances of the day." 99Thus, the section in my opinion neither altered nor limited the areas in respect to which damages could be claimed, or altered what was stated in Todorovic v Waller to be the purpose served by the discounting of such damages. 100Awards for damages for future economic loss were discounted well prior to the decision in Todorovic v Waller. However, prior to the decision in Todorovic, disagreement had arisen in respect of the appropriate discount rate to be adopted and to the extent that future variation in wages or prices could otherwise be taken into account. 101In Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd [1981] HCA 3; (1981) 145 CLR 625, the appellant suffered loss as a result of incurring liability to make ongoing workers' compensation payments to an injured worker in circumstances where the respondent had negligently failed to effect insurance against such liability. The workers' compensation legislation as it existed at the time provided for indexation of compensation payments in proportion to increases in the average minimum weekly wage payable to adult males for a full week's work (an index published by the Australian Statistician). The issue before the High Court was whether the Court of Appeal was correct in awarding a lump sum based on the projection of such increases. The Court rejected that claim, saying that indexation was to be taken into account in calculating the appropriate discount. Barwick CJ said the discount rate should be 5%, Gibbs, Mason and Wilson JJ held that the claim should be discounted at a rate of 2%, whilst the minority (Stephen, Murphy and Aickin JJ) held there should be no discount. 102In the course of his judgment, Mason J made the following remarks at 678 and 680-681: "In substance the United Kingdom approach to the assessment of damages for personal injury is to ignore the element of inflation and to assume the existence of two of the characteristics of a stable economy, (a) a continuation of existing nominal wage rates, and (b) low interest rates appropriate to such an economy. It has been thought that by taking an approach which is adapted to the fiction that we have a stable economy the plaintiff's damages will be fairly assessed, it being for the plaintiff to counter the effects of inflation as best he can by pursuing a suitable investment policy. The use of a low interest rate in the selection of the multiplier excludes one of the principal characteristics of inflation, the prevalence of high rates of interest. The consequence of this is that, if inflation continues, the plaintiff will be able to invest his verdict at a higher rate of interest than that on which the verdict was based. Conversely, if inflation does not continue, the verdict will have been calculated on an interest rate which will approximate the prevailing rate. ... We are left then with the question whether the selection of a discount rate should be based on rates of interest appropriate to a stable economy or on the real rate of interest as established by evidence of past experience. For the moment I put to one side the element of taxation on the investment income produced by the verdict. The adoption of a low rate of interest reflective of a stable economy is supported by the recent United Kingdom decisions. However, its weakness is that it also reflects an element of inflation for even in times of a stable economy inflation has generally proceeded at 2 to 3 per cent. The adoption of a 4 to 5 per cent interest rate appropriate to such an economy therefore throws up an element of inflation, though not at such an unacceptable level as that reflected by current interest rates. The adoption of the real interest rate would have an obvious advantage. Unfortunately it also has disadvantages. One such disadvantage is that the statistical and other information relating to past experience which is available to me does not establish that there is a steady real rate of interest in Australia or that, if there be such a rate, what it happens to be. The parties did not direct their attention to this question and the Court has therefore not had the benefit of evidence and expert opinion upon the matter. In this unsatisfactory situation I would adopt a discount rate of 2 per cent as a fair approach to the problem raised by this case - one which does more justice to the plaintiff than the adoption of a 4 per cent or 5 per cent rate appropriate to a stable economy reflecting a moderate level of inflation. In expressing this view I am not to be taken as saying that it should necessarily apply to all personal injury cases. I am conscious of the special nature of this case and the imperfect materials which have been made available to us. Accordingly, subject to an examination of the question of taxation, I would apply a discount rate of 2 per cent." 103These passages make clear what has been accepted in subsequent cases; the discount rate is not an estimation of interest the plaintiff will earn from time to time from the investment of his or her damages. Rather, it is to take account of at least inflation in a stable economy whilst recognising that in times of high inflation the plaintiff will be able to obtain higher rates of return. 104Todorovic v Waller dealt with the issue in a case directly concerned with personal injury. The Court prior to delivering judgment made the following well-known statement: "In an action for damages for personal injuries, evidence as to the likely course of inflation, or of possible future changes in rates of wages or of prices, is inadmissible. Where there has been a loss of earning capacity which is likely to lead to financial loss in the future, or where the plaintiff's injuries will make it necessary to expend in the future money to provide medical or other services, or goods necessary for the plaintiff's health or comfort, the present value of the future loss ought to be quantified by adopting a discount rate of 3 per cent in all cases, subject, of course, to any relevant statutory provisions. This rate is intended to make the appropriate allowance for inflation, for future changes in rates of wages generally or of prices, and for tax (either actual or notional) upon income from investment of the sum awarded. No further allowance should be made for these matters." 105In their joint judgment, Gibbs CJ and Wilson J at 412 set out what they described as fundamental principles in the assessment of damages: "Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them. In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff. Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it. Fourthly, the burden lies on the plaintiff to prove the injury or loss for which he seeks damages." 106Their Honours at 414 described the purpose of discounting as "to find a present equivalent for all future pecuniary loss". Their Honours rejected the admissibility of evidence of inflation in considering that issue, making the following remarks at 420: "We have already given reasons for adhering to the settled doctrine which requires the Court to reject evidence of inflation. Such evidence would be purely speculative, it would tend to prolong trials, and would introduce an additional element of uncertainty into awards. The only practicable alternative, if inflation is to be considered, is by taking it into account in fixing the discount rate. In the absence of evidence, that can only be done by an intuitive recognition that the chosen discount rate bears a just relation to the impact of inflation." 107After dealing with the question of notional tax on investment earnings, their conclusion was in the following terms at 423-424: "We consider that in future the courts in Australia, in States where the question is not governed by statute, should, in assessing damages, arrive at the present value of a future loss by discounting at a fixed rate which will be applied in all cases and which will in itself reflect the effect of notional tax on notional income from the invested fund. To take this course may seem to involve some sacrifice of accuracy in the interests of predictability, but the whole process involves so much speculation that it is impossible to pretend to accuracy. In fixing the discount rate, the fact that for so long the rates applied by the courts in Australia have been at a level of 5 per cent and above should not be disregarded. Some downward adjustment is necessary to take account of notional tax. The actuaries' tables show that if the assumption is, as it must be, that the income is earned at the discount rate the necessary adjustment is quite small, particularly when the assumed income is within the range within which most employees' incomes fall in Australia. Now that the effect of inflation has become more apparent, it seems right to make a further moderate downward adjustment to the rate. Our own choice would be to adopt a discount rate of 4 per cent, but all that we have said indicates how arbitrary any choice must be and for that reason it is necessary for individual members of the Court to adjust their views in the interests of achieving a final and authoritative decision. We therefore concur in the view, to which we understand a majority of the Court is prepared to subscribe, that until this Court otherwise decides, a discount rate of 3 per cent should in future be applied and that no further allowance should be made for notional tax." 108Brennan J at 466 emphasised the fact that discounting, whether and however it is done, offers no guarantee that an amount of damages will prove to be precisely right. He stated at 467 that the object of the calculation is to arrive at a figure which fairly represents the present value of the plaintiff's future net losses. His conclusion was in the following terms at 478-479: "Perhaps it is desirable to recapitulate those factors: the continuance of the practice of making a calculation of future net earnings losses based on current net earnings adjusted for savings in expenditure during a span of years discounted for the possibility of losses caused otherwise than by the defendant's tort, the economic history of the past twenty years showing the relationship between average earnings and the long term bond rate earlier mentioned, the comparative incidence of income tax upon gross earnings and yields on investments, and the advantages to be derived from present possession of a capital sum in comparison with an entitlement to payment of moneys over a period where the capital sum represents the present value of the aggregate of those payments. I would anticipate that the generality of awards assessed on the footing of a 3 per cent discount rate are likely to be within the appropriate limits of a sound judicial discretion. In the ordinary course of personal injury litigation, no evidence should be given or economic material received with a view to establishing a discount rate other than 3 per cent. None of the factors material to the selection of a discount rate is an issue for consideration by the tribunal of fact in a personal injuries action. It would unduly encumber the hearing of such an action to investigate Australian economic history, and if some future period throws up a substantially different comparison between average earnings and yields on secure investments, the relevant facts can be brought to the attention of this Court and the Court might then be asked to consider whether 3 per cent ought to be retained as the appropriate rate. Nor should evidence be admitted in an endeavour to show that a discount rate other than 3 per cent can be supported in a particular case by measuring the immeasurable factors (tax and advantages from possession of a capital sum). These factors are taken into account in selecting a discount rate not because they have been shown to represent accurately the circumstances of each case, but because it is necessary to bear them in mind in selecting a basis by reference to which Australian courts may assess damages which will give comparable compensation in comparable cases being as fair to plaintiff and defendant as the uncertainties of the future and the limited ability of courts to receive evidence about them permit." 109Aickin J also emphasised the inherently speculative nature of the calculation: Todorovic v Waller at 457-458, 459. 110A number of matters emerge from this case which are of importance. First, the discount rate is designed to take into account both the effect of inflation and notional tax on investment income. Second, the discount rate to be applied is not based on an assumption by the court that in each and every year of the life of the fund income at the assumed discount rate will be earned. Third, generally speaking, a court is not concerned with what a plaintiff will do with the damages awarded. The appellant understandably placed reliance on these matters. 111The effect of Todorovic v Waller was summarised by Mason CJ, Wilson, Toohey and Gaudron JJ, in Commonwealth v Blackwell supra in the following terms at 435: "In our opinion this approach cannot be supported. It fails to recognize the true significance of this Court's decision in Todorovic. It was far more than a decision of fact based on the evidence adduced in that particular case. It was a decision which took the unusual course of prescribing a rule of practice for future cases. This extraordinary course was prompted by a recognition of the magnitude of the difficulty that confronted courts as they sought to provide fair and just compensation to plaintiffs in personal injury cases in respect of losses to be suffered far into the future, and by the importance of predictability in the assessment of damages. A majority of the Court was satisfied that a plaintiff obtains an advantage when receiving present payment of a sum of money which in other circumstances would not be received until a future date: Gibbs C.J. and Wilson J. [at 413-414]; Mason J. [at 442-443]; Aickin J. [at 460]; Brennan J. [at 466-467, 477-478]. That conclusion was reached notwithstanding evidence of extraordinary fluctuations during the seventies in both inflation and interest rates. The settled doctrine which had required courts to reject evidence of future inflation was adhered to because it would be purely speculative, would tend to prolong trials and would introduce an additional element of uncertainty into awards. It was recognized that some allowance must be made to counter the effect of tax on the income produced by investment of the lump sum but that the speculative elements in such a task defied any pretence at precision."(Citations omitted) See also Tchadovitch v Tchadovitch [2010] NSWCA 316; (2010) 79 NSWLR 491 at [46]-[53]; Rosniak (No 3) at 614-615. 112These cases, in my opinion, demonstrate that the discount rate applied in respect of damages awarded is referable to the matters referred to in s 127(1)(a)-(d) of the Act and was designed to take into account the effect of inflation and notional tax on income earned from the fund. Neither the Act nor the cases to which I have referred lend support to the proposition that for all purposes a constant rate of diminution to the fund is to be assumed or that interest will be earned at a constant rate throughout the life of the fund, although these assumptions underpin the calculation of the discount rate. By contrast, the cases recognise that in times of high inflation the plaintiff will be protected by the high interest rates and yields that can be earned, as compared to a time of relatively low inflation. The discount rate takes account of this factor as well as notional tax on investment.

(c) Fund management costs 113As I have indicated, as a general matter the court is not concerned with what a plaintiff does with his or her verdict. That generally speaking would deny any entitlement to an amount of damages as compensation for the costs of managing the fund. However, an exception has developed at least in cases where the injured plaintiff has been held intellectually incapable of managing the fund as a result of his or her tortiously inflicted injuries. Notwithstanding, issues have arisen as to the manner of assessment of those damages. 114In Brindall v McDonald (Court of Appeal, 11 March 1985, unreported), this Court held that at least some part of the administration of the estate of a plaintiff with intellectual disabilities who is unable to attend to his or her affairs due to an intellectual disability and possibly other disabilities arising from the tortious act of the defendant, are recoverable. 115In Treonne Wholesale Meats Pty Ltd v Shaheen supra, it was suggested that Brindall was contrary to Todorovic v Waller and was incorrectly decided. Leave was refused to argue the point. However, the question of the assessment of the costs of such fees was considered. Clarke JA, with whom Mahoney and McHugh JJA agreed, cited with approval the statement by Zelling J in Campbell v Nangle (1985) 40 SASR 161 at 178 to the following effect: " ... 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." 116Clarke JA then made the following comments at 528-529: "In my opinion the proper approach is to include within the damages an allowance for fund management which reflects the probable difference between the expenditure likely to be incurred by a person who is unable to manage his affairs as a consequence of the accident in question and the expenses which as a matter of probability, would be incurred by a plaintiff whose intelligence is unimpaired and who seeks expert aid in the investment of the damages fund. Whilst no inflexible rule can be laid down for every case it would seem to me that in the case of a very large judgment it would be appropriate to approach the matter in two stages. First the court should assess the cost of the management of the fund which flows from the judgment and then make an adjustment to the resulting figure to cater for the cost of expert advice which would probably have been incurred by the plaintiff even if he had not suffered intellectual impairment in the accident." 117The primary judge in that case had assessed damages accepting the assumption that the Protective Commissioner would be able to invest the fund at a rate of 16% per annum for the initial year reducing by 1% per year for six years and thereafter remaining at 10%. The primary judge discounted the assessed amount of damages at the same rate. 118The respondent in that case contended that whilst it was appropriate to take into account the return expected to be earned by the Protective Commissioner, it was not appropriate to discount it at a rate other than the 3% rate mandated in Todorovic v Waller. 119Clarke JA rejected that argument and made the following comments at 531 and 532: "The respondent contends that, while it was appropriate to adopt the returns on investment likely to be obtained by the Protective Commissioner for determining the future losses it was erroneous, and contrary to Todorovic, to adopt a similar rate in discounting to obtain present values. It was submitted that Todorovic requires that in every instance the court disregard inflation and the bite of taxation and adopt a discount rate of 3 per cent in ascertaining the present value of future losses. The same submission was made to the learned trial judge who rejected it. I think it was correct that he do so. The gravaman of Todorovic was that there were so many complications in endeavouring to make specific allowance in damages awards for inflation in the future and the impact of taxation upon the investment of funds resulting from the award that a discount rate of 3 per cent should be adopted as a matter of policy in all cases. ... It must be remembered however that the damages are awarded in terms of the money of today. That is, that impairment of future earning capacity and other future losses are assessed upon the basis that earnings and fees remain constant. This necessarily means that future inflation is to be disregarded at all stages of the assessment of damages. ... There were, it seems to me, two choices open to him. He could follow the course which was adopted. That is, apply interest rates thought to be probable and discount by the same rates, or, preferably, disregard the effects of inflation and adopt the 3 per cent rate for return on income and discounting. Whichever approach is adopted should throw up substantially the same figure. In these circumstances I do not agree that his Honour erred in his choice of a discount rate." 120Thus Clarke JA preferred an approach which assumed a regular return equivalent to the discount rate laid down in Todorovic v Waller and that the present value of the resulting management fees be discounted at the same rate. However, he did not suggest that approach was mandated by Todorovic v Waller. 121In Treonne Wholesale Meats a deduction was made from the amount awarded in respect of fund manager's fees to take account of money which would be expended by an unimpaired plaintiff in managing the fund. In Rosniak (No 1) Meagher JA, with whom Kirby P agreed, said that such a deduction was inappropriate. Meagher JA at 697-698 also gave consideration to the manner in which such damages should be calculated: "Mr Sperling QC attacked his Honour's reasoning on two grounds. First, he said that it was vitiated by inconsistency. One should, he said, either compute investment income using an actual rate of 15 per cent and discount at the same rate or compute the income at an arbitrary rate of 3 per cent and discount at the same rate, preferably the latter. Treonne's case in the Court of Appeal provides some justification for this approach. That case argued the need for the use of consistent figures for calculating investment returns and discounting the fees payable on such returns. It also suggested that the choice of a figure did not matter. This latter suggestion was in fact justified on the facts in evidence in that case. On that evidence it did not matter what figure was chosen provided that figure was used in both exercises. However, on the evidence in the present case it very much did matter, as wildly different results (of up to $100,000) occurred depending on the figure chosen. I would not accept this argument, which is based on an appeal for symmetry. But the charms of symmetry may be illusory, and in my view are illusory in the present case. In the first case, in Todorovic v Waller the issue was the correct discount rate, that is, the rate of "real" inflation. The Court was thus concerned to discover what figure could fairly represent the difference between the rate of actual inflation and the bond rate. In that exercise, actual rates of investment return play but an incidental role, whereas in cases like the present the rate of investment return is the central issue. In the second place, in endeavouring to ascertain a proper discount rate, one is considering investment returns at a high level of abstraction, that is one is dealing with investment returns (in so far as one deals with them at all) from the point of view of investors generally. In the present case one is dealing with investment returns in a context where there is a high level of particularity. In other words, one is dealing with the investment returns which the Protective Commissioner will obtain on Miss Rosniak's money in circumstances where one knows what returns he has in fact been deriving on funds in his control over the last decade or so. In these circumstances it would seem to be erroneous totally to disregard actuality, as distinct from modifying it. But his second argument, which tends to a somewhat similar result, I would accept. It may be summarised as follows: his Honour's mode of calculation must be erroneous, as it involves the assumption that for sixty-one years the capital of the fund will remain unimpaired, whereas one should assume that it will gradually be depleted to zero; and that, moreover, the notion that the investment income will always be received free of income tax is unsupportable. Some allowance should be made, as his Honour did not, both for the gradual erosion of the capital of the fund and for the payment of income tax. Since neither the rate of erosion nor the rate of tax can be determined otherwise than on an arbitrary basis, this Court should choose that arbitrary basis, as the High Court chose an arbitrary discount rate in Todorovic v Waller. In my view a rate of 5 per cent ought be chosen in all cases as the appropriate figure for calculating the investment return of a fund such as the present fund. That figure is arrived at by taking the current rate of investment return of 15 per cent (since one does not know whether in future the actual rate will be greater or less), then halving it to reflect the fund's gradual erosion (yielding a figure of 7.5 per cent), and then reducing that figure to 5 per cent on the assumption that income tax payable on the investment income will always approximate to 33 per cent. Such a figure is, as I have said, arbitrary, but ought be adopted faute de mieux." 122There are two matters which should be noted. First, Meagher JA did not suggest that the approach he adopted was mandated by Todorovic v Waller. Rather, he reached his own (in his words) arbitrary conclusion. The second matter of significance was that he said in calculating the award for fund management costs, which in that case were at least partly based on income received from the fund, an investment return of 5% should be used. This was reflected in his ultimate calculation. 123In Nominal Defendant v Gardikiotis supra, the High Court rejected the proposition that an allowance should be made for fund management costs in cases other than those where the injured plaintiff's inability to manage the fund was a consequence of physical or intellectual impairment suffered as a result of the injury caused by the defendant's negligence. Gummow J, with whom Brennan CJ, Dawson, Toohey and Gaudron JJ agreed, said that the correct principles were set out by King CJ in Campbell v Nangle supra at 192 in the following terms: "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." 124McHugh J agreed and stated the principles in the following terms at 54-55: "Damages may therefore be awarded for the expense of managing a plaintiff's verdict moneys when the plaintiff's disabilities prevent him or her from managing those moneys and the disabilities are the foreseeable consequence of the defendant's negligence. Damages may also be awarded for the expense of investment advice where, as the result of the defendant's negligence, the plaintiff is no longer able to make adequate decisions concerning his or her own financial affairs. In both cases, damages are payable by the defendant because the expense is the necessary product of the defendant's negligence and is not the result of the free, informed and voluntary act of the plaintiff. The expenses have been brought about by the loss of the plaintiff's ability to do what that person was capable of doing before the occurrence of the tort which gives rise to the claim for compensation." 125In rejecting the submission that such an award could be made other than in those circumstances, McHugh J made the following comments at 60-61: "However, this contention misconceives the role of a court in awarding common law damages. Except in those cases where the plaintiff is under a legal disability, a court has no interest in what happens to the plaintiff's damages. It has a duty to assess fair compensation for all the effects, physical, mental and financial, that the defendant's negligence has had on the plaintiff. But at common law, compensation is given on a one off basis; there are no periodic payments of compensation. The court awards a single sum and enters judgment. Its role is then finished. To the inadequate extent that monetary compensation can compensate for the effects of personal injury, a court has done its duty when it makes its award of damages. What the plaintiff does with the verdict moneys is a matter entirely for the plaintiff. ... The courts make assumptions about long term interest rates and use those assumptions to determine the discount rate. The courts also make assumptions about the investment behaviour of rational investors in order to determine what present sum invested at the discount rate will fairly compensate a plaintiff for anticipated economic loss or expense. But there is no duty on a court to ensure that a plaintiff achieves a rate of interest corresponding to the discount rate or to ensure that the plaintiff invests his or her moneys in a manner that will result in the sum awarded being periodically reduced and finally exhausted at the end of the discount period. Use is made of a discount rate to assess the present value of future economic loss and expense because it is perceived to be the conceptual tool best suited to determine what is fair and reasonable compensation for that loss or expense. The discounting exercise is a hypothetical construct and does not attempt to reflect, anticipate or govern the future actions or intentions of the plaintiff. It simply attempts to determine what sum represents the present value of the anticipated losses or expenses of the plaintiff."(Emphasis in original. Citations omitted) See also Willett v Futcher [2005] HCA 47; (2005) 221 CLR 627 at [51]. 126It is necessary to apply these principles to the issues raised in the present case.

(d) The third issue - Deductions from the fund prior to calculation of fund management fees 127It is necessary to initially determine whether there are any components of the verdict which would be deducted from the fund prior to its commencement or whether in principle any amount should not be included in the fund: Rosniak (No 1) at 688 per Mahoney JA. 128In the present case there is no reason to suggest that the whole of the fund would not be available for investment, at least initially. Further, it is not clear when the outgoings the appellant contended should not be included in the fund would in fact be dispersed. As I indicated, senior counsel for the appellant ultimately contended that the monies might be there for a year or two years but would not be available for the life of the fund. 129The uncertainty can be demonstrated by a consideration of each of the items in question. The first was an amount of $200,000 for solicitor and client costs. That figure was an estimate of such costs. They have yet to be assessed and their quantum will ultimately be assessed on the difference between the total costs and the amount of costs payable to the respondent pursuant to the settlement approved by Hoeben J. 130With respect to the primary judge, the question of whether these payments and costs will take annual outgoings over the sum of $500,000 in any year is irrelevant to this issue. No doubt the liability will be met when it arises. However, her Honour was correct in concluding that the time at which such liability will arise is a matter of speculation. 131The same position applies in relation to Griffiths v Kerkemeyer damages. There has been no recommendation sought for their payment out of the fund. If a recommendation was sought and made there would be little doubt that the fund manager would seek to comply with it. Whilst the manager might take into account the particular position of the fund at the time the recommendation was made in deciding how and when to comply with it, I do not think it would depend on a cut-off level of expenditure of $500,000 per annum as her Honour concluded. Nevertheless, her Honour was correct in my opinion to conclude that the making and timing of the payment was a matter of speculation. 132The payment out of the fund for house modifications and the costs of a swimming pool is a matter of even greater speculation. There was no evidence when it would occur and the primary judge was correct in my opinion in concluding that the payment of such amounts would depend on the position of the fund and the needs of the respondent at any given time. 133In these circumstances it does not seem to me to be appropriate to make any deduction from the fund for the purpose of the calculation of fund management costs. It must be remembered as I pointed out earlier, that the method of calculation of these costs does not necessarily reflect what would occur over the future and is, as McHugh J explained in Nominal Defendant v Gardikiotis supra, a hypothetical construct. Consistent with that approach it is not appropriate, in my opinion, to speculate whether payments will be made and to adjust the fund accordingly. 134It follows that this ground of appeal is not made out.

(e) The second issue - Fund management on fund income 135It should be noted that the calculation of the amount to be awarded for fund management costs based on an estimate of the income that will be derived from the fund is not unprecedented. It will occur when as a matter of fact the amount of fund management costs claimed are charged on the basis of income earned. That was the position in Rosniak (No 1) where part of the fee charged by the Protective Commissioner was based on such earnings. I have referred at par [121] above to the manner in which that was dealt with by Meagher JA. 136Similarly, in the present case The Trust Company fee includes an income component, being the supervision fee charged by the NSW Trustee. I have explained at par [86] above how this was dealt with by reference to Table 1. 137However, unlike cases such as Rosniak (No 1), what is sought in the present case is compensation for additional fees caused by the accretion of income to capital. This is perhaps more accurately shown in Table 2, in which the fund is eroded at a slower rate due to the income earned by the fund and thus higher management fees become payable. 138I do not believe this claim should be allowed. First, it does seem to me to be contrary to the requirement in s 127(1) that the present value of a liability to incur expenditure in the future is to be qualified by adopting the prescribed discount rate. As I have indicated, the discount rate assumes a rate of return sufficient to provide the injured plaintiff with fair and just compensation for the claimed loss: Nominal Defendant v Gardikiotis supra at 60-61. The return is assumed to take into account the costs of earning income which would include any fees payable as a consequence. Indeed, in Todorovic v Waller the discount rate proposed by the majority and ultimately adopted by the Court was adjusted to take account of notional tax: Todorovic v Waller at 423 (Mason J who preferred a 2% rate made a similar adjustment at 449). In these circumstances her Honour, with respect, was incorrect in saying that Hislop J in Rottenbury v Rottenbury supra misapprehended what is denoted in a fixed discount rate. 139There are other difficulties. First, the application of a mandatory discount rate as explained in Pennant Hills Restaurant supra, Todorovic v Waller, Commonwealth v Blackwell supra and Nominal Defendant v Gardikiotis supra in the passages to which I have referred above, was intended to avoid the need to consider the rate of inflation, consequent changes in wages or prices and the incidence of income tax. A consideration of the income earned on a fund for the purpose of the calculation involves either making two artificial assumptions, one as to the income earned on the fund on an ongoing basis and the other as to the rate of depletion of the fund, or alternatively the court after hearing evidence making an assessment of each of those matters. Even if the cost of earning the income was not taken into account for the discount rate set under s 127, there seems no basis to make an assumption as to the actual income earned for the purpose of the calculation and the court would inevitably be speculating as to what income would be derived from the fund from time to time. The difficulty in producing evidence on these matters was highlighted in the cases to which I have referred. The difficulty was the reason for the application of the fixed discount rate in Todorovic v Waller and s 127 of the Act. 140As Brennan J said in Todorovic v Waller at 478-479, a discount rate is selected taking into account uncertainties in such a way as to give comparable compensation in comparable cases being as fair to the plaintiff and the defendant as the uncertainties of the future permit. To seek to calculate income earned for the purpose of making the assessment of additional fund management fees seems to run counter to this approach. 141Finally, there is the question of income tax. The respondent would be entitled to a deduction on the fees incurred in deriving the income. The amount of the relevant tax deductions is again a matter of speculation which was not addressed in the evidence. Indeed, it would be a matter of difficulty to assess what benefit the respondent would derive from such tax deductions in the future. This does not mean that it can be ignored. If one assumes as shown in Table 2 that the respondent will earn investment income as there set out, it is entirely possible that she will be liable to tax and the tax deductions could be of significant benefit to her. This is not taken into account in the assumed discount rate. Indeed, in one sense the respondent is obtaining a benefit in having fund management fees themselves deducted at a rate assumed to take into account the notional tax on investment earnings in circumstances where there has been no adjustment for the tax deductions on fees paid to obtain those earnings. 142Finally it is said that the exclusion of an award for fund management on fund income will operate unfairly. If it is unfair that fees incurred in the earning of income are taken into account in the assumed rate of return then that may be a matter for consideration by the legislature. Further, it cannot be said with any certainty that it will operate unfairly. This will depend on the needs of the respondent and the performance of the fund over a period of 67 years, something that is inherently uncertain. 143For these reasons her Honour erred in my opinion in making an allowance for fund management on fund income.

(f) The first issue - Fund management on fund management 144There is a certain logic in making an award for damages for fund management on fund management. Once it is accepted that a plaintiff who is incapable of managing a fund as a consequence of injuries received as a result of the defendant's negligence is entitled to compensation for the costs of fund management, it may be said to follow that if the fund management fees themselves require management, an allowance should be made to the plaintiff for that fact. 145However, I do not think it is appropriate to make such an award. The general principle is that a court is not concerned with what a plaintiff does with his or her damages. Although this has been modified in the case of a plaintiff who is incapable of managing his or her award by reason of the injuries sustained, it does not seem to me appropriate to extend this principle to awarding a further amount to cover fees for managing that fund by the multiple iterations proposed. 146The court is required in a case such as the present to provide what is a reasonable amount for the costs of managing the fund. It is open to the respondent or perhaps more accurately those representing her, to choose a fund manager with the approval of the court and to negotiate the terms on which the fund manager will be paid. The court should not, in my opinion, order additional amounts on the assumption that fees would also be paid on the amount set aside for fund management costs or indeed on the basis that in the particular case the chosen manager levies fees in such a way as to require the amount set aside for fund management to itself be managed. 147Further, as a number of the cases which have rejected such a claim have pointed out, the calculation of the amount to cover fund management on fund management involves either speculation as to the performance of the fund in any given year, or assumptions as to the rate of dissipation of the fund management award which in all probability will bear little relation to reality. The uncertainty of speculation involved is even more apparent when the calculation is done in multiple iterations to produce the ultimate result. It is not for the court to speculate on every possible circumstance but rather to give fair compensation. The provision of an amount for fund management costs in my opinion achieves this result. To provide further funds would lead to the respondent being over-compensated. It was in this sense that Meagher JA in Rosniak (No 1) used the expression "double counting" in rejecting a claim of this nature. 148It follows in my opinion that this ground of appeal is made out.

(g) The fourth issue - The quantum of fund management fees 149Having regard to the conclusions which I have already reached, the alternative fund manager's charges were in the case of The Trust Company $1,495,000 or 15.1% of the fund and in the case of the NSW Trustee $1,014,000 or 10.2% of the fund. 150A similar situation to that which exists in the present case arose in Morris v Zanki (1997) 18 WAR 260, a decision of the Court of Appeal of Western Australia, not referred to by either party in argument or before the primary judge. The issue in that case was whether it was appropriate to order that an award of damages made to a plaintiff who was incapable of managing the award as a result of his injuries, should be managed by a private trustee company, National Australia Trustees Ltd, rather than by the Public Trustee of Western Australia, which charged lower rates. The reason the former company was sought as trustee was that the injured plaintiff's guardian considered there were prospects of a better return on capital. The Court held it was appropriate to appoint National Australia Trustees as manager but assessed fund management fees on the basis of the lower fee charged by the Public Trustee. The Court reached the following conclusion at 295: "Finally, we come to the level of the award for the costs of future fund management. Those costs are compensible because they are directly referable to the disability suffered as a result of the accident. What is not compensible is a cost that is not necessarily incurred but which results from the exercise of a choice by a plaintiff as to how to invest those damages. The fact of the creation of the trust fund and the necessity to incur management costs are what gives rise to the entitlement. Order 70; r 12 entails the pre-disposition to which we have referred. There is no suggestion in the evidence that the Public Trustee could not handle this investment. However, in this case there are good reasons why the fund should be placed with NAT. But they are reasons associated with the respondent's apprehension of the prospects for better capital and income returns and with the convenience of his family. That is a matter of choice, not necessity. In our opinion costs over and above those that would have been incurred had the fund remained with the Public Trustee are not compensible in accordance with the principles enunciated in Gardikiotis." 151That approach would lead to the conclusion that fees in the present case should only be awarded on the assumption that a reasonable amount was that charged by the NSW Trustee. Subsequently, in Willett v Futcher supra, the High Court took a somewhat different approach. In considering whether an amount for fund management expenses should be based on fees charged by the Public Trustee as distinct from higher fees charged by the plaintiff's preferred manager, Perpetual Trustees Queensland Ltd, the Court emphasised that an important consideration was the statutory limitations on the costs of management of the fund and that the question did not depend only on whether Perpetual's proposed fees and charges were less than those of the Public Trustee: Willett v Futcher at [52]. 152As Basten JA has indicated, the order made by White J resulted in the respondent becoming a managed person pursuant to s 38 of the Guardian Act, as a result of which the Court or the NSW Trustee could make an order for payment of remuneration of a specified amount to the manager of the estate pursuant to s 115(1)(b) of the Guardian Act. 153White J did not make any order for remuneration. However, he had before him a report of Mr Plover dated 9 November 2010, setting out details of the fees charged at that time by each of Perpetual Trustee Company Ltd, ANZ Trustees Ltd, The Trust Company and the NSW Trustee. He also had an affidavit of Mr Paul O'Neill, the Business Development Manager of The Trust Company, stating that The Trust Company was prepared to manage the respondent's estate on the basis of fees which were in fact greater than the fees ultimately negotiated with that company. 154As Basten JA has pointed out, Chapter 5D of the Corporations Act 2001 (Cth) regulates licensed trustee companies which are entitled to carry out functions of the nature of those carried out by the manager in the present case: Corporations Act (Cth) s 601RAC(2)(e). The companies which are licensed trustee companies are set out in Sch 8AA of the Corporations Regulations 2001 (Cth). Relevantly, they include The Trust Company, ANZ Trustees Ltd and Perpetual Trustee Company Ltd. 155There is no provision regulating fees payable to the licensed trustee companies either in the Corporations Act (Cth) or the Corporations Regulations (Cth). Indeed, s 601TBB of the Corporations Act (Cth) permits agreements to be made in respect of such fees. Section 601TBE, however, provides that without the approval of the Australian Securities and Investments Commission, the fees for management of a person's estate can only be paid out of income. 156As Basten JA has pointed out, the only other constraint on fees is the requirement to disclose their level, both publicly and to clients. However, s 601RAE of the Corporations Act (Cth), in conjunction with r 5D.1.04 and Sch 8AC to the Corporations Regulations (Cth), preserves the operation of the Guardian Act including the power under s 115 of that Act. 157In those circumstances the power of the Court and the NSW Trustee to approve fees is preserved. 158The question is what is reasonable compensation in these circumstances. Whilst it is true that the fee of the NSW Trustee is somewhat lower than that of The Trust Company, the fees proposed to be charged by The Trust Company as ultimately negotiated are competitive with the fees of the other private trustees whose fees are in evidence. The establishment fee charged by The Trust Company is $24,000 lower than that charged by Perpetual Trustee Company Ltd, whilst its management fees including the management expense ratio are significantly lower for the first $3 million of the fund, although .08% higher for the balance. In the case of ANZ Trustees Ltd, although The Trust Company's establishment fee is $1,000 higher, its management fees are lower and in respect of the first $5 million, significantly so. As all the fees are a matter of public disclosure it can be assumed they were set in a competitive and informed market. 159In addition to those matters it is also necessary to take into account the concern of the respondent's mother in relation to the NSW Trustee which the primary judge recognised was legitimate, the length of the life of the fund, the need for constant communication between those having day-to-day care of the respondent and the fund manager and to the fact that White J approved of the appointment of The Trust Company knowing of the fee differential between that company, the other private trustees and those of the NSW Trustee. Taking all those factors into account, it seems to me to be reasonable to award an amount for fund management fees on the basis of those charged by The Trust Company. 160I should add that I have not taken into account the evidence of Mr Plover as to the possible change in the fee structure of the NSW Trustee. The evidence seemed to me to be speculative and not based on any recognised field of expertise: Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588.

(h) Disposal 161It follows that based on the agreed position of the experts, I am of the opinion that the appeal should be allowed in part and that an amount of $1,495,000 should be awarded to the respondent in respect of fund management fees. Order (1) made by the primary judge on 15 December 2011 (and entered on 16 December 2011), giving judgment for the plaintiff in the sum of $12,151,000 should be set aside and replaced by an order giving judgment for the plaintiff in the sum of $11,424,000, being the total of the fund as otherwise agreed ($9,929,000) and the additional figure noted above as the appropriate cost of fund management ($1,495,000). As to the costs of the appeal and the costs of proceedings below, I agree with the orders proposed by Basten JA for the disposal of these matters. 162BEAZLEY P: I agree with the reasons of and the orders proposed by Bathurst CJ. 163McCOLL JA: I agree with the Chief Justice's reasons and the orders his Honour proposes. 164BASTEN JA: Where a tortiously caused injury renders the plaintiff incapable of managing a fund intended to provide for her needs for many years, full compensation may require a sum to cover the cost of administering the fund. This case does not challenge the entitlement to such an allowance, but rather seeks to establish the proper basis on which it should be calculated. However, the basis on which it is awarded will inform the proper method of calculation. (1) Proceedings below 165Damages for heads of loss other than the cost of fund management were agreed in a sum of $10 million, the settlement being approved by Hoeben J on 5 August 2011. A trial in relation to the remaining issue was heard by McCallum J, the question of how the additional sum should be calculated being dealt with in two tranches. It was accepted that a trustee/manager would charge fees calculated by reference to the value of the fund from time to time and that fees would continue to be charged until the fund was exhausted. In her first judgment, Gray v Richards [2011] NSWSC 877, at [74], McCallum J made two rulings: "(a) that the plaintiff's claim for the future cost of managing the fund management component of her damages award be allowed; (b) that the plaintiff's claim for the future cost of managing income earned upon the investment of the fund at an assumed rate of 5 per cent be allowed." 166These findings 'allowed' as part of the corpus of the fund on which the fees were payable (a) the amount of the fees, and (b) an estimate of the income to be earned by the fund. Both findings were challenged by the appellant, who was the defendant at trial. 167There were a number of subsidiary questions to be determined. McCallum J reserved for further consideration two questions which were addressed in a judgment delivered on 8 December 2011, Gray v Richards (No 2) [2011] NSWSC 1502, identified at [3] in the following terms: "(a) the rate of fees at which the final calculation of future fund management costs should be undertaken; (b) whether any sum should be deducted from the proposed verdict as being likely to be paid out early in the life of the fund." 168Extensive evidence was adduced. There was a dispute as to whether the fees were to be calculated by reference to those presently charged by the private financial manager preferred by the plaintiff's tutor, namely The Trust Company Limited, or, as the defendant contended, by reference to the fees payable to the NSW Trustee and Guardian under the NSW Trustee and Guardian Regulation 2008 (NSW). The plaintiff adduced evidence from an actuary as to the proper understanding of the costs charged by the NSW Trustee and the defendant called evidence from an officer working in the office of the NSW Trustee. 169The plaintiff's actuary asserted that the cost of management by the NSW Trustee was not limited to the disclosed rates, but included certain additional (indirect) costs which ought properly to be taken into account. There was a dispute, maintained in this Court, as to whether Mr Plover (the plaintiff's actuary) had the necessary expertise to give evidence as to the "additional" or "indirect" costs and as to the basis of his calculation. The figures in issue were not small: they were summarised in the second judgment, at [11], as involving the following amounts: (a) fees of NSW Trustee at prescribed rates - $1,286,000; (b) additional indirect costs - $106,000, and (c) Trust Company fees - $2,499,000, although on one calculation Mr Plover asserted that the real costs of the NSW Trustee were actually higher than those of The Trust Company. 170The trial judge accepted that the appropriate figure was that charged by The Trust Company. On that basis, she did not need to resolve the dispute as to the proper calculation of the costs incurred through the use of the NSW Trustee, but indicated that she was not satisfied that any sum should properly be awarded for such additional indirect costs: at [57]. The respondent has not sought to challenge that conclusion, being content to rely upon the award of a sum sufficient to cover the costs of The Trust Company. 171The trial judge's conclusion that it was appropriate to allow as an amount for the cost of fund management the sum charged by The Trust Company was based upon satisfaction that "the tutor's choice of a private manager was entirely reasonable": at [82]. The factual finding may be accepted: the question is whether the tutor's choice was relevant to the exercise of assessing the compensation payable by the tortfeasor under this head of damages. 172It is important to note that these issues were addressed purely for the purpose of calculating the compensation payable by the defendant tortfeasor. The Court was not being called upon to sanction any particular fees charged by a particular trustee. As McCallum J noted, between the date of her first judgment (16 August 2011) and the date of her second judgment (8 December 2011), namely on 2 September 2011, White J (dealing with the matter in the Protective List in the Equity Division) had declared the plaintiff to be a person incapable of managing her own affairs and had ordered that her estate be subject to management under the NSW Trustee and Guardian Act 2009 (NSW), s 41. White J appointed The Trust Company as the manager of the plaintiff's estate and ordered that the proceeds of the damages proceedings be paid to The Trust Company in its capacity as manager. (2) Basis of entitlement 173Before turning to the questions of calculation, it is helpful to understand the basic principles in assessing damages and, in particular, the present value of awards covering future losses. In Todorovic v Waller [1981] HCA 72; 150 CLR 402 at 412, Gibbs CJ and Wilson J, prior to discussing the calculation of the present value of future loss, set out four fundamental principles: "Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them. In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff. Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it. Fourthly, the burden lies on the plaintiff to prove the injury or loss for which he seeks damages." 174In discussing the first principle, their Honours stated that "the process must always be one of judgment rather than calculation": at 413. They noted that calculations "may sometimes give a false appearance of accuracy", because the figures on which they are based may be the result of "estimate or speculation": at 412. (That is why the current practice of calculating damages to the nearest cent is misleading and categorically wrong.) That is not to say the assumptions upon which the calculations are based should not be spelled out (the principle of transparency requires that they should) but that the element of speculation involved in some assumptions may defy logical dissection into constituent parts. Further, the procedural obligation to facilitate the just, quick and cheap resolution of disputes should not be subverted by the construction of substantive law principles which complicate the nature of litigation beyond a point at which the increased cost renders any increase in fairness and accuracy unacceptable. 175The compensatory principle is further qualified by the need to identify limits to the kinds of loss which are properly compensable by the tortious defendant. These questions may be described as involving principles of causation or "remoteness". Under the Civil Liability Act 2002 (NSW) they are treated as part of the assessment of causation by asking whether it is "appropriate for the scope of the negligent person's liability to extend to the harm so caused": s 5D(1)(b). The application of a similar general law principle, which is particularly concerned with economic loss, is exemplified by the cases referred to by Luntz, Assessment of Damages for Personal Injury and Death (4th ed, 2002), Ch 2, sec 7. 176The second and fourth principles require no comment. The third principle is important in two respects for present purposes. First, because the law is unconcerned with the use which the plaintiff may make of the money received by way of compensation, evidence as to his or her intentions will be inadmissible, because irrelevant. Secondly, the principle draws attention to the fact that the law may make its own assumptions about future use for the purposes of calculating loss. In other words, if the cost of funds management is, as a matter of law, an accepted head of damages, it will not matter whether the funds will in fact be invested. As will be seen, other aspects of future circumstances may be dictated by principles of law, rather than evidence as to likely events. 177The principle that the court calculating an award of compensation on a once only basis is not concerned with how the plaintiff might actually use the award in the future, does not imply that future events are irrelevant. Indeed, the determination in Todorovic v Waller that a discount rate (with a particular value) should be applied in calculating the present value of future income or expenditure, rested on a number of assumptions. One was that the fund provided would be invested and would earn income. A second was that the income would be taxed. A third was that the net return on investment would exceed the rate of inflation and any other factor tending to increase the value of the income or expenditure (the amounts in the award, whether for lost earning capacity or future medical expenses, being calculated by reference to present values). 178An award for fund management assumes that the incompetent plaintiff will invest the money prudently and apply the available resources for the purposes for which they are required. More accurately, given that the plaintiff is incompetent, the assumption is that the person's guardian will, in the exercise of his or her fiduciary duties, so act. In policy terms, it might be thought desirable to provide funds which would allow a large award to be prudently managed rather than effectively creating circumstances in which it is likely to be mismanaged or frittered away. 179That policy might well apply to many plaintiffs who, in varying degrees, may be incapable of managing a large sum of money. However, that is not the approach which the law has adopted in this country. The governing principle is that stated in the joint reasons of Brennan CJ, Dawson, Toohey and Gaudron JJ in Nominal Defendant v Gardikiotis [1996] HCA 53; 186 CLR 49 at 52: "True it is that, but for the accident, the respondent would not have a verdict to invest and, thus, would not need assistance in its management. But it is contrary to common sense to speak of the accident causing a need for assistance in managing the fund constituted by her verdict moneys in circumstances where her intellectual abilities are not in any way impaired. It would be otherwise 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." 180As explained by King CJ in the South Australian Supreme Court in Campbell v Nangle (1985) 40 SASR 161 at 192, in a passage adopted as correct by Gummow J in Gardikiotis (with the agreement of other members of the Court other than McHugh J) at 67: "The capital sum awarded to [the plaintiff, on account of future loss] 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." 181In principle, it would be possible to treat the cost of realising a return on an investment as covered by the overall discount rate. Mason J in Todorovic expressly recognized that to invest the award the plaintiff would be expected to incur the cost of professional advice; at 442 and 449; see also Wells v Wells [1999] 1 AC 345. Indeed, the adoption of a discount rate to determine the present value of future income or expenditure assumes that the plaintiff will invest the fund 'prudently'. However, the approval in Gardikiotis of an amount for the cost of fund management is inconsistent with treating the cost as covered by the discount rate, in the case of a plaintiff disabled by the tortious conduct of the defendant from administering the fund. (3) Calculation of cost of fund management (a) general factors 182In broad terms, the calculation of the cost of fund management will depend upon four factors, namely: (a) the basis of calculation; (b) assumptions as to the use of the fund by the plaintiff; (c) the quantum on which the calculation will be based, and (d) policy considerations relevant to the scope of the defendant's liability. 183With respect to the first question, it is quite possible that the basis on which fees are charged may change over time. For example, the cases reported from the mid-1980s suggest that fund managers calculated their fees as a percentage of income earned by the fund: eg, GIO of NSW v Rosniak (1992) 27 NSWLR 665 at 687G. The present case indicates that fund managers currently calculate their recurrent fees primarily by reference to the value of the funds under management from time to time. 184The second question requires assumptions as to those matters which are not taken into account as a matter of general principle, namely how the plaintiff will draw down on the fund for expenditure. If the fund is heavily drawn down in the early years, costs will diminish rapidly. If the fund is drawn down steadily, that will not necessarily be so. 185The third factor requires determination of the corpus of the fund by reference to which costs will be calculated. The fourth factor, namely policy considerations, may inform the correct approach to assessment of the first three factors, including whether to add the cost of fund management to the fund in order to calculate the fees, so that the fund manager is being paid to manage its future fees. (b) legal principles 186It is necessary to address first the principles relevant to assessing the cost of fund management. As explained in Willett v Futcher [2005] HCA 47; 221 CLR 627, it is necessary to have regard to the legal framework under which the fund resulting from the award of damages will be managed and hence the legal basis for the entitlement to charge. 187The first step (which has already been taken) is for the plaintiff's tutor to apply to the Court for orders pursuant to s 41 of the Trustee and Guardian Act. That section relevantly provides: 41 Orders by Supreme Court for management of affairs (1) If the Supreme Court is satisfied that a person is incapable of managing his or her affairs, the Court may: (a) declare that the person is incapable of managing his or her affairs and order that the estate of the person be subject to management under this Act, and (b) by order appoint a suitable person as manager of the estate of the person or commit the management of the estate of the person to the NSW Trustee. 188The orders made under s 41(1) by White J on 2 September 2011 resulted in the plaintiff becoming a "protected person" and thus a "managed person", pursuant to s 38 of the Trustee and Guardian Act. As such, the Court (or the NSW Trustee) could order payment from the estate of "remuneration, of a specified amount, to the manager of the estate": s 115(1)(b). 189Prior to 6 May 2010, the entitlement of a trustee company (or, more accurately, those listed in a schedule to the Act) to charge "a commission" was regulated by the Trustee Companies Act 1964 (NSW), s 18. Under that regime, the amounts allowed were not to exceed 4.25% of the corpus (or capital value) of the estate and 5.25% of the annual income: s 18(1)(c). The court had power to reduce the commission if it considered the amount "excessive": s 18(3). 190The repeal of that provision coincided with the commencement, on 6 May 2010, of Chapter 5D of the Corporations Act 2001 (Cth), entitled "Licensed trustee companies". A "licensed trustee company" was defined to mean "a trustee company that holds an Australian financial services licence covering the provision of one or more traditional trustee company services": s 601RAA. A licensed trustee company was empowered to charge fees for the provision of "traditional trustee company services", which were not to exceed any limit imposed by Part 5D.3: s 601TBA. Limits were provided, but only in respect of a trustee or manager of a charitable trust: Part 5D.3, Div 4. Although they have no application in the present case, it may be noted that the basic scheme was to allow a commission calculated by reference to the gross value of the trust's assets and an annual income commission, or an annual management fee "at a rate not exceeding 1.056% of the gross value of the charitable trust's assets": s 601TDD(1), and see s 601TDC. For a licensed trustee company not acting as the trustee or manager of a charitable trust, the only control is the requirement to disclose fees, both publicly and to "clients": ss 601TAA and 601TAB. 191In GDR v EKR [2012] NSWSC 1543, White J referred to an "interim judgment" in which he had expressed the tentative view that "a private manager is not entitled to payment of remuneration (as distinct from reimbursement of expenses) out of the estate of a protected person unless the Court (or in limited circumstances, the NSW Trustee and Guardian) so orders": referring to the Trustee and Guardian Act, s 115 and established authority in support of that principle, adding, at [30] a reference to the discussion of the right to remuneration under the predecessor to the Trustee and Guardian Act, namely the Protected Estates Act 1983 (NSW) in Gell v Gell [2005] NSWSC 566; 63 NSWLR 547 at [21] (Campbell J). White J continued at [32]: "It has been long established that a private manager is not entitled to payment of remuneration out of the protected person's estate, although the Court may authorise payment of remuneration where it is in the protected person's interest so to do. The position concerning remuneration of financial managers (apart from the NSW Trustee and Guardian and trustee companies that have a statutory right to remuneration) is analogous to that of trustees. Unless the trust deed otherwise provides, a trustee is required to act gratuitously, but the Court has inherent jurisdiction to allow remuneration where it is advantageous to the trust estate to allow such remuneration...." 192The fee chargeable by a manager which is a licensed trustee company is thus unregulated, except to the extent that the court which approves the appointment under the Trustee and Guardian Act may exercise the power under s 115. That aspect was not addressed in argument and may raise issues as to the operation of Ch 5D of the Corporations Act and, consequentially, the provisions dealing with the interaction between the Corporations Act and State laws set out in Pt 1.1A. The position with respect to the NSW Trustee, however, falls into a different category. The entitlement of the NSW Trustee to charge fees derives from s 111 of the Trustee and Guardian Act. That section further provides that the amount of any such fees is to be prescribed by the Regulations: s 111(2). The next step is to identify the fees payable pursuant to the NSW Trustee and Guardian Regulation 2008 (NSW). Clause 38 prescribes fees payable to the NSW Trustee "in respect of the management of estates of managed persons". According to cl 37, words and expressions used in Pt 4 have the same meaning as in the Mental Health Act 2007 (NSW). Part 4 is itself entitled "Managed estates". Unfortunately, neither that term nor other relevant terms used in cl 38 are defined in the Mental Health Act. Rather, the expression "managed person" is defined in the Trustee and Guardian Act. The order rendering the person's estate subject to management is provided for in the Guardianship Act 1987 (NSW). It was assumed (no doubt correctly) that the terms in cl 38 deal with the fees payable in respect of the plaintiff, as a managed person under the Trustee and Guardian Act. So far as presently relevant, the fees identified as applicable were an establishment fee of 2.1% of the value of the estate and thereafter an annual fee of 1.1% of the value of the estate: cl 38(1)(a). There were other fees chargeable for the "management of an investment for a managed person in a common fund" and for the cost of a manager of an estate (other than the NSW Trustee) as a percentage of net annual income: cl 38 (1) (b) and (c). For the purposes of calculating the "value" of the estate, the defined meaning is "the gross amount of the value of the assets (whether real or personal) of the estate without deduction of debts or liabilities secured or unsecured, but does not include the value of the person's last known principal place of residence": cl 38(5). 193There was evidence that the NSW Trustee did not in fact charge the full amount of fees permitted under the Regulation. The situation, as explained by Mr Farrell, the Director of Finance and Client Funds Management at the NSW Trustee, evidence identified by the trial judge as uncontested, was that there were three types of fees levied on clients directly managed by the NSW Trustee, namely: (a) an establishment fee of 1% for the first year only, capped at $3,300; (b) an annual management fee of 1.1% of "chargeable assets" capped at $15,000 per annum; (c) an investment fee of 0.5% charged to the various investment funds held by the NSW Trustee. The only other charges levied in the year 2010-2011 totalled 0.013% of the value of the total funds under management: at [43]. That amount was properly ignored as insignificant. 194The plaintiff noted that the "caps" were not imposed by regulation and that, if they were disregarded, the fees chargeable by the NSW Trustee would exceed those charged by The Trust Company. That was no doubt true, but was not directly relevant. If the inference was that a fee uncontrolled by legislation could be raised at any time, the same could be said of The Trust Company's fees. That there was a degree of flexibility in the private marketplace was revealed by evidence that The Trust Company had offered during the course of the proceedings to reduce its fees from those originally disclosed to the plaintiff. (As noted above, an award of damages would not constitute 'approval' of any fee actually levied in the future.) (c) inclusion of fund management cost in fund 195The plaintiff's case was that once it be accepted that the cost of fund management is a head of damage recoverable from the tortfeasor, there is no reason to treat it differently from other heads of damage. On the basis that the fees will accrue over time, that factor must be taken into account when awarding a single amount at the date of judgment. A calculation of the present value of those fees will be made according to an appropriate algorithm. Within the terms of s 127(1) of the Motor Accidents Compensation Act 1999 (NSW), the head of damages constitutes "a liability to incur expenditure in the future" which must be "qualified" (presumably meaning quantified) by "adopting" the prescribed discount rate. The sum thus calculated will be part of the award of damages and thus part of the fund to be managed. To the extent that the cost of fund management will itself depend on the size of the fund, that amount will need to be included in the fund, as part of the relevant calculation. 196The appellant raised three broad objections to that approach. The first was that the manager was being paid to manage its own future fees, a step characterised in an earlier case as involving "unwarranted double counting": see Rosniak (1992) at 698 (Meagher JA). That language does not clearly identify the problem, but the idea seems to be that a trustee entitled to fees from a fund should not be paid to administer that part of the fund which notionally represents its own future fees. One alternative would be to pay the fund manager a discounted amount on account of all future fees: that sum would also presumably be held on trust and managed until appropriated, but whatever approach the trustee adopted, the tortfeasor would not be required to pay the cost of managing that satellite fund. Absent some legal arrangement which is not presently contemplated, it may tend to tie the plaintiff to the one fund manager. 197The second objection is that the process of calculation "could go on forever": see Buckman v M&K Napier Constructions Pty Ltd [2005] NSWSC 546 at [13], per Burchett AJ, referring to Zeno's paradox. In principle, each time a calculation is made that amount should be added to the corpus and a further calculation made with respect to the added amount. In practice the calculation can readily be undertaken by use of an appropriate algorithm; the additional amounts become insignificant after a relatively small number of iterations. Nor is the reference to Zeno's paradox entirely apt: the paradox says that before an arrow can reach its destination it must first travel half the distance and therefore can never arrive. On that reasoning the arrow must first travel half the distance to any point on its trajectory, and therefore never starts. The paradox implies not eternal flight but the impossibility of movement. (What it actually demonstrates is the power of imagery to subvert logic.) In the present case the infinite regression is ended by rounding: cf Lewis v Bundrock [2008] QSC 189; [2009] 1 Qd R 524 at [16] (Martin J). 198The third objection seems to be quite simply that the value of the fees will be large. The cost will depend upon the rate at which the charge is levied, the size of the fund and the number of years for which the fund must be managed. It will also depend upon a matter to be addressed below, namely whether the fund should be assumed to reduce at a steady rate, or whether, taking account of income earned in the early years the rate of reduction will be slow in the early years and greater in the later years. Assuming a steady rate of reduction and that the fund is to last for 50 years, the cost of management will be the average amount in the fund (that is half the total) multiplied by 1% and by the number of years. This may be represented as J = D + Cfm, where J is the amount of the final judgment, D the damages other than the fee, and Cfm the cost of fund management. On the parameters set out above, Cfm will be the sum of a series the first item being 1/100 x J/2 x 50, which = J/4. The first iteration will produce a further sum calculated as 1/100 x J/4 x 50, which = J/8. Further iterations will give amounts which in total (without discounting to present value) will approximate 50% of D, or 33% of the judgment. 199The calculation proposed by the appellant uses D instead of J; where D is $10m, the result will be that Cfm (without discounting to present value) will approximate 33% of D, rather than 50%. 200McCallum J accepted the logic of the plaintiff's calculation. No doubt with a managed investment portfolio, the manager will commonly be entitled to recoup its fees from the corpus and will, in that sense, have been managing its own future fees. However, there is a policy question whether a limit should be placed on the amount to be awarded for this head of loss. The liability of the defendant is not necessarily dictated by a particular means of calculating the cost of managing her award. In principle, the plaintiff should reasonably be required to offer the fund manager prepayment of fees by transferring the equivalent of a satellite fund, notionally set aside for that purpose, calculated by reference to the corpus of the main fund. (d) should the fund include an amount for income? 201The second matter addressed by McCallum J in her first judgment was whether an amount should be included in the fund, for the purpose of assessing management costs, as reflecting income derived from the investment of the fund. She recorded the plaintiff's submission as being that if such income were to be included, "the calculation should be undertaken at an assumed earnings rate of 5 per cent to reflect the statutory discount rate": at [16] and [39]. The defendant's submissions were that "if the potential swelling of the fund by returns on investment were to be taken into account, then all variables would have to be taken into account, subverting the purpose of section 127 of the Motor Accidents Compensation Act": at [46]. The trial judge dismissed that argument on the basis that the Court was not asked to calculate the "actual income the fund will earn" but to adopt "the device of a statutory assumption as to future earnings": at [47]. She then stated at [48] that the discount rate "is the assumed earnings rate". The trial judge accepted that approach, relying on the assumption said to underlie the discount rate, namely that the fund would earn income and at the discount rate. 202The argument below, and in this Court, proceeded on the basis that the prescription by s 127 of the Motor Accidents Compensation Act of a discount rate reflected the exercise undertaken in Todorovic. Whether or not that is so, it is not accurate to describe a discount rate as an earnings rate or even a net earnings rate. A discount rate of 5% would imply a net earnings rate of approximately 5.26%; an interest rate of 5% would attract a discount rate of 4.74%. 203There are other difficulties: by describing the discount rate as an allowance for "net earnings" it is necessary to ask, net of what? If the cost of the fund manager were assessed according to the value of the fund, on what basis is the fund to be valued, and at what intervals? Are unrealised capital gains to be taken into account, or only realised gains? In the latter case, what assumptions are made about the incidents of taxation, if any? Further, for the purpose of calculating the discount rate, though not necessarily for the purpose of calculating the cost of the fund manager, the intended benefit to be offset is the increase in value of the award after allowance for inflation. The need for that allowance flows from the fact that both income and expenditure are measured, in assessing damages, according to figures current at the time of judgment. If the size of the award does not increase by more than the rate of inflation (covering the cost of living, increase in wages and the cost of major expenses such as medical treatment) then no discount should be required. Furthermore, a realistic discount rate should take into account the kind of investments which are likely to be appropriate to a severely disabled plaintiff: see Wells v Wells. 204To adopt the statutory discount rate as an assumed basis for increasing the value of the fund, in order to calculate the costs of the fund manager, is to adopt an arbitrary figure. Further, the calculation appears to have been justified on the basis of an assumption of "uniform drawings and depletion of the fund to zero on the last day of the term": at [51]. That assumption may well be appropriate for some purposes, but it will provide a very imperfect basis for calculating income. 205While it is true that a discount in order to quantify present value of future payments assumes that the investment will appreciate over time, it does not follow that the calculation of the value of the fund from time to time should be adjusted on an arbitrary basis to reflect that assumption. Assuming steady repayments, a graph of the size of the fund over time would not involve a straight line diminution, but rather a line which bulges at the top and diminishes rapidly towards the end (rather in the way that a mortgage repayment chart will commence with payments which are comprised largely of interest and a small amount of capital and will finish with payments which involve a small component of interest and a large element of capital). 206As a matter of fact, there may also be a difficulty with the assumption that drawings will be at a steady rate. A seriously disabled plaintiff may incur heavy capital expenditure immediately after obtaining an award, which would render the attempt to increase the size of the fund on account of income invalid. The principle that the Court should not be concerned with the manner in which the plaintiff will use the award, requires that these matters be disregarded in calculating the amount in the fund from time to time. Although the result may be to underestimate the likely cost of fund management, the disadvantage of engaging in such speculative exercises, by way of an exception to general principle, means that it should not be adopted by this Court. (e) deductions from award 207On the basis that the amount of the damages has been settled, the remaining question is whether there should be any deductions from the corpus of the fund. The appellant argued that certain amounts which were to be paid out of the damages immediately they were approved should have been deducted from the corpus before calculating the cost of fund management. These amounts were: (a) $200,000 representing the difference between party and party and solicitor and client costs; (b) $200,000 payable to the plaintiff's mother for past domestic services, and (c) $250,000 to cover modifications to her home and provision of a swimming pool. 208The appropriate principle with respect to calculating the corpus is to reduce the amount of the damages awarded by the amount of existing legal liabilities. Otherwise, in accordance with the principle that the Court is not concerned what the plaintiff does with her award, it is inappropriate to speculate in that regard, even though in the case of a tutor or guardian, owing fiduciary duties to the plaintiff, it would be reasonable to assume that amounts reasonably necessary to be expended forthwith will be expended. Apart from any effect on the establishment fee (which will be a minimal sum overall) the proper assumption (if somewhat arbitrary) is that the corpus will be reduced by a steady amount over the life of the fund. As a practical justification, the likelihood that there may be greater expenditure in the first few years may be offset by the fact that higher income will be earned in those years. 209Applying the relevant principle, there should have been a reduction for the amount of costs already incurred and payable, but not with respect to the other amounts. By their nature, past gratuitous domestic services (provided by the plaintiff's mother) were accompanied by no legal liability, nor did the anticipated early expenditure for capital expenses involve any extant legal liability. 210From a proposed judgment (disregarding fund management costs) of $10 million, as approved by Hoeben J, deductions of $66,000 appear to have been made for repayment of Centrelink payments, an advance for the purchase of a motor vehicle and Medicare costs. Hoeben J identified the total deduction as approximately $266,000, of which $200,000 was attributed to solicitor/client costs. Calculations of the corpus of the fund should have been reduced by the full amount of $266,000, as envisaged by Hoeben J. That would have given a figure of $9,734,000. 211The appellant sought to argue for a more expansive approach to deductions, based on the reasoning of this Court in Rosniak. In Rosniak at 699, Meagher JA stated: "[Senior counsel for the appellant] also submitted that there should be included in the 'deductibles' from the 'fund' any sums allowed in respect of past care, but I do not see why. There was no evidence from the respondent that she had any intention to repay such moneys to the providers of the past care, and it is not entirely clear that the Protective Commissioner would be empowered to do so." 212That approach would not have permitted a deduction on account of past gratuitous domestic services. The amount contained in the schedule of damages for the plaintiff in this case was $373,000, as to which Hoeben J noted that he would have been prepared to recommend to the trustee an immediate payment to the plaintiff's mother of $200,000. Foreshadowed approval of a possible disbursement does not create a liability in the trustee to make a payment which may or may not be sought. 213Nevertheless, the calculation in Rosniak did allow reduction for two amounts, one involving purchase of outstanding property interests ($210,000) and "swimming pool modifications" ($200,000): p 694D. Kirby P referred to those items at 674-675, but did not consider the principles by which such deductions were appropriate. It is not entirely clear how they were dealt with in the calculation undertaken by Mahoney JA. Meagher JA did not discuss why they should be allowed. Further, the discussion in Rosniak was premised on the need to calculate the costs of fund management by reference to the annual income of the fund. In that case the timing of any major expenditure may have taken on a different significance to the current practice of calculating such fees. To the extent that a principle was identified, it was simply that any calculation of the cost of fund management should be undertaken by reference to amounts which will in fact be paid to the trustee. Accordingly, the only additional deduction beyond those accepted by the parties in the present case is the amount of $200,000 for solicitor/client costs already incurred at the time of approval of the settlement. (4) Calculations 214Both parties made calculations as to how the various fees operated: not all the assumptions were entirely clear. For example, the fees appear to have been calculated on the assumption that there would be no purchase of freehold property; the offer of a reduced fee by The Trust Company was conditioned on the absence of a plan to purchase freehold property "in the short or medium term". However, The Trust Company also proposed to charge a minimum annual fee of $16,500 (at a rate of 0.55% per annum) which implied that the fund would notionally never drop below $3 million. 215Although the trial judge did not ultimately calculate the appropriate fee on the basis of those charged by the NSW Trustee, she gave careful consideration to the actuarial evidence of Mr Plover for the plaintiff, stating at [70]: "70 I am persuaded by the evidence of Mr Plover that there is a small but appreciable risk that the assumption adopted on behalf of the defendant (that the existing fee structure of the NSW Trustee will continue for 67 years) would produce an underestimate as to the true future cost of fund management calculated by reference to the fees of the NSW Trustee." 216The only relevance of that finding appears to have been to inform a conclusion as to whether the tutor's choice of a private manager was reasonable: at [82] and [86]. However, the question was not whether the plaintiff would pay a particular manager a particular amount, but rather what, making an informed estimate on the basis of current practice, would be an appropriate basis for calculating the likely cost of fund management over the life of the fund. 217In accordance with established principle, what the plaintiff did with her award was immaterial. Evidence that she was likely to fritter it away was as irrelevant as evidence of what she (or in this case her tutor) proposed to do by way of fund management. That principle should not be abandoned because, as a matter of chronology, a fund manager had in fact been appointed, with Court approval, prior to a final judgment in the damages claim. Nor was the approval irrevocable. In principle, evidence of the fees which would have been charged by The Trust Company was admissible as a basis for assessing reasonable costs in the market, unless as a matter of principle a different approach should have been adopted. The first question is whether, as asserted by the appellant, the costs recoverable from the defendant should have been restricted to the costs charged by the NSW Trustee, which were regulated. 218In Best v Greengrass [2012] WADC 44, Wager DCJ, sitting in the District Court of Western Australia, was invited to determine a similar question by reference to the costs charged by the National Australia Trustees ("NAT"), an organisation which apparently managed many trusts on behalf of brain injured people in that State, and those charged by ANZ Trustees Ltd: at [270]-[272]. On a fixed corpus of $2.4 million, the NAT fund management fee was 20.4% of the corpus and that of ANZ, 13.8%. Judge Wager adopted a sum that "recognises the plaintiff's preference for NAT but that is reasonable in the circumstances", adopting a figure of 19%: at [289]. The judge appears to have relied upon the reasoning of McCallum J in Gray v Richards (No 2) - at [287] - in giving weight to the plaintiff's preference for a particular trustee, but in fact did not adopt either proffered figure. She was entitled to take the latter approach, although it was not appropriate to take account of the future intention or preference of the plaintiff. 219In the present case, assuming a corpus of $9.934 million, and a life expectancy of 67 years, the experts accepted that, calculating fees on the initial sum only, the respective percentages were 15.1% (The Trust Company) and 10.2% (NSW Trustee). If allowance were to be made for the inclusion of fees in the corpus, the disparity increased to 20.5% (The Trust Company) and 12.0% (NSW Trustee). The approach accepted above does not permit the inclusion of fees in the corpus on which the fees are calculated. Nor did it accept the corpus was $9.934m. 220To seek to assess likely changes in legislation and the market for financial services with respect to managed estates is to engage in speculation. It is also to engage in speculation as to what the plaintiff (or, more accurately, her tutor) will do with the funds in the future. Whether or not a plaintiff who obtains an award of damages on the basis of a high estimate of future fees will then switch to a cheaper option once the award has been paid, or will make some other change over the course of the plaintiff's life is not a fruitful area for inquiry. The proper course is to adopt what may be considered a reasonable fee, having regard to the services available and the needs of the plaintiff. 221It would almost certainly be preferable if there were a fixed basis upon which to calculate the costs of fund management, even if the result was to a degree arbitrary. That is not, however, a matter for this Court to determine. Because it is inappropriate to allow either the cost of the fund manager or a separate element for income to be included in the corpus to be managed, the appropriate differential in the present case lies between 10.2% and 15.1%. Those figures will not be significantly affected by reducing the corpus to $9.734m. 222The disparity between the two figures could reflect a number of factors, including the level of service provided, the likelihood that the private trustee company will seek to derive a profit from its activities, whilst the government authority may well be subsidised. On the other hand, the fact that The Trust Company sought to adopt a minimum annual fee of $16,500 suggests that the failure to cap its fees in early years may give rise to unreasonable profits in those years. Given the size of the particular fund in the present case (which is likely to be between $10m and $11m) it is appropriate to err on the conservative side. Rather than undertake precise calculations, it is appropriate to adopt a figure of 12.5% of the fund as defined as the rate for calculating the fee. (5) Costs of trial 223The first judgment of McCallum J was delivered on 16 August 2011, following four days of hearing, which had concluded on 8 August. The appellant did not resist an order that it pay the plaintiff's costs of the trial up to that time. 224The second tranche of the hearing occurred on 25 November and 1 December 2011, the second judgment being delivered on 8 December 2011. A substantial issue addressed in that hearing was a question as to the proper quantification of the fees charged by the NSW Trustee. The plaintiff sought to establish, through expert evidence of Mr Plover, that properly understood those fees were of the same order as the fees charged by The Trust Company. It failed in that regard. The appellant sought an order that the plaintiff pay its costs either for that period, or with respect to that issue. In the alternative, it sought an order that there be no order as to the costs of the parties incurred during that period. 225For her part, the plaintiff sought an order that her costs incurred between 28 October and 11 November 2011 should be paid on an indemnity basis because of failures by the appellant to comply with directions of the Court as to the times within which evidence was to be filed. McCallum J noted the defendant's response to that claim that the delay was "largely if not wholly a result of the sheer complexity of the task in reviewing the financial operations of the NSW Trustee & Guardian": Gray v Richards (No 3) [2012] NSWSC 344 at [36]. She accepted that submission and declined to order indemnity costs. 226With respect to his application, the appellant submitted that the affidavit obtained from Mr Farrell (referred to above) and served on 19 August 2011, should have put the position beyond doubt. Although the trial judge treated that date as significant, she did not think it was "unreasonable" for the plaintiff to persist in her investigation of the issue thereafter. Nevertheless, McCallum J considered that part of the cost of having done so should lie with the plaintiff. In the end she ordered that "the defendant pay the plaintiff's costs of the proceedings except for half of the plaintiff's costs from 19 August 2011 to 8 December 2011". She adopted the period rather than the issue as the basis for assessment, to avoid the potentially difficult task for an assessor to differentiate between costs incurred on different issues: at [32]. 227The appellant has challenged the failure to make an order in the terms it originally sought in respect of that issue; the plaintiff has, by a cross-appeal, challenged the reduction of costs recoverable by her for the period from 19 August until 8 December 2011. 228An affidavit of the appellant's solicitor, dated 31 January 2012, estimated that its costs of responding to the allegation that there would be undisclosed fees and charges incurred if the NSW Trustee were used to administer the fund, were at least $170,000. 229Shortly after filing its notice of cross-appeal, the plaintiff apparently decided that it was necessary to seek leave to cross-appeal and filed a summons for that purpose. The appellant did not oppose a grant of leave, were that necessary. 230In his written submissions, the appellant noted that the evidence and submissions dealing with the costs judgment were "voluminous and complex" and proposed that all costs issues be deferred until this Court had determined the substantive issues: written submissions, par 102-106. While it is true that a variation of the approach adopted by the trial judge will itself give rise to a different outcome with respect to costs, the proposition that the Court will tolerate some expansive and voluminous paper war in respect of costs should not be entertained. In the end, the parties agreed that costs should be dealt with by way of written submissions, following delivery of the principal judgment. Despite that, the plaintiff put in a further written submission (with leave) following the hearing, on 3 May 2013. Directions will be appropriate to allow that course to be completed, but given the apparent propensity of the parties (or at least their lawyers) to incur costs, it is convenient to indicate the Court's preliminary view at this stage so that the parties have an indication as to how the matter might best be approached and possibly resolved by agreement. 231So far as the circumstances as they arose before the trial judge are concerned, three points should be made. First, there is no reason to interfere with her conclusion that it would be desirable to avoid any assessment on an issue-by-issue basis. Awarding part or all of the costs for a particular period was an appropriate course to take. 232Secondly, the assessment made by the trial judge of the reasonableness of the respective approaches of the parties was informed, not only by full knowledge of the material submitted by the parties and the positions taken in the course of the hearing, but by her assessment of the significance of particular issues in the proceedings. That the trial judge acted on that basis is clear from the reasons given in her third judgment: in the absence of manifest error, this Court would be loathe to interfere with that evaluative assessment. 233Thirdly, no precise apportionment of costs is appropriate. The adoption of a broad brush approach is not to be dismissed because the parties, through their own efforts, have incurred significant costs in the course of the litigation. 234Any reassessment of costs must now take into account the fact that the outcome on substantive issues has changed. The outcome has demonstrated why the attempts at factual precision as to the likely costs of fund management, to be incurred over a period of 67 years, were misguided. Further, attempts to speculate as to what changes might occur in the future were also misguided. Given the outcome of the appeal in this Court, and on the basis that the Court would not otherwise interfere with the order made by the trial judge in the circumstances which confronted her, an appropriate variation could now be to require either that each party to bear his or her own costs of the proceedings from the date of the first judgment, namely 16 August 2011, or that the plaintiff pay the defendant's costs for that period. On that basis the cross-appeal would be dismissed and the appeal, so far as it concerned the costs order made by the primary judge, would be allowed consequentially on the appellant's success on the substantive issues. (6) Costs in this Court 235With respect to the issue concerning the basis for calculating the cost of fund management, the appellant has been successful in identifying error on the part of the trial judge. With respect to the amounts to be included in the corpus for the purpose of calculating the cost of the fund management, the appellant has been successful in excluding any calculation on account of income earned on the fund and in seeking to exclude from the corpus the costs of fund management. 236With respect to deductions from the fund, the appellant has been partly successful and partly unsuccessful, although the issue was not a significant one in terms of the time consumed on appeal. 237It should also be recognised that the case was treated as a test case to establish relevant principles and, to the extent necessary, to reconsider and refine the approach adopted in GIO v Rosniak. It should be recognised that the appeal is not ultimately of any concern to the individual appellant, but has a broader concern for the appellant's insurer, which will take the benefit or bear the cost of the outcome, with flow-on effects for other cases. The interests of the respondent are entirely her own personal interests. Nevertheless like any other party, she had (and may have taken) such opportunities as were available to avoid further litigation. 238Having been unsuccessful in her cross-appeal and largely unsuccessful in resisting the appeal, the respondent must bear part of the costs of the appellant. An appropriate proportion may lie in the range of 50%-80%. 239Given these indicative parameters, the parties should be able to deal with the question of costs succinctly in writing. To that end, the Court should make the following directions: (1) Each party file and serve within 14 days his or her primary submissions with respect to appropriate orders as to the costs of the trial and the costs of the appeal, such submissions not to exceed 10 pages. (2) If there have been offers of compromise relied upon by the parties, the submissions should be accompanied by an affidavit annexing the relevant material. (3) Each party should have a further period of 14 days to reply to the principal submissions of the other party, such replies not to exceed 5 pages. 240The parties have leave to apply jointly for an extension of time for compliance with these directions on the ground that discussions directed to settling the appropriate orders for costs are taking place. 241MEAGHER JA: I agree with the reasons of and orders proposed by Bathurst CJ.

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