A woman was on her way home from work when a truck ran into the back of her car. She was injured in the accident. Because she was returning from work, she has been paid workers compensation in respect of her injuries. The circumstances of the accident created a liability in the truck driver who drove his truck into the back of her car. That means that the woman's employer is entitled to be indemnified by the truck driver for the compensation which it has paid to the woman.
In this case the employer, which is the State of New South Wales (because the woman was a teacher at a public school), is suing the truck driver, John Adlington, under s 151Z of the Workers Compensation Act 1987 to enforce that indemnity.
The issue which I have to determine, as described by Mr J Turnbull of counsel who appeared for Mr Adlington, is to assess what damages the woman would have received had she sued Mr Adlington directly. It is a notional assessment of those damages.
There are two principal issues in the case. The first is this - again Mr Turnbull put it clearly in his closing submissions - the onus is on the plaintiff, which is the State of New South Wales, to prove that the treatment which the woman received and for which she received compensation payments was for injuries which were caused by the traffic accident. Mr Turnbull's case was that there was insufficient evidence for me to conclude that injuries for which certain recent treatment was received are causally related to the car accident.
The second issue concerns my assessment of damages which, as I have said, is a notional assessment. The evidence in the case came from one witness and a series of exhibits. The witness was the woman car driver. Her name is Jennifer Lee Phegan. The exhibits comprised exhibits A to G tendered by Mr N Kelly of counsel, who appeared for the State of New South Wales, and exhibit 1 tendered by Mr Turnbull.
First I will give a brief account of what I regard as the relevant portions of Ms Phegan's evidence. The accident happened a long time ago. It was on 8 September 1998. Ms Phegan was then aged 28. She was stopped and she felt what she described as a "very big bump" from behind. She became confused because it was followed by a series of further bumps - five, six, seven, eight bumps. She realised that there was a large truck behind her which was bumping the back of her car. In fact, the bumping was so severe that it crushed the back of her sedan up to the back window, effectively concertinaing the boot.
Obviously concerned for her safety if she stayed in the car, Ms Phegan jumped out of her car whilst it was still moving. She heard a loud twang in her left hip and felt a burning sensation in the left hip and down the left leg in the front or, as she described it, in the front of the left hip and to the side a little. Although she was able to drive the car home, it was later regarded as a write-off.
Ms Phegan was in good health up until then. She had been married a couple of years at that stage and was a very active sportswoman. She played tennis twice a week. She also played netball, golf and walked her dogs. She had never had any problems with her hip before the accident.
Ms Phegan took a day or so off and went back to work as a primary school teacher. Mr Kelly asked Ms Phegan what problems she had after the car accident. She said her main problem was in her left hip. Asked how long she had had it, she said a long time, really until now. After the accident, she found that she could never return to any sport up until last year. If she became active, her left hip troubled her and affected her sleep. At work, she always stood on her right leg and tried not to use her left leg. She said that over the years, her left hip got worse. She tried various kinds of treatment over the years. She has had physiotherapy. She has seen a chiropractor. She has had acupuncture and she has taken medication. She has had injections into the left hip and two arthroscopies into the left hip.
Ms Phegan and her husband had their first child in 2000 and their second child in 2006. After the birth of her second child, she found herself complaining about her hip and the restrictions which it placed on her. She found that she was also putting on some weight, so she decided to get more exercise. She started running and walking more with her dogs. She got up to about five kilometres a day but she found the effect on her hip was, as she described it, very detrimental and she could not continue to walk. She continued to see her local GPs and was referred to various orthopaedic surgeons who administered the injections and arthroscopies.
At one point in her evidence, Ms Phegan became obviously upset. Mr Kelly explored why and Ms Phegan explained that the injury was a very long ongoing process where she felt that she was made to feel that there was nothing wrong with her. Finally, a major problem was identified and she described it as a long and exhaustive process. It limited the activities she could do in the ways that I have described. She felt that her two children did not have a mother who could interact with them, such as kicking a ball or riding on a bike or playing netball.
The injury affected Ms Phegan's sleep as well as her day to day activities. The injections and arthroscopies provided temporary relief. She had time off work after the arthroscopies and received compensation. Later on she saw a psychologist to help her, as she said, to see the light at the end of the tunnel. Then she said that last year she received approval for a left hip replacement. I might add that some radiological investigations before then had indicated that there was some pathology in her left hip. It is significant to observe that X‑rays in 2003 and 2007 showed no abnormality.
Last year, on 28 July, one of the orthopaedic surgeons, Dr A Gursel, performed the total left hip replacement. Ms Phegan was off work for six or eight weeks and went back, as it happened, on the 16th anniversary of the accident - 8 September 2014. She started off at one or two days a week, working up to five days a week.
Ms Phegan is now back to full duties and feels, as she said, "a great deal better than before". She has even played tennis a couple of times. There is a bursitis out the outside of her left hip which needs some attention. She is getting some physiotherapy fortnightly but she would like to reduce it to monthly. Aged now 44, she is in a senior position as the equivalent to a deputy principal and would like to advance in her career.
Cross-examined by Mr Turnbull, Ms Phegan repeated that she heard the twang in her left hip. When Mr Turnbull drew her attention to a document which said that she had felt a twang in her left hip and asked her whether she might have been mistaken in saying she had heard it, she answered that she believed she had heard and felt it but acknowledged that she may be mistaken. To my mind, there is little distinction in her descriptions of her sensations to do with the left hip. Obviously she perceived one way or another or both that something had happened to her left hip at the time of the accident.
Turning to the exhibits, Mr Turnbull relied on the opinion of an orthopaedic surgeon who had not treated Ms Phegan but who was qualified to provide an opinion. He is Dr James Bodel and provided a report on the same day that he examined Ms Phegan, which was 8 February 2010. He noted the history that over time "the longstanding discomfort, particularly in the region of the left hip...steadily deteriorated without additional accident or injury." He noted the X-ray in 2003 which had shown no significant abnormality and the MRI scan in 2009 which, he noted, "shows a labral tear but no significant arthritic change."
Under his diagnosis, Dr Bodel noted that Ms Phegan "first suffered an injury at work on 08 September 1998" and at the stage that he saw her "she has developed increasing pain in the region of the left hip which has led to further treatment." He noted that the "symptoms have been present for some considerable time although it has only recently developed to such an extent that she needed to pursue further investigation and treatment." In the expression of his opinion, Dr Bodel said that Ms Phegan "has developed pathology in the region of the left hip and this has come on insidiously over time and it dates from the original injury in the motor vehicle accident on 08 September 1998. There is no history of any other accident or injury which has intervened in the subsequent period."
Dr Bodel noted that as at February 2010 "her treatment protocol has not yet been completed." He said that there is "historically a causal link between the episode of injury on 08 September 1998 and her current complaints in the region of the left hip." He emphasised in response to a specific question that there is "a direct causal link between the episode of injury on 08 September 1998 and the development of the increasing symptoms in the left hip. This is a recurrence of her old injury. There is no additional accident or injury and no new pathology but merely a progression of the regional pathology probably caused by the accident on 08 September 1998."
Mr Turnbull on other hand relied upon a report by another orthopaedic surgeon, a Dr David O'Keefe. He did not examine Ms Phegan but was obviously given the relevant material and he provided an opinion in a report dated 2 March 2015 which became exhibit 1. In his observations about the accident, Dr O'Keefe noted that Ms Phegan's "car was drivable after the accident so there wasn't a lot of major damage so it can be inferred that the collision was fairly low speed. Also the fact that Ms Davey [Ms Phegan's maiden name] was able to return to work after a few days would confirm that her injuries were not severe." In addressing the question of the relevance of the accident to her injuries, Dr O'Keefe first noted that Ms Phegan "was 38 years old when the injury occurred". That was an error. Although he had noted correctly her date of birth, Ms Phegan was 28 and not 38 when the accident occurred. Dr O'Keefe went on to say that "she complained of problems in 2008 to Dr Greenway which is 10 years after the injury, and if the hip problems were in fact caused by the MVA then they would have presented much earlier." Dr O'Keefe expressed the opinion that it was "therefore highly unlikely that this lady's hip problems were related to the original low speed MVA for the reasons outlined above, but more likely due to the normal aging process".
Mr Kelly tendered further material, the relevant parts of which I have read.
Both counsel addressed me very helpfully on the two major questions of causation and damages. Mr Turnbull argued that the causation question was a medical issue to be proved by medical evidence. He pointed out that Dr Bodel's report was dated 8 February 2010, before both arthroscopies and injections and, most significantly, before the hip replacement in 2014. He argued that without a doctor saying that the treatment which occurred since Dr Bodel's report, namely in 2013 and 2014, was causally related to the car accident, then I cannot so find. I do not accept that submission.
The reasons for not accepting the submission are partly related to the findings which I make about Ms Phegan as a witness. Mr Kelly argued that she came across as honest, stoic, articulate and made reasonable concessions and considered answers. I agree with those submissions. They are consistent with my own observations. Her evidence was consistent with the histories given in various reports. Specifically in cross-examination when Mr Turnbull was asking her about hearing or feeling the twang, my own note at the time was that Ms Phegan was not a defensive witness and was prepared to make concessions. I accept her evidence in its entirety.
It follows that I accept and find that Ms Phegan felt and/or heard a loud twang in her left hip area at the time of jumping out of the car during the accident, and had ongoing problems with her left hip ever since.
The reasoning of Dr Bodel includes the observations that there were no additional accidents or injuries. As he said, there "is no additional accident or injury and no new pathology but merely a progression of the regional pathology probably caused by the accident". The evidence which I have before me from Ms Phegan is consistent with that doctor's history. There is no other explanation for her consistent pain and disability in her left hip since the accident occurred, nor is there any explanation for that pain and disability continuing after the time that Dr Bodel saw her on 8 February 2010 up until and including her hip replacement on 28 July 2014.
I am comfortable in finding on the balance of probabilities that the treatment received and expenses incurred by Ms Phegan since Dr Bodel's report are attributable to the accident. As Mr Kelly said, the pain has never gone away. It has varied in degree, often depending upon the treatment she has received, but the hip problem which she has had since 8 September 1998, up until at least the hip replacement, is the same hip problem. As Mr Kelly pointed out, the place or location or region of the pain is the same. He pointed out, by reference to exhibits F, G and H, that the histories taken by various doctors referred to longstanding hip problems brought about by the traffic accident.
To my mind, there is no other explanation for Ms Phegan's treatment, days lost off work and expense, than the hip injury caused in the car accident.
Mr Turnbull pointed to exhibits B and C which were both X-ray reports from 2003 and 2007 showing no abnormality in the hip region and compared it with an MRI scan taken in 2009 which showed the labral tear. He argued that that was consistent with some fresh pathology which was shown up in 2009. That argument has some force but I do not accept it. The radiological investigations were different in nature. In 2003 and 2007, they were X-rays but in 2009, it was an MRI. To the extent to which there is still some doubt, on balance I am persuaded by the plaintiff that those observations from the X-rays in 2003 and 2007 do not affect my opinion that Ms Phegan's ongoing hip problems are related to the car accident. Perhaps that issue and the issue of Dr Bodel's opinion about the treatment that Ms Phegan has received since the accident could have been clarified by the calling of various doctors. But to my mind both counsel and those instructing them conducted this case efficiently and expeditiously and in accordance with the proper discharge of their duties under the Civil Procedure Act 2005.
Mr Turnbull obviously relied on Dr O'Keefe. There are two problems with Dr O'Keefe's report which means that I put little weight on it, without being critical of Dr O'Keefe himself. The first problem concerns his description of the collision. He was right in concluding that it was "fairly low speed" but I would regard his conclusion that there "wasn't a lot of major damage" as being doubtful because of the damage to the car which I have described and the fact that it later was written off.
More significantly, however, is his history that Ms Phegan, "complained of problems in 2008 to Dr Greenway which is ten years after the injury, and if the hip problems were in fact caused by the MVA, then they would have presented much earlier." Of course, the evidence given by Ms Phegan is that she has always had problems with her left hip since that accident. She has seen doctors and it has affected her life, her sport and her behaviour. Dr O'Keefe's history there is incomplete in a very significant way and, in my opinion, it affects the reliability of his conclusion and I put little weight on it. I also note that he did not see her personally and towards the end of the report where he was expressing his opinion and attributing her condition to "the normal aging process", recorded her age as being ten years older than she in fact is.
For those reasons, the State of New South Wales has satisfied me on the balance of probabilities that all of the treatment that Ms Phegan has received and the compensation payments that she has received are causally related to the traffic accident which occurred in 1998.
I now come to the notional assessment of damages which I would award. Again, the efficiency and competence of counsel has been of significant assistance to me. Mr Kelly provided MFI 5 which was a written draft submission about the range of damages. Both counsel agreed on the amounts for past economic loss, superannuation on that past loss and past out of pocket expenses. The controversial issues were non-economic loss, future economic loss and future out of pocket expenses.
Regarding non-economic loss, Mr Turnbull fairly conceded that if I found the causation question against him, then he accepted that Ms Phegan exceeded the threshold. In response to Mr Kelly's submission that the relevant percentage under s 79A of the Motor Accidents Act 1988 (NSW) (the relevant legislation in this case) should be between 30% and 33%, Mr Turnbull said that it would be closer to 25%. He acknowledged that Ms Phegan had had some problems but reminded me that she had been at work full time for a large amount of the period. She had received a good result from her operation and had a bright future. He therefore assessed her at around a quarter of a most extreme case.
Mr Kelly justified his figures by reference to the fact that Ms Phegan had had to give up all her sporting activity for some 15 or 16 years and it affected what she could do within her family and with her children and had had obviously a traumatic effect. As he pointed out, Ms Phegan had a problem for almost half of her life to date. That is why his figure was between 30 and 33%. I think there is force in Mr Kelly's submission. Although Ms Phegan did go back to work, as Mr Kelly said, she should not be punished for her stoicism. The pain has been present for a great number of years, which is significant in the life of a 44 year old and, particularly as a young mother, it has affected her interacting with her children. I regard an appropriate percentage as being one of 30%.
So far as future economic loss is concerned, Mr Turnbull argues that there is no evidence to suggest that Ms Phegan won't be able to continue her work full time. She has been able to do so in the past. There is a significant improvement after her operation and no doctor expresses the view that she will be away from her work for any period of time. There is a lack of medical evidence on the question. Mr Kelly on the other hand argues for a contingency or a buffer of between $20,000 and $40,000. As Heydon JA said (when his Honour was sitting in the Court of Appeal) in State of New South Wales v Moss [2000] NSWCA 13; 54 NSWLR 536 at 553 (at [71]), "compensable loss is not a loss of income but the loss of capacity to earn income in a manner productive of financial loss." His Honour referred to authorities which make clear that a judge in assessing damages for future economic loss is engaged in "an exercise in estimation of possibilities, not proof of probabilities." Not the same degree of precision is required as for past economic loss.
Nevertheless, I think Mr Turnbull has a good point in referring to the lack of medical evidence. I simply do not know from a medical point of view what the prognosis is for Ms Phegan's future working capacity. I would nevertheless regard it as appropriate to give her a modest buffer because she has had major surgery affecting one of her limbs and I would regard an appropriate figure as $5000.
Mr Kelly argues for a buffer of between $10,000 and $25,000 for future out of pocket expenses. Again Mr Turnbull points out that there is a lack of medical evidence but acknowledges that there may be a need for some medication and physiotherapy. He proposed a buffer of $5000. Again, I am hampered by a lack of evidence. As Mr Turnbull points out, I do know that Ms Phegan is still receiving physiotherapy but wants to reduce it and she gives a good account of her recovery. I would be inclined to allow a buffer of $7000 for future medical expenses.
HIS HONOUR: I'll just depart from my judgment there, Mr Gardner and Mr Wholohan. I just need your assistance with the amount. So I have found 30%. That's where I need assistance with. What I don't seem to have is the actual figure which - the 30% means a 23%, doesn't it?
GARDNER: ..(not transcribable).. $13,000.
HIS HONOUR: We know because it's one of the figures there. Thank you. Got it. The MFI shows it. Thank you. MFI 5. Good. I'd better do the sums now. You two do the sums as well to make sure we're all in agreement. So the figures are 113,000 and then 20,160 and then 1814 and then 84,801 and then 5000 and then 7000. I get a total of 231,775. What do you two get? Agreed? Good.
In my opinion, the notional damages which would have been awarded to Ms Phegan are these: for non-economic loss, $113,000; for past economic loss, $20,160; for superannuation on past economic loss, $1814; for past out of pocket expenses, $84,801; for future economic loss, $5000; for future out of pocket expenses, $7000, being a total of $231,775.
HIS HONOUR: Now, gentlemen, what order do I make if anything? Do I make an order under this legislation? It looks as though I just express the opinion. What do you say, Mr Gardner?
GARDNER: It'd be correct obviously to make the finding of what the notional pool has been and then following from that, we have the workers comp payback, which I presume that's been tendered.
HIS HONOUR: It was. No, I've got the figure here. You're right.
GARDNER: Of $91,000.
HIS HONOUR: Yes, you're right. That's right.
GARDNER: $91,366.
HIS HONOUR: Just a moment, Mr Kelly gave it to me. I've got here $91,366.03 and interest of $17,842.50.
GARDNER: Yes. So it would follow from that finding of the notional pool that you make a finding that the workers compensation payback is that figure and that there's an agreement on the interest.
HIS HONOUR: Sorry, which figure?
GARDNER: The $91,366.
HIS HONOUR: Yes, and there's agreement on interest.
GARDNER: The interest is agreed for that figure of $17,000-odd. From there, you would find a judgment in favour of the plaintiff for the $91,366 plus interest of $17,000 and then an order in respect of costs, which I'd like to make an application about.
HIS HONOUR: An order for judgment for the plaintiff in the sum of 91, et cetera, and agreed interest in the sum of 17, et cetera. Does that sound right to you?
WHOLOHAN: Yes, your Honour.
Accordingly, I find a verdict for the plaintiff and I enter judgment for the plaintiff against the defendant in the sum of $91,366.03. I order interest payable on that amount by the defendant to the plaintiff in the agreed sum of $17,842.50.
HIS HONOUR: Does that deal with the formal orders?
GARDNER: Yes.
HIS HONOUR: Okay. Now, costs. Mr Gardner.
GARDNER: Firstly, there's the Calderbank letter of offer of 14 July. At that time, as is evident in that correspondence, the plaintiff had offered to resolve the proceedings on the basis they were discontinued, that past payments as at that point in time or thereabouts be paid, which was in the sum of 42,299.50. The defendant to pay costs and the element of compromise that was contained in that offer was to waive the interest entitlement. You'll note annexed to that, there's correspondence shortly after that offer was served in which we clarify with my friend the list of payments as it was at that time.
You'll see at the time the list of payments was $48,870.43. The offer took into account the previous interim payment the defendant had made back in approximately 1999, which was about $6500-odd and hence the offer contained what was the balance of payments owing as at about that time. I would submit that the offer has an appropriate degree of compromise and that attached to that email at the back, I've included a calculation of what the interest would have been on those payments at that time, which was about $7300.
HIS HONOUR: Just remind me, what you're looking for is costs on a?
GARDNER: The order would be for costs on a normal basis up to the date of the Calderbank offer and then indemnity costs thereafter.
HIS HONOUR: Right. Just remind me where I'm looking in the rules.
GARDNER: As it's a Calderbank offer, it's not strictly speaking covered by the rules but you'd be guided by the decision in Multicon Engineering v Federal Airports (1997) 47 NSWLR 631.
HIS HONOUR: Which is probably footnoted here somewhere.
GARDNER: Yes, that's right. It's footnoted to the UCPR.
HIS HONOUR: Just let me track it down.
GARDNER: Also the basic principle of Calderbank v Calderbank [1975] 3 All ER 333.
HIS HONOUR: Yes.
GARDNER: I think you'll find a footnote addressing the issue of Calderbank offers following from r 42.15 in the UCPR.
HIS HONOUR: Yes. Thanks. What was the case you referred to?
GARDNER: Multicon Engineering v Federal Airports. We don't have the citation here unfortunately.
HIS HONOUR: It's alright. So the principle seems to be - well, it says in the footnote at 42.13.26, "A simple principle...embodied a compromise." You're saying it did in the interest.
GARDNER: In the waiver of interest, correct. In terms of the amount of that compromise, when you compare the interest component to the value of the payback at that time, the interest component is essentially 20% of--
HIS HONOUR: About 20% of it.
GARDNER: That's right.
HIS HONOUR: Where are those calculations? At the end?
GARDNER: At the very end. I've provided a calculation of interest which is basically calculated from the first date that payments were made after the initial payments in 1999. So that was 18 February 2010. Then calculated the interest up to the date of the Calderbank offer, which gives you the sum down below, then divided that by two because the interest accrues on each individual payment. So if you strictly did the interest calculation, you'd calculate interest on every individual payment from the date the payment was made. But to avoid that sort of complexity of going through every individual payment--
HIS HONOUR: You divide by two.
GARDNER: --I've approached the interest component as you would as a past economic loss type of component, so divided it by two. So it gives you a potential interest at that time of the offer of about 7300. So that's the component we offered to waive by way of compromise and it'd be our submission that that's a substantial compromise which would invite the Court to make a special order in respect of indemnity costs from the date of the Calderbank.
HIS HONOUR: What do you say, Mr Wholohan?
WHOLOHAN: There's no doubt your Honour has the discretion to make the orders sought.
HIS HONOUR: I do.
WHOLOHAN: If your Honour is minded to the order that my friend proposes is the correct one. There's nothing I can really put to your Honour. The offer was made. I can't dispute that it incorporates that element of compromise, albeit not significant. But there's nothing I can put to you on the principles, your Honour. You have the discretion.
Mr Gardner argues that I should award costs to his client on the normal basis up to 14 July 2014 and on an indemnity basis after that date. The reason for that is a letter of that date sent by him to Mr Wholohan, the defendant's solicitor, making an offer that the plaintiff would be prepared to discontinue the proceedings if the payout amount was paid. It also indicated that the defendant would waive its entitlement to costs. The entitlement was also calculated in the same exhibit as the letter appeared (which is exhibit J) to be something in the region of $7000. The payout at that stage was a little over $42,000.
To my mind, the compromise involved is significant. The letter says that the defendant will "seek indemnity costs from your client in accordance with the principles in Calderbank v Calderbank." To my mind, there was a significant compromise on the part of the defendant in making the offer, given the state of the medical evidence at that stage. The offer to my mind was unreasonably rejected.
Accordingly, the costs order I make is this. The defendant is to pay the plaintiff's costs on the ordinary basis up to and including 14 July 2014 and on an indemnity basis from 15 July 2014 to date.
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Decision last updated: 15 July 2015