State of Victoria v McIver & Ors [2005] VSCA 50

State of Victoria v McIver & Ors [2005] VSCA 50 - VSCA 2005 case summary — Zoe

[7]

3 The State appeals against the second and third of those orders. The plaintiff cross-appeals in relation to the quantum of damages and his Honour's refusal to order costs on an indemnity basis up to and until 27th March 2003. The police members seek an extension of time within which to cross-appeal against the first order referred to in [2] above and the order for costs in so far as it was made against them. The Court heard argument on the application for an extension of time and the argument to be advanced on the proposed cross-appeal. We reserved our ruling on that application.

4 The plaintiff was born in Dunedin on 2nd October 1943. He worked with an insurance company in New Zealand and moved to Australia in 1982 to become its Victorian Regional Manager. He continued to work in the insurance industry until the early 1990s, when he began to operate two small cafes, one in Richmond and the other in Malvern. In 1993 he became the franchisee of Muffin Break at the Australia on Collins. That was a successful business which he sold in 1998. He then became the franchisee of Muffin Break on Acland Street in St Kilda. It was at those premises that he was arrested on the morning of 7 October 1999.

5 The police members, Detective Senior Constables Tucker and Stuber, attended. They initially spoke to an employee, Ms Doris Delle Vergini. The plaintiff was behind a counter preparing coffee. When he finished, he approached the two policemen and there was a conversation in the adjacent arcade. They asked the plaintiff to accompany them to answer allegations of sexual abuse made by the daughter of his estranged de facto wife. He was permitted to fetch a jacket from the kitchen at the back of the café and was then arrested and handcuffed. The judge accepted the plaintiff's and Ms Delle Vergini's evidence that his hands were handcuffed behind him, not in front covered by the jacket as the police members claimed.

6 The plaintiff was taken from the shop in the presence of customers and led down Acland Street towards Barkly Street and along Barkly Street in full view of other traders. He was then driven in a police vehicle to the St Kilda Criminal Investigation Unit. After questioning, he was released in what the judge accepted was "a distressed and shocked state". No charges were laid then or subsequently.

7 As the State no longer contests the applicability of s.123 of the Police Regulation Act_[2]__,_ it is unnecessary to go into detail concerning the conflicts in the evidence as to the mode and purpose of the arrest and the way in which the judge resolved them; but, as there is a minor issue relating to aggravated damages, it will be as well to set out [123] of his reasons:

[9]

His Honour acknowledged that the community is prepared to give great latitude to the police in the course of their duty, but here there was no emergency and ample time for reflection.

8 Within days of his arrest, the plaintiff developed a serious psychiatric illness. Dr Phillip Perlstein, a general practitioner, saw him urgently on 22nd October 1999. (He was already a patient of Dr Perlstein's clinic, having seen one of his colleagues, Dr Nicole Rose, on 15th and 22nd September 1999.) Dr Perlstein was sufficiently concerned about the plaintiff's condition to telephone him the next day, Saturday, to check on his well-being. He spoke to him again by telephone on the following Monday, when the plaintiff was admitted to the Albert Road Clinic, a private psychiatric hospital. He remained there for some days before returning to the Acland Street premises. He was unable to cope and the business was sold on 5th December 2001. The plaintiff has not been employed since.

9 The State's appeal, the plaintiff's cross-appeal and the police members' proposed cross-appeal raise six issues. They relate to causation; general, including aggravated, damages; damages for capital loss on sale of the business; damages for past and future economic loss; the judge's refusal to give the plaintiff his costs of the entire proceeding on an indemnity basis; and the way in which judgment should have been entered, liability for the police members' torts having attached to the State pursuant to s.123 of the Police Regulation Act.

Causation

10 Although the judge found that several torts had been committed, the gravamen of the plaintiff's case was intentional trespass to the person. (It will often be convenient, as counsel did in the course of the argument, to speak simply of "the tort" committed by the police members.) Accepting that the tort had been committed, Mr Ruskin advanced two submissions with respect to causation. The first was that, although nominal or even general damages might in principle be awarded, because damage is not an element of the cause of action, there was no causal link between the tort and the plaintiff's psychiatric illness or the other items for which damages were awarded. The second was that the damages for psychiatric illness should be reduced on account of the plaintiff's pre-existing circumstances and the other causes of that illness.

11 At first sight, the first submission is surprising. Prima facie, this is a straightforward case for applying March v. E. & M.H. Stramare Pty. Ltd.[3] That is the way counsel for the State argued the issue of causation below. Mr Ruskin submitted that the causal link should nevertheless be denied for policy reasons of the kind referred to by Hayne, J. in Pledge v. Roads and Traffic Authority.[4] His Honour said:

[11]

The footnote at the end of the second-last sentence in that passage referred to Professor Jane Stapleton's essay, "Unpacking Causation", in Cane and Gardner (eds), Relating to Responsibility (2001) 145 at 166-173. Counsel argued that the policy reason for denying causation here was the difficulty of decision making in an operational situation.

12 I do not accept that submission. In the first place, March v. E. & M.H. Stramare Pty. Ltd. is binding on us and I do not understand Hayne, J. to have enunciated a different doctrine. His Honour was explaining some of the ramifications of the existing law. For that reason it matters not that Pledge v. Roads and Traffic Authority was decided after judgment was given in the present case. Secondly, the passage suggests that his Honour considered that policy inquiries would be relevant only in exceptional cases and Professor Stapleton was considering causation in a wide sense, as a label that could just as well refer to duty or breach.[5] Causation, in the sense with which we are concerned, is a question of fact.[6] At a trial with a jury, it would be decided by the jury.

13 Mr Ruskin's second submission began with the fact that there was more than one cause of the plaintiff's psychiatric illness. In addition to the tort, there was the break-up of his relationship with his former partner, the allegations of sexual abuse, the problems that the business was facing and a pre-existing psychiatric condition. Multiple causes are, however, commonplace. In most cases they are answered by the proposition that it is sufficient that the tort was one of the causes of the injury, loss or damage.[7] Nevertheless, it was submitted, the plaintiff's damages for psychiatric injury should have been reduced. Reference was made to Watts v. Rake[8] and Purkess v. Crittenden.[9] Counsel also referred to Petkovski v. Galletti[10], especially to the second-last page of the joint judgment of Southwell and Teague, JJ. Speaking in the context of a "serious injury" within the meaning of s.93(17) of the Transport Accident Act 1986, their Honours said that, where there is a pre-existing condition, an analysis must be made of the extent of impairment before and after the relevant injury. So here, it was said, the State should be liable only for the consequences of the tort.

14 The answer to this submission, in my opinion, is similar to the answer to the first submission. This was a straightforward case where the defendants were obliged to take the plaintiff as they found him.[11] It was not shown that any part of the plaintiff's psychiatric injury flowed solely from a cause other than the tort. It is true that there were concurrent causes and there was some evidence of the plaintiff's pre-existing psychiatric condition. He had seen Dr Nicole Rose twice in September 1999 and was already on medication that included the anti-depressant Zoloft. Nevertheless, as the learned presiding judge observed in the course of the argument, the defendants did not lay a foundation for the kind of "before and after" comparison referred to in Petkovski v. Galletti and other cases. To adapt the words of Purkess v. Crittenden[12], they did not establish with the required measure of precision what the plaintiff's pre-existing condition was and what its future effects were likely to be. Both Dr Kornan and Dr Cole agreed that the tort was a significant contributing factor. Their evidence was accepted by the judge and his Honour was not obliged to reduce the damages for an established antecedent condition.

General, including aggravated, damages

15 Aggravated damages are compensatory damages that are larger than they would otherwise be to take account of a circumstance of aggravation, for example high-handed conduct in the commission of a tort. They stand in contrast with exemplary damages, which are separate and additional and intended to punish the defendant rather than to compensate the plaintiff.[13] The judge was nevertheless asked to make separate awards of "general damages" and "aggravated damages" in order to provide transparency in case he was of opinion that a distinction should be made between Tucker's conduct and that of Stuber_._ In the event no such distinction was made and, on appeal, the two awards may be regarded as a single award of general damages of $100,000, increased to that sum to take account of the aggravating factors identified in the reasons for judgment. [14]

16 His Honour said that aggravated damages should be awarded for the following reasons:

[15]

18 The evidence most favourable to the plaintiff was that of Dr Kornan. He diagnosed an adjustment disorder with anxiety and depression, indications of post-traumatic stress disorder and associated feelings of inferiority, humiliation and embarrassment. He considered that the plaintiff suffered a chronic psychiatric deficit of moderate to moderately severe intensity and that he was likely to remain at that level permanently. Nevertheless, when the plaintiff's age is taken into account, I do not think it can be said that an award of $85,000 was manifestly inadequate. Even less, I think, can it be said to be manifestly excessive. The judge had advantages denied to us, for example in seeing the plaintiff give his evidence, and made a quasi-discretionary judgment with which we should not interfere.

19 I return to the question of aggravated damages. Were it not for the reasons his Honour gave, I should have considered that aggravated compensatory damages in the sum of $100,000 were within the range. I still think that they are, but it would be unfair to the State not to make some adjustment for the reasons given in the second and third sentences of the passage quoted in [16] above. Those reasons did not in this case support an increase in the damages awarded. I would therefore reduce the aggravated damages to $10,000, but I would not make a separate award. I would substitute an award of aggravated compensatory damages for pain and suffering and loss of enjoyment of life in the sum of $95,000.

Capital loss

20 At trial the plaintiff claimed a capital loss of $77,114 when the business was sold on 5th December 2001.[16] That loss was calculated exclusively by reference to the value of plant, equipment and fit-out. It was not a claim for diminution in the income-producing capacity of the business or for goodwill. The judge awarded only $10,000, i.e. about 13 per cent of the amount the plaintiff claimed.

21 I accept Mr Ruskin's submission that there should have been no allowance for capital loss, because the evidence did not establish a causal link between the tort and the loss on sale with respect to plant, equipment and fit-out. Mr Priest submitted that they would have realized more if they had been sold as part of a vibrant business and that the business was not vibrant because of the plaintiff's psychiatric illness consequent upon the tort. Whatever might be said of that submission had the business been profitable, it is speculative in the context of a business that always operated at a loss. The purchaser was buying the assets of an unsuccessful business. Maybe he would have paid a little more if they had been sold by an enthusiastic proprietor in good health, but that possibility is not enough to discharge the burden of proof.

Past and future economic loss

22 When the judge turned to these items in his reasons, he recorded that counsel for the State had argued that the reason the plaintiff had not found employment was largely due to his age. His Honour rejected that submission, saying that the evidence of the psychiatrists was that, even if the plaintiff did get a job, he would not be able to keep it. A man who had worked all his life in responsible positions was now virtually unemployable. Nevertheless, his Honour continued, he could not conclude that the plaintiff's incapacity to work was total, even though it was permanent. An apportionment would be made, but heavily in the plaintiff's favour.

23 His Honour then referred to the evidence of Mr Infanti, an officer of the franchisor of Muffin Break, who was called at the trial by the State. In cross-examination by counsel for the plaintiff he gave the following evidence:

[17]

24 A mean figure of $45,000 per annum would equate to $666 net per week, but the judge pointed out that the wages paid to a temporary manager, Ms Palmer, and to Ms Delle Vergini were somewhat less. In those circumstances, he concluded, a more appropriate figure would be $600 per week for the period from the date the business was sold to the date of trial. That was 104 weeks. The resultant sum was $62,400.

25 Turning to future economic loss, the judge applied a multiplier of three per cent to notional wages of $600 per week. He considered that, with five years to go until age 65, an allowance for contingencies of ten per cent was "probably too high" but that "when one makes allowance for some potential to work at a reduced level ... the overall figure should be reduced by 15 per cent". It was later agreed that those calculations would result in a figure of $119,340.

26 The State contends that his Honour erred in assuming notional wages of $600 per week for past and future economic loss. The plaintiff contends that the allowance for contingencies should have been five per cent at most.

27 Mr Ruskin conceded that the judge's approach would have been correct but for the fact that the plaintiff was not earning $600 per week but instead was carrying on a losing business which, absent the tort, he would probably have continued to carry on for more than the 26 months that elapsed between his arrest and the sale of the business. We were invited to assess that probability in accordance with the principles relating to past hypothetical facts and future predictions explained in Malec v. J.C. Hutton Pty. Ltd.[17], but I see no reason to conclude that the plaintiff, a competent and experienced businessman, would have been likely to trade at a loss beyond 5th December 2001. If he had been in better health, he might have sold the business earlier. The purchaser, too, was unable to make it profitable.

28 Mr Priest submitted that the proper allowance for contingencies should have been less than the commonly allowed 15%. The plaintiff had only five years to go to age 65 and, if he had been in good health, he would have been comparable with the appellant in Wynn v. New South Wales Insurance Ministerial Corporation.[18] In my opinion, there is substance in that submission, but the plaintiff was not in perfect health before the tort and a man in his 60s is at risk. Counsel's suggestion of five per cent is too low. A more appropriate figure would be ten per cent.

Partial refusal of indemnity costs

29 It will be recalled that the judge ordered that the defendants[19] pay the plaintiff's costs on a party and party basis up to and until 27th March 2003 and thereafter on an indemnity basis. The plaintiff cross-appeals against that order, contending that there should have been an order in his favour for his costs of the entire proceeding on an indemnity basis. The foundations of that submission are an offer of compromise that was served on 27th March 2003, but not accepted, and Rules 26.08 and 63A.15 of the County Court Rules of Procedure in Civil Proceedings 1999.

30 Rule 63A.15 of those Rules provides that, where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment, liability for costs shall be determined in accordance with Rule 26.08, which provides:

[19]

31 Counsel for the plaintiff at the trial submitted that Rule 26.08(2)(a) entitled his client to his costs of the entire proceeding on an indemnity basis unless the judge otherwise ordered and that that prima facie rule should apply. Counsel for the State submitted that his Honour should otherwise order because of the amount of time that had been consumed in an issue resolved against the plaintiff. That issue related to the profitability of the business. It did indeed occupy a good deal of evidence and approximately 300 pages of exhibits. The judge evidently accepted the State's submission in part, but he gave no reasons for refusing indemnity costs up to and including the date of service of the offer of compromise.[20]

32 Especially in the absence of reasons, it is difficult to resist the conclusion that his Honour's discretion miscarried. Even if the issue relating to profitability was an appropriate basis for moderating the effect of Rule 26.08(2)(a), there was no logical reason to do so by reference to the date of service of the offer of compromise. There is no logical connection between the two. If rough justice has been done, as Mr Ruskin submitted, that would seem to be accidental. The plaintiff has received indemnity costs in respect of the trial, at which time was consumed by the issue on which he failed. The Court is obliged, in my opinion, to re-exercise the discretion.

33 It would probably have been better to deny the plaintiff a proportion of his costs of the entire proceeding to reflect the issue on which he failed rather than to displace or modify the operation of Rule 26.08(2)(a), but the State did not ask the judge to deny the plaintiff a proportion of his costs. It submitted that the judge's discretion should be adversely exercised by reference to a factor that was irrelevant to the offer of compromise except that it helped to explain the defendants' mistake in rejecting it. Not without hesitation, I would allow the cross-appeal in relation to this issue and substitute an order that the State pay all the plaintiff's costs of the proceeding below on an indemnity basis.

Police members' cross-appeal

34 The State no longer contests the judge's conclusion that s.123 of the Police Regulation Act applied. The police members contend that the correct way to implement the section is that, instead of the first and second orders referred to in [2] above, there should simply be judgment for the plaintiff against the State and that they should not be liable for the plaintiff's costs. They do not ask for an order in their favour for costs in the Court below.

35 The summons seeking an extension of time to bring the cross-appeal was filed on 21st January 2005. It was supported by an affidavit sworn by a solicitor in the employ of the firm acting for the police members. The affidavit is not challenged. Upon receiving the State's notice of appeal, the deponent sought advice from counsel, who advised that a notice of cross-appeal was unnecessary and that issues relating to s.123 could be raised by notice of contention. A notice of contention was filed within the time prescribed by the Rules but it sought to vary the orders that had been made. The notice of contention may therefore be disregarded.[21] When Mr Masel was briefed for the police members he advised, correctly, that a notice of cross-appeal was necessary. Notice of intention to apply for an extension of time was given to the other parties on 17th December 2004. The application is not opposed by the State but it is opposed by the plaintiff.

36 In my opinion, for reasons that will shortly appear, it was wrong to enter judgment against the police members and to include them in the order for costs. It is desirable that the error be corrected and there is no relevant prejudice to the plaintiff. The State has informed the Court that it will stand behind the police members, so the plaintiff will have no need to enforce, or seek to enforce, the orders made against them. There is no detriment flowing from the fact that a notice of cross-appeal should have been served approximately 12 months before 17th December 2004. The police members reserve the right to argue that they should have the costs of the cross-appeal if it is allowed to proceed, but the risk that such an order may be made against the plaintiff is not relevant prejudice. If the police members apply for those costs, that application will be dealt with on its own merits.

37 Section 123 of the Police Regulation Act provides:

[22]

38 Mr Masel submitted that the effect of sub-s.(1) is that his clients are not liable for the torts they committed. The statute grants them an immunity, preventing such liability from arising. Consistently with that construction, sub-s.(2) provides that any liability that would attach to them attaches instead to the State. I accept that submission. The learned judge erred in holding that there could be no liability, for the purposes of s.123, until such time as a judgment was entered, which was the reason his Honour made, separately, the first and second orders referred to in [2 [22]] above.22

39 Put simply, a judgment may be entered only against a person who is liable. Judgment could not be entered against the police members because, by force of s.123(1), they were not liable. Judgment should have been entered in their favour and an order for costs should not have been made against them. It is unnecessary to decide whether an order for costs might have been made in their favour. It is also unnecessary to consider legislation in pari materia.[23] The only authority that was cited to us was consistent with Mr Masel's construction of the section.[24]

40 It is, however, desirable to refer to a procedural matter. Where liability may attach to the State pursuant to s.123, the State should be a party to the proceeding. It should be a defendant because, if the section applies, there will be judgment against the State in favour of the plaintiff. The issue may be first raised by a police member or police recruit by way of defence, leading to joinder of the State and amendment of the statement of claim, but, even if a police member or police recruit does not plead the section by way of defence, the plaintiff may wish to join the State in order to secure a judgment against it. There will, of course, be cases where it is clear that the section does not apply and the State need not be joined as a party.[25]

Orders

41 I would make orders in accordance with the following minutes:

[26]

[1] I assume that "until" means "including".

[2] The State had contested the applicability of that section in its notice of appeal but abandoned the relevant grounds the day before the appeal was called on for hearing.

[3] [1991] HCA 12; (1991) 171 C.L.R. 506.

[4] [2004] HCA 13; (2004) 78 A.L.J.R. 572 at 574 [10]. See also Harvey v. PD [2004] NSWCA 97; (2004) 59 N.S.W.L.R. 639 at 671. That case, in turn, refers to Tambree v. Travel Compensation Fund [2004] NSWCA 24, in respect of which special leave to appeal was granted by the High Court on 4th February 2005.

[5] See especially, but not only, 171-172.

[6] It is a question of law whether there is evidence on which the tribunal of fact could find a causal link. Policy considerations may well be relevant at that stage.

[7] A recent illustration of that basic principle, and discussion thereof by Kirby, J., are to be found in Shorey v. PT Ltd. [2003] HCA 27; (2003) 197 A.L.R. 410 at 411 [2], 412 [9] and 418 [41]-[42].

[8] [1960] HCA 58; (1960) 108 C.L.R. 158 at 160.

[9] [1965] HCA 34; (1965) 114 C.L.R. 164 at 168.

[10] [1994] VicRp 32; [1994] 1 V.R. 436. See also Dalton v. Dandenong Scaffolding Hire Co. Pty. Ltd. [2003] VSCA 183.

[11] Compare Tame v. New South Wales [2002] HCA 35; (2002) 211 C.L.R. 317 at 332 [16], 384 [199] and 386 [203].

[12] At 168.

[13] Because they are compensatory in nature, there is no reason why aggravated damages should be excluded from s.123, as contended in the State's written submissions. As to exemplary damages, see State of Victoria v. Horvath [2002] VSCA 177; (2002) 6 V.R. 326 at 350 [62]- [67].

[14] Compare De Reus v. Gray [2003] VSCA 84 esp. at [32].

[15] [1998] 2 V.R. 505 at 508.

[16] Strictly speaking, the business was sold by the plaintiff's company, Gary McIver Pty. Ltd., but no distinction was drawn between the plaintiff and the company either at trial or on appeal.

[17] [1990] HCA 20; (1990) 169 C.L.R. 638 at 642-643.

[18] [1995] HCA 53; (1995) 184 C.L.R. 485 at 498.

[19] The case was argued on the assumption that that is what "the defendants and the State as attached" meant. It does not matter, but I think his Honour intended the third order in [2] above to have the same effect, as regards costs, as the first and second orders.

[20] See fn. 1 above. In effect, his Honour applied Rule 26.08(2)(b).

[21] A notice of contention is appropriate only where a respondent does not seek to have the judgment or order made below discharged or varied: Supreme Court (General Civil Procedure) Rules 1996, Rule 64.17(5).

[22] Compare, for example, the way the word "liable" is used in Part IV of the Wrongs Act 1958.

[23] See, for example, Wrongs Act 1958, s.37; Accident Compensation Act 1985, s.58; Health Services Act 1988, s.38A; Public Prosecutions Act 1994, s.46; Legal Profession Act 2004, s.6.2.18;

[24] Security Pacific Gold Ltd. v. Tricontintental Corporation Ltd. [1991] FCA 413; (1991) 31 F.C.R. 213.

[25] Compare the facts of State of Victoria v. Horvath [2002] VSCA 177; (2002) 6 V.R. 326.

[26] That sum is made up of general damages ($95,000), employment of a temporary manager ($6,000), medical and like expenses ($6,000), past economic loss ($62,400) and future economic loss with a 10 per cent allowance for contingencies ($126,360). The two items of $6,000 were not challenged on the appeal or plaintiff's cross-appeal.

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Judgment (26 paragraphs)

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Legislation Cited (2)