• District Court Act 1991 ss 42(3), 42(4);
• Wrongs Act 1936 ss 35A(1)b), 35A(1)(h), 35A(2);
• Magistrates Court Act 1991 s 19(3), referred to.
• Packer v Cameron [1989] SASC 1948; (1989) 54 SASR 246;
• Graham v Baker [1961] HCA 48; (1961) 106 CLR 340;
• Medlin v SGIC [1995] HCA 5; (1995) 182 CLR 1;
• Metro Meat v Werlick (1992) 167 LSJS 455;
• Duke v Pilmer [1999] SASC 97; (1999) 73 SASR 64, applied.
• Garland v Clifford (1996) 67 SASR 47, discussed.
• Versace v Messer (1993) 172 LSJS 409;
• Wade & Ors v Allsopp & Anor (1976) 10 ALR 353;
• Dairyvale Foods v Manfield (1999) 203 LSJS 126;
• Cox Constructions Pty Ltd v Dawes [1999] SASC 229; (1999) 73 SASR 557;
• Osborne v Kelly & Anor (1993) 61 SASR 308;
• Digging v Brunotti (King CJ, unreported, 22 November 1988);
• SGIC v Amoroso (1993) 173 LSJS 72;
• Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, considered.

Counsel: MR A CROCKER - Solicitors: RAY NOLAN & ASSOCIATES

Appellants MICHAEL WILLIAM SPECK AND MICHAEL W SPECK & CO (SOUTHERN LAW CHAMBERS) PTY LTD:

Counsel: MR M FRAYNE - Solicitors: MICHAEL W SPECK & CO

Counsel: MR S WALSH QC WITH MR A WARD - Solicitors: WARD & WARD

Judgment No. [2000] SASC 198

[2000] SASC 198

DOYLE CJ: I agree with the orders proposed by Nyland J, and with her reasons for the making of those orders. There is nothing that I wish to add to those reasons.

DEBELLE J: I agree with the substance of the reasons of Nyland J.

NYLAND J: In this matter, the plaintiff suffered injuries as a result of a motor vehicle accident which occurred on 31 May 1994. There was no dispute as to liability and the trial proceeded by way of assessment of damages only.

On 10 June 1999, a District Court judge assessed the plaintiff's damages in the total sum of $85,970. The plaintiff has appealed against the amount included in that award with respect to future economic loss and non-economic loss. She says those damages are inadequate. There is also a cross appeal by the defendant with respect to the amount included in the award for past and future gratuitous services. On 31 August 1999, the District Court judge made orders as to costs and interest. As a result of the delay in instituting proceedings and the failure to comply with the 90 day Rule, the judge reduced the amounts recoverable by the plaintiff with respect to interest and costs. He further ordered an inquiry under s 42(3) of the District Court Act and DCR 101.06(1). The plaintiff has also appealed against those orders. The defendant has lodged a cross-appeal with respect to the question of costs.

On 25 February 2000 an order was made by a Supreme Court judge that Michael William Speck and Michael W Speck & Co (Southern Law Chambers) Pty Ltd (the plaintiff's solicitors) each be joined as an appellant in the appeal. The judge ordered that the inquiry be stayed pending the outcome of the appeal.

On the hearing of the appeal, Mr Crocker appeared for the plaintiff. He informed the court that he only wished to make submissions with respect to the awards for future economic loss, non-economic loss and gratuitous services.

Mr Frayne appeared on behalf of the plaintiff's solicitors and sought leave to make submissions with respect to the remaining grounds of appeal, although no separate notice of appeal had been filed on behalf of the plaintiff's solicitors. Upon Mr Crocker indicating that plaintiff maintained all grounds of appeal, leave was given to Mr Frayne to make submissions as to the orders for costs, interest and the inquiry. For completeness, I mention that Mr Walsh QC, with Mr Ward, appeared for the defendant.

At the trial the judge heard evidence from the plaintiff, her husband and her mother, Mrs Hopwood. Evidence was also given by Dr Roe, a general practitioner, Dr Callum, a physician, Dr Schembri and Dr Kutlaca, both of whom were psychiatrists, and Dr Lipert an orthopaedic surgeon. Each of these witnesses also provided reports which were admitted in evidence. Reports were also admitted from Dr Saies, a surgeon, and Dr Atkinson, an orthopaedic surgeon. In addition, Mr Kesting, a physiotherapist gave evidence. The judge accepted the plaintiff, her mother and husband as honest witnesses, although he thought the delay in bringing the matter to fruition affected the reliability of their recollection of some matters. Ultimately there was no real dispute as to the medical evidence.

On 31 May 1994, the plaintiff was stationary in her car while driving home from work. Her car was hit with "some force" by the defendant's car which she did not see before the impact. The plaintiff remembered getting out of the car and saying that she had "a dead arm and a dead leg".

On the day after the accident she consulted Dr Roe, who prescribed rest and referred her to Mr Kesting for physiotherapy treatment. She saw Dr Cullum for the first time on 12 December 1994. Prior to that appointment, the plaintiff had been suffering from neck pain and headaches. There was a concern that she was suffering from post-traumatic stress disorder and she was referred to Mr Bright, a psychologist, and Ms McArdle, a clinical psychologist. As her physical problems continued, Dr Cullum arranged for Dr Saies to perform "an arthroscopic decompression of an impingement syndrome in the subachromial joint". This was carried out by day surgery on 7 March 1995. The plaintiff took some weeks to recover from this procedure and she had extensive physiotherapy thereafter. The judge found that this treatment resolved much of the pain in her shoulder but that she had been left with significant permanent residual disability in it. Abduction was limited to 100 degrees and flexion to 120 degrees and internal and external rotation were reduced to two-thirds of normal.

The judge found that, as a result of the accident, the plaintiff suffered a rotator cuff injury to her right shoulder and musculo ligamentous strain of her neck with radiation into the shoulder blades and upper back. The judge accepted the conclusions of Dr Lipert and Dr Cullum that the plaintiff's subsequent neck problems had resulted from the accident and that her complaints of thoracic pain from November 1994 and afterwards had also resulted from the accident. The judge further found that at some time well after the accident, and possibly as late as November 1994, the plaintiff started to suffer severe headaches. Some started in he base of her neck and moved up to the back of her head. Others were migraine-type headaches in the front of her head which were accompanied by vomiting and which could last for up to 24 hours. The judge accepted the opinion of Dr Cullum that these headaches were myofacial in origin and emanated from muscle problems associated with the accident. To some extent they had been associated with other neck and shoulder symptoms and had been relieved to an extent by painkillers, physiotherapy and massage. The judge found that they had diminished over time but that they might still re-occur.

In about November 1995, the plaintiff was referred to Dr Schembri. The judge accepted Dr Schembri's opinion that for an indeterminate period after the accident, but ceasing before Dr Schembri first saw her in November 1995, the plaintiff had suffered from a post-traumatic stress disorder and associated depression as a result of the accident. He found that while the plaintiff had recovered from this disorder, she remained more vulnerable to a further such disorder if she suffered other trauma in the future than if she had not had the accident.

The judge found that the plaintiff had suffered a significant permanent disability with respect to a number of daily activities. Her neck and shoulder problems substantially impeded her ability to do her normal housework and look after her family. Since the surgery in March 1995, she had continued to have significant problems in any activity involving raising her right arm above shoulder level and lifting weights with that arm, particularly when it was away from her body. She could no longer clean windows, hang out and bring in the washing, iron for any length of time, change beds, put up a roller door or play sport with her children. She had some difficulty in washing her hair and doing up some zips and hooks in her clothing. While she could vacuum, she found that she suffered adverse consequences if she did more than one room at a time. She had difficulty in lifting heavy shopping. She had problems in driving a vehicle without power steering. The judge found that these disabilities were likely to be permanent.

Pursuant to the provisions of s 35A(1)(b) of the Wrongs Act 1936, the judge was required to assess damages by assigning a numerical value on a scale running from 0 to 60 (the greater the severity of the non-economic loss the higher the number). The judge assigned a numerical value of 10 which, on the agreed multiplier of $1,430, resulted in an award of $14,300 by way of damages for non-economic loss.

At the date of trial the plaintiff was aged only 35 years. She was a mother with young children. The evidence established that she struggled emotionally in the period immediately subsequent to the accident. She has been left with a permanent injury to her shoulder which is of some significance. This has severely impeded her ability to take part in day to day activities. She has been obliged to rely on assistance from her family. It has also created difficulty in carrying out her employment.

In assessing damages for non-economic loss pursuant to s 35A(1)(b) of the Wrongs Act 1936, "the courts are required to assign to a plaintiff a figure that compares the severity of his particular non-economic loss with the worst possible loss that anyone could suffer." (per Cox J in Packer v Cameron [1989] SASC 1948; (1989) 54 SASR 246 at 251-252). In this case, the plaintiff has suffered a severe injury which has had a significant and long-term impact on her ability to carry out her day to day activities. I think that the assessment based on a numerical value of 10 was an extremely modest award to cater for those injuries. The plaintiff was unable, however, to point to any error made by the learned trial judge in making this assessment. It is not open to this court to substitute its own assessment for that of the trial judge unless the award can be shown to be manifestly inadequate. At the end of the day, I am not persuaded that the award in this case was so inadequate as to justify this court in interfering with it. I would therefore dismiss the appeal with respect to non-economic loss.

The judge found that the plaintiff left school at age 15 years and thereafter had regular employment as a clerk and data entry operator. Upon her marriage in March 1983, she gave up her previous employment. She subsequently undertook some part-time employment as a doctor's receptionist. She eventually returned to more regular employment in 1994 when she obtained casual work at the Flinders Medical Centre in the catering department. She did not like the work at the Flinders Medical Centre and was hoping ultimately to get back into some type of office work. In April 1994, she left the Flinders Medical Centre and obtained part-time work at Pinocchios coffee lounge at Marion, working about four to five hours each day on four days per week. This was the plaintiff's employment at the time of the accident. After the accident, the plaintiff was off work for a period of time and in receipt of WorkCover income maintenance payments. On an unspecified date she returned to work at Pinocchios on a restricted basis. The plaintiff said that she had problems with that employment as a result of her inability to carry heavy trays or reach up to high shelves as a result of her shoulder problems. There did not appear to be any light duties available. In an endeavour to get back into the type of office work which was her ultimate goal, she left Pinocchios in late August 1994. She obtained casual part-time work as an office assistant at Litchfield Motors for one or two days each week with extra days at the end of the month. It appears, however, that the company took on another employee when the plaintiff was unable to work for a period following her operation, after which there was a diminution in employment available to the plaintiff. In March 1995, she had some further casual work on one or two days per week but she eventually left Litchfields in about mid-July.

In November 1995, she obtained casual part-time work shift work as a telephonist with Suburban Taxis. The judge found that she was able to carry out this work without undue difficulty. The plaintiff did not particularly like the job and gave it up after a particularly arduous shift on New Year's Day 1997.

In mid-February 1997, she started a full time job as a customer services officer with the Australian Postal Institute (API). She was in that employment at the date of trial. The plaintiff said that she enjoyed that employment and she was "very lucky" as she had fellow employees who would assist her by undertaking duties that she was not able to do, such as lifting heavy boxes and trying to find things above head height.

The judge found that there was "no reason to believe that her existing employment with API will not continue almost indefinitely" but said there was "always a risk that before the end of her working life she may need to seek other employment on the open labour market. In this she will be disadvantaged because of her permanent disability although her success with her employment at API for a considerable period is likely to stand her in good stead in the eyes of future prospective employers". He thought, however, that it was unlikely that she could ever obtain employment involving substantial lifting and reaching such as the type of work which she previously had at Flinders Medical Centre or Pinocchios. Having made those findings, the judge assessed damages for future economic loss in the sum of $7,500. The plaintiff complains that this sum is inadequate.

The plaintiff was entitled to damages for her loss of earning capacity if she could establish that there had been a diminution in her earning capacity and that such diminished earning capacity was or might be productive of financial loss: Graham v Baker [1961] HCA 48; (1961) 106 CLR 340; Medlin v SGIC [1995] HCA 5; (1995) 182 CLR 1.

The evidence clearly established that the plaintiff has a significant permanent residual disability which affects her right shoulder, neck and back. Dr Lipert in evidence described the complaint as "a frozen shoulder". When asked what type of work she could not do Dr Lipert said:

"A Any work that meant lifting weights away from the side of her body or the front of her body, or any activity which required her to have her - use her arm really, above upper chest level. By the time she gets to shoulder level there would be some, probably some discomfort. Q. Can you give his Honour any sense of what the weight restrictions might be or the types of weight - A. An example she gave me was that filling a kettle with water, and one normally holds one's arms out in front to do that. Then to carry it to the stove she couldn't hold it with her right hand in that position. So - that's probably getting about two and a half, perhaps, depends on the size of the kettle, it would be two and a half, three kilos, something like that, at the most. Q. Any sort of work that required her to put items or take items from shelves above shoulder height would be a difficulty. A. Yes. Q. Is the restriction that she has permanent. A. Yes. Q. Do you expect it to improve. A. No."

In view of the plaintiff's age, she potentially has another 20-30 years of employment ahead of her. She had worked prior to the accident. The judge accepted that, but for the accident, she would have wanted to get back to full-time employment by the time that her younger child was settled at school. The judge assumed that the plaintiff's employment at API would continue almost indefinitely. The plaintiff had, however, only been in that employment for a period of about two and a half years as at the date of trial. The evidence of the plaintiff was that she was only able to undertake her duties at API with the assistance of supportive work-mates. She was also assisted by being able to get up and walk away to do something else if she found she was sitting at her computer for too long. These were matters of some significance when considering the plaintiff's loss of earning capacity.

As Perry J said in Versace v Messer (1993) 172 LSJS 409, when considering an appeal with respect to future economic loss for a woman suffering a soft ligamentous tissue injury to the neck who was employed as a check-out operator (at 414):

"... a person carrying even the relatively minor residue of a neck injury of the kind in question may feel the need, as this plaintiff has since the accident, when, for example, working at a computer keyboard to stand up or interrupt the work more often than would be the case with most employees in order to relieve some pain that may be the product of some stress occasioned by the employment. In such a situation, a tendency to do that may well have a marginal effect of an adverse kind on the security of the plaintiff's employment which, in competitive times, could result in some loss. I do not think that the matters to which I have referred in this connection are speculative or unreal. I think they reflect the reality of the market place within which the plaintiff is likely to have from time to time to offer her skills."

And further, to adopt the oft quoted dicta of Stephen J in Wade & Ors v Allsopp & Anor (1976) 10 ALR 353 at 361:

"the process of selecting one from a number of applicants for employment is, on each occasion, an all or nothing affair in which the applicant with diminished capacity may each time be wholly unsuccessful."

At the date of trial, the plaintiff's salary with API was $26,000 per annum gross plus bonuses. The plaintiff appears fortunate to have obtained her job at API. If she were to lose that job she could well be confronted with problems such as those she had at Pinnochios which could result in substantial periods of unemployment. The amount allowed by the learned trial judge is substantially less than she is currently earning in a year. On the other hand, the judge was also obliged to take into account the possibility that the diminution in the plaintiff's earning capacity might never be productive of any financial loss as well as all other usual contingencies. It is obvious therefore that this was not a matter in which the assessment was capable of any precise mathematical calculation.

Nevertheless, having considered all of the evidence, I believe the learned trial judge gave insufficient weight to the severity of the plaintiff's injuries and her diminished capacity to work as a result thereof. I would allow the appeal with respect to future economic loss, set aside the award made by the learned trial judge, and in lieu thereof substitute an award of $25,000.

The trial judge accepted the evidence of the plaintiff that in the weeks following the accident she received considerable assistance from her husband, mother and father in performing household and domestic duties. This included her parents driving her to various medical appointments and assisting her with the care of her children. The judge found that, ever since the accident, the plaintiff's husband has vacuumed the bedrooms, cleaned the wet areas and windows, hung out some washing and has lifted the garage roller door, all of which would have been done by the plaintiff before the accident. The judge found that he was likely to continue to do these tasks.

Mrs Hopwood, the plaintiff's mother, gave evidence that from the end of 1994, she had attended at the plaintiff's home once a fortnight on a Friday for about two to four hours. She did the vacuuming and the washing and other household chores. The judge found that this arrangement was likely to continue in the future.

The judge rejected the submission by the defendant that even if the accident had not occurred, the plaintiff would still have received similar assistance or most of it from her husband, parents and daughter. He was satisfied that the major part of the household responsibilities were now taken over by the husband, the parents and the elder daughter and had only been made necessary as a result of the accident and the tasks would normally have been done by the plaintiff if the accident had not occurred.

Section 35A(1)(h) of the Wrongs Act 1936 provides:

"[D]amages awarded to allow for the recompense of gratuitous services of a parent, spouse or child shall not exceed four times State average weekly earnings".

"Notwithstanding the limits fixed by subsection (1)(h), if the court is satisfied that by rendering gratuitous services a parent, spouse or child has saved or will save the injured person the cost of engaging another person to provide those services (those services being reasonably required by the injured person), the court may make an award of damages in excess of that limit but the damages awarded in that event must not reflect a rate of remuneration for the person providing the services in excess of State average weekly earnings."

At the trial there was a dispute as to whether s 35A(2) operated in this matter to remove the limit imposed by s 35A(1)(h) on such damages. In his reasons, the judge referred to the discussion of those provisions by Lander J in Garland v Clifford (1996) 67 SASR 47 wherein he said at 59-60:

"Voluntary services are therefore to be assessed upon the basis that the damages awarded shall not exceed four times State average weekly earnings unless the injured person can establish first, that the voluntary services are reasonably required by the injured person and, secondly that the gratuitous services rendered by the injured party's parents, spouse or children have saved or will save the injured person the cost of engaging another person to provide those services. If both these matters can be established then the Court may award damages in excess of the limit prescribed in s35A(1)(h), but in that case the assessment of damages must not reflect a rate of remuneration for the person providing the services in excess of State average weekly earnings. The first matter requires no more than establishing, as the common law also requires, that by reason of the injuries suffered the injured person is in need of care and attention. The second matter requires that the injured person prove that, in respect of voluntary services rendered to the date of trial, the provision of those services has saved the injured person the cost of engaging someone else to provide those services. In respect of future voluntary services it must be established that the services to be provided by the parent, spouse or child will obviate the need for the cost of employing another person. It was argued that the injured person ought to have to establish that, but for the provision of each and every voluntary service the injured person would have employed a professional service provider to provide that particular service. In those circumstances it was argued an injured person could not recover, for example, for the gratuitous service provided by a parent in offering remedial teaching for a short time each day. It was argued that the injured person would not have otherwise engaged another person to provide that service. I think that is to take too narrow a view of the section. Clearly the injured person must establish need. To then establish that the services were reasonably required means no more than to establish that the need was great enough to require the provision of care and attention or some other voluntary services. It does not mean that one has to establish that the care, attention or service was needed at precisely the same time and for precisely the same intervals of time as that which is voluntarily provided. Similarly, it is not necessary to establish that if the care, attention or service were not provided voluntarily, somebody else would have been engaged to provide exactly the same care, attention or service at the same time and for the same length of time. It is enough to establish that the provision of that service obviated the necessity of engaging some other person to provide a similar service. If the need for the provision of voluntary services has been established, ordinarily it would follow that the reasonable provision of those services has saved or will save the injured person the cost of engaging another person to provide the services. The assessment therefore in that respect is similar to a common law assessment. The difficulty arises, as it does in a common law assessment, where the services or part of the services were provided by the parent spouse or child before the tort because they were ordinarily provided out of affection or by reason of the ordinary domestic relationship, but that after the tort the services are required to be performed out of the need generated by the injuries. In Van Gervan v Fenton the majority (Mason CJ, Toohey and McHugh JJ), and Gaudron J in a separate judgment, held the defendant is not entitled to any allowance by way of deduction for the fact that the gratuitous services now provided by the compulsion of need were previously provided by reason of affection or domestic arrangement. There is nothing in s35A of the Wrongs Act, and in particular in s35A(2), to distinguish the reasoning of the majority in Van Gervan v Fenton. Whilst Van Gervan v Fenton was concerned with the provision of voluntary services by a spouse to an injured person, there is no reason not to apply that reasoning where the voluntary services are provided by a parent to a child. I think, therefore, that if the parents in this matter are now providing gratuitous services which arise out of the need generated by the injuries, that need is compensable in damages in the same way as a common law assessment and no regard ought to be had to the fact that the services were previously supplied in any event by reason of parental love or obligation."

After indicating that he was bound by this decision, the learned trial judge went on to say that:

"It creates a presumption that once the need for the voluntary services have been established, which has occurred here, it ordinarily follows that the reasonable provision of those services will save the plaintiff the cost of engaging another person to provide those services. The question of whether the plaintiff would have employed someone on a commercial basis to provide those services, or some of them, if she had not the benefit of their provision by her husband, parents and daughter, was not explored in evidence. In that event the ordinary inference spoken of by the Full Court is to apply, namely that the plaintiff has been saved the cost of such services. If the defendant had wished to show that this was an extra-ordinary case in which that inference was not properly to be drawn, such as for example that some of the services might have been provided gratuitously by someone else where recovery was barred under s35a(1)(g)(i) of the Act, there was an evidentiary onus on her to pursue that question but she has not done so." (emphasis added)

By reference to Exhibit P8, a letter provided by "Dial an Angel", the judge noted that the current cost of a minimum three hour visit for a person doing general domestic duties was $63. He then assessed past loss in the sum of $11,000 and damages for future loss in the sum of $25,000.

Mr Walsh challenged the award based on s 35A(2). He submitted that the learned trial judge had fallen into error in referring to the "presumption" that once the need for voluntary services had been established, it would ordinarily follow that the reasonable provision of those services would save the plaintiff the cost of engaging another person to provide those services. He submitted that if that were so, it would emasculate the operation of s 35A(1)(h) which limits the damages to a sum not exceed four times the State average weekly earnings. Mr Walsh criticized the judge for his further comments which suggested that the defendant carried some evidentiary onus when it was for the plaintiff to demonstrate that she came within the exception to the rule in s 35A(1)(h).

The use of the word "presumption" by the judge was inappropriate. The ordinary process of reasoning to which Lander J referred is no more than that. That process does not displace the requirement under s 35A(2) to satisfy the court as required by that provision. It does not automatically follow that once a need has been established that a plaintiff will be saved the cost of employing someone to provide those services and therefore s 35A(2) applies. In many cases, however, that will be the proper inference to be drawn from the evidence as to the plaintiff's injuries and the nature of the services provided. In this case, the judge applied the reasoning of Lander J in Garland v Clifford (supra) to the facts as he found them to be. The judge, having heard the evidence from the plaintiff and those who have seen and assisted her, was satisfied that the need had been established. He then had regard to the evidence as to the services being provided by the plaintiff's family. He was satisfied that the plaintiff's family were providing her with considerable assistance. This included housekeeping services provided by her mother on a regular basis. These were the type of services which obviated the need to employ someone else. Mr Walsh contended that there was no justification for the conclusion that family members had saved the plaintiff the cost of engaging another person at home both before and after the accident. He submitted that as between the plaintiff, her husband and children, it was simply a matter of re-arranging duties. For example, it could not be argued that it was necessary to employ someone lift the roller door. If the services were limited to such matters as the roller door, I would agree with Mr Walsh that you would not expect anyone else to be employed to carry out that task, and s 35A(2) would not apply. But the nature of the services in this case, particularly those being provided by the plaintiff's mother were much more extensive. If the family had not been able to assist, the plaintiff would have been expected to engage, and justified in engaging, some other person to provide them.

Exhibit P8, established the rate of payment for services of the kind being provided by the plaintiff's mother. There was therefore evidence upon which the judge was entitled to find that the provisions of s35A(2) applied.

In my opinion, the appeal with respect to voluntary services should be dismissed.

After making an interim assessment of damages, the judge adjourned the proceedings to hear argument as to pre-judgment interests and costs. On 31 August 1999, the judge made the following orders:

"1. That there be a further judgment for pre-judgment interest for the plaintiff for $3,200. 2. That pursuant to R101.01(1)(b) the plaintiff's costs of action be reduced by 10%. 3. That the costs recoverable by the plaintiff for work done while the action was in the Magistrates Court only be on the scale applicable to that Court. 4. That the plaintiff pay to the defendant her costs of the transfer of the action to the District court and that the plaintiff recover no costs in relation to that transfer. 5. That the plaintiff not recover costs of work which was only made necessary by the trial of the action not being completed by mid 1997. 6. That there be no order about the costs of the proceedings after the interim judgment for interest and costs. (I consider this order appropriate as each party has succeeded to some extent on these issues.) 7. Subject to paras 2 to 6 above the defendant is to pay to the plaintiff her costs of the action as agreed or taxed and as between solicitor and client. 8. Liberty to apply. 9. That an inquiry under s42(3) of the District Court Act and R101.06(1)be held on 7 October 1999 at 9.15am."

On the hearing of the appeal, Mr Frayne said that there was no appeal against Orders 3, 4 or 8 of the above order. The appeal against order 7 was only against that part of the order which read "subject to paras 2 to 6 above" and not to the balance of the order.

The cross-appeal by the defendant relates only to para 2 of the above order, that is, non-compliance with the 90 day rule.

In order to consider these issues, it is necessary to have regard to the sequence of events leading up to the trial of the action. The subject accident occurred on 31 May 1994. The judge found that within a few months the plaintiff instructed a solicitor who had acted for her ever since, and that by the end of 1995, her condition had stabilised sufficiently so that a claim for her damages could have then been formulated and pursued.

The plaintiff said she left it to her solicitor to do what was necessary to pursue the claim. The judge said:

"For unexplained reasons nothing was done until 29 May 1997, which was two days before the expiration of the three year period under Section 36 of the Limitation of Actions Act 1936, when a claim was instituted on her behalf in the Magistrates Court."

No notice of claim 90 days before the action was given as required by R 106(8)(a) of the Magistrate Court Rules as they then stood. No evidence was given to explain why this was not done. All the plaintiff could say was that she had left matters to her solicitors to do whatever was necessary. On 7 July 1997, a written formulation of the plaintiff's claim was put to the defendant's insurer. On 20 August 1997, an informal conference took place but no settlement resulted.

On 19 September, 4 December 1997 and 1 April 1998, the defendant's solicitors wrote to the plaintiff's solicitors requesting service of the proceedings on the defendant. They referred to the medical evidence and expressed concern about the delay and complained about it. The claim was eventually served on the defendant personally on 28 April 1998.

On 21 May 1998, the defendant's solicitors lodged an offer to consent to judgment in the Magistrates Court in the sum of $38,000 plus costs.

On 25 June 1998, the defendant filed a defence and a list of documents. On 8 September 1998, the plaintiff's solicitors filed an interlocutory application in the Magistrates Court seeking a transfer of the action to the District Court. The affidavit of the solicitor in support thereof merely said that the assessment of the plaintiff's damages was likely to exceed the jurisdiction of that court.

On 14 October 1998, an order for transfer was made by consent. Nothing was said in the order as to the question of costs.

On 3 November 1998, the file arrived at the District Court following the transfer from the Magistrates Court.

On 19 January 1999, the defendant lodged a DCR 40 offer for $43,070.

On 4 February 1999, the conference officer listed the action for trial on 19 May 1999.

On 25 March 1999, the plaintiff lodged a DCR 41 offer for $55,000 which was not accepted.

On 19 May 1999, the trial proceeded before the District Court judge as to an assessment of damages.

On 10 June 1999, the trial judge delivered his reasons and entered an interim judgment for $85,970 which included all of the plaintiff's damages apart from pre-judgment interest. The outstanding issues of interest and costs were argued before the judge on 20 August 1999.

In his reasons delivered on 31 August 1999, the judge said that he rejected the defendant's submission that damages should be reduced for undue delay in the prosecution of the claim. He said he did not make any findings on the issue of delay except that in so far as there had been any delay it was not the fault of the plaintiff personally.

Neither at the trial nor at the interest and costs argument did the plaintiff call her solicitor or anyone else who had knowledge of the matter to explain why it had taken until November 1998 for her action to reach the District Court. The judge said that he gave the plaintiff's counsel every opportunity to call such evidence but he did not do so. He therefore decided the matter on the evidence which he had but on the basis that the plaintiff had declined to call a witness who was available to her who could have given any innocent explanation for the delays if they were available. The judge accepted that privilege may have been claimed for some matters if the solicitor had been called but did not speculate about that matter. He indicated that if there had been genuine excuses for the delays the plaintiff would presumably have waived any privilege involved in them.

In considering the appropriate period for which pre-judgment interest should be allocated under s 39 of the District Court Act, the judge referred to both the decision of Lander J in Dairyvale Foods v Manfield (1999) 203 LSJS 126 and the obiter dicta of Perry J (with whom Prior J concurred) in Cox Constructions Pty Ltd v Dawes [1999] SASC 229; (1999) 73 SASR 557. The judge summarised Lander J's decision as stating that the dominant criterion was that the defendant had had the benefit of the judgment moneys in the period of the delay and the plaintiff should not be penalised if the delay was caused by the default of her own solicitor. The judge, however, found that the comments in Cox Constructions were in conflict with this decision, as Perry J said that the dominant criterion was that interest was to compensate plaintiffs for being kept out of their money and therefore, if a plaintiff without proper excuse had failed to prosecute the claim promptly, interest should not be allowed for the period of delay.

The judge found that the plaintiff in this case, through her solicitor, had been guilty "of inexcusable and unreasonable delay in not having instituted her action in [the District] Court by mid 1996 and in not having brought it into [the District] Court until November 1998". He considered that if the action had been instituted in the District Court in mid 1996, judgment would have been delivered by about mid 1997. The plaintiff could not therefore complain about being kept out of her money after that time. It was not the fault of the defendant. He therefore fixed a lump sum in lieu of pre-judgment interest only for a period ending in mid 1997 in the sum of $3,200.

Mr Frayne submitted that the learned trial judge had fallen into error in reaching the conclusion that there had been inexcusable and unreasonable delay in not instituting her action in the District Court by mid 1996. He did not dispute that there had been substantial delay but submitted that it was impermissible for the judge to infer that the delay was inexcusable and unreasonable absent any explanation as to that matter. At best the learned trial judge could have found there was unexplained delay in the progress of proceedings which were instituted within the relevant time limit. If, therefore, the delay was properly categorised as mere delay or unexplained delay the award of interest should not be reduced on that account.

I have considerable difficulty accepting this argument. The judge was confronted with a case in which there had been substantial delay in the institution of proceedings. There was evidence of the plaintiff that she had sought legal advice in the first month after the accident. She left the matter "in the hands of my lawyers ... I was relying on him to do it". The delay in the prosecution of the proceedings was a live issue in the trial and the reason therefor was apparently raised by the judge on a number of occasions. It would have been a simple matter to provide an explanation but none was forthcoming. In that situation, the judge was entitled to infer that there had been inexcusable and unreasonable delay on the part of the plaintiff. The judge made it clear, however, that he did not attribute that delay to the plaintiff personally but rather to her legal advisers.

Mr Frayne further argued that in so far as the delay could be regarded as a basis for reducing interest, it was inappropriate to do so with respect to delay by a solicitor. In support of this submission, he referred to Osborne v Kelly & Anor (1993) 61 SASR 308 at 310. In that case, the trial judge found that there had been inexcusable delay by the plaintiff and limited the period for which interest should be paid. On appeal, the court approved and applied the dicta of King CJ in Digging v Brunotti (unreported, 22 November 1988). The court held that interest was awarded to compensate plaintiffs for being kept out of their money, not to punish defendants, and if the plaintiff was kept out of the money by the plaintiff's own default, interest should not be allowed for that period. The court found, however, that the delay in that case had not been caused by the plaintiff. The evidence established that the plaintiff had been unable to conduct his own affairs since the date of the accident and the delay may have been caused by the Public Trustee or advisers or by both, but not by the plaintiff. On that basis, the court allowed the appeal and held that interest should have been allowed for the whole period.

Mr Frayne also referred to SGIC v Amoroso (1993) 173 LSJS 72, wherein Perry J, following Osborne v Kelly & Anor, said (at 78):

"It must follow from the decision of the Full Court in Osborne v Kelly & Anor that where there is delay in prosecuting the action, it will be incumbent upon the trial Judge to distinguish between delay occasioned by the plaintiff personally and delay occasioned, for example, by his legal advisers. It must be said that not only will that create a situation which will give rise to some embarrassment on the part of counsel for the plaintiff, who will be tempted to blame his instructing solicitors rather than the plaintiff for any delay, but it will have the consequence that a negligent solicitor will pay reduced damages if he can show that delay resulted from his own negligence rather than from any act or omission of his client."

Mr Frayne relied on these decisions to submit that in this case the judge had erred in reducing interest as a result of the delay by the solicitor. In Osborne v Kelly, however, the plaintiff was not mentally competent to manage his affairs. In SGIC v Amoroso the plaintiff was a minor at the time of the accident and she had left the conduct of her affairs to her father. It is understandable therefore that the court in each of those cases declined to attribute any fault to the plaintiff.

Perry J who was the appeal judge in SGIC v Amoroso again considered this matter in Cox Constructions Pty Ltd v Dawes (supra). He referred to the statements of principle in Osborne v Kelly and said (paras 174-176):

"Those statements of principle were applied by the Full Court of this Court in Osborne v Kelly where it was held that, given that interest is awarded to compensate plaintiffs for being kept out of their money, it follows that if the plaintiff is kept out of his or her money by the plaintiff's own default, interest should not be allowed for that period. The only reason that the plaintiff's default in Osborne v Kelly did not have that consequence was that the plaintiff was unable to conduct his own affairs due to the accident injuries. Applying those principles in this case, if the delay in prosecuting the action was due to Dawes, and ordinarily a plaintiff is to be held accountable for a failure to get on with proceedings, interest should not be allowed for the period of the delay. It does not appear that the point was taken in this case. It was not raised by counsel on the appeal. In those circumstances, I do not pursue the matter further, except to indicate that, in my view, the courts should now take a more active role with respect to failures to prosecute actions promptly. In particular, courts should, of their own initiative, raise the question of delay where it has been, as was the case here, inexcusable and, where appropriate, reduce the amount of interest to be awarded. Furthermore, in my opinion, the stage has been reached at which the courts should more actively consider the making of orders for costs against solicitors who have been shown to have been dilatory in the prosecution of proceedings."

Relying on these statements by Perry J, the judge commented (at para 11):

"One way in which the Court can assist in having actions commenced at the proper time is to refuse interest to plaintiffs who have unreasonably delayed commencing their actions and who have after commencement allowed them to remain in another Court to avoid the pressures for prompt disposal which would have applied if they had been in this Court."

In this case, there was no apparent impediment to the plaintiff in the conduct of her affairs. The only explanations she gave for the delay was that she left the matter with her solicitors. For this she had to accept some responsibility. I believe, therefore, that it was appropriate for the judge to resolve this issue by reducing the period for which she should receive interest to that to which she would have been entitled if the proceedings had been prosecuted in a timely manner.

Mr Frayne put a further submission in reliance on Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, that as interest was compensatory, delay was not an appropriate matter to be taken into account in the exercise of the discretion. In my view, this submission cannot be sustained. This court has, on a number of occasions, recognised the existence of the discretion: Osborne v Kelly (supra), Cox Constructions v Dawes (supra), Metro Meat v Werlick (1992) 167 LSJS 455 and Duke v Pilmer [1999] SASC 97; (1999) 73 SASR 64. The balance of authority clearly favours the view that, in the exercise of the discretion to award interest, delay on the part of the plaintiff may be taken into account as a factor against the award of interest, or in favour of reducing the amount of interest that would otherwise be awarded. Contrary views have been expressed: see, for example, Dairyvale Foods v Manfield (1999) 203 LSJS 126 at 142, Lander J. Mr Frayne acknowledged, however, that the weight of authority was against him. It is therefore unnecessary to debate this aspect of the matter. I would refuse the appeal against the order with respect to interest.

The rules of both the Magistrates Court and the District Court contain what is commonly referred to as "the 90 day Rule". This rule requires an intended plaintiff to give 90 days notice before action to the proposed defendants' insurer. It is part of the case flow management system of the Court and is designed to reduce litigation in the courts by encouraging the resolution of cases before the institution of proceedings with the consequent saving in costs to litigants. The rules of each court are similar with respect to the requirement as to the giving of notice, but there are significant differences with respect to the consequences for non-compliance.

MCR 106(8)(a) (as it was at the relevant time) provides that

"Unless the Court orders otherwise in an action for damages for personal injuries (including a minor civil action) the plaintiff shall not recover costs, or shall recover part costs only, for the filing of the action if the plaintiff at least 90 days before the filing of the action has failed to submit to the defendant's insurer, if he or she is aware of the identity of the insurer, or if he or she is not so aware to the defendant, particulars in writing of the intended action including any intended claim for past and future economic loss together with copies of supporting documents including medical reports which set out the nature and extent of the plaintiff's injuries and residual disabilities as known to the plaintiff at that time."

District Court Rule 101.01(1)(b) provides as follows:

"(1) Notwithstanding the following provisions of this Rule and of the provisions of Rule 101A.01, the costs of any party, the amount thereof, the person by whom, or the fund or estate, or portion of an estate, out of which they are to be paid are in the discretion of the Court, and the Court may: (a) award a lump sum award a lump sum in lieu of, or in addition to, any taxed costs; (b) in any action seeking damages for personal injury order that the plaintiff shall not recover costs or shall recover part only of the costs if the plaintiff has failed to submit, at least 90 days before the institution of the proceedings, to the defendant's insurer, if he is aware of such insurer, or, if he is not so aware, to the defendant, a detailed claim in writing together with copies of supporting documents including medical reports which set out the nature and extent of the plaintiff's injuries and residual disabilities as known to the plaintiff at that time."

In this case, there was no dispute that there had been a failure to give the required notice. As the proceedings had been transferred from the Magistrates Court to the District Court, the judge was required to consider whether the appropriate rule to be applied was MCR 106(8)(a) or DCR 101.01(1)(b). In resolving this matter, the judge had regard to s 19(3) of the Magistrates Court Act 1991 which provides:

"(3) Where proceedings have been transferred under this section, they may be continued and completed as if steps taken in the proceedings prior to the transfer had been taken in the Court to which they are transferred."

The judge found that the purpose and intent of the rule was that once an action had been transferred, the steps taken for the transfer need not be repeated in the new court after transfer and would be deemed to satisfy the requirements of the transferee court, provided they were substantially equivalent to those requirements. He found in this case that no further notice needed to be given under DCR 101.01(1)(b) when the transfer was effected to the District Court because such a notice was an equivalent step to that under MCR 106(8)(a). He found the procedural requirement in the District Court was that laid down by its Rules and the consequence for non-compliance in relation to the costs of the District Court action was therefore to be found in DCR 101.01(1)(b).

Mr Frayne submitted that the judge should have applied the Magistrates Court Rules to this aspect of the proceedings. He had therefore fallen into error by applying DCR 101.01(1)(b) and making an order as to costs at large. Mr Frayne repeated the argument, rejected by the judge, that to penalise the plaintiff with respect to 10% of the costs of the action as a whole was unwarranted as the plaintiff had in any event been obliged to take all the steps normally required. The defence of the action demonstrated that even if notice had been given in compliance with the Rules it would not have led to a settlement or altered the course of the action. There was, therefore, no prejudice to the defendant as a result of the failure to give the required notice.

It is convenient to consider this argument in conjunction with the cross-appeal. The defendant supported the approach of the judge in applying DCR 101.01(1)(b) to the question of costs but submitted that the Rule operated as a complete bar to the plaintiff being awarded costs of the action if there was non-compliance with it.

In this case, there was no explanation as to the reason for the institution of the proceedings in the Magistrates Court. It appears always to have been a matter appropriate to the jurisdiction of the District Court. The requirement of giving notice is a requirement of both courts. Once the proceedings were transferred it became a District Court action. It is regrettable that the consequences of non-compliance are different in each court. It would be inappropriate to avoid the consequences of the District Court Rule by instituting the proceedings in the lower court. I think the judge was right in applying s 19(3) of the Magistrates Court Act to the present situation. The judge, in my view, correctly found that once the proceedings were transferred to the District Court, the proceedings were to be treated as if the action had been commenced in the District Court. DCR 101.01(1)(b) therefore applied.

In reaching his decision to reduce the plaintiff's costs by 10%, the learned trial judge said:

"I reject the plaintiff's submission that no order should be made because as subsequent events demonstrated even if the notice had been given in due time it would not have led to a settlement or altered the course of the action. DCR101.01(1)(b) is again part of the caseflow management requirements of this Court. It is to ensure that personal injury claims are not needlessly brought into the Court when the parties are able to settle them without resort to litigation. It is not for a plaintiff to decide that there is no point in complying with the rule. If there is some good reason for a plaintiff not to comply with it, a dispensation should be sought from the Court as soon as the action is commenced. DCR101.01(1)(b) is no different from the many other mandatory procedural requirements in the Rules. Parties are expected to comply with them and it is no excuse not to do so because in the particular case the party may think it is a pointless exercise. Some adverse consequences need to follow non-compliance without adequate excuse so that the Court upholds the integrity of its Rules and its caseflow management procedures. If the defendant was able to show any prejudice from the plaintiff's default, the consequences for the plaintiff would be greater, but some order is still to be made even where the defendant has not been prejudiced. No prejudice was shown here. I order under DCR101.01(1)(b) that the plaintiff not recover 10% of her costs of the action as a consequence of her failure to give the required notice."

I agree with those remarks. The purpose of the 90 day Rule is to ensure that litigants take all such proper steps to address the relevant issues prior to the issue of proceedings. The rule is designed to encourage an exchange of information at an early stage in the hope that parties can resolve matters by negotiation and discussion rather than by litigation. As the trial judge said, if the defendant was able to show any prejudice from the plaintiff's default, the consequences would be greater. True it is that in this case the subsequent history of the matter established that the action would not have resolved even if notice had been given and therefore there was no prejudice to the defendant. This could, however, be said of any matter which ultimately proceeds to trial. If the lack of prejudice demonstrated in the course of proceedings was sufficient to avoid the application of the Rule there would be little incentive to parties to address the issues at an early date and the operation of the Rule would be severely curtailed. Mr Walsh supported the approach taken by the judge. He submitted that the judge had correctly exercised his discretion by penalising the plaintiff with respect to costs in order to enforce the case flow management principles of the court.

It is clear that the making of an order with respect to costs is a discretionary matter. In considering the exercise of the discretion it is necessary to have regard to the practical consequences of the failure to comply with the Rule. That includes the prejudice or lack of prejudice to a defendant. This was a matter clearly taken into account by the judge. He expressly stated that the reduction of costs was limited to 10% as a result of the lack of prejudice to the defendant. As the judge said, it is not for the plaintiff to decide whether there is any point in complying with the Rule.

This also disposes of the defendant's cross-appeal. Mr Walsh acknowledged, in any event, that the argument raised by the cross-appeal that the plaintiff should not get any costs, was inconsistent with his primary submission that this court should not interfere with the exercise of the discretion by the learned trial judge. I would therefore disallow both the appeal and cross-appeal on the question of costs.

Mr Frayne also complained of the order made by the learned trial judge for there to be an inquiry. He said that this was in the nature of a disciplinary inquiry which he submitted was inappropriate and unnecessary. Much of Mr Frayne's argument on this topic was, however, predicated on his earlier submission that this was a case of unexplained, rather than unreasonable, delay. For reasons already given, this argument is rejected. The power for the judge to make the order for an inquiry is contained in s 42(3) of the District Court Act 1991, which provides:

"(3) If proceedings are delayed through the neglect or incompetence of a legal practitioner, the Court may - (a) disallow the whole or part of the costs as between the legal practitioner and his or her client and, where appropriate, order the legal practitioner to repay costs already paid); (b) order the legal practitioner to indemnify his or her client or any other party to the proceedings for costs resulting from the delay; (c) order the legal practitioner to pay to the Registrar for the credit of the Consolidated Account an amount fixed by the Court as compensation from time wasted."

"(4) The Court may not make an order against a legal practitioner under subsection (3) unless the Court has informed the practitioner of the nature of the order proposed and allowed the practitioner a reasonable opportunity to make representations, and call evidence, in relation to the matter."

"(1)(a) Where in a proceeding, costs are incurred improperly, or without reasonable cause, or arise because of undue delay, neglect or other default, the Court may, when the solicitor whom it considers to be responsible, whether personally or through a servant or agent, is before the Court or has had notice, make an order: (i) disallowing the costs as between the solicitor and client; (ii) directing the solicitor to repay to his client costs which the client has been ordered to pay to any other party; (iii) directing the solicitor personally to indemnify any other party against costs payable by the party; (iv) directing a Master to inquire into the act or omission with power to order or disallow any costs dealt with in clauses (i) to (iii) hereof."

84. In this case, the plaintiff said that she had instructed her solicitors shortly after the accident. She was unaware of the delay. She left the matter in the hands of her solicitors. The judge found that the delay was inexcusable and unreasonable. He sought some explanation for that delay but none was forthcoming.

85. As a result of that delay the judge imposed a penalty upon the plaintiff with respect to the amount he awarded for pre-judgment interest and costs. He found, however, that the delay was not attributable to the plaintiff personally. It was therefore understandable that the judge was concerned about the manner in which the proceedings had been conducted by the plaintiff's solicitors. Section 42(3) and DCR 101.06(1) provide a number of options to a judge who is satisfied that delay in a case is the fault of relevant solicitors. In this case, however, the judge was left in the invidious position of having insufficient information to resolve this matter. He could not, therefore, without further inquiry, make any orders against the plaintiff's solicitors. That inquiry might well exonerate the solicitors. It is, however, inappropriate at this stage to speculate about the outcome. There was, in my opinion, ample material to support the judge's decision to hold an inquiry in order to resolve these issues. I would dismiss the appeal against this order.

(1) That the order of the District Court of 10 June 1999 be set aside and that there be substituted for that order an order assessing the plaintiff's damages by way of an interim assessment of damages of $110,970.

(2) That the cross-appeal against the judgment of 10 June 1999 be dismissed.

(3) That the appeal and cross appeal against the judgment and orders of 31August 1999 should be dismissed.