Gray v Richards

The High Court has partly allowed an appeal from a decision of the NSW Court of Appeal relating to the assessment of damages and fund management fees. The appellant Gray suffered a traumatic brain injury in a motor vehicle accident with the respondent and is now unable to manage her affairs. At trial the appellant succeeded in an action for negligence and was awarded $10 million in damages, which included an amount for the costs of administering the sum. The NSWCA allowed the appeal in part and reduced the fund management fees based on expert opinions on the costs of management, calculated as a mid-way percentage between the fees of the state trustee and a major trust fund manager (the latter was appointed by the Court to manage the fund in an earlier proceeding).

The Court unanimously held that the appellant was entitled to costs associated with managing the lump sum damages payment, but was not entitled to costs of managing the predicted future income of the managed fund. The NSWCA erred on the first point but was correct on the second. Central to this appeal was the principles in Todorovic v Waller [1982] HCA 72, in particular the third principle:

In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff. Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it. Fourthly, the burden lies on the plaintiff to prove the injury or loss for which he seeks damages.

The Court held that calculating the cost of managing the damages was not a separate exercise from calculating the value of fund management expenses as part of the appellant’s future outgoings, but rather is an integral part of that cost (at [45]). Whether those costs are reasonable is not generally a matter of judicial discretion: the court’s main concern is fulfilling the first Todorovic principle in ensuring the plaintiff’s actual loss is compensated (at [46]), and the court will only question the choice of a different fund manager other than the State Trustee (as the appellant had done) if that management arrangement is so unreasonable that, as a matter of common sense, it could not be said to be a consequence of the injury (at [47]). There was no suggestion here that the chosen fund manager’s fees were outside the market or statutory regulations (at [48]ff).

The Court rejected the appellant’s argument that the current value of future economic loss from managing future fund income was not covered by the statutory discount rate of 5%. The Court held that the discount rate was neither a statutory requirement of 5% earnings in the fund nor an implication that damages must be supplemented to sustain an income of 5%, net of the expenses incurred in achieving that income: rather, the section (and the second Todorovic principle) assumes that the return from the fund takes into account the costs of generating that return (at [63]).

Order on Costs [2013] HCA 47 14 November 2014
High Court Judgment [2013] HCA 40 15 October 2014
Result Appeal allowed in part
High Court Documents Gray v Richards
Full Court Hearing [2014] HCATrans 199  10 September 2014
Special Leave Hearing [2014] HCATrans 109 16 May 2014
Appeal from NSWCA [2013] NSWCA 402 2 December 2013
Trial Judgments
[2012] NSWSC 344  13 April 2012

[2011] NSWSC 1502  8 December 2011

[2011] NSWSC 877  16 August 2011
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About Martin Clark

Martin Clark is a PhD Candidate and Judge Dame Rosalyn Higgins Scholar at the London School of Economics and Political Science and Research Fellow at Melbourne Law School. He holds honours degrees in law, history and philosophy from the University of Melbourne, and an MPhil in Law from MLS. While at MLS, he worked as a researcher for several senior faculty members, was a 2012 Editor of the Melbourne Journal of International Law, tutor at MLS and various colleges, a Jessie Legatt Scholar, and attended the Center for Transnational Legal Studies Program.