Rhiannon Gray by her Tutor Kathleen Anne Gray v Richards [2014 HCA 40]
On 15 October 2014, the High Court of Australia unanimously allowed, in part, an appeal from the New South Wales Court of Appeal in respect of the methodology to be used to calculate damages for fund management. This is an extremely important decision for severely injured plaintiffs in relation to the calculation of damages for fund management.
Our client sustained a traumatic brain injury as a result of a motor vehicle accident causing significant disabilities, a need for constant care and an incapacity to manage her own affairs. Proceedings were commenced against the driver of the motor vehicle claiming that he was liable in negligence for her injuries. Those proceedings settled on terms that required the CTP insurer of the defendant’s vehicle to pay damages in the sum of $10,000,000.00 plus an amount of damages to be assessed to cover expenses associated with managing the settlement funds (the fund management damages).
Our client was declared incapable of managing her own affairs by reason of her severe brain injury and a private trustee was appointed to manage her estate pursuant to legislative requirements in New South Wales. The private trustee charges management fees on the whole of the funds under management including the settlement monies and the fund management damages. This is a typical commercial arrangement in the marketplace.
In 2011, Justice McCallum in the Supreme Court of New South Wales determined that the fund management damages should include an amount to offset the cost of managing the fund management damages and a further amount to offset the cost of managing the fund’s predicted future income. These amounts were awarded on the basis that the fund management damages and the predicted future income of the fund would need to be managed and would therefore attract their own management charges. The CTP insurer appealed this decision and the New South Wales Court of Appeal reversed the decision of the primary judge ordering that an amount of damages for the cost of managing the fund management damages and the fund’s predicted future income should not be awarded.
Beilby Poulden Costello was successful in obtaining special leave to appeal to the High Court of Australia. On 15 October 2014, the appeal was allowed in part. The High Court held that the New South Wales Court of Appeal had erred in deciding that no allowance should be made for the cost of managing the fund management damages, but was correct in deciding that no amount should be made for the costs of managing the fund’s predicted future income.
This is an extremely important decision for cases involving severe injuries which render a person incapable of managing their own affairs. The High Court has unanimously held that an injured person is entitled to recover costs associated with management of damages awarded for the purpose of managing all funds under management. Pursuant to this decision, an incapacitated plaintiff is now entitled to recover costs associated with managing the component of damages which has been awarded to meet the cost of managing lump sum compensation recovered by way of damages. In this case, it was held as follows:-
“The Court’s concern is to ensure that the plaintiff’s actual loss is compensated. There is, for example, no scope for the Court to say that the amount is simply ‘too much’ as a matter of intuition or impression if the plaintiff has no practical ability to bargain for a lesser charge.”
The High Court also stated as follows:-
“It is well settled that ‘the common law does not permit difficulties of estimating the loss in money to defeat an award of damages’ by way of compensation for loss actually suffered.”
This decision of the High Court unanimously determines the methodology to be adopted when calculating damages in respect of fund management. The High Court has held that fund management damages include the cost of managing the fund management component of an injured person’s damages consistent with the principle of “restitutio in integrum”.
This case summary is provided by Kate Henderson, a senior solicitor and accredited specialist in personal injury law at BPC Lawyers. Kate acted on behalf of the plaintiff in the Supreme Court of New South Wales, the New South Wales Court of Appeal and High Court of Australia. Kate has a special interest in catastrophic injury claims. For more information or to speak with Kate, or any of our specialist lawyers, please contact us on (02) 8280 6900 or firstname.lastname@example.org