Mahony v Watson [2003] NSWCA 259 (26 September 2003)

New South Wales Court of Appeal

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MAHONY v WATSON [2003] NSWCA 259 (26 September 2003)

Last Updated: 26 September 2003

NEW SOUTH WALES COURT OF APPEAL

CITATION: MAHONY v WATSON [2003] NSWCA 259

FILE NUMBER(S):

41047/02

HEARING DATE(S): 3 September 2003

JUDGMENT DATE: 26/09/2003

PARTIES:

Garry Thomas Mahony - Appellant

Michael Watson - Respondent

JUDGMENT OF: Sheller JA Young CJ in Eq Gzell J

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): 1062/00 (Newcastle)

LOWER COURT JUDICIAL OFFICER: Gibson DCJ

COUNSEL:

L King SC/J T Kearney - Appellant

M J Neil QC/D Ronzani - Respondent

SOLICITORS:

Michael Evers & Co - Appellant

Blake Dawson Waldron - Respondent

CATCHWORDS:

Appeal - DAMAGES - negligence - personal injury - evidence - causation - injury received in motor vehicle accident - whether further injury sustained in subsequent motor vehicle accident - apportionment of damages - liability of respondent - whether trial judge's conclusion to discount damages by reason of subsequent accident was correct.

Appeal - DAMAGES - mitigation of damages - whether finding by trial judge of a failure to mitigate was correct.

Appeal - costs order - offers of compromise - District Court Rules Part 39A rule 25 (1A) - whether trial judge took proper account of offers of compromise.

LEGISLATION CITED:

Motor Accidents Act 1988

DECISION:

1 Appellant to file and serve written submissions on what orders this Court should now make on or before 3 October 2003

2 Respondent to file and serve written submissions on what orders this Court should now make on or before 13 October 2003

3 Liberty to either party to apply for directions to Sheller JA in Chambers on 24 hours notice to the other.

JUDGMENT:

-

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41047/02

DC 1062/00

SHELLER JA

YOUNG CJ in EQ

GZELL J

MAHONY v WATSON

The appellant, a painter while driving to work in December 1997 was involved in a motor vehicle accident, when his car was struck by the respondent's car. The appellant sustained injury. The respondent admitted that the accident was a result of a breach of his duty of care owed to the appellant. About four months after the accident, the appellant was involved in another motor vehicle accident, when he was a passenger in a car driven by his employer. The respondent had no involvement with the second accident. The appellant brought proceedings to recover damages for the injuries, which he sustained in the December 1997 accident.

The respondent claimed that the appellant's injuries were in part due to the second accident and that the appellant had significantly failed to mitigate his loss as required by s39 of the Motor Accidents Act 1988. The trial Judge gave judgment for the appellant, awarding a sum in excess of $123,000 and costs.

The trial Judge apportioned the appellant's damages on the basis that his injuries were two-thirds due to the first accident and one-third due to the second accident. The trial Judge further reduced some of the damages allowed for economic loss on account of the appellant's failure to mitigate his loss. The appellant appealed on the ground that the trial Judge had erred in apportioning the damages in part as due to the later accident and in finding that the appellant had failed to mitigate his loss.

The trial Judge ordered the respondent to pay the appellant's costs of the trial, even though the respondent had rejected offers of compromise, which exceeded the amount recovered. The respondent cross-appealed against the costs order on the basis that the trial Judge erred in finding "exceptional circumstances" within the meaning of Pt 39A r25(6) of the District Court Rules 1970.

Held: (per Sheller JA, Young CJ in EQ, Gzell J agreeing):

1. The trial Judge did not indicate that she found any part of the evidence of the appellant or of his principal witness unacceptable. Further she found that none of the numerous medical reports admitted in evidence assisted in apportioning the injury. Her Honour gave no indication that she did not accept the appellant's evidence that at the time of the second accident he was still in pain and getting worse and worse every day. The discount of one-third was not justified by any process of reasoning and was not open on the evidence before the trial Judge.

2. There was no evidence to support the trial Judge's conclusion that the appellant had significantly reduced his employability by reason of his drink driving conviction. The appellant's evidence was that the disqualification, which resulted in the loss of his licence, would not have prevented him from going to work as a painter. Furthermore the trial Judge found that the appellant was unable to pursue his physically demanding job due to constant pain. Nowhere did her Honour weigh such factors in the balance when considering mitigation. Taking such evidence into account it was not open to the trial Judge to reduce the amount of damages because the appellant had lost his licence or otherwise had failed to mitigate his loss.

3. A new trial was undesirable for various reasons. It was appropriate if possible that the Court substitute an amount of damages for the plaintiff which accorded with her Honour's conclusions but omitted any deduction on account of the second motor accident or on account of failure to mitigate.

4. Part 39A r25 (1A) sets out the objects of the rule in pursuance of which the Court must decide to make or refuse to make an order for costs under the rule. Her Honour erred in failing to pay sufficient account to these objects. Therefore, if the offers of compromise should still be brought into account in determining the costs, a reassessment taking account of the objects of the rule is required.

Legislation:

Motor Accidents Act 1988

Cases cited:

Brogan v McGeary (1995) Aust Torts Reps 81-342

Commercial Minerals Ltd v Hollins [1993] NSWCA (unreported)

Goodsell v Murphy [2002] NSWCA 216

Jobling v Associated Dairies Ltd [1981] UKHL 3; [1982] AC 794

Kirby v Sanderson Motors [2002] NSWCA 44

Makita Pty Ltd v Sprowles [2001] NSWLR 705

Medlin v State Government Insurance Commission (1995) 182 CLR 22

State Government Insurance Commission v Oakley (1990) Aust Tort Reps 81-003

Thompson v Smiths Shiprepairers (North Shields) Ltd [1984] 1 QB 405

ORDERS

1. Appellant to file and serve written submissions on what orders this Court should now make on or before 3 October 2003;

2. Respondent to file and serve written submissions on what orders this Court should now make on or before 13 October 2003;

3. Liberty to either party to apply for directions to Sheller JA in Chambers on 24 hours notice to the other.

**********

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41047/02

DC 1062/00

SHELLER JA

YOUNG CJ in EQ

GZELL J

Friday, 26 September 2003

MAHONY v WATSON

Judgment

1 SHELLER JA:

Introduction

The appellant, Garry Thomas Mahony, was injured while driving a motor vehicle to work on 19 December 1997. His motor vehicle was struck in the rear by a motor vehicle driven by the respondent, Michael Watson. As a consequence, the appellant sustained injury. The respondent admitted that the accident was the result of a breach of his duty of care to the appellant. On 16 April 1998 the appellant was involved in a second motor vehicle accident as a passenger in a car driven by his employer, Christopher Roland Butler. The respondent had nothing to do with this second motor vehicle accident.

2 On 8 February 2002 her Honour Judge JC Gibson heard the proceedings brought by the appellant against the respondent to recover damages for the injuries he claimed resulted from the December 1997 accident. Her Honour gave judgment for the appellant in the sum of $123,521.19 and ordered the defendant to pay the plaintiff's costs. Her Honour summarised the damages awarded as follows:

Non-economic loss (22%) $13,500.00

Past Economic Loss ($14,000 + $30,000 to date of trial) $44,000.00

Fox v Wood $ 8,859.32

Superannuation (past) $ 2,700.00

Future Wage Loss and Future Superannuation Loss $30,000.00

Past Out of Pocket Expenses $19,461.87

Future Out of Pocket Expenses $ 5,000.00

TOTAL $123,521.19

3 The trial Judge reduced the amount allowed for non-economic loss from 33 per cent to 22 per cent on the table of severity of non-economic loss as a proportion of a most extreme case in s79A of the Motor Accidents Act 1988, as amended (MAA), on the basis that one-third of the injury was attributable to the second accident. The amount so produced was $13,500.

4 The amount allowed for economic loss was also reduced on the basis that the appellant's injuries were one-third due to the second accident and, in part, because the appellant had significantly failed to mitigate his loss as required by s39 of the MAA. Her Honour was of the view that s39 was a section with very significant implications in relation to the obligations of a plaintiff to look for work and to ensure he was as employable as possible.

5 The trial Judge allowed nothing for the period up to 29 June 1998. Because of what her Honour regarded as the unsatisfactory nature of the evidence, for the period from 29 June 1998 until 1 December 1998, she allowed only "a cushion figure". In her view the mitigation factor relied upon by the respondent did not affect this portion of past economic loss and there was no reason to vary the figure of two-thirds to one-third. Her Honour treated the appellant's claim as $21,000 and reduced it by one-third to $14,000.

6 For the period from 1 December 1998 to 7 May 2002 her Honour calculated the appellant's claimed economic loss at $79,650 on the basis that he was totally incapacitated for work. Her Honour then went on to look at the period from 7 May 2002 to the date of judgment and said:

"The plaintiff has been unemployed for two hundred weeks and seeks his whole wages for that period of $450 per week ($90,000). I am of the view that the plaintiff should be entitled to one-third of this sum and not to two-thirds by reason of his failure to mitigate his loss. The plaintiff should be awarded the sum of $30,000."

7 To this, as the above table shows, was added the $14,000 to produce an amount of $44,000 for past economic loss. Her Honour allowed the appellant's claim for the Fox v Wood component and said that any claim for superannuation must relate to his two hundred weeks of unemployment. She said that, since she had awarded the appellant for past economic loss a figure amounting to one-third of two hundred weeks, she would award 9 per cent of $450 for 66.66 weeks producing the amount rounded up of $2,700.

8 About future economic loss her Honour said:

"It is my view that the plaintiff's wage loss for the remaining eighteen years of his working life is $150 and his economic loss on the 5 per cent tables using the multiplier of .625 and allowing for vicissitudes in the normal percentage of 15 per cent is $79,375. One-third of this figure is $26,562.50."

9 Thus her Honour made a one-third deduction for the consequences of the second accident and a further one-third deduction for failure to mitigate. She said that future superannuation on such a figure was a very imprecise sum but given the rate of 9 per cent and the figure this would have produced it was simpler to round up the future economic loss to $30,000. This is the amount that appears in the table.

10 Her Honour awarded past out of pocket expenses, as she said, en bloc for the full amount claimed. She allowed future out of pocket expenses of $5,000 on the basis that the appellant would need to take analgesics and would need to see his doctor for prescriptions. She left it open to the parties to make application about interest and costs.

11 In a separate judgment on 24 October 2002 her Honour ordered the respondent to pay the plaintiff's costs despite the fact that there had been three offers of compromise made by the respondent, one below the sum awarded, the second of $190,000 plus costs of $15,000 on 11 July 2001, and the third an offer of $205,000 plus costs of $5,000 made on 20 September 2001.

Reasons for judgment at trial

12 The trial Judge treated the proceedings as an assessment of compensation, if any, under the MAA. Her Honour said that the issues to be considered, which were of some complexity, were (a) the second accident on 16 April 1998, (b) the failure to mitigate loss in accordance with s39 of the MAA and (c) whether the appellant cleared the statutory thresholds set by s70A in respect of future economic loss and s79A in respect of non-economic loss.

13 Judge Gibson faced what appeared to be formidable obstacles in assessing damages. Before any oral evidence was called the plaintiff's medicals and the defendant's medicals were tendered and admitted without objection. Her Honour, on the invitation of counsel for the parties, went off the bench to read them. None of the medical witnesses was called to give evidence. Thirteen doctors provided written reports. About thirty-four reports were received into evidence. As one would expect, some were largely updates, which repeated what was contained in earlier reports. Some were quite long. The histories varied, as did the opinions. Only three of the doctors, the appellant's treating general practitioner, Dr Ismay, Dr Russo and Dr Price, referred to or took account of the impact, if any, on the appellant's physical condition of the second motor vehicle accident.

14 In her reasons for judgment delivered on 22 October 2002, eight months after what, from the transcript, appears to have been the last day of the hearing of oral argument on damages, 8 February 2002, Judge Gibson said:

"The factual dispute in this case, which concerns which of the two accidents injured the plaintiff, can only be resolved by careful analysis of the medical evidence."

15 She attempted to summarise the medical reports tendered by the appellant and the respondent. That analysis occupied almost fourteen pages of the reasons for judgment. But, with due respect, it was little more than a précis with some passing comment. The trial Judge did not decide which of the medical evidence she should accept and which she should reject and state her conclusions and findings on the evidence. In this précis her Honour made these comments:

(a) That in his reports Dr Ismay did not differentiate between the first and second accident and that this did not help the plaintiff's claim that only the first and not the second accident caused his injury.

(b) That Dr Ismay's reports contained a number of troubling features, for example, that he had noted that the appellant made a rapid recovery to full duties after the first accident, and that he presented again after the second accident when he "again" showed signs of the same kinds of injuries.

(c) That "[r]eading his report in the context of the referral to Dr Hollo, the impression is conveyed that the second accident is of at least similar severity."

(d) Of the report of Cheryll Jones, a rehabilitation consultant, that "[t]his report is of considerable importance in relation to the claim of failure to mitigate loss".

(e) Of Dr Plowman that "[w]hat troubles me about this report is that there is no reference to the second motor vehicle accident in April. As the Court of Appeal explained in Makita Pty Ltd v Sprowles [2001] NSWLR 705, expert opinions based on inadequate or misleading facts are largely valueless".

(f) That Dr Kleinman's four reports between 1998 and 2001, by reason of the time span, gave "quite a helpful review of the plaintiff's condition". A little later her Honour observed: "What, however, would Dr Kleinman's opinion have been if he had been given information about the second accident? This must undermine the value of his report".

(g) Of the conclusion of one of the respondent's doctors, Dr Price, that the appellant had settled down completely and returned to his pre-accident duties after very short treatment and was managing these until his second accident on 16 or 18 April 1998, that

"69 The difficulty I have with this conclusion is that Dr Price does not give any reason for arriving at the conclusion that the disabilities the plaintiff has are a result of the second and not the first accident, beyond noting that Dr Ismay considered the plaintiff had recovered satisfactorily over this period.

70 In other words if Dr Ismay is incorrect, then Dr Price must similarly be incorrect. The kind of issues that would need to be considered to arrive at an opinion independent of Dr Ismay's statement would include, but not necessarily be limited to, the significance of the minor degree of lipping in the X-ray, the comparatively much greater severity of the first accident when compared to the second, what the plaintiff's complaints actually were during the period January to April 1998, and whether the April 1998 accident could have aggravated a pre-existing injury and/or rendered an asymptomatic condition symptomatic."

(h) After quoting from a report of Dr Donaldson, another of the respondent's doctors, in which he said:

"In my view this is the reason why he was having pain when he came to see me. He returned to work and did not see his doctor for three months after the first accident. Surely, if he had ongoing neck pain he would have seen him sooner and perhaps more frequently for he certainly saw him many times after the April accident according to the family practitioner's record of his visits."

Her Honour said that this explanation of the plaintiff's medical problems was compelling: "Dr Donaldson has explained why he considers the second accident is the more significant".

16 Having completed her summary of the medical reports, her Honour addressed the question of damages. First, she described the legal issues relevant to the apportionment of damages between the first and second accident. Before referring to several authorities the trial Judge said:

"81 The evidence establishes that the plaintiff was able to work full time prior to the second accident but that his condition had not settled completely. At that stage he would have been left with limitations to his physical (and hence his working) capacity caused by problems in his neck and back. It was probable that the plaintiff would improve so as to remain able to work on a full time basis. However, there was also a real possibility that he might not have improved and that, by reason of aggravation of his injury or deterioration of the injury site, have deteriorated to the state that he was at the date of the trial, had the second accident not intervened. A defendant is only liable for the harm his negligence causes.

82 It is difficult to disentangle the consequences of the first and second accident; I note Dr Hollo does not do so. The similar nature of the injury and the similar location in the neck and back, the comparative closeness in time and the likelihood that the second injury aggravated a first injury that had been settling down mean that it is difficult to determine the extent to which each accident contributed to the plaintiff's ultimate condition. However, on the medical evidence it is clear that both have contributed and I must have regard to the authorities that offer guidance as to the correct approach to adopt in such circumstances."

17 A little later under the heading "Non-economic loss", the trial Judge said:

"86 Having set out the law I now come to the submissions of the parties in relation to non-economic loss. There is no doubt the plaintiff is in considerable constant pain, reliant upon very strong pain medication and unable to pursue his quite physically demanding job as a painter. The plaintiff simply says it is `for the court to determine quantum' but since the plaintiff makes no submissions about apportionment and asserts the second accident had no effect whatever, I infer that the plaintiff would expect an apportionment for the second accident of zero. Mr Ronzani [counsel for the respondent], more helpfully, asserts the non-economic loss attributable to this accident is 22%, which I infer is a figure selected by him to represent the proportion of the plaintiff's injury attributable to the first and not the second accident.

87 The paucity of medical evidence before the second accident and Dr Ismay's reference to the plaintiff returning to `full duties' on 19 January suggest [my emphasis] that the plaintiff was making a recovery from the first accident which could have become a full recovery. The wage records attached to the plaintiff's submissions show the plaintiff was not receiving any partial incapacity payments between 16 January and 4 May 1998.

18 The trial Judge said that none of the medical reports had been of any assistance to her in apportioning the injury and where percentage figures had been referred to by the doctors, these had to be treated with caution because in general such figures were given by doctors with no information about the second accident. In this case a central and determinative issue was whether the injury suffered, for which the appellant sued, was partly due to a later accident for which the respondent was not responsible. The method of trial allowed over thirty medical reports to be admitted in evidence. None was of any assistance in apportioning the injury. This demonstrates yet again the injustice both to litigants and to the medical profession of allowing medical issues to be resolved without any oral medical evidence. It is hard to imagine a more costly or inefficient way of resolving such a dispute.

19 The trial Judge continued:

"89 Doing the best I can with this limited information, I am of the view that the plaintiff's first injury was the more serious. It was a much more severe whiplash, as the damage to the vehicle (for the first accident) and the evidence of Mr Butler (concerning the second accident) shows. The plaintiff was able to rest immediately by reason of his imminent holidays and following physiotherapy and treatment by Dr Ismay appeared to be recovering from the whiplash. However, at a time when I find (notwithstanding the unhelpful medical reports from both sides) that his neck was at a vulnerable stage of recovery, he suffered a second whiplash that not only undid the recovery taking place but worsened his condition.

90 It is my view that the plaintiff has suffered a 33% loss arising from the first accident. Under the table of non-economic loss damages for accidents pursuant to Section 79A Motor Accidents Act, 33% would entitle the plaintiff to $97,500. However, it is my view that one third of this figure of 33% is injury attributable solely to the less serious second accident and that the percentage figure to which the plaintiff is entitled is 22% of the statutory figure.

91 If both tortfeasors were sued I could award the total to which a plaintiff is entitled when the award is 33% and make an apportionment of that sum. However only one tortfeasor has been sued and in my view I must treat the plaintiff as a person who has a claim for injury where I must regard the other injury as falling entirely outside the Motor Accidents Act by reason of there being no claim. Accordingly the plaintiff is only entitled to 22% in accordance with the Motor Accidents Act table and his non-economic loss is $13,500.

92 I now turn to the issue of mitigation of damages. For reasons explained further below, I have taken the view that the claim for mitigation of damages relates to economic loss only. The grounds for attack on the plaintiff's non-economic loss (the assertion that he should have had more physiotherapy) has been rejected by me and the figure of $13,500 is not therefore subject to further reduction."

20 The important elements of what I have quoted are:

(a) The finding that at the date of trial the appellant was in considerable constant pain, reliant upon very strong pain medication and unable to pursue his quite physically demanding job as a painter (par 86).

(b) If the word "suggest" equates with "find", by 19 January 1998 the appellant was making a recovery from the first accident, which could have become a full recovery (par 87), but that his condition had not settled completely and he was left with limitations to his physical and hence working capacity (par 81).

(c) None of the medical reports had been of any assistance in apportioning the injury. This does not seem to be consistent with what her Honour had said about Dr Donaldson's report. Despite this report she found that the appellant's first injury was the more serious. Her Honour said, it seems correctly, that on the first occasion the appellant suffered more severe whiplash. This finding was supported by the damage to the vehicle in the first accident and the evidence of Mr Butler about the second accident. This led to the finding "notwithstanding the unhelpful medical reports from both sides", that the neck was at a vulnerable stage of recovery when he suffered, in the second accident, a whiplash that not only undid the recovery taking place but worsened his condition.

21 Judge Gibson referred to s79A of the MAA. Subsection (3) provides that no damages are to be awarded for the non-economic loss of an injured person as a consequence of a motor accident unless the injured person's ability to lead a normal life has been, or in the near future is likely to be, significantly impaired for a continuous period of not less than twelve months by the injury suffered in the accident. It must be assumed that her Honour concluded that the appellant satisfied this requirement although there is no specific finding. The same may be said about subs (4) which provides that no damages may be awarded for the non-economic loss, unless the severity of the non-economic loss of the injured person is at least 15 percent of a most extreme case. Presumably the first sentence in para 90 of the reasons for judgment should be read as saying that the severity of the non-economic loss of the appellant arising from the first accident was 33 percent of a most extreme case. However, this finding is contradicted by the finding in the last sentence of par 90 that because of the "less serious second accident", the appellant is entitled only to 22 percent "of the statutory figure"; that is, that the severity of the non-economic loss of the appellant was 22 percent of a most extreme case. The trial Judge made no finding to support this conclusion.

22 There are two things to be said immediately about this. In the first place, her Honour quoted the appellant's description of the first accident:

"My head hit the front windscreen, come back, the belts' threw me again, then it's grabbed then it's come back and broke the seat, and my head hit the - out through the glass and hit the rails in the tray."

23 Her Honour had said the first injury was the more serious, a much more severe whiplash as the damage to the vehicle showed. But what is far more important in this discussion is to examine the reasons for judgment for any finding about the second accident in terms of its severity or consequences.

24 The appellant was a passenger in the car driven by Mr Butler. Speaking of the second accident, he said "we were just tapped at a set of lights again. ... A little truck hit the mirror and clipped the tray." In cross-examination the appellant was asked whether he went to see Dr Ismay on 30 April 1998 because of what had happened to his body in the second motor vehicle accident of 16 April 1998. The appellant denied this and denied the suggestion put to him that when he went to see Dr Ismay on 30 April 1998 the movement ability of his cervical spine was reduced or in other words, that it was less mobile after the second accident. The appellant was cross-examined as follows:

"Q. In fact you had no treatment, did you, at all from 19 January 1998, or it might have even been 16th - let's pick 19 January 1998, until you saw Dr Ismay after the second accident? Isn't that correct? A. No I was still in pain, I was told by my employer to report the accident and I had to go and see him anyhow because my neck was all in pain and that then.

Q. That was the second accident that you're talking about? A. That was from the first accident.

Q. Well let's please, if you will, think about the period of time that I'm asking you which is from the middle of January when you've stopped all physiotherapy, you've stopped seeing Dr Ismay - from that period, the middle of January 1998 until you see Dr Ismay after the second accident, during those weeks, months, no treatment, saw nobody for treatment, isn't that right? A. I've seen nobody for treatment but I was getting worse and worse every day.

Q. The history that you've just mentioned is not, I suggest to you, what you told Dr Ismay when you presented yourself after the second accident, because I suggest to you that what you presented yourself [sic] to Dr Ismay after the second accident was that you had jarred your neck in a car accident with your boss on 16 April 1998 when you were on your way home from buying paint, isn't that what happened? A. All I said was, we had a slight knock and to report - I was told by the employer to report it.

Q. You told Dr Ismay you had jarred your neck in that second accident didn't you? A. Well I don't know how he write it but I just said that `We've had a jar in the car', but I was all right from that accident. I was still --

Q. So you agree that you used the words, you had a jar, your neck was jarred or words to that effect, when you saw Dr Ismay after the second accident? You agree don't you? A. Yes."

25 Later he conceded that his neck was "jarred". Asked why he had not told other doctors about the second accident he said: "Because I didn't think it was necessary, I just reported it to my own GP, under orders from work." The appellant was not asked any other questions relating to the nature or effect of the second accident.

26 Mr Butler gave the following evidence about the April incident.

"Q. Well now I want to take you now to April 1998. Were you on 16 April in a motor vehicle with Garry? A. The cab - I believe that was the date.

Q. Well let's assume that it was. Where had you been that day? A. We'd been working at a - I think it was like a retirement building for Catholic aged care at Waratah.

Q. Right? A. That's just near the Mater Hospital.

Q. And what were you doing? A. As in work during that day?

Q. No, when you left that job where were you going? A. Okay, well we had to go to Pascol Paints because we'd run out of a particular paint, so yep, we called around at Pascol Paints which is on Griffiths Road there at Lambton.

Q. And did something happen in the proximity of Griffiths Road, Lambton? A. Yeah we were unfortunate enough to be involved in an accident there on the way home.

Q. Well now would you tell us something about that accident? If I might start you off with a vehicle coming from your right-hand side, is that right? A. Yeah.

Q. What sort of Vehicle was that? A. It was Toyota Dyna which is - what would you call it, a small one tonner.

Q. Were you driving? A. Yes.

Q. And was Garry a front-seat passenger? A. Yeah.

Q. Right, now what happened? A. Well we were coming down Turton Road towards, I think it's Waratah Railway Station.

Q. Yes? A. The road at the last set of lights veers around.

Q. To the right? A. To the right where the palm tree lined avenue is that goes off to the railway station, but before we got to the corner I saw this Dyna coming across--

Q. Your path? A. -bearing towards us, it was already in our lane, and so I swerved to the left and I guess the other driver did the same thing, swerved away from us but the collision resulted from that which took the - like the driver's side mirror off and clipped the - what would you call it, the corner edge of the tray.

...

Q. What sort of level of force did the vehicle strike your vehicle with? A. Well it give it a fair clout. I had a can of soft drink in my left hand and a little bit of the drink spilt out but that was pretty well it. I mean fortunately we were already braking because we were approaching the corner.

Q. What sort of damage was done to your vehicle? A. Well there's a mirror on the driver's side door which is on a bracket. Well it just knocked that off, pulled that off. The vehicle I was driving was a Holden Rodeo one tonner which has got an aluminium tray on the back of it.

Q. Right? A. It didn't actually hit the front cab but it clipped like the corner post of the aluminium tray.

Q. Did anyone complain of injuries? A. No.

Q. Did you? A. My right shoulder felt a little bit funny but that seemed to be all it was. I asked Garry if he was okay and the other --

Q. And what did he say? A. He said he was fine.

Q. Right. A. Yeah, that there was nothing apparent.

Q. Was there anyone else in the vehicle? A. With the other vehicle, well the same thing, we asked those guys. We were all about the same. Other than having the tripe scared out of us it was pretty well it.

Q. Did you make a personal injury claim in respect of it? A. No.

Q. Did you say something to Garry about that accident or the reporting of the accident? A. Well only in view of what he'd already had and the experience, that he should see his doctor just to, you know, to let him know about it, that this had happened.

Q. Did you ask him to discuss it with anyone? A. As in Garry?

Q. To doctors or to someone else? A. Well just to his doctor. I mean - yeah, because - well yeah, with Workcover and one thing another these days you sort of need to do these things.

...

Q. After this accident did he make any complaints to you of pain in any region of his body that were different from the ones before? A. No.

...

Q. Did he suggest anything about his condition after the second accident that was different from before? A. Can I answer that?

FURTHER LEGAL ARGUMENT. QUESTION ALLOWED.

Q. Did he make any complaints after the second accident to you of pain in areas that he didn't complain of before? A. No."

27 Mr Ronzani cross-examined Mr Butler but not about the nature or effect of the second accident. Counsel for the appellant relied upon this failure to cross-examine which her Honour acknowledged. She said:

"16 The plaintiff submits that Mr Ronzani did not cross-examine Mr Butler at all as to the significance of the second accident and the effects which it might have had upon the plaintiff. However, Mr Butler could not give this kind of evidence and questions to this effect from the plaintiff's counsel were disallowed."

The second sentence above is not correct. It was open to the respondent's counsel to cross-examine Mr Butler about the second accident and his observations about its effect upon the appellant; for example, whether he was thrown forward or back in his seat or whether he struck himself on any part of the motor vehicle. It was also open to cross-examine him about what he observed about the appellant's condition after the second accident. He had already in chief described the level of force and the damage to his vehicle and said that the appellant had not complained of injuries. The appellant was entitled to rely upon any failure by the respondent's counsel to cross-examine Mr Butler on such matters.

28 On the other hand her Honour said that Mr Ronzani cross-examined the appellant very effectively about the effects of the second accident. Her Honour said:

"17 ... The plaintiff responded in a frank and open fashion but the chronology of events effectively speak for themselves, as do facts as summarized in the medical reports.

18 At T-34 and T-35.24 Mr Ronzani asked the plaintiff: `...You fortunately, had, for you, a rapid recovery from the first accident up until the second accident happened?' The plaintiff denied this. Mr Ronzani's question becomes more understandable when one refers to the plaintiff's treating GP's reports of 28 June 1998 and 20 October 1998. Dr Ismay reported that the plaintiff saw him on 7 January 1998 (after the plaintiff's holidays) describing `whiplash' type injury to his cervical spine, sustained when he was hit from behind by another motor vehicle whilst travelling to work on 19 December 1997. Dr Ismay noted in his report that `Mr Mahony had experienced neck pain and headaches from 19 December 1997 and finally sought medical attention on 7 January 1998. Mr Mahoney also described radiation of pain to the right upper limb'.

19 Dr Ismay also reported that the plaintiff made a rapid recovery and returned to full duties on 19 January 1998 and that when seen on 30 April 1998 some two weeks after the second accident, he `jarred' his neck and `again' showed signs of reduced movement about the cervical spine."

29 However, once again beyond such comments her Honour made no findings and expressed no view about which parts of the evidence she accepted and which she did not. In cross-examination the appellant said that from the middle of January 1998 although he had seen nobody for treatment he was getting worse and worse every day.

Appeal

30 The appellant's grounds of appeal were:

(i) Her Honour erred in apportioning the plaintiff's damages partly to the injury sued on and partly to the injury of April 1998.

(ii) Her Honour erred in finding that the plaintiff had failed to mitigate his loss.

31 The respondent cross-appealed against the costs orders on the following grounds:

1. Her Honour erred in finding `exceptional circumstances' within the meaning of Part 39A rule 25(6) of the (NSW) District Court Rules 1970.

2. Her Honour erred in ordering the defendant to pay the plaintiff's costs of the proceedings.

3. Her Honour erred in not making an order that the defendant pay the plaintiff's party/party costs up to and including 11 July 2001 and that the plaintiff pay the defendant's party/party costs thereafter.

Second accident

32 During argument we were referred to State Government Insurance Commission v Oakley (1990) Aust Tort Reps 81-003, a decision of the Full Court of the Supreme Court of Western Australia. In that case the plaintiff had been injured in a motor vehicle accident in 1981 and then three years later was involved in another. In the plaintiff's action in relation to the first accident, for which the defendant was liable, the trial Judge awarded damages on the basis that half of the consequences of the second accident were attributable to the earlier accident. The defendant appealed, submitting that the plaintiff's residual disability was due substantially, if not entirely, to the second accident. The evidence of one medical expert that the plaintiff was fit for work prior to the second accident was relied on by the defendant.

33 In the course of his judgment, Malcolm CJ said at 67,577:

"In my opinion, where the negligence of a defendant causes an injury and the plaintiff subsequently suffers a further injury the position is as follows:

(1) ...

(2) where the further injury results from a subsequent accident which would have occurred had the plaintiff been in normal health, but the damage sustained is greater because of aggravation of the earlier injury, the additional damage resulting from the aggravated injury should be treated as caused by the defendant's negligence; and

(3) where the further injury results from a subsequent accident which would have occurred had the plaintiff been in normal health and the damage sustained includes no element of aggravation of the earlier injury, the subsequent accident and further injury should be regarded as causally independent of the first."

34 At 67,578 his Honour said that the second proposition covered the "increased vulnerability" cases and referred to Luntz, Assessment of Damages for Personal Injury and Death, 2nd ed, (1983), p140; see now 4th ed, (2002) p187. His Honour continued:

In Pyne v Wilkenfeld (1981) 26 SASR 441 at 442 Zelling J held that such cases are concerned with:

`...an accident arising from an independent cause which increases the damage caused by the first accident but does not arise out of it.'

In such a case the plaintiff does not recover the full damages resulting from the second accident, but only those extra consequences of the second injury due to the existence of the first injury."

35 Thompson v Smiths Shiprepairers (North Shields) Ltd [1984] 1 QB 405, which was referred to with approval by Handley JA in Commercial Minerals Ltd v Hollins [1993] NSWCA (unreported) at 12, concerned two groups of plaintiffs, labourers and fitters in ship repair and ship building yards, who claimed damages against their employers for loss of hearing caused by exposure to excessive noise in the course of their work. Mustill J (as his Lordship then was) held that the plaintiffs were not entitled to recover their loss in full because a substantial part of the impairment of their hearing took place before the defendants were in breach of their duty of care and although precise quantification was impossible, the Court had to apportion the loss and make the best estimate it could in the light of the evidence. At 437-8 Mustill J made these comments about the task he confronted:

"The starting point for any inquiry into the measure of damages is the principle that the court should so far as possible endeavour to restore the plaintiff to the position in which he would have found himself but for the defendant's wrongful act. The impracticability of giving full effect to this principle must be recognised at every stage of the process. ... Complete logical rigour cannot be attained.

... The first step is to consider the case of a worker, whose hearing has been impaired by excessive noise wrongfully suffered whilst in the service of successive employers A and B. The basic principle suggests that A should be liable in full, but not more than in full, for the impairment existing when the worker leaves his employment. ...

The intermediate step is the ascertainment of symptoms: for it is the symptoms which are the immediate cause of loss. It is, however, essential to recognise that symptoms are of two kinds. First, those (if any) which the plaintiff has already suffered and is suffering at the date of trial. Second, those symptoms which, because of damage to bodily structure suffered through breach, are definitely going to happen, or may happen, at a future date. ... In the present context, such symptoms take the shape of - (i) the earlier onset of presbyacusis which will be suffered by anyone whose `non-disability' reservoir of hearing impairment has been drawn upon by excessive noise, and (ii) the further handicap which may be suffered by the plaintiff if he undergoes further exposure to excessive noise. A proper award of damages against employer A will recognise the existence of both current and potential symptoms.

What of employer B? Principle and common sense demand a recognition of the fact that he has `taken over' the plaintiff in a condition where his organs of hearing are already damaged, and where he is already subject to actual and potential symptoms. It would be an injustice to employer B to make him liable for damage already done before he had any connection with the plaintiff. His liability, first principles suggest, should be limited to compensation for (a) the perpetuation and amplification of the handicaps already being suffered at the moment when the employment changed hands, and (b) the bringing to fruit in the shape of current hardship those symptoms which and previously been no more than potential.

If this reasoning is followed, the result should be that the recoveries against A and B will amount in total to the award which would have been made if the damage had all been caused by the wrongs of a single employer; and, equally, that the assessment of such an award could form at least the starting point of any quantification of the individual liability of employers A and B."

36 His Lordship referred to Jobling v Associated Dairies Ltd [1981] UKHL 3; [1982] AC 794 where Lord Keith of Kinkel said at 815:

`it would clearly be unjust to reduce the damages awarded for the first tort because of the occurrence of the second tort, damages for which are to be assessed on the basis that the plaintiff is already partially incapacitated. ... In the event that damages against two successive tortfeasors fall to be assessed at the same time, it would be highly unreasonable if the aggregate of both awards were less than the total loss suffered by the plaintiff. The computation should start from an assessment of that total loss. The award against the second tortfeasor cannot in fairness to him fail to recognise that the plaintiff whom he injured was already to some extent incapacitated."

37 It was not inappropriate as a guide to determining the respondent's liability, first to determine the total award which would have been made by measuring the damage or injury caused both by the blameworthy act of the respondent and by the non-blameworthy act, the second accident. This total her Honour described as 33 per cent of a most extreme case. It is no doubt fair to assume, as the respondent submitted, that in the first sentence of para 90 in her reasons for judgment, the trial Judge meant to express the view that the plaintiff had suffered a 33 percent loss after the occurrence of the second accident. However, with due respect, from that point the reasoning process ceases and what follows is no more than a declared result (par 90).

38 The trial Judge had to decide what impairment or what part of that loss resulted from the first accident for which the respondent was responsible. The problem is that she had no basis on the findings she had made for concluding that less than the whole of the damage flowed from the earlier accident. She did not indicate that she found any part of the appellant's evidence or of Mr Butler's evidence unacceptable. Her Honour said that the appellant responded in a frank and open fashion, though she added "but the chronology of events effectively speak for themselves, as do facts as summarised in the medical reports." She dismissed Dr Price's conclusion that the appellant had settled down completely and returned to his pre-accident duties after very short treatment and was managing these until his second accident by saying that Dr Price did not give any reason for arriving at the conclusion that the disabilities the appellant had were a result of the second and not the first accident, beyond noting that Dr Ismay considered the plaintiff had recovered satisfactorily over this period. In para 70 of her judgment (quoted above) the trial Judge pointed out the kind of issues that would need to be considered to arrive at an opinion independent of Dr Ismay's statement. But the respondent neither produced nor extracted from the appellant or Mr Butler any such evidence.

39 Her Honour gave no indication that she did not accept the appellant's evidence that at the time of the second accident he was still in pain and that, although he saw nobody for treatment, he was getting worse and worse every day. The suggestion that he returned to full time employment in January 1998 accords with neither his evidence nor the evidence of Mr Butler. In my opinion, the discount of one-third is not justified by any process of reasoning and was not open on the evidence before the trial Judge.

Mitigation

40 Relevantly, s39 of the MAA provides:

"An injured person is under a duty to mitigate his or her damages, and, therefore, in assessing damages in respect of a claim, consideration is to be given to the steps taken by the injured person and to the reasonable steps that could have been or could be taken by the injured person to mitigate those damages.

(1A) These steps include the following:

...

(d) pursuing alternative employment opportunities.

(2) In any proceedings to enforce a claim, the onus of proving that all reasonable steps to mitigate damages have been taken by the injured person lies with the claimant.

..."

41 In her reasons for judgment, Judge Gibson referred to this section (mistakenly she said s39A) as "an under utilised provision" and as one "(including the placement of onus on the plaintiff)" which deserved "more than lip service". She said that the respondent's complaints about failure to find work and in particular the defendant's loss of his licence for drink driving was an issue of significance.

42 In her reasons for judgment, Judge Gibson referred to four reports provided by Cheryll Jones, a rehabilitation consultant, about attempts to rehabilitate the appellant. Her Honour said:

"One of the points she noted was that a job goal and plan was agreed to by the plaintiff and he renewed his driving licences but before the plan could be activated he lost his driving licence again. (This was due to a drink/driving offence.) By reason of the plaintiff's medical condition (in that he was unfit for work), his isolated geographical location and restricted access to transport and his very limited transferable skills, there was not much Ms Jones could do. This report is of considerable importance in relation to the claim of failure to mitigate loss."

43 This is a reference to that part of the earliest of Ms Jones' reports, that of 16 July 1999, which contains the following assessment:

"Due to the very limited nature of employment opportunities for Mr Mahony in his current situation, options for self-employment were explored during the vocational assessment, and it was found that Mr Mahony felt strongly that he would be able to undertake self employment as a contractor for painting and decorating work. He did not intend to undertake the physical work himself, but do quotes and supervise others. He had a background in self employment, and a strong background in his trade skills. He had previously been involved in a family business, and his son was negotiating with him regarding a partnership arrangement. He had a business licence and has previously traded under that business name. He did not have a drivers licence at this time, but agreed with the provider to undertake independently to renew this licence as soon as possible.

Given the nature of his restrictions in relation to the labour market it was felt that self employment in an area that Mr Mahony is very familiar with, and feels confident he can generate at least part time income is the best option at this stage.

A job goal and plan was agreed to by the Doctor and Mr Mahony, and Mr Mahony renewed his licences. Unfortunately, however, before the plan was activated, Mr Mahony lost his driving licence again, and is due to go to Court on 6 August 99.

Mr Mahony reported on 16 July 99 that his doctor has now found him to be totally unfit for work.

OPINION:

In view of Mr Mahony's current medical condition, ie, unfit for work, combined with his significant limitations in regard to severely reduced functional abilities, very limited transferable skills, restricted access to transport, isolated geographical location, and reduced working hours (ie 12 hours per week), it is felt that Mr Mahony does not currently have access to employment."

44 On 28 July 1999 Ms Jones reported:

"CURRENT SITUATION

Mr Mahony is living alone in a caravan at Neath in the Hunter Valley. He is relatively isolated, and reports going several days without social contact.

At the time of this assessment, he reported that he had arranged to relocate to his son's home, which is located in a small township, and which should allow him to significantly increase his social interactions.

He is currently undertaking a fitness upgrading program, but reports his level of pain increases so significantly following the sessions, that he takes large doses of Panadeine Forte and alcohol to reduce symptoms.

Mr Mahony has recently lost his drivers licence, and is due to make a court appearance in the near future. This has considerably elevated his experience of stress at the current time.

While Mr Mahony feels he does not have a problem with alcohol, he indicates that he has attempted to rely on it recently to reduce elevated symptoms. He has also had significant life change as a result of his injury, including loss of job, loss of income, and loss of social contact and mental stimulation. As expected, this has impacted significantly on his emotional state, and also on his pain experience."

45 Two later reports of 9 and 20 August 1999 referred to "serious personal issues on his current situation" but observed improvement in his health.

46 The trial Judge described the respondent's submissions as follows:

"(i) The plaintiff's ability to work has been materially limited by reason of his abuse of the drink/driving laws and the revocation of his licence precluded him from exercising his work capacity. It would appear that in fact the plaintiff has had a patchy driving record in the past and has not held a licence at all for quite long periods of time, apparently due in part to a prior drink/driving offence.

(ii) The plaintiff's departure from Mr Butler's employment was, it is submitted, essentially because Mr Butler did not have the work for him rather than by reason of the plaintiff being incapacitated. The plaintiff's evidence about this and the evidence of Mr Butler concerning Exhibit B and Exhibits 5 and 6 make it clear that the plaintiff's cessation of employment with Mr Butler has to do with issues which are not restricted to the plaintiff's actual incapacity. The letter from the plaintiff's solicitors to Butler's CID Painting Pty Limited of 12 October 1998 is of interest in this regard.

I note the circumstances in which following both accidents the plaintiff continued to work for Mr Butler for some months. The timing of his cessation of employment tends to confirm the conclusion I draw in relation to Exhibits B5 and B6 and the letter to Butler's CID Painting Pty Limited that was tendered on 13 June 2002 that plaintiff's cessation of employment with Mr Butler was at least equally a result of Mr Butler's financial position as of the plaintiff's incapacities.

(iii) The defendant submits that the plaintiff has not mitigated his loss by endeavouring to find alternative employment. The defendant draws to my attention that the plaintiff told Associate Professor Jones on 15 December 1999 about possibly operating a painting business himself by quoting for jobs and supervising the work of others. The plaintiff's failure to exercise his work capacity is thus of significance."

47 After referring to several cases in the Supreme Court in which the failure to mitigate argument was unsuccessful and after some discussion her Honour said:

98 ... However, the defendant's complaints about failure to find work and in particular the defendant's loss of his licence for drink-driving is an issue of significance.

99 In practical terms such issues tend to be raised in questions of future economic loss and I note in particular the decision of the Court of Appeal in Goodsall v Murphy (2002) NSWCA 216. The plaintiff in those proceedings was injured in a motor vehicle accident following which she returned to heavy drug use and served a term of imprisonment for a year. No claim was brought that the plaintiff had failed to mitigate her loss but her conduct (coupled with the extreme vagueness about her earning capacity in any event) was a factor in the Court taking away awards for economic loss granted at first instance.

100 Where a plaintiff has suffered a motor vehicle accident, there is an obligation on the plaintiff imposed by statute to mitigate his or her damages, and the onus of proof lies on the plaintiff. I consider that this section has far-reaching implications given the reversal of the onus of proof and the reference to the kind of evidence a plaintiff can provide (for example rehabilitation reports).

101 The principle at common law that a plaintiff will not be recompensed for any loss he could have avoided by mitigation (Ardleson Options Ltd v Easdown [1915] HCA 53; (1915) 20 CLR 285 at 296 per Isaacs J) has been confirmed by statute in circumstances where by principles of statutory interpretation the provisions of s39A (including the placement of onus on the plaintiff) deserve more than lip service. The standard by which such behaviour is judged is objective (Boyd v SGIO [1978] QdR 195 - objection to operation on religious grounds unreasonable) but some weight can be given to subjective factors such as migrant background (Glavonjic v Foster [1979] VR 536).

102 The plaintiff has significantly reduced his employability by reason of his drink-driving conviction. It is not simply that the plaintiff has been unable to drive for a particular purpose, but also that the plaintiff has made himself a less employable person as a result. In addition the plaintiff has not made any attempt to find employment of any kind, although he is clearly aware of the possibilities in this area, as his discussion with Associate Professor Jones indicates. Taking all of these factors into account in my view it is appropriate that future economic loss be halved (ie represent one third, not two thirds, of the plaintiff's economic loss from the two accidents).

103 It is my view that the plaintiff's conduct in losing his licence due to an alcohol offence must have significance as a factor going to mitigation. Similarly, I am of the view that the plaintiff has failed to mitigate his loss by taking steps to find some form of employment of the kind he discussed with Associate Professor Jones. This is referred to further in the economic loss portion of this judgment."

48 It will be noted that her Honour, apart from referring to one of the reports of Ms Jones, does not set out any evidence to support her conclusion that the plaintiff had "significantly" reduced his employability by reason of his drink driving conviction. Her Honour made no reference in her reasons for judgment to the appellant's evidence in chief that the cancellation of his driving licence would not have prevented him from going to work as a painter. Asked about this in some detail, the appellant said that he could get to work by bus or alternatively take a lift with his son who was an apprentice and drove a car. This question and answer came out in chief:

"Q. So is it your case that you weren't prevented from going to work by reason of your cancellation of your licence? A. I would have been there every day."

49 In cross-examination the appellant accepted that he lost his licence in 1982, that in 1991 he was disqualified for one year as the result of a high range PCA concentration of alcohol and that in August 1999 he was disqualified for two years for a high range concentration of alcohol. Apparently, shortly before this he was disqualified for one year for a mid range PCA. It seems to have been accepted that he was entitled to have his licence back either in August or September 2002. Asked how he got about without a licence he said: "I just walk and catch the bus, taxis. I go shopping in a taxi, walk. I've got to walk every day. I walk up and normally get a taxi back with the groceries and all that."

50 So far as any allegation was made that the appellant failed to seek work, it seems to have been accepted that he had not applied for work because he was not fit. Judge Gibson had found that the appellant was in considerable constant pain, relied upon very strong pain medication and unable to pursue his quite physically demanding job as a painter. This cross-examination took place:

"Q. ...Isn't one of the big problems that you lost your licence? A. No that's never worried me.

Q. Well how do you carry your tools of trade with you, on the bus, do you? A. I can carry 90 per cent of my tools in my work bag.

Q. Well you can't carry ladders on the bus, can you? A. If I work for somebody I don't need to carry ladders.

Q. Painters seem to always carry around with them a whole swag of stuff don't they Mr Mahony, to put it bluntly. We've all seen it. We've all had our homes painted? A. Yeah.

...

Q. And what about the different places of work you get sent to by your employer. It's not always the same house is it? A. No it goes everywhere.

Q. Which means that to go everywhere the best way, really the only way to make sure you can turn up for work is that you've got your own transport, isn't that right? A. You normally work in a crew of two or three but there's always--

Q. But if you went along - I'm sorry were you going to say something? A. You normally work in a crew of two or three, you don't work on your own.

Q. But if you went along to some other employer than Mr Butler and said, `Look I don't have a licence, I can't drive but I can do this work that I've been doing at Butlers but they couldn't keep me there because they didn't have the job for me', you'd agree that that prospective employer or that person you were asking a job from would say, `Well mate, if you haven't got a licence you're no use to me', isn't that the reality of it? A. No.

Q. But of course you don't know because you haven't even tried that have you? A. No I haven't tried it."

51 In cases of this sort it is as well to bear in mind what McHugh J said in Medlin v State Government Insurance Commission (1995) 182 CLR 22-23:

"The plaintiff's complaints of pain and fatigue, his decreasing confidence in his own abilities, his belief that he was no longer teaching as well as he was before the accident and his inability to find time for research combine to make a strong case for concluding that his early retirement was not unreasonable. A defendant cannot reasonably require a plaintiff to remain in employment for the purpose of reducing the damages that the defendant would otherwise have to pay if to do so would interfere with the plaintiff's reasonable enjoyment of life. The doctrine of mitigation of loss was not intended to turn injured plaintiffs into economic slaves."

52 In Brogan v McGeary (1995) Aust Torts Reps 81-342 (a case not referred to by Judge Gibson) this Court had to deal with the issue of mitigation on an appeal from a Master. The Master said, when speaking of the plaintiff's claim to future loss of earning capacity that he did not consider that the plaintiff had in any way mitigated his damage in this regard. Kirby P, with whom Priestley and Meagher JJA agreed, said at 62,421:

"The respondent submitted that the Master's approach was correct in law. The argument went thus. Section 39(2) of the Act imposed upon the appellant the onus of proving, at trial, that all reasonable steps to mitigate damages had been taken. He had failed to do so. The subsection was in the nature of a `disqualifying' or `penal' (sic) provision. Having failed to establish that he had taken `all' steps (including attempts to get work through the union, or through his father or by visits to employers etc) the appellant had failed to show mitigation of damages. It was the purpose of the section, as of the Act, to limit the appellant's recovery in such circumstances. The Master had correctly so determined.

I do not agree that this is the proper application of s39(2) of the Act. The reference to `all' in that subsection must be understood in the context in which it appears. It is only `all reasonable steps' which must be taken. To that extent, the word `all' is qualified. Furthermore, the subsection appears as an adjunct to the operation of s39(1). It obliges the Court to give consideration to the steps of the three kinds there mentioned which are taken by the injured person. All that needs to be taken into account are `the reasonable steps'. There will always, in theory, be additional `steps' which an injured person might take. On a particular day, he or she might have gone elsewhere. A search overseas or interstate might have been possible. A constant barrage of attendances on theoretical employers might be open to the injured person. But this is not the object which s39 is designed to secure. In its context, the section must be given a construction to encourage the taking of reasonable steps by injured persons to promote their restoration to economic capacity. It is not a penal provision (even using that word loosely). Section 39(2) is not a disqualification. It is intended to indicate the reversal of the common law onus of proof. The `reasonable steps' referred to in s39(2) are those referred to in s39(1). If this were the construction adopted, the section would not operate as a whole."

53 Kirby P emphasised that the injured person has an onus of proving no more than that all reasonable steps to mitigate damages have been taken by that person. That question cannot satisfactorily be answered by saying in the present case that the plaintiff had significantly reduced his employability by reason of his drink driving conviction over a limited period of time and that he had not made any attempt to find employment of any kind. As it happened his period of disqualification had come to an end either in August or September 2002 before her Honour gave judgment. This factor seems to have been ignored. But other factors should have been brought into account. Those included the appellant's ability to work as a result of his injury. That was the overriding consideration in determining his loss of earning capacity. Nowhere did her Honour weigh in the balance her finding which I repeat again that the appellant was in considerable constant pain, reliant upon very strong pain medication and unable to pursue his quite physically demanding job as a painter.

54 Judge Gibson took the failure to mitigate, exemplified by the appellant's loss of his licence for drink driving, into account to reduce the amount awarded for economic loss after 1 December 1998 to the date of trial and then for future economic loss. In my opinion, her Honour erred in holding that the amount of damages to be awarded for past and future economic loss should be reduced because he lost his licence for the period up to September 2002 for drink driving or otherwise for any failure to mitigate.

Calculation of damages

55 In my opinion, the appellant succeeds on both grounds of appeal. No case was made out before the trial Judge to reduce the amount of damages recoverable for the appellant's injury because of the event of the second motor vehicle accident or because of the appellant's failure to mitigate. The appellant advanced no argument which undermined the trial Judge's conclusion that the appellant's claim should be treated as one for non-economic loss of a severity of 33 per cent of a most extreme case. Again, on the claim for economic loss, the appellant advanced no argument to suggest that her Honour's calculation of damages before she made the one-third or two-thirds deductions was wrong.

New trial

56 A question arose as to whether if we upheld this appeal we had any choice but to order a new trial limited to damages. Taking account of the history of these proceedings, the expense of preparing and providing to the Court medical evidence which was regarded as useless, the long delays since the matter was heard at first instance in February 2002, the failure of the respondent to cross-examine the appellant and Mr Butler on significant matters and the relatively small amount at stake, I regard a new trial as undesirable. The appropriate order is that this Court substitute an amount of damages for the plaintiff which accords with her Honour's conclusions, but omits any deduction on account of the second motor vehicle accident or on account of failure to mitigate.

Costs

57 Judge Gibson ordered the defendant to pay the plaintiff's costs of the proceedings, despite the fact that there had been tendered on 24 October 2002 copies of three offers of compromise; see District Court Rules Part 39A. I have already referred to the second and third offers of compromise which exceeded the amount the appellant recovered. The respondent cross-appealed against the costs order. If the amount of damages ordered by this Court exceeds $205,000, in accordance with these reasons for judgment, there would be no grounds for interfering with the trial Judge's costs order. But the matter having been raised and argued, the approach taken by the trial Judge calls for comment.

58 Her Honour gave judgment on 24 October 2002 on the question of costs. This is part of the transcript. Her Honour said that the costs orders proposed in the offers were manifestly inadequate "but it is pointed out to me that those costs orders were severable and there could have been a rejection of that portion of the offer." A little later her Honour said:

"I should mention briefly, however, there are essentially two factors which would militate against the awarding of costs as sought by the defendant pursuant to Part 39A rule 25 sub-rule 6 of the District Court Rules and they are that the case is exceptional and that a substantial injustice should be avoided."

59 Her Honour then went back to the question of mitigation and observed that when she examined the case law in mitigation "I cannot see that any court, apart from a very early decision of Master Malpass in 1992, has ever done more than pay lip service to the whole concept of mitigation." She then rehearsed some of the issues which she said went to mitigation and referred to Goodsell v Murphy [2002] NSWCA 216, a decision of this Court which, as her Honour observed, had nothing to do with s39. That case was about causation and as the catchwords in the headnote point out, whether negligence had caused a relapse into heroin addiction, particularly bearing in mind that the plaintiff had a history of heroin dependency for some years before the accident. With due respect, it is impossible to understand how this case was seen as having any bearing on the meaning or application of s39 of the MAA.

60 Her Honour referred to Kirby v Sanderson Motors [2002] NSWCA 44 at length. The trial Judge concluded in this way:

"There is no question of anybody saying that the plaintiff is not a genuine witness and I note the significant amount of drugs that he seems to be taking. This is not a plaintiff who is malingering; it is a plaintiff who has been scissored on the complexities of the very technical construction of the Motor Accidents Act.

The point about the offer of compromise system was to promote settlement, and I must have regard to those provisions. However, I have a wide discretion, as I said, and I am entitled, on exercising that wide discretion, to regard this as being an exceptional case and also to regard this as being a case where substantial injustice would be visited on the plaintiff by reason of the defendant effectively running and succeeding on, to a significant degree, a matter that was not set out in the pleadings. Now, whether I am right or wrong will almost certainly be for another Court to determine, but it is my view that fundamental issues of fairness mean that the costs order I made earlier in these proceedings should not be disturbed. Accordingly, the costs orders that I made on 22 October will remain and, in relation to this application, will once again follow the event."

61 Part 39A rule 25 provides under the heading "Offer of Compromise" as follows:

"(1A) The objects of this rule are:

(a) to introduce an added element of risk in order to promote early settlement of actions without hearing or arbitration;

(b) to compel the parties to an action, under threat of possible penalties in costs, to arrive at an early assessment of the amount of damages, if any, recoverable by the plaintiff;

(c) to encourage the making and acceptance of reasonable offers of compromise by:

(i) providing for penalties in costs to be imposed on a party who rejects an offer of compromise and does not at the hearing or arbitration of the action achieve a position better than he would have held if he had accepted the offer of compromise; and

(ii) providing corresponding costs relief to the party making the offer;

(d) to impart as much certainty to the imposition of costs penalties referred to in object (c) as may be imparted without substantial injustice; and

(e) to provide a discretion in the Court to relieve a party from the imposition of a costs penalty, to be exercised only in an exceptional case and for the avoidance of substantial injustice.

(1B) A decision of the Court to make or refuse to make an order for costs under this rule must be made in pursuance of the objects of this rule.

(1) Subject to subrule (2), upon the acceptance of an offer of compromise in accordance with Part 19A rule 3(4), the defendant shall, unless the Court otherwise orders, pay the costs in respect of the claim by the plaintiff against the defendant up to and including the day the offer was accepted.

(2) If a notice of offer contains a term which purports to negative or limit the operation of subrule (1), that offer shall be of no effect for any purpose under Part 19A or this rule.

...

(6) Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on party and party basis."

62 With due respect to say no more of what her Honour described as the offer of compromise system, than that it was to promote settlement, is to pay no proper regard to the objects of the rule as required by subrule (1B). The briefest glance at subrule (1A) shows that this extends beyond the promotion of settlement. This error undermines the conclusion to which her Honour came and would require re-assessment properly taking account of the objects of rule 25.

Conclusion

63 In my opinion, the Court should publish its reasons for judgment and require the parties to put in submissions as to what orders the Court should make in light of these reasons for judgment.

Orders

1. Appellant to file and serve written submissions on what orders this Court should now make on or before 3 October 2003;

2. Respondent to file and serve written submissions on what orders this Court should now make on or before 13 October 2003;

3. Liberty to either party to apply for directions to Sheller JA in Chambers on 24 hours notice to the other.

64 YOUNG CJ in EQ: I agree with Sheller JA.

65 GZELL J: I agree with Sheller JA.

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LAST UPDATED: 26/09/2003