Zhang v Golden Eagle International Trading Pty Ltd & Ors [2006] NSWCA 25 (22 February 2006)

CITATION: ZHANG v GOLDEN EAGLE INTERNATIONAL TRADING PTY LTD & ORS [2006] NSWCA 25

FILE NUMBER(S):

40405/05

HEARING DATE(S): 3 February 2006

DECISION DATE: 22/02/2006

PARTIES:

Yu Zhang by his Tutor the Protective Commissioner - Appellant/Cross Respondent

Golden Eagle International Trading Pty Ltd - First Respondent/First Cross Appellant

Chen Guang - Second Respondent/Second Cross Appellant

Rui Manuel Stousa Menonga and Jose Alcivo de Freitas T/As DPM Automotive Repairs - Third Respondents/Third Cross Appellants

JUDGMENT OF: Ipp JA McColl JA Basten JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 10471/2000

LOWER COURT JUDICIAL OFFICER: Balla DCJ

COUNSEL:

Mr H.G. Shore SC/Mr E.G. Cox - Appellant

Mr K.P. Rewell SC/Mr E.G. Romaniuk - Respondents

SOLICITORS:

Graham Jones Lawyers - Appellant

Sparke Helmore - Respondents

CATCHWORDS:

NEGLIGENCE – commercial van used tyres with load carrying capacity below manufacturer’s specifications – whether issuer of safety inspection certificate breached its duty of care – whether issuer should have identified defect

TRADE PRACTICES – s42 of the Fair Trading Act 1987 (NSW) - whether the issuing of a safety inspection certificate constituted a representation that the vehicle was roadworthy in relevant respects – implied representation to owner only – representation temporally limited

DAMAGES – assessment of life expectancy – use of historic tables or prospective tables – whether a most extreme case under s79A of the Motor Accidents Act 1988 (NSW) – amounts paid under s45 of the Act – whether amounts should be reduced on account of contributory negligence

LEGISLATION CITED:

Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW)

Fair Trading Act 1987 (NSW), s42, s68

Interpretation Act 1987 (NSW), ss35(2)(c) and (5)

Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s10

Motor Accidents Act 1988 (NSW), s45, s74, s79A

Motor Accidents Amendment Act 1995

Motor Traffic Act 1909 (NSW)

Motor Traffic Regulations 1935 (NSW), cl 1AA, cl 2A, cl 13(1),

Road Transport (Vehicle Registration) Act 1997 (NSW)

Road Transport (Vehicle Registration) Regulation 1998

Workers Compensation Act 1987 (NSW), Part 5

DECISION:

(1) Appeal allowed in part and judgment in the District Court in favour of the Appellant set aside

(2) Judgment be entered for the amount assessed by the trial judge, subject to the following variations -

(a) the assessment of future loss be recalculated by reference to a life expectancy using the 5% multiplier for 48 years, being 966.6

(b) the damages to be assessed and subject to reduction of 30% for contributory negligence be for an amount excluding the expenses paid by the insurer pursuant to s 45 of the Motor Accidents Act

(3) The Appellant file short minutes of orders within 14 days in an amount agreed between the parties to give effect to (2)

(4) The appeal be otherwise dismissed

(5) The cross-appeal be dismissed

(6) The Appellant pay the Third Respondents’ costs of the appeal

(7) The First and Second Respondents pay the Appellant’s costs of the cross-appeal and of the appeal other than costs incurred in relation to the issue of liability of the Third Respondents

(8) The First and Second Respondents have a certificate under the Suitors Fund Act 1951 (NSW) in relation to the costs of the appeal (but not the cross-appeal) if otherwise so entitled

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40405/05

DC 10471/2000

IPP JA

McCOLL JA

BASTEN JA

22 February 2006

YU ZHANG (by his tutor THE PROTECTIVE COMMISSIONER) v GOLDEN EAGLE INTERNATIONAL TRADING PTY LTD & ORS

This is an appeal from a decision of the District Court which awarded damages to Mr Zhang for loss suffered as a result of a motor vehicle accident.

Mr Zhang was a passenger in a light commercial van which rolled over after the driver lost control when the tread separated from the rear nearside tyre. Mr Zhang was successful in his action against both the first respondent (who was the employer of both Mr Zhang and the driver) and the driver (second respondent). Mr Zhang was unsuccessful against the third respondent, being the proprietors of an automotive repair and maintenance business. The third respondent, through an employee, was responsible for issuing a safety inspection certificate for the vehicle less than a month before the accident.

The evidence established that at the time of the inspection (and the accident), the tyres fitted to the vehicle were not in accordance with the manufacturer’s specifications, having a significantly lower load carrying capacity than the type recommended. The load carried at the time of the accident exceeded the load carrying capacity of the tyres, but not that of the vehicle.

The issues for determination by the Court of Appeal were whether:

(i) the third respondent was liable in negligence for either issuing a certificate to the owner or failing to identify the defect;

(ii) the issuing of the certificate constituted a representation that the vehicle was roadworthy in relevant respects which was misleading or deceptive under s42 of the Fair Trading Act 1987 (NSW);

(iii) the trial judge erred in assessing life expectancy on the basis of ‘historic’ tables and not ‘prospective’ tables available from the Australian Bureau of Statistics;

(iv) the trial judge erred in assessing non–economic loss under s79A of the Motor Accidents Act 1988 (NSW) as ‘a most extreme case’; and

(v) the trial judge erred in reducing the amounts paid under s45 of the Motor Accidents Act on account of the finding of contributory negligence of 30%.

Held as to (i) negligence:

By Basten JA (Ipp and McColl JJA agreeing)

1. Since the duty of care imposed on the inspector was limited and did not extend to checking whether the tyres complied with the manufacturer’s specifications, the third respondent was not negligent in failing to do so: at [27].

2. It was open to the trial judge on the evidence to conclude that the defect was not apparent at the November inspection and that accordingly, Mr Zhang had not proven, on the balance of probabilities, that the inspector exercised a lack of reasonable care in failing to identify the defect: at [38].

Held as to (ii) liability under the Fair Trading Act 1987 (NSW)

By Basten JA (Ipp and McColl JJA agreeing)

1. The undertaking of an inspection and the signing of a report, in the standard form required from an authorised inspection station, would give rise to a representation to the owner that ‘on the date of the inspection, those aspects of the vehicle and equipment required to be inspected pursuant to the rules for authorised inspection stations, demonstrated no apparent defects’ : at [44].

2. The representation was made directly to the owner of the vehicle only, was temporally limited and went no further than the scope of the inspection required to be taken: at [45].

3. Since the authorised inspection, which was required to be carried out in accordance with the Rules and safety check standards, did not extend to ensuring that the tyres accorded with the manufacturer’s specifications, the implied representation was not relevantly misleading or deceptive for the purposes of s42 of the Act: at [47].

Held as to (iii) the calculation of life expectancy

By Basten JA (Ipp and McColl JJA agreeing):

It is appropriate for the courts to make their estimation as to life expectancy on the basis of the best information available. The projected tables would appear to be a more accurate assessment of future trends than the historical tables and the trial judge should have referred instead to the projected tables: at [55].

Held as to (iv) the finding of ‘a most extreme case’

By Basten JA (Ipp and McColl JJA agreeing):

1. The principles established by Moran v McMahon [1985] 3 NSWLR 700 should apply in relation to appellate review of a finding that a particular case is or is not ‘a most extreme case’, as such a finding will involve ‘questions of fact and degree, and matters of opinion, impression, speculation, and estimation, calling for the exercise of common sense and judgment’: at [69].

2. The question to be determined is not whether the plaintiff’s injuries constitute “the most extreme case” that could be imagined, but rather whether they fall within a class of most extreme cases: at [70].

3. The purpose for which the assessment of severity is to be made is to identify the effect of the injuries suffered on the particular plaintiff and the injuries need not qualify as “most extreme” in relation to each of the categories identified in the definition of non-economic loss in s68: at [71].

4. There was no express suggestion that the judge acted upon a wrong principle, gave weight to extraneous or irrelevant matters or failed to give weight to relevant matters. Nor was there a challenge to any relevant finding of fact upon which the estimate of severity was based. The respondent did not show that to categorise this as “a most extreme case” was so unreasonable or plainly unjust so as to demonstrate error in approach of the trial judge: at [76] – [77].

Dell v Dalton (1991) 23 NSWLR 528 and Moran v McMahon [1985] 3 NSWLR 700 applied.

Held as to (v) the reduction for contributory negligence for amounts paid pursuant to s45 of the Motor Accidents Act:

By Basten JA (Ipp and McColl JJA agreeing):

Section 74 suggests that the first step in the calculation is to assess the damages otherwise recoverable: where an amount is not recoverable because of the payment of that amount constitutes a defence to the proceedings, to the extent of the amount so paid, that amount cannot form part of the damages recoverable. Accordingly, as a matter of construction, the damages as assessed should be reduced by the amount of the s45 payment before being reduced by the relevant percentage on account of contributory negligence: at [83].

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40405/05

DC 10471/2000

IPP JA

McCOLL JA

BASTEN JA

22 February 2006

YU ZHANG (by his tutor THE PROTECTIVE COMMISSIONER) v GOLDEN EAGLE INTERNATIONAL TRADING PTY LTD & ORS

Judgment

1 IPP JA: I agree with Basten JA.

2 McCOLL JA: I agree with Basten JA.

3 BASTEN JA: This proceeding involved an appeal and cross-appeal arising out of an accident which occurred on 24 December 1997. The Appellant, Yu Zhang, was a passenger in a motor vehicle which rolled over whilst travelling along the F6 Freeway at Maddens Plains. The vehicle was a light commercial van. The driver lost control of the vehicle when the tread separated from the rear nearside tyre, whilst travelling at between 90 and 100 kph.

4 The Appellant suffered what the trial judge described as “catastrophic injuries”, the details of which will need further consideration in due course.

5 The First and Second Respondents were the first and second defendants respectively at the trial, the former being the employer of the Appellant and the driver of the vehicle; the latter being the driver himself. The third defendants were the proprietors of an automotive repair and maintenance business. Their employee, Mr Lu Zhong Zhang, had issued a safety inspection certificate in relation to the vehicle less than a month before the accident. At trial, the Appellant was unsuccessful against the third defendant.

The appeal

6 No issue was raised at trial as to the liability of the First and Second Respondents. As between the Appellant and those parties, the issues were restricted to questions with respect to the assessment of damages. Five issues were raised by the appeal and cross-appeal in that respect, which may be summarised as follows:

(1) the life expectation of the Appellant;

(2) the proper discount for vicissitudes;

(3) the omission of an amount by way of earnings on a superannuation fund;

(4) the inclusion in the total award of amounts paid pursuant to s 45 of the Motor Accidents Act 1988 (NSW) prior to reduction on account of contributory negligence;

(5) the use of a 5% discount rate for common law damages, instead of a 3% discount rate, and

(6) on the cross-appeal, the assessment of non-economic loss under s 79A of the Motor Accidents Act on the basis that the case fell within the most extreme category of case.

7 In relation to the Third Respondents, the Appellant challenged the findings of the trial judge that the issue of the safety inspection certificate did not constitute:

(1) negligent conduct, and

(2) “misleading or deceptive conduct” for the purposes of s 42 of the Fair Trading Act 1987 (NSW).

8 It is appropriate to deal with the questions of liability in respect of the Third Respondents, prior to considering the grounds relating to the assessment of damages. However, in the event that the Appellant fails against the Third Respondents, issue (5), which was in any event not in dispute between the parties, will not arise.

Motor vehicle safety inspection – negligence claim

9 The trial judge was satisfied that the primary cause of the accident was the tread separation of the rear nearside tyre. At that time, the van had been fitted with four 4-ply passenger tyres, each of which was a retreaded radial tyre. The vehicle manufacturer’s recommendation was that the van should be fitted with 8-ply commercial or light truck tyres. Such tyres would have a load carrying capacity of 840 kg, whereas the passenger tyres had a load carrying capacity of 580 kg. Her Honour found that the rear tyres were seriously overloaded at the time of the accident.

10 In addition to being fitted with inappropriate tyres, there was an issue as to whether the incipient separation of the tread should have been observed and reported, either at the time the vehicle was serviced in May 1997, or at the time of the vehicle inspection on 20 November 1997.

Use of passenger tyres

11 It is convenient to deal with the issue of the use of passenger tyres first, because it was relevant both to the May service and to the November inspection. In relation to the routine service, her Honour noted that the matter was not pressed in submissions at trial. However, as explained in this Court, the substance of the issue raised was whether it should have been apparent to a competent mechanic carrying out the service that the vehicle was fitted with inappropriate tyres and whether that fact should have been conveyed to the owner, as part of the conduct of the service. A similar argument was pressed in relation to the vehicle inspection in November.

12 Her Honour accepted that it would have been apparent to any mechanic who viewed the tyres that they were not the recommended tyre for the vehicle. That conclusion gave rise to two issues: the first was whether a competent mechanic exercising reasonable care should have advised the owner of that fact or, in carrying out a safety check, should have declined to pass the vehicle for that reason.

13 The vehicle in question was purchased by the First Respondent early in 1997, second hand, and apparently with the tyres with which it was fitted at the time of the accident. Accordingly those tyres were fitted at the date of the service in May. The trial judge accepted that the mechanic who carried out the service would have been aware that the car was fitted with passenger tyres. The question was whether there was any breach of duty in failing to act on that knowledge.

14 For reasons which will be explained below, her Honour also concluded there was nothing unlawful in the fitting of passenger tyres, nor would they render the vehicle unfit for use, except with a load above the weight-carrying capacity of the tyres. No doubt a different question would have arisen if the vehicle had been inherently unsafe, but her Honour found there was no lack of reasonable care on the part of the Third Respondents in not advising the First Respondent of the limits of the tyres. It was no doubt the difficulty in identifying a relevant element of the duty of care in relation to carrying out a routine service for maintenance of a vehicle which resulted in the argument focussing on the safety inspection, which occurred in November. Nor is it clear that the First Respondent was not aware, prior to the accident, that the vehicle was fitted with passenger tyres. If it were aware, a failure to advise it of that fact would have been immaterial.

15 A second question, to which the trial judge gave careful consideration, was whether the vehicle should have been passed as roadworthy at the November inspection, whilst fitted with passenger tyres. A major part of the argument in the Court below appears to have been directed to the reasonableness of the conduct of the inspector in issuing a certificate for the purposes of registration in that circumstance. However, an antecedent issue was the scope of his statutory authority and the prescribed criteria for exercise of that authority. These matters were addressed, but apparently in the context of an argument that the inspector had acted contrary to the Motor Traffic Regulations.

16 The Regulations then in force were the Motor Traffic Regulations 1935 (NSW) (“the 1935 Regulations”), made under the Motor Traffic Act 1909 (NSW). (The current statute is the Road Transport (Vehicle Registration) Act 1997 (NSW) and the Regulation under it is the Road Transport (Vehicle Registration) Regulation 1998.) The Traffic Act, as in force in November 1997, made no relevant provision in relation to the registration of vehicles: that was provided for under the 1935 Regulations. Clause 13(1) of the Regulations provided:

(1) A motor vehicle shall not be registered nor shall the registration of a motor vehicle be renewed unless the vehicle is suitable for safe use and the vehicle and its equipment comply with the conditions mentioned in or prescribed under Schedule F to these Regulations.

17 There was no consideration of the requirement that the vehicle be “suitable for safe use”, nor the specific role of the safety inspection in relation to that requirement. Her Honour did refer, however, to the requirement that “the vehicle and its equipment” comply with the prescribed conditions. Division 1 of Schedule F was headed “Construction and Equipment of Motor Vehicles”. Clause 2A dealt separately with motor vehicles which were motor cars or motor car derivatives, and other vehicles. The vehicle would appear to have been a “panel van” and thus within the description of a “motor car derivative” in clause 1AA of the Schedule. However, whether a motor car derivative or another form of vehicle, the relevant requirement read as follows:

2A(1) A ... motor car derivative shall not be altered from its specifications, as originally manufactured, so that it no longer complies with the requirements of an Australian Design Rule ... applicable to that vehicle ... .

The question was whether the fact that passenger tyres were fitted meant that the vehicle no longer complied with a requirement of an Australian Design Rule (an “ADR”) and, if so, whether it should not have been certified as registrable.

18 The relevant ADR with respect to “tyre and rim selection” was ADR 24/01. The relevant parts of that ADR are directed to requirements with respect to a “placard” to be affixed to the car, including certain information, such as “recommended tyre size designation”: 24.2.1.1.2. The placard also required a statement of the kind:

“The tyres fitted to this vehicle shall have a maximum load rating not less than ‘xxx’ kg, or a load index of ‘xx’ ... .”

If light truck tyres were “also recommended as suitable for fitment to the vehicle, the requirements of Section 24.3 shall be met for such tyres”: clause 24.2.6. That provision required, in part, that the sum of the “load carrying capacities of the tyres” should not be less than “the minimum specified on the vehicle’s tyre placard”. A formula was prescribed for the calculation of the minimum to be so specified: clause 24.3.4.4.

19 The experts apparently agreed that ADR 24 was difficult to interpret and that a mechanic would probably have found the relevant rule unintelligible. Her Honour accepted the submission by the Respondents that it was “not possible” to determine the lowest load carrying capacity and, accordingly, the contents of the placard, which were not otherwise in evidence, could not be ascertained.

20 Not all of the relevant ADR was in evidence, and there would appear to have been other provisions, including definitions of technical terms, and other standards, which were not before the Court. However, the undisputed evidence included the manufacturer’s identification of the “gross vehicle mass” as 2800 kg, the “kerb weight”, being the vehicle’s weight unladen, as 1465 kg and the manufacturer’s gross weight for the load capable of being carried by the vehicle as 1335 kg, being 2800 minus 1465 kg. Although the “placard” was not in evidence, the tyre information displayed in the owner’s manual for the vehicle was, and identified, for Australian vans, a light truck tyre of a carrying capacity of 840 kg per tyre, which would give a figure safely above the required capacity for the gross vehicle mass.

21 It is surprising that no evidence was given as to the information contained on similar placards on the same model of van: however, in the absence of such evidence, it would be reasonable to infer that the placard reflected the manufacturer’s information, noted above. Further, the ADR required:

“The sum of the load carrying capacities of the tyres fitted on each ‘Axle’ or ‘Axle group’ shall not be less than the minimum specified on the vehicle’s tyre placard.”

Accordingly, it may reasonably be inferred that the tyres fitted did not comply with that requirement of the ADR.

22 In this case, the evidence supported the conclusion that the vehicle was travelling within the speed limit of 110 kph on the road in question and therefore within the designated speed of 120 kph which may affect the relevant specification of tyres. Further, it was not suggested that the vehicle was laden to a gross vehicle mass beyond the manufacturer’s specified limit of 2800 kg. Nor was there evidence to suggest that it had been so over-laden on previous occasions. Rather, the evidence supported the finding, made by the trial judge, that the rear tyre failed because it was not designed to carry the loads which the vehicle could carry and which it did in fact carry in the operation of the First Respondent’s business.

23 The next question is whether there was a failure on the part of the inspector in certifying that the vehicle was registrable, in circumstances where it was not fitted with appropriate tyres.

24 Vehicle inspections are carried out in accordance with “rules for authorised inspection stations” issued by the Road Traffic Authority pursuant to the 1935 Regulations. Rules 8-13, together with the “safety check inspection standards” which appear to form part of the Rules, set out the requirements for the inspection of motor vehicles: r 8.01. Rule 8.06 stated:

“The requirements set out in the inspection standards are not to be regarded as exhaustive but, in most cases, they will cover the great majority of inspection checks. Where an Authorised Examiner considers that a vehicle is unroadworthy in any way that is not covered in these Rules, the vehicle should on no account be passed.

In cases of doubt, Authorised Examiners should contact the RTA at one of the offices listed in Rule 2.02. AIS personnel should remember that vehicle owners rely on them to make sure their vehicles meet Safety Check requirements and are safe to drive.”

25 The safety check standards commence with the following statement of objectives:

“100.01 The objectives of the inspection are:

(a) to check that the vehicle is free from apparent safety defects would affect its use on a road;

(b) to ensure that the level of occupant protection provided by the manufacturer is maintained;

(c) to validate the vehicle identification details for registration records.

100.02 The following Rules are the Safety Check standards. They are aimed at assessing a vehicle’s safety related features. The Safety Check is NOT meant to be a guarantee, or a thorough assessment of the mechanical quality of a vehicle. Examiners and Proprietors should advise motorists accordingly.”

26 The requirements in relation to safety check standards with respect to wheels and tyres involved visual inspection of each wheel and tyre and identified failings, such as lack of tread depth and signs of carcass failure, different tyres on an axle and regrooving, as reasons for rejection: r 104. There is no reference to the requirement that tyres be consistent with those identified on the placard. However, appendix C to the safety check standards included a summary of the ADR which, in relation to ADR 24 – tyre selection, stated:

“Requires vehicles to be fitted with a placard showing the recommended range of tyres, wheel rims and pressures.”

27 This summary, as will appear from the description of ADR 24 set out above, makes no reference to specific aspects of the ADR, including the requirement that tyres be fitted in accordance with the manufacturer’s specification. Rules 8-13 did not require inspections to check whether a vehicle was fit for registration on the basis that it complied with reg 13(1). The use to be made by an inspector of appendix C is unclear: the appendix would not itself have instructed the inspector as to the relevant requirements of the ADR for the purposes of the relevant 1935 Regulations. In effect, the system for inspection of vehicles prior to registration appeared, at least under the 1935 Regulations as in force in December 1997, not to involve a comprehensive check of the requirements which reg 13 and ADR 24 prescribed. Her Honour was correct to hold that, in the circumstances of the case, there was no negligence on the part of the inspector in not failing the vehicle because the tyres did not comply with the manufacturer’s specification. That is because the duty of care imposed on the inspector was limited and did not extend to checking that requirement.

Failure to identify defect

28 The trial judge accepted evidence that at the time of the accident, “the tread of the failed tyre had been very significantly worn away in one spot at the point of separation”: Judgment, p 9. Her Honour further accepted on the basis of the expert evidence that:

“• an abnormal tread wear pattern develops after tread separation has commenced;

• a localised area of worn tread is an indicator of tread separation;

• an irregular tread wear pattern can have a number of causes including suspension or wheel balance problems.”

29 Her Honour noted the evidence of Mr Wingrove, a consultant transport engineer called by the plaintiff, to the following effect:

“He concluded that given the relatively small distance travelled between inspection and the accident and the extent to which the portion of the failed tyre’s tread had worn away, ‘the heat separation’ defect that existed in the rear nearside tyre on the day of the accident was more than likely present within the tyre on the day that the van was inspected for registration. He was of the view that at that time an abnormal tread wear pattern, being an indication of impending failure, would probably have been observable on proper examination because the wear pattern would not have developed in less than 2,000 kilometres.”

Her Honour noted that Mr Wingrove conceded in cross-examination that it was “possible” that the defect had either not started to develop or was not visible, at the date of the inspection on 20 November 1997.

30 Her Honour then referred to the evidence of Mr Le Guier, a forensic mechanical investigator, and that of Mr Anderson, a consulting automotive engineer. They were both of the view that the defect would not have been apparent on 20 November, but Mr Le Guier accepted that he did not have specific experience in such matters and Mr Anderson was not available to be cross-examined.

31 In his written opinion, Mr Le Guier referred to the safety check on 20 November 1997 and stated:

“It is the author’s opinion that the tread separation of the failed tyre would have been present when the subject vehicle underwent its annual inspection. The author is unable to offer an opinion as to how advanced the treat separation would have been at the time of inspection, or whether it would have been readily detectable.”

He also concluded:

“It is the author’s opinion that the incorrect passenger vehicle tyres fitted to the subject vehicle instead of light truck or commercial tyres was an apparent safety defect and should have been cause for rejection of the RTA Safety Check conducted on 20 November 1997.”

32 In relation to Mr Le Guier, her Honour stated:

“He was of the view that the tread separation defect could have either occurred or advanced very quickly in the period between the inspection and the accident.”

33 In his written opinion, Mr Anderson was critical of the use of passenger tyres. In relation to the servicing in May, he expressed the view that:

“It is extremely unlikely that there would have been any signs of uneven tread wear at this stage and the tyres would have appeared to be of the correct diameter and section width. Thus the average mechanic would not have been prompted to investigate whether the tyres were of the correct ply rating.”

34 In relation to the vehicle inspection, he appears to have assessed the “signs of carcass failure” by reference to the photographs of the tyres. His opinions included the following statements:

“• the worn area of tread shown in Appendix 1 [the photograph] is about 40mm wide by about 300mm long.

• the tread separation had probably started to develop at the time of the AIS check but it is not possible to determine how extensive, if any, the localised uneven tread wear would have been at that time;

• localised tread separations will develop very quickly on tyres that are heavily loaded and operated at speeds over 80kph;

...

• thus is it my opinion that:

• it is possible but unlikely that a very careful examination (including tread depth measurement) around the circumference of the tyre at the AIS check time would have revealed the beginning of the uneven wear; but

• it is highly probable that a routine AIS inspection at that time would not have revealed a ‘cause for rejection’.”

Mr Anderson was not cross-examined.

35 Mr Anderson’s evidence was summarised by her Honour in the following terms:

“He concluded that it was possible but very unlikely that careful examination ... of the tyre would have revealed the beginning of uneven wear but it was highly probable it would not have been revealed by a routine inspection.”

36 In restating this conclusion, her Honour varied Mr Anderson’s phrase “possible but unlikely” to “possible but very unlikely”. However, given the second part of Mr Anderson’s conclusion, that it was highly probable that the defect would not have been revealed by a routine inspection, this element of overstatement would have been immaterial.

37 The Court also heard from Mr Lu Zhong Zhang, the inspector. Her Honour’s findings depended to a significant extent on his evidence. After reviewing all of the evidence, the trial judge concluded:

“I am satisfied that the totality of the evidence establishes that the rate of progress from the development of a tread separation to a visible defect through to tyre failure is variable. It is affected by a number of factors. This means that the progress cannot be predicted with confidence nor can the point at which a symptom of the defect would become obvious on visual inspection. I accept the evidence of the mechanic who performed the inspection of the van. I am satisfied that Mr Lu Zhong Zhang is an experienced and conscientious mechanic. He was an impressive witness. He was well aware of the potential danger associated with areas of wear on tyres. I am satisfied that he would not have passed the van for inspection if he had seen the signs suggested by Mr Wingrove.”

38 As will be apparent, her Honour’s conclusion in relation to this issue depended significantly upon her assessment of the inspector himself. Whilst his evidence was said to be of limited weight, because he could not remember the circumstances of the specific inspection, that was a factor which was noted by the trial judge and which no doubt was properly taken into account. By itself it would not allow this Court to reassess her Honour’s conclusion that he was an experienced and conscientious mechanic and an impressive witness. Furthermore, it was well open to her Honour to conclude, on the basis of the evidence presented by the experts, that there was at least a possibility and even a probability that the defect was not apparent at the November inspection. There was nothing in the objectively assessable material to preclude, or render inherently unlikely, a finding that the reason why the defect was not identified by the inspector was that it was not apparent at that time. Accordingly, it was open to her Honour to conclude that the plaintiff had not satisfied her that the inspector exercised a lack of reasonable care in failing to identify the defect. Her Honour’s conclusion in this regard should be accepted.

Liability under Fair Trading Act

39 In the Court below, the Appellant ran a separate argument alleging breach of s 42(1) of the Fair Trading Act 1987 (NSW), which is found in Part 5 of the Act and relevantly provides:

42 Misleading or deceptive conduct

(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

40 Section 68 provides, in relation to enforcement and remedies:

68 Actions for damages

(1) A person who suffers loss or damage by conduct of another person that is in contravention of a provision of Part ... 5 ... may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.

41 Two aspects of these provisions should be noted, in order to be put to one side. First, s 68 has been amended so as to exclude actions for damages arising from death or personal injury: see s 68(1A). Her Honour’s conclusion that the amendment of s 68 inserting the new sub-s (1A) by the Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) did not operate in relation to this claim was not challenged on the appeal. Secondly, there was no suggestion that the conduct of the Third Respondents in carrying out a safety inspection for the purposes of the 1935 Regulations did not constitute conduct “in trade or commerce”.

42 The particulars of the conduct and representation of the third defendant were originally pleaded as follows:

“11. The third defendant by their servant and agent made the following representations and engaged in the following conduct:

(a) certified that the vehicle to which the four tyres was [sic] fitted was roadworthy and fit for registration when it was not;

(b) certified that the tyres had undergone a proper inspection when they had not;

(c) represented and conducted themselves such as to suggest that there was in place an adequate system, instruction or direction as to the inspection of tyres as part of general registration inspections when there was not;

(d) representing and conducting themselves such as to suggest that there was in place an adequate system for assessing and checking the adequacy of tyre inspections undertaken as part of general registration authorisation inspections when there was not.”

43 This pleading left something to be desired in terms of clarity and the Appellant was invited through counsel to identify more precisely and clearly the representation which he relied upon as flowing from the “safety inspection report” prepared for the purposes of re-registration of the vehicle in December 2004.

44 That task proved not to be without some difficulties. However, I would accept that the undertaking of an inspection and the signing of a report, in the standard form required from an authorised inspection station, would give rise to a representation to the owner that:

“On the date of the inspection, those aspects of the vehicle and equipment required to be inspected pursuant to the rules for authorised inspection stations, demonstrated no apparent defects.”

45 Three aspects of this representation should be noted. First, it is apparent that the representation is made, at least directly, only to the owner of the vehicle. Secondly, because changes can be effected to the vehicle immediately it leaves the inspection station, including by the direct and deliberate act of the owner, the representation must be temporally limited. Thirdly, it cannot be treated as a representation which goes further than the scope of the inspection required to be undertaken.

46 That some such implied representation may properly be identified is indirectly acknowledged by the qualification to the objectives of the inspection set out at [25] above. The qualification is important, because it is not possible to identify a representation in relation to defects which would not reasonably have been identified in the course of an inspection which complied with the rules. However, it is important to note that, in the present case, the Appellant does not argue that the issue of the report constituted a guarantee of roadworthiness, nor is there any suggestion that the owner changed the tyres between the date of the inspection and the date of the accident. Furthermore, as noted above, the argument must be assessed on the basis of the factual finding that there was no apparent defect caused by the separation of the retread visible at the time of the inspection, in accordance with her Honour’s factual finding.

47 In the result, the implied representation can only be misleading or deceptive to the extent that there was a failure to record that the tyres fitted were passenger tyres and not those specified by the manufacturer as appropriate for use on that vehicle. However, that argument must also fail in light of the conclusion that the authorised inspection, required to be carried out in accordance with the Rules and safety check standards, did not extend to that matter, although, properly construed, the 1935 Regulations required satisfaction of that condition, for registration. It follows, in my view, that there was no misleading or deceptive conduct on the part of the Third Respondents.

48 Without identifying a specific representation, it is not possible to determine whether any particular loss was suffered “by” the conduct giving rise to the representation, for the purposes of s 68(1) of the Fair Trading Act. As noted at [45] above, any representation to be implied from the carrying out of an inspection and the issuing of a report, will be directed to the owner of the vehicle. The Appellant was a passenger in the vehicle and an employee of the owner. There would remain to be determined a large question as to whether the Appellant could establish that he had suffered loss or damage “by” any misleading or deceptive representation, in the sense that the necessary causal connection was established: see Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525 (Mason CJ) and Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [14] (Gleeson CJ), [54]-[61] (Gaudron J), [92]-[109] and [136] (McHugh J) and [158]-[163] (Hayne J), Gummow J agreeing with McHugh J and Hayne J at [153]. However, this question is not reached in the present case.

Calculation of damages: assessment of life expectancy

49 There remain for consideration the Appellant’s challenges to the manner in which the trial judge assessed his damages. The first complaint was that her Honour had assessed his life expectancy by reference to “historic” tables rather than “prospective” tables, published by the Australian Bureau of Statistics. Any calculation of the life expectancy of a person alive today, based on “mortality rates” derived from past experience, involves a prediction of future events. Conjecture as to such matters should not be eschewed: see Malec v J.C. Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 643. Nevertheless, generally speaking greater accuracy is to be preferred over known inaccuracy.

50 The factors which determine mortality rates are numerous. For example, it is standard practice to make separate assessments for men and women because females are recognised as having, on average, a greater life expectancy. Similarly, the present age of the individual may be relevant: if the average or mean life expectancy of men is 79 years, that does not mean an 80 year old man has no relevant expectation of further years of life. Similarly, as is apparent from life insurance practice, life expectancy may well depend on whether or not one smokes, has a particular disease, or a particular genetic characteristic rendering one susceptible to a specific disability. Thus, information about the particular individual may justify taking that individual outside the statistical norm.

51 The issue raised by the Appellant does not require an assessment of these various factors: rather it seeks to include in the calculation statistically verifiable increases in life expectancy over recent decades. Taking into account improving life expectancy will, according to the tables presented in evidence in the present case, give rise to an increased life expectancy which is some 5.6 years higher than is the case ignoring projected improvement in life expectancy in the future. The difference is sometimes referred to as the difference between using “historical tables” and the adoption of “projection tables”. These terms tend to be misleading, as the only difference drawn to the attention of the Court was the adoption, in the latter case, of the additional calculation based on historically determined rates of improving life expectancy, themselves determined on past experience. The former table is based on ABS information in relation to deaths in a particular year, the latter is adopted for the purpose of one aspect of the prediction of the future population in Australia.

52 The trial judge was of the view that she should follow current practice, which is to apply tables based upon annual information with respect to deaths. In taking that course, she felt obliged to follow the approach of Studdert J in Beck v State of New South Wales [2001] NSWSC 278 at [132] where his Honour said:

“No evidence was called in this case concerning the two sets of statistics. Whilst I do not regard the argument for the projection tables as being unattractive, I have decided that I should employ the tables traditionally used in these matters, leaving it to an appellate court to determine, if such be considered appropriate, that the projection tables should be adopted. Any set of tables can only be a guide, and I propose to approach my task guided by the historical tables and providing for the plaintiff’s needs for a further 45.2 years, since I determine such period reflects his life expectancy.”

53 There are arguments in favour of following a traditional approach in assessing damages based on unknown events. In some respects, as will be noted below, those arguments are persuasive. They are based on two primary considerations: first, that the assessment of damages is an inherently speculative task, the exercise of which is not improved by apparent refinements and, secondly, that the choice of particular figures is in any event, to an extent, arbitrary. There is a third pragmatic consideration, namely that attempts to move away from standards statistics, in favour of a more individualised assessment, may well increase the costs of litigation without any guaranteed benefits in the end results. This last consideration is not relevant for present purposes, because the argument in relation to life expectancy is put upon the basis of statistical norms, not individual assessment.

54 In the case of life expectancy, the reasonableness of the calculation may be speculative, but the criteria adopted are not arbitrary. Rather, they are based on solid information in relation to past deaths. However, if there is further information, again based on past deaths, which suggests that the predictive figures are likely to change in the future, it is not obvious why such further information should be excluded. Indeed, that exclusion tends to render a rational, if imprecise basis of assessment more arbitrary than it needs to be. Of course, projected changes in life expectancy may prove to be misguided when future experience is known. However, the same can be said, with possibly a greater degree of certainty, in relation to reliance on information concerning past life expectancy without taking into account a statistical change which is already taking place and is measurable. Further, changes in life expectancy are not treated by the Australian Bureau of Statistics as arbitrary or irrelevant: rather, the Bureau relies upon them for the important task of seeking to estimate the future population of the country in decades to come. Nor was it suggested that the relevant figures were not publicly or readily available. They are published by the ABS on an annual basis and would be turned into accessible tables by those forensic accounting consultants which presently produce information as to life expectancy based on “historical tables”.

55 On the basis that the projections of changes in life expectancy should be accepted as an appropriate estimate of life expectancy, there was no challenge by the Respondents to the figure relied upon by the Appellant. In my view it is appropriate for the courts to make their estimations on the basis of the best information available: the projected tables would appear to be a more accurate assessment of future trends than the historical tables. Accordingly, it would have been appropriate for the trial judge to adopt the projected table and the figure resulting therefrom, in the present case. According to the report prepared by Cumpston Sarjeant Truslove Pty Ltd, that gave a predicted life expectancy for a man of the Appellant’s age as at 3 May 2004 as 54.28 years. (That figure had to be adjusted for any diminution caused by the injuries caused by the accident.)

Calculation of damages: vicissitudes

56 A separate challenge was raised to the adoption by her Honour of the standard discount of 15% on account of vicissitudes.

57 Using information available in relation to “male intermediate production and transport workers at age 25-34”, the same consultant estimated that an appropriate deduction for vicissitudes would be 8%, and that the rate for tradespersons and related workers at the same age range was 7%, giving an average of 7.5%.

58 In Wynn v NSW Insurance Ministerial Corporation [1995] HCA 53; (1995) 184 CLR 485, the joint judgment of Dawson, Toohey, Gaudron and Gummow JJ stated at 497:

“Calculation of future economic loss must take account of the various possibilities which might otherwise have affected earning capacity. The principle and the relevant considerations were identified by Barwick CJ in Arthur Robinson (Grafton) Pty Ltd v Carter [1968] HCA 9; (1968) 122 CLR 649 at 659 as follows:

‘Ill health, unemployment, road or rail accidents, wars, changes in industrial emphasis, so that industries move their location, or are superseded by new and different techniques, the on-set and effect of automation and the mere daily vicissitudes of life are not adequately reflected by merely – and blindly – taking some percentage reduction of a sum which ignores them.’

It is to be remembered that a discount for contingencies or ‘vicissitudes’ is to take account of matters which might otherwise affect earning capacity and as Professor Luntz notes, death apart, ‘sickness, accident, unemployment and industrial disputes are the four major contingencies which expose employees to the risk of loss of income’. Positive considerations which might have resulted in advancement and increased earnings are also to be taken into account ... . Finally, contingencies are to be considered in terms of their likely impact on the earning capacity of the person who has been injured, not by reference to the workforce generally. Even so, the practice in New South Wales is to proceed on the basis that a 15% discount is generally appropriate, subject to adjustment up or down to take account of the plaintiff’s particular circumstances.”

59 The figures relied upon by the Appellant give little indication as to the basis on which they were calculated, but they are clearly calculated by reference to occupational groups, and not by reference to the individual circumstances of the Appellant. The trial judge was not persuaded that the Appellant had shown any relevant justification for adopting a different figure from that relied on in accordance with usual practice: no error has been shown in that approach.

Assessment of earnings on superannuation fund

60 It was common ground before her Honour that the Appellant was entitled to an amount on account of lost superannuation. Conflicting expert evidence was tendered as to the appropriate basis on which to calculate the amount. In substance, the complaint made by the Appellant was that the trial judge adopted an assessment based on 11% of the award for past and future economic loss, which was not the approach adopted by either of the experts whose reports were tendered on behalf of the parties. (She also allowed an increment of 18% for the management of the fund which included the superannuation allowance.) The error in her Honour’s approach was said to be to allow an increment of 2% on the net amount of both past and future economic loss, rather than by taking 9% of the gross amount of both past and future economic loss and then allowing for earnings on the fund. The approach adopted by her Honour was said to be inconsistent with the approach adopted by this Court in Roads and Traffic Authority v Cremona (2001) 35 MVR 190, [2001] NSWCA 338.

61 As McColl JA noted in Ghunaim v Bart [2004] NSWCA 28 at [146]- [147], (Giles and Ipp JJA agreeing):

“146 Roads and Traffic Authority v Cremona concerned a Compensation to Relatives Act 1897 claim on behalf of a wife and two children for loss of superannuation benefits in relation to the death of a high income medical practitioner. The plaintiff’s claim was based on an actuarial report. The defendant sought to challenge the methodology used in the plaintiff’s expert report on the basis of Jongen [v CSR Ltd (1992) Aust Torts Rep ¶81-192, Anderson J in the Supreme Court of Western Australia].

147 Clearly the question of the extent to which a plaintiff must go to prove a claim for loss of superannuation benefits must turn on the facts of each case. Not every case will require sophisticated actuarial evidence.”

62 The calculation of superannuation benefits is complicated, in a practical sense, by the fact that the loss of earning capacity will be calculated by reference to likely net earnings, whereas superannuation payments will be calculated by reference to gross earnings, before deduction for income tax. Furthermore, in the case of professionals, who make voluntary payments on account of superannuation, it may be necessary to take care to ensure that loss of earning capacity is not subject to double compensation nor to inadequate allowance for future benefits. In such cases specific actuarial evidence may well be necessary.

63 On the other hand, this was not such a case. Although the parties tendered actuarial evidence, by not requiring each other’s experts for cross-examination, the trial judge was left with little by way of assistance in resolving which assumptions provided an appropriate basis for calculating loss of superannuation benefits. She was not required to adopt the evidence of one expert, or the other: nor was there any unfairness in seeking to adopt a “rule of thumb” without specific notice to the parties. Both parties should reasonably have been aware of the likelihood of that course being adopted, in circumstances where the Court had not been provided with the means by which a rational choice could be made. Nor, significantly, was any attempt made to persuade this Court, either in written or oral submissions, that there was error in principle in failing to adopt the Appellant’s evidence. Accordingly, I am not persuaded that error has been established on her Honour’s part in this respect.

Assessment of general damages

64 It is convenient at this stage to consider the cross-appeal of the First and Second Respondents in relation to the assessment of non-economic loss under s 79A of the Motor Accidents Act. Her Honour assessed non-economic loss as falling within that part of the range described as “a most extreme case”. That assessment was, the Respondents asserted, manifestly excessive.

65 Section 79A, relevantly for present purposes, provides for the determination of non-economic loss in accordance with the following principles:

79A ...

(2) The object of this section is to limit the amount of damages for non-economic loss in cases of claims relating to relatively minor injuries, in order to achieve the object of the Act of more fully compensating those with more severe injuries at a cost the community can afford to meet.

(3) 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 12 months by the injury suffered in the accident.

(4) No damages may be awarded for non-economic loss unless the severity of the non-economic loss of the injured person is at least 15% of a most extreme case.

(5) The maximum amount that may be awarded for non-economic loss is [$341,000], but the maximum amount is to be awarded in a most extreme case.

The maximum included in sub-s (5) was the applicable figure, after indexation, adopted in this case. Section 79A(6) then provides a table for the calculation of damages as a proportion of the maximum amount, the proportion being equivalent to the severity of the non-economic loss as a direct proportion of a most extreme case, above 33%.

66 Although the table envisages a precise calculation of the relevant proportion, it is nevertheless clear that the proportion identified as appropriate for the purposes of a particular case will fall within a range: it is not an exercise in precision, although the end result will be a specific figure.

67 The objective of the section is stated in terms of limiting damages in relation to relatively minor injuries, but the imposition of a cap will have the effect of limiting the amounts awarded in relation to more serious claims as well.

68 In Dell v Dalton (1991) 23 NSWLR 528, this Court (Handley JA, Kirby P and Priestley JA agreeing) established three principles in dealing with a challenge to the damages awarded for non-economic loss under s 79 of the Motor Accidents Act. Although there were differences in parts of s 79 (which applied to accidents occurring before 26 September 1995), as compared with s 79A (applying to accidents occurring after that date), the use of a proportion of a “most extreme case” was the principle adopted in sub-ss 79(2) and (3). The three propositions in relation to s 79 should be applied in relation to calculations under s 79A.

69 The first proposition is that the principles established by this Court in Moran v McMahon [1985] 3 NSWLR 700 should apply in relation to appellate review of a finding that a particular case is or is not “a most extreme case”: Dell, at 533G-534. That is because such a finding “will involve questions of fact and degree, and matters of opinion, impression, speculation, and estimation, calling for the exercise of common sense and judgment”.

70 Secondly, the question to be determined is not whether the plaintiff’s injuries constitute “the most extreme case” that could be imagined, but rather whether they fall within a class of most extreme cases: Dell at 531D-E, quoting with approval Southgate v Waterford (1990) 21 NSWLR 427 at 434. That conclusion followed from the use by the Parliament of the indefinite article “a”, before “most extreme case”.

71 Thirdly, the purpose for which the assessment of severity is to be made is to identify the effect of the injuries suffered on the particular plaintiff. The Court rejected the submission that the injuries must qualify as “most extreme” in relation to each of the categories identified in the definition of non-economic loss in s 68. That definition provides:

Non-economic loss means:

(a) pain and suffering, and

(b) loss of amenities of life, and

(c) loss of expectation of life, and

(d) disfigurement.

As Handley JA noted in Dell (at 532C-E) increased severity in one category may in fact diminish the effects in another category.

72 There was no argument in the present case, but that the Appellant suffered very serious injuries. Thus, the Respondents conceded that 70% would have been an appropriate proportion to adopt. The thrust of the complaint made by the Respondents is that her Honour reached the conclusion that this was a most extreme case, after identifying a number of respects in which she accepted that witnesses for the Appellant (including the Appellant himself) had exaggerated the extent of his disabilities. Her Honour’s conclusions in that respect were based to a significant extent on the evidence supplied by a lengthy surveillance film of the Appellant which, her Honour held, “shows a significantly higher level of function than that displayed by the plaintiff in Court, to his carer, and to the various doctors and health professionals”.

73 The specific issues identified by the Respondents were as follows.

(1) In connection with what they accepted was “the undoubtedly severe head injury” suffered by the Appellant, they noted a finding that he had made “a good recovery from a very severe head injury”.

(2) In connection with his partial blindness, they again noted her Honour’s findings that he had made “a good functional recovery, and had the capacity to use the various aids which are available for persons with impaired vision, so as to increase his independence and range of activities”.

(3) As a result of his loss of function in the pituitary gland, he had suffered obesity, but, her Honour held, he was likely to continue to have weight problems, but not necessarily to the current extent.

(4) He also suffered from depression as a result of his injuries, in relation to which the trial judge found that he was being treated successfully with medication and did not suffer “any significant on-going disability”.

74 There were, however, other findings that militated in favour of greater, rather than less, severity of injury. Thus, while her Honour accepted that he might not suffer the current level of obesity, she also found that he would need to take medication for the rest of his life. Further, the level of medication needed careful monitoring to avoid side effects, including weight increase. He suffered a marked change in facial appearance “caused by both his obesity and scarring”. It was also said to be common ground that he was now unemployable. The Appellant had incurred diabetes as a result of the accident, even though her Honour was not satisfied that it was “causing any disability”. The fact that he had made a good functional recovery in relation to his sight impairment, qualified the primary finding that he suffered “a significant loss of vision”. She assessed a 10% loss of life expectancy.

75 There appears to have been no challenge to the description given by her Honour in the opening paragraph of the judgment that the Appellant had suffered “catastrophic injuries”. Further, it is to be noted that the video film upon which her Honour placed reliance in mitigation of the on-going consequences of the accident, was made on 7 July 2003, more than five and a half years after the accident in question. Her Honour’s assessment of general damages would necessarily have taken into account the pain and suffering, disabilities and loss of amenities of life over that period, as well as his functional abilities at the end of that period. Furthermore, her Honour saw the plaintiff in the witness box. She had before her testimony from people who knew him both before and after the accident. In addition, the fact that the trial judge spent some pages of her judgment, immediately prior to concluding that the Appellant fell within “a most extreme case”, recounting the extent to which she did not accept the level of continuing disability presented as part of his case, makes it difficult to suggest that her Honour had forgotten or disregarded such matters in reaching her assessment of severity.

76 In these circumstances, the Respondents face a difficult task in seeking appellate intervention. As noted in Moran (at 718E-G) this Court adopted in Wilks v Bradford Kendall Limited (1962) 79 WN(NSW) 850, a case dealing with quantum appeals from a decision of a judge sitting alone, the principles which had long been accepted in relation to discretionary judgments. In the present case, there is no express suggestion that the judge acted upon a wrong principle, gave weight to extraneous or irrelevant matters or failed to give weight to relevant matters. Nor is there a challenge to any relevant finding of fact upon which the estimate of severity was based. All that the Respondents can say is that to categorise this as “a most extreme case” was so unreasonable or plainly unjust as to demonstrate an error in approach.

77 The table in s 79A(6) suggests that the severity of the economic loss is to be calculated as a proportion of a most extreme case, on a scale up to 100%. That may have led her Honour to express her conclusion in the following form:

“I am satisfied that the severity of the plaintiff’s non-economic loss is 100% of a most extreme case.”

However, too much attention should not be given to the form of this conclusion. As already noted, the Act provides for the maximum amount to be awarded “in a most extreme case”, a phrase which creates a class of cases. The assessment either brings the present case within that class or it does not. To speak of a case being “100% of a most extreme case” may suggest that the case is the most extreme case. Of course, that might be intended, but this was not such a case. And it should not be understood that her Honour intended such a conclusion, or thought that such a conclusion was necessary. The last possible construction of that sentence would reveal error (see [70] above), but clearly an error which her Honour did not commit. Further, because the class of most extreme cases will contain a degree of variability, a proportion in the high 90’s will tend to suggest that the scope of the class has been defined with undue precision.

78 It should be noted that the present case, apart from some reasonably brief evidence with respect to liability of the Third Respondents, was limited to the assessment of damages. The evidence ran for three weeks. The conclusion that this fell within the category of a most extreme case, was undoubtedly a matter of impression and one in respect of which a trial judge was likely to depend heavily on her overall assessment of the evidence and her experience of such cases. The Respondents have not persuaded me that the result was so manifestly unreasonable as to demonstrate error. That conclusion derives support from the fact that the judgment was carefully reasoned and reflects a willingness to discount the Appellant’s case in a manner inconsistent with adoption of an over-generous approach to his case, sufficient to generate injustice. I would dismiss the cross-appeal.

Reduction for contributory negligence

79 The final complaint raised by the Appellant in relation to the assessment of damages concerned the approach adopted to payments made by the Respondents under s 45 of the Motor Accidents Act. Although the Appellant was a passenger in the car, it was inferred that he was not wearing a seat belt at the time of the accident and the award of damages was therefore reduced by 30% on account of contributory negligence. Those findings are not in dispute. What is in dispute is the inclusion in the amount of the award, as calculated prior to reduction for contributory negligence, of past out-of-pocket expenses totalling $630,000. Within this figure was an amount of $409,906 which had been paid by the Respondents pursuant to s 45 of the Motor Accidents Act. The total damages payable (after reduction for contributory negligence) were reduced by that figure. As a result, he was effectively awarded 70% of the s 45 payment, but had the total award reduced by the full amount. This, he argued, was an error of law.

80 The question of law was said to revolve around the effect of making a payment under s 45 “a defence to proceedings by the claimant against the defendant for damages”: see s 45(4). Nevertheless, to understand the effect of the provision, it is necessary to consider the whole of the section, including the provision for payment by an insurer which gives rise to the defence.

45 Duty of insurer to try to resolve claim etc

(1) It is the duty of an insurer to endeavour to resolve a claim, by settlement or otherwise, as expeditiously as possible.

(2) Once liability has been admitted (wholly or in part) or determined (wholly or in part) against the person against whom the claim is made, it is duty of an insurer to make payments to or on behalf of the claimant in respect of:

(a) hospital, medical and pharmaceutical expenses, and

(b) rehabilitation expenses, subject to Part 4, and

(c) respite care in respect of a claimant who is seriously injured and in need of constant care over a long term,

as incurred.

(2A) The duty of an insurer under subsection (2) to make payments applies only the extent to which those payments:

(a) are reasonable and necessary, and

(b) are properly verified, and

(c) relate to the injury caused by the fault of the owner or driver of the motor vehicle to which the third-party policy taken to have been issued by the insurer relates.

(3) It is a condition of a third-party insurer’s licence that the insurer must comply with this section.

(4) A payment made under this section to or on behalf of a claimant before the claimant obtains judgment for damages against the defendant is, to the extent of its amount, a defence to proceedings by the claimant against the defendant for damages.

81 It would be a reasonable construction to treat the operative provisions as reflecting a mechanism for giving effect to the duty to endeavour to resolve claims, imposed by sub-s (1). However, it is not clear how that might operate in practice. As the Respondents pointed out, an admission of liability will leave a number of matters undetermined. In particular, it is common for a defendant’s liability to be reduced on account of contributory negligence, a fact which will not be known if liability is admitted pre-trial. The Respondents argued that, if, in such a case, damages were to be assessed on the basis that the insurer was liable to pay the whole of the amounts identified in s 45(2), without reduction for contributory negligence, that would provide a disincentive to early settlement, rather than the incentive, which the section appears to envisage. Those payments become, in part, as it was argued, a liability without fault. On the other hand, the liability to make payments appears to be unlimited, once the section is engaged, which may happen where liability is admitted or determined only in part. In such a case, the section does not provide for a proportionate payment of the relevant expenses.

82 The argument on either side focussed on the meaning of sub-s (4), which rendered payments made in advance of judgment “a defence” to the proceedings. The use of that terminology is consistent with the reduction of any damages assessed as payable by a defendant, before judgment is entered against it: see El Tarraf v Linknarf Limited [2004] NSWSC 244 (Studdert J), and the authorities referred to therein, including Tabvena v Oag [2002] NSWCA 61. However, that question does not resolve the present issue, which is whether the amount of the payment should be removed from the calculation prior to the reduction on account of contributory negligence.

83 The Motor Accidents Act makes express reference to findings of contributory negligence in s 74. In particular, s 74(2)(c) requires that a finding of contributory negligence shall be made in circumstances, such as the present, where the injured person was not wearing a seat belt. The section then provides:

(3) The damages recoverable in respect of the motor accident shall be reduced by such percentage as the court thinks just and equitable in the circumstances of the case.

This provision suggests that the first step in the calculation is to assess the damages otherwise recoverable: where an amount is not recoverable because the payment of that amount constitutes a defence to the proceedings, to the extent of the amount so paid, that amount cannot form part of the damages recoverable. Accordingly, as a matter of construction, the Appellant would appear to be correct: the damages as assessed should be reduced by the amount of the s 45 payment before being reduced by the relevant percentage on account of contributory negligence.

84 The effect of this conclusion in the present case is to vary the assessment of the trial judge. Her Honour concluded that all of the past out-of-pocket expenses, which included those on account of which payments had been made under s 45, giving a total assessment of $2,791,761, should be totalled and then reduced by 30% on account of contributory negligence, to give a figure of $1,954,233. From that figure the amount of the s 45 payment of $409,906 was deducted, giving a balance of $1,544,327.

85 If the past out-of-pocket expenses, subject to prior payment under s 45, had not been included in the initial calculation, the assessment, prior to reduction on account of contributory negligence would have been $2,381,855. When that figure is reduced by 30% on account of contributory negligence, the balance is $1,667,299. The Appellant is better off by the proportionate reduction for contributory negligence, as applied to the s 45 payment, being an amount (in round figures) of $123,000.

86 It is necessary to consider whether there is anything else in the Act, or in the Second Reading Speech, or in authority, which precludes acceptance of this position. The first matter to be considered is a lengthy note which follows s 45 and reads:

“Note Section 45 places obligations on insurers to act as expeditiously as possible, and to make certain payments of an interim nature once liability has been admitted or determined. The obligations are consistent with the insurer’s obligations regarding the rehabilitation of the claimant under sections 37 and 38.

Failure to observe the obligations in individual cases exposes the insurer to an award of interest under section 73. Continual failure to observe the obligations places an insurer’s licence at risk (section 45(3)).

In order to meet its obligations, the insurer must have sufficient information to enable it to properly investigate and assess the claim, and make an appropriate offer of settlement. This requires early notice of the claim under section 43, and the provision of full particulars of the claim under s 48.”

87 The last paragraph of the note appears to reflect the conditions found in s 73 with respect to possible liability for payment of interest, as noted in the second paragraph of the note. Otherwise, that paragraph refers to the additional sanction with respect to the insurer’s licence, referred to in sub-s (3).

88 The second sentence in the first paragraph of the note merely cross-references the insurer’s obligations under ss 37 and 38. The first sentence is of a different kind in that it characterises the nature of the payments made under s 45 as “of an interim nature”. However, the tenor of this statement is obscure. In any event, the note is not part of the Act but may be treated as extrinsic material upon which reliance may be placed in construing the Act: Interpretation Act 1987 (NSW), ss 35(2)(c) and (5). The note does not provide relevant assistance for present purposes.

89 The Court was also taken to the Second Reading Speech in relation to the amendment which inserted s 45(4), in its present form: see Motor Accidents Amendment Act 1995, Hansard of 16 November 1995 (Legislative Council), p 3323-3324. The Attorney-General stated:

“Under section 45 of the Act an insurer must endeavour to resolve a claim expeditiously and pay all reasonable medical and rehabilitation expenses once liability has been admitted. This may involve the insurer making payments on an interim or advanced basis. To avoid the incurring of unnecessary legal costs in determining damages, the Bill provides for a statutory defence in respect of amounts already paid under section 45. A similar provision currently operates under the Workers Compensation Act. Currently, claimants are not obliged to attempt to resolve claims quickly. While the Act contains certain provisions requiring co-operation by claimants, insurers are commonly experiencing difficulty in obtaining full details of the claimant’s losses prior to the commencement of proceedings, as well as responses to offers of settlement.”

90 Counsel were unable to assist the Court greatly in relation to the manner in which unnecessary legal costs would be avoided by the obligation to make payments, coupled with the statutory defence in relation to those payments. It may, perhaps, be inferred that the effect of the provisions was to remove from the courts any need to assess the reasonableness or otherwise of the expenses already incurred and met.

91 The principal argument which led the trial judge to accept the Respondents’ submissions in this respect was that, prior to the 1995 Amendment Act, all out-of-pocket expenses would have been included in the assessable damages, before reduction on account of contributory negligence. Her Honour accepted the submission she identified in the following terms:

“Until the January 1996 amendment, the Motor Accidents Act operated so that the payments were included in the assessment of damages, the total was reduced by any contributory negligence and the total of the payments made [by] the insurer were treated as a credit against that amount.

Counsel for the defendants submitted that there was no discernable legislative intention to alter that position by the 1996 amendment.”

92 With respect, the last proposition cannot be accepted in its terms. Prior to the 1995 Amendment Act, sub-s (4) read as follows:

(4) Payments made under this section are taken to form part of any damages payable to the claimant.

That provision renders inevitable the inclusion of such amounts in the “damages recoverable”, identified in s 74(3), which are to be reduced on account of contributory negligence. However, the fact that the provision in those terms was removed and the new sub-s (4) inserted, is entirely consistent with the result proposed above, namely a variation in the effect of s 74(3).

93 A further argument upon which weight was placed by the Respondents relied upon the reference in the Second Reading Speech to the “similar provision” in the Workers Compensation Act. However, the reference to the Workers Compensation Act is itself by no means clear. Insofar as a worker was required to repay an employer, out of damages recovered in respect of the injury, and the amount recovered was reduced on account of his own fault or the fault of another person, the amount repayable was reduced to the same extent. That consequence, which flowed from a combination of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 10 and Part 5 of the Workers Compensation Act 1987 (NSW) is not to the same effect as the provisions of the Motor Accidents Act now in consideration. However, to the extent that the reference gives any assistance in the present case, it assists the Appellant’s contention that payments under s 45 were to be treated as made regardless of fault, by analogy with the Workers Compensation legislation.

94 In my view, the Appellant’s argument should be upheld and the recalculation as proposed in paragraph [85] above is required. It is not, however, possible for this Court to undertake the necessary calculations, as these require reference to the variation in calculation of life expectancy referred to at [55] above.

Costs of Third Respondents

95 These conclusions leave open the proper order with respect to the costs of the Third Respondents. A ground of appeal challenged the conclusion of the trial judge that the First and Second Respondents should not be responsible for the costs of the successful Third Respondents. Because the Appellant has failed insofar as he sought on this appeal to establish liability on the part of the Third Respondents, that question remains alive, as does the appropriate order in relation to the Third Respondents’ costs of the appeal.

96 Because the Appellant was unsuccessful at trial in his claim against the Third Respondents, he was correctly ordered to pay the Third Respondent’s costs. The question was whether the First and Second Respondents, who were unsuccessful at trial, should have been required to reimburse the Appellant for the costs payable to the Third Respondents. Her Honour declined to make such an order because, as her Honour said, there was no suggestion that the claims against the Third Respondents were “in any real sense” interdependent or framed in the alternative. Further, she was not persuaded that there were “any unusual circumstances” requiring the making of such an order.

97 The principles to be applied in respect of such an application were authoritatively stated by Gibbs CJ in Gould v Vaggelas (1985) 157 CLR 215 at 229-230, in a passage which has frequently been applied, including, recently, by this Court in Furber v Stacey & Anor [2005] NSWCA 242 at [109]- [110] (Einstein J) and in Herning v GWS Machinery Pty Ltd & Anor [2005] NSWCA 263 at [40]. In Gould, Gibbs CJ noted that such an order would not flow from the mere fact that the joinder of two defendants was reasonable and where the unsuccessful defendant had said or done nothing to lead the plaintiff to sue the other defendant, or where there was no similar reason which would make such an order appropriate.

98 In the present case, it was not argued that the First and Second Respondents had sought to rely upon the conduct of the Third Respondents or had otherwise taken steps which would indicate an intention to argue that the real responsibility for the accident lay elsewhere, namely with the Third Respondents. Rather, it appears that the Third Respondents were joined because success against them might have allowed the Appellant to recover additional damages, unconstrained by the Motor Accidents Act. That attempt to cast responsibility on the Third Respondents having been shown to be in error, the Appellant should bear responsibility for the costs of the Third Respondents.

99 The same conclusion must follow in relation to the costs of the appeal. All Respondents were jointly represented in this Court, but to the extent that the costs of defending those grounds of appeal which concerned the liability of the Third Respondents can be severed and would otherwise be separately accounted for, the Third Respondents are entitled to such an order.

100 So far as the costs of the appeal with respect to the First and Second Respondents and the cross-appeal are concerned, those Respondents must pay the Appellant’s costs other than those attributable to the challenge to the judgment in favour of the Third Respondents.

Conclusions

101 I would propose the following orders:

(1) Appeal allowed in part and judgment in the District Court in favour of the Appellant set aside.

(2) Judgment be entered for the amount assessed by the trial judge, subject to the following variations:

(a) the assessment of future loss be recalculated by reference to a life expectancy using the 5% multiplier for 48 years, being 966.6;

(b) the damages to be assessed and subject to reduction of 30% for contributory negligence be for an amount excluding the expenses paid by the insurer pursuant to s 45 of the Motor Accidents Act.

(3) The Appellant file short minutes of orders within 14 days in an amount agreed between the parties to give effect to (2).

(4) The appeal be otherwise dismissed.

(5) The cross-appeal be dismissed.

(6) The Appellant pay the Third Respondents’ costs of the appeal.

(7) The First and Second Respondents pay the Appellant’s costs of the cross-appeal and of the appeal other than costs incurred in relation to the issue of liability of the Third Respondents.

(8) The First and Second Respondents have a certificate under the Suitors Fund Act 1951 (NSW) in relation to the costs of the appeal (but not the cross-appeal) if otherwise so entitled.

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LAST UPDATED: 27/03/2006