5
Injury Liability Gazette
time. A plaintiff under incapacity would have no
better ability to manage the additional $2m than
the initial $10m. It follows that the award of a
component for fund management would itself give
rise to future management expenses in the order of
$400,000 (assuming fees charged on that amount
at the same rate of 20%). The additional $400,000
in turn would cost a further $80,000 to manage,
which would cost a further $16,000, and so on
.
’
In relation to the fund management on fund income,
the court accepted that income derived from the
management of the fund and reinvested by the
manager would itself become part of the managed
fund and, accordingly, would incur its own fund
management fees. Her Honour, Justice McCallum
observed that:
‘
If income earned by the fund is excluded from
the calculation of fund management costs… there
will be a shortfall in the damages allowed on that
account and there will be insufficient money to
manage the [appellant’s] damages
.’
The Primary Judge stated the discount rate of 5%
prescribed by s 27 of
Motor Accidents Compensation
Act
1999 (NSW) (
MACA
) represents the net earning
capacity of the fund over time. The discount rate
represented a statutory assumption as to the net
earning capacity of the damages awarded to a plaintiff.
The Primary Judge also considered whether fund
management expenses could be awarded at the
rates charged by a private trustee. She indicated
the decision to select someone other than the NSW
trustee was entirely reasonable. The defendant did not
seek to challenge that finding in the Court of Appeal or
in the High Court.
Decision of the Court of Appeal
The defendant appealed the decision. The Court of
Appeal overturned the decision of the Primary Judge
on both issues.
The court stated a reasonable amount for the cost
of managing the fund should be provided and there
should be no additional amounts awarded on the
assumption that fees would be paid on the amount set
aside for management costs.
Similarly, damages for managing the fund income
was disallowed. Chief Justice Bathurst stated that the
