Who pays the costs associated with managing the fund management component of a plaintiff’s damages? Gray v Richards [2014] HCA 40

In 2003, 10 year old Rhiannon Gray sustained a traumatic brain injury in a motor vehicle accident. Due to her injuries, she will require constant care and will remain incapable of managing her own affairs. Through her mother, she commenced legal proceedings and the parties compromised the majority of her claims for $10 million plus an amount of damages, to be assessed at a later date, to cover the expenses associated with managing her lump sum award.

The defendant’s negligence was responsible for the plaintiff’s inability to manage her lump sum award and therefore, in accordance with the principles in Todorovic v Waller [1981] HCA 72, her damages should include a component for managing the lump sum award (fund management damages).

In Gray’s case, there has been significant litigation in relation to fund management issues.

On 15 October 2014, the High Court handed down its decision and held as follows:

1. The calculation of the cost of managing an incapacitated plaintiff’s damages was not a separate exercise from calculating the value of fund management expenses as part of the plaintiff’s future outgoings. The expenses in question are not incurred separately from the cost of fund management; they are an integral part of that cost.
2. Whether the fund management expenses are reasonable is not generally a matter of judicial discretion. The court’s concern is to ensure that the plaintiff’s actual loss is compensated. If the fund management expense component of the award reflects the actual market conditions and is not contrary to any statutory control then it is an expense that is a consequent of the tortfeasor’s negligence and therefore compensable.
3. An incapacitated plaintiff is entitled to recover from the defendant the costs associated with managing the fund management damages.
4. An incapacitated plaintiff is not entitled to recover costs associated with managing the predicted future income of the managed fund.