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Professional liability, limitation periods and summary dismissal December 5, 2017

(1)   The respondent’s causes of action accrued once the impact of the settlement of the first WC claim became “known or apparent”. According to his pleaded and particularised case, that occurred on or around the date of his knee surgery in November 2007, at which time he suffered measurable damage for the purposes of both his negligence and misrepresentation claims, being the total loss of his earning capacity. The respondent’s claims were therefore extinguished by operation of s 63 of the Limitation Act on or around November 2013. Accordingly, the primary judge ought to have summarily dismissed the respondent’s proceedings: [76], [84] – [87], [90], [91].

Commonwealth of Australia v Cornwell (2007) 229 CLR 519; [2007] HCA 16 distinguished.

(2)   The appellants succeeded on a case which was not advanced before the primary judge which should be reflected in the order for the costs of the appeal: [88], [90], [91].

Wickstead v Browne (1992) 30 NSWLR 1; [1992] NSWCA 272 applied.


Dougall v Melville [2017] NSWCA 309

McColl JA at [1],
Payne JA at [90],
Davies J at [91]

  1. The power the primary judge was exercising summarily to dispose of the proceedings is one which calls for the exercise of “exceptional caution”. [45] It cannot be exercised “once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it.” [46] It is only to be exercised “when the action is clearly without foundation and … to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff.” [47] Nevertheless, a plaintiff’s case may be summarily dismissed even though extensive legal argument may be necessary to demonstrate the case is so clearly untenable that it cannot possibly succeed. [48]
  2. I also recognise that “it [is regarded] as undesirable that limitation questions … should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases.” [49]
  3. Although I also note that the “Court is not concluded by the manner in which the litigant formulates his case in his pleadings,” [50] the respondent did not suggest it was necessary to go beyond his SFASC to determine the summary dismissal motion. However, it is also appropriate to have regard to the particulars given of the SFASC to which I have referred.
  4. The respondent’s causes of action seek to recover economic loss consequent upon the appellants’ alleged negligence and breach of the Fair Trading Act. In seeking to determine when the respondent’s causes of action accrued it is necessary to identify, with some precision, the interest infringed by those matters. [51] The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. [52]
  5. Actual damage or injury is the gist of the tortious cause of action in negligence. [53] A plaintiff cannot sue for damages in negligence until the cause of action accrues. To show the existence of a completely constituted cause of action in negligence, “a plaintiff must be able to show duty, breach, and damage caused by the breach; accordingly, in the ordinary case, it is at the time when that damage is sustained that the cause of action ‘first accrues’ for the purposes of a provision such as s 11 of the Limitation Act 1985 (ACT)”. [54] Once that occurs, the cause of action will then be regarded as having accrued, even if some of the plaintiff’s damages are prospective. [55] Time then begins to run for the purposes of the limitation period.
  6. Similarly, insofar as the respondent claimed for breach of s 42 of the Fair Trading Act, the effect of s 68(2) was that the limitation period began to run at the time when the cause of action under s 68(1) accrued. Once again, as “loss or damage is the gist of the statutory cause of action for which [s 68(1)] provides, the cause of action does not accrue until actual loss or damage is sustained.” [56]
  7. Both the respondent’s negligence and Fair Trading Act causes of action are substantially founded on the proposition that he was induced to enter the settlement of the first WC claim by reason of the appellants’ negligent advice and/or misrepresentations. [57] The way the appellants put their case before the primary judge, and the first way they advanced it in this Court, was based on the proposition that the respondent suffered damage as soon as he made that agreement because he suffered loss because he acquired an “inferior package of rights”. Such a case has been described as a “transaction case” [58] or the “damaged goods analogy”. [59]
  8. The difficulty with both such cases was explained by the plurality in Wardley. As their Honours said, when “a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement … because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff.” [Emphasis added.] [60]
  9. However, such detriment is not “universally … equated with the legal concept of ‘loss or damage’”, at least if “the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent”. [61] In that event, “the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual”. [62]
  10. In order for there to be such damage, the court “must be able to apprehend and evaluate the damage, that is the loss, deprivation or detriment caused by the alleged breach of duty” so as to be able to discern whether the plaintiff “is left worse off as a result of the negligence complained about, which can be established by the comparison of a plaintiff’s damage or loss caused by the negligent conduct, with the plaintiff’s circumstances absent the negligent conduct.” [63]
  11. Accordingly, in order for the respondent’s causes of action to accrue, there had to be some actual, measurable damage, beyond what can be regarded as negligible; prospective loss is not enough. [64]
  12. For this reason, the appellants’ first submission that the causes of action accrued on or about 25 May 2007 should be rejected. As at that date it is not apparent that the respondent had suffered any measurable loss in relation to his knee injuries. However, for the reasons which follow, the operations case should be upheld.
  13. In my view, the respondent’s causes of action can be taken to have accrued once the impact of the settlement of the first WC claim, and on his mooted case, the loss of his ability to recover either workers compensation benefits or work injury damages in relation to the injuries to his knees, became “known or apparent”. As is apparent from the respondent’s statement referred to earlier in these reasons, his claim of loss both in the negligence and misrepresentation claims turn on the proposition that he was totally incapacitated from work after his knee surgery. That is also evident from the particulars given attributing his serious financial loss to his total loss of earning capacity from the date of his surgery, surgery said to have been necessitated by the injury he suffered arising “from the nature and conditions of his employment with Toll”. [65]
  14. As before the primary judge, the respondent sought to persuade the Court that his case was one of contingent loss, analogous to Cornwell. In that case, in July 1965 Mr Cornwell received negligent advice from his superior to the effect that he was not eligible for membership of the Commonwealth superannuation fund which had been established in 1922 (the 1922 Fund), despite him having been eligible to join it since 8 May 1965. On 24 March 1987 Mr Cornwell became a member of the Commonwealth superannuation fund established in 1976 (the 1976 Fund) in succession to the 1922 Fund. The 1976 Fund provided lesser retirement benefits compared to those available under the 1922 Fund.
  15. Mr Cornwell retired on 31 December 1994. On 16 November 1999 he commenced an action against the Commonwealth, alleging that the Commonwealth was vicariously liable for his superior’s negligent advice and claiming the additional benefits he would have received on his retirement if he had been admitted to the 1922 Fund from 8 May 1965. The Commonwealth contended that his claim was statute-barred on the basis that his loss had been “actualised” either in 1976, when the 1922 Fund was replaced by the 1976 Fund, or on 24 March 1987, when he joined the 1976 Fund. The limitation defence was rejected at all stages of the litigation.
  16. The majority in the High Court characterised the nature of the interest infringed for the purposes of determining the limitation question as being “an ‘entitlement’ conferred by federal statute law”, which Mr Cornwall “stood to enjoy upon ‘retirement.’” [66] Their Honours analysed the legislative schemes for the Superannuation Act 1922 (Cth) and the Superannuation Act 1976 (Cth) (the 1976 Act). [67] Having done so, they concluded that Mr Cornwell had sustained actual loss only on his retirement, so that his cause of action in tort for the negligent advice accrued on that date. Hence the action had been commenced within the relevant limitation period under s 11 of the Limitation Act 1985 (ACT). [68]
  17. Critical to their Honours’ conclusion was the fact that to become “entitled” to the “standard age retirement pension” under the 1976 Act, an eligible employee would be required, among other criteria, to have ceased to be such an employee on or after attaining the ages of sixty and sixty-five years. The entitlement to an “early retirement benefit” also depended upon satisfaction of various temporal and other criteria for voluntary or involuntary early retirement, as, too, did entitlement to an “invalidity benefit”. [69]
  18. Thus, the majority held that even if Mr Cornwell had joined the 1922 Fund in 1965, his pension entitlements thereunder would have been contingent upon meeting the statutory criteria. The same was true of his position under the 1976 Act after 24 March 1987 and before his retirement seven years later, “subject to the qualification that the amount of his actual contributions would no longer have been paid to him unless the conditions of s 80 were met.” [70] Thus, Mr Cornwell’s loss was only suffered on his retirement when the statutory criteria were satisfied. [71]
  19. The majority rejected the Commonwealth’s submission that Mr Cornwell’s loss was “necessarily and irretrievably sustained” when the 1976 Fund commenced and replaced the 1922 Fund as a matter of speculation. In their Honours’ view, “[h]e could not be said, consistently with the remarks in Sellars v Adelaide Petroleum NL, [72] in 1976 to have sustained loss of a commercial opportunity which had some value, as a matter of the degree of probabilities and possibilities.” [73]
  20. In my view, the matters upon which the respondent sought to rely as contingencies were not contingencies such as were considered in Cornwell. Rather, they were matters which would have to be proved in the course of any workers compensation claim or work injury damages claim the respondent may have sought to bring.
  21. Rather, as the appellants contended in the operations case, the respondent suffered measurable damage for the purposes of both his negligence and misrepresentation claims in November 2007 when he suffered the total loss of his earning capacity after his knee replacement. This was clearly loss which was more than negligible in the sense referred to in the authorities to which I have referred. On his pleaded and particularised case, the respondent was, thereafter, precluded from making any, or any adequate, workers compensation or work injury damages claim by reason of the compromise of the first WC claim as reflected in the compromise of the second WC claim.
  22. Accordingly, in my view, both the respondent’s causes of action accrued on or around the date of that surgery. They were extinguished by the operation of s 63 of the Limitation Act on or around November 2013. His statement of claim pleading the negligence claim was not filed until approximately 7 years after the accrual of that cause of action. The amendment pleading the misrepresentation claim took effect from 29 June 2015, more than seven and a half years after the accrual of that cause of action. Both were clearly statute barred.
  23. Despite strongly advancing the respondent’s contingencies case, the respondent ultimately accepted in the course of argument in this Court the force of this logic. In my view, that concession was properly made. It recognised that sufficient is known of the respondent’s loss and the damage he suffered consequent upon the resolution of the first WC claim by reason of his knee surgery and lost employment capacity to warrant the Court exercising its power of summary dismissal at this stage of the proceedings. [74]
  24. In my view, the primary judge ought to have held that the respondent’s proceedings should be summarily dismissed as both causes of action he sought to pursue had been extinguished by the operation of s 63 of the Limitation Act in or around November 2013, 6 years after the causes of action accrued.

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