In Pel-Air Aviation Pty Ltd v Casey  NSWCA 32, one of the issues for the Court of Appeal was whether the respondent could recover the higher funds management costs charged by a private manager.
The Court (Macfarlan JA, with Ward & Gleeson JJA concurring).held that to limit Ms Casey’s recovery of the estimated costs of funds management to an amount calculated by reference to (lower) NSW Trustee rates, Pel-Air needed to show that Ms Casey’s decision, through her tutor, to appoint National Australia Trustee Limited was so unreasonable that it could not be regarded as a consequence of Ms Casey’s injuries.
This could not be achieved simply by proving that NSW Trustee was a cheaper alternative. As the evidence established that the decision to appoint National Australia Trustee as Funds Manager was a reasonable one, Ms Casey could recover damages for the costs of funds management calculated by reference to its rates.
At  – :
- Damages are awarded to compensate a plaintiff for costs that have or will be incurred as a result of the defendant’s conduct. Only reasonable costs are recoverable (H Luntz, Assessment of Damages for Personal Injury and Death, (4th ed 2002, LexisNexis) at [4.2.3]).
- Subject to any relevance of the evidence that NSW Trustee’s fees were lower than those of NAT, in my view the following evidence supported the conclusion that NAT’s appointment and the fees it charged for that appointment were reasonable:
- The appointment was approved by Lindsay J.
- The appointment was authorised by NSW Trustee in accordance with the terms of Lindsay J’s orders.
- Ms Casey’s tutor decided to make the appointment after a number of discussions with a certified financial planner.
- There was no evidence that NAT’s rates were inconsistent with market rates or those of any institution other than NSW Trustee.
- Indeed, the primary judge expressly stated that “there was no suggestion that the decision to appoint National Australia Trustees as manager was unreasonable” (Judgment ).
- In my view these matters created a strong prima facie case for recoverability at NAT rates. For Pel-Air to have that recovery denied, it would in my view needed to have shown that Ms Casey’s failure, through her tutor, to choose the cheaper alternative (NSW Trustee) rendered her decision to appoint NAT “so unreasonable … that it could not be regarded, as a matter of common sense, as a consequence of [Ms Casey’s] injury” (Gray v Richard at ).
- As Ms Casey proved a prima facie case of causative connection with Pel-Air’s conduct and reasonableness of the expense, the onus was on Pel-Air to prove that Ms Casey failed to mitigate her loss by appointing NAT rather than NSW Trustee (as to the onus of proof in relation to mitigation of loss, see for example T C Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR 130 at 138;  HCA 57 at - and Tasman Capital Pty Ltd v Sinclair (2008) 75 NSWLR 1;  NSWCA 248 at ). This could not be achieved simply by proving that there was a cheaper alternative to the course taken by Ms Casey, particularly when the appointment of a manager would be likely to create a long-term relationship in which its expertise in producing returns and securing the safety of capital, as well as in maintenance of a satisfactory working relationship, would loom large. In the same way, a claim for the cost of a medical operation will not be defeated merely because it has been proved that a particular operation could have been performed more cheaply elsewhere or by another practitioner (Luntz, [4.2.3]).
- It was open to Pel-Air to explore Ms Casey’s tutor’s reasons for appointing NAT in cross-examination or to adduce evidence of market rates. However it chose not to do either, with the result that it failed to counter the prima facie case made against it. As in Gray v Richards, there was no evidence that NAT’s fees were “outside the market” (at ) and reliance simply on a disparity between the rates of the appointed trustee and those of NSW Trustee did not suffice (at ).
- For these reasons, the cross-appeal should be allowed and damages increased to compensate Ms Casey for her prospective costs of $872,000 in respect of funds management.