Australia: Fund management available in work injury damages claims

Legal Directions
Last Updated: 30 September 2011
Article by Judith Waldock

Workers Compensation Nominal Insurer v Gary Luke by his tutor Matthew Charles Luke [2011] NSWCA 251

The Court of Appeal recently upheld a District Court judgment allowing damages for fund management for an injured worker who sued his employer for work injury damages.

The facts

On 21 December 2004, the worker fell several metres from a roof while working as a roof tiler. He suffered spinal and skull fractures, and a traumatic brain injury (bleeding and swelling). He had 10 days of post traumatic amnesia (suggesting he suffered a severe brain injury), and it was common ground that he could not manage his own affairs.

Section 77 of the Civil Procedure Act provides that all moneys recovered in proceedings on behalf of people who lack capacity, or who are found by the court to be incapable of managing their own affairs, must be paid into Court, and then paid out to a trustee or manager. Fund management fees are charged by institutional and professional trustees to manage such damages.

Fund management is a well recognised head of damage, but the issue in this case was whether it is available in claims constrained by s151G.

The worker sued his (uninsured) employer in negligence. Liability was not an issue.

His claim was governed by s151G of the Workers Compensation Act, which relevantly provided:

(1) The only damages that may be awarded are:

(a) damages for past economic loss due to loss of earnings, and

(b) damages for future economic loss due to the deprivation or impairment of earning capacity.'

A consequence of obtaining work injury damages is that the worker is not entitled to receive further periodic compensation for wage loss, and the insurer is no longer responsible to meet his treatment and care requirements. Because of s151G, a worker can not recover any damages, either, for the future cost of his treatment and care needs.

The relevant issue for the trial judge was whether the defendant was liable for the professional fees involved in managing the compensation awarded to the worker.

First instance decision

Sidis DCJ held that the words 'due to' in s151G was capable of a fairly wide interpretation. The parliament had the chance to make it clear that fund management damages were not available and only 'lost wages' were recoverable, and it had not done so.

If damages for fund management were not available, her Honour reasoned that an injured worker would be required to use part of their lost income to pay for fund management fees, and that diversion of settlement proceeds amounted to a loss of earning capacity.

Therefore, she found that damages for fund management could be recovered.

She also accepted evidence from the particular manager who had been appointed to manage the worker's fund that the fund would not be exhausted by the time that the worker reached his statistical life expectancy, in case he lived longer than the average man of his age. Her Honour allowed damages for fund management for longer than the worker's life expectancy (increasing the amount allowed for that head of damage).

The Appeal

The defendant challenged both the award of any damages for fund management, and in the alternative, the requirement to pay for management of the fund beyond the worker's life expectancy.

The Court of Appeal (McColl and Campbell JA and Handley AJA) unanimously held that s151G does not prevent an award of damages for fund management, but they agreed the period of management should be limited to the worker's statistical life expectancy.

Campbell JA observed that 'earning capacity' is the potential to earn money, and that included the potential to earn income from invested money. It did not matter whether the particular worker was earning money in that particular way prior to his injury. Because he was incapable of managing his money as a result of the work accident, he had suffered an impairment of his earning capacity, and could recover damages for the fees of someone else managing his money.

Handley AJA observed that the need for fund management (the worker's inability to manage his own affairs due to his head injury) arose from the creation of the fund to compensate the worker for the deprivation of his earning capacity, and it was a component of his future economic loss incurred because his earning capacity had been lost.

On the defendant's alternative argument, while Handley AJA agreed that it would be entirely reasonable for the worker's advisors to conserve the fund against the chance that the worker outlived his life expectancy, that did not mean the defendant had to pay for that choice. The life tables balance the chances of early mortality or extended life, so Courts must adopt the average figures reflected in the life tables (unless of course there is evidence specific to the worker's life expectancy which justifies a difference approach).


This is the first time the Court of Appeal has considered the issue, so the decision is significant.

However, it seems that few workers who are so seriously mentally disabled as to be rendered incapable of managing their affairs would trade off their workers compensation rights (including payment of their treatment and care needs for the rest of their lives) for a lump sum representing only their loss of earnings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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