In Gray v Richards [2014] HCA 40, the High Court of Australia held that damages recovered by an injured plaintiff should allow for the cost of fund management of the lump sum. But no allowance should be made for the cost of managing the fund’s future income.

The consequence is that on an agreed verdict of $10 million plus fund management, the damages for fund management allowed in the NSW Court of Appeal of $1,495,000 were increased by $539,000 to $12,151,000 in total.

The amount not allowed by the High Court for fund management on income into the fund would have been a further $117,000 or 18% of the additional sum claimed in the High Court.

Astute negotiators for such catastrophically injured plaintiffs and astute fund managers will no doubt in the future ensure that there is 100% recovery of the cost of managing the allowance for fund management by it being levied only on the decreasing capital of the fund, and not on the income, but at a rate which produces the same or similar ultimate charges.

Accordingly, it is likely that the whole of fund management will be recoverable if this course is pursued.

It is noted that both the NSW Trustee and Guardian and private fund managers have shown themselves willing in the past to negotiate in respect of the regime of future charges and indeed, to offer discounts to those for whom very large sums of money are being invested and managed, such as this severely disabled plaintiff.