Allianz Australia Insurance Ltd v Shamoun

Judgment 1This is an application pursuant to s 69 of the Supreme Court Act 1970 for relief in the nature of certiorari in respect of a decision of a claims assessor under the Motor Accidents Compensation Act 1999. The decision under review is the assessment of a claim by Mr Roger Shamoun for damages for personal injury arising out of a motor vehicle accident. Mr Shamoun is the second and only active defendant to the application. His claim was referred to the Motor Accidents Authority of New South Wales for assessment by an assessor in accordance with part 4.4 of the Motor Accidents Compensation Act. The Authority and the assessor are the first and third defendants to the application. I was informed that each has entered a submitting appearance (notices to that effect have been served but have not made their way to the Court file). 2The plaintiff, Allianz Australia Insurance Ltd, is the insurer of the claim. Allianz accepted liability for the claim and accordingly the assessment was confined to the amount of damages for that liability. 3The assessor assessed the claim and specified damages in the amount of $569,050.50. Most of that amount was for past and future loss of earnings. The assessor's reasons in support of the certificate of assessment identified an award of $300,000 for past loss of earnings and $150,000 for future loss of earnings. The assessor expressly stated that he approached the quantification of each of those components on "a buffer basis", finding that it was "impossible to accurately forecast or quantify the extent of [Mr Shamoun's] economic losses flowing from the accident" (reasons for decision at [26]). 4The present application is confined to the assessment of future economic loss in the amount of $150,000. 5As explained by Basten JA in Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244 at [9], an application to invoke the Court's supervisory jurisdiction under s 69 of the Supreme Court Act must be grounded upon jurisdictional error or error of law on the face of the record. His Honour there explained with welcome clarity how those two categories of error "speak in different tongues". 6Allianz expressly characterises its grounds of review in the present case as raising only jurisdictional error, inviting the Court to consider all of the material before the decision-maker (not only that material which comprises "the record"). The particular grounds relied upon to support the contention that the assessment of future economic loss entailed error of the kind properly characterised as jurisdictional are specified in an amended summons filed in Court at the outset of the hearing, particularly at paragraph 2, where Allianz contends that, in approaching the task of assessing the future component of economic loss, the assessor asked himself the wrong question and failed to take into account relevant considerations. 7Ms Nolan, who appeared for Allianz, provided further clarification of those grounds in both written and oral submissions. In order to explain her precise submissions, it is necessary to understand the task conferred on an assessor under the statute. 8Where (as here) the insurer accepts liability for a claim, the task of an assessor under part 4.4 of the Motor Accidents Compensation Act is to assess "the amount of damages that a court would be likely to award": see s94(1)(b) of the Act. 9Section 94(2) of the Act requires that the assessment be made "having regard to such information as is conveniently available to the claims assessor". 10The determination of "the amount of damages that a court would be likely to award" is necessarily informed by the provisions of chapter 5 of the Act, which governs the award of such damages by a court. One of the provisions of chapter 5 is s 126 of the Act. Allianz contends that the assessor fell into jurisdictional error "because of failure to comply with...requirements imposed by s 126". 11Section 126 provides: (1) A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant's most likely future circumstances but for the injury. (2) When a court determines the amount of any such award of damages it is required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury. (3) If the court makes an award for future economic loss, it is required to state the assumptions on which the award was based and the relevant percentage by which damages were adjusted. 12Ms Nolan stated that Allianz's contention that the assessor asked himself the wrong question was based on an alleged failure to answer the questions posed by that section. 13An aspect of that ground was the contention that, in the circumstances of this case, the assessor was required to adopt "a conventional approach" to the award of damages and that it was not open to him to take the approach of awarding a lump sum or "buffer". Specifically, it was submitted at paragraph 17 of the plaintiff's written submissions that s 126 required the assessor: (a) only to make an award of damages for future economic loss in circumstances where the Claimant first satisfied him that the assumptions about future earning capacity or other events on which the award is to be based accord with the Claimant's most likely future circumstances but for the injury; (b) to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury; (c) upon determining the amount of any such award of damages, to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury; [my note: this contention appears to duplicate (b) above] and (d) to set out the assumptions upon which the award was predicated with sufficient rigour and transparency so that the parties affected by the award might understand properly its basis. 14The second ground of review was that the assessor failed to take into account relevant considerations. Although that was articulated as a separate ground, I think it is fair to say that it emerged in argument as being a different way of expressing the same proposition. Ms Nolan submitted that "a conventional approach" to the assessment of damages always starts with a consideration of the claimant's actual earnings. She submitted that it was "very obvious" that the assessor did not take into account evidence of the claimant's actual earnings in the present case, since he did not expressly refer to the relevant figures or make an estimation of the baseline figure of the future earnings of the business being conducted by the claimant at the time of the accident. Allianz submitted that evidence of actual earnings was "conveniently available to the claims assessor" and he was accordingly required to have regard to it under s 94(2) of the Act. 15Allianz's submissions on the "wrong question" ground closely replicate the terms of the decision of the Court of Appeal in Allianz Australia Insurance Ltd v Sprod [2012] NSWCA 281; (2012) 81 NSWLR 626. The insurer in that case was the same company as in the present case. In Sprod, the assessor assessed future economic loss by reference to a roughly determined allowance of $250 per week multiplied by 18.3 years, giving an amount of $134,300. The assessor did not state, in terms, that he or she had adopted "a buffer approach". 16Allianz sought judicial review on the same basis as is relied upon in the present case, namely, that the assessor had failed to comply with the requirements of s 126 of the Act. At first instance, Hoeben J (as his Honour then was) considered that although the assessor did not specifically state that he was adopting a "buffer" approach, his methodology and approach was the same as that used in buffer cases, the only difference being the adoption of a calculation by reference to a percentage of the plaintiff's earnings rather than the specification of a lump sum: see Allianz Australia Insurance Ltd v Sprod [2011] NSWSC 1157 at [30]. 17Against that analysis, Hoeben J rejected the submission that the assessor had failed to comply with the requirements of s 126. Although expressed by reference to the adequacy of the assessor's "reasons", his Honour's judgment plainly rests on the substantive conclusion that the assessor had complied with the requirements of the section as to making assumptions about future earning capacity, to the extent required where a buffer approach is adopted: at [45]. 18The Court of Appeal overturned that decision. The main judgment was given by Barrett JA, with whom Campbell JA and Sackville AJA agreed (at [1] and [44] respectively). Barrett JA accepted a submission put by Allianz that the case "was not, in truth, one of 'buffer' award": at [24]. On that premise, his Honour said (at [37]): There was, in my opinion, a failure of the assessor in these respects to engage with and perform the tasks prescribed by s 126. Once the assessor embarked on a process of calculation, the duties imposed by s 126 were enlivened (they would also have been enlivened, but required potentially very much less by way of explanation of assumptions, had the circumstances exhibited such uncertainties and imponderables as to justify the broad evaluative "buffer" approach). 19The appeal in Sprod was heard on 14 August 2012 and determined in a judgment delivered on 12 September 2012. It is surprising, in that context, that the Court in Sprod was apparently not referred to its own decision (delivered less than a week earlier by a differently constituted court) in Cervantes. 20One of the grounds of appeal in Cervantes was that the assessor erred in awarding lump sums for past and future economic loss. Although that ground does not appear to have relied in terms upon any alleged failure to comply with the requirements of s 126, the content of the requirements of that section necessarily arose in the determination of that ground. Basten JA said (at [40]-[42]): [40] Under s 126 of the Compensation Act, the court is required to be satisfied that any assumptions about future earning capacity "or other events" accord with the claimant's most likely future circumstances but for the injury. Any award is to be discounted by the "percentage possibility that the events concerned might have occurred but for the injury". On one view, s 126 could be read as inconsistent with the award of a buffer for future economic loss. Such an approach would force a court, satisfied on the probabilities that there has been such a loss, to make an arithmetical calculation suggesting a degree of precision which was not warranted by the circumstances. As explained in Allianz v Kerr at [30], that approach has been rejected in a consistent line of authority in this court, which was not challenged in the present case. [41] Part of the appellant's argument, revisiting a point raised in Allianz v Kerr, was that buffers were inherently unsatisfactory because they failed to reveal the true basis on which the figure was reached. In so far as the complaint is addressed to the use of a buffer as such, as opposed to the adequacy of the reasons given by the assessor, it is misconceived in two respects. First, the failure to adopt an arithmetical calculation does not mean that the assessor was excused from identifying the circumstances he was satisfied would most likely have occurred but for the injury. Nor was he excused from identifying, in broad terms, the limits on the earning capacity resulting from the injury. To that extent, there was transparency. Secondly, there was a misconception as to the value of "transparency" in relation to a speculative exercise. As already noted, if a precise calculation were to be mandated it could no doubt be undertaken. In each case the result will be precise, being a monetary figure; in one case there will be a false impression as to accuracy, whereas in the other inaccuracy will, with justification, be conceded. [42] The appellant accepted that the statute permitted what it described as a "compliant buffer". However, it was unable to articulate the principles which distinguished a compliant from a non-compliant buffer. The point appears to have been that where the assessor could reasonably have been expected to make an arithmetical calculation in the conventional sense, there would be an error in point of law in failing to undertake that task. However, that approach merely relocates the error of law to a different stage in the process. It must be an essentially evaluative judgment to determine whether in a particular case one approach is preferable to another, if both are available. It is then a matter for the appellant to establish that the course taken by the assessor in the present case was not reasonably open to him. Why that should be so, given the inherent uncertainties in the exercise being undertaken, was not made clear. The underlying premise appeared to be that a precise calculation was demanded in circumstances where the buffer for future economic loss was as large as $400,000. 21The other members of the court agreed: per McColl JA at [1]; per Macfarlan JA with additional remarks at [50] to [52]. 22It is perhaps a step too far to say that Allianz's appeals in Cervantes and Sprod, each conducted apparently in ignorance of the other, have produced inconsistent decisions in the Court of Appeal. As already noted, the decision in Sprod accepted the premise contended for by Allianz that the assessor did not, in truth, adopt a buffer approach whereas, in Cervantes, the fact of adoption of such an approach was not in dispute. However, it is difficult to conclude that the Court in Sprod would not have been assisted by the analysis of the legislation provided by Basten JA in Cervantes (set out above) and, in particular, his Honour's regard to the proposition that the determination whether to adopt a buffer approach is "an essentially evaluative judgment": at [42]. 23Allianz's contention, if upheld, would hold that the adoption of a buffer approach is not open where the assessor could have undertaken an arithmetic calculation, even if such calculation would have been difficult and, to a degree, speculative. Basten JA's remarks in Cervantes at [41] explain the vice of such a formulaic approach, which confuses precision with accuracy. 24Similar remarks were made by Robertson J in Minister for Immigration and Citizenship v SZRKT [2013] FCA 317 at [77], citing the decision of the US Supreme Court in Universal Camera Corp v National Labor Relations Board 340 US 474 (1951) per Frankfurter J. That is a judgment which repays close reading. Frankfurter J said: A formula for judicial review of administrative action may afford grounds for certitude but cannot assure certainty of application. Some scope for judicial discretion in applying the formula can be avoided only by falsifying the actual process of judging or by using the formula as an instrument of futile casuistry. 25Whether or not there is any tension between the decisions in Cervantes and Sprod, the present case is one in which the assessor expressly determined that it was appropriate to assess both past and future economic loss on a buffer basis. Accordingly, I am bound to apply the principles stated in Cervantes. 26In accordance with those principles, the task for Allianz is to establish that the course taken by the assessor was not reasonably open to him in the assessment of future economic loss (noting that there is, perhaps inconsistently, no challenge to the adoption of the buffer basis in respect of past economic loss): see Cervantes at [42]. If the buffer approach was open in the present case, it nonetheless remained necessary for the assessor to make and articulate the assumptions adopted but that requirement was able to be discharged by more generalised statements: see Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13 at [32] to [36] per Basten JA; and see the additional remarks of Macfarlan JA (agreeing with Basten JA) at [66] to [72]. Further, as held in Kerr at [35], the adoption of a buffer approach obviates the need to articulate the percentage adjustment required by s 126 since, on the buffer approach, that percentage is nil. 27In my view, it was open to the assessor to adopt a buffer approach to the assessment of future economic loss in the present case. Indeed, it is difficult to see how he could have taken any other approach without deluding himself as to the measure of accuracy attained. Had he embarked on any calculation by reference to the available financial information, scant as it was, he would have exposed himself to the criticism expressed by Barrett JA in Sprod at [37] (set out above) that, having embarked on such a process, "the duties imposed by s 126 were enlivened", requiring calculation to a degree of precision not warranted or even available on the evidence. 28On that premise, I am not persuaded that the assessor failed to comply with the requirements of s 126. 29At the time of the accident, Mr Shamoun had recently established a new business, called Hopscotch. The financial material before the assessor as to the operations of that business was confined to a period of about six months. Any projection of that experience into the future was necessarily speculative. By the time of the assessment Mr Shamoun had, after a period of incapacity attributable to the accident, accepted the failure of that business but applied his evidently considerable business skills to the establishment of a different business, better tailored to his post-accident condition. 30The specific findings made by the assessor were carefully summarised in Mr Shamoun's written submissions, as follows: The assessor made the following findings in satisfaction of the requirements of section 126 of the MACA: i. The evidence of the Claimant and his mother was "convincing and truthful". ii. In the subject motor vehicle accident, "the Claimant did injure his neck and back as he alleges". iii. "The immediate impact of the injury on the Claimant after the accident was very significant and caused him in turn a severe psychological injury, the effect of which together with the physical injuries lasted until 2010." The effects of the accident on the Claimant were "devastating." iv. When he started his own business, "it is clear that he did so on a professional basis, as he formulated a business plan, obtained advice from an accountant as to the correct and appropriate tax structure and threw himself into the venture." v. "Within a period of 6 to 7 months [of the commencement of the business] he secured orders of about $400,000 and was understandably upbeat about the prospects of his venture." vi. "He had obtained two major contracts with international companies ... and was confident he could expand his business and would soon be able to dispense with his Chinese intermediary, which would have dropped his production costs by 50%." vii. "His physical injury meant that he could not take advantage of the work he had put into establishing his business and he was not able to help the business continue to expand." viii. "He sustained an immense shock to his confidence and self-esteem as a result of the accident and future financial setbacks and pressure may well result in the re-emergence of psychological condition in the future." ix. The Plaintiff had "failed to address the opinion of Mr Osmond." x. But for injury, the Claimant would likely "have continued with hopscotch which would have maintained its growth in terms of sales and profitability as the Claimant no longer had to rely upon an intermediary in China and then could deal directly with Chinese manufacturers." xi. "I accept that as his business volume increased ... he would be able to negotiate a lower cost of manufactured goods." xii. "Given the Claimant's maturity, family tradition of being involved in commerce and the Claimant's professionalism in identifying a business opportunity and planning for its success and making substantial progress in the first 6 or 7 months of operation, I believe that it was far more likely that the claimant's business would have been a success and may well have been a substantially successful operation." xiii. The Claimant's new venture "will probably not be as lucrative as Hopscotch and the Claimant will face some small additional expenditure as a result of having to employ people to do some physical tests which he cannot undertake himself." xiv. The Assessor considered that a buffer was the correct approach "as it is impossible to accurately forecast or quantify the extent of the Claimant's economic losses flowing from the accident." 31Those findings lead the assessor to conclude (at [32] of the reasons): I have already found that the Claimant's future earnings will be diminished as a result of the failure of Hopscotch. My overall impression weighing up all of the material before me is that Hopscotch most likely would have been a solid and successful business from which the Claimant would both in the past and in the future reap significant financial rewards. The extent of those rewards could have ranged from modest to extremely profitable. I believe the Claimant is now in a position to devote all of his talents as a businessman to his new venture and I believe that he will be more than passably successful. It is possible that his new venture will be equally or more successful than Hopscotch, but there exists a significant chance that it will be less so. Taking that into account and the fact that will take him some years to get to where Hopscotch would have been at the present time, my estimation is that the appropriate buffer to be awarded in these circumstances is the sum of $150,00. 32Ms Nolan submitted that the assessor was required, rather than saying that the extent of the rewards that might have been derived from Hopscotch "could have ranged from modest to extremely profitable", to make a finding one way or the other on that issue. If that were a task mandated by s 126, the section would in my view suffer from the vice of requiring illusory precision discussed in the cases considered above. However, I think it is clear from the decision in Cervantes and the earlier authorities there considered that s 126 does not mandate such an approach. On the contrary I accept, as submitted by Mr Mooney SC on behalf of Mr Shamoun, that the imponderability of that issue was one of the factors which the legislation allows to contribute to the conclusion that a buffer approach should be adopted. 33I am not persuaded that the decision entailed jurisdictional error in that the assessor asked himself the wrong question or failed to take into account the evidence of the claimant's actual earnings. For those reasons, the plaintiff's summons should be dismissed with costs.