Gordian Runoff Limited v Ozurumba

Supreme Court of NSW|2020-06-12|Before: Fagan J

Judgment

The plaintiff seeks judicial review of a decision made on 2 December 2019 by the third defendant, Allan Cowley, in his capacity as a claims assessor of the State Insurance Regulatory Authority ("SIRA", the third defendant). The decision was an assessment of damages claimed by Mr Kevin Ozurumba, the first defendant, under the Motor Accidents Compensation Act 1999 (NSW). The claim arose out of a motor vehicle accident on 5 July 2015. The plaintiff submits that there are errors of law on the face of the record and jurisdictional errors in the assessor's decision to certify Mr Ozurumba's past economic loss in the sum of $182,712 and loss of future earnings at $200,000.
Mr Ozurumba was in the driver's seat of his stationary vehicle when it sustained a rear end collision. The plaintiff is the compulsory third party insurer of the driver of the other vehicle. The plaintiff admitted liability of its insured and did not allege contributory negligence. Mr Ozurumba sustained soft tissue injuries to his neck, back and shoulders. He was medically assessed at 5% Whole Person Impairment. He was not able to claim non-economic loss.

Grounds of review

The plaintiff's grounds of judicial review are set out in the summons in considerable detail over 2½ pages of single-spaced text. Particulars of the assessor's findings of fact that are said to be unsupported by any evidence were elaborated in written and oral submissions. For the purposes of this judgment the grounds can be summarised and condensed as follows: 1. Failure to give reasons, or adequate reasons, for the decision concerning past and future economic loss. This ground includes contentions that 1. aspects of the assessor's reasons are internally inconsistent; 2. no reasons are stated for accepting the claimant's projected figures for what he would have earned as a CNS-1 in the 230 weeks after the accident up to the date of the assessment; 3. no reasons are stated for using the calculations of Mr Smith, an accountant whose report was tendered by the insurer, to derive a buffer for future loss of earnings. 1. In contravention of s 126 of the Motor Accidents Compensation Act, failure to state assumptions as to the "most likely future circumstances" that informed the assessor's determination of his award for future economic loss. 2. Failure to respond to substantial and clearly articulated arguments made by the insurer affecting the assessment of future economic loss. 3. Purporting to find facts despite there being no substantiating evidence, including findings: 1. that but for the accident, in FY16 and FY17 the claimant's earnings would have been at the weekly rates calculated by him in "Potential Earnings" schedules and 2. that, but for the accident, upon the claimant accepting a promotion to CNS-2 he would have been rostered to night and weekend shifts and overtime so that his earnings would have been increased by the application of penalty and overtime rates calculated on the higher base salary of a CNS-2.

Past economic loss - evidence and the assessor's reasons

At [75] of his decision the assessor referred to a series of schedules prepared by the claimant from which the assessor extracted figures for actual past earnings and "Potential Earnings" that the claimant submitted would have been derived post-accident, but for his injuries. The assessor extracted figures from those schedules into a table at [75]. Entries in that table were then used as the basis of the assessor's calculation of past economic loss, at [76]-[81]. As explained by the Court of Appeal in Mulcahy v NRMA Insurance Limited [2018] NSWCA 189 at [35]-[37], the assessor's reasons are taken to be part of the record for the purposes of identifying any error of law on the face of the record. In a manner similar to what occurred in Mulcahy v NRMA Insurance Limited, the claimant's schedules were referred to and drawn upon by the assessor as part of his articulation of reasons and they have thereby become incorporated as an integral part of the record of the decision under review.
The claimant's schedules showed his actual earnings after-tax for the two financial years immediately before the accident and for four years thereafter, up to 30 June 2019. The same schedules also showed the claimant's average weekly net earnings calculated from the annual figures. These undisputed figures were as follows: FY Annual net $ Weekly net $ 14 61,673 1,291 15 65,989 1,269 16 69,302 1,332 17 62,225 1,197 18 63,685 1,224 19 66,296 1,275

The claimant's schedules referred at [75] in the assessor's reasons also included calculations entitled "Potential Earnings as Clinical Nurse/Midwife" for the years of alleged past economic loss; that is, for FY16-FY19 inclusive. These "Potential Earnings" schedules purported to be based on the CNS-1 classification for FY16 and FY17 and on the CNS-2 classification for FY18 and FY19. The calculation for FY16 was as follows, with line numbers added for ease of reference and with some abbreviation of the item descriptions: $ 1 Base Weekly Pay $46.14/Hour [38 hours] 1,753.60 2 Penalty at 50% base pay for Saturdays [7.5 hours] 519.00 3 Penalty at 70% base pay for Sundays [7.5 hours] 605.65 4 Gross/Week 2,878.25 5 $2,878.25 x 52 weeks 149,669.00 6 Add 2 weeks extra annual leave 5,756.00 7 [Total gross for 54 weeks] 155,425.50 8 Less: Deductions (as per tax returns for 2016) 7,362.00 9 [Taxable income] 148,049.00 10 [Tax and Medicare levy] 45,686.00 11 [Net income for FY16] 102,363.00 12 [Net weekly income] 1,968.50
Line 1 was unsupported by any evidence. The award pay scales for each of the financial years in question were attached as appendices to the report of the insurer's accountant, Mr Smith, dated 22 October 2019. The awards showed that the weekly base pay for a CNS-1 in FY16 was $1,628.40. The weekly rate of $1,753.60 was not awarded until the first full pay period in FY19.
Lines 2, 3, 4 and 5 are based on the claimant working seven days per week in all 52 weeks of the year. There was no evidence to support a conclusion that this would occur. As will be seen, despite the conspicuous impossibility of this basis of calculation the assessor accepted it and acted upon it. If it did not immediately register with the assessor that Mr Ozurumba could not work a full shift for 365 days straight, perusal of the only evidence on the subject would have alerted him.
First, Mr Smith's report included the conditions of the Public Health System Nurses' and Midwives' (State) Award 2019. This publication was effective from 1 July 2019. There was no evidence that the general award conditions were any different in earlier years. Clause 4 provided that the ordinary hours of shift workers "shall not exceed an average of 38 hours per week in each roster cycle". It was also prescribed that these hours should "where possible, be arranged in such a manner that in each roster cycle of 28 calendar days each employee shall not work his/her ordinary hours of work on more than 19 days in the cycle". A qualification permitted that shifts of less than 8 hours might be worked across 20 days in each cycle of 28 days. Mr Smith's report drew attention to these restrictions in pars 2.7.5 and 5.6.5 of his report.
Secondly, the claimant's pay slips for the last six months of FY15 were tendered. These showed that up to the date of the accident he worked between 56 and 80 hours per fortnight. On average he worked 37 hours per week. If he had ever worked seven days per week for a full shift each day, that would have come to 53 hours in a week. None of his payslips from the period prior to the accident indicated that he had at any time worked to that extent. Hence the only evidence on the subject was to the effect that award conditions would not have permitted him to work the hours for which he claimed to have been incapacitated and that in any event he had not worked such hours up to the date of his alleged injury.
Payslips were also in evidence for parts of the two years immediately following the accident, namely, for half of FY16 and for most of FY17. He worked an average of 37 hours per week in those periods as well. His actual earnings in FY16 and FY17 were very similar to his actual earnings in FY15 (see [16] above), consistently with the hours of work per week having remained constant for the years before and after the accident.
Line 6 in the "Potential Earnings" calculation at [17] above was unsupported by evidence. There was no material upon which the assessor could have accepted that but for the accident the claimant would have been able to work full shifts for 52 weeks of the year and be paid for 54 weeks.
It follows from the above observations concerning Lines 1-6 that there was no evidence to substantiate integers in the calculation that were essential to derivation of the end-result figures relied on by the claimant; namely, total projected gross income for FY16 (Line 7), total projected net income for the year (Line 9) and projected net weekly income of $1,968.50 (Line 12).
The claimant's "Potential Earnings" schedule for FY17 followed the same pattern, again commencing at Line 1 with a base weekly pay for CNS-1 of $1,753.60. The award rate for FY17 was actually $1,669.10. The FY17 schedule similarly adopted the assumptions that a full shift would have been worked on all 365 days of the year and that the claimant would have received payment for 54 weeks rather than 52. The claimant asserted "potential" net income for the year of $103,603 giving rise to a weekly net pay of $1,992. The slight difference from the FY16 bottom line was attributable to slightly lower tax deductions in FY17.
For each of FY18 and FY19, Line 1 used a base weekly pay of $1,883.70. The calculations followed the same steps as for FY16 and FY17; that is, they were based upon work for 365 days of the year and payment for 54 weeks. For two reasons there was no evidence to support base weekly pay of $1,883.70. First, it is a CNS-2 rate that only took effect from the first full pay period in FY19 and it could not have had any application to FY18. Secondly, there was no evidence that the plaintiff could have worked rotating shifts at the CNS-2 classification. There was no evidence that shift work would have been available at that classification to support a calculation based upon seven full shifts per week for the whole year.
On the evidence, a calculation based upon the claimant working night shifts and weekends would have had to assume a base pay at the CNS-1 classification, which was $1,710.80 per week for FY18 and $1,753.10 per week for FY19. The claimant's assertions in the FY18 and FY19 schedules that he would have worked 365 shifts in the year and been paid for 54 weeks were in any event unsupported by any evidence, for reasons already given. The schedules projected net income, but for the accident, at $111,291 for FY18 at a net weekly rate of $2,410. For FY19 the corresponding figures were $111,768 and $2,149. The slight difference between these two years is again attributable only to different amounts of deductible expenses brought to account in the calculations.
The average of the claimant's actual net earnings in the two years immediately before the accident, FY14 and FY15, was $66,576. The claimant's "Potential Earnings" schedules propounded a claim that, but for the accident, he would have achieved in FY16-FY19 an increase in net income relative to the average of the two years immediately prior to the accident of between 54% and 68%, as follows: FY Claimed annual net "Potential Earnings" $ % increase on FY16-17 average ($66,576) 16 102,363 54% 17 103,603 55% 18 111,291 67% 19 111,768 68%

It would have been remarkable there had been any evidence to substantiate that such a dramatic increase in earnings would have occurred but for the accident. There was no such evidence. Nevertheless, the assessor calculated past loss of earnings on the premise that the claimant's projections for FY16 and FY17 were established. In the table at [75] of his reasons the assessor included the following figures. Those in the actual earnings column were undisputed but everything else was derived from the claimant's "Potential Earnings" schedules: FY Actual net weekly $ "Potential" net weekly $ Claimed loss per week $ 14 1,291 15 1,269 16 1,332 1,968 636 17 1,197 1,992 795 18 1,224 2,410 916 19 1,275 2,149 925

From the above figures the assessor's reasons proceeded as follows: [76] My conclusion is that the Claimant has established that but for his accident related injuries he would have continued in his pre-accident role working overtime/weekend shifts. [79] In making my assessment I have assumed that the Claimant would not have invariably [scil inevitably] been promoted to CNS Grade Two if he had remained in his pre-accident role. The average of his net weekly loss in 2016 and 2017 is $715 (636 + 795 / 2 = $715). In my assessment that is his net weekly loss which totals $148,720. [From the date of the accident to 30 June 2019: 208 weeks x $715 = $148,720]. [80] I have then allowed a further 22 weeks at $715 to take my calculations to the end of November [2019] approximately which I calculated to be an additional $15,492. Therefore I calculate the claimant's total past loss of earnings at $164,212. [81] To this I have added past superannuation which I calculate to be $18,500 [at 11.26%] rounded down.
The total of the two figures derived at [80] and [81] is $182,712. The assessor included this amount in his assessment. It is explicitly based upon the findings that I have identified as having been made without any supporting evidence. There is a clear error of law on the face of the record, as claimed by the plaintiff in its ground (4)(a): see [14] above. This aspect of the assessment, at least, must be set aside.
It is also correct, as the insurer submits, that the assessor failed to give reasons for having accepted the claimant's "Potential Earnings" figures for FY16 and FY17 that he used to derive the shortfall for the relevant years. On the other hand, he did give reasons for projecting the same shortfall into FY18 and FY19, namely, that he concluded the claimant would not have accepted the promotion to CNS-2 if he had not suffered the accident and instead he would have continued as a CNS-1 on rotating shifts, in general nursing. This conclusion was in turn based upon a finding at [71] that the claimant "appears to be financially stressed and [would] prefer the higher income".
The absence of reasons for having accepted the claimant's FY16 and FY17 figures sustains ground (1)(b) of the insurer's judicial review application: see [14] above. The question of how much the claimant would have earned but for the accident in the period between 5 July 2015 and the date of the assessment was critical to the contest between the parties. It was the subject of the detailed accountant's report tendered by the insurer and written submissions in which the insurer explicitly and robustly disputed assumptions underlying the claimant's schedules.
In the circumstances of this case it was the assessor's legal duty to refer to the evidence from the insurer and to explain why it was not acted upon: Campbelltown City Council v Vegan (2006) 67 NSWLR 372; [2006] NSWCA 284 at [121]; Qushair v Raffoul [2009] NSWCA 329 at 52; Alchin v Daley [2009] NSWCA 418 at [35]-[47]. This ground of review is subsidiary, in relation to the assessment of past economic loss, because I have found that there was no evidence to sustain the factual conclusions upon which the assessor made his calculations. Accordingly, no sensible reasons could have been given for those conclusions.

Future economic loss - evidence and the assessor's reasons

At par 2.12 of Mr Smith's report he stated the following (underlining in original): If the Claimant can establish that, but for his accident related injuries, and having regard for his historical expertise, there would have been a CNS Grade 2 role available to him that provided a rotating shift with overtime and weekend work, then in theory, the Claimant may have suffered a loss of income of up to 30% of his Annual Base Pay as a CNS Grade 2. Mr Smith stated that if the above assumptions could be established then, having regard to the level of his CNS-2 base pay in FY19, he could have derived "theoretical over base earnings of $356.04 after tax per week".
The assessor's decision contains the following with respect to an allowance for future loss of earnings: [83] […] [If] I was to rely upon [the insurer's] expert Smith adopting the 30% of theoretical annual over base earnings then he calculates a weekly loss of $356.04. [84] If I was to allow for retirement at age 67 then the Claimant has further 20 years of working life for which the 5% multiplier is 666.4. That I calculate to be $237,265. After allowing the usual 15% for vicissitudes that would come to a figure of about $201,675. [85] If on the other hand […] I was to assume that the Claimant, but for the accident, would now be promoted to [CNS-2] then the average of his loss [from the claimant's "Potential Earnings" schedules, for FY18 and FY19] is $920 [net per week]. I calculate that loss to be $613,088 which allowing 15% deduction for vicissitudes comes to $521,125. [86] I also think it is entirely possible that the Claimant, once his new family has arrived in Australia, would be less inclined to continue the more strenuous hours required of a [CNS-1] and would eventually have gravitated to a role such as a diabetes educator. [87] It seems to me that one has to make far too many assumptions and perhaps make inappropriate calculations to make an appropriate assessment. I therefore follow the reasoning of McColl JA in Allianz Australia Insurance Ltd v Kerr (2012) 83 NSWLR 302; [2012] NSWCA 13. [The assessor quoted the statements of principle at [7]-[9] of that decision, concerning the allowance of a buffer]. [88] In allowing a buffer and [sic] I adopt the calculation as made by the insurer's expert Mr Smith and allow $200,000 for the future. I make no further allowance for superannuation or vicissitudes because this has been included in that figure.
The first thing that may be said about the above paragraphs of the assessor's decision is that Mr Smith's calculation "in theory" was expressly premised upon proof that the claimant would have been able to take the promotion to CNS-2, with higher base pay, and work in that classification on night shifts and weekends at overtime and penalty rates. As noted earlier, there was no evidence that this was possible. It was therefore an error of law for the assessor to have adopted Mr Smith's theoretical calculation, resting as it did upon an unsupported premise. The error identified in the plaintiff's ground (4)(b) is established.
Secondly, the assessor's reasons with respect to future economic loss do not satisfy s 126 of the Motor Accidents Compensation Act. That section provides as follows: 126 Future economic loss - claimant's prospects and adjustments (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.
It was inherently contradictory for the assessor to have (a) adopted Mr Smith's calculation of a theoretical weekly loss, (b) adopted a working-life expectancy of 20 years and (c) applied a multiplier and a discount for vicissitudes - and then called the result a "buffer". By mis-describing his approach, which was really one of calculation, the assessor passed over the necessity to make a finding about the underpinning of Mr Smith's "theoretical … $356.04 after tax per week". The underpinning was that the "there would have been a CNS Grade 2 role available to him that provided a rotating shift with overtime and weekend work". Further, the assessor concluded at [71] and [76] that the claimant would have continued as a CNS-1. It was contradictory to have adopted Mr Smith's calculation that assumed CNS-2 classification. At [86] the assessor did no more than recognise the possibility that the claimant might move to CNS-2 and made no finding as to when this might occur.
The assessor's reasons in all of these respects are seriously deficient, both generally (see the authorities referred to at [34] above) and by reason of non-compliance with s 126. If this was truly a buffer case, the assessor would nevertheless have had to state his assumptions albeit that they might have been more generalised than would be required for a calculation: Allianz Australia Insurance Ltd v Sprod (2012) 81 NSWLR 626; [2012] NSWCA 281 at [30]. Grounds (1)(c) and (2) in the insurer's application for review are established. These defects with respect to exposure of reasons are subsidiary to the no evidence point referred to at [37] above. That is because, in the absence of any evidence upon which the assessor could have found the fact that was essential to adoption of Mr Smith's calculation, no intelligible reasons could have been formulated.
The assessor's award of $200,000 for future loss of earnings must be set aside.

Orders

I have not found it necessary to consider separately the plaintiff's ground (3) concerning failure to respond to substantial and clearly articulated arguments. The aspects of the decision that are challenged under that ground overlap with the assessor's failure to give adequate reasons and are sufficiently addressed by what I have said on that topic.
In written and oral submissions to this Court the claimant's counsel was unable to identify any evidence to sustain those findings that I have referred to his reasons as unsupported. In opposition to the other grounds of review, counsel referred to s 94(5), which requires only a "brief statement …. setting out the assessor's reasons". He cited well known authorities to the effect that the obligation of an assessor is less than that imposed upon courts with respect to giving reasons and that the nature of the task may mean that aspects of an assessment are not susceptible to detailed articulation of reasoning. The authorities also establish that in judicial review proceedings the decision under review must be read as a whole, fairly and with a beneficial construction and must not be construed minutely with a keen eye for error.
I have applied those considerations in reaching the conclusions expressed above regarding the plaintiff's grounds (1) and (2). The assessor's reasons manifestly fail to disclose a coherent, intelligible justification for his award. The reasons place a veneer over the complete absence of lawful, evidence-based justification for the significant award of $382,712. The claimant's counsel submitted orally, in defence of the reasons, that the assessor "did the best he could". I do not accept that. The Act establishes a system in which entitlements and obligations as between motor accident victims and licensed insurers are to be adjudicated according to law and on the basis of evidence. There should have been no difficulty about performing that function in this case but, in substance, it has not been performed at all. Where disputed projections of hypothetical income have been treated as facts in the absence of evidence and where no adequate reasons for decision have been given, the assessment has the appearance of unauthorised largesse.
The orders of the Court will be: 1. The decision of the third defendant in his capacity as a claims assessor of the second defendant made 2 December 2019 assessing the first defendant's damages and issuing a certificate pursuant to s 94(4) of the Motor Accidents Compensation Act 1999 in respect of the first defendant's claim lodged with the second defendant arising out of a motor accident on 5 July 2015 is set aside in so far as it assesses past loss of earnings at $182,712 and future loss of earnings at $200,000. 2. The second and third defendants, by themselves or their servants or agents, are prohibited from acting on or taking any step in reliance on the said decision in so far as it assesses past and future loss of earnings. 3. The assessment of the first defendant's claim for past and future loss of earnings is remitted to the second defendant for determination according to law by a claims assessor other than the third defendant. 4. The first defendant is to pay the plaintiff's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 June 2020

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