IAG Limited t/as NRMA Insurance v Al-Kilany

CARS Assessment

1. I briefly described the scheme for assessing claims for damages under the MAC Act in AAMI Ltd v Ali [2012] NSWSC 969 at [12] to [17]. I will not repeat that discussion.
2. In this case, the relevant function performed by the Assessor was that conferred by s 94 of the MAC Act, which provides: (1) The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of: (a) the issue of liability for the claim (unless the insurer has accepted liability), and (b) the amount of damages for that liability (being the amount of damages that a court would be likely to award). (2) Such an assessment is to be made having regard to such information as is conveniently available to the claims assessor, even if one or more of the parties to the assessment does not co-operate or ceases to co-operate. (3) The assessment is to specify an amount of damages. (4) The claims assessor must, as soon as practicable, after an assessment issue the insurer and claimant with a certificate as to the assessment. (5) The claims assessor is to attach a brief statement to the certificate, setting out the assessor's reasons for the assessment. (6) If the Principal Claims Assessor is satisfied that a certificate as to an assessment or a statement attached to the certificate contains an obvious error, the Principal Claims Assessor may issue, or approve of the claims assessor issuing, a replacement certificate or statement to correct the error.
3. Two matters should be noted about the function performed by assessors under s 94. First, s 94(5) obliges assessors to attach a brief statement of reasons to the certificate recording their assessment. This obligation is supplemented by clause 18.4 of the Claims Assessment Guidelines made under s 69 of the MAC Act (the "guidelines") which provides: "18.4 A certificate under section 94 or 96 is to have attached to it a statement of the reasons for the assessment. The statement of reasons is to set out as briefly as the circumstances of the assessment permit: 18.4.1 the findings on material questions of fact; 18.4.2 the Assessor's understanding of the applicable law if relevant; 18.4.3 the reasoning processes that lead the Assessor to the conclusions made; and 18.4.4 in the case of an assessment certificate pursuant to section 94, the Assessor must specify an amount of damages and the manner of determining that amount."
4. Section 106(1) of the MAC Act makes claims assessments under Part 4.4 of the MAC Act of the kind undertaken here subject to the "relevant provisions" of the guidelines.
5. Second, s 122(3) of the MAC Act provides that the provisions of Chapter 5 of the MAC Act which regulate and limit the awarding of various heads of damages by Courts also apply to assessors acting under s 94. Section 123(1) precludes a "court", and thus an assessor, from awarding damages "contrary to" Chapter 5. The relevant restriction in Chapter 5 for this case concerns the awarding of amounts of damages for future economic loss. In particular, s 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."
6. A number of decisions of this Court have addressed compliance with this provision in the context of the awarding to an injured claimant of an amount said to represent a "buffer", that is a "figure for economic loss [that] is so fraught with uncertainty that the preferred course is to award a lump sum as a "buffer" without engaging in an artificial exercise of commencing with a precise figure and reducing it by a precise percentage" (see Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13; 83 NSWLR 302 at [30]). In particular it has been held that s 126 does not preclude an award of a buffer (see Penrith City Council v Parks [2004] NSWCA 201). Nevertheless, if a buffer is to be awarded, compliance with s 126 is still required although "the obligations imposed by s 126 upon the assessor may be discharged by much more generalised statements" (see Allianz Australia Insurance Ltd v Sprod [2012] NSWCA 281; 81 NSWLR 626 at [30] per Barrett JA; "Sprod").

The Assessment

1. The Assessor's reasons that accompany the certificate under s 94(4) of the MAC Act run to some ninety paragraphs. After setting out some introductory matters, the Assessor identified the various issues that he considered he had to address, which included determining whether Mr Al-Kilany's evidence was reliable, determining what were his most likely future circumstances but for his accident, determining what, if any, loss of income he had suffered because of his injuries and determining what, if any, loss of income he is likely to suffer in the future because of his injuries. The Assessor then addressed those issues in turn.
2. The Assessor commenced by setting out a summary of Mr Al-Kilany's evidence, which he later stated that he accepted in its entirety. Relevantly, the Assessor recorded that Mr Al-Kilany was born in 1959 and emigrated to Australia in 2008. Shortly after he arrived in Australia he established a motor mechanics business. The Assessor accepted that, up until the time of his accident, Mr Al-Kilany had a reasonable expectation that his business would continue to expand and that he intended to maintain low overhead expenses by only employing casual staff on an as needed basis rather than employing full-time motor mechanics. The Assessor also accepted that, up until the time he was injured, there were no physical constraints on Mr Al-Kilany in undertaking all the aspects of motor mechanic work for his business.
3. The Assessor recorded that Mr Al-Kilany had accepted that, for the financial year ended 30 June 2014, his business income was $74,062, consisting of a sum of $43,899 in wages yielding a profit of $30,163. In respect of the period after the accident, the Assessor accepted Mr Al-Kilany's evidence that he could continue to perform so called "light vehicle repair work" but he was unable to perform "heavy work". The Assessor accepted Mr Al-Kilany's evidence that, because of his injuries, he employed his son to undertake heavier mechanical work from September 2014 although his son had no formal qualifications. It was accepted that Mr Al-Kilany's son left his father's employment in late 2015 or early 2016.
4. The Assessor also summarised the evidence given before him by Mr Al‑Kilany's son, which was consistent with that given by his father. Ultimately, the Assessor found that had Mr Al-Kilany "not been injured his most likely future circumstances are that he would have continued to work in and operate his light vehicle repair business in the same or similar manner to how he worked and ran the business in the years leading up to the accident". The reference to "same or similar manner" is to that part of Mr Al-Kilany's evidence in which he stated that his preferred approach was only to employ staff on an as needed basis to keep his overheads down.
5. In the next part of his reasons the Assessor summarised the medical evidence. Ultimately, the Assessor accepted that that evidence established that Mr Al-Kilany "suffered a significant musculo-ligamentous injury to his cervical and thoracic spine" which caused him ongoing neck pain and restricted his ability to undertake "normal mechanical work". Nevertheless, the Assessor rejected a submission that was made on behalf of Mr Al-Kilany that his injuries were such that they would require him to retire prematurely. Instead, the Assessor considered it more likely than not that, if he continued to undertake fitness training and hydrotherapy and avoid heavier work for the "next several years", he would be able to continue working until the normal retirement age.
6. After addressing Mr Al-Kilany's claim for future medical expenses, the Assessor then addressed his claim for past economic loss. The Assessor found that he was satisfied that Mr Al-Kilany had "suffered a loss of income because of his injuries which … created a need for the claimant to employ mechanical staff which he would not have done had he not been injured". Considered in context, the reference to "income" must be a reference to gross income net of expenses. The Assessor then reviewed an accountant's report that had been tendered on behalf of Mr Al-Kilany. The Assessor noted that the accountant's report had stated that Mr Al-Kilany had experienced an increase in profit in the financial year ended 30 June 2004 which was "due to increased revenue with no deduction made for external labour costs". As noted, Mr Al-Kilany's accident was in May 2014, such that this financial year only included a small period of time that was affected by his accident. The Assessor noted that the accountant had opined that, in the following financial year, Mr Al-Kilany had experienced a "significant reduction in profitability" because he incurred "external labour costs" as a result of employing his son. Nevertheless, the Assessor noted the accountant's statement that it was difficult to identify any loss in particular.
7. The Assessor then stated: "82 [The accountant] concedes in his report that it was difficult for him to identify any loss suffered by the claimant between the date of the accident and the end of the 2014 financial year and continuing as it is possible that the claimant would have had to employ mechanical staff in any event, as the work load of the business grew. 83 I am satisfied that the medical and lay evidence establishes that the claimant has been restricted in his ability to undertake his normal mechanical work since the accident, because of his injury. I am also satisfied that this restriction has resulted in the claimant suffering a loss of earning capacity and some loss of income. However I find that the claimant's loss … is difficult to calculate on a net weekly basis. In the circumstances I consider it more appropriate to award the claimant a buffer for this head of damages. I consider an award of $25,000.00 to be appropriate and justified on the basis that had the claimant not been injured he would not have had to employ full-time mechanical staff. In determining the quantum of this buffer, I have considered the amount of time that has elapsed since the accident, the evidence regarding the claimant's level of earnings and the extent of the claimant's injuries and their effect on his work, as discussed above."
8. Having made those findings, the Assessor then addressed future economic loss. The Assessor noted a submission made on behalf of Mr Al-Kilany that he should be awarded a sum based on a calculation involving a loss of $500 net per week until the age of sixty-seven with "the usual discounts". The Assessor responded to this, and IAG's, contention that no damages should be awarded by finding as follows: "85. I am satisfied that the claimant continues to suffer from neck, pain and is restricted in his ability to undertake heavy mechanical work because of the injury he suffered in the accident. I refer to my findings on the medical and lay evidence. 86. I am satisfied that with the appropriate medical treatment and therapy, including the recommended exercise regime, the claimant will make a significant recovery from his injury in due course and will be able to resume his normal mechanical work in about five years' time. 87. I allow the claimant a loss of $500.00 net per week, as submitted by the claimant's counsel. However I allow this loss for a period of 5 years only, by which time I would expect the claimant will have recovered sufficiently from his injury to have resumed normal mechanical work. The 5% multiplier for 5 years is 231.5. Therefore I allow $500.00 x 231.5, namely $115,750.00 less a discount of 15% for the vicissitudes of life, which reduces the award to $98,387.50." (emphasis added)
9. As noted, the ultimate amount awarded was $137,579.25. This included the sum of $98,387.50 for future economic loss.
10. Insofar as IAG complains that the Assessor committed jurisdictional error then regard may be had to material extraneous to the Assessor's certificate and reasons (see Craig v State of South Australia [1995] HCA 58; 184 CLR 163 at 176). Two aspects of that material should be noted. The first concerns the accountant's report referred to in the Assessor's reasons. The report purported to set out various scenarios upon which past economic loss and future economic loss should be calculated. The calculations appear to have been predicated on an assumption that Mr Al-Kilany did not undertake any mechanical work in his business. Of course, that assumption was invalidated by Mr Al-Kilany's own evidence, which the Assessor accepted. However, the accountant's report also included figures for gross income and the expenses of Mr Al-Kilany's business up to 30 June 2015. The report did not address the period of time after that, which included the period when Mr Al-Kilany's son left his business. Those figures indicated, as already noted, that for the financial year ended 30 June 2014 the gross income was $74,062 and the gross expenses were $43,899. They also indicated that for the financial year ended 30 June 2015 the gross income was $105,243 but the total expenses were $102,140. Thus they suggested that the amount of business being undertaken was increasing but the profitability had reduced dramatically. This was consistent with Mr Al-Kilany's evidence that he found it necessary to employ additional labour because of his injuries.
11. Second, [87] of the Assessor's reasons referred to the "submissions made by the claimant", that is, Mr Al-Kilany's counsel. As best as can be ascertained this appears to be a reference to a schedule of damages provided to the Assessor, which included a claim for future economic loss "as a buffer in the amount of $500 per week". The schedule did not provide any explanation beyond that.

Ground 1: Findings did not assess true lost income

1. Ground 1 of IAG's summons contends that the Assessor erred "in awarding sums for past and future economic loss that did not reflect the first defendant's true loss of income in circumstances of the first defendant's then increasing income after the date of the accident". The ground also alleges that the Assessor erred by "overcompensating" Mr Al-Kilany.
2. As formulated this ground appears to seek merits review of the Assessor's decision. This impression is not dissipated by the written submissions that were lodged in support of this ground. They contend that there was error on the part of the Assessor because it was said that Mr Al-Kilany "did not actually establish before the claims assessor that his incapacity was likely to be productive of financial loss" and that Mr Al-Kilany "did not actually establish before the claims assessor that he had suffered any past income loss as a result of injury". The submissions also contend that there was an alleged disparity between the amount awarded for past economic loss, being the amount of $25,000 for a period of just over two years, and the awarding of future economic loss on the basis of an amount of $500 a week. The approximate weekly amount for past economic loss was just under $220.
3. All of these contentions are said in IAG's written submissions to demonstrate that the Assessor's decision was "legally erroneous and irrational and unreasonable in the sense described by the High Court in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332" ("Li").
4. Properly analysed, these submissions do not raise any grounds for reviewing the assessment that can be considered by this Court. I discussed the basis upon which findings of fact similar to those made by the Assessor might be reviewed for jurisdictional error in Insurance Australia Ltd v O'Shannessy [2015] NSWSC 1047 at [56ff] ("O'Shannessy"). The most favourable basis upon which IAG could review these types of findings is by contending that they are not supported by probative material or logical grounds as stated by the Assessor (see O'Shannessy at [79]). This basis for review is quite distinct from "Wednesbury unreasonableness" of the kind considered in Li which concerned unreasonableness in the exercise of discretionary powers (see Li at [63]). In particular, the power exercised in Li was the power to adjourn the hearing. The determination under challenge here, being one made under s 94(1)(b) of the MAC Act concerning future economic loss, does not involve the exercise of any discretionary power but is instead concerned with fact finding (see Allianz Aust Insurance Ltd v Habib [2015] NSWSC 1719; 73 MVR 412 at [45]; "Habib").
5. A challenge framed in terms that the evidence "did not actually establish" that Mr Al-Kilany's incapacity was productive of financial loss does not conform with any aspect of the approach discussed in O'Shannessy (which was in turn derived from Minister for Immigration and Ethnic Affairs v Eshetu [1999] HCA 21; 197 CLR 611).
6. In any event, to the extent that I have been able to consider the matter, I am not satisfied that the Assessor's findings in this respect were not supported by probative material and made on logical grounds. The Assessor clearly accepted Mr Al-Kilany's evidence that his injuries were such that he was required to incur additional expenses in terms of labour costs that he would not have incurred had the accident not happened. Those findings were well open and were supported by the material. That said, the complaint that there was an inconsistency in assessing past economic loss on the basis of a buffer of $25,000 and future economic loss on the basis of a net loss of $500 per week certainly has substance. I will return to address that aspect in dealing with the next grounds. At this point it suffices to state that IAG has not satisfied me that a finding of $500 per week net loss was itself unsupportable. The stronger complaint, which is addressed by other grounds, is that that finding was completely unexplained by the Assessor.
7. I reject ground 1.

Ground 2: Failure to provide reasons; Ground 3. Findings in relation to future economic loss

1. Ground 2 of the summons complains that the Assessor failed to set out "proper or lawful reasons" for his decision as was said to be required pursuant to s 94(5) of the MAC Act and cl 18.4 of the Guidelines. Ground 3 contends that the Assessor erred by failing to state "his own assumptions pursuant to s 126 of the [MAC] Act as he was required to do" when determining future economic loss on the basis of an amount of $500 per week net. As ground 2 also addresses issues about future economic loss these grounds are best addressed by first considering all the complaints in relation to past economic loss and then addressing the complaint about the findings of future economic loss.
2. In relation to past economic loss IAG's written submissions complain that the Assessor failed to state sufficient reasons for his findings in relation to past economic loss and, in particular, "wholly failed to state why or how [Mr Al-Kilany's] restriction in his ability to undertake his normal work resulted in him suffering a loss of earning capacity and some loss of income". I do not agree. As noted, the Assessor accepted that Mr Al-Kilany's injuries restricted his ability to undertake "normal mechanical work" after the accident. The Assessor also accepted his evidence that, although he was capable of performing some light mechanical work, he found the performance of heavy work painful and instead needed to employ his son to undertake that work. The Assessor accepted that there had been a growth of income in his business but also found that, because of the employment of casual staff to perform mechanical work, "this came at the cost of profitability". These findings were more than sufficient to establish that not only did Mr Al‑Kilany suffer a diminution in his earning capacity, that diminution was "productive of actual financial loss", specifically the incurring of additional expense (see Graham v Baker [1961] HCA 48; 106 CLR 340 at 347). However, the Assessor found it difficult to determine a net weekly loss and instead awarded a "buffer".
3. The Assessor's reasons in all these respects were clear and logical. The Assessor set out his "actual path of reasoning" on this issue (see Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43; 252 CLR 480 at [5]). Accordingly insofar as the Assessor addressed past economic loss there was no failure to comply with s 94(5). Such obligation as was imposed by clause 18.4 of the Guidelines was complied with.
4. In relation to future economic loss, IAG complained that "the Assessor merely selected a figure of $500 net per week and used it as the basis for his calculations" and in doing so relevantly erred by failing to state "his own relevant assumptions that led to the adoption of the particular net weekly loss of $500 in awarding future economic loss". Whether or not it can be fairly said that the Assessor "merely" selected a figure of $500 per week, I accept that the Assessor relevantly erred in failing to state his own assumptions that led to the adoption of that figure, and that such error vitiates his decision.
5. In his reasons, the Assessor did not express any misgivings about the adoption of the figure of $500 per week, as he did when he awarded a "buffer" of $25,000 for past economic loss. Instead, the Assessor appears to have made a finding that has a degree of exactitude without stating any assumption upon which that figure was based. All that was stated was that the figure was "submitted by the claimant's counsel". In the absence of any statement of the assumptions upon which the figure of $500 net per week was based, as required by s 126(3), it cannot be determined whether any assumptions that supported that figure accorded with Mr Al-Kilany's most likely future circumstances as required by s 126(1). Given that the finding of past economic loss of $25,000 was referable to the period in excess of two years immediately prior to the assessment, and given the absence of anything that is said to have altered the position, there are substantial reasons to believe that the $500 did not in fact accord with any assessment of Mr Al-Kilany's most likely future circumstances.
6. This apparent failure to comply with s 126(3) of the MAC Act cannot be rectified by having regard to the figures "submitted by the claimant's counsel" as was referred to in the assessment, for three reasons.
7. First, for the reasons already indicated, those figures did not state any relevant assumptions either.
8. Second, as best as can be ascertained those figures appear to have been prepared on a basis that was inconsistent with the Assessor's findings in relation to past economic loss which would suggest s 126(1) was contravened. In particular, in adopting the figure of $500 net per week Mr Al‑Kilany's counsel appears to have taken up the suggestion in the accountant's report concerning the various scenarios involving employment of his son. However, the adoption of those scenarios was invalidated by Mr Al-Kilany's own oral evidence before the Assessor.
9. Third, in any event the Assessor's obligation to state the assumptions cannot be rectified by recourse to documents that were exchanged between the parties during the course of the assessment (Sprod at [27] and [42] per Barrett JA and Habib at [38]).
10. For the sake of completeness I add that, in this case the Assessor was not precluded from awarding an amount as a buffer for future economic loss and that such a buffer could potentially have been calculated by reference to a weekly amount (see Habib). However, that does not obviate the need for the Assessor to identify the assumptions upon which the award is based, even though, as stated, they may be only "generalised statements"(see Sprod at [30]; Habib at [32]). In this case the Assessor did not state that the amount of $500 net per week constituted a "buffer", that is, the Assessor did not explain whether there were various uncertainties that had led him to adopt that figure and, if so, what those uncertainties were. Moreover, the Assessor did not state any assumptions, generalised or otherwise, that supported the adoption of that amount.
11. It follows that I am satisfied that the Assessor failed to comply with 126(3) of the MAC Act. At the very least that failure amounts to an error of law on the face of the record sufficient to grant relief (see Sprod at [39]).

Relief

1. It follows that IAG is entitled to relief setting aside the Assessor's certificate. Mr Al-Kilany's claim under Chapter 4 of the MAC Act will need to be re‑determined. In light of the approach taken by the first defendant there will be no order as to any party's costs of the proceedings.
2. Accordingly the Court orders that:
3. The certificate dated 5 August 2016 purportedly issued under s 94(4) of the Motor Accidents Compensation Act concerning the claim made by the first defendant be set aside;
4. The first defendant's claim under Chapter 4 of the Motor Accidents Compensation Act be re‑determined according to law; and
5. There be no order as to the 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: 06 April 2017