IAG Limited t/as NRMA Insurance v Damien Mares

Judgment

1. On 1 June 2016 the plaintiff, IAG Limited t/as NRMA Insurance commenced these proceedings by way of Summons in which a number of orders were sought in relation to an assessment and certificate of a claims assessor, Alan Cowley, the second defendant (the Claims Assessor) made on 26 February 2016, purportedly pursuant to s 94(6) of the Motor Accidents Compensation Act 1999 (the Act).
2. The first defendant, Mr Mares, (the claimant) was injured in a motor vehicle accident in NSW on 14 April 2013. He lodged a claim for compensation with the compulsory third party insurer of the vehicle, the plaintiff. The plaintiff admitted that its insured was at fault for the accident. The matter proceeded on the question of the assessment of damages only.
3. The plaintiff and the claimant were parties to a non-curial personal injury damages assessment process that was undertaken by the Claims Assessor. An award in the sum of $97,297.62 plus some assessed costs was made in favour of the claimant in respect of personal injury damages.
4. The Summons was supported by the affidavit of Michael Joseph Gillis, solicitor, sworn 20 July 2016. Annexed to the affidavit were copies of the relevant documentation pertaining to the Claims Assessment and Resolution Service proceedings.
5. The plaintiff subsequently sought and obtained leave to rely upon an Amended Summons dated 14 June 2016 and a Further Amended Summons dated 3 November 2016.
6. In the proceedings the plaintiff invoked the Supreme Court's judicial review jurisdiction under s 69 of the Supreme Court Act 1970.
7. The plaintiff contends that a number of jurisdictional errors and/or errors of law on the face of the record were made in the course of the Claims Assessor making his decision, in particular, in relation to the award of damages for future economic loss.
8. Paragraph 6 of the Amended Summons asserts three errors using the following terms: "(a) The First Error - In making his assessment of future economic loss of the first defendant, the claims assessor erred in law in that he applied the wrong legal test to such damages in that upon finding that there was diminution of the first defendant's earning capacity, he failed to find that it was productive of a financial loss before making his award here. (b) The decision is accordingly void. (c) The Second Error - In making his assessment of future economic loss of the first defendant, notwithstanding that he awarded a buffer amount of damages here, the claims assessor erred in law in that he failed to comply with s 126(3) of the Motor Accidents Compensation Act 1999 (NSW) ("the Act") by not setting out assumptions or sufficient assumptions on which the award was purportedly based. (d) Further, or alternatively, the claims assessor failed to set out proper or lawful reasons for his decision in this regard as he was required to do pursuant to section 94(5) of the Act and pursuant to clause 18.4 of the SIRA Claims Assessment Guidelines effective 1 May 2014, and which were made pursuant to sections 69(1) and 106 of the Act. (e) This is also a vitiating error and the decision should be set aside - IAG Limited t/as NRMA Insurance v Zahed (2015) 71 MVR 86 at [26] to [29] and [32]; and AAI Ltd v Fitzpatrick (2015) 72 MVR 97 at [30] and [74]. (f) The Third Error - in making his assessment of future economic loss of the first defendant, the claims assessor's decision was legally unreasonable in that it was irrational and illogical and lacked any intelligible justification."

The Claims Assessor's Reasons for the Decision

1. The Claims Assessor's Certificate issued in accordance with s 94(4) of the Act was attached to the Claims Assessor's Reasons for Decision (the Reasons). A copy of them is to be found in the Court Book (CB) at pp 330-334.
2. The Reasons were structured into five parts. In the first part, Introduction, the Claims Assessor noted that the claimant was 28 years of age at the date of the accident and was 31 years of age at the date of the Reasons.
3. The Reasons recorded that the accident in which the claimant was injured occurred when the insured's vehicle cut across in front of the claimant's car as he was driving at about 60km per hour. He braked so heavily that it caused fractures to his right foot. He also suffered a whiplash type injury to the neck.
4. It was noted that the insurer admitted liability and the claimant conceded that there was no claim for non-economic loss.
5. In respect of past economic loss the Claims Assessor noted that this was agreed at six weeks at $773 being $4,638 plus superannuation of $598.85.
6. It was also noted in that the claimant sought future economic loss for which the insurer made no concessions.
7. In the second part of the Reasons entitled "What is the nature and extent of the Claimant's injuries?", the Claims Assessor noted that the claimant fractured the second, third and fourth metatarsal necks of his right foot and that he was taken to Westmead Hospital and was treated and referred to his general practitioner, who in turn referred him to an orthopaedic surgeon. He remained in a CAM boot for six weeks and was discharged under the care of the surgeon to his GP.
8. The Claims Assessor noted at [15]: "He continues to complain of pain in his right foot particularly after standing for extended periods at work which requires him to be on his feet up to 10 hours per day. He is no longer able to play competition squash, nor continue riding his road bike for more than 15 minutes per week. He previously rode up to 100km per week."
9. The Claims Assessor noted that the claimant conceded to the Insurer that his foot had continued to gradually improve, as he had been reassured by his treating doctor: at [16].
10. The Claims Assessor also noted that he continued to suffer from neck pain arising out of the subject accident but again the claimant conceded that he was gradually improving in that respect.
11. It was noted that he continued to take some over-the-counter analgesics from time to time and had taken himself to a physiotherapist to obtain some relief.
12. There were two reports tendered at the assessment. One report was from Dr Habib, who was qualified on behalf of the claimant, and the other report of a Dr Maxwell qualified on behalf of the Insurer. The Claims Assessor noted that Dr Maxwell agreed the injuries as claimed had been caused by the subject accident although Dr Maxwell disagreed that the fractures to the foot would give rise to degenerative atrophy.
13. The Claims Assessor further noted at [20]: "There was no issue as to Mr Mares' credibility. He gave frank and full evidence, readily conceding some matters against his interests and from time to time was refreshingly candid."
14. The Claims Assessor then made an observation which is of significance to the issue arising in respect of the award for future economic loss. He stated at [22]: "I also accept that the injuries to his cervical region will gradually improve. I note it is almost three years since the subject accident. The injuries to his foot I also believe will gradually improve, although I believe he will have a permanent restriction such that it will limit him from being able to crouch or stand for extended periods of time, and restrict his ability to run or to play competition squash."
15. The third part of the Reasons dealt with future treatment expenses, a matter that does not rise for consideration in the present case.
16. The fourth part of the Reasons was entitled "Future Economic Loss". The submissions for the claimant relied upon before the Claims Assessor, stated: "Future economic loss 25. The claimant claims a buffer of $150,000 into the future. This buffer would cover the Claimant for the residual effects of the injuries sustained in the subject accident which has naturally affected and diminished his ability to sell his labour on the open labour market. 26. Given his age and the likelihood of arthritis in the future, the claimant is claiming a buffer of at least $150,000. This buffer would also cover the Claimant for the possibility that his employment may be terminated in the future as a result of his injuries and any inherent inability to perform."
17. The Claimant made a statement dated August 2015 which was before the Claims Assessor. In paragraph [52] of his statement, he stated: "I fear I will no longer be able to work on cars and doubt I will ever be able to return to work as a mechanic at all as a result of my injuries and the restrictions it has left me with."
18. The Claims Assessor noted that the claimant submitted that this was a major part of his claim.
19. By reason of the issues that fall for decision in these proceedings it is desirable that I reproduce all of the matters recorded in the Reasons in relation to the future economic loss claim at [27] to [47]: "27. The Claimant submitted that this was a major part of his claim. 28. The Claimant has had an exemplary work history demonstrating that he has always tried to become trades qualified, provide for his family and pursue vocations that would assist in that regard. 29. After finishing school obtaining his year 10 school certificate he became apprentice to a sign manufacturer working mostly with computers. After he obtained his trade certificate he then worked in an electrical apprenticeship but after 12 months ceased his apprenticeship because his then wife fell pregnant and so he returned to the sign industry. 30. He then worked as a service technician in Emerald Queensland servicing heavy machinery and [sic] what appears to be an open cut mine. 31. He then commenced a mechanical apprenticeship which he concluded in two years working for Mazda Artarmon. He became trades qualified approximately four weeks before the subject accident and it was agreed that he was then earning $773 net per week. 32. After the accident he was absent from work for some six weeks then returning on light duties for some time. However, once he returned to fulltime duties as a mechanic he found it increasingly difficult to do certain tasks. For example working in confined spaces within a vehicle such as removing and replacing the instrument panel, or having to manipulate heavy objects (even with mechanical assistance) such as removing and replacing heavy items such as gearboxes. 33. He therefore gave up his career as a mechanic "on the tools" and obtained employment as a service advisor with Mercedes Benz Parramatta. 34. He told me and I accept that the role of the service advisor is liaison between the clients at the front of the shop and the mechanics at the back of the shop. Further that being a trades qualified mechanic is extremely helpful if not essential in such a role. 35. However as a sales advisor he is no longer entitled to claim overtime and is expected to work much longer hours. 36. He and Ms Fitzsimmons live in the lower Blue Mountains. He left Mercedes Benz Parramatta partly because of the extended driving but mostly because of the internal bickering that took place in the work environment. Thus in May 2015 he commenced work again as a service advisor with Mazda Penrith where he continues. 37. It seems that at Mercedes Benz he was earning $60,000 gross per year and took a small pay cut of $5,500 per annum to work at Penrith Mazda. He is thus earning about $1,057 gross per week which is about the same as the sum earned as a mechanic at the time of the accident. 38. However it also appears he now earns a commission. 39. The Insurer submits that in fact he is earning more now as a service administrator than he did as a mechanic and therefore is not entitled to make any claim for future economic loss. 40. The Claimant submits that this is a classic situation requiring an assessment of a buffer. 41. The Claimant submits that but for the accident it was his intention to pursue a career that ultimately would mean working as a mechanic in the pits for a racing team. Indeed he said that ultimately he would aspire to be a mechanic for a Formula 1 racing team and that he had made enquiries and had contacts all the way from having to work initially for minor racing teams before working up to Formula 1. 42. However, this evidence was given as nothing more than an aspiration and there was no evidence as to this dream being fulfilled or if it was fulfilled what the economic return would be. 43. He said that he could not continue in this aspiration because working with a racing team in the pits would require him to be very agile and work in tight spaces, none of which he could do because of his injuries. 44. The Claimant also submitted that it was fanciful of the Insurer to suggest that his salary would have remained static at the same rate as at the time of his accident when he was fresh out of his apprenticeship and only in the first month as a trades qualified mechanic. 45. The Claimant also submitted that he has in fact achieved what any rehabilitation vocational advisor would hope for him: that is, to say to transfer his skills as a mechanic to a semi-sedentary role as a service administrator. He tried to be a mechanic but he has taken the most logical path and for that he should not be criticised. The Claimant says I should reject the opinion of Dr Maxwell who says that he could work as a mechanic. I agree with that submission that although he could work as a mechanic he could not sustain it without experiencing inappropriate pain, restrictions and impairment all of which the Insurer is responsible for. 46. The Insurer submits that I have to be satisfied that his injuries will result in a loss. They submit the evidence is in fact the other way that he says he is getting better which is in accordance with his treating doctors' advice. Further that there is no medical evidence that he could not follow his dream to become a racing mechanic. 47. In my view s 126 is satisfied. His earning capacity has been impaired by the subject accident which is incapable of precise calculation. The Claimant submits that I should allow up to $150,000 for such a loss. I believe $80,000 is the more appropriate sum."
20. The Claims Assessor set out his assessment of the claim in his certificate dated 26 February 2016 as follows: "Economic Losses Past loss of earnings (incl superannuation and Fox v Wood) $5,236.85. Future loss of earnings (incl superannuation) $80,000. Past treatment (incl section 83 payments) $1,958.77. Future treatment $2,000. Future economic care $8,102 Total economic losses and non-economic loss: $97,297.62."

SUBMISSIONS

1. I had the benefit of detailed written submissions on behalf of both parties. The plaintiff insurer relied upon the following: 1. Plaintiff's summary submission prepared by Mr Mark Robinson SC, dated 24 October 2016. 2. Plaintiff's reply submissions prepared by Mr Mark Robinson SC, dated 2 November 2016.
2. The first defendant's written submissions prepared by Mr E Romaniuk SC and Mr D Hanna of counsel were entitled First Respondent's Written Submissions and dated 2 November 2016.

Plaintiff's Submissions

1. The plaintiff's written submissions helpfully set out an overview of the relevant statutory compensation scheme under the Act. It was noted at [18] that claims assessors are empowered by and have regard to "guidelines" made under the Act establishing procedures for assessing claims and styled "Claims Assessment Guidelines" (the Guidelines).
2. In respect of an assessment conference involving the determination of monetary damages, Chapter 16 of the Guidelines is the most relevant. In particular clauses 16.1 to 16.12 set out the Claims Assessor's role and powers. The plaintiff's submissions set out what are referred to as Guiding Principles in respect of what constitutes errors of law on the face of the record and/or jurisdictional errors.

Grounds of Judicial Review - the First Error

1. It was submitted for the plaintiff that a claims assessor is bound to make an award of damages in accordance with s 94(1)(b) of the Act which provides: "(1) The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of: … (b) the amount of damages for that liability (being the amount of damages that a court would be likely to award)." (Plaintiff's emphasis)
2. Accordingly, it was submitted the claims assessor must make an award that accords with the general law and Chapter 5 of the Act (ss 122 to 146). It was then submitted: "48. In making his assessment of future economic loss of the claimant here, the assessor erred in law in that he applied the wrong legal test to such damages in that upon finding that there was impairment of the claimant's earning capacity, he failed to find that it was productive of a financial loss before making his award. 49. In accordance with the requirements of the general law of assessment of such damages, it was not sufficient for the claims assessor to merely determine that there was some impairment and to then proceed to make an award for economic loss. The claims assessor was required to consider whether the impairment and any diminution of loss of earning capacity was likely to in fact be productive of loss of income: see, Tran v Younis [2006] NSWCA 188 at [11]-[15] (Per Handley JA with Hislop J agreeing). 50. In Tran v Younis (ibid) at [11] the Court summarised the biding principles of general law in the following way: '... Damages are awarded for loss of earning capacity, not loss of earnings as such: Medlin v The State Government Insurance Commission (1995) 182 CLR 1,16; but only if "the diminution of his earning capacity is or may be productive of financial loss"': Graham v Baker (1961) 106 CLR 340, 347. Although there is some tension between these principles, this Court must be guided by the statement of McHugh J in Medlin at 16: 'Earning capacity is an intangible asset. Its value depends on what it is capable of producing. Earnings are evidence of the value of earning capacity but they are not synonymous with its value. When loss of earnings rather than loss of capacity to earn is the criterion, the natural tendency is to compare the plaintiff's pre-accident and post-accident earnings. This sometimes means that no attention is paid to that part of the plaintiff's capacity to earn that was not exploited before the accident. Further, there is a tendency to assume that if pre-accident and post-accident incomes are comparable, no loss has occurred' 51. There was no evidence before the assessor to indicate that the claimant accepting the job of service advisor was a step down. There was also no evidence that as a service advisor, the claimant was likely to earn less in his current role as a service advisor than what he would have earned had he continued work as a mechanic. In fact, from the evidence presented, both roles offered the very same remuneration (MJG "D" [34-38] page 275). 52. The decision should be set aside on this ground alone."

The Second Error

1. It was submitted for the plaintiff that notwithstanding that the Claims Assessor awarded damages in the nature of a "buffer", when performing his statutory task, he was still required to comply with s 126 of the Act by setting out his found assumptions on which the award was purportedly based.
2. The provisions of s 126 of the Act, it was noted, are in the following terms: "(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." (Plaintiff's emphasis)
3. It was observed that it was well settled that claims assessors are required to comply with s 126 when performing their statutory function. In that regard reference was made to the observations of Basten JA in Allianz Australia Insurance Ltd v Kerr (2012) 83 NSWLR 302; [2012] NSWCA 13 (with whom McColl and Macfarlan JJA agreed at [31].
4. The plaintiff contended that the Claims Assessor had failed to comply with s 126 when making his decision. He did not, it was argued, make any findings as to the claimant's most likely future circumstances but for the accident.
5. It was further submitted on behalf of the plaintiff: "60. Even if it were open to the assessor to merely accept the claimant's evidence in full compliance with section 126, the assessor! would still have needed to make some findings as to his actual and found assumptions. 61. The section cannot be lawfully complied with by the claims assessor making some general remarks, citing some of the evidence and then setting out some conclusions. 62. Something more is required by section 126. 63. In Allianz Australia Insurance Ltd v Sprod (2012) 81 NSWLR 626 at [42] (per Barrett JA) the NSW Court of Appeal held: 'The purpose of s 126, a provision directed at judges and applied in a derivative way to assessors, is to produce a reasonable degree of transparency as to assumptions and the reasons for them so that those interested in the assessment may have an insight into the way in which the task of assessment was performed. The section recognises that assumptions are necessary and appropriate. It does not seek to define aspects that may or may not properly be made the subject of assumptions about future earning capacity. Its aim is merely to ensure that an insight can be obtained into the content of the assumptions and the reasons for their adoption.' 64. In the present case, no insight is possible here, when the statutory requirement is not addresses [sic] in terms or at all (except for [47] where it is noted by the assessor in a strange and legally incorrect fashion), The claims assessor determines nothing that could properly and relevantly constitute a section 126 assumption. 65. Having regard to the requirements of section 126, it was incumbent on the claims assessor here to state his assumptions regarding the claimant's most likely future circumstances were it not for the accident. 66. The claims assessor made no findings about what the claimant's most likely circumstances would have been, and instead, he proceeded to deal only with the issue of what the claimant's disability would be now, as a result of the accident. 67. Accordingly, he failed to comply with section 126 as he was required to do and in doing so has failed to perform his statutory function. 68. Further, or alternatively, the claims assessor failed to set out proper or lawful reasons for his decision.
6. It was submitted at [79] that the Claims Assessor failed to set out "lawful reasons" to explain his award for future economic loss, at least in the following respects: "(a) He failed to give any reasons as to why, in absence of any evidence, he found that the claimant is likely to suffer financial loss as a result of his inability to work as a mechanic. (b) He failed to set out any reasons as to the period of time the claimant would be unable to work as a mechanic (given that he accepted that the claimant's symptoms prevent him from working as a mechanic but noting that the claimant continues to improve). (c) Whether the buffer of $80,000 that was ultimately awarded was on the basis that the claimant will never be able to work as a mechanic or for the duration of the time the claimant will not be able to work as a mechanic (whatever length of time it may be)."
7. It was contended that these are most basic matters that need to be explained and, in effect without that, there is no transparency.
8. It was noted that in the absence of a proper "path of reasoning" being set out it is not possible to know why the Claims Assessor did what he did.
9. The failure to give reasons, it was contended, amounts to a denial of procedural fairness and the Reasons should be set aside on this basis.

The Third Error

1. This relied upon the ground of legal unreasonableness. The alleged third error was not developed or specifically the subject of further oral submissions.
2. In the written submissions, the plaintiff contended that in making the findings that gave rise to the first and second errors, the Claims Assessor made a decision that plainly lacked an evident and intelligent justification. It was also contended that there were inconsistencies in the Claims Assessor's reasoning.
3. It was concluded that the decision under review is vitiated by jurisdictional error and/or error of law on the face of the record and that it should be set aside and the matter remitted for hearing by a different claims assessor.

First Defendant's Submissions

1. It was noted in the submissions for the first defendant, the claimant, that the plaintiff's allegations of administrative error in respect of the award for future economic loss are inter-related and cover the same subject matter. It was noted that the plaintiff submitted that the error concerned the following matters: 1. The Claims Assessor had applied the wrong legal test upon a finding that there was a diminution of the claimant's earning capacity. It was argued that he failed to find that the injury was productive of a financial loss before making the award. 2. The Claims Assessor did not set out assumptions, or sufficient assumptions, or alternatively, the Claims Assessor failed to set out proper or lawful reasons for that award. 3. The award for future economic loss was "legally unreasonable in that it was irrational and illogical and lacked any intelligible justification".
2. In respect of the first error, it was contended for the First Defendant that in relation to the correct approach to assessing future economic loss, his earnings, current at the time of assessment, did not speak to future losses. Accordingly it was argued the plaintiff's reliance on the then current earnings of the First Defendant was legally and factually misplaced as it misses the legal and factual purpose of an award in the nature of a buffer in respect of future economic loss where, at the time of the award, there was no demonstrable loss. It was submitted that this is commonplace as, for example, in the case of children or injured persons in the early stages of their employment. It was noted that at the time of the accident the plaintiff had only just commenced his career as a qualified mechanic.
3. In respect of the second error, it was noted that the plaintiff had identified three matters that it says needed to be explained but were not. First, that the injuries were likely to be productive of loss. Second, the period of time when the loss would be suffered. Third, whether it reflected what is referred to as an "all the time" inability to do mechanic work.
4. These three matters, it was argued in fact established the legal and factual justification for a buffer or an estimated approach. It was submitted that they are sufficiently apparent from the Reasons. Reference in this respect was made to paragraphs [15], [20], [21], [22], [32], [33], [45] and [47] of the Reasons.
5. The buffer or estimate approach was said to reflect an "evaluative" assessment of those type of matters where the evidence does not permit more precise findings. Further, the sum fixed on by the Claims Assessor was said to itself be an evaluative judgment that reflects the above three matters as well as other matters, including age.
6. It was argued that where an evaluative assessment and an evaluative judgment are involved, the decision maker's obligation to state assumptions and reasons has to reflect that process in a "practical manner". In this respect it was submitted that s 126 is not a statutory device that precludes legally or factually the evaluative nature of an award by a buffer or estimate approach. The "reasons obligation" is to provide "brief" reasons. In assessing whether that obligation has been met it was appropriate to have regard to the whole of the reasons: at [6.8].
7. In respect of the third error contended by the plaintiff, it was noted that this error relied upon the failure to state reasons complaint and the complaint about "no evidence" as to the difference in the then current earnings.
8. As to specific aspects of the contentions made by the plaintiff as to error, it was submitted on behalf of the claimant that as to the contention that the wrong legal test was applied by the Claims Assessor, the reasons at [47] identified the basis for the buffer or cushion approach because the extent by which the claimant's earning capacity has been impaired is "incapable of precise calculation": at [13].
9. It was further submitted that the conclusion reached in this case that the assessment of the impairment of the claimant's earning capacity was incapable of precise calculation lays the correct legal foundation for an award by way of buffer, estimate or cushion. Authorities of the Court of Appeal cited in this respect were recorded in [14] of the written submissions. Accordingly it was argued "That conclusion is in fact a conclusion that the impairment of earning capacity is or may be productive of financial loss."
10. It was also noted that a buffer or estimate approach is awarded as "compensation for the chance that the claimant may be disadvantaged in the future because of the injury": Penrith City Council v Parks [2004] NSWCA 201 at [58].
11. It was contended that there was no legal merit to the plaintiff's contention that the Claims Assessor "did not find that it was productive of a financial loss" because in fact that was done through the buffer, estimate or cushion methodology: at [15].
12. It was also that the plaintiff's factual position at the hearing before the Claims Assessor that as the claimant was earning more money at the time of the assessment conference hearing than he had been at the time of the accident, that meant that there could be no award for future economic loss. However, it was submitted that the complaint that is now made in the present proceedings as to error was being put forward on a different basis: at [17].
13. It was submitted that the submission made before the Claims Assessor factually, and legally, failed to recognise that at the time of the accident the claimant was in his first month of a mechanical apprenticeship and was removed from his career for which he had trained for at an early stage.
14. It was contended that "the static comparison" of the claimant's pre-accident and post-accident earnings were particularly inappropriate on the question of his future impairment of earning capacity. In any event, it was of no significance on the question of future economic loss (loss of earning capacity) by merely comparing earnings at the time of the accident to earnings at the time of the assessment conference hearing: at [18].
15. It was submitted: "The question in the assessment of economic loss is whether the impairment to the earning capacity caused by the injury is or may be productive of financial loss: see, for example, the discussion in Allianz Australia Insurance Limited v Kerr [2012] NSWCA 13, [21]-[36] (Basten JA) citing [24] amongst other decisions, Graham v Baker (1961) 106 CLR 347, 347; not that it was productive of financial loss, which is the approach suggested by the Plaintiff (see, for example, paragraph 48 and 49 which fix on "was", but the passage cited from Tran v Younis [2006] NSWCA 188, [11] is an extract that references Graham v Baker (1961) 106 CLR 340, 347, which refers to "is or may") and which overstates the legal test."
16. As to the provisions of s 126(3) of the Act (relevant to the second alleged error) it was submitted that it is not necessary for a Claims Assessor to provide a separate and specific set of reasons which deal with the assumptions for the purposes of that section. Rather, what is in issue is whether the reasons, taken as a whole, show that the purposes of an award by way of cushion, buffer or estimate, have been addressed. It was further submitted that where an award is by way of a buffer or cushion, some of the matters referred to in s 126(3) of the Act are appropriately addressed at a general, if not implicit, level: Allianz Australia Insurance Ltd v Kerr, supra, at [21]-[36] per Basten JA.
17. It was submitted that in a sense, an award made on the basis that the impairment of earning capacity is incapable of precise calculation means that the assumptions for the purpose of s 126(3) of the Act in such a case have the same level of imprecision.
18. In relation to the error asserting a failure to provide reasons it was noted that, the matters relied upon in support of the claimant's case in relation to the other asserted errors, are also applicable to this ground.
19. Finally, as to the question of whether the reasons were legally unreasonable, it was submitted that when the Claims Assessor's reasons are properly understood as a whole, the award of future economic loss does not fall within the administrative law concept of being legally unreasonable. To the contrary, it was submitted, the award reflected an assessment of the impact of the impairment upon the claimant's earning capacity but that the assessment of that was incapable of precise calculation.

CONSIDERATION

1. Before coming to the provisions of the Act, given the nature of the issues raised in these proceedings concerning the award of damages for future economic loss, I note that it has been accepted that the fact that a claimant/plaintiff's income has not declined does not mean that the injured person has not suffered loss. Such an injured person is entitled to recover damages for a diminished earning capacity: Medlin v State Government Insurance Commission (1995) 182 CLR 1; [1995] HCA 5.

The correct assessment of future economic loss

1. In the consideration of the plaintiff's submissions it is as well to commence with the provisions of the Act, in particular with the relevant provisions of Part 5.2, headed "Damages for Economic Loss". In that Part, s 126 prescribes the basis upon which an assessment of the value of loss of an incapacity is to be made. That section is extracted at [36] above.
2. A series of Court of Appeal decisions have clarified the provisions of s 126 and their application. In particular, it is now clear that s 126 does not prevent the award of a cushion or buffer for future economic loss: MacArthur Districts Motor Cycle Sportsmen Inc v Ardizzone (2004) 41 MVR 235; [2004] NSWCA 145; Penrith City Council v Park, supra; and Nominal Defendant v Lane [2004] NSWCA 405.
3. The relevant common law principles have been encapsulated within the following formulation which was approved by the Court of Appeal in Kallouf v Middis [2008] NSWCA 61: 1. Assess the "most likely" of the possible future economic circumstances facing the claimant but for the accident (including type of employment, duration of employment and remuneration); 2. Assess the claimant's economic prospects as a consequence of the accident; 3. Compensate the claimant for the difference between (1) and (2), including, where appropriate, through the use of a buffer; 4. Adjust (3) by an appropriate percentage (including, where appropriate, by 0%) for vicissitudes, to reflect the possibility that the claimant may not have achieved (1) even had the accident not occurred; 5. Include a statement of the assumptions made as the claimant's most likely future circumstances and the appropriate percentage adjustment (as to the above formulation see Leslie & Britts, Motor Vehicle Law New South Wales, at [MAC.126.40].
4. In Nominal Defendant v Livaja [2011] NSWCA 121 the Court of Appeal (Basten and Campbell JJA and Rothman J) discussed the structured approach required in the assessment of future economic loss. In that case, their Honours stated: "[39] The assessment of future economic loss involves an hypothetical calculation, with the need to balance a number of variables: see the recent discussion in Amoud v Al Batat [2009] NSWCA 333 at [22]-[28]. One purpose of s 126 is to require a structured approach to such a calculation. Subsection (1) is expressed in terms which emphasise the need for the plaintiff to satisfy the Court as to certain 'assumptions' in respect of future earning capacity. The Court must only act upon such assumptions as are established to its satisfaction on the balance of probabilities. Those assumptions must accord with the plaintiff's 'most likely future circumstances' on the basis that the injury for which he or she seeks compensation had not occurred. There is nothing obscure about the nature of the findings so required: they must be sufficient to establish a baseline of earning capacity, extending into the future, from which diminution caused by the injury may be calculated: see State of New South Wales (NSW Police) v Nominal Defendant [2009] NSWCA 225 at [83]-[84] (Beazley JA, Allsop P and Macfarlan JA agreeing). Further, the assumptions must be stated and there is authority for the proposition that failure to do so would render the judgment invalid: sub-s (3); Zahra v Brown [2006] NSWCA 162 at [71] (Beazley JA, Santow JA agreeing). [40] The purpose of sub-s (2) is less clear. There is a missing step between sub-ss (1) and (2). An essential part of the calculation is the assessment of the consequences for the claimant's earning capacity as a result of the injury. Subsection (2) requires adjustment of the amount of damages 'by reference to the percentage possibility' that 'the events concerned might have occurred but for the injury'. Reference in sub-s (2) to 'those assumptions' must be a reference to the assumptions about future earning capacity, absent the injury, referred to in sub-s (1). Subsection (1) refers to both assumptions and 'other events': it might appear that the reference in sub-s (2) to 'the events concerned' was intended to mirror the reference in sub-s (1) to 'other events', although the language is somewhat obscure."
5. In addition, the Court in Livaja noted at [41]: "The assumptions or events upon which a baseline may commonly be calculated include: (a) identification of the skills, training and experience of the plaintiff, as at the date of the accident; (b) the work he or she was undertaking immediately prior to the accident; (c) the likelihood that he or she would have continued in such employment, but for the accident; (d) the possibility that he or she might have obtained promotion or other benefits, but for the accident; (e) the age to which he or she was likely to have worked in that employment, and (f) the possibility that the employment would not have been continuous."
6. The Court in that case observed that each of these factors is liable to variation, depending upon the circumstances of the case. Examples given included the likelihood of improved earning capacity for a skilled or professional person who was at the beginning of a career when the accident occurred, may be high. The possibility of unemployment for periods may be low in some occupations and higher in others. The Court noted that it was common under the general law to allow a reduction in the order of 15% (depending on the circumstances) for "vicissitudes" to allow for the possibility that some event other than the injury would have adversely affected earning capacity. Assuming that length and continuity of employment are treated as "events concern" for the purposes of 126(2), that provision may be seen as allowing for variation for such vicissitudes: at [42].
7. Accordingly, in the present case, in order to apply the structured approach under s 126, the Claims Assessor was required to consider the likely future employment prospects of the claimant had he remained uninjured, the "but for" test. The Claims Assessor then was required to have regard to the evidence including medical evidence relating to the claimant's injuries and subsequent history and to assess, in light of all the relevant evidence, the residual earning capacity.
8. In Allianz Australia Insurance Ltd v Cervantes (2012) 61 MVR 443; [2012] NSWCA 244, the Court of Appeal considered, inter alia, an award of a buffer for economic loss: see, in particular, Basten JA at [33]-[48]. In that case, his Honour considered the provisions of s 126 in relation to an award of a buffer, McColl and Macfarlan JA agreeing.
9. In Cervantes, the claimant sought compensation under the Act and was awarded $75,000 for past economic loss and $400,000 for future economic loss. Each amount was awarded as a lump sum or "buffer".
10. During the course of his consideration, Basten JA observed: "[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."
11. In Allianz Australia Insurance Ltd v Kerr, supra, McColl JA considered an award of damages including in particular damages for future economic loss. The principal complaint concerning what was an award by way of a cushion or buffer in the sum of $200,000 was the fact of the buffer for a substantial sum having been made and also if a buffer was to be awarded, then the reasons for the quantification should be expressed.
12. McColl JA observed that the circumstances in which damages by way of a buffer are appropriate, were summarised in Pollard v Baulderstone Hornibrook Engineering Pty Ltd (2008) 172 IR 453; [2008] NSWCA 99. In that case it was stated at [84]: "As to the future economic loss, it is appropriate to award damages by way of a buffer, including in a case such as this, where damages are to be determined pursuant to the Civil Liability Act, when the impact of the injury upon the economic benefit from exercising earning capacity after injury is difficult to determine. In such a case, the Court still undertakes a comparison between the economic benefits the plaintiff derived from exercising earning capacity before injury and the economic benefit derived from exercising earning capacity after injury, although the difference cannot be determined otherwise than by the broad approach of the buffer…".
13. In Kerr, McColl JA further observed at [7] that the award of a buffer for future economic loss in circumstances "where earning capacity has unquestionably been reduced but its extent is difficult to assess", reflects the proposition that the want of precise evidence "does not necessarily result in non-recovery of damages": State of New South Wales v Moss (2000) 54 NSWLR 536; [2000] NSWCA 133 at [87] per Heydon JA.
14. McColl JA further observed that it must also be taken into account, when considering the appellant's complaint in that case as to the adequacy of the claims assessor's reasons for quantifying the buffer, that the task of assessing damages for loss of earning capacity is "necessarily impressionistic": Brear v James Hardie & Co Pty Ltd (2000) 50 NSWLR 388; [2000] NSWCA 352 at [49].
15. McColl JA also observed in Kerr that the authorities recognise that, whether in the s 126 context or when applying common law principles of assessment of damages as to future hypothetical scenarios, there is a point at which, even with the application of the requisite degree of intellectual rigour which s 126 was presumably intended to promote, an element of impression must be involved. Her Honour observed that the Claims Assessor properly arrived at this point once he had made the minimum factual assumptions necessary for the s 126 exercise and that no legal error had been identified in the award of the buffer.
16. In Kerr, Basten JA observed: "[24] The applicant's submissions focused on the language of s 126, but identification of the specific non-conformity relied upon would have illustrated the insufficiency of that approach. Section 126 does not purport to codify legal principles relevant to assessment of loss of earning capacity. It does not identify factors to be taken into account in making an assessment. Nor does it appear to depart from or vary the general law principle that the compensable loss is not a loss of income but the loss of capacity to earn income which 'is or may be productive of financial loss': Graham v Baker [1961] HCA 48; 106 CLR 340 at 347; State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536 at [71] (Heydon JA); State of New South Wales (NSW Police) v Nominal Defendant [2009] NSWCA 225 at [86] (Beazley JA; Allsop P and Macfarlan JA agreeing). Income earned prior to the accident may well be the best evidential basis to assess the earning capacity of the claimant, but for the injury, subject to adjustment for the passage of time since that income was last earned. Income earned between the accident and the trial may be (but often is not) a good indicator of current capacity. The latter may be capable of extrapolation into the future, but it will usually be necessary to consider whether, and to what extent, both pre-accident capacity and post-accident capacity might have been and might be expected to vary in the future. [25] Although a claimant must establish a diminution in earning capacity resulting from the injury to obtain an award under this head, he or she is not required to identify with precision the value of that loss. … [28] Structural difficulties with the form of s 126 (and the more generally applicable equivalent provision, namely s 13 of the Civil Liability Act 2002 (NSW)) have been the subject of comment in numerous cases. It has been pointed out that the calculation of future economic loss depends not only upon assumptions about unimpaired future earning capacity, but also upon the extent to which earning capacity is, or is likely to be, diminished as a result of the injury. Section 126 makes no direct reference to the latter limb of the calculation, unless sub-s (3) is addressed to the broader set of assumptions and not limited to those referred to in sub-s (1). [29] Further, sub-s (2) has been understood as referring, at least primarily, to the reduction commonly allowed for 'vicissitudes' which, absent particular features warranting some other approach, is usually fixed at 15%. In circumstances where, for example, the employment situation of the claimant is inherently unstable, a greater percentage is allowed. In Amoud v Al Batat [2009] NSWCA 333 I explained my understanding of s 126(2) in the following terms at [25]: 'Subsection (2) requires an adjustment to an otherwise appropriate amount to take account of the possibility that 'the events concerned might have occurred but for the injury'. There is clearly a step between the exercise addressed in sub-s (1) and that required by sub-s (2). That step must be to identify the departure from the baseline earning capacity (calculated in accordance with sub-s (1)) caused by the injury. The third step is to calculate, as a monetary amount, the present value of the difference between the baseline and the assessment of post-injury earning capacity. The diminution caused by the tortious injury will provide a figure for assessing the appropriate award of damages. It may not be the final figure, because the diminution caused by the accident might have occurred, in part or in whole, in any event, within the working life of the claimant. Some allowance must be made for that circumstance: it is that allowance which constitutes the adjustment required by sub-s (2).'"
17. The argument that had been advanced in the written submissions for the appellant in Kerr to the effect that there was no evidence that the provisions of s 126 had been complied with, was without substance. Basten JA observed that most of the factors had been discussed by the assessor relevantly with respect to future economic loss.
18. It was noted in that case that the assessor had set out the claimant's background noting that she had psychiatric disabilities suffered from a young age, her training, her work experience, and the injuries suffered in the accident. After reviewing various medical reports, the assessor expressed the opinion that despite her pre-existing vulnerability, her condition had been noticeably exacerbated by the subject accident. Further, it was noted that whilst the respondent was still in employment, it was not in a job that she had found satisfying and there was a real possibility of losing it. Accordingly, the assessor was satisfied that, but for the accident, the respondent would have continued work with some time off to change jobs and some time off work otherwise. He stated that she had satisfied s 126 of the Act and was entitled to an amount for future economic loss.
19. Basten JA concluded at [35] that the only factor which was not stated, in conformity with s 126(3) in that case was "the percentage possibility" that the events concerned might have occurred but for the injury: s 126(2). However, it was noted that as explained by Giles JA in Penrith City Council v Parkes, supra, adopting "the broad approach of a buffer" meant that there is no question of a percentage adjustment. Further, the failure to state that fact did not constitute a material error.

The assessment in the present case

1. The observations and findings made in relation to the nature and extent of the claimant's injuries at [12]-[26] of the Reasons (relevantly summarised at [15] to [23] above) it is clear, must be read, and were intended to be read, together along with the observations and findings made in respect of the discussion of future economic loss at [27] to [47] of the Reasons (extracted at [27] above).
2. The question is whether the reasoning process can be discerned, reading the reasons as a whole and applying a beneficial construction: Zahed v IAG Limited t/as NRMA Insurance (2016) 75 MVR 1; [2016] NSWCA 55, per Leeming JA at [6]. As there also observed, a gap in reasons may be filled as a matter of necessary inference on a fair reading of the reasons.
3. When read together, the following were accepted by the Claims Assessor: 1. The claimant was a person who was motivated and qualified in the occupation of a motor mechanic and his future employment, it is to be assumed, would have been in a career in his chosen occupation (mechanics). 2. In consequence of the fractures to his right foot, the claimant had continued to suffer from a physical impairment which restricted his sporting activities, as well as his occupational activities as a motor mechanic. 3. That the impairment had resulted in disabilities and limitations that prevented him from doing the full range of work as a motor mechanic. Accordingly, for that reason, he sought and obtained employment in an alternative field of work, namely, as a service advisor with Mercedes Benz at Parramatta and, in due course, with Mazda Penrith. 4. By reason of the claimant's disabilities and impairment, he had permanent restrictions on his future earning capacity, in particular in the field of motor mechanics. Such impaired earning capacity would remain for the balance of his normal working life. 5. The impairment of his earning capacity as a result of the subject accident was incapable of precise calculation. Accordingly, on that basis the assessment of the loss of earning capacity was appropriately to be considered on the basis of a buffer in the amount of $80,000.
4. On the basis of the above findings, it is at least implicit that the Claims Assessor proceeded upon the premise that, on the probabilities, the claimant would have exercised his earning capacity as a mechanic, but for the accident. However, the impairment of that capacity by the accident-caused injuries, on the probabilities, would occasion economic loss that was not capable of precise calculation.
5. As has been observed, the calculation of economic loss, whether in the past or for the future, involves a comparison between the actual circumstances of the claimant, as a result of the accident, and the circumstances which would probably have continued or come to pass but for the accident. On the assumption that the accident resulted in a loss of earning capacity, in proceedings such as the present, consideration must also be given to the question as to whether such loss might have occurred independently of the accident: Allianz Australia Insurance Ltd v Cervantes, supra, at [33].

Conclusion

1. The Claims Assessor was obliged only to provide brief reasons for his decision. When his reasons are analysed and details as to the relevant findings are identified, the path of reasoning of the Claims Assessor becomes evident. The claimant at the time of the accident was qualified in the field of mechanics, and he had no impairment or disabilities prior to the accident. On the evidence including that of the Claimant, who was accepted as a credible witness, the injuries suffered in the accident produced permanent physical impairment with consequent restrictions on his ability to undertake the full range of work of a motor mechanic. On that basis, the likely employment future facing the claimant prior to the accident, but for the accident/injuries, he being a fit young man in good health and qualified for his occupation, was established by the Claims Assessor's findings. That formed a critical basis for the assessment of future economic loss.
2. The findings as to permanent impairment of earning capacity required the Claims Assessor to consider whether or not an assessment of future economic loss could be made on a quantified basis. It is evident from the conclusions and findings of the Claims Assessor that that was an impossible task.
3. The claimant, a young man at the time of assessment, had a long working life expectancy. Post-accident he was left with a significant and permanent impairment which would limit his earning capacity on the open labour market.
4. The claimant's impairment carried with it the real possibility of future loss of earnings. As to precisely what form that would take, periodic time off work, or loss resulting from an inability to compete on the open employment market due to his impairment was, of course, impossible to forecast.
5. Notwithstanding the inability to undertake any forecasting on such matters with precision, the established physical and economic impairment and consequent partial incapacity lent itself to an award of a buffer, the precise amount of which was a matter of evaluation rather than precise calculation.
6. When the Reasons are so read, the path of reasoning followed and applied by the Claims Assessor, in my opinion, is clearly evident. Furthermore, having regard to the favourable findings as to the claimant's credibility, the award of damages for future economic loss by way of a buffer of $80,000 for a person of his age and qualifications, was, in my opinion, an unexceptionable award.
7. In relation to the claimed errors relied upon in the Amended Summons, I have concluded: 1. That Mr Mares, as claimant, established, to the Claims Assessor's satisfaction, the assumptions as to his future earning capacity on which the award was to be based. The award accorded with his most likely future circumstances but for the injury, namely, that having qualified in the field of mechanics, he would have, but for the accident, pursued a career as a qualified mechanic. 2. In making the award for future economic loss, the Claims Assessor stated and proceeded upon the basis ("the assumptions") that whilst the claimant would permanently remain incapacitated for the full work of a mechanic, he would be able to pursue other forms of employment, and that the impairment/partial incapacity was not susceptible to precise quantification. Accordingly, the appropriate approach was to evaluate his loss in terms of a 'buffer' or 'cushion': Pollard v Baulderstone Hornibrook Engineering Pty Ltd, supra, at [84] per McColl JA, and Allianz Australia Insurance Ltd v Kerr, supra at [7] per McColl JA. 3. Given the required basis for assessing future economic loss, the Claims Assessor did not, in my opinion, fail to set out "proper or lawful reasons for his decision," pursuant to s 94(5) of the Act, as claimed in the Amended Summons. 4. There is no basis for the asserted third error that, in making the assessment of future economic loss, the Claims Assessor's decision was legally unreasonable in that it was irrational and illogical and lacked any intelligent justification. The Claims Assessor's Reasons represented a conventional approach to the assessment of a case such as the present. The Reasons took into account the evidence, the claimant's accepted credibility, his age, his qualifications at the time of the accident as a mechanic, and the medical and other evidence that established a permanent impairment of his earning capacity.
8. Accordingly, as the asserted errors relied upon by the plaintiff insurer have not been established, and for the reasons set out above, the proceedings should be dismissed.

Orders

1. I make the following orders: 1. The proceedings by way of Summons commenced on 1 June 2016 are dismissed. 2. In accordance with the provisions of s 98 of the Civil Procedure Act 2005 and under UCPR r 42.1, costs should follow the event. Accordingly, I make an order that the plaintiff pay the First Defendant's costs of the proceedings subject to any submission on costs made upon delivery of this judgment or upon the proceedings being re-listed for that purpose at 9.45am Wednesday 14 December 2016.

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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: 13 December 2016