IAG Limited v Priestly

Supreme Court of NSW|2019-09-06|Before: Fagan J

Judgment

The plaintiff is a compulsory third party liability insurer under the Motor Accidents Compensation Act 1999 (NSW) ("the Act"). It seeks judicial review of an administrative decision made under that Act on 28 November 2018 by the third defendant ("the assessor"). The assessor's decision is in the form of a certificate issued under s 94(4) of the Act, assessing damages for injuries sustained by the first defendant in a motor vehicle accident on 24 June 2010. The amount of damages assessed is $602,087.37.
The first defendant is referred to in the assessor's certificate and reasons as "the claimant" and she will be so referred to in this judgment for ease of cross-reference. The plaintiff admitted fault in the accident and the parties were referred to the second defendant ("the Authority") for assessment of damages. The Authority appointed the assessor pursuant to s 93 of the Act. He conducted an assessment conference in accordance with s 104 on 23 August 2018. His certificate under s 94(4), dated 28 November 2018, has 11 pages of reasons attached.
The claimant filed a response to the summons and has opposed the plaintiff's claim to have the assessment set aside. The second and third defendants filed submitting appearances.
The breakdown of the assessment at [101] of the assessor's reasons includes the following components: Past loss of earnings (incl. superannuation and Fox v Wood) $50,000 Future loss of earnings (incl. superannuation) $400,000
The plaintiff asserts administrative law error in the award of the amounts for past and future loss of earnings. The following is a paraphrase of the grounds of judicial review set out in the plaintiffs summon: 1. In respect of past economic loss, two errors of law on the face of the record, namely: 1. The assessor erred in awarding a buffer for past economic loss in circumstances where an actual calculation could be made and the evidence enabled a more certain determination of the difference between the economic benefits the plaintiff derived from exercising earning capacity before the accident and those she derived after the accident. 2. The assessor failed to give sufficient or lawful reasons for awarding the buffer for past economic loss. 1. In respect of future economic loss, errors of law on the face of the record in the following respects: 1. The assessor failed to state his assumptions about future earning capacity that led to the award of the buffer of $400,000, as he was required to do by s 126(c) of the Act. 2. The assessor failed to set out proper or lawful reasons for his award of the $400,000 buffer, contrary to s 94(5) of the Act and cl 18.4 of the SIRA Claims Assessment Guidelines made pursuant to ss 69(1) and 106 of the Act.

The assessor's reasons

The assessor's award of "buffer" amounts in respect of both past and future economic loss necessarily depended upon a finding as to what injury the claimant had suffered in the accident and what consequent disability she was under. Findings on those matters can be ascertained from [41]-[48] where the assessor summarised the reports of a neurologist, two orthopaedic surgeons, one orthopaedic and spinal surgeon and a rehabilitation specialist. The assessor found that all of these doctors had concluded that the plaintiff satisfied the criteria for "DRE III and therefore 10% WPI pursuant to AMA4". These acronyms are not expanded in the reasons. They refer to the Diagnostic-Related Estimate method of evaluating categories of impairment of the spine, as described in Chapter 3 of the American Medical Association Guides, Issue 4.
Permanent Impairment Guidelines issued by the Authority under s 44(1)(c) of the Act stipulate in cl 1.111 that the DRE method described in the AMA4 Guides, as modified by the Permanent Impairment Guidelines, is to be used in the assessment of Whole Person Impairment. Table 7 under cl 1.117 of the Permanent Impairment Guidelines stipulates that category DRE III impairment of the spine is to be attributed to a patient with "low back or neck pain with radiculopathy". Elsewhere, DRE III is equated to 10% Whole Person Impairment.
The assessor's reasons contain further factual conclusions relevant to past economic loss. These are extracted below and rearranged chronologically. Where the assessor recited the claimant's evidence in his reasons it may be taken that he accepted that evidence. The assessor made a general finding that the claimant's evidence before him was credible (at [40]) and in a number of instances throughout the reasons he explicitly accepted her statements of fact, including with respect to her intentions regarding employment.
For present purposes the relevant findings are as follows (at the paragraph numbers indicated): [29] The claimant was … 19 [at the date of the accident], single with no dependents and working as a trainee childcare worker at Abacus Kindergarten. [30] There is no relevant pre-accident medical history. [The claimant] was in good health and had completed her higher school certificate … [32] [L]ater the following day [the claimant] attended upon her general practitioner with complaints of neck pain and back pain. It was only after a few days that she complained of pain going down her left leg. [37] [W]ithin two weeks all symptoms to her neck region had apparently settled or resolved. [33] [The claimant] left employment with Abacus in September 2010 to take up employment as a Certificate III childcare worker immediately thereafter with Twinkle Star Childcare. The claimant states that she was in fact constructively terminated by her employer at Abacus on the basis that her unsympathetic employer was not prepared to provide her with light duties. [33] [The claimant gave birth to her first child in 2011 and took some maternity leave]. [34] In September 2012 [the claimant] obtained [a] Diploma of Children Services (Early Childhood Education and Care) and in September 2013 attained her Supervisors Certificate, Section III Children (Education and Care Services) National Law. [33] [The claimant's second child was born in August 2014 and she again took some maternity leave]. [35] In June 2015 [the claimant] changed employment to Cool Bananas firstly on a casual basis and then by September 2015 made permanent working a 32-hour week. [67] [I]n September 2015 [the claimant] was earning $750 gross [per week] working for Cool Bananas [for 4 days, 32 hours). [33] [The claimant continued in this employment up to February 2017, from which date she took maternity leave due to pregnancy with her third child, born March 2017]. [69] [F]ollowing her ceasing work [for Cool Bananas] in February 2017 anticipating the birth of her [third child] in March 2017, the claimant has been earning $600 per week doing administrative work for [her former partner's] business. She does this work reluctantly and it seems [that she] doesn't like it. It involves invoicing and other administrative work. [Her former partner] believes it is a convenient arrangement for him in that it assist him in his business while simultaneously means that he does not have to provide childcare payments [ie child maintenance]. For the moment it suits [the claimant] although she doesn't like the work and would prefer to get back to working in childcare. [38] In effect [the claimant] has continued to work on light duties since [the] date of [the] accident to date when not on maternity leave. [66c] Allowing for the interruption to her work as she had a family, [the claimant] gave unequivocal evidence that it was her intention to work full-time until normal retirement age. [68] [Irrespective of the accident, the claimant's] relationship with … the father of her three children would nonetheless have still resulted in the birth of her children and hence her having to take maternity leave and perhaps even having to work reduced hours. [72] I do accept that the claimant … has suffered a loss as a result of the motor vehicle accident and not as a result of maternity leave. In particular … prior to the birth of [her third child in March 2017] she would have been working full-time five days per week and not part-time four days per week. Further, that after her return from maternity leave on the birth of [her third child] she would have chosen to return to work full-time as a childcare worker as a room supervisor and not taken on the role as office administrator for her former partner …
Upon these findings the assessor allowed $50,000 as a buffer for past economic loss (for the 8 years and 5 months from the date of the accident up to the issue of the certificate). His reasons for allowing a buffer were given as follows: [73] I accept that it is impossible to calculate any particular loss and pursuant to the appropriate [principles] a buffer is appropriate and in my assessment is $50,000. Such sum is inclusive of superannuation.

Ground (1)(a) - buffer where calculation possible

Section 94(1)(b) of the Act required the assessor to determine the claimant's damages as a result of the motor accident as "the amount of damages that a court would be likely to award". The general principle invoked by the assessor at [73] of his reasons is that stated in Penrith City Council v Parks [2004] NSWCA 201 at [5] (Giles JA): The occasion for a buffer is when the impact of the injury upon the economic benefit from exercising earning capacity after injury is difficult to determine. There is still a comparison between the economic benefits, although the difference can not be determined otherwise than by the broad approach of a buffer.
In an assessment of future economic loss s 126 of the Act prescribes that specific findings must be made and stated regarding the claimant's most likely future circumstances but for the accident. The effect of that section on the general principle stated by Giles JA has been considered in a number of Court of Appeal decisions, some of which are referred to later in these reasons. With respect to assessment of past economic loss Giles JA's statement of the general principle is applicable in the terms stated by his Honour.
A caveat regarding awards of buffers was expressed by McColl JA in Allianz Australia Insurance Ltd v Kerr (2012) 83 NSWLR 302; [2012] NSWCA 13 at [9]: The foregoing should not be seen as a license to award buffers indiscriminately. Where the evidence enables a more certain determination of the difference between the economic benefits the plaintiff derived from exercising earning capacity before injury and the economic benefit derived from exercising that capacity after injury, recourse should not ordinarily be had to the award of damages for future economic loss by way of a buffer. Each case must turn on its own facts.
In the same case Macfarlan JA said (at [72]): [A]wards in respect of future economic loss should wherever possible result from evidence-based calculations or estimates that are exposed in the decision-maker's reasons. The award of a buffer that is not supported by an explanation of how and why the amount was arrived at should remain a last resort where no alternative is available.
Although the observations of McColl and Macfarlan JJA were made in a case concerning future economic loss, it is evident that the same constraint applies to buffers for past economic loss. The need to award a buffer would be expected to arise less frequently in the assessment of past economic loss because more of the facts relevant to that aspect of a claimant's damages assessment will be known with certainty.
In so far as the assessor determined (at [72]) that the claimant has suffered some past loss of earnings due to the accident, it is clear that he attributed that loss to the 10% whole person impairment caused by her back pain and radiculopathy, as found at [41]-[48].
The findings extracted at [9] above would have permitted an evidence-based calculation of past lost earnings in two periods. First, there were 74 weeks from the beginning of September 2015 up to the end of January 2017 during which the claimant worked for Cool Bananas for four days per week for $750 whereas, but for the accident, the assessor found she would have worked five days per week. By simple arithmetic that is a wage loss of $187.50 per week, a total of $13,875 over the period.
Secondly, from the beginning of February 2017 up to the date of the assessor's certificate (28 November 2018), a period of 95 weeks, the plaintiff worked for her former partner. The assessor accepted that the claimant had a break from work from some date in February 2017 in anticipation of giving birth to her third child in March of that year. He did not make a finding about the length of the maternity leave. It may be inferred that this would have been not less than 4 weeks, reducing the total period in which the claimant worked for her former partner to 91 weeks. In that employment she was paid $600 per week whereas, on the assessor's findings, but for the accident she might have earned $937.50 per week ($750+$187.50, being her potential earnings for five days per week at Cool Bananas). The shortfall of $337.50 per week for 91 weeks is a total of $30,712.50.
The effect of the findings extracted at [9] above was to identify only these two periods in which the claimant had suffered a shortfall in earnings by reason of her injury. Although the assessor found that in September 2010 the claimant transferred from Abacus Kindergarten to Twinkle Star Childcare because the former employer was not considerate of her restricted physical capacity, he made no finding that any loss of earnings resulted. In finding that the claimant initially obtained only casual employment with Cool Bananas (from June to September 2015) he did not find that this was in any way attributable to her 10% whole person impairment. The assessor's general finding at [38] that the plaintiff has worked on "light duties" since the accident is not accompanied by any finding that this has been reflected in a reduction of earnings.
On these findings the assessor was not justified in taking an overview of the entire period from the date of the accident up to his assessment and purporting to find that "it is impossible to calculate any particular loss". It was simple arithmetic to calculate the combination of reduced earnings for the two periods he had identified, namely, $44,587.50. This was not a case where the evidence satisfied the assessor that over the whole period there must have been a loss of economic benefit attributable to diminished earning capacity but he could not put his finger on any particular wage loss. The reality is that the assessor did not find any facts tending to show loss of earnings other than those which gave rise to the two calculations referred to above.
The assessor's reasons thus show an error of law on the face of the record, namely, applying a buffer when this was not warranted in principle. However on this aspect of the case if the assessor had taken the approach required by law his award in favour of the claimant would have been less by only a little over $5,000. In the exercise of the Court's undoubted discretion with respect to granting relief under s 69 of the Supreme Court Act 1970 (NSW) I would refuse relief if no other ground of review were made good.

Ground (1)(b) - failure to give reasons for assessment of a buffer

The assessor was bound to give reasons for his decision: see s 94(5) of the Act; cl 18 of the Claims Assessment Guidelines issued pursuant to s 69(1) of the Act; Allianz Australia Insurance Ltd v Kerr at [51]-[53] (Basten JA). Failure to give adequate reasons is an error of law that may justify a grant of relief under s 69 of the Supreme Court Act. In the present case the assessor gave, at [73], clear and sufficient reasons for awarding a buffer in respect of past economic loss rather than making calculation. His error of law was not that he failed to give reasons but that his reasons and this aspect of his decision were wrong. It was not "impossible to calculate any particular loss" and the assessor should have made such a calculation on the basis of his express findings. There is no additional error in the nature of failing to explain why this wrong course was taken.

The assessor's reasons

Relevant to future economic loss the assessor made the following findings: [29] [The claimant was 27 at the date of the assessment]. [66c] Allowing for the interruption to her work as she had a family, [the claimant] gave unequivocal evidence that it was her intention to work full-time until normal retirement age. [66e] [The claimant] would have worked to age 67. [86] But for the accident I believe that she would have been either in full-time work as a supervisor of a childcare centre [or in] full-time work as a primary school teacher. To carry out the [latter] she would have needed some time off work to study …
The assessor's decision to award a buffer future economic loss appears at [86], devoid of explanation. The assessor stated that he had taken into account a number of variables, which he did not quantify, in his "assessment of a buffer for her future loss of income which I assess to be $400,000". He said, "Such sum is inclusive of vicissitudes and superannuation".
Although the assessor's findings extracted above amounted to a conclusion that, but for the accident, the claimant would have worked full-time for a further 40 years, he did not determine which was the most likely of her career alternatives (supervisor of a childcare centre or further study leading to a primary school teaching role) or what her weekly income would likely have been from whichever of those alternatives was the most probable.
Further, the assessor did not make any finding as to what the claimant's weekly hours would be reduced to as a result of her impairment. Nor did he determine whether the overall length of her working life would be reduced. At [84] he noted a submission - it is not clear from whom - that the plaintiff would be likely to work for only 20 hours per week. The assessor does not say whether he accepted that this was likely or whether he thought it more probable that she would work four days per week as she had done for 17 months up to February 2017.

Grounds (2)(a) and (b) - failure to state assumptions and reasons

The assessor's reasons at [67] disclose that he had evidence of how much the claimant earned from working in childcare, current to February 2017. He had a report from a recruitment expert regarding salary scales for primary teachers (referred to at [66d]). It was open to him to draw a conclusion about the claimant's likely future rate of earnings, but for the accident. On the other side of the calculation, it was open to the assessor to make findings about how many hours per week the claimant would in fact work, under the effects of her disability, and whether the remaining 40 years of what would have been her working life but for the accident would be foreshortened.
Finally, the assessor could have applied appropriate discount tables to derive a present capital value of the future loss of weekly income. He would also have had to adopt a discount for vicissitudes. The assessor may have considered that some deduction ought to be made for loss of working time that would have occurred irrespective of the claimant's injury, having regard to the fact that at the date of the assessment she was a single parent caring for three children aged 8, 5 and 2.
The further steps that the assessor could have taken in order to calculate future economic loss are the basic everyday activities of courts and tribunals called upon to make such assessments. Nothing appears on the face of the reasons to suggest that this case presented any particular difficulty in forecasting the most likely future circumstances of the claimant exercising her capacity for work.
The assessor did not state that he was unable to make findings on the integers of a future economic loss calculation. Nor did he state that any critical factor in the calculus was intractably indeterminate, permitting no more than speculation and rendering calculation impossible. The assessor's reasons lack any explanation for his resort to the buffer approach. There is an error of law on the face of the reasons at the fundamental level of failing to state why these basic steps in assessment of future economic loss were not attempted and why, instead, a buffer was adopted. The plaintiff's ground 2(b) is made out.
The plaintiff claims that the assessor erred in law by failing to state his assumptions as required by s 126 of the Act. Section 126 is in these terms: 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.
In the circumstances of this case I do not see what reasons could have been advanced for awarding a buffer rather than calculating future economic loss on the basis of specific findings. But if the buffer approach could be rationalised it was still incumbent upon the assessor under s 126(3) to state as far as possible his assumptions, both with respect to the claimant's likely circumstances if the accident had not occurred (subs (1)) and with respect to her likely actual circumstances (subs (3); Allianz Australia Insurance Ltd v Kerr at [31]).
In Allianz Australia Insurance Ltd v Sprod (2012) 81 NSWLR 626; [2012] NSWCA 281 Barrett JA said (citation omitted): [30] In a true "buffer" case, the obligations imposed by s 126 upon the assessor may be discharged by much more generalised statements. But there will still be, of necessity, some assumptions. Assumptions as to life expectancy and likely remainder of working life are examples, even if circumstances mean that the assumptions are necessarily somewhat impressionistic. But if that is the quality of the relevant assumption, it is still possible for to be stated, if only in very general terms, for example that remaining working life has been assumed to be a minimum of five years and a maximum of 20 years. That, while it would do little to elucidate any basis of calculation, would serve to accentuate one aspect of the uncertainty that form the very basis for resort to the evaluative approach of "buffer".
Here, unlike the kind of case to which Barrett JA referred, the assessor found no uncertainty about the likely length of the claimant's working life but for the accident. As to the relevant matters on which the assessor made no finding, such as the plaintiff's future rate of earnings and the hours per week and number of years for which she would in fact work, the assessor did not even state an assumed range. This was a breach of s 126. The plaintiff's ground 2(a) is established.
The assessor cannot be additionally faulted for failure to state any basis upon which he quantified the buffer: Allianz Australia Insurance Ltd v Kerr at [56]-[60] (Basten JA). However the fact that an assessor is not required to explain why or how the quantum of a buffer has been chosen, in combination with the principle that this approach to awarding future economic loss should not be adopted where the evidence enables a more transparent determination (as held in Allianz Australia Insurance Ltd v Kerr - see [12]-[14] above), increases the importance of reasons in such a case. It was incumbent on the assessor to explain why he considered himself unable to make, in the words of Macfarlan JA, "evidence-based calculations or estimates that [could be] exposed in the […] reasons".
The future economic loss component of the total award was substantial. It is not possible to say whether $400,000 is within or outside a reasonable range in the absence of any delineation of what the actual future circumstances of employment are expected to be. It is unacceptable that there should be awarded against an insurer under the motor accidents compensation scheme a sum of $400,000 without either a statement of the actual future earnings that have been assumed in the award or an explanation of why it is considered not possible or too difficult to draw conclusions in that regard. The inadequacy of these reasons leaves the affected party with an impression of arbitrariness. This case illustrates why the legal requirement of adequate reasons is important to public confidence in administrative decision making under the Act.

Orders

The plaintiff has made good its claim for an order in the nature of certiorari setting aside the decision. The plaintiff submitted that the certificate is an indivisible whole and must be set aside entirely, rather than partially in respect of only the components of damage to which the errors of law relate. The first defendant did not contend otherwise. The dispute as to the claimant's damages must be remitted to the Authority for reassessment. As a practical matter, in view of the plaintiff having contested only those parts of the assessor's reasons relating to economic loss, it would be expected that the reassessment would be limited to that aspect.
The reassessment should be assigned to an assessor other than the third defendant. If the matter were to be returned to the third defendant there would be a justifiable apprehension on the plaintiff's part that the matter may have been prejudged and that the third defendant would be inclined to justify the quantum previously certified. Upon reassessment the replacement assessor will not be bound by any of the third defendant's findings of fact bearing upon past or future economic loss.
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, assessing damages as recorded in his certificate dated 28 November 2018 issued pursuant to s 94 of the Motor Accidents Compensation Act 1999 (NSW) is set aside. 2. The dispute between the plaintiff and the first defendant concerning quantum of the first defendant's damages is remitted to the second defendant for assessment according to law by an assessor other than the third defendant.

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: 11 September 2019

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