NRMA Insurance Limited v Pham

The Proceedings 8The proceedings invoke this Court's jurisdiction under s 69 of the Supreme Court Act 1970. Section 69(3) provides: "69 Proceedings in lieu of writs ... (3) It is declared that the jurisdiction of the Court to grant any relief or remedy in the nature of a writ of certiorari includes jurisdiction to quash the ultimate determination of a court or tribunal in any proceedings if that determination has been made on the basis of an error of law that appears on the face of the record of the proceedings." 9Section 69(4) provides: "(4) For the purposes of subsection (3), the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination." 10The Summons is supported by the affidavit of Tain Rachel Moxham, solicitor, sworn on 16 August 2012. Exhibited to that affidavit are a number of documents as detailed in [4] to [10] of the affidavit. 11Produced at the hearing was a volume of documents containing the exhibits. 12On the hearing of the proceeding, Mr MA Robinson SC appeared on behalf of the plaintiff. Mr M Daley of counsel appeared on behalf of the Mr Pham.

The Nature of the Claim for Assessment under the Motor Accidents Compensation Act 1999 13Mr Pham claimed damages as a result of injury received by him on 20 August 2007. The proceedings by him included a claim for both past and future economic loss. At the time of the accident, he was making a dry cleaning delivery in a work van along the Gladesville Bridge in peak hour traffic. He was making a right turn when a vehicle travelling at high speed struck his vehicle propelling him onto the incorrect side of the roadway with the result that his vehicle collided with vehicles coming in the opposite direction. His vehicle was written off. It was said that it took some considerable time before he was freed from the motor vehicle and taken by ambulance to Royal North Shore Hospital. 14Liability was admitted by the plaintiff insurer. The matter was listed for an Assessment Conference on 16 April 2012 but on the application of the plaintiff the Assessment Conference was adjourned until 18 April 2012. 15The issues in dispute identified by the assessor in her decision were said to be threefold: (1) Mr Pham's credit in light of the surveillance on him and alleged inconsistent history given by him to doctors and to the occupational therapist. (2) Mr Pham's real economic loss. (3) Whether Mr Pham has any residual capacity. 16For the purposes of the present proceedings, the second and third issues are central matters in the resolution of the issues raised by the Summons. 17The assessor dealt with the issue of credit in her Reasons for Decision in [4] to [10]. She concluded that the Mr Pham was "an honest and reliable witness": Reasons at [10]. 18The claims assessor turned to deal with "Economic Loss" and "Residual Earning Capacity". The claims assessor quantified both past economic loss and future economic loss at [28] and [29] of the Reasons for Decision. She also separately dealt with both past and future treatment expenses, past and future domestic care, as well as non-economic loss.

THE AWARD OF DAMAGES 19In the Reasons for Decision, the award of damages was summarised as follows: "a. Past treatment expenses - $34,420.22 b. Future treatment expenses - $25,000.00 c. Past economic loss - $166,780.00 d. Future economic loss - $311,376.00 e. Future paid domestic care - $89,848.50 f. Non-economic loss - $190,000.00 Total - $817,424.72"

The Assessor's Analysis of the Economic Loss Claims 20The claims assessor commenced her consideration of the economic loss claim by stating in [11] "Addressing Mr Pham's economic loss is challenging. Clearly, the figures in his taxation returns cannot be correct." 21The assessor recorded Mr Pham's personal history which included the fact that he was born in Vietnam and escaped from that country in 1982. He remained in Hong Kong for two years before coming to Australia in 1984. 22After arriving in Australia he worked on building sites as a stonemason for 10 years. 23In 1993, he purchased a dry cleaning business in North Ryde Shopping Mall which he operated under the name "Spotters Dry-Cleaning". The assessor observed that he continued in that business until approximately August 2007 when the Shopping Mall was shut down for renovations. Notice of the shut down had, according to the Mr Pham, been given to him in July 2007. 24He relocated his equipment and stock to a storage area. He negotiated a lease in the Meadowbank Shopping Centre, where he said he had planned to commence business on 13 November 2007. Attached to the Claims Assessment and Resolution Service (CARS) application dated 19 August 2010 was a copy of a letter dated 9 July 2007 addressed to Mr Pham from the leasing agents proposing a lease upon those premises for a term of 7 years. The assessor accepted that it had been Mr Pham's intention to operate a business at the new location. 25The claims assessor noted in [12] that Mr Pham's North Ryde business on the basis stated in his taxation returns had generated losses for a number of years except in the 2007 year when a profit of $35,000 was shown. The assessor noted that this "... appears to be as a result of a reduction in rent for that year." 26In My Pham's statement dated 18 August 2010 in support of his claim, he stated that, apart from the 2007 year the business made losses and that, "I had planned however [to] expand my business to increase its profitability" (at [17]). He also stated: "Because the business was not making a lot of money I received some Centrelink support through these years" (at [18]). 27The Mr Pham's evidence was that he performed all the dry cleaning business but that his accountant looked after the books of the business. 28His evidence was that he personally worked the business six or seven days a week, over long hours. 29The claims assessor noted at [13] that: "On its face, the business made no or little profit. Prior to the accident, Mr Pham's wife also took in some sewing work, which she did at home. However, her income alone could not support the standard of living Mr Pham's family was enjoying. The assessor in that respect observed: "They supported 5 children. Some of the children attended a private school. Mr and Mrs Pham were purchasing their family home. The mortgage was over $600 a month. The family incurred household utilities and expenses including food, clothes, medical, motor vehicle expenses, rates, insurance, etc." Reasons at [13]. 30The claims assessor continued: "[14] I asked Mr Pham if some of these expenses were paid from the business before tax. He said he gave everything to his accountant and he relied on him to prepare the returns. However, I am not satisfied Mr Pham understood my question. Although there was an interpreter present, I asked Mr Pham to attempt to give his evidence in English. However, the interpreter would translate where necessary. [15] Mr Pham was asked on a number of occasions and confirmed that he paid family expenses referred to above from the business and it is for this reason I accept that his income exceeded what is shown on his taxation return." [16] After the Assessment Conference, Mr Daley sent to me the case of Guzman v Zammit [2003] NSWCA 224 (15 August 2003), which he says is authority for the proposition that in the circumstances where a tax payer painter from his taxation returns was earning between $200.00 and $350.00 a week, where an employed painter would earn at least $600.00 a week, it was fairly clear that if there had been no accident, the Plaintiff painter would have been driven by economic necessity back into the employed workforce. It is Mr Daley's submission that in these circumstances, where the taxation returns show no income, Mr Pham would have been forced to find employment as a dry cleaner and nominates a loss of $2,000.00 net per week. The Furzer Crestani report prepared for the Claimant adopts the extract from the Australian Bureau of Statistics publications on adult male laundry workers and at Schedule D and E of that report, calculate a past and future economic loss. [17] Based on the authority of Guzman v Zammit and Mr Pham's statement that he was paying for his family expenses from the business, I accept that if this were not the case, Mr Pham would have been forced to sell or close the business and seek employment either as a dry cleaner or as a stonemason, but for the accident." (emphasis added) 31The claims assessor then proceeded: [18] In order to fairly compensate Mr Pham, the approach I intend to adopt is the average weekly net earnings of a laundry worker from the time of the accident. I reject Mr Daley's submissions that the weekly loss is $2,000 per week, because there is no evidence to support this loss. I also reject the claim of a buffer for the loss of opportunity of selling the business at a profit. There is simply no evidence that this was Mr Pham's intention and based on the taxation returns, it is most unlikely that he would have found a purchaser willing to pay any money at all for the business, other than for stock and equipment." 32In relation to the medical evidence the claims assessor stated that she preferred the opinion of Dr Wallace who said that Mr Pham remained unfit to return to his pre-injury duties as a self-employed dry cleaner. Dr Wallace, the assessor noted, placed substantial restrictions on Mr Pham's activities and had concluded that he was then currently unfit to be gainfully employed in any capacity by reason of his ongoing disabilities, the result of the motor vehicle accident. 33The assessor also noted that Dr Lorentz, a consultant neurologist, opined that Mr Pham was unable to return to work as a manager of a dry cleaning establishment. Dr Lorentz stated that he may be capable of a light job for 20 hours a week, providing it did not involve prolonged standing, bending or lifting, or any complex mental functions. 34The assessor noted that Dr Ellis had a similar opinion, stating that Mr Pham was unable to return to work as a dry cleaner and could not stand or walk for long periods. 35As to Mr Pham's psychiatric condition, the assessor noted that Dr Morse found his prognosis overall was poor and that there was little prospect of him returning to work. The assessor further noted that Dr Duong considered that Mr Pham was unfit for work. 36The reasons for decision then referred to the medical evidence adduced on behalf of the plaintiff insurer. The assessor stated that the plaintiff's medical evidence was to the effect that Mr Pham had a work restriction which prevented him from working as a dry cleaner. She then detailed medical evidence including that from Drs Lim and Barrett as to the nature of the physical restrictions they considered existed and the limitations generally on Mr Pham's working capacity. 37The claims assessor noted that, so far as sedentary or clerical type work was concerned, by reason of Mr Pham's limited English skills, alternate employment, as suggested by Dr Barrett, was "not feasible": Reasons at [20]. 38In [21], the claims assessor stated: "[21] I believe Mr Pham can engage in sedentary type employment, even if limited to part-time. What impedes Mr Pham from finding suitable light duties is his limited English skills. For this reason I do not consider Mr Pham has any residual earning capacity."

The Plaintiff's Submissions 39Mr Robinson SC on behalf of the plaintiff insurer provided written submissions dated 29 August 2012: Plaintiff's Summary Submissions. The submissions helpfully reviewed and set out relevant provisions of the MAC Act and decisions both of the Court of the Appeal and of single judges of this Court. 40The plaintiff's contention was that the claims assessor had erred in terms of [5] and [6] of the grounds to the Summons. It was submitted that the alleged errors constituted jurisdictional error and/or errors of law on the face of the record and/or constructive failures by the decision maker to perform her duty under the MAC Act: Written Submissions at [12]. 41It was submitted for the plaintiff that the assessor had erred in making the awards for past and future economic loss on the basis of the decision of the Court of Appeal in Guzman v Zammit [2003] NSWCA 224 and in relation to the determination that, were it not for the accident, the "claimant would have been forced to sell or close his business and seek employment either as a dry cleaner or as a stone mason". In proceeding upon that basis it was observed that the assessor adopted the average weekly net earnings of an employed laundry worker. The damages for past economic loss were calculated from the time of the accident at a rate of $773 per week for past loss and as well for future loss to the age of 65. 42In [6] of the Grounds of Judicial Review the errors of law were set out in subparagraphs (a) to (e) in relation to which it was contended: That Guzman v Zammit was not an authority which the assessor was bound to follow; The award of damages based on the earnings of an employed laundry worker were inconsistent with the evidence which established that Mr Pham had been self-employed in his own cleaning business. It was submitted for the plaintiff that an assessor was required to make findings based on facts and not on assumed facts that had no evidentiary foundation. It was further contended that there was no evidence for the making of that determination. There had been a failure by the claims assessor to comply with the provisions of s 126 of the MAC Act. Under that section the claims assessor was bound to disclose the assumptions as to the claimant's "most likely future circumstances" but for the injury. Adjustments had then to be made to any amount of damages for future economic loss by reference to a "percentage possibility" of future events occurring. The finding that Mr Pham would have been employed as a laundry worker in the future was not in Mr Pham's case the most likely future circumstance. The assessor's findings "about the claimant's most likely future circumstances but for the injury", were against the evidence. It was contended that the assessor's finding as to Mr Pham's most likely future circumstance was "manifestly irrational" and "not logical for the claims assessor to make ..." There had been a failure by the assessor to state her reasons as to why she determined that Mr Pham would have been forced to sell or close his business some time in the future. 43On the above bases, it was contended for the plaintiff, that the assessment decision is invalid and should be set aside. 44The primary error identified in the submissions for the plaintiff was said to be at [16] to [18] and [28] and [29] of the assessor's reasons dated 24 April 2012 which dealt with the claims for past and future economic loss. 45As the assessor relied upon the decision in Guzman v Zammit as an authority, it is necessary to determine exactly what issues were raised in relation to the award for damages for economic loss in that case and how the Court of Appeal resolved those issues. 46The plaintiff, Mr Guzman, had worked between 1987 to 1992 as an employed painter. In 1992 he commenced work as a painter on his own account. He worked for another six years before the relevant motor vehicle accident in which he was injured. Despite his best endeavours the business did not prosper. 47Following the motor vehicle injury in 1998, the plaintiff suffered difficulties with his right shoulder and arm. He continued for some months performing work although with increasing difficulties. The evidence suggested, and it was accepted, that he had lost about fifty percent of his work capacity. 48In mid-2000, as the plaintiff's position deteriorated, he abandoned his painting altogether. The issue for determination was the proper basis upon which damages for past and future economic loss should be assessed. 49The Court observed that as to the actual earnings of the plaintiff, there was only a "scattering of figures which do not suggest any particular pattern": at [10]. 50On the basis of those figures, the trial judge had concluded that, unsatisfactory as the plaintiff's job was, he managed to earn $200 to $350 per week. To put that in perspective it was noted that the evidence was that an employed painter would earn at least $600 per week. 51In his judgment, Meagher JA stated: "12 Although his Honour made no explicit finding to this effect, it is, I think, fairly clear that, if there had been no accident, the plaintiff would have been driven by economic necessity back into the employed workforce. 13 All these considerations combine to suggest that the plaintiff should be re-compensated at the rate of $300 per week (ie fifty percent of $600). Instead his Honour ... calculated his economic loss at the inexplicable figure of $160 per week." 52Accordingly, the damages were recalculated for past and future economic loss on the basis of fifty percent of $600 a week. 53The first matter to be noted is that the decision in Guzman did not establish any principle. It was a decision on its own facts and the approach taken by the Court of Appeal proceeded upon the evidence as to the actual pre-injury earnings of the plaintiff which were relatively low (estimated at between $200 to $350 a week). 54The judgment of the Court of Appeal did not refer in full detail to the precise evidence that was adduced in the District Court hearing. In paragraph [12], set out above, Meagher JA referred to the fact that no explicit findings had been made as to what the plaintiff would probably have done in terms of seeking out employment in the workforce, but that it may well have been that there was evidence which made it "fairly clear" that if there had been no accident the plaintiff would have been driven back into the employed workforce. 55I do not consider that the decision in Guzman can be taken as in any way determinative of the proper approach to be taken by the assessor in the present case. The factual circumstances were not the same there as those appearing in the present case. 56The plaintiff contended that the finding made by the assessor to the effect that "the claimant would have been forced to sell or close his business and seek employment either as a dry cleaner or as a stonemason" was without evidence and was against the claimant's contention that he would have pursued a dry cleaning business after the accident, that he did not wish to be employed and saw himself as a small businessman. 57At [36] of the Plaintiff's Summary Submissions, attention was drawn to the observations made by the claims assessor at [14]-[15] where it was contended that the essence of what she said was: "I do not believe your income on your tax returns was correct. It was understated and you earned more than you declared to the Tax Office". (This submission should not be taken as quoting the assessor's actual words.) 58It was further contended by the plaintiff at [37], that the assessor then effectively said: "Because of your low income tax returns, I will determine to give to you compensation (past and future) based on an income you did not actually have before the accident, namely one based on full time employment." (Note: these are not the actual words expressed by the assessor.) 59It was the plaintiff's submission that this reasoning is "entirely perverse and it [is] not logical or rational": Plaintiff's Summary Submissions at [38]. 60It was also submitted that the approach taken was not open to the claims assessor as a matter of law. 61It was argued that the plaintiff had not abandoned his business but had had it temporarily disrupted by the closure of the North Ryde Shopping Mall and that he intended to recommence his operation as a sole trader/dry cleaner as soon as practicable: Plaintiff's Summary Submissions at [40]. 62Accordingly, the primary basis for the relief sought in the Summons was that the claims assessor acted without proper regard to the evidence as to Mr Pham's pre-injury history as a self-employed person, disregarded the evidence contained in the tax returns and constructed, without evidence, the central premise for assessment for past and future economic loss, namely, that the plaintiff would have turned to employed work as a laundry worker and simply calculated lost earnings past and future on that basis. 63The plaintiff contended that the claims assessor had failed to comply with the provisions of s 126 of the Act in respect of future economic loss. 64In summary, s 126 required: (1) The claims assessor to disclose the assumptions made about the claimant's most likely future circumstances but for the injury; (2) To make adjustments to any amount of damages for future economic loss by reference to a "percentage possibility" that the future events might occur. 65In relation to (1) above, it was contended that the finding that Mr Pham would have become an employed laundry worker in the future was plainly not the most likely future circumstance. 66It was submitted that the assumptions to be adopted must be properly found, stated and quantified in the reasons for decision, but that this did not occur with the subject assessment. 67In this regard it was submitted that there had been a failure to comply with "legislative requirements" and that the claims assessor had therefore acted without power and the decision was ultra vires. 68The provisions of s 126 are in the following 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." 69In support of its submissions the plaintiff relied upon the decision in Insurance Australia Limited t/as NRMA Insurance v Hutton-Potts (2010) 57 MVR 194; [2010] NSWSC 1446 at [27] to [41] (Schmidt J). 70As earlier noted, the submission was that the claims assessor had failed to state the reasons as to why she had determined that Mr Pham would have been forced to sell or close his business some time in the future. 71Section 94(5) of the MAC Act required the claims assessor to record a "brief statement" of the assessor's reasons for the assessment. It was submitted that failure to state reasons on significant matters constitutes an error of law. Reference in this respect was made to a number of decisions including Campbelltown City Council v Vegan (2006) 67 NSWLR 372 at 377 [31] (Handley JA), 377 [33] (McColl JA agreeing), 399 [130] (Basten JA); Insurance Australia Limited t/as NRMA Insurance v Hutton-Potts, supra, at [42]-[44]) Schmidt J.

Submissions On Behalf of Mr Pham 72The submissions for Mr Pham sought to distinguish legal or jurisdictional error from error in relation to facts or factual findings made in the CARS Assessment in order to support the submission that the plaintiff was, in effect, engaging in an impermissible attempt to pursue what was said to be a merits review. 73The determination of damages for economic loss, it was submitted, was inherently a factual exercise. 74In a case when there was "an undoubted loss" (found by the CARS Assessor to amount to economic total incapacity) then, it was submitted, the function of the CARS Assessor was to assess the loss as best she was able to, even if on limited material: Written Submissions at [5], citing NSW v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536. 75In NSW v Moss, Heydon JA (as his Honour then was) observed: "66 There are two uncontroversial themes running through the cases relating to the assessment of damages for injury to earning capacity. One is that in general it is desirable for precise evidence to be called as to what the plaintiff would have been likely to earn but for the injury and what the plaintiff is likely to earn after it. The second is that the failure to call such evidence does not necessarily result in selection of only a nil or nominal figure as damages for impaired earning capacity." 76His Honour at [71] emphasised that the compensable loss to be assessed was not a loss of income but the loss of capacity to earn income in a manner productive of financial loss. It was also observed however, that: "... the income earned before the injury is relevant, but only as an evidentiary aid in assessing damages for the loss of capacity to earn income ..." 77Additionally, Heydon JA observed that: "... the mere fact that the quantum of damages is difficult to assess does not mean that the plaintiff is only entitled to a nominal sum" (at [72]). 78Reliance was also placed upon the observations made by his Honour as follows: [87] In short, where earning capacity has unquestionably been reduced but its extent is difficult to assess, even though no precise evidence of relevant earning rates is tendered, it is not open to the court to abandon the task and the want of evidence does not necessarily result in non-recovery of damages." 79His Honour went on to state that the task of the trier of fact was to form a discretionary judgment by reference to not wholly determinate criteria within fairly wide parameters. 80The submission for Mr Pham was that the award of damages is not an award for a loss of income but an assessment of the value of the capital asset lost by reason of the injury, namely, Mr Pham's earning capacity. The task of the assessor was to value that "asset". 81It was submitted that it was common to award damage for future economic loss by reference, in difficult cases, to average weekly earnings. It was suggested that this was "a common practice" (at [10]). It was submitted that the CARS Assessor had done nothing more than to "refine the average weekly earnings to those in the laundry industry rather than by reference to average weekly earnings generally": (at [10]). 82The written submissions for Mr Pham then addressed the decision of the Court of Appeal in Guzman v Zammit, supra. It was submitted that it was open to the assessor to find that, absent an ability to earn sufficient income as a self-employed dry cleaning proprietor, Mr Pham would be compelled by economic necessity to return to some form of work: (at [14]). 83The evidence, it was noted, disclosed that the only form of work known to Mr Pham was that involved in the dry cleaning industry and work as a stonemason. It was submitted that the CARS Assessor had made a factual decision based on the evidence. 84It was further submitted that the claimed error was a finding of fact and not an error of law. Reliance was placed upon the well-known decision in Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139 in particular at p 156. 85It was submitted that the matters relied upon by the plaintiff did not elevate the assessor's reasoning to an error of law: (at [21]). 86It was additionally argued that the assessor did not find that because of Guzman she was required to approach the question of quantification of Mr Pham's economic loss in the manner undertaken by her. Rather, it was because the assessor found, as a fact, that if the family expenses could not be paid from the earnings of the business then Mr Pham "would have been forced to sell, close the business and seek employment either as a dry cleaner or as a stonemason, but for the accident": (at [22]). 87This factual finding, it was submitted, enlivened the approach of the Court in Guzman and there had been no error in its application in the present proceedings. 88The submissions for the plaintiff in relation to s 126, it was submitted, amounted to an argument as to the facts and which sought to dispute the factual findings of the assessor. 89Finally, in respect of the complaint as to an absence of reasons for the factual finding made as to Mr Pham's most likely future circumstances involving work as a laundry worker, reference was made to well-known authority including the decision of the Court of Appeal in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, in particular at p 281. It was submitted that there was no obligation on an assessor to provide lengthy or discursive reasoning. Reliance was also placed upon the decision of the Court of Appeal in Insurance Australia Limited v Helou [2008] NSWCA 240, in particular the observations of Campbell JA at [60]. 90It was submitted that the assessor had sufficiently stated the grounds and had made detailed findings in respect of the factual questions including in particular a finding that economic necessity, in the event that the business was not sufficiently profitable, would have compelled Mr Pham to obtain full-time employment in one of only two fields of employed work (being those in which Mr Pham had worked). The assessor, it was submitted, had sufficiently explained how she had arrived at the damages awarded for economic loss.

REPLY SUBMISSIONS 91In reply in the supplementary submissions for the plaintiff it was submitted that, "the findings relating to facts are merely a symptom of the contended legal errors of the claims assessor": (at [2]). 92Alternatively, it was submitted that the claims assessor's findings evidenced "manifest irrationality or unreasonableness": (at [3]). 93The assessment accordingly, it was submitted, must be set aside for manifest irrationality or unreasonableness in the Wednesbury sense: Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223.

The Assessor's Reasons for Decision 94The assessor recited the circumstances of the accident and the fact that the major injury sustained by Mr Pham was to his right leg, knee and heel. It was noted that he also suffered an aggravation to pre-existing back and neck symptoms: (at [1]). 95On the issue of Mr Pham's credit, it had been submitted on behalf of the plaintiff that there had been inconsistency in Mr Pham's complaints to doctors and in his statement. The assessor stated she disagreed with the submission having regard to both the nature of his activities the subject of surveillance and to the total number of hours over which the surveillance was conducted. The assessor stated that she considered that the surveillance evidence in fact provided confirmatory evidence favouring Mr Pham, in particular it depicted him walking favouring his right leg and demonstrating a limp whilst doing so. 96The assessor stated that in her opinion, and having regard to what Dr Barrett had said, the surveillance overall supported Mr Pham's description of his disabilities, including a psychological/psychiatric disorder: (at [8]). 97The assessor noted the personal history of the claimant as set out at [21]-[25] of this judgment. 98In addition, the Assessor noted Mr Pham's evidence to the effect that he did all the duties in the dry cleaning business but that his accountant looked after the books of the business. He worked six to seven days a week, opening at 6:00 am and closing at 6:00 pm except on Thursday nights when he remained open until 9:00 pm. On weekends the business would open between 7:00 am and 4:00 pm and on Sundays it would open at 9:00 am. 99In relation to the financial returns from the business and lifestyle expenses, the Assessor noted that his wife only made a small but unspecified amount from sewing work which was not sufficient to support the standard of living of the family. They had five children, some of whom attended private school. They were purchasing a family home, the mortgage of which was the equivalent of $150 per week $600 per month. There were other expenses including household expenses, insurance, rates etc to be paid. 100I have earlier set out the findings made by the assessor - at [29]-[31] 101I am of the opinion that the assessor's conclusions expressed in paragraph [17] of the Reasons for Decision, extracted at [31] above, indicate: (1) That the assessor regarded the decision in Guzman v Zammit as a precedent referring to it as "the authority" in that respect. As already indicated, I do not consider that the decision established any point of principle and the decision of the Court of Appeal turned on its own facts. (2) That the statement of the assessor concerning the payment for family expenses from the takings of the business and the proposition that if this were not the case then Mr Pham would have been forced to sell or close the business evidences some confusion of thought and does not provide a basis for concluding that Mr Pham would have abandoned the business which he had, up to the date of the accident, pursued over very many years. It, however, was the premise for the award of damages which the evidence did not support.

Assessment of Damages for Economic Loss 102The approach taken by the claims assessor in calculating past and future economic loss ultimately did not have regard to Mr Pham's pre-injury earnings based upon the gross and net profits generated by the laundry business operated by him over the years prior to the date of accident. Instead, the assessor determined that in assessing economic loss she would rely upon wage earnings of employees, as the tax returns lodged by Mr Pham for previous years did not accurately record his earnings in each tax year. As stated at [17] in the Reasons (extracted at [30] above) this approach was adopted on the basis of Guzman and Mr Pham's statement that he had been paying family expenses from the business and that "if this were not the case, Mr Pham would have been forced to sell or close the business...". The assessor's reasoning in this way, with respect, was flawed. 103In the circumstances of this case, the loss of earning capacity was claimed on the basis that Mr Pham had been self-employed and that his pre-injury earning capacity was to be measured by his pre-injury earnings prior to the subject accident. 104Whilst damages are intended to compensate for impairment of earning capacity rather than strictly represent compensation for earnings, where a person has been self-employed it is normally appropriate to have regard to the pre-injury earnings which often reflect the vagaries of the industry and other factors that can operate, for better or for worse, upon the profit-making capacity of a business. 105The present claim, having regard to the way in which it was conducted, was to be assessed having regard to the fact that the claimant had exercised his earning capacity, in his own dry cleaning business in the North Ryde Shopping Mall between 1993 and July 2007 (approximately 14 years) and to the fact that he had negotiated to take a lease to pursue a similar business at the Meadowbank Shopping Centre commencing on 13 November 2007. The assessor noted that Mr Pham had been questioned in relation to the new lease suggesting that he had no intention of relocating his business but the assessor stated at [11]: "... However, based on the material that I have regarding the Meadowbank Lease, I accept that this was Mr Pham's intention ..." 106After the assessor referred to the long trading hours under which the business was operated, including weekends, reference was made in the reasons for decision to the expenses associated with maintaining the mortgage on the family home and otherwise fully maintaining his family, before stating: "... I accept this his income exceeded what is shown on his taxation return" (at [15]). 107Having earlier noted that the business made losses "... on the taxation returns for a number of years, except in 2007 where a profit of $35,000 is shown ..." (at [12]), the assessor adopted the approach urged in submissions made subsequent to the Assessment Conference based on the Guzman decision. The submission was that in the circumstances "... where the taxation returns show no income, Mr Pham would have been forced to find employment as a dry cleaner and nominates a loss of $2000 net per week ...". 108As to Mr Pham's future intentions but for the accident, the following paragraphs in his statement of 18 August 2010 were relied upon: "61 If I had not had the accident I would have moved into this new business and would anticipate for the foreseeable future that I would be conducting business as a dry-cleaner. This is largely all I now know. I am a good dry-cleaner. 62 It had also been my intention at the time to get the new business up and running and when the shopping mall where my business had been was finished being renovated that I would again take a lease in that shopping centre. 63 I was hoping in this fashion to have two dry cleaning businesses operating and to therefore increase the income I was able to earn from my business. 64. In my own business as a dry-cleaner I could conservatively make $150,000 per year. ... 67. It was anticipated that the new businesses would also be run solely in my own name." 109Mr Pham's claim having been brought upon the basis that he had been, and intended to continue as, a self-employed person, did not provide a basis for the approach taken by the claims assessor, namely that Mr Pham would not have pursued his laundry business but would have been forced to sell or close the business and seek employment as either a dry cleaner or as a stone mason. This was premised upon the assumption that the business failed to generate a sufficient return to enable him to pay the family expenses from the business. Principles 110Although it is loss of earning capacity and not loss of earnings that is the subject of compensation, the remuneration earned up to the time of an accident and the rate likely to be earned in the future affords a basis for assessing compensation for the loss of earning capacity: Kallouf v Middis [2008] NSWCA 61 at [47]. 111Both the capacity that has been lost and the economic consequences that flow from that loss must be identified. Only then will it be possible to assess what sum will put the claimant in the same position he or she would have been in if injury had not been sustained. What a worker earned in the past may provide a very useful guide about what would have been earned if that person had not been injured: Kallouf v Middis, supra, at [48]. However, that said, given that the inquiry concerning future economic loss is one about the likely course of future events, the evidence of past events does not always provide certain guidance about the future: Husher v Husher [1999] HCA 47; (1999) 197 CLR 138 at [7[-[8] per Gleeson CJ, Gummow, Kirby and Hayne JJ. 112Whilst it has long been accepted that a compensable loss is not a loss of income but the loss of capacity to earn income in a manner productive of financial loss (Graham v Baker (1961) 106 CLR 340 at 347), the income earned before the injury is relevant, but only as an evidentiary aid in assessing damages for the loss of capacity to earn: Paff v Speed (1961) 105 CLR 549 at 566 per Windeyer J; NSW v Moss, supra, at [71] per Heydon JA. 113In Dyldam Developments Pty Ltd v Jones [2008] NSWCA 56, the plaintiff had been employed as a labourer and at the time of the accident was a subcontractor. At trial he produced tax returns for three financial years preceding the accident. Alternative proposals were put forward on behalf of the plaintiff as to the appropriate way of calculating the plaintiff's wage loss. There was evidence of payments directly to the plaintiff's bank account over a period of 33 weeks before the accident, producing an average of $646 per week. The Court determined that a more accurate estimate could be made in respect of some months after the injury and that an overtime component should be added for the purpose of assessment. It was argued that this produced an amount for which there was no justification. In his decision, Hodgson JA stated: "66 In my opinion, it was erroneous for the primary judge to have paid no regard to the plaintiff's record of earnings, as disclosed by his tax returns and as disclosed by the records concerning the 33 weeks prior to the accident. Those were important matters, and if they were to be totally disregarded, they needed to be explicitly addressed and reasons given for disregarding them. The failure of the plaintiff to lead satisfactory evidence concerning his pre-accident employment earnings, and to give any explanation for the earnings shown in the income tax returns, means in my opinion that uncertainties created by this absence of evidence should not be resolved in the plaintiff's favour." 114The Court of Appeal considered that the appropriate figure to take in assessing damages was $562 per week as the basis for calculating past economic loss with a percentage increase to derive the figure for calculating future economic loss. 115In the present case, as earlier observed, Mr Pham sought that damages for economic loss be assessed based on business income. In the Application for General Assessment by CARS completed by him, he described his employment as "self employed". 116In the s 82 particulars, at the Particulars of Loss of Income, at paragraph 7(m) it was stated that Mr Pham's intention was to run the dry cleaning business from the new premises. In paragraph 7(o) he claimed a past economic loss from November 2007 at a rate of $2,000 per week net. Future loss of earning capacity was claimed in paragraph 8(d) at the same rate to the age of 67. 117Copies of income tax returns of the 2002, 2003, 2004, 2005, 2006 and 2007 tax years were provided in support of the claim. In summary the gross and net earnings for each year is as follows: Tax Year Total Business Income Total Expenses Net Income/Loss 2002 $77,765 $87,757 $9,992 2003 $76,372 $90,860 -$14,488 2004 $88,564 $88,398 -$166 2005 $92,290 $91,504 $786 2006 $84,871 $82,283 $2,588 2007 $91,487 $56,472 $35,015

118Mr Pham completed a statement for the purposes of the assessment dated 18 August 2010. In paragraph 60 he stated: "60 The intention was that the new lease would commence on 13 November 2007. I was unable to sign the lease because of the accident and before November 2007. The people who offered me the lease ended up selling to another purchaser. The new purchaser was not prepared to offer me another lease because I had taken too long to accept the original offer because of my injuries. They have a dry-cleaner in the new shop. This should have been me." (p 168 of Moxham affidavit) 119In paragraph 61 he said that but for the accident he would have moved into the new business and that he would "... anticipate for the foreseeable future that I would be conducting business as a dry cleaner ...": at [61]. 120He stated that the business that he had conducted at North Ryde had been conducted in his own name and he was the sole proprietor of it. In paragraph 64 he stated that in his business as a dry cleaner: "... I could conservatively make $150,000 per year". 121In the Assessment Conference Mr Pham relied upon a report from Furzer Crestani Services dated 6 September 2011. The report sets out business income as derived from the taxation returns. It stated that due to the change in Mr Pham's circumstances at the time of the accident it was unclear what level of profits he may have achieved but for his accident: at 5.1.1. 122The estimate of Mr Pham's earnings but for the accident were based on the assumption that his earning capacity could be measured by reference to the total remuneration of a full-time employee laundry worker based on average weekly earnings: at 5.1.2. 123The report then provided an assessment of past loss of income on that basis as well as future loss of income. Past loss of income was assessed at $148,228 and future loss of income at $421,328. The report also estimated a loss of superannuation benefits; past loss of superannuation being calculated at $15,052 and future loss of superannuation at $42,607 making a total loss of superannuation of $57,659. 124In Kallouf v Middis, supra, the provisions of s 126 of the MAC Act were considered and the following observations made: "[91] These requirements were, no doubt, inserted in the legislation to which we have referred to require courts to make clear the basis on which awards for future economic loss are founded. [92] We do not understand it to have been in dispute at trial that the respondent would have continued to work in either a self-employed capacity or in employment, in either case involving work of a physical nature, had he not been injured. That is the assumption on which the primary judge proceeded (at [50]). As to the future loss, the primary judge assumed that there had been a permanent loss of the respondent's capacity for pre-injury work and for other physical work requiring physical fitness (at [50]), an assumption that while the respondent was capable of retraining, even with that benefit, he would be unable to compete with an able bodied rival for any particular position." 125In the present case, Mr Pham's claim was brought upon the basis of an assumption: (i) that his past and future economic loss is to be assessed having regard to the exercise of his earning capacity in the pursuit of his owner operated laundry business; and (ii) that that assumption accords with his most likely future circumstances but for the injury. 126However, as events transpired, as noted above, the assessment by the assessor proceeded upon the basis that past and future economic loss was to be assessed upon the basis that Mr Pham would have been forced, by economic circumstances, to have taken up employment and receive remuneration as an employee in the industry. Given that Mr Pham had, for so many years continued to earn remuneration through a self-operated business, the evidence did not establish that the most likely future circumstance was that he would earn remuneration as an employee in a laundry business. 127The approach followed by the assessor in the present case, however, did not, for the reasons set out above, comply with the requirements of s 126(1). Furthermore, the assessment was not made by an adjustment as required by s 126(2). 128The Court in Giorginas v Kastrati (1988) 49 SASR 371 examined the requirements in a personal injury case to be met in relation to the assessment of the extent of loss the subject of a claim for damages. That was a case in which the plaintiff, prior to a motor vehicle accident occurring in 1983, had operated a plumbing business in a self-employed capacity but in which the taxation returns failed to disclose the true level of earnings. Whilst that is not the basis upon which the plaintiff's case was pursued before the assessor, the observations made by the Court in that case (von Doussa J) are noted. In that case, von Doussa J observed, at 374: "The burden of proof rests on the plaintiff. Where damages are claimed for a loss of earning capacity, the plaintiff must prove the extent of his pre-accident earning capacity, the extent to which that capacity would have been productive of income had the accident not happened, and the extent to which the compensable injuries have diminished his ability to exercise the pre-accident earning capacity. It is necessary to emphasise that these matters cannot be satisfactorily proved by medical experts alone. There must also be evidence to prove the basic facts on which the medical opinion depends, and the circumstances of the plaintiff which are necessary to translate the medical opinion into findings of fact pertinent to the assessment of damages for a loss of earning capacity. Medical opinion alone as the plaintiff's pre-accident and post-accident capacity for work cannot prove the extent to which the plaintiff's earning capacity has been exercised in the past, or the extent to which his residual earning capacity is likely to be exercised in the future. In a case like the present one, it is incumbent on the plaintiff to show how he has used his capacity for work both before and after the accident. The plaintiff will be well advised to produce the best available evidence. That will include whatever records exist as to his pre-accident and post-accident earnings and other income. If a plaintiff attempts to give oral evidence on these topics from memory, unaided by records which are in his possession or power, he invites the opposing party, and the court, to question his evidence ..." 129His Honour made further observations upon the consequences of uncertainties in determining a plaintiff's claim for lost earning capacity at 375. A distinction was made between cases where the damages are, by the nature of the loss, difficult to calculate from other cases where precise calculation is rendered impossible and even broad assessment difficult, not by the nature of the loss, but by a paucity of evidence where it is clear that it lies within the power of the plaintiff to produce business and taxation records usually maintained by people in employment or business or other evidence which could clarify the extent of his income. 130In particular, observations were made as to the position where income taxation returns do not disclose the full extent of earnings and the consequences in that respect to the assessment of damages for loss of earning capacity (at pp 375-376). 131The claim, whilst premised on the fact that Mr Pham had been for many years self-employed and intended, but for the accident, to continue to do so, was assessed upon the hypothesis, for which there was no evidence, that he would be forced by economic circumstances to change and to work for wages in an employed capacity. The decision, and the certificate of assessment accordingly, was made and issued on a basis contrary to the statutory requirements in s 126 of the MAC Act.

Orders 132I make the following declaration and orders: (1) A declaration that the certificate issued under s 94 of the Motor Accidents Compensation Act 1999 dated 30 April 2012 in respect of the assessment conducted on 16 April 2012 was contrary to law. (2) An order setting aside the certificate. (3) An order remitting the claimant's assessment application to the third defendant or the Principal Claims Assessor of the third defendant for reallocation of the matter to a different claims assessor for determination of the matter according to law. (4) Leave to the parties to make application in respect of the issue of costs or ancillary orders arising from the orders set out above.

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: 03 May 2013