Pham v NRMA Insurance Ltd

Judgment 1MACFARLAN JA: For a period of about 14 years concluding in August 2007, Mr Thang Van Pham, the appellant, operated a dry cleaning business in North Ryde Shopping Mall. The business ceased when the mall was shut for renovations. Mr Pham had planned to commence a replacement business at the Meadowbank Shopping Centre in November 2007 but on 20 August 2007 he was involved in a motor vehicle accident which caused him serious injury and destroyed his income earning capacity. 2Following a claim by Mr Pham, NRMA Insurance Ltd, the first respondent and a compulsory third party insurer of the owner of a vehicle involved in the collision, admitted liability to him. Assessment of the damages to which he was entitled was referred under s 90 of the Motor Accidents Compensation Act 1999 ("the MAC Act") to Ms Elyse White, a claims assessor designated as such under s 99 of that Act. 3By a certificate of 30 April 2012, Ms White assessed Mr Pham's damages at $817,424.72. In the absence of an entitlement to appeal against that decision, the first respondent commenced proceedings in this Court for judicial review, pursuant to s 69 of the Supreme Court Act 1970, alleging that the Assessor made errors of law that vitiated her decision. In a decision of 3 May 2013, Hall J, sitting in the Common Law Division of the Court, accepted that such errors had been made and set aside the Assessor's Certificate ([2013] NSWSC 468). His Honour held, in short, that there was no evidence before the Assessor to support the basis upon which she assessed Mr Pham's future economic loss and that she did not comply with the requirements of s 126 of the MAC Act in respect of that head of damages. 4For reasons that appear below, I consider that Mr Pham's appeal against that decision should be allowed.

THE ASSESSOR'S DECISION 5Mr Pham's taxation returns, purporting to record the net income he earned from his dry cleaning business in the North Ryde Shopping Mall, were in evidence before the Assessor. The Assessor said that on their face they indicated that the business made "no or little profit" but the figures in them could not be correct as Mr Pham gave evidence that he paid family expenses out of the income of the business. The Assessor noted that Mr Pham's income from the business largely provided the support for his family, which included five children, some of whom attended a private school. 6The Assessor then concluded: "16. After the Assessment Conference, Mr Daley sent to me the case of Guzman v Zammit [2003] NSW CA 224 (15 August 2003), which he says is authority for the proposition that in 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[s] 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 stone mason, but for the accident. 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 $2,000.00 per week, because there is no evidence to support this loss ... " 7The Assessor went on to conclude that Mr Pham has no residual earning capacity and to calculate his future economic loss by assuming retirement at age 65 and making a conventional discount for vicissitudes of 15 per cent.

THE JUDGMENT AT FIRST INSTANCE 8The primary judge's reasoning is encapsulated in the following extracts from his decision: "125 In 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. 126 However, 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. 127 The 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). ... 131 The 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." 9Section 126 of the MAC Act, to which his Honour refers in the above extracts, is 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." 10In the course of his judgment, the primary judge referred to a number of aspects of the evidence before the Assessor revealed by documents exhibited to an affidavit of Ms Tain Moxham sworn on 16 August 2012. In doing so, his Honour overlooked the fact that those exhibits were not tendered at the hearing before him. Reference to them was accordingly impermissible.

RESOLUTION OF THE APPEAL 11To determine the appeal it is necessary to consider the basis upon which the Assessor made her award of damages for future economic loss. 12The Assessor's reasoning, evident from the extracts from her decision quoted above, was to the following effect: (1)Mr Pham's taxation returns purported to show that he earned little if any profit from his North Ryde dry cleaning business. (2)The returns were inaccurate as he in fact earned more than shown. (3)The evidence did not enable the Assessor to determine how much more Mr Pham earned from the business. (4)At the time of his accident, the Mall at North Ryde, and therefore Mr Pham's business, had closed but Mr Pham intended to recommence his business at Meadowbank Shopping Centre. (5)As a result, his future economic loss was to be assessed upon the basis that, but for his accident, he would have been likely to operate a dry cleaning business at Meadowbank, similar to that which he had operated for some 14 years at North Ryde. (6)It is a reasonable inference that if Mr Pham had not been deriving remuneration from his North Ryde business at least equal to that which he could have earned as a salaried employee in another business in the industry, he would not have persisted in conducting his business. (7)It is also a reasonable inference that he would not have planned to conduct his new business if he had not had a reasonable basis for expecting it to generate earnings for him of at least that level. (8)In these circumstances, a fair estimate of Mr Pham's loss of earning capacity, as reflected in his loss of opportunity to conduct the planned business at Meadowbank, was that it was at least equivalent to the earnings of a relevant salaried employee. Any greater loss was not proved by the evidence. 13Contrary to the primary judge's finding, the Assessor did not therefore proceed upon the basis that Mr Pham "would be forced by economic circumstances ... to work for wages in an employed capacity" (Judgment [131] quoted in [8] above). To hold otherwise would be to conclude that at one point in her reasoning the Assessor accepted that it was Mr Pham's intention to relocate his business to Meadowbank (and, by inference that he would have done so) ([11]) and that later she concluded that he would not have been able to do that and would have been forced to seek salaried employment ([17]). This would not make sense of the Assessor's reasons. Paragraph [17] (quoted in [6] above) of the reasons lacks clarity but is in my view to the effect that Mr Pham must have been earning a significant amount from his business at North Ryde, otherwise he would not have been able to pay his family expenses from it and would have been forced to sell or close the business. It was not a conclusion that, but for the accident, Mr Pham would in the future have had to do so. Rather it was an explanation for him not having done so in the past and, by inference, not being likely to have to do so in the future. 14There was nothing irrational in the Assessor then deciding that the earnings of a salaried worker were an appropriate guide to Mr Pham's loss, that is, an indication of the minimum amount which, but for his accident, he would have been able to earn in the future from his business. The evidence before the Assessor was limited but, in accordance with well-established authority, she had to do the best she could to estimate Mr Pham's loss (see for example Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 83; State of New South Wales v Moss [2000] NSWCA 133; 54 NSWLR 536 at [71] - [72]). 15Before the primary judge, the first respondent bore the onus of establishing that the Assessor had made an error of law. It did not establish that there was error in the Assessor taking this approach and the Assessor's reference in [16] to a report of "Furzer Crestani" suggests that it was supported by an accountant's report tendered by Mr Pham. Indeed, the primary judge's (impermissible) reference to the contents of that report (which was not in evidence before him) indicated that that was in fact what the report did: that is, that it said that Mr Pham's lost earning capacity "could be measured by reference to the total remuneration of a full-time employee laundry worker based on average weekly earnings" (Judgment [122]). 16As I have indicated, the Assessor's reasoning is not as clearly expressed as it could have been but the following approach is applicable in this context: "[T]he reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed" (Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259 at [31]; Plaintiff M70/2011 v Minister for Immigration and Citizenship; Plaintiff M106/2011 v Minister for Immigration and Citizenship [2011] HCA 32; 244 CLR 144 at [2]). In my view, the Assessor's reasons complied with the requirement imposed by s 94(5) of the MAC Act that a claims assessor provide a "brief statement" setting out his or her reasons for the assessments (see also clause 18.4 of the MAA Claims Assessment Guidelines). 17The Assessor said that she relied "on the authority of" the decision of this Court in Guzman v Zammit [2003] NSWCA 224 ([17]). In that case the Court inferred that, but for his accident, "the plaintiff would have been driven by economic necessity back into the employed workforce" (at [12]). In referring to Guzman, I do not think that the Assessor was saying that its facts were on all fours with the case before her. Rather I infer that she thought it provided some general support for reference being made to salaries of employed tradesmen where there was a need to assess the future economic loss of a self-employed tradesman. The portion of the sentence in [17] of her reasons that immediately follows her reference to Guzman makes this tolerably clear by its use of the expression "if this were not the case": that is, she was saying that the sale or closure of the business was only a relevant possibility if the business did not earn enough to pay the family expenses. 18It follows from these conclusions that I do not agree with the primary judge's view that Ms White assessed damages on the basis that Mr Pham would have been forced to take up salaried employment. 19It also follows that the primary judge's conclusion that the requirements of s 126 of the MAC Act were not complied with cannot be sustained. In accordance with s 126, the Assessor did identify her assumptions as to Mr Pham's "most likely future circumstances but for the injury": that is, that he would conduct his contemplated Meadowbank business. Her subsequent calculations by reference to Mr Pham's age and prospective retiring age and her deduction of the conventional amount (15 per cent) for vicissitudes were not challenged and recorded the percentage referred to in s 126(2) and required by s 126(3) to be stated in the reasons. 20Accordingly, the appeal should be allowed. I add that the primary judge's mistaken references to the exhibits to the affidavit of Ms Moxham were not of significance in the resolution of this appeal. 21In conclusion, I note that in assessing Mr Pham's damages it was permissible for the Assessor to have regard to what the evidence indicated about the level of his business' actual earnings even though part appear not to have been disclosed for taxation purposes (see Matar v Jones [2011] NSWCA 304 at [16]; Morvatjou v Moradkhani [2013] NSWCA 157 at [57] - [84]). However, as occurred in Matar v Jones, a direction should be made that this judgment be referred to the Commissioner of Taxation for consideration. 22I propose the following orders: (1)Appeal allowed. (2)Declaration and orders made by Hall J on 3 May 2013 and any order for costs made by him subsequent to that date are set aside. (3)Order that the Summons filed on 5 June 2012 be dismissed. (4)Order the first respondent in this Court to pay the appellant's costs of the proceedings at first instance and on appeal. (5)Direct the Registrar of the Court to refer this judgment to the Commissioner of Taxation for consideration. 23LEEMING JA: I agree with Macfarlan JA that the appeal should be allowed and with the orders his Honour proposes. I substantially agree with his Honour's reasons, which I have seen in draft. I prefer to express my reasons as follows, because there are some additional matters which I wish to elaborate. However, I do not regard anything in what follows as inconsistent with his reasons. 24First, NRMA's summons asserted that there were "a number of jurisdictional errors and/or errors of law on the face of the record", without discriminating between the categories. An identically imprecise approach was criticised in Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13; 83 NSWLR 302 at [11] and [19]. The difference matters, because the court will review the decision on the basis of different material. That is why, as Basten JA there said, the applicant for judicial review is required to identify with a degree of precision which grounds involve jurisdictional error and which involve error of law on the face of the record. 25Secondly, it was common ground that the primary judge wrongly referred to evidentiary material, reproduced at [116]-[123] of his reasons, not tendered at the hearing. It is plausible that the reason material going beyond the record was included in the affidavit made available to and erroneously used by the primary judge was NRMA's failure to attend with precision to the nature of its challenge at the outset. 26Thirdly, NRMA sought to defend the appeal on the basis that what had been said by the primary judge at [101] was dispositive, and was based on only the reasons of the assessor. That submission should be rejected. On its face, the reasoning at 101 was a conclusion that "the evidence did not support" the assessor's finding that Mr Pham would have abandoned the business. That is consistent with the structure of his Honour's reasons, for [101] precedes the section of the reasons described as "Consideration", and is a summary of the outcome of the reasoning which follows. 27Fourthly, NRMA submitted that the assessor's reasons attracted s 69(4) of the Supreme Court Act 1970 (NSW), on the basis that she was a "quasi-judicial tribunal". No written or oral argument was addressed to that proposition, which is not self-evident (and was merely assumed in Kerr: see at [17]). It is not necessary to rely on s 69(4). The assessor's certificate undoubtedly incorporated her reasons, and not merely by reference, but also by physically attaching them to the certificate, in accordance with the obligation to do so in s 94(5) of the MAC Act. After recording the amounts of damages and costs, the certificate states "Details of the assessment and full reasons for this decision are attached to this Certificate". The certificate thereby became analogous to the "speaking order" as opposed to the "unspeaking or unintelligible order" to which Earl Cairns LC referred in this context in Overseers of the Poor of Walsall v London and North Western Railway Co (1878) 4 AC 30 at 40. A very clear way of causing the reasons to form part of the record is for statute to require reasons to be given and to be attached to the certificate: cf Craig v South Australia [1995] HCA 58; 184 CLR 163 at 181-183. 28Fifthly, although s 94(5) requires the assessor to prepare reasons, and to attach them to the certificate issued to the parties pursuant to s 94(4), those reasons are required to comprise a "brief statement". Consistently with this, s 106(1) requires assessments to comply with, relevantly, cl 18.4 of the MAA Claims Assessment Guidelines, which in turn requires the statement of reasons to set out findings, reasoning process and any relevant law "as briefly as the circumstances of the assessment permit". 29The approach to be adopted is stated in Allianz Insurance Ltd v Kerr at [53]. The obligation upon the assessor to give reasons is less than that imposed on courts. In particular, irrespective of whether it is said that the reasons disclose error of law or jurisdictional error, "the limitations of the obligation to give reasons must be kept firmly in mind by a judicial officer accustomed to a higher obligation". 30Sixthly, NRMA maintained that the assessor's statement of reasons failed to comply with s 126 (which is made applicable to the assessor by s 122(3)). NRMA did not submit there had been non-compliance with s 126(2), which requires an adjustment (the assessor had expressly allowed a 15% deduction for vicissitudes). However, the primary judge found, and NRMA maintained, that that there had been other non-compliance with s 126. It was not disputed that it was necessary for the assessor, in order to comply with s 126(3), to state the assumptions relied on. 31In order to determine NRMA's submission as to non-compliance with s 126, it is necessary to construe the reasons, fairly and not over-zealously, bearing in mind the obligation upon her to be as brief as the circumstances permit, and that the obligation is less than that imposed upon courts. I respectfully agree with what Macfarlan JA has said is the effect of the reasons, and why there was error by the primary judge in concluding that there was a finding that Mr Pham would be forced to work for wages. It is clear that the assessor found that the actual income earned from Mr Pham's business was (a) more than was shown on his taxation return and (b) sufficient to enable him to pay family expenses (including mortgage, school fees, food, clothes, medical, motor vehicle expenses, rates and insurance). The basis of that was the reasoning that were it not so, Mr Pham would have been forced to sell or close the business and seek employment elsewhere. What is not plain is the extent to which the actual earning exceeded the actual expenses paid by Mr Pham. That lack of clarity did not make it wrong for the assessor to do the best she could to determine the loss of earning capacity. 32There was no evidence before the Court that, in the alternative, Mr Pham had not submitted to the assessor that a measure of the lost earning capacity was the average weekly net earnings of a laundry worker. That is sufficient to determine the point against NRMA, which bore the onus. However, as Macfarlan JA has observed, the matters referred to by the primary judge at [122] indicate that such a submission had in fact been made. 33Seventhly, NRMA emphasised that the assessor's reasoning process amounted to rewarding conduct which was both (a) a failure to discharge the applicant's obligation to establish his or her loss, and, more importantly, (b) a failure to comply with taxation laws and, perhaps, a fraud on social security. However, there was no evidence that any such submission had been made to the assessor. If it had, then the legal consequences are far from straightforward: see for example Nelson v Nelson (1995) 184 CLR 538. But it is sufficient to observe that there is no error of law in the assessor failing to address a legal submission which has not been shown to have been put to her: Commissioner of Taxation v Glennan [1999] FCA 297; 90 FCR 538; Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; 141 FCR 107 at [29]. 34Eighthly, I agree with what Macfarlan JA has written about the reference by the assessor to Guzman v Zammit [2003] NSWCA 224. 35Finally, because there is a finding, which was invited by Mr Pham, that his actual income exceeded what is shown on his taxation return (at [15]), it is appropriate that the judgment be referred to the Commissioner of Taxation. It is then a matter for the Commissioner to determine what course if any to follow (there may be mitigating circumstances, for the assessor says in the previous paragraph that Mr Pham "gave everything to his accountant and he relied on him to prepare the returns", and it is far from clear on the limited materials before this Court that a power to reassess is available, having regard to the fact that the most recent year of income was 2007). 36TOBIAS AJA: I agree with the orders proposed by Macfarlan JA for the reasons expressed. I also agree with the additional observations and reasons of Leeming JA.

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: 19 February 2014