QBE Insurance (Australia) Limited v Peter Cowan

Background 3 The first defendant was born in 1975. He injured his back and neck in a motor vehicle accident on 3 January 2006. He claimed damages for his injuries. The plaintiff was the compulsory third party insurer of the driver at fault. It accepted liability. 4 On 12 February 2008 a medical assessor, Dr Kenna, issued a certificate of determination of assessment made under Pt 3.4 of the Act assessing the first defendant's permanent whole person impairment at "not greater than 10 percent". In his attached statement of reasons Dr Kenna assessed the whole person impairment at 5 percent. 5 On 18 December 2008 the first defendant lodged an application for general assessment by the Claims Assessment and Resolution Service ("CARS") under s 94 of the Act. 6 On 7 July 2009 the CARS assessor certified the amount of damages in respect of the claim at $228,318. Details of the assessment and reasons for the decision were attached to the certificate. The first defendant accepted the assessment pursuant to s 95 of the Act. 7 The assessment included the sum of $55,000 for past loss of earnings (including superannuation) and $160,000 for future loss of earnings (including superannuation). The plaintiff was dissatisfied with the assessment of those heads of damage. As there is no appeal against the assessment, the plaintiff has sought to invoke this court's jurisdiction under s 69 of the Supreme Court Act 1970.

Relevant facts 8 The first defendant was born in 1975. He obtained qualifications as a carpenter/joiner. He largely did physical work. In 2005 he was running a business which manufactured and sold furniture. In August 2005 he consulted his general practitioner in respect of lower back pain. An x-ray of the lumbar spine was normal. On 30 November 2005 he fell from a roof, injuring his back. However, he lost no time from work. At the end of 2005 a CT scan showed a L4/5 disc bulge and other mild pathology. On 3 January 2006 he was injured in the subject motor vehicle accident. He ceased work. On 31 January 2006 his business was burnt to the ground. In April 2006 he tried to build two houses but the venture failed. On 17 May 2006 he was working on the first day of employment with his parents when he suffered a tendon injury to the left little finger (he is right handed), in respect of which he received workers' compensation. He has not returned to work since that date. An issue was raised by the plaintiff as to the first defendant's credit.

General principles 9 Section 94 of the Motor Accidents Compensation Act 1999 provides, relevantly: "(1) The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of: (a) the issue of liability for the claim (unless the insurer has accepted liability), and (b) the amount of damages for that liability (being the amount of damages that a court would be likely to award). (2) Such an assessment is to be made having regard to such information as is conveniently available to the claims assessor, even if one or more of the parties to the assessment does not co-operate or ceases to co-operate." 10 The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in had the contract been performed or the tort had not been committed - Haines v Bendall (1991) 172 CLR 60 at 63. 11 A plaintiff in an action in negligence is not entitled to recover damages for loss of earning capacity unless he or she establishes

(a) his or her earning capacity has in fact been diminished by reason of the negligence-caused injury;

(b) "the diminution of…earning capacity is, or may be, productive of financial loss" - Medlin v State Government Insurance Commission (1995) 182 CLR 1.

The assessment of loss of earnings past and future 12 Counsel for the first defendant submitted that the plaintiff's complaint was really about the assessor's construction of his reasons and that there was no error either as to jurisdiction or on the face of the record. 13 It is apparent on examination of the assessor's reasons that he made the following findings:

(a) the first defendant suffered permanent injury to his back in the motor vehicle accident;

(d) the first defendant's occupational activities have been impaired by the motor vehicle accident;

(e) the first defendant has not worked since he worked for his father and sustained injury to his finger;

(f) had the motor vehicle accident not occurred it was most likely the first defendant would have gone back to house construction;

(g) if the motor vehicle accident had not occurred and the plaintiff had returned to house construction work he would have earned about $600 net per week from the date he would have commenced house construction to the date of assessment;

(h) however, the first defendant was not totally incapacitated for work by the injury, and made no effort to obtain sedentary work in Singleton or employment in Newcastle;

(i) the assessment for past economic loss based on what he was likely to have earned had he not suffered the motor vehicle accident must be reduced to allow for the retained earning capacity and for the impact on work capacity of the pre-existing back condition;

(j) $600 net per week from April 2006 to the date of assessment is a little over $100,000. The figure of $100,000 should be taken as the starting point and reduced by 45 percent on account of the retained earning capacity and the impact of the pre-existing condition of the lower back;

(k) the same approach should be taken in regard to future economic loss save that a greater reduction for the impact of the pre-existing back condition should be made. A buffer of $160,000 (inclusive of superannuation) was appropriate. 14 Prima facie, the assessor appears to have had regard to the relevant considerations in making his assessment. 15 However, the plaintiff has challenged a number of aspects of the assessment. Those challenges are dealt with hereunder.

Ground 1 - The assessor asked himself the wrong question and failed to apply s 94(1)(b) of the Act 16 The plaintiff submitted that:

(a) the assessor failed to determine whether the first defendant had suffered a diminution in his capacity but instead had adopted the finding of permanent impairment made in the medical assessment certificate as conclusive of that question;

(b) the assessor assumed that that diminution of earning capacity was productive of financial loss (this alleged error is discussed at Ground 2(ii));

(c) as a consequence of the assessor's failure to answer those critical questions the assessor failed to ask himself the question as to what amount of damages a court would be likely to find as required by s 94(1)(b) of the Act. 17 An assessor may have appropriate regard to matters certified or reported in the medical assessor's reasons - Brown v Lewis [2006] NSWCA 87; (2006) 65 NSWLR 587 at [22]-[24]. Since that decision, s 61 of the Act has been amended, but the comments in that case remain generally applicable. 18 Here the assessor made a finding of diminution of earning capacity. He did so by having regard (inter alia) to the medical assessor's report, the video evidence, the evidence of Drs Schutz, Mutton and Somes and the evidence of the first defendant. The assessor in his reasons made reference to this evidence. 19 The assessor found that the first defendant's work history was one of physical work which he would have endeavoured to pursue had he not been injured in the motor vehicle accident. He accepted the first defendant's evidence that he had significant worsening of his lumbar symptoms since the motor vehicle accident, with his back pain going from 3/10 to 7/10. The first defendant had continued to work after the fall from the roof until the motor vehicle accident. 20 I am unable to accept the plaintiff's submission that the assessor reached his conclusion purely on the basis of his consideration of the contents of the medical assessment certificate or that the assessor adopted the finding made in the medical assessment certificate that the first defendant had a five percent whole person impairment as conclusive of the question as to what was the first defendant's earning capacity and whether it was affected by the injury. 21 For the reasons given in relation to ground 2(ii), I do not accept the assessor erred in determining that the diminution of earning capacity was productive of financial loss. 22 In my opinion, this ground fails.

Ground 2(i) - The assessor erred in determining the amount of past economic loss in that he failed to assess the nature and extent of the first defendant's residual or retained earning capacity 23 The plaintiff submitted:

(a) the assessor did not evaluate what residual capacity the first defendant had for other work, such as sedentary or supervisory work, during the period from the date of injury to the assessment;

(b) instead the assessor took no account of residual capacity and assumed a loss of the entire earning capacity rather than a reduction in earning capacity;

(c) the assessor should have considered the effect upon the first defendant's earning capacity of the existing injury to his back, incurred as a result of the fall on 30 November 2005 which caused the disc bulge at L4-5 of his spine. The assessor's failure to take into account this pre-existing diminution of earning capacity is an additional indicator of error of law in determining the amount of diminution of earning capacity, productive of financial loss, in the period from the accident on 3 January 2006 until hearing;

(d) it is erroneous to compare what money the first defendant would have earned apart from the injury and what money he would earn after the injury. The compensable loss is not a loss of income but the loss of capacity to earn income in a manner productive of financial loss. The assessor did not compare the first defendant's earning capacity as affected by 30 November 2005 injury and that injury as affected by 3 January 2006 accident. Identification of the earning capacity as affected by the existing 30 November 2005 injury may have lead to a conclusion that 3 January 2006 accident had little effect upon earning capacity productive of financial loss. 24 The assessor assessed what the first defendant would have earned but for the injury. He assessed that sum at $600 net per week from the date he would have commenced house construction to the date of the assessment. He concluded the first defendant had a residual earning capacity. He also concluded the first defendant's lower back condition may have impacted upon his earning capacity. As these were matters difficult of assessment, he adjusted the damages under this head by deduction of a percentage which he considered appropriately represented the effect of those two matters in order to arrive at the damages for past economic loss attributable to the motor vehicle accident. 25 Thus the assessor took into account the two matters referred to by the plaintiff. Neither was susceptible of precise calculation and I do not apprehend error by reason of the use of a percentage reduction rather than finite figures. 26 This ground, in my opinion, fails.

Ground 2(ii) - The assessor erred in determining the amount of past economic loss in that he failed to ask whether the first defendant's loss of earning capacity was, or may be, productive of financial loss 27 The plaintiff submitted:

(a) that there must be a causal relationship between the financial loss and the diminished earning capacity;

(b) the assessor made no finding as to whether the loss of earning capacity was productive of financial loss;

(c) the first defendant was injured doing work on his parents' property. It was stated that he was to be paid $628 net per week in that job. He was injured doing that work before he had "worked for a day";

(d) he thus retained the capacity to earn wages of that magnitude, that is what he would have been earning had he not suffered the subsequent injury on 17 May 2006. Once the force of this finding is accepted, then there is no finding that any diminution in earning capacity caused by the motor accident is or may be productive of actual financial loss. 28 In State of New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 Heydon JA (with whom the other members of the court agreed) in reviewing the authorities said: "[68] 'the task of assessing damages in personal injuries cases should be kept as simple as possible'… [69] …'[W]here a plaintiff has suffered a significantly disabling injury which obviously affects the range and nature of the work he can, therefore, perform, a tribunal of fact can, without specific evidence as to what other persons with that kind of disability can earn, make a judgment and assessment, on a percentage basis or otherwise, of the value of the lost capacity'."

The field is "an 'uncertain' one" and "very much 'at large'" [70]: "…'it is inevitable that individual opinions as to what amount may be said to constitute full compensation in any particular case will vary. Indeed within the bounds of reasonableness they may vary greatly'." 29 The assessor found that the first defendant had suffered a significant impairment of his earning capacity as a result of the motor vehicle accident which affected the range and nature of the work he could perform. The assessor assessed the financial impact of the diminution of earning capacity by reference to what the first defendant was likely to have earned had he not suffered injury in the motor vehicle accident and then reduced that figure by a percentage, representing his assessment of the retained earning capacity and the impact of the pre-existing back condition. This is a legitimate approach. It accords with the authorities and reflects s 126(3) which requires that the assumptions made be adjusted by "the relevant percentage". 30 In relation to the calculation of the first defendant's likely earnings but for the motor vehicle accident, the first defendant framed "the claim for past wage loss on the basis that his wages with his parents of $750 per week would have continued." The assessor rejected that approach as the work was undertaken after the motor vehicle accident. 31 The plaintiff submitted that the wages for employment with the first defendant's parents would continue and would exceed the $600 net per week found by the assessor, and thus the first defendant's impairment of earning capacity was not, and would not be, productive of financial loss. 32 The plaintiff's submission fails to have regard to the first defendant's statement, which was before the assessor, that "When I agreed to do work for my mother and father in May 2006 I did not know the extent to which I would be able to do that work and for how long but expected to get paid $750 per week gross…If I had not been injured on 3 January 2006 I would expect that I would have earned at least the sort of money that I would have been able to earn from my parents." 33 The performance of less than a day's work for his parents provides no basis for a conclusion that the diminution of the first defendant's earning capacity is not, and will not be, productive of financial loss, particularly when he has not subsequently returned to that work. 34 In my opinion, no error has been demonstrated in the assessor's determination that the first defendant's diminution of earning capacity was productive of financial loss.

Ground 2(iii) The assessor erred in determining the amount of past economic loss in that he failed to make a discount for payments received by the first defendant 35 The first defendant received workers' compensation payments between May and October 2006 in respect of the finger injury. He also received moneys from his insurer in respect of a claim arising from the fire at his business premises. These moneys, it is contended, included payment for business interruption. 36 The plaintiff submitted that the assessor erred in not making a discount or deduction for the above matters. 37 It is doubtful that any discount or deduction for the insurance payment for business interruption is appropriate. No direct authority was cited in support of that contention. It is arguable the workers' compensation payments may have been deductible - Manser v Spry (1994) 181 CLR 428 at 437-9; however no specific submissions were made to the assessor that a discount or deduction should be made for either amount. In my opinion, if such issues were to be relied upon by the plaintiff, it was necessary that they be clearly raised and appropriate submissions made. This did not occur. Accordingly, there was no error on the part of the assessor in making no discount or deduction in this regard.

Ground 3 - In determining future economic loss the assessor failed to observe the procedure required by s 126 of the Act 38 Section 126 of the Act provides: "(1) A court cannot make an award of damages for future economic loss unless the claimant first satisfies the court that the assumptions about future earning capacity or other events on which the award is to be based accord with the claimant's most likely future circumstances but for the injury. (2) When a court determines the amount of any such award of damages it is required to adjust the amount of damages for future economic loss that would have been sustained on those assumptions by reference to the percentage possibility that the events concerned might have occurred but for the injury. (3) If the court makes an award for future economic loss, it is required to state the assumptions on which the award was based and the relevant percentage by which damages were adjusted." 39 The plaintiff submitted:

(b) the assessor made no reference in his reasons to s 126;

(c) the assessor failed to comply with s 126(1), (2) and (3);

(d) the assessor failed to adjust the amount of damages for future economic loss by reference to the percentage possibility that the events concerned might have occurred but for the injury. That is, the assessor failed to consider the percentage possibility that the first defendant might have failed to achieve an earning capacity of $750 gross per week, irrespective of the injury. 40 The assessor referred, in assessing past economic loss, to s 128 of the Act. It is apparent from the context that the reference to s 128 was either a slip of the tongue or a typographic error and was intended to be a reference to s 126. 41 Whilst it is true s 126 applies to future loss and not past loss, reference to it in the context of past loss was appropriate as the assessor was approaching the assessment of past and future economic loss in a similar fashion. 42 It is apparent that the assessor made an assessment that the first defendant's most likely future circumstances but for the injury was that he would have engaged in house construction earning about $600 net per week. He then made a percentage reduction for the nominated adjusting factors of residual earning capacity and the impact of the pre-existing condition. 43 It was possible the first defendant, irrespective of the motor vehicle accident, may have failed to achieve an earning capacity of $600 net per week. However, no adjustment is required for this as it is counterbalanced by the possibility (as found by the assessor) that the first defendant could have earned more if uninjured. 44 The assessor, having regard to the many imponderables, assessed future loss by way of a buffer. This is permissible - Penrith City Council v Parks [2004] NSWCA 201 at [5] (a decision in respect of the Civil Liability Act 2003, s 13, a provision in the same terms as s 126 of the Act). 45 The use of the buffer renders compliance with s 126(2) unnecessary - Parks at [5]. The assessor stated the assumptions upon which his assessment was based. He did not in terms specify the percentage adjustment for the nominated adjustment factors of residual earning capacity and the impact of the pre-existing condition in calculating future loss but this is readily calculable from the assessment. 46 In my opinion, no error has been demonstrated.

Ground 4 - In determining the amount of damages, the assessor failed to comply with the requirements of s 94(5) and s 97 of the Act, Ch 18 of MACA Claims Assessment Guidelines made under s 69 of the Act 47 The plaintiff challenged the credit of the first defendant before the assessor. The challenge failed. The plaintiff contends the reasons given by the assessor for his conclusion as to credit and in respect of the matters in s 126 were inadequate. 48 Section 94(5) of the Act requires the assessor to attach a brief statement to the certificate setting out the assessor's reasons for the assessment. Chapter 18 of the Guidelines contains certain requirements as to the content of the reasons. 49 The plaintiff submitted that:

(a) however brief, the reasons ought to be adequate for the statutory purpose for which they were required - Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 at [67]-[69] and [82];

(b) it may be incumbent upon a judge to give adequate reasons supporting a finding as to credit when that claimant's credit has been challenged at the time - Todorovic v Moussa [2001] NSWCA 419; (2001) 53 NSWLR 463 at [52]. Todorovic was authority which was capable of applying to the judicial review process on assessor's reasons for an award. 50 The assessor, in his reasons, stated that he had considered the written material submitted by the parties prior to the assessment conference and, like the insurer, there were a number of matters which he believed raised questions and suspicions to elements of the claimant's claim for damages. He said he arrived at a quite different estimation of the first defendant's credibility after the first defendant's questioning by the insurer's solicitor and that, despite a very focussed and detailed probing, the first defendant's credit remained unscathed apart from two relatively minor areas. The assessor specifically dealt with those two matters. He referred at length to his conclusions as to credit. Similarly, though briefly, the assessor gave reasons for his assessment of future economic loss which, in his reasons, he linked to his determination of past economic loss. 51 In my opinion, there was no failure by the assessor to provide reasons as required by the Act and Guidelines as to the matters raised by the plaintiff.

Conclusions 52 In order to succeed in this matter the plaintiff must demonstrate jurisdictional error or error of law on the face of the record. This has not been done. Accordingly, the summons is dismissed with costs.

2. The plaintiff to pay the defendants' costs. **********

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