Consideration of Cervantes
25The brief facts in Cervantes are that on 24 June 2006, Dr Cervantes was injured in a motor vehicle accident. In the assessment under the Act, the CARS Assessor issued a certificate awarding Dr Cervantes $400,000 for future economic loss awarded by way of buffer. On appeal, the insurer, Allianz claimed that the amount was manifestly unreasonable. In 2009, Dr Cervantes qualified as a Nephrologist. On 11 January 2011, when the assessment took place, Dr Cervantes was 46 years of age. After the accident, Dr Cervantes was able to work in the public health system, but was no longer able to work in private practice. Dr Cervantes could have earned a much larger amount had she been able to work in both private practice and the public system. It was held that the buffer of $400,000 awarded by the CARS Assessor was not excessive in the circumstances of the case. Hence, the appeal was dismissed.
26In Cervantes at [12], [16], [26], [33] - [40] and [43] Basten JA (with whom McColl and Macfarlan JJA agreed) stated:
"[12] On the assumption (discussed below) that failure to refer to particular evidence can constitute a failure to take a 'relevant consideration' into account, that submission may be accepted. Indeed, it was necessary for the appellant to go further in order to establish such a ground. It needed to rely upon the reasons of the assessor to demonstrate what the assessor had or had not taken into account. That it was entitled to do, in order to establish jurisdictional error, whether or not the reasons formed part of the 'record'. However, the material relevant to such a ground could, in the absence of a concession, include any record of submissions made to the decision-maker by the applicant for judicial review. That extra material may be necessary because, unless the party seeking judicial review can establish that the material was in fact relied upon for a particular purpose, there can be no legitimate complaint that the decision-maker failed to take it into account. It follows that the submissions, or at least the relevant parts thereof, before the decision-maker could be relevant and admissible as evidence before the reviewing court.
...
[16] Secondly, the obligation is, as stated in Peko-Wallsend, to take a consideration 'into account'. How it is to be taken into account and what weight it is to be accorded in all the circumstances are matters within the authority of the decision-maker. Thus, assuming for present purposes that the assessor was bound to take into account the particular statement set out above, he could do so by dismissing it, by giving it little weight, or by giving it decisive weight.
...
[26] Finally, the appellant relied upon a supposed lack of adequacy of the reasons provided by the assessor for his final determination. The relevant principles in this regard were addressed in Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13; 60 MVR 194 at [47]-[64] by the Court as constituted in the present matter and need not be repeated. The analysis of the relevant passage in the evidence reveals no need for any specific reference in the reasons.
...
[33] The calculation of economic loss, whether in the past or for the future, involves a comparison between the actual circumstances of the claimant, as a result of the accident, and the circumstances which would probably have continued or come to pass but for the accident. On the assumption that the accident has resulted in a loss of earning capacity, the Court must also consider whether such a loss might have occurred independently of the accident.
[34] That, in broad terms, is the exercise which must be undertaken in each case: Pollard v Baulderstone Hornibrook Engineering Pty Ltd [2008] NSWCA 99; 172 IR 453 at [84] (McColl JA, Mason P and Beazley JA agreeing). At least parts of that exercise are now identified in s 126 of the Compensation Act, as explained in Nominal Defendant v Livaja [2011] NSWCA 121 at [39]-[40].
[35] The conventional approach to such an exercise is to assess the earning capacity of the claimant in monetary terms prior to the accident (usually on the basis of net weekly or annual earnings) and, where there is evidence of unemployment or employment at a reduced income thereafter, to assess the quantum of the difference up to the date of hearing (past economic loss) and to project the calculation into the future (future economic loss). The latter exercise will, again conventionally, be discounted by 15% on account of vicissitudes.
[36] Such calculations produce precise figures, often resulting in awards expressed in dollars and cents. However, such precision is fallacious. Varying degrees of uncertainty will attend the hypothetical aspects of the calculation, rendering any degree of precision misleading.
[37] Additionally, with respect to future economic loss, the exercise requires a discounting of the calculation in order to achieve a present monetary value for the assessed loss which, it is assumed, will accrue steadily over the remaining working life of the claimant.
[38] Under the general law, it has long been accepted that, at least in some cases, the assessment will involve such a degree of speculation as to render a calculation by the conventional techniques inappropriate. In those cases, a lump sum is awarded by way of 'buffer', the court being satisfied on the probabilities that a loss will be suffered or, indeed, has been suffered.
[39] One of the contingencies which may not be readily assessable, thus supporting the lump sum approach, may be the question of vicissitudes. The greater the difficulty in identifying the claimant's most likely future circumstances but for the accident, the greater the difficulty in assessing the uncertainty as to whether or not those circumstances would have arisen in any event, and if so when and for how long they might subsist. Awarding a lump sum will usually incorporate the element of vicissitudes into the global assessment.
[40] Under s 126 of the Compensation Act, the court is required to be satisfied that any assumptions about future earning capacity 'or other events' accord with the claimant's most likely future circumstances but for the injury. Any award is to be discounted by the 'percentage possibility that the events concerned might have occurred but for the injury'. On one view, s 126 could be read as inconsistent with the award of a buffer for future economic loss. Such an approach would force a court, satisfied on the probabilities that there has been such a loss, to make an arithmetical calculation suggesting a degree of precision which was not warranted by the circumstances. As explained in Allianz v Kerr at [30], that approach has been rejected in a consistent line of authority in this Court, which was not challenged in the present case.
...
[43] The actual monetary value of the award may in some circumstances be indicative of error. Whether that is so will depend upon the circumstances of the particular case. As the respondent noted, without contradiction, the award in the present case could have been reached by calculating a loss of earning capacity of $740 net per week. If that were in fact the full extent of the claimant's earning capacity (as it might be for some claimants), error might well be demonstrated; an immediate and total loss of the earning capacity of the claimant should be stated and the amount would very likely be calculable in the conventional manner. That, however, was not this case. The claimant was in fact, at the date of the assessment, earning approximately $2,500 net per week. The indicative calculation undertaken by the respondent indicated a loss of earning capacity of approximately 23% or perhaps a little higher once vicissitudes were factored in."
27QBE submitted that the present case is quite different to Cervantes, because Dr Cervantes had completed her specialist qualifications as a Nephrologist. Had Dr Cervantes not been injured, she would have commenced private practice in that speciality and worked as a staff Nephrologist in a public hospital. The evidence before the CARS Assessor was that Dr Cervantes would have earned an extra $2,000 per week in the public hospital system but at the time of assessment she was earning $2,500 net a week. In contrast, QBE submitted that Mrs Volokhova was not working before the accident, failed the first hurdle in her legal studies when she began the LPAB course after the accident, and has not had remunerative employment since the accident. QBE also contended that there is no yardstick to compare Mrs Volokhova's future earnings because there is some uncertainty as to whether she would ever be qualified for employment in the legal profession in Australia.
28Senior counsel for QBE referred to Cervantes at [43] where Basten JA recorded the approach Dr Cervantes was to equate that the lump sum awarded for her future economic loss of $400,000 to the sum of $740 net per week. Adopting this approach for Mrs Volokhova, the lump sum of $500,000 for future economic loss equates to $750 net per week. QBE says that $750 net per week is excessive in circumstances where Mrs Volokhova is yet to begin legal studies in this country, has to pass all of the subjects and get a job and also has a residual earning capacity. This, senior counsel says is a different picture altogether from Dr Cervantes (T 26.15-20).
29There is no doubt that the factual situation between Dr Cervantes and Mrs Volokhova is different. As the Court of Appeal in Cervantes (at [43]) and the CARS Assessor pointed out, each case depends on its circumstances. One point of difference is that at the time of the assessment Mrs Volokhova was 33 years of age, whereas Dr Cervantes was 46.
30The CARS Assessor had an obligation to take a relevant consideration into account (Cervantes at [16]). While failure to refer to particular evidence can constitute a failure to take a relevant consideration into account, it is necessary for QBE to go further to establish such a ground. It needs to rely upon the reasons of the CARS Assessor to demonstrate what the Assessor had or had not taken into account. Submissions made by the parties to the CARS Assessor can also be considered. Unless QBE can establish that the material was in fact relied upon for a particular purpose, there can be no legitimate complaint that the CARS Assessor failed to take it into account: see Cervantes (at [12]).
31On the topic of future economic loss, QBE's submissions to the CARS Assessor are as follows [Ex A p 435]:
"The claimant claims just over $1,000,000.00 based on a net loss of $1,200.00 net per week over 34 years which assumes that the claimant will never engage in any form of remunerative employment. This net figure is based on the projected earnings of a solicitor which assumes the claimant would have completed her degree at the Legal Practitioners Admission Board and then secured a position at a law firm. The insurer notes there is a consistently high failure rate, see enclosed results, for students who attend the LPAB and submits that employment as a solicitor required more than mere enrolment in a course, before employment as a solicitor is guaranteed.
The claimant's claim for damages for future economic loss assume the claimant will never engage in any form of work and is unemployable. From a physical perspective the insurer submits the claimant is fit to work and relies on Dr Dalton in that regard. Even Dr Allnutt, qualified for the claimant concedes in his report of 24 October 2011 that while the claimant may not be able to work as a solicitor she 'could probably have worked less than 20 hours a week in a different position requiring less skill and was different.'
The insurer submits that precise calculation based on the weekly figure is artificial in the circumstances of this matter and a general cushion might provide a more accurate assessment; Kmart Australia Limited v McCann [2004] NSWCA 283. A buffer may be more appropriate in light of the differing views on the claimant's capacity for work. If a buffer were awarded the insurer submits that the amount of $100,000.00 is adequate. This figure would also take account of any claim for superannuation benefits."
32Mrs Volokhova's submissions to the CARS Assessor were as follows [Ex A p 471-472]:
"The claimant obtained a Bachelor of Law from Odessa National Academy of Law in 2000. She reports in her statement of 13 June 2013 that she was a conscientious student who enjoyed learning.
The claimants extract translation of education certificate illustrates that she graduated from her degree with distinction.
The references from Svetlana Shagovets and Ella Katyeva establish that the claimant had a broad legal experience and was well regarded in the legal areas in which she worked.
The Claimant in her statement of 13 June 2013 notes at paragraph 22 that:
'Prior to commencing the Legal Profession Admission Board course I examined the subjects and the curriculum there generally and formed an opinion that I would have no difficulty completing the course having regard to my study of law in the Ukraine and my work as a lawyer in that country.'
The documents from the Legal Profession Admission Board establish that in term two the claimant failed the exam, which occurred on 7 September 2010.
The claimant's inability to pass the exam in September 2010 is to be contrasted with her ability in relation to the Diploma of Financial Services which she undertook in 2007 wherein the claimant had no difficulty in passing those subjects.
The claimant submits that, but for the subject accident she would have successfully completed the LPAB course. Both her academic results and the favourable accounts of her post-graduation legal career point to the fact that she had the intellectual ability and the application to succeed in her studies. It is also of note that the claimant's ability to complete the Diploma of Financial Services reflects the fact that she had excellent command of the English language at the time when she undertook the course. The claimant submits therefore that the assessor would find on the balance of probabilities that she had sufficient ability and the application to complete the LPAB course and become a legal practitioner.
Dr Allnut in his report of 24 October 2011 at page 7, paragraph 8 notes:
'Post traumatic stress disorder with anxiety and depression can impact on a person's capacity for adequate concentration, energy levels, motivation, interest and underlying drive to pursue any form of study; She notes that in particular she had difficulty with concentration and can only read for up to 10 minutes before she loses focus; Given her experience of post-traumatic stress disorder and depressive symptoms I believe it was reasonable in light of her disabilities for her to have discontinued studying.'
Ms Carol Lausch in her report dated 14 July 2011 at paragraph 7 47 notes:
'Ongoing physical impairment and psychological sequelae arising from the injury have precluded Mrs Volokhova from resuming her studies to obtain the necessary qualifications to pursue a legal career in Australia'."
33The CARS Assessor's reasons in relation to the assessment of future economic loss are set out at [58] - [63]. They are:
"[58] Mrs Volokhova's submissions assume completion of the LPAB course and the practical legal skills course by 2015 would have occurred but for the accident ... [H]er original submissions [list] a list of disabilities, which she says, would preclude her working at all. Wage loss is allowed to age of 70 but deferred for two years to commence in 2015. An average annual gross salary of $107,000 has been used based on the Hudson Legal Salary Insights 2012 document; this is the figure of the average of a four to five year experienced solicitor. It is stated by using this figure of a net of $1500 per week, rather than increasing the same for the more experienced positions, allowance has been made for 'residual earning capacity after 4 years as a solicitor'. I do not understand this logic. The Hudson charts show much lower starting salaries in year one in all areas they list such as boutique, mid tier, top tier and government. They don't consider the fees in suburban firms. So by following Mrs Volokhova's submissions, choosing 4-5 year experience from the start would give an over estimate in years 1 up to 4. There is no guarantee that the experience gained overseas would assist her employment prospects.
[59] There are many uncertain factors including when Mrs Volokhova would have finished the LPAB course uninjured, which in turn depends on the number of subjects undertaken each semester and her success rate. If she completed that course, it is also not certain when she would have obtained employment as a solicitor. If she did secure such employment is not clear what type of firm this would have been in. It is also not certain how she will respond to future treatment. There is a possibility that she may recover sufficiently to recommence studies, or alternatively undertake some form of work involving lesser skill as referred to by Dr Allnutt or alternatively she may not recover at all, although I consider the later to be the less likely outcome. It is not yet four years post accident, she has not had 'optimal treatment', there are some encouraging signs such as being able to obtain a driver's licence; albeit with the restrictions to which I have referred previously. As I have said Mrs Volokhova presented to me as an intelligent, articulate person. She is young and has much to offer. She does not have severe physical injuries. However Assessor Jones and Dr Allnutt have diagnosed a significant psychological injury.
[60] S126 of the Act requires a consideration of the assumptions of a claimant's most likely future circumstances but for injury and for me to state the percentage 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. However there have been many cases where the Court of Appeal has found the use of a 'buffer' does satisfy the requirements of s126: Allianz Australia Insurance Ltd v Kerr [2012] NSWCA 13 (Kerr). In Kerr at [35] it was stated:
'However, as explained by Giles JA in Penrith City Council at [5], adopting 'the broad approach of a buffer' means that there is no question of a percentage adjustment, so that for the purposes of s 126(2), the adjustment is nil.'
[61] The same Court of Appeal bench in Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244 (Cervantes) affirmed the principles it stated in Kerr. In Cervantes the injured claimant was a physician with speciality in renal disease and the Court found a challenge to the buffer of $400,000, was not erroneous. Obviously each case turns upon its own particular facts.
[62] In Mrs Volokhova's case I accept that her most likely circumstances prior to the accident would have been that she would have intended to undertake at some future time after the accident the necessary study to enable her to practice as a solicitor. However because of the uncertainties that I have referred to above I find the appropriate method to assess her loss is by way of a buffer. I consider the insurer's suggested buffer is too low. The amount sought by Mrs Volokhova was $1,001,348.41 and did not involve the use of a buffer but makes assumptions, which I consider are really just as speculative. It is apparent from the calculation they have used only the 'usual' 15% reduction for vicissitudes. As the Court of Appeal noted in Cervantes at [41]:
'As already noted, if a precise calculation were to be mandated it could no doubt be undertaken. In each case the result will be precise, being a monetary figure; in one case there will be a false impression as to accuracy, whereas in the other inaccuracy will, with justification, be conceded.'
[63] I note Macfarlan JA in Kerr at [69] referred to, at times, an Assessor having to make 'an intuitive assessment of the claimant's possible future loss.' I find myself in this situation and I am satisfied the appropriate buffer in this case is $500,000 including loss of superannuation."
[CARS Assessor's emphasis]
34Senior counsel for QBE submitted that the CARS Assessor was only certain that Mrs Volokhova's Ukrainian law degree was not recognised in New South Wales, but she was uncertain what the comparative difficulty between the Ukrainian law degree and the LPAB course was.
35According to QBE, the CARS Assessor had not at all, or adequately, taken into account uncertainties facing Mrs Volokhova at the time of the accident. QBE contended the following are uncertainties: how long Mrs Volokhova would take to complete the LPAB course; whether she would have passed the course; the comparative difficulty of the New South Wales course compared to the course that Mrs Volokhova studied in Ukraine; if Mrs Volokhova had of been able to become qualified to practice law in New South Wales, whether she would have been able to gain employment as a solicitor, or whether she would have found employment in some other area; and how long it would take for Mrs Volokhova to obtain employment.
36QBE also contended that the following circumstances were relevant to the award of a buffer:
(i) The fact of Mrs Volokhova's legal qualifications in the Ukraine;
(ii) The fact that those qualifications are not recognised in New South Wales;
(iii) Mrs Volokhova's admission before the CARS Assessor that her focus after coming to Australia was on her role as a mother of young children;
(iv) The fact that Mrs Volokhova had not commenced legal studies in New South Wales, or engaged in remunerative employment, up to the time of the accident;
(v) The fact that Mrs Volokhova did not enrol in the LPAB course until early 2010, after the accident;
(vi) The fact that Mrs Volokhova failed the first examination she attempted, in Legal Institutions (making due allowance for the effects of her physical and psychological injuries);
(vii) The fact that Mrs Volokhova had to successfully complete 20 subjects in order to obtain her legal qualifications in New South Wales;
(viii) The uncertainty as to whether Mrs Volokhova would have obtained legal qualifications in New South Wales, had the accident not occurred;
(ix) The uncertainty whether Mrs Volokhova would ever have obtained employment in the legal profession, had the accident not occurred;
(x) If Mrs Volokhova would have obtained legal qualifications and employment but for the accident, when those events would have occurred;
(xi) If Mrs Volokhova would have obtained legal qualifications and employment, her earnings in that employment;
(xii) Whether Mrs Volokhova will, in the future, recommence her legal studies;
(xiii) If she does recommence her legal studies at some time in the future, whether Mrs Volokhova will successfully complete those studies and obtain employment in the legal profession;
(xiv) The extent to which Mrs Volokhova is likely to recover from her psychological injuries in the future.
37QBE claimed that the CARS Assessor failed to take into account adequately or, in some instances, all these relevant considerations as to the assessment of damages for future loss of earnings and that this resulted in the amount awarded being outside the range of sound discretionary judgment, and was manifestly excessive.
38Senior counsel for Mrs Volokhova submitted that in referring to these 14 factors, QBE is seeking to argue, in part, a new case with the benefit of hindsight that the CARS Assessor should have "adequately" taken those factors into account. He contended that those submissions are merits submissions and it is not appropriate to raise such merit submissions in judicial review proceedings. Further, senior counsel for Mrs Volokhova submitted that QBE's overall case is seeking a detailed examination and analysis of the CARS Assessor's reasoning, which he says is not permissible: see Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, Attorney-General (NSW) v Quin (1990) 170 CLR 1, and Minister For Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259.
39According to Mrs Volokhova, the assertion that the sum of $500,000 awarded for future loss of earnings is manifestly excessive, does not amount to an error of law on the face of the record. She submitted that in judicial review proceedings, a vitiating legal error or jurisdictional error must be found. Mrs Volokhova does not accept that the amount was excessive and drew to this Court's attention to the fact that at the conference she sought $1,001,348.41 for the award of future economic loss, based upon the Hudson Legal Salary Insights 2012.
40These circumstances outlined earlier by QBE do not refer to those considerations that are favourable to Mrs Volokhova which had been taken into account by the CARS Assessor. These included that Mrs Volokhova is young and has much to offer. She presented at the assessment as intelligent and very articulate. Prior to the accident, Mrs Volokhova had obtained a law degree and worked as a practising solicitor for about three years in a varied legal practice in the Ukraine. Her employer thought highly of her capabilities. Shortly after she arrived in Australia, she undertook and completed a Diploma of Financial Services (Banking), having studied 12 subjects, 4 with distinction. After the accident Mrs Volokhova had been able to obtain her drivers licence [59]. I should add that there was no suggestion that the future economic loss would have occurred independently of the accident. The CARS Assessor determined that it was most likely Mrs Volokhova would have intended to take, at some future time after the accident, the necessary study to enable her to practice as a solicitor [62].
41The buffer approach was adopted by the CARS Assessor for the assessment of future economic loss because it was the most appropriate one where there are a number of uncertain factors. The CARS Assessor was of the view that Mrs Volokhova's most likely circumstances prior to the accident would have been that she would have intended to undertake at some future time after the accident the necessary study to enable her to practice as a solicitor. [Emphasis added]. At [59], the CARS Assessor took into account a number of uncertain circumstances. They include most of the circumstances referred to by QBE in [36] of this judgment. The submissions made by the parties to the CARS Assessor do not refer to the other circumstances that QBE claims were relevant to the assessment of future economic loss. After the accident occurred, it is not known if Mrs Volokhova would recommence her legal studies. QBE says that the CARS Assessor should have considered that if Mrs Volokhova were to recommence her legal studies at some time in the future, firstly, whether she would have successfully completed those subjects; secondly, whether she would have obtained employment in the legal profession; and finally, the extent to which she would recover from her psychological injuries in the future. While there is some speculation involved in assessing the appropriate amount of a buffer, the CARS Assessor was not obliged to take into account matters that involved conjectures based upon the identified uncertainties.
42In my view, the CARS Assessor did not fail to take into account the relevant considerations. Counsel for Mrs Volokhova had sought the sum of $1,001,348.41, based on a net loss of $1,500 per week for future economic loss until she reached the age of 70 on the basis that she would never engage in remunerative employment. Due to the number of uncertainties, the CARS Assessor was unable to be specific as to what work Mrs Volokhova could undertake after the accident. The CARS Assessor also took into account that before the accident Mrs Volokhova intended to undertake study to qualify as a solicitor, but the CARS Assessor did not find as a certainty that Mrs Volokhova would qualify as a solicitor. The CARS Assessor outlined the relevant considerations that she took into account and determined that the buffer for future economic loss should be reduced.
43As discussed earlier in this judgment, the circumstances of Dr Cervantes and Mrs Volokhova differ. Each case depends on its facts. The similarities are that they are both female, injured in motor vehicle accidents and were awarded a substantial amount by way of buffer for future economic loss.
44After the CARS Assessor took into account the relevant considerations, both favourable and unfavourable, to Mrs Volokhova she reduced the amount claimed by Mrs Volokhova for future economic loss to $500,000. In these circumstances the award for this sum for future economic loss is not excessive. This ground of judicial review fails.