Vrahnos v Ozbrand

CATCHWORDS : Appeal - Local Court Magistrate's decision - weight given to expert evidence

Civil Procedure Act 2005 (NSW) - s 60 LEGISLATION CITED : Evidence Act 1995 (NSW) - s 79 Local Courts Act 1982 (NSW) - s 73

Hevi Lift (PNG) Ltd v Etherington [2005] NSWCA 42 CASES CITED : Lambros v Riethmuller (Local Court, 4 October 2006, unreported) Makita v Sprowles (2001) 52 NSWLR 705 Sydneywide Distributors v Red Bull Australia Pty Ltd (2002) 55 IPR 354

PARTIES : Nick Vrahnos - Plaintiff Ozbrand Pty Ltd - Defendant

COUNSEL : Mr M Cashion SC with Mr K J Manion - Plaintiff Mr T Alexis SC with Mr J Gruzman

SOLICITORS : CKB Partners - Plaintiff Mason Black Lawyers - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

JUDGMENT (Appeal - Local Court Magistrate's decision - weight given to expert evidence) 1 HER HONOUR: This is an appeal from the Local Court concerning the assessment of damage in relation to a motor vehicle. The plaintiff does not contend that the decision to find in favour of the defendant was incorrect, only that the quantum of damages should be reassessed according to law. By summons filed 13 November 2006, the plaintiff seeks firstly, an order that the judgment of His Honour Mr Lulham LCM made on 18 October 2006 in proceedings 6956/2005 be set aside; secondly, an order granting leave to appeal; thirdly, an order that judgment be entered for the defendant in the sum of $4,456.26; and lastly, an order that the matter be remitted to the Local Court to be heard and determined according to law. On 23 February 2007, the defendant filed a notice of contention. 2 The plaintiff is Nick Vrahnos (Mr Vrahnos). The defendant is Ozbrand Pty Ltd (Ozbrand). On 18 October 2006, His Honour Lulham LCM entered judgment in favour of Ozbrand in the sum of $8,254.35 against Mr Vrahnos. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by Mr Vrahnos. Section 73 of the Local Courts Act 1982 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. Mr Vrahnos no longer seeks leave pursuant s 74 of the Act. The onus lies with the Mr Vrahnos to demonstrate that there has been an error of law or that leave should be granted on a question of law. 4 Section 75 of the Act provides that the Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 5 The amount in dispute in this matter is between $2,690.56 and $4,783.55. Given the small amount in dispute, this matter should have been remitted to the Small Claims division of the Local Court. This matter has occupied a substantial amount of time in both the Local Court (two days) and this Court. To say the least, it has generated excessive and unnecessary legal costs and a waste of Court resources. There is meant to be some measure of proportionality between the importance and complexity of the dispute and the costs incurred in the litigation of that dispute - see s 60 Civil Procedure Act 2005 (NSW).

Grounds of appeal and contention 6 The grounds of appeal can be summarised as follows. They are firstly, His Honour misapprehended the principles to be applied concerning weight to be given to expert evidence; secondly, that His Honour erred in law by holding that the report and evidence of Mr Kay complied with the requirements of s 79 of the Evidence Act 1995 (NSW); thirdly, that His Honour erred in holding that anything recorded in the judgment at paragraph 12 satisfied the requirements of s 79 of the Evidence Act; and finally, His Honour erred in fact by finding in favour of Ozbrand for the judgment amount. 7 The ground of contention is that His Honour should have found, upon being satisfied that the repairs to the damaged motor vehicle were necessary to restore the vehicle to its pre-accident condition, that the plaintiff was liable to the defendant for damages that indemnified it for the actual costs of repairs ($9,239.81), subject only to a reduction for any items of repair that the plaintiff established to be extravagant.

The proceedings in the Local Court 8 On 4 November 2004, there was a collision between Mr Vrahnos' motor vehicle, and a vehicle owned by Ozbrand (the vehicle). The vehicle was a Lexus RX330 Wagon. Liability was admitted. 9 On 11 November 2004, the vehicle was inspected by Darren Kay, motor vehicle loss assessor for NRMA. He assessed the fair and reasonable cost of repairs to be $9,239.81. NRMA paid that amount to the vehicle's repairer, North Shore Classic Autobody Repair Centre (North Shore Classic), in accordance with an authority from Ozbrand. Mr Vrahnos' vehicle was insured by AAMI. Mr Matthews who was employed by AAMI, assessed the fair and reasonable cost of repairs to be $4,456.26. Originally, he assessed the reasonable cost of repairs at $7,204.16 (including GST) (B 222). A part confession was paid into Court in this amount. 10 The NRMA having paid the sum of $9,239.81 to the repairer, sought to recover that amount from AAMI. The proceedings were brought and defended pursuant to each insurer's rights of subrogation in the names of the respective vehicle's owners. 11 In order to rely on expert evidence there are two important steps that have to be countenanced. The first is whether or not the expert evidence is admissible, and if it is, the second step is what weight, if any, should be afforded to that expert evidence.

The test in Makita 12 Section 79 of Evidence Act reads: "79 Exception: opinions based on specialised knowledge If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."

13 In Makita v Sprowles (2001) 52 NSWLR 705 at 743-744 Heydon JA (as he then was) at [85] stated: "In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v The Queen (at 428 [41]), on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise." 14 Mr Vrahnos' Counsel referred to Hevi Lift (PNG) Ltd v Etherington [2005] NSWCA 42, where McColl JA stated, at [80], [84] and [85]: "80. In my opinion the primary judge's conclusion that the medical reports met the requirements of the Makita test was plainly wrong. In the absence of any identified factual basis for their opinions that the respondent's work could possibly be (Doctor Khoo) or was a substantial contributing factor to his injury the reports were inadmissible and, if admitted, carried no weight. 84. It is not, in my view, necessary to consider for present purposes whether Heydon JA's judgment in Makita set too high a standard for the admissibility of expert opinion evidence. The critical parts of Doctor Selby Brown and Doctor Khoo's reports fell short, even by pre- Makita standards, of the standard required for admissibility. It has long been the case that a court cannot be expected to, and should not, act upon an expert opinion the basis for which is not explained by the witness expressing it: see Cross on Evidence at [29065]; R v Jenkins; Ex parte Morrison (No 2) [1949] VLR 277 at 303; R v Hally [1962] Qd R 214; Steffen v Ruban [1966] 2 NSWR 622; Perry v R (1990) 49 A Crim R 243 and, of course, the principal authorities examined by Heydon JA in Makita (at 729 - 741 [59] - [82]). 85. In my view, the primary judge should not have accorded the respondent's medical reports any weight. They were incapable of constituting evidence capable of satisfying the s 9A requirement that the respondent's employment was a substantial contributing factor to either of the mechanisms of injury upon which he relied." 15 The Mr Vrahnos' Counsel also referred to Sydneywide Distributors v Red Bull Australia Pty Ltd (2002) 55 IPR 354, where Branson J in discussing the Makita principle stated that: "the requirement that an expert opinion be wholly or substantially based on the witness's specialised knowledge is not, in my view, intended to require a trial judge to give meticulous consideration, before ruling on the admissibility of the evidence of the opinion, to whether the facts on which the opinion is based form a proper (in the sense of logically or scientifically or intellectually proper) base for the opinion. Were the position otherwise the smooth running of trials involving expert evidence could be expected to be interrupted by the need to explore in detail, in the context of admissibility, matters more properly considered at the end of the trial in the context of the weight to be attributed to the evidence. It is sufficient for admissibility, in my view, that the trial judge is satisfied on the balance of probabilities on the evidence and other material then before the judge that the expert has drawn his or her opinion from known or assumed facts by reference wholly or substantially to his or her specialised knowledge." 16 Mr Vrahnos' insurer did not contend that the statement of Mr Kay should not have been admitted into evidence (the first step). The statement of Mr Kay was admitted into evidence without objection. It is the second step that is in issue in this appeal, that is, whether Mr Kay's expert evidence should have been afforded no weight. According to Counsel for Mr Vrahnos' insurer, Mr Kay failed to provide the asserted factual basis of his opinions as to the fairness and reasonableness of the repair costs and failed to expose any reasoning process capable of meeting the criteria set out in the cases or as required by s 79. 17 It was submitted that Mr Kay's evidence failed to set out the factual basis and reasoning process upon which it was based as it appeared that the assessment was based on negotiation and agreement with the repairer, based on some nebulous and undisclosed (as to their specific provisions) "guidelines" which specified the allowances to be made. Counsel further submitted that it was not a basis of assessment comprehensible under either s 79 or the Makita cases and it fell within the realm of Hevi Lift, that is, opinion evidence insufficiently supported which ought to be accorded little or no weight. 18 As the Magistrate had dealt with some of the issues raised in this case in a previous case before him, namely Lambros v Riethmuller (Local Court, 4 October 2006, unreported), His Honour imported paragraphs [10] to [57] of Lambros into his judgment in this case. Counsel for Mr Vrahnos' insurer referred to the passage where the Magistrate stated at [53]: "That test proposed by Heydon JA is often put forward as the only test to be applied. The test has, however, been somewhat watered down by the decision of the Court of Appeal in Asic v Rich (2005) NSWCA 152 (see particularly 92-135) and also particularly in Sydney Wide Distributors Pty ltd v Red Bull Australia Pty Ltd (2002) FC AFC 157. Branson J in that case considered the requirement that the Court be 'sure ' placed too high a test upon the admissibility of expert evidence."

19 And at [54]: "…It seems to me that to require strict compliance with the principles of Makita in this matter would set the bar too high." 20 These statements, according to Counsel for Mr Vrahnos' insurer are wrong and constitute an error of law. My reading of the Magistrate's discussion of Rich, Red Bull and Hevi Lift is in relation to the issue of whether or not the expert evidence is admissible, and it is not in relation to the weight that should be afforded to that expert evidence. Paragraph [12] is where the Magistrate set out the plaintiff's submissions in Lambros, the earlier case he decided. 21 The Magistrate in his written reasons (at p 21) stated: "I propose to deal at this point with the main submission made by Mr Manion that Mr Kay's report failed to comply with the requirements of s79 of the Evidence Act. Mr Manion submitted Mr Kay's report failed to set out the factual basis and reasoning process upon which his opinions were based. Mr Kay said he negotiated and agreed with the repairer on the amounts to be allowed for the repairs. He said he relied upon his experience, expertise and also upon an agreement reached between the NRMA and prestige repairers as to the amounts to be allowed.

The first point to be made is that if Mr Manion's submission was correct, then the report should not have been allowed into evidence. It was in fact admitted without objection. I acknowledge that the findings which I have made in relation to the application of the principles in Makita's case in Lambros v Riethmuller were not argued in that case and not argued in this case. I emphasise that if I applied the principles of Makita strictly, the result in Lambros v Riethmuller would not have been different. The same position applies in this case. (my emphasis added)

I reject Mr Manion's submission in this matter that Mr Kay's report in this matter does not comply with the requirements of s.79 Evidence Act as explained in subsequent cases of Makita and Asic v Rich (Court of Appeal 2005 NSWCA 152) and Hevi-Lift Pty Ltd v Etherington (2005) NSWCA 42."

The evidence of Mr Kay 22 Mr Kay prepared a sworn statement and was cross examined. At paragraph [12] of his sworn statement, Mr Kay said: "12. I inspected motor vehicle registration NXF-61L on claim number APACR04/49379 on 11 November 2004 at Northshore Classic. The inspection was a visual inspection of the damaged vehicle. I marked up all damage consistent with the claim into the Motor Vehicle Assessment Report." 23 Mr Kay set out his expert background at [1]-[11] of his statement. He has spent 16 years in the industry as a panel beater and foreman and has experience with prestige cars. Since October 2002 Mr Kay has been employed by IAG and is currently a senior loss assessor. He assessed the vehicle in accordance with guidelines for prestige cars. His evidence is that on average he uses a three to one (t 5.18 - 2/6/06) because a lot more effort goes into stripping the vehicles down and repairing them. Mr Kay explained (Statement [29] - [30]): "29. When assessing prestige vehicles we have an understanding with prestige repairers that we allow approximately a 3:1 ratio of the hourly rate for repairs as prestige vehicles require more technical knowledge to be worked on and also require expensive equipment, for example, inverted welders, miracle systems, specialised jig systems for some vehicles etc. Also the refinish on these vehicles is completed with more detail than a run-of-the-mill vehicle such as a Holden or Ford. Because of this these vehicles require more time and attention to replicate the pre-accident condition. 30. The 3:1 ratio is allowed to prestige repairers because of the outlays and overheads that are required to operate the repair shops." 24 So if a panel beater were to take an hour to perform a task on an ordinary vehicle, three hours would be allowed to perform the work on a prestige vehicle (t 7.16-37 - 2/6/06). The Magistrate made a finding of fact that the Lexus was a prestige vehicle. At [22]-[40] of his statement, Mr Kay explained the methodology he used to arrive at his opinion. 25 Mr Matthews (together with Angelo Houliaras) did not inspect the damaged vehicle prior to repair. He used the Motor Traders Association guide as a basis for his calculations. Mr Matthews quite rightly conceded that a loss assessor who was able to inspect the damaged vehicle was in the best position. Both Mr Matthews and Mr Kay based the itemised time costed quote provided by North Shore Classic as a basis for allowing and disallowing certain costs. Mr Matthews used an hourly rate of $30.90 to make his assessment. The experts agreed upon certain items and disagreed on others. A Scotts Schedule was prepared. In relation to the items where there was disagreement, the Magistrate formed his own view - see [44]. 26 The Magistrate at [77] stated: "I have already indicated the difficulty that I have in assessing the fair and reasonable cost of repairs based on the evidence of the two assessors. The practise adopted by the repair industry of preparing quotes and assessing quotes on the basis of two fictions, makes it extraordinarily difficult. The evidence in this matter added further to those problems. Mr Matthews agreed that if assessing a scheduled vehicle he would allow the MTA Schedule allowance, even if he was aware that the allowance was even more generous than the three hours of fictional time equalling one hour of real time. He agreed that he would allow the one hour of fictional time, or $30.90 to disconnect the computer system for the airbags, even though the evidence seemed to indicate that the real time for such task might be six minutes. That example exemplified the further difficulty the court faced. I am satisfied on the evidence in this matter that vehicles are assessed on an allowance basis, apparently almost on a 'swings and roundabout' approach. I accept Mr Gruzman's submission that this factor makes it unhelpful to rely too heavily on cross examination as to the real time that some task might take. The evidence indicated clearly that the repair industry does not operate on that basis, and whatever else I do, I am required to assess the fair and reasonable costs of the repair of North Shore Classic's repair account on the basis adopted and used in the repair industry." 27 The situation here is unlike that in Hevi Lift. Mr Kay in his statement exposed his reasoning process and the basis for his conclusions. Mr Kay physically inspected the damaged vehicle. He considered the items contained in the quote prepared by North Shore Classic. This quote comprised of a list of all the parts that required repair and the corresponding estimate of time involved in carrying out repair of that item. The quote also contained an itemised list of parts required and their estimated cost. Mr Kay made adjustments to the quote where necessary. The adjustment took the total cost of repairs from $9,708.30 to $9,239.81. Mr Kay determined that the sum of $9,239.81 was a fair and reasonable amount for the repairs. 28 In his statement, Mr Kay explained that he referred to the guidelines set out by the Motor Traders Association and various insurance companies and the NRMA scheduled times as a guide only. He noted that the vehicle fell into the category of 'prestige vehicle', and in those circumstances relied on his previous experience in determining a fair and reasonable cost. He was of the opinion that the damage to the vehicle was consistent with the accident. Mr Kay's view as to the fair and reasonable cost of repair was supported by reasoning, and was based on his knowledge and experience. Mr Kay's evidence satisfied the test in Makita and the Magistrate was entitled to afford Mr Kay's evidence the weight he did. There is no error of law. 29 Even if the Magistrate erred in relying on Mr Kay's evidence, there was in evidence the quote provided by North Shore Classic as to the cost of the repairs to the motor vehicle. There was also evidence that the repair work had actually been carried out. This evidence could have supported Ozbrand's case. The appeal is dismissed. The decision of His Honour Lulham LCM made on 18 October 2006 is affirmed. The summons filed 13 November 2006 is dismissed. 30 It should be noted that I fully endorse the Magistrate's comments at [89] of his judgment. As the Magistrate said, in matters such as this, insurance companies incur considerable legal fees by litigating matters that would most likely be settled, if loss assessors jointly inspected damaged vehicles prior to repair. Further, this intractable attitude incurs unnecessary expense and ties up Court resources. 31 Costs are discretionary. Costs normally following the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(2) The decision of His Honour Lulham LCM made on 18 October 2006 is affirmed.

(3) The summons filed 13 November 2006 is dismissed.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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