Checchia v Insurance Australia Ltd t/as NRMA Insurance
[2013] NSWSC 674
•30 May 2013
Supreme Court
New South Wales
Medium Neutral Citation: Checchia v Insurance Australia Ltd t/as NRMA Insurance [2013] NSWSC 674 Hearing dates: 30/7/12; 1/8/12; 6/8/12-8/8/12; 27/8/12-28/8/12 Decision date: 30 May 2013 Jurisdiction: Common Law Before: Hall J Decision: (1) Parties to bring in Short Minutes of Order to give effect to this judgment.
(2) Grant leave to the parties to apply, by my Associate, for the proceedings to be re-listed on a convenient date.
Catchwords: MOTOR ACCIDENT COMPENSATION - Motor Accidents Compensation Act 1998, s 118 - false and misleading conduct for purpose of obtaining a financial benefit
STATUTES - principles of construction - Motor Accidents Compensation Act 1999, ss 118(1) and (2) - "financial benefit" - application of the provisions of s 118(2) in determining the issue of "financial benefit" obtained under a lump sum settlement - approach in determining financial benefit attained - factors in the quantification of the relief to which the defendant insurer is entitled to relief under s 118(2) of the above Act - adverse findings against the plaintiff in terms of s 118(1) of the above Act - impact of such findings in determining plaintiff's credibility - extent to which medical and other evidence provides independent corroboration of plaintiff's impairment and incapacity - basis for assessing true settlement value of the plaintiff's claim - discounting factors to be considered - settlement amount to be reduced - determination of the quantum of the relief to which the defendant insurer is entitled under s 118(2) of the above ActLegislation Cited: Motor Accidents Compensation Act 1998 Cases Cited: Briginshaw v Briginshaw (1938) 60 CLR 336
Checchia v Insurance Australia t/as NRMA Insurance [2009] NSWSC 1005
Dasreef Pty Ltd v Hawchar [2011] 243 CLR 588
Jones v Dunkel (1959) 101 CLR 298
Luxton v Vines (1952) 85 CLR 352
Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Malco Engineering Pty Ltd v Ferreira (1994) 10 NSWCCR 117
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170
Nominal Defendant v McLennan [2012] NSWCA 148Category: Principal judgment Parties: John Checchia (Plaintiff)
Insurance Australia Limited t/as NRMA Insurance (Defendant)Representation: Counsel:
BJ Gross QC; S Dixon (Plaintiff)
K Rewell SC; B Kelleher (Defendant)
Solicitors:
Young and Muggleton Solicitors (Plaintiff)
Moray & Agnew Solicitors (Defendant)
File Number(s): 2007/15423
Judgment
PART A - INTRODUCTION
HALL J: The plaintiff originally commenced proceedings in this Court by Statement of Claim filed on 24 October 2007 in which he claimed damages from the defendant insurer, NRMA Insurance, being the compulsory third party insurer of a motor vehicle in which the plaintiff claims that he suffered injuries on 21 January 2003.
A settlement of those proceedings was agreed upon by the plaintiff and the defendant insurer in the amount of $1,225.000 inclusive of costs. The agreement was entered into on 20 October 2006. The defendant subsequently refused to pay the amount under the agreement, relying upon the provisions of s 118 of the Motor Accidents Compensation Act 1999 (MAC Act). In its Amended Defence, filed on 11 September 2008, the defendant insurer pleaded that the plaintiff had failed to provide a true and correct medical history prior to the accident of 21 January 2003, and further had not given a true and correct history of his pre-injury earnings.
As to the first matter (the plaintiff did not disclose the fact that he had suffered a back injury in 1993), the defendant has contended that this was a deliberate and material non-disclosure.
As to the second matter, the defendant insurer alleged that for the purpose of settlement negotiations the plaintiff dishonestly misrepresented his earnings for the 2002 financial year. In particular, the allegation is that he did so by producing documents for the purposes of his claim, and in particular for the Settlement Conference on 20 October 2006 the authenticity of which is strongly disputed.
The defendant additionally claimed that in a statement to the Claims Assessment and Resolution Service (CARS) pursuant to the MAC Act the plaintiff dishonestly represented that, at the time of the accident, he was earning $1,000 per week.
The proceedings were the subject of a hearing before this Court in 2008 ("the first hearing"). As noted in the written submissions for the defendant, the issues to be determined at the first trial included:
(a) Whether the Plaintiff had engaged in false or misleading conduct;
(b) If so, whether the Plaintiff engaged in that false or misleading conduct "for the purpose of obtaining a financial benefit" [ss 118(1)];
(c) Whether the Plaintiff did in fact obtain a "financial benefit" as a result of his false or misleading conduct;
(d) If so, the extent of that financial benefit, being the measure of the defence to which the defendant was entitled [s 118(2)(a)].
Outline of Defendant's Submissions at [27].
In the judgment given in the first hearing, the trial judge found that the respondent had failed to disclose the fact of a 1993 back injury and had at times exaggerated the extent of his ongoing symptoms.
His Honour, however, determined that the plaintiff had not made the representation that he had not had a previous back injury for the purpose of obtaining a "financial benefit" within the meaning of s 118. His Honour also rejected the defendant's contention that the plaintiff had falsified his pre-injury earnings.
In consequence of those findings, the trial judge determined that the defendant was not entitled to relief from liability for any part of the settlement and made an order in favour of the plaintiff in the settlement amount together with interest and costs: Checchia v Insurance Australia t/as NRMA Insurance [2009] NSWSC 1005.
The defendant insurer subsequently appealed the orders made by the trial judge (referred to in this judgment as "the appeal proceedings"). The Court of Appeal (Beazley, and McColl JJA and Handley AJA) concluded, inter alia, that the trial judge had erred both in his construction and application of the provisions of s 118 of the MAC Act and in his factual findings. In the latter respect the Court of Appeal determined that some of those findings were unsupported by and contrary to the evidence, and that there had been a failure to make findings of fact that ought to have been made on the evidence.
In the leading judgment, Beazley JA (as her Honour then was) considered the provisions of s 118 and the proper construction to be applied to them ("the construction issue") at [34]-[41]. I will return to her Honour's judgment below.
The first trial was a lengthy one and the appeal books are voluminous. There are three "black" appeal books (transcript) and four blue appeal books (Exhibits). They were all tendered as evidence in the present trial. The four blue appeal books were respectively marked as exhibits in the present proceedings, becoming Exhibits 1A, 1B, 1C and 1D.
The black appeal books were also tendered and were admitted in the present proceedings as Exhibits 2A, 2B and 2C.
The re-trial of the proceedings proceeded on 30 July 2012, 7, 8, 27 and 28 August 2012. Mr BJ Gross QC with Ms S Dixon of Counsel appeared on behalf of the plaintiff. Mr K Rewell SC with Mr B Kelleher of Counsel appeared on behalf of the defendant.
PART B - THE STATUTORY PROVISIONS
The provisions of s 118 of the MAC Act are in the following terms:
118 Remedy available where claim fraudulent
(1) This section applies to a claimant or insurer if it is established that, for the purpose of obtaining a financial benefit, the claimant or insurer did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading.
(2)If this section applies to a claimant:
(a) a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and
(b) a person who has paid an amount to the claimant in connection with the claim (whether under a settlement, compromise or judgment, or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claim.
(3)If this section applies to an insurer, the claimant is entitled to recover from the insurer as a debt the amount of the financial benefit so obtained by the insurer and any costs incurred by the claimant in connection with the claim.
THE CONSTRUCTION ISSUE - SECTION 118
In the determination of the construction issue, Beazley JA in her Honour's judgment in the appeal proceedings, made the following observations:
(i) The word "purpose" within s 118(1) means the subjective intention of the claimant [at [34]],
(ii) The purpose or intention is to be inferred from the whole of the evidence [34].
(iii) The false and misleading conduct must be engaged in for the purpose of obtaining "a financial benefit". A person may knowingly engage in false or misleading conduct in circumstances where no claim is available. Alternatively, there may be conduct where that person may be entitled to compensation under the MACAct but engages in false or misleading conduct, such as, for example, by exaggerating the extent of disability, or not disclosing a pre-existing injury, and this is done for the purpose of obtaining greater compensation than that to which he or she is entitled. Whatever be the content of the false and misleading conduct, it must be for the purpose of obtaining a financial benefit under the MAC Act: at [37].
(iv) Although an insurer may have established the factual matters necessary to satisfy s 118(1) it will not be known whether an insurer will be relieved of liability under s 118(2)(a) (in respect of a payment, settlement, compromise or judgment):
"... until it is known whether the financial benefit in fact obtained by the claimant was one to which he or she was not entitled. That requires a determination of the financial benefit to which the claimant was entitled on the premise that no misleading statement was made. The quantitative difference between the two, if any, is the extent to which the insurer is relieved from liability pursuant to s 118(2)(a)": at [38]
(v) Section 118(1) specifies the circumstances in which the section is engaged. Section 118(2) specifies the consequences which may flow where the section is engaged: at [39].
(vi) Section 118(2)(a) is directed to the quantification of the amount of the liability which an insurer is relieved from paying where subsection (1) has been engaged.
(vii) Where a settlement is involved, s 118(2) expressly provides that the insurer is relieved from the legal liability to pay under the settlement "to the extent of the financial benefit obtained by the settlement". Beazley JA stated that the Court is required to determine, not what the person guilty of the false and misleading conduct would have obtained in a judgment, but the financial benefit obtained in the settlement, as a result of the false and misleading conduct: at [46].
PART C - ASSESSING CREDIBILITY
In the present case, the assessment of the plaintiff's credibility, in particular his honesty and reliability, arises in somewhat unusual circumstances. In relation to certain matters analysed below, the evidence establishes a lack of honesty in him. In particular, in that regard, adverse findings are made in this judgment against him concerning false and misleading documents created and supplied in support of his claim. However, other issues (particularly in relation to issues related to causation and disability) there is objective evidence that I have concluded corroborates his evidence. It need hardly be said that, in those circumstances, in undertaking the fact-finding that is essential in the resolution of the issues in dispute, a high degree of caution is called for.
In a case where there are adverse credit findings against a party in relation to particular facts or issues they may, but will not necessarily, of course, be determinative of that party's honesty and reliability on other facts and issues that arise for determination.
In Nominal Defendant v McLennan [2012] NSWCA 148, McColl JA at [149] referred to the application by Heydon JA (as his Honour then was) in Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 of the observations of Handley JA in Malco Engineering Pty Ltd v Ferreira (1994) 10 NSWCCR 117. Heydon JA observed, at [35]:
"... [C]ounsel for the defendant contended that the trial judge had not complied with the passage set out above from Handley JA's reasons for judgment in Malco Engineering Pty Ltd v Ferreria (1994) 10 NSWCCR 117 at 118. That contention is not made out. Handley JA did not say that where a party-witness has lied, the balance of the testimony can never be accepted without corroboration. All he said was that the balance of the testimony in that case called for careful assessment. What the trial judge here provided was careful assessment. Counsel for the defendant fell back onto the contention that while the trial judge could have accepted parts of the plaintiff's evidence, he could not do so without "proper reason". He said: "Just because they say something, you can't just accept that when you know they're a liar." But though the trial judge gave no reason for accepting the evidence of the plaintiff about the fact that the shoe Professor Morton tested was the shoe she wore, and about how much she wore it after the accident, he was entitled to accept her evidence on the basis of the overall character of her testimony, part of which was to be disbelieved for particular reasons, part of which was to be believed because it was corroborated, and part of which was, though not corroborated, not affected by any particular reason not to accept it. Finally, counsel for the defendant said that even if the approach for which he was contending was not a universal rule, it was appropriate to employ it in particular cases, and this was one. The difficulty is that it has not been shown that the trial judge failed to assess and analyse the totality of the plaintiff's evidence against the background of the other evidence in such a way as to cast doubt on his conclusions that substantial parts of her evidence could be accepted. It is common enough in litigation for witnesses with a truthful story to succumb to the temptation of gilding the lily or over-egging the pudding. The test for the trier of fact is to separate the truthful parts from the rest. While it may be that other triers of fact would have arrived at conclusions different from those of the trial judge in this case, the fact is that the conclusions that he arrived at were not implausible. The weaknesses of parts of the plaintiff's evidence here, while troubling, were not so great as to call for a rejection of all the uncorroborated parts of it."
I have read the transcript of the plaintiff's evidence given in the first trial, (Black AB 1, 142-345) and have had the advantage of seeing him in giving evidence in the present trial. An assessment of has credibility is, of course, essential in the determination of all issues, including in particular in relation to the level of his impairment.
The defendant's contention was, in effect, that, whilst the plaintiff may have a permanent impairment of his lumbar spine, he has exaggerated the level of his symptoms.
It is in these circumstances that I have determined that nothing other than a detailed examination of all the medical evidence adduced in the first hearing and in the retrial of the proceedings, is essential. This, in particular, is necessary for the purpose of determining whether the medical evidence, (including the evidence of medical practitioners who have been involved in his treatment), provides a sufficient level of corroboration of his subjective symptoms and disability generally. To that end, the recorded histories on examination, the consistency or otherwise of symptoms, and the plaintiff's presentation on clinical and medico-legal examinations, all form part of the assessment required to be undertaken. Similarly, the results of investigative procedures, findings made at surgery and the clinical and other findings and assessments made from time to time by examining doctors are to be brought into account in determining the reliability of the plaintiff's complaints of disability, including the issue of alleged exaggeration.
Accordingly, the discussion and analysis of the medical evidence is more detailed and protracted than is often required in a damages assessment and has contributed to the production of this lengthy judgment.
PART D - ISSUES
In the plaintiff's written submissions, 27 August 2012, the bases upon which the defendant sought relief from the liability under the settlement were identified as follows:
(a) The defence alleging that there was a fraudulent non-disclosure by the plaintiff of the 1993 accident and injury.
(b) The Defence alleging that the plaintiff fraudulently mislead the Defendant insurer into believing that he had no on-going disability between 1993 and 2003.
(c) The Defence that the plaintiff knowingly exaggerated falsely and misleadingly the extent of his injuries and disabilities since the 2003 accident.
(d) The Defence that the plaintiff wilfully misrepresented what his earnings were in the 2002 tax year and obtained forged or false PAYG summaries from Blue's Point Café and Bar Cupola in 2005 or 2006 in support of his claim for lost earning capacity.
(e) The Defence that the plaintiff wilfully misrepresented what his agreed earnings were at Jet Café and created in conjunction with Ms Mowad a forged employment agreement in support of his claim.
The abovementioned written submissions for the plaintiff addressed each of the above issues at [20]-[87].
(A) PLAINTIFF'S SUBMISSIONS
Issue (a)
It was accepted for the purpose of the present proceedings that the plaintiff, as found by the trial judge in the first proceedings, had wilfully withheld information that he had suffered injury in 1993: at [20].
However, the position was maintained, as it had been in the first hearing, that the plaintiff had recovered from the 1993 injury and had no disability or symptoms over the following nine-year period and had no treatment or attendance on doctors in relation to his back in that period, and that he was fully fit at the time of the 2003 accident: at [21].
It was also contended on behalf of the plaintiff that Dr Matheson had, prior to the settlement conference, been aware of pre-existing pathology in the lumbar spine which he considered was consistent with an earlier injury prior to the 2003 accident so that the defendant was aware of the fact that the plaintiff had had some previous damage or injury to the lumbar spine prior to the 2003 accident. Reference in this respect was made to Dr Matheson's report 29 March 2005 (Blue AB 3, 1107 It was submitted that the plaintiff did not obtain any pecuniary benefit on this basis as failure to report the 1993 accident did not change the position as the defendant could have taken into account the possibility of pre-existing degeneration as a discounting factor: at [26].
The plaintiff's submissions analyse the medical evidence. I will refer later in this judgment to the evidence so I do not here reproduce all of the submissions made. Suffice to say that reliance was placed upon the evidence and findings of the treating surgeon, Dr Parkinson: at [21] and at [33].
Reliance was also placed upon other medical evidence including that of Dr Nakhle and Dr Bruce as well as Dr Cameron at [35].
Issue (b)
In relation to issue (b) it was contended that the defendant had not discharged the onus of proof on this issue and that in any event appropriate concessions had been made both by Mr Roberts SC, the defendant's expert witness, and Mr Rewell SC on behalf of the defendant. It was contended that these concessions provide support for the fact that there was no misleading or deceptive conduct by the plaintiff under this heading. It was also submitted that on the basis of these concessions and on the medical evidence, it is clear that no financial benefit was obtained: at [36]-[37].
Issue (c)
In relation to issue (c), reference was made in the plaintiff's written submissions to particular observations made by Beazley JA at [13], [15], [51], [56] and [59]: Written Submissions at [38]-[42] based on the report of Dr Mills, physician in Occupational Medicine, dated 23 August 2005.
However, the submission in the present proceedings was that issue (c) must, in effect, be revisited and determined on the evidence in the re-trial: at [50].
It was submitted for the plaintiff that the reality is that on the totality of the evidence adduced on the re-trial, the defendant could not make out a case of fraudulent exaggeration of disabilities and symptoms or that the disabilities or symptoms are less than what the plaintiff has reported: at [51].
Again, reference was made to the concession said to have been appropriately made by Mr Roberts in the course of his evidence and the concessions made on behalf of the defendant: at [52]. These concessions, it was submitted, would require conclusions: (a) that there was no fraudulent, misleading or deceptive statements by the plaintiff so as to exaggerate his disabilities and symptoms; and (b) for the purposes of the assessment and determination under s 118 it must be accepted that the plaintiff in fact has a genuine disability which he has reported over time to various doctors and other health professionals (it was submitted that Dr Mills' evidence should be rejected). It was contended that other medical examiners, in relation to the assessment of the plaintiff's ongoing disabilities, expressed their opinions on the basis of valid conclusions: at [52].
It was further contended on behalf of the plaintiff that in the re-trial in cross-examination of the plaintiff on his alleged exaggeration of symptoms a formal "Browne v Dunn" question only was put to the plaintiff and that this issue was not really pursued: at [53].
It was further submitted that the plaintiff's credibility is not impaired in any way or is to be discounted in relation to other issues, such as his claim for economic loss, by reasoning of his alleged "exaggeration" of disabilities as contended for by the defendant at the first trial and before the Court of Appeal: at [54].
Issue (d)
In relation to issue (d) lengthy and detailed submissions were made at [55] to [73]. I have, of course, carefully considered all of the matters set out in those paragraphs, but do not mean any disrespect to counsel for the plaintiff in not reproducing them in full in this judgment. Each of them will arise in the analysis and discussion later in this judgment of the particular factual matters touching or concerning this particular issue. That said, I will however, refer to certain points raised in the written submissions.
It was submitted that the plaintiff did not, himself, take any positive steps to contact his former employers, Bar Cupola or Blue's Point Café in order to get further documentation from them as to his pre-injury earnings: at [62]. It was submitted that he provided explanations as to how it came about that the revised group certificates (referred to as the "second batch of group certificates") came into existence: at [62]. I do not here reproduce detail of that submission although I have, as earlier indicated, considered it and taken it into account in determining the issue. See also [63] and [64]. These factual issues are discussed in detail later in this judgment.
Whilst the plaintiff stated that he could not remember how he obtained the revised PAYG summaries and that he simply located them in a drawer at his home, it was submitted on his behalf that it could not be expected that an "unsophisticated and relatively unorganised such as the Plaintiff" would ordinarily be expected to keep a perfect filing system or to take notes or preserve memory or record as to how and when he received documents: at [65].
Reliance was also placed upon the fact that, in the case of the Bar Cupola the second PAYG summary, contains the same figures as the original. This was inconsistent with an intention as to the forging of the document for a fraudulent purpose: at [66].
It was further submitted that it was consistent that the same person had produced the revised PAYG summaries for both Bar Cupola and Blue's Point Café and that that person generated the documents to meet a request made to each employer at about the same time. In the circumstances, it was understandable that the plaintiff would need to obtain documents as evidence of his earlier earnings: at [67].
It was submitted that the correct conclusion was that the revised PAYG summaries from the two earlier employers were obtained generally on the plaintiff's behalf and sent to him and that they were then put forward by him honestly as to what his earnings were with those employers: at [72]. It was submitted that the defendant was not entitled to any deduction by reference to these documents.
Issue (e)
In relation to issue (e), it was submitted that Exhibit G, the Jet Café employment/agreement, was a genuine document: Plaintiff's Written Submissions at [80]. The submissions set out in detail specific matters relied upon in support of the employment agreement as being genuine.
In relation to the evidence as to the records of Jet Café in relation to the 11 payments made in the amount of $409 per week from January 2006.
The plaintiff disputed the defendant's contention that the 11 payments of $408 are consistent with the payment of wages under the relevant award for a grade 2 employee (at the gross rate of $455.30 per week). Reference was made to the 2003 tax scales which, if applied to that weekly gross amount would produce a net result of $378 per week: Submissions at [75].
Reference was also made to the evidence of Ms Mowad as to what was termed a "half-half" arrangement (a reference to half the plaintiff's remuneration allegedly having been paid in cash and the other half as recorded in the employer's records): at [76].
It was contended for the plaintiff that on analysis the evidence would support a finding that the plaintiff was "... basically earning $1000 gross per week, which would accord with 40 hours at $25 per hour ...": at [77].
In relation to the records of the Jet Café business, variations in the evidence as to the plaintiff's commencement date with it were noted: at [78]. Reliance was placed upon records which contradicted the defendant's argument that the plaintiff only commenced work at Jet Café the day before the accident. Other records, referred to in the submission, were said to support the proposition that the plaintiff commenced work in January 2003: at [78]. The information supplied by Ms Mowad in response to a letter from the defendant's solicitors dated 9 May 2006, suggesting a net wage of $3,240 per week, (Blue 2/340) should be taken as indicating an average weekly figure of $748 net per week: at [78].
It was contended on behalf of the plaintiff that allowance should be made for Ms Mowad's "paperwork systems" which were "inefficient, poor and involved substantial informality and inaccuracies ...": at [79].
The submission for the plaintiff dealt with each of the matters raised and relied upon by the defendant in its contention that Exhibit G was not a genuine document: at [80]-[87]. I do not here reproduce the detail of the particular matters therein raised. They are discussed later in this judgment.
The submission was that the defendant's argument that the plaintiff only earned the amounts shown in the Payment summary should be rejected. The amount of $409 net per week for the plaintiff was said to be far too low for a worker who was highly experienced, valued and well-regarded in the particular employment position for which he was required: at [47]. An amount of $409 net per week was said to be far too low for the pre-injury position he occupied. It was also stated that it can be assumed that in the restaurant/café industry there is a fair amount of cash payments that can be received. Taking all matters into account, it was extremely unlikely that the plaintiff would have undertaken employment at the low rate of $409 net per week: at [87].
(B) DEFENDANT'S SUBMISSIONS
The Outline of Defendant's Submissions dated 27 August 2012, set out detailed submissions in relation to the background, material facts, relevant documents obtained by the defendant, the decision of the Court of Appeal and matters concerning construction of s 118: at [1]-[66].
The defendant disputed the contention made on behalf of the plaintiff that the Court in the present proceedings could not take into account acts of dishonesty by the plaintiff prior to the settlement conference, of which the defendant is now aware: at [54]-[56].
The matters relied upon by the defendant in this respect were set out at [60]-[61]. An alternative or second suggested approach was set out in the defendant's outline of submissions at [62]-[66]. Although I do not here set out the detail of those submissions, I have carefully considered all of the submissions raised on this issue and the other matters addressed in the defendant's outline of submissions. I will return to this issue in greater detail below.
It is sufficient to state here that, in general terms, I accept, as was submitted for the defendant in relation to the "second way" of approaching the matter, that the Court should have regard and bring into account any knowledge that the plaintiff had as to his non-disclosure of prior injury and what was referred to as the "non-authenticity" of any financial documents he provided to the defendant and in particular to false or misleading information. I have sought to give effect to that approach in the ultimate determination of these proceedings.
The defendant's written submission set out its contentions as to the findings of fact that ought to be made: at [67]-[87]. I have also considered the submissions made as to the failure by the plaintiff to call Mr Armstrong in the proceedings: at [88]-[92]. I will deal with these issues later in this judgment.
In relation to the issue of the quantification of any "financial benefit" fraudulently obtained, the defendant relied upon submissions set out at [93]-[104] of its outline of submissions. I will return to consider the issues there addressed later in this judgment.
(C) PLAINTIFF'S SUPPLEMENTARY SUBMISSIONS
The plaintiff relied upon supplementary submissions dated 30 August 2012. Those submissions, inter alia, address the suggested operation of s 118(2). In particular, it was there submitted that the defendant's case, at its highest, is that there was fraud in relation to the plaintiff's statements and documentary evidence but that these related specifically to the issues of economic loss: at [7]. It was submitted that the defendant had not established that the plaintiff had obtained a financial benefit as the result of any false or misleading act or omission in relation to any other heads of claim: at [8].
In the task of "re-adjusting the settlement figure by reference to the extent of the benefit obtained" it was submitted that it was necessary to determine two figures: (a) the amount which was probably included in the settlement for past and future economic loss, and superannuation-related losses; and (b) the amount which would probably have been included in a settlement for past and future economic loss and superannuation-related losses in a reasonable settlement between the parties, on the basis the true facts were known: at [10].
The supplementary submissions then set out the method contended for in determining the issue of "financial benefit" in relation to future economic loss: at [13]-[23]. It is not necessary here to reproduce all of the submissions in that respect. I have carefully considered the suggested approach that should be taken.
(D) DEFENDANT'S SUPPLEMENTARY SUBMISSIONS
The defendant's supplementary submissions responded to the plaintiff's supplementary submissions. They addressed, specifically, two matters. The first related to the facts and issues concerning Exhibit 19 and certain observations made by Beazley JA in the appeal proceedings in the case. The second, concerned the operation of s 118(2). In particular, in this respect, the defendant responded to the submission made that s 118(2) requires only that the claim for economic loss be "recalculated" on the basis of the pre-accident earnings found by the court to be the plaintiff's true earnings: at [21]. The defendant took issue with this submission and developed its contentions at [22]-[40].
The defendant submitted, based upon the expert evidence and approach of Mr Roberts SC, in particular, his recommended settlement range, that the appropriate outcome in the present case would be based upon the lower end of the range proposed by Mr Roberts in his supplementary Opinion ($525,985 plus out-of-pocket expenses of $149,000 plus Fox v Wood of $15,000 plus costs of $40,000 making a total of $729,985. That was said to be a reasonable, if not generous, indicator of the "settlement value" of the plaintiff's claim as at 20 October 2006: at [34].
The defendant's submission noted that, rounded out, an amount of $730,000 (inclusive of costs), if deducted from the settlement agreement of $1,225,000 (inclusive of costs) would produce a calculation of "financial benefit" allegedly obtained fraudulently by the plaintiff of $495,000. It is this sum, the defendant submitted, that it should be entitled to by way of its defence under s 118(2): at [35].
PART E - MEDICAL ISSUES
(A) INTRODUCTION
The defendant put in issue the extent of the plaintiff's disabilities arising from the 2003 accident. In essence, it contended that the plaintiff had exaggerated any disability from which he was suffering and further that any disability that he in fact suffered was partly attributable to the 1993 accident.
The defendant's contentions need to be considered against the factual background including, in particular, the nature of the back injury suffered by the plaintiff in 1993 and its sequelae. Those matters are discussed in the analysis of the evidence.
(B) THE PLAINTIFF'S CLAIM FOLLOWING THE 2003 ACCIDENT
On 1 May 2003, the plaintiff lodged a Personal Injury Claim Form. In answer to questions 33 and 34 respectively, he indicated that he had not had any other injuries before the subject accident, nor had he made a claim for personal injury compensation or workers compensation or damages (Blue AB 1, 260).
The plaintiff later (in 2006) provided a signed statement to CARS in support of his claim in respect of his 21 January 2003 accident (referred to as the "CARS Statement": (Blue AB 1, 267-272). In that statement, he made no mention of any previous back injury and stated that, at the time of the 2003 accident he was fit, healthy and active and had no prior problems with his back or legs.
On 13 April 2006, he underwent a medical assessment pursuant to the MAC Act. Professor Michael Ryan issued a Statement of Reasons (Blue AB 3, 1272-1283) in which he noted that the plaintiff had had no prior history of lower back pain, that he suffered pain in the left buttock and lower back but had returned to work the next day. The plaintiff continued to work for approximately one month doing light duties and attended a chiropractor several times, and in March 2003 attended Dr Nakhle, general practitioner. Professor Ryan also concluded that there was consistency in the plaintiff's presentation with no element of exaggeration (Blue AB 3, 1279). Dr Ryan determined that he had sustained injuries in the 2003 accident, in particular, a disc/nerve root problem with muscle reduction, sensory change; right leg numbness and weakness, neck strain.
Professor Ryan stated that the disc/nerve root problems and muscle reduction and sensory change and the right leg problems had given rise to a permanent impairment. He assessed that as a 25% whole person impairment.
(C) THE PLAINTIFF'S INCONSISTENT STATEMENTS ON HIS PRE-2003 MEDICAL HISTORY
The plaintiff's claim form and CARS statement were incorrect. Beazley JA noted that both the claim form and the CARS Statement included statements that the plaintiff had not had any previous injury to his back and had not made any previous claim for compensation and that both statements were false: at [63]. He had in fact sustained an injury to his back on 23 May 1993 whilst employed as a shop assistant when he fell from a truck and a loading ramp suffering a disc protrusion at L4/5 and a fracture to the endplate of the L4 vertebrae. He had been hospitalised for about four days and came under the care of an orthopaedic specialist, Dr Bruce. Dr Bruce had reviewed him in June, July, and August 1993. He made a claim and was paid workers compensation at that time.
According to the report of Dr Bruce dated 19 July 1993, the plaintiff continued to have discogenic back pain. A more detailed examination of the clinical history whilst he was under Dr Bruce's care is set out below. On 28 August 1993, Dr Bruce observed that he still had a decreased range of movement of the lumbar spine but no neurological signs. He certified him fit to resume light duties on and from 29 August 1993. It appears that on advice he resigned from his employment as a shop assistant and commenced working in the hospitality industry as a waiter.
The evidence establishes, and I so find, that the plaintiff's statement in the claim form in the CARS assessment that he had had no previous injuries to his back was false and must be taken to have been known by the plaintiff at the time to have been false.
The evidence, as I have indicated, establishes that the 1993 injury caused injury to the plaintiff's lower back which produced disabling symptoms for a period of time. However, as discussed below, there was no evidence of ongoing disability or loss of time off work by reason of the 1993 injury in the years leading up to the 2003 accident. There was evidence, apart from the plaintiff's own evidence, that he had continued working following recovery from the 1993 injury.
I will return to the significance of these findings to the overall question that arises under s 118(2)(a) of the MAC Act.
(D) HISTORY OF TREATMENT: THE 1993 INJURY
The plaintiff was originally referred to Dr Warwick J.M. Bruce, Orthopaedic Surgeon, by a Dr A Pricolo of Western Suburbs Hospital. Dr Bruce treated him in respect of his 1993 injury between 24 May 1993 and 27 September 1993. Dr Bruce's reports were tendered in the first hearing and are contained within Blue Appeal Book 3 at pp 981-1000.
Dr Bruce took a history of the plaintiff having fallen on 23 May 1993 between a truck and a loading ramp hitting his lumbar spine: Dr Bruce's first report (24 May 1993). Following radiological investigation and a CT scan performed on 26 May 1993, Dr Bruce diagnosed a posterior protrusion of the L5 disc with indentation of the thecal sac. He noted a fragment had separated from the posteroinferior aspect of the L4 vertable body in association with the disc lesion contributing to the indentation of the thecal sac.
He reviewed the plaintiff on further occasions, in particular, on 7 June 1993, 24 June 1993, 19 July 1993, 26 August 1993, 27 September 1993.
In his report of 27 September 1993, Dr Bruce noted that the plaintiff at that time was still on light duties and did not get much pain "except for an occasional twinge": (Blue AB 992). In the same report he said "I am very happy with his progress and will see him in 6 weeks time".
He subsequently saw him on and after 7 December 1993 in respect of a right knee problem and pain in the right thigh. Following his review on 7 December 1993, Dr Bruce observed, "back is now good with no real discomfort and no right leg pain".
On 23 May 2007, Dr Bruce provided the plaintiff's then solicitors, Young and Muggleton, with a comprehensive report setting out the full accident history, investigations and results on examination.
So far as the plaintiff's back was concerned, Dr Bruce wrote:
"It seems the last time I saw him about his back was on the 27th September, 1993. He was still on light duties and did not get much pain except for an occasional twinge. He had a normal gait and could walk on his heels and toes. There was mild restriction of lumbar spine movement but no neurological signs. At that time I said I was happy with his progress and I would see him in 6 weeks time. I am not sure if I saw him again."
A little later in his report he stated:
"We can say that after his recovery from the 1993 accident he led a very active life and did not have back problems until the injury in 2003. Also recurrent pain from a disc injury usually occurs with lifting or twisting. The fact that he was in a bike accident being hit by a car is a different mechanism of trauma than the spinal surgeons that had operated on his back are the ones that can best comment on whether this is a different injury." (Blue AB 3, 1000).
Doctor Robert S Cameron, Consultant Surgeon, examined the plaintiff on behalf of QBE Workers Compensation (NSW) Limited, the workers compensation insurer of the plaintiff's then employer. He wrote a report dated 17 September 2004: (Blue AB 3, 1001-1004).
In the report, Dr Cameron recorded that the plaintiff had been under Dr Bruce's care, had had physiotherapy for a few weeks and some spa treatment afterwards, but had no other active treatment. He recorded the position following the 1993 injury as follows:
"... symptoms gradually resolved over ensuring months and he was certified fit for work on light duties last month. At that stage he resigned from his position with World of Fruit and he does not intend to return to heavy work. Last week he started a trial of unpaid work as a waiter, working 2 or 3 hour shifts about once a week."
Dr Cameron expressed the opinion that the plaintiff had sustained an injury to his back with a fracture of the L4 vertebral body posteriorly and some probable injury to the L4/5 intervertible disc. He noted he had been treated conservatively, and on examination he showed mild restriction of back movement, probably with some overprotection. He noted that symptoms in the right lower leg were not consistent with an organic nerve distribution. Dr Cameron wrote:
"Mr Checchia is expected to make a full recovery from his injury. There is no indication for surgical or other active medical treatment.
Mr Checchia is now fit to return to work on a basis of graduated selected duties. He remains unfit for work involving heavy lifting or repeated bending, probably for the next six months. As Mr Checchia has resigned from his work with World of Fruit, a graduated increase of work as a waiter would be appropriate for the time being ...
The prognosis is for full recovery without permanent impairment."
On the evidence the plaintiff resumed work as a waiter. Mr Roberts SC, who provided the defendant insurer with two expert opinions (discussed below) noted on the material reviewed by him that the plaintiff had apparently changed his employment as a result of the 1993 injury and had some back pain in September 1994 on moderate lifting and bending and some reduced sensation in the right leg. Mr Roberts also stated in his first report, at [21], that he proceeded on the assumption that after 1994 the plaintiff did not suffer from symptoms of any movement in his lower back and his capacity to perform work as a waiter/supervisor was unaffected. That, with respect, appears to be an accurate statement of the plaintiff's post-1993 condition, supported by the evidence in the present proceedings.
The plaintiff was examined by Dr JM Matheson, Consultant Neurosurgeon, on behalf of the defendant insurer. As discussed below, Dr Matheson provided a number of reports. In his initial report dated 6 October 2005, Mr Matheson expressed the opinion that the plaintiff had a large calcified disc lesion on the right side which was certainly present before the accident. He recorded that the plaintiff denied any symptoms prior to the 2003 accident and that the accident appears to have precipitated further prolapsing of the disc at L4/5 and the entrapment of the L5 nerve root. He stated that this was probably due to the accident but not certainly so. He stated that it would be impossible to deny a relationship: (Blue AB 3, 1104).
Dr Matheson provided a further report dated 11 October 2005 in which he noted that Dr R Rushworth had diagnosed the plaintiff with a recurrent L4/5 disc lesion and that Dr Rushworth had felt that the subject accident was a substantial contributing factor to his condition. He also noted reports of other doctors including Dr Steele dated 27 October 2004, and Dr John Lawson dated 29 March 2005. He stated that nothing in the reports caused him to alter his previously expressed opinion.
Dr Matheson wrote a report dated 18 March 2006 to the defendant's solicitors. He referred to the fact that the plaintiff had undergone back surgery on three occasions. The initial surgery, he noted, was undertaken by Dr Parkinson. He was later operated on on 26 July 2004 by Dr Steele. In the Opinion section of the report he noted that the plaintiff through having undergone three back operations was not improving, and that he had some functional features:
"... but nevertheless an established disability is present. Whilst it is almost certain there are some degenerative changes in his back prior to his accident, the history given from the accident would lead us to believe that it caused the prolapse of the L4/5 disc and ultimately his surgery and disability. This would have to be related to the accident ..." (Blue AB, Vol 3 at p1111). (emphasis added)
On 12 December 2006, Dr Matheson wrote a report to the defendant's solicitors which addressed information that had been supplied to him concerning the plaintiff's back injury sustained in 1993. He stated that that information influenced his opinion. Having regard to observations that he had earlier made as to degenerative changes, he said that the new information about the 1993 injury had come as no surprise to him. In his conclusion he stated that the information relating to the 1993 incident which included the employer's Report of Injury, a report from Dr Bruce dated 27 May 1993 reporting on investigations, and a report to QBE dated 19 July 1993 as well as the report of Dr Cameron dated 19 September 1994, led him to state that such material:
"... makes me radically alter my opinion of 18th May 2006. Clearly the incident of 21st January 2003 had little effect on him. It was merely a recurrence of his symptoms falling off a bike. It did not cause the L4/5 prolapse which was present many years earlier. It is clear that the main genesis of his problems is in 1993 and the incident of 21 January 2003 is unlikely to have played any part in the progression of his symptoms."
Dr Matheson did not identify specifically how the additional information operated to require an alteration of his opinion given Dr Bruce's opinion to the effect that the plaintiff had recovered from the 1993 injury, together with the history of him working without loss of time over the period of almost 10 years (1993 to January 2003) and the later history that discogenic symptoms and findings linked to the production of neurological symptoms in the plaintiff's right lower back commenced after the 2003 accident. I will return to Dr Matheson's alteration of his opinion below.
On 26 August 2008, Dr Matheson reported to the defendant's solicitors on having viewed video film. He concluded that the material suggested that the plaintiff had "a minor back disorder" and he considered that the film indicated "... he was exaggerating a bit when he was close to a medical environment but there is evidence of minor back disorder in some of the other film but also evidence that he is capable of working ..." (Blue AB 3, 1117). Dr Matheson's opinion based on the video surveillance in this regard, as noted below, was contrary to other medical opinions given in evidence.
On 18 September 2008, Dr Matheson issued his final report, again commenting on film of the plaintiff that he had been shown. He did not consider that it showed him doing anything strenuous, that it did not exclude a back disability, but it showed that he was quite functional.
The medical history, including the history of the treating doctors, was reviewed by Mr Roberts SC in his Opinion dated 14 June 2012 at [23] to [49]. Mr Roberts took into account in his analysis the fact that subsequent to the 2003 accident the plaintiff had undergone surgery on three occasions, namely:
(i) On 12 May 2003 by Dr Parkinson - a right L5 rhizolysis and L4/5 discectomy.
(ii) On 26 June 2004, a further discectomy - at operation the L4 nerve root was found to be significantly compressed by pieces of floating disc.
(iii) On 21 November 2005, performance by Drs Parkinson and Bentivoglio of a further decompression at L4/5 and a pedicle screw fusion at that level.
Mr Roberts reviewed the reports of the defendant insurer's qualified specialists at [69] to [80] of his opinion. (This review did not include Dr Matheson's report concerning the new material that had been supplied to him confirming the fact of the 1993 injury.) Mr Roberts then assessed the question of the plaintiff's capacity for work based on the medical evidence available to him.
As to his capacity for work subsequent to the 1993 accident, Mr Roberts concluded in his Opinion of 14 June 2012:
"104 It would certainly have been open to the plaintiff to argue that he had, to all intents and purposes, no residual incapacity. On any view, such residual capacity he had was extremely limited. No one suggests he could have gone back to his pre-injury employment or a full-time basis, and most suggest that only sedentary work, probably on a part-time basis, would have been appropriate."
In oral evidence, Mr Roberts accepted that he was indicating in that paragraph that it was open to the plaintiff to argue that he had no residual incapacity, and on any view it was extremely limited: (T 201, lines 4-7).
He indicated that he did not think that Dr Bowers' assessment of the plaintiff's residual earning capacity would translate into a very likely finding.
He said:
"... I think it was Dr Bowers who said in his report that he could work something like - correct me if I am wrong - two-thirds of normal hours or something. My view was that that would be a very unlikely finding, it would be too high a residual capacity": (T 201:15-20)
Mr Roberts observed in respect of Dr Cameron's report:
"... however it is notable that the plaintiff apparently changed his employment as a result of the 1993 injury and even in September 1994 he noticed some back pain after moderate lifting or bending and still had some reduced sensation in his right leg (see Dr Cameron's report): at [20].
In his conclusions, Mr Roberts observed:
"128 To my mind the plaintiff's failure to disclose this prior injury, even though it occurred 10 years prior to subject injury, could hardly have been the result of forgetfulness. According to the history he gave Dr Cameron, he changed occupations following his injury. He had been hospitalised for 3 days following the injury and had been off work for about 3 months.
129 Of course this would probably go to the plaintiff's credit. It is conceivable that NRMA may have been able to obtain a report before trial raising the possibility that his pre-existing condition would have come against him in any event and thus affecting the award for future loss. However, accepting the lack of symptoms for a number of years prior to the subject accident, that seems unlikely."
On the question as to whether the 1993 injury had played any significant role in the plaintiff's ongoing back disability/symptoms and the cause of his ongoing incapacity, Mr Roberts in his oral evidence expressed his opinion on the significance of matters established by the medical evidence. He stated:
"Applying the lawyer's eye to it it would seem to me that the earlier injury did nothing more than render him more susceptible. Dr Matheson talks of there being a calcified lesion, but it wasn't causing any - I accepted that wasn't causing any symptoms until the current, the subject accident": T 202, lines 3-6.
Mr Roberts was asked about the failure to disclose the 1993 injury. It was put to him:
"Q. It seems, I think based on your evidence and analysis that at the end of the day the prior injury couldn't be said to play any on-going role, certainly not a significant role, in the disability which put him out of work.
A. Yes." (T 202, lines 32-36)
Mr Roberts' evidence provides an expert assessment by Senior Counsel, of the significance of the medical evidence upon the issues relevant to the settlement value of the plaintiff's claim.
It is clear that Mr Roberts, with respect, accurately recorded and analysed the medical evidence. His conclusion that the 1993 injury did not play any significant ongoing role in the disability which put the plaintiff off work in 2003, was well supported by the medical evidence including, in particular, the evidence of Dr Bruce and Dr Parkinson. Dr Matheson's later and altered opinion (see [91] above), conflicts with the opinions of Dr Bruce, the treating specialist responsible for the plaintiff's treatment in 1993 and of Dr Parkinson who treated him in the 2003-2006 period respectively. Having closely considered their evidence, I find their opinions quite compelling. Additionally, there was lay evidence to which I have earlier referred that the plaintiff had appeared to be working and otherwise proceeding without signs of back disability in the years leading to the accident in 2003.
Dr Parkinson reviewed the medical history of the plaintiff's treatment in 1993, including, in particular, the reports of Drs Bruce and Cameron. He concluded:
"Based on this, and the fact that Mr Checchia went on to continue full employment following this injury and did not require any further treatment beyond what Dr Bruce had performed in 1993, that if Mr Checchia had suffered a chronic injury at that time, then it would have caused trouble for him in the 10 years in between the first accident and the second.
I am entirely of the opinion that Mr Checchia's trouble with his back and leg which are causing his current symptoms have resulted from the motor vehicle accident and secondarily from the treatment which has been required following it. This includes the spinal surgery which he has undergone.
I am not of the opinion that there is any pre-existing component to his current condition attributable to the 1993 accident, for the above reasons ..."
The cross-examination of Dr Parkinson at Black AB 1, 451-484, did not undermine either the fundamental reasons upon which Dr Parkinson's opinion was expressed, nor his conclusion on attributability (the 2003 accident and subsequently surgery for the disc injury sustained in that accident).
Examination of Dr Matheson's oral evidence does not, as earlier indicated, provide any basis or explanation for his revised opinion in his 12 December 2006 report. As has been established, the prime duty of an expert in giving opinion evidence is to furnish the trier of fact with criteria enabling evaluation of the validity of the expert's conclusions: Makita (Australia) Pty Ltd v Sprowles (2001) NSWLR 705, 729 per Heydon JA (as his Honour then was); Dasreef Pty Ltd v Hawchar [2011] 243 CLR 588 at [37].
He gave extensive evidence-in-chief beyond his written reports (Black AB 1, 619, 626). He was cross-examined at 626-641. He was asked in evidence-in-chief about findings made on operation. The first surgery, as earlier noted, was performed by Dr Parkinson on 12 May 2003 (not 23 May 2003 as Dr Matheson stated in his first report (Black AB 1, 1102). In that report, Dr Matheson identified each of the "investigations" performed (radiological, MRI and CT scans). He did not, however, refer specifically in any of his reports to Dr Parkinson's detailed "Operation Note" on his findings at surgery on 12 May 2003.
In oral evidence Dr Matheson did not have a copy of the "Operation Note" but claimed that he could recall the "report": Black AB 2, 621 L-M. He was then invited by Senior Counsel for the defendant to comment "about the operation findings as found by Dr Parkinson ..." at 621 M-N. He replied:
"A. I found it clear that there was a scarred up mass as they put it and was not disc material so there was nothing new is 'seen' and no new pathology evident. Or unreported, anyway." Black AB 2, 621 M-P.
He then went on to deal with the effect of the 2003 injury upon that basis (at 621 P-X).
Dr Matheson's evidence on the operation findings as set out above is, as evident from Dr Parkinson's reported findings, however, quite inaccurate and his opinions on causation are, in my opinion, affected by that inaccuracy. Specifically:
Dr Parkinson, as the operation surgeon, did not describe his findings as a "scarred up mass" as Dr Matheson claimed.
There was, in fact, a finding of "new pathology" as Dr Parkinson's "Operation Note" and his report of 10 November 2005 (Blue AB 3, 1214) both make clear. Dr Parkinson's "Operation Note" records the following findings:
"... a broad based disc herniation could be palpated at the L4/5 disc. Retracting the dura showed a large intra annular L4/5 disc protrusion with no evidence of any extruded fragment. This appeared to be compressing the L5 nerve root at its axilla. The postero lateral disc was incised with a number 15 scalpel blood and free fragments of disc were meticulously removed with great care."
Dr Matheson did not refer to or address each or any of Dr Parkinson's specific findings. Dr Parkinson was cross-examined about the surgery and findings on the operation he performed on 12 May 2003: Black AB 1, 458-459. It was not put to him that there was "no new pathology evident" as Dr Matheson claimed in his evidence at Black AB 2, 621. Nor was it put to Dr Parkinson in cross-examination that there was no "broad based disc herniation", or no "large intra annular 4/5 disc protrusion" or that there was no compression by that disc causing the disc herniation. No proposition was put to Dr Parkinson in cross-examination that his findings as reported by him in his Operation Note for 12 May 2003 (or anyone of them) were not recent or did not or may not have been caused by the 2003 motor vehicle accident. In other words the cross-examiner did not set out in cross-examination to establish that no new pathology arose from the 2003 motor vehicle accident.
Dr Matheson's evidence on the pathological effects of the 2003 accident, and his views on causation in relation to that accident and the 1993 injury, were, with respect, in the nature of unsupported and unexplained assertions which conflicted with the unchallenged evidence of Dr Parkinson.
On the evidence, and I so find, the plaintiff made an effective recovery from the 1993 injury. By December 1993 he had regained his capacity to undertake a wide range of work, and he in fact worked thereafter until January 2003 in the hospitality industry as a waiter.
The medical evidence overall clearly supported the plaintiff's claim for damages on the issue of causation. Apart from Dr Matheson's revised opinion, the evidence, as Mr Roberts properly accepted, favoured a causal nexus between the 2003 accident and the onset of a discogenic lesion and associated pain at the L4/5 level with L5 nerve root radiculopathy.
In considering settlement of the plaintiff's claim, if the defendant insurer had possessed knowledge of the 1993 accident and injury and associated medical treatment, in light of the evidence and opinions of the treating doctors in 1993 it, in my opinion, could not, and would not, have considered that there existed an evidentiary basis to support a significant discount on settlement by reason of the fact that the claimant had sustained injury to his lumbar spine in 1993. Mr Roberts' Opinion, as I have noted, in effect, accepted that proposition. Whilst the 1993 accident/injury may be seen as a matter that was relevant to the plaintiff's reliability insofar as the level of his subjective symptoms following the January 2003 accident was concerned, the available medical opinion of treating specialists, as at October 2006, as discussed above, strongly supported the plaintiff's claim, firstly, on the issue of causation and, secondly, having regard to the operative findings and the need for multiple surgical procedures, on the issues of his ongoing disability and incapacity.
PART F -
ISSUES AS TO THE PLAINTIFF'S PRE-INJURY EARNINGS
(A) THE 2002 EARNINGS: PAYG SUMMARIES - BLUES POINT CAFE
(i) Employment Records
A central issue in the assessment of the plaintiff's claim for past and future economic loss concerned his pre-injury earnings. In the course of the first proceedings and on the retrial, considerable attention was directed to his earnings in his employment in the 2002 financial year with employers, Blue's Point Café and Bar Cupola and in the period immediately prior to the accident with Kahve Pty Ltd trading as QVB Jet Café. The nature of the issue requires detailed analysis of the evidence.
The period of his employment with Jet Café was itself in dispute. The plaintiff maintained that he commenced employment with Jet Café (operated by Ms Antoinette Mowad) in December 2002 whereas the defendant asserted that he had been employed only days before the motor vehicle accident occurring on 21 January 2003.
The issue of the plaintiff's pre-injury earnings requires an examination of relevant taxation records, including PAYG payment summaries, the plaintiff's income tax returns and a document allegedly signed on 16 December 2002 in respect of terms and conditions of the plaintiff's employment at Jet Café (the "Employment Agreement") as to which see [184] to [263] below.
The 2002 financial year was the last complete tax year prior to the plaintiff's accident on 21 January 2003. He worked after the accident until 8 April 2003, although he said with difficulty and with a reduction in work duties. Significant claims by the plaintiff in the present proceedings concerned his claims for past and future economic loss. This brought into question the true level of his pre-injury earnings in the 2002 tax year. This brought into question specific documents which the defendant insurer alleged were false documents made well after the 2002 financial year, being:
(i) A PAYG Payment Summary from Blue's Point Café (operated by Mr Anthony Colosi trading as Blue's Point Café) for the 2002 financial year (utilising a 2005 ATO form): Blue AB 1, 97 - Exhibit 19 (which with Exhibit 18 is referred to in this judgment as "the revised PAYG Payment Summaries".
(ii) A PAYG Payment Summary from Bar Cupola for the 2002 financial year (utilising 2005 ATO form): Blue AB 1, 96 (Exhibit 18).
(iii) A letter of employment addressed to the plaintiff bearing date 15 December 2002 (Blue AB 1, 189 - Exhibit G), the "Employment Agreement".
As to the first of these documents - Exhibit 19 - the plaintiffs' gross income from Blue's Point Café for the 2002 year is recorded as $35,700: Blue AB 1, 97. However, the original PAYG payment summaries for the 2002 year issued by Blue's Point Café recorded the plaintiff's gross earnings at a much lower figure, namely at $7,800. It was apparently signed by a Mr Colosi and dated 2 October 2002. (Blue AB 1, 103)
There is therefore a significant difference between the total of the original PAYG Payment Summary and the Blue's Point Café revised PAYG Payment Summary and the original Payment Summary, namely an amount of $27,900. The defendant insurer strongly disputed the authenticity of Exhibit 19. Both PAYG summaries issued by Blue's Point Café for the 2002 financial year were purportedly signed by Mr T Colosi, respectively at Blue AB 1, 97 and 103, and both bore the handwritten date, 2 October 2002. Mr Colosi was not called to give evidence either in the first trial or in the retrial with which this judgment is concerned. The defendant contends, in the circumstances, having regard in particular to Exhibit 19 itself and related matters, that a Jones v Dunkel (1959) 101 CLR 298 inference should be drawn against the plaintiff in respect of the failure to call Mr Colosi.
In respect of the same financial year, an original PAYG Payment Summary was issued by Bar Cupola for the plaintiff's gross earnings in respect of that year, the amount of $6,899 dated 30 June 2002 (Blue AB 1, 102). There was a second PAYG Payment Summary issued by Bar Cupola for the same year, 2002, (dated 30 June 2002). However, it was of less significance than Exhibit 19 as it recorded the same amount of gross and net earnings ($6,899) as appeared in the original document. (It was written on a form identified as "Nat.46-01-2005").
I have earlier referred to the specific matters relied upon in the plaintiff's submissions.
The defendant's submission was that the plaintiff was involved in "in the forgery of the PAYG payment summaries (and in particular the PAYG payment summary in the higher amount from Blue's Point Café ..."): Outline of Defendant's Submissions at [65].
The defendant's contention that the plaintiff had deliberately overstated his pre-injury earnings relied upon:
(i) The statement of the plaintiff, Exhibit 9, forming part of his CARS application (lodged prior to 20 October 2006);
(ii) The alleged falsification of the plaintiff's earnings in the 2002 financial year (in particular, the revised Payment Summary for Blue's Point Café - Exhibit 19).
(iii) The so-called 'Employment Agreement' with Jet Café which was produced to the defendant's solicitor prior to the settlement conference. The defendant contended that the plaintiff had falsified and/or participated in its falsification: Outline of Defendant's Submissions at [67] 5.
The defendant submitted that the plaintiff's true earnings from the Blue's Point Café in the 2002 financial year was $7,800 gross in accordance with what was described as "... the genuine PAYG payment summary dated 2 October 2002 ... and in accordance with the Plaintiff's 2002 tax return [Blue 54: Outline of Defendant's Submissions at [67] 7.
The plaintiff gave evidence as to the circumstances in which he came to receive the revised Payment Summaries for the 2002 financial year (on 2005 ATO forms). That evidence is discussed in some detail below.
(ii) The Plaintiff's Evidence on the Payment Summaries
In evidence-in-chief the plaintiff's evidence was that information supplied to the defendant's solicitors as to his earnings at various stages was honestly given by him (T 65/10-16). He said that the "group certificates" (namely the Payment Summaries) were received by him at his home and either he or his wife would put them away in a drawer (T 67). He said that he did not compare what was shown on the Payment Summaries against the amounts that he had in fact received from Mr Colosi at Blue's Point Café (T 67/30-35). He said that it was his practice to provide them to his accountant when required.
He was asked for his explanation as to how the revised PAYG summaries for the 2002 year came into existence in 2005 (they being printed on the 2005 ATO version of the Payment Summary required to be issued by employees). He said that he had spoken to his accountants, ITP, Burwood, and asked the person he dealt with at ITP to make sure that all his "group certificates" were up-to-date and "... confirm (sic) with all my employer, if you need to. That was it, really." (T 68/40-45). He said he did not take any steps to contact Bar Cupola or Blue's Point Café in order to obtain the revised PAYG Payment Summaries.
When asked how the 2005 revised payment summary for Blue's Point Café came into existence the plaintiff gave evidence as follows:
"Q. What's your best recollection as to how it came about you got those?
A. Well I was going through all my - really, I was looking through my drawers, looking through documents and all that and I actually found - I found these group certificates through my files of the paper work that I have there at the time." (T 69/45-50)
He said that he first took steps to obtain documentation as to his true earnings at both Blue's Point Café and Bar Cupola in "around 2006; something like that" (T 70/15).
He was then asked:
"Q. Okay. I'm asking you about what were called the post 2005 PAYG summaries; what is showing $35,700 for the Blue's Café and the other is $6,899 for Bar Cupola, were those amounts accurate?
A. Yes, they were the right amounts.
Q. In relation to what was written on either the original group certificates or the later group certificates did you have any role or did you make any communications in relation to the employer about what should be in those group certificates?
A. No.
Q. I've probably asked you about this to a large extent, but just for clarity, did you make any contact with either the proprietors or anyone at Bar Cupola or Blue's Café in relation to getting replacement group certificates?
A. No.
Q. When you provided, what I'll call, the second set of group certificates for use in the case did you do so honestly?
A. Yes." (T 71/10-28)
There was a significant amount of additional evidence given by the plaintiff in cross-examination as to how the revised payment summaries received from Blue's Point Café and Bar Cupola came into existence and how they came into his possession. It is not necessary to detail all of that evidence. It was effectively summarised in the Plaintiff's Submissions at [62]. In summary the plaintiff's evidence was that towards the end of 2005 he was asked to make sure that his "group certificates" were all up-to-date and accordingly he went to his accountant to make sure that he had all the relevant copies and that everything was correct and up-to-date. He indicated in his evidence that he left it up to his accountant to pursue that task, that is, to make sure that the payment summaries were up to date and to confirm that with his employers if the accountants needed to. As observed in the plaintiff's written submissions, at the time he went to the accountants he had a claim for economic loss as part of his personal injuries claim and he needed documentation to support the claim: Plaintiff's Written Submissions [62](a). It was also noted in that paragraph that the plaintiff's evidence was that he understood or believed that his accountant must have contacted both Bar Cupola and Blue's Point Café (T 68.35-69.06).
When tested on the evidence as to the circumstances leading to the production of the revised Payment Summaries the plaintiff said he left it to the accountants to pursue his request - that he "... left it all up to them to make sure that everything was there and correct ...": Plaintiff's Written Submissions at [62](a). He was not able to provide a name as to the accountant to whom he made the request at ITP (he said there was a turnover of accounting staff at that firm.) He could not recall specifically when he made the request and he could not recall whether the person to whom the request was directed at ITP was a male or a female. In the written submissions it was stated that what was provided to the defendant's solicitors before the settlement conference in 2006 was:
"... whatever was given to him ... but he cannot remember how he got them, in that he cannot remember if he went and picked them up or ITP sent them to him but one way or another he got them": Plaintiff's Written Submissions at [62](d); T 166.37-166.45.
At some unknown time after the plaintiff said that he made the request to ITP for copies of relevant group certificates and for them to check that they were up-to-date, he said that he found the revised Payment Summaries (include, in particular, the controversial Exhibit 19) in a drawer at his home.
On behalf of the defendant, it was submitted that the plaintiff's evidence on the revised payment summary for the 2002 financial year (AB 96-97) was "... evasive, contrived, illogical and obviously false (T 145-149).
In cross-examination, he was asked whether he obtained the second set of payment summaries or group certificates from ITP and he said he could not remember (T 145/15-17). He said he did not create the documents (T 125/20). He rejected the proposition that he created them in collusion with some other person or persons (T 145/20-25). He also disputed that they were "fakes" (referring to the two Payment Summaries for the 2002 tax year).
The plaintiff said in cross-examination that he could not recall when he received the second set of (the "revised") payment summaries. He said that the revised payment summary purportedly signed by Mr Colosi could have come in the mail (T 146/45-50). He admitted that he may in fact have looked at the original payment summary from Blue's Point Café when he received it in October 2002 from Mr Colosi. He later suggested that it may have been received in the mail and his wife placed it in the drawer (T 147).
The plaintiff was asked in cross-examination:
"Q. Your employers only sent you one group certificate or PAYG payment summary each just after the end of the 2002 tax year, didn't they?
A. No, I received another one.
Q. In October 2002 in the case of the document on page 103 you received from your employer, Blues Point Café, the document, a copy of which is on that page, didn't you?
A. I received another one of these, sir.
Q. Not in October 2002, did you?
A. I don't know when I received it.
Q. Well it certainly wasn't in October 2002, was it?
A. Papers were put in the drawer. It could have been any time I received it. I don't remember.
Q. Are you going to answer my question? It wasn't in October 2002 that you received it, was it?
A. Mustn't have been.
Q. It couldn't have been, could it?
A. Well you've got one here and you've got one on the other side, sir.
Q. But only this one on page 103 could have been received in October 2002, couldn't it?
A. Like I said, sir, I received another one, at the time this is probably what I received.
Q. And when did you receive the other one?
A. I don't remember.
Q. What year?
A. I don't remember, sir.
Q. Before or after October 2006?
A. I don't remember.
Q. From whom did you receive it?
A. For Mr Colosi it looks like. That's what is says on the other one as well, sir.
Q. But when did - how did you receive it from Mr Colosi?
A. It could have come in the mail.
Q. It could have, but did it?
A. Yes, it must of.
Q. Why?
A. It must have been a miss - a mistake. Like this is very low income as stating on here, sir.
Q. Well did you notice that when you received this document on page 103--
A. Yes.
Q. --in October 2002?
A. Yes.
Q. You noticed: "Gee, that's a low income"?
A. Yes.
Q. What did you do about it?
A. Didn't think anything of it. I was--
Q. Why not?
A. I was working, lost track of time.
Q. You knew this was an important tax document?
A. Didn't cross my mind, sir.
Q. You say now that you looked at it and thought: "Gee, that's a very low income"?
A. Everything was filed in the cabinet. I looked at - I don't even half the time look at my paperwork, what I get--
Q. You looked--
A. --in the mail. My wife could have opened it up and put it in there herself.
Q. You told me just a moment ago that you looked at it.
A. Yeah I could have looked at it, but what I'm saying is I'm just going by what I'm seeing here.
Q. You told me you did look at it.
A. I could have looked at it at the time I took it to the Tax Department, sir--
Q. And you thought--
A. --to the tax accountant.
Q. And you thought:" "Gee, that's a low income"?
A. Yes.
Q. But you did nothing about it?
A. No. Didn't cross my mind.
Q. Even though you say when you say low it's about $28,000 less than you earnt from that employer, is that what you say?
A. Whatever's stating on here wasn't the right figure, in my head."
The plaintiff was further cross-examined on the revised payment summary (Exhibit 19):
"Q. Just look at the document on page 97?
A. Yes.
Q. When was that document created Mr Checchia?
A. I'm not sure, sir.
Q. What year?
A. I'm not sure.
Q. By whom?
A. You've got it here the name, Mr Anthony Colosi.
Q. That's what written there.
A. Correct.
Q. I asked you by whom it was created?
A. I don't know. By him.
Q. How do you know?
A. Well it must be. It's got his name on there.
Q. Anyone can write his name there. You could.
A. Doesn't look like my handwriting.
Q. You say that with a smile. Did you get someone else to write his name there?
A. No, sir.
Q. It would be rather foolish, actually, for you to write it there in your own handwriting, wouldn't it?
A. Or anyone else, sir.
Q. Why?
A. Because it's not a legit document if someone else does it for you, or I do it. It's not a real document, is it --
Q. It's --
A. -- It's a lie.
Q. It is a lie, isn't it?
A. No.
Q. Does that mean that the document on page 103 is a lie?
A. No.
...
Q. Can you explain the difference between 97 and 103?
A. Well it's a mistake in the actual figure that should have been written down.
Q. When he wrote $7,800 on page 103 at line N, that was a mistake, was it?
A. Sir, I --
Q. Wait a moment. That was a mistake was it?
A. I don't know, the way he did it, and when I received it, I just did the right thing and just went off and put it into the taxation - into the ITP, sir, when I found it. That was the right thing to do ..." (T 7 August 2012 at p 148)
The plaintiff was taken to the contested PAYG summary a copy of which is at Blue AB 1, 97. He said that the signature "T Colosi was not in his handwriting and he did not get anyone else to write it" (T 148:35-50). He was asked to explain the difference between the first, or the original, PAYG payment summary dated 2 October 2002 at AB 1, 103 and the revised payment summary (Exhibit 19) purportedly signed by Mr Colosi on 2 October 2002 at p 97. He did not explain the difference but said that "well it's a mistake in the actual figure that should have been written down" (T 149:20-25).
The plaintiff rejected the proposition that he had used the revised Payment Summary (Exhibit 19) in a deliberate attempt to mislead the defendant as to his 2002 earnings from Blue's Point Café (T 152:1-10).
The following propositions were then put to him:
(i) That the handwriting on the document, Exhibit 19, was different from the handwriting on the original payment summary issued by Mr Colosi on 30 June 2002. He agreed.
(ii) That the signature "T Coloi" appeared to omit an "s" which appeared to be included in the signature "T Colosi" on the original payment summary dated 2 October 2002: Blue AB 1, 103.
(iii) Whereas the original payment summary issued by Mr Colosi on 2 October 2002 was on a standard ATO form designated "NAT 46-2.2001" the revised payment summary (Exhibit 19) bore the designation "NAT 46-01.2005"
The matters referred to in the preceding paragraph were relied upon by the defendant as indicia of the fact, as it contended, that the revised payment summary (Exhibit 19) was a false document.
The plaintiff rejected the proposition that it was only when he realised that he had been "caught out" by reason of the notation "2005" on Exhibit 19 that he tried to amend his 2002 tax return in 2008: (T 7 August 2012, at 153 25-35). He was then asked:
"Q. May we have your explanation for not attempting to amend this tax return earlier?
A. No.
Q. May we have your explanation for not attempting to amend your 2000, 2001 or 2003 tax returns at any time up to now, even though you say all of them are wrong.
A. No." (T 7 August 2012 at p153, 30-44)
Mr Rewell put to the plaintiff that the designation "NAT 46-01.2005" is evidence of the fact that the revised payment summary (Exhibit 19) in the name of Blue's Point Café was issued either in 2005 or 2006. That fact became common ground in the course of the plaintiff's cross-examination. It was the defendant's contention, again put to the plaintiff, that the revised payment summary was a false document either created by the plaintiff or created by somebody colluding with him. It was further put to him that the document was specifically created for the purposes of inflating his pre-injury earnings in order to deceive the defendant insurer and so operate to his benefit in settlement negotiations. The plaintiff denied those propositions: (Blue AB 1, 153).
Mr Colosi was not called to give evidence in the plaintiff's case either in the first or second hearing. As earlier noted, the failure to do so was relied upon by the defendant for the purposes of drawing an adverse inference: Jones v Dunkel (1959) 101 CLR 298.
(B) THE EVIDENCE AS TO ACTUAL EARNINGS
As discussed below, the plaintiff in the cross-examination contended that both in his employment with Jet Café and in earlier employments he had received remuneration by way of cash earnings and that these were not reflected in the tax returns he lodged with the ATO. In answering questions relating to such non-disclosure he had the protection of a certificate under s 128 of the Evidence Act 1995.
(iii) The medical evidence plainly establishes that the plaintiff was effectively totally incapacitated for work up to 20 October 2006.
(iv) The medical assessment of the existence and extent of the plaintiff's disability is reflected, inter alia, in the substantial assessments made by the insurer's legal advisers prior to settlement, namely:
(i) Senior Counsel, 4 October 2006: Blue AB 2, 678-684.
(ii) Junior counsel, 20 September 2006: Blue AB 2, 652-670.
(iii) The defendant's solicitors, 16 October 2006: Blue AB 2, 686-689.
(v) Surgical intervention, in particular back surgery, is conventionally regarded as treatment of last, not first, resort and is only undertaken where there exists cogent and clear evidence of a pathological basis responsible for spinal symptoms warranting intervention. In the present case there is cogent medical evidence in support of the genuineness and seriousness of the plaintiff's injury and disability consequent upon the subject motor vehicle accident and the need for surgery.
(vi) With respect to the findings of exaggeration made by the trial judge to the extent that it was said to have been based upon the plaintiff's appearance in the witness box, I consider that the evaluation of the actual level of disability is primarily to be gauged by the medical and other evidence rather than by the presentation or appearance in the course of giving evidence.
(vii) The medical evidence supports the conclusion that as a consequence of his back injury the plaintiff has been and is likely to continue to be incapacitated for his pre-injury work as a waiter and for any form of work involving repeated lifting, bending and/or prolonged standing due to the effects of injury sustained in the 2003 accident.
(viii) That whilst the evidence overall establishes that the plaintiff has a residual earning capacity, given the medical evidence as to the level and extent of the disability, the plaintiff's age and his limited qualifications, his residual physical capacity for work is and has, since 8 April 2003, in my assessment, been very limited.
I have earlier referred to Mr Roberts' opinion in which he considered that it was certainly open to the plaintiff to argue that he had, to all intents and purposes, no residual earning capacity and that on any view such residual earning capacity as he had was extremely limited: at [104] of his Opinion, 14 June 2012. As earlier indicated, the medical evidence in my opinion supports that assessment.
The above conclusions, I consider, accord with the opinions expressed by Mr Roberts SC in his first report to the following effect:
"80 The above ... summary of the medical evidence would have led, in October 2006, to the following conclusions:
80.1 as a result of the injury the plaintiff suffered a severe aggravation of a pre-existing back disorder including a pre-existing calcifying lesion at L4/5. This precipitated further prolapsing of the disc at L4/5 and entrapment of the L5 nerve root.
80.2 As a result the plaintiff has undergone 3 attempts at surgical correction, none of which has led to a significant improvement in his condition although the 2005 fusion probably led to some improvement in his right sciatica.
80.3 The plaintiff remained subject to severe back pain aggravated by activity, buttock pain and occasional right leg pain with numbness. He also suffers depression resulting from the pain. His ability to enjoy sexual function is also adversely affected by the pain and associated depression.
80.4 In the period between April 2003 and March 2004 the plaintiff was able to perform some restricted duties on a limited basis. Since March 2004 he has, to all intents and purposes, been totally incapacitated for work.
80.5 The plaintiff remains unfit for his pre-injury employment and his employment opportunities are extremely limited. At best he may be able to obtain employment on a part-time basis in some sedentary position, for which he has little training.
80.6 The plaintiff has required, and will continue to require, significant amounts of domestic assistance. He also requires some assistance in childcare activities.
80.7 The plaintiff has an ongoing need for medical treatment, principally pharmacological but also involving some physical therapy and psychotherapy."
(F) PERSONAL FACTORS
The plaintiff was, as at the date of the accident, 31 years of age and as at the date of the Settlement Conference (20 October 2006) he was 35 years of age. As at the latter date he was a married man with a three-year old child and it appeared that his wife was expecting their second child when he was injured. He is presently 42 years of age with a normal residual working life to age 65 of 23 years.
The plaintiff left school in about 1990 having completed his Higher School Certificate and commenced work in the hospitality industry in 1995 and thereafter pursued such employment up to the date of the accident. On the evidence, he had a history of sustained or continued employment.
Mr Roberts in his Brief Summary of Opinion dated 14 June 2012, with respect, accurately summarised the position concerning the plaintiff's disability and incapacity in the following terms:
"3 I am of the opinion that, when consideration was given to a recommended settlement range as at 20 October 2006, the plaintiff would have been found to have suffered a severe aggravation of a pre-existing back disorder including a pre-existing calcifying lesion at L4/5. The motor vehicle accident precipitated further prolapsing of the disc at L4/5 and entrapment of the L5 nerve root. Notwithstanding 3 attempts at surgical correction, treatment had not led to a significant improvement in his condition. As at October 2006 the plaintiff remained subject to severe back pain and occasional right leg pain with numbness. He also suffered from depression, and an inability to enjoy normal sexual function.
4. As at October 2006 the plaintiff had had a protracted period of being totally incapacitated for work and remained unfit for his pre-injury employment. His residual employment opportunities were extremely limited.
5. He had undergone a great deal of medical treatment and required further treatment. He had received gratuitous domestic assistance and required such domestic assistance to continue in the future."
Although the plaintiff wilfully withheld information concerning the 1993 injury, other than its possible implication upon the plaintiff's credibility, (discussed below) his failure to disclose it, in my opinion, does not undermine or detract from the opinion and findings made by Dr Parkinson or Dr Steel as to the nature and cause of the spinal injury suffered and the fact of continuing impairment and incapacity since 2003.
(G) PRINCIPLES: ASSESSMENTS UNDER SECTION 118
The judgment of the Court of Appeal in Insurance Australia Limited t/as NRMA Insurance v Checchia [2011] NSWCA 101 establishes a number of principles relating to the construction of s 118 in respect of claims involving false and misleading conduct for the purpose of obtaining a financial benefit, several of which are set out in [16] above.
In summary, the following propositions were enunciated by Beazley JA
(i) Although an insurer may establish factual matters necessary to satisfy s 118(1), an entitlement to relief of liability under s 118(2)(a) (in respect of a payment, settlement, compromise or judgment) will not be known until it is know whether the financial benefit in fact obtained by the claimant was one to which he or she was not entitled: [38].
(ii) That requires a determination of the financial benefit to which the claimant was entitled on the premise that no misleading statement was made. The quantitative difference between the two, if any, is the extent to which the insurer is relieved from liability pursuant to s 118(2)(a): at [38].
(iii) It follows that there need not be a correspondence between any financial benefit the claimant was fraudulently seeking and the financial benefit, from the payment of which the insurer is relieved under s 118(2). In other words, s 118(1) specifies the circumstances in which the section is engaged. Section 118(2) specifies the consequences which may flow where the section is engaged: at [39].
(iv) It is not appropriate to assess a claimant's damages as if assessing a personal injuries claim under the MAC Act. (Referred to as the 'true value theory' at [43]).
(v) Section 118(2) is directed to the quantification of the amount of the liability which an insurer is relieved from paying where s 118(1) has been engaged.
(vi) A settlement involves compromise by both parties. There are a myriad of factors that may affect that compromise. One factor of significance is the costs involved in the proceedings or full hearing. Another may be the avoidance of delay. There may be factors personal to a particular party that are not quantifiable but which may influence the person to offer or to accept a particular amount, eg willingness to engage in stressful litigation. There may be other less worthy motivations in settling, including a desire that previously undisclosed income does not come to notice. It cannot be assumed that an amount agreed by way of settlement of compromise, and the amount obtained or likely to be obtained in a court judgment, would be the same: at [45].
(vii) When a settlement is involved, s 118(2) expressly provides that the insurer is relieved from the legal liability to pay under the settlement "to the extent of the financial benefits so obtained by the claimant". The court is required to determine, not what the person guilty of the false and misleading conduct would have obtained in a judgment, but the financial benefit that person obtained in the settlement, as a result of the false and misleading conduct: at [46].
(viii) The insurer has the onus of establishing the amount in respect of which it may be relieved of reliability: at [49].
PART J - ASSESSMENT OF FINANCIAL BENEFIT
In determining the issue of financial benefit on the evidence in this case, there is a question as to:
(i) whether or not the upper or lower end of the range, or some other intermediate figure as summarised in Mr Roberts' report, is appropriate in the circumstances of the case having regard to the evidence including as to the plaintiff's disabilities and incapacity and
(ii) whether or not that amount should be further discounted by reason of what the defendant termed the "motivational factors" affecting the plaintiff and if so by what margin ("motivational factors" is a reference to the matters referred to by Beazley JA at [45] as noted in the defendant's Supplementary Submissions at [27]-[30]).
Although, as was submitted by Mr Rewell on behalf of the defendant, the plaintiff may be taken as having had some concern over his non-disclosure of the 1993 injury and the issues concerning Exhibits 19 and "G" at the time of the settlement conference he must also have had an appreciation through, at least, his legal advisers, and his knowledge of the effects of the accident upon him, that the medical evidence strongly favoured the conclusion that he suffered significant injury in the motor vehicle accident in 2003 and that the disability, treatment and surgical interventions that thereafter occurred, were, on the evidence, attributable to it.
I accept that the plaintiff's "motivational factors" to settle his claim are to be evaluated and given weight in the assessment of the proper settlement value of the claim. That is to also be considered and assessed in light of the body of medical evidence in support of the claim. Even assessed on the basis of net weekly award earnings, the economic loss damages and other components of the claim were, as at the date of settlement, likely to sound in substantial damages.
The assessment of what was described as the "unworthy motivation" factor is not amenable to the application of a particular percentage discount as Mr Roberts made clear and he did not adopt or seek to apply such a discount approach.
Plainly each case depends very much upon its facts and the assessment is to be made in particular having regard to the relevant strength or weakness of the plaintiff's evidentiary case.
Whilst the defendant retained Mr Roberts to undertake an assessment and then a further assessment in his Opinions 14 June 2012 and 2 August 2012, there is a need for caution in adding a further discount to the earlier discount made in the initial assessment. That is particularly so in circumstances in which, as I have determined, the medical evidence is against the 1993 injury as being causative of the injury/disability flowing from the subject accident.
Additionally, it is noted that Mr Roberts, understandably, in undertaking his retainer, approached the settlement opinion assessment in the context of an assessment by a court or tribunal ("As assessor or a judge"): at [14], [23] and at [31].
In Mr Roberts' Supplementary Opinion on future loss of earning capacity, reference is made to the opinion of Dr Bowers as likely to gain acceptance by an assessor or judge. I, however, in undertaking the assessment under s 118, have had regard to the wider range of medical evidence as the preferred basis for making the assessment, for reasons I have earlier discussed.
Mr Roberts in his Supplementary Opinion proceeds upon the basis that a need for past and future care existed and will remain in the future. Having considered the latter Opinion, I remain of the view that the assessment set out in Mr Roberts' Opinion of 14 June 2012 at [124] is a more reliable and useful guide.
(A) COMPARABLE EARNING DATA
The plaintiff sought to rely upon reports of Mr Craig Martin, rehabilitation counsellor, to establish levels of remuneration of a barista working in Sydney: Report 29 June 2012. The defendant objected to the admission of the report and of the Supplementary Report of Mr Martin dated 6 August 2012 (MFI 3), and other materials. The report of 29 June 2012 and other materials were all admitted on the voir dire (Exhibits V-A, V-B, V-D and V-E) for the purpose of assessing the relevance of the evidence.
Mr Martin compiled remuneration details from advertised jobs on the internet. Based on that material he concluded:
(i) A barista working in Sydney was likely to earn $686.17 gross per week as at August 2003.
(ii) A barista working as a Floor Manager in Sydney was likely to earn $796.84 as at 2003.
A number of matters were raised in his cross-examination that revealed that Mr Martin's source data had limitations which need not here be detailed. See T 8 August 2012 at 293-242.
Mr Gross QC sought to rely upon the evidence to support the plaintiff on the issue of his pre-injury earnings "as to what the market rate would have been": T 217, 1-5.
Mr Rewell contended that it was not relevant to an issue in the proceedings: T 217.
I have concluded that the report dated 29 June 2012 should be admitted. However, I do not consider that the report has much in the way of probative value to the issues in the proceedings. It will be marked as Exhibit B.
In the first trial there was lengthy cross-examination of the plaintiff which included reference to the surveillance material. The cross-examiner, whilst accepting that the plaintiff had some spinal disability and impairment, put questions to him based on surveillance conducted, including his ability to walk distances, on occasions at quick pace and at other times moving slowly when near Dr Mathesons' rooms, and other aspects, although the effect of this was, of course, necessarily limited by the content of the surveillance material itself: Black AB 1, 230-232, 250-253, 259, 263, 265-266, 278-279, 280.
I proceed to determine the financial benefit to which the plaintiff was entitled on the approach and the premise stated by Beazley JA at [38] of her Honour's judgment in the appeal proceedings, and in particular having regard to the following.
(i) In assessing the financial benefit to which the plaintiff was entitled on a settlement basis as at 20 October 2006, the "Recommended Settlement Range" set out in Mr Roberts' Opinion 14 June 2012 at [124] should, in the circumstances and on the evidence and findings in this case, be adopted as a guide in determining the extent of any financial benefit in respect of which the defendant is entitled to relief.
(ii) The heads of damage as therein assessed by Mr Roberts, on the lower end of the range totalled $718,800 and at the upper end of the range, $956,000 (in round figures) to which was to be added past out-of-pocket expenses (agreed at $149,000) and tax deducted from weekly payments of compensation ($15,000).
(iii) The "Recommended Settlement Range" as assessed by Mr Roberts and referred to in (i) makes provision for the assessment of past and future economic loss on a lower basis than that contended for by the plaintiff at the settlement conference -the range of economic damages is based on net weekly earnings of $409 net per week adjusted for assessing future economic loss to $452 net per week: Mr Roberts' Opinion at [99]-[110].
(iv) The assessment of value of lost past and future superannuation payments is consequentially assessed on the lower range of weekly earnings referred to in (iii) above.
(v) A further discount to the "Recommended Settlement Range" should be made to allow for the possibility that the plaintiff would have been anxious to settle his claim than pursue it in court for reasons discussed in this judgment arising out of the provision of false and misleading information. As discussed above, although there is no recognised or conventional discounting percentage or approach to be applied to take account of "motivational factors" the assessment is essentially one of impression and evaluation rather than of mathematical calculation. I have, in assessing the settlement value of the plaintiff's claim, reduced the assessment of individual heads of claim as set out below by reason of such factors.
(vi) The cogency and strength of the medical evidence on the issues of causation, nature and level of impairment and incapacity would, in my assessment, place the plaintiff's claim towards the upper end of the "Recommended Settlement Range" set out in Mr Roberts' first Opinion at [124].
(vii) In determining the issue of "financial benefit" under s 118, I have considered each head of claim and determined what I consider to have been the appropriate value of each on a settlement basis as at 20 October 2006. The adjustments that have been made to the upper end of the range of Mr Roberts' "Recommended Settlement Range" have been made on the basis of (i) an assessment of the plaintiff's residual earning capacity (ii) the "motivational factors" and (iii) taking into account evidence, in particular that of Dr Mills, that was available to the defendant for the purposes of settlement negotiations, in which Dr Mills maintained that there was exaggeration of symptoms.
(viii) The adverse findings made in this judgment against the plaintiff (in particular as to the issue of pre-injury earnings), the plaintiff's unsatisfactory evidence in relation to the latter issue and as to earnings, cash payments allegedly received and as to his taxation returns and declarations.
(ix) The need for caution in assessing the plaintiff's credibility given that this is a case where there is a need for the trier of fact to separate the truthful parts of the party-witness' evidence from the rest in accordance with the observations contained in the authorities referred to in Part C of this judgment.
A review of the medical evidence strongly supports the conclusion that the plaintiff has had, and is likely to remain, for all intents and purposes, with a limited residual earning capacity.
(i) Non-Economic Loss
The maximum amount available for non-economic loss under the provisions of the Motor Accidents Compensation Act 1999 as at 20 October 2006 was $366,000.
In determining the appropriate award for non-economic loss there is to be taken into account the following matters:
(i) Plaintiff's age - as at the date of the accident.
(ii) The nature of the injury - involving prolapsing of the L4/5 disc.
(iii) The requirement for, and undergoing, surgery on 12 May 2003, 26 June 2006 and October 2005, hospitalisation and post-operative treatment.
(iv) The permanent impairment resulting from injury to the lumbar spine.
(v) The loss of occupation by reason of the injury previously and impairment pursued by the plaintiff and incapacity on the open labour market.
(vi) Prolonged treatment and rehabilitation undertaken.
(vii) General impact upon the plaintiff's ability to enjoy the amenities of life.
(viii) The pain and suffering and psychological consequences including sexual dysfunction consequent upon physical impairment.
I assess non-economic loss at $230,000.
(ii) Past Out-of-Pocket Expenses
These are agreed at $149,000
(iii) Future Out-of-Pocket Expenses
I assess future costs at $75,000.
(iv) Past Loss of Earnings
Past loss of earnings is assessed on the basis that the plaintiff's net earnings as at the date of the accident were $405 per week. I adopt the estimate increase in net earnings upon the basis specified by Mr Roberts at [100] of his first Opinion and the assessment at $70,253.
(v) Past Loss of Superannuation
This head of claim is assessed on the basis of a net past loss of income of $7,728.
(vi) Future Loss of Earning Capacity
Future weekly earnings are assessed by taking as a starting point, comparable earnings at $452 net per week.
On the finding earlier made as to the nature and extent of the plaintiff's impairment I consider that future economic loss should be based upon the existence of a quite limited residual earning capacity. Accordingly, on that basis, as at the date of settlement I consider that the proper basis for the claim for future economic loss should be calculated on the basis of a loss of $400 net per week. Accordingly, calculation on that basis is as follows:
$400 x 822 (multiplier) less 15% for contingencies equals $279,480 or as rounded up, $280,000.
I would further discount that amount to allow for the effect of "motivational factors" to $270,000 in relation to the assessment under s 118(2).
(vii) Future Loss of Superannuation
Based on a future loss of earning of $280,000, the value of future loss of superannuation for settlement purposes, I assess and round up at $30,000.
(viii) Past Gratuitous Care
I assess the past care upon the basis of Mr Roberts' calculation in his first Opinion at [108] to [114] and would estimate a fair amount at $30,000.
(ix) Future Care
The assessment of accident-caused need for future care was assessed by Dianne Croker, occupational therapist, on referral from the defendant's solicitors. Her assessment report is at Blue AB, vol 3, pp 1005-1026 with a supplementary letter dated 18 September 2006 (Blue AB 3, 1027).
Ms Judith Davidson, occupational therapist, provided a report dated 22 September 2005 on her assessment at the request of the plaintiff's solicitors (Blue AB 3, 1028-1043).
Both Ms Croker and Ms Davidson were agreed that their assessments of the care required for the plaintiff's past needs are likely to continue into the future (that is, excluding child care).
Accordingly, as at 20 October 2006, the assessment was based on a need of between 6 hours and 8 hours. On a gratuitous basis under s 128 of the MAC Act, the rate was $22 per hour.
If future care was assessed on the same basis for the balance of the plaintiff's life expectancy as at October 2006 (50 years multiplied by $976.20) then, as Mr Roberts observed, that would produce a range of $128,858 to $171,811. From that range, allowance as made by Mr Roberts for the prospect that the plaintiff would have required assistance in any event. He accordingly adjusted the above range to $115,000 to $155,000.
In his Supplementary Opinion, Mr Roberts concluded that the plaintiff at best would recover damages for no more than 6 hours assistance per week. He revised the range of future care from nil to $155,000.
The findings earlier made based on the medical evidence are, of course, relevant to this head of claim as well as other heads including past and future economic loss. Allowance must be made for the adverse findings made as to the plaintiff's credibility arising on the issues earlier discussed - the non-disclosure of prior injury ad the production of false documentation to support the economic loss heads of claim. Other evidence, including the surveillance evidence, is also to be considered, although as earlier indicated it is, in my assessment, of limited assistance.
The assessment of the plaintiff's need for future care must necessarily reflect the fact that the plaintiff had, and as at October 2006 been assessed with having a permanent impairment. The assessment of future care requirements in a comparatively young man such as the plaintiff over a long period, clearly does not lend itself to precise calculation. I have concluded that, in order to bring into account all of the above considerations, the calculation of the claim for future care should be based on a starting point of a requirement, established by the evidence, of future care on the basis of 6 hours per week.
On that basis, the future care claim is to be calculated as follows:
6 hours x $22 per hour x 976.2 (50 years).
The above results in a calculation of $128,858. That amount, in order to derive the proper settlement value of this head of claim as at 20 October 2006, on a settlement basis should be, in my assessment, adjusted downwards to an amount of $115,000. That adjustment represents what I consider to be inappropriate provision for the "financial benefit" obtained and to which s 118 relates.
On the above bases I am of the opinion that the proper settlement value of the plaintiff's claim as at 20 October 2006 should be assessed as follows:
Non-economic loss
$230,000
Past out-of-pocket expenses (agreed)
$149,000
Future out-of-pocket expenses
$75,000
Past loss of earnings
$70,253
Fox v Wood component (agreed)
$15,000
Past loss of superannuation
$7,728
Future loss of earnings
$270,000
Future loss of superannuation
$30,000
Past gratuitous care
$30,000
Future care
$115,000
Costs
$40,000
Total
$1,031,981
On the basis of the above assessment, the amount of $1,031,981 (inclusive of costs of $40,000) if deducted from the settlement figure of $1,225,000 (inclusive of costs), the resulting calculation of the "financial benefit" to which the plaintiff was not entitled in terms of s 118(2) is the amount of $193,019.
I note that the assessment includes an amount in respect of costs of $40,000. That amount may be agreed between the parties as a proper amount having regard to paragraph [36] of the defendant's Supplementary Submissions. I will, however, defer formally entering judgment in order to permit the parties the opportunity of considering that and any other issue as to matters of calculation, interest, costs or ancillary matters.
Subject thereto, I direct the parties to bring in Short Minutes of Order to give effect to this judgment.
I grant leave to the parties to apply, by my Associate, for the proceedings to be re-listed on a convenient date.
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Decision last updated: 31 May 2013
Key Legal Topics
Areas of Law
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Insurance Law
Legal Concepts
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Breach of Contract
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Unconscionable Conduct
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Compensatory Damages
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