Mulcahy v NRMA Insurance Limited

[2018] NSWCA 189

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Mulcahy v NRMA Insurance Limited & Ors [2018] NSWCA 189
Hearing dates:	28 July 2018
Decision date:	30 August 2018
Before:	Beazley P at [1]; Meagher JA at [2]; White JA at [3]
Decision:	(1)   Appeal allowed. (2)   Set aside the orders of Adamson J of 3 November 2017. (3)   In lieu thereof order that the summons filed by the first respondent on 19 July 2017 be dismissed. (4)   Order that the first respondent pay the appellant’s costs of the proceedings below and of the appeal.
Catchwords:	Administrative Law – Judicial review – Motor Accidents Compensation Act 1999 (NSW) – Error of law on the face of the record – Whether claims assessor had sufficiently disclosed reasoning in an award of future economic loss – Where reasoning included adoption of accountant’s report – Whether report incorporated into reasons of claims assessor – Statutory requirement for reasons to be brief - Appeal allowed
Legislation Cited:	Accident Compensation Act 1985 (Vic) Motor Accidents Compensation Act 1999 (NSW), Ch 5, Div 2, Pt 4, ss 94, 95, 126 Supreme Court Act 1970 (NSW), s 69
Cases Cited:	Allianz Australia Insurance Limited v Habib [2015] NSWSC 1719 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (2015) 235 FCR 305; [2015] FCAFC 123 Craig v South Australia (1995) 184 CLR 163 Hockey v Yelland (1984) 157 CLR 124 Minister for Immigration & Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 NRMA Insurance Limited v Mulcahy [2017] NSWSC 1499 Overseers of the Poor of Walsall v London and North Western Railway Co (1878) 4 AC 30 Pham v NRMA Insurance Ltd [2014] NSWCA 22 Reg. v Medical Appeal Tribunal; ex parte Gilmour [1957] 1 QB 574 Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 Zahed v IAG Limited t/as NRMA Insurance [2016] NSWCA 55
Category:	Principal judgment
Parties:	Keiran Mulcahy (Appellant) NRMA Insurance Limited (1st Respondent) Gary Victor Patterson (in his capacity as Claims Assessor of the State Insurance Regulatory Authority of New South Wales) (2nd Respondent) State Insurance Regulatory Authority of New South Wales (3rd Respondent)
Representation:	Counsel: P Deakin QC with M Maxwell M Robinson SC with J Gumbert   Solicitors: Law Partners Personal Injury Lawyers (Appellant) Curwoods Lawyers (1st Respondent) Crown Solicitors (2nd and 3rd Respondents)
File Number(s):	2017/350849
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2017] NSWSC 1499 Date of Decision: 3 November 2017 Before: Adamson J File Number(s): 2017/219421

headnote

[This headnote is not to be read as part of the judgment]

The appellant, Mr Mulcahy brought a claim against the first respondent, NRMA Insurance Ltd (“the Insurer”) for damages suffered as a result of a motor vehicle accident for which the Insurer admitted liability. The assessment of damages was referred to the third respondent, the State Insurance Regulatory Authority under Chapter 5 of the Motor Accidents Compensation Act 1999 (NSW) where it was allocated to the second respondent, Mr Gary Patterson (“the claims assessor”). Both the appellant and the first respondent presented reports from qualified accountants.

The claims assessor assessed damages of $1,504,870.37 which included sums for past and future economic loss. In relation to past economic loss, the claims assessor adopted a scenario provided by an accountant retained by the appellant and made adjustments after accepting criticisms made by the first respondent’s accountant. In relation to future economic loss, the claims assessor adopted a scenario provided by the appellant’s accountant as the baseline for calculation. The appellant accepted the assessment.

The insurer sought judicial review contending that there had been jurisdictional error, error of law on the face of the record, and legal unreasonableness. They sought orders, inter alia, in the nature of certiorari and other consequential relief.

Adamson J held that there was no error of law on the face of the record in respect of past economic loss, the claims assessor’s reasons having been sufficient to expose the path of reasoning. However, her Honour held that there was error of law on the face of the record in respect of the award for future economic loss. It was held that the claims assessor had not incorporated the accountant’s report by reference, and there was no reasoning as opposed to calculations based on assumptions.

Mr Mulcahy appealed against the orders of Adamson J on the basis that the claims assessor’s reasons in respect of future economic loss were sufficient.

The Court (per White JA, Beazley P and Meagher JA agreeing) allowed the appeal:

The claims assessor had adopted the schedule in the accountant’s report into the reasons for the award of future economic loss. Accordingly, there was no error of law on the face of the record. The reasoning was consistent with the statutory obligations to state reasons briefly. The report provided a path of reasoning which explained the assumptions on which it was based: [16]-[17], [36]-[38]

Reg v Medical Appeal Tribunal; ex parte Gilmore [1957] 1 QB 574; Hockey v Yelland (1984) 157 CLR 124; Craig v South Australia (1995) 184 CLR 163 applied.

Judgment

1. BEAZLEY P: I have had the advantage of reading in draft the reasons of White JA.  I agree with his Honour’s reasons and proposed orders.

2. MEAGHER JA: I agree with White JA.

3. WHITE JA: This is an appeal from orders of the Common Law Division (Adamson J) that:

“1. ... the certificate of assessment dated 15 May 2017 purportedly issued by the second defendant pursuant to s 94(4) of the Motor Accidents Compensation Act 1999 (NSW) in respect of the first defendant’s claim be set aside.

2. Remit the assessment of the first defendant’s claim under Ch 4 of the Motor Accidents Compensation Act 1999 (NSW) to the third defendant for allocation to a claims assessor for determination according to law.

3.   Order the first defendant to pay the plaintiff’s costs of the proceedings.”

(NRMA Insurance Limited v Mulcahy [2017] NSWSC 1499.)

4. The proceedings arose from a motor vehicle accident on 1 July 2012 in which the appellant (Mr Mulcahy) was seriously injured in a head-on collision with another vehicle that was travelling at high speed on the wrong side of the road. The first respondent (NRMA Insurance Limited) (“the insurer”) admitted liability for the claim.

5. At the time of the accident Mr Mulcahy was aged 59. He conducted his own business through a private company as a self-employed property consultant in building, construction and development in both the public and private sectors. The assessor recorded that at the time of the assessment he continued to conduct that business, but was restricted by his physical and psychological impairments. He was 63 at the date of assessment.

6. An award of damages was regulated by Ch 5 of the Motor Accidents Compensation Act 1999 (NSW) (“the Act”). Mr Mulcahy’s claim was referred to the State Insurance Regulatory Authority for assessment pursuant to Div 2 of Pt 4.4 of the Act. The claim was referred to the second respondent, Mr Gary Patterson, for assessment pursuant to s 94 of the Act. Relevantly s 94 provides:

“94   Assessment of claims

(1)     The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of:

...

(b)     the amount of damages for that liability (being the amount of damages that a court would be likely to award).

(2)     Such an assessment is to be made having regard to such information as is conveniently available to the claims assessor, even if one or more of the parties to the assessment does not co-operate or ceases to co-operate.

(3)     The assessment is to specify an amount of damages.

(4)     The claims assessor must, as soon as practicable, after an assessment issue the insurer and claimant with a certificate as to the assessment.

(5)     The claims assessor is to attach a brief statement to the certificate, setting out the assessor’s reasons for the assessment.

(6)     If the Principal Claims Assessor is satisfied that a certificate as to an assessment or a statement attached to the certificate contains an obvious error, the Principal Claims Assessor may issue, or approve of the claims assessor issuing, a replacement certificate or statement to correct the error.”

7. On 15 May 2017 the assessor issued a certificate purportedly in accordance with s 94(4) of the Act that relevantly stated as follows:

“The findings of this assessment are as follows:

1.    The amount of damages assessed in respect of this claim is $1,504,870.37.

2.    The Claimant’s economic loss is reduced by, and the Insurer is to have credit for the sum of $9,619.19 in accordance with s 130 of the Motor Accidents Compensation Act 1999.

3.    The amount of the Claimant’s costs, taking into account the amount of damages assessed in respect of this claim, assessed in accordance with the Motor Accidents Compensation Regulation 2015 is $124,035.70 inclusive of GST,

4.    Details of the assessment and reasons for this decision are attached to this certificate.”

8. Mr Mulcahy accepted the assessment in settlement of his claim. If the assessment is valid it is binding on the insurer (s 95(2)).

9. On 19 July 2017 the insurer filed a summons seeking an order in the nature of certiorari, or alternatively a declaration, setting aside or declaring invalid the decision of the claims assessor. It sought an order in the nature of prohibition or alternatively an injunction preventing Mr Mulcahy or the State Insurance Regulatory Authority from acting on or taking any further steps in reliance upon the assessment. It also sought other consequential relief. The application was made pursuant to s 69 of the Supreme Court Act 1970 (NSW). The relief sought was by way of judicial review. The insurer contended that the assessor’s decision was invalid because the assessor committed jurisdictional error, error of law on the face of the record, and legal unreasonableness.

10. The primary judge upheld the second ground, that is, error of law on the face of the record. Her Honour found it unnecessary to address the question as to whether jurisdictional error had been established or whether the assessment was legally unreasonable in the sense considered in Minister for Immigration & Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18.

11. The insurer has not filed a notice of contention. It submits that the primary judge was correct to find error of law on the face of the record.

12. The error the primary judge found was that the assessor had not sufficiently disclosed his reasoning that led to future economic loss that was a component of his assessment of a likely damages award ([51]ff). For the reasons which follow, the correctness of that conclusion depends upon whether material in a report by Furzer Crestani Forensic, Chartered Accountants, which the assessor said he adopted as a base line for his calculation of future economic loss is to be taken as having been incorporated into the assessor’s reasons so that they form part of the record. If the answer to that question is yes, then for the reasons which follow, the assessor’s reasoning process was sufficiently elucidated. If no, the primary judge’s conclusion was correct.

13. As appears below, I consider that the material which the assessor said he adopted can and should be treated as part of his reasons for his decision consistently with the assessor’s duty to set out his reasons in a brief statement to be attached to the certificate (s 94(5)) and clause 18.4 of the Motor Accident Guidelines with which the assessor was required to comply (s 106(1)). Clause 18.4.3 of the Guidelines required the assessor to attach a statement of reasons that set out:

“as briefly as the circumstances of the assessment permit:

... the reasoning processes that led the Assessor to the conclusions made.”

14. It was common ground that the 11 pages of reasons of the assessor that were attached to his certificate were included in the “record” for the purpose of the Court’s determining whether there was error of law on the face of the record that would justify the making of an order in the nature of certiorari (Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58 at 181-183; Pham v NRMA Insurance Ltd [2014] NSWCA 22 per Leeming JA at [27]). In Pham Leeming JA said that once reasons were attached to the certificate the certificate became analogous to a “speaking order” to which Earl Cairns LC referred in Overseers of the Poor of Walsall v London and North Western Railway Co (1878) 4 AC 30 at 40. Lord Cairns there referred to a mode of procedure by which a question of law which appeared to the Court of Quarter Sessions to be doubtful might be left open for the exercise of the judgment of the Court of Queen’s Bench on an application for prerogative relief in the following way:

“All that was necessary was that the Court of Quarter Sessions, in making its order, should not make it an unspeaking or unintelligible order, but should, in some way state upon the face of the order, the elements which had led to the decision of the Court of Quarter Sessions. If the Court of Quarter Sessions stated upon the face of the order, by way of recital, that the facts were so and so, and the grounds of its decision were such as were so stated, then the order became upon the face of it, a speaking order; and if that which was stated upon the face of the order, in the opinion of any party, was not such as to warrant the order, then that party might go to the Court of Queen's Bench and point to the order as one which told its own story, and ask the Court of Queen's Bench to remove it by certiorari , and when so removed to pass judgment upon it, whether it should or should not be quashed.” (Emphasis added.)

Reasons of the costs assessor

15. After describing the circumstances of the accident, the medical consequences of the accident, matters of assessment of damages on which the parties were agreed, and making an assessment of damages for non-economic loss and for future treatment expenses, the assessor dealt with the assessment of damages for past and future economic loss. Before the primary judge the insurer contended that the assessor’s reasons did not expose the path of reasoning for the award of either past or future economic loss. The primary judge rejected the submission in so far as it related to the award for past economic loss. Her Honour then found that there was an unexplained discrepancy between the net weekly figure for past earnings up to 15 May 2017 ($1,893.72) and a higher net weekly figure applied to future earnings ($2,496.08). It is appropriate therefore to set out the assessor’s reasons in respect of both past and future economic loss. The assessor said as follows:

“DETERMINATION OF ISSUE 4 / PAST ECONOMIC LOSS

20. Mr Mulcahy relies on the report of Furzer Crestani Forensic Chartered Accountants (dated 29 August 2016) for the purpose of his claim for past economic loss. For the period from the date of the motor accident until 31 August 2016 (217 weeks) the authors of the report provide two calculations of Mr Mulcahy's past economic loss. Those estimates are predicated on two different calculations of his Annual Net Business Income and, having already taken tax liability into account, have been expressed in net terms. It is submitted for Mr Mulcahy that both of those calculations are equally valid. Mr Mulcahy therefore claims the average of the two namely $463,318.00. Additionally, he claims ongoing loss from 1 September 2016 to the date of assessment at the rate of $2,135.10 per week x 34 weeks = $72,593.40. On that basis, Mr Mulcahy claims $535,911.40 for past economic loss plus superannuation at 11% of the net loss ($58,950.25).

21. The Insurer relies upon a report dated 9 December 2016 by Cutcher and Neale Forensic Accounting. Mr Wholohan summarises the relevant matters in that report as follows:

(a) There were fluctuations in the Claimant's income both post and pre-accident which are related to fluctuations reasonably expected to occur in a business of the type conducted by the Claimant.

(b) It is difficult to reach a concluded opinion as to whether or not revenue was less than it would otherwise have been but for the accident. If it is accepted that there was a loss of revenue caused by the accident, that loss should be restricted to the period from the date of the accident until February 2013, given the significant new work accepted by the Claimant in March 2013.

(c) in view of the matters raised in the report and criticisms of the Furzer Crestani methodology, the Cutcher and Neale report does not calculate the amount of any loss.

The Insurer submits that, in the circumstances, it is not appropriate to assess past economic loss on the basis of weekly or annual losses, but rather on the basis of a lump sum. It suggests that $100,000.00 is appropriate. Additionally, it allows $11,000.00 for superannuation, calculated at 11% of the net loss, notwithstanding that it would not agree that rate.

22. The Insurer's qualified forensic account, Nick Gaudion, is unable to reach a concluded opinion as to whether Mr Mulcahy's business revenue, in the period July 2012 to February 2013, was less than it would otherwise have been, but for the motor accident. In the event that it is accepted that there is a loss of revenue attributable to the alleged injuries sustained by Mr Mulcahy in the motor accident, Mr Gaudion thinks that any such loss should be restricted to the period July 2012 to February 2013. His reasons for those opinions are set out in section 3 of his report under the following headings:

• Assertion that the Claimant was unable to work for 5 to 6 weeks after the motor accident.

• Analysis of the invoices based on when the work was performed.

• Analysis of the reasons for the increase in revenue in March 2013.

I accept Mr Mulcahy's assertion that he was unable to work for 5 to 6 weeks after the motor accident. I am not persuaded by Mr Gaudion that an analysis of the invoices based on when the work performed is of any real relevance to the question of whether or not there has been past economic loss, The conclusion reached in paragraph 3.19 of Mr Gaudion's report is a non-sequitur because it ignores entirely the possibility, as asserted by Mr Mulcahy, that he would have generated more new work from March 2013, than he actually did, as a direct result of the motor accident. I accept Mr Mulcahy's assertion.

23. In section 4 of his report, Mr Gaudion critiques the loss set out in the Furzer Crestani report, under the following headings:

(a) Assumption regarding the weekly hours worked prior to the motor accident.

(b) Incorrect adjustments to invoiced revenue to determine when worked performed.

(c) Reasons for the improved results in the Year Ended 30 June 2014.

(d) Increasing the hourly rate Mr Mulcahy is asserted to have charged but for the accident without property establishing the basis for the increase.

(e) Incorporation of expenses recorded in the Financial Statements after the date of the motor accident.

I have considered the material in section 4 of Mr Gaudion's report in detail. It seems to me that the matters set out under the headings (a), (b) and (c) above are not such as to impact in any significant way upon the Furzer Crestani findings. However, I think that there is some substance in the matters set out in (d) and (e) above, as they impact directly upon the calculation of Annual Net Business Income ("ANBI"), which is the foundation of the Furzer Crestani modelling. For those reasons, I do not accept that scenario 2 proposed by Furzer Crestani is valid. I propose to disregard it. I will make some adjustment to the Furzer Crestani calculations, based upon scenario 1, taking into account Mr Gaudion's criticisms.

I should also say that it is not clear to me, from the Furzer Crestani calculations, how the estimated ("ANBI") from 1.7.2015 (in Schedules K and L) is derived. In the absence of Mr Mulcahy's Income Tax Returns, I cannot be satisfied that the deduction of market rent for the Strathfield premises ($11,400 in each of the years 2013-2015) was an actual expense rather than a book entry. The only references I can find are Attachments C-1 and C-2 to the Furzer Crestani report in which it is nilled-off.

I allow past economic loss as follows:

Date:	$
• 1 July 2010 to 31 August 2016	410,938.00
• 1 September 2016 to date $1,893.72 x 36 weeks	68,173.92
TOTAL	479,111.92

I round that down to $440,000.00 and I also allow $48,400.00 for past superannuation foregone. I note the disclaimer contained in paragraph 3.3 of the Furzer Crestani report as to financial documents that were not available for their consideration. That material apparently was not available to Furzer Crestani when preparing their supplementary report as it is not referred to in that report. It is unfortunate that up-to-date financial data was not provided. It may have enabled a more accurate assessment of past economic loss. Nothing contained in the Supplementary Report causes me to alter the findings that I have made.

DETERMINATION OF ISSUE 5 / FUTURE ECONOMIC LOSS

24. Mr Mulcahy relies on the Furzer Crestani forensic accountants report dated 29 August 2016 for the formulation of his future of his economic loss claim. As with past economic loss, the authors of that report provide two estimates of the Claimant's future economic loss, namely $749,208.00 and $898,536.00, as set out in Schedules M & N to that report. Those two scenarios are calculated from 1 September 2016. Those two scenarios are based upon the same, or similar, assumptions as informed the calculation of past economic loss. Mr Maxwell submitted that I should disregard the Insurer's forensic accountant's report and allow the average of the two scenarios proposed by Furzer Crestani. On that basis, Mr Mulcahy claims the average of these two scenarios less 15% for vicissitudes plus superannuation.

25. The Insurer submits that future economic loss should be allowed as a buffer. It doesn't challenge Mr Mulcahy's intention to work until age 70 years but says that there would have been a tapering off in his work activities as he grew older. It says that likelihood should be factored into the calculation of future economic loss. It seems to me that Is only one factor to which I must have regard in performing the exercise prescribed by section 136 [sic, 126] of the Act.

Having considered all of the evidence, I am satisfied that, absent the motor accident, his most likely future course is that he would have continued working in his business until aged 70 years, with a gradual winding back of his business and professional activities, as he grows older, and his financial need to work reduced, as his grandchildren increased.

26. It is trite law that an award for future economic loss can be made only if I am persuaded that Mr Mulcahy has a reduction in his earning capacity, as a result of the motor accident, which is likely to be productive of financial loss. I am so satisfied because of the degree, extent and nature of his permanent impairments, which flow from the motor accident. In quantifying that loss, I am mindful of what has been said in the Court of Appeal about the desirability of Claims Assessors adopting an arithmetic approach, instead of a buffer, in the calculation of future economic loss. See Allianz v Cervantes (2012) NSWCA 224, Allianz v Sprod (2012) NSWCA 281 and Allianz v Shamoun (2013) NSWCA 579. In the present case, Mr Maxwell submits that I should adopt an arithmetic approach, whereas Ms Allan contends for a buffer.

27. Having considered the contending forensic accountant's reports, I think that I should adopt the Furzer Crestani scenario 1 as my base line for calculation. I note that Furzer Crestani have used an incorrect multiplier (258.1) which should be 271.4 (5% for 6 years). I adjust the figure for future economic loss in the same manner as I adjusted the claim for past-economic loss. The calculation is as follows:

$2,496.08 x 271.4 x 91.84% (adjustment to Furzer Crestani) x 85% (for vicissitudes) = $528,833.73.

As that award is based upon a mathematical calculation, rather than a buffer, I allow an additional $69,806.05 for future superannuation, calculated at 13.2% of the net loss.” (Underlining added.)

16. If one has regard only to the passage set out above without consideration of the material which it adopts, the primary judge is correct in saying that it is not possible to identify how the figure for lost future income of $2,496.08 per week was arrived at.

17. However, the assessor said that he adopted the “Furzer Crestani scenario 1 as my baseline for calculation”. Scenario 1 was set out in Schedules K and M to the Furzer Crestani report. Schedule K in turn referred to Schedule J (relevantly Schedule J-1). The body of the report identified assumptions on which the calculations in scenario 1 were based (paras 5.1, 5.3.2 and 5.4.2). (A copy of Schedules J-1, K and M is appended to these reasons.) Other schedules provided a breakdown of the reported financial results of the business of Keiran Mulcahy and Associates Pty Ltd from which the figures in Schedules J-1, K and M were derived. When regard is had to schedules K and M of the Furzer Crestani report which are headed “Past loss of income – scenario 1” and “Future loss of income – scenario 1” respectively, then the derivation of the figure of $2,496.08 and the reason for the difference from the figure of $1,893.72 used for calculating past economic loss is clear. (There is some confusion due to an evident typographical error in the box in para 23 of the reasons. The reference to 1 July 2010 should be to 1 July 2012 as is apparent from Schedule K.)

18. Schedule K calculated past loss of income (on scenario 1) for the period from 1 July 2012 to 31 August 2016. The loss of income was calculated to be a total of $410,938 as found by the assessor. There were 217.57 weeks in that period (as appears on Schedule K). The figure of $1,893.72 is $410,938 divided by 217. By necessary inference there has been a rounding of the denominator to reach the weekly figure (the numerator is $410,938) to be applied in the calculation of past economic loss from the date of Schedule K to the date of the assessment. There is no challenge to the finding that there were sufficient reasons for the determination of past economic loss.

19. The basis for the calculation of future economic loss appears from the second column of Schedule M. The estimated weekly loss of income of $2,496.08 was the difference between the estimated weekly income after tax of $2,979.74 and estimated actual weekly earnings of $483.66. The latter reflected Mr Mulcahy’s residual earning capacity. The explanation for that table is also found in Schedule K as supplemented by Schedule J-1 and explained at paras 5.1 (scenario 1), 5.3.2 and 5.4.2 of the report.

20. As appears from Schedule K, Furzer Crestani estimated that but for the injury Mr Mulcahy would have earned an annual net business income of $243,453 from 1 July 2015 based on a new average hourly rate of charge of $205 per hour. That same figure was used to estimate the income he would have earned from 1 July 2017 to 7 August 2023 (when he would have turned 70). This yields the future net weekly income after tax of $2,979.74. Furzer Crestani then assessed his residual earning capacity at $483.66 per week based upon anticipated actual annual income of $27,006 before tax. That is the figure determined for actual income for the period from 1 July 2014 to 30 June 2015 as appears at Schedule K and as further explained in Schedule J. Schedule J-1 shows how the figure of $27,006 was made up. Paragraph 5.4.2(b)(2) of the report states that Furzer Crestani were instructed to assume that Mr Mulcahy had a residual earning capacity based on the actual Annual Net Business Income (“ANBI”) in the year ended 30 June 2015 being $27,006 per Schedule J. They reported on the basis of that assumption. The assessor adopted it and adopted the calculations in scenario 1.

21. In his reasons for determining the past economic loss component of an award of damages, the assessor rejected the view of the forensic accountant called by the insurer that it was not possible to reach a concluded view as to whether Mr Mulcahy’s business revenue after the accident was less than what it would have been but for the accident. The assessor also rejected the submission from Mr Mulcahy that two calculations of Mr Mulcahy’s ANBI were equally valid and should be averaged. He accepted two criticisms of the Furzer Crestani report summarised at para 23(d) and (e) of his reasons. As noted above, Furzer Crestani’s estimate of the ANBI that Mr Mulcahy would have derived from 1 July 2015 was based upon their accepting Mr Mulcahy’s assertion that the hourly rate he would have charged would have increased but for the injury. One might think that this was not an unreasonable assumption, but the assessor concluded that there was not an established basis for the increase. The assessor made “some adjustment to the Furzer Crestani calculations, based upon scenario 1, taking into account Mr Gaudion’s criticisms.” (Para 23) That is reflected in the assessor’s rounding down his allowance for past economic loss from $479,111.92 to $440,000 (Para 23). $440,000 is 91.84 per cent of $479,111.92. The assessor made the same adjustment in his calculation of future economic loss (Para 27), evidently to adjust for the criticisms of the Furzer Crestani report that he had accepted.

22. The assessor’s reasons do not suggest that Mr Gordian (the forensic accountant on whose report the insurer relied) criticised the assumption adopted by Furzer Crestani that Mr Mulcahy’s residual earning capacity should be based on his net business income in the year ended 30 June 2015, being $27,006.

Reasons of the Primary Judge

23. The primary judge referred to the reasons of the High Court in Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 that considered the obligation of a medical panel to give reasons as required by the Accident Compensation Act 1985 (Vic). Her Honour quoted [55] of the Court’s reasons as follows:

“[55] The standard required of a written statement of reasons given by a Medical Panel under s 68(2) of the Act can therefore be stated as follows. The statement of reasons must explain the actual path of reasoning by which the Medical Panel in fact arrived at the opinion the Medical Panel in fact formed on the medical question referred to it. The statement of reasons must explain that actual path of reasoning in sufficient detail to enable a court to see whether the opinion does or does not involve any error of law. If a statement of reasons meeting that standard discloses an error of law in the way the Medical Panel formed its opinion, the legal effect of the opinion can be removed by an order in the nature of certiorari for that error of law on the face of the record of the opinion. If a statement of reasons fails to meet that standard, that failure is itself an error of law on the face of the record of the opinion, on the basis of which an order in the nature of certiorari can be made removing the legal effect of the opinion.”

24. Her Honour noted that this principle was applicable to the reasons required to be given by a claims assessor by s 94(5) of the Act (Zahed v IAG Limited t/as NRMA Insurance [2016] NSWCA 55 at [34]).

25. It was common ground on appeal that this passage enunciated the standard below which the assessor’s reasons would involve an error of law. The primary judge did not find, and it was not contended on appeal that her Honour ought to have found, that the reasons disclosed an error of law in the way the assessor formed his opinion. Rather, it was found that the assessor’s reasons did not explain the actual path of reasoning in sufficient detail to enable a court to see whether the opinion did or did not involve an error of law (Judgment [51]-[54], [58]).

26. The primary judge rejected the insurer’s challenge as to the adequacy of reasons for the assessment of past economic loss. Her Honour said:

“41   ... I accept that it is apparent from the Assessor’s reasons that the discount from $479,111.92 to $440,000 was to take into account the criticisms of Mr Gaudion in (d) and (e). The mathematical calculation of the figure of $1,893.72 was also sufficiently clear to expose its provenance and the reasons for its adoption.

42 The reasons were, expressly and by necessary implication, sufficient to expose the Assessor's path of reasoning for the award of past economic loss according to the standard expected of claims assessors. Although some degree of deduction (by necessary inference) was required, I consider that the reasons given for the calculation of past economic loss were sufficient to comply with the obligation in s 94(5) and cl 18,4.3 of the Guidelines and that neither error of law on the face of the record nor jurisdictional error has been established.”

27. The primary judge recorded the submission of Mr Robinson SC for the insurer that although the assessor accepted criticisms made by Mr Gaudion of the Furzer Crestani report, he nonetheless adopted the figure from Schedule K of that report of $410,938 for past economic loss without, so it was submitted, explanation of his reasons for doing so (Judgment [36]). In accepting that the assessor’s path of reasoning for the award of past economic loss was sufficient, the primary judge must have had regard to the terms of Schedule K that identified how the figure of $410,938 for past economic loss to 31 August 2016 was derived.

28. However, in considering the challenge to the award of future economic loss, the primary judge eschewed reference to the schedules. The primary judge at [51] rejected the insurer’s submission that the provenance of the ratio of 91.84 per cent applied in para 27 of the assessor’s reasons was unexplained. That conclusion was clearly right and the ratio of 91.84 per cent can be explained as a necessary inference from the assessor’s other reasons (see [21] above).

29. The primary judge took a different view in relation to the figure of $2,496.08 as the assessed net weekly future economic loss. Her Honour said:

“52 ... Although there is no provision equivalent to s 126 of the Act which requires assumptions as to the past hypothetical (what the claimant would have earned but for the accident) to be specified, the principle of coherence requires such assumptions to be made and, where there is a requirement for reasons to be given, that they be set out with sufficient clarity to expose the path of reasoning.

53   Thus, although it need not be the case that, if a mathematical approach is taken (by multiplying a weekly amount of net earnings by a multiplier), as opposed to the award of a buffer, the weekly amount up to the date of assessment will correspond with the weekly amount from the date of assessment, it will commonly transpire that they are. In the present case, the net weekly economic loss to 15 May 2017 was $1,893.72, whereas the net weekly economic loss from that date was $2,496.08, a difference in the order of $600 net. Had the Assessor given the explanation that Mr Deakin gave (which I have endeavoured to summarise above) this might, depending on how it was done, have exposed the actual path of reasoning sufficiently to comply with the statutory requirement for reasons. However, the Assessor did not give that, or any such explanation. Although resort can be had to the evidence beyond the record for the purposes of establishing jurisdictional error, reasons which are insufficient cannot be made sufficient by attempting to divine the Assessor’s reasoning process from working out how the result in the reasons could have been arrived at from the evidence.

54   The apparent disparity of $600 between the figure for the past and the figure for the future is aggravated by the finding in [25] on which Mr Robinson relied, that the claimant would have worked less in the remaining years of his working life until he reached the age of 70. It is difficult to reconcile the finding with the disparity. The reasons do not indicate either the basis for the disparity or how the finding as to the claimant’s likely future work patterns is to be reconciled with it. The discount of 15% for vicissitudes is standard, and therefore could not, without reasons to explain it, give rise to any necessary implication that it reflected the claimant’s assumed diminishing work between his age at assessment and his retirement at the age of 70. Mr Deakin’s suggestion that the assessor accepted the expert’s figure, which was higher for the future because it was predicated on minimal residual earning capacity, notwithstanding the likely diminution in the claimant’s working hours, is one possibility. However, the assessor was obliged to explain his reasons for making the assessment of future economic loss and was not entitled to leave the parties to guess what his reasoning process was.

...

58   ... In the present case, the Assessor’s reasons did not reveal the answer to the following question: What was the reasoning process which led the Assessor to calculate past economic loss on the basis of $1,893.72 per week and future earning capacity on the basis of $2,496.08 per week in circumstances where the Assessor found that the claimant would probably be gradually winding back his business and professional activities, as he grew older, and his financial need to work reduced, as the number of his grandchildren increased? The Assessor failed to disclose his reasoning process on the critical integer of $2,496.08 at all. It was not enough for the claimant merely to say in this Court that it was the figure put forward by the claimant’s expert in the first report: see also Allianz Australia Insurance Ltd v Habib [2015] NSWSC 1719 at [38]-[39] (Beech-Jones J). I do not accept that, by saying that he was adopting the baseline approach in the first report as the basis for the award of future economic loss, the Assessor ought be taken to have adopted the expert’s ‘path of reasoning’ or that this was sufficient to discharge the Assessor’s obligation to give reasons for his assessment. The first report revealed how the amount was calculated on the assumptions on which it was based. However, its authors did not engage in a reasoning process such as was required of the Assessor. I reject Mr Deakin’s submission that the Assessor incorporated the first report by referring to it in his reasons or that, if he did so, it revealed any path of reasoning, as opposed to calculations based on assumptions.”

30. The primary judge’s principal reason for finding error of law by reason of inadequate reasons was that the assessor did not give any explanation as to the derivation of the figure of $2,496.08 for future net weekly economic loss. Mr Mulcahy’s written submissions before the primary judge were that the figure of $2,496.08 was the figure calculated by Furzer Crestani in Schedule M and that the path of reasoning was clearly set out in the report. He submitted that the assessor made it clear that he was adopting that path of reasoning. It appears from her Honour’s reasons at [53] that her Honour was of the view that the evidence as to the content of scenario 1 which the assessor said he adopted was not part of the record. Her Honour must have taken the view that the part of Furzer Crestani’s report that embodied and explained scenario 1 was not incorporated by reference into the record. If it were so incorporated then for the reasons given, the parties were not left to guess as to the reasons for the assessment of future economic loss.

31. It is common ground that the 11 pages of reasons of the assessor are part of the record. The question is whether the assessor’s stated reason that “I think that I should adopt the Furzer Crestani scenario 1 as my baseline for calculation” means that the Furzer Crestani scenario 1 is incorporated by reference into the reasons and thereby into the record. It does not appear that the primary judge was assisted by reference to authority on this question. Nor was this Court.

30. Reg. v Medical Appeal Tribunal; ex parte Gilmore [1957] 1 QB 574 concerned an application for an order of certiorari to remove and quash a decision of a medical appeal tribunal. Denning LJ said (at 582) that “just as a pleading is taken to incorporate every document referred to in it, so also does an adjudication”. It was only on reading the entirety of a specialist’s report that was referred to in the record of the tribunal that the error of law was disclosed.

31. In Hockey v Yelland (1984) 157 CLR 124 Gibbs CJ with whom Mason, Brennan and Dawson JJ agreed, said (at 131) that a precise reference to a specific document is required to bring about its incorporation into the adjudication that forms the record.

32. In Craig v South Australia the High Court outlined the circumstances in which it can be inferred that the reasons of an inferior court or tribunal have been incorporated as part of the record for the purposes of certiorari. The High Court said (at 182) that a merely introductory or incidental reference to the reasons for decision does not produce the consequence that a whole or part of the reasons become part of the formal order and the record. It is only those parts of the reasons or transcript of proceedings as is referred to in the formal order “in a way which brings about its incorporation as an integral part of that order and ‘the record’” that becomes part of the record.

33. In Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (2015) 235 FCR 305; [2015] FCAFC 123 the Full Court of the Federal Court (Dowsett, Tracey and Katzmann JJ) summarised the effect of the authorities as being that:

“[94]    The limitation of the availability of review to cases in which error appears on the face of the record is, at least in part, designed to limit the frequency of such reviews. Identification of the content of the record should not be guided by the desire to find error. Rather, the focus should be upon identification of the issues raised for determination and the outcome of the process. As we have observed, Craig establishes that the starting point is that the record comprises ‘no more than’:

•    the documentation which initiates the proceedings and thereby grounds the tribunal’s jurisdiction;

•    the pleadings (if any); and

•    the adjudication.

The reasons and transcript will only be incorporated by reference into the formal order (and therefore the record) to the extent that the reference brings about its incorporation as an integral part of the order (and record).”

36. In the present case the assessor’s reasons are part of the record pursuant to s 94(5) that requires a brief statement of reasons to be attached to the assessor’s certificate. (It is unnecessary to decide whether the reasons are also part of the record pursuant to s 69(4) of the Supreme Court Act 1970.) It is unnecessary to decide whether the same limitations as expounded in Craig v South Australia to the incorporation of reasons into the record apply to the incorporation of materials specifically referred to in the reasons. In his oral submissions Mr Robinson SC referred to Craig v South Australia in a sense that, as I apprehended his submission, suggested that the same principles should apply. Even if that is so, the express adoption by the assessor of scenario 1 which provided the basis (subject to later identified adjustments) of his calculation of both past and future economic loss means that the incorporation of the calculations in and explanation of scenario 1 in the Furzer Crestani report was an integral part of the reasons that is taken to be incorporated in the record. Obviously, it was also specifically referred to so as to satisfy the condition stated by Gibbs CJ in Hockey v Yelland referred to at [33] above.

37. The conclusion that the “Furzer Crestani Scenario 1” adopted by the assessor is part of the record is consistent with s 94(5), that requires the assessor’s reasons to be stated briefly. If, instead of adopting that part of the Furzer Crestani report, the assessor had paraphrased its contents or quoted it, he would not have been acting in accordance with s 94(5). The approach taken was consistent with his obligations of explanation and concision (Zahed at [4] per Leeming JA).

38. Because the path of reasoning is clearly articulated in the Schedules J-1, K and M that make up scenario 1 and the explanation of that scenario, including the explanation of the assumption as to the basis upon which residual earning capacity was assessed, it follows that the assessor’s reasons were not erroneous in failing to expose the path of reasoning. The reasons of the primary judge in [52] and [53] of her Honour’s judgment quoted at [29] above are, with respect, erroneous.

39. The primary judge’s reasoning in [54] that it is difficult to reconcile the assessor’s figure for loss of future earnings with his conclusion that Mr Mulcahy would have worked less in the remaining years of his working life until he reached the age of 70, does not disclose an error of law. If it is an error, it is an error of fact.

40. It is by no means clear that there is even an error of fact. The calculation of past economic loss adopted an average of three years of earnings from 1 July 2012 to 30 June 2015 as reflective of Mr Mulcahy’s residual earning capacity. In so far as his actual earnings (through his company as a self-employed businessman) reflected business attracted before his injury, the assumptions adopted under scenario 1 for past loss of income may not have been favourable to him. The assumption upon which scenario 1 was based for the calculation of future loss of earnings was that Mr Mulcahy’s residual earning capacity should be assessed on the basis of income in the year to 30 June 2015. The reasonableness of that assumption was a question of fact. In any event, it is not obviously unreasonable. Furzer Crestani’s report in Schedule K shows no income having been derived in the 14 months to 31 August 2016. Once the schedules to Furzer Crestani’s reports are taken into account as having been incorporated into the assessor’s reasons, there was no failure to explain the reasoning process.

41. As noted above (at [22]) no error of law on the face of the record is demonstrated in relation to the adoption of that assumption when, on the face of the record, there was no challenge by the insurer to the assumption that required an explanation.

42. Accordingly, I do not agree with the primary judge’s further conclusion at [58] that the Furzer Crestani report did not reveal a path of reasoning as opposed to the making of calculations based on assumptions. The calculations based on assumptions revealed a path of reasoning. It was sufficient to determine whether or not there was an error of law in the reasoning.

43. Finally, the primary judge referred to the observations of Beech-Jones J in Allianz Australia Insurance Limited v Habib [2015] NSWSC 1719 at [38]-[39] for the proposition that it was not enough for the claimant merely to say that the figure adopted by the assessor was a figure put forward by his expert in Furzer Crestani’s report. Beech-Jones J was there addressing a complaint that the assessor had not complied with the requirements of s 126 of the Act. In the present case, the insurer abandoned before the primary judge its contention that the assessor failed to set out his assumptions as to Mr Mulcahy’s likely future earnings but for the motor vehicle accident (Judgment at [15]).

44. For these reasons the appeal should be allowed. I propose the following orders:

1. Appeal allowed.

2. Set aside the orders of Adamson J of 3 November 2017.

3. In lieu thereof order that the summons filed by the first respondent on 19 July 2017 be dismissed.

4. Order that the first respondent pay the appellant’s costs of the proceedings below and of the appeal.

Decision last updated: 30 August 2018