Mulcahy v NRMA Insurance Limited & Ors

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.

MEAGHER JA: I agree with White JA.

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

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.

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.

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:

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

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

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.

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.

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.

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.

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:

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:

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:

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.

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.)

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.

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.

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.

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.

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.

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:

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]).

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]).

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

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.

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).

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:

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.

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.

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.

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.

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.

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:

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.

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).

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.

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.

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.

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.

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.

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]).

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