Allianz Australia Insurance Ltd v Sprod  NSWCA 281
Jurisdiction: New South Wales Court of Appeal1
- Where an assessor undertakes a calculation based on precise figures, this may not be considered a "buffer", and the assessor must exercise their duty under s 126 of the Motor Accidents Compensation Act 1999 to articulate, to a reasonably obvious degree, the assumptions on which the calculation is based.
- The assessor must provide sufficient insight into his or her reasoning process.
The claimant sustained injuries to his neck, back and left shoulder in a motor accident on 20 June 2008. He had suffered an earlier injury to his left shoulder at work in November 2007. Liability was admitted and the matter proceeded to General Assessment at CARS.
The claimant asserted that he was unable to work his usual overtime since the accident and that he was fearful of losing his job in the future. Nevertheless, his earnings continued to increase after the subject accident. The insurer submitted that the claimant's inability to work overtime was as a result of his left shoulder injury sustained in the earlier accident and that there was no ongoing economic loss as a result of the subject accident.
The claims assessor determined that the left shoulder injury had resolved by the time of the subject accident. He allowed past economic loss at $10,000 in respect of lost overtime and future economic loss at $250 net per week for 18 years for the possibility that the claimant may lose his job in the future.
The insurer applied to the Supreme Court for administrative review on the basis that the claims assessor failed to discharge his duty under s 126, namely, to be satisfied with the assumptions forming the basis of the award and for those assumptions to be sufficiently stated.
Hoeben J rejected this argument and held that the award was in the form of a buffer, even though it was calculated as a percentage of weekly earnings rather than a lump sum, and was therefore not constrained by s 126.
Court of Appeal Judgment
In the Court of Appeal, Barrett JA set out the requirements of s 126. The first stage is for an assessor to be satisfied that the assumptions in relation to matters going to future earning capacity "accord with the claimant's most likely future circumstances but for the injury." This is supplemented by the second stage, to articulate the assumptions on which the award is based.
Barrett JA observed that all awards for future economic loss involve assumptions and "speculation as to future earning capacity". However, in this case, the award was not a nominated lump sum. Rather, it was a calculation based on an unusually high and inexplicable "jump" in earnings in the most recent financial year despite the injury. Additionally, no explicit explanation was given as to why a residual working life of 18.3 years was given or the reasons for an allowance of 15% vicissitudes. Once the assessor had embarked on this process of calculation the award moved away from a buffer towards an evaluation requiring an explanation of the assumptions relied on in making that calculation. In the absence of a sufficient explanation, the assessor breached the duties imposed by s 126 and an error of law on the face of the record was established.
While not seeking to define aspects that may or may not properly be made the subject of assumptions about future earning capacity, Barrett JA stressed "nothing I have said is intended to suggest that assessors must prepare elaborate statements of reasons and explanations of assumptions."
His Honour provided the guidance, "a brief statement of what might seem to be reasonably obvious will suffice."
The appeal was allowed and the original assessment was quashed. The matter was remitted to CARS to be determined by another assessor and the respondent was forbidden from relying on the previous assessment.
At first instance, Hoeben J warned against "an increasing number of applications for prerogative relief in respect of decisions of assessors under the MAC Act" and described them as "thinly veiled attempts at a merits appeal where no such appeal is provided under the Act".
However, in light of the successful appeal in this case, insurers should not be discouraged from seeking administrative review in appropriate cases. When the content of the assumptions and the reasons for their adoption are not reasonably obvious, an insurer may have grounds for administrative review.
The case also confirms that s 126 requires a reasonable degree of transparency and consistency in the deployment of the expertise and experience of assessors.
Generally, in a true buffer case, the obligations imposed by s 126 upon the assessor may be discharged by much more generalised statements.
1 Campbell and Barrett JJA, Sackville AJA
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