Aaron Mordue v QBE Insurance

Supreme Court of NSW|2014-12-02|Before: Adams J

Judgment Introduction

The plaintiff made a claim against the first defendant under the Motor Accidents Compensation Act 1999 (NSW) in respect of injuries allegedly suffered by him in an accident during a motorcar rally in the Coopernook State Forest on 1 December 2012. He was a front seat passenger in the vehicle driven by his son, Tobie. On part of the rally course, Tobie lost control of the vehicle which landed in a gravel drain, causing injury to the plaintiff. An unregistered vehicle permit under the Road Transport (Vehicle Registration) Act 1997 (NSW) had been issued in respect of the vehicle, to which was attached a third party insurance policy issued by QBE. The plaintiff made a claim for compensation under the Act on 27 December 2012, to which QBE at first admitted liability and then denied indemnity to the driver and, hence, liability to the plaintiff. In due course, the Principal Claims Assessor (the Assessor) of the Claims Assessment and Resolution Service (the Service) of the Motor Accidents Authority, on the basis that QBE had denied indemnity, concluded that the claim must be exempted from determination by the Service. At the same time, the Assessor indicated that, were exemption not obligatory, she would likely have exercised her discretion to exempt the claim. A consequence of this decision is that, to recover damages, the plaintiff must sue in the District Court instead of having his claim determined by the Service.
The plaintiff seeks an order in the nature of certiorari or, alternatively, a declaration setting aside or declaring invalid the decision of the assessor and ancillary relief. The crucial question is whether QBE's denial of indemnity to the insured driver requires (or permits) exemption under the Guidelines from assessment by the Service despite its earlier admission of liability to the plaintiff engaging that process.

The Act 10 Third-party policies (1) A third-party policy under this Act is a policy that is in the following terms: Third-party Policy The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle: … (b) if the motor vehicle is subject to an unregistered vehicle permit under the Road Transport Act 2013 - in the use or operation of the vehicle on any road in any part of the Commonwealth. … 72 Time for and notice of making of claims (cf s 43 MAA) (1) A claim must be made within 6 months after the relevant date for the claim. The relevant date is the date of the motor accident to which the claim relates unless the claim is made in respect of the death of a person, in which case the relevant date is the date of the person's death. (2) A claim is made by giving notice of the claim as follows: (a) in the case of a claim against a person whose insurer is a third-party insurer, to the person's insurer, … 81 Duty of insurer with respect to admission or denial of liability (1) It is the duty of an insurer to give written notice to the claimant as expeditiously as possible whether the insurer admits or denies liability for the claim, but in any event within 3 months after the claimant gave notice of the claim under section 72. (2) If the insurer admits liability for only part of the claim, the notice is to include details sufficient to ascertain the extent to which liability is admitted. (3) If the insurer fails to comply with this section, the insurer is taken to have given notice to the claimant wholly denying liability for the claim. (4) Nothing in this section prevents an insurer from admitting liability after having given notice denying liability or after having failed to comply with this section. (5) It is a condition of an insurer's licence under Part 7.1 that the insurer must comply with this section. 82 Duty of insurer to make offer of settlement (1) It is the duty of an insurer to make a reasonable offer of settlement to the claimant (unless the insurer wholly denies liability for the claim): (a) within 1 month after the injury is sufficiently recovered to enable the claim to be quantified, or (b) within 2 months after the claimant has provided to the insurer all relevant particulars about the claim as required by section 85A, whichever is the later. … 92 Claims exempt from assessment (1) A claim is exempt from assessment under this Part if: (a) the claim is of a kind that is exempt under MAA Claims Assessment Guidelines or the regulations, or (b) a claims assessor has made a preliminary assessment of the claim and has determined (with the approval of the Principal Claims Assessor) that it is not suitable for assessment under this Part. (2) If a claim is exempt from assessment under this Part, the Principal Claims Assessor must, as soon as practicable, issue the insurer and claimant with a certificate to that effect (enabling court proceedings to be commenced in respect of the claim concerned). 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: (a) the issue of liability for the claim (unless the insurer has accepted liability), and (b) the amount of damages for that liability (being the amount of damages that a court would be likely to award). …

Claims Assessment Guidelines 8.11 For the purpose of section 92(1)(a) [of the Act] the PCA shall issue a certificate of exemption when, as at the date of the consideration of the application, and after a preliminary assessment of the claim, the PCA is satisfied that the claim involves one or more of the following circumstances [emphasis added]: 8.11.1 liability is expressly denied by the insurer, in writing, but only in circumstances where liability is denied because the fault of the owner or driver of a motor vehicle in a use or operation of the vehicle is denied; (Note: Only denials of liability where fault is denied will satisfy this requirement. Denials of liability for any other reasons, but where the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is not denied, will not satisfy this requirement.) 8.11.5 the insurer has notified the claimant, and the owner or driver of the motor vehicle against which the claim has been made of the third-party policy provided for in section 10 of the Act, in writing, that it declines to indemnify that owner or driver; …

Course of Communications

On 14 February 2013 QBE sent to the plaintiff a letter headed "Section 81 Notice", of which the relevant portion reads - On the basis of our enquiries to date, QBE is prepared to accept that the accident occurred as a result of the fault of our insured driver. Therefore liability is admitted in accordance with section 81(1) of the Motor Accidents Compensation Act 1999. QBE reserves the right to withdraw this admission should further relevant information come into our possession.
On 5 June 2013, a QBE solicitor forwarded what was called an "Amended s 81 Notice" to the plaintiff's solicitor which relevantly read - We have fully reviewed the circumstances of this accident. It is clear that your injury arose during the course of an organised motor sports event and therefore QBE, as CTP insurer, has available to it the defence of voluntary assumption of risk as provided by s 140 of the Motor Accidents Compensation Act 1999. QBE relies on this defence to fully meet any liability it might otherwise have in relation to your claim and liability is therefore denied to the extent of 100%.
On 3 March 2014 QBE's solicitor wrote a letter to Tobie, with a copy to the plaintiff's solicitors, which relevantly reads - Please note that by operation of s 10 (1)(b) of the Motor Accidents Compensation Act, QBE's third party policy only operates whilst this vehicle is being used or operated on a road, within the meaning of that term set out in the Road Transport Act 2013. A road is defined to mean "an area that is opened to or used by the public" and we note that this accident occurred during the course of a rally authorised by the Australia Auto Sport Alliance and that the road on which the accident occurred was closed to the public at the time of the accident. For that reason, we must advise you that QBE's third party policy does not respond to this claim. Accordingly, indemnity is denied for this claim.

Submissions

Mr Robinson SC for the plaintiff submitted that the Notice of 14 February 2013 was an admission of liability within the meaning of s 81(1) which, despite the purported reservation, could not be validly withdrawn, at least after 27 March 2013 (the date upon which the three month period specified in s 81(1) expired). Neither the Amended Notice of 5 June 2013 nor the denial of indemnity of 3 March 2014 were or could be effective. (It follows that whether it was open to QBE to withdraw its admission of liability and substitute a denial before the three month period for response had expired does not fall for decision.) The admission was unqualified, although QBE intimated its attitude might change. Mr Robinson submitted that an admission of liability necessarily implied an acceptance that the policy responded to the claim and the insured was indemnified in respect of the claimant's claim, relying in particular on Smally v Motor Accidents Authority of New South Wales [2013] NSWCA 318. This conclusion is reinforced by QBE's payments of medical expenses pursuant to s 83(1), which obligation depended on liability having been accepted (or determined). These payments, primarily the obligation of the insured, can only have been paid on the basis that QBE accepted its obligation to indemnify him under the policy. Having admitted liability, QBE could not by an indirect route effectually notify the plaintiff that it declined to indemnify the driver and thus was not liable to compensate the claimant for his injuries. It followed that Guideline 8.11.5 was immaterial. Even if the denial of indemnity fell literally within the Guideline, in the circumstances s 81(1) governed the matter and the Guideline, being subordinate legislation, gave way. Accordingly, the Assessor erred in finding that the claim was exempt from a determination by the claims assessment and resolution service. The indication that, exemption not being mandatory, the Assessor would likely have exercised her discretion under s 92(1)(b) to exempt the claim, this was the mere intimation of a potential decision and should be disregarded.
Mr Robinson contended further that the interpretation of the Act and the Guidelines for which QBE contends unnecessarily complicates what is plainly the legislative purpose of simplifying the process of dealing with compensation for those injured in car accidents, which places considerable emphasis on early determination of potentially contentious issues. Insurers are required to decide their attitude to claims at an early stage. It is clear that QBE was always aware of the fact that the accident occurred in a rally situation and thus almost certainly where the road in question was closed or at least was, from the beginning, on notice of that possibility. The policy of the Act would be frustrated if insurers could change their stance long after an initial acceptance of liability.
For QBE, Mr Rewell SC conceded that, although the admission of liability made by QBE to the plaintiff (as here) implied, so far as he was concerned, that the policy responded to the claim, that did not affect its position in respect of the insured driver. Mr Rewell contended that this distinction is implicit in cl 8.11.5, which is not subject to any pre-conditions and, in particular, does not assume that the insurer has not previously made an admission of liability under s 81. It is fair to point out, in this respect, that the Notice stated that QBE accepted "that the accident occurred as a result of the fault of our insured driver" and it was for this reason that "liability is admitted". It could not, therefore, deny liability (because there was no obligation to indemnify) within cl 8.11.1, which refers only to a denial of liability resulting from an absence of fault in the insured. Clause 8.11.5 specifically deals with the situation here and, not imposing any time limit, permitted QBE to take the course it did, requiring the certificate of exemption to be issued. This was not to say that the admission to the claimant was of no effect: it operated as an evidential admission of which he was entitled to take advantage, for what it was worth, and might give rise to some estoppel argument. But this did not affect the question whether a certificate of exemption should be given under cl 8.11.
Mr Rewell conceded that, liability having been admitted, QBE is liable to pay the expenses provided for under s 83 and (as I understood him) the mere denial of indemnity does not affect this obligation, from which QBE is not entitled to resile. However, it would be entitled to dispute the indemnity issue in court proceedings and, if it succeeded, would not be obliged to pay damages to the claimant, although it would remain obliged, by virtue of s 83(1), to continue to pay the medical and other expenses stipulated by that provision.
Mr Rewell also submitted that in motor accident cases, it is rare that circumstances might allow a third party insurer to deny indemnity. Here, it is only the fact that the vehicle was the subject of an Unregistered Vehicle Permit and not ordinary road registration that raises the issue of indemnity. It being the plain policy of the Act that a third party insurer should be not be obliged to indemnify an insured in that situation, where the accident occurs otherwise than on a road, and necessarily impacts on the cost of insurance (which is compulsory) the scheme when read as a whole favours the position for which QBE contends.

Discussion

Where liability is admitted, claims take two successive processes, the first involving immediate payment of medical and related expenses under s 83 and the second the assessment - by the Service or by the court - of damages. Commencing payment of the claimant's expenses is obviously to avoid any hardship which an injured person may suffer through the inability to afford appropriate care and because, in many cases, early intervention will reduce the deleterious effects of injury. Damages require the assessment of sometimes contentious matters such as the extent of injury and, unsurprisingly, require further consideration.
Here QBE has paid and continues to pay the s 83 expenses. Division 4 of Part 4.4 of the Act deals with the assessment of claims. Unsurprisingly, the first substantive provision, s 92, deals with exemption from the process of assessment by the Service and the carving off of those cases that must go to court. There are two alternative mechanisms for exemption: under para 91(1)(a) by way of application of the Guidelines or the regulations; or, under para 91(1)(b) where the assessor on a preliminary assessment determines the claim is not suitable for assessment by the Service. It should be noted at this point that s 92(1) incorporates by reference the considerations stipulated in the Guidelines into the Act. It is therefore not correct to approach the Guidelines as subordinate. Rather, they must be read together with the other material provisions of the Act in accordance with the conventional canons of statutory construction. When, on either basis, the claim is exempt, the exemption certificate must be issued. A claim for exemption in a case like the present may be made at any time: s 91(2)(c); cl 8.5.
The crucial question in this case is whether, once admitting liability to a claimant under s 81(1), an insurer can later deny indemnity to the insured who caused the injury and, in that indirect way, later deny liability to the claimant. It is significant, as I think, that s 81(4) permits an insurer which has given notice denying liability or otherwise failed to comply with the giving of a Notice (ie, a deemed denial) to subsequently admit liability but there is no obverse provision permitting an insurer to deny liability once it has been admitted. As Basten JA observed in The Nominal Defendant v Gabriel [2007] NSWCA 52 (2007); 71 NSWLR 150 at [39] the procedures, closely regulated by the statute, give rise to the readily available inference "that an admission of liability pursuant to s 81 (1) cannot be 'withdrawn' except as provided by s 118" - in this case irrelevant. It is conceded by QBE that the Act provides no mode of varying, let alone completely reversing, the admission of liability made under s 81(1) and that the purported amended s 81 notice was ineffectual. This concession is correctly made. But can QBE now deny liability on the ground that, as the policy does not respond to the claim, it is not bound to indemnify the insured and, by that circuitous route, deny liability to the claimant? The answer to this question depends on the effect of the initial admission of liability.
In Smalley the claimant, who had been involved in a motor vehicle accident in 2005, made a claim for damages in personal injuries in 2010 against the compulsory third party insurer of the vehicle's driver. The claims assessor allowed a late claim and the claimant applied for an exemption from assessment under s 92 of the Act to permit commencement of court proceedings. The Assessor refused to issue an exemption certificate. The insurer wrote to the claimant, purportedly under s 81 of the Act, expressly denying liability for the claim but admitting that the insured driver was at fault. The claimant made two further applications for exemption but, since the denial of liability had not rested on the ground that insured driver was at fault (under the equivalent of cl 8.11.1), these were also refused. The Court of Appeal held that, where an insurer has admitted an element of the claim, such as fault or injury, but has denied it was obliged to pay any money to the claimant, it had not admitted liability either for the claim as a whole under s 81(2) or in part under s 81(4) of the Act. It followed, therefore, that the insurer was taken, under s 81 (3), to have given notice wholly denying liability for the claim, thus providing a basis under what is now cl 14.11 for deciding under s 92 (1)(b) of the Act that the claim was unsuitable for assessment.
Leeming JA (with whom Meagher and Barrett JJA agreed) pointed out it is necessary to start with the terms of the policy as determined by the Act - [24] Plainly enough, it is intended that the (statutory) language of the policy accords with the provisions of the Act which impose rights and obligations upon claimant and insurer. The definition of "injury" was made much simpler by the Motor Accidents Compensation Amendment Act 2006, but the elaborate definition continues to apply to the facts of this case: see Schedule 5, Part 5, item 19. Those details do not presently matter; it is sufficient to observe that not every injury will answer the terms of the statutory policy. The terms that are critical for the purposes of this appeal are "fault" and "liability". Both those terms recur in the Act and the Guidelines as well as in the statutory policy. "Fault" is defined in s 3 to mean "negligence or any other tort". Liability is not defined. … [60] In short, it follows that the elements of the CTP insurer's liability to indemnify include: (a) death or injury (noting that "injury" is an elaborately defined term, and that the amendments to that definition effected by the Motor Accidents Compensation Amendment Act 2006 do not apply to Mr Smalley's claim: see item 19 of Schedule 5 to the Act); (b) "fault": whether the insured driver breached a duty owed to the claimant; (c) causation: whether the insured's fault caused the death or injury; (d) the motor vehicle was operated in the Commonwealth (whether or not on a road) unless the motor vehicle was subject to an unregistered vehicle permit, in which case it was used or operated on a road in any part of the Commonwealth. Only if each of those four elements is satisfied will the s10 policy respond to a claim. If an insurer admits each of them, then it will be liable to pay a sum of money to a claimant. An insurer may admit liability while disputing that it is liable to pay all the amount claimed. This will commonly be the case where there is a dispute as to apportionment between joint tortfeasors or for contributory negligence, or as to whether all of the claimed injuries result from the accident. If and only if an insurer admits liability in the sense of acknowledging an obligation to pay some money to the claimant do the pecuniary consequences in s 82, 83 and 84 apply.
His Honour distinguished between admissions which might be made by an insurer and an admission that it was obliged to make payments to the claimant - [62] There are a number of admissions that an insurer could give whilst at the same time wholly denying that it was obliged to make any payment to the claimant. An insurer could, for example, admit that the driver of a vehicle subject to an unregistered vehicle permit was at fault, but deny that the vehicle had been used or operated on a road. In such a case, the insurer's liability would depend upon both fault and the vehicle being used or operated on a road (cf Maric v Nominal Defendant [2013] NSWCA 190). Another example is that given by Hodgson JA in Gudelj at [69], namely, that there was no "injury" within the meaning of the Act: cf the examples in Allianz Australia Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568 and Zotti v Australian Associated Motor Insurers Limited [2009] NSWCA 323; (2009) 54 MVR 111. In either case it would follow that the s10 policy would not respond to the claim.
Here, QBE did not, in its Notice, deny it was obliged to make any payment to the claimant and, although its admission of liability was said to have followed from its explicit admission of fault, this did not imply or suggest that it was not admitting all the other elements giving rise to its liability (ie those specified by Leeming JA in para [60] above quoted) including, in particular that the policy responded to the claim. Smalley thus does not resolve the problem in this case. It may readily be accepted that an admission of liability necessarily implies the admission that the policy responds to the claim. The question is what is the effect of that implied admission.
On the face of it, if an admission of liability cannot be withdrawn, neither can any of the corresponding implicit admissions. The effect would be to do indirectly what cannot be done directly, usually regarded as an unattractive proposition. It is not unreasonable to regard permitting this indirect withdrawal of the admitted obligation to pay, at least, as undermining the purpose of Part 4.3 of the Act, aimed at ensuring that an injured claimant can obtain at least some assistance at an early stage. On the other hand, if the s 83 expenses are and continue to be paid even if indemnity is later declined, this argument is substantially weakened. Furthermore, since there is at all events a bifurcation of the process between initial payment of medical and related expenses on the one hand and later determination of damages, enabling the insurer to change its stance in respect to damages arguably might not do violence to this process.
QBE's argument relies on the point that the Notice was an admission made to the claimant and not to its insured. Thus there was no obstacle to its taking a different stance so far as its insured was concerned. Were it not for the statutory scheme this argument might well be correct. However, the admission to the claimant was made for a statutory purpose and has statutory effects, the consequence of which necessarily binds QBE so far as its liability to the claimant is concerned. Since it cannot withdraw its admission to the claimant, its relationship with the insured is, though perhaps interesting, immaterial. It is necessary to examine the particular statutory context with some care. The admission is made under s 81 for the purpose, essentially, of setting in train the assessment processes of the scheme and, in the meantime, ensuring that the medical and related expenses will be paid. It is then that consideration of the mode of assessment as provided in Div 2 of Part 4.4 - including, in particular, s 92 - takes place. This is governed by the Guidelines, together with a specific statutory power in s 92(1)(b) given to the assessor to exempt the claim, in effect, from determination by the Service. No doubt, in almost all cases where liability is admitted, the scheme envisages that the quantum of compensation will be determined by the administrative scheme and not a court. However, there may be cases of particular difficulty or complexity which the assessor (with the approval of the PCA) thinks should be determined by a court. But it seems to me that, given that an admission of liability under s 81(1) cannot be withdrawn and that indemnity is necessarily implied, the question of liability is precluded from further examination and an assessor could not decide that, because the insurer wished to contest the issue of indemnity so far as is insured is concerned, the claim should be exempted from determination by the Service. That issue has already been determined so far as the claimant is concerned and the insured person is not a party to the proceedings in any sense.
I accept the submission, in effect, that permitting QBE to litigate the question whether the policy answers the claim undermines the statutory scheme which requires the insurer to answer to the claim within the specified time limit, which is ample. If the insurer is in doubt, it can deny liability and later admit it when the facts become clear and show that it is liable. The process commences with the disclosure of the insurer of its attitude to liability and then moves on according this communication. Section 92 and the adopted Guidelines assume that this process has occurred. They do not suggest the possibility of a new starting point. This is why (as I think) further time limits do not need to be imposed.
Moreover, as QBE is bound for all purposes by its Notice admitting liability, there is no room for the exercise of the discretion to exempt the claim, since the issue of indemnity, controversy about which would be the only basis for exemption, is no longer a live issue. Accordingly, granting the relief sought in the summons could not be regarded as potentially futile. Orders 1. The decision of the Principal Claims Assessor made on 20 May 2014 is quashed. 2. The Motor Accidents Authority is prohibited from issuing a certificate of exemption. 3. The plaintiff's claim is to be determined by the Service in accordance with the Motor Accidents Compensation Act 1999 (NSW). 4. The first defendant is to pay the plaintiff's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 March 2015

Road Transport (Vehicle Registration) Act 1997(NSW)

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