Australian Associated Motor Insurers Ltd v Cassidy & 2 Ors

Australian Associated Motor Insurers Ltd v Cassidy & 2 Ors - [2009] NSWSC 804 - NSWSC 2009 case summary — Zoe

[12]

2 The relief sought includes orders either quashing the decision or, in the alternative, setting it aside with a declaration that the claim be exempt from assessment under the Act and requiring the PCA to issue a certificate of exemption to that effect. Further in the alternative, the plaintiffs seek an order remitting the application for exemption to the PCA for determination according to law. 3 The PCA filed a submitting appearance. The second defendant also filed a submitting appearance. However, in discharge of its statutory responsibilities under the Act to monitor the operation of the Motor Accidents Scheme and to advise the Minister as to its administrative efficiency and effectiveness, the second defendant appeared at the hearing and sought leave pursuant to r 6.11(2) of the Uniform Civil Procedure Rules ("UCPR") to permit it to advance submissions concerning the construction and operation of those sections of the Act that are the subject of review in these proceedings. The plaintiff did not object to leave being granted. 4 There was no appearance by the third defendant. The plaintiff sought orders under r 10.1.4(3) of the UCPR that the summons and supporting affidavit be deemed to have been served on the third defendant to enable the summons to be heard in his absence. Upon examination of the court file I noted that the third defendant appeared in person when the proceedings commenced in this Court in September 2008. He has not however participated in the proceedings since 15 September 2008 despite concerted efforts to make contact with him. I also noted that although the effect of the relief the plaintiff seeks is that the third defendant's claim for damages will be diverted from the bureaucratic process of assessment, it was the third defendant who originally lodged the application for exemption with the Authority after lodging a claim for assessment of damages in accordance with the scheme provided for in Part 4.3 of the Act in August 2007. There is nothing on the file to indicate that the position of the third defendant has altered since the application for exemption was lodged. For this reason, together with the fact that the plaintiff does not seek an order for costs against the third defendant in these proceedings, I was satisfied that it was appropriate that the matter proceed in his absence and made orders accordingly. The history of the third defendant's claim for damages 5 By reference to a police report dated 12 January 2005 the accident giving rise to the third defendant's claim for damages occurred in the following circumstances: (a) On 8 November 2004 a Commodore station wagon driven by the third defendant collided with the rear of a Mazda sedan driven by Jacqueline Elizabeth Hutson (Ms Hutson) at which time a third driver, Mr Ye Li collided with the rear of the third defendant's car.

[34]

(6) …" 24 Section 84 obliges the insurer to meet the rehabilitation needs of the claimant and associated expenses essentially on the same basis as it is obliged to meet the expenses referred to in s 82. Compliance with all three sections is a stipulated condition of the insurer's licence under Part 7.1 of the Act. 25 Part 4.4 of the Act, headed "Claims Assessment and Resolution", prescribes the administrative or bureaucratic procedure for resolving claims. It applies whether the insurer admits or denies liability. The procedure has legislative precedence over curial process by operation of s 108 of the Act. That section precludes a claimant from commencing proceedings in any court of competent jurisdiction unless a certificate of exemption has issued under s 92 or a claims assessor has issued a certificate in respect of the claim under s 94. In the latter case, if liability is denied, the claims assessor is to make an assessment of the issue of liability and an assessment of the amount of damage for that liability. The status of that assessment is then governed by s 95, which provides, in short, that the issue of liability is not binding on either party but the assessment of damages is binding on the insurer if it accepts liability and the claimant accepts the damages in settlement of the claim. 26 The claim the subject of these proceedings has not been assessed under s 94 of the Act because application was made for it to be exempt from assessment under s 92. 27 Section 92 provides that a claim is exempt from assessment under Part 4.4 in one of only two ways: " 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)." 28 The applicable Motor Accident Authority Claims Assessment Guidelines ("the Guidelines") for the purposes of these proceedings are dated March 2006. They operate to mandatorily exempt a claim from assessment under s 92(1)(a) if the claim involves one or more of the following circumstances: "7.1 For the purpose of section 92(1)(a) the PCA shall issue a certificate of exemption when satisfied that, as at the time of the assessment, the claim involves one or more of the following circumstances: 7.1.1 where the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied by the insurer of that vehicle. 7.1.2 where the fault of the owner or driver of a motor vehicle, in the use or operation of the vehicle, is not denied by the insurer of that vehicle, but the insurer of that vehicle makes an allegation that the claimant was at fault or party at fault and claims a reduction of damages of more than 25%. 7.1.3 the claimant lacks legal capacity. 7.1.4 the person against whom the claim is made is not a licensed or other CTP insurer." 29 Where a party is seeking a determination that a claim is not suitable for assessment under s 92(1)(b) of the Act the Guidelines provide as follows: "7.11 In determining whether a claim is not suitable for assessment an assessor and the PCA shall have regard to the circumstances of the claim as at the time of the preliminary determination including: 7.11.1 the heads of damage claimed by the claimant and the extent of any agreement by the insurer as to the entitlement to those heads of damage. 7.11.2 whether the claim involves complex legal issues. 7.11.3 whether the claim involves complex factual issues. 7.11.4 whether the claim involves complex issues of quantum or complex issues in the assessment of the amount of the claim including but not limited to major or catastrophic, spinal or brain injury claims. 7.11.5 whether the claimant has been medically assessed and is entitled to noneconomic loss pursuant to section 131 and the claim involves other issues of complexity. 7.11.6 whether the claim involves complex issues of causation in respect of the relationship between the accident, the injuries sustained and disabilities arising from it including but not limited to multiple accidents or preexisting injuries or medical conditions. 7.11.7 whether the insurer is deemed to have denied liability under section 81(3). 7.11.8 whether the claimant or a witness, considered by the assessor to be a material witness, resides outside the jurisdiction. 7.11.9 whether the claimant seeks to proceed against one or more non-CTP parties. 7.11.10 whether the insurer makes an allegation that a person has made a false or misleading statement within the meaning of section 117." 30 Although the Act does not specify any statutory criterion against which a determination of the suitability of a claim for assessment at the preliminary stage under s 92(1)(b) is to be made, I note that s 106(1) of the Act operates to give the Guidelines the force of law as if they are delegated legislation. The Guidelines may not however be used for the purposes of construing the Act (see Paice v Hill [2009] NSWCA 156 per Ipp JA at [60] and Allsop P at [1]-[3]). 31 Clause 7.1 of the Guidelines provides that a certificate of exemption under s 92(1)(a) "shall" issue where the claim involves one or more of the specified circumstances without any assessment of the claim. This is to be contrasted with an application for a claim to be exempt because it is not suitable for assessment having regard to the circumstances of the claim which include those set out under s 92(1)(b) in cl 7.11. These circumstances are not exhaustive. The assessor's determination that a claim is not suitable for assessment (thereby enabling court proceedings to be commenced) is subject to the approval of the Principal Claims Assessor. 32 Clearly enough the Guidelines oblige the claims assessor engaged in the preliminary assessment (and if appropriate the Principal Claims Assessor) to have regard to the circumstances of the claim specified in cl 7.11, and any other circumstances of relevance in a particular case. I am not persuaded however that should a particular circumstance (or more than one circumstance) be present the claims assessor is obliged to find that a claim is unsuitable for assessment. The discretion that responses in the assessor is not so confined. The plaintiff submitted that in circumstances where an insurer is deemed to have denied liability, either because the s 81 notice was defective or the insurer had otherwise failed to comply with its duty to state a position on liability, the discretion to exempt under cl 7.11.7 converts into a mandatory exemption because of what is said to be the parallel operation of cl 7.1.1 of the Guidelines. This construction is not only in conflict with the insurer's statutory duty under s 81 to issue a notice in a timely fashion, which is itself a reflection of the insurer's general duty in s 80 to endeavour to resolve a claim by settlement or otherwise as justly and expeditiously as possible, but the fact that a deemed denial of liability is specified as a circumstance that may warrant the claim being exempt from assessment would seem to be contrary to the legislative intention that only a denial of liability in compliance with the insurer's duty to state a position at the outset, necessitates that the claim be exempt. In any event, because I am not satisfied that the notice in this case was defective such as to invoke the deeming provision, or that it should be construed as a denial of liability, the question does not need to be resolved.

[37]

35 The plaintiff submitted that no particular importance attaches to the fact that the application for exemption was made to the PCA under s 92(1)(a), because she was obliged to consider the application as an application for exemption under s 92(1)(b), or more precisely, refer it for preliminary assessment by a claims officer under that section in any event. I was invited not to discriminate between any presumed seniority of the Principal Claims Assessor and other claims assessors or their differing obligations under the Act or to approach an analysis of the operation of s 92 mechanistically in circumstances where it is simply serendipitous whether a claims assessor or the Principal Claims Assessor is the officer considering an application for exemption. For that submission to have any force the administrative functioning of the Authority pursuant to Part 4.4 would need to be amply demonstrated by evidence in the usual way. There was no evidence of this kind relied on in the proceedings. I regard the application for exemption as confined to an application brought under s 92(1)(a) only. 36 In ultimately disposing of the proceedings before me I regard it is as significant that in her reasons for decision the PCA expressly reserved the question whether to the extent that a claim may involve false or misleading information it might be exempt under s 92(1)(b) on the grounds that it is not suitable for assessment under the Act for that reason. I can readily see that where, for example, an insurer contends that liability was admitted on the basis of deliberately false information being included in the claim that would likely be a matter best resolved by litigation and a certificate of exemption would issue. If on the other hand the information upon which liability was admitted by an insurer is revealed later to have been simply misleading, whether as a result of error or inadvertence on the part of the claimant or because the insurer's investigations were inadequate (as seems to be the case here), the claims assessor may nevertheless take the view that the claim is suitable for assessment under the Act either because the misleading information is thought unlikely to be material to the issue of liability, assuming it to be disputed or, because for other reasons the claim is considered appropriate for assessment despite the misleading information. These are matters the Parliament has left for the discretion of officers charged with the statutory duties of administering the Act under Division 3 of Part 4.4. It is also consistent with the legislative scheme embodied in the Act that, by its structure and operation, gives precedence to a non-curial approach to claims resolution.

[39]

37 In her reasons for decision the PCA referred to the majority judgment of the Court of Appeal in The Nominal Defendant v Gabriel as providing some guidance on the effect of an admission of liability under s 81 when a claim is being assessed in the bureaucratic process, a question which was referred to but which the majority judgments of Campbell and Hodgson JJA left unresolved. In the proceedings before me both the plaintiff and the Authority rely on the decision in The Nominal Defendant v Gabriel in support of the construction of the Act for which they each contend. The Court of Appeal's decision has also been the subject of consideration in QBE Insurance v Motor Accidents Authority [2008] NSWSC 434. 38 In The Nominal Defendant v Gabriel the Court was concerned with whether an admission of liability in a s 81 notice prevented an insurer from denying liability in court proceedings brought to litigate a claim after the claim has been granted exemption from the bureaucratic process. Campbell and Hodgson JJA were satisfied that it did not. Basten JA was of the contrary view and published a dissenting judgment. The circumstances in which the claim in The Nominal Defendant v Gabriel had been granted exemption from the operation of the Act were apparently uncontroversial. Campbell JA simply noted that the Principal Claims Assessor in that case found that the claim was unsuitable for assessment under s 92(1)(b) without detailing the reason for that decision. It was clear however that it was only after a claims assessor had determined that the claim was unsuitable for assessment that the insurer's solicitor forwarded to the claimant a document headed "Amended Section 81 Notice" in which breach of duty was denied. Accordingly, while one of the questions raised on the appeal concerned the legal or evidential effect of the "amended notice" in proceedings brought to litigate the claim, the effect of a so-called "amended notice" where a claim is subject to administrative assessment under the Act did not arise. At [167] Campbell JA was at pains to make it clear that the question whether an admission of liability made by an insurer can ever be departed from by withdrawal or amendment while the claim is subject to the bureaucratic process of assessment and, in particular, whether an admission made in error could be grounds for the issue of a certificate of exemption under s 92, did not arise for determination on the appeal.

[43]

(1) The objects of this Act are as follows: (a) to encourage early and appropriate treatment and rehabilitation to achieve optimum recovery from injuries sustained in motor accidents, and to provide appropriately for the future needs of those with ongoing disabilities, (b) to provide compensation for compensable injuries sustained in motor accidents, and to encourage the early resolution of compensation claims, (c) to promote competition in the setting of premiums for third-party policies, and to provide the Authority with a prudential role to ensure against market failure, (d) to keep premiums affordable, recognising that third-party bodily insurance is compulsory for all owners of motor vehicles registered in New South Wales, (e) to keep premiums affordable, in particular, by limiting the amount of compensation payable for non-economic loss in cases of relatively minor injuries, while preserving principles of full compensation for those with severe injuries involving ongoing impairment and disabilities, (f) to ensure that insurers charge premiums that fully fund their anticipated liability, (g) to deter fraud in connection with compulsory third-party insurance." 46 In this same connection, the Authority also emphasised the significance of an insurer's admission of liability in the assessment process under Part 4.4 given that, by operation of s 89(1), the process applies to any claim whether or not the insurer admits or denies liability. Where an insurer denies liability a claim may be referred for assessment at any time, whereas if an insurer admits liability the claim can only be referred if two months have elapsed since the insurer made an offer of settlement, or the period within which the insurer was required to make an offer has expired and no offer was made. It was submitted that this legislated approach to resolving claims provides additional support for the irrevocability of an admission of liability in a s 81 notice, endorsing as it does the underlying operation and objects of the scheme, without detracting in any way from the potential weight of a reviewed or revised position on liability being a discretionary consideration where an issuer seeks exemption under s 92(1)(b). The decision in QBE Insurance v Motor Accidents Authority 47 In QBE Insurance v Motor Accidents Authority Associate Justice Harrison was confronted with the same primary issue that I have identified is raised by the present proceedings. (I note that the decision maker in that case is the PCA in the proceedings before me.) Although the circumstances giving rise to the review of her decision by Harrison AsJ were different from this case, the plaintiff did not submit that her Honour's decision should be distinguished for that reason. The plaintiff submitted that her Honour's decision was wrong as a matter of law and should not be followed. 48 In QBE Insurance there was no issue as to the adequacy of the s 81 notice for the purposes of constituting an admission of liability. The claim for exemption in that case was sought because the insurer claimed an increase in the reduction of damages for contributory negligence from 25 per cent, as specified in the original s 81 notice, to 40 per cent after a review of all the available information had been undertaken. As is apparent from the Guidelines (extracted in full at [28] above), cl 7.1.2 provides that a certificate of exemption must issue where an insurer alleges that the claimant was at fault and claims a reduction in damages of more than 25 per cent. In QBE Insurance the Principal Claims Assessor refused to issue the certificate on the same basis as she refused to issue an exemption in the present case, namely that upon issue of a s 81 notice the insurer is irrevocably bound by its terms to the extent that the claim remains subject to the bureaucratic process.

[56]

60 Finally, and again of significance here, his Honour rejected a submission that the Act should not be construed so as to detract from the claimant's common law rights. He said in that regard: "In my opinion, however, this argument carries little weight in regard to the MACA which is a specific code for dealing with claims arising out of motor accidents and which, by its very nature, involves fundamental changes to the common law rights of the parties involved." 61 The plaintiff also submitted that because the Act does not exhaustively state the circumstances in which liability can be denied by an insurer and, moreover, because on its proper construction the issue of a notice under s 81 is simply in discharge of the insurer's duty to state a position as to liability to enable the claimant to appreciate the insurer's position on the question and, if liability is admitted, to have the claim settled expeditiously and to provide for payment of the medical and other expenses in the meantime, the question of liability should be able to be revisited and restated by the insurer when an application for the claim to be exempt from the bureaucratic process under s 92 is under consideration. The plaintiff submitted that this approach is not in conflict with the objects of the Act encapsulated in s 5 to provide compensation for compensable injuries sustained in motor vehicle accidents and to encourage early resolution of compensation claims. For the reasons I have already discussed, I am not persuaded that the Act admits of this approach. Accordingly, I am not persuaded that the PCA's findings in (b) and (c) in paragraph [18] above disclose error. The related issue raised by the summons 62 On the application for exemption the plaintiff sought, unsuccessfully, to persuade the PCA that the s 81 notice issued in April 2005 was defective and, for that reason, liability was deemed to have been denied. The PCA was satisfied that although the notice was effective to admit liability in part it was nevertheless effective to trigger the operation of the Act locking the insurer into participation in the bureaucratic assessment process from which it could not resile. The plaintiff submitted that irrespective of whether the notice contained only a partial admission of liability unless the notice was effective to constitute an admission of liability for the purposes of the Act, liability was deemed to be denied under s 81(3). I have already considered and rejected the plaintiff's allied submission that were this the case mandatory exemption from the bureaucratic process of assessment as provided for under cl 7.1.1 of the Guidelines should follow. The form of a s 81 notice: the related issue comprehended by finding (d) 63 For reasons that are not apparent neither the Act nor the Regulations prescribe the form of a s 81 notice. This is surprising given that an admission of liability in the notice triggers significant statutory consequences. 64 The minimum requirements of a notice under s 81 was however the subject of discussion in The Nominal Defendant v Gabriel. In her reasons for decision the PCA expressly referred to the judgment of Campbell JA in deciding that the notice in the present case was valid and effective as a partial admission of liability under s 81(2). The plaintiff submitted that the PCA misinterpreted his Honour's remarks and that the notice was not effective as an admission of liability at all.

[58]

86 I recognise that the letter also indicates an intention to pay medical accounts in full. Section 83 imposes an obligation on an insurer to make such payments even if there has been a partial admission of liability, so it does not seem to me that the offer to pay medical accounts is an admission that there has been any consequential damage. It would still be open to AAMI to dispute whether any particular medical account related to the injury caused by the fault of the driver of the unidentified vehicle, or indeed, if there was a factual basis for doing so, whether there were any such medical accounts." 66 The plaintiff submitted that the PCA failed to appreciate material differences in the s 81 notice sent by the insurer in The Nominal Defendant v Gabriel compared with the notice the subject of the present proceedings. The notice sent by the insurer in The Nominal Defendant v Gabriel was set out in full in his Honour's judgment: "Re: Section 81 Notice We have examined the circumstances of your client's motor vehicle accident that occurred on 28 May 2002. As a result we consider the accident occurred through the fault of our insured driver. Accordingly, under Section 81 of the Motor Accidents Compensation Act, 1999 , we admit breach of duty of care in respect of your client's claim. Nevertheless, we believe the surrounding him circumstances indicate that your client contributed to the accident. We estimate contributory negligence at 25%. As a result we propose to make a 25% deduction from any final settlement. In the meantime we will pay all your client's reasonable medical accounts in full. We will make contact soon to discuss your client's claim. In the meantime please forward any original accounts or receipts for which your client claims reimbursement. Should you wish to discuss any of the matters raised in this letter please do not hesitate to contact me. We further advise that we shall be seeking a contribution from NRMA being the insurers of motor vehicle registration number WIX474." (emphasis added) 67 It is clear that the letter shared only one feature in common with the notice the subject of the present proceedings, namely an admission that the insured driver was at fault. Despite the fact that the letter in The Nominal Defendant v Gabriel also admitted breach of the duty of care the plaintiff accepted that its admission of fault in April 2005 equated with the failure on the part of its insured driver to take reasonable care commensurate with the duty of care he owed to the third defendant as another road user. (I note that s 3 of the Act defines "claim" as a claim for damages in respect of the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle and defines fault as "negligence or any other tort".) 68 Importantly, so the plaintiff submitted, the letter in The Nominal Defendant v Gabriel also alleged contributory negligence, which it estimated at 25 per cent, and it was this that enabled Campbell JA to regard the letter as a partial admission of liability under s 81(2) because it "contained details sufficient to ascertain the extent to which liability is admitted". The following extract is said to make that clear:

[59]

"84 As the claim form was received by the Nominal Defendant on 22 July 2002, and the Nominal Defendant had neither admitted nor denied liability within three months, it was deemed, under section 81(3), to have denied liability as from 23 October 2002. AAMI's letter of 3 June 2003 was the type of admission of liability, after an initial denial that is permitted by section 81(4). 85 The admission made by AAMI's letter of 3 June 2003 was of breach of duty of care. As the claim made by the plaintiff was that the driver of the unidentified vehicle had committed the tort of negligence, and as someone is liable for the tort of negligence only if that person owes a duty of care to the plaintiff, has breached that duty of care, and the plaintiff has thereby suffered damage, the admission made by AAMI was not, strictly, an admission of liability for the claim. The admission of breach of duty of care necessarily contained within it an admission of the existence of a duty of care, but no admission was made of any consequential suffering of damage. Thus it counts as an admission of liability for only part of the claim. An admission of liability for part of a claim, in this way, can fairly be described as a notice that includes "details sufficient to ascertain the extent to which liability is admitted" , and thus is expressly contemplated by section 81(2) MAC Act . 86 I recognise that the letter also indicates an intention to pay medical accounts in full. Section 83 imposes an obligation on an insurer to make such payments even if there has been a partial admission of liability, so it does not seem to me that the offer to pay medical accounts is an admission that there has been any consequential damage. It would still be open to AAMI to dispute whether any particular medical account related to the injury caused by the fault of the driver of the unidentified vehicle, or indeed, if there was a factual basis for doing so, whether there were any such medical accounts." 69 By contrast, the notice issued by the plaintiff in the present case did not address the issue of contributory negligence at all. This, so it was submitted by the plaintiff, together with the fact that there was nothing in its letter to justify the inference that it was making a partial admission of liability, rendered the notice inadequate for the purpose of the assessor ascertaining the extent to which liability is admitted as required by s 81(2), and that it is invalid as a notice for that reason. 70 Although, as Campbell JA observed in [85] above, the insurer's stated intention to pay for all reasonable medical expenses is not an admission that there has been damage suffered consequent upon breach, s 81 only imposes an obligation to meet such expenses where the insurer admits liability. Here the insurer clamed in its letter of 29 April 2005 that it had looked at the circumstances surrounding the accident and on that basis accepted that the insured driver was at fault and agreed to pay the third defendant's reasonable medical expenses. The fact that, the letter omitted to address the extent to which the third defendant should bear some responsibility for the accident, whether by error or oversight, in my view, does not diminish the force of its admission of liability, an admission which is open to be read in an unqualified way. Equally, the fact that in the absence of some specification of the extent of contributory negligence there may be insufficient details to ascertain the actual extent to which liability is admitted does not render the notice ineffective, even if the notice might be deficient from the insurer's perspective. 71 I am not satisfied that the PCA was in error in finding the notice was adequate to operate as an admission of partial liability under s 81(2).

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