Lee v Yang

LEGISLATION CITED: Law Reform (Miscellaneous Provisions) Act 1965; Motor Accidents Compensation Act 1999.

PARTIES: Heng Ham Lee - Claimant Heng Ming Yang - Opponent

COUNSEL: R Bartlett SC - Claimant P J Doherty SC & B McManamey - Opponent

SOLICITORS: David McLachlan - Claimant Somerville & Co, North Sydney - Opponent

LOWER COURT JURISDICTION: District Court

LOWER COURT DATE OF DECISION: 29 June 2005 & 23 September 2005

LOWER COURT MEDIUM NEUTRAL CITATION: Garling DCJ, 23 September 2005, unreported

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40818/05 DC 3922/04

GILES JA HODGSON JA IPP JA

Wednesday 2 August 2006 LEE v YANG Judgment 1 GILES JA: The stated objects of the Motor Accidents Compensation Act 1999 ("the Act") include encouraging the early resolution of claims to compensation for injuries sustained in motor accidents (s 5(1)(b)). As part of the encouragement, notice of a claim is to be given to the third party insurer of the person against whom the claim is made (s 72(2)), the insurer acts for that person (s 78), and the insurer must try to resolve the claim justly and expeditiously (s 80(1)). By s 81(1), the insurer must promptly notify the claimant whether it admits or denies liability for the claim. Part 4.4 of the Act provides for claims assessment and resolution. By s 108, court proceedings in respect of a claim may not be commenced unless a certificate has issued that the claim is exempt from assessment, or there has been assessment of the claim and a certificate has issued in respect of the claim. 2 By s 92 of the Act, a claim is exempt from assessment if it is of a kind exempt under certain guidelines or the regulations, or if on a preliminary assessment it has been determined that it is not suitable for assessment. The guidelines include exemption where the insurer denies that its owner or driver was at fault, and where the insurer alleges that the claimant was at fault and claims a reduction of damages of more than 25 per cent. Section 9 of the Law Reform (Miscellaneous Provisions) Act 1965 ("the LR Act") provides for such reduction of damages, and there is a like specific provision in s 138 of the Act; it is conventionally referred to as contributory negligence of a stated percentage. 3 Making an assessment is governed by s 94 of the Act. Where an assessment has been made, its effect as between the claimant and the insurer is governed by s 95. Sections 94 and 95 relevantly provide - "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

(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.

(1) An assessment under this Part of the issue of liability for a claim is not binding on any party to the assessment.

(2) An assessment under this Part of the amount of damages for liability under a claim is binding on the insurer, and the insurer must pay to the claimant the amount of damages specified in the certificate as to the assessment if: (a) the insurer accepts that liability under the claim, and

(b) the claimant accepts that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued.

Note. If the amount of damages is not accepted by the claimant within that period, section 151 makes provision with respect to liability for legal costs incurred after the certificate of assessment was issued.

(3) … " 4 Section 151 of the Act relevantly provides - " 151 Costs where claims assessment made

(1) This section applies if an assessment is made under Part 4.4 of the amount of damages for liability under a claim.

(2) If the claimant does not accept that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued, then the following provisions have effect with respect to liability for costs incurred after the certificate of assessment was issued: (a) the insurer is liable to pay the costs if: (i) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $2,000 or 20% (whichever is the greater), or

(ii) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $200,000, (b) the claimant is liable to pay the costs if the amount of court awarded damages in respect of the claim does not exceed the amount of damages specified in the certificate of assessment, but the maximum amount that a claimant is liable to pay for the insurer's costs is $25,000 (or such other amount as is determined by the Authority by order published in the Gazette),

(c) except as provided by paragraph (a) or (b), the insurer and claimant are liable to pay their own costs. … " 5 The question in this application for leave to appeal, heard on full submissions as if an appeal, is whether by force of s 95 of the Act an assessment of the amount of damages was binding on the insurer, although the insurer had not accepted the percentage of contributory negligence in the assessment of liability for the claim.

Facts 6 The claimant was injured in a motor vehicle accident on 25 July 2000. On or about 14 November 2000 she gave notice of her claim to the insurer. 7 On 14 February 2001 the insurer wrote to the claimant's solicitors - "Our inquiries are now complete and we accept liability on the basis that the accident that the occurred due the fault of our driver [sic]. However, our investigations indicate that contributory negligence on the part of your client may have been a factor in the injuries she received … ". 8 The insurer suggested in the letter that the contributory negligence "amounts to 25%". 9 On or about 10 July 2003 the claimant applied for assessment pursuant to s 94 of the Act. The claim was referred to an assessor, who conducted a hearing on 8 April 2004 and issued a certificate on 12 July 2004. He relevantly certified - "The findings of this assessment are as follows: · On the issue of liability for the claimant, the amount of contributory negligence on the part of the claimant is assessed at 10%. · The amount of damages assessed in respect of this claim is $[-] … ". 10 From the assessor's reasons, the assessed amount of damages was an amount after reduction by 10 per cent for contributory negligence. The amount has not been disclosed to the Court, see s 115 of the Act: it provides - "115 Disclosure of offers or assessment by claims assessor

(1) This section applies to: (a) the amount of an offer of settlement under section 82 in connection with a claim, or

(b) the amount of an assessment of damages by a claims assessor under Part 4.4.

(2) Except as prescribed by the regulations, any such amount is not to be specified in any pleading, affidavit or other document filed in or in connection with court proceedings, and is not to be disclosed to or taken into account by the court, before the court's determination of the amount of damages in the proceedings." 11 On 23 July 2004 the claimant advised that she accepted the amount of damages assessed in settlement of the claim. On the same day the insurer advised that it did not accept "the liability finding (contributory negligence)" and invited the claimant to bring proceedings. The precise terms in which these advices were given were not given in evidence, and the words I have used are taken from a solicitor's affidavit.

The decisions below 12 On 14 September 2004 the claimant as plaintiff brought proceedings in the District Court against the insurer's driver as defendant. For convenience, I will continue to refer to the claimant and the insurer. 13 It must have become apparent that the insurer maintained that the amount of damages to which the claimant was entitled, quite apart from reduction for contributory negligence, was in issue in the proceedings. By a notice of motion filed on 20 April 2005 the claimant sought that there be determined as a separate question "whether the Court has power to determine the quantum of damages otherwise [than] in accordance with the Assessment Certificate issued on 12 July 2004". 14 By an amended notice of motion filed on 4 May 2005 that became an application for orders - "1. That the Defendant's Insurer has accepted liability.

2. The Defendant's Insurer is bound by the assessment of damages as found by the Assessor of Claims Assessment and Resolution Service and detailed in the Certificate issued pursuant to Section 94 of the Motor Accidents Compensation Act 1999 on 12 July 2004.

3. The only issue to be determined in these proceedings is the issue of contributory negligence." 15 These could not properly be orders, but were treated as separate questions for determination. 16 The amended notice of motion was heard by Judicial Registrar McDonald, who concluded her reasons published on 29 June 2005 by making "orders 2 and 3 in the amended notice of motion" and ordering the insurer to pay the claimant's costs. 17 The Judicial Registrar construed s 95(2) of the Act as providing first that the assessment of the amount of the damages was binding on the insurer, and then for when the damages had to be paid. She accepted that contributory negligence was "an issue of liability, not quantum", and could be argued in the proceedings, but said as to s 95(2) - "16. Subsection (2) says that an assessment of damages is binding on the insurer and follows those words with a comma. The section then spells out when the insurer has to pay - when it accepts the liability finding and when the claimant accepts the damages within 21 days. 'That liability' refers back to s 95(1) and 'that amount of damages' refers to the damages in s 95(2). There is no need to read 'and' as meaning anything other than 'and'. Mr Ronzani's submission - that there is nothing in the Act which allows the assessment of damages to be binding on the insurer when it has disputed liability - does not take account of the section when read as a whole. The section clearly says that the amount of damages is binding on the insurer. This construction is supported by the Second Reading Speech, when the extract is read as a whole: 'There will, however, be cases that involve difficult legal issues or complex matters of fact and the bill provides that CARS may issue a certificate which allows the parties to proceed directly to court without an assessment. Decisions by CARS about liability will not be binding. However, assessments by CARS of the amount of compensation will be binding on the insurer but binding on injured people only if they accept the assessment within 21 days. An injured person who does not accept the assessment by CARS may take his claim to court, but will risk not having his further legal costs paid and even having to pay the insurer's further legal costs if he does not get a better result at court.' 16. The second part of s 95(2) provides when the insurer must pay damages. The comma separates the two clauses of the subsection to make clear that it deals with an event and its consequences. If the claimant does not accept the CARS assessment within 21 days, the insurer does not have to pay. The claimant must then wait for her damages until the court determines the proceedings. Section 137 governs the limited circumstances when interest will be payable on damages for economic loss and out of pocket expenses. That section does not refer to a situation where the claimant has failed to accept a CARS assessment but s 137(4) which applies to court proceedings will protect the position of both parties. Section 151 imposes a significant costs penalty on a claimant who does not accept an assessment of damages within 21 days. There should not be a costs penalty if this claimant does not better her position because she did not accept the assessment of damages. 17. There is nothing in the objects section of the Act which suggests that this approach is wrong. If the issues between the parties are limited, the claim will be resolved more quickly, though not 'early' as mentioned in s 5(1)(b). The hearing time will be shorter. The cost to the scheme will be reduced so that premiums can remain affordable as set out in s 5(e)." 18 The insurer moved for review of the decision of the Judicial Registrar. The application was heard by Garling DCJ, who for reasons published on 23 September 2005 upheld the Judicial Registrar's decision. His Honour ordered that the insurer's notice of motion be dismissed and that it pay the claimant's costs. 19 His Honour said in the reasons - "In my opinion s 94, firstly, sets out two matters which the assessor has to deal with: One, the liability for the claim. That clearly means whether or not the insurer is liable to pay an amount of damages after there has been a consideration of the question of negligence. It would, of course, also include any question relating to contributory negligence and, secondly, the amount of damages for that liability obviously if any. The question of liability can be challenged by either party pursuant to s 95(1). Section 95(2) I believe then provides that in relation to damages the only one who can challenge those damages is the claimant. If the claimant does challenge them, then the claimant is subject to the provisions of s 151 in relation to costs. If there was any doubt about that and if the section was not clear, and I believe it is, then under those circumstances I would have turned to the second reading speech. The second reading speech, in my mind, is quite clear. It reads: [Here his Honour set out the extract from the Second Reading Speech which the Judicial Registrar had set out.]

I believe, for the reasons I have given, that the Judicial Registrar's construction was correct, that her approach to the construction of s 95 did, in fact, consider what is binding on the insurer, and that her consideration of that section was correct, and therefore, I am of the view that this motion must fail. 20 The "reasons I have given" in the third of these paragraphs appear to have been those in the first two of the paragraphs. It is not entirely clear that his Honour was endorsing the Judicial Registrar's reasons; if he was not, his reasons were, with respect, little more than statement of a conclusion.

Consideration 21 It was common ground that an assessment of "the issue of liability for the claim" in s 94(1)(a) encompassed contributory negligence and the extent of any reduction of damages. The effect of s 9 of the LR Act is that a claim is not defeated by contributory negligence, but that the damages recoverable are reduced; by s 11, the total damages recoverable but for the contributory negligence must be found and recorded. Notwithstanding that the statutory effect is on damages, contributory negligence can readily be regarded as going to liability, see the heading to s 9 "Apportionment of liability in cases of contributory negligence". Thus the assessment of "the amount of damages for that liability" in s 94(1)(b) is of the damages payable to the claimant after any reduction for contributory negligence. There is no occasion to question the common ground. 22 There are difficulties in the Judicial Registrar's construction of s 95(2). On that construction, the words before the comma make an assessment of the amount of damages binding on the insurer but leave its effect on the claimant up in the air. If the assessment is binding on the insurer, why by the words following the comma provide for payment only if the two conditions in paras (a) and (b) are satisfied, including the condition of acceptance by the insurer of "that liability under the claim"? Absent acceptance by the insurer of "that liability under the claim", curial determination of liability for the claim does not satisfy the conditions and enliven the statutory obligation to pay; nor can the court take up the binding assessment, because s 115 of the Act prohibits disclosing the amount before the court's determination of the amount of damages in the proceedings. So the asserted binding effect on the insurer leads nowhere. 23 These difficulties suggest that the Judicial Registrar's construction is flawed, and that s 95(2) states the double consequence of satisfaction of the two conditions in paras (a) and (b): that the assessment is binding on the insurer, and that the insurer must pay the claimant. The structure is readily understandable. Section 95(1) is in the terms of an assessment being not binding. Section 95(2) follows it in the terms of an assessment being binding, and adds an obligation to pay the claimant. It is necessary to impose the obligation, because s 95(2) will commonly operate in the absence of legal proceedings. But both conditions must be satisfied. 24 In my opinion, the double consequence construction is correct. 25 What may be binding is "the amount of damages for liability under a claim". This picks up the liability found on the issue of liability for the claim, and is "the amount of damages for that liability" in s 94(1)(b) and so the damages payable to the claimant after any reduction for contributory negligence. The claimant may accept "that amount of damages" in settlement of the claim, and correspondingly the insurer may accept "that liability under the claim", being the liability assessed "on the issue of liability for the claim". 26 Section 95(2) provides a mechanism by which the non-binding assessment of the issue of liability for a claim and the assessment of the amount of damages for that liability become binding as a package. By accepting "that amount of damages", the claimant agrees to liability, including any reduction in damages for contributory negligence; the claimant can do so if the damages are an amount the claimant is prepared to take to resolve the claim. By accepting "that liability under the claim", the insurer also agrees to liability, and is then precluded from contesting the amount of the damages; the insurer can do so if the damages are an amount the insurer is prepared to pay to resolve the claim. But there must be the conjunction of the two conditions in paras (a) and (b), and each of the claimant and the insurer may decline to accept and thereby make the other go to court. The subsection refers to the assessment of the amount of damages for liability under the claim being binding on the insurer, rather than on both the claimant and the insurer, because the claimant's acceptance necessarily involves the assessment being binding on the claimant in the event of the insurer's acceptance; and because it is open to the insurer to contest the assessment of damages only if the insurer contests the liability as found by the assessor. 27 The claimant submitted that the double consequence construction would require an additional comma after "must pay", and that it would mean that an assessment of the amount of damages for liability under the claim would only be binding if the insurer agreed to be bound; this, it was said, removed all content from being binding. An additional comma could have been used, but I do not think its absence precludes the construction. It is correct that the assessment would only be binding on the insurer if the insurer accepted the liability assessed on the issue of liability for the claim, but equally it would only be binding on the claimant if the claimant accepted the assessment within the 21 days. 28 As continuation of the encouragement to resolve claims, the claimant is given by s 151 a costs incentive to accept the assessment of the amount of damages for liability under the claim: the claimant may suffer in costs unless the assessment is bettered. The insurer has a like incentive, since an unsuccessful defendant is always exposed to costs. The second reading speech is not in my opinion of assistance. The Minister's summary that an assessment "will be binding on the insurer but binding on injured people only if they accept the assessment within 21 days" takes no account of s 95(2)(a); it is not a substitute for construing the words of the legislation. 29 In the present case, the insurer did not accept the liability assessed on the issue of liability for the claim, being a liability with contributory negligence of ten per cent. Accordingly, the condition in para (a) was not satisfied, and the assessment of the amount of damages for liability under the claim was not binding on the insurer.

Orders 30 The question is of some general importance, and significant in the resolution of the proceedings in the District Court. Leave to appeal should be granted. 31 I propose the orders -

1. Grant leave to appeal and direct the filing of the notice of appeal within seven days.

3. Set aside the orders of Garling DCJ and in lieu thereof order - (a) that the orders of the Judicial Registrar be set aside; (b) that the plaintiff's amended notice of motion be dismissed; and

(c) that the plaintiff pay the defendant's costs of the applications heard by the Judicial Registrar and Garling DCJ.

4. Opponent/respondent to pay the claimant/appellant's costs of the application for leave to appeal and have a certificate under the Suitors Fund Act if otherwise qualified. 32 HODGSON JA: I agree with Giles JA. 33 IPP JA: I agree with Giles JA. **********

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