QBE Insurance (Australia) Ltd v Mordue

Court of Appeal (NSW)|2015-10-21|Before: Beazley P, Ward JA, Simpson JA, Adams J

Solicitors: McIness Wilson Lawyers (Appellant) Stacks/Goudkamp (First Respondent) Crown Solicitor's Office (Second and Third Respondents) File Number(s): CA 2015/79665 Decision under appeal Court or tribunal: Supreme Court Citation: Aaron Mordue v QBE Insurance (Australia) Limited [2015] NSWSC 98 Date of Decision: 20 February 2015 Before: Adams J File Number(s): 2014/200844

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Beazley P and Ward JA, allowing the appeal: (1) The determination of whether a claim is exempt pursuant to cl 8.11 of the Guidelines, being made "as at the time of the consideration of the application", must be made by reference to all relevant factors as at that time. [41]. (2) A s 81 notice admitting liability is not binding for all purposes. The insurer continues, after giving notice admitting liability under s 81, to have an entitlement to deny indemnity to an insured and, for that reason, to have the claim determined curially. This approach is consistent with the statutory scheme which, first, draws a distinction between liability to indemnify the insured under the policy and liability to the claimant for damages; and secondly, provides in s 81 a requirement for a timely response by an insurer, which militates against that response being final for all purposes. [38], [42]-[43]. Smalley v Motor Accidents Authority of New South Wales [2013] NSWCA 318; 85 NSWLR 580 (3) As the first respondent accepted, fraudulent claims could be subject to exemption pursuant to cl 8.11.6, notwithstanding an admission of liability under s 81. Other exemptions and means of recovery relating to fraud were also available. However, contrary to the first respondent's submissions, there was no basis, as a matter of statutory construction or principle, to treat cases involving fraud differently from those coming under cl 8.11.5. [44]-[49]. The Nominal Defendant v Gabriel [2007] NSWCA 52; 71 NSWLR 150

Beazley P and Ward JA, Simpson JA agreeing: (4) The trial judge erred in prohibiting the issue of a certificate of exemption, notwithstanding the position with respect to s 92(1)(a) and cl 8.11.5, as there was nothing before the court to preclude the consideration of a further exemption on some other basis, particularly the discretionary exemption pursuant to s 92(1)(b). [55] (Beazley P and Ward JA); [99] (Simpson JA).

Simpson JA, dissenting: (5) As delegated legislation, the Guidelines must be read consistently with the Act. Since the language of s 81(1) does not admit of an interpretation whereby an insurer can admit liability for the claim but not indemnify the insured, neither can sub-cl 8.11. [87]-[93]. (6) The exclusion of the insured, by Ch 4 of the Act, from involvement in the resolution of the claim has the consequence that once an insurer has admitted liability for a claim it cannot be given exemption from the assessment process by reason of sub-cl 8.11.5 of the Guidelines. [95].

Judgment

BEAZLEY P and WARD JA: The first respondent was injured on 1 December 2012, when the vehicle in which he was travelling as a passenger went out of control and landed in a drain causing the suspension of the vehicle to break. The vehicle was owned and, at the time of the accident, was being driven by the first respondent's son. The vehicle, which was subject to an unregistered vehicle permit under the Road Transport Act 2013 (NSW), was insured by the appellant, QBE Insurance (Australia) Ltd (QBE), pursuant to a Third Party Policy of insurance taken out by the first respondent's son (hereinafter referred to as the insured).
The first respondent made a claim under the Motor Accidents Compensation Act 1999 (NSW) (the Act) for medical and other expenses and for damages arising from the injuries he sustained in the accident. QBE admitted liability under s 81 of the Act on the basis that the accident was due to the fault of the insured.
The third and second respondents were, as at the commencement of the appeal, the Motor Accidents Authority of NSW and its Principal Claims Assessor, respectively. Both filed submitting appearances. On 1 September 2015, the Motor Accidents Authority was abolished and its functions were assumed by the State Insurance Regulatory Authority (SIRA). Pursuant to the State Insurance and Care Governance Act 2015 (NSW), Sch 4, cl 4, the assets, rights and liabilities of the Motor Accidents Authority were transferred to SIRA. The identification of the parties to these proceedings has been amended to reflect that change. References to "the Authority" in this judgment should be taken to mean the Motor Accidents Authority of NSW, in relation to events prior to its abolition, and otherwise to SIRA.
QBE subsequently purported to withdraw its admission of liability by serving an amended s 81 notice stating that, as the accident occurred in the course of a car rally, being an organised motor sports event, QBE had available to it the defence of voluntary assumption of risk pursuant to s 140 of the Act. As is explained below, the service of the amended s 81 notice was ineffective to withdraw the admission of liability under the statutory scheme for the assessment of motor vehicle accident claims.
In March 2014, QBE advised both the first respondent and the insured that it declined to indemnify the insured in respect of the first respondent's claim on the basis that pursuant to s 10 of the Act, the insurance policy only extended to the use of the vehicle when it was being used on a road in any part of the Commonwealth. As the road upon which the accident occurred was closed to the public, QBE contended that the insurance policy did not respond to the claim.
On 7 March 2014, QBE lodged an application with the Authority pursuant to s 92(1)(a) of the Act and cl 8.11.5 of the Claims Assessment Guidelines, seeking mandatory exemption of the claim from the Claims Assessment and Resolution Service (CARS) process. On 20 May 2014, the Principal Claims Assessor, who considered that she was obliged to do so by the terms of the Act and the Claims Assessment Guidelines, issued a certificate of exemption. The Principal Claims Assessor noted that, had the question of discretion arisen, she would have been likely to exempt the claim.
The first respondent sought judicial review of that determination. On 20 February 2015, Adams J quashed the decision of the Principal Claims Assessor and declared that the Authority was prohibited from issuing a certificate of exemption. His Honour further declared or directed that the first respondent's claim was to be determined by the Claims Assessment and Resolution Service in accordance with the Act.
QBE appealed from his Honour's determination. The primary issue raised by the appeal is within a narrow compass. QBE did not dispute that it was not entitled to withdraw the admission of liability that it made pursuant to s 81. It contended, however, that it was nonetheless entitled to decline to indemnify the insured in respect of any liability arising from the claim made by the first respondent. It further contended that having so notified the insured, it was entitled to a certificate of exemption under s 92.
QBE also raised, in the alternative, an issue as to the breadth of the prohibition ordered by Adams J which, on its contention, went beyond what was justified by his Honour's reasons. That issue will be dealt with at the conclusion of the judgment.

The statutory scheme

The Act provides both for a scheme of compulsory third-party insurance and for the determination of claims relating to injuries sustained as a consequence of motor vehicle accidents. Leeming JA's overview of the statutory scheme in Smalley v Motor Accident Authority of New South Wales [2013] NSWCA 318; 85 NSWLR 580: see at [22] ff, remains for relevant purposes accurate and enables us to refer to the Act briefly and only to the extent necessary to determine the issue on the appeal.
Chapter 2 of the Act deals with Third Party Insurance. Section 8 creates an offence of using an uninsured motor vehicle on a road. Section 10 provides for the terms of a third party policy of insurance issued under the Act. Insofar as a vehicle is subject to an unregistered vehicle permit, as was the case here, the statutory policy of insurance only extends to the use or operation of the vehicle on any road in any part of the Commonwealth: s 10(1)(b).
Chapter 4 governs motor accident claims. Part 4.2 makes provision for the making of claims and other preliminary matters. Relevantly, s 72 provides for the time limit for making, and the giving of notice of, a claim. Part 4.3 specifies the duties of an insurer in respect of a claim. The following provisions are presently relevant: "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. … (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. … 83 Duty of insurer to make hospital, medical and other payments (1) Once liability has been admitted (wholly or in part) or determined (wholly or in part) against the person against whom the claim is made, it is the duty of an insurer to make payments to or on behalf of the claimant in respect of: (a) hospital, medical and pharmaceutical expenses, and (b) rehabilitation expenses, and (c) respite care expenses in respect of a claimant who is seriously injured and in need of constant care over a long term, and (d) attendant care services .. as incurred …"
Section 84 imposes a duty upon an insurer to do such things as are reasonable and necessary for the rehabilitation of an injured person.
Part 4.4 deals with claims assessment and resolution and applies whether or not the insurer admits or denies liability. Leaving aside the requirement to engage in the settlement processes specified in Div 1 of Pt 4.4, s 90 provides that a claim may be referred to the Authority for assessment. Pursuant to s 93, the Principal Claims Assessor is responsible for making arrangements as to the claims assessor who is to assess the claim, provided that the claim is not exempt from assessment.
Section 94(1) provides that a claims assessor is to make an assessment both of liability, unless the insurer has accepted liability, and of the amount of damages. Having made the assessment, the assessor is then to issue the insurer and the claimant with a certificate as to the assessment: s 94(4). Pursuant to s 95, an assessment of the issue of liability by an assessor is not binding on any party. An assessment of damages is binding in the circumstances specified in the section.
Curial proceedings may be brought by a person claiming damages for injuries sustained in a motor vehicle accident in the circumstances provided by the Act including, relevantly, when a claim is exempt from assessment. Section 92 provides for two circumstances in which this may occur, as follows: "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 Motor Accidents 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)."
The relevant guidelines for the purposes of s 92(1)(a) contained in Ch 8 of the Claims Assessment Guidelines provide for the exemption of claims from general assessment. Relevantly, cl 8.11 provides: "8.11 For the purpose of section 92(1)(a), the PCA shall issue a certificate of exemption when, as at the time 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: 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 the 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.) 8.11.2 (omitted); (Note: Under clause 1.2, the omission of clause 8.11.2 applies to applications received at CARS on or after the date these Guidelines come into effect. The former clause 8.11.2 continues to apply to applications received before the date these Guidelines come into effect.) 8.11.3 the claimant, or in a claim for an award of damages brought under the Compensation to Relatives Act 1897 one of the dependents, is a 'person under a legal incapacity'; (Note: See definition in Chapter 1 at clause 1.6.27) 8.11.4 the person against whom the claim is made is not a licensed or other CTP insurer; 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 under the third-party policy provided for in section 10 of the Act, in writing, that it declines to indemnify that owner or driver; and/or 8.11.6 the insurer alleges that the claim is a fraudulent claim in terms of the circumstances of the accident giving rise to the claim. (Note: For example where it is alleged that the accident may have been staged or where a person claiming to have been a passenger in the vehicle is alleged to have been the driver of the vehicle.)"
It is relevant to observe, as Leeming JA pointed out in Smalley v Motor Accident Authority of New South Wales at [34], that the circumstances in which a claim is mandatorily exempted from a CARS assessment by cl 8.11 raise matters of factual or legal complexity as to be appropriate for judicial, rather than administrative, determination.
There are also guidelines relating to the evaluation to be made under s 92(1)(b): see cl 4.
Part 4.5 provides for court proceedings in respect of claims. Section 108 provides: "108 Claims assessment or exemption pre-condition for commencement of court proceedings (1) A claimant is not entitled to commence court proceedings against another person in respect of a claim unless: (a) the Principal Claims Assessor has issued a certificate in respect of the claim under section 92 (Claims exempt from assessment), or (b) a claims assessor has issued a certificate in respect of the claim under section 94 (Assessment of claims)."
The effect of the combined operation of ss 94, 95 and 108 is that, in the circumstances specified in those sections, a claim for compensation may proceed to a curial determination.
The Act, in Pt 4.6, also makes provision for the recovery of monies where a claim was fraudulent, as follows: "118 Remedy available where claim fraudulent (1) This section applies to a claimant or insurer if it is established that, for the purpose of obtaining a financial benefit, the claimant or insurer did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading. (2) If this section applies to a claimant: (a) a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and (b) a person who has paid an amount to the claimant in connection with the claim (whether under a settlement, compromise or judgment, or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claim."

Trial judge's reasons

Adams J identified as the critical question for determination whether, having admitted liability to a claimant, the insurer could later deny indemnity to an insured and thereby, indirectly, deny the claimant's claim: at [14]. His Honour held that it was significant that s 81(4) permitted an insurer that had denied liability subsequently to admit liability, but that there was no express provision permitting an insurer to deny liability once admitted.
His Honour found, at [18], that QBE's admission of liability necessarily implied an admission that the policy responded to the claim: Smalley v Motor Accident Authority of New South Wales. The issue was therefore, on his Honour's analysis, the effect of that implied admission. At [19], his Honour observed that, on the face of it, if an admission of liability could not be withdrawn, neither could the implicit admission of liability to indemnify the insured, as the alternative would be to permit the insurer to do indirectly what could not be done directly. His Honour noted that the force of that point was reduced by the statutory bifurcation between s 83 payments and the later determination of damages. Nonetheless, his Honour rejected the distinction sought to be drawn by QBE between liability to the claimant, that was the subject of the s 81 notice, and liability to the insured. At [20], his Honour held that: "… the admission to the claimant was made for a statutory purpose and has statutory effect, 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."
On Adams J's reasoning, it followed, by reference to the statutory scheme, that the question of liability was precluded from further examination once it had been admitted. Importantly for the purposes of this case, his Honour, at [21], accepted the first respondent's submission that: "… permitting QBE to litigate the question whether the policy answers the claim undermines the statutory scheme which requires the insurer to answer 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 (sic). 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."
Adams J concluded, at [22], that QBE was bound "for all purposes" by its notice admitting liability, such that the issue of indemnity under the third party policy of insurance was no longer a live issue and there was no basis for an exception to be granted.

Submissions of the parties

QBE accepted that it was not entitled to withdraw the admission of liability that it had made on 14 February 2013. It also accepted that in admitting liability it had at least inferentially, if not explicitly, agreed to indemnify the insured in respect of the claim.
However, QBE submitted that, notwithstanding that it was not entitled to withdraw the admission of liability in respect of the first respondent's claim, it was nonetheless entitled to seek exemption from the statutory assessment process on the basis that it had no liability to indemnify the insured in respect of the claim. In this regard, it pointed out that the Claims Assessment Guidelines drew a distinction between liability to a claimant for compensation and the insurer's liability to indemnify an insured if it satisfied one or more of the matters specified in cl 8.11.
The first respondent contested QBE's entitlement to a certificate of exemption. He contended that the admission of indemnity implied in the admission of liability made pursuant to s 81, was equally binding on QBE as an admission of liability of the claim itself and that withdrawal of that implied admission was thereby impermissible.

Consideration

To determine the issue raised by the appeal, it is necessary in the first instance to understand the meaning and proper operation of s 81 and, in particular, s 81(1).
Section 81 imposes a duty on an insurer to give an expeditious notice of admission or denial of liability of a claim. The admission or denial of liability required by s 81 is of the insurer's liability to the claimant under the relevant third party insurance policy. That this is so is apparent from the clear words of the section: the insurer must give notice "whether the insurer admits or denies liability": see also Smalley v Motor Accident Authority of New South Wales at [49]. Having admitted liability, the insurer has a number of statutory duties in respect of payments of the claim: ss 82-84.
Although an insurer may subsequently admit liability that it has denied: see s 81(3), there is no provision for the withdrawal of an admission made under the section. In this regard, the parties were in agreement that QBE was bound, for the purposes of the Act, by its admission of liability of the first respondent's claim under s 81: see Nominal Defendant v Gabriel [2007] NSWCA 5; 71 NSWLR 150. In that case, the insurer had given written notice admitting liability to an insured pursuant to s 81(1) of the Act but subsequently served an "amended section 81 notice" which denied liability. The question for determination was whether the insurer could then properly file a defence in curial proceedings in which it denied liability. The trial judge held that it could not.
Campbell JA, with whom Hodgson JA agreed, characterised the admission under s 81 as being an admission made pursuant to a statutory scheme. His Honour held that, as the statute did not provide for its withdrawal, the s 81 admission could not be withdrawn. However, in his Honour's view, the effect in court proceedings of an admission made under s 81 was limited to its value as evidence of a position reached by the insurer and, potentially, as the basis for a claim of estoppel.
In allowing the appeal, Campbell JA held that a defence in court proceedings denying liability to pay after giving a notice under s 81 was not an abuse of process. At [142], Campbell JA stated: "In my view, the provisions of [the Act] do not confer on an admission of liability under section 81 any consequences other than those provided for by the Act itself. Thus, the making of such an admission of liability triggers an obligation to pay the medical and related expenses referred to in section 83. Pursuant to section 94(1)(a) an assessor is not empowered to decide the issue of liability for the claim if the insurer has accepted liability. However, an admission of liability under section 81 has no greater status, once court proceedings are begun, than any other admission of liability made out of court has in those proceedings."
Campbell JA concluded, at [167], that: "The 'amended section 81 notice' served in the present case does not have any effect pursuant to [the Act], for the simple reason that [the Act] has no provision for any amended section 81 notice that retracts an admission of liability previously made in a section 81 notice. For reasons already given, it is not open to an insurer to 'withdraw' a section 81 notice in the sense that it ceases to be an admission for the purposes of the law of evidence. Because it is not made in court proceedings, in my respectful view, no question arises of whether, if an adequate explanation was forthcoming, an admission in a section 81 notice could be withdrawn in the same way that a formal admission made in court proceedings can sometimes be withdrawn. Whether a section 81 admission, once made, can ever be departed from by an insurer in the course of the bureaucratic assessment procedure, and whether circumstances that show that a section 81 admission was made in error could be grounds for the Authority to issue a section 92 certificate (thereby permitting the insurer to dispute liability in court proceedings) are questions that do not arise in this appeal."
The effect in this case of the principle stated in Gabriel is that QBE's purported withdrawal of liability in this case was ineffective. Having admitted liability, the consequences for which ss 83 and 84 provide became operative. Relevantly, QBE was thereafter under a duty to pay, and in fact paid, medical expenses claimed by the first respondent.
Further, and as accepted by QBE, in admitting liability in the terms in which it did, QBE not only admitted liability for the claim made by the first respondent, it also admitted that it was liable under the terms of the third party policy to indemnify its insured.
The question for determination on the appeal is therefore whether, notwithstanding that admission, by later denying liability to the insured, QBE could obtain an exemption from the assessment process pursuant to s 92(1)(a) as a step towards putting in issue the question of its indemnity under the third party policy to the insured, should the respondent commence court proceedings. The answer to that question again lies within the terms of the Act. Before turning to the Act, it is pertinent to observe that this question was adverted to on a somewhat different basis in Smalley, where Leeming JA observed that there may be some cases where there was a difference between the liability of an insured for negligence and liability of an insurer to a claimant: see at [58]. Importantly, as his Honour noted, the Act refers to two different liabilities: viz, the liability to indemnify the insured under the policy and the liability to the claimant for damages.
As already noted, the Act not only establishes a statutory scheme for the provision of compensation by way of administrative assessment, it preserves the availability of the curial determination of claims in the circumstances specified. As explained above, this can occur either prior to a CARS assessment, pursuant to s 92(1)(a); after a preliminary assessment, in one or more of the circumstances specified in cl 8.11 of the Guidelines pursuant to s 92(1)(b); or following a CARS assessment, pursuant to ss 94, 95 and s 108.
For the purposes of this case, it is the circumstances in which an exemption must be made pursuant to cl 8.11 which are relevant for the purposes of this case and a close consideration of the terms of cl 8.11 is required. A number of inter-related points may be made about them.
Clause 8.11 specifies that the determination of whether a claim is exempt is made "as at the time of the consideration of the application". This must mean that the Principal Assessor is to take into account all relevant factors as at that time.
We consider that the lack of an express exclusion from s 92 of cases in which a s 81 admission has been made is a recognition of an insurer's entitlement to deny indemnity to an insured and, for that reason, to have the claim determined curially. In any such curial proceeding, it will be for the court to determine, as a matter of evidence, the import of and weight to be given to the statutory admission. This approach gives recognition to the difference drawn by the Act between liability for a claim and liability to indemnify the insured. The reason for this is obvious: the statutory assessment process is directed towards the assessment of claims for compensation for injuries sustained in motor vehicle accidents. It is not concerned with the interstices of insurance law.
This understanding of the operation of s 92 is consistent with the overall scheme of the Act insofar as it relates to the claims assessment process. The statutory scheme is premised upon the timely making of a claim and an equally timely response by an insurer. It can easily be envisioned that the circumstances in which an insurer may seek to deny indemnity may not become apparent until after the three month time limit specified in s 81. It is not an answer, in our opinion, simply to say that an insurer could deny liability expressly or be deemed to have denied liability under s 81(3), just in case the insurer subsequently became aware of circumstances whereby it was entitled to deny indemnity. Such an approach would be contrary to the scheme of the Act and may even jeopardise an insurer's licence.
A fraudulent claim is an obvious example where an insurer may not be aware of the right to deny indemnity within the statutory time frame specified in s 81. It would not be consistent with the objects of the Act to require that an insurer be bound by an admission of liability in respect of a claim that was subsequently ascertained to be fraudulent and not be entitled to rely upon the provisions of cl 8.11.6 for the purpose of being exempt from the assessment processes of the Act.
The first respondent accepted that this was not the case, and that a fraudulent claim could be subject to exemption pursuant to cl 8.11.6, notwithstanding that liability had been admitted under s 81. He also pointed out that the Act makes provision in s 118 either for the recovery of amounts paid to a person who acted in a false or misleading way or for the defence of such a claim on the basis of fraud. The Act also provides that fraud is a consideration relevant to the determination of the discretionary exclusion pursuant to s 92(1): see cl 14.16.11. However, he contended, in effect, that with those exceptions a s 81 admission was binding in all circumstances.
It must be said that the observations of Basten JA in Gabriel support this argument. His Honour, who dissented in Gabriel, held, at [39], that a s 81 admission could not be withdrawn except in the sense provided for in s 118. His Honour differed from the majority in finding that, in the scheme of the Act as a whole, it would be anomalous if that admission were to be disregarded by the insurer when litigation commenced. His reasons for so finding were predicated upon the entitlement of the insurer under s 118. His Honour stated: "33 … the language of [s 118] makes clear that it applies both to liability for payments incurred pre-litigation and liability under a court judgment. If the liability arises as the result of an admission based on a false statement, relief is provided from its consequences at any stage. The proper conclusion based on that approach is that, where an admission of liability has been made, and the insurer has not proved that it can be relieved of the consequences of the admission pursuant to s 118, the denial of all liability is an abuse of process. 34 … The consequences are … anomalous if the insurer, having made an admission is entitled, in circumstances where s 118 is not engaged, to deny liability in court proceedings. If successful, the insurer will remain liable for all s 83 expenses which will not go in reduction of any judgment. The conclusion that the insurer cannot deny the admitted liability, is to be preferred. It is consistent with the fact that liability for such expenses will continue to operate if no court proceedings are brought. In my view it is compelled by the terms of s 118, which clearly apply to both pre- and post-litigation liabilities."
Nevertheless, the reasoning of the majority supports the conclusion that the giving of a s 81 notice does not preclude a later application to withdraw the admission (and implied admission) contained therein.
Secondly, as the first respondent accepted, at least in relation to the situation to which cl 8.11.6 applies, the fact that the statute provides a right to recover monies paid on a fraudulent claim pursuant to s 118 does not preclude the insurer from seeking exemption from the assessment process. This must be so. Let it be assumed that an admission of liability was made and monies were paid to an alleged fraudulent claimant under s 83 but that the claimant resisted the fraud claim and contended that the insurer remained under the duty imposed by s 83 to continue making payments. It would be an odd result, and there is nothing in the statute that would compel the conclusion, that the insurer could not seek to have the claim taken out of the assessment system pursuant to s 92(1)(a) so that the question of fraud could be contested in court proceedings.
But in any event, s 118 only applies to fraudulent claims, and cl 8.11.6 only applies to the subset of fraudulent claims in which the fraud relates to the circumstances of the accident. However, cl 8.11 provides for a number of other circumstances which, if established, must be exempted from the assessment process. There is no reason, either as a matter of statutory construction or as a matter of principle, to treat a case falling within cl 8.11.5 differently from one that falls within cl 8.11.6 or, as QBE submitted, from cl 8.11.3.
For those reasons, we consider that the primary judge erred in determining that QBE was bound for all purposes by its s 81 notice admitting liability in respect of the first respondent's claim.

Order 2 made by the primary judge

Order 2 made by the primary judge on 20 February 2015 was as follows: "(2) The Motor Accidents Authority is prohibited from issuing a certificate of exemption."
QBE contended that, even if his Honour were correct in his finding that the Authority could not validly issue a certificate of exemption pursuant to s 92(1)(a) and cl 8.11.5, the effect of the relief granted by order 2, which was to prohibit the granting of a certificate on any ground at all, went beyond what could be justified by his Honour's reasons. It is appropriate that this question be determined notwithstanding that it has relevance only if we are wrong in our findings above.
As we have noted, a certificate of exemption may be issued both pursuant to subs 92(1)(a), in which case the exemption is mandatory, or pursuant to subs 92(1)(b), in which case the assessor must exercise a discretion, subject to the considerations outlined in cl 14.11. That clause provides: "For the purpose of section 92(1)(b), an Assessor may, in dealing with an application for general assessment and following a preliminary assessment of the claim, determine that the claim is not suitable for assessment."
Clause 14.16 provides that, in determining whether a claim is suitable for assessment, an assessor shall have regard to a number of listed circumstances. QBE contended that, in particular, the considerations in cls 14.16.2-14.16.5 might become relevant in the present matter. Those clauses provide: "14.16.2 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; 14.16.3 whether the claim involves complex legal issues; 14.16.4 whether the claim involves complex factual issues; 14.16.5 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 …"
We need make no comment about whether the discretion pursuant to subs 92(1)(b) should be exercised having regard to the mandatory considerations of cl 14.16. The validity of any potential discretionary exclusion pursuant to subs 92(1)(b) is not in issue in this Court and was not in issue before the trial judge. His Honour appears to have made order 2 on the basis that there was no room for the exercise of discretion since QBE was bound for all purposes by its s 81 notice and hence the issue of indemnity was no longer a live issue (at [22]). However, it is by no means apparent that an assessor could not reasonably form the view that the claim should be exempt from CARS even leaving aside the s 81 issue. Nor should the Court preclude, as order 2 does, any further claim for exemption on some other basis. We would set aside order 2 on this ground alone.

Additional comment

At the commencement of the hearing of the appeal, the Court raised the question whether the insured should be joined as a party to the appeal. QBE accepts that the insured was an appropriate party to be joined but, it submitted, not a necessary party. The first respondent informed the Court he did not propose to join the insured.
In the circumstances, we have decided that the insured is not a necessary party to the proceedings. In those circumstances, we do not consider it is necessary to take any steps relating to his joinder. Our decision in this regard is essentially on the basis that if curial proceedings are brought against the insured by the first respondent, he will, in these proceedings, have the opportunity to claim indemnity from QBE, should QBE continue to maintain it is not liable to indemnify him under the third party policy of insurance.

Orders

We make the following orders:
Appeal allowed;
Set aside the orders of Adams J made 20 February 2015;
Order the first respondent to pay the appellant's costs of the appeal and in the court below;
Order that the first respondent is to have a certificate under the Suitors' Fund Act 1951 (NSW) if otherwise eligible.
SIMPSON JA: I have read in draft the joint judgment of Beazley P and Ward JA. I have come to a different conclusion. I would dismiss the appeal.
The relevant statutory scheme is set out in full in the joint judgment. I will refer only to those provisions necessary to explain my conclusion.
On 1 December 2012 the first respondent (to whom, as he is the only active respondent, I will refer simply as the respondent) was injured when the motor vehicle in which he was a passenger ran out of control and into a drain. The vehicle was owned and driven by the respondent's son, Tobie Mordue. It was participating in a motor rally and was subject to an unregistered vehicle permit issued under the Road Transport (Vehicle Registration) Act 1997 (NSW) and to a third party policy of insurance issued by the appellant (QBE).
Because of his injuries, the respondent made a claim on the insurance policy under s 72 of the Motor Accidents Compensation Act 1999 (NSW) ("the MAC Act"). A "claim" is defined in s 3 of the MAC Act 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."
By s 72(2)(a), where a claim is made against a person who holds a third party policy of insurance under the MAC Act, the claim is made by giving notice (directly) to that insurer. The owner or driver is not involved. On 20 December 2012 the respondent gave notice to QBE of the claim.
By s 77(1), a person who holds a third party policy of insurance may not, without the consent of the insurer: "(a) enter upon, or incur any expense in, any litigation, or (b) make any offer or promise of payment or settlement, or (c) make any payment or settlement, or (d) make any admission of liability, in respect of a claim …"
By s 78(1), when a claim is made against a person, that person's insurer may: "(a) conduct and control negotiations in respect of the claim, and (b) conduct, or take over the conduct of, any legal proceedings in respect of the claim and may conduct those proceedings in the name and on behalf of the person, and (c) at any stage of those negotiations or proceedings, compromise or settle the claim, and (d) exercise any function conferred by this Act on the person in respect of the claim." By subs (2) of s 78 the person against whom the claim is made is obliged to sign any warrants, authorities or documents as are necessary to give effect to this section.
By s 81(1) of the MAC Act, the insurer is under a duty, as expeditiously as possible but in any event within 3 months, to give written notice to the claimant whether it admits or denies liability for the claim. This QBE did on 14 February 2013, in the following terms: "SECTION 81 NOTICE … 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." QBE went on to advise the respondent to forward all original accounts or receipts for medical and rehabilitation treatment to its office and that QBE would only pay for hospital, medical and rehabilitation expenses that were reasonable and necessary and related to the injuries caused by the accident.
An admission of liability under s 81 has significant consequences. By s 82, unless it wholly denies liability for the claim, an insurer is under a duty to make a reasonable offer of settlement to the claimant, and relatively tight time limits within which this is to be done are imposed.
One consequence of QBE's admissions of liability was that, by s 83, it was under a duty to make payments to or on behalf of the respondent in respect of such hospital, medical, pharmaceutical, rehabilitation and respite care expenses as were reasonably and necessarily incurred and properly verified and related to the respondent's injury. QBE has made some such payments.
There is no indication that QBE consulted Tobie Mordue before accepting that the accident occurred as a result of his fault, and it is quite clear, on the evidence, that it did not do so. Nor, as will be seen, was it obliged to do so.
The purported reservation in the s 81 Notice of the right to withdraw the admission of liability was ineffective. That is because, although the MAC Act makes express provision (in s 81(4)) for an insurer to withdraw a denial of liability, it contains no corresponding provision permitting an insurer to withdraw an admission of liability, and there is no capacity for an insurer to do so: The Nominal Defendant v Gabriel [2007] NSWCA 52; 71 NSWLR 150 at [6] (per Hodgson JA, [3]-[6], and per Campbell JA at [167]); CIC Allianz Insurance Ltd v Erturk [2010] NSWSC 302; 55 MVR 224. QBE expressly disclaimed any contention that Erturk was wrongly decided, and similarly made no contention that the statements in Gabriel were incorrect or should not be followed.
Notwithstanding that it had no capacity to do so, solicitors acting on behalf of QBE, on 5 June 2013, purported to withdraw its admission of liability. The solicitors wrote to the respondent in the following terms: "AMENDED SECTION 81 NOTICE … 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 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 solicitors wrote to Tobie Mordue, in the following terms: "… Please note that by operation of s 10(1)(b) of the Motor Accidents Compensation Act, QBE's third party policy only operates whilst the vehicle is being used or operated on a road, with the meaning of that term set out in the Road Transport Act 2013. A road is defined to mean 'an area that is open 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. If you had other insurance in place to cover this event, you should contact that insurer if you have not already done so." The solicitors sent a copy of this letter to the respondent.
Part 4.4 of the MAC Act is headed "Claims Assessment and Resolution". It applies "whether or not the insurer admits or denies liability" (s 89(1)). Essentially, this Part provides for extra-curial resolution of claims. Section 98 provides for the establishment of a claims resolution service, called "The Motor Accidents Claims Assessment and Resolution Service" ("CARS" for short). The purpose of CARS is to achieve (where possible) resolution of s 72 claims without resort to a court process. A Principal Claims Assessor ("PCA") (s 99A) and Claims Assessors (s 99) are appointed to implement a claims assessment process. Section 69(1) makes provision for "the Authority" (that is, the State Insurance Regulatory Authority, formerly the Motor Accidents Authority) to issue guidelines (Motor Accidents Claims Assessment Guidelines, to which I will refer as "the Claims Assessment Guidelines") for or with respect to procedures for the assessment of claims under Pt 4.4 and associated matters.
By s 88(1) the parties to the claims assessment process are the insurer and the claimant. The holder of the insurance policy has no role to play in the process.
The claims assessment process is mandatory (ss 89A-89E), unless the claim comes within one of the exclusions specified in s 89E. One basis for exclusion is that a claim is exempt under the Claims Assessment Guidelines or the regulations (s 92(1)(a)). (Another basis for exclusion from the mandatory process of assessment, found in s 92(1)(b), is that a claims assessor has made a preliminary assessment of the claim and has determined, with the approval of the PCA, that it is not suitable for assessment under Pt 4.4. This provision has some peripheral relevance in this case.)
If a claim is exempt from assessment under Pt 4.4, the PCA is required, by s 92(2), as soon as practicable, to issue the insurer and claimant with a certificate to that effect, enabling court proceedings to be commenced in respect of the claim.
The Authority has in fact issued Claims Assessment Guidelines under s 69(1). Relevantly for present purposes, these include: "8.11 For the purpose of section 92(1)(a), the PCA shall issue a certificate of exemption when, as at the time 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: 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 the use or operation of the vehicle is denied; … 8.11.2 … 8.11.3 … 8.11.4 … 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 under the third-party policy provided for in section 10 of the Act, in writing, that it declines to indemnify that owner or driver; and/or 8.11.6 the insurer alleges that the claim is a fraudulent claim in terms of the circumstances of the accident giving rise to the claim." A note to sub-cl 8.11.6 gives as examples of fraudulent claims circumstances in which it is alleged that the accident may have been "staged", or in which a person claiming to have been injured as a passenger is alleged to have been the driver.
It will be seen that sub-cl 8.11 is expressed in mandatory terms - that is, if the relevant conditions are satisfied, the PCA shall issue a certificate of exemption.
On or about 7 March 2014, using a form provided for the purpose, QBE applied for exemption from the claims assessment process. In the section of the application form requiring statement of the reason or reasons for the application, QBE placed crosses in boxes that indicated that the reasons were those provided for in sub-cl 8.11.1 (denial of fault of the owner or driver) and sub-cl 8.11.5 (declining to indemnify the owner or driver).
The first was patently incorrect. Even in its purported amended s 81 Notice, QBE did not deny fault on the part of Tobie Mordue, the owner and driver (and the holder of the insurance policy).
QBE's application for exemption came before the PCA, Ms Belinda Cassidy. On 20 May 2014 Ms Cassidy issued a certificate of exemption. She rejected QBE's claim for exemption based on sub-cl 8.11.1. She stated that she was satisfied that QBE had declined to indemnify the owner and driver of the vehicle against which the claim was made, and that, therefore, she had no discretion and was obliged to exempt the claim from assessment. She accordingly held that the claim was "an exemptible claim under s 92(1)(a) and cl 8.11.5" of the Claims Assessment Guidelines. She added that, if she were wrong in her interpretation of sub-cl 8.11.5, she was of the view that the claim was unlikely to be suitable for assessment, and she would have been likely to have exempted it under s 92(1)(b). Her expressed reason for this was the existence of a dispute about insurance and indemnity, and the inability of CARS fairly to determine that dispute, particularly in the light of the inability of CARS to join Tobie Mordue as a party to the claim.
The respondent sought judicial review of the decision in the Supreme Court. On 20 February 2015 Adams J made the following 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 [QBE Insurance (Australia) Ltd] is to pay the plaintiff's [the respondent's] costs." His Honour considered that an admission of liability under s 81(1) necessarily implies the further admission that the policy responds to the claim, and that, if an admission of liability cannot be withdrawn, neither can any of its corresponding implicit admissions.
QBE has appealed against that decision.
The essence of QBE's case on appeal is that, while it accepts that it is bound by its original admission of liability to the respondent, that admission does not extend to an admission of liability to indemnify Tobie Mordue in respect of the respondent's claim. Since it has, within sub-cl 8.11.5 of the Claims Assessment Guidelines, notified Tobie Mordue, and the respondent, that it declines to indemnify Tobie Mordue, the PCA was obliged to issue a certificate of exemption.
Resolution of the issue, in my opinion, turns upon what is meant by the words "admits … liability for the claim" as they appear in s 81(1). It is therefore best to set out the whole of that sub-section. It is as follows: "(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." Three questions of construction emerge: whose liability? liability to whom? and liability for what?
There are good reasons for answering that the liability is that of the insurer; it is liability to the claimant; and it is liability for the claim that the claimant makes (that is, for damages for personal injury). One of the reasons is that, by ss 77 and 78, the insured owner or driver is entirely excluded from the decision to admit or deny liability, from negotiation in respect of the claim, and, by s 88(1), from the assessment process that follows. By s 72(2) the claim is made directly to the insurer. The parties to the assessment process are the insurer and the claimant; there is no role for the insured to play. Yet an admission of liability necessarily implies an admission of fault on the part of the owner or driver, and this was expressly contained in QBE's initial s 81(1) Notice.
The language of s 81(1) does not, in my opinion, admit of an interpretation that involves an admission of liability on the part of the insurer for the claim but does not involve indemnifying the insured. I find it impossible to understand what the purportedly admitted liability could be if it is not liability of the insurer to pay the claim. As a matter of plain statutory construction, admission of liability for a claim encompasses liability to pay the claim (after assessment or determination by a court). As is clear from Erturk, a mistaken admission of liability cannot, as the legislation presently stands, be rectified.
Section 81(1) does not expressly, and, in my opinion, does not impliedly, differentiate between liability to a claimant, and liability to indemnify an owner or driver who is at fault in the use or operation of the vehicle insured. The phrase "the insurer admits or denies liability for the claim" is a composite one, encompassing the insurer's admission of its own liability to meet the claim made in respect of the injury.
Senior counsel for QBE acknowledged as much when pressed during the course of argument. He said: "It is clear that when one looks at what follows that the effect of that admission for the claim, of liability for the claim in whole or in part, immediately gives rise to financial obligations imposed by statute on the insurer and of course that is redolent of an obligation to indemnify. It can only be seen as consistent with that, that there are other logical possibilities, does not matter. (T7, 15-20) … It is either an admission on behalf of the insured … that there was fault and all the other matters which would render the driver liable to the injured person, or it is that plus the operation of the terms of the policy so as to render the insurer liable to indemnify for that liability. It has been held below of course that it was the second, and as you have seen from our submissions, it is extremely difficult to contend against that, because an insurer admitting liability for the claim and the partial denial of liability is of course suggestive that there can be by reasons of the scope of indemnity, non liability of the insurer while still liability of the driver thus admission of liability by an insurer would appear to carry with it statements about the state of the indemnity." (italics added) (T7, 29-40)
No provision of the MAC Act which drew any distinction between liability to meet a claim, and liability to indemnify an owner or driver was identified. The only such provision, to which this Court was referred, in which such a distinction appears to be drawn, is to be found in sub-cl 8.11.5 of the Claims Assessment Guidelines.
That naturally leads to a consideration of the status of the Claims Assessment Guidelines, particularly sub-cl 8.11.5.
The Claims Assessment Guidelines are delegated, or subordinate, legislation. By s 69(6) of the MAC Act, s 40 of the Interpretation Act 1987 (NSW) (requiring statutory rules to be tabled in both Houses of Parliament) and s 41 of the same Act (permitting disallowance) apply to the Claims Assessment Guidelines. They thus have the characteristics of delegated legislation. One such characteristic is that, to the extent (if any) that they are irreconcilably incompatible or inconsistent with the statute under the authority of which they are made, they must give way to that statute: Morton v Union Steamship Co of New Zealand Ltd [1951] HCA 42; 83 CLR 402; Pearce, D C and Geddes, R S, Statutory Interpretation in Australia, (8th ed, 2014, LexisNexis), 3.42; and see the discussion in Pearce, D C and Argument, S, Delegated Legislation in Australia, (4th ed, 2012, LexisNexis), at 19.9-19.18.
It was not argued in the present case that the Claims Assessment Guidelines, or any part of them, were inconsistent with the MAC Act, and I make no such finding. The Claims Assessment Guidelines can be read consistently with s 81. If sub-cl 8.11.5 is construed in such a way as to allow an insurer, having admitted liability under s 81, to go behind that admission by declining to indemnify its insured, then, in my opinion, it would be inconsistent with the MAC Act and must give way to it. However, the clause is not inconsistent with s 81 unless it contemplates denial of indemnity after the admission of liability. It is not necessary to interpret the sub-clause in the former way; it is entirely open to the interpretation that, where an insurer has denied liability (or made no admission or denial), and also declines to indemnify the owner or driver, the PCA is required, under the clause, to issue a certificate of exemption. In this respect it is to be remembered that the claims assessment process applies and is mandatory, regardless of the position adopted by the insurer with respect to liability (s 89(1)).
In Smalley v Motor Accidents Authority of New South Wales [2013] NSWCA 318; 85 NSWLR 580, Leeming JA (at [58]) contemplated the possibility of a difference between the liability of an insured for negligence, and the liability of the insurer to a claimant. His Honour did not proceed to make any finding in that respect.
The view I take is in accordance with the general tenor of Ch 4 of the MAC Act. It is hardly to be thought that the legislature intended that the holder of an insurance policy could be prohibited from being involved in any way with the resolution of a claim (s 77), that an insurer could admit liability on behalf of its insured (without consultation) (s 81), conduct and control negotiations in respect of the claim to the exclusion of the insured (s 78(1)(a)), compromise the claim (s 78(1)(c)), and exercise any function conferred on the insured in respect of a claim (s 78(1)(d)), but nevertheless deny the insured indemnity.
The consequence of the above is that, in my opinion, once an insurer has admitted liability for a claim, it cannot be given exemption from the assessment process under sub-cl 8.11.5. Whether that applies also to an allegation, made after an admission of liability for the claim, that the claim is fraudulent (sub-cl 8.11.6) does not arise for consideration. Once it is accepted - as it was on behalf of QBE - that a s 81(1) admission of liability is final and irreversible, and encompasses an admission of liability to indemnify the policyholder, sub-cl 8.11.5 cannot be used to exempt the claim from the assessment process.
I appreciate that acceptance of these conclusions may potentially operate harshly on insurers. By reason of the time limit (3 months) imposed by s 81(1), there is considerable pressure on insurers to investigate claims and determine their position. That pressure is intensified by s 82(1), requiring insurers to make reasonable offers of settlement within tightly prescribed time periods, and by s 82(7), providing that compliance with s 82 is a condition of the insurer's licence.
My conclusions are purely the result of statutory interpretation. If it is the case that the MAC Act operates too harshly on insurers, it is open to insurers to seek the intervention of the legislature.
In my opinion the appeal, so far as it challenges Order (1) of the orders of Adams J, should be dismissed. I agree, for the reasons given in the joint judgment, that Order (2), prohibiting the issue of a certificate of exemption, could not be justified, particularly in light of the PCA's observation that she might, in any event, have issued such a certificate under s 92(1)(b) (although her stated reasons might not survive analysis if my reasons herein were to prevail).
The orders I would make are: (1) Set aside Order (2) of the orders made by Adams J on 20 February 2015; (2) Otherwise dismiss the appeal; (3) Order that the appellant pay the respondent's costs of the appeal.

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: 02 December 2015

Suitors' Fund Act 1951(NSW)

Motor Accidents Claims Assessment Guidelines Motor Accidents Compensation Act 1999(NSW)

Road Transport (Vehicle Registration) Act 1997(NSW)

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