QBE Insurance v Motor Accidents Authority

QBE Insurance v Motor Accidents Authority - [2008] NSWSC 434 - NSWSC 2008 case summary — Zoe

[17]

(5) Subsections (3) and (4) do not affect the operation of any legislative provision to the extent to which the provision is, according to common law principles and disregarding those subsections, effective to prevent the Court from exercising its powers to quash or otherwise review a decision." 5 The scope for intervention by way of relief in the nature of certiorari with regard to administrative decision makers was considered by the High Court in Craig v South Australia (1995) 184 CLR 163 at 179: "If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it." 6 This was later clarified in the case of Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 where McHugh, Gummow and Hayne JJ in a joint judgment said at 351: "Jurisdictional error" can thus be seen to embrace a number of different kinds of error, the list of which, in the passage cited from Craig , is not exhaustive. Those different kinds of error may well overlap. The circumstances of a particular case may permit more than one characterisation of the error identified, for example, as the decision-maker both asking the wrong question and ignoring relevant material. What is important, however, is that identifying a wrong issue, asking a wrong question, ignoring relevant material or relying on irrelevant material in a way that affects the exercise of power is to make an error of law. Further, doing so results in the decision-maker exceeding the authority or powers given by the relevant statute. In other words, if an error of those types is made, the decision-maker did not have authority to make the decision that was made; he or she did not have jurisdiction to make it." 7 In this case QBE submitted that the Principal Claims Assessor firstly, made an error of law; and secondly, has asked the wrong question in deciding that the Authority had jurisdiction to assess the claim.

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7.1.2 where the fault of the owner or driver of a motor vehicle, in the use of 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 and claims a reduction in damages of more than 25%." 26 The main issue is whether the phrase "makes an allegation" in cl 7.1.2 is interpreted as being modified by s 81 of the Act. 27 QBE submitted that "makes an allegation" can include a new allegation regarding their liability that differs from what they have previously admitted in their s 81 notice. This is said to flow from the requirement that the principal claims assessor will decide whether to issue the s 92 certificate on the information that was available to them at the "time of the assessment" and not at the time when the s 81 notice was issued. 28 QBE also sought to draw support from the Court of Appeal's decision in Gabriel, which it submitted was misinterpreted by the Principal Claims Assessor in that The Nominal Defendant v Gabriel [2007] NSWCA 52 did not hold that once made, an insurer is bound evermore by their allegations in s 81. In fact it contends quite the opposite. It says that Gabriel decided that a defence could be filed notwithstanding that it contains allegations that are inconsistent to what was raised by an insurer in their s 81 notice. It submitted that this approach is in line with the purpose of the Act and ordinary statutory construction as if an insurer was prohibited from ever deviating from their s 81 notice great injustice would be occasioned. QBE in support referred to the situation where an insurer has accepted a fraudulent claim and by the operation of s 81 would be prevented from raising a valid defence. It submitted that where such an interpretation has the effect of extinguishing a common law right, this Court should be reluctant to interpret the Act in this way. 29 Mrs White, on the other hand, submitted that since cl 7.1.2 is a guideline, like all pieces of delegated legislation it "cannot vary or depart from the positive provisions made by the Act" nor can it "go outside the field of operation which the Act marks out for itself": Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402 at 410; Shanahan v Scott (1957) 96 CLR 245 at 250; State of New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307 at 320-321. In her submission, since Gabriel made it clear that an "amended s 81 notice" is to have no effect, cl 7.1.2 should not be interpreted in a way that enables an insurer to make fresh allegations, as to do so would give effect to an "amended s 81 notice" and would depart from the provisions of the Act. 30 Although Mrs White conceded that there is a problem in that the Court of Appeal did ultimately conclude in Gabriel that a s 81 notice was not finally binding upon an insurer once the matter was litigated, they submitted that this exception only applied to court proceedings but not to bureaucratic assessments. 31 Mrs White also conceded that if a s 81 notice is held to be finally binding upon an insurer in a bureaucratic assessment there is a possibility for unfairness, such as fraud. However, there is a remedy for fraud under s 108(1)(b) of the Act. In her submission if fraud or other unfairness could be shown to have influenced the bureaucratic assessment that would entitle an insurer to relief on appeal. 32 From these submissions it can be seen that the decision of the Court of Appeal in Gabriel is central to resolving this application.

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Consideration of Nominal Defendant v Gabriel 33 In Gabriel the claimant was injured when the motor vehicle she was a passenger in veered off the road and crashed into a telegraph pole. The driver of that vehicle was her cousin who was insured with NRMA. 34 Police had arrived at the scene of the accident and interviewed the driver. Gabriel was unconscious and at the time of trial did not remember anything about the accident. As a result, with the exception of some other witnesses, the insurance company was almost totally reliant upon the recollection of the driver in assessing the claim. 35 The driver claimed that she was not at fault and that the real cause of the accident was a third party who had been driving a red commodore. She claimed that in the process of overtaking her, the red commodore had almost side swiped her car, forcing her to violently swerve off the road and into the pole. The driver of the red commodore had fled the scene and was never located by the police. 36 When the NRMA denied liability for the accident, Gabriel made a claim against the nominal defendant pursuant to Part 2.4 of the Act. AAMI Insurance Ltd was assigned to represent the nominal defendant and to assess the claim. After carrying out an investigation, AAMI advised the nominal defendant to accept liability and a s 81 notice was issued were they accepted liability and made a claim (or to be more accurate a cross claim) of contributory negligence against the driver of 25%. 37 As the matter progressed further information was provided to AAMI which led them to question their earlier admission. On 24 May 2005 AAMI lodged an application to have the claim excluded from bureaucratic assessment on the basis that the determination of whether the driver was liable for contributory negligence involved complex questions of facts, the resolution of which required the calling of witnesses and the making of judgments not suitable for bureaucratic assessment. An exemption was granted under s 92(1)(b) and proceedings were initiated in the District Court of New South Wales. 38 At court, the nominal defendant revaluated the situation. It obtained access to the police photos and purported to issue what was entitled an "amended s 81 notice". In their amended s 81 notice the nominal defendant raised numerous grounds which were not included in their original s 81 notice. The defence pleaded those new claims. Although acknowledging that an inconsistency arose between the pleadings and the original s 81 notice, the defendant submitted that the amended s 81 notice should be taken as a substitute for the original notice. It was submitted that since the first notice had been withdrawn it should be treated as if it never existed in the first place, and accordingly no problem of inconsistency arose between the defendant's pleadings and the applicable s 81 notice. 39 By a notice of motion, the claimant sought to strike out parts of the defence that deviated from the nominal defendant's original s 81 notice. At first instance, Naughton DCJ struck out the offending parts of the defence. His Honour ruled that in the absence of any mistake or fraud he did not see why in the interest of justice the insurer could deviate from their original s 81 notice. It was therefore held that since the original s 81 notice is taken to be binding on the defendant, any pleadings to the contrary should be struck out on the basis that they are hopeless and have little to no probability of success. 40 The nominal defendant appealed and by a majority of 2 to 1, the Court of Appeal overturned the decision of Naughton DCJ. 41 Campbell JA wrote the leading judgment. The starting point for his Honour was considering the provisions of the Act and whether they displace the usual approach of the Court in dealing with admissions made out of court. At [113] his Honour considered the usual approach of the Court in dealing with admissions made out of Court and what is their impact when a party raises pleadings that are inconsistent with such admissions: "113 An admission made otherwise than in the course of a formal court process, is merely an item of evidence that the court might ultimately accept or reject. It is open to a party who has made such an admission to seek to demonstrate, through other evidence, that the admission was made under a misapprehension, or at a time when the person who made the admission did not have all the relevant information, or that there is some other reason why the court ought not accept that the admission states the truth about the matter admitted. In that way, an admission that is an item of evidence made outside court proceedings can be qualified or explained away. However, there is no question, absent some statutory context that provides it, of any such admission being "withdrawn" . If a motorist, after an accident, says "I wasn't looking" nothing that the motorist does afterwards can alter the fact that he or she said those words, and it is the saying of the words that constitutes the admission." 42 At [141] - [143] Campbell JA considered the effect of the Act and whether the issuing of a new "amended s 81 notice" can be taken to have replaced the previous notice: "141 The MAC Act is not legislation that exhaustively covers the field of claims for damages for personal injury caused by motor vehicles. In particular, it deals only in certain specific respects with the manner in which such a claim is dealt with, when and if it gets to court. It says nothing expressly about a defendant's opportunity to deny negligence, once the matter is in court, being restricted. Nor can I find any implied intention in the legislation to limit a defendant's freedom to deny negligence in litigation, in any way that did not already arise under the pre-existing rules and procedural practices of the courts. Cutting down of the jurisdiction of courts to decide controversies needs to be done clearly by legislation, if it is done at all.

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143 There is no provision in the MAC Act that says that a section 81 admission of liability, once made, can be "withdrawn" , either unilaterally by the insurer or with the permission of a court or of anyone else. In contrast, section 81(4) empowers an insurer to in effect retract either an actual denial of liability, or a deemed denial of liability arising under section 81(3)." 43 Importantly, however Campbell JA did not decide that the insurer could never resile from their s 81 notice. Rather, his Honour concluded that, like all out of court admissions, a s 81 notice must be seen as a piece of evidence the making of which is obviously telling, but not necessarily conclusive of the insurer's case. This can be seen in the following excerpt from his Honour's judgment: "144 Even though a section 81 admission does not preclude the pleading of a defence denying liability, the fact that such an admission was made might still be proved by the plaintiff in litigation to enforce the claim. Whether it was an "admission" within the meaning of the Evidence Act 1995 , and thus admissible, might depend on its precise terms, and might depend on a question of law that was not argued before us about the scope of the definition of "admission" in the Evidence Act (namely, whether in light of Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 a statement out of court of a matter of mixed fact and law can be an "admission" within that definition). If it were admitted and there were other evidence, the section 81 admission would need to be weighed along with the other evidence. Its precise terms - and in particular whether it said anything more than that the insurer admitted liability, or admitted breach of a duty of care, might also affect the weight it was given: cf Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317. The fact that a section 81 admission had been made and tendered in evidence at a trial might mean that a defendant would be well advised, at the trial, to give evidence of the circumstances that caused it to change its mind about whether it was liable. However any such evidence would be for the purpose of qualifying or explaining away the admission, in the same way as any party who had made an out-of-court admission might seek to qualify it or explain it away. When a section 81 admission can be dealt with in this way if admitted as evidence I do not see the absence of any power for it to be "withdrawn " as indicative of a legislative intention that, once such an admission has been made, a defendant can only deny liability with leave of the court. Rather, a section 81 admission is then in the same position as any other out-of-court admission made by a party.

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148 There may well be factual circumstances in which an insurer who makes a section 81 admission is unable to retreat from that position. Such a situation might arise if the plaintiff had relied upon the admission in circumstances that gave rise to an estoppel, or if the admission was made in circumstances that amounted to an election, or a contract to admit liability. But deciding whether there is such an estoppel, election or contract is done following a trial." 44 The judgment of Campbell JA therefore contains two conclusions, firstly, that a s 81 notice can never be withdrawn and treated as if it never existed in the first place. It is a piece of evidence that is relevant in assessing what is the insurer's position in relation to the claim and is not simply replaced by an "amended s 81 notice". However, on the other hand the insurer is not necessarily bound to the position that they take in their s 81 notice. Since the original s 81 notice is a voluntary admission such evidence would have to be persuasive to overcome the impact of their earlier admission but to interpret a s 81 notice as irredeemably locking in an insurance company to a stated position would take away a common law right (that is the right of a party to raise a relevant defence), a course that should only be countenanced when it is mandated by unequivocal statutory language. In this case the Act does not include such unequivocal statutory language and a s 81 notice is not binding on an insurer forevermore. 45 It is with this context that the comments of Campbell JA in the last paragraph of his judgment needs to be read: "167 The "amended section 81 notice" served in the present case does not have any effect pursuant to the MAC Act , for the simple reason that the MAC 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." 46 A similar conclusion was reached by Hodgson JA. At para [3] his Honour agreed that there are "indications" in the Act "that an admission pursuant to s 81 has continuing effects that cannot be overcome by purporting to withdraw it". Although, like Campbell JA, Hodgson JA does not conclude that the effect of s 81 is to prevent an insurer from ever deviating from what they admit in their s 81 notice, except perhaps in a case where an estoppel may arise. As his Honour explained at [4] - [10]: "4 The obligation to make payments under s.83 arises "Once liability has been admitted …", and there is no reference to its ceasing by reason of a later withdrawal of the admission.

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27 With respect, the latter approach is not readily supportable. Like earlier rules of the Supreme Court, the Uniform Civil Procedure Rules, Part 17, dealing with formal admissions, clearly do not apply in terms to pre-litigation admissions by persons who are not party to proceedings. The remedy, if there be one, must be found within the MAC Act." 49 In his Honour's view if the Act did provide an option for an insurer to resile from s 81 notice it was to be found exclusively in s 118. Section 118 deals with fraud and gives an insurer a right to recover funds that have been paid out under an insurance claim if their decision to pay the claim was induced through fraud or misleading conduct. In all other situations Basten JA was of the view that an insurer was bound by their s 81 notice. 50 Basten JA provided three reasons why this interpretation was more consistent with the provisions of the Act. Firstly, at [31] - [34] he pointed to the consequences that follow when an insurance company admits liability in a s 81 notice. In particular he noted how an admission from an insurance company in a s 81 notice automatically make them liable under ss 83 and 84 of the Act to pay the expenses that have been incurred by the claimant in treating their injuries. If the insurer could amend their defence and succeed in their case this may lead to a strange result in which they have succeeded in avoiding liability but are unable to recover their expenses. In his Honour view such an outcome would be contrary to the purposes of the Act. 51 Basten JA secondly focused on s 78(4) which is a provision that is designed to protect insurers from being bound by statements they make in connection "with the settlement of a claim" or the "conduct of proceedings". To Basten JA it was material that the protection did not extend to statements made by insurers before the commencement of litigation, meaning that pre litigation statements could be binding upon insurers. This has important consequences for s 81 notices which are admissions of liability made by an insurer before proceedings have commenced. As his Honour explained: "35 There are other provisions which favour the view that a formal admission made under s 81 is not to be disregarded by the insurer when litigation commences. First, s 78 confers on the insurer control over negotiations in respect of a claim and conduct of any legal proceedings in respect of the claim and requires the person against whom the claim is made to act as required by the insurer. Section 78(4) then provides: (4) Nothing said or done by an insurer under this section in connection with the settlement of a claim or the conduct of proceedings in respect of a claim is to be regarded as an admission of liability in respect of or in any way prejudice any other claim, action or proceeding arising out of the same occurrence. The language is awkward and "prejudice" might appropriately be replaced by "prejudicing", but the intent is reasonably clear. It does not suggest that something done by the insurer in connection with the settlement or assessment of a claim, prior to litigation, may not prejudice its position in the conduct of proceedings in respect of the same claim. The obvious form of prejudice is that the admission takes effect according to its terms.

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36 The giving of a written notice under s 81(1) is something done by an insurer "in connection with the settlement of a claim" and, probably, in connection with "the conduct of proceedings in respect of a claim". Part 4.3 commences with the imposition on the insurer of a duty to endeavour to resolve a claim, by settlement or otherwise, as justly and expeditiously as possible. Section 82(1) requires the insurer to make a reasonable offer of settlement. Section 85(1) requires a claimant to co-operate to allow an earlier assessment of liability and to enable an informed offer of settlement to be made. Section 82(1), read in context, is itself part of the process by which settlement of a claim is to be achieved. The separate time constraints imposed on the giving of notice in relation to liability and the offer of settlement specifying an amount of damages, reflect the different stages of investigation at which such steps can reasonably be expected to be taken. Furthermore, the phrase "in connection with" has a wide frame of reference which, in the statutory context, cannot be limited in some artificial manner: see, eg, Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 at 48 (Brennan, Deane and Gaudron JJ). The activities referred to in s 78(1) cannot properly be read down to exclude the obligations imposed under ss 80-82. Were it otherwise, the obligations placed on the insured person, under s 78(2), would not operate in relation to the things required to be done by the insurer under ss 80-82. That would not be a rational result." 52 Basten JA in his third conclusion focused upon the wording (or more accurately the absence of wording) in s 81(4), the one clause with the exception of s 118 his Honour believes may give an insurer the right to withdraw a s 81 notice. His Honour noted that since the section gives an insurer a right to withdraw a s 81 notice if the insurer after denying responsibility changes their mind and decides to accept full liability for the accident, as it did not provide a reciprocal power to withdraw a s 81 notice if an insurer sought to reduce their liability, the legislature must have intended for an insurer to bound in the latter circumstance by their s 81 notice. As his Honour explains: "37 Whilst again providing a negative inference from silence, an inference may also be derived from the terms of s 81(4). As already noted, s 81 imposes a duty on an insurer to make "as expeditiously as possible" an admission or denial of liability by written notice to the claimant. Subsection 81(3) provides that where the insurer fails to give notice in a timely manner, or with adequate detail, "the insurer is taken to have given notice to the claimant wholly denying liability for the claim". The section then provides: (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.

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(7) In proceedings before a court with respect to a claim (other than proceedings under Part 4.6), evidence of a statement made during an assessment conference is not admissible unless the person who made the statement agrees to the evidence being admitted." 58 At the assessment conference the parties are given an opportunity to present information and to make submissions to the assessor. There is nothing in these sections that indicate that those submissions are limited to the information that was provided by claimant in their insurance claim or by the insurer in their s 81 notice. 59 Section 92 gives the authority the power to prescribe situations were an assessor does not have jurisdiction to hear particular submissions. One of those is cl 7.1.2 which provides that an assessor cannot make an assessment where an insurer alleges contributory negligence greater than 25%. When such an allegation is made an assessor does not have jurisdiction to carry out an assessment and the matter must be referred to a Court of competent jurisdiction. The wording of cl 7.1.2 provides that the relevant time for determining when such an allegation is being made is when the assessment is being determined. That according to the plaintiff anticipates that there can be allegations made after the s 81 notice is filed. 60 The Court in Gabriel held firstly, that an "amended s 81 notice" has no effect and that it is not open to an insurer to withdraw a s 81 notice in the sense that it ceases to be an admission for the purposes of evidence; and secondly, a s 81 notice has continuing effects that cannot be overcome by purporting to withdraw it. 61 Hence, on any view, a s 81 notice issued by the insurer in assessing the claim cannot be considered as being meaningless. As in court at the very least an insurer must provide information to the assessor indicating why they have chosen to depart from their original notice and what are the circumstances that brought about that change. But does the Act permit an assessor determine whether the new evidence is persuasive enough to rebut the position the insurer previously took in a s 81 notice or is he or she bound only to consider the s 81 notice? 62 In a situation like this where the making of the new claim would take the dispute outside the jurisdiction of a bureaucratic assessment, it is a court of competent jurisdiction which unlike the assessor, has the power to balance the new allegation vis a vis the original s 81 notice. The Court performs the role as envisaged by the Court of Appeal in Gabriel. The Court decides is a binding admission or whether the insurer's original position as stated in their s 81 notice or their new position is to be accepted. 63 There are some factors which support the approach that an assessor can consider the allegations which depart from those contained in the s 81 together with the explanation for that departure. Firstly, s 5(2)(c) of the Act states that the Act should be interpreted in a way that encourages predictability and stability in the law. Finding that s 81 notices have different effects depending upon whether a dispute is proceeding to Court or to bureaucratic assessment seems to go against this object. Secondly, if the assessor can only consider the s 81 notice, that approach would necessitate an insurer to undergo a bureaucratic assessment in order to exercise its rights to appeal to the Court. This process would delay the final determination of the dispute. 64 On the other hand, if an insurer can depart from a s 81 notice, that also means that there is less predictability in the bureaucratic process. However, if an insurer can resile in court from a s 81 notice on the basis it is an "out of court admission", this distinction would not be applicable to a bureaucratic assessment because it itself is an out of court procedure. 65 More importantly, s 81 by its wording permits an insurer to admit liability after having given notice denying liability or having failed to comply with this section. There is no statutory counterpart to permit the insurer to depart from its admission of liability once it has been given in a s 81 notice. As Basten JA in Gabriel explains, the legislature must have intended for an insurer to be bound by their s 81 notice. The only departure permitted by the Act is set out in s 81(4). The wording of s 81 itself is the main reason why it is in my view that in the bureaucratic process the insurer is bound by the admission of liability contained in the s 81 notice unless there is fraud where 118 applies. This interpretation of s 81 is consistent with other provisions of the Act, namely ss 83 and 84. 66 Where cl 7.1.2 of the guidelines refers to "makes an allegation" it must be referring to "an allegation" in the s 81 notice. To read it otherwise would be a departure from s 81 of the Act. 67 The Principal Claims Assessor determined that she was obliged to consider only the allegation made as to liability that was contained in the s 81 notice. The Principal Claims Assessor's decision was correct. 68 The decision of the Principal Claims Assessor, Belinda Cassidy dated 23 June 2007 is affirmed. The summons filed 27 August 2007 is dismissed. 69 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the second defendant's costs as agreed or assessed.

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