QBE Insurance v Motor Accidents Authority

CATCHWORDS : REVIEW - Principal Claims Assessor - Motor Accidents Compensation Act 1988 - s 81 notice not binding upon an insurer - Part 4.4 assessment

LEGISLATION CITED : Motor Accidents Compensation Act 1999 Supreme Court Act 1970

Craig v South Australia (1995) 184 CLR 163 Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 CASES CITED : Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402 Nominal Defendant v Gabriel [2007] NSWCA 52 Shanahan v Scott (1957) 96 CLR 245 State of New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307

QBE Insurance (Australia) Ltd (Plaintiff) PARTIES : Motor Accidents Authority of New South Wales (First defendant) Susan White (Second defendant)

COUNSEL : G J Bellew SC (Plaintiff) G R Petty SC with R E Quickenden

TL Lawyers (Plaintiff) SOLICITORS : Submitting Appearance, Crown Solicitor (First defendant) Aubrey Brown Partners (Second defendant)

LOWER COURT JURISDICTION : Motor Accidents Authority of New South Wales

LOWER COURT FILE NUMBER(S) : CARS2006/12/2591; 2007/11/0919

LOWER COURT JUDICIAL OFFICER : Principal Claims Assessor, Belinda Cassidy

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30095/2007 - QBE INSURANCE (AUSTRALIA) LTD v MOTOR ACCIDENTS AUTHORITY OF NSW

JUDGMENT (Review decision of Principal Claims Assessor under the Motor Accidents Compensation Act 1988- s 81 notice not binding upon an insurer in a Pt 4.4 assessment) 1 HER HONOUR: By summons filed 27 August 2007, the plaintiff seeks orders setting aside the decision of Principal Claims Assessor, Belinda Cassidy of the Motor Accidents Authority of New South Wales in which she refused to grant the plaintiff an exemption certificate under s 92(1)(a) of the Motor Accidents Compensation Act 1999 ("the Act"). The plaintiff relied upon the affidavit of Simon Hunt filed 25 October 2007. The plaintiff seeks that the matter be referred back to the Principal Claims Assessor for redetermination according to the law. 2 The plaintiff is QBE Insurance (Australia) Ltd ("QBE"). The first defendant is the Motor Accidents Authority of New South Wales ("the Authority"). The second defendant is Susan White ("Mrs White"). The Authority has filed a submitting appearance. 3 These proceedings arise from a motor accident in which Mrs White was allegedly injured when a vehicle driven by Mr Schouten collided with her vehicle. Mr Schouten had a compulsory third party motor vehicle insurance policy with QBE. This review relates to the way in which the Principal Claims Assessor on behalf of the Authority has managed Mrs White's claim. QBE seeks for the disputed claim to go directly to a Court of competent jurisdiction. Mrs White wants to participate in the non curial dispute resolution regime created under Part 4.4 of the Act and administered by the Authority ("the bureaucratic assessment process").

Jurisdiction of this Court 4 It is common ground that this Court has jurisdiction to review the decision of the Principal Claims Assessor. Section 69 of the Supreme Court Act 1970 provides: "(3) It is declared that the jurisdiction of the Court to grant any relief or remedy in the nature of a writ of certiorari includes jurisdiction to quash the ultimate determination of a court or tribunal in any proceedings if that determination has been made on the basis of an error of law that appears on the face of the record of the proceedings.

(4) For the purposes of subsection (3), the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination.

(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.

History of Proceedings 8 On 18 March 2004, QBE wrote the following letter to Aubrey Brown Partners, the solicitors who had been engaged to act for Mrs White. It reads: "We refer to your client's Motor Accidents Personal Injury Claim Form.

On the basis of our enquiries to date, we are prepared to admit our insured breached his Duty of Care to your client in accordance with Section 81(1) of the Motor Accidents Compensation Act. We reserve the right to withdraw this admission in the event that further relevant information comes into our possession.

Our assessment of information currently available indicates that your client's own actions in failing to keep a proper look-out contributed to her alleged injuries being sustained. On this basis, we suggest that a discount of 20% should be applied to any damages or award which would otherwise be payable on your client's claim. If you disagree with -our assessment we encourage you to contact us and put an alternative view for our consideration." 9 QBE engaged its solicitor TL Lawyers who advised QBE that they had been too lenient in discounting Mrs White's claim by only 20% and that in the circumstances her contributory negligence was more deserving of a discount of up to 40%. On 6 September 2006 TL Lawyers wrote the following letter to the solicitors for Mrs White: "We refer to our correspondence dated 18 March 2004 in which the insurer admits breach of duty of care and alleges contributory negligence to the extent of 20%.

The insurer continues with its admission of breach of duty of care but on further consideration of the statements of the insured and all other parties, alters its allegations of contributory negligence to 40%, on the basis of, but not limited to, the following: · Failing to keep a proper lookout; · Proceeding at excessive speed in the circumstances; · Failing to steer and control the vehicle so as to avoid an accident when danger threatened; · Failing to wear an available seatbelt.

This admission is made after considering all the relevant information available at this time. However we reserve our right to withdraw our admission and reassess our position if, at a later date or further information is received that would cause us to alter our view." 10 On 30 April 2007 the parties attended a preliminary conference before Assessor Watson. QBE notified Assessor Watson that they had filed an Application for Exemption pursuant to s 92(1)(a) of the Act. On 15 May 2007 Mrs White filed a formal reply notifying the Authority that she intended to contest QBE's application. On 7 May 2007, Assessor Watson adjourned the assessment and referred QBE's application to Principal Claims Assessor Belinda Cassidy who under the Act had the authority to grant such an exemption. 11 On 23 June 2007, after receiving submissions from each party, the Principal Claims Assessor made a decision to reject QBE's application. In her view since QBE had provided notice pursuant to s 81, they are bound by that representation and cannot resile from their original allegation of 20% contributory negligence. Since this amount is below the percentage threshold of contributory negligence required to exempt the matter under cl 7.1.2 the Principal Claims Assessor referred the matter back for assessment. 12 I shall briefly refer to the relevant sections of the Act.

Motor Accidents Compensation Act 1999 13 The Act establishes a system in which claims for compensation arising from motor accidents are not determined solely in the courts, and the damages are not awarded (whether in court or out of court) solely in accordance with common law principles. 14 Section 5, amongst others define the objects of the Act to include: "(a) to encourage early and appropriate treatment and rehabilitation to achieve optimum recovery from injuries sustained in motor accidents, and to provide appropriately for the future needs of those with ongoing disabilities,

(b) to provide compensation for compensable injuries sustained in motor accidents, and to encourage the early resolution of compensation claims." 15 It also provides: "(2) It must be acknowledged in the application and administration of this Act: (a) …

(b) that the law (both the enacted law and the common law) relating to the assessment of damages in claims made under this Act should be interpreted and applied in a way that acknowledges the clear legislative intention to restrict the level of non-economic loss compensation in cases of minor injuries, and

(c) that: … (iii) the preparation of fully funded premiums requires a large measure of stability and predictability regarding the likely future number and cost of claims arising under policies sold once the premium is in place, and (iv) the stability and predictability referred to in subparagraph (iii) require consistent and stable application of the law." 16 Section 6 reads: "Interpretation and application of Act by reference to objects

(1) In the interpretation of a provision of this Act or the regulations, a construction that would promote the objects of this Act or the provision is to be preferred to a construction that would not promote those objects.

(2) In the exercise of a discretion conferred by a provision of this Act or the regulations, the person exercising the discretion must do so in the way that would best promote the objects of this Act or of the provision concerned." 17 Chapter 4 of the Act provides for a regime in which the claims of those who have suffered injuries arising from motor accidents are managed and assessed. The assessment process is made up of four stages. 18 Firstly, obligations are placed upon claimants under Part 4.2 to contact police and insurers shortly after an accident occurs in order to report their claims. Part 4.3 outlines the powers and responsibilities of insurers in receiving and acting on those claims. 19 Section 78 reads: "Power of insurer to act for insured When a claim is made against a person, the 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. (2) The person against whom the claim is made is required to sign all such warrants, authorities and other documents as may be necessary to give effect to this section.

(3) If the person fails to do so or is absent or cannot be found, the insurer may sign the warrants, authorities or other documents on behalf of the person.

(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." 20 The second stage of the assessment process is outlined in Part 4.3. At this stage the insurer has assessed the claim and is obligated to make a decision as to whether to accept or contest the claim. The assessment provided by the insurance company is meant to provide the basis for each party entering into discussions with a view to resolving the dispute. This much is outlined in ss 80 and 81 of Act which provides: " 80 General duty of insurer to try to resolve claim expeditiously

(1) It is the duty of an insurer to endeavour to resolve a claim, by settlement or otherwise, as justly and expeditiously as possible.

(2) It is a condition of an insurer's licence under Part 7.1 that the insurer must comply with this section.

81 Duty of insurer with respect to admission or denial of liability

(1) It is the duty of an insurer to give written notice to the claimant as expeditiously as possible whether the insurer admits or denies liability for the claim, but in any event within 3 months after the claimant gave notice of the claim under section 72.

(2) If the insurer admits liability for only part of the claim, the notice is to include details sufficient to ascertain the extent to which liability is admitted.

(3) If the insurer fails to comply with this section, the insurer is taken to have given notice to the claimant wholly denying liability for the claim.

(4) Nothing in this section prevents an insurer from admitting liability after having given notice denying liability or after having failed to comply with this section.

(5) It is a condition of an insurer's licence under Part 7.1 that the insurer must comply with this section." 21 To facilitate this process insurers are obligated to make a reasonable offer of settlement (s 82) and if they have admitted liability in a s 81 notice they are to commence paying the claimant's medical expenses (s 83). If the insurer has admitted liability in their s 81 notice, but has alleged that the claimant is liable for contributory negligence they are still obliged for the claimant's medical expenses but may be able to subtract those expenses from any damages a claimant may be awarded in the assessment or by a Court (s 83(5)). 22 If the insurer and the claimant are not able to agree on a settlement figure a non-curial dispute resolution system outlined in Part 4.4 applies ("a bureaucratic assessment"). Under this system the Motor Accident Authority of New South Wales is empowered to receive submissions from insurers and claimants and to make non-binding decisions regarding each parties' liability for the accident (s 94(1)(a)). This includes the power to determine damages (s 94(1)(b)). 23 Section 108 makes participation in bureaucratic assessments mandatory by restricting parties' rights to commence proceedings in a court of competent jurisdiction unless they have either obtained a certificate of exemption issued by the Authority under s 92 or are appealing against an assessment made by the Authority pursuant to s 94. 24 Section 92 exempts certain claims from assessment. It reads: "92 Claims exempt from assessment

(1) A claim is exempt from assessment under this Part if: (a) the claim is of a kind that is exempt under MAA Claims Assessment Guidelines or the regulations, or

(b) a claims assessor has made a preliminary assessment of the claim and has determined (with the approval of the Principal Claims Assessor) that it is not suitable for assessment under this Part.

(2) If a claim is exempt from assessment under this Part, the Principal Claims Assessor must, as soon as practicable, issue the insurer and claimant with a certificate to that effect (enabling court proceedings to be commenced in respect of the claim concerned)." 25 The power for the Authority to issue Claim Assessment Guidelines is found in s 69. One of the grounds in which the Authority has indicated that it would issue an exemption certificate under s 92(1)(a) is outlined in cl 7.1.2 of the guidelines. Clause 7.1.2 provides: "For the purposes of s 92(1)(a) the PCA shall issue a certificate of exemption when satisfied that, as at the time of the assessment, the claim involves one or more of the following circumstances:

7.1.2 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.

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.

142 In my view, the provisions of the MAC 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.

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.

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.

5 Further, if an insurer has accepted liability, an assessor makes an assessment under s.94 only of the amount of damages; and this in turn binds the insurer under s.95 only if "the insurer accepts that liability": cf. Lee v. Yang [2006] NSWCA 214. It would set the assessment procedure at naught if, after such an assessment, the insurer could then withdraw the previous admission of liability.

6 However, these considerations lend no support to the idea that such an admission can be withdrawn if the Court gives leave for the insurer to do so, as suggested by Ness v. Graffen (2003) 60 NSWLR 549, and in relation to somewhat similar provisions of the Motor Accidents Act 1988 (the 1988 Act), by Leaf v. Boral Transport Ltd. (1993) 35 NSWLR 592 and Hannaford v. Cochrane (Dunford J, SCNSW, 14/9/95). The MAC Act makes (and the 1988 Act made) no provision for any such role for the Court.

7 As pointed out by Campbell JA, Government Insurance Office of NSW v. Phillips (NSWCA 27/8/92) is authority for the propositions that liability could be contested in court proceedings even if there was an admission of liability under the 1988 Act; and that if the plaintiff was disadvantaged by reason of the admission, the remedy was to seek to raise an estoppel by a pleading in reply.

8 Maile v. Rafiq [2005] NSWCA 410 proceeds on the same assumption, in relation to a claim under the MAC Act.

9 If a defence has been filed admitting liability, and the defendant needs leave to amend the defence, then prejudice caused by the belated amendment (and any prior admission of liability) can and should be raised when the amendment is sought: Wollongong Fabrications Pty. Ltd. v. Ramsbottom [2006] NSWCA 279 at [6]. The onus will be on the defendant to show that it is in the interests of justice to allow the amendment.

10 However, where as in this case an original defence filed within time denies liability, it would be a rare case where a prior admission of liability would make the defence an abuse of process and thus liable to be struck out. Any prejudice alleged to arise from the initial admission of liability would generally need to be raised by a reply alleging estoppel, as suggested in Phillips . 11 Since writing the above, I have read the judgment of Basten JA. There is force in the argument that s.118 of the MAC Act provides the only remedy to avoid injustice where later events disclose that an insurer's admission of liability was unwarranted." 47 At [14] - [15] his Honour stated: "14 The question then is, does the Act show an intention to take away the ordinary right to defend proceedings brought in Court, once a s.81 admission has been made?

15 In my opinion, a clearer expression of such intention would be required. And if proceedings brought by a claimant result in a judgment against the claimant on liability, in my opinion the obligation to make payments under s.81 would come to an end, just as they would if there was a judgment awarding nothing to the claimant because the payments already made under s.81 exceeded the damages otherwise payable." 48 It is important to consider the view of Basten JA in dissent as he considered the effect of a s 81 notice in the bureaucratic process. At [26] - [27] his Honour explained: "26 The second consideration relied upon concerns the need, identified in various decisions holding there is no general power to withdraw an admission, for exceptions to prevent injustice to the insurer. Various possibilities were canvassed in the course of the cases as to how that might be avoided. For example, in Leaf v Boral Transport Ltd (1993) 35 NSWLR 592, in a passage set out at [127] below, Nash DCJ considered that a defendant was not entitled to withdraw an admission of liability except in two circumstances, one being fraud and the other being a misrepresentation not amounting to fraud as to the facts of the accident. In Hannaford v Cochrane (14 September 1995, NSWSC, unrep) Dunford J thought that an admission could be withdrawn in accordance with principles relevant to the withdrawal of formal admissions made in the course of court proceedings: see [132] below. Similarly, in Ness v Graffen (2003) 60 NSWLR 549, McLoughlin DCJ, at [29]-[30], thought that an admission could be withdrawn with leave of the Court for adequate reasons, adopting the approach of Dunford J in Hannaford .

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.

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.

It is significant that the Parliament has conferred in this section an express power to abandon a denial of liability, but not to withdraw or revoke a notice admitting liability. The fact that the provision is itself directed to possible effects of other parts of the same section may give it a somewhat ambiguous operation. However, when read in combination with s 118, the negative inference forms part of a coherent scheme." 53 In taking these sections into account Basten JA reached the following conclusion: "39 Overall, these provisions provide a general indication that, at least prior to the commencement of court proceedings, the procedures to be followed are closely regulated by the statute. The inference is readily available that an admission of liability pursuant to s 81(1) cannot be "withdrawn", otherwise than in the sense and in the circumstances provided by s 118."

The Principal Claims Assessor's reasons 54 The Principal Claims Assessor at [22] of her reasons dated 23 June 2007 referred to Gabriel and stated: "In my view, section 81 is self contained as to the issue of changing, altering or amending an admission (partial or whole) or denial of liability. It sets the boundaries of what an insurer can do. It appears to have been specifically drawn so as to lock an insurer into a fixed position on the question of liability. If an insurer does not wish to be locked in for example if the issue of liability is not straightforward and its enquiries are continuing then section 81(3) applies to deem the liability status of the matter as denied. The insurer can then, when it wants to or is ready to be locked in for example when its investigations are complete, admit liability in whole or in part. But it is the plain intention of Parliament as interpreted by the Court of Appeal that there is no statutory provision for the withdrawal of any admission in whole or in part and the alternation or amendment of a section 81 notice (other than provided for in section 81(4) which appears to provide for the withdrawal of a denial of liability in whole and arguably in part)."

And continued at para [29]: "In considering whether a claim is exemptible under either section 92(1)(a) and either clause 7.1.1. or 7.1.2 I cannot be concerned with the merits or substances of the allegation. I can only be concerned with the fact that the allegation has been made. In this case the only allegation I can consider is that contained within the first section 81 notice." 55 Mrs White submitted that in accordance with Gabriel the effect of a s 81 notice is different depending upon whether it is considered in the bureaucratic assessment or the court.

The legislative provisions in relation to the bureaucratic process 56 Part 4.4 of the Act outlines the nature of the bureaucratic process, some of which were referred to by Basten JA in Gabriel and reproduced earlier in this judgment. Section 94 of the Act provides: "94 Assessment of claims

(1) The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of: (a) the issue of liability for the claim (unless the insurer has accepted liability), and

(b) the amount of damages for that liability. (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.

(5) The claims assessor is to attach a brief statement to the certificate, setting out the assessor's reasons for the assessment.

(6) If the Principal Claims Assessor is satisfied that a certificate as to an assessment or a statement attached to the certificate contains an obvious error, the Principal Claims Assessor may issue, or approve of the claims assessor issuing, a replacement certificate or statement to correct the error." 57 Sections 98 to 106 grant assessors the power to issue directions and to control the manner by in which assessments proceed. Sections 100 and 101 for example enable assessors to direct parties to produce specified documents and for those documents to be provided to the other party. Under s 102, an assessor may issue a Summons to require a party to attend an assessment. Section 104 is by far the more prescriptive provision and provides: "104 Proceedings before claims assessors

(1) In this section: "assessment conference" means any conference or other proceeding held with or before a claims assessor in connection with an assessment of a claim, and includes any such proceedings at which the parties (or some of them) participate by telephone, closed-circuit television or other means.

(2) A person who is a party to an assessment under this Part is entitled to be represented by an Australian legal practitioner or by an agent. The claims assessor may however refuse to permit a party to be represented by an agent if of the opinion that the agent does not have sufficient authority to make binding decisions on behalf of the party.

(3) A party to an assessment at an assessment conference is entitled to such representation or assistance (for example, the assistance of an interpreter) as may be necessary to enable the party to communicate adequately at the assessment conference.

(4) A claims assessor must take into account any written submission prepared by an Australian legal practitioner acting for a party to the assessment and submitted by or on behalf of the party (whether or not the party is represented by an Australian legal practitioner at an assessment conference on the assessment of the claim).

(5) A claims assessor may, subject to any general directions of the Principal Claims Assessor, hold an assessment conference with all relevant parties in attendance and with relevant experts in attendance, or a separate assessment conference in private with any of them.

(6) If the claims assessor is satisfied that sufficient information has been supplied to him or her in connection with an assessment, the assessor may exercise functions under this Act without holding any assessment conference or other formal hearing.

(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.

(1) The decision of the Principal Claim Assessor, Belinda Cassidy dated 23 June 2007 is affirmed.

(2) The plaintiff is to pay the second defendant's costs as agreed or assessed. **********

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