Smalley v Motor Accident Authority of New South Wales

Factual background 6The facts in this appeal are entirely uncontroversial. The active parties are the appellant and Allianz. (The Authority has at all times filed a submitting appearance.) The appellant lodged a claim on 14 January 2010 in respect of the accident, which occurred on 16 December 2005. There seems to be no dispute that he was treated at the scene of the accident by ambulance officers, and also that he attended his general practitioner later on that day. Allianz is the third-party insurer of the other vehicle involved in the accident. 7Section 72 of the Act requires claims to be made within six months from (relevantly) the accident, but (speaking generally) s 73 permitted a late claim if the claimant provided a full and satisfactory explanation for the delay. Allianz rejected the appellant's late claim. It asked the appellant to provide a full and satisfactory explanation for the delay. Although an explanation was provided, Allianz rejected it, accepting that the explanation was full, but denying that it was "satisfactory" within the meaning of the Act. That dispute was referred to Assessor Wall who determined, pursuant to s 96 of the Act, that a late claim could be made, and issued a certificate to that effect on 16 November 2010. Section 96(4) provides that such an assessment is "binding on the parties to the dispute to the extent that it relates to the duties of the parties with respect to the claim under Part 4.3". 8Allianz then wrote on 24 January 2011 in these terms (emphasis in original): "Although the decision was made in favour of your client and it was determined a late claim could be made in this matter, the writer notes this assessment and the Certificate is not binding on the Insurer. The Insurer maintains this claim may not be made pursuant to Section 73 of the MACA. Because the Insurer maintains this claim may not be made, the Insurer is not required to admit or deny liability for the claim pursuant to Section 81(1), and will not do so. The fact that the Insurer declines to give written notice to the claimant pursuant to Section 81(1) is not to be taken as a denial of liability pursuant to Section 81(3). The Insurer does not accept any liability for this claim regardless of whether the matter proceeds to assessment under Section 94 of the MACA. The Insurer will not regard any assessment under Section 94 as binding on the Insurer." It may be noted that notwithstanding the terms of Allianz's letter, s 96(4) makes the assessment of a dispute under s 96 binding to the extent it relates to duties under Part 4.3, such as the duty to provide notice under s 81. 9Irrespective of whether an insurer admits or denies liability for a claim, a claimant cannot commence proceedings in a court unless either the claim has been certified as exempt under s 92, or else it has been assessed and a certificate issued under s 94: s 108(1). Section 92(1) provides for two ways in which a claim is exempt, to which the parties referred as "mandatory exemption" and "discretionary exemption". Claims that are found to be exempt under the MAA Claims Assessment Guidelines (Guidelines) must be certified as exempt if application is made under s 92(1)(a) and cl 8.2 of the Guidelines. Alternatively, a claims assessor may form the view pursuant to s 92(1)(b) that a claim is unsuitable for assessment, again in accordance with the Guidelines, and issue an exemption certificate to that effect. 10The appellant applied pursuant to s 92(1)(a) and cl 8.2 for mandatory exemption from assessment. He did so on the basis that he claimed that the "fault" of the owner or driver of the other motor vehicle was "denied by the insurer ... in its written notice issued in accordance with s 81": cl 8.11.1. The Principal Claims Assessor, Ms Cassidy, was not satisfied that the insurer had denied fault, within the meaning of cl 8.11.1 of the Guidelines. She gave reasons dated 7 March 2011 (First Decision). Ms Cassidy agreed with the statement in the insurer's letter dated 24 January 2011 that it was not required to admit or deny liability pursuant to s 81, and relied in terms upon Gudelj v Motor Accidents Authority of New South Wales [2010] NSWSC 436; (2010) 55 MVR 357 as authority for the proposition that the insurer was not required to issue a s 81 notice where a rejection of a late claim was maintained. Ms Cassidy then said: "As the insurer has not issued a section 81 notice, I do not know what the insurer's attitude to liability is and I do not in particular know whether the insurer admits or denies fault for this claim. I can only grant a mandatory exemption if I can be satisfied the insurer has firstly issued a section 81 notice and secondly that the notice denies fault. As there is no notice, and I do not know whether the insurer admits or denies fault I am of the view that I cannot exempt this claim." 11Parts of Ms Cassidy's reasoning turned out to be wrong, because six weeks later, on 21 April 2011, this Court allowed an appeal in Gudelj and held that either the refusal of a late claim itself constituted a denial of liability, or s 81(3) applied such that there was a deemed denial of liability: Gudelj v Motor Accidents Authority of New South Wales [2011] NSWCA 158; (2011) 81 NSWLR 158. However, the appellant did not apply again under s 92(1)(a). Instead, in August 2011, he applied for a discretionary exemption pursuant to s 92(1)(b) of the Act. The letter of 24 January 2011 was annexed to the application. The essence of the appellant's submissions was that the insurer had denied liability, had indicated that it would not regard itself as bound by a s 94 certificate, and that therefore it should not be assumed that it would pay any amount determined by CARS. 12After that application was made, but before it was determined, the solicitors for the insurer sent, on 21 September 2011, to the appellant's solicitors a letter described as a "SECTION 81 NOTICE". The letter was in these terms: "We refer to our client's letter of 24 January 2011 and the decision of Gudelj v Motor Accidents Authority [2011] NSWCA 158. The insurer denies liability for this late claim. The insurer accepts the accident occurred due to the fault of the insured driver, Ju Xian Zhu." 13Allianz placed that letter before the assessor determining the application (Ms Snell). For reasons dated 27 January 2012 (Second Decision), Ms Snell refused the application pursuant to s 92(1)(b), saying (emphasis added): "The Claims Assessment Guidelines Chapter 14, clauses 14.11 to 14.16.11 deal with an application for exemption under s 92(1)(b). None of the factors set out in those provisions are evident in this matter on the information available to me. While fault has not been admitted it has not been denied and there has been no allegation of contributory negligence. If the facts as related by Mr Smalley are not challenged by the insurer there seems to be no real issue about the circumstances of the accident. There do not appear to be any complex medical issues. It is obvious that I do not have all the material the parties may seek to rely upon in relation to an assessment of damages. However having read the MAS Assessor's reasons it is evident to me that the types of injury suffered by the claimant are of the nature routinely assessed in CARS. There is reference to some causation issues in the MAS assessor's report but, on the information before me, I also am satisfied that some issues are also of a nature that are considered by Claims Assessors in many matters." 14Ms Snell noted that the crux of the appellant's application was that it was futile and not cost effective to proceed through CARS, when it was likely that the matter would go to court in any event. She said (emphasis added): "In my experience as a Claims Assessor for 7 years many cases resolve prior to or at a CARS assessment conference and the vast majority of assessments are accepted by the parties even in the situation where there has been a late claim dispute such as this and with an insurer being unwilling to agree before such an assessment that it will accept liability. As the insurer says, this does not mean it will reject liability. I also note if the Claimant's argument were to succeed it really makes otiose section 96(1)(a) assessments, because then no matter how a late claim dispute is determined an exemption would follow and the matter would proceed to Court. It would therefore be pointless to assess late claim disputes in CARS. Parliament has provided for CARS to determine such disputes and s 73(3) permits a late claim that has been successfully determined in favour of the claimant to proceed to assessment before CARS. I have considered the objects of the Act in s5 and I am not satisfied the objects would be furthered if the matter was exempted. I am not satisfied the costs will be less if the matter were to be exempted. Assessments in CARS are much shorter and are more cost effective." 15Parts of the reasons for that decision are wrong. The letter of 21 September 2011 had, at least on its face, admitted fault, contrary to what is said in the first emphasised passage of the reasons above. Liability had been denied, contrary to the second emphasised passage. The reasons given on 27 January 2012 do not mention the letter of 21 September 2011 at all. When this was brought to the attention of Ms Snell, she wrote as follows (letter of 6 April 2012): "The insurer's solicitor has drawn to my attention an error in my 'Assessment of Suitability Report' by not referring to her letter to the Claimant's solicitor dated 21 September 2011. ... For completeness sake, I have now considered this Section 81 Notice and have determined it provides an added reason for me confirming the decision I have made in relation to the application for exemption under section 92(1)(b)." 16By this time the appellant had made a further application for mandatory exemption under s 92(1)(a), on the basis that clause 8.11.1 of the Guidelines was satisfied. The matter came again before the Principal Claims Assessor, Ms Cassidy, who rejected the claim for reasons dated 15 May 2012 (Third Decision). She said that: "It is clear that while the insurer has denied liability, and fulfilled its duty under s 81, it has not denied fault on the part of its insured driver as is required by cl 8.11.1 to ground a mandatory exemption. The insurer has in fact admitted that its insured driver is at fault, and as such I cannot be satisfied that it has denied fault and that this is an exemptible claim." 17She expressed the view that it might be that the matter was not suitable for assessment, but she was not empowered to overrule or interfere with Assessor Snell's decisions in that respect. 18On 15 June 2012 the appellant commenced a proceeding in the nature of judicial review concerning each of the First, Second and Third Decisions. The proceeding was heard on 12 October 2012 and the appellant's summons was dismissed by the primary judge on 2 November 2012: [2012] NSWSC 1456. It was not clear on the materials in this Court whether there was an amount in issue exceeding $100,000, however, the parties were content to proceed by way of a concurrent hearing of an application for leave and an appeal.

The decision of the primary judge 19The primary judge found that the First Decision was vitiated by legal error (although it was an error that was only exposed when the appeal in Gudelj was allowed) insofar as it was based on the first instance decision in Gudelj and proceeded on the basis that the deeming provision of s 81(3) did not apply. However, because there had been a subsequent mandatory exemption application pursuant to s 92(1)(a), as a matter of discretion, the primary judge did not set it aside. 20The main argument relevant to the validity of the Second and Third Decisions turned on the construction of s 81. Following what had been said by Campbell JA in The Nominal Defendant v Gabriel [2007] NSWCA 52; (2007) 71 NSWLR 150 at [85], his Honour accepted Allianz's submissions that an admission of "part of the claim" in s 81(2) was "not limited to part of the heads or amount of damages, but [extended] to part of the ingredients making up the claim" (at [24]). His Honour found that s 81(4) should be read in the same way, such as to permit an insurer to admit liability after the three month period to the same extent it was permitted to do pursuant to s 81(2). His Honour stated (at [25]) that he reached that conclusion simply as a matter of construction of s 81 and the application of Gudelj. However, his Honour added that that construction was one which promoted the object of encouraging the early resolution of compensation claims, and that he saw no policy reason why the legislature would wish to prevent partial admissions, even after liability had been denied, nor any reason to prevent a claim otherwise appropriate for assessment within the CARS scheme from being dealt with in the system (at [29]-[30]). 21It followed that his Honour regarded the letter of 21 September 2011 as a notice which complied with s 81(4) (at [34]), with the result that the Second and Third Decisions disclosed no reviewable error in that respect (at [36] and [38]). He dismissed other aspects of a challenge to the Second Decision. In the course of doing so, and contrary to what had been said by Allianz in its letter of 24 January 2011, his Honour said (at [41]) that a determination as to a late claim was binding on the parties to the dispute.

The relevant statutory regime 22The applicable legislative regime was that in force at the time of the accident, in 2005, rather than in 2010, when the claim was made, save for, relevantly, some particular amendments effected by the Motor Accidents Compensation Amendment (Claims and Dispute of Resolution) Act 2007 (the general position is that amendments do not apply to accidents occurring before the amendments commenced: see Schedule 5, Part 6, item 25; however, some of the amendments do apply to such accidents where the claim was made after commencement, including the amendments to s 82 and s 83, the insertion of s 85A and s 85B and the insertion of Division 1A within Part 4.4: see items 30 and 27, 28 (as well as 31(b)) and 26 of Part 6 of Schedule 5 to the Act). Generally speaking, the descriptions of the legislative regime by this Court in Gabriel and Gudelj remain accurate. 23Chapter 4 of the Act concerns "Motor accident claims". A "claim" is defined to mean: "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." A "claimant" is "a person who makes or is entitled to make a claim". The statutory requirement of compulsory third party insurance means that for most claims, there will be an insurer whose policy may respond to it. The terms of the compulsory third-party (CTP) policy are stated in s 10: "A third-party policy under this Act is a policy that is in the following terms: Third-party Policy The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle: (a) if the motor vehicle is not one to which paragraph (b) applies - in the use or operation of the vehicle in any part of the Commonwealth (whether or not on a road), or (b) if the motor vehicle is subject to an unregistered vehicle permit under the Road Transport (Vehicle Registration) Act 1997 - in the use or operation of the vehicle on any road in any part of the Commonwealth. In this policy, words and expressions have the same meanings as in the Motor Accidents Compensation Act 1999." 24Plainly enough, it is intended that the (statutory) language of the policy accords with the provisions of the Act which impose rights and obligations upon claimant and insurer. The definition of "injury" was made much simpler by the Motor Accidents Compensation Amendment Act 2006, but the elaborate definition continues to apply to the facts of this case: see Schedule 5, Part 5, item 19. Those details do not presently matter; it is sufficient to observe that not every injury will answer the terms of the statutory policy. The terms that are critical for the purposes of this appeal are "fault" and "liability". Both those terms recur in the Act and the Guidelines as well as in the statutory policy. "Fault" is defined in s 3 to mean "negligence or any other tort". Liability is not defined. 25A claim must be made, relevantly, within six months from the date of the motor accident: s 72(1). It is made by giving notice, in the case of a claim against a person whose insurer is a third-party insurer, to that insurer: s 72(2). It must be in the approved form, and accompanied by such particulars and information as the form requires: s 74(1). Provision is made in s 73 for "late claims" made more than six months after, relevantly, the date of the motor accident. In such cases, the claimant is to provide a "full and satisfactory explanation for the delay", and the insurer has a qualified right to reject the claim. 26Part 4.3, which contains s 81, is headed "Duties with respect to claims". Each section imposes a duty upon the insurer, claimant, owner or driver of the motor vehicles involved in the claim. In the case of duties imposed on the insurer, it is a condition of the insurer's licence that the insurer comply with the duty: s 80(2), s 81(5), s 82(7), s 83(4), s 84(5). 27Section 80 is headed "General duty of insurer to try to resolve claims expeditiously". That "general duty " is stated in s 80(1): to "endeavour to resolve a claim, by settlement or otherwise, as justly and expeditiously as possible". It will be seen that incidents of that "general duty" are reflected in the duties to give written notice of an admission or a denial of liability, to make a reasonable offer of settlement, and to make hospital, medical and other payments and to meet the costs of travel and accommodation for rehabilitation under s 81-s 84. 28The first specific obligation on the insurer is that imposed by s 81, which is central to this appeal: "(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." 29Unless the insurer wholly denies liability for the claim, s 82 requires the insurer to make a "reasonable offer of settlement" within one month after the injury has sufficiently recovered to enable the claim to be quantified, or within two months after the claimant has provided all relevant particulars, whichever is the later. Section 82(6) imposes another time limit: the insurer is not entitled to delay making an offer of settlement on the ground that particulars of the claim are insufficient "unless the insurer requested further relevant particulars within 2 weeks after the claimant provided particulars". Section 83 imposes a duty upon the insurer to make payments to or on behalf of the claimant in respect of hospital, medical, pharmaceutical and rehabilitation expenses, and in certain circumstances in respect of respite care expenses and attendant care services expenses. That duty arises "[o]nce liability has been admitted (wholly or in part) or determined (wholly or in part) against the person against whom the claim is made". Section 84 requires the insurer to "do all such things as may, in accordance with MAA Medical Guidelines, be reasonable and necessary for the rehabilitation of an injured person", and in particular to pay travel and accommodation expenses. That duty is qualified by slightly different words: "to the extent of the insurer's liability under a third-party policy or this Act". 30The balance of Part 4.3 imposes duties upon the claimant and other parties which may be mentioned briefly. A claimant must cooperate fully with the person against whom the claim is made and the person's insurer, so that they may have sufficient information to be satisfied as to the validity of the claim and "to be able to make an early assessment of liability, and to be able to make an informed offer of settlement": s 85(1)(b) and (c) (plainly those are references to the insurer's duties under s 81 and s 82). Sections 85A and 85B impose a duty on the claimant to provide particulars of his or her claim as expeditiously as possible after it is made. The insurer is empowered to give a written direction to the claimant if a claimant has failed without reasonable excuse to provide those particulars after a period of two years and six months: s 85B(1), and a claimant who does not comply with a direction within three months is taken to have withdrawn his or her claim: s 85B(3). Section 86 requires a claimant to comply with a request by the person against whom the claim is made or that person's insurer to undergo a medical examination or a rehabilitation assessment. Sections 85 and 86 both provide that if the claimant fails without reasonable excuse to comply, then court proceedings cannot be commenced in respect of the claim while the failure continues: s 85(4), s 86(4)(b). Section 87 requires the owner or driver of the motor vehicle to cooperate fully with the owner's insurer in respect of the claim, and furnish to the insurer such information as it may reasonably request in connection with the claim. Failure to comply with that latter obligation is an offence. 31Whether or not the insurer admits or denies liability, Part 4.4, which is titled "Claims assessment and resolution", applies: s 89(1). Either the claimant or the insurer may refer a claim for assessment under that Part: s 90. However, a claim may not be referred until 28 days have elapsed since each party made an offer of settlement under s 89C unless certain exemptions apply, such as where the insurer has failed to make an offer in accordance with s 82: s 91, although a claim may be referred for assessment at any time if the insurer wholly denies liability: s 91(2)(a) and s 89E(c). As noted above, a claimant cannot commence court proceedings in respect of a claim unless either the claim has been determined to be "exempt" or else it has been assessed under s 94: s 108(1). 32Claims are determined to be exempt from assessment pursuant to s 92: "(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)." 33Section 69(1) authorises the Authority to issue "guidelines for or with respect to procedures for the assessment of claims under Part 4.4 and associated matters (MAA Claims Assessment Guidelines)". Those Guidelines are required to be tabled, and may be disallowed, in accordance with the provisions of s 40 and s 41 of the Interpretation Act 1987: s 69(6). 34The applicable Guidelines at all relevant times were those contained in Version 4 (gazetted on 11 July 2008, as amended on 1 October 2009): cl 1.2. Clause 8.11 prescribes the kinds of claims that are within s 92(1)(a) dealing with mandatory exemption. In particular, cl 8.11.1 requires a Principal Claims Assessor to issue a certificate of exemption when satisfied that the claim involves the circumstance that "the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied by the insurer of that vehicle in its written notice issued in accordance with section 81". Other circumstances requiring the issue of a certificate of exemption are where the claimant was at fault or partly at fault and the insurer claims a reduction of damages of more than 25 per cent, the claimant is a "person under a legal incapacity", the person against whom the claim is made is not a licensed or other CTP insurer, the insurer has declined to indemnify the owner or driver of the motor vehicle against which the claim is made and the insurer alleges that the claim is a fraudulent claim. Plainly enough, all of those considerations give rise to legal or factual complexity suggesting that a judicial, rather than an administrative, determination is appropriate. 35Clause 8.12 authorises the Principal Claims Assessor to dismiss an application for mandatory exemption under s 92(1)(a) if satisfied that, relevantly, the claim "may not be exempted in accordance with section 92(1)(a) and clause 8.11 of these Guidelines". 36Separate provision is made in cl 14.11-cl 14.16 for the determination of whether a claim is not suitable for assessment for the purposes of the discretionary exemption under s 92(1)(b). In particular, cl 14.16 provides (emphasis added): "14.16 In determining whether a claim is not suitable for assessment, an Assessor and the PCA shall have regard to the circumstances of the claim as at the time of the preliminary determination including, but not limited to: 14.16.1 whether the claim is exempt under section 92(1)(a) because the claim involves one or more of the circumstances set out in clause 8.11; 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; 14.16.6 whether the claimant has been medically assessed and is entitled to non-economic loss pursuant to section 131 and the claim involves other issues of complexity; 14.16.7 whether the claim involves complex issues of causation in respect of the relationship between the accident, the injuries sustained and disabilities arising from it including but not limited to multiple accidents or pre-existing injuries or medical conditions; 14.16.8 whether the insurer is deemed to have denied liability under section 81(3); 14.16.9 whether the claimant or a witness, considered by the Assessor to be a material witness, resides outside New South Wales; 14.16.10 whether the claimant or insurer seeks to proceed against one or more non-CTP parties; and/or 14.16.11 whether the insurer makes an allegation that a person has made a false or misleading statement in a material particular in relation to the injuries, loss or damage sustained by the claimant in the accident giving rise to the claim." 37Sections 94 and 95 deal with "liability". (Both were amended by the 2007 Act, which amendments apply to Mr Smalley's claim: item 31(a) of Part 6 of Schedule 5). Under s 94(1), the claims assessor is 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 (being the amount of damages that a court would be likely to award)." The scope of the assessment under Part 4.4 therefore turned on whether the insurer had admitted liability. (Nothing of present importance turns on either the different language between "admit" in s 81 and "accept" in s 94 and s 95 or the operation of s 94 where there is a partial admission of liability.) 38Section 95 applies differently to the claimant and the insurer, and its application is also dependent upon whether the assessment includes liability. It is in these terms: "(1) An assessment under this Part of the issue of liability for a claim is not binding on any party to the assessment. (2) An assessment under this Part of the amount of damages for liability under a claim is binding on the insurer, and the insurer must pay to the claimant the amount of damages specified in the certificate as to the assessment if: (a) the insurer accepts that liability under the claim, and (b) the claimant accepts that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued. Note: If the amount of damages is not accepted by the claimant within that period, section 151 makes provision with respect to liability for legal costs incurred after the certificate of assessment was issued. (2A) The amount of damages payable by an insurer (including any costs assessed as payable by the insurer) must be paid within such period as may be prescribed by the regulations and the regulations may require the payment of interest on so much of the amount payable as is from time to time unpaid after the end of that period. The rate of interest may be set by reference to the rate of interest prescribed for the purposes of section 101 of the Civil Procedure Act 2005 but may not exceed that rate. (3) It is a condition of an insurer's licence under Part 7.1 that the insurer complies with this section." 39The non-binding nature of the assessment on liability in s 95(1) mirrors the s 94(1)(a) assessment of the issue of liability. The potentially binding assessment (in the event that the insurer accepted liability and the claimant accepts the amount) of the amount of damages in s 95(2) mirrors the s 94(1)(b) assessment by the claims assessor. (It may be noted that the primary judge was wrong to say (at [41]) that a decision on damages is binding on the insurer; as the appellant points out, that is only so if it admits liability and the claimant accepts the amount. However, on a fair reading of his Honour's reasons, this minor inaccuracy did not play any part in the reasoning process.) 40If a claimant does not accept the amount of damages pursuant to s 95(2)(b), then there is the potential for the costs sanctions in s 151 to apply (broadly, the insurer is liable to pay costs if the amount awarded by a court significantly exceeds the amount in the certificate of assessment, and the claimant is liable to pay costs if the amount awarded by a court does not exceed the amount specified in the certificate, up to a maximum of $25,000).

Construction of the legislation 41The following four matters flow directly from the text of s 81. First, the "liability" which is to be the subject of the s 81 written notice is the liability of the insurer in respect of the claim. Secondly, where, as here, the third-party policy which is the source of that liability must be in the language of s 10, it is "liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle". Thirdly, it is plain from s 81(2) that liability may be wholly or partly admitted. Fourthly, it is plain from s 81(3) that the insurer is required, for the purposes of the administrative regime established by the Act, very quickly to communicate a view on "liability", with a default position of denial in whole after three months. 42It will be necessary to return to what is meant by "liability" and "admits liability for only part of the claim" and "wholly denying liability" below. It is convenient to make two general observations about the legislative regime as a whole: it is clear that it is narrowly prescriptive, and replete with obligations compliance with which is to take place in a short time frame, and non-compliance with which by the insurer is a breach of a condition of its licence. Moreover, the obligations upon an insurer are pecuniary: to make a reasonable offer of settlement within two months of receiving relevant particulars, and to make payments in respect of hospital, medical, pharmaceutical and rehabilitation and other expenses. In short, it will be seen that unless the insurer "wholly denies" liability, it will become obliged to make actual payments and to make a reasonable offer of settlement very rapidly after a claim has been made.

Approach to construction of the Act 43Allianz's first submission, made repeatedly, was that the question should be approached by reference to s 81 and s 81 alone, without reference to the balance of the Act. Allianz invoked s 64 of the Interpretation Act, which provides that "Every section of an Act has effect as a substantive enactment without introductory words." A provision to that effect was introduced by s 2 of the very first interpretation act (13 & 14 Vict c 21), which was promoted by Lord Brougham, whose purpose was to avoid verbiage arising from the custom of repeating the enacting formula before each clause or section. Francis Bennion has pointed out (Bennion on Statutory Interpretation, 5th ed (2008) at 719) that in the Act immediately preceding Lord Brougham's Act, s 8 provided "And for the Purposes of exempting the Metropolitan Police District as herein-before provided, be it enacted, That ...." Section 64 does not support Allianz's submission. 44Allianz's approach of construing the section in isolation collides with basic and well-settled principles of construction. It is axiomatic that the Act is to be read as a whole. "The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute": Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69] (emphasis added). There is nothing novel about that approach: it is "of ancient provenance", as has been observed: P Herzfeld, T Prince and S Tully, Interpretation and Use of Legal Sources (2013) Thomson Reuters at 170. Further, the process of construction "must always begin by examining the context of the provision that is being construed": Project Blue Sky at [69] (emphasis added). 45Those points were reiterated by French CJ and Hayne J in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56; (2012) 87 ALJR 131 at [24], under the heading "Some basic principles", where the same emphasis was given to achieving consistency with the language and purpose of all the provisions of the statute as has been indicated above. Their Honours also said that "It is not to be doubted" that the relevant provisions must be construed in context: at [28]; see also at [70] (Crennan and Bell JJ) and [88] (Kiefel J). These principles were applied by this Court in relation to the Act in Axiak v Ingram [2012] NSWCA 311; (2012) 82 NSWLR 36 at [3] (Tobias AJA, Beazley JA and Sackville AJA agreeing). 46Those basic and well-settled principles are of particular importance where s 81 turns on the word "liability", a word which is fundamental to the obligations of an insurer under the s 10 statutory third-party policy, and on which the rights and obligations of the claimant and insurer in the immediately following sections expressly turn.

"Liability" 47As Windeyer J observed in Ogden Industries Pty Ltd v Lucas (1967) 116 CLR 537 at 584, echoing Wesley Newcomb Hohfeld before him, "liable" and "liability" are chameleon-hued; he said that "liability" could "be the heading of a chapter in a work of analytical jurisprudence", so variously is it used in law. The answer to the question of construction posed by its use in the statutory policy in s 10 and elsewhere in the Act (in the definition of "insurer" in s 66, in provisions relating to the making of informal admissions of liability in s 77(1) and s 78(4) and s 84(3), in the formal written notice admitting or denying liability provided for in s 81, in the provisions which turn upon the insurer not having wholly denied liability (s 82 and s 83) and in the scope of the assessment under Part 4.4 and its consequences (s 94(1) and s 95(1) and (2)) is not to be found in dictionary definitions. Although the primary judge was supplied with and reproduced (at [21]) definitions from the Shorter Oxford and Macquarie Dictionaries, it would not appear that his reasoning relied upon them. That, with respect, was correct. As Learned Hand J said, "it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning": Cabell v Markham 148 F 2d 737 at 739 (1945), cited with approval in Residual Assco Group Ltd v Spalvins [2000] HCA 33; (2000) 202 CLR 629 at [27] and by this Court in Blacktown Workers' Club Ltd v O'Shannessy [2011] NSWCA 265; (2011) 183 LGERA 184 at [37] (Basten JA, Handley and Sackville AJJA agreeing). 48This is a case, no different from most, where the legal meaning of a term is determined by reading the Act as a whole in its context. Plainly enough, the word "liability" applies in two different cases. An insurer which offers a third-party policy in the terms of s 10 is naturally described as a "liability insurer"; cf D Derrington and R Ashton, The Law of Liability Insurance, 2nd ed (2005) LexisNexis. The insurer indemnifies the liability of its insured as specified in the policy, and is subject by statute to certain rights and obligations in advance of court proceedings when and if it accepts that it itself is "liable" under that statutory policy. In s 10 reference is made to the liability of the insured, and that is the sense in which "liability" is used in (for example) s 77. 49However, in the provisions of central importance to this appeal, notably, s 81, the Act refers to the liability of the insurer. The natural meaning of such language is the insurer's obligation to pay under the statutory policy of third-party insurance - ie where the policy responds to the claim so as to give rise to an obligation to indemnify the insured. 50Further, although s 81(1) speaks of a binary decision ("whether the insurer admits or denies liability for the claim") the section is, explicitly, more nuanced. Subsection (2) is premised on the insurer admitting liability for only part of the claim, and other sections likewise expressly turn on whether liability has been wholly denied (as distinct from admitted or partially denied). It is therefore necessary to identify what is meant by an admission of liability for part of the claim, as opposed to what is meant by liability which is wholly denied. 51It will be recalled that his Honour's reasoning was in essence that (a) Campbell JA had said in Gabriel that a s 81(2) partial admission extended to an admission of breach of duty, (b) s 81(4) permitted the insurer to make admissions after the s 81(3) period which would, had they been made within three months, have satisfied s 81(2), and (c) Allianz's letter of admitting "fault" was therefore a partial admission, notwithstanding that it was plain that Allianz did not regard itself as obliged to pay a dollar to Mr Smalley. 52I respectfully disagree with the primary judge, for three reasons. The first is what emerges from reading the Act as a whole. If the insurer admits liability, wholly or in part, (which is to say, it does not wholly deny liability), then that will be known within three months from the claim, and there will be a written s 81 notice. The Act provides for these consequences to follow. First, the insurer is required to make a reasonable offer of settlement within specified time limits (s 82(1)) following receipt of the s 85A relevant particulars. Secondly, that in turn may engage the provisions in Part 4.4, Division 1A requiring there to be a settlement conference, the exchange of information, and the making of settlement offers (these provisions do not apply in certain circumstances, including if the claim is exempt: s 89E). Thirdly, the insurer is required to make payments under s 83 for various expenses and under s 84 for the cost of travel and accommodation for rehabilitation. 53Plainly enough, there are swift pecuniary consequences following an insurer's admission of liability (whether in whole or in part). The insurer is required to make an offer to settle the claim, and to advance funds to the claimant immediately. As Basten JA said (in dissent, but not in this respect) in Gabriel at [18] (see also at [29] and [31]): "The statutory significance of an admission of liability under s 81 is twofold. The first, and most immediate, effect is that the insurer becomes liable to make payments with respect to hospital, medical and related expenses ..." Hodgson JA made the same point in Gabriel at [4] and [12], as did Campbell JA at [86]. 54The conclusion is inescapable that not only does "liability" bear its ordinary meaning in an insurance context, namely, liability to pay a sum of money, but also that an admission of liability for part of a claim is likewise an admission that the insurer owes some pecuniary obligations to the claimant. The insurer whose policy responds may not agree that it must pay the entire amount that is claimed, and indeed in many cases the entire amount claimed will not be known at that time (most obviously, because treatment is still occurring). Certainly, there may be a dispute about whether some of the claimed loss is attributable to the fault of the insured, and there may be a dispute as to apportionment for contributory negligence or contribution between joint tortfeasors. But all of those provisions turn on whether or not the insurer accepts that it is obliged to pay some money to the claimant. Conversely, an insurer which merely admits an element of the claim (such as fault, or injury, or (in some cases) driving on a road) but which denies that it is obliged to pay any money to the claimant has not admitted liability, whether for the claim as a whole, or for "part only of the claim". 55The second is that Allianz's construction leads to results which are aptly described as "absurd" or "irrational" or "unjust", to use the language in Legal Services Board v Gillespie-Jones [2013] HCA 35; (2013) 87 ALJR 985 at [48]. Why should an insurer which maintains that it is not obliged to pay a dollar pursuant to its statutory policy but which admits an element of liability be required to make a reasonable offer of settlement under s 82? (Indeed, it is difficult to see how compliance with s 82 is to be demonstrated, and yet compliance is a condition of the insurer's licence, which means that a civil penalty may be imposed pursuant to s 166.) And why would an insurer which maintains that it is not required to pay a dollar under the policy be required, as the price of admitting an element of liability, to meet the expenses under s 83 and s 84 (breach of which are, again, breaches of its licence). It should be acknowledged that, accepting the force of what flowed from his construction, Mr Robinson SC for Allianz submitted that because the 21 September 2011 letter did engage s 81 such that liability was no longer wholly denied, the obligations to pay expenses under s 83 were engaged. But his doing so does not persuade me to abandon the natural meaning of the Act or to depart from the reasoning of Hodgson and Basten JJA in Gabriel, as to which see below. 56Thirdly, and contrary to the submissions advanced by Allianz at trial and on appeal, Allianz's construction is not supported by Gabriel. Indeed, it is contrary to Gabriel. In Gabriel the insurer had accepted that "the accident occurred through the fault of our insured driver", and accordingly, it admitted "breach of duty of care in respect of your client's claim", but went on to estimate contributory negligence at 25 per cent: see the notice reproduced at [82]. In those circumstances, Campbell JA said at [85] that: "the admission made by AAMI was not, strictly, an admission of liability for the claim. The admission of breach of duty necessarily contained within it an admission of the existence of a duty of care, but no admission was made of any consequential suffering of damage. Thus it counts as an admission of liability for only part of the claim." Campbell JA said that such an admission was expressly contemplated by s 81(2). It is not clear whether his Honour was expressing a view that an admission of breach unaccompanied by the statement that contributory negligence was estimated at 25 per cent would count as an admission of liability. 57Without intending any disrespect to Campbell JA, the reasons of the remaining members of the Court, Hodgson and Basten JJA, are clearer in this critical respect. Both expressly relied upon the statement of a reduction of 25 per cent for contributory negligence in order to conclude that there was an admission of liability. Hodgson JA said at [2]: "In my opinion, AAMI's letter of 3 June was an admission of liability within s 81, subject to a reduction of 25 per cent for contributory negligence. The admission was expressed to be an admission of breach of duty of care, but the reference to a deduction of 25 per cent from any final settlement, and to payment in full of medical expenses, amounted to an implied admission of at least some consequential suffering of damage." 58Basten JA said that "there is no liability in negligence without damage" and referred to the immediately following context of the s 82 duty of an insurer who did not wholly deny liability to make a reasonable offer: at [41]. (To be strict about it, there may in some cases, although seemingly not in Gabriel, be a difference between the liability of an insured for negligence, and the liability of the insurer to a claimant; for present purposes it suffices merely to note the point and refer to the two different liabilities to which the Act refers.) 59It is at the least unsafe to rely on Campbell JA's words in a context where an insurer contends it is not liable to pay a dollar, to conclude that there is a partial admission of liability. More importantly, so to do is to reason inconsistently with the express reasoning of Hodgson and Basten JJA in the same case. As best as can be seen from his Honour's reasons, the primary judge was persuaded to conclude that there could be an admission of liability merely by the admission of fault at a time when there was a complete denial by the insurer of all obligation to pay. In this Court Allianz said, wrongly, that Hodgson JA agreed with what Campbell JA had said at [85]. That submission was wrong because Hodgson JA's agreement was qualified by what his Honour himself wrote (at [1]) and on any fair reading what Hodgson JA said at [2], concluding that there had been a s 81 admission of liability, turned on his view that there was an implied admission of at least some consequential suffering of damage, as noted by Rothman J in Allianz Australia Insurance Ltd v Anderson [2013] NSWSC 1186 at [78]-[85].

Conclusion on construction 60In short, it follows that the elements of the CTP insurer's liability to indemnify include: (a)death or injury (noting that "injury" is an elaborately defined term, and that the amendments to that definition effected by the Motor Accidents Compensation Amendment Act 2006 do not apply to Mr Smalley's claim: see item 19 of Schedule 5 to the Act); (b)"fault": whether the insured driver breached a duty owed to the claimant; (c)causation: whether the insured's fault caused the death or injury; (d)the motor vehicle was operated in the Commonwealth (whether or not on a road) unless the motor vehicle was subject to an unregistered vehicle permit, in which case it was used or operated on a road in any part of the Commonwealth. Only if each of those four elements is satisfied will the s 10 policy respond to a claim. If an insurer admits each of them, then it will be liable to pay a sum of money to a claimant. An insurer may admit liability while disputing that it is liable to pay all the amount claimed. This will commonly be the case where there is a dispute as to apportionment between joint tortfeasors or for contributory negligence, or as to whether all of the claimed injuries result from the accident. If and only if an insurer admits liability in the sense of acknowledging an obligation to pay some money to the claimant do the pecuniary consequences in s 82, 83 and 84 apply.

The legal effect of the 21 September 2011 letter 61How then does Allianz's 21 September 2011 notice fit into the legislative scheme? True it is that there is an admission of one of the elements of the insurer's liability to pay under the s 10 statutory policy, namely, fault. (It is to be read as an admission of breach of duty; it could not sensibly be read as an admission of all elements of the tort of negligence - comprehending an admission that at least some of the damage suffered by Mr Smalley was caused by the breach of duty of Allianz's insured. Neither party contended for this.) But it is quite plain that the insurer was not for a moment accepting that it had any pecuniary obligation to Mr Smalley. No other meaning can be given to the words "The insurer denies liability for this late claim". Moreover, the letter refers to Allianz's letter of 24 January 2011 and does not advise of a changed position from its emphatically emphasised last paragraph to the effect that Allianz does not accept any liability for Mr Smalley's claim. 62There are a number of admissions that an insurer could give whilst at the same time wholly denying that it was obliged to make any payment to the claimant. An insurer could, for example, admit that the driver of a vehicle subject to an unregistered vehicle permit was at fault, but deny that the vehicle had been used or operated on a road. In such a case, the insurer's liability would depend upon both fault and the vehicle being used or operated on a road (cf Maric v Nominal Defendant [2013] NSWCA 190). Another example is that given by Hodgson JA in Gudelj at [69], namely, that there was no "injury" within the meaning of the Act: cf the examples in Allianz Australia Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568 and Zotti v Australian Associated Motor Insurers Limited [2009] NSWCA 323; (2009) 54 MVR 111. In either case it would follow that the s 10 policy would not respond to the claim. 63The letter dated 21 September 2011 is not a notice answering the description of s 81(4). It is expressed to be a denial of liability. True it is that it contains an admission of an element of liability (and indeed, an admission of what is apt to be a commonly disputed element of liability). But its author has left nothing to chance. Allianz's solicitor made it clear that her client denied liability for the claim. It is the opposite of an admission that the insurer was liable to pay any amount to Mr Smalley. 64It is said, however, that the 21 September 2011 letter does contain an admission of part of the claim. That is so: it contains an admission of one of the elements needed to be established in order for the policy to respond. But it is not an admission of liability for part of the claim in the sense required by s 81(2). 65Test the matter this way. Suppose the 21 September 2011 letter had been written within the three month period required by s 81. It would not be a letter answering the description of s 81(2). Although an element of liability, namely, fault of the insured driver, is admitted, the insurer maintained that it was not liable to pay one dollar to Mr Smalley. It is not a letter which would, on the reasoning of Hodgson JA or Basten JA in Gabriel, engage s 81(2). 66It follows that the 21 September 2011 letter does not engage s 81(4). It was not suggested that the effect of the s 81(3) deeming could in some other way be displaced. The consequence is that there continues to be a single s 81 notice - the deemed notice which the insurer was taken to have given by reason of s 81(3). 67Section 81(4) is not an empowering section; it does not purport to detract from the deeming provision in s 81(3). Perhaps out of an abundance of caution, it confirms that the insurer may, later on in the process of resolving a claim, make an admission that it is liable. It is not necessary for the purposes of this appeal to address the question whether a differently worded letter, which admitted liability, but which was sent only after s 81(3) took effect, would alter the "wholly denying liability" notice deemed to have been given by that subsection, which is touched upon by Campbell JA in Gabriel at [143]. Moreover, in my view that question is expressed at too great a level of generality. In this scheme, replete with detailed prescription of timing and consequences, a greater level of specificity is required. Does a letter which engages s 81(4) displace the deemed s 81(3) admission for what purpose? For the purpose of altering the scope of a review under Part 4.4? For the purpose of the definition in the Guidelines for exempt claims? For the purpose of triggering the obligation to make payments under s 83 and s 84? For the purpose of remedying a breach of the insurer's licence? For the purpose of litigation? There is no necessary reason why the analysis and answer to each of those questions is identical. 68Turning to the Third Decision, Ms Cassidy correctly proceeded on the basis that the insurer was denying liability, but admitting fault of its insured. The question for her was whether she was satisfied that the claim involved the circumstance that: "the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied by the insurer of that vehicle in its written notice issued in accordance with section 81". 69The only written notice issued in accordance with s 81 was that deemed to have been issued under s 81(3) which wholly denied liability. The letter of 21 September 2011 was not a notice which engaged s 81. Ms Cassidy wrongly characterised the 21 September 2011 notice as a s 81 notice; although described as a s 81 notice, it was not one in point of law. Although it may have been drafted to engage cl 8.11.1 of the Guidelines, the question turns on the construction of the Act. 70This is a case where there could only be one answer. The (deemed) s 81 notice wholly denied liability. Clause 8.11.1 requires attention to be drawn to a particular document: the s 81 notice. Where as here there is no actual s 81 notice, but a deemed s 81(3) notice, cl 8.11.1 will always be satisfied. That is not altered by the fact that the insurer chooses, outside the time constraints imposed by s 81, subsequently to admit the fault of its insured. Nor is it altered by the fact that insurer chooses to describe the letter evidencing that admission as a "SECTION 81 NOTICE". This is consistent with the approach taken by Campbell JA in Gabriel at [167], (although concededly it was not necessary for his Honour to determine whether an s 81 admission can ever be departed from): "The 'amended section 81 notice' served in the present case does not have any effect pursuant to the Motor Accidents Compensation Act, for the simple reason that the Motor Accidents Compensation Act has no provision for any amended s 81 notice that retracts an admission of liability previously made in a s 81 notice." 71That might, with some force, be said to be an artificial result. In my view, little turns on that criticism, once it is appreciated that an essential aspect of the efficiency of the regime are the strict time limits, with serious consequences on claimant and insurer for non-compliance. 72Further, plainly enough the First Decision was wrong in law. For the reasons above, Ms Cassidy should have (with the benefit of what was established by Gudelj on appeal) proceeded on the basis that a deemed s 81(3) notice had issued, and found that the claim was exempt. Allianz contended, courageously, that "the deemed denial of liability pursuant to section 81(3) does not constitute a written notice in the terms required by clause 8.11.1". That submission must be rejected. The fiction created by the Act operates to bind the parties to the administrative procedure established by it. Without expressing a concluded view (for this was not argued), it is unlikely that the Guidelines could subtract from the statutory deeming effected by s 81(3), for that would be to "vary or depart from, and thus [be] inconsistent with", the Act, and there is no sound basis to conclude that s 69 authorises Guidelines which are inconsistent with the Act; cf Harrington v Lowe (1996) 190 CLR 311 at 324-325. 73Finally, as Ms Cassidy with respect correctly appreciated, an actual denial of liability provides a sound basis for a discretionary assessment that the claim is unsuitable for assessment under s 92(1)(b), in accordance with what was said by Hodgson JA in Gudelj at [71] ("an actual denial of liability would surely provide as strong a ground for a certificate of exemption as a deemed denial"). The deemed denial of liability under s 81(3) was one of the considerations to which Ms Snell was required to have regard pursuant to cl 14.16.8 of the Guidelines. So too was the fact of the extent of any agreement by the insurer as to the entitlement of the claimant to the heads of damage claimed under cl 14.16.2 - the letter made it plain that there was no agreement at all. Further, the basis on which the insurer denied liability was, so far as the record discloses, unexplained, but no regard seems to have been given to whether there were complex legal issues or complex factual issues or complex issues of causation. Although Ms Snell had formed the view that there was no real issue about the circumstances of the accident, nor any complex medical issues, there was no consideration on the face of her 27 January 2012 reasons as to on what basis liability had been denied (because she was unaware of the letter), and no further consideration of those issues when that fact was drawn to her attention. It is not necessary to consider whether she was functa at that time, or whether regard may be had to her supplementary reasons, for those reasons disclose no grappling whatsoever with the fact that the actual denial of liability was a matter tending against the suitability of Part 4.4 assessment, something which is self-evident on the face of the Guidelines themselves.

Orders 74In my view, to the extent necessary, there should be a grant of leave, the appeal should be allowed, the orders made by the primary judge should be set aside and each of the First, Second and Third Decisions should be quashed, and the applications remitted to the Authority for determination in accordance with law. Allianz must pay Mr Smalley's costs at first instance and on 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: 26 September 2013