THE NOMINAL DEFENDANT v GABRIEL & ANOR

CATCHWORDS: TORTS - NEGLIGENCE - Road Accident cases - admission of liability made by insurer out of court pursuant to section 81 Motor Accidents Compensation Act 1999 - exemption granted enabling claim to be pursued in court - insurer files defence denying liability - whether that defence liable to be struck out by reason of the earlier section 81 admission - PROCEDURE - striking out defence - motor accident claim - admission of liability under section 81 Motor Accidents Compensation Act 1999 - defence in court proceedings denies liability - whether defence liable to be struck out - EVIDENCE - confessions and admissions - whether admission able to be "withdrawn" - TRAFFIC LAW - Transport accident legislation - liability - admission by insurer - withdrawal - Motor Accidents Compensation Act 1999, section 81

Civil Procedure Act 2005 Evidence Act 1995 Freedom of Information Act 1989 Motor Accidents Act 1988 LEGISLATION CITED: Motor Accidents Compensation Act 1999 Suitors Fund Act 1951 Supreme Court Act 1970 Transport Accidents Compensation Act 1987 Uniform Civil Procedure Rules 2005

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Clough and Rogers v Frog (1974) 48 ALJR 481 Commonwealth v Verwayen (1990) 170 CLR 394 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 Drabsch v Switzerland General Insurance Company Ltd and ors (Supreme Court of NSW, Santow J, 16 October 1996, unreported) Dunn v Brown and Another (1911) 12 SR (NSW) 22 In Re the Will of FB Gilbert (dec) (1946) 46 SR (NSW) 318 Government Insurance Office of New South Wales v Phillips (NSW Court of Appeal, 27 August 1992, unreported) Hannaford v Cochrane (Supreme Court of NSW, Dunford J, 14 September 1995, unreported) CASES CITED: Leaf v Boral Transport Ltd (1993) 35 NSWLR 592 Lee v Yang [2006] NSWCA 214 Maile v Rafiq [2005] NSWCA 410 McFadden v Snow (1952) 69 WN (NSW) 8 Ness v Graffen (2003) 60 NSWLR 549 Rafiq v Maile [2006] HCA Trans 243 Ricketts v Callan (1992) 15 MVR 220 The State of Queensland and another v J L Holdings Pty Ltd (1997) 189 CLR 146 Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 Urquhart v Butterfield (1887) LR 37 Ch D 357 Wollongong Fabrications Pty Ltd v Ramsbottom [2006] NSWCA 279 Zhang v Golden Eagle International Trading Pty Ltd [2006] NSWCA 25

The Nominal Defendant - Appellant PARTIES: Cristy Gabriel - First Respondent Fatmah Rustom - Second Respondent

B Gross QC - Appellant COUNSEL: J Sexton SC; PA Regattieri - First Respondent No Appearance - Second Respondent

Moray & Agnew, Newcastle - Appellant SOLICITORS: Doherty Partners, Liverpool - First Respondent Curwoods Lawyers - Second Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40190/06

HODGSON JA BASTEN JA CAMPBELL JA

23 March 2007 THE NOMINAL DEFENDANT v CRISTY GABRIEL & ANOR Judgment 1 HODGSON JA: I agree with the orders proposed by Campbell JA and, subject to what I say below, substantially with his reasons. 2 In my opinion, AAMI's letter of 3 June was an admission of liability within s.81, subject to a reduction of 25% 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% 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. 3 There are indications in the Motor Accidents Compensation Act 1999 (the MAC Act) that an admission pursuant to s.81 has continuing effects that cannot be overcome by purporting to withdraw it. 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. 12 However, in my opinion it is clear that the liability to make payments pursuant to s.83 does come to an end in circumstances other than those dealt with in s.118. The fact that s.83(5) provides that such payments, made "before a claimant obtains judgment for damages", are a pro tanto defence to proceedings for damages makes it clear that the obligation to make payments under s.83 comes to an end when a claimant obtains judgment for damages. 13 Although the matter is not quite so clear, in my opinion it must be the case that such liability also comes to an end when an insurer becomes liable to pay damages pursuant to s.95 of the Act. The assessor will have assessed damages on the same basis as a court would have in proceedings for damages, and if the assessment takes effect under s.95 it must be intended that it have a similar effect on an insurer's liability to make payments under s.81. 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. 16 BASTEN JA: The outcome of this appeal, the circumstances of which are sufficiently recounted by Campbell JA, turns upon the consequence of an insurer giving a written notice admitting liability, pursuant to s 81(1) of the Motor Accidents Compensation Act 1999 (NSW) ("the MAC Act"). The specific question is whether, where court proceedings are commenced by a claimant in respect of a motor accident, the insurer can properly file a defence on behalf of the defendant, denying liability, in circumstances where it had earlier made an admission of liability under s 81(1). Because the statute makes no express provision as to the particular consequence of such an admission in relation to subsequent litigation, the relevant consequence, if any, must be inferred. 17 The inferences contended for by each party may be summarised in two propositions. First, for the plaintiff (the Respondent in this Court), it is argued that the legal consequences prescribed by statute make it unlikely that an admission made pursuant to a statutory duty to state a position with respect to liability, is to have no effect once proceedings commence. For the insurer, it is argued that it cannot be taken to have admitted liability irrevocably, so that it is precluded from defending on the basis that there was no unidentified vehicle and hence no liability, where, for example, evidence is only obtained after an admission is made. Each of these contentions requires further elucidation. 18 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 to the extent that such payments are reasonable and necessary in the circumstances and relate to the injury caused by the fault of the insured: MAC Act, sub-ss 83(1) and (2) and s 84 with respect to rehabilitation expenses. 19 A second consequence concerns the statutory process for "claims assessment and resolution", pursuant to Part 4.4. Unless the claim is "exempt", the issue of a certificate by a claims assessor, on completion of assessment, is a statutory precondition to the commencement of litigation: s 108. 20 Part 4.4, Div 2 of the MAC Act, headed "Assessment of claims" operates differentially, depending upon whether there has been an admission or denial of liability. Section 81(2) permits an insurer to admit liability "for only part of the claim" but requires it to specify in the notice "the extent to which liability is admitted". The duty of the claims assessor depends upon whether the insurer has "accepted liability", in which case the assessment is limited to the amount of damages, whereas, if the insurer has not accepted liability, the assessment must extend to the issue of liability for the claim: s 94(1). 21 Assuming there are no questions of liability in dispute, the assessment will be limited to the amount of damages payable. The binding effect of s 95 in relation to the result of the assessment is somewhat obscure, and not all ambiguities were resolved in Lee v Yang [2006] NSWCA 214. Nevertheless, a construction which allowed an insurer to limit the possible consequences of the assessment by withdrawing its admission of liability after the assessment was effected, would appear to be inconsistent with the legislative scheme. It would also raise a question as to whether an assessment which did not address issues of liability could give rise to the issue of a certificate under s 94 which would satisfy the requirements of s 108(1). 22 Putting to one side the approach required during the claims assessment process, there are two major bases for the contention in favour of a right to withdraw an admission of liability after the commencement of court proceedings. The first is that, under the general law, no admission made prior to proceedings would prevent the filing of a defence denying liability. The second is that it is easy to envisage circumstances where it would seem unjust to hold an insurer to an admission made early in its consideration of a claim. 23 In respect of the first matter, some support may be gleaned, as explained by Campbell JA, from the judgment of this Court in Government Insurance Office of New South Wales v Phillips (unrep, 27 August 1992), the primary judgment being that of Kirby P, with whom Clarke and Cripps JJA agreed. The statement of principle which supports this contention is extracted by Campbell JA at [124]. However, there are reasons for giving limited weight to those opinions in the present case. First, they were obiter. The plaintiff's reply, which was the basis on which she sought to strike out the defendant's denial of liability was expressly founded on estoppel; the admission was said to be a representation upon which the plaintiff had relied and had changed her position to her detriment. Express reference was made in the course of argument (referred to by the President at p 7) to the decision of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394. It is entirely understandable that the factual issues raised by such a pleading were thought not to give rise to a peremptory right to strike out the defence. 24 Secondly, there is no discussion in the judgment of the President of the possible consequences of the admission under the statutory regime pursuant to which the admission was made. Indeed, in the passage set out at [124] his Honour referred to the fact that the initial admissions were made "in the context of claims under the successive transport accidents compensation statutes". The conjunctive reference to the Transport Accidents Compensation Act 1987 (NSW), which introduced a no-fault scheme for motor accidents and the Motor Accidents Act 1988 (NSW) ("the 1988 Act"), which reintroduced the general law concept of negligence, demonstrates that, in conformity with the issue defined in the pleadings, nothing turned on the statutory language. 25 Thirdly, even if reliance had been placed on the specific terms of the 1988 Act, read in its statutory context, there are important differences between that Act and the MAC Act. In particular, the 1988 Act contained no equivalent to the pre-litigation claims assessment procedures contained in the MAC Act. Nor did the equivalent of s 81 (s 45) contain a duty to give a written notice, as required by the MAC Act. Accordingly, I do not think that Phillips provides guidance as to the issue of statutory construction of the MAC Act now requiring determination. 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. 28 In fact there is such a remedy, contained in s 118, which provides as follows (so far as relevant): 118 Remedy available where claim fraudulent (cf section 66 MAA) (1) This section applies to a claimant or insurer if it is established that, for the purpose of obtaining a financial benefit, the claimant or insurer did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading. (2) If this section applies to a claimant: (a) a person who has a liability in respect of a payment, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and (b) a person who has paid an amount to the claimant in connection with the claim (whether under a settlement, compromise or judgment or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claim. 29 In order to understand the full significance of this provision, it is necessary to return to the effect of an admission of liability under s 81(1). As noted above, one significant effect is to render the insurer liable to pay hospital, medical and other expenses relating to the injury caused by the fault of the insured defendant. Subject to s 118, there would appear to be no escape from that payment obligation, once the admission of liability is made. Furthermore, the payments to be made are the full amount of the reasonable and necessary payments and are not limited by the extent to which liability is denied, for example, on the basis of contributory negligence. However, the making of payments under s 83(1) gives rise to a defence, pursuant to s 83(5) which states: (5) A payment made under this section to or on behalf of a claimant before the claimant obtains judgment for damages against the defendant is, to the extent of its amount, a defence to proceedings by the claimant against the defendant for damages. 30 The operation of the equivalent provision in the 1988 Act (s 45(4)) where there was a finding of contributory negligence was the subject of consideration by this Court in Zhang v Golden Eagle International Trading Pty Ltd [2006] NSWCA 25 [presently the subject of a reserved judgment in the High Court]. On the other hand, there is no provision in the MAC Act which would allow the insurer to recover payments in the event that the plaintiff is unsuccessful, or brings no proceedings. In other words, payments of that kind become the responsibility of the insurer if it accepts that its insured is at least partly liable for the damages claimed. 31 Since the liability of the insurer is the most immediate and significant on-going consequence of an admission of liability, the limitation of the circumstances in which such an admission can be withdrawn is itself significant. A purported withdrawal of the admission will not excuse the insurer from continuing liability, nor allow it to recover past payments, absent satisfaction of the circumstances identified in s 118(1). 32 It may be argued that that aspect of the statutory scheme gives rise to no particular inference as to what stance the insurer might take if no settlement is achieved and the claimant commences court proceedings. On the other hand, it may seem curious that an insurer could deny all liability once court proceedings are commenced, do so successfully and yet remain liable for the expenses already incurred by the claimant under ss 83 and 84. It is this consequence which, in my view, gives weight to the comment of Dunford J in Hannaford, dealing with equivalent provisions in the 1988 Act, that: "These provisions, in my view, evidence a clear legislative intention to have claims resolved as expeditiously as possible and, if they can't be resolved, to have the issues in any subsequent litigation reduced to those matters which are genuinely in dispute." 33 Although his Honour did not refer to the predecessor to s 118, the language of the section makes clear that it applies both to liability for payments incurred pre-litigation and liability under a court judgment. If the liability arises as the result of an admission based on a false statement, relief is provided from its consequences at any stage. The proper conclusion based on that approach is that, where an admission of liability has been made, and the insurer has not proved that it can be relieved of the consequences of the admission pursuant to s 118, the denial of all liability is an abuse of process. 34 It may also be objected that, in circumstances where a claimant sues both the known driver and the nominal defendant, who makes an admission of liability, the resultant proceedings may bear an air of artificiality. Thus the trial judge may not be affirmatively satisfied that there was a second car and may conclude that the accident resulted solely from the negligence of the driver of the car in which the claimant was travelling. On the construction adopted above, the claimant, as plaintiff, would be entitled to a judgment as to (say) 75% of her damages as against the nominal defendant, based on the admission of liability. What consequence that would have under the relevant statutory provisions, for the respective liabilities of the two third party insurers, is not a question which need be addressed here. It may be doubted that there is a real anomaly, because the outcome results from the removal of an issue from the matters in dispute. The plaintiff will rely on the admission and need not prove the existence of the second vehicle. In any event, the consequence as between the plaintiff and the nominal defendant follows because the statute operates, as it does with responsibility for payment of hospital, medical and other expenses, to impose its own regime of liability, which may not reflect the results which would be achieved under the general law, absent the statutory scheme. The consequences are more clearly anomalous if the insurer, having made an admission is entitled, in circumstances where s 118 is not engaged, to deny liability in court proceedings. If successful, the insurer will remain liable for all s 83 expenses which will not go in reduction of any judgment. The conclusion that the insurer cannot deny the admitted liability, is to be preferred. It is consistent with the fact that liability for such expenses will continue to operate if no court proceedings are brought. In my view it is compelled by the terms of s 118, which clearly apply to both pre- and post-litigation liabilities. 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. 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. 38 A third provision which should be taken into account in this context is the imposition of a duty on the claimant to co-operate with the defendant's insurer, in part to enable "an early assessment of liability" and in part to allow for the insurer to make "an informed offer of settlement": s 85(1). That duty terminates when court proceedings are commenced, but failure to comply with the duty, without reasonable excuse, provides a bar to the commencement of proceedings: s 85(4). Thus an admission of liability results not merely from a potentially uninformed decision of an insurer. It arises in circumstances where both parties are required to cooperate with the insurer. The claimant should not too readily be deprived of the benefit of her statutory duty to cooperate. 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. 40 The matter raised by the application for leave to appeal is clearly one of some significance and one which justifies a grant of leave. I would, in any event, have granted leave, had I come to a different conclusion, because, for the reasons given by Campbell JA, the approach adopted by the trial judge proceeded on a wrong basis. Nevertheless, in my view the insurer was not entitled to file a defence inconsistent with the terms of its admission of liability. 41 This gives rise to a minor subsidiary question as to the terms on which it sought to admit liability. The admission, contained in the notice of 3 June 2003, admitted "breach of duty of care" and asserted contributory negligence estimated at 25% (apparently based on the failure of the claimant passenger to wear a seat belt). There is no liability in negligence without damage. Further, the purpose of the statutory scheme is demonstrated by the preceding section, which requires an insurer "to endeavour to resolve a claim, by settlement or otherwise, as justly and expeditiously as possible": s 80. It is also demonstrated by the terms of the subsequent section, which requires an insurer to make "a reasonable offer of settlement to the claimant (unless the insurer wholly denies liability for the claim)": s 82(1). The offer of settlement "is to specify an amount of damages or a manner of determining an amount of damages": s 82(2). Thus, although s 81(2) permits the insurer to admit liability "for only part of the claim", read in context an admission of liability involves a concession that damage has been suffered as a result of a breach of duty. Accordingly, I would read the notice as an admission of liability limited in extent by the claim of contributory negligence and, possibly, by the reservation of rights of contribution, though it is doubtful that Part 4.3 of the MAC Act is concerned with questions of contribution. 42 I would propose the following orders:

(3) Order the Appellant to pay the Respondent's costs of the application and the appeal. 43 CAMPBELL JA: This is an Application for Leave to Appeal, and concurrent hearing of the appeal, concerning a decision of his Honour Judge Naughton QC in the District Court. The case concerns whether, and if so to what extent, an admission of liability by an insurer under section 81 Motor Accidents Compensation Act 1999 ("the MAC Act") inhibits that insurer in denying liability in later court proceedings. 44 The litigation before the learned Judge was brought by Ms Cristy Gabriel, who was badly injured on 28 May 2002 when she was a passenger in a car travelling along a suburban street in Busby. The car ran off the road to its left and hit a telegraph pole. The driver of the car was her cousin, Ms Fatmah Rustom. At the time of the accident the plaintiff was aged 17, and Ms Rustom was aged 18. 45 In her Statement of Claim filed 16 September 2005, the plaintiff sued both Ms Rustom, and the Nominal Defendant. The plaintiff's contention is that the accident was caused both by the negligent driving of Ms Rustom, and also by the negligent driving of the driver of an unidentified motor vehicle that overtook the car Ms Rustom was driving, causing Ms Rustom to veer to the left. 46 The Nominal Defendant, within what I infer to be the time permitted by the Uniform Civil Procedure Rules 2005, filed a defence on 29 October 2005. In substance, that defence denied that there was any unidentified vehicle, denied negligence on the part of the driver of any such unidentified vehicle, and alleged that the plaintiff was guilty of contributory negligence. 47 The plaintiff filed a Notice of Motion seeking to have that Notice of Grounds of Defence struck out, with leave being granted to the Nominal Defendant to file an Amended Notice of Grounds of Defence limited to the issues of damages and contributory negligence. The learned trial Judge acceded to the application made by that Notice of Motion. He based his decision upon that fact that before the Statement of Claim was filed the Nominal Defendant had made an admission of breach of duty of care, and upon Rule 14.28 of the Uniform Civil Procedure Rules 2005. That Rule provides: "(1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)."

Structure of the MAC Act 48 The MAC Act establishes a system whereby claims for compensation arising from motor accidents are not determined solely in the courts, and the quantum of compensation is not ascertained (whether in court or out of court) solely in accordance with common law principles. Its objects are stated, by section 5(1) to be: "(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,"

as well as other objectives concerned with keeping premiums for third party policies "affordable" , having insurers fully fund their liabilities, and deterring fraud. 49 Section 198 establishes a new corporation, the Motor Accidents Authority of New South Wales ("the Authority"). Section 32 provides that the Authority "… is, for the purposes of this Act, the Nominal Defendant". 50 Section 34 enables an action for the recovery of 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 a vehicle on a road in New South Wales to be brought against the Nominal Defendant if the identity of the vehicle cannot, after due enquiry and search, be established. 51 Section 66 provides that, for the purpose of Chapter 4 of the MAC Act (which runs from section 66 to section 121), the Nominal Defendant counts as an "insurer". 52 Under the definition in Section 3, " claim means 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." 53 The MAC Act establishes a special regime for the medical assessment of injuries sustained in motor accidents. Section 44 enables the Authority to issue Medical Guidelines relating to, amongst other things, the manner of treatment of injured persons, and how to assess the degree of impairment of an injured person. Section 59 requires the Authority to appoint medical practitioners and other suitably qualified persons to be medical assessors. Section 60 enables a medical dispute to be referred for assessment by either party to the dispute, or by a court or claims assessor. There is an exception, in that if the insurer disputes all liability under a claim, the dispute cannot be referred for assessment by the claimant alone. Under section 61, any certificate issued in consequence of the assessment is evidence as to the matters certified in any court proceedings or in any assessment by a claims assessor, and conclusive evidence as to three specific topics. Section 61 imposes limits (the details of which need not be gone into here) on the extent to which a court can substitute its own views for those contained in an assessment certificate, insofar as the certificate is not conclusive. 54 Section 72 requires, in circumstances like the present, where no claim is made in respect of the death of a person, a claim to be made within six months of the date of the motor accident. If the person against whom the claim is made has third-party insurance, section 72(2) requires that claim to be made, not to the person against whom it is made, but to that person's insurer. 55 Section 78 provides: "(1) 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." 56 Of particular importance for this case, the MAC Act also 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." 57 Section 83(1) provides: "(1) Once liability has been admitted (wholly or in part) or determined (wholly or in part) against the person against whom the claim is made, it is the duty of an insurer to make payments to or on behalf of the claimant in respect of: [various medical and related expenses]" 58 Section 84 imposes an obligation on an insurer to take certain steps concerning the rehabilitation of an injured person. 59 Sections 88 to 106 inclusive contain a procedure for the assessment of claims by a bureaucratic process. Section 90 enables either the claimant, or the insurer, or both, to refer a claim to the Authority for assessment. 60 Section 98 requires the Authority to establish a "unit" to be known as the Motor Accidents Claims Assessment and Resolution Service. That "unit" has become known as CARS. CARS includes various officers who are designated as claims assessors, under section 99. One of those claims assessors is designated by the Authority as the Principal Claims Assessor. 61 Section 92 provides: "(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)." 62 Sections 94 and 95 provide: " 94 Assessment of claims (1) The claims assessor is, in respect of a claim referred to the assessor for assessment, to make an assessment of: (a) the issue of liability for the claim (unless the insurer has accepted liability), and (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. 95 Status of assessments (1) An assessment under this Part of the issue of liability for a claim is not binding on any party to the assessment. (2) An assessment under this Part of the amount of damages for liability under a claim is binding on the insurer, and the insurer must pay to the claimant the amount of damages specified in the certificate as to the assessment if: (a) the insurer accepts that liability under the claim, and (b) the claimant accepts that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued. Note. If the amount of damages is not accepted by the claimant within that period, section 151 makes provision with respect to liability for legal costs incurred after the certificate of assessment was issued. (3) It is a condition of an insurer's licence under Part 7.1 that the insurer complies with this section." 63 While section 90 merely empowers a claimant or an insurer to refer a claim to the Authority for assessment, and does not impose any positive obligation to submit a claim for assessment, there is a considerable practical incentive for a claimant to submit the claim for assessment. That incentive arises from section 108, which permits a claimant to commence court proceedings against another person in respect of a claim only if: "(a) the Principal Claims Assessor has issued a certificate in respect of the claim under section 92 (Claims exempt from assessment), or (b) a claims assessor has issued a certificate in respect of the claim under section 94 (Assessment of claims)." 64 Section 109 provides a different bar to the commencement of court proceedings. Under it, for a claim not in respect of the death of a person, unless the court grants leave, a claimant cannot commence proceedings in respect of a claim once three years, plus, broadly, the time taken by the assessment process plus an additional two months, has elapsed from the date of the motor accident to which the claim relates. 65 Chapter 5 (which runs from section 122 to section 146 inclusive) sets out provisions that alter the common law concerning damages for personal injury in various specific ways. Section 123 provides that a court cannot award damages to a person in respect of a motor accident contrary to Chapter 5. 66 Section 136 alters the law (in ways that need not be discussed in detail) concerning a plaintiff's obligation to mitigate damages. Section 137 alters significantly the principles by reference to which interest can be payable on damages. Section 138 modifies the law of contributory negligence, by requiring a finding of contributory negligence to be made in certain circumstances. Section 140 prevents a defence of voluntary assumption of risk from being a total defence, but rather requires any voluntary assumption of risk to be a basis for reduction of damages (except while the vehicle is engaged in motor racing). Section 142 forbids the award of damages for loss of the services of the person in respect of a motor accident. Section 143 confers on the Court power to approve a settlement that provides for periodical payments, rather than a lump sum. Section 144 forbids the Court from awarding exemplary or punitive damages. Section 145 requires the Court to state, in circumstances where damages are partly in respect of a motor vehicle accident, and partly in respect of some other matter, the portion that relates to the motor vehicle accident. 67 Chapter 6 (section 147 to 156 inclusive) imposes various controls on the costs orders that a court can make. Facts Leading to the Notice of Motion 68 On 18 July 2002 the plaintiff's solicitor, Mr Rimes, sent a personal injury claim form, of the type required by section 72 of the MAC Act, to the Nominal Defendant, which the Authority received on 22 July 2002. In it the plaintiff describes the accident as: "Other vehicle overtook vehicle I was in and cut in front causing vehicle I was in to crash off road. Other vehicle did not stop." 69 The section of the form seeking the claimant's opinion about the person who was at fault read: "The driver that hit our car first. Police told me that other vehicle hit the vehicle I was in." 70 The section of the form that sought information about action taken to find the registration number of any unidentified vehicle, or the name of the person who drove any unidentified vehicle stated: "I reported to the police and gave a statement to the police. I didn't recognise the other vehicle. I did not see the driver. I am dependent on the police inquiries." 71 I adopt the following findings of the learned trial judge (pages 6-7): "On 8 August 2002 a similar claim form was lodged with NRMA Insurance Limited. It was the insurer of the car in which the plaintiff was travelling and which the first defendant was driving. That claim form contained the same statements which I have quoted from the one which was lodged with the Nominal Defendant. … On 18 January 2005 NRMA Insurance Limited, on behalf of the first defendant, denied liability in respect of the accident. The fact that the plaintiff made a claim on NRMA Insurance Limited on 8 August 2002 and the fact that that insurer denied liability on 18 January 2005 did not become known to the Nominal Defendant until 1 June 2005. … On 22 July 2002 the plaintiff's claim against the Nominal Defendant was assigned for management to AAMI Insurance Limited ("AAMI"). On 18 February 2003 AAMI instructed "M. & A. Investigations" (Investigators and Loss Assessors) to investigate the accident and provide a report. The letter of instruction … said that the "object" of the required investigation was "to establish if there was in fact an unidentified vehicle and, if so, if it was to blame, either wholly or partly, for this accident" . The letter enclosed a copy of the claim form against the Nominal Defendant and a copy of the police report. The letter said: "Please bear in mind that AAMI must make a decision on liability within 3 months from the date of claim receipt under the Motor Accidents Compensation Act 1999 ." 72 This last-quoted statement appears to be the use of a form letter without thought, because by the time M & A Investigations was requested to provide the report more than six months had already elapsed since the Nominal Defendant had received the claim form. Hence the Nominal Defendant had already been deemed, by section 81(3) MAC Act, to have denied liability. 73 About 26 May 2003 M & A Investigations delivered to AAMI a report of more than 60 pages, including enclosures. It reported that police had interviewed Ms Rustom on the night of the accident, and obtained a statement from her. As well, the police had conducted an electronically recorded interview with Ms Rustom on 7 July 2002. Further, the police took a written statement from the plaintiff on 10 July 2002. The police had also obtained statements from two people who lived immediately adjacent to the crash site and who had rushed to the scene as soon as they had heard the noise of the crash. The report of M & A Investigations contained a verbatim transcription of each of those statements. 74 The police had taken a large number of photographs at the scene of the accident. The police provided the investigator with a schedule of the photographs, that he included in his report. He did not include copies of the photographs themselves, but advised that it was possible to obtain copies of the photographs by making application to the police department, and paying the appropriate fee. 75 The transcriptions of the police statements disclosed that, on the night of the accident itself, Ms Rustom asserted that the accident was caused by another vehicle that came alongside of her, did not collide with her vehicle, but came really close. She identified that vehicle, to the policeman on the night of the accident, as being an old red Holden Commodore sedan. That was also the account she gave, at much greater length, in her electronically recorded interview. 76 The electronically recorded interview contained an acknowledgement by Ms Rustom that shortly before the accident she was travelling at "between 50 and 55". The speed limit in the area was 50 kph. It also contained an allegation that the unidentified vehicle, at the time it was overtaking her vehicle, "wasn't straight in line with mine", but was at an angle of about 45º. 77 The statement that the plaintiff gave to the police on 10 July 2002 contains an account that: ".. when I looked out I saw a car along side of us. It was very close and it was coming even closer. I immediately started to scream." 78 She says that she does not recall colliding with the pole. She gives no account of a recollection of the unidentified vehicle colliding with the car she was occupying. 79 Examination by the police of the vehicle Ms Rustom had been driving showed no evidence of it having had contact, on its driver's side, with any other vehicle. 80 One of the people who came on the scene very soon after the accident said, in his statement to police, that while he was talking to Ms Rustom: "She then said "there's the car". I immediately turned and faced that location a distance of two house blocks and saw a sedan an older model Commodore red in colour completing a U turn within the intersection. The vehicle then travelled towards us travelling along Aberdeen Road towards the intersection of St Johns Road. As it travelled past us it was travelling pretty quick and the engine revved fairly loud. I turned as the Commodore travelled past and my gaze followed it travelling past. Then about five or ten metres beyond the scene, the driver and I saw it slow to almost a complete stop. I was of the opinion that this vehicle was going to stop. The lady then went hysterical and I saw the red Commodore speed up and I saw it continue along Aberdeen Road towards St Johns Road out of my view. The female driver then fainted." 81 On receiving the investigation report, Ms Nikki Whiting, the AAMI employee with carriage of the file, recommended to her superior, Mr Sam Graziono, that liability should be admitted. Mr Graziono agreed. 82 In consequence, on 3 June 2003 Ms Whiting wrote, on behalf of AAMI, to Mr Rimes, saying: "Re: Section 81 Notice We have examined the circumstances of your client's motor vehicle accident that occurred on 28 May 2002. As a result we consider the accident occurred through the fault of our insured driver. Accordingly, under Section 81 of the Motor Accidents Compensation Act, 1999 , we admit breach of duty of care in respect of your client's claim. Nevertheless, we believe the surrounding circumstances indicate that your client contributed to the accident. We estimate contributory negligence at 25%. As a result we propose to make a 25% deduction from any final settlement. In the meantime we will pay all your client's reasonable medical accounts in full. We will make contact soon to discuss your client's claim. In the meantime please forward any original accounts or receipts for which your client claims reimbursement. Should you wish to discuss any of the matters raised in this letter please do not hesitate to contact me. We further advise that we shall be seeking a contribution from NRMA being the insurers of motor vehicle registration number WIX474." 83 Also on 3 June 2003, AAMI wrote to NRMA claiming contribution, and to the police department seeking a copy of the photographs. 84 As the claim form was received by the Nominal Defendant on 22 July 2002, and the Nominal Defendant had neither admitted nor denied liability within three months, it was deemed, under section 81(3), to have denied liability as from 23 October 2002. AAMI's letter of 3 June 2003 was the type of admission of liability, after an initial denial, that is permitted by section 81(4). 85 The admission made by AAMI's letter of 3 June 2003 was of breach of duty of care. As the claim made by the plaintiff was that the driver of the unidentified vehicle had committed the tort of negligence, and as someone is liable for the tort of negligence only if that person owes a duty of care to the plaintiff, has breached that duty of care, and the plaintiff has thereby suffered damage, the admission made by AAMI was not, strictly, an admission of liability for the claim. The admission of breach of duty of care 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. An admission of liability for part of a claim, in this way, can fairly be described as a notice that includes "details sufficient to ascertain the extent to which liability is admitted", and thus is expressly contemplated by section 81(2) MAC Act. 86 I recognise that the letter also indicates an intention to pay medical accounts in full. Section 83 imposes an obligation on an insurer to make such payments even if there has been a partial admission of liability, so it does not seem to me that the offer to pay medical accounts is an admission that there has been any consequential damage. It would still be open to AAMI to dispute whether any particular medical account related to the injury caused by the fault of the driver of the unidentified vehicle, or indeed, if there was a factual basis for doing so, whether there were any such medical accounts. 87 On 11 November 2003 AAMI received three medical reports relating to the plaintiff. One of those reports, from Dr J C Beer, records as history: "The patient relates that she was involved in a road traffic accident. Thank you for the file and hospital notes. It was a good thing they came because the patient is unable to remember many details about the accident day or for a number of days in hospital. The patient was apparently a front seat passenger in a Ford Telstra [sic] vehicle. She was informed by her sister, who was driving, that the car had been clipped at the time by someone trying to overtake them. As a result their car went into a pole." 88 Another of those reports, from Dr William Wolfenden records as history: "She was a front seat passenger in a car driven by her sister and she was wearing a seatbelt. The car was apparently clipped by another vehicle overtaking and then went into a pole. She remembers nothing of the accident. She was taken to Liverpool Hospital and her next memory is of several weeks later." 89 The third of the reports that AAMI received on 11 November 2003 was from Mr Peter Rawling. It records as history: "She was a front seat passenger in a car that ran out of control after being clipped by another car and collided with a telegraph pole. … Ms Gabriel said that she had a fleeting memory of seeing a car veer in front of the car in which she was travelling but she had no memory of the collision or events at the accident scene." 90 On 10 February 2004 AAMI received another medical report, from Dr Kevin Bleasel. That report included as history: "Her cousin was driving. Cristy Gabriel was a front seat passenger. The car was side swiped on the driver's side by a car which was attempting to overtake. When their car was hit it lost control, ran off the road and hit a telegraph pole. Her cousin did not lose consciousness, but Cristy Gabriel did, although she said she remembers seeing the car and even felt the impact, but not the final crash." 91 On 14 October 2004 the police wrote to AAMI enquiring if AAMI still wanted to receive the photographs that had been requested. 92 On 12 April 2005 the plaintiff's solicitor lodged an application for the Medical Assessment Service of the Motor Accidents Authority to determinate a dispute. The form by which that application was made was called an Application for General Assessment, and was the type of form appropriate if there was a dispute about whether the injuries sustained in the motor vehicle accident have stabilised, and/or whether the injuries sustained in the motor vehicle accident have caused a greater than 10% whole person impairment. After AAMI received notice of that application, it referred its file to Hunt & Hunt, solicitors, on 28 April 2005, for advice. AAMI had not previously sought external legal advice about the claim. 93 On 24 May 2005 AAMI lodged a reply to the Application for General Assessment, and also made application for exemption of the claim from assessment. In its reply to the Application for General Assessment AAMI said (somewhat ungrammatically): "The Respondent AAMI while admitting breach of duty of care on behalf of the Nominal Defendant. The Nominal Defendant has sought contribution from the CTP Insurer of WIX474, NRMA, but to date no reply has been received. The NRMA accordingly will have to be joined to proceedings in the matter. The Respondent also notes that the MAS Assessor, Professor Cameron's 22% whole person impairment in relation to her mental status and the claimant may require an exemption based on mental capacity. The Respondent has now filed an Application for Exemption." 94 Also in its reply to the Application for General Assessment, AAMI asserted that the matter was not ready for assessment, saying: "The matter is not ready for assessment and indeed is not suitable as an exemption is required: 1. CTP Insurer of WIX474 needs to be joined to proceedings. 2. Questions regardint [sic] the Claimant's capacity. 3. The matter involves complex legal issues. 4. Witnesses will need to be called in relation to the allegations of Contributory Negligence and in relation to Negligence as against the driver of WIX474. These will include Police Officers, Ambulance Officer, independent witnesses. 5. Expert evidence will need to be qualified in relation to Contributory Negligence and Primary Negligence." 95 The application for exemption from assessment was made under both section 92(1)(a) and (b). The application was made by completing a standard form, CARS Form 1A. One part of the form, headed "Liability Information" instructs: "Tick any relevant box [This information is contained in the insurer's letter headed "Section 81 Notice" - insurer's letter admitting or denying liability or breach of duty of care]. " 96 AAMI ticked the box that acknowledged that it had: "Admitted its insured driver partly caused the accident and that the claimant;injured person or deceased was partly at fault? [alleged contributory negligence?] " 97 Insofar as the application for exemption from assessment was made under section 92(1)(a), it asserted that the plaintiff lacked legal capacity other than through being under 18. This contention was, it seems, based on some medical evidence that asserted or suggested - the evidence itself is not before us on this appeal - some mental deterioration of the plaintiff. AAMI also alleged, under section 92(1)(b), that the claim was unsuitable for assessment, by ticking boxes to allege that the matter involved complex legal issues, complex factual issues, complex issues in the assessment of the quantum of value of the claim, and issues of indemnity or insurance. AAMI supplemented those bases for asserting the claim was unsuitable for assessment by saying: "The matter involves the following issues: (i) contributory Negligence - failure to wear a seat belt. (ii) Level of negligence of driver of vehicle WIX474 which will need to be joined as a party to proceedings. (iii) Level of care required past and future. (iv) Level of mental capacity - Claimant assessed at 22% by MAS Assessor, Professor Cameron, on 18/10/04. (v) The matter will require the calling of at least four lay witnesses in relation to Contributory Negligence plus a number of Police Officer and Ambulance Officers and possible Expert Evidence. (vi) In relation to Primary Liability, the matter would require the calling of three witnesses and probably Expert Evidence. (That is Primary Liability as between the Nominal Defendant and the CTP Insurer of WIX474)" 98 On 1 June 2005 officers of AAMI discussed amongst themselves "the absence of any independent evidence establishing negligence as against the alleged Nominal Defendant Vehicle", and resolved that further information be obtained, including the police photographs and a personal injury request search to determine if the plaintiff had made a claim against Ms Rustom. That personal injury request search was carried out on 1 June 2005, and showed, as mentioned earlier, that a claim had been made against the NRMA insured vehicle on 8 August 2002, and that NRMA had denied liability on 18 January 2005. 99 At some stage between 27 and 30 June 2005 the police photographs came to hand. On 30 June 2005 an officer of AAMI informed Mr Rimes that AAMI intended to withdraw its admission of liability. 100 On 18 July 2005 the Principal Claims Assessor issued a certificate under section 92(1)(b) of the MAC Act, that the matter was not suitable for assessment. The certificate stated that the Principal Claims Assessor adopted a particular report of an assessor. That report was not in evidence, so the precise reasons why the matter was found unsuitable for assessment are not before the Court. 101 On 5 August 2005 Hunt & Hunt wrote to the plaintiff's solicitors, saying: " Amended Section 81 Notice We refer to previous correspondence and now enclose a copy of photographs taken by the Police Department which we have now obtained access to. We are of the view that these photographs indicate that the vehicle in which the claimant was travelling was likely to be exceeding the speed limit and we also note that there appears to be concerns over the condition of at least one of the claimant's tyres. As previously informed we now hold instructions to deny breach of duty-of-care on behalf of the Nominal Defendant and maintain the allegations already made of contributory negligence. We note that in addition to the alleged nominal defendant's vehicle you have provided notice of the accident to the CTP Insurer of the driver - Fatmah Rustom and as the claimant is a passenger if both vehicles are joined in the action the success of her claim is clearly assured." 102 On 1 September 2005 the solicitor handling the matter at Hunt & Hunt received a copy of the police brief relating to the police investigation into the circumstances of the accident. That was received in edited form, after making an application under the Freedom of Information Act 1989. It contained no information that differed in substance from the transcription of the police statements that had earlier been provided to AAMI by M & A Investigations.

Formal Admissions in Court Proceedings 103 Once court proceedings are begun, the court rules themselves provide various ways in which admissions can be made. The Uniform Civil Procedure Rules 2005 ("UCP Rules") have, pursuant to rule 1.5 and Schedule 1 of those Rules, applied in the District Court to all civil proceedings since 15 August 2005. UCP Rule 14.6 requires any pleading to be divided into paragraphs and for each matter, so far as convenient, to be put in a separate paragraph. That requirement, coupled with the provision in Rule 14.26 that: "(1) An allegation of fact made by a party in a pleading is taken to be admitted by any opposite party required to plead in response unless: (a) in the pleading in response, the opposite party traverses the allegation, or (b) a joinder of issues under rule 14.27 operates as a denial of the allegation. (2) A traverse may be made by denial or by a statement of non-admission, either expressly or by necessary implication, and either generally or as to any particular allegation."

sets up a structure that permits the making in the defence of express admissions or deemed admissions of specific matters that have been alleged in the Statement of Claim. The matters that can be pleaded in a statement of claim, or admitted in a defence, include matters of law, such as existence or breach of a duty of care: UCP Rule 14.19 ; Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at [69], 340. 104 Once an admission is made in a defence, UCP Rule 12.6 governs it: "(1) A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time. (2) Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court." 105 Rule 17.2 enables admissions to be made voluntarily, other than in a pleading, in a special formal way: "(1) The admitting party may, by a notice served on the requesting party, admit, in favour of the requesting party only and for the purposes of the proceedings only, the facts specified in the notice. (2) The admitting party may, with the leave of the court, withdraw any such admission." 106 Admissions can also be obtained by one party serving on another a Notice to Admit Facts, pursuant to Rule 17.3, or a Notice to Admit the Authenticity of Documents, pursuant to Rule 17.4. Those Rules each provide that, when admissions are made pursuant to them, the admitting party may, with the leave of the court, withdraw any such admission. 107 Thus, for all these types of formal admissions that may be made pursuant to court rules, the Rules themselves expressly provide for the admission being withdrawn with the leave of the court. 108 Another way in which admissions may be made pursuant to a formal procedure in court proceedings is pursuant to section 191 Evidence Act 1995, which provides: "(1) In this section: agreed fact means a fact that the parties to a proceeding have agreed is not, for the purposes of the proceeding, to be disputed. (2) In a proceeding: (a) evidence is not required to prove the existence of an agreed fact, and (b) evidence may not be adduced to contradict or qualify an agreed fact, unless the court gives leave. (3) Subsection (2) does not apply unless the agreed fact: (a) is stated in an agreement in writing signed by the parties or by lawyers representing the parties and adduced in evidence in the proceeding, or (b) with the leave of the court, is stated by a party before the court with the agreement of all other parties." 109 In addition, under the common law, if counsel makes an admission at a trial, not in consequence of any agreement, and the trial thereafter proceeds on that basis, any further investigation of the matter admitted is dispensed with unless the court grants leave for the admission to be withdrawn: Urquhart v Butterfield (1887) LR 37 Ch D 357 at 369 per Cotton LJ, 374 per Sir J Hannen, 377 per Lopes LJ; Dunn v Brown and Another (1911) 12 SR (NSW) 22 at 41 per Cullen CJ, 51 per Pring J, 52 per Gordon J; McFadden v Snow (1952) 69 WN (NSW) 8 at 9 per Kinsella J. 110 As it is the pleadings that define the issues for trial, if an admission is made in a defence, there is no issue at the trial about the truth of the fact admitted, and therefore no evidence may be led, or submission made, for the purpose of controverting that admitted fact. Similarly, an assumption that underlies the requirement for leave to withdraw a formal admission made in court proceedings by one of the means prescribed by the Rules, other than admission on the pleadings, is that, unless and until leave to withdraw that admission is given, the matter that is admitted cannot be controverted by other evidence in the case. However, pursuant to UCP Rule 17.6, such an admission operates only in favour of the party in whose favour it was made, and is taken to have been made for the purpose of those particular proceedings only. 111 It is only because admissions made by a formal step in proceedings, of the various types I have just mentioned, prevent there being any issue in the proceedings about the correctness of the matter admitted that any question arises about such admissions being "withdrawn". Granting leave for such an admission to be withdrawn is, in effect, granting permission for an issue to be raised in litigation about the correctness of the matter that had been admitted.

Withdrawal of a Formal Admission in Court Proceedings 112 There are various principles of law that must be followed, and guidelines for practical decision-making that might sometimes assist, when a court is deciding whether it is appropriate to grant leave to withdraw an admission that has been made formally in the proceedings: eg ss 56, 58 and 64(2) Civil Procedure Act 2005 (which, pursuant to section 4(1) and Schedule 1 of that Act have applied to all civil proceedings in the District Court since 15 August 2005); The State of Queensland and another v J L Holdings Pty Ltd (1997) 189 CLR 146; Clough and Rogers v Frog (1974) 48 ALJR 481; Drabsch v Switzerland General Insurance Company Ltd and ors (Santow J, Supreme Court of New South Wales, 16 October 1996 unreported; BC 9604909 at 7 of BC 9604909). It is not presently necessary to discuss the content of those principles and guidelines.

Contrast with Admission Out of Court 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.

The Law Governing Motor Vehicle Claims Before the MAC Act 114 Some account of the law governing motor vehicle claims prior to the commencement of the MAC Act is needed to understand three cases that are relevant to deciding the present appeal: Government Insurance Office of New South Wales v Phillips (New South Wales Court of Appeal, 27 August 1992, unreported; BC9201645); Leaf v Boral Transport Ltd (1993) 35 NSWLR 592; and Hannaford v Cochrane (Dunford J, Supreme Court of NSW, 14 September 1995, unreported). 115 The Transport Accidents Compensation Act 1987 ("the 1987 Act") governed recovery of compensation for injuries sustained in consequence of an accident caused by or arising out of the use of a motor vehicle after 1 July 1987. The Motor Accidents Act 1988 ("the 1988 Act"), which commenced on 10 March 1989, repealed the 1987 Act (section 5) and restored retrospectively to 1 July 1987, the common law and statute, other than the 1987 Act, as the means for determining liability and quantum (section 6). 116 The 1988 Act established a corporation called the Motor Accidents Authority of New South Wales (section 83). That corporation was a different entity, and with different functions to the Authority created by the MAC Act. Section 43 of the 1988 Act (as enacted) provided: "(1) A claimant is not entitled to commence court proceedings against another person ("the other party") in respect of a claim until - (a) the person gives notice of the claim to the other party and (if the other party's insurer is a third-party insurer) to the other party's insurer; and (b) 6 months have elapsed since notice of the claim was given to the other party and (if required by paragraph (a)) to the other party's insurer. (2) If notice is given to the other party's insurer (being a third-party insurer) then despite subsection (1) the claimant is entitled to commence court proceedings after any of the following occurs: (a) the insurer denies all liability in respect of the claim; (b) the insurer admits partial liability in respect of the claim but the claimant is dissatisfied with the extent to which liability is admitted; (c) the insurer has not admitted liability (wholly or in part) within 3 months after notice is given to the insurer. (3) The requirement under subsection (1) to give notice to the other party does not apply if - (a) the other party is dead; or (b) the other party cannot be given notice." 117 Section 45 provided: "(1) It is the duty of an insurer to endeavour to resolve a claim, by settlement or otherwise, as expeditiously as possible. (2) Once liability has been admitted (wholly or in part) it is the duty of an insurer to make payments to or on behalf of the claimant in respect of - (a) hospital, medical, pharmaceutical and rehabilitation expenses; and (b) loss of earnings, as incurred. (3) It is a condition of a third-party's insurer's licence that the insurer must comply with this section." 118 Section 47 was in nearly exactly the same terms as are now contained in section 78 of the MAC Act (quoted at para [55] above). 119 Government Insurance Office of New South Wales v Phillips (New South Wales Court of Appeal, 27 August 1992, unreported; BC9201645) involved a plaintiff who, while a passenger in a motor coach, was injured when a car went out of control and collided with the coach. The driver of the car was found, after the collision, to be dead. The injury occurred on 7 September 1988, a time when the 1987 Act was still in force. The plaintiff made a claim under that legislation, and was informed by TransCover, the corporation administering benefits under that Act, that she was entitled to receive benefits under the 1987 Act. After the 1988 Act came into force, it came, because of the retrospective operation of its provisions, to apply to the plaintiff's claim. After the 1988 Act came to apply to the accident, the GIO wrote to the plaintiff admitting liability. Thereafter, she filed a Statement of Claim in the Supreme Court, alleging negligence on the part of the driver of that car. It then came to the attention of the GIO that there may be a basis for asserting that the collision had been caused by the driver of the car having a stroke. The GIO then filed a defence - the first defence that it filed in the proceedings - that, amongst other things, denied liability. 120 Sharpe J struck out the defence. The Court of Appeal reversed that decision. Kirby P (with whom Clarke JA and Cripps JA agreed) divided his judgment, characteristically, into sections, each of which was preceded by a heading in bold type and underlined, with the headings intended to mark the different logical stages of the argument. The Butterworths unreported version of the judgment, characteristically, removes the formatting from the judgment, so that, while the text of the headings is retained, that text appears to be the first sentence of what is really the paragraph that follows the heading. Thus, the clarity of the distinction between headings, and the balance of the judgment is lost. I have relied upon the judgment as actually handed down by the court. 121 Under the heading "The discretion of the primary judge miscarried" Kirby P gave several grounds for concluding that Sharpe J's discretion had miscarried. The first of them (at pages 9-10) was: "First, it is not at all clear as to what basis the respondent relied upon to support the claim for the peremptory striking out of the Statement of Defence as filed, without a trial on the merits. Such a procedure is reserved to truly exceptional cases where a pleading discloses no reasonable defence on its face or presents a defence which has a tendency to cause prejudice, embarrassment or delay to proceedings or is otherwise shown to be an abuse of the process of the Court. I do not doubt that in the case of a sham defence an applicant would be entitled to invoke such relief from the Court both under the Court's rules (see SCR Pt15 R26) and under its inherent powers. See Remmington v Scoles [1897] 2 Ch 1 (CA) at 6, 7f. But the Statement of Defence filed by the appellant did not fall in this class. On its face, it was perfectly regular." 122 Kirby P recognised that, while a defence of inevitable accident could have been raised at common law by a defendant who denied negligence, the system of pleading under the Supreme Court Act 1970 required the pleading of any matter that might take the opponent by surprise, and hence if the defendant had tried to run a case of inevitable accident at the trial (at pages 10-11): "… it is almost certain that an adjournment of the trial would be granted and the Costs occasioned by the adjournment ordered to be paid by the appellant.

But the appellant had a perfectly good Statement of Defence on file. It was not one which fell within the very narrow class of pleadings which would warrant peremptory removal. See General Steel Industries Inc v Commissioner for Railways (NSW) and Ors (1964) 112 CLR 125, 129. If it was claimed that facts existed which gave an answer to the defence as pleaded, the proper course for the respondent to adopt was that actually adopted in her Reply. It was to plead facts by reason of which a legal answer was provided to the Statement of Defence filed. There would then be tendered to the court of trial issues of fact and law to be determined in the normal way at the trial. It is by a trial on the merits that the issue dealt with by Sharpe J should have been determined. The only exception would have been if his Honour, pursuant to the Supreme Court Rules, had ordered a separate trial of the issue raised by the Reply. As I have said, his Honour did not do that. Nor did the manner in which he dealt with the first application before him indicate a resolution of the complex issues of estoppel and waiver to which passing mention only was made." 123 Kirby P also relied on a ground that was dependent upon the way the application had been argued before Sharpe J, but was not of any general application. He also relied on the fact that the whole of the defence had been struck out, not merely the part that had denied liability. 124 The next section of Kirby P's judgment is headed "Substitution of orders by the Court of Appeal". Under that heading he continued, at 12-13: "This was not a case where peremptory relief against the Statement of Defence as filed, whether in its entirety or confined to the issues of liability, ought to have been granted. Whether in a stereotyped form or not, the defence was perfectly plain. Relevantly, it denied negligence of the appellant or its agent (Mr Taylor). It put the respondent to the proof of negligence. This, under our law, the appellant is perfectly entitled to do. Nor do I see any injustice in restoring the defence. The sequence of events which I have described indicates that the initial admissions were made in the context of claims under the successive transport accidents compensation statutes and in apparent ignorance of the availability of a defence to contradict negligence. Whereas admissions were made and payments provided under the legislation, from the start the common law damages action was (so far as the pleading was concerned) defended. Whether, by reason of past admissions under the statutes and payments made or other conduct an estoppel or waiver arose is not a matter susceptible to peremptory relief. It must be tried upon the pleading by way of the Reply which the respondent has filed." (emphasis added) 125 His Honour granted leave to add an express defence of inevitable accident, and continued, at 13-14: "This will leave the parties in the situation which the modern principles of pleading are designed to produce. The appellant will have given notice of the defences it seeks to raise. The respondent will have the opportunity of pleading, by way of her reply, any matters of fact or law which, she contends, deprive the appellant of an entitlement to succeed, upon those defences. Neither party will have been excluded peremptorily from the opportunity to have these matters determined on their merits as the law provides. Such peremptory relief was inappropriate in this case." 126 Leaf v Boral Transport Ltd (1993) 35 NSWLR 592 is a decision of his Honour Judge Nash, given on 14 May 1993. It concerned a plaintiff who was injured when his own vehicle ran off the road. He alleged that the accident was the fault of the owner of the vehicle, because the steering system of the vehicle was defective. Before litigation was brought, the claims officer of the owner's insurer wrote to the plaintiff's solicitors stating that, "liability in this matter is admitted". 127 When the plaintiff began court proceedings, the defendant filed a defence denying negligence. Nash DCJ struck out that defence. His Honour said, at 594-595: "I do not consider that the defendant is entitled to withdraw the admission of liability made by its insurer which has the conduct of the case on behalf of the defendant. At common law admissions may be withdrawn. However, in my view, this form of litigation is now covered completely by the provisions of the Act, including where it has preserved certain common law rights. The Act envisages that insurers will make binding admissions of liability, either in whole or in part, and envisages that such admissions will be binding throughout the litigation. When this has been done a plaintiff need not do anything to endeavour to search for witnesses or to gather any evidence that he may require, in addition to what might be regarded as the usual evidence as to how the collision occurred, as he would do if liability was denied. I consider a reasonable plaintiff in the circumstances can wait until the insurer's decision on liability in general before gathering such evidence and adding to the costs of the litigation and the burden upon the insurer. In my view there are two exceptions to what I have just stated. If the admission of liability has been demonstrated to have been given as a result of fraud, either by the plaintiff or, perhaps, in some cases, even the insurer's own insured or someone closely connected with that insured, or even by a misrepresentation not amounting to fraud as to the facts of the accident, or if it is demonstrated that the admission of liability was made on the basis of information given by the plaintiff in his claim form which is demonstrated to be at least prima facie wrong, then a defendant in any such circumstance may be permitted to withdraw the admission of liability and deny it in its, his or her pleading. If a defendant could with no apparent good reason withdraw an admission of liability formally made by the defendant's insurer, then I would have expected the Act, which now covers the field in this form of litigation, to have so provided. It does not do so. In my view there is every reason for having the defendant bound by its insurer's admission of liability and no reason for permitting the action to proceed on the basis that the issue of negligence raised in the statement of claim is a matter of dispute." 128 No cases are cited in the judgment in Leaf, and, according to the report at 592, no cases were cited in argument. Thus Nash DCJ did not realise that the view that he had arrived at, of the effect of an insurer making an out-of-court admission of liability concerning a claim arising from a motor accident covered by the 1988 Act, was not the same as the Court of Appeal had earlier, in Phillips, held was applicable. 129 Hannaford v Cochrane (Dunford J, Supreme Court of New South Wales, 14 September 1995, unreported) concerned a situation where a plaintiff had been injured by being crushed by a grader owned by the defendants. The plaintiff made a claim against the defendant's third party insurer, NRMA. After investigating the matter to some extent (but not completely), but before any court proceedings were begun, NRMA wrote to the plaintiff's solicitor admitting breach of duty of care. When proceedings were later begun, the defendant filed a defence that, inter alia, denied negligence. Dunford J acceded to an application by the plaintiff to strike out the defence, on the ground that it disclosed no reasonable defence and had a tendency to cause embarrassment or delay the proceedings. 130 His Honour referred to Nash DCJ's decision in Leaf, and to a contrary unreported decision of Master Greenwood given on 19 June 1992 that Dunford J referred to as Rickett v McCallum. That is apparently the same case as Ricketts v Callan (1992) 15 MVR 220. Dunford J then summarised (accurately) provisions of the 1988 Act as follows, at 3-4: Part 5 (ss 40 to 67) of the Act deals with claims and court proceedings whilst Division 2 of that Part (ss 42 to 47) deals with claims and other matters preliminary to court proceedings. Sections 43 and 44 provide for the making of claims, s 45(1) provides that it is the duty of an insurer to endeavour to resolve a claim by settlement or otherwise as expeditiously as possible, while sub-s (2) provides that once liability has been admitted (wholly or in part), it is the duty of an insurer to make payments to or on behalf of the claimant, in respect of hospital, medical and similar expenses and sub-s (3) makes it a condition of a third party insurer's licence that the insurer comply with the section. Section 46 then provides that the insured is not to make any admission of liability, while s 47(1) provides for the insurer to take over and conduct negotiations and subsequent proceedings in the name of and on behalf of the insured. Section 47(4) is as follows: "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 shall 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."" 131 His Honour then continued at 4-5: "These provisions, in my view, evidence a clear legislative intention to have claims resolved as expeditiously as possible and, if they can't be resolved, to have the issues in any subsequent litigation reduced to those matters which are genuinely in dispute. In addition the requirement in s 45(2) for the insurer to pay hospital and medical expenses once liability has been admitted in whole or in part would appear to be designed to relieve injured claimants of worry about the meeting of such expenses, and this can only be so if admissions of liability in whole or in part as and to the extent appropriate is to be encouraged. If insurers fail to comply with ss 45(1) and (2) they risk losing their licences: s 45(3). It is difficult to see what would happen to hospital, medical and such expenses if an admission, having been made, was withdrawn. The Act provides that after the admission has been made the insurer must pay such expenses; there is no provision for ceasing to pay them if the admission is withdrawn. Moreover, the provisions of s 47(4) limiting the effect of any admission to the claim in respect of which it is made, strongly suggests that such admission is to remain binding in respect of such claim and any proceedings in respect of such claim. Mr Garling sought to distinguish the claim and the court proceedings but, in my view, a fair reading of the sub-section refers to a claim and proceedings in respect of such claim on the one hand, as opposed to any other claim and proceedings arising out of such other claims." 132 His Honour went on to apply the principles applicable to withdrawal of formal admissions made in the course of court proceedings, saying (at 6): "Although the admission at issue in the present application was not made under the section nor under the Rules, I consider that the same principles are applicable and that an admission of liability in whole or in part made under s 45(2) of the Act can only be withdrawn or disregarded if the interests of justice require, and this means that some good reason must be shown for so doing. To this extent, I agree with Nash DCJ although I do not necessarily agree with his Honour's proposition that this form of litigation is now completely covered by the provisions of the Act (at least as a bald unqualified proposition)." 133 Unfortunately, the Court of Appeal's decision in Phillips was not cited to Dunford J, so he also was not aware of the discrepancy between the view he came to about whether the making of a section 45(2) admission of liability inhibited the later pleading of a defence denying liability, and the view on that topic to which Phillips had come.

Ness v Graffen 134 In Ness v Graffen (2003) 60 NSWLR 549 McLoughlin DCJ considered a situation where an insurer had made an admission of liability under section 81 of the MAC Act, and purported to withdraw that admission before the plaintiff had begun any proceedings in court. When the plaintiff began proceedings in court, after obtaining a section 92 exemption, the first defence that the defendant filed denied liability. McLoughlin DCJ struck out that defence, on the ground (at 556-557, [33])

"… that par 2 and par 3 of the notice of grounds of defence disclose no reasonable defence, and have a tendency to cause embarrassment and are contrary to the admission required to be made by statute, namely s 81 of the Motor Accidents Compensation Act as amended …" 135 In reaching that conclusion, McLoughlin DCJ reviewed the previous case law relating to the effects of an out-of-court admission of liability under section 45(2) 1988 Act. It is not necessary to discuss all of that case law, save to say two things. First, that some cases had gone one way, and some the other, on the question of whether when a defendant had made such an admission of liability, that defendant could file a defence in court proceedings that denied liability only if the leave of the court was obtained to withdraw the admission. Second, that apart from Phillips all the cases referred to were first instance decisions. 136 His Honour's account, at 553, [17] of Phillips should, however, be mentioned: "In that matter the admission of liability was withdrawn because evidence became available to the insurer of inevitable accident, that is, the insured driver had suffered cerebral haemorrhage which caused the accident. This information was not available at the time of the admission and the evidence of it becoming available by the time the defence was filed. In that matter the Court of Appeal substituted orders providing for the restoration of the defence, and granted leave to file the specific defence of inevitable accident, there being evidence to support such defence being raised." 137 The nub of the decision of McLoughlin DCJ in Ness v Graffen was, at 556: " [29] I am of the view that an admission under s 81 of the Motor Accidents Compensation Act by the insurer required adequate reason for it to be withdrawn.

[30] I agree with Dunford J when he questions the reasons proffered by Nash DCJ in his decision in Leaf as to a total acceptance of the matters under s 45 of the Motor Accidents Act . Section 81 of the Motor Accidents Compensation Act is, in my mind, in far stronger terms and places greater onus and responsibility upon the insurer. There must, in my view, be evidence which sets out mistake by the claims manager, change of circumstances, further information being ascertained, or misrepresentation being established to enable the court to properly review an attempt to withdraw such admission. The court then is to decide such application in accordance with the matters that Dunford J has referred to in his decision of Hannaford v Cochrane and the rules relating to withdrawals of admissions of liability in both the District and Supreme Courts.

[31] The Motor Accidents Compensation Act came to be in part because of increasing court costs, the need for expedition, and further, for there to be less legal formality. All of these matters require any insurer to give proper reasons and obtain the court's approval to withdraw an admission once made, in my view, under s 81 of the Motor Accidents Compensation Act ."

Is Ness v Graffen Correct? 138 Ness v Graffen held that, if a defendant has made an admission of liability under section 81 of the MAC Act, that defendant was able to file, as the first defence filed in any court proceedings relating to that motor accident, a defence that denied liability only if the defendant satisfied the court that there is adequate reason for the earlier admission to be withdrawn, in accordance with the same principles as govern the withdrawal of formal admissions made in the course of court proceedings. In my view that is not the law. 139 While McLoughlin DCJ's account, quoted at para [136] above, of Phillips is correct, as far as it goes, it does not pay attention to the detail of the reasoning in Phillips. As I read Phillips, Kirby P regarded the defendant as entitled to file the defence denying negligence, notwithstanding the making of the earlier admissions of liability under the 1987 Act and the 1988 Act, and that any question of whether the previous admissions gave rise to an estoppel or waiver would need to be raised by a reply. Kirby P recognised that there was a narrow category of case in which it might be possible to peremptorily remove a defence, under the then equivalent of UCP Rule 14.28 (Supreme Court Rules 1970 Part 15, Rule 26), but the fact that there had been an admission of liability out of court, under section 45(2) of the 1988 Act, was not sufficient to show that a defence should be peremptorily struck out. While Kirby P mentioned that the insurer had, after the admission of liability, obtained evidence concerning the driver of the car suffering a stroke, that formed no part of the error that Kirby P identified in Sharpe J's reasons. Rather, it appeared in the part of his reasons dealing with what the Court of Appeal should do once it had identified the error. 140 I see no reason to reach any different conclusion under the MAC Act, concerning admissions made under section 81 MAC Act, to the conclusion that Phillips came to about the effect of an out-of court admission of liability under the 1988 Act. 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). 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. 145 I do not place the same significance upon section 78(4) MAC Act as Dunford J in Hannaford placed upon the corresponding subsection under the 1988 Act. In the context of section 78, "proceedings" are court proceedings. Section 78(1)(a), (b) and (d) draw a distinction between "negotiations in respect of the claim", "any legal proceedings in respect of the claim", and "any function conferred by this Act on the person in respect of the claim." The action of an insurer in making a section 81 admission, before action is brought, fits within the first or third of these phrases, but not the second. 146 In many cases, when an insurer makes a section 81 admission, that admission will not be made "in connection with the settlement of a claim" but rather will be made in exercise of the insurer's statutory responsibility under section 81. And in many cases where an insurer makes a section 81 admission, before action is brought, that admission will not be one made "in connection with … the conduct of proceedings in respect of a claim", because no proceedings are then on foot or contemplated. In such cases, section 78(4) has nothing to say about the significance of the section 81 admission. 147 If it were the case that the factual context in which a section 81 admission was made was such that the admission could be described as being made "in connection with the settlement of a claim", or could be described as being "in connection with … the conduct of proceedings in respect of a claim", section 78(4) would apply to that admission. However the way it would apply to that admission is by leaving open the possibility that that section 81 admission might prejudice the claim, if that claim ultimately came to be enforced by litigation. What section 78(4) does not prescribe is the way in which the section 81 admission might then prejudice the claim. It is consistent with section 78(4) that any prejudicing of the claim that might then arise is by it having the same effect as any out-of-court admission by a party has in litigation. 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.

Is there Error in the Reasoning of Naughton DCJ? 149 His Honour's reasons for judgment in the present case included the following, at page 25: "The 4 affidavits relied on by the Nominal Defendant in response to the plaintiff's notice of motion in substance did no more than provide a selective history of the processing of the plaintiff's claim. No one in authority from AAMI having direct knowledge of the matter said on oath what the reason was for the purported retraction of the 3 June 2003 admission of liability. It was left to submissions from the bar table based on asserted inferences from selected parts of the material which was before the Court. That was not good enough. It was no substitute for evidence on oath from a person or persons in authority from AAMI having direct knowledge of the reason, whatever it was. In particular, no one from AAMI said on oath that the reason for the purported retraction of the admission of liability was because of (1) any mistake by its claims manager, or anyone else; (2) any relevant change of circumstances since the date of the admission; (3) any relevant further information which was not available when the admission was made; (4) any misrepresentation which had induced the admission, or (5) fraud. See, eg, Maile v Rafiq [2005] NSWCA 410, at [43], Ness v Grappen [sic] (2003) 60 NSWLR 549, and Leaf v Boral Transport Ltd (1993) 35 NSWLR 592. Nor were any other reasons disclosed suggesting that the interests of justice required the retraction of the 3 June 2003 admission of liability. The interests of justice require that before such an admission can be retracted "some good reason must be shown for so doing" . Hannaford v Cochrane (Unreported; NSWSC; Common Law Division; Dunford J; 14 September 1995), at 6." 150 As his Honour's decision is a discretionary decision in a matter of practice and procedure, particular caution is needed before an appeal court overturns the decision: In Re the Will of FB Gilbert (dec) (1946) 46 SR (NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177. 151 However, there is a significant error of principle at the core of his Honour's reasons. He took the view that once a section 81 admission had been made, a defence could later be pleaded that denied liability only if the defendant showed good reason why a defence that put liability in issue should be permitted. For reasons already given, that approach is not required by either the terms of, or any implication in, the MAC Act. 152 Further, it is the party who invokes Rule 14.28 UCP Rules to strike out a pleading who bears the onus of presenting evidence and argument to satisfy the court that one or more of the grounds set out in Rule 14.28(1)(a), (b) and (c) is made out. While proof that an admission of liability under section 81 has been made might sometimes be part of the basis upon which one of the matters in Rule 14.28(1)(a)(b) or (c) is established, it is not in itself enough to make out any of those grounds. 153 As Kirby P said in Phillips, at 9, a "sham defence" can be struck out under such a rule. As the circumstances in which a breach of Rule 14.28(1) might be established are so heterogeneous, I will not even attempt a sketch of other types of circumstances in which an application to strike out a defence under that Rule could succeed. 154 In these circumstances, his Honour's decision should be set aside.

Re-exercise of the Discretion 155 Mr Gross QC, counsel for the Nominal Defendant, pointed out, both to Naughton DCJ and to this Court, that there was no independent witness who could confirm that there was a red Commodore sedan that drove in the manner that Ms Rustom described, immediately before the accident. He submitted that her account to the police, of the unidentified vehicle being at an angle of about 45º to her vehicle, did not sit well with the fact that no collision between the vehicles occurred. 156 Before Naughton DCJ, and before this Court, the only material that was pointed to by Mr Gross as being new material that came into the hands of AAMI after making its admission of breach of duty of care on 3 June 2003 are the medical reports containing the histories that I have set out at paras [87]-[90] above. Those histories, containing as they do an account that the unidentified vehicle actually collided with the vehicle in which the plaintiff was a passenger, are at odds with the statements that Ms Rustom provided to the police (though not with the hearsay in the plaintiff's claim form (para [69] above)). The weight and significance (if any) of those discrepancies could only be ascertained at a trial. 157 Mr Gross accepted that a significant reason for the change of stance of the Nominal Defendant, so far as admitting liability was concerned, was that different minds had taken a different view of the significance of the material that had been in AAMI's possession on 3 June 2003. 158 The factors that Mr Gross pointed out are ones that show that, whatever its ultimate success might be, a defence involving denial of liability is one that could bona fide be raised. In those circumstances, the defence should be allowed to stand. 159 Though prejudice to the plaintiff was not the basis of his Honour's decision, his Honour made some mention of it. He considered that one item of prejudice that the plaintiff would suffer would be that, if the admission of liability remained on foot, it would not be necessary for her to serve the Statement of Claim on her cousin. His Honour was factually mistaken in thinking there was any such benefit to the plaintiff in striking out the defence - the second defendant had filed a defence in the proceedings on 28 February 2006. That was the first of the hearing days before his Honour of the Notice of Motion, and prior to his decision on 13 March 2006. He also found that if the admission were retracted, the length and costs of the litigation was likely to be greater, and the stress anxiety and inconvenience for the plaintiff was likely to be increased. I accept that those consequences would be likely to follow - they are almost inevitable consequences of any litigation. 160 The plaintiff did not present any specific evidence directed to loss of evidence through now needing to pick up a trail which had become cold in consequence of the vacillation by the defendant. She relied, however, upon the inherent tendency of delay to make litigation harder to pursue, because of the risk of fading memories or loss of relevant documents: cf Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551 per McHugh J. In the present case, however, the plaintiff commenced her proceedings fairly promptly - around three years and four months after the accident - by comparison with the limitation period that was the occasion for McHugh J's remarks in Brisbane South. For a period of nearly eight months before then, from 19 October 2002 to 3 June 2003, the defendant was deemed by section 81(3) to have wholly denied liability for the claim, and it was only from 3 June 2003 until 30 June 2005 that the plaintiff's solicitor could have been of the view that it would not be necessary for him to prepare a case on liability. Given the plaintiff's statement in her claim form of 18 July 2002 that she was dependent on the police enquiries, I would not regard there as having been any significant prejudice, even if that were a relevant consideration. 161 The plaintiff filed a reply, on 7 February 2006, that alleged the Nominal Defendant was estopped from denying liability by reason of making the section 81 admission. I stress that these remarks about prejudice are based upon the evidence that was before the learned trial Judge, and, being interlocutory, do not create any issue estoppels that would inhibit a trial judge in ultimately deciding, on the evidence then before him or her, the merits of that reply.

Express Withdrawal of the Section 81 Admission 162 In the present case, AAMI's solicitors have served what purports to be an "amended section 81 notice" that denies liability (para [101] above). There is a dictum in Maile v Rafiq [2005] NSWCA 410 (application for special leave to appeal dismissed: Rafiq v Maile [2006] HCA Trans 243) that needs to be considered, concerning the effect of that purported withdrawal. 163 Maile v Rafiq involved a two-car motor accident. The plaintiff was the driver of one of the vehicles, the defendant was the driver of the other. The defendant's insurer had served a notice under section 81 of the MAC Act admitting breach of duty of care by its insured driver. The plaintiff commenced proceedings, and the defendant filed a defence that also admitted breach of duty of care. That defence was filed at a time when the defendant's insurer had attempted to locate both the defendant, and a person who had been a passenger in the defendant's car, for the purpose of obtaining statements, but had been unsuccessful. Later, investigators located the defendant, and the passenger, and obtained statements from them that suggested that the accident had been caused by the plaintiff driving through a red light. The defendant thereupon applied to amend its filed defence, to deny negligence. A District Court judge refused that leave. An appeal from the decision succeeded. 164 There are significant respects in which the structure of facts considered in Maile v Rafiq differs from the present case. First, it concerned an application for leave to amend a defence already filed, not whether the defendant was inhibited by a previous out-of-court admission in filing the first defence it chose to file. Second, it is clear from paragraph [42] of the judgment of Tobias JA (with whom Brownie AJA agreed) that there was no dispute in the Court of Appeal about the principles that the trial judge ought to have applied in deciding whether to permit the amendment. Rather, the decision in the Court of Appeal turned upon a finding that the trial judge had made that the plaintiff had demonstrated that she would be prejudiced if the amendment were permitted. That finding was held to have been incorrect. 165 As Tobias JA noted at [92], the only application to the court below was to amend the defence by withdrawing the admission of negligence in it, and there was no application to withdraw the admission that had been made in the section 81 notice. 166 Tobias JA said, at [101]: "Had it been relevant, I would not have endorsed the withdrawal by the insurer of its admission of breach of duty on behalf of the claimant contained in the s 81 notice. As I have already observed, no explanation was forthcoming as to why that admission was made and, in particular, there was no evidence that the author of the letter constituting that notice, Ms Hibberd, was not available to provide that explanation."

As the opening words made clear, those remarks were obiter. They do, however, show his Honour's view that a section 81 admission that a court finds is unexplained does not mean that a defence denying liability cannot be filed in later court proceedings. 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.

2. Set aside the orders made by his Honour Judge Naughton QC on 13 March 2006.

3. Notice of Motion filed by the plaintiff on 30 November 2005 dismissed.

4. Respondent to pay costs of the appellant of the appeal and of the hearing in the court below.

5. Respondent to have a certificate under the Suitors Fund Act 1951 . ********** 169 Since writing the above, I have had the opportunity to read a draft of the judgment of Basten JA, and Hodgson JA's comments on the judgment of Basten JA. 170 I do not, with respect, agree that the remarks of Kirby P in Phillips, set out at para [124] above, are obiter. While it is true that the argument before Sharpe J, and also in the Court of Appeal, raised allegations of waiver or estoppel, Kirby P said, at 9: "It is important to stress that Sharpe J did not dispose of the applications before him, explicitly at least, upon the basis of estoppel or waiver … Instead, he appears to have dealt with the application upon the footing that he was exercising a general discretion reposed in the Court."

It was the course taken by Sharpe J, in exercising that sort of general discretion, that Kirby P held was in principle mistaken, in the passage quoted at [121] above, and the reasons of Kirby P for adopting a different course are those quoted at [124] above. 171 I do not, with respect, attribute the same significance to section 118 as does Basten JA, for the purpose of resolving the present case. Insofar as section 118 gives rights to an insurer, it is to recover back any amounts it has paid out in consequence of a fraudulent claim. Section 118 can enable recovery of hospital and related expenses paid under section 83, rehabilitation expenses paid under section 84, other amounts of damages paid following an assessment process, damages paid pursuant to a judgment obtained in litigation, or amounts paid under a settlement agreement. It provides an extra source of remedy, in those situations, to the remedies already provided by the tort of deceit, and the law enabling the setting aside of contracts or judgments obtained by fraud. 172 Section 83 creates an obligation for an insurer to pay medical and similar expenses that is not dependent upon the fault of the person against whom the claim is made. Rather, it is an obligation, purely of statutory origin, that arises from the fact that an insurer has made an admission of liability wholly or in part, or that there has been a determination of liability wholly or in part. Section 118 has the effect that any payment that has been made pursuant to that special statutory obligation can be recovered only if the making of that payment arose from the type of fraud that section 118 is concerned with. A payment made under section 83 can be recovered only in the circumstances section 118 sets out, regardless of whether there is litigation concerning the claim. Recovery of the money paid under section 83 is, of course, different to relying on the fact that the payment was made as a means of reducing, under section 83(5), the amount of damages that would otherwise have been payable. 173 The critical question for the present case concerns the circumstances in which an insurer can, by the first defence it files in litigation, dispute liability. The liability concerned is a liability to make a payment that a plaintiff claims the insurer is legally obliged to make by reason of the negligence of the insured, not a liability that arises by force of statute under section 83. Further, it is a liability to make a payment that the insured has not yet paid - namely, whatever damages the plaintiff claims entitlement to at common law minus the amount for which the insurer has a section 83(5) defence. I do not find that section 118, concerned as it is with circumstances in which a payment already made by an insurer can be recovered, assists in finding the parliamentary intention concerning that question. 174 I agree with the remarks of Hodgson JA in paras [12]-[15] of his judgment. **********

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