Zurich Australian Insurance Limited v Motor Accidents Authority of New South Wales

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

Allianz Australia Insurance Ltd v Ward [2009] NSWCA 264 Kioa v West 1985 HCA 81; (1985) 159 CLR 550 CASES CITED : Ramsay v Australian Postal Corporation [2005] FCA 640; (2005) 147 FCR 39 The Annot Lyle (1886) LR 11 PD 114 at 116 Walton v Gardiner [1993] HCA 77; (1992-1993) 177 CLR 378 Zian Fu v Kiem Dang Investment Pty Ltd [2009] NSWCA 380

Zurich Australian Insurance Limited (Plaintiff) Motor Accidents Authority of New South Wales (First defendant) PARTIES : Alex Bolton (Second defendant) Belinda Cassidy (Third defendant) Teresa Robinson (Fourth defendant)

COUNSEL : F Kunc SC with H El-Hage (Plaintiff) A Stone with M Holz (Fourth defendant)

George Mallos (Plaintiff) SOLICITORS : I V Knight, Crown Solicitor (First, Second and Third defendants) Grogan & Webb (Fourth defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

30116/2009 Zurich Australian Insurance Limited v Motor Accidents Authority of New South Wales, Alex Bolton, Belinda Cassidy and Teresa Robinson

JUDGMENT 1 HIS HONOUR: These proceedings ultimately concern the question of whether there has been a denial of procedural fairness because of a refusal by a CARS assessor to permit an insurer to cross-examine an 88-year old claimant. These reasons are limited to consideration of the issue of whether a stay should be granted on terms until that question can be decided. Background 2 Mrs Robinson was born in 1921. She was hit by a bus and injured on 13 May 2003 when crossing the street. Zurich had issued CTP insurance cover for the bus and admitted liability. The principal issue in dispute was the quantification of Mrs Robinson's damages. 3 As part of the evidence relied upon by Mrs Robinson at a CARS assessment hearing convened under the provisions of the Motor Accidents Compensation Act 1999 ("the Act"), her counsel tendered a DVD that recorded an interview conducted between Mrs Robinson and her counsel on 23 August 2009 in Mrs Robinson's home at Manly. This interview took the form of Mrs Robinson's counsel asking her questions relating to her claim. The solicitor for Zurich objected to the DVD interview being put before Assessor Bolton at the CARS Assessment Conference on 18 September 2009. Mrs Robinson did not attend that assessment conference when this occurred as she was said to be agoraphobic. She was therefore unavailable for cross-examination. Despite Zurich's objection Assessor Bolton allowed Mrs Robinson to rely upon the DVD as part of her case. 4 On 6 October 2009 Assessor Bolton issued an assessment in which he assessed the amount of damages payable to Mrs Robinson as $225,184.10. (Due to an arithmetical error, another assessor later issued a replacement certificate but no point of principle turns on that). Mrs Robinson accepted the assessment. On 23 November 2009 Zurich paid one half of the sum awarded to Mrs Robinson and commenced these proceedings. 5 The matter came before me in the duty judge list the same day when Zurich sought ex parte orders for an abridgement of time for service. By its summons Zurich sought an order pursuant to s 69 of the Supreme Court Act 1970 setting aside the assessment of Assessor Bolton made on 6 October 2009 (as amended) on the ground that the plaintiff was denied procedural fairness because Assessor Bolton allowed Mrs Robinson to rely on the video recording when she did not attend the conference and was not available for cross-examination. On the return of the summons on 26 November 2009, Mr Kunc of senior counsel and Mr El-Hage of counsel appeared for Zurich and by notice of motion filed in Court on the first occasion sought a stay of Assessor Bolton's assessment made under s 94 of the Act until a final hearing. Mr Stone and Ms Holz of counsel appeared for Mrs Robinson at this time and opposed that application. The first three defendants made a submitting appearance. Consideration 6 As the result of Mrs Robinson's acceptance of the assessment, Zurich had a statutory period of 20 business days to pay the full amount of damages to her: see s 95(2) and s 95(2A) of the Act and reg 17A(1) of the Motor Accidents Compensation Regulation. Under s 95(2) an assessment of the amount of damages on a claim where liability is not in issue that is accepted by the claimant is binding on the insurer. Section 95A(2) imposes an obligation on the insurer to pay the amount of damages within the prescribed period and provides for the payment of interest as well. It is a condition of an insurer's licence that the insurer complies with s 95: see s 95(3). Regulation 17A(3) requires an insurer to pay interest on any part of the damages that remains unpaid at the end of the 20 day period. 7 Zurich acknowledges that it is required to pay interest on so much of the damages as remain unpaid. Zurich says that it has not paid more than half of the amount assessed because it is concerned that it may have difficulties recovering monies paid to Mrs Robinson in the event that it is successful in the proceedings and the assessment of Assessor Bolton is set aside. Before it commenced these proceedings Zurich sought an undertaking from Mrs Robinson that she would preserve 50 per cent of the amount of the damages pending resolution of the matter and indicated that it would apply to have the proceedings expedited. Mrs Robinson did not give any such undertaking. Instead, Mrs Robinson's solicitors threatened to lodge a formal complaint with the General Manager of the Motor Accidents Authority and the Minister for Finance if the whole amount was not paid. 8 Zurich contends that this Court has power to order a stay in the present circumstances pursuant to s 23 of the Supreme Court Act. If s 23 empowers the Court to order a stay of proceedings in a tribunal, as occurred in Walton v Gardiner [1993] HCA 77; (1992-1993) 177 CLR 378, by analogy it must have power to restrain or to stay the outcome of a process such as the assessment which is challenged in these proceedings. 9 A stay can be granted where there is evidence that a judgment may not be repaid if an appeal is successful: The Annot Lyle (1886) LR 11 PD 114 at 116. 10 The applicable principles are well known. They were very recently referred to and applied by Hodgson JA in Zian Fu v Kiem Dang Investment Pty Ltd [2009] NSWCA 380 at [2] - [5] and [9] as follows: "[2] As stated by the Court of Appeal in Kalifair Pty Ltd v Digi-tech (Australia) Ltd [2002] NSWCA 383 at paragraph [18], an appellant seeking a stay must generally show that the appeal raises serious issues for determination of the appellate Court, and that there is a real risk that the appellant will suffer prejudice or damage if a stay is not granted which will not be redressed by a successful appeal.

[3] A usual way of showing a risk of prejudice or damage of this kind is to lead evidence that there is a real risk that, if the money is paid over to the respondent to the appeal and the appeal succeeds, the money, or some of the money, will not be recovered back from the respondent. There is no evidence to that effect in this application, and indeed there is affirmative evidence from the respondent suggesting that the respondent would be able to repay the money if the appeal were to succeed. [4] Another possible way of satisfying this second requirement is to show substantial hardship, and to show that if the judgment is not stayed and is enforced against the appellant, the appellant will be deprived of the means to pursue the appeal. There isn't any evidence on that matter either in this case.

[5] In those circumstances, the appellant seeks to rely on a general submission that having to pay over the judgment at this point would be prejudicial, and to seek to make out a powerful case on the other aspects that might justify a stay, namely, the serious issues for determination. For that reason, perhaps more time has been spent than is usual in an application of this kind on the issues raised by this appeal.

[9] It seems [to] me therefore this is a case where the appellant has not shown in a substantial sense a real risk of prejudice or damage if a stay is not granted that would not be redressed by successful appeal, and has not shown a particularly strong case as regards the grounds of appeal." 11 Two issues emerge as central to the present application. First, is there a risk that Zurich will not be able to recover the damages it pays if a stay is not granted? Secondly, what is the likelihood that Zurich will succeed on its challenge to the assessment process in this case? 12 Zurich's submission on the first of those issues is that it "may face difficulties in recovering the money". No evidence concerning the strength of that fear is referred to in support. Rather, Zurich seeks to rely upon an inference that it says arises from a refusal or failure by Mrs Robinson to undertake that she will preserve at least 50 per cent of the damages if she were to be paid the full amount. Zurich also says that this inference is strengthened by Mrs Robinson's failure to adduce evidence either of her capacity to repay the money or of any particular or pressing need that she has for payment to her of the sum as assessed. Zurich submits that it should be protected from the "potential risk of not being able to recover the money in the event that it succeeds". 13 In my view a party seeking to support a departure from an undisputed obligation that it has to pay damages pending an appeal, because there is said to be a risk that loss of the damages would render an appeal or similar review of the decision in question futile or nugatory, ought at least to be required to establish that such a risk of loss exists and that it is more than merely apprehended as a possibility. In the present case there is no such evidence at all. Zurich's attempt to suggest that Mrs Robinson's position is weaker because she neither proffered an undertaking that she would preserve the funds nor produced evidence that she had a particular need for the funds appears in my opinion to seek inappropriately, if not somewhat audaciously, to reverse the onus of proof. No such inferences adverse to Mrs Robinson can arise before Zurich manages to establish the existence of the risks that it contends for. In my opinion the mere potential for non-recoverability is insufficient. There is no evidence that a refusal of a stay would render the appeal process futile or would deprive Zurich of the means to prosecute it or that it would impose irreparable harm in the event that the appeal were successful. Hardship is not a relevant concern in this case. 14 Zurich's submissions on the second issue concede that it is not possible to be definitive about the likely outcome of the proceedings given that the central issue raised in its summons concerning the alleged denial of procedural fairness has not apparently previously been tested or decided. However, Zurich submitted that it had strong grounds upon which to mount its challenge. There was said to be no question that the requirements of procedural fairness applied to the assessment of the claim: see Mason J at 584 in Kioa v West [1985] HCA 81; (1985) 159 CLR 550. In short, Zurich foreshadowed that it will contend that Assessor Bolton's decision to allow Mrs Robinson to rely on the DVD interview was "highly prejudicial", particularly in circumstances where all the other evidence was presented "on the papers" and where there was no medical evidence to substantiate Mrs Robinson's avowed reason for being unavailable for cross-examination. 15 Zurich submitted that the right to challenge by cross-examination a deponent whose evidence is adverse in important respects to the case the party wishes to present is an incident of the obligation to accord procedural fairness: see, for example, Ramsay v Australian Postal Corporation [2005] FCA 640; (2005) 147 FCR 39 at [27] as follows: "[27] Procedural fairness requires fairness in the particular circumstances of the case. The duty imposed on a decision maker pursuant to s 39 of the SRC Act is to give each party an opportunity to present their case. While a right to cross-examination is not necessarily to be recognised in every case as an incident of the obligation to accord procedural fairness, the right to challenge by cross-examination a deponent whose evidence is adverse, in important respects, to the case a party wishes to present, is." 16 Zurich proposes in due course to argue that the inability to cross-examine Mrs Robinson on the evidence she gave in the DVD interview amounted to a denial of procedural fairness in the case given the importance of her evidence to the claim and the existence of other contradictory evidence from her doctors and surveillance videos. 17 In support of these assertions, George Mallos, the solicitor for Zurich, swore an affidavit upon which Zurich relied in this application. Paragraphs [26] and [27] of that affidavit are as follows: "26 There were particular issues I would have raised in cross-examination of Ms Robinson, including the following:

(a) I would have cross-examined Ms Robinson in relation to the surveillance evidence which depicted her moving about in public without assistance and without the need for a companion. These were all matters which it was asserted in the DVD interview Ms Robinson is unable to do, although she attempted to explain that she could do these activities only within a confined distance from her home. I would have cross-examined Ms Robinson in relation to that assertion;

(b) I would have cross-examined Ms Robinson in relation to a number of facts which, in my opinion, would have gone to the limited role which the accident has played in relation to Ms Robinson's overall medical condition. In my view, the evidence disclosed Ms Robinson suffers poor health not because of the effects of the accident but because of age and other unrelated medical problems. She suffers from a number of medical ailments and the records of her general practitioner (which were before Assessor Bolton) . . . disclosed 24 " long-term medical classifications ", only three of which, in my opinion, were in any way related to any injuries suffered in the subject accident. I wished to cross-examine her on those issues;

(c) The medical records also identify 21 different "long-term medications", only two of which are partly related to the subject accident. I would have cross-examined Ms Robinson in relation to the conditions which gave rise to her need to take those medications and how those conditions have affected her ability to function from day to day. I would have cross-examined her on these issues with a view to establishing the comparative minor needs addressed by the two long-term medications referable to injuries suffered in the accident as compared to the other 19 long-term medications not related to any injuries suffered in the subject accident.

(d) Ms Robinson's medical records also disclosed four different conditions under the heading Medical Warnings . None of those conditions were, in my opinion, referable to the subject accident. I would have cross-examined Ms Robinson for the purpose of establishing the limited effect which the accident has had to play in her medical condition as compared to the conditions identified as " medical warnings ".

(e) In my opinion, the surveillance footage depicted Ms Robinson as being independent and active. Ms Robinson made significant claims for past and future care. I would have cross-examined Ms Robinson in relation to the extent of care actually required and also to identify, against her medical background, the precise reasons giving rise to each activity of care claimed. I would have also cross-examined her in relation to the care provided in the past and the care claimed for the future.

27 I would also have objected to Ms Holz leading Ms Robinson through her evidence as is depicted in various parts of the DVD interview." 18 In my opinion there are at least three reasons why a failure to allow cross-examination of Mrs Robinson in this case is unlikely to be found to have caused Zurich to suffer some form of procedural unfairness. First, the evidence on this application reveals that Zurich was quite prepared to consent to the tender of the transcript of the DVD without the need for Mrs Robinson to be cross-examined upon it. Paragraphs 5 and 6 of the 11th Preliminary Conference Report of 11 September 2009 deal with the issue of the DVD as follows: "5. Mr Mallos confirmed his objection on the basis of the lack of procedural fairness to the insurer. Ms Holz suggested that there was little difference between the video and a written statement. To this Mr Mallos noted that there are emotional issues and that the DVD evidence might be seen as an attempt to 'pull at heart strings'.

6. Mr Mallos said that without the opportunity to test the evidence, it is unfair. He said that he did not have a problem with the transcript of the evidence being provided as given from the DVD but when it came to a visual presentation of the evidence, this was an entirely different and unsatisfactory form from the point of view of the insurer." [Emphasis added] 19 It is clear that Zurich had no fundamental trouble or concern with the substance of Mrs Robinson's evidence inasmuch as the tender of the transcribed words of the DVD was not originally opposed. Subject to an accurate transcription, therefore, the spoken and written words were always going to be identical. It is in these circumstances somewhat difficult to understand the expressed reasons for wishing to cross-examine Mrs Robinson or the alleged significance of the proposed cross-examination topics to which Mr Mallos has referred in his affidavit. If Mr Mallos "did not have a problem with the transcript of the evidence" then presumably, if not certainly, he was wholly content to abandon each and every one of his nominated topics for cross-examination if that course had been adopted. There is some obvious tension, if not a complete inconsistency, between these two positions. 20 There is also some associated tension or inconsistency between the approach Mr Mallos took to the evidence of Mrs Robinson's daughter and son-in-law. Mr Mallos refers to them at par 31 of his affidavit as follows: "31 Ms Robinson's daughter and son-in-law were in attendance at the CARS assessment conference. I did not seek to cross-examine either of them. They had provided evidence of the care which they provide to Ms Robinson. Zurich's case was not that Ms Robinson had little or no care requirements. Zurich's case was that the need for such care was not substantially due to any injuries suffered by Ms Robinson in the accident giving rise to her claim but rather due to age and unrelated medical factors. I took the view that the evidence of Ms Robinson's daughter and son-in-law does not go to that issue and I could see no benefit in cross-examining either of them as to why they provided the services that they claim to have provided. In my opinion, those were matters for Ms Robinson to give evidence about." 21 The obvious difficulty with that statement is that Mrs Robinson did apparently give evidence about her need for care during the interview with Ms Holz and would not have been required to be cross-examined on what she said about it if the transcript of the DVD had been tendered alone. It is difficult to see how the substance of Mrs Robinson's evidence was likely to be, or actually became, in any way different when given electronically. 22 Secondly, Zurich has not been able to identify the way in which the result in the assessment procedure differs from the result that they now contend would have flowed if procedural fairness had been afforded them. Even if it will be sufficient for Zurich's ultimate purposes to establish only that it was denied the opportunity of conducting its case in a different way, without the need to show that the result would necessarily also have been different, I consider that the position is not the same on an application such as this. When balancing the competing claims about whether or not Mrs Robinson should be kept out of her money, it seems to me that Zurich ought to be required to point at least to a reasonable likelihood that a lesser sum might be expected to be awarded following an assessment conducted in the way for which Zurich contends and to the way in which such a different result might be expected to occur. It cannot in my opinion be taken as a given that Mr Mallos' cross-examination would have had a detrimental effect upon Mrs Robinson's credit in particular or that it would have produced a less favourable outcome for her case in general. I do not consider that for present purposes Zurich is entitled to the benefit of an inference, presently unsupported by evidence, that Mrs Robinson's damages would be different if reassessed. The present case is to be compared with the position in Allianz Australia Insurance Ltd v Ward [2009] NSWCA 264 where an actual discrepancy was identified. 23 Thirdly, the scheme of the legislative and regulatory regime under consideration is one that promotes informality and efficiency. In Allianz Australia Insurance Ltd v Ward Young JA said this: "[48] The 'MAC Act' clearly sets up a regime whereby there is to be a relatively informal assessment of damages by an administrative official. This displaces the former system of trial by judge or judge and jury with witnesses called and cross-examined. The new system is doubtless much cheaper. However, one would not expect that its accuracy would be as great as the result obtained through what is now regarded as a 'Rolls Royce' procedure.

[49] The legislature doubtless considered that errors could emerge out of the new procedure. However, it provided that there would be a review for obvious error by the Principal Claims Assessor, but only for obvious error and provided no appeal to the insurer.

[50] The aim of the legislature was to see that claimants were assessed quickly and cheaply and paid their entitlements promptly." 24 As Zurich's submissions anticipate, there can be no particular degree of confidence that a failure to permit a party to cross-examine an opponent's witness in the course of the assessment process under this regime will always or ever be reviewable. The absence of any authority on the point so far is both curious and instructive if the consequences of the denial of the opportunity to cross-examine are as significant and important as Zurich contends they are. It cannot be taken as established that there has been any denial of procedural fairness at all. I consider that Zurich would need to establish that its prospects of success were higher than a mere possibility if an application to keep an elderly and definitively infirm claimant out of the fruits of her victory in the proceedings is to succeed. Some argument would need to be advanced at this stage, which does more than simply assert that the broadly accepted importance of cross-examination in other litigious contexts is retained in the assessment process under the Act or that its denial in the current setting should attract equivalent disapprobation. Zurich has not to my mind established more than nominally that Assessor Bolton's decision to allow Mrs Robinson to rely on the DVD interview without being cross-examined was of this character in the present context. Conclusion 25 In my opinion Zurich has not established that there are sufficient grounds for the grant of the stay that it seeks. Accordingly I refuse the stay sought. 26 Zurich proffered that it would seek expedition of the final hearing as a condition of its application for a stay. Whether that offer remains current or even what it means in terms of the Court's realistic ability to give a date to hear the matter this year remains to be seen. Mrs Robinson's counsel have indicated that they are prepared to argue the matter on a final basis as soon as possible and were indeed prepared to do so when the matter was returned on 26 November 2009. Zurich's position was that it was not then prepared to argue the matter on a final basis, but it has indicated that the matter would not occupy more than half a day's hearing time and would be conducted on limited and largely undisputed facts. The proceedings are said by Zurich to raise questions of law and an important matter of principle. 27 Subject to any contrary submissions about what course the proceedings should now take, it seems to me that I should simply grant the parties leave forthwith to approach the List Clerk with a view to obtaining a date as soon as possible having regard both to their own convenience and the convenience of the Court. I invite the parties to propose a timetable for further steps in the proceedings if anything else is required before a hearing date is allocated. 28 I will also hear the parties on the question of the costs of Zurich's unsuccessful application for a stay.

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