Australia: Exemption Certificates: Consideration of Section 81 Notices post Gudelj

Curwoods Case Note
Last Updated: 19 November 2012
Article by Peter Hunt and Laura D'Alessandri

Smalley v Motor Accidents Authority of New South Wales, unreported

Judgment date: 2 November 2012

Jurisdiction: Supreme Court1

In Brief

  • A CTP insurer is able to partially admit liability after having deemed to wholly deny liability pursuant to s 81(3) of the Motor Accidents Compensation Act 1999 (the Act).That is, s 81(4) does not limit the insurer to admitting liability in an unqualified form following a deemed denial.
  • A Section 81 Notice which denies liability for the claim but admits fault on the part ofthe Insured does not trigger a mandatory exemption and may not itself qualify the claimant for an exemption certificate on discretionary grounds.


On 16 December 2005, Mr Michael Smalley (claimant) was injured in a motor vehicle accident. No claim form was served on the insurer until 25 January 2010.

The insurer requested a full and satisfactory explanation which was provided by the claimant and thereafter rejected by the insurer. The claimant sought a Special Assessment from the Claims Assessment and Resolution Service (CARS) as to whether the explanation provided was 'full and satisfactory' and was successful on that Application.

The insurer wrote to the claimant's solicitors advising that they did not consider the CARS Special Assessment Certificate to be binding, that they did not therefore accept any liability for the claim and maintaining that they were not required to admit or deny liability for the claim pursuant to s 81(1) of the Act.

The claimant made an Application for Exemption, on mandatory grounds, which was rejected by The Principal Claims Assessor ("PCA") (first decision).

The insurer then issued a Section 81 Notice denying liability for the claim but accepting that the accident occurred due to the fault of the insured driver.

The claimant made a further Application for Exemption which was rejected by Assessor Snell (second decision). Assessor Smell determined that the matter was suitable for assessment at CARS.

The claimant then made a third Application for Exemption which was again rejected by the PCA (third decision). The PCA rejected the Application on the basis that the insurer had admitted fault on the part of the insured driver.

The claimant challenged all three decisions in the Supreme Court.

Supreme Court

Third Decision

The claimant's primary challenge of the third decision was based on an argument that the insurer was unable to partially admit liability (that is admit fault but maintain the denial of the claim on the basis that the explanation provided was not 'full and satisfactory') after the matter had been a deemed a denial pursuant to s 81(3). The claimant submitted that if the s 81 notice was defective, the matter would have remained a 'deemed denial' and should have been exempted on that basis. The primary judge, Rein J, did not accept this Submission.

Section 81(4) prescribes that "Nothing in this section prevents an insurer from admitting liability after having given notice denying liability or having failed to comply with this section"

Rein J found that an interpretation preventing an insurer from partially admitting liability was not with keeping with the objects of the Act.

Rein J therefore found that the decision of the PCA to reject the claimant's Application for Exemption was correct.

First Decision

The parties accepted that the first decision was incorrect as it was founded on the first instance decision in Gudelj v Motor Accidents Authority of NSW2 which has since been overturned. The Gudelj decision found that the deeming provision of s 81(3) did not apply because the claim was a late claim,

The first decision was however reconsidered by the PCA when making her third decision, discussed above.

Second Decision

The claimant's challenge to the second decision was primarily an attack on the Assessor's treatment of the Section 81 Notice. Rein J's decision on this issue was discussed above in relation to the third decision.

The claimant however also challenged the decision on the basis that the Assessor failed to consider other reasons for exemption outside of the eleven matters enumerated in cl 14.16 of the Guidelines. In particular the claimant argued it was futile and not cost effective to proceed through CARS if the matter was likely to go to court in any event.

The claimant further argued that the Assessor had not considered the comments of Hodgson JA in Gudelj. Those comments relate to the intention of the legislature that claimants could, as a last resort, have recourse to the courts to determine their rights and that claimants should generally not be shut out of an arguable claim before the courts. Rein J did not consider the comments of Hodgson JA in Gudelj to be relevant to his decision and he distinguished the subject matter on the basis that a Special Assessment had occurred and fault had been admitted.

Rein J therefore found that the decision of Assessor Snell to reject the claimant's Application for Exemption to be correct.


This case demonstrates that the discretionary exemption from CARS called for in late claims by Gudelj has been somewhat reined in, especially where insurers have admitted fault on the part of the insured driver.

In this case the CARS Special Assessment was resolved in the claimant's favour, however the insurer advised the claimant that it did not accept the result of the Special Assessment and did not consider itself bound (thus maintaining its denial of liability).

The claimant's Applications for Exemption were rejected and the claimant will, therefore, be forced proceed to a General Assessment of damages by CARS, even though the insurer has foreshadowed that the assessment of damages will not be accepted.

It should be noted that the decision in Smalley has no impact upon the procedure in cases where the claimant loses at Special Assessment and a Certificate is issued stating that a late claim may not be made. In those matters, the Court of Appeal's decision in Gudelj stands and the claimant is likely to be granted a discretionary exemption in order to have a `second bite at the cherry' in court.


1 Rein J.

2 Gudelj v Motor Accidents Authority of NSW [2011] NSWCA 158.

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