18 June 2007
Mason P, Ipp and McColl JJA
- An Insurer loses the right to challenge a claim on the basis of delay where it fails to request an explanation for delay within 2 months of receiving the claim.
- A Special Assessment Certificate, although issued "in accordance with" s 94(4), is not a Section 94 Certificate for the purpose of s 108 and does not permit the Claimant to commence court proceedings.
The NSW Court of Appeal handed down its decision in Hayek v Trujillo on 18 June 2007.
The decision concerned an appeal by the Plaintiff from a decision of Naughton DCJ dismissing her proceedings.
The main issue before Naughton DCJ was whether or not a Special Assessment Certificate, certifying that a late claim could not be made, allowed the Plaintiff to commence court proceedings.
However, there was a subsidiary issue as to whether the Insurer had lost the right to challenge the claim on the basis of delay through a failure to request an explanation within 2 months of the claim being made.
By way of broad factual background, the Claimant was injured in a motor accident on 1 May 2001. She did not lodge her Claim Form until 23 June 2003, over two years after the accident. The late claim dispute proceeded to Special Assessment and a CARS Assessor found that the Claimant did not have a full and satisfactory explanation for delay. The issue of whether the Insurer had lost the right to challenge the claim on the basis of delay was not raised before the CARS Assessor.
In the Court of Appeal, the leading Judgment was delivered by Ipp JA with Mason P and McColl JA agreeing.
Court of Appeal
Whether the Insurer had Lost the Right to Challenge the Claim on the Basis of Delay
The Plaintiff argued that the Insurer had lost the right to challenge the claim on the basis of delay because the Insurer had failed to request an explanation within 2 months of receiving the Claim Form, in breach of s 73(3)(a).
The Insurer received the Claim Form on 4 July 2003. On 14 July 2003, the Insurer received a letter from the Claimant’s Solicitors advising that they no longer acted and providing details of the Claimant’s contact details. Notwithstanding this letter, the Insurer wrote to the Solicitors on 17 July 2003 requesting an explanation for delay. By that stage, the Solicitors were no longer authorised to send or receive correspondence as the Claimant’s agent as they no longer acted for her.
The Insurer argued that s 73(4) still requires a Court to dismiss proceedings in respect of a late claim in the absence of a full and satisfactory explanation – given the use of the mandatory words "must dismiss" – even where the Insurer failed to comply with s 73(3)(a). His Honour held that a Court is only required to dismiss proceedings where the Insurer applies for such a dismissal and an Insurer can not make the application where it is has lost the right to do so.
The Insurer also argued that a Section 96 Certificate stating that the late claim may not be made trumped the Insurer’s loss of the right to challenge on the basis of delay. His Honour held that pursuant to s 96(4), the Section 96 Certificate was not binding on the parties and had no effect upon the Insurer’s lost right.
The Court of Appeal therefore held that the Insurer had lost the right to challenge the claim on the basis of delay through a failure to request an explanation for delay within 2 months of receiving the claim, in breach of s 73(3)(a).
It followed that Naughton DCJ erred in dismissing the court proceedings on the basis that the Claimant did not have a full and satisfactory explanation.
Whether a Section 96 Certificate Permits the Commencement of Proceedings
The Claimant argued that the Section 96 Certificate permitted the Claimant to commence court proceedings because the Certificate was issued in accordance with s 94(4) and therefore satisfied s 108.
Section 96(3) provides that a Special Assessment Certificate – in this case dealing with a late claim – must be issued "in accordance with the relevant provisions of this Division relating to the assessment of claims."
The "relevant provisions" are found in ss 94(4) and 94(5). The Claimant therefore argued that the Special Assessment Certificate was a Certificate "under s 94" for the purpose of s 108(1)(b) and allowed proceedings to be commenced.
In response to this argument, Ipp JA immediately observed, at paragraph 62, that such an interpretation would defy the purpose of the Act:
"62 If this argument were to be correct, a claimant would be entitled to commence court proceedings in respect of a claim without having to go through the assessment procedure set out in Div 2 of Pt 4.4. There is no reason in policy for such a construction."
In paragraph 70, Ipp JA held that a Special Assessment Certificate, whilst issued "in accordance" with s 94(4) was not a s 94 Certificate for the purpose of s 108:
"70 The certificate issued to the appellant unequivocally concerned only a dispute between a claimant and insurer as to whether a late claim may be made in accordance with s 73. The dispute is of the kind described in s 96(1)(a). Thus, although stated to be "issued in accordance with s 94 of the Act", the certificate is plainly not a s 94 certificate. It is a s 96 certificate. Although the certificate was issued in accordance with the machinery provisions of s 94, it is not a certificate in respect of a claim under s 94 (assessment of claims) as s 108(1)(b) requires."
Accordingly, Ipp JA held that the Special Assessment Certificate was not the kind of Certificate contemplated by s 108 and did not entitle the Claimant to commence proceedings.
Loss of Right to Challenge Late Claim
The Court of Appeal made it clear in Hayek that s 73(1)(a) is absolute in its terms. Where an Insurer fails to reject the claim or request an explanation within 2 months of receipt, it loses its right to challenge the claim on the basis of delay for all time.
The fact that the late claim dispute may proceed to Special Assessment – essentially through the parties overlooking that the right to challenge on the basis of delay may have been lost – does not revive the Insurer’s right, once lost.
Right to Commence Court Proceedings
The Court of Appeal also made it clear in Hayek that a Certificate in respect of a late claim dispute does not permit a Claimant to commence court proceedings.
Pursuant to s 108, the Claimant may only commence proceedings if he or she holds a Certificate of Exemption (under s 92) or a General Assessment Certificate (under s 94). A Special Assessment Certificate (under 96) does not fall within the scope of s 108.
Obiter in Paragraph 67
In paragraph 67 of his Reasons, Ipp JA states:
"67 Thus, in my view, a claimant, who has received an unfavourable certificate under s 96(1)(a), is entitled, thereafter, so long as the claim is not exempt from assessment, to require the claims assessor to make an assessment of the issue of liability (unless the insurer has accepted liability – see s 94(1)(a)) and the amount of damages for that liability, and to issue a certificate as to the assessment under s 96(4). The claimant, thereafter, would be entitled to commence court proceedings (despite the unfavourable s 96 certificate). That is because that certificate is not binding on the parties."
It appears that there is a typing error in this paragraph. The reference to "issue a certificate as to the assessment under s 96(4)" should read "issue a certificate as to the assessment under s 94(4)". Section 96(4) says nothing about the issuing of certificates.
In any event, Ipp JA appears to be suggesting that a Claimant may require a CARS Assessor to proceed to General Assessment even where a Special Assessment Certificate has been issued stating that a late claim can not be made. Alternatively, given the term "the claims assessor", Ipp JA may have been suggesting that quantum be assessed during the Special Assessment.
The difficulty with that construction of the legislation is that Ipp JA appears to have assumed that the mechanism he has suggested would somehow result in the late claim dispute ultimately being determined by the Court.
However, Ipp JA appears to have overlooked s 95(2). Pursuant to that provision, the Claimant can compel the Insurer to accept the s 94 Certificate which is then issued by accepting "amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued".
Thus, if Ipp JA’s obiter were to be followed, a Claimant can compel the Insurer to proceed to General Assessment and pay the sum assessed, despite the claim being late and despite a CARS Assessor finding that the Claimant does not have a full and satisfactory explanation for delay.
On any view – and with respect to Ipp JA – the obiter found in paragraph 67 fails to disclose a proper understanding of the procedural complications of the Act.
It is yet to be seen how Ipp JA’s comments will be interpreted and how they may affect the procedural aspects of CARS Assessments. Afterall his comments are only obiter and appear, with respect, to disclose a failure to properly appreciate the statutory regime.
(The writer maintains the view that the effect of s 96(4) – which provides that a Special Assessment Certificate in respect of a late claim dispute is not binding on the parties – merely means that a party who receives an unfavourable Certificate can make a second Application for Special Assessment provided there is compelling new evidence.)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.