Case Note QBE Insurance v Motor Accidents Authority [2008]
NSWSC 434
Harrison AsJ
In Brief
- An Insurer is bound, within the CARS process, by any admission of liability contained in a s 81 notice unless there was fraud where s 118 applies.
- In considering an application for exemption under s 92(1)(a), the Principal Claims Assessor may only consider the determination made as to liability contained in the Insurer's first valid s 81 notice.
Background
Associate Justice Harrison handed down her decision in QBE Insurance v Motor Accidents Authority on 14 May 2008.
The main issue in dispute between the parties was whether or not the PCA erred in finding that she was not permitted to look beyond the Insurer's first s 81 Notice in assessing whether a claim was exempt from assessment pursuant to s 92(1)(a) of the Motor Accidents Compensation Act 1999.
The Insurer served its first s 81 Notice on 18 March 2004. In that Notice, the Insurer admitted breach of duty of care but alleged contributory negligence at 20%.
The Insurer subsequently engaged solicitors who advised that the allegation of contributory negligence was inadequate. The Insurer's solicitors wrote to the claimant on 6 September 2006 advising that the admission of breach of duty of care was maintained but that contributory negligence was now alleged at 40%.
On 23 June 2007, the PCA rejected the Insurer's application for exemption. The PCA reasoned that the Insurer could not resile from its original allegation of 20% contributory negligence as set out in its original s 81 notice.
The Insurer sought administrative law relief in the Supreme Court.
Decision
Associate Justice Harrison reviewed the Court of Appeal's decision in Nominal Defendant v Gabriel. At paragraph 44, her Honour summarised the leading judgment of Campbell JA as follows:
" The judgment of Campbell JA therefore contains two conclusions, firstly, that a s 81 notice can never be withdrawn and treated as if it never existed in the first place. It is a piece of evidence that is relevant in assessing what is the Insurer's position in relation to the claim and is not simply replaced by an `amended s 81 notice'. However, on the other hand the Insurer is not necessarily bound to the position that they take in their s 81 notice. Since the original s 81 notice is a voluntary admission such evidence would have to be persuasive to overcome the impact of their earlier admission but to interpret a s 81 notice as irredeemably locking in an insurance company to a stated position would take away a common law right (that is the right of a party to raise a relevant defence) a course that should not be countenanced when it is mandated by unequivocal statutory language. In this case, the Act does not include such unequivocal statutory language and a s 81 notice is not binding on an Insurer forever more "
At paragraph 46 of her judgment, Harrison AsJ observed that Hodgson J A formed a similar view to Campbell J A. Her Honour noted that, like Campbell J A, Hodgson J A did not conclude that the effect of s 81 was to prevent an Insurer from ever deviating from what they admit in their s 81 notice, perhaps except in a case where an estoppel may have arisen.
Notwithstanding her review of the reasons given by Campbell and Hodgson JJA, Harrison AsJ stated, at paragraph 48, that it was important to consider the dissenting view of Basten JA. Her Honour summarised the views of Basten JA at paragraph 49 of her judgment as follows:
" In his Honour's view if the Act did provide an option for Insurer to resile from s 81 notice it was to be found exclusively in s 118. Section 118 deals with fraud and gives an Insurer a right to recover funds that have been paid out under an insurance claim if their decision to pay the claim was induced through fraud or misleading conduct. In all other situations Basten JA was of the view that an Insurer was bound by their s 81 notice "
Thereafter, Harrison AsJ reviewed the bases for Basten JA's view, including that s 81(4) allows an Insurer to accept full liability for a claim, notwithstanding an earlier denial in a s 81 notice, but does not give the Insurer a reciprocal power to withdraw a s 81 notice which contains an admission of liability.
At paragraphs 63 and 64 of her judgment, Harrison ASJ weighed up the competing statutory constructions, as follows:
" There are some factors which support the approach that an assessor can consider the allegations which depart from those contained in the s 81 together with the explanation for that departure. Firstly, s 5(2)(c) of the Act states that the Act should be interpreted in a way that encourages predictability and stability in the law. Finding that s 81 notices have different effects depending upon whether a dispute is proceeding to court or to bureaucratic assessment seems to go against this object. Secondly, if the assessor can only consider the s 81 notice, that approach would necessitate an Insurer to undergo a bureaucratic assessment in order to exercise rights to appeal to the court. This process would delay the final determination of the dispute. On the other hand, if an Insurer can depart from a s 81 notice, that also means that there is less predictability in the bureaucratic process. However, if an Insurer can resile in court from a s 81 notice on the basis it is an `out of court admission', this distinction would not be applicable to a bureaucratic assessment because it is itself an out of court procedure."
Ultimately, Harrison AsJ was persuaded that an Insurer could not deviate from its original s 81 notice.
Her Honour adopted the reasoning used in the dissenting judgment of Basten JA in Gabriel, namely that s 81 only permits an Insurer to resile from a denial of liability and not an admission. Specifically, her Honour stated at paragraph 65:
" More importantly, s 81 by its wording permits an Insurer to admit liability after having given notice denying liability or having failed to comply with this section. There is no statutory counterpart to permit the Insurer to depart from its admission of liability once it has been given in a s 81 notice. As Basten JA in Gabriel explains, the legislature must have intended for an Insurer to be bound by their s 81 notice. The only departure permitted by the Act is set out in s 81(4). The wording of s 81 itself is the main reason why it is in my view that in the bureaucratic process the Insurer is bound by the admission of liability contained in the s 81 notice unless there is fraud where 118 applies. This interpretation of s 81 is consistent with other provisions of the Act, namely ss 83 and 84. Where clause 7.1.2 of the Guidelines refers to "makes an allegation" it must be referring to "an allegation" in the s 81 notice. To read otherwise would be a departure from s 81 of the Act. "
On this basis, Harrison AsJ decided that the PCA was correct to refuse the Application for Exemption and dismissed the Summons.
Implications
Principles
On the face of it, the decision in QBE Insurance v Motor Accidents Authority precludes an Insurer from departing from its original s 81 notice (unless substituting a denial with an admission of liability pursuant to s 81(4)).
The case is also authority for the proposition that in assessing whether a mandatory exemption should be granted, the PCA is required to look only at the position communicated by the Insurer in its first s 81 notice.
The message to be taken from QBE Insurance v Motor Accidents Authority is that great care must be taken in issuing a s 81 notice because there is clear potential that the Insurer will be held to its position even where new information comes to hand.
Possible Errors in Reasoning
However, there appear to be some difficulties with her Honour's reasoning process.
Firstly, it appears from paragraph 65 of her Judgment, that the crux of her Honour's reasoning process is that s 81 does not permit an Insurer to withdraw an admission of liability and substitute a denial, in circumstances where the provision does allow the opposite to occur.
However, this argument was considered by the Court of Appeal in Nominal Defendant v Gabriel and rejected as a reason for binding the Insurer to its original s 81 notice.
In paragraph 147 of Campbell JA's judgment in Gabriel, his Honour stated:
" When a s 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 admission has been made, a defendant can only deny liability with leave of the court. Rather, a s 81 admission is then in the same position as any other out of court admission made by a party. "
Accordingly, on the face of it, the decision by Harrison AsJ in QBE Insurance v Motor Accidents Authority is contrary to the majority reasoning by the Court of Appeal in Nominal Defendant v Gabriel.
Whereas the Court of Appeal were not convinced that the wording of s 81 prevented the Insurer from departing from a s 81 notice once court proceedings were commenced, Harrison AsJ relied specifically upon the wording of s 81 in deciding that an Insurer was bound by a s 81 notice within the CARS process.
The closest that Harrison AsJ appears to come to explaining the difference appears to be in paragraph 62, as follows:
" In a situation like this where the making of the new claim would take the dispute outside the jurisdiction of a bureaucratic assessment, it is a court of competent jurisdiction which unlike the Assessor, has the power to balance the new allegation vis a vis the original s 81 notice. The court performs the role as envisaged by the Court of Appeal in Gabriel. The court decides is (sic) a binding admission or whether the Insurer's original position as stated in their s 81 notice or their new position is to be accepted. "
Associate Justice Harrison does not appear to explain why her Honour formed the view that only a Court would have "the power to balance the new allegation vis a vis the original s 81 notice".
In addition, her Honour's finding that the wording of s 81 precludes an Insurer from withdrawing an admission of liability in a s 81 notice is contrary to her own summary of the majority decision in Gabriel, as set out in paragraph 44 of her Judgment; namely that irredeemably locking in an Insurer to its stated position would take away a common law right namely the right to raise a relevant defence and this course should only be countenanced when it is mandated by unequivocal statutory language.
In our view, it is highly arguable that the Insurer's common law right to raise a valid defence in respect of liability, even within the CARS process, may not be precluded without clear, unequivocal statutory language. Given that s 81 does not explicitly state that an Insurer cannot withdraw an admission of liability contained in a s 81 notice, that clear, unequivocal statutory language does not exist.
Discretionary Exemptions
Notwithstanding the decision in QBE Insurance v Motor Accidents Authority, it remains possible to obtain an exemption from assessment even where the Insurer's original s 81 notice admits liability in full.
In a recent Curwoods matter, the Insurer admitted fault and made no allegation of contributory negligence in its s 81 notice. The Insurer subsequently obtained evidence suggesting that the Claimant may not have been wearing a seatbelt at the time of the accident and sought to add an allegation of contributory negligence.
The Insurer sought an exemption both pursuant to s 92(1)(a) and s 92(1)(b).
The Insurer argued that the first s 81 notice was not a valid notice because it had been induced by the Claimant's misrepresentation in her Claim Form and elsewhere that she was wearing a seatbelt.
The PCA rejected the Application for mandatory exemption upon the basis that she was not permitted to look beyond the original s 81 notice which admitted liability and made no allegation of contributory negligence.
However, in respect of the discretionary exemption Application, the PCA accepted that the claim was unsuitable for assessment and issued an exemption certificate under s 92(1)(b).
The PCA reasoned as follows:
"I do not propose to make a finding as to the validity or otherwise of the Insurer's section 81 notice issued in August 2007 because of the nature of the allegations made and my view that this claim is, in any event, not suitable for assessment. For me to undertake an enquiry into the validity of the notice would require a trial within a trial with almost all of the evidence on liability being provided including evidence from the claimant as to the circumstances of the accident, her beliefs at the time of it and shortly afterwards. It might also require evidence from the driver and other witnesses the insurance company's claim staff and so on. It would seem a more cost effective means of resolving the claim to exempt it thereby enabling the court to determine whether the insurer can withdraw its admission of liability, whether there has been a misrepresentation or not by the claimant and all other aspects of the liability for and quantum of [the claim]".
Accordingly, notwithstanding the decision in QBE Insurance v Motor Accidents Authority, it remains feasible for an Insurer to side step an inconvenient s 81 notice by, where the grounds exist, arguing that the s 81 notice was not validly issued.
Theoretically, an Insurer could argue that a s 81 notice was not a valid s 81 notice where:
- It was issued by a claims manager without the approval of his manager and, therefore, without authority.
- It was issued through a mistake, such as where the notice is issued under an incorrect claim number and claimant name.
- It was induced by misleading conduct by the Claimant (or potentially by the Insured) as to the circumstances of the accident.
- It was issued upon the basis of a misunderstanding as to the law.
Each case, would, of course, depend upon its merits. Furthermore, there may be occasions where the Claimant has acted to its detriment in reliance upon the original s 81 notice and the Insurer is estopped from taking a different position (such as where liability evidence is lost or destroyed in reliance upon the admission of liability).
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.
