NSWSC 98. The decision has significant implications in CTP compensation claims.
Our client Mr Mordue was involved in a motor vehicle accident on 1 December 2012 whilst a passenger in a motor vehicle participating in a motor rally event in a national forest near Taree. He sustained a significant injury to his neck.
Although the vehicle was unregistered, the driver of the vehicle (his son) obtained a “Permit to Operate an Unregistered Vehicle” (UVP) from the Roads Traffic Authority. The UVP allowed the driver to operate the vehicle for the purpose of the motor rally event on the date of the accident.
The CTP insurer of the vehicle was QBE.
Mr Mordue brought a compensation claim for his injuries and lodged a Personal Injury Claim Form with QBE.
On 14 February 2013, QBE Insurance issued a Section 81 Notice admitting liability. It proceeded to make s83 payments.
Under s140 of the Motor Accidents Compensation Act 1999 (NSW), a defence is available to CTP insurers when a motor vehicle accident occurs whilst the vehicle is engaged in motor racing. QBE had not relied on this defence, but had instead admitted liability. It therefore seemed that QBE had made their admission of liability by mistake.
On 5 June 2013, after QBE’s lawyers evidently realised that liability had been admitted in error, QBE issued an amended Section 81 Notice denying liability for the claim. QBE relied on s140 of the Motor Accidents Compensation Act 1999 (NSW) and denied liability because the injury arose during the course of an organised motor sports event.
On 3 March 2014, after QBE appreciated that it was probably burdened with their erroneous Section 81 admission of liability, QBE wrote to the driver of the vehicle advising that it was refusing to indemnify him because the accident did not occur on a ‘public road’.
Shortly afterwards QBE lodged an application for Exemption from the Claims Assessment and Resolution Service (CARS) on the basis that fault and indemnity had been denied.
If QBE were successful in exempting Mr Mordue’s claim from CARS, they would be able to deny liability in court proceedings, despite their Section 81 notice admitting liability. This would have been fatal to Mr Mordue’s claim. Stacks Goudkamp’s motor vehicle lawyers therefore vehemently resisted QBE’s application for an Exemption.
On 20 May 2014 the Principal Claims Assessor (PCA) accepted QBE’s submissions and issued a Certificate of Exemption and Reasons for the Decision.
Whilst the PCA accepted that an admission of liability cannot be withdrawn, she granted the exemption on the basis that the denial of indemnity rendered the claim unsuitable for assessment by CARS.
Stacks Goudkamp sought judicial review of the PCA’s decision in the Supreme Court of NSW.
The matter was heard before Justice Adams in the Supreme Court on 2 December 2014.
In brief, the Claimant Mr Mordue argued that an admission of liability necessarily implied an acceptance that the policy responded to the claim and that the driver was accordingly indemnified. The subsequent notices issued by QBE denying liability and indemnity therefore had no legal effect.
QBE argued that its admission of liability had no effect on its position in respect of indemnity to its insured driver. It contended that the matter of indemnity was a contractual matter between the insurer and the insured, which is specifically governed by clause 8.11.5 of the Motor Accidents Authority Claims Assessment Guidelines. QBE asserted that clause 8.11.5 of the Guidelines is unambiguous and clear and that claims must be exempted from CARS if indemnity has been denied. QBE therefore argued that no error had been made by the PCA in exempting the matter.
The decision was handed down on 20 February 2015.
Justice Adams identified that the crucial question was whether, after admitting liability, an insurer could later deny indemnity to the driver. This was an issue that had not been expressly dealt with by the Courts before.
Justice Adams found in favour of the Claimant Mr Mordue and quashed the PCA’s exemption from CARS. Justice Adams said:
The admission to the claimant was made for a statutory purpose and has statutory effects, the consequence of which necessarily binds QBE so far as its liability to the claimant is concerned. Since it cannot withdraw its admission to the claimant, its relationship with the insured is… immaterial…
It seems to me that, given an admission of liability under s81(1) cannot be withdrawn and that an indemnity is necessarily implied, the question of liability is precluded from further examination…
Moreover, as QBE is bound for all purposes by its Notice admitting liability, there is no room for the exercise of the discretion to exempt the claim, since the issue of indemnity… is no longer a live issue.
Essentially this last paragraph has the effect of precluding the PCA from exempting a claim on a discretionary basis.
The following orders were made:
The decision of the PCA made on 20 May 2014 is quashed.
The Motor Accidents Authority is prohibited from issuing a certificate of exemption.
The Plaintiff’s claim is to be determined by CARS.
The Defendant to pay Mr Mordue’s costs.
This case has significant implications for CTP insurance companies, as an admission of indemnity to their insured is implicit in an admission of liability to a claimant.