AAI Limited v Feng

The plaintiff, AAI Limited trading as AAMI (the Insurer), seeks to have two decisions made by assessors appointed by the second defendant, State Insurance Regulatory Authority (SIRA), set aside on the basis of jurisdictional error or error of law on the face of the record. The effect of the two decisions was to decline the Insurer’s application to have the claim for damages made by the first defendant, Natasha Feng (the Claimant), exempted from assessment by Claims Assessment and Resolution Service (CARS). Had exemption been granted to the Insurer, the Claimant’s claim for damages would have been determined by a court.

The third defendant, Marie Johns, a Principal Claims Assessor appointed by SIRA (the Principal Claims Assessor), decided that the Insurer was not entitled to mandatory exemption from CARS assessment under s 92(1)(a) of the Motor Accidents Compensation Act 1999 (NSW) (the Act). The fourth defendant, Colin Stoten, a claims assessor appointed by SIRA (the Claims Assessor) decided not to grant the Insurer a discretionary exemption from CARS assessment under s 92(1)(b) of the Act.

All references to legislation in these reasons are references to the Act, unless otherwise stated.

The Principal Claims Assessor and the Claims Assessor have filed submitting appearances. SIRA, for which Mr Free SC appeared with Mr Smith, appeared to make submissions on questions of statutory construction.

Section 3 defines “fault” as meaning “negligence or any other tort”. Section 3A provides:

Section 69(1) provides that SIRA “may issue guidelines for or with respect to procedures for the assessment of claims under Part 4.4 and associated matters”. These guidelines are known as “Motor Accidents Claims Assessment Guidelines” (the Guidelines). Section 106(1) provides that claims assessments under Part 4.4 “are subject to relevant provisions of [the Guidelines] relating to those assessments”.

Section 72 provides for the making of claims within a specified time. Section 81 requires an insurer to inform the claimant in writing “as expeditiously as possible” whether it admits or denies liability for the claim, but in any event within 3 months after the claimant has given notice of the claim under s 72. If an insurer admits liability for only part of the claim, the notice is to include sufficient details to indicate the extent to which liability is admitted: s 81(2).

Part 4.4 is entitled “Claims Assessment and Resolution”. Division 2 of Part 4.4 contains provisions relating to assessment of claims and includes s 92, which exempts certain claims from CARS assessment as follows:

An application for an exemption under s 92(1)(a) is known as a mandatory exemption application (because the exemption is required to be granted). An application for exemption under s 92(1)(b) is known as a discretionary exemption application.

Section 94 relevantly provides:

Part 4.5 provides for claims which are exempted from CARS assessment to be determined in court proceedings.

Section 116 provides that a licensed insurer must take all such steps as may be reasonable to deter and prevent the making of fraudulent claims. Section 117 makes it an offence for a person to make a statement knowing that it is false or misleading in connection with certain matters arising under the Act, including in a claim form. Section 118 provides that a claimant or an insurer has a right of recovery where money has been paid as a consequence of a fraudulent claim.

Section 122 provides:

It was common ground that the Guidelines comprise those which came into effect on 1 May 2014.

Clause 1.6 of the Guidelines contains definitions of various terms. It does not include a definition of “fault”. Clause 1.8 of the Guidelines provides that to the extent that terms are not defined in cl 1.6, the definitions in, relevantly, s 3 apply.

Clauses 1.13 and 1.14 of the Guidelines relevantly provide:

Clauses 8.11 and 8.12 of the Guidelines provide in part:

Clause 8.11.6 of the Guidelines is included for completeness but it was not suggested that it had any relevance as the Insurer confirmed that it did not contend that it applied in the present case.

Chapter 14 of the Guidelines provides, of present relevance:

Section 6 of the Interpretation Act 1987 (NSW) provides that definitions that occur in an Act or instrument apply to the construction of the Act or instrument except in so far as the context or subject-matter otherwise indicates or requires.

Section 11 of the Interpretation Act provides that words and expressions that occur in an instrument have the same meanings as they have in the Act, or in the relevant provisions of the Act, under which the instrument is made.

On 25 February 2016 the Claimant was sitting, with her seat-belt fastened, in her parked vehicle. The driver of a vehicle insured by the Insurer, when attempting to reverse into a car space in front of the Claimant’s vehicle, hit the Claimant’s vehicle. It was common ground that the driver had breached the duty of care which he owed to the Claimant by causing his vehicle to come into contact with her vehicle.

The Claimant made a claim for damages against the Insurer pursuant to s 72. She alleged that she had suffered injuries to her neck, back and right shoulder. On 9 September 2016 the Insurer served a notice under s 81 of the Act, denying liability for the claim in the following terms:

The Insurer’s solicitors subsequently wrote to the Claimant’s solicitors, by letter dated 5 January 2018, to inform them that “both fault and liability are now denied on the basis that the claimant did not suffer injury, loss or damage in the subject accident”.

On 26 June 2016 the Insurer applied to SIRA for discretionary exemption of the claim pursuant to s 92(1)(b). It based its application principally on cl 14.16.11 of the Guidelines. SIRA allocated the application to the Claims Assessor. On 11 September 2018, before the application for discretionary exemption had been determined, the Insurer applied to SIRA for mandatory examination of the claim pursuant to s 92(1)(a). It based its application on cl 8.11.1 of the Guidelines. SIRA referred the application to the Principal Claims Assessor.

On 13 November 2018 the Principal Claims Assessor dismissed the Insurer’s application and gave reasons for her decision. She accepted that the Insurer had expressly denied liability in writing but rejected the Insurer’s argument that it had denied “fault” on the part of the driver in the use or operation of the vehicle within the meaning of cl 8.11.1 of the Guidelines.

The Principal Claims Assessor had been provided with the Insurer’s solicitors’ letter of 5 January 2018 referred to above but had not been provided with the notice under s 81 dated 9 September 2016. It was not suggested that anything turned on this as it was common ground that the Principal Claims Assessor appreciated that the Insurer denied liability on the basis that the Claimant had not suffered any injury.

The Insurer had contended in its submissions to the Principal Claims Assessor that the word “fault” in the Guidelines required not only that there be a breach of duty by the driver in the use and operation of the vehicle but also that personal injury had been suffered by the Claimant as a result. The Principal Claims Assessor decided that the word fault in cl 8.11.1 of the Guidelines did not incorporate the concept of personal injury. For these reasons, she did not consider that the Insurer had made out an entitlement to mandatory exemption under s 92(1)(a) and cl 8.11.1 of the Guidelines and dismissed the application.

On 3 December 2018 the Claims Assessor dismissed the Insurer’s application for discretionary exemption and gave reasons for his decision. He accepted that the Insurer alleged that the Claimant had made false or misleading statements that she had suffered injury and recorded that it was not his function to determine whether the statements made by the Claimant were false or misleading, but rather whether the Claimant’s claim was unsuitable for assessment because of those all allegations.

The Claims Assessor referred to the expert reports relied on by the Insurer: the report of Mr Griffiths, a biomedical engineer, and the report of Dr Pierides, an occupational physician. These experts opined that, having regard to their assessment of the speed of the driver’s reversing vehicle, less than 5kph, and the evidence of impact on the Claimant’s vehicle, there was no possible mechanism whereby the Claimant could have suffered personal injury as a consequence of the impact.

The Insurer contended before the Claims Assessor that the claims assessment process was unsuitable in circumstances where it would necessary to test the Claimant’s credit and the opinion of any medical expert whose opinion supported her assertion that she had suffered an injury as a result of the impact caused by the accident.

The reasons of the Claims Assessor include the following:

Mr Rewell SC, who appeared on behalf of the Insurer, argued that the Principal Claims Assessor’s construction of the word “fault” was legally erroneous because it omitted an essential requirement: that there be injury or damage caused by the breach of duty of care. The Insurer relied on the definition of “fault” in s 3, which is defined to mean “negligence or any other tort”. The Insurer contended that these words were apt to incorporate not only breach of duty of care, but also personal injury. It submitted that ss 6 and 11 of the Interpretation Act had the effect that “fault” in cl 8.11.1 of the Guidelines had the same meaning as provided for in the definition in s 3 and that therefore both elements were required for cl 8.11.1. The Insurer argued that the result of the construction for which it contended was that although it had admitted breach of duty of care, it had denied “fault”, since it had denied damage.

The Insurer submitted that its construction of cl 8.11.1 of the Guidelines ought be preferred because it tended to promote the purposes of the clause. It contended that the intention of cl 8.11.1 was to exempt from CARS assessment claims for which the insurer had denied fault in the use or operation of a motor vehicle but not to exempt claims which had been denied for some other reason. Such other reasons might include late claims where the delay had not been satisfactorily explained or a dispute about whether the claim fell within the Act.

Mr Rewell submitted that the construction for which he contended was consistent with, if not mandated by, what was said by Tobias JA (Beazley JA and Sackville AJA agreeing) in Axiak v Ingram (2012) 82 NSWLR 36; [2012] NSWCA 311 at [53]-[58].

Mr Free submitted on behalf of SIRA that the context in which the word “fault” appeared in cl 8.11.1 of the Guidelines made it plain that it was intended to mean “breach of duty” because of the qualifying words “in the use or operation of the vehicle”. Further, he submitted that the Insurer’s construction was based on the erroneous premise that “negligence” in s 3 meant “liability according to the tort of negligence”. Mr Free also relied on the distinction drawn in the wording of s 3A between fault and causation in support of the submission that “fault” did not include a causal element when used elsewhere in the Act.

Mr Free submitted that the approach endorsed in Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103], which was applied by the Court of Appeal in Axiak v Ingram at [62] and [66] was to be preferred: that is, the meaning of a term which is contended for should be tested by inserting it into the statutory provisions which contain the term to ascertain whether the definition fits with the balance of the legislation. He submitted that this approach would produce a prolix, tautologous result if all the elements of liability were imported into the word “fault” in the Act.

Mr Robinson SC, who appeared with Dr Lucy on behalf of the Claimant, adopted the submissions made on behalf of SIRA.

The tort of negligence has three elements: duty of care owed by the alleged wrong-doer to the alleged injured party, breach of duty and damage caused by the breach of duty. The elements are commonly referred to in summary form as duty, breach and causation. In court proceedings these matters must be separately pleaded. Although liability in the tort of negligence depends on proof of all three matters, the second element is commonly also referred to as “negligence”. Thus a party who is negligent will not be liable in negligence if its negligence caused no loss.

The lawfulness of the refusal of the application for mandatory exemption turns on whether the word “fault” in cl 8.11.1 requires all three of these elements (duty, breach and damage) or whether it is confined to the second (breach). Fault is defined in s 3 as meaning “negligence or any other tort”. “Tort” is a particular legal wrong and includes the tort of negligence. Fault is not defined to include tortious liability. Indeed, there is no reference to liability in the definition of “fault” in s 3.

The wording of cl 8.11.1 makes it clear that it is not any fault that is relevant: it is only “fault of the owner or driver of the motor vehicle in the use or operation of the vehicle”. These qualifying words tend to suggest that the word fault is used in the sense of “negligence” (or other wrong) rather than “liability in negligence” or “tortious liability”.

There is scant material to indicate the legislative purpose for the exemption of claims where an insurer denies liability on the basis of a denial of fault on the part of the owner or driver in the use and operation of a motor vehicle. However, it can be inferred that the legislative intent was to exempt from CARS assessments disputes about whether the conduct of the owner or driver was wrongful, either because the owner or driver was negligent or because the owner or driver was guilty of a deliberate act, such as intentionally colliding with another car.

It is necessary to read the Act as a whole. I accept Mr Free’s submission that s 3A distinguishes between “fault” and “causation” in a way which indicates that the draftsperson intended to confine the word to the element of breach of duty (in the case of the tort of negligence) or other wrong (in the case of another tort) and did not intend fault to include the causal element.

I do not regard Axiak v Ingram as advancing the construction for which the Insurer contended. In that case, the question was whether the words “fault of any other person” in the definition of “blameless accident” in s 7A included fault on the part of the plaintiff who was a child pedestrian. The Court held that “fault” in that context meant “tortious negligence” and did not mean “non-tortious negligence”. Thus, although it was alleged that the plaintiff was guilty of contributory negligence, this did not amount to “fault” for the purposes of the definition of “blameless accident” in s 7A. Tobias JA said at [58]:

The reference to “fault giving rise to a cause of action for damages” in this passage does not make fault synonymous with liability. Rather, Tobias JA was drawing a distinction between fault as an element of liability for damages in negligence and fault as a matter relevant to contributory negligence which operates defensively to reduce the plaintiff’s damages but which does not give rise to a cause of action for damages. The distinction between fault and liability is fundamental. It is illustrated by the principle that, if a defendant admits liability, it is erroneous for a judge to enter judgment for the defendant: Sivas v Government Insurance Office (1990) 12 MVR 272 (Kirby P, Samuels and Mahoney JJA). As Samuels JA said at 276, a defendant who wants to maintain that no damage was caused by admitted negligence ought admit duty and breach of duty but deny liability: see also Smalley v Motor Accidents Authority of New South Wales (2013) 85 NSWLR 580; [2013] NSWCA 318 at [54] (Leeming JA, Meagher and Barrett JJA agreeing).

In Smalley v Motor Accidents Authority of New South Wales, which was decided after Axiak v Ingram, Leeming JA, at [60], set out the four elements of a compulsory third party insurer’s liability to indemnify which included, relevantly:

This extract from the reasons in Smalley v Motor Accidents Authority of New South Wales indicates not only that the statute differentiates between fault and causation but that the passages in Axiak v Ingram relied on by the Insurer did not alter the principles expressed in Sivas v Government Insurance Office: that fault is not synonymous with liability, but is merely one integer which is required to be established before the Insurer is liable. Although the wording of cl 8.11.1 of the Guidelines was amended after Smalley v Motor Accidents Authority of New South Wales, nothing turns on the amendment in the present case.

In my view, “fault” in cl 8.11.1 is, when the relevant tort is the tort of negligence, synonymous with breach of duty simpliciter. Fault in this context does not include the element of damage caused by the breach of duty. The definition is s 3 is consistent with this construction since “negligence” means breach of duty and “any other tort” is a reference to any other wrong which can form the basis for liability for an intentional tort, such as when a driver deliberately collides with another vehicle or pedestrian. This construction is consistent with the intent of cl 8.11.1 being to exempt claims where an insurer denies liability on the basis that the owner or driver is at fault in the use or operation of the vehicle, but not to exempt claims where liability is denied, as here, because the Insurer contends that the breach of duty did not cause any injury.

Thus, the effect of cl 8.11.1 is:

Liability will necessarily be in issue in all cases in (1) above and will only be in issue in those cases in (2) above where the insurer contends that the claimant has not suffered any injury as a result of the fault of the owner or driver. The cases in category (1) are subject to mandatory exemption under cl 8.11.1 of the Guidelines: s 92(1)(a). The cases in category (2) may be the subject of application for discretionary exemption under cll 14.11-14.16: s 92(1)(b).

Mr Rewell contended that it was only if I accepted the Principal Claims Assessor’s reasoning process in full that I ought dismiss the summons. He submitted that if I disagreed with any part of the reasons then I ought set aside her decision and remit the matter to be determined in accordance with law. I reject this submission. As Mr Free submitted, the question whether the Insurer denied liability on the basis that the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle was denied was a pure question of construction. There was no factual question involved as the Insurer admitted duty and breach and denied liability on the basis that it denied that the Claimant had suffered any injury as a consequence of the driver’s breach of duty.

For the reasons given above, the Principal Claims Assessor was correct in her construction of cl 8.11.1 and therefore no error of law on the face of the record or jurisdictional error has been established with respect to her decision that the Claimant’s claim was not exempt under s 92(1)(a) or cl 8.11.1.

The Insurer contended that the Claims Assessor had not undertaken the statutory task required by s 92(1)(b) and cl 14.11-14.16 of the Guidelines in that he had asked himself the wrong question. Mr Rewell submitted that the Claims Assessor had asked whether the claim was capable of being the subject of CARS assessment, when the correct question was whether it was “not suitable” for such assessment.

Mr Rewell relied on two recent decisions of this Court: IAG Limited t/a NRMA Insurance v Khaled [2019] NSWSC 320 (Khaled) and IAG Limited t/a NRMA Insurance v Lou [2019] NSWSC 382 (Lou). In both Khaled and Lou, the Court held that the claims assessor had not asked the correct question and had decided the application on the basis of capacity rather than suitability. Although Mr Rewell accepted that some of the grounds in the summons could be read as alleging that certain matters had to be taken into account by a claims assessor determining an application for a discretionary exemption under s 92(1)(b), he confirmed that he did not press those matters as mandatory relevant considerations in the sense used in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40 (Mason J); [1986] HCA 40.

Mr Robinson submitted that a fair reading of the Claims Assessor’s reasons indicated that he had asked the correct question. He submitted that the question of capacity was a relevant matter when determining the question whether CARS was “not suitable” for such assessment and that the Claims Assessor had not stopped at the question of capacity but had considered matters germane to suitability.

Claims assessors are required to give “a brief statement of reasons” if an exemption pursuant to s 92(1)(b) is granted: cl 14.13 of the Guidelines. They are also required to give reasons for assessment: Chapter 18 of the Guidelines. There is no express requirement that reasons be given where an application for a discretionary exemption is declined. In the present case, the Claims Assessor gave reasons for declining the exemption which, accordingly, form part of the record: s 69(4) of the Supreme Court Act 1970 (NSW).

The Claims Assessor’s reasons should be read fairly as a whole. In the introductory paragraphs, he posed the correct question: namely, whether “this claim ought be exempt from assessment pursuant to s 92(1)(b)” and referred to the applicable provisions of the Guidelines. The words “ought to” are apt to refer to a discretion and do not connote any automatic process to be determined by reference to capacity rather than suitability. The Claims Assessor’s recitation of the submissions of the parties has not been shown to be inadequate or erroneous.

In paragraph [13] of the reasons, the Claims Assessor posed the question whether it was “appropriate having regard to the claims made, the claim can be properly assessed within CARS”. The word “appropriate” suggests a discretionary consideration of relevant factors and is consistent with the application of a test of suitability. Although the word “can” implies capacity, the addition of the qualifying adverb “properly” is sufficient, in my view, to indicate that the Claims Assessor realised that he was making a qualitative assessment of suitability rather than determining whether CARS had the capacity to hear and determine the dispute.

In paragraph [14] the Claims Assessor outlined the jurisdiction and experience of CARS as a “specialist Tribunal” and what, in his experience, had occurred in such assessments. Although this paragraph was relied upon by the Insurer as an indication that the Claims Assessor had fallen into the same error as the claims assessors in Khaled and Lou, I do not consider this paragraph to have that effect in the present case. Although the ultimate question turns on suitability (or lack thereof), capacity will commonly, if not invariably, be a relevant factor in determining suitability. In paragraph [15], the Claims Assessor again used the words “properly determined”, which, in my view, is sufficient to indicate that he was addressing suitability rather than purely addressing capacity. The reference in paragraph [15(ii)] to the potential for the issue of suitability to be revisited implies that the question of suitability was being addressed in the reasons. The words “particularly complex” in paragraph [15(v)] also imply that an evaluative judgment is being made. The highlighted words in paragraph [17] in the passage from the reasons extracted above suggest that the Claims Assessor was not engaged in a rudimentary exercise of determining whether CARS had the capacity to determine the dispute but rather that the Claims Assessor had not been persuaded by the Insurer’s arguments that the claim was unsuitable for CARS assessment.

For the reasons given above, the Insurer has not demonstrated any error of law on the face of the record or jurisdictional error in the Claims Assessor’s reasons.

The summons as originally filed did not include the names of the Claims Assessor or the Principal Claims Assessor. Mr Rewell explained that he understood that there was a practice in this Court which deprecated the inclusion of the names. Mr Robinson submitted that the relevant decision-makers were required to be named. Mr Free contended that the identification of the relevant decision-makers was required by the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Mr Rewell sought leave to amend the summons to add two further paragraphs to incorporate arguments which it was accepted that he had put in his written submissions. He also added the names of the Claims Assessor and the Principal Claims Assessor.

UCPR, r 59.3(4) provides that the person responsible for the decision must be joined as a defendant but not as the first defendant, unless there is no other defendant. The requirements for the summons, which are set out in UCPR, r 59.4, include a requirement that the summons state “the identity of the decision-maker”. These rules have the effect that it is not sufficient to describe, in the summons, the third and fourth defendants as “the Principal Claims Assessor” and “the Claims Assessor” respectively since the rules require that they be identified by name.

The plaintiff and the Insurer agreed that, as between them, costs ought follow the event. SIRA did not seek costs and submitted that no costs order ought be made against it. The plaintiff and the Insurer did not oppose this course.