Fault means fault

Author: Lily Barbouttis
Judgment Date: 13 May 2019
Citation: AAI Limited v Feng [2019] NSWSC 535
Jurisdiction: Supreme Court of New South Wales*

Principles

• In the context of the Motor Accidents Compensation Act 1999 and the Guidelines to that Act, "fault" does not extend to include "injury".
  
  
• Whether a claim is capable of assessment may inform the issue of suitability but the ultimate question to be asked on an application for discretionary exemption is whether it is suitable for assessment.

Background

The Insurer, AAMI, lodged a summons in the Supreme Court of New South Wales to have two decisions made by Assessors on behalf of the State Insurance Regulatory Authority set aside on the basis of jurisdictional error or error of law.

The effect of the two decisions was to decline the Insurer's two applications for a mandatory and discretionary exemption to have the Claimant's (Natasha Feng) claim for damages determined by a court as opposed to the Claims Assessment Resolution Services (CARS).

The Claimant was sitting as a restrained passenger in her parked vehicle, when the Insured driver attempted to reverse into a car space in front of the Claimant's vehicle and in doing so, collided with it. As a result, the Claimant alleged that she sustained injuries.

Although the Insurer conceded that its insured driver had breached his duty of care, the Insurer denied both fault and liability on the basis that the Claimant did not sustain any injury, loss or damage in the accident.

The Insurer applied for a discretionary exemption and based its application principally on clause 14.16.11 of the Guidelines, which states "whether the Insurer makes an allegation that a person has made a false or misleading statement in a material particular in relation to the injuries, loss or damage sustained by the claimant in the accident giving rise to the claim".

The application was allocated to a Claims Assessor for determination. Although the Assessor accepted the Insurer's submission that the Claimant had made false and misleading statements that she had suffered injury, he held that it was not his role to determine whether the statements made by the Claimant were false or misleading, but rather whether the claim was unsuitable for assessment because of those allegations. Based on the available evidence, the Assessor dismissed the application.

The Insurer also applied for a mandatory exemption and based its application on clause 8.11.1 of the Guidelines, which states "liability is expressly denied by the insurer, in writing, but only in circumstances where liability is denied because the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle is denied".

In respect of the mandatory exemption, the Principal Claims Assessor accepted that the Insurer had denied liability in writing, but rejected the argument that the Insurer had denied fault. Of note, the Insurer submitted 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 PCA determined that the word fault did not incorporate the concept of personal injury and dismissed the Insurer's application.

Decision

The Insurer challenged the refusal of the applications, which the Court dismissed for the following reasons:

Mandatory Exemption

Justice Adamson held that the word "fault" does not include the element of damage caused by the breach of duty. Her Honour stated that this construction is consistent with the intent of clause 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 in this instance, because the Insurer contends that the breach of duty did not cause any injury.

The Court did not accept a submission that Axiak v Ingram (2012) 82 NSWLR 36 advanced the Insurer's argument. It was emphasised that fault is not synonymous with liability.

Discretionary Exemption

Her Honour found that that the Insurer had not demonstrated any error of law or jurisdictional error in the Claims Assessor's reasons.

Her Honour held that although the ultimate question turns on suitability (or lack thereof), capacity will commonly, if not invariably, be a relevant factor in determining suitability.

Further, Her Honour noted that the Assessor posed the correct questions and used the correct terminology, when he considered whether the claim "ought" to be exempt from assessment and whether it was “appropriate having regard to the claims made, the claim can be properly assessed within CARS”. The word "ought" refers to a discretion and does not connote any automatic process to be determined by reference to capacity rather than suitability.

Why this case is important

When considering exemption applications, parties should be mindful of the following:

1. A denial of injury, loss or damage does not, without more, constitute grounds for a mandatory exemption. Fault, which is synonymous
   with breach of duty of care, needs to be expressly denied.
   
   
2. In respect of discretionary exemptions pertaining to false and misleading statements, the function of CARS is not to determine whether the allegations of false and misleading statements are made out, but rather, whether it is appropriate having regard to the facts, that the claim be assessed by CARS. Suitability is the key consideration.

*Adamson J