Pauja v Allianz Australia Insurance Limited

CERTIFICATE OF DETERMINATION OF MERIT REVIEWER
Citation:	Pauja v Allianz Australia Insurance Limited [2022] NSWPICMR 58
ClaimanT:	Teresa Pauja
Insurer:	Allianz Australia Insurance Limited
Merit Reviewer:	Ray Plibersek
DATE OF DECISION:	24 October 2022
CATCHWORDS:	MOTOR ACCIDENTS - Merit Review; legal costs, one invoice, two amounts claimed; total claim of $2,159.44 (inclusive of GST) for professional legal costs; claim for $1,660.16 and additional claim for $302.97; minor injury dispute; insurer part paid the invoice amount of $830.08 incl GST; claimant sought payment of full amount for both amounts; sections 8.3 and 8.10 of the Motor Accident Injuries Act2017 (the 2017 Act); section 42 “guiding principle” of the Personal Injury Commission Act 2020 applied; AAI Ltd trading as GIO v Moon applied; Held – insurer is to pay the claimant’s reasonable and necessary legal costs assessed at $1,200 plus GST less amount already paid; this was $369.92 plus GST totalling $406.91; parties not acting consistently with legislation which encourages the early resolution of claims and the quick, cost effective and just resolution of disputes; parties have not acted in a way that is proportionate to the importance and complexity of the small amount of legal costs in dispute; Personal Injury Commission’s scarce resources diverted to deal with a dispute about a small amount of legal costs.
Determinations made:	1. The insurer is to pay the claimant’s additional reasonable and necessary legal costs assessed at $369.92 plus GST totalling $406.91 for solicitor’s professional legal services for the minor injury dispute invoice dated 21 November 2019.

Background

The claimant, Teresa Pauja, was injured in a motor car accident on 4 October 2018. She was the driver of her car when another car hit the back of her car.
In this case there is a dispute between the claimant and the insurer about the payment of her legal costs. The claimant’s solicitors are seeking payment of an invoice dated 21 November 2019 totalling $2,159.44 (inclusive of GST) for a minor injury dispute.
On 21 February 2019 the insurer issued a Liability Notice - Benefits After 26 Weeks, which advised the claimant that it accepted liability for statutory benefits for the first 26 weeks after the accident
On 27 March 2019 the insurer decided that the claimant’s injuries met the definition of a minor injury under the MAI Act.
The claimant’s solicitors disputed the insurer’s determination that the claimant’s injuries were a minor injury.
The claimant’s solicitors lodged an application to review the insurer’s minor injury determination in accordance with Division 7.5 Schedule 2 sub-cl 2(e) of the MAI Act.
In a Medical Assessment Certificate dated 18 September 2019 Medical Assessor Sophia Lahz determined that the claimant’s injuries were caused by the motor accident. The injury was described as a cervical spine soft tissue injury which met the definition of a minor injury for the purposes of the MAC Act
In legal terms, the issues for determination are whether under s 8.3 and 8.10 of the MAI Act, costs and expenses incurred by the claimant are reasonable and necessary.
The claimant’s solicitors issued a tax invoice dated 21 November 2019 for the minor injury medical dispute addressed to the insurer totalling $2,159.44 (inclusive of GST) for professional legal costs. There was a claim for $1,660.16 under Schedule 1 Part 1,
sub-cl 2 (1) Motor Accident Injuries Regulation 2017 (the Regulations), for a medical assessment under division 7.5 of the MAC Act for 16 monetary units. There was also a claim for $302.97 under Schedule 1 Part 1 sub-cl 2 (1), Column 1 Stage I item (a). The second amount claimed was for acceptance of retainer preparation and service of notice of claim – 2.92 monetary units.
On 14 January 2021 the insurer paid the claimant’s solicitors $830.08 incl GST for the invoice dated 21 November 2019 for the minor injury dispute (R10).
By email dated 28 January 2021 the insurer wrote to the claimant’s solicitors declining to make full payment of the invoice dated 21 November 2019, (A 3). The email read in part:
“Further to our conversation this morning regarding part-payment of invoice dated 21 November 2019 related to services for Teresa Pauja - Given Alliance assistance with the application was limited, $830.08 only is payable and the other invoiced amount of $302.97 is in relation to claim for damages which is not related to this matter as there has been no claim for damages and there is no entitlement to claim for damages.”
In response to the insurer’s part payment of the invoice, the claimant’s solicitors made an application for merit review dated 13 January 2020.The review application stated that: “Allianz has only agreed to partial payment of invoice for DRS Assessment of Dr Sophia Lahz dated 18/09/2019 (DRS reference 10094080).” The review application sought the outcome to be: “Payment of invoice according to Schedule and regulated costs.”

Submissions

The solicitors for the claimant did not make detailed written submissions. What is clear from their review application, which is referred to above, they seek the full payment of the claimant’s outstanding legal costs as claimed in their invoice dated 21 November 2019.
In its written submissions dated 6 December 2021, (R1) the insurer submits as follows:
·        the claimant’s solicitors are entitled to legal costs for legal services provided for the medical assessment dispute but that only eight monetary units plus GST is appropriate bearing in mind the amount of legal services provided and the prospects of success of the application;
·        legal costs can be awarded within a range which does not automatically entitle the claimant to a payment of the maximum or any legal costs;
·        the claimant’s review application lacked sufficient legal services to warrant maximum costs for a medical assessment;
·        the claimant’s submissions were brief did not list the injuries in dispute and failed to turn their mind to the relevant statutory provisions for the assessment of minor injury;
·        the claimant’s submissions only referred briefly to her alleged symptoms and her desire for medical treatment to continue;
·        the claimant also failed to provide relevant information to the Dispute Resolution Service about the injuries in dispute;
·        based upon the medical and radiological evidence it was clear that the claimant’s minor injury dispute had minimal prospects of success. It should have been apparent to the claimant’s solicitors that the claimant’s injury was a soft tissue injury;
·        regarding the claim for further payment of $302.97, Schedule 1 Part 2 of the Regulations relate only to legal services provided in connection with a claim for damages. This part of the schedule has no reference to claims for statutory benefits. The claimant’s claim in this case is only in relation to statutory benefits. As no claim for damages has been made there is no entitlement to payment of legal costs as is claimed in the invoice.

Statutory provisions

The claimant’s entitlement to recover legal costs is governed by Part 8 of the MAI Act. That Part applies to and in respect of legal costs payable on a party and party basis, on a solicitor and client basis or on any other basis, unless the Part otherwise provides, s 8.2.
Section 8.3 of the MAI Act provides for the fixing of maximum costs recoverable by Australian legal practitioners. Sub-s 8.10(1) provides that a claimant for statutory benefits is (subject to that section) entitled to recover from the insurer ‘reasonable and necessary’ costs in connection with the claim. This is qualified by sub-ss (3) and (4) which provide that the recovery of costs is allowed if payment is permitted by the Regulations or the Personal Injury Commission (the Commission), if satisfied that the claimant is under a legal disability or exceptional circumstances exist.
Sub-s 8.3 provides, in part, as follows:
“8.3 Regulations fixing maximum costs etc recoverable by Australian legal practitioners
(cf s 149 MACA)
(1)    The regulations may make provision for or with respect to the following:
(a) fixing maximum costs for legal services provided to a claimant or to an insurer in any motor accidents matter,
(b) fixing maximum costs for matters that are not legal services but are related to proceedings in any motor accidents matter (for example, expenses for investigations, for witnesses or for medical reports),
(c) declaring that no costs are payable for any such legal services or other matters of a kind specified in the regulations.
(2)     Without limiting subsection (1), the regulations may fix maximum costs for legal services provided to a claimant by reference to the amount recovered by the claimant.
(3)     An Australian legal practitioner is not entitled to be paid or recover for a legal service or other matter an amount that exceeds any maximum costs fixed for the service or matter by the regulations under this section. An Australian legal practitioner is not entitled to be paid or recover any amount for a legal service or other matter of a particular kind if the regulations declare that no costs are payable for a service or other matter of that kind.
(4)     An Australian legal practitioner is not entitled to be paid or recover legal costs for any legal services provided to a party to a claim for statutory benefits (whether the claimant or the insurer) in connection with the claim unless payment of those legal costs is permitted by the regulations or the Commission.”
Sub-s 8.10 provides as follows:
“8.10 Recovery of costs and expenses in relation to claims for statutory benefits
(1)     A claimant for statutory benefits is (subject to this section) entitled to recover from the insurer against whom the claim is made the reasonable and necessary legal costs, and other costs and expenses, incurred by the claimant in connection with the claim. Other costs and expenses include the cost of medical and other tests and reports.
(2)     The regulations may make provision for or with respect to fixing the maximum costs and expenses recoverable by a claimant under this section (including any matters for which no costs and expenses are recoverable from the insurer).
(3)     A claimant for statutory benefits is only entitled to recover from the insurer against whom the claim is made reasonable and necessary legal costs incurred by the claimant if payment of those costs is permitted by the regulations or the Commission.
(4)     The Commission can permit payment of legal costs incurred by a claimant but only if satisfied that—
(a) the claimant is a person under legal incapacity, or
(b) exceptional circumstances exist that justify payment of legal costs incurred by the claimant.
(5)     An insurer is not entitled to recover from a claimant for statutory benefits any legal costs, or other costs and expenses, of the insurer in relation to the claim.”
Schedule 1 Part 1 sub-cl 2 (1) of the Regulation provides that the maximum costs for legal services provided to a claimant or an insurer in connection with a medical assessment under Division 7.5 of the MAI Act are 16 monetary units (to a maximum of 60 monetary units per claim).
Sub-s 7.1(1) of the MAI Act defines “medical assessment matter” to mean a matter declared by Schedule 2 to be a medical assessment matter for the purposes of this Part.
Schedule 2, cl 2(e) of the MAI Act declares a dispute about whether an injury is a minor injury for the purposes of the Act is declared to be a “medical assessment matter” for the purposes of Part 7.
Thus maximum legal costs for a dispute about a minor injury are 16 monetary units to a maximum of 60 monetary units per claim.
I particularly draw the parties attention to the “guiding principle” contained in s 42 of the Personal Injury Commission Act 2020 (PIC Act) is that the Commission and the parties must co-operate and facilitate the just, quick and cost-effective resolution of the real issues in the proceedings. In the context of this case I especially underscore sub-s 42(4) which exhorts the Commission and the parties to resolve issues together in such a way that the cost to the parties and the Commission is proportionate to the importance and complexity of the subject-matter of the proceedings.
Section 42 provides, in part, as follows:
“42 Guiding principle to be applied to practice and procedure
(1)     The guiding principle for this Act and the Commission rules, in their application to proceedings in the Commission, is to facilitate the just, quick and cost effective resolution of the real issues in the proceedings.
(2)     The Commission must seek to give effect to the guiding principle when it—
(a) exercises any power given to it by this Act or the Commission rules, or
(b) interprets any provision of this Act or the Commission rules.
(3)     Each of the following persons is under a duty to co-operate with the Commission to give effect to the guiding principle and, for that purpose, to participate in the processes of the Commission and to comply with directions and orders of the Commission—
(a) a party to proceedings in the Commission,
(b) an Australian legal practitioner or other person who is representing a party in proceedings in the Commission.
(4)     In addition, the practice and procedure of the Commission should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Commission is proportionate to the importance and complexity of the subject-matter of the proceedings.”
I also briefly note the objects of the MAI Act include, at s 1.3(2)(g), ‘to encourage the early resolution of motor accident claims and the quick, cost effective and just resolution of disputes’. In the interpretation of a provision of the MAI Act or the Regulations, a construction that would promote the objects of the MAI Act or the provision is to be preferred to a construction that would not promote those objects (s 1.3(4)). In the exercise of a discretion conferred by a provision of the MAI Act or the Regulations, the person exercising the discretion must do so in the way that would best promote the objects of the MAI Act or of the provision concerned (s 1.3(5)).

Reasonable and necessary costs

In this matter the claimant’s solicitor claims total professional legal costs of $2,159.44 (inclusive of GST) in relation to the minor injury dispute invoice dated 19 November 2019.
The insurer initially paid the claimant $830.08 (instead of the amount of for $1,660.16 that was claimed) only and refused to pay the other invoiced amount of $302.97.
The claimant’s solicitors and the insurer maintain their respective positions for payment of professional legal costs. The first observation I would make is that it is very disappointing that the parties have be unable to resolve a dispute over this small amount. Such a dispute is in stark contrast to the exhortations contained in the objects of the MAI Act and s 42 of the PIC Act. The legislation encourages the early resolution of motor accident claims and the quick, cost effective and just resolution of disputes. Sub-s 42(4) urges the resolution of disputes in such a way that the cost to the parties and the Commission is proportionate to the importance and complexity of the subject-matter of the proceedings. In this case the parties have not acted in a way that is proportionate to the importance and complexity to the small amount of legal costs in dispute. No doubt the parties have spent many times that amount in arguing this application for review. The Commission has been required to divert its scarce resources to deal with a dispute about a small amount of legal cost.
I have reviewed the materials supplied by the claimant’s solicitors which are contained in minor injury application, attachments and other documents filed in the Portal. I have also reviewed the claimant’s solicitors tax invoice for the minor injury medical dispute dated 19 November 2019.
The claimant’s solicitors have not provided any detailed description or itemisation of the legal work done by them on the minor injury dispute. Nor do the claimant’s solicitors give any detailed description of the work done by them in their review application for the medical assessment dispute. The claimant’s solicitors main contention seems to be that they had done the work for the medical review and they were entitled to the maximum prescribed payment without the need for any detailed explanation or account. In their invoice The claimant’s solicitors also claim a further payment of $302.97 under Schedule 1 Part 2 of the Regulations.
Simply claiming the maximum amount of legal costs in a medical dispute in the absence of a detailed explanation of the work done and why it was necessary does not accord with ss 8.3 and 8.10 and the objects of the MAI Act.
The issue of legal costs was dealt with comprehensively by Wright J in AAI Ltd trading as GIO v Moon [2020] NSWSC 714, (Moon’s case). In that case his Honour held that legal costs are recoverable by a claimant under s 8.10(1) and (3), namely those whose “payment … is permitted by the regulations”, includes all legal costs that do not exceed the maximum legal costs fixed by the regulations, subject to those costs being “incurred” and “reasonable and necessary” as required by s 8.10(1), at [92]. The meaning of was the phrase “reasonable and necessary” was referred to briefly by Wright J as follows at [105] :
“Whether legal costs are ‘reasonable and necessary’ is a matter that depends on the particular circumstances of each case. No issue arose in the present matter concerning the construction or application of the words ‘reasonable and necessary’. As a result, it is not appropriate to consider that aspect of s 8.10(1) in these reasons. It can be noted that, if there is a dispute concerning whether the legal costs sought to be recovered by a claimant for statutory benefits are ‘reasonable and necessary’, this is declared by Sch 2 cl 1(aa) of the MAI Act to be a ‘merits review matter’ for the purposes of Pt 7 of the Act and can be determined in accordance with Div 7.4 of Pt 7.”
A claimant is entitled to recover “reasonable and necessary” legal costs under s 8.10. Despite what is submitted by the claimant’s solicitors, the entitlement to legal costs does not arise as a matter of right but must be shown to be: permitted by the Regulations, “reasonable and necessary” and to have been “incurred”. Sub-s 8.10 (2) provides that the Regulations may make provision for fixing the maximum costs. The Regulations provide, under Schedule 1 Part 1 sub-cl 2 (1), that the maximum costs for legal services provided to a claimant or an insurer in connection with a medical assessment under Division 7.5 of the MAI Act are 16 monetary units. In this case the claimant can claim the maximum amount of 16 monetary units if the costs were “incurred” and “reasonable and necessary”.
In the present case the claimant’s solicitors issued an invoice totalling $2,159.44 incl GST which under Moon’s case qualifies as being incurred. The remaining issue is whether those cost were reasonable and necessary in the particular circumstances of this case. Based on my reading of the minor injury dispute application and other material before me, it is clear the claimant’s solicitors devoted little time and effort in preparing and arguing the minor injury medical dispute. Nor did the claimant’s solicitors provide much detail or an explanation in their invoice, letters or submissions detailing exactly what work they did and why this was “reasonable and necessary” as required by sub-s 8.10(1).
I agree with the insurer’s submissions that the claimant’s review application lacked sufficient legal services to warrant maximum costs for a medical assessment. I also agree with the insurer’s submissions that the claimant’s review submissions were brief, did not list the injuries in dispute and failed to engage with the relevant statutory provisions for the assessment of minor injury.

I also agree with the insurer’s submissions about the claim for further payment of $302.97 under Schedule 1 Part 2 of the Regulations. This clause in the Regulations relate only to legal services provided in connection with a claim for damages. The claimant’s claim in this case is only in relation to statutory benefits. As no claim for damages has been made there is no entitlement to payment of legal costs as is claimed for that amount in the invoice.
I also note that the insurer wrote to the claimant’s solicitors that given the assistance with the application was limited, only $830.08 is payable by the insurer. This reasoning was expanded in the insurer’s written submissions which read that the claimant’s solicitors are entitled to legal costs for legal services provided for the medical assessment dispute but that only eight monetary units plus GST is appropriate bearing in mind the amount of legal services provided and the prospects of success of the application. I do not agree with this part of the insurer’s submissions. These submissions are inadequate. They do not amount to sufficient reasons to justify an award limited to only eight monetary units plus GST.
Because the work done was not described in detail by the claimant’s solicitors, it is difficult when assessing legal costs to determine whether the work was “reasonable and necessary” in the circumstances of this case.
Based on the considerations set out above, I find that the claimant’s solicitors have shown the claimant has incurred reasonable and necessary legal costs. I note they claim the maximum amount which is fixed by the Regulations. Because the claimant’s solicitors have not provided a detailed explanation of what work they did and why that work was reasonable and necessary I am not satisfied that I should allow them the maximum legal costs that they have claimed. Nor do I accept the insurer’s submissions that the award of legal costs should be limited to half the prescribed amount of only eight monetary units or $830.08.
Given the material and submissions before me, I find that the amount of the claimant’s reasonable and necessary legal services in accordance with the MAI Act and the Regulations is $1,200 plus GST for the solicitors professional legal costs. This amount equates to approximately 12 monetary units not including GST.
I note the insurer has already paid $830.08 to the claimant’s solicitors which seems to be only eight monetary units not including GST.
Thus my conclusion is that the insurer is to pay to the claimant’s solicitors an additional amount of $369.92 plus GST. I have calculated this amount by subtracting the amount already paid by the insurer from the award made: $1,200 - $830.08 which equals $369.92 plus GST.
I agree with the insurer’s submissions that the claim for further payment of $302.97 under Schedule 1 Part 2 of the Regulations is not payable because it relates only to legal services provided in connection with a claim for damages.

Conclusion

Under ss 8.3 and 8.10 of the MAI Act and the Regulations, I am satisfied that the claimant is entitled to recover from the insurer reasonable and necessary legal costs incurred by the claimant in connection with the claim.
In the circumstances of this case I have assessed the amount of the claimant’s reasonable and necessary legal costs in accordance with the MAI Act and the Regulations as $1,200 plus GST for the solicitors professional legal costs less the amount already paid by the insurer.

[2022] NSWPICMR 58

24 October 2022