Rafiq v Maile

[2006] HCATrans 243

[2006] HCATrans 243

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S590 of 2005

B e t w e e n -

EVELYN MARGARET RAFIQ

Applicant

and

SIONE TUKUAFU MAILE

Respondent

Application for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 MAY 2006, AT 10.33 AM

Copyright in the High Court of Australia

MR K.P. REWELL, SC:   If the Court pleases, I appear with my learned friend, MR E.G. ROMANIUK, for the applicant.  (instructed by Keddies Litigation Lawyers)

MR B.J. GROSS, QC:   May it please the Court, I appear with MR K.J. KELLEHER for the respondent.  (instructed by McMahons National Lawyers)

GLEESON CJ:   Yes, Mr Rewell.

MR REWELL:   Your Honours, the current motor accident scheme in New South Wales was introduced by means of the Motor Accidents Compensation Act in late 1999.  One feature of the scheme is that a compulsory third party insurer against whom a claim is made is required to make a very early decision as to admission or denial of liability.  Section 81 of the Act requires the insurer to make a decision within three months after receiving notice of a motor accident claim.

We have set section 81 out in the application book on pages 65 and 66 and made certain comments as to the context in which it appears in the Act.  Section 81(1), which appears at the bottom of page 65, refers to “the duty of an insurer to give written notice” of admission or denial of liability “within 3 months”.

GLEESON CJ:   Suppose there had been no 81 there but it just suited an insurer to either make an admission or a denial of liability.  In other words, the insurer admitted or denied liability because it wanted to.  What would be the principles that would then apply in deciding whether it could withdraw the admission involved in ‑ ‑ ‑

MR REWELL:   The same as those that Judge McLoughlin formulated in Ness v Graffen because that was one of the things that his Honour had in mind and it is something I will come to, that what the Court of Appeal failed to grasp is that there may be reasons for admitting liability early which require that the insurer remain bound by that admission even if it discovers evidence later which would improve its position.

GLEESON CJ:   It is ultimately a matter for discretion, is it not?

MR REWELL:   It is.

GLEESON CJ:   On page 30 at paragraph 42 Justice Tobias says:

The parties –

that is the parties to the appeal –

generally accepted that the primary judge had correctly stated the principles to be applied –

Is that still accepted?

MR REWELL:   Other than that her Honour did not refer herself to Ness v Graffen and her Honour ought to have.  I cannot say that I agree with that statement, your Honour, because her Honour ought to have investigated why no application was being made to withdraw the section 81 admission by reference to the criteria set out in Ness v Graffen.

GLEESON CJ:   Is it common ground that she had a discretion?

MR REWELL:   Yes, but a discretion which had to be exercised in accordance with the established principles.

GLEESON CJ:   So the issue in the case concerned the application of a discretion to the circumstances of the case?

MR REWELL:   Yes, but the decision of the Court of Appeal went well beyond that in terms of its application and significance in motor accidents law and that is the problem.

GLEESON CJ:   And the relevant discretion is a discretion as to when you allow somebody to withdraw an admission?

MR REWELL:   That is correct.  The point of this case is, of course, that the insurer never sought to withdraw the admission that it made under section 81.  Not only did it not seek to comply with the criteria established in Ness v Graffen it did not seek to withdraw the admission at all.  The importance of this case – which is still on foot – is that there now exists in the same case an admission under section 81 which remains extant – that is an admission of liability and a denial of liability in an amended notice of grounds of defence.  They co‑exist in the same case.  Our point is they cannot.

GLEESON CJ:   What is the difference between an admission under section 81 and an admission in a letter that you choose to write?

MR REWELL:   None, except that the insurer is required to give formal notice under section 81 but, effectively, none.

GLEESON CJ:   You do not have to withdraw the letter, do you?  All you have to do is get yourself in a position where when the matter comes to a court decision you are allowed defend it on a basis that is inconsistent with what you put in a letter.

MR REWELL:   The difficulty with that proposition, your Honour, is that the Act specifically based its scheme on early admissions of liability and that there were two reasons for the admission of liability which have significance.  The first, obviously, was to encourage settlement at an early stage in cases where liability was admitted but, secondly, this Act established a second tier of decision-making.  It established in addition to and outside the court system the cutely named Claims Assessment and Resolution Service, or CARS, for short, the purpose of which was to bureaucratically determine damages completely independently of the court system.

In any case where liability is admitted under section 81, the matter is to proceed through the CARS system unless there is some good reason for exempting it.  So the formal admission of liability does have significance under this system.  It channels you into an entirely different method of decision-making which excludes the court process unless there is an application for review by one party.  The terms of section 81 actually emphasise the importance of admissions.  Section 81(1) imposes the duty on the insurer to admit or deny liability within three months.  Section 81(4) says that:

Nothing in this section prevents an insurer from admitting liability after –

first denying liability.  So that if the insurer sends out a section 81 notice saying “liability is denied” it may, by express authority of the Act, change that position to admit liability but not the reverse.  There is no mention in section 81 of admitting liability and then changing your position to withdraw it.

GLEESON CJ:   But are you submitting that as a matter of construction of section 81 the judge had no discretion?

MR REWELL:   No.  There was an argument fairly soon after the Act came into effect, which became common, as to on what basis an insurer could withdraw its admission of liability under section 81.  That was the significance of the case of Ness v Graffen which is reported, despite being a decision of a single judge in the District Court.  We referred to what the decision was, in its essence, in our application book at page 67.  Judge McLoughlin set out the basis and the only basis on which an admission of liability under section 81 could be withdrawn.  The first thing that is implicit in what his Honour has said is that ‑ ‑ ‑

GLEESON CJ:   The basis was “the interests of justice”.

MR REWELL:   Yes, but the first thing that is implicit is that the Court’s leave is required, that the insurer cannot simply write a letter to the claimant or plaintiff saying, “We withdraw our admission of liability made under section 81”.  It cannot be done.  The leave of the Court is required, as it was sought in that case and refused, and his Honour set out the criteria, particularly in subparagraph (b) at line 22.  So his Honour is acknowledging that “the interests of justice” may, in certain circumstances, warrant the withdrawal of an admission of liability but equally, and this was not appreciated by the Court of Appeal, “the interests of justice” may warrant denial of leave.

Now, in this particular case the defendant did not seek to withdraw its admission under section 81, it sought only to amend a pleading and as Justice Tobias said, it provided no explanation at all as to why liability was admitted in the first place.  Indeed, his Honour wondered aloud why the relevant claims officer would have admitted liability in circumstances where the plaintiff always said that she did not know what happened, she had no recollection.  That is on page 51 of the application book.  Justice Tobias said:

it is difficult to understand why in the light of that material –

before her –

Ms Hibberd –

who was the claims manager –

considered it appropriate or necessary to admit breach of duty of care.

What his Honour failed there to grasp was that Ms Hibberd may have had reasons of her own, or of the insurer’s, to make the admission despite having a claimant who said, “I don’t know what happened”.  She may have had a tactical reason.  She may have wished to keep the matter within the CARS system rather than allow the court to get its hands on the case.  If that was the nature of her decision, if that was the reason for it, then justice would demand that the insurer be bound by its admission and continue to be bound because it made a tactical decision as to which way it wanted to go.

GLEESON CJ:   Does the evidence show whether both vehicles had the same insurer?

MR REWELL:   No.  What happened, though, was Ms Hibberd’s reasons for admitting liability were never exposed.  The whole purpose of what Judge McLoughlin did in Ness v Graffen was to say to an insurer, if you want to withdraw an admission of liability then you may, on good reasons, but you must expose your reasons to the court so that both the court and the plaintiff will know why the admission is being withdrawn.  In this case, had Ms Hibberd been required to expose her reasons a reason may well have emerged which meant that the insurer should remain bound by its admission, but if the decision of the Court of Appeal is correct we will never know.

That is one powerful point, we would submit, as to why this decision should be reviewed, but the second is the sheer lack of logic in having co‑existing in the same case at the same time an admission of liability under the statute and a denial of liability in court pleadings.  It does not correspond with our system of understanding of motor accident claims that one can deny and admit at the same time, yet that is the effect of the decision of the Court of Appeal.  It seems that the Court of Appeal, without saying so, has relegated section 81 notices to some sort of pre‑hearing, pre‑litigation procedure but there is no mandate in the Act at all for that to take place.

CALLINAN J:   There was no estoppel point argued.

MR REWELL:   No.

CALLINAN J:   Could there have been?

MR REWELL:   Yes.

GLEESON CJ:   What would be the change of position to its detriment on the part of your client?

MR REWELL:   There were settlement negotiations which took place while liability was admitted which were unsuccessful.  Had liability been denied at that time the result of those negotiations may have been different.

CALLINAN J:   There would have been costs incurred in undertaking the negotiations.

MR REWELL:   Yes, and particularly in a context where the plaintiff was always in the position where she has no recollection of the circumstances of the accident.

GLEESON CJ:   If that had been argued we would have been straight into Verwayen’s Case where the Commonwealth admitted liability and then withdrew the admission.

MR REWELL:   Yes, but what happened before Judge Sidis was that no one sought to withdraw the section 81 admission.  Now, it is our position that that had to be done.  That would have exposed the reasons why it was made in the first place and then the true interests of justice could have been determined.

GLEESON CJ:   I have to tell you that I have a little problem with this concept of withdrawing a section 81 admission and it is related to what I said earlier about writing a letter.  You could make an admission in a letter.  You do not withdraw the letter.  What you do is get yourself into a position where in the litigation, in the pleadings, you can deny something that you had previously admitted and you need a judge’s leave to do that.

MR REWELL:   But this scheme formalises admissions of liability and it does it for good reason.

GLEESON CJ:   But the admission of liability is just a fact.  It has happened.

CALLINAN J:   It is an admission against interests and could be tendered against you in the proceedings no matter what your pleading was.

MR REWELL:   That is correct, but it is not only a fact, it is a step which dictates the procedure that the claim would follow.

GLEESON CJ:   In this case the procedure was a court procedure, was it not?

MR REWELL:   It initially, of course, sent the case towards the CARS system because once admission of liability is made it has to go in that direction.  It was ultimately exempted from the CARS system for wholly unrelated reasons to do with the fact that the plaintiff’s injuries did not stabilise within the required time.  But the proposition is that once liability is admitted you are sent down a different path altogether.

GLEESON CJ:   Once you get into the litigation process you have judges with discretions.

MR REWELL:   Yes, but that is where ‑ ‑ ‑

GLEESON CJ:   And, as is recorded on page 30, paragraph 42:

The parties generally accepted that the primary judge had correctly stated the principles to be applied ‑ ‑ ‑

MR REWELL:   But this is where Judge McLoughlin’s decision comes in.  You see, of course the case before Judge McLoughlin was in the court system, yet Judge McLoughlin said you have to have leave to withdraw a section 81 admission and to get leave you have to satisfy one or other of these criteria.  Now, if the Court of Appeal’s decision is right, Ness v Graffen is wrong, but the Court of Appeal did not overrule Ness v Graffen nor can it be shown to be wrong.

What Judge McLoughlin said is, if you end up in court and you want to get rid of a section 81 admission, which by virtue of the Act is not limited to the pre‑litigation situation, then you need leave and leave will be granted if you can satisfy the criteria.  But the whole purpose is to force the insurer, as Judge McLoughlin made clear, to expose its reasons for admitting liability in the first place, otherwise the system can be either abused or unused.  Section 81 demands that an insurer gives careful consideration to the issue of liability early and makes a decision one way or the other.

Judge McLoughlin’s decision made sure that that was done properly and that if the admission was sought to be withdrawn the reasons for doing so were exposed.  The Court of Appeal has overlooked those requirements and as a result has rendered confused the status of a section 81 admission.  The fact is that now the profession and the courts do not know what the status of a section 81 admission is.  Does it have any effect at all after court proceedings are commenced?

CALLINAN J:   Has the plaintiff put in a reply to the amended defence?

MR REWELL:   I am told it has.  I am not appearing in the trial of the proceedings but I am told that it has.

CALLINAN J:   And has not raised estoppel there?

MR REWELL:   Your Honour sees the headnote.  Yes.

CALLINAN J:   What is that?  Yes?

MR REWELL:   Yes, and it will certainly be ‑ ‑ ‑

CALLINAN J:   And it would probably need leave to raise an estoppel now in a reply, would that be right?

MR REWELL:   Probably.  Our point is that there is – there is firstly that no one now knows what the status of a section 81 admission is.  Do you need leave to withdraw it?  Can you ignore it once you start court proceedings?  We do not know.  Secondly, where does the mandate come from to treat section 81 notices in this way?  Certainly not in the Act.  There is nothing there which suggests that there is any limitation on the power of a statutory admission.  Thirdly, there is nothing in this decision to indicate that Ness v Graffen is wrong or that it should be overruled or that it has been overruled and yet it stands inconsistent with the Court of Appeal’s decision.

The situation needs to be clarified.  It is of very widespread importance.  As I said, in every case the insurer is required to make such a decision.  In most cases liability is admitted.  Can the claimant rely on the admission - we do not know - and, to what extent, and that is why we are here.  We submit this is an appropriate case for special leave.

GLEESON CJ:   Thank you, Mr Rewell.  We do not need to hear you, Mr Gross.

In the course of his reasons in the Court of Appeal, Justice Tobias said, “The parties generally accepted that the primary judge had correctly stated the principles to be applied”.  The outcome of the decision in the Court of Appeal turned on the application of generally accepted principles to the particular facts and circumstances of the case. 

The case does not raise an issue suitable to a grant of special leave.  The application is refused with costs.

AT 10.51 AM THE MATTER WAS CONCLUDED