Keywords: Section 81 notice | admission of liability | denial of liability | estoppel | prejudice
Hodgson, Basten and Campbell JJA
Overview
An insurer’s Section 81 notice admitting liability does not preclude a subsequent denial of liability, CARS exemption and a Defence in court proceedings that places liability in issue.
A Section 81 notice admitting liability, that is followed by a denial of liability, has no greater evidentiary or procedural significance than an out-of-Court admission.
Where a claimant alleges that it relied on a section 81 admission so that a subsequent denial of liability gives rise to estoppel, this allegation must be dealt with via a Reply pleading estoppel that is considered at the trial, or via the application of Uniform Civil Procedure rule 14.28 (no reasonable cause of action; estoppel, embarrassment or delay; abuse of process) which can be dealt with via interlocutory application. The existence of a section 81 admission is not of itself sufficient to ground striking out under rule 14.28.
Facts
Gabriel was a passenger in a vehicle that struck a telegraph pole. She claimed that an unidentified vehicle performed a hazardous overtaking manoeuvre that contributed to the accident. A claim was accordingly filed against the Nominal Defendant.
The first defendant (the driver of the vehicle in which the plaintiff was a passenger) denied liability by way of Section 81 notice. The second defendant (the Nominal Defendant) issued a Section 81 notice admitting liability. An amended Section 81 notice denying liability was issued 3 years later (after solicitors were instructed). A Defence consistent with this denial of liability was filed thereafter.
The plaintiff filed a Motion applying to have the Defence struck out on grounds that it was inconsistent with the Section 81 notice and leave had not been granted for withdrawal of the notice.
The plaintiff’s motion was successful and the Nominal Defendant appealed from that decision.
Court of Appeal Judgment
Campbell JA delivered the leading judgment. He, along with Hodgson JA, allowed the appeal. Basten JA delivered a dissenting judgment.
Campbell JA determined that an admission of liability pursuant to section 81 does not preclude a Defence that controverts this admission.
Character of a Section 81 Admission and its Affect Upon Subsequent Proceedings
Campbell JA ascribed to the Section 81 notice the character of a procedural pre-litigation device that is solely relevant to provision of medical and rehabilitation services (pursuant to section 83) and to a timely determination of whether or not an exemption from CARS is available.
Once an exemption from CARS is obtained and litigation is on foot, the contents of and amendments to pleadings are governed by the UCP Rules in isolation of the effects of section 81.
Campbell JA observed that prior to Gabriel the applicable law was to be found in Government Insurance Office of New South Wales v Phillips (NSW Court of Appeal 27 August 1992 unreported). In that matter the Court of Appeal’s findings (in relation to section 45 of the Motor Accidents Act 1988) were consistent with those enumerated above. Campbell JA observed that Ness v Graffen (2003) 60 NSWLR 549 was recently distinguished from Phillips on grounds that the insurer in Ness had failed to demonstrate that additional evidence was adduced between issuing the Section 81 notice and filing its Defence. For this reason McLoughlin DCJ refused to permit a Defence that was inconsistent with a prior section 81 admission. Campbell JA expressly disagreed with this approach and found that it is not necessary for an insurer to demonstrate a reason for its change in position. The Defence stands on its own and is exclusively subject to the rules that govern pleadings.
Section 81 notice as Evidence at Trial
Section 81 has no ramifications beyond the commencement of litigation other than in a manner consistent with the rules of evidence. The notice can serve as evidence that the insurer at one time believed that liability ought to be admitted and that evidence to this effect presumably existed. As such, an insurer defending a matter where a section 81 admission has previously been made ought to be equipped to demonstrate at trial why that admission is no longer applicable.
Where Claimant Alleges Estoppel
Campbell JA foresaw that allegations of estoppel could arise in circumstances where a claimant alleged reliance on a section 81 admission. Estoppel, he found, can be alleged in these circumstances via 2 mechanisms. Firstly, by way of estoppel. Campbell JA found that allegations of an estoppel are properly raised by a Reply to the Defence, so that issues raised in the Reply, as part of the pleadings, are subsequently determined at trial. Secondly, via UCPR rule 14.28 whereby the Section 81 notice is a part of the basis, but not of itself an entire basis, upon which one of the matters that ground peremptory striking out by application of that rule are established.
Campbell JA found that the Act makes no allowance for an Amended Section 81 notice, other than to move from denial to admission. Whether or not an Amended Section 81 notice is served, its predecessor remains of evidentiary value in the proceedings.
Application to CARS
An Amended Section 81 notice nevertheless remains of value in terms of the insurer’s communication to CARS that it denies liability for purposes of exemption.
The Claims Assessment Guidelines do not specifically require that the Principal Claims Assessor decides whether to exempt a matter on the basis of a Section 81 notice. Arguably, the insurer can convey a denial (or an allegation of contributory negligence greater than 25%) by any means. Paragraph 7.1 of the Guidelines states that the PCA must make its decision as to exemption on the basis of the insurer’s denial or admission “at the time of the assessment”. It is thus arguable that the PCA has no authority to make a determination predicated on a prior Section 81 admission when a later denial of liability (however conveyed) is before it at the time of its decision.
As an amended Section 81 notice is of no consequence beyond communicating to the PCA that an exemption is appropriate, the only utility of the amended notice is to permit litigation. The judgment offers no guidance as to the effects of an amended notice in circumstances where the insurer prefers to remain at CARS.
Conclusion
An insurer is at liberty to deny liability that has previously been admitted by a Section 81 notice without providing reasons. The insurer can then obtain an exemption and file a Defence that is independent of the effects of the prior admission.
The claimant can challenge the withdrawal of admission via an allegation of actual estoppel. This may be framed as an estoppel, which must be pleaded in Reply and dealt with at trial, or via the application of UCPR rule 14.28, which can be dealt with via interlocutory application. The existence of a section 81 admission is not of itself sufficient to ground striking out under rule 14.28.
Where a matter proceeds to trial on the basis of a denial of liability, and liability was at an earlier time admitted by a Section 81 notice, the insurer ought to present evidence as to why that admission was erroneous or inappropriate.
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