The Nominal Defendant v Gabriel & Anor [2007 ... - DibbsBarker

Insurance
Case Note
April 2007
The Nominal Defendant v Gabriel
& Anor [2007] NSWCA 52
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

Insurance Case Note April 2007
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.
For further information, please
contact a member of our National
Insurance Team.
SYDNEY
Dean Newell | Partner
Level 8 Angel Place 123 Pitt Street Sydney NSW 2000
Tel 61 2 8233 9717 Fax 61 2 8233 9555
Email dean.newell@daslaw.com.au
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Peter Moriarty | Special Counsel
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Email peter.moriarty@daslaw.com.au
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Kelli Stallard | Partner
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Email kelli.stallard@daslaw.com.au
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Keith Fleming | Partner
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Tel 61 2 6201 7270 Fax 61 2 6257 4011
Email keith.flemimg@daslaw.com.au
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Brett Ablong | Partner
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Email brett.ablong@daslaw.com.au
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© 2007
Dean Newell | Partner | Sydney
Matthew Seisun | Lawyer | Sydney