Section 81(3) Deemed Denial of Liability and Exemption from CARS General Assessment

Motor Vehicle Directions

Insurance Australia trading as NRMA v Ural [2015] NSWSC 620

Date of judgment: 29 May 2015

Before: Young AJA, NSW Court of Appeal

Relying on the decision of the NSW Court of Appeal in Smalley v Motor Accidents Authority of New South Wales [2013] 85 NSWLR 580 (‘Smalley’), Young AJA has held that, on application, a Principal Claims Assessor must exempt claims from general assessment where there has been a deemed denial of liability under s81(3) of the Motor Accidents Compensation Act 1999 (NSW) (‘MACA’), even when payments are subsequently made by the insurer on the claim.


These proceedings arose from an application by the insurer for administrative review of the Principal Claims Assessor’s decision to decline to exempt the claim from general assessment in the Claims and Resolution Service (‘CARS’).

On 9 April 2013, the claimant was injured in a motor vehicle accident which occurred in Smithfield, in Sydney’s south-west. He subsequently made a claim for personal injury damages in about July 2013.

The insurer did not provide the claimant with written notice of its admission or denial of liability within three months of the claimant giving notice of the claim, and so the insurer was deemed to have given notice to the claimant wholly denying liability for the claim by virtue of s81(3) of MACA.

On 3 March 2014, the insurer sent a s81 notice to the claimant’s solicitor denying liability. Both before and after the date of this notice, the insurer had made payments for medical services rendered to the claimant. Some of these payments were noted as being ‘without prejudice’ on the insurer’s file although it seems those words did not appear in correspondence from the insurer to the claimant’s solicitors when the alleged ‘without prejudice’ payments were made.

The insurer made an application to CARS to have the matter exempted from general assessment pursuant to clause 8.11.1 of the Claims Assessment Guidelines, which provides that a certificate of exemption will issue where:

‘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;’

On 22 January 2015, the Principal Claims Assessor (‘PCA’) declined to exempt the claim from general assessment. Her rationale was that the payments for medical services amounted to an admission of liability by the insurer and thus, clause 8.11.1 did not apply.


There were two main issues considered by Young AJA, namely:

  1. Did the insurer’s payments amount to an admission of liability?
  2. Was the deemed denial of liability under s 81(3) enough to satisfy clause 8.11.1 of the Claims Assessment Guidelines so that a certificate of exemption should issue?

Only the insurer took an active role in the proceedings (the claimant, and PCA and the Motor Accidents Authority (‘MAA’), filed submitting appearances).


Did the Payments Amount to an Admission of Liability?

There were two arguments propounded by the insurer on this issue:

  1. That the payments were marked as ‘without prejudice’ in its file and could not be used in evidence to prove an admission of liability.
  2. That the payments were rehabilitation expenses and were therefore excluded from constituting an admission of liability pursuant to s84(3) of MACA.

As to the first argument, Young AJA was quick to dismiss it on the basis that there was no evidence that the ‘without prejudice’ nature of the payments had been conveyed to the claimant’s solicitors.

As to the second argument, section 84(3) provides that if rehabilitation services are provided to an injured person before an admission of liability is made by the insurer, the provision of those services is not to be taken to be an admission of liability.

There was some controversy surrounding whether the payments could properly be classified as rehabilitation expenses for the purpose of s84(3). Young AJA reasoned that MACA required insurers to be sympathetic towards the payment of a claimant’s lawful consequential expenses and that it would be assuming too much to make a finding that these payments amounted to an admission of liability, especially in circumstances where there had been a denial of liability.

While tending to the view that the insurer’s payments (even if not made ‘without prejudice’) did not amount to an admission of liability, his Honour did not feel the need to decide the issue, because he considered the decision of the Court of Appeal in Smalley made that issue irrelevant.

Was the deemed denial of liability enough to warrant exemption from general assessment?

Young AJA referred to the decision of the Court of Appeal in Smalley where it was held at para [70] that a s81(3) deemed notice (even if not in writing) would always satisfy clause 8.11.1 of the Claims Assessment Guidelines, whether or not an insurer subsequently admitted liability.

His Honour referred to Nominal Defendant v Gabriel [2007] 71 NSWLR 150 as authority for the proposition that there is nothing in MACA to alter the effect of a s81 notice denying liability or a s81(3) deemed notice, apart from s81(4) (which allows an insurer to subsequently admit liability). His Honour also referred to paras [66]-[67] of Smalley, where it was held that the deeming effect of s81(3) could not be displaced except by an admission made under s81(4).

In this case, after the deemed denial took effect, there had been no admission of liability made under s81(4). Therefore, liability had been denied, and the claim should have been exempt from general assessment pursuant to clause 8.11.1.


The decision of the PCA was quashed and the matter was remitted to her to be decided according to law. The MAA was ordered to pay the insurer’s costs of the proceedings.

The PCA will have to exempt this claim on remitter.


This decision makes it clear that if an insurer does not give notice of its admission or denial of liability pursuant to s81 within three months of the claimant giving notice of his or her claim, and is therefore deemed to have denied liability, it (or the claimant) will be entitled to have the claim exempted from CARS general assessment upon application.

Young AJA did say that the construction of the MACA in Smalley means that whenever the insurer does not issue a Section 81 Notice within three months, it is entitled to an exemption certificate ‘for the asking’, and he suggested that to avoid this consequence, the MAA would need to amend its guidelines.

Authored by Judith Waldock, Partner and Christopher Lisica, Lawyer, Sydney.

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