The NSW Supreme Court overturned the settlement of a CTP claim with the effect that the defendant lost $1.1 million. This Insight analyses the representations made by the defendant concerning his injuries, conflicting evidence and credibility, and also considers whether the plaintiff insurer had a duty to investigate the defendant’s representations.
In issue
The issues before the Court were:
- whether the defendant breached s 118 of the Motor Accidents Compensation Act 1999 (MACA); and
- the application of the tort of deceit.
We analyse Justice Weinstein’s consideration of these issues in the context of the salient issue underpinning the proceeding: Whether the defendant knowingly made false or misleading representations in relation to his insurance claim.
The background
The defendant claimed to have suffered severe deterioration in his mental health and significant disabilities as result of a motor vehicle accident which occurred on 31 July 2013. The defendant commenced legal proceedings against the plaintiff in respect of the mental and physical injuries that he allegedly suffered as a result of that accident. In 2015 the plaintiff and the defendant settled the proceedings on the basis that the defendant paid to the plaintiff the sum of $750,000 inclusive of costs. After the settlement, the defendant’s wife (Ms Chung) brought her own claim pursuant to the MACA. She alleged a psychological injury arising out of her husband’s motor accident. She was medically assessed by a psychiatrist, in October 2017. On the basis of what Ms Chung told the psychiatrist, the plaintiff formed the view that the defendant had knowingly misrepresented his condition prior to the settlement referred to above, for the purpose of enriching himself.
The decision at trial
Section 118 of the MACA and the tort of deceit were found to be indistinguishable in relation to damages.
Justice Weinstein considered that on the balance of probabilities, the plaintiff had made out the claim in the tort of deceit and s 118 of the Motor Accidents Compensation Act 1999. The defendant was ordered to pay $670,000 plus interest of $200,000 and costs of $230,000.
The representations made by the defendant to the plaintiff and doctors as to the nature and extent of his alleged psychiatric injury were found to be:
- knowingly false and misleading;
- with the intention of inducing the plaintiff to act upon those representations;
- made with the intention of obtaining a financial benefit in the form of personal injury damages greater than that to which he was entitled; and
- a material cause of the plaintiff agreeing to pay the defendant the settlement sum of $750,000 inclusive of costs, plus payments already made.
In reaching his decision, Justice Weinstein relied upon the evidence of Mr. Nehme and Mr. Weerakkody, two ‘disinterested’ witnesses, whose evidence (contrary to the defendant’s representations) was that the defendant was largely able to conduct himself in a normal fashion. This was reaffirmed in Dr McClure’s report where he opined that the defendant’s 'objectively-displayed cognitive abilities are inconsistent with his self-description to me'.
Implications for you
Although this decision deals with section 118 of MACA, the principles apply equally to the identical provision contained in section 6.42 of the current applicable NSW CTP legislation, the Motor Accident Injuries Act 2017. The Court’s approach in this matter emphasised the importance of the defendant’s credibility and whether he made misrepresentations to the plaintiff, rather than whether further investigations could have addressed the truthfulness of the defendant. Justice Weinstein followed the judgment in Hayward v Zurich Insurance Company plc [2017] AC 142 in finding that 'an insurer ought to be permitted to accept claimants at face value when determining the merits of claims'. The defendant deprived the plaintiff of that entitlement and was ordered to pay damages that put the plaintiff in the position in which it would have been had the (knowingly) false and misleading representations not been made.
