Allianz successful in recovery of damages for false and misleading representations

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By Stephen Vardanega, Partner, and Leah Pryde, Special Counsel
Allianz Australia Insurance Limited v Yu [2024] NSWSC 31
Factual Background

The Defendant, Mr Yu, was involved in a motor vehicle accident on 31 July 2013.  He claimed damages against the Insurer, Allianz, in relation to his alleged psychological injury which he sustained as a result of the MVA.  The claim was settled on 9 March 2015 for $750,000.00 inclusive of costs.  Following the settlement, the Defendant’s wife, Ms Chung, brought her own claim alleging psychological injury arising out of her husband’s MVA.  The evidence provided by Ms Chung through the course of her claim contradicted Mr Yu’s evidence from his claim. This caused Allianz to undertake further investigations.

Allianz alleged that Mr Yu made false and misleading representations with respect to his psychiatric condition for the purpose of achieving a financial gain.  Allianz brought a claim against Mr Yu in the tort of deceit and pursuant to the statutory recovery provision within Section 118 of the Motor Accidents Compensation Act 1999 (MACA)).  Allianz had to prove its case on the balance of probabilities, but in accordance with the  “Briginshaw” standard. In other words, given the seriousness of the allegations, the insurer’s evidence had to be sufficiently strong.

Allianz called detailed evidence from a number of sources to show that the true position in relation to the effects of the MVA were grossly inconsistent with the evidence adduced by Mr Yu for the purposes of his claim for damages. This included evidence from persons with whom Mr Yu entered into commercial contracts, Allianz’s solicitor in Mr Yu’s damages claim,  claims staff from Allianz and Dr McClure, psychiatrist, who prepared reports for  Allianz for Mr Yu’s damages claim and Allianz’s recovery claim.

Mr Yu gave evidence as did his wife. Mr Yu was cross examined over a number of days.

Legal Issue
The issue for determination in relation to the tort of deceit was whether or not the representations made by Mr Yu were false and misleading, with the intention that they  would be relied upon, whether Allianz relied on the false representations and, if so, whether they suffered damage as a result of the reliance on the false representation.

Similarly, in order to be successful on the statutory recovery, Allianz had to prove that Mr Yu did or omitted to do something  with the knowledge that the act  or  omission was false or misleading for the purpose of obtaining a financial benefit (s 118(1) of the MACA).  Once the threshold is satisfied, the Court will then consider the amount which is entitled to be recovered (s 118(2) MACA).

Dr McClure, psychiatrist, prepared a report dated 26 August 2021 who ultimately concluded that with the new information obtained by Allianz he would not have regarded Mr Yu as a credible historian nor would he have accepted that Mr Yu had a diminished cognitive ability or that his depression was dysfunctional.  He would have assessed 5%  whole person impairment (WPI), at most.  This is in comparison to Assessor Cassidy who assessed Mr Yu at 28% WPI throughout the course of the initial proceedings.  This would mean that Mr Yu would not be entitled to damages for non-economic loss.

Mr Yu maintained his position that he continued to be plagued by the same debilitating psychiatric restrictions.

His Honour made adverse credibility findings against Mr Yu and his wife.  The findings were based on oral and documentary evidence which contradicted their evidence during cross examination. His Honour found that “the cross- examination of the defendant and his wife was devastating to their respective probability.” Their evidence was rejected in its entirety.

His Honour accepted that Mr Yu made representations for the purpose of obtaining a financial benefit and that his statements were deceptive. The cause of action contained in s 118 of the MACA was satisfied and the evidence was sufficiently strong to prove fraud.  His Honour accepted that the elements of the tort of deceit were also made out.

Damages were to be assessed by determining the amount for which Allianz would have settled the claim had Mr Yu not engaged in false and misleading conduct.

His Honour accepted Dr McClure’s assessment of 5% WPI and therefore Mr Yu was not entitled to damages for non-economic loss.  His Honour also accepted the Plaintiff’s evidence that Mr Yu would have been entitled to $80,000.00 inclusive of costs, absent his misrepresentations.  Allianz settled the claim for $750,000.00.

Accordingly, Judgment was awarded for the Plaintiff in the sum of $670,000.00 plus interest and costs.

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