Recovery of Legal Costs in Claims for Statutory Benefits: AAI Ltd trading as GIO v Moon [2020] NSWSC 714

Published by Daniel Russell and Ryan Machado on August 10, 2020

The Supreme Court recently considered the power of a Claims Assessor in the Dispute Resolution Service (“DRS”) to permit payment of legal costs incurred by claimants outside the regulated amount under the Motor Accident Injuries Regulation 2017 (“the Regulation”) where there are exceptional circumstances in connection with a claim for statutory benefits under the Motor Accident Injuries Act 2017 (“the Act”).


Mr Moon was riding his motor bike near Walcha in New South Wales on 20 May 2018 when he suffered injuries in a collision with a motor vehicle. Mr Moon made a claim for the statutory benefits against the relevant insurer, GIO.

Under the Act, statutory benefits are payable whether or not a motor accident was caused by the fault of the owner or driver of a motor vehicle, or even if the motor accident was caused by the fault of the person to whom statutory benefits are payable.

Accordingly, Mr Moon received statutory benefits for the first 26 weeks after the accident, which included:

  • paid weekly income support; and
  • treatment and care benefits.

After 26 weeks from the date of the accident, GIO terminated Mr Moon’s statutory benefits on the basis that GIO considered that Mr Moon was wholly or mostly at fault for causing the accident.

Mr Moon applied to the DRS to challenge GIO’s decision about liability. A Claims Assessor appointed by the DRS upheld GIO’s decision and determined that the accident was caused wholly by the fault of Mr Moon.

Despite Mr Moon’s unsuccessful application to the DRS, the Claims Assessor determined that GIO was to pay Mr Moon’s legal costs outside the regulated amount prescribed by the Regulation due to the particular facts and circumstances of Mr Moon’s claim against GIO.

GIO challenged the costs decision made by the DRS in the Supreme Court. In particular, GIO contended that on the proper construction of the costs provisions of the Act, the DRS did not have the power to permit payment of legal costs incurred by a claimant in relation to a claim for statutory benefits where those costs exceeded any maximum costs fixed by the Regulation, even if there were exceptional circumstances within the meaning of section 8.10(4)(b) of the Act.

GIO did not challenge the finding that exceptional circumstances existed in Mr Moon’s claim for statutory benefits.

The relevant cost awarding provisions under the Act were considered by the Supreme Court, namely sections 8.3 and 8.10.

Costs Permitted Under the Regulation and by the DRS

Section 8.3 of the Act refers to recovery of costs for services provided by a lawyer to a claimant or to an insurer that are permitted by the Regulation or by the DRS.

Section 8.10(1) of the Act refers to costs between a claimant and an insurer. Justice Wright noted that the provision provides that a claimant, such as Mr Moon it entitled to recover from an insurer, such as GIO, legal costs that:

  • have been “incurred” in connection with a claim for statutory benefits; and
  • are “reasonable and necessary”.

Furthermore, His Honour found that the claimant’s entitlement to recover costs from an insurer under section 8.10 was subject to the following circumstances as provided under section 8.10:

  • where reasonable and necessary legal costs are incurred by the Claimant, then payment of those costs is permitted by the Regulations or the DRS; and
  • where the DRS is satisfied that legal costs have been incurred by a claimant, but only if:
  • the claimant is under a legal disability,
  • exceptional circumstances exist that justify the payment.

The Decision

Justice Wright held that the DRS did not make an error by permitting payment of the reasonable and necessary legal costs incurred by Mr Moon exceeding the maximum legal costs fixed by the regulations.

His Honour determined that the DRS can permit the payment of legal costs in statutory benefit claims where the claimant is under a legal disability or where exceptional circumstances exist.

His Honour explained, having regard to section 8.10(4), that the DRS’s power to permit payment of legal costs has been designed to deal with particular, unusual situations where the maximum costs fixed by the regulations may not be adequate.

Cases involving claimants with legal disability usually require legal assistance in making their claims for statutory benefits and, in such cases, their legal representatives are usually required to undertake significantly more work than would be required in cases where claimants are not under a legal disability.

Justice Wright concluded that for the costs provisions to be interpreted as GIO contented would result in an injustice in cases of claimants under a legal disability who require significantly more legal assistance than usual, when prosecuting their claims for statutory benefits. Claimants under a legal disability may include infants or persons without legal capacity Other cases that involve “exceptional circumstances”, that is, an unusual degree of factual or legal complexity or for some other reason, and requires the incurring of more substantial legal costs by a claimant, the Act permits the amount of legal costs recoverable under section 8.10 in such exceptional cases to exceed the maximum fixed by regulation, where that was reasonably required to prevent injustice, hardship or some other relevant adverse consequence.


  1. This decision provides guidance on the proper construction of the costs provisions in the Act and the Regulation.
  2. The DRS is permitted to allow legal costs in excess of those prescribed by the Regulations in disputes where exceptional circumstances exist.
  3. Exceptional circumstances may require “particular or unusual situations” and not just claims involving a degree of complexity.

It can be seen from this decision that there are several complexities involved in navigating the Motor Accident Scheme in NSW.

Importantly, the decision confirms that people involved in motor vehicle accidents in NSW who decide to retain legal representation can have their legal costs paid by the insurer.

If you or someone you know has been injured in an accident, contact our compensation specialist, Michael Shasha on (02) 8248 2800 to find out your rights and entitlements.

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