Offers, Costs and Rehabilitation in CTP Claims

CTP claim on a busy road

Case note: McDermott v Manley & Anor [2018] QSC 35

A Claimant has been unsuccessful in an application to the Supreme Court of Queensland for a declaration that a Compulsory Third Party (CTP) insurer’s Mandatory Final Offer (MFO) should be increased for the rehabilitation services paid by the insurer.

The application was brought with a view to allowing the Claimant to recover a higher amount for costs.


Mr McDermott (Claimant) brought a claim for personal injuries arising out of a motor vehicle accident under the Motor Accident Insurance Act 1994 (Qld) against RACQ Insurance Limited (RACQ).

The claim proceeded to a Compulsory Conference. RACQ delivered a MFO stating:

We have considered all of the material presently available to us and we are prepared to offer your client the amount of $53,000 inclusive of all heads of damage and statutory refunds, exclusive of payments made to date to or on behalf of your client in the sum of $22,318.11. Pursuant to section 51C(6) of the Motor Accident Insurance Act (as amended), this offer remains open for a period of fourteen (14) days.

The MFO was silent on costs. The Claimant’s solicitors responded by noting that the offer equated to a gross offer of $75,318.11.

RACQ did not provide the Claimant’s lawyers with notice pursuant to section 51(4) of the Act before funding rehabilitation. RACQ disputed the Claimant’s characterisation of the offer. The Claimant’s solicitors wrote to RACQ stating that the Claimant would accept the offer if it was for $75,318.11.

A MFO of $53,000 would limit RACQ’s liability for costs to $3,600 under the Motor Accident Insurance Regulation 2004 (Qld). An offer of $75,318.11 would allow the Claimant to recover standard costs.

The Claimant made application to the Court for a declaration that the MFO was for damages of $75,318.11, inclusive of statutory refunds and plus standard costs and outlays to be agreed or assessed.


The relevant parts of section 51 of the Motor Accident Insurance Act 1994 (Qld) provide as follows:

’51 Obligation to provide rehabilitation services

(4) If the insurer intends to ask the court to take the cost of rehabilitation services into account in the assessment of damages, the insurer must, before providing the rehabilitation services, give the claimant a written estimate of the cost of the rehabilitation services and a statement explaining how, and to what extent, the assessment of damages is likely to be affected by the provision of rehabilitation services. 

(9) The cost to the insurer of providing rehabilitation services under this section is to be taken into account in the assessment of damages on the claim if (and only if) the insurer gave a statement to the claimant, as required under subsection (4), explaining how and to what extent the assessment of damages was likely to be affected by the provision of the rehabilitation services.

(9A) If the cost of rehabilitation services is to be taken into account in the assessment of damages, the cost is taken into account as follows-

(a) the claimant’s damages are first assessed (without reduction for contributory negligence) on the assumption that the claimant has incurred the cost of the rehabilitation services as a result of the injury suffered in the accident; 

(b) any reduction to be made on account of contributory negligence is then made; 

(c) the total cost of rehabilitation services is then set-off against the amount assessed.


Suppose that responsibility for a motor vehicle accident is apportioned equally between the claimant and the insurer. Damages (exclusive of the cost of rehabilitation) before apportionment are fixed at $20,000. The insurer has spent $5,000 on rehabilitation services. In this case, the claimant’s damages will be assessed under paragraph (a) at $25,000 (that is, as if the claimant had incurred the $5,000 rehabilitation expense) and reduced to $12,500 under paragraph (b), and the $5,000 spent by the insurer on rehabilitation will be set off against this amount, resulting in a final award of $7,500.’


The Court dismissed the Claimant’s application and in doing so, found that the Claimant had not accepted RACQ’s offer. The Claimant was ordered to pay RACQ’s costs.


It was found that because the insurer had elected to bear the costs of rehabilitation, those rehabilitation expenses were irrelevant to the MFOs.

The judgment relied upon the analysis of the above subsections in Aldridge v Allianz Australia Insurance Ltd [2009] QSC 257.


This judgment is the first reported case to address whether rehabilitation expenses could be added to damages in a MFO to give a Claimant a more favourable entitlement to costs.

The decision clarifies that where a CTP insurer:

  1. agrees to bear amounts by way of rehabilitation expenses; and
  2. does not provide a notice under section 51(4),

those rehabilitation expenses will be disregarded in considering the cost consequences which flow from a MFO. 

The Court found that it is only in circumstances where subsection 51(9A) applies, that rehabilitation expenses may be added to the damages (of course, they must then be set off).

Prior to amendments to the legislation in 2000, the rehabilitation expenses paid by an insurer were required to be taken into account in the assessment of damages in all claims: subsection 51(9) Motor Accident Insurance Act 1994 (Qld) (Act No.9 of 1994). However, subsection 51(9) of the Motor Accident Insurance Act 1994 (Qld) (Act No.9 of 1994) was not tested in relation to costs and MFOs; and it is unclear what ‘taken into account’ meant in that repealed subsection.

The decision will be welcomed by CTP insurers.

As a matter of strategy, CTP insurers may be inclined to be more generous in their funding of ‘rehabilitation services’ to reduce their MFO and consequently, their liability to pay costs. Rehabilitation may be paid at any time prior to the exchange of MFOs.

The result highlights the need for parties to take care to draft their MFOs in a way which clearly explains the offer proposed. If RACQ’s offer in this case had been drafted to refer to statutory costs, the application may have been avoided.

Can we help with a CTP claim?

This article is not legal advice.

CTP claims can be complex and if you require advice specific to your circumstances, please contact Denning Insurance Law for an appointment.