Serious Driving Offences – Claimant Injured During Psychotic Episode Entitled to Statutory Benefits

In Brief

• Section 30 of the Mental Health and Cognitive Impairment Forensic Provision Act 2020 (MHCI Act) provides a special verdict must be entered if “act proven but not criminally responsible” where a jury is satisfied that a mental health impairment or cognitive impairment defence has been established on the evidence.
• Section 10(1)(a) of the Crimes (Sentencing Procedure) Act 1999 (CSP Act) gives the Court power to dismiss charges, even where the offence is proven, when it is inexpedient to punish the offender.
• Section 3.37 of the Motor Accident Injuries Act 2017 (MAIA) precludes the recovery of statutory benefits from the time a claimant is charged with a serious driving offence unless they are subsequently acquitted or the criminal proceedings are discontinued.
• For the purposes of section 3.37(2) of MAIA a special verdict under section 30 of the MHCI Act comes within the broad concept of an “acquittal” because the Court has found that the Claimant is not criminally responsible for the conduct which caused their injuries.

Facts

The Personal Injury Commission (PIC) published its decision in Flanagan v Allianz Australia Insurance Limited [2026] NSWPIC 79 on 20 February 2026.

The Claimant was injured in a motor accident on 5 February 2022.

He was subsequently charged with multiple driving offences which fell within the definition of a “serious driving offence” for the purpose of section 3.37(5) of MAIA. Those offences included a police-pursuit charge and two counts of causing bodily harm by misconduct in charge of a motor vehicle.

The Insurer denied liability to pay the Claimant statutory benefits on the grounds that he had been charged with serious driving offences and s 3.37, therefore, disentitled him from those benefits.

The Court accepted, however, that the Claimant was suffering a manic psychotic episode, associated with his bipolar affective disorder, at the time the serious driving offences were committed.

The Court, therefore, disposed of the criminal proceedings as follows:

• Indictable offences – the Court entered special verdicts of “act proven but not criminally responsible” pursuant to section 30 of the MHCI Act.
• Summary offences – the Court found the offence proved but dismissed the charges without conviction pursuant to section 10(1)(a) of the CSP Act.

It followed that all the criminal proceedings brought against the Claimant were brought to an end and no convictions were recorded.

The Insurer, following the conclusion of the criminal proceedings maintained that section 3.37 of MAIA precluded statutory benefits because the Claimant had been charged with serious driving offences (as contemplated by sub-section (1)) and the criminal proceedings had not ended with either an acquittal or a discontinuance (as required by sub-section (2)).

Supreme Court Precedent

The Insurer relied upon the Supreme Court’s decision in Insurance Australia Limited (t/as NRMA) v James Hulse [2024] NSWSC 142.

In that matter, Harrison AsJ concluded that:

• Pursuant to section 3.37(1) of MAIA, a claimant may be disentitled to statutory benefits, for all time, when they are charged, at one point in time, for a serious driving offence and the disentitlement is not terminated pursuant to s 3.37(2).
• Dismissal of the charge pursuant to s 10(1)(a) of the CSP Act does not terminate the disentitlement because there is neither an acquittal nor a discontinuance.

Our full McCabes Case Note on Hulse, can be accessed here.

The Member’s Decision

Distinguishing Hulse

The Member concluded that section 3.37 of MAIA did not apply to preclude the recovery of statutory benefits, in the circumstances of this claim.

At the outset, the Member distinguished the Supreme Court’s decision in Hulse on the following basis:

• Hulse stands for the proposition that a dismissal under s 10(1)(a) of the CSP Act, following a finding of guilt, does not remove the operation of s 3.37(1), because the terms of s 3.37(2) are not specifically satisfied.
• In Hulse, the Supreme Court was not called upon, and did not resolve, the distinct question, arising in these proceedings, where criminal responsibility has been negatived as a matter of fact and/or law.

In other words, the claimant in Hulse was found criminally responsible for their conduct, but the Court exercised its discretion, during the sentencing phase, to be lenient and not record a conviction.

By contrast, in this claim, the matter did not even get to sentencing because the Court found that the Claimant was not criminally responsible for his actions given his manic psychotic episode.

Construing s 3.37

Having distinguished Hulse, the Member made the following points in construing section 3.37 of MAIA:

• Read as a whole, section 3.37 imposes a temporary suspension of statutory benefits from the time a claimant is charged with serious driving offences pending the outcome of those criminal proceedings. The entitlement to statutory benefits is restored if the claimant is acquitted of the offences charged or if the criminal proceedings are discontinued.
• The concept of “acquittal” in section 3.37(2) is capable of extending beyond the formal verdict of `not guilty’ to a broader construction which looks at the substance and legal effect of criminal disposition.
• The outcome in this case was akin to an acquittal because the criminal proceedings were finally determined without any criminal responsibility being attributed to the Claimant due to his manic psychotic episode.
• The purpose of section 3.37 is to preclude claimants from recovering statutory benefits where their injuries are sustained in the course of culpable criminal conduct.
• Section 3.37 is not directed at precluding statutory benefits where the criminal law has declared that the claimant is not criminally culpable by reason of mental disability.

Why This Case is Important

The decision in Flanagan is important because it clarifies – and, arguably, expands upon – the circumstances under which a claimant, charged with a “serious driving offence”, will have their entitlement to statutory benefits restored.

The key to the decision is the Member’s conclusion that “acquittal” is equivalent to “not criminally responsible”.

It follows that, based on this decision, statutory benefits can be reinstated, pursuant to s 3.37(2) of MAIA, whenever a court finds that the claimant was not criminally responsible for the driving conduct which caused their injuries, irrespective of the legal label attached to the conclusion of the criminal proceedings brought against them.

Importantly, the decision in Flanagan should not apply to a Claimant who has received the benefit of s 10(1)(a) of the CSP Act. In those circumstances, in our view, the Claimant has been found criminally responsible for their conduct, but the Court has exercised leniency by deciding, during the sentencing phase, not to record a conviction.

That distinction is real.

As we understand it, an accused who successfully argues for a “section 10” can still be subjected to a criminal release order or an intervention program. In other words, there may still be criminal consequences despite the Court exercising its discretion not to record a conviction.

By contrast, an accused who successfully argues for a special verdict pursuant to s 30 of the MHCI Act can not be subjected to any criminal sanctions. They have effectively been found not guilty.

If you would like to discuss this case note, please don’t hesitate to get in touch with CTP Practice Group Leader Peter Hunt today.

Additional McCabes Resources

• MC PIC Decision of the Week
• MC MAIA Toolkit
• The Proper Lookout Podcast
• MC Ready Reckoner