Negligence: Is Recovery for Personal Injury too Generous?
NEGLIGENCE: IS RECOVERY FOR PERSONAL INJURY
TOO GENEROUS?
ADDRESS BY THE HONOURABLE J J SPIGELMAN AC
CHIEF JUSTICE OF NEW SOUTH WALES
TO THE 14th COMMONWEALTH LAW CONFERENCE, LONDON
14 SEPTEMBER 2005[1]
The District Court of New South Wales is the highest volume personal injury jurisdiction in Australia. Filings for the twelve months ending 30 June each year - the financial year in Australia - was about 14,500 cases per year in the late 1990s. This increased in the year 2000/2001 to 17,500 and in 2001/2002 to over 19,000. Thereafter a precipitate decline occurred: to about 8,500 in 2002/2003; 6,500 in 2003/2004; and 5,500 in 2004/2005. Similar trends have occurred in other courts.
These figures reveal a dramatic change in the practical operation of the law of negligence in Australia over a few years. This is the result of two factors. First, there has been a substantial shift in judicial attitudes at an appellate level, led by the High Court of Australia. Secondly, fundamental changes to the law of negligence have been implemented by statute.
Legislative intervention was prompted in large measure by the escalation of insurance premiums: in 2000 premiums for public liability increased by 10% and for professional negligence by 35%; in 2001 the increases were, respectively, 18% and 31%; in 2002 they were 43% and 29%; in 2003 they were 17% and 16%. In 2004, as the changes began to have some effect, public liability and professional negligence premiums both decreased by 4%[2]. Further falls appear to be occurring this year. This experience may not be replicated in other nations. It does, however, explain why the political reaction in Australia was urgent and wide ranging.
Background
Until about the middle of the 20th century judges were regarded, so far as I am aware universally in all common law jurisdictions, as mean, conservative and too defendant-oriented. This led parliaments to extend liability: Lord Campbell's Act; the abolition of the doctrine of common employment; the abolition of the immunity of the Crown; the creation of workers' compensation and compulsory third party motor vehicle schemes; provision for apportionment in the case of contributory negligence.
In Australia, about twenty to twenty-five years ago, the process of legislative intervention changed its character. It proceeded on the basis that the judiciary had become too plaintiff-oriented. There may very well be an iron law which dooms judges to always be a decade or two behind the times. That is probably a good thing. Fluctuations in intellectual fashion and transient crises or enthusiasms make it difficult to discern a permanent change.
Throughout Australia, in different ways and at different times, new regimes were put in place from about the early 1980s, particularly for the high volume areas of litigation involving motor vehicle and industrial accidents. In Australia's second largest state of Victoria, a no fault scheme for traffic accidents was established, similar to the wide-ranging New Zealand scheme. In the largest state of New South Wales such a scheme was actively considered but not, in the event, adopted. In all states, what had come to be regarded as common law rights were significantly modified by legislative intervention. I say, "come to be regarded", because many of the causes of action were only available because of the previous century of legislative change, to which I have referred, which overrode the common law.
Professor Atiyah referred to a long-term historical trend of expanding the scope of the tort of negligence and the damages recoverable for the tort, as "stretching the law"[3]. There was, however, an equivalent, parallel trend, perhaps of even greater practical significance, of 'stretching the facts'. It may well be that these phenomena occurred to a greater degree in Australia than other common law countries. Our experience may not be relevant to others.
The undefined elements of the tort of negligence leave much open. What effects are reasonably foreseeable? What protective conduct is reasonably required? What damages are remote? What does "commonsense" suggest as the cause? When is a contribution to the creation of a risk "material"? Should a limitation period be extended? Should the plaintiff's evidence be accepted? How should one choose between two widely divergent experts' opinions, each of which is probably at, or beyond, the boundaries of the range of legitimate opinion? Should the plaintiff be believed about what affect a hypothetical warning would have had upon him or her? There is much flexibility in the outcome of negligence litigation.
Contemporary judges generally reached intellectual maturity at the time that the welfare state was a widely accepted conventional wisdom. The "progressive" project for the law of that era was to expand the circumstances in which persons had a right to sue. We are now more conscious of limits - social, economic, ecological and those of human nature. Hobbes has triumphed over Rousseau, albeit not over Locke. For several decades now economic and social limits on the efficacy of governmental intervention have received greater recognition. The law cannot remain isolated from such trends in social philosophy.
In particular there has been a significant change in expectations within Australian society, as elsewhere, about persons accepting responsibility for their own actions. The previously dominant idea that any personal failing is not your fault, that everyone can be categorised as a victim, has receded. The task is to restore an appropriate balance between personal responsibility for one's own conduct and social expectations of proper compensation and care.
The debate in Australia, leading to recent statutory changes, focused on particular cases in which persons recovered damages, sometimes substantial damages, when there could be little doubt that they were the authors of their own misfortune. One case referred to frequently[4] involved a young man diving from a cliff ledge into a swimming pool without checking the depth of the water. I know of no English case which went this far, with the possible exception of Dorset Yacht[5]. The idea that the authority which owned the land should have put up a warning sign advising against diving is no longer, with the changing times, accepted to be as a reasonable basis for liability. The High Court is now reserved in two other diving cases and may well follow the House of Lords in Tomlinson by giving renewed emphasis to personal responsibility[6].
There seems no doubt that the past attitude of judges, when finding facts, determining liability and awarding compensation, was influenced to a substantial extent by the assumption, almost always correct, that a defendant was insured. Judges may have proven more reluctant to make findings of negligence, if they knew that the consequence was likely to be to bankrupt the defendant and deprive him or her of the family home. The result was that the broad community of relevant defendants bore the burden of damages awarded to injured plaintiffs. Some commentators came to regard such loss sharing as the prime object of tort law.
The line between the kinds of mistakes or unfortunate results that are an inevitable concomitant of day to day human interaction, including professional practice, on the one hand, and the sorts of mistakes or results which should not occur at all, on the other hand, may have been drawn in a different way on many occasions in the absence of the ubiquity of insurance. The various choices that the fungibility of the concepts associated with the tort of negligence throws up may very well have been made differently.
Over the course of a number of decades the effect of Australian judicial decision-making was, in substance, to virtually transform the tort of negligence from a duty to take reasonable care into a duty to avoid any risk by reasonably affordable means.
The Australian judiciary has now become more sensitive to the broader implications of individual decisions, including their effect on the overwhelming majority of claims that are settled out of court in the light of practitioners' understanding of the likely outcome. Evidence has accumulated about the unintended consequences of the tort system. The practice of defensive medicine is a good example. Both my brothers are doctors. Even in the late 1960s I recall the scorn that they expressed about their American colleagues who refused to stop at the scene of road accidents. Australian doctors have long since joined them. The adverse social effects of fear of litigation have become substantial. Risk averse reactions will often go too far. However, overreaction based on an exaggeration of risk is understandable and all too human.
The judiciary cannot be indifferent to the economic and social consequences of its decisions. Insurance premiums for liability policies can be regarded as, in substance, a form of taxation (sometimes compulsory but ubiquitous even when voluntary) imposed by the judiciary as an arm of the state. For many decades there was a seemingly inexorable increase in that form of taxation by judicial decision[7]. In Australia that increase has stopped as a result of a change in judicial attitudes and, subject to the vagaries of the insurance market, appears certain to be reversed, as a result of legislative intervention throughout Australia.
Perhaps indirectly in the case of judges, and overtly in the case of the parliaments, the shift in attitude has been driven by the escalation of insurance premiums to which I have referred and by the unavailability of insurance in important areas on any reasonable terms, or at all.
Over 2002-2003 there were virtually daily reports in the Australian media about the social and economic effects of increased premiums: cancellation of charitable and social events such as dances, fetes, surfing carnivals and Christmas carols; the closure of children's playgrounds, horse riding schools, adventure tourism sites and even hospitals; the early retirement of doctors and their refusal to perform certain services, notably obstetrics; local councils were shutting swimming pools and removing lethal instruments such as seesaws and roundabouts from children's playgrounds; our Sydney tabloid proclaimed "The death of fun"; many professionals could not obtain cover for categories of risks, leading to the withdrawal of their services - for example, engineers advising on cooling tower maintenance could not get cover for legionnaires disease, building consultants could not get cover for asbestos removal, agricultural consultants could not get cover for advice on salinity; midwives were unable to get cover at any price; many professionals were reported to have disposed of assets so as to be able to operate without adequate cover or even any insurance.
The issue became highly charged politically. The talk was of "crisis". The concern of governments was motivated, in part, by the liability of government directly as a major employer, property owner and provider of services, particularly in education, health and transport. This was reinforced by the emergence, over recent years, of a role for government as a backstop for private insurers, as the reinsurer of last resort. It took many years for the government role of "lender of last resort" to take the institutional form of the contemporary central bank. We are in the early stages of institutional development of the "reinsurer of last resort" function.
In Australia we have had a range of proposals in different areas for the government to underwrite existing insurers, e.g. for the risks associated with terrorism. Of particular significance was the acceptance that it was politically impossible for the government to stand by and let a major insurer default on its obligations. A national scheme was implemented to support the major medical insurer when it appeared to be insolvent. Governments at both levels of our federal system became involved in protecting policyholders when a major general insurer, HIH Limited, went into liquidation. This is exactly what happened long ago in the case of banks.
Governments have a very real financial interest in the operations of the tort system.
Whether by way of increases in insurance premiums or by way of a call on taxpayers funds, it became widely accepted at all levels of Australian government and in the general community that the existing tort system had become economically unsustainable. The particular focus was the sudden escalation of premiums. Insurance premiums are a result of a multiplicity of factors. The suddenness and size of the increases, and the expansion of policy exclusions, reflected contemporary developments in the insurance market. However, the cost of claims sets the basic structural parameters within which other forces operate. Those costs have increased considerably over recent decades.
Responsibility
One of the clearest themes to emerge in recent Australian case law and legislation is the renewed emphasis on individuals taking responsibility for their own actions. There is a distinct retreat in Australian jurisprudence, as in a broad range of social policies, from the hitherto dominant relativism by which misconduct is to be explained and, generally excused, on the basis of difficulties experienced by a person in his or her upbringing or other social interaction. There is, in Australian law, as in other aspects of Australian policy, renewed acceptance of the possibility of failure. Many things that happen are not someone else's fault. Not everyone is a victim in a culture of complaint.
There is, of course, nothing new about blaming others for one's own failings. This reaction started in the Garden of Eden when God called Adam to account for his transgression. He, of course, blamed his wife. She - more imaginatively - blamed the snake. Nevertheless, the end result was to enforce Adam and Eve's personal responsibility. Indeed, some religious traditions suggest that their responsibility has been inherited by us all.
There are, of course, limits to the extent to which personal responsibility can operate. It is not appropriate to, in effect, restore the old rule that contributory negligence is a defence. It is necessary to ensure that personal responsibility is balanced with other social values such as compassion, the understanding of personal failings and the social need to maintain mutual communal responsibility, particularly for the seriously injured.
The balance amongst these conflicting considerations will, necessarily, be made differently in different societies and at different times within a society. Over recent years the balance has been altered in Australia for reasons which may or may not be relevant to the other common law nations represented at this Conference.
Judicial Attitudes
It is at the boundaries of the tort, where new and different situations are under consideration, that the change in judicial attitudes has become most apparent. However, the change will also have an effect on the outcome of cases in well-established categories. The various choices available to a judge in terms of acceptance of evidence and the formulation of the relevant judgments required in a negligence case will be affected by the change of attitudes to which I refer.
There has been a steady stream of cases in the appellate courts, particularly in the High Court, in which the outcomes would have been different if the process of stretching the law and of stretching the facts had not been arrested and reversed[8].
People who trip on footpaths no longer always successfully sue local councils. The owner of a shopping mall was not responsible for criminal conduct in the mall's car park. The authors of the rules for rugby were not liable to injured players. Nor was the person who conducted an indoor cricket arena. A cinema was not liable when a client tried to sit down but the seat was, as is common, retractable. A hotelier was not liable for injuries suffered after his departure by an intoxicated patron. A club with gambling machines was not liable to refund the losses of a compulsive gambler whose cheques it had cashed. The driver of a vehicle was not liable when a child suddenly darted out into the road. A school authority was not liable for intentional criminal conduct, relevantly sexual abuse, of a teacher against a pupil. Another school authority was not liable for failing to constantly supervise children playing on a flying fox. A government department was not liable for the health consequences of a failure to regulate self-interested commercial actors whose conduct caused injury. Governmental intervention on the basis of allegations, that proved incorrect, in family relationships which caused psychiatric injury did not create liability. An employer which conducted disciplinary or dismissal actions with adverse psychiatric consequences was found not to be liable. Nor was an employer liable for psychiatric injury arising from over work. An occupier was not liable for not breaking up a fight on its premises. A home owner was not liable when intoxicated guests caused an explosion by throwing methylated spirits on a barbecue. A prison authority was not liable for psychiatric injury caused to the victim of a crime by an escapee, nor for injuries to her prematurely born son. A company which was repairing callipers for a polio sufferer, but which had not followed up the victim who had failed to provide the requisite form to secure governmental financial assistance, was not liable to their client for injuries suffered when his old callipers broke.
It is quite likely that many of these cases would have been decided differently only a few years ago. I do not wish to imply that the development has been all one way. There have been important cases in which liability has been established in circumstances where the issue was debatable. Nevertheless, the drift of judicial decision-making is plain at a senior appellate level. It is having a substantial effect on trial judge decision-making.
If one had to pick a single point of departure for the imperial march of the tort of negligence, the beginning of the process of what Atiyah calls "stretching the law", it was probably the judgment of Lord Reid for the Privy Council in Wagon Mound (No 2)[9]. That judgment was delivered at a time when the practice of the Board was to deliver a single inscrutable judgment. Such a judgment acquires some of the power of a legislative enactment, precisely because it is bereft of that divergence of reasoning amongst different judges in a final court of appeal that is more appropriate for the principled development of the law. Lord Reid's judgment is quite simplistic. That is sometimes the product of the compromises that are required for a joint judgment.
The case was an appeal directly from a single judge of the Supreme Court of New South Wales, Mr Justice Walsh, later to serve on the High Court. Sir Cyril Walsh, placed particular weight on his assessment that the likelihood of an oil spillage catching fire was "rare" and "very exceptional". The Privy Council rejected this as the appropriate test. It asked whether or not something was "a real risk" in the sense that it would not be brushed aside as "far fetched". The subsequent application of this test by the High Court in Australia has led to the formulation that a risk of injury is foreseeable unless it can be described as "far fetched or fanciful"[10].
Lawyers, even after Wagon Mound (No 2), continued to refer to the test for identifying a duty as one of "reasonable foreseeability". I cannot see that "reasonableness" has anything to do with a test that only excludes that which is "far fetched or fanciful". The test appears to be one of "conceivable foreseeability", rather than one of "reasonable foreseeability"[11].
There has been criticism of the "farfetched or fanciful" test in recent judgments of the High Court of Australia[12]. The High Court will reconsider the issue in the near future[13].
Many of the recent cases to which I have referred have refused to extend the boundaries of the border of negligence into new areas. When deciding proceedings in which a novel issue arises the Australian common law does not adopt the three part Caparo test applied in England and Wales[14]. The contemporary Australian approach, although there are a number of different views expressed in the authorities, is to engage in a multi-factorial or salient features analysis, in which a range of different aspects of the relationship are assessed[15].
In such an analysis two matters are of particular significance. First, the control of the situation on the part of the party said to owe the duty[16]. Secondly, the vulnerability of the person to whom it is alleged the duty is owed. Vulnerability is used in the sense that it was not reasonably possible for the person to take steps to protect themselves from the identified risk. This consideration is the complement of the new emphasis on personal responsibility[17].
One factor that has proven to be important in restraining the hitherto imperial march of the tort of negligence has been the emphasis given in recent Australian decisions to the importance of coherence in the law. The tort of negligence has not been permitted to extend so as to interfere with another area of the law which has developed a distinctive approach to balancing the conflicting interests that arise in the interaction of persons in disparate spheres of discourse. Issues of coherence have been of particular significance in cases in which the exercise of a statutory power or performance of a statutory duty has arisen[18]. The imposition of a duty of care may be directly inconsistent with the statute or otherwise inappropriate by distorting the focus of the statutory decision-making process or inducing decisions to be made in what has been called a "detrimentally defensive frame of mind"[19]. Questions of coherence have also arisen in common law contexts such as the interaction between negligent words causing mental harm and actions for defamation or whether recovery can be permitted for negligent conduct causing nuisance where the law of nuisance would not permit recovery[20].
Legislative Change
In New South Wales legislative change had commenced in a number of areas prior to the events of 2002-2003. Those events led to a national response in which many of the New South Wales proposals were adopted generally. Indeed, the new legislation went even further than had been considered appropriate until that time.
In the high volume areas of motor vehicle and industrial accidents the regimes vary considerably from state to state. Changes to these regimes from about 1999 onwards made them even less generous than those adopted in 2002-2003 for other claims. I will focus on the generally applicable regime.
The Commonwealth and the States appointed an inquiry to review the law of negligence. The Panel was chaired by the Honourable David Ipp, a judge of the New South Wales Court of Appeal. By and large, the recommendations of this panel have been implemented, with some variation, in all States and Territories, with complementary national legislation. The principal thrust of the changes is the limitation of circumstances in which damages can be recovered for personal injury and the restriction of the heads and quantum of damage that can be so recovered. The changes are wide ranging and include the following:
- The not "far fetched or fanciful" test for foreseeability has been replaced by a test that a risk be "not insignificant" which, despite the double negative, is of a higher order of possibility.
- A requirement has been introduced identifying a range of factors which have to be taken into account when determining breach of duty - referred to as the "negligence calculus". These factors include probability of harm, seriousness of harm, the burden of taking precautions, the social utility of the activity and precautions that may be required by similar risks, not just the particular causal mechanism of the case before the court. This statutory requirement, which in most respects reflects the common law, may focus attention on matters which may not have been given adequate weight, particularly in lower courts.
- An express acknowledgment of the normative element in determination of issues of causation, also reflecting Australian common law, is adopted by applying a test of whether responsibility for the harm should be imposed on the negligent party.
- An express provision emphasising that the plaintiff always bears the onus of proving any fact relevant to the issue of causation, thereby implicitly overturning judgments which state that in the case of evidentiary gaps - often medical causation issues - proof on the issue of causation could shift from the plaintiff to the defendant.
- The introduction of a modified version of the Bollam test, which was not the law in Australia, in all cases of professional negligence, providing that treatment was not negligent if it occurred in accordance with an opinion widely held amongst respected practitioners, subject to the ability of the court to intervene if the opinion was "irrational". The test does not, however, apply to a duty to warn or inform.
- The enactment of a "person of normal fortitude" test for purposes of foreseeability of mental harm, which the Ipp Panel identified as representing the majority view in the most recent High Court authority on the subject, although the judges who did in fact hold that view have since accepted that the majority regarded normal fortitude as merely a relevant consideration and was not an independent test[21]. The statutory test is likely to deny liability in many situations in which the common law would have imposed it.
- In a number of states, including New South Wales, the legislature has gone beyond the Ipp recommendations by restricting recovery for pure mental harm to a person who directly witnessed another being killed or injured or put in peril or who was a close family member of the victim.
- A number of States have adopted, in different terms, a policy defence available to public authorities, requiring that the interests of individuals after materialisation of a risk have to be balanced against a wider public interest, including the taking into account of competing demands on the resources of a public authority. In New South Wales the defence is contained in a set of principles for determining whether a duty exists or breach has occurred, expressly acknowledging that performance may be limited by financial and other resources available to the authority, that the allocation of resources is not open to challenge and that the conduct of the authority is to be assessed by reference to its full range of functions. Also, in New South Wales, the legislation provides that a public authority is not liable for a failure to exercise a power to prohibit or regulate an activity, if the authority could not have been required to exercise that function in mandamus proceedings instituted by the claimant. This provision may well come to test the limits of the availability of mandamus and principles of standing.
- The liability of a volunteer and of a good samaritan is limited.
- The liability of persons who act in self-defence to criminal conduct is limited.
- Changes are made to the law about voluntary assumption of risk and contributory negligence. An intoxicated person is deemed to have contributed twenty-five percent to the injury. In New South Wales the defence of intoxication is broader.
- An injured person is deemed to have been aware of any obvious risk, about which there is no duty to warn save after express request or in the case of a professional service.
- Provision is made that an apology cannot constitute an admission. This is regarded as of particular significance in the field of medical negligence. Doctors can say sorry for a result, without fear of making an admission of liability.
There are also thresholds, caps and restrictions on recoverable damages, including:
- Establishment of an indexed maximum for the recovery of economic loss, generally three times average weekly earnings. Persons earning more than that are believed to have the ability to take out first person loss of earnings insurance.
- Establishment of a threshold of a percentage of permanent impairment before a person may recover general damages at all, generally a sliding scale of fifteen percent up to about thirty percent, after which full recovery is permitted.
- Establishment of an indexed maximum for recovery of general damages.
- Restrictions have been imposed on the recovery of damages for provision of gratuitous services.
- The rate of interest that can be awarded on damages has been fixed and generally reduced.
- The discount rate established by the courts for the determination of the present value of future loss has been fixed and increased.
- Exemplary damages have been abolished in many jurisdictions and, to some degree, aggravated damages have also been abolished. Exemplary damages were rarely awarded and this will make little practical difference to insurance premiums. Aggravated damages represent actual loss. This change does, however, pander to the current imperative of political life in a media saturated age: to be seen to be doing something. In the heat of the debate it appeared that anything less was more. The reasons proffered for this change are singularly unconvincing.
This list indicates how wide-ranging and fundamental the alterations of the law have been. Some of the changes were contained in a list of possible amendments to the law which I compiled in an address in 2002 - not including caps and thresholds - and which became something of a template for the subsequent debate[22]. In that address I emphasised the importance of proceeding on the basis of a principled alteration, rather than an underwriter driven alteration of the law. In many respects the changes are not principled.
The Australian Experience
The differences amongst nations with respect to personal injury litigation makes it difficult to assess how relevant the experience of one nation is for others. Relevant considerations extend beyond differences in the substantive law to encompass differences in judicial attitudes which affect fact finding, and the formulation of judgments, differences in the organisational structure and culture of the legal profession, differences in social expectations, differences in the structure of the insurance industry and, particularly, the level of competitiveness amongst insurance companies and also differences in investment practices and success on the part of insurance companies.
The Australian experience in the years 2002 to 2003 occurred in a context where the business cycle in the insurance industry transformed a buyer's market into a seller's market, virtually everywhere. The causes of this included an unusual concatenation of natural disasters which drew down the capital of insurance companies, particularly that of reinsurers. The events of 11 September 2001 in New York and Washington exacerbated this process. This coincided with the end of a share market boom which further reduced capital available to insurance companies. Quite quickly, demand exceeded supply in the global reinsurance market and this was immediately reflected in premiums and in decisions as to what kinds of businesses to write and where.
This effect was aggravated in Australia by events that were entirely Australian made. For many years one of the country's biggest general insurers, as became clear in retrospect, had been aggressively underpricing in order to increase market share. The company collapsed at this time. The problem was further aggravated by the fact that the largest medical indemnity insurer in Australia, covering some 50 percent of Australian practitioners, was faced with insolvency and had to be saved by the financial support of the government.
The cumulative effect of all of these factors, some of them limited to Australia, caused the explosion in insurance premiums to which I have referred. Nevertheless, these factors operated in the context of structural elements affecting the cost of claims of general insurers which were determined by the operation of the legal system. Many of those structural elements were also peculiar to Australia.
I note that in a Government report prepared for purposes of the debate in the United Kingdom, figures are set out for OECD countries specifying "tort costs" as a percentage of the gross domestic product in each of those countries in the year 2000. I am not sure how these figures were calculated but they show, as one would expect, that the United States of America was at the top of the list, expending 1.9 percent of its GDP on tort costs. Australia was the equal fourth highest country, expending 1.1 percent on tort costs. The United Kingdom was the second lowest on the list, expending only 0.6 percent of GDP on tort costs in that year[23]. I cannot vouch for the accuracy of these figures but the range itself indicates that these issues will vary in their significance from one jurisdiction to another.
The United Kingdom debate has focused on whether or not there has emerged in this nation a "compensation culture". The debate has been stirred by the tabloid press in a campaign which is very similar to that which we experienced in Australia. The view that personal injury claims had become grossly excessive became quite widespread. The United Kingdom Government has announced that it will introduce a new Compensation Bill to address a range of perceived difficulties. The details of the Bill are not yet available. It will, however, go some way to addressing one of the problems that arises when people believe they are at greater risk of being sued than is in fact the case. As the Better Regulation Taskforce of the United Kingdom indicated in its report on this matter, the perception itself affects behaviour in quite significant ways.
"The prospect of litigation for negligence may have positive effects in making organisations manage their risks better, but an exaggerated fear of litigation, regardless of fault can be debilitating. The fear of litigation can make organisations over cautious in their behaviour. Local communities and local authorities unnecessarily cancel events and ban activities which until recently would have been considered routine. Businesses may be in danger of becoming less innovative - and without innovation there will be no progress."
The report concluded that the "compensation culture is a myth, but the cost of this belief is very real"[24].
Risk averse behaviour is not always rational but it is very human. The British consideration of appropriate policy responses has been more deliberate than that which occurred in Australia during what was perceived to be a crisis requiring urgent attention. For that reason alone the Australian response may not be of great assistance. However, I should note that the Australian reaction was not as radical as that which has occurred in the Republic of Ireland, where all civil actions for personal injuries must now be referred for prior assessment by a Personal Injury Assessment Board. This requirement came into effect together with legislation altering almost all aspects of the procedure for pursuing compensation for personal injury[25].
There is an active debate in Australia as to whether or not the statutory changes have gone too far. Those changes occurred without a full appreciation of the extent to which judicial attitudes had already changed and were changing. A number of persons, including myself, have indicated that in various respects the statutory changes have gone too far.
This debate is to some degree fuelled by the modest reduction in premiums that has occurred to date, in contrast with the considerable increase in insurance company profits and their escalating share prices. There is now a flow of judgments interpreting the new legislation which include critical comment by judges about the anomalies and the injustices arising from the application of the statutes. Legal practitioners and their representative organisations have emphasised that many people with serious injuries are no longer able to receive any or adequate compensation. Insurance companies and their organisations have responded by highlighting the self-interest that some legal practitioners have in these observations. There is a distinct element of pots calling kettles black and vice versa in all of this.
In New South Wales a parliamentary committee is conducting an inquiry into the changes to personal injury compensation law both with respect to the general tort law reform and also the earlier changes to workers compensation and third party motor accident schemes. The changes in New South Wales went well beyond what has occurred in other States. That included significant changes that have no implication for insurance premiums paid by individual organisations or companies. The changes in New South Wales have fundamentally altered the ability of citizens to sue the government and its instrumentalities. These changes go well beyond anything that was recommended by the Ipp Report. New South Wales is virtually the only State to have gone so far in restricting the liability of government.
One of the matters that has been raised in the course of the parliamentary inquiry is the existence of significant differences amongst the different schemes. By reason of the political process in which different insurers have a seat at the table when determining what should be the government response in their particular cases, whether and to what degree an individual can recover for personal injury depends on who and where s/he is. Whether the injury occurred at work or at home? Whether it occurred in a car or in a car park? The existence of such inconsistencies is often criticised. A remaining concern is the determination of compensation for the long term of persons who suffer catastrophic injuries[26].
The insurance industry is, of course, particularly concerned with certainty, so that it can both price its products and make appropriate provisions. Nevertheless the speed, some would say haste, with which the changes were introduced in Australia was such that there are substantial pressures emerging for some changes to be reversed.
There are straws in the wind which would indicate that some reversal of the statutory intervention is likely. One plaintiff who succeeded in recovering damages from the Council responsible for Bondi Beach after diving into a sandbank was originally portrayed in a most unflattering light in media articles that proclaimed the death of the Australian way of life. When he was ultimately successful in the High Court a few years later, his victory was treated, in the same media, as a triumph for compassion. Australian law in this regard has not yet settled.
One lesson we must all learn from history is never to underestimate the ingenuity of the legal profession when faced with such dramatic changes to its customary practices. I am reminded of the attempt by the City of New York to control its burgeoning litigation bill by adopting a law to the effect that the City could not be sued for a defect in a road or sidewalk unless it had had fifteen days' notice of the specific defect. The plaintiff lawyers, or as, they call themselves, trial lawyers of New York City, established the BAPSPC, the Big Apple Pothole and Sidewalk Protection Committee. The function of this committee was to employ persons to continually tour the streets and footpaths of New York to note each and every blemish and, forthwith, to give the City of New York precise details of each defect. Regular reports cataloguing the notices which had been given to the City were available for sale to trial lawyers[27].
At any one time the total cost of curing the defects of which the city had been given notice was several billion dollars. Last year the Mayor of New York complained that in calendar year 2002 alone, the city received 5,200 maps from BAPSPC spotters which identified some 700,000 blemishes[28]. Needless to say the city has never successfully defended a case under the fifteen days' notice law. I am confident that Australian lawyers lose little by way of invidious comparison with their American cousins on the scale of creativity.
End notes
[1]This address repeats and develops themes in two earlier published addresses: Spigelman “Negligence: The Last Outpost of the Welfare State” (2002) 76 ALJ 432; Spigelman “Negligence and Insurance Premiums: Recent Changes in Australian Law” (2003) 11 Torts LJ 91. Both addresses are accessible on the NSW Supreme Court website www.lawlink.nsw.gov.au/sc under speeches.
[2] Australian Competitions and Consumer Commission, Public Liability and Professional Indemnity Insurance: Fifth Monitoring Report July 2005 ACCC, Canberra 2005 pp15, 30.
[3] Atiyah, The Damages Lottery (1997) Hart Publishing, Oxford, Chapters 2 and 3.
[4] Nagle v Rottnest Island Authority (1993) 177 CLR 423.
[5] Home Office v Dorset Yacht Co [1970] AC 1004.
[6] See Tomlinson v Congleton Borough Council [2004] 1 AC 46 esp at [44]-[46].
[7] See Kinzett v McCourt (1999) 46 NSWLR 32 at [97]; cf at [116].
[8] See Liftronic Pty Ltd v Unver (2001) 179 ALR 321; Derrick v Cheung (2001) 181 ALR 301; Agar v Hyde (2000) 201 CLR 552; Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254; Rosenberg v Percival (2001) 205 CLR 434; Ghantous v Hawkesbury Shire Council (2001) 206 CLR 512; Sullivan v Moody (2001) 207 CLR 562; Woods v Multi-Sport Holdings Pty Ltd (2002) 208 CLR 460; Graham Barclay Oysters Pty Ltd v Ryan (2003) 211 CLR 540; New South Wales v Lepore (2003) 212 CLR 511; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Cole v South Tweed Heads Rugby League Football Club Ltd (2004) 217 CLR 469; Koehler v Cerebos (Aust) Ltd [2005] 79 ALJR 845; Commissioner of Main Roads v Jones (2005) 79 ALJR 1104; Trustees of the Roman Catholic Church for the Diocese of Canberra and Goulburn (as St Anthony’s Primary School) v Hadba [2005] HCA 31; Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43; Van Der Sluice v Display Craft Pty Ltd [2002] NSWCA 204; Richmond Valley Council v Standing (2002) Aust Torts Rep 81-679; University of Wollongong v Mitchell (2003) Aust Torts Rep 81-708; New South Wales v Paige (2003) Aust Torts Rep 81-676; Newcastle City Council v Shortland Management Services (2003) 57 NSWLR 173; New South Wales v Godfrey & Godfrey (2004) Aust Torts Rep 81-741; Amaca Pty Ltd v New South Wales [2004] NSWCA 124; Wyong Shire Council v Vairy [2004] NSWCA 247; Boyded Industries Pty Ltd v Canuto [2004] NSWCA 256; Lake Macquarie City Council v Holt [2004] NSWCA 136; State of NSW v Finnan [2004] NSWCA 314; TAB Ltd v Atlis [2004] NSWCA 322; Parissis v Bourke [2004] NSWCA 373; Australian Capital Territory v Kitt [2004] NSWCA 444; TNT Australia Pty Ltd v Willis [2004] NSWCA 455; Spooner-Hart Prosthetics Pty Ltd v Jones [2005] NSWCA 2.
[9] Overseas Tank Ship (UK) Limited v Miller Steam Ship Co Pty Ltd [1967] 1 AC 617.
[10] Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47.
[11] I have advanced this proposition on a number of occasions, originally in my address Spigelman “Negligence: The Last Outpost of the Welfare State” supra esp at 441-442.
[12] Swain v Waverley Municipal Council (2005) 79 ALJR 249 at [79]-[81]; Koehler v Cerebos supra at [54].
[13] Mulligan v Coffs Harbour City Council; Varley v Wyong Shire Council [2004] HCA Trans 494.
[14] Caparo Industries plc v Dickman [1990] 2 AC 605.
[15] See Sullivan v Moody (2001) 207 CLR 562 at 579 [50]-[51]; Perre v Apand Pty Ltd (1999) 198 CLR 180 at 198 [27]-[28] and 254 [204], 302 [333], 326 [406]; Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at 597 [149], 624 [236]-[237].
[16] See e.g. Brodie v Singleton Shire Council (2001) 206 CLR 512 at 559 [102]; Graham Barclay Oysters supra at 598 [150]; Crimmins Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 24 [43]-[46], 42 [104], 61 [166], 82 [227], 104 [304], 116 [357]; Modbury Triangle supra at 260 [19]-[21], 270 [42]-[43], 292 [110]-[117]; Graham Barclay Oysters supra at 558 [20], 579 [90]-[95].
[17] See Perre v Apand supra at 194 [10]-[11], 220 [104]-[105], 225 [118]-[120], 228 [125]-[126], 229 [129], 259 [216]; Crimmins supra esp at 26 [51], 39 [93], 40 [100]-[104], 24 [44], 25 [46], 65 [233]; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 78 ALJR 628 at 23 and 80; Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43 at 49 [29]-[43].
[18] See Perre v Apand supra 253 [197]; Sullivan v Moody supra at 576 [42], 579 [50], 580 [53]-[55]; Tame v New South Wales (2002) 211 CLR 317 at 335 [28], 342 [58], 361 [123], 425 [323]; Graham Barclay Oysters supra at 574 [78]; New South Wales v Paige (2003) 60 NSWLR 371 at 390 [93]-[95]; New South Wales v Godfrey (2003) Aust Tort Rep s81-741 at [71]-[80]; Newcastle City Council v Shortland Management Services supra 189 [87]-[89]; Edwards v Attorney General (NSW) (2004) 60 NSWLR 667 at 671 [6]-[9]; Hunter Area Health Service v Presland [2005] NSWCA 33 at [20]-[21].
[19] See Hill v Chief Constable of West Yorkshire [1989] AC 53 at 63D; See also Crimmins supra at [29]; X v Bedfordshire County Council [1995] 2 AC 633 at 739E; Graham Barclay Oysters at 574 [78] and Crimmins supra at 77 [216], [292]. The cases summarised in Hunter Area Health Service v Presland supra at [20]-[21].
[20] See Sullivan v Moody supra at 580-581 [54]-[55]; Tame v NSW supra at 335 [28]; Newcastle City Council v Shortland supra at 189 [86]-[89.
[21] See Commonwealth of Australia Review of the Law of Negligence: Final Report September 2002 (The Ipp Report), www.revofneg.treasury.gov.au at 9.13 and cf Tame v New South Wales (2002) 211 CLR 317 esp at [16], [61], [109], [196], [273] and [366] and Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 77 ALJR 1205 at [98] and [119].
[22] See Spigelman “Negligence: The Last Outpost of the Welfare State” supra.
[23] See Better Regulation Taskforce Better Routes to Redress, London, May 2004, at p15.
[24] Ibid esp at p3.
[25] Personal Injuries Assessment Board Act 2003 and the Civil Liability and Courts Act 2004.
[26] See a recent proposal published by the NSW State Government Lifetime Care and Support for People with a Catastrophic Injury from a Motor Vehicle Accident Motor Accidents Authority of NSW, Sydney, 2005.
[27] The New Yorker April 21 and 28 2003 at p101. See also www.nystla.org.
[28] See www.nyc.gov/html/law/pressreleases/pr050602.pdf.
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