I. INTRODUCTION

3.1 In this Section we examine briefly four major systems for compensating accident victims in New South Wales. These are

• the common law negligence action, which requires proof of fault, but provides “full” compensation in the form of a once-and-for- all lump sum payment for pecuniary and non- pecuniary loss suffered by the victim or his or her family;
• the workers’ compensation system which provides no-fault compensation for pecuniary loss (with limited benefits for non-pecuniary loss) in the form of lump sum and periodic payments for most (but not all) work-related injuries and diseases;
• limited statutory schemes, which in New South Wales take the form of criminal injuries and sporting injuries schemes;
• the social security system which, although not usually regarded as a source of compensation, provides subsistence payments, usually through sickness benefits or the invalid pension to people incapacitated through injury who cannot support themselves.

3.2 The analysis in this Section is not exhaustive, but seeks to explain the major features of each system and to identify some of the more important policy questions we shall need to consider. A full investigation of the detailed workings of the workers’ compensation system, for example, would be a major undertaking in itself, requiring considerable resources. Nor does the depth of treatment necessarily reflect the significance of each system as a source of compensation for accident victims. In particular, it is likely that a survey of all persons suffering incapacity through injury would reveal that the principal source of compensation would be neither the common law action nor workers’ compensation but social security. The relatively brief description of social security is therefore not intended to suggest that we can or should ignore its role as a compensation system. The social security system is of course the Commonwealth’s responsibility, but we shall have to consider very carefully the relationship between any recommendations we make and the Commonwealth’s income maintenance program.

II. THE COMMON LAW NEGLIGENCE ACTION

A. Liability

1. THE FAULT PRINCIPLE

3.3 The negligence action emerged surprisingly late in the history of the common law. The early law applied a principle of “strict liability”, under which a person causing injury to another person was liable to compensate the injured person regardless of whether “fault” could be established. This principle apparently served well enough in a predominantly agricultural community in which entrepreneurial activities played little part. With the advent of industrialisation in the nineteenth century the modern tort of negligence, based on the moral precept of “no liability without fault”, replaced strict liability.

3.4 The conventional explanation for this development is that the new doctrine struck a balance between the conflicting demands of an expanding industrialised society. It was necessary both to encourage individual initiative, and to compensate individuals who sustained injury as the result of another person’s activities. Viewed in an historical perspective, the emergence of the modern negligence action restricted the liability of defendants rather than expanded it. The action could be justified on ethical grounds, since liability depended on a showing that the defendant had failed to exercise reasonable care, a matter which was within his or her own control. Liability could also be justified as a means of exacting retribution from a negligent defendant and as a device for deterring careless behaviour that might cause harm to others in the community.

3.5 The principle that emerged was that an injured plaintiff could recover damages only by establishing that the defendant owed him or her a duty of care and had caused the injury by a failure to take such care as was reasonable in the circumstances. This principle was formulated and applied before the use of motor vehicles had become almost universal in the community. It also pre-dated the widespread reliance on liability insurance which shifted the financial responsibility for compensation from the negligent defendant to insurers and, through them, to the community at large.

2. STATUTORY EXTENSION OF LIABILITY

3.6 In modern times, the main changes which have taken place in the compensation systems (outside social security and workers’ compensation)

“have all been directed towards extending entitlement to compensation as a result of fault, and towards trying to ensure that people so entitled do in fact receive their compensation.” ¹

In particular, legislation has removed defences or immunities available to defendants in cases of personal injury or death. Four examples illustrate the point. At common law, no action lay in respect of the death of a human being, so that the defendants of a person killed in an accident had no right to damages even where the accident was caused by another person’s negligence. This was changed in New South Wales by the legislation in 1847, now embodied in the Compensation to Relatives Act 1897. Secondly, the doctrine of “common employment” limited the liability of an employer to pay damages to an injured employee where the injury was caused by the negligence of a fellow employee. This common law defence was removed by the Workers’ Compensation Act 1926. Thirdly, until recently in New South Wales, the contributory negligence of the plaintiff afforded a complete defence in an action for damages, even though the defendants negligence was primarily responsible for the accident. This was changed by the Law Reform (Miscellaneous Provisions) Act 1965, which introduced a system of “apportionment of damages”. The Act allows damages to be awarded to a plaintiff who has been contributorily negligent, but requires the damages to be reduced in accordance with the court s assessment of the plaintiff s share of the responsibility for the loss sustained. Finally, the common law doctrine of “inter-spousal immunity”, prevented a person injured by the negligence of his or her spouse from suing that spouse for damages. The doctrine had the effect of preventing the injured spouse taking advantage of any liability insurance held by the negligent spouse. The immunity was abrogated by the Law Reform (Married Persons) Act 1964.

3. COMPULSORY INSURANCE

3.7 Another development of great significance to the operation of the common law negligence action was the introduction of compulsory third party insurance. A person injured in a road accident is now protected against the risk that the negligent person responsible for the accident will not have the resources to meet an award of damages. Compulsory third party motor vehicle insurance was introduced in New South Wales by the Motor Vehicles (Third Party Insurance) Act 1942. This requires all motor vehicle owners to insure with an insurer authorised to provide insurance against the liability of the owner or driver of the vehicle to a person (the “third party”) injured by reason of the use of the vehicle. The system guarantees that the defendant in personal injury litigation arising out of a motor vehicle accident will be insured. The legislation protects the plaintiff even where the defendant has failed to take out the required insurance.² It also provides for the case where the plaintiff is injured by an unidentified person, such as a hit-and-run driver. The solution has been to appoint a nominal defendant against whom proceedings may be taken where injury or death arises out of the use of a motor vehicle the identity of which cannot be established after due inquiry. Damages awarded to the plaintiff in such a case are paid from moneys provided by authorised insurers in New South Wales in proportions determined by the Commissioner for Motor Transport. In New South Wales insurance by employers against their common law liability to employees (as well as their liability to make workers’ compensation payments) is also compulsory. That insurance must provide coverage unlimited as to amount. ³

3.8 The introduction of compulsory insurance has had a profound impact on the conduct of negligence actions. The conduct of road accident personal injury litigation in New South Wales, for example, very largely revolves around the practices adopted by the Government Insurance Office of New South Wales (the “GIO”), the principal third party insurer, The road accident compensation system is, in effect, administered through a statutory authority, with the courts playing a limited role in the disposition of individual cases. From figures supplied to us by the GIO, it appears that only about 38% of personal injury claims arising out of road accidents are litigated, in the sense that legal proceedings are instituted. The litigated claims account for nearly 80% of the total amounts paid, but fewer than 10% of the litigated claims are decided by a court verdict. The remainder are settled before that stage, although in a significant proportion of cases settlement takes place at the door of the court. These figures support the view that road accident personal injury claims are in large measure processed outside the courts, albeit in accordance with criteria laid down in judicial decisions.

3.9 The common law negligence action, although profoundly influenced by compulsory third party motor vehicle and employers’ liability insurance, operates in areas other than road and work-related accidents. A common law action may lie wherever injury or death is caused as the result of negligence of a person other than the victim. Claims may be made, for example, in respect of injuries and death caused by medical malpractice, defective products and unsafe premises (occupiers’ liability). Of course defendants in such actions may have their own insurance - it would be uncommon, for example, for a hospital or doctor not to carry insurance to cover liability to patients for negligence. Nonetheless there may be cases in which the defendant in a common law negligence action is not insured. The principles applied by the courts in such cases do not vary from those where the defendant is insured. In practice, however, judges may be somewhat more reluctant to find an uninsured defendant liable, recognising that the defendant will be personally responsible for payment of the damages.

B. Damages

1. ASSESSMENT OF DAMAGES

3.10 In practice disputes more often relate to the assessment of the plaintiffs damages than to the question of whether the defendant was at fault. Common law damages take the form of a lump sum which is awarded “once and for all” to cover both past and future losses. The fundamental principles governing the assessment of damages in personal injury cases were recently restated by the High Court:

“In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff. Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it.” ⁴

2. RECENT CHANGES IN THE LAW OF ASSESSMENT OF DAMAGES

3.11 The interpretation of these apparently clear principles has recently been in a state of flux, partly because of the difficulties confronting the courts in dealing with the impact of future inflation on damages awards. For example Australian courts adopted divergent approaches to the problem of the “discount rate” until the matter was determined, at least temporarily, by an uneasy compromise in the High Court in December 1981. ⁵ (See para.2.7, above). But important changes have been made by the courts quite independently of the problem of inflation. In the landmark case of Griffiths v. Kerkemeyer, ⁶ for example, the High Court decided that where the plaintiff requires supportive services, such as home nursing care, he or she is entitled to recover the market value of those services even though they have been provided gratuitously by a family member or friend, or indeed have not been supplied at all.

3.12 The significance of the ruling in Griffiths v. Kerkemeyer is shown by two large damages awards made in New South Wales in 1981. In one case, the award of $2.66 million included compensation for services which were provided before, and were likely to be provided for some time after the trial by the plaintiffs mother. These were assessed at over $800,000. In another case, an award of $2.87 million included $49,741 in respect of past care provided by the plaintiffs mother and brother.⁷ The award also included $1.86 million in respect of future care, some of which might also be expected to be provided by the mother and brother.

3.13 The course of a South Australian case which found its way to the Privy Council ⁸ illustrates the extraordinarily fluid state of the recent law of damages. The trial judge in the case assessed damages in accordance with the established principle that the plaintiff s loss should be assessed on the basis of his net earnings after tax. Before the case reached the Full Court of the Supreme Court of South Australia the High Court of Australia had ruled that the plaintiff s loss should be calculated on his gross earnings. ⁹ By the time of the appeal to the Privy Council the High Court had overruled itself and restored the net earnings approach. ¹⁰ Moreover, between the trial and the appeal the practice relating to the award of interest for non-pecuniary loss had changed. ¹¹ This is perhaps indicative of the difficulties the courts have had in adjusting the law of damages to changing economic circumstances.

C. Criticism of the Common Law Action

3.14 A number of criticisms have been made of the common law negligence action. Some of these criticisms are directed at the philosophical justification for the fault principle, which underlies the action, and at the practical effects of the fault principle. Criticisms have also been made of the rules governing the assessment of damages in common law negligence actions.

1. THE FAULT PRINCIPLE

Background

3.15 Critical assessment of the common law negligence action, especially the fault principle, has a long history. As early as 1932 a Committee of Columbia University in New York proposed that persons injured in motor vehicle accidents should be entitled to compensation without the need to prove that another party had been negligent. ¹² In Australia the debate began in earnest in the 1960’s, prompted by official inquiries in New Zealand which had served to highlight deficiencies of the common law. ¹³ The argument against the fault system was put this way by Sir John Barry, a distinguished Victorian judge, in an article published in 1964:

“My opposition to litigation based on negligence... goes to fundamentals. As Professor J.G. Fleming has put it, the individualistic fault dogma of the 19th century has been replaced by the mid-twentieth century quest for social security, and the function of the law of torts is seen less in its admonitory value than in ensuring the compensation of accident victims and distributing the cost among those best able to bear it. Compensation of victims of highway collisions should not now be dealt with in litigation under the guise of an action between adversaries based on fault liability.” ¹⁴

3.16 The controversy came to a head with a vigorous attack on the common law by the Woodhouse Committee in 1974. The Committee recommended that the negligence action be replaced by a comprehensive and universal system of social insurance to cover incapacities arising from injury or illness. The scheme was not implemented, but the failure of the Woodhouse proposals did not end the debate. ¹⁵ The arguments on each side by now follow familiar paths, which we summarise below.

An “Indictment” of the Common Law

3.17 Professor Atiyah has presented an “indictment of the fault principle”, in which he specifies a number of counts that in his view, lead inexorably to a verdict of “guilty”. ¹⁶

Count 1: “The compensation payable bears no relation to the degree of fault”. Even the slightest degree of fault - a moment of inattention - may -reduce catastrophic losses for which the defendant is held responsible.

Count 2: “The compensation payable bears no relation to the means of the defendant”. In theory the defendant’s liability to pay damages operates independently of his or her capacity to pay. Indeed the fault system can operate only because of compulsory third party motor vehicle and employees insurance which ensures that the plaintiff will actually recover any damages awarded, at least where the injury occurs on the roads or at work.

Count 3: “The fault Principle is not a moral principle because a defendant may be negligent without being morally culpable and vice versa”. Negligence involves a failure to take reasonable care to avoid a reasonably foreseeable risk. This is an objective standard which may be breached even though the defendant was attempting to take due care and, in some cases, even though it was virtually impossible for the defendant to attain the standard which, after the event, is deemed reasonable.

Count 4: “The fault principle pays insufficient attention to the conduct or needs of the plaintiff’. Except for the question of contributory negligence, the conduct of the plaintiff is irrelevant. For example, a heroic person of limited means who is severely injured in a rescue attempt receives no damages unless he or she can show fault on someone’s part. Conversely someone whose conduct is selfish, and who has ample means to bear any loss sustained, recovers full damages if negligence can be shown.

Count 5: “Justice may require payment of compensation without fault”. There are many cases where the law recognises that compensation should be paid independently of fault For example, a person who innocently and without carelessness purchases stolen property will generally be liable to the true owner. Thus making the right to compensation dependent on fault is not a universal principle.

The Ascertainment of Fault

3.18 Other critics point to the practical consequences of the fault principle. One is the difficulty and cost of ascertaining fault in an individual case. ¹⁷ This often involves great problems of proof and the making of artificial judgments years after the relevant event Professor Luntz, a trenchant critic of the common law, uses the recent High Court case of Henderson v. Public Transport Commission,¹⁸ to illustrate what he sees as the futility of the current system.

“In [Henderson’s Case] the plaintiff, who had recently had a double cataract operation which left him with little peripheral vision, stepped off the kerb in Martin Place, Sydney, into the side of a bus. There was little dispute that if the driver of the bus was negligent, the plaintiff was contributorily negligent and that his damages should be reduced. Thus there was no question of him receiving “full compensation”. The question was whether he was to receive something less than that by way of damages, or nothing at all. This issue was resolved almost four years after the accident after a hearing in the Supreme Court (where the defendant was held liable and the plaintiff was awarded two-thirds of his damages), an appeal to the Court of Appeal (where the defendant succeeded) and a further appeal to the High Court (where, by a majority of three to two, the judgment of the trial judge was restored). The difference of opinion between the judges turned largely on how far the bus- driver travelled against an amber light as he crossed Martin Place. It is obvious that this fact can never be known with any degree of certainty. Yet it occupied the time of nine highly paid judges, their tipstaffs and other court officials and reporters, a number of expensively remunerated barristers, as well as solicitors, witnesses and others. Little wonder that the tort system costs so much to deliver such meagre benefits!... [T]he costs of the investigation into fault are manifestly huge, yet the benefits are undiscernible. How much longer will the community tolerate such a waste of its resources?” ¹⁹

The Fault System and Delays

3.19 The fault system is said by its critics to involve substantial delays which not only cause hardship to the injured persons, but positively discourage their rehabilitation. Any delays in resolving common law negligence actions are not entirely due to the fault principle. In contested cases delays are often occasioned by difficulties relating to the assessment of damages. Nonetheless, to the extent that delay is a problem, the fault system is an important contributing factor. Evidence of delay in road accident cases was provided by a survey conducted by the Woodhouse Committee of compulsory third party motor vehicle insurance files closed in 1972 and 1973. This showed, among other things, that nearly half the serious claims remained unresolved two years after the accident. Table 3.1 sets out the results for New South Wales.

Table 3.1: Compulsory Third Party Motor Vehicle Insurance: Percentage of Claimants Not Paid Within Period Shown

Period After Accident	No Permanent Effects	Permanent Disabilities(a)	All Cases
	%	%	%
1 Year	41	83	51
2 Years	20	49	27
3 Years	11	29	15
4 Years	11	21	13
5 Years	9	13	10

(a) Permanent disabilities include fatal, permanent total disability, permanent partial disability and permanent disfigurement cases.

Source: Woodhouse Report, Tables I, II

3.20 Recent information suggests that the position has not improved. In answer to a Parliamentary Question given in December 1981, the New South Wales Treasurer stated that the average period between accident and settlement for all claims handled by the GIO was 3.2 years. ²⁰ The answer pointed out that a ma-or factor in the delay was the need for the 3.2 years. plaintiff s injuries to stabilise so that a more accurate assessment of damages could be made. Where court action was initiated the delay between commencement of the action and final judgment was, on average, 20 months in the District Court and 3 years in the Supreme Court.

Incomplete Coverage

3.21 A major criticism related to the fault principle is the incomplete coverage provided by the common law negligence action, even taking into account the additional compensation provided by workers’ compensation and other statutory schemes. There is very little reliable information in Australia on the proportion of accident victims recovering compensation under the common law. The General Manager of the NRMA Insurance Ltd. estimated to the Woodhouse Committee that about 64% of all road accident victims could demonstrate fault and therefore appeared to have a right to damages in a common law negligence action. ²¹ If this figure is correct it indicates that over one third of road accident victims have no common law claim and thus, unless they are covered by workers’ compensation arrangements, receive no compensation other than any private insurance payments or social security benefits. Where injuries occur otherwise than at work or on the roads, there is little likelihood of the plaintiff successfully bringing common law proceedings. ²² As the material in Section 4 (paras.4.3 3-4.35) indicates, a substantial proportion of all accidents occur otherwise than at work or on the roads. This proportion includes a large number of tragic accidents resulting in catastrophic injury. In addition, the principles of contributory negligence serve to reduce the awards (or settlements) made in many personal injury cases, reinforcing the incompleteness of the common law negligence action as a compensation mechanism.

Legal and Administrative Costs

3.22 The expense associated with compensation through the common law negligence action, including legal and administrative costs, has prompted further criticism. This question is discussed in Section 4 (paras.4.19-4.23).

2. ASSESSMENT OF DAMAGES

3.23 Apart from the fault principle, the common law is criticised on the ground that the “once-and-for-all” assessment of damages is unsatisfactory. The once-and-for-all principle is criticised on three major grounds:

• the difficulty involved in accurately estimating future economic loss;
• the lump sum award need not be used by the plaintiff to provide for medical treatment or future support;
• even very large lump sum awards may later prove to be inadequate.

Uncertainty of Assessment

3.24 The first criticism is that, where the plaintiff is seriously injured, the assessment of compensation for future economic loss (principally reduced earning capacity and future medical, hospital and nursing expenses) necessarily involves considerable uncertainty and guesswork, often leading to injustice. If, for example, the estimate of a plaintiff s life expectancy is too low, the award is bound to be inadequate. If the plaintiff dies unexpectedly soon after settlement of the claim, the beneficiaries of his or her estate may receive an unjustifiable windfall from the compensation paid. The problems are particularly acute where the courts have to consider the impact of future inflation and levels of taxation, neither of which can be predicted with confidence. As has been seen (paras.2.6-2.10), the courts have begun to despair of making accurate assessments of the plaintiffs loss and to urge Parliament to examine the question.

Use of Award by Plaintiff

3.25 A second criticism is that the law does not oblige a plaintiff to apply the lump sum award for the purposes used as the basis for calculating the award. If the plaintiff dissipates the amount awarded by the court, or fails to invest so as to protect the award adequately against inflation, the community will be required to provide support through the social security system. The award of a lump sum is, therefore, no guarantee that a seriously disabled plaintiff will act prudently so as to ensure that the sum awarded is put to the best use.

Inadequacy of Lump Sum Awards

3.26 Thirdly, it is argued that the common law system does not provide adequate compensation for seriously injured plaintiffs, despite the apparently huge awards of recent times. Only a small proportion of common law claims are litigated to finality. The vast majority are settled and in most of these it is fair to assume that the plaintiff accepts some discount to avoid the vagaries of litigation, whether in relation to disputed liability or doubts on the assessment of damages. Such plaintiffs will therefore receive something less than “full damages”. Even where full damages are awarded after a hearing it is contended that the award often turns out to be seriously inadequate because of the ravages of inflation which cannot be avoided notwithstanding prudent investment. A case often cited is Thurston v. Todd ²³ in which a then record award of £69,000 was made in 1965 to a young plaintiff who had become a quadriplegic in a motor accident. Despite prudent investment of the whole award, by 1973 the gross income was less than the cost of nursing expenses alone even with the plaintiff’s mother providing unpaid care for seven hours each day. ²⁴ Undoubtedly it would not be difficult to select other more recent, cases where apparently large awards could be shown to be insufficent, particularly in relation to medical, hospital and nursing expenses which have risen far more rapidly than prices general. ²⁵ The Woodhouse Committee argued that its proposals for periodic earnings-related payments would provide seriously injured plaintiffs with fuller compensation than lump sum awards. ²⁶

D. Support for the Common Law Negligence Action

1. BACKGROUND

3.27 Despite sustained criticism of the common law, the system retains strong support from some sections of the community. This support is not now usually put on the basis that the common law should survive untouched and unsupplemented by any other schemes for accident victims. The more recent tendency has been to argue that the common law should be preserved, perhaps with some modifications to the principles governing the assessment of damages, but ²⁷ should be supplemented by no-fault schemes for road accident victims. For example, a study published in 1972 by the Victorian Bar Council and the Law Institute of Victoria expressed support for a no-fault scheme for road accident victims to operate alongside the common law. The study acknowledged that “if the tort [common law] system is viewed as a social system of compensation it has... very grave defects”. ²⁸ It argued, however, that this was not the proper approach, since the scheme had to be compared with practicable alternatives. A comprehensive no-fault compensation scheme was not feasible and any financially viable no-fault scheme could not satisfy the purposes served by the common law. The study therefore urged retention of the common law.

2. THE GROUNDS FOR SUPPORT

The Acceptability of the Fault Principle

3.28 The fault principle underlying the common law negligence action tends to receive support on the ground that ordinary people understand and accept the principle that a defendant whose conduct has been negligent should be required to pay full compensation to the plaintiff. It is argued that to make liability dependent on a showing of fault has a moral basis, even though liability insurance is compulsory in some fields and widespread in others. The common law is said to rest on the simple and well-accepted principle that a person

“who has been guilty of wrong behaviour injuring another, should be made to repair the injury, so that the loss does not rest upon the innocent party.... [T]he law is not really concerned with whether the payment made by the offender comes out of his own pocket [or from insurance].” ²⁹

On this view the fact that compensation is actually paid by the defendant’s insurer is not inconsistent with philosophy underlying the fault principle, but merely ensures that the injured person receives fruits of a judgment and that the defendant is not subjected to financial disaster.

Deterrence

3.29 It is also argued that, notwithstanding liability insurance, the common law is still capable of serving a deterrent function. This is particularly so in relation to industrial accidents, where common law negligence actions may expose unsafe working practices and encourage the development of safer systems of work and more effective accident prevention programs. The deterrent function of the law could be given effect, it is said, by the adjustment of premiums to reflect more accurately the claims records of individuals and companies taking out insurance.

Individual Assessment of Loss

3.30 The proponents of the common law stress that it is the only system which attempts to assess compensation not according to a prescribed formula, but on an individual basis taking into account the special circumstances and needs of the plaintiff. In a recent comment the Chairman of the Accident Compensation Committee of the Law Council of Australia referred with approval to the conclusion of the Pearson Commission in the United Kingdom that the common law negligence action should be retained, even where particular injuries were covered by a no- fault scheme. ³⁰ He emphasised that the Pearson Commission had not been convinced that the social security system could provide compensation for certain heads of damage, such as pain and suffering or prospects of promotion, so as to take account of individual circumstances. A majority of the Commission thought it “not unreasonable that high income earners should be free to pursue full reparation” at common law. ³¹ The Commission argued that the primary emphasis in compensation arrangements should move from the common law action to social security, so that “the function of [the common law action] would become that of supplementing the no-fault compensation already provided by the state”. ³²

The Decision-Making Process

3.31 Proponents of the common law negligence action contend that claimants should be given the opportunity of having a court, rather than an administrative body, determine the appropriate level of compensation. Court proceedings are open to public scrutiny and their decisions are subject to review by appellate courts. By contrast, it is argued, an administrative system for the payment of benefits to accident victims would be less responsible to public criticisms and more vulnerable to political control. In particular, the level of benefits would be more likely to be influenced by government economic policy and financial stringencies affecting the public sector.

Lump Sum Awards

3.32 The lump sum damages award also attracts support on several grounds. A once-and-for-all damages award disposes of a claim and promotes finality in litigation. This saves costs and permits insurers to close the file on a case. The knowledge that the court will make an order for a lump sum payment is said to act as an incentive to settlement of the claim. Once the claim is finalised, the plaintiff is relieved of the continuing uncertainty of litigation. According to many, this promotes rehabilitation in contrast to a system which provides regular payments so long as the claimant is unable to resume work. The award of a lump sum gives the plaintiff a choice as to how he or she will utilise the compensation payments and therefore affords an opportunity to make the best financial adjustment to his or her new situation. ³³

III. WORKERS’ COMPENSATION

A. Introduction

3.33 Until the late nineteenth century, it was almost impossible for the victim of an industrial accident to receive compensation from his employer. Under the common law the worker could recover compensation only by showing that the injury had been caused by the fault of some other person. But even if the worker could establish that the employer, or a fellow worker, had been negligent, the courts developed three defences to protect the employer. This “unholy trinity” of defences comprised the doctrine of common employment (para.3.6 above), contributory negligence (which protected the employer if a worker was even partly responsible for his or her own injury) and the doctrine of volenti non fit injuria (which prevented the worker succeeding if the injuries were caused by risks inherent in the work). The growth of unionism and public concern about the plight of injured workers led to the enactment of the Workers’ Compensation Act 1897 in England. This was designed to provide limited compensation to injured workers independently of proof of fault. Soon after, the legislation spread to Australia, with the first New South Wales Workers’ Compensation Act being passed in 1910. The current legislation is contained in the Workers’ Compensation Act 1926. ³⁴ In the following paragraphs we briefly describe the operation of the workers’ compensation. system and some of the more important criticisms made of the system. The analysis is not intended to be exhaustive.

B. The Present Scheme

1. BASIC PRINCIPLES

3.34 The workers’ compensation system differs from the common law in three important respects.

• First, compensation is paid regardless of fault. One effect of this principle is that the costs of the injury are transferred from the worker to the employer and, through insurance, to the rest of the community. It is now compulsory for employers to insure against their liability to compensate injured workers under the Workers’ Compensation Act.
• Secondly, unlike the common law, workers’ compensation benefits are not designed to provide “full” compensation tailored to the needs and circumstances of the particular plaintiff. Benefits are paid by reference to statutory formulae and do not necessarily restore the victim to the position he or she would have enjoyed had the accident not occurred.
• Thirdly, the workers’ compensation system provides benefits in the form of periodic payments, although provision is made for lump sum payments in the case of death or for specified injuries. In some cases the worker may redeem his or her right to periodic payments for a single lump sum payment

2. COVERAGE OF THE SCHEME

3.35 Broadly speaking, the Workers’ Compensation Act 1926 provides for benefits to workers suffering work-related injuries, or to the families of workers who are killed in work-related accidents. This apparently simple statement requires explanation in the light of the complex and heavily amended legislation.

3.36 First the claim must be in respect of a “worker” as defined in the Act (s.7). In general only employees are entitled to compensation, leaving self-employed persons unprotected by the legislation (although of course they may have rights to recover damages in common law negligence actions). However, the Act does extend to some categories of “independent contractors” and others who would normally fall outside the definition of “worker”. In New South Wales these extensions are relatively generous, but by no means comprehensive.

3.37 Secondly, the worker must have received a “personal injury arising out of or in the course of employment”(s.6(1)). The legislation originally required that the injury arise “out of and in the course of” the worker’s employment, a phrase that is said to have provoked more litigation than any other on the statute-book.³⁵ The current phrase is hardly unambiguous, but is more generous to the worker. The legislation also extends coverage to journeys between the worker’s residence and place of employment and to temporary absences from the place of employment during normal breaks in work (s.7).

3.38 Thirdly, the definition of “injury” includes a disease contracted by the worker in the course of his or her employment and to which the employment was a contributory factor. It also includes the aggravation or deterioration of a disease to which the employment was a contributing factor (s.6(1)). This is an important extension of coverage, since modern industrial processes are often deleterious to health, particularly where there is long-term exposure to toxic chemicals or other harmful substances.

3.39 Despite the legislative extensions, the coverage provided by the Act is limited. Workers injured outside working hours or work-related journeys, and most self-employed people, are not entitled to workers’ compensation. As commentators frequently point out, this leads to anomalies. ³⁶ For example, two people may be injured in an explosion at a factory. The first, an employee, is entitled to workers’ compensation; the second, seeking employment at the factory, is not. Again, two people may be injured while working in adjoining market gardens. The first, an employee, is covered; the second, a self-employed person conducting his or her own business, is not.

3. COMPENSATION PAYABLE

3.40 In general, the Workers’ Compensation Act 1926 provides for three different kinds of compensation:

• weekly (or other periodic) payments;
• lump sums; and
• payment of medical, hospital, rehabilitation and related expenses.

The kind of payment made, and the amount of the payment may vary according to the nature and consequences of the injury.

Total Incapacity - Periodic Payments

3.41 Where the worker is totally disabled, either temporarily or permanently, he or she is entitled to receive compensation for loss of wages at the relevant award rate for up to twenty-six weeks (s.9(1)(a)). This does not necessarily amount to full compensation for loss of earnings, since the worker’s earnings may have exceeded the award rate. Indeed, the legislation specifically provides that over-award payments, and payments in respect of over-time and shift work are to be disregarded in assessing the amount of compensation payable. After the twenty-six week period, the worker is entitled to a periodic sum, determined in accordance with a formula, subject to maximum and minimum limits specified in the legislation. The statutory formula makes allowance for a dependent spouse and dependent children. The total weekly payment may not exceed the workers’ current weekly wage rate (s.9(1) (a), (2)). Where the worker is permanently disabled, periodic payments continue until death, even though wages would not normally have been earned after retiring age. Where the worker’s incapacity is temporary, periodic payments continue until recovery. Unlike some other Australian jurisdictions there is no maximum dollar limit on the total amount of periodic payments to an injured worker.

3.42 Table 3.2 sets out the periodic payments available in New South Wales to totally incapacitated workers. It should be noted that since 1978 weekly benefits and death benefits (see para.3.47, below) have been indexed twice yearly by reference to increases in the average minimum weekly wage (s.9A). For comparative purposes the Table includes similar benefits provided by workers’ compensation legislation in Victoria.

Lump Sum Awards for Specified Injures

3.43 In addition to periodic payments, the worker is entitled to a lump sum as compensation for any injury specified in a statutory table (s.16). Examples of these lump sum payments are:

loss of either arm	24,100
loss of sight of both eyes	31,000
loss of sight of one eye	12,850
loss of hearing of both ears	18,950
severe facial disfigurement	7,900
loss of a forefinger	5,950

The table has been criticised, mainly on the ground that it is excessively rigid and does not take account of the particular circumstances of the injured worker. Injuries which may have serious effects on the employability of some people are not covered at all. Yet other injuries, which may have no effect on the earning capacity of workers in certain occupations, are covered and entitle the injured worker to compensation regardless of whether any financial loss is sustained.

Medical and Other Expenses

3.44 The Act requires the employer to pay medical, hospital, ambulance and rehabilitation expenses incurred by a worker as a result of a compensable injury (s.10). The Act fixes maximum amounts for which the employer will be liable, but the worker may apply to the Workers’ Compensation Commission (see para.3.57, below) for higher payments. In practice, where liability is not in dispute, insurers tend to pay the higher amounts without reference to the Commission on the basis that if an application is later made, credit will be allowed to the insurer for the higher payments. The rate of payment for hospital services is fixed by regulation on the recommendation of the Health Commission. The legal position is that a worker who is entitled to payment of medical and related expenses under workers’ compensation legislation is not entitled to reimbursement for those expenses from health funds.³⁷

	NEW SOUTH WALES
First 26 weeks of total incapacity	Worker's current weekly wage rate is fixed by award (not including shift work, overtime etc). Other provisions apply if there is no award.
	Basic Weekly Payment for Worker	Each Dependent Child	Dependent Spouse	Maximum Payment for One Week	Limit of Aggregate Payments
After 26 weeks of total incapacity	$120.60 or 90% of workers' average weekly earnings over previous 12 months, whichever is less, with adult minimum of $95.90	$13.80 for child under 16, or full-time student under 21.	$27.60	Total weekly amount not to exceed worker's current weekly wage rate.	No time limit.
(Indexed twice a year)	If worker under 21 earns less than $87.20, then not more than 100% of average weekly earnings, up to a Maximum of $78.50				No limit as to total amount.
	VICTORIA
Any period of total incapacity	$130.00 adult worker $96.00 worker under 21	$12.00 for child under 16, or full-time student under 21	$37.00	$193.00 adult worker, $167.00 worker under 21, or worker's average weekly earnings (including overtime payments), whichever is least	$45,802 in weekly payments, with discretion in Board to continue weekly paymenys beyond this sum

Partial Incapacity

3.45 Compensation for partial incapacity, whether temporary or permanent, is available on broadly the same basis as compensation for total incapacity (s.9). The employer is liable to pay medical and related expenses and a lump sum may be payable if the worker has suffered an injury specified in the statutory table. Where a worker is partially incapacitated the periodic sum payable cannot exceed the difference between the amount the worker would have received had the injury not occurred and the average amount the worker can now earn in suitable employment (s.11(1)(a)).

3.46 In some cases partial incapacity for work may be treated as total incapacity. This may occur, for example, where the worker has attempted to obtain suitable employment, but has failed to do so because of the injury (s.12). In an attempt to encourage the rehabilitation of injured workers, the Act also requires employers to provide suitable employment for the worker during a period of partial incapacity. If the employer fails to do so, the worker is to be compensated as if the incapacity is total, unless other suitable employment is arranged by the insurer (s.11(2)). It is argued by some that this provision, far from encouraging rehabilitation, may discourage it by allowing a partially incapacitated worker to be treated as totally incapacitated and thus to receive higher compensation payments.

Death Benefits

3.47 Where the injury results in death, the Act provides for a lump sum, currently $47,150 to be paid to the dependent widow or widower (including a de facto spouse) of the deceased worker (s.8). In addition, periodic payments, currently $23.60 per week, are made for the dependent children of the worker, until they reach 16 years or, if they are students, 21 years. Provision is also made for a reduced lump sum, up to $13,250, to be paid to the family of a worker under 21 without dependents and for medical and funeral expenses to be paid where the worker is an adult without dependents. Lump sum death benefits like periodic payments, are automatically adjusted twice yearly.

4. WORKERS’ COMPENSATION AND COMMON LAW ACTIONS

3.48 A worker who is entitled to workers’ compensation may also claim common law damages from his employer, or from a third party who has negligently caused the injury. The Workers’ Compensation Act preserves the workers’ common law rights but contains provisions preventing the worker from recovering double compensation for the same injury (s.63). For example, where the worker recovers common law damages from an employer, the damages are reduced by the amount of workers’ compensation already paid by the employees insurer to the worker.

3.49 The dual system of compensation has obvious unsatisfactory features. A common law claim may take many years to resolve and is not determined by the Workers’ Compensation Commission, but by the ordinary courts. If the employer disputes liability to pay workers’ compensation or raises doubts about the extent of the worker’s incapacity, the contested workers’ compensation claim may have to be determined by the Commission in the meantime. Thus, the question whether compensation should be paid for a particular injury must be considered by two separate court systems on two separate occasions. This involves the legal representatives of the employer and the worker in two distinct actions, as well as the attendance of medical and other expert witnesses. Such a system has been criticised by judges, among others, as inefficient, costly and productive of delay. ³⁸

5. REDEMPTIONS

3.50 It is not always appreciated that lump sum payments, apart from those for injuries specified in the legislation, play an important part in the workers’ compensation system. This is because the Workers’ Compensation Act allows an employer, with the consent of the worker and subject to the approval of the Commission, to pay a lump sum in lieu of the whole or part of any liability to make weekly payments or to meet the worker’s medical and related expenses. This procedure is known as redemption. In addition, the redemption may, by agreement, terminate the worker’s entitlement to take common law proceedings claiming damages for personal injuries. Redemption applications are scrutinised carefully and their approval is by no means automatic.

3.51 An application for redemption may be made while a worker is receiving weekly payments or as settlement of a disputed claim. The records indicate that in 1981, 250 orders, involving payment of $10 million were made for the redemption of existing awards to totally or partially incapacitated workers. However, 3,407 orders, totalling $92 million, were made for the redemption of claims where no award for periodic payments had been made. ³⁹ The second category includes cases where the worker was receiving regular payments from an insurer without any formal award being in existence. It should not be inferred from the figures, therefore, that most redemptions are made in disputed cases. The recent tendency has been for lump sum redemptions to increase. In 1974, 9.8% of the total amount of workers’ compensation payments was paid in lump sum redemptions. By 1980 this had increased to 21.3 %. ⁴⁰ The increasing popularity of redemptions presumably reflects their advantages for insurers and workers. A redemption allows the insurer to finalise a claim and may also permit the insurer to gain some assistance from the Insurers’ Contribution Fund (para.3.56 below) in meeting the lump sum payment. The worker receives immediate payment of a lump sum which will not be reduced if he or she happens to resume employment earlier than expected. The worker may be able to receive the lump sum without prejudicing his or her future entitlement to social security pensions or benefits, depending on the purposes to which the sum is applied. Moreover, practices have grown up in New South Wales, as in other States, which make redemption especially attractive in certain situations. Approvals of redemption applications may be made in a way which has the practical effect of allowing the worker to escape or, at least, to moderate the statutory obligation to repay sickness benefits received from the Commonwealth pending determination of the workers’ compensation claim (see para.3.87, below). The major danger of redemptions is that a worker may sacrifice long-term security for short-term gain and be left without resources, other than social security, if the amount turns out to be inadequate or the incapacity is more serious than anticipated.

6. INSURANCE ARRANGEMENTS

Compulsory Insurance

3.52 The workers’ compensation system in New South Wales is based on a system of compulsory insurance. All employers are required to insure with a licensed insurer for the full amount of their liability to pay workers’ compensation and common law damages (s. 18(1)). An exception is made for employers which the Workers’ Compensation Commission has licensed as self-insurers, on the basis that they have the financial capacity to meet any claims under the Act. The Commission issues guidelines for insurers seeking licences and may terminate or suspend a licence after it has been granted. At present 67 insurers are licensed to carry on workers’ compensation business in New South Wales and 42 employers are licensed self-insurers.

3.53 The compulsory insurance requirement is designed to ensure that no injured worker is prejudiced by the inability of an employer to meet claims. This goal is further advanced by an uninsured liability scheme operated by the Commission (s.18C). This meets awards of compensation made against uninsured employers and is financed from the funds of the Workers’ Compensation Commission.

Multiple Insurers

3.54 The involvement of a large number of private insurers in the workers’ compensation system has been criticised on two main ground s. ⁴¹ First, it is argued that workers’ compensation is basically a social welfare system, intended to compensate injured workers and spread the cost throughout the community. Where a large number of private insurers are involved there may be little incentive for individual companies to encourage employers to adopt more stringent safety precautions or to support actively the rehabilitation of injured workers. No insurer has any guarantee that it will retain the business of particular employers and therefore insurers find it difficult to justify the allocation of resources for the purpose of improving safety and rehabilitation standards. Current conditions in the insurance industry make it difficult to adjust premiums according to the employees individual safety record. In New South Wales, as elsewhere, premiums are weighted according to occupational risk, but fierce competition for business among insurers has usually prevented the introduction of merit and penalty rates by reference to the specific claims record of the individual employer.

3.55 It has also been suggested that the multi-insurer system is less efficient and more costly than one administered by a single insurer. A South Australian Committee, for example, concluded that the centrally administered, single-insurer scheme operating in Queensland was considerably cheaper than the multi-insurer system. ⁴²

Insurers’ Contribution Fund

3.56 As we have mentioned, both periodic and some lump sum payments are indexed by reference to rises in average minimum weekly wage rates. Other benefits have been regularly increased. Increases in the compensation payable have traditionally compounded the problems facing insurers seeking to make adequate provision for outstanding claims. The Insurers’ Contribution Fund was introduced in 1975 to assist insurers confronting these difficulties. Where a worker was injured before statutory increases in the level of benefits came into force, payments from the Fund are made to the insurer to make up the difference between the amount of compensation currently payable and that which would have been payable had the benefit levels not been increased (s.30K). The Fund is designed to cushion insurers against part of the increased cost of past claims by spreading the burden among all licensed insurers and self-insurers. It is made up of contributions levied on licensed insurers and self-insurers and is administered by the GIO. The position is now that

“there is no longer an obligation on licensed insurers to create and maintain reserves in respect of compensation payments recoverable from the Insurers’ Contribution Fund.” ⁴³

7. WORKERS’ COMPENSATION COMMISSION

3.57 The Workers’ Compensation Commission comprises a Chairman and twelve members having the status and rights of District Court judges. It has a dual role, performing both judicial and administrative functions. It has exclusive jurisdiction to “examine into, hear and determine all matters and questions arising under the Act” (s.36). These matters include, for example, determining whether a worker has suffered a compensable injury, establishing the degree of incapacity and deciding the amount of compensation the worker is entitled to receive. In addition, the Commission has administrative functions. Among other things, it licenses insurers and self-insurers, reviews existing licences, administers the uninsured liability scheme, compiles statistics on the extent of accidental injury and the operation or the workers’ compensation scheme, deals with breaches by employers and insurers under the Act and, since 1974, assists in the rehabilitation of injured workers. Concern has been expressed at the combination of judicial and administrative functions vested in the Commission. It can be argued, for example, that there is an apparent conflict of interest if the Commission rules on matters it has set in train in the discharge of its administrative functions. A Working Party has reported to the Attorney General on the possibility of separating the Commission’s judicial and administrative functions. The separation would entail significant changes to the structure of the Commission, but would not necessarily affect other aspects of the workers’ compensation system.

3.58 The operations of the Commission are financed from a statutory fund, the great bulk of which is made up of annual levies imposed by the Commission on insurers and self-insurers (s.44). In 1980-1981 the income of the fund amounted to $8.9 million of which $7.5 million was derived from contributions by insurers and self-insurers.

C. Criticism of the Workers’ Compensation System

1. INTRODUCTION

3.59 Debate about the workers’ compensation system has not generally followed the same lines as discussion about the common law. It has long been argued by some commentators that the common law should be abolished, either in whole or in part, and replaced by other compensation systems. From an historical perspective the workers’ compensation system was designed to remedy one of the major deficiencies of the common law, by providing no-fault compensation for workers injured in the course of their employment. Few commentators in official inquiries have sought to argue that the workers’ compensation system should be abolished, except for the proponents of comprehensive compensation schemes such as the Woodhouse Committee in Australia. There have been many official inquiries into the workers’ compensation system in Australia,⁴⁴ but they have been concerned with recommending improvements to the established framework.

3.60 We refer here very briefly to some of the major criticisms of the workers’ compensation system. These include:

• incomplete coverage of injured workers;
• high, costs of administration;
• insufficiently generous benefits;
• delays in determining claims;
• excessive reliance on adversary procedures;
• insufficient emphasis on rehabilitation.

We do not suggest that these criticisms are necessarily well-founded, nor that any specific changes should be made to the workers’ compensation system.

2. CRITICISMS

Incomplete Coverage

3.61 Reference has been made to the fact that the workers’ compensation system, despite relatively generous extensions, does not protect all members of the community from the consequences of work-related accidents or diseases (paras.3.35-3.39, above). Even to the extent that the system aims to protect all workers, coverage is incomplete.

Costs of Administering the System

3.62 Various estimates have been made of the administrative costs of the workers’ compensation system. A common criticism is that, even though an injured worker is not required to prove that the employer was at fault to recover compensation, the total costs of the system, including legal investigative and administrative expenses of paying benefits to injured workers are high. The question of cost is referred to in Section 4 (para.4.32).

Adequacy of Benefits

3.63 As has been explained, the system provides relatively generous benefits for workers suffering short-term incapacity, but much less generous benefits for long-term disablement or death. The policy of making lump sum payments for scheduled injuries has been questioned, as has the wisdom of permitting injured workers to redeem for a lump sum their entitlement to periodic payments and to payment of medical and related expenses.

Delays

3.64 The vast majority of claims for workers’ compensation are paid without dispute and without the Workers’ Compensation Commission making a determination. In each of the last three years well over 200,000 new compensation cases have been reported to the Commission. By comparison, in 1981, only 11,800 applications for determination were made to the Commission. ⁴⁵ Nonetheless the disputed claims tend to be the more serious cases and there is evidence that considerable delays occur in the resolution of some disputed cases. ⁴⁶

Adversary Procedures

3.65 The workers’ compensation system is basically conducted on adversary lines, with the worker being required to prove his entitlement and the insurer having the right to investigate the claim fully and test it vigorously in litigation. This leads to criticism that resources are devoted to investigation of the claim, and to the conduct of adversarial litigation, rather than to the treatment and rehabilitation of the worker or the promotion of safety. The hearing of a disputed claim involves two sets of legal representatives, and medical experts as well as other witnesses and the time of the Commission. Critics contend that the unfamiliar procedures are often frightening to workers and difficult to understand. They suggest that cases sometimes arise where the proceedings are not satisfactorily explained and settlements reached without the claimant understanding their effect. ⁴⁷ We make no judgment on these contentions at this stage; it will be necessary to conduct our own investigations.

Rehabilitation

3.66 Although the Workers’ Compensation Commission conducts a rehabilitation service for injured workers, it is often claimed that the workers’ compensation system as a whole actually delays or prevents rehabilitation. During the period leading up to determination of a disputed claim, for example, the worker is usually required to attend for medical examinations by his own doctor and the insurer’s doctor. These examinations are not for the purpose of treating the injured worker, but to assist in substantiating or resisting the claim. One commentator has said that it

“is not surprising that as a result of the constant repetition of his symptoms to one doctor after another, each with an impressive set of initials after his name, the worker develops what is called ‘a functional overlay’, a psychological condition for which no organic cause can be ascribed.” ⁴⁸

On this view, the workers’ compensation system tends to prolong the worker’s disability and to act as a disincentive to rehabilitation. ⁴⁹

IV. CRIMINAL INJURIES COMPENSATION SCHEME

A. Background

3.67 Injuries deliberately inflicted in the course of criminal conduct are not usually regarded as “accidents”. Yet from the victim’s point of view, they are “unlooked-for mishaps”, capable of being described for legal purposes as “injuries suffered by accident”. ⁵⁰ Criminal injuries schemes operate in all Australian States, including New South Wales where the major statutory scheme was established by the Criminal Injuries Compensation Act 1967. The Australian Law Reform Commission, after a detailed review of the State schemes, has recommended the establishment of a Commonwealth scheme for victims of crimes committed either against Commonwealth law or in the Australian Capital Territory. ⁵¹

3.68 The Australian Law Reform Commission canvasses in its Report the arguments for establishing special compensation schemes for victims of violent crime. ⁵² The main argument in support of such schemes is that since the State assumes responsibility for the protection of the citizen, it should accept responsibility for compensating the victim where protection proves inadequate to prevent violence. Moreover, all citizens bear the cost of crime control measures. When those measures fail it can be argued that it is unjust that the innocent victim, who has already suffered injury, should be penalised further by having to suffer the financial consequences of the injury. It is also suggested that a criminal injuries compensation scheme aids crime prevention, by making it more likely that citizens will be prepared to assist potential victims and the police, since they will be compensated if injured. The existence of such schemes throughout Australia indicates that legislatures have considered that these arguments justify the cost of providing at least some compensation to victims of crime, although none of the schemes affords full compensation to seriously injured victims.

B. The Statutory Scheme in New South Wales

3.69 Since 1900 courts in New South Wales have had power under the Crimes Act to order a convicted offender to pay compensation to any “aggrieved person” for personal injury (which includes pregnancy, mental and nervous shock) and property loss caused by commission of the offence. ⁵³ In 1979, the class of “aggrieved persons” in whose favour an order may be made was extended to the family (including a de facto spouse) of a person who died as the result of the offence. The maximum amount for which compensation can be awarded is at present $10,000, although the Government has announced its intention to increase the limit to $20,000. The statutory language is rather confusing, but has been interpreted to mean that the maximum limit of $10,000 applies where the offender is convicted of a felony or misdemeanour by a judge or magistrate. ⁵⁴ A separate section authorizes a court of summary jurisdiction to award up to $1,000 in compensation to an “aggrieved person”. On the authorities, this section appears to be relevant only where the offender is convicted of an offence other than one punishable under the Crimes Act 1900. In determining whether to make an award the judge or magistrate is to have regard to any behaviour of the “aggrieved person” which contributed to the injury and to such other circumstances considered relevant.

3.70 Standing alone, the provisions of the Crimes Act would be of little value, since few convicted offenders have the means to satisfy orders for compensation. The Criminal Injuries Compensation Act 1967, which has provided a model for legislation in three other States, establishes a scheme whereby a victim of violent crime may be compensated by the State. Where an “aggrieved person” (the victim) has obtained a compensation order under the Crimes Act against a convicted offender he or she may apply to the Government for payment of the sum specified in the order. Even if the alleged offender is acquitted, the court still has a discretion to grant a certificate stating the amount of compensation that would have been awarded had the accused been convicted. The legislative scheme therefore permits an aggrieved person to obtain a certificate and to apply for payment of the sum specified in the certificate without the need for the offender to have been convicted. The Act makes it quite clear that the aggrieved person is not entitled as of right to the amount specified in the court order or certificate, whether or not the offender has been convicted. The State Treasurer has a discretion as to the amount, if any, to be paid to the aggrieved person. The Act specifically states that any payments are made “ex gratia and not as of right”. ⁵⁵

C. The “Ex Gratia” Scheme

3.71 One obvious gap in the statutory scheme is that a person injured through criminal violence can receive no compensation if the alleged offender is not apprehended or brought to trial. To remedy this deficiency, an administrative scheme operates under which the victim may apply for payments, similar to those that would have been available under the statutory scheme. The police investigate claims of this kind, since no court proceedings are involved. Table 3.3 shows the claims received and payments made under the two schemes in New South Wales for the 1980-1981 year. The administrative scheme is somewhat misleadingly described as the “Ex Gratia Scheme”, since payments under both schemes are technically made by the State ex gratia.

Table 3.3: Criminal injuries Compensation: Claims

New South Wales 1980-1981

Scheme	Claims Received	Number of Payments Made	Payments $
Statutory	327	324	1,265,702
Ex Gratia	204	149	619,139
Total	531	473	1,884,841

Source: Attorney General’s Department: Claims Section.

D. Criticisms

3.72 The arrangements for criminal injuries compensation in New South Wales have been subjected to criticism. The low maximum limits for payments under the scheme may be inadequate. The Australian Law Reform Commission draws attention to a New South Wales case where a man taken hostage during the course of a crime was shot and killed as police attempted to mount a rescue operation. ⁵⁶ The victim’s family was left without means. The maximum compensation in New South Wales at that time under the scheme was $4,000, but the Government responded to representations by making an ex gratia payment of $25,000. Other major defects in the scheme are said to include serious delays (resulting from the need under the statutory scheme for both an order from the criminal court and separate administrative approval); the inappropriateness of using criminal courts, with their elaborate procedures and rules of evidence, to make compensation orders in favour of victims; and the absence of any legal entitlement to compensation. ⁵⁷ It has also been suggested that relatively few victims apply for compensation because of the failure to publicise the scheme adequately. ⁵⁸

3.73 Considerations such as these prompted the Australian Law Reform Commission to support a scheme modelled on the Victorian victim compensation program. Under the Criminal Injuries Compensation Act 1972 (Vic), claims for compensation are made to a Crimes Compensation Tribunal, which is directed to proceed expeditiously and informally. The Tribunal’s awards do not require ratification by the Government and, upon proof of the .statutory requirements, compensation is available as of right. ⁵⁹

V. SPORTING INJURIES SCHEME

A. Background

3.74 The Sporting Injuries Insurance Act 1978 (NSW) was designed to overcome two major problems concerning injuries sustained in the course of sporting or athletic activities. First, amateur sportsmen and sportswoman injured while competing in organised activities were not entitled to workers’ compensation and were usually unprotected by private insurance. A committee set up to inquire into a sporting injuries scheme in New South Wales compiled a list of nine amateur rugby players who had been killed or had suffered serious injuries between May and September 1977. ⁶⁰ In no case was workers’ compensation payable. Secondly, committee members of unincorporated sporting associations were concerned that injured professional or semi- professional players could be entitled to workers’ compensation benefits. As “employers”, the committee members would be obliged to maintain employers’ liability insurance to cover the injury or death of these “worker-players” in the course of sporting activities.

B. The Scheme

3.75 As the result of the committee’s report a Sporting Injuries Insurance Scheme was established under the Sporting Injuries Insurance Act 1978. The scheme is intended to provide amateurs and professionals with “reasonable cover for acceptably low premiums” ⁶¹ and operates, in general, on a “user pays” principle. Any individual or incorporated or unincorporated association declared a “sporting organization” under the Act must collect and pay to the Sporting Injuries Committee the premiums which the Committee decides each player should pay for the “sporting year”. There is no legal compulsion to join the scheme. However, if an organization, which would have been an “employer” but for special exclusions in the workers’ compensation legislation, fails to pay the premiums, it will be liable to pay workers’ compensation to the injured player. By 30 June, 1981, 48 sporting organizations, including all the major bodies, had joined and more than 200,000 individuals were covered.

3.76 An applicant for benefits must be a registered player of a sporting organization who has suffered or contracted a personal injury or disease whilst participating in an authorized sporting activity. The injury must fall within the list of “compensable injuries”, which include the permanent loss of various functions or use of parts of the body. There is a maximum amount recoverable for each type of loss with a set additional amount payable for quadriplegia and paraplegia. A benefit of at least $25,000 is payable if the injury results in death, with $1,000 added for each surviving dependent child. In some cases there is a payment to cover funeral expenses. The overall maximum for injuries from one incident is $60,000. By 30 June, 1981,199 injury cases had been dealt with under the scheme and approximately $628,000 in benefits paid.

C. Criticisms

3.77 In 1981 the Sporting Injuries Committee which administers the scheme, reported that the scheme had “made good progress” but that there were a number of short comings. ⁶² Some organizations considered that the relative infrequency of serious injuries in their sport made it unnecessary to participate in the scheme. This affected the level of premiums and financial viability of the scheme. The scheme was also affected by competition from private insurers. “Low-risk” organizations participating in the scheme were heavily subsidising “high-risk” organizations. The Committee said that major problems arise in applying the legislation where New South Wales organizations are subordinate to a national body and that there are a number of perplexing aspects of the legislation requiring attention.

VI. SOCIAL SECURITY

3.78 A person who has suffered accidental injury and who cannot work by reason of the injury may be entitled to payments under the Social Services Act 1947 (Cth.). Depending on the circumstances, a person incapacitated by injury may be able to claim the invalid pension or sickness benefits. Of course, these benefits are available to a wider range of people than those who have been incapacitated as the result of injury, but they are the primary sources of assistance available to such people through the “safety net” of social security. We provide only a brief outline in this Paper of eligibility criteria for the invalid pension and sickness benefits. We also mention some other social security benefits that may be available to accident victims. It will be necessary later in this Inquiry to explore other issues in greater detail, notably the relationship between social security and the other compensation systems.

A. Invalid Pensions

3.79 In order to receive an invalid pension a person must be over 16 and “permanently incapacitated for work” or permanently blind (s.24). ⁶³ Where a person relies on permanent incapacity as the ground for the grant of the pension, the Act requires the degree of permanent incapacity to be not less than 85% (s.23). The criteria which are to be taken into account in determining whether a person is not less than 85% incapacitated have been the subject of considerable debate within the community and are still by no means clear. In May 1981 the Minister for Health and Social Security released new guidelines for the assessment of eligibility for invalid pensions. The guidelines indicated that a number of matters, in addition to the applicant’s physical condition, could be taken into account in determining the extent of incapacity. These included the applicant s age, level of education and skills. The guidelines note that

“the fact that a severely handicapped applicant might be able to get work at a time of full or over- full employment because of the scarcity of labour would not disentitle him if he was unlikely to get work at any reasonably foreseeable time given the general level of demand for labour in Australia.” ⁶⁴

3.80 The legislation provides that an invalid pension shall not be granted to any person if he or she

“has an enforceable claim against any person, under any law or contract, for adequate compensation in respect of his permanent incapacity or permanent blindness.” (s.25(1) (d)).

This provision has been interpreted as not applying where the injured person commences a common law negligence action.⁶⁵ It appears to be confined in its practical operation to claims for workers’ compensation and to rights under contractual arrangements such as private insurance. Thus the fact that an injured person has commenced a common law negligence action will not disqualify him or her from receiving an invalid pension. By contrast, a pending workers’ compensation claim may be a barrier to receiving the pension, so that an injured worker bringing such a claim is usually limited to sickness benefits in the interval. It appears that a workers’ compensation claim, once settled, is not a barrier to payment of the invalid pension although, of course, the injured person’s entitlement to the pension may be affected by the means test.

3.81 The base rate of the invalid pension varies according to whether the recipient is single or married. The base rate is indexed by reference to the Consumer Price Index, adjustments being made in May and November each year. Extra amounts are paid for children and dependent full-time students (ss.28,28A). The amounts payable as at April 1982 are set out in Table 3.4 below. The amounts are at subsistence level only. This is illustrated by the fact that the invalid pension for a married couple with two children, after taking into account family allowances, was $144.70 per week, while the poverty line for such a family (the head not being in the work force), at September 1981, was estimated at $153.00 per week. ⁶⁶

Table 3.4: Social Security: Rate of Invalid Pension

	Pension per week
Single Pensioner	69.70
Married Couple	116.20
Married Couple, two children (a)	136.20

(a) The family would also receive family allowances totalling $8.50 per week.

3.82 Payment of the invalid pension is subject to a means test which is currently assessed on income alone. The amount which may be earned without affecting the pension varies according to whether the pensioner is single or married, and according to the number of dependent children. Thus, for example, in the case of an unmarried pensioner, $20 per week may be earned without affecting the amount of the pension payable. For each $1 earned in excess of the relevant limit the pension is reduced by 50 cents. The means test is based on family income. It follows that a person who is incapacitated, and whose spouse is in paid employment, will not usually receive the invalid pension. Generally speaking, there is no means test for permanently blind invalid pensioners (ss.28, 29).

3.83 Records are not routinely kept by the Department of Social Security as to the proportion of invalid pensioners whose incapacity resulted from accidental injury. However, a survey of invalid pensioners throughout Australia conducted in 1979 found that in 8.9% of cases the major cause of incapacity was an accident. ⁶⁷ Since at 30 June 1981 there were 82,847 invalid pensioners in New South Wales, ⁶⁸ the survey suggests that approximately 7,400 invalid pensioners in the State became invalids as the result of an accident.

B. Sickness Benefits

3.84 An applicant for sickness benefits is required to satisfy the Director-General of Social Services that,

“throughout the relevant period, he was incapacitated for work by reason of sickness or accident (being an incapacity of a temporary nature) and that he has thereby suffered a loss of salary, wages or other income” (s.108(1)(c)). ⁶⁹

Usually sickness benefits are payable seven days after the date of incapacity for work.

3.85 Where an incapacitated person receives regular compensation payments, such as weekly workers’ compensation benefits, the Act provides that any entitlement to sickness benefits shall be reduced by the amount of compensation received (s.115(1)). If compensation for incapacity is paid in the form of a lump sum, the Director-General has a discretion to determine how the lump sum should be allocated for the purpose of reducing the amount of sickness benefits payable (s.115(2)).

3.86 The Department of Social Security often pays sickness benefits to people waiting to receive workers compensation or damages in a common law negligence action. When the beneficiary finally receives compensation the Act provides that he or she is liable to repay to the Department the sickness benefits received in the interim period (s.115(4)-(12)). The Director-General has a discretion, where there are special circumstances, to release the beneficiary from that liability. Alternatively the Director- General may require the person liable to pay compensation (for example the employer’s workers’ compensation insurer) to repay directly to the Commonwealth the amount of sickness benefits received by the beneficiary. ⁷⁰

3.87 Settlements between litigants may be reached on the basis that part of the amount received as damages or as a lump sum redemption will have to be paid to the Department of Social Security as reimbursement for sickness benefits paid pending settlement. In the case of lump sum redemptions under the Workers’ Compensation Act the parties often attempt to avoid or minimise the obligation to repay, by attributing only a small portion of the lump sum received to loss of wages over the period during which a sickness benefit was paid. Partly for this reason, the legislation governing the obligation to repay sickness benefits was extensively amended in 1979, but the amending legislation has not yet been proclaimed. ⁷¹ A further Bill, which amends the unproclaimed legislation, is currently before the Commonwealth Parliament. ⁷²

3.88 The amounts payable to adult sickness beneficiaries are identical to those payable to invalid pensioners (ss.112, 112AA). The means test is, however, more stringent than that applied to invalid pensioners, benefits being reduced if additional income exceeds $6 per week.

C. Other Benefits and Allowances

3.89 A person who has been partially incapacitated, but has recovered sufficiently to resume work, may apply for unemployment benefits if he or she is willing to undertake suitable work, but such work cannot be found (s.107). The Act also provides for the payment of sheltered employment allowances to people who are permanently incapacitated for work, but whose incapacity is less than 85% (s.133C). The allowances may also be paid to people who are incapacitated. To qualify, the applicant must be working in paid employment provided for disabled persons by an approved non-profit organisation.

D. Commonwealth Rehabilitation Service

3.90 The Department of Social Security is responsible for the administration of the Commonwealth Rehabilitation Service. The Service provides treatment and training for people suffering from mental or physical disabilities which constitute a substantial handicap in undertaking employment, or which prevent them living “an independent life” in his or her own home (s.135A). A person receiving treatment continues to be entitled to an invalid pension or sickness benefit, but may also receive a training allowance. Where a person who has been given treatment or training later receives compensation in respect of the disability, he or she may be required to pay for the cost of treatment or training. Alternatively the cost of the treatment or training may be recovered directly from the person liable to pay compensation (s.135R).

FOOTNOTES

1. P.S. Atiyah, Accidents, Compensation and the Law (Weidenfeld and Nicholson, Londom 3rd ed. 1980), p.468. Compare para.2.13, n.12 above.

2. Motor Vehicles (Third Party Insurance) Act 1942 (NSW), s.30. Proceedings arising out of the use of an uninsured motor vehicle are taken against the nominal defendant.

3. Workers’ Compensation Act 1926 (NSW), s.18.

4. Todorovic v.Waller (1981) 56 ALJR 59, at p.61, per Gibbs C.J. and Wilson J.

5. State courts had been applying discount rates ranging from 0% to 5% immediately before Todorovic v. Waller decided that 3% was the proper rate.

6. (1977) 139 CLR 161.

7. The two cases, each unreported, are Peart v. Parker, 8 September 1981, and Stanlund v. Kelsey, 8 December 1981. It should be noted that the trial judge in each case applied a discount rate of 0%. The calculations would therefore require modification in the light of Todorovic v. Waller.

8. Paul v.Rendell (1981) 55 ALJR 371.

9. Atlas Tiles Ltd. v.Briers (1978) 144 CLR 202.

10. Cullen v. Trappell (1980) 29 ALR 1.

11. Fire and All Risks Insurance Co. Ltd. v. Callinan (1978) 140 CLR 427.

12. A Report by the Committee to Study Compensation for Automobile Accidents to the Columbia University Council for Research in the Social Sciences (International Printing Co., Philadelphia, 1932).

13. The first report in New Zealand was the Report of the Committee on Absolute Liability (NZ Govt. Printer, Wellington, 1963).

14. Sir John Barry, “Compensation Without Litigation” (1964) 37 Australian Law Journal 339, at p.343. And see his remarks in his judicial capacity: Tzouvelis v. Victorian Railways Commissioners [1968] VR 112, at pp.119-121.

15. For a recent example see the article by Professor Harold Luntz, “Proposals for a National Compensation scheme” (1981) 55 Law Institute Journal 745; the letter from Mr. G.A. Murphy, Q.C., Chairman of the Accident Compensation Committee of the Law Council of Australia: (1981) 55 Law Institute Journal 807; and the reply by Professor Luntz: (1982) 56 Law Institute Journal 35.

16. P.S. Atiyah, n.1 above, pp.472-497.

17. This is Atiyah’s sixth count: “fault is an unsatisfactory criterion for liability because of the difficulties caused in adjudicating on it”. Ibid., p.490.

18. (1981) 56 ALJR 1.

19. H. Luntz, “Annual Survey 1981: Torts” (forthcoming).

20. NSW Parl. Deb. (Leg. Ass.), 2 December 1981, pp.1439- 1440.

21. Woodhouse Report, para.127.

22. See Pearson Report, para.78; see also para.4.36 below.

23. [1965] NSWR 1158, affirmed (1966) 84 WN (Pt.1) (NSW) 231.

24. Woodhouse Report, paras.149-150.

25. See, for example, para.2.21 above.

26. Woodhouse Report, paras.145-148.

27. J. Sher, “Damages for Personal injuries-Current Developments, Future Trends and Suggested Reforms” (1981) 55 Australian Law Journal 458.

28. Victorian Bar Council and Law Institute of Victoria, No Fault Liability (The Hawthorn Press, Melbourne 1972), para.4.4.

29. “Liability Without Fault - The Claim that a Change of Law is Necessary” (1963) 37 Australian Law Journal 209, at p.213 (a report for the New South Wales Bar Council by NA. Jenkyn Q.C., H.H. Glass Q.C. and T.E.F. Hughes Q.C.).

30. Letter to the Editor, (1981) 55 Law Institute Journal 807; Pearson Report, para.275.

31. Pearson Report, para.301. It should be noted that the Pearson Commission considered that its terms of reference did not permit it to consider the merits of a no-fault scheme covering all injuries.

32. Ibid., para.279.

33. These contentions found favour with a sub-committee of the Victorian Chief Justice’s Law Reform Committee, causing it to reject suggestions that the court should have power to award periodic payments in lieu of a lump sum award: Report on Damages by Way of Periodic Payments (1968).

34. Specific areas are dealt with in other legislation such as the Workers’ Compensation (Dust Diseases) Act 1942 (NSW) and the Workmen’s Compensation (Broken Hill) Act 1920 (NSW).

35. H. Luntz, D. Hambly and R.A. Hayes, Torts, Cases and Commentary (Butterworths, Sydney, 1981), p.24.

36. Ibid., p.23.

37. Health Insurance Act 1973-1981 (Cth.), ss.18, 35A.

38. Thiess Bros. Pty. Ltd. v. Arcidiacono, 21 December 1981, Supreme Court of New South Wales (Full Ct.), per Mahoney J.A.

39. Figures supplied by Workers’ Compensation Commission of New South Wales.

40. Ibid.

41. Report of the Board of Inquiry into Workers’ Compensation (Vic Govt. Printer, 1977) Judge C.W. Harris, para. 1.

42. Report of the Tripartite Committee on the Rehabilitation and Compensation of Persons Injured at Work (SA, 1980), p.41.

43. Report of the Insurance Premiums Committee for the Year Ended 30 June 1980 (NSW Govt. Printer, 1980), p.10.

44. See, for example, the Victorian Report. n.41 above; Report of the Judicial Enquiry into the Workers’ Compensation Act of Western Australia (WA Govt. Printer, 1979) (Hon. B.J. Dunn): Report of the Joint Committee of the Legislative Council and House of Assembly - Workers’ Compensation (Tas Govt. Printer, 1977): the South Australian Report, n.42 above.

45. Figures supplied by the Workers’ Compensation Commission of New South Wales.

46. B.A. Nye, “Some Aspects of Workers’ Compensation”, in Ethnic Affairs Commission of New South Wales, Participation (1978), 43.3, at p.451.

47. See the comments of Powell J. In Australian Direct Mail Advertising and Addressing Co. Pty. Ltd. v. Sukkar, 28 October 1981, Supreme Court of New South Wales.

48. H. Luntz, “The Role of Compensation in Health and Safety at Work” [1981] Journal of Industrial Relations 383, at p.392.

49. Cf., B.A. Nye, n.46 above: G. Mendelson, “Persistent Work Disability Following Settlement of Compensation Claims” (1981) 55 Law Institute Journal 342.

50. In Weston v. Great Boulder Gold Mines Ltd. (1964) 112 CLR 30, any worker on duty in a mine was assaulted by in intruder. The assault was not related to the victim’s work, but arose out of a personal dispute. The High Court held that the worker had Suffered “personal injury by accident” and that this hid arisen in the course of his employment within the meaning of the Workers’ Compensation Act 1912 (WA).

51. Law Reform Commission, Sentencing of Federal Offenders (Report No. 15, Interim. 1980), ch.12.

52. Ibid., para.462.

53. Crimes Act 1900 (NSW), ss.437, 554.

54. Fleming v. White, 20 November 1981, New South Wales Court of Criminal Appeal.

55. Criminal Injuries Compensation Act 1967 (NSW), s.5(2B).

56. Law Reform Commission. n.51 above, para.472.

57. Ibid., paras.477-478.

58. A.P. Bates, T.L. Buddin, D.J. Meure The System of Criminal Law: Cases and Materials (Sydney, 1979), para.7.92.

59. The Victorian scheme has in upper limit for compensation of $10,000 (as from October 1981).

60. Report of the Committee on Inquiry into a New South Wales Scheme of Compensation for Inquiry to Contestants in Sport (unpublished, Spt 1977), pp.47-48.

61. First Report of the Sporting Injuries Committee Concerning the Application and Administration of the Sporting Injuries Insurance Act 1978 (Sept. 1981), p.3.

62. Ibid., p.3.

63. An applicant must also satisfy certain other requirements: Social Services Act 1947 (Cth.), ss.24(1)(b), 25.

64. The guidelines are reproduced in (1981) 1 Social Security Reporter 7.

65. National Insurance Co. of NZ Ltd. v. Espagne (1960) 105 CLR 569; Markovic and Director-General of Social Services (1981) 5 Social Security Reporter 48.

66. Figure supplied by the Australian Council of Social Service.

67. Department of Social Security, Survey of Invalid Pensioners Research Paper No.10 (2nd ed. 1981), Table 15.

68. Department of Social Security, Annual Report 1980-81 (AGPS, 1981), Table 15.

69. For other eligibility criteria, see Social Services Act 1947 (Cth.), ss.108(1)(a), (b).

70. See Saqqa and Director-General of Social Services (1981) 5 Social Security Reporter 53.

71. Social Services Amendment Act 1979 (Cth.).

72. Social Services Legislation Amendment Bill 1982 (Cth).