I. INTRODUCTION

11.1 A person sustaining a permanent disability has suffered a loss, over and above continuing loss of earning capacity or other economic loss. This view was encapsulated in the New Zealand Woodhouse Report:

Whether or not such a loss of physical faculty has economic consequences, it is nonetheless a loss to the individual concerned, and in a greater or a lesser degree may adversely affect him thereafter. ¹

The same approach is reflected, although in varying forms, by existing systems of compensation including the common law and workers’ compensation (paragraphs 11.21-11.35). The case studies illustrate the kinds of difficulties which may be experienced in everyday living by people who have suffered serious disabilities. ² Ordinary activities such as dressing, eating or housework may take very much longer for disabled people and may require an attendants assistance or outside replacement household help. Seriously disabled people may be dependent upon others to complete routine chores like shopping, or even to go on an outing. Many activities that able-bodied people take for granted are beyond the reach of disabled people, either because their disabilities make the activities impossible or because the community falls to provide the necessary facilities to allow participation in them. Disabled people also have to contend with continuing discomfort and, sometimes, persistent pain.

11.2 The principal objective of rehabilitation is to minimise the degree of permanent impairment and consequent disability suffered by accident victims. To this end the recommendations in Chapters 9 and 10 are designed to maximise a seriously disabled person’s chances of living in the community and resuming as normal a life as possible. Yet even the most effective rehabilitation program cannot prevent some accident victims Sustaining permanent disabilities. No doubt some of the difficulties experienced by disabled people could be ameliorated by better community planning, but at present their disabilities create serious and continuing problems for them. Submissions which considered this question favoured some compensation for disability, in addition to compensation for loss of earning capacity. ³ One of the main reasons given was

... the belief that no-one should suffer the humiliation or indignity of a loss of function without compensation whether or not this loss of function interferes with ability to work or perform socially necessary functions. ⁴

11.3 The Pearson Royal Commission in the United Kingdom gave three reasons for paying compensation for non-economic losses. The Commission argued that such compensation:

• serves as a palliative or solace to the victim;
• allows the victim to purchase alternative sources of satisfaction to those which he or she has lost; and
• helps to meet the hidden costs of the disability. ⁵

These reasons apply to the permanent disabilities sustained by transport accident victims although the Scheme has made separate provision for compensating the “hidden costs” of disability such as reduced mobility. ⁶

11.4 Some argue that the compensation system should be concerned with economic losses and, since the non-economic aspects of disability cannot be translated into financial terms, compensation for those losses should not be paid. ⁷ However, the fact that a given disability has no intrinsic economic value does not mean that the loss is unimportant or incapable of being accommodated within a compensation system. The restricted ability to lead a normal life, resulting from permanent impairment of mind or body, should be reflected in monetary compensation regardless of whether the person has also suffered a loss of earning capacity.

11.5 For these reasons, the Scheme should provide compensation for permanent disability in addition to compensation for loss or impairment of earning capacity and for other economic losses. Accordingly, we recommend that a person who suffers a permanent physical or mental disability as the result of a transport accident should receive compensation for that disability. Compensation of this kind could be paid in a variety of forms. For reasons given later (paragraphs 11.41-11.42), we recommend that the compensation for permanent disability should be paid in a lump sum, the amount of which should be related directly to the degree of disability. This lump sum should be paid in addition to all other forms of compensation. That is, a permanently disabled person could be entitled not only to a lump sum, but also to periodic compensation for loss of earning capacity, additional amounts for home and vehicle modification, a mobility allowance, attendant care, replacement household services and medical, hospital, nursing, rehabilitation and like services.

11.6 Given our recommendation that a lump sum payment should be made for permanent disability, the remainder of this Chapter discusses:

• the standard which should be employed to assess compensation for permanent disability;
• other possible bases for assessment of non-economic loss and the reasons for rejecting these; and
• the means by which the general proposals should be implemented.

II. THE CONCEPT OF PERMANENT DISABILITY

11.7 Compensation for the non-economic consequences of an accident can be assessed on one or more of a number of bases. The reasons for preferring the permanent disability approach are discussed in more detail later, but can be summarised as follows.

• Given that choices must be made in allocating limited resources, compensation for non-economic loss should be directed to those suffering long-term rather than short-term disabilities.
• Compensation should be assessed in a manner consistent with the objectives of rehabilitation. Other approaches, particularly compensation for pain and suffering, detract from those objectives.
• Criteria for measuring the extent of permanent disability can be applied uniformly and with a minimum of disputation.

A. The Meaning of Permanent Disability

11.8 The terms “impairment” and “disability’ are defined in the Glossary. As indicated there, a permanent impairment is a medical condition that includes

... any anatomic or functional abnormality or loss after maximal medical rehabilitation has been achieved, which abnormality or loss the physician considers stable or non progressive at the time of assessment. ⁸

A long-term disability is

... the measurable long-term/permanent functional limitation or loss resulting from an impairment whether mental or physical. ⁹

Thus disability is the cumulative effect of impairments.

11.9 The most satisfactory approach to the assessment of permanent disability is the so called “Whole Person Approach”, which measures

... the nature and extent of the patient s... injury as it affects his personal efficiency in one or more of the activities of daily living. These activities are self-care, communication normal living postures, ambulation, elevation travelling, and non specialised hand activities. ¹⁰

The Whole Person Approach was originally implemented in the American Medical Association’s Guides to the Evaluation of Permanent Impairment, which was adopted by the Australian Woodhouse Report as the basis for compensating permanent partial disability. ¹¹ The Guides has now been adapted and updated in Australia by the Commonwealth Department of Veterans’ Affairs. ¹² The Australian adaptation was intended:

• to abbreviate the format of the American Guides;
• to enhance its acceptability as a working manual among medical assessors;
• to enhance its ease of use by those not fully experienced with the use of the Guides; and
• to update various sections to bring them into line with modern clinical practice and assessments. ¹³

11.10 The Australian adaptation is still in draft form and undergoing trials. It has not been accepted for general use within the Department. Furthermore it is possible that, even if accepted by the Department, the adapted Guides will be capable of further refinement and improvement with experience. We envisage that the Corporation would coordinate with the Policy Review Committee (paragraphs 15.59-15.61) in maintaining a continuing review of the Guides and would seek expert medical opinion on ways of improving particular aspects found to be unsatisfactory. Subject to the need for continuing review, we recommend that the degree of permanent disability should be measured in accordance with the “Whole Person Approach” used in the Australian adaptation of the American Medical Association’s Guides to the Evaluation of Permanent Impairment.

B. The Scope of Permanent Disability

11.11 The Whole Person Approach is comprehensive in the range of impairments covered. For example, it includes:

• loss of limb or limb function;
• loss of organ or organ function;
• loss of organ control;
• loss of sexual and reproductive capacity;
• loss of mental capacity;
• disfigurement;
• loss of sensation and senses; and
• pain.

11.12 “Pain” is measured in terms of its effect on bodily or mental function. According to the Australian adaptation of the American Guides (appendix 14), the assessment of pain is based consideration of:

• peripheral spinal or cranial nerve involvement;
• interference with activities of daily living;
• therapy needs - nature, frequency and efficacy;
• psycho-physiological reactions; and
• pathological tissue reactions.

Acute pain, unconnected with bodily function, such as that associated with identifiable medical conditions like neuralgia or sciatica, is also included.

11.13 A number of individual characteristics, such as the age of the disabled person, maybe relevant in assessing the degree of disability attributable to the injury. For example, in appendix 1 of the Australian Guides, which provides assessment of impairments of the cardiovascular system, different levels of activity and energy expenditure are allocated different levels of impairment depending upon age. In other words, allowance is made for the fact that age itself can be expected to affect activity and energy levels. Thus the impairment level for an 18 year old is higher than that for a 70 year old, because the 18 year old has more to lose. Similarly, age is relevant to both sexual and reproductive capacity. Male sexual or reproductive function according to the Australian Guides is at its highest level in men below 40 years of age, decreasing between 40 and 65 years of age and failing to its lowest level in those over 65 years. ¹⁴ In women, the impairment varies between pre- and post-menopausal age groups. ¹⁵ In addition to age and sex, other individual characteristics are taken into account. For example, the degree of impairment assigned to an injured upper limb depends on whether it is dominant or not. The amputation of an index finger produces a disability assessment of 15 per cent if it is from the dominant hand and 10 per cent if it is from the non-preferred hand. ¹⁶

11.14 The Guides also addresses the problem of assessing permanent disability where there is more than one impairment. This may be the case where the one injury produces several impairments, such as the case in which acute facial scarring results in limited face movement, reduced sensation continuing pain and psychological trauma. Alternatively, the one accident may cause multiple injuries, such as the case in which the victim sustains a permanent limp in one leg, limitation of movement in his or her dominant hand and limited vision in one eye. The Guides rely on a Combined Values Table to give a total assessment of the level of permanent disability, ¹⁷ as the process involves more than simply adding together the individual percentages attributable to each impairment. For example, in the case of an 18 year old male paraplegic who cannot stand, and who has no bladder or bowel control or sexual function, the combined values in the Table below ¹⁸ produce a permanent disability assessment of 93 per cent.

Individual Impairment Values19	Per cent
Cannot stand	65
No Bladder control	60
No Bowel control	25
No Sexual function	30
Total Permanent Disability	93

11.15 A system of this kind combines the virtues of individualised assessment with the advantages of objective standards of impairment. To illustrate this, if a person suffers sciatic back pain, appendix 11 of the Australian adaptation makes allowances for impairment of the whole person for between 0 and 30 per cent for loss of function from loss of strength, as well as an additional 0 to 10 per cent purely for loss of function arising from pain, discomfort or loss of sensation. The total degree of permanent disability from an impairment of the sciatic nerve may therefore range from 0 to 40 per cent depending upon the loss of function caused by pain and by loss of strength.

11.16 It is important that compensation for permanent disability, like all forms of compensation under the Scheme, should be paid as promptly as possible. Against this must be weighed the need to allow conditions to stabilise and to take account of the effects of rehabilitation on the impairment. Moreover, in some cases there may be uncertainty as to whether an impairment is permanent. Balancing these considerations, we recommend that in general, the degree of permanent disability should be assessed 12 months after the date of accident. However, the Corporation should have power to assess the degree of disability at an earlier time where it is satisfied that the disability is stable and permanent. This is designed to allow prompt payment of compensation where rehabilitation efforts are not likely to diminish the impairment, but are concentrated on minimising the consequences of the impairment, such as where a limb has been amputated.

11.17 It may be clear from the date of accident that there is going to be a residual disability which will remain regardless of medical treatment and rehabilitation efforts and that the extent of the residual disability may not be known for some time. To allow prompt payment in these cases, we recommend that the Corporation should have power to make interim payments, where a disability is permanent but the extent of the disability cannot finally be assessed.

11.18 A disabled person’s condition may deteriorate unexpectedly after compensation for permanent disability has been assessed. The case study program reported a case in which an accident victim received compensation on the basis that he was paraplegic and could continue to work. His condition subsequently deteriorated unexpectedly and he lost the use of one of his arms. He faced the prospect, if the deterioration continued, of becoming quadriplegic. ²⁰ Because a common law verdict or settlement is reached on a once-and-for-all basis, the case could not be reopened. It is important to avoid this situation. We recommend that where compensation has been assessed in respect of permanent disability but the person’s degree of permanent disability subsequently increases, the Corporation should increase the compensation to take account of the increased degree of disability. This means that a speedy assessment will not disadvantage the claimant because, if the condition later deteriorates, he or she can apply for an increase in the award.

III. COMPARISONS WITH EXISTING COMPENSATION SYSTEMS

11.19 The recommendation that compensation should be paid according to the claimant's degree of permanent disability departs significantly from the approach taken by other compensation systems, notably the common law. This section reviews other approaches and explains our reasons for not adopting them.

A. The Common Law

11.20 Earlier Chapters have referred to the principles upon which damages are assessed at common law for non-economic loss. ²¹ Such damages include compensation for:

• pain and suffering;
• loss of amenities and enjoyment of life; and
• loss of expectation of life.

Each of these is now examined in turn.

1. Pain and Suffering

11.21 Compensation for pain and suffering at common law is not clearly defined. It certainly includes the conscious experience of pain and extends to distress with the injury and anxiety about its consequences. The uncertainty surrounding its definition is reflected in widely differing judicial attitudes about the appropriate amount of compensation in a given case. ²² There is also considerable doubt surrounding community attitudes to the importance of compensation under this head, compared for example, with compensation for immobility and social isolation. ²³ There is also some evidence that people receiving payment in settlement of claims do not even realise that a component for pain and suffering was included. ²⁴ Damages for pain and suffering are not restricted to people suffering permanent disability. Compensation can be recovered for short-term pain and suffering, which has often ceased well before compensation is assessed. This aspect has not escaped judicial criticism.

It may be that giving damages for physical pain that is wholly past, not continuing and not expected to recur, is simply an anomaly, for there can be no solace for past pain. ²⁵

11.22 An assessment procedure which concentrates specifically on the degree of the claimant's pain and suffering, rather than on the extent of permanent disability has potentially adverse effects upon rehabilitation. This is particularly so where the size of the award depends upon the subjective level of suffering experienced by the claimant. This aspect of the common law has also attracted judicial comment In the words of Lord Pearce.

It would be lamentable if the trial of a personal injury claim put a premium on protestations of misery and if a long face was the only safe passport to a large award. ²⁶

Some submissions stressed that the common law’s approach to assessing compensation for non-economic loss provided a “reward for complaint”. This reward has an anti-rehabilitative effect, discouraging strenuous efforts to overcome a disability as rapidly as possible.

One of the stupidities of the present system is the way that the complainer is encouraged to complain and continue, because the more he does the more he is financially rewarded; whereas the well motivated person who may suffer some quite serious injury, but who puts up with the pain and really works at getting himself mobile again... gets little reward out of the present system. ²⁷

Limiting compensation to cases of permanent disability, as we recommend, minimises the risk of "reward for complaint”, yet recognises the impact of pain on the most seriously injured victims of transport accidents.

11.23 A further argument against compensating short-term pain and suffering is that scarce resources available to compensate accident victims are directed to less seriously rather than more seriously injured people. Table 11.1 provides information on the proportion of motor vehicle accident common law verdicts attributable to non-economic loss.

11.24 The prospect of even small amounts of compensation for pain and suffering leads to substantial disputation, frequent appeals and the retention of adversary attitudes derived from common law proceedings. This has been the experience in New Zealand (paragraph 11.40). In combination, the conflict and delays aggravate the anti-rehabilitative effects of compensation for pain and suffering and impose substantial administrative costs on the system. Obviously, a system of compensation for permanent disability will not avoid all disputes or appeals. However, the decision-making process should be substantially swifter and less contentious than an assessment of the monetary value of temporary pain and suffering.

2. Loss of Amenities and Enjoyment of Life

11.25 In awarding damages for loss of amenities, the common law in theory evaluates the effect of an injury on the individuals life. Since continual pain is likely to affect enjoyment of fife, there is inevitably some overlap between the two heads of damage. Like pain and suffering, loss of amenities and enjoyment of life suffers from lack of definition and widely differing judicial attitudes. Damages under this head are meant to reflect the effect of the injury on the pre-accident lifestyle of the particular person and how he or she has reacted to the injury. Two people suffering identical disability may react differently. Indeed, severely disabled people may adjust more readily to their circumstances than those suffering only moderate impairments.

The cripple by the fireside reading or talking with friends may achieve happiness as great as that which, but for the accident, he would have achieved playing golf in the fresh air of the links ... Some less robust persons, on the other hand, are prepared to attribute a great loss of happiness to a quite trivial event. ²⁹

Table 11.1: Motor Accident Common Law Verdicts: Component for Non-Economic Loss

New South Wales July- December 1982

Verdict Range	Number of Verdicts	Aggregate of Verdicts $,000	Non-Economic Loss Component Aggregate $,000	% Paid for Non-Economic Loss
District Court
Below $10,000	90	492	378	76
$10,000 and above	106	3,298	1,406	43
Supreme Court
Below $50,000	32	581	383	66
$50,000-$149,000	37	3,476	1,376	40
$150,000 and above	53	6,682	2,040	31

Source: Information supplied by the GIO.

The Table suggests that the more seriously disabled receive proportionately less for pain and suffering (and loss of enjoyment of life) than the less seriously disabled. This does not merely reflect the greater economic losses sustained by the more seriously disabled but also demonstrates the fact that relatively large amounts can be obtained in respect of short-term injuries. Trivial claims involving very little economic loss may also attract sizeable settlements because of their “nuisance” value. ²⁸ The result is that a substantial, although not precisely quantifiable, proportion of common law verdicts and settlements is used to compensate the less seriously disabled for their non-economic losses.

11.26 The varying impact of severe disability on individuals was demonstrated in the case study program. On any view, seriously disabled people had suffered a loss compared with their pre-accident position. However, their response to the new situation differed according to many factors, including their personality, resources and the assistance available in rehabilitation and retraining programs. Some severely physically disabled people appeared to have adjusted remarkably well to their disability and pursued a wide range of interests notwithstanding their need for constant attention. Less severely disabled people may find the restrictions on their movement and capacity to carry out daily tasks so great that their capacity to “enjoy life” is more deeply affected.

11.27 It is one thing to acknowledge that the reactions of victims sustaining similar disabilities may differ significantly. It is, however, another to suggest that compensation should be assessed taking account of the subjective impact of the disability on the individual’s enjoyment of life. To do so not only makes the process of assessment more complex and uncertain but creates an incentive for the victim to maximise the impact of the disability and a disincentive to participate fully in rehabilitation programs. A further reason for preferring disability as the standard, rather than enjoyment of life, is that the activities a person pursues vary over time. The fact that the person, at the time of the accident, gained pleasure or enjoyment from a specific activity which he or she can no longer pursue, is not as important as the reduced opportunity in the future to pursue a range of activities.

11.28 Compensation for permanent disability, assessed in accordance with earlier recommendations, takes account of factors affecting quality of life. For example, a person whose physical capacity is reduced from an athletic to a sedentary level would be compensated for the impairment. ³⁰ Similarly, a person unable to perform daily activities Would be assessed as more severely disabled than someone who can carry out these activities. ³¹ For these reasons, we take the view that compensation for permanent disability incorporates many aspects of loss of amenities and enjoyment of life, without incorporating the disadvantages of that concept.

11.29 Furthermore, compensation for permanent disability is not intended to be the only means of compensating for loss of amenities and enjoyment of life. The fact that identical disabilities can mean different things to different people is partly taken into account in the payment of periodic benefits for loss of earning capacity. For example, a professional pianist who loses two fingers will suffer a greater loss of earning capacity (and thus will receive higher compensation) than the person whose employment is unaffected by the disability. Other recommendations in this Report are designed to minimise the loss of amenities or enjoyment of life suffered by accident victims, or to provide them with more appropriate forms of compensation. For example, a loss of mobility is to be compensated (in part) by the payment of a mobility allowance, while services such as leisure counselling, are to be provided in order to improve a seriously disabled victim’s quality of life.

3. Loss of Expectation of Life

11.30 Compensation for permanent disability does not include compensation for loss of expectation of life. Even as a head of damage at common law, the role of loss of expectation of fife has been minor and much criticised. In practice, a small conventional sum is awarded under this head, in recognition of the impossibility of estimating in money terms the value of a part of life that may be lost. The sum currently awarded is in the order of $2,000 to $3,000. The Pearson Royal Commission criticised this head of damage and recommended its abolition. ³²

In our view, damages for loss of expectation of life have an air of unreality. It is not possible to assess how happy the victim might have been if he had lived out his days. Still less is it possible to evaluate such a loss. These difficulties have led the courts to fix damages for loss of expectation of life at a level which means they are usually of no practical significance. ³³

We agree with the reasoning of the Commission. It is relevant to add that a person whose injuries are sufficiently serious to curtail life expectancy significantly is likely to suffer a substantial permanent disability for which compensation would be payable.

4. Once-and-For-All Assessment

11.31 The principle of once-and-for-all assessment applies to the assessment of damages in a common law negligence action, including damages awarded for non-economic loss. ³⁴ This principle, which is distinct from the award of damages in a lump sum, encourages the plaintiff to maintain his or her symptoms over the very considerable period that often elapses before a final settlement of his or her claim. The counterproductive effect on rehabilitation of such delay was discussed in Chapter 3. ³⁵ Compensation for permanent disability under the Scheme will generally be paid within twelve months of the accident, or sooner if the disability is stable and permanent (paragraphs 11.16-11.17) and provision has also been made for reassessment where there is subsequent deterioration (paragraph 11.18). Thus, the adverse features of once-and-for-all assessment are avoided. Early assessment allows the accident victim to receive the lump sum, as well as being able to participate in social, medical or vocational rehabilitation without the fear that his or her efforts will mean a reduction in compensation.

5. Why Not the Common Law Approach?

11.32 The preceding discussion outlines the main reasons for rejecting the common law’s approach to compensation for non-economic loss. These may be summarised as follows:

• the disproportionate amount of resources paid for short-term pain and suffering;
• the anti-rehabilitative consequences of assessing non-economic loss in accordance with the common law rules;
• the potentially damaging delays in a once-and-for-all assessment; and
• the apparently high incidence of disputes arising from the use of these heads of damage.

We discussed in Chapter 4 reports which had recommended limitation or abolition of the common law’s approach (paragraphs 4.18-4.20).

11.33 There are, however, aspects of the common law’s approach which are included in compensation for permanent disability. These include:

• individual assessment of permanent disability (including disability caused by pain);
• the use of the concept of impairment of the whole person, which contains many elements compensated for by the common law as loss of enjoyment of life; and
• compensation for permanent disfigurement.

11.34 One consequence of compensating only for permanent disability is that those who suffer short-term pain and suffering, with no long-lasting effects will not receive compensation for this “loss”. They will, of course, be eligible for all other forms of compensation, such as periodic compensation for loss of earning capacity. However, even if it were decided that. compensation for the non-economic aspects of short-term disability was desirable, we would not favour the use of the current common law method of assessment because of the shortcomings previously discussed. Nor is the approach we propose suitable to cases of short-term disability, since it depends on assessment of permanent disability. Thus if compensation for short-term disability were to be provided, a new base would need to be developed which avoided the adverse effects of the common law and which ensured that those who suffered permanent disabilities are adequately compensated. It would then be a question of whether sufficient extra funds should be made available through increased contributions to pay this form of compensation. Priority should be accorded to providing other benefits, discussed in this Report, including compensation for permanent disability, before resources are allocated to compensate short-term pain and suffering.

B. The New South Wales Workers’ Compensation System

11.35 Section 16 of the Workers’ Compensation Act, 1926, provides for lump sum compensation in respect of certain physical disabilities sustained as the result of work- related accidents or diseases, some of which are presented in a “table of maims”. However, the coverage of the section is not comprehensive. Among other things, it omits some serious disabilities such as loss of control of bladder or bowels, ³⁶ back injuries (except so far as they cause loss of function in limbs) and impairment of mental capacity. The section provides compensation for loss of a sexual organ, but not for loss of function of an intact organ. ³⁷ These omissions, and the fact that the table appears to have developed without any consistent philosophical basis for the various levels of compensation for specified impairments, make it far less satisfactory for the purposes of the Scheme than the approach we have adopted. Tables of the kind found in the Workers’ Compensation Act are sometimes described as “amputation” tables because of their concentration on these sorts of injuries at the expense of less dramatic but equally disabling conditions.

C. The New Zealand Accident Compensation Act 1982

11.36 The New Zealand Act provides for two forms of compensation for non-economic loss. Under section 78 of the Act up to $NZ 17,000 is payable for permanent loss or impairment of bodily function, while section 79 provides for up to $NZ 10,000 for loss of enjoyment of life and pain and suffering.

1. Compensation for Permanent Impairment

11.37 The New Zealand Act contains a schedule ³⁸ which lists the percentages of the maximum sum which is to be paid for various impairments. Some of the items in the schedule include the following.

Injury	Percentage
Loss of the pulp of an index finger	4
Total loss of an index finger	14
Shortening of leg by between 37.5 and 50 mm	15
Total loss of vision in one eye (normal vision in the other eye)	30
Total loss of all fingers, thumb intact	63
Total loss of a hand or lower part of an arm	70
Total loss of both legs by above-knee or below-knee amputation	100

These percentages are applied to the $NZ 17,000 lump sum, but deductions can be made for pre-existing conditions. Where there are several impairments the total percentage of compensation payable is simply assessed by adding the values of the impairments together. This tends to mean that many assessments arrive at the maximum because the sum of impairment exceeds 100 per cent. Where the impairment is not listed in the schedule, the Accident Compensation Corporation is given a discretion to decide the appropriate amount of compensation

... in the light of the medical and other evidence available to it and having regard to the severity of the loss or impairment and the contents of the schedule. ³⁹

11.38 The New Zealand table is far more detailed than that adopted in the New South Wales Workers’ Compensation Act. It has the advantage that no disability or impairment is excluded simply because it is not mentioned in the schedule. It is fairly straightforward to use, although complications can arise in relation to the assessment of impairment where there are multiple injuries. In practice, the Corporation relies on medical certificates in making assessments, but is ultimately responsible for determining the appropriate level of compensation. An important defect is that the percentages allocated do not refect any consistent view as to the nature of the impairment to be compensated, presumably because it was based on the New Zealand Workers’ Compensation schedule. The upper limit on compensation for permanent impairment is low, even having regard to different money values and purchasing power, and the availability of compensation for pain and suffering.

11.39 While the New Zealand schedule has some advantages, notably its simplicity, we prefer the more detailed and consistent. Whole Person Approach outlined earlier. Such an approach assesses the degree of disability in accordance with a coherent philosophy, and avoids the criticism that percentages have been arbitrarily assigned for different impairments.

2. Compensation for Pain and Suffering

11.40 The provision allowing compensation for loss of enjoyment of life and pain and suffering ⁴⁰ has been trenchantly criticised by the New Zealand Accident Compensation Corporation:

In practice, the Corporation has found that a disproportionate amount of administration, expense and time, and a disproportionate amount of total compensation, is being applied towards compensating for pain, mental suffering and loss of amenities or enjoyment of life. These particular items of compensation have become the focus of claimants’ attention almost largely to the exclusion of other forms of entitlement under the Act. This also had an effect of unduly concentrating on relatively minor injuries or losses. ⁴¹

The provision has also given rise to much disputation producing a high proportion of all appeals made under the Act. ⁴² These reasons add weight to the case made earlier for not providing compensation for pain and suffering. It should be noted that the repeal of this provision has been suggested by an inquiry in New Zealand but, partly because of the inadequacy of the compensation for permanent impairment, the suggestion has not been accepted. ⁴³

IV. DETAILED PROPOSALS

A. The Form of Compensation

11.41 In general we have recommended that compensation should be paid on a periodic basis and other benefits provided as and when the need arises or an expense is incurred. It is arguable that compensation for permanent disability should also be paid on a periodic basis. For example, a periodic sum, related to a maximum weekly sum for permanent and total disability, could be paid whether or not the person was receiving compensation for loss of earning capacity or earning an income. Such a proposal would have the advantage that it would continue for the length of time the person endures a permanent disability (usually his or her actual life span) and perhaps would be less likely to be dissipated than a lump sum.

11.42 Nonetheless, we have concluded that compensation for permanent disability should be paid in the form of a lump sum (although not necessarily on a once-and-for-all basis). Other forms of compensation under the Scheme will cover the economic losses sustained by the accident victim and should provide him or her with financial security. A lump sum for permanent disability can give the disabled person the freedom to purchase alternative forms of satisfaction without risking loss of money required for accident-related expenses or for replacement of earning capacity. In particular, the lump sum may be used to assist the disabled person to adjust to a new lifestyle. The money could be applied, for example, towards the purchase of a home or used to pay off a mortgage, although other compensation is available for necessary home modifications, and periodic compensation for loss of earning capacity could be used (as are weekly earnings) to meet mortgage commitments. Alternatively, the disabled person may choose to use the lump sum for leisure pursuits, investment, the establishment of a small business or other purposes that he or she thinks appropriate. A further factor, although not decisive, is that other compensation systems, including the common law and workers’ compensation, provide lump sums for non-economic loss. This form of compensation has become an accepted means of redressing the non-economic consequences of a permanent disability on a person’s life. In our view, payment of a lump sum for permanent disability and (generally speaking) periodic compensation for economic losses, strikes an appropriate balance between providing long-term security and affording the disabled person some economic freedom to enable him or her to adjust more readily to the new circumstances.

B. The Amount of Compensation

11.43 There is no self-evident basis for determining the amount of compensation that should be provided for permanent disability. The loss sustained by the victim cannot readily be translated into monetary terms and to some extent the selection of a maximum figure is a matter on which community expectations might be important. The Working Paper tentatively suggested a maximum of three times average annual earnings. On the index used in that Paper, the maximum would have been approximately $53,300 in June 1984. This compares with common law awards for non-economic loss in cases of total and permanent disability in the range of $150,000 to $190,000. Many commentators thought the maximum proposed in the Working Paper was too low, although perceptions may have been influenced by the misconception that the lump sum would be required to pay for home modifications, aids and other requirements for which specific provision is in fact made under the Scheme.

11.44 It is necessary to balance the need to acknowledge in monetary terms the significance of the loss sustained by the severely disabled accident victim and the fact that resources are not unlimited. A further factor is that compensation for permanent disability is additional to other forms of compensation which, in the case of seriously disabled people, are very extensive. They include compensation for loss of earning capacity, mobility allowances, provision for home or vehicle modifications, coverage of medical, hospital, nursing and ancillary care services, attendant care provision and the possibility of the provision of replacement household services. Taking these matters into account we think that the appropriate maximum compensation for permanent disability should be four times average annual earnings. Accordingly, we recommend that the maximum compensation for permanent disability should be 208 times the value of AWE at the date of payment (approximately $87,360 in June 1984). This recommendation is subject to reduction of the maximum on the ground of the age of the victim (see paragraph 11.49).

C. Thresholds

1. A Minimum Level of Disability

11.45 While a substantial number of transport accident victims suffer permanent disabilities, a large number of those disabilities are minor.

Many of the permanent effects left behind by injury after convalescence... have no more than a nuisance effect upon earning capacity or upon normal living. They may involve a degree of discomfort: but the man is well able to accommodate himself to the situation and he suffers no repercussions of any practical significance. ⁴⁴

A decision must be made whether to compensate all those disabilities, or whether to impose a threshold level of disability, below which no lump sum will be payable. The New Zealand Accident Compensation Corporation provides figures which relate to all compensable accidents (not only transport accidents) resulting in permanent disability.

Permanent Disability Range	Percentage of Claims	Cumulative Percentage
Less than 5%	30	30
5-9	23	53
10-14	18	71
15-34	23	94
35-54	3	97
55-74	2	99
75-100	1	100

Since transport accidents are more likely than many other accidents to produce more serious disabilities, the percentage of minor permanent disabilities may be fewer than suggested in this table. Nonetheless, if no threshold is imposed, the multitude of small claims would add considerably to compensation costs and to the costs of administration. This could divert limited resources away from those with serious disabilities to those with minor, albeit permanent disabilities.

11.46 A number of Inquiries have recommended a threshold to overcome this problem. The Australian Woodhouse Report recommended a 10 per cent threshold because

... reasonable people with any sort of pride in themselves neither want nor accept, and certainly should not be offered, easy handouts for every small problem. ⁴⁵

This was subject to a discretion to include people below this threshold in “unusual and special cases”, where it is necessary to avoid injustice. ⁴⁶ The Quigley Report in New Zealand recommended the establishment of a threshold of 15 per cent because

... it appears that at this level no loss normally occurs which is likely to affect seriously the earning capacity of the injured person. ⁴⁷

There was also to be a limited discretion in the Commission (now the Corporation) to waive the threshold in order to avoid any serious anomalies. The actual threshold now provided is 5 per cent, but no discretion to waive this has been included in the legislation. ⁴⁸

11.47 Having regard to these matters, we recommend that where the assessed degree of permanent disability is 4 per cent or less, no compensation for permanent disability should be payable. This means that a lump sum will be payable once the degree of permanent disability reaches 5 per cent. The degree of disability should be assessed in percentage terms as a whole number, with no assessments involving fractions of a percentage point.

2. Total Disability

11.48 We recommend that a person who reaches an assessed level of permanent disability of 90 per cent should be entitled to the maximum level of compensation for permanent disability.

D. Variations Because of Age

11.49 The Working Paper was criticised in discussions on the ground that the maximum compensation for permanent disability did not take account of the age of the victim and, therefore, the period for which he or she would be likely to endure the disability. As has been noted (paragraph 11.13), assessment of permanent disability takes age into account in measuring the extent of impairment which can reasonably be attributed to the injury, but this is a quite separate consideration from the length of time over which the disability must be endured. The problem could, of course, be overcome by paying compensation for disability on a periodic basis. However, we prefer to accommodate the criticism by reducing the maximum compensation as the victim’s age increases beyond 25. This will not relate compensation to the precise life span of the victim, but will afford recognition to the fact that, in general the older the victim the less the period for which the disability will be endured. We therefore recommend that in assessing compensation for permanent disability adjustment should be made to take account of the person’s age. The adjustment should take the following form.

Age of Victim at Date of Accident	Percentage of Assessed Compensation Payable
0-25 years	100 per cent
26-64 years	99-61 per cent (reducing on a uniform sliding scale of 1 per cent per year of age)
65 years and above	60 per cent

There should be no further reduction in the maximum payable beyond the age of 65. While an older person may not have a long life expectancy the effect of an impairment may be even more devastating than for a younger person because of the difficulty of adjusting to that impairment.

11.50 Table 11.2 illustrates the impact of the age variation on six disabled people, aged 20 to 70, each with a 50 per cent disability.

Table 11.2: Compensation for Permanent Disability: Age Variations Under Transport Accidents Scheme Recommendations

New South Wales June 1984

Age	Percentage Entitlement	Compensation Payable at 50% Disability $
20	100	43,680
30	95	41,496
40	85	37,128
50	75	32,760
60	65	28,392
70	60	26,208

E. The Deceased or Unconscious Victim

1. The Deceased Victim

11.51 Compensation for permanent disability is designed to provide some solace for a permanently disabled transport accident victim and to recognise in a tangible way the level of his or her loss. Where the victim dies soon after the accident, before compensation has been assessed, no compensation for permanent disability should be paid. In these circumstances the spouse and children of the victim will be entitled to death benefits, including lump sum compensation. We recommend that no compensation for permanent disability should be paid where the disabled person dies before assessment of the disability or payment of the sum due.

11.52 A transport accident victim may receive compensation for permanent disability and die shortly thereafter. In these circumstances, the surviving spouse and children ordinarily will be entitled to claim death benefits. Consideration has been given to adjusting the death benefits to take account of the compensation for permanent disability already paid, but this course of action was rejected. Such an adjustment might penalise the surviving family members, who would not necessarily have benefited from the lump sum payment

2. The Unconscious Victim

11.53 Considerable difficulties are created by the case of a person who is permanently unconscious or otherwise totally unaware of his or her disability. On the one hand, the person clearly is permanently disabled, usually totally. On the other, the lack of awareness makes it very difficult to justify compensation to provide alternative sources of pleasure or solace. This question has caused difficulties in existing systems of compensation.

11.54 Under the common law in Australia a permanently unconscious plaintiff who has no feelings of pain, discomfort or loss of enjoyment, receives only minimal damages for non-economic loss. It was decided by a majority of the High Court in Skelton v. Collins ⁴⁹ that his or her subjective awareness of the loss was the central question.

I am unable myself to understand how monetary compensation for the deprivation of the ability to live out life with faculties of mind and body impaired can be based upon an evaluation of a thing lost. It must surely be based upon solace for a condition created not upon payment for something taken away. ⁵⁰

... Consolation presupposes consciousness and some capacity of intellectual appreciation If money were given to the plaintiff he could never know that he had it He could not use it or dispose of it... He is not, like Samson Agonistes, aware and able to bemoan his fate “to live a life half dead, a living death”. His existence is in very truth a living death. ⁵¹

The courts in England have taken a different view, regarding the objectively observable loss as more important. ⁵²

11.55 The Northern Territory’s no-fault motor vehicle scheme provides compensation for specified impairments. ⁵³ Where a victim is unconscious and likely to remain a full-time patient in a hospital or institution, the dependent spouse may apply to have the injured person deemed to be dead. This operates from the date of determination, so that if the victim has previously recovered compensation for his or her permanent disability, there is no apparent reason why the dependent spouse cannot then apply for lump sum death compensation for himself or herself and periodic benefits for any children on the basis of the deemed death of the injured person. The interaction between these provisions appears to acknowledge, first the objective loss of the unconscious person and secondly, the death-like loss to his or her dependents, so far as support and companionship are concerned.

11.56 While the “deemed death” approach provides a means of directing compensation to dependents of an unconscious accident victim, there is something distasteful in attributing death to anyone who is still alive. But if death benefits are not to be made available to dependents in such cases, there is still good reason for providing benefits to them as they may not only be deprived of support but are also placed under very great stress. This is especially likely in the case of spouse and children. We recommend that where a person is permanently unconscious, or otherwise totally and permanently unaware of his or her disability, compensation for permanent disability should only be payable where that person has a dependent spouse and/or children. The compensation should be paid to a trustee, who should have power to apply it to the support of the spouse and children, having regard, where relevant, to the possibility that the disabled person will recover from unconsiousness or develop awareness. The same approach should be taken in relation to compensation for the unconscious persons loss of earning capacity As in other parts of the Report, “spouse” includes de facto partner (paragraph 12.21).

F. Duty to Mitigate

11.57 We recommend that in assessing the degree of permanent disability, the Corporation should have regard to any unreasonable refusal by an injured person to participate in a rehabilitation program or to undergo medical treatment where these may have reduced the degree of permanent disability. The approach to this problem recently taken by the courts in common law actions provides a useful guide to what amounts to reasonable refusal. For example, refusal to undergo surgery has been held reasonable where motivated by a genuine fear caused by deep-rooted cultural prejudice ⁵⁴ or prolonged hospitalisation. ⁵⁵

G. Assessment

11.58 Because assessment of degree of permanent disability is based upon medical evaluation of impairments, the role of assessing doctors will be central. The Corporation will base its assessments upon the reports of these doctors having regard, where appropriate, to information supplied by the person’s rehabilitation team. Appeal procedures for compensation for permanent disability will be the same as for other forms of compensation and are discussed in Chapter 16.

V. SUMMARY

11.59 The Scheme should provide compensation for permanent disability sustained by transport accident victims. This should be in addition to compensation for loss or impairment of earning capacity and other forms of compensation under the Scheme, including provision for home modification and attendant care. Compensation for non-economic loss of this kind serves as a solace to the permanently disabled victim and provides him or her with a means of adjusting to the disability.

11.60 Compensation for non-economic loss should be limited to cases of permanent disability and should not be available, for example, to those suffering only short-term pain and suffering. The reasons for this decision are that:

• compensation for non-economic loss should be directed to those suffering permanent rather than short-term disabilities;
• compensation should be assessed in a manner consistent with promoting rehabilitation. Other approaches, particularly compensating pain and suffering, detract from this objective; and
• the criteria for measuring the extent of permanent disability can be applied uniformly and with a minimum of disputation.

11.61 The degree of permanent disability should be measured in accordance with the Whole Person Approach used in the Australian adaptation of the American Medical Association’s Guides to the Evaluation of Permanent Impairment. The Whole Person Approach is comprehensive in the range of impairments covered and includes, for example, loss of sexual and reproductive capacity, disfigurement and pain as elements of permanent disability. In general the degree of permanent disability should be assessed 12 months after the date of the accident, but a reassessment should be possible if the degree of disability subsequently increases.

11.62 Compensation for permanent disability should be paid in the form of a lump sum. This exception to the general rule of periodic compensation can be justified on the ground that the disabled person’s economic losses will be covered and a lump sum will give him or her freedom to purchase alternative forms of satisfaction without risk to long-term security. The maximum compensation for permanent disability should be 208 times the value of AWE at the date of payment (approximately $87,360 in June 1984). However, the maximum should be adjusted to take account of the accident victim’s age. Thus a totally disabled person aged 25 would receive 100 per cent of the maximum; a person aged 45 would receive 80 per cent of the maximum and a person aged 65 would receive 60 per cent of the maximum. Where a claimant is permanently unconscious, compensation for permanent disability should only be paid where the claimant has a dependent spouse and/or children. In such cases, payment should be made to a trustee with power to apply it to the support of the spouse and children.

1. New Zealand Woodhouse Report, para.291.

2. See generally, Case Study Booklet and Traffic Accident Study.

3. See eg. Submissions S34, p.35; S32, p.21; S42, p.2; S60, p.2; and S79, p.2.

4. Submission S60, p.2. This part of Submission S60 was approved in Submissions S73, p.1; S62, p.1.

5. Pearson Report, vol.1, paras.360-362.

6. See chapter 10.

7. See eg. Submission W2, pp.3-4.

8. American Medical Association. Guides to the Evaluation of Permanent Impairment (1971), p.iii.

9. Australian Council for Rehabilitation of Disabled and the International Year of Disabled Persons National Committee of Non-Government Organisations, Discussion Paper, Income Security Policies for Mentally and Physically Disabled People in Australia (1981), para-2.3.

10. See note 8 above, p.iii.

11. Australian Woodhouse Report, vol.1, para.400.

12. In a pilot program by medical assessors of the Department, the Australian adaptation worked well. We have been advised by the Department of Veterans’ Affairs that further trials will be held in late 1985.

13. This applies particularly to the sections dealing with the cardiovascular, respiratory, ophthalmological, haemotopoietic, ear, nose and throat and urinary systems. Information supplied by Dr. D. Donnelly, retired medical officer. Department of Veterans’ Affairs.

14. Australian adaptation of the American Medical Association’s Guides to the Evaluation of Permanent Impairment, appendix 4, tables 8-11.

15. Id., tables 13-15.

16. Id., appendix 10, table 1.

17. The American Guides (see note 8 above) uses the term “impairment of the whole man” for any total value, while the Australian adaptation (see note 14 above) uses the term Departmental Medical Assessment Value (DMA). For our purposes, both these terms are equivalent to our term “the degree of permanent disability”.

18. See note 14 above, appendix 15.

19. Id., appendix 12, table 2.

20. See Case Study Booklet. para. 4.17, LS.S.3.

21. See paras.2.30, 3.68-3.70.

22. H. Luntz, Assessment of Damages (2nd ed. 1983), para. 3.2.04, H D Sperling, “Compensation for Pain”, a paper delivered to the Australian Pain Society, Annual Scientific Meeting (Sydney, February 1984).

23. P S Atiyah, Accidents, Compensation and the Law (3rd ed. 1980). at p.221.

24. O’Connell and R. Simon, “Payment for Pain and Suffering: Who Wants What, When and Why?” [1972] University of Illinois Law Forum 1.

25. Skelton v. Collins (1965) 115 CLR 94, at p.132, per Windeyer J; see also Fairbairn v. Cummins [1961] ALR 205, at p.206.

26. H. West & Son Ltd. v. Shephard [1964] AC 326, at pp.368-369.

27. Submission S17, p.3.

28. Although Table 11.1 is concerned only with verdicts, it is likely that the same pattern is reflected in settlements.

29. H. West & Son Ltd. v. Shephard [1964] AC 326, at p.368, per Lord Pearce.

30. See eg. note 14 above, appendix 1, tables 1, 2.

31. Id., appendix 2, table 3.

32. Pearson Report, vol.l. para.372.

33. Id., para.371.

34. See paras.2.29-2.30, 3.40-3.70.

35. Paras.3.71-3.77.

36. This has been the subject of criticism in some submissions: see eg. Submission W91.

37. Workers’ Compensation Act 1926, s.16(1B)(a2).

38. Accident Compensation Act 1982 (NZ), first schedule.

39. Id., s.78(3), (4).

40. Id., s.79(1).

41. Submission S61, p.32.

42. Information supplied bv the New Zealand Accident Compensation Corporation.

43. In the 1980 Quigley Report, the abolition of this section was recommended, but political opposition to this proposal was strong: Quigley Report, pp.16-18. See also Submission S61, pp.32-33.

44. Australian Wodhouse Report, vol.1, para.389(a).

45. Id., paras.389(a), 401(b).

46. Id., para.401(b).

47. Quigley Report, p.18.

48. Accident Compensation Act 1982 (NZ), s.78(6).

49. (1965) 115 CLR 94.

50. Id., at p.130, per Windeyer J.

51. Id., at p.133, per Windeyer J.

52. See eg. H. West & Son Ltd. v. Shephard [1964] AC 326.

53. Para.4.45.

54. Fazlic v. Milingimbi Community Inc. (1982) 38 ALR 424.

55. Vecera v. Dickinson, 28 May 1982, Supreme Court of New South Wales, Court of Appeal.