I. INTRODUCTION

3.1 In Chapter 2 the history and present state of compensation arrangements in New South Wales were outlined. Except for the safety net of social security, the common law negligence action remains the principal source of compensation for victims of transport accidents. This Chapter assesses the adequacy of the common law negligence action as a means of compensating accident victims. Identifying the deficiencies of the action will assist in charting the course of reform and in evaluating the many proposals for change discussed in Chapter 4. For this purpose the term “common law” includes not only the negligence action as developed by the courts but also legislative changes which have modified specific aspects. The latest example is the recent legislation in New South Wales increasing the discount rate and limiting damages in other respects (paragraphs 2.32, 2.97).

3.2 In its current form the common law system has received virtually no support in submissions. Nor has it been supported by recent official inquiries in other Australian jurisdictions. Almost all have argued for substantial changes to the present system. While such criticism of the common law negligence action shows the need for reform, it does not necessarily establish that one alternative should be preferred over another. In particular, there are some who consider that the deficiencies of the common law negligence action can best be remedied by the addition of limited no-fault benefits to supplement it. ¹ Accordingly, in Chapter 6 we explain why we prefer a no-fault transport accidents compensation scheme which would replace the common law negligence action rather than a limited no-fault scheme which would operate as a supplement to the common law.

3.3 The Issues Paper identified the main arguments in favour of retention of the common law. While we reject many of the claimed advantages, others have considerable force and should influence the shape of new compensation arrangements. The real challenge is to devise a scheme which effectively overcomes the deficiencies of the common law, while not abandoning its more positive features.

II. A CRITIQUE OF THE COMMON LAW

A. Arguments in Support

3.4 The arguments most frequently made for the retention of the common law negligence action and identified in the Issues Paper are:

• the fault principle is in accordance with community expectations;
• liability based on fault acts as a deterrent against conduct which is dangerous to others;
• lump sum awards promote rehabilitation and encourage independence on the part of the accident victim;
• only individual assessment of the kind applied at common law takes into account the special needs and circumstances of the plaintiff, and therefore provides full compensation; and
• victim s rights are protected by the courts which are best able to determine the appropriate level of compensation are responsive to community needs and are not vulnerable to political control.

1. The Fault Principle

3.5 A number of submissions referred to the fault principle as fulfilling community expectations.

Where the death or injury of a person is the fault of a third party, then the injured person or dependent should have the right to recover damages at common law ... Community concepts of fairness and justice demand that if a person is injured through the fault of some other person and his life is thereby interrupted he should be compensated.²

The role of the common law in making good a perceived injustice to the accident victim has been described as its “corrective” justice function. ³ The victim of another’s fault, because he or she has suffered as a result of the other’s negligence, has a right to be indignant about the injury. The recovery of damages, especially for pain and suffering, satisfies this feeling of indignation. ⁴ The fact that compensation is actually paid by the third party insurer is not inconsistent with this philosophy. ⁵ It merely ensures that the victim receives the compensation, while the party at fault is not subjected to financial disaster.

3.6 Corrective justice can also be achieved by reducing the compensation otherwise payable to a plaintiff at fault. Because the defendant at fault is not being made to pay where compulsory third party insurance exists, fault has a greater relevance when applied to the plaintiff rather than the defendant. While the plaintiff is made to bear part of his or her loss if damages are reduced on grounds of contributory negligence, the defendant is never made to pay, even if he or she is wholly to blame. A number of submissions argued that it was just to compensate those who have brought injury on themselves less generously than those innocent of fault. ⁶

2. Deterrence

3.7 Historically, one of the important justifications for the fault principle was its deterrent effect in relation to careless and potentially dangerous conduct. Since the wrongdoer was liable to pay compensation for the consequences of his or her carelessness, the fault principle provided a powerful incentive to take the precautions necessary to avoid accidents. The introduction of compulsory third party motor insurance has left no room for fault to have a deterrent effect in this immediate sense. However, it is argued that the deterrent effect of fault can operate in a number of other ways.

3.8 Because of apportionment of damages on the grounds of contributory negligence, the prospect of a reduction in compensation because of the victim’s failure to take care for his or her own safety is seen as a deterrent of the same kind as that which operates when a defendant does have to pay for his or her carelessness towards the safety of others. It has also been argued that litigation may expose the negligent defendant, even if covered by third party or liability insurance, to public condemnation and that this prospect acts as a deterrent. ⁷

3.9 Fault can also be used as a basis for premium loadings, ⁸ although in practice this is done only in cases of property, not personal injury insurance, in New South Wales. In theory, a motor vehicle owner could be deterred from negligent conduct by the prospect of having to pay a higher third party insurance premium. If this were done, it could, in a limited way, make the party at fault pay for his or her negligence, although the burden is far less onerous than having to pay compensation to the victim.

3.10 Fault can have a more general deterrent effect. The maintenance of a system of liability based on fault, even if underwritten by third party insurance, is said to encourage a continuing awareness of the need for the exercise of reasonable care. ⁹ It is one of the responsibilities of the law, which is fulfilled by the common law negligence action, to encourage an appropriate level of personal responsibility. ¹⁰ In economic terms fault is regarded as a measure of conduct which causes accidents unnecessarily and therefore makes the cost of the activity, such as car ownership, more expensive. There is therefore an incentive to drive carefully and avoid accidents, in order to keep the cost of owning a car as low as possible. ¹¹ This process is sometimes described as “general deterrence ¹² because the incentive to drive carefully has a general influence on those taking part in the activity. The cost of careless driving falls on the activity as a whole, and therefore those who finance it, rather than on the individual who happens to be careless.

3. Lump Sum Awards

3.11 The award of damages by way of a lump sum is supported on several grounds. Its most obvious advantage is that it promotes finality in litigation and therefore saves costs. It eliminates the prospect of ongoing medical examinations and review. ¹³ It is said that this element of finality is an aid to rehabilitation.

The award of a lump sum has the effect of pushing the trauma of the accident into the past and allowing the victim to concentrate on the future. ¹⁴

3.12 This rehabilitative effect is reinforced by the independence and restoration of personal dignity which the receipt of the lump sum provides. A common assertion is that a lump sum makes it possible for the victim to adjust to a new lifestyle. ¹⁵ A typical example is the purchase of a small business to provide income in place of the pre-accident earnings from employment made impossible by the injury. ¹⁶ For these sorts of reasons it is said the lump sum is what most litigants prefer. ¹⁷

The possession of a lump sum gives the injured victim some freedom, dignity, and independence which he could never enjoy while kept on the “charity” of weekly periodic payments. ¹⁸

4. Individual Assessment and Full Compensation

3.13 The proponents of the common law claim 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. ¹⁹ The principle of restitution upon which compensation at common law is based, rests on the assumption that no two people and no two injuries are exactly the same. ²⁰ Individual assessment permits account to be taken of an individuals earning capacity and his or her pre-accident lifestyle in order to identify what has been lost. In addition to recognising individual differences, the principle of restitution is, by definition aimed at replacing the loss caused by the injury in full. It is frequently argued by proponents of the common law that it is the only system which makes good all aspects of the plaintiff s loss and thus provides full compensation. ²¹

5. The Decision-Making Process

3.14 Another attribute of the common law is said to be the fact that liability and assessment of damages are determined by judges whose independence and impartiality are beyond question and whose actions are open to public scrutiny and review by appellate courts. A fair result is more likely when produced from a dispute between adversaries, both legally represented, which will be resolved objectively in accordance with well established principles, ²² than when it is the response, to an unrepresented claimant, of a bureaucrat with an “insurance mentality”. ²³ This phrase is used to describe an attitude unsympathetic to the claimant. It is based on the assumption that because insurance companies insure defendants, they pay the lowest possible compensation in order to minimise losses.

3.15 It is also said that the courts are flexible and responsive to community pressures and changing needs. ²⁴ By contrast, it is argued, an administrative system for the payment of benefits to accident victims would be less responsive 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.

B. Arguments Against

3.16 A number of criticisms have been made of the common law negligence action as the basis for compensating transport accident victims, especially motor vehicle accident victims. These include answers to many of the above arguments. Main criticisms are:

• the failure of the common law negligence action to provide compensation for a substantial proportion of transport accident victims;
• the failure of the fault principle to fulfil its stated aims and the practical difficulties in its application;
• the deficiencies of assessing damages on a once-and-for-all basis;
• the difficulties and inconsistencies which arise in assessing damages for non-economic loss;
• the adverse effects of the common law negligence action on the rehabilitation of many transport accident victims;
• the delays and consequent hardship experienced by many transport accident victims in obtaining common law damages;
• the burden on the court system, and the drain on judicial resources, caused by deciding claims arising out of transport accidents;
• the substantial legal and administrative costs associated with common law. negligence actions; and
• the increasing cost to the community of a compensation system relying heavily on the common law negligence action.

1. The Fault Principle

The Uncompensated or Under compensated Accident Victim

3.17 The common law negligence action is not, by definition, a remedy available to all injured people. An injured person, or the family of a person who has been killed, can claim compensation only where it is proved that another person was legally at fault for the accident. In addition, there are some cases, identified in Chapter 2, where an injured person can be denied compensation, even though the negligence of the defendant can be clearly established, as where a negligent drunk driver can rely on the defence of “voluntary assumption of risk” by a passenger. ²⁵ The use of the fault principle as a criterion for entitlement to compensation has attracted criticism from members of the judiciary on many occasions. ²⁶

3.18 In the Working Paper, ²⁷ we estimated that approximately one-third of people injured (or the families of people killed) in motor vehicle accidents, are unable to obtain any compensation through a common law negligence action because they are unable to prove fault. This estimate was originally challenged by the Law Society of New South Wales ²⁸ but in a recent report to the Attorney General conveying the Law Society’s proposals for change, it was stated, in relation to those who cannot prove fault, that

[t]his gap in the law is estimated to affect between twenty and thirty per cent of persons injured in transport accidents. ²⁹

Since publication of the Working Paper, further evidence has been obtained supporting the estimate in the Working Paper and indeed suggests that the proportion of severely injured people unable to obtain damages may be even higher.

3.19 A survey of spinal injuries patients admitted to the Royal North Shore Hospital in Sydney over a 25 year period, suggested that 44 per cent of those injured in all kinds of motor vehicle accidents were not entitled to common law damages. For the victims of motor cycle accidents, nearly two-thirds (63 per cent) were not entitled to common law damages. ³⁰ These conclusions receive support from information obtained by the Law Society from a survey of 200 paraplegics and quadriplegics, which it conducted in September 1983. This showed that of the 106 victims who sustained their injury on the roads, at least 38 per cent ³¹ had failed to prove fault. ³²

3.20 The Tasmanian Motor Accidents Insurance Board is responsible for processing compulsory third party claims, as well as for paying no-fault benefits under the Tasmanian motor vehicle accidents scheme. ³³ The Board provides information on the proportion of claimants who applied for scheduled benefits and common law damages.

Table 3.1: Tasmanian Motor Accidents Insurance Board:

Financial Year Ended 30 June	Scheduled Benefits	Common Law	CL/SB %
1983	3178	1721	(54.0)
1982	3547	2260	(63.7)
1981	3402	1722	(50.6)
1980	3379	1544	(45.7)
1979	3297	1505	(45.6)
1978	3617	1611	(44.5)
1977	3064	1259	(41.1)
1976	2814	1212	(43.1)

Source: Motor Accidents Insurance Board, Report for Year 1982-83.

Allowance must be made for the fact that the figures are based on claims received and it is possible that some accident victims on scheduled benefits make no common law claim even though entitled to do so. ³⁴ Against this, some common law claims received may ultimately prove unsuccessful and some accident victims may not claim scheduled benefits. On balance, therefore, the figures are likely to give a reliable indication of the proportion of motor accident victims with a valid common law claim. It is therefore significant that, over the eight year period, the average ratio of common law claims to scheduled benefit claims was not quite 1:2 (48.8 per cent).

3.21 It is often alleged that people who cannot show fault must in some sense be at fault themselves and therefore do not deserve to recover compensation. ³⁵ However, in many cases, the person’s injuries are the result of a pure accident. ³⁶ The following case studies illustrate this.

• Early in 1979, Ms T was driving on a country road when a tyre blew out and the car hit an oil slick. The car flew through the air and rolled a couple of times. Ms T is now quadriplegic. She was a primary schoolteacher and assisted her husband with his electrical business. After the accident she was hospitalised for 13 months and has had to return to hospital on several occasions. She received legal advice that she had no grounds to claim compensation. Ms T is in financial difficulties and receives a full invalid pension. ³⁷
• Mr G was riding a motorcycle in 1964 when he hit an oil slick, lost control of the cycle and collided with an oncoming car. He is now quadriplegic. He was 21 years old at the time of the accident and worked as a cement renderer. Mr G spent 16 months in hospital after the accident and has had to return to hospital on several occasions. He received legal advice that he had no grounds to claim compensation. Mr G had no health insurance at the time of the accident and was forced to rely on the government to pay medical costs. Mr G has married since the accident. He and his wife are dependent on the invalid pension. ³⁸

3.22 In addition to the accident victims who receive no compensation at common law are those who do not recover “full” compensation because their damages are reduced by reason of their contributory negligence. ³⁹ There is no recent statistical information which enables us to estimate the proportion of cases in which damages are reduced because of contributory negligence. However, a survey of closed insurance files conducted by the Australian Woodhouse Committee throws some light on this question. ⁴⁰ In New South Wales, an examination of files closed during 1972 showed that 20.5 per cent of successful plaintiffs suffering permanent disability and 14.6 per cent of plaintiffs with no permanent effect from the accident, had some reduction in damages for contributory negligence. ⁴¹ Overall, approximately one-sixth of successful plaintiffs had their damages reduced. The average reduction in total damages for such cases was almost 50 per cent. ⁴² In other States reductions ranged between 30 and 40 per cent. ⁴³ There is no obvious reason for the proportion to be any less today than in 1972.

3.23 This reduction in damages can be substantial and may lead to severe financial difficulties for the injured person and his or her family. One case from the Traffic Accident Study illustrates this.

• Ms CG suffered brain damage in an accident in 1970 when aged 18. It had been anticipated by her lawyer that Ms CG would receive close to $400,000 compensation. The third party insurer had made an opening offer of $80,000. The possibility of finding some contributory negligence had been considered. However, the court found Ms CG almost entirely responsible for the accident and only awarded her $50,000 gross compensation in 1978. Only $12,000 remained after the deduction of past accident related expenses. Ms CG was a trainee phyiotherapist prior to the accident. Since the accident she has worked in a sheltered workshop on a full-time basis. She has been dependent on the invalid pension since the accident. ⁴⁴

3.24 Apportionment of damages on grounds of contributory negligence not only has the potential to operate harshly on plaintiffs at fault, it also assists in working injustices of different kinds. When fault is a criterion of both liability and reduction of damages, as it is in the common law negligence action, an entirely innocent plaintiff who cannot prove fault, and therefore gets nothing, is worse off than the grossly negligent plaintiff, who can prove fault but still recovers a proportion of the damages. ⁴⁵ Where compulsory third party insurance exists, the unfortunate injured plaintiff is made to pay for his or her contributory negligence while the negligent defendant, who may be fortunate enough to escape injury, is not made to pay at all.

Settlements

3.25 Other injured people may receive less than “full compensation” because they settle their claims. The vast majority of motor vehicle accident claims are settled. In 1982,90.9 per cent of motor vehicle accident cases in the Supreme Court were settled.⁴⁶ In 1983, in the District Court, 88.6 per cent of such cases were settled.⁴⁷ About 65 per cent of the cases settled were settled prior to the hearing. Of the remaining 35 percent, at least 86 per cent were settled within one hour of the commencement of hearing. ⁴⁸

3.26 One reason a plaintiff may settle is that there may be difficulty in proving fault. ⁴⁹ Where claims are settled, the plaintiff may receive substantially less than the amount which a court might be expected to award if the defendant s liability were established and if the plaintiffs evidence of loss were accepted. In such cases the reduction is the price the plaintiff pays for certainty of outcome. In addition to difficulties of proof, a person may settle because he or she has pressing financial needs and cannot afford to wait for the determination of the claim by the courts. ⁵⁰ Once again, the cost of a speedy outcome may well be a reduction in damages. This is discussed further in paragraphs 3.80-3.83 below.

3.27 In exposing the extent to which the common law negligence action fails to compensate, or to compensate fully, the fact should not be overlooked that in some cases other sources of compensation ma be available, such as workers’ compensation, ⁵¹ social security ⁵² or even, occasionally, another common law action such as breach of statutory duty. ⁵³ However, the concern of this Chapter is to evaluate the adequacy of the common law negligence action as such, as a system of compensation.

Community Expectations

3.28 Reliable information on community attitudes to accident compensation is very limited. However, the available studies do not bear out the assertion that the community expects the right to compensation to depend on someone else’s fault. In one English survey of over 1,000 accident victims, only half (210 out of 410) of those injured, who thought that they should be compensated, were of the opinion that the compensation should be paid by the person at fault. ⁵⁴ But even amongst those who expressed the view that the right to compensation should depend on fault, opinions may have been conditioned by the existing state of the law as they understood it. ⁵⁵ Despite claims of community attachment to fault at the time of the introduction of comprehensive no-fault compensation in New Zealand, ⁵⁶ community support for fault-based compensation could not be found after eight years of no-fault. ⁵⁷

2. Other Inadequacies of the Fault Principle

Evidentiary Problems

3.29 The failure of the common law to compensate all victims is almost universally recognised as a deficiency requiring remedial action. But the shortcomings of the fault principle as a criterion for the award of compensation are not confined to the obvious fact that some victims are excluded from compensation. Problems of proof often produce quite arbitrary results. Many commentators ⁵⁸ have pointed out the difficulties of applying the fault principle to high speed traffic situations which involve varying forms of transport and drivers of uneven experience and ability. Transport accidents usually occur suddenly and unexpectedly. Consequently great difficulties may arise in ascertaining who was at fault in a legal sense. judgments are made in respect of events which take place quickly, and which often involve split-second observations and decisions. ⁵⁹

3.30 In attention is not only the cause of most accidents; it is also the reason why so much evidence is unreliable. Usually witnesses who give evidence were not paying close attention at the time of the accident Reliability of evidence is further undermined because the question of fault often has to be determined many years after the accident, on the basis of the imperfect and uncertain recollections of witnesses. ⁶⁰ The judge or court may be forced to make an assessment of fault on the basis of incomplete or unreliable information. ⁶¹ Witnesses generally do not have the training or experience to gauge speed or distance, matters which may be crucial in determining liability. ⁶²

3.31 Judges themselves have frequently commented on the difficulties of resolving the issue of fault, and have suggested that the decision often involves elements of artificiality and arbitrariness.

The Court is asked to come to a conclusion on what the fictional reasonable and prudent man would have done in the circumstances which more often than not required split-second decisions. Witnesses are asked to tell months or years after the event, with great accuracy, their observation of events prior to and leading up to an accident when they had no occasion whatever to make any observations because no accident was anticipated. The evidence in the ordinary intersection case affords the best example of the unreality of evidence of this character. It would require several witnesses observing the accident armed with directors and stopwatches to give the sort of evidence witnesses are continually asked to give in these cases ... A great part of the evidence in actions arising out of motor vehicle accidents is in fact reconstruction and too often reconstruction with an eye on the result. ⁶³

3.32 Difficulties of proof and uncertainty of result are especially likely in cases involving unidentified vehicles, which require an action against a nominal defendant⁶⁴. Because the allegedly negligent driver has not been identified and very often there are no witnesses apart from the victim,⁶⁵ the accident has to be reconstructed from circumstantial evidence. The special difficulties faced in such circumstances are demonstrated in the differences of opinion found in the High Court decision in Holloway v. McFeeters.⁶⁶

3.33 Problems of proving negligence are not confined to those arising from insufficient or equivocal evidence. Transport accidents often involve family vehicles in which the victim has to prove the negligence of another family member to recover compensation. Submissions referred to the reluctance of some accident victims to give evidence supporting their case ⁶⁷ even though failure to do so was contrary to their own financial interests. ⁶⁸ This may be offset by the knowledge that the third party insurer would pay the damages award and relieve the party at fault from having to bear the loss. Thus the victims attitude will vary depending on the extent of his or her understanding of the system. ⁶⁹ Given the often crucial role of the victim’s evidence in proving fault, the attitude of the victim is yet another variable likely to produce inconsistences.

Decline of the Significance of Fault

3.34 The use of motor vehicles and public transport services is almost universal in Australia and the accidents which occur are among the inevitable hazards of modern life. Indeed, it is largely for this reason that the system of compulsory third party motor vehicle insurance was instituted. Both the Australian Woodhouse Committee and the Pearson Royal Commission in the United Kingdom have pointed out that it is unrealistic to assume that a motorist can drive safely at all times and that lapses into carelessness can be avoided. ⁷⁰ In the words of the Pearson Commission:

[e]ven good drivers make mistakes. A study by the World Health Organisation in 1962 found that a good driver makes a mistake every two miles; and an American study in 1964 suggested that on average a good driver makes nine mistakes every five minutes. A detailed investigation of over 2,000 road accidents in the Thames Valley, carried out over a four year period by the Transport and Road Research Laboratory, concluded that human mistakes were the sole cause of 65 per cent of accidents, and a contributory factor in a further 30 per cent. ⁷¹

The commonest contributory faults were carelessness or lack of attention and, for motorists, driving too fast. As a cause of accidents, irresponsible or reckless driving was relatively infrequent, and deliberate aggressive driving relatively rare. ⁷²

Similarly, a report of a Study of accidents occurring in the Adelaide metropolitan area in 1976 concluded as follows:

[M]ost of the accidents involved ordinary drivers behaving in an ordinary way. There were some others who were intoxicated, or inexperienced, or who were speeding. But it would be wrong to assume that the road accident problem can be solved by concentrating solely on these few well recognised risk factors, important though they are. ⁷³

In a study carried out under normal driving conditions, in Washington DC, it was found that “good” drivers committed an average of nine driving errors of four different types every five minutes. ⁷⁴

3.35 Findings of this kind suggest that the fault principle as it is now applied in motor accident cases has lost a great deal of its original meaning. A breach of duty in a negligence action involves a departure from the standards of the ordinary and reasonable road user. Yet by those standards, if they were to be applied stringently, relatively few defendants would be held liable. The trend to extend compensation to a wider class of claimants has expanded the notion of “fault” as a criterion of liability in transport accident cases. This has increased the apparent arbitrariness of decisions as to whether an individual has departed from standards of reasonable care and, if anything, has added to the already considerable uncertainty surrounding the application of the fault principle. Such discrepancies between the theory of fault and its application undermine its alleged role in fulfilling community expectations.

3.36 Another important consideration is that human error is not the only cause of motor vehicle accidents. Other circumstances, such as lighting, road construction, or roadside structures obstructing vision may also be significant.⁷⁵ The search for fault on the part of a driver may divert attention from the role that these matters have played and may play in future accidents.⁷⁶ Mr DC Herbert, Superintendent of the Traffic Accident Research Unit, made the following submission in his private capacity.

The consequence (of the ‘fault concept’) [is] that there is little or no financial or other incentive for measures to be taken to prevent a recurrence of the crash and resulting injuries -measures largely out of the hands of the individuals (usually drivers) who are blamed for crashes -measures that could, however, readily be instituted by various corporate bodies that have the capacity and technology to provide a safe vehicle and road environment ... [B]y focusing attention upon individual drivers, the common law positively discourages remedial work by corporate bodies to produce a less risky environments.⁷⁷

Fault and Deterrence

3.37 The system of compulsory third party insurance is one which recognises that accidental injury is an inevitable consequence of the ownership and management of motor vehicles.⁷⁸ Under the system in force in New South Wales (and elsewhere in Australia) the cost of paying compensation is spread more or less evenly among all motor vehicle owners. Negligent motorists pay nothing extra for the additional risks or losses they create. Accordingly, to the negligent motorist, fault in the common law sense is irrelevant. It is the criminal law which, in a wide range of driving offences, is the instrument of deterrence. What we now have in New accidents which has many of the South Wales is a system of compensation for motor accidents which has many of the trappings of a no-fault scheme. This includes funding from a compulsory levy on car ownership, to which direct access is now provided without even the pretence of naming the negligent motorist as defendant in the proceedings (the GIO being named instead).⁷⁹ As noted earlier (paragraph 3.8), the proponents of the deterrent value of fault have been forced to direct their attention to the allegedly deterrent effect on the plaintiff of apportionment on grounds of contributory negligence.

3.38 Contrary to confident assertions by the proponents of fault, it is difficult to find any empirical evidence which proves that, whether plaintiff or defendant at fault is made to pay, fault operates as an effective deterrent It may well be that other factors, such as fear for one’s own safety, are much more likely to influence a person’s conduct. ⁸⁰ To put it another way, anyone not deterred by a risk to his or her own personal safety is unlikely to be deterred by the possibility of having to pay damages ⁸¹ or having his or her own damages reduced. As to the argument that public exposure of those found to be at fault can act as a deterrent (paragraph 3.8), commentators agree that, to the extent that this may be true, it applies only in certain areas, such as manufacturers’ liability for defective products, but not negligent driving. ⁸²

3.39 Other deterrent effects which the common law negligence action is claimed to have could be incorporated in a no-fault compensation scheme if shown to be effective. Premium contribution adjustment (paragraph 3.9) does not have to depend on liability for damages based on fault. It could be based on accident records kept independently of court proceedings, or on conviction records for driving offences. This would mean that a person with a bad driving record would be made to pay indirectly for the cost of transport accidents, assuming that the cost is met from contributions from motor vehicle owners and levies (see Chapter 17). As to the general deterrence theory (paragraph 3.10), this is equally relevant to a no-fault system as it is to one based on fault. There is the same incentive to keep down contributions by driving carefully and thus avoid the overall cost of transport accidents.

3. Once-and-For-All Assessment

3.40 Common law damages are awarded in the form of a single lump sum which covers past and future economic loss and non-economic loss. ⁸³ Since the award is made once-and-for-all, it cannot be altered if it turns out to have been based on false predictions. Many commentators ⁸⁴ have criticised the once-and-for-all rule, as have a number of people who made submissions. ⁸⁵ Although criticisms of it are not confined to common law negligence actions arising out of transport accidents, they are of particular importance in this area. The reason is that motor vehicle accident victims tend to suffer relatively serious injuries and are thus more likely to become reliant on their lump sum awards to provide for future needs for long, perhaps indefinite, periods.

3.41 The grounds of criticism, accepted even by many who otherwise support retention of the common law negligence action, include the following:

• the difficulty, if not impossibility, of accurately estimating future economic losses;
• the danger that even very large awards may prove to be inadequate to meet the injured person’s losses during the period of incapacity;
• the absence of any requirement that the injured person use the award to provide for his or her future expenses or support; and
• the risk of the community paying “double compensation” where awards are exhausted or diminished and the injured person has recourse to the social security system for support.

3.42 Because the payment of damages on a once-and-for-all basis is a central feature of the common law negligence action in New South Wales and one that has received strong support in some quarters, we considered it important to gather information about the experiences and attitudes of accident victims who have received lump sum awards or settlements. As is noted in Chapter 1, three surveys of accident victims were conducted. Information gathered in these surveys supports the criticisms which have been made of once-and-for-all assessment.

Estimating Economic Loss

3.43 In order to assess damages for economic loss, the court must make a number of predictions. These include predictions as to:

• the life expectancy of the victim;
• the likelihood of the victim returning to work and contingencies such as future unemployment, sickness or further accident;
• the nature and extent of medical, hospital and nursing services that the victim will require and the costs of these services in the future; and
• the extent to which care of the victim will be provided by his or her family in the future.

3.44 The extraordinary difficulty of making accurate predictions on these matters, often over a lengthy period, makes it almost certain that a seriously injured person will be over-compensated or under compensated for future loss. The plaintiff will be under compensated if his or her life is longer than estimated if the award is discounted to take into account predicted developments (such as improved capacity for work) which do not occur, or if medical and related expenses are higher than anticipated. Overcompensation will occur if the plaintiff dies sooner than expected (in which case there will be a windfall for the estate); if the loss of earning capacity is less than anticipated; or if the plaintiff s rate of recovery is more rapid than predicted. in the words of Lord Scarman:

[k]nowledge of the future being denied to mankind, so much of the award as is to be attributed to future loss and suffering -in many cases the major part of the award -will almost surely be wrong. There is really only one certainty. the future will prove the award to be either too high or too low. ⁸⁶

3.45 The task is particularly difficult in the case of seriously injured children whose losses may endure for many years. For example, in a case involving a four year old boy who sustained brain damage in a road accident, a Judge of the Court of Appeal commented on the task of the trial judge in assessing damages.

Where the earning capacity of a four year old has been destroyed and he comes to trial aged nine, it must be an exercise of a most speculative character upon which the law requires a judge to embark. ⁸⁷

In another recent case the problem of assessment in relation to a boy aged 13 was said to be “a task worthy of Solomon”, and one in which

... different minds could come to wide-ranging figures and it would be impossible to say that they are wrong, once the fundamental findings of fact as to the impact of the injury are reached. ⁸⁸

Of course, where a young person has been severely disabled there are likely to be difficult problems of prediction whatever the system and form of compensation. However, an approach which requires compensation to be assessed on a once-and-for-all basis must exacerbate the inherent problems.

3.46 There are no studies which have systematically attempted to ascertain the proportion of cases in which over and under-compensation occurs because of inaccurate predictions. Such a study would require a detailed comparison of the assumptions made by the court at the time of the award, and the situation of the accident victim some years later. In the Traffic Accident Study, however, we were able to make this comparison for 17 recipients whose cases were decided between 1973 and 1982. (The remainder of cases involved settlements or unreported judgments which could not be found).

3.47 The comparison revealed that in 16 of the 17 cases, predictions made by the court as to the future needs and circumstances of the victims were inaccurate. In all but two cases the inaccurate prediction disadvantaged the victim. Of the 14 disadvantaged victims, 10 had adequate incomes at the time of the survey, but nine of these had received compensation after 1979 and therefore it was too soon to judge whether their incomes would continue to be adequate. The most common reason for inaccuracy was an underestimation of future medical expenses.

3.48 One cause of inaccuracy was an unexpected deterioration in the victims health after the award of damages. ⁸⁹ A second cause of inaccuracy was the failure to make adequate allowance for the effects of inflation on the cost of items and services including wheelchairs, pharmaceuticals, home nursing and domestic assistance. This occurred even over relatively short periods. ⁹⁰

3.49 A third cause of inaccuracy was the failure to assess accurately the physical capabilities of the victim and his or her likely lifestyle. ⁹¹ Inaccurate predictions were also made in respect of employment prospects. ⁹² In one case, an inaccurate prediction relating to life expectancy resulted in a windfall to the estate of the accident victim. ⁹³

Inadequacy of Lump Sum Awards

3.50 As already noted, the vast majority of plaintiffs in common law negligence actions settle their claims, often at a substantial discount from their theoretical entitlements to “full” compensation. However, even where damages are assessed by a court, the compensation often turns out to be inadequate to meet the needs of the injured person arising out of the accident in serious cases. In some cases this happens because the lump sum has not been invested or managed wisely. It may also occur, for example, because of factors of the kind referred to in paragraphs 3.48-3.49, or because of the effects of inflation which in areas such as medical and nursing expenses, may exceed the general rate of price increases.

3.51 In the Lump Sum Survey an attempt was made to measure the adequacy of awards and settlements in two different ways. These involved:

• an examination of the subjective attitudes of recipients of awards and settlements; and
• an objective analysis of their present financial situation.

Interviewees were asked whether they had been satisfied with the amount of damages they received in 1976. They were also asked whether they were satisfied with this amount at the time of the interview. The answers displayed a considerable change in the level of satisfaction between the time the award was received and the time of the interview.

• Of the 26 motor vehicle accident victims who received damages awards, or settlements, of $100,000 or more, 18 (69 per cent) had been satisfied with the amount received in 1976. By the time of the interview, which took place in early 1983, only four (15 per cent) were satisfied. The level of dissatisfaction was highest in this group, which included some record verdicts. ⁹⁴
• Of the 112 motor vehicle accident victims who received medium awards or settlements, in the $20,000 -$35,000 range, about half (54) had been satisfied in 1976. By the time of the survey, less than one-quarter (25) were satisfied. ⁹⁵

3.52 Respondents who were dissatisfied with the amount they received were asked about their main reason for dissatisfaction. The reasons included inflation, limited job prospects, the fact that money could not compensate and extra medical costs. In the case of people receiving high awards for motor vehicle accidents, 10 of the 22 dissatisfied respondents (45.4 per cent) said inflation was their main reason for dissatisfaction. In the case of dissatisfied recipients of medium awards for motor vehicle accidents, the most common reason for dissatisfaction was that “money could not compensate” for the injuries (52.9 per cent) and almost one-fifth of the group (19.5 per cent) gave inflation as their main reason. ⁹⁶

3.53 The Lump Sum Survey also made an objective assessment of the circumstances of recipients, by identifying those who were in a particularly weak or strong financial position. People were defined as “vulnerable” if they were either receiving income tested social security payments, or reported an income of under $150 per week, and as “secure” if they had an income of over $300 per week. ⁹⁷

3.54 A significant proportion of recipients of both “high” and “medium” damages fell into the “vulnerable” category. Almost 34 per cent of motor accident victims who received medium-range awards and 50 per cent of those who received high awards were financially vulnerable at the time of the survey. Only 21 per cent of accident victims who received high awards and around 19 per cent of those who received medium range awards were financially secure.⁹⁸

3.55 In general there was a link between the objective financial circumstances of the interviewee and his or her satisfaction with the award or settlement at the time of the interview. Although the statistical differences must be interpreted cautiously, because of the small sample, those currently dissatisfied with their damages proved more likely to be vulnerable, while those currently satisfied with their damages were more likely to be secure. ⁹⁹

3.56 In the Traffic Accident Study, the adequacy of the award was measured in terms of whether it continued to meet accident related and reasonable living expenses at the time of the survey. This measure of adequacy is well short of the avowed intention of the common law to restore the accident victim to a standard of living similar to that which he or she would have had but for the accident. Had the latter criterion been applied, there would have been many more respondents whose financial resources and income at the time of the survey were inadequate.

3.57 Table 3.2 presents the results of the analysis, although care must be taken as the Survey was not designed to be statistically valid. Even where compensation was received after 1 January 1979, there were some cases where income and financial resources were already failing to meet accident related and reasonable living expenses. For cases resolved before 1 January 1979 more than half of the awards have proved inadequate. A further 13 per cent of respondents were in a financially vulnerable position and for most of these it is likely, on our assessment, that the award will prove inadequate in the future. Nearly two-thirds of cases more than five years old involve inadequacy or financial vulnerability.

Table 3.2: Traffic Accident Study: Adequacy of Income at Time of Survey

New South Wales 1983

Compensation Before 1979			Compensation After 1979		Total
Financial Situation	Number	%	Number	%	Number	%
Inadequate Cases	28	52	5	17	33	39
Financially vulnerable cases	7	13	5	17	12	14
Adequate	19	35	20	66	39	47
TOTAL	54	100	30	100	84	100

Source: Traffic Accident Study, Table 3.1

3.58 The information in Table 3.2 paints only a general and impersonal picture. Individual case studies more graphically illustrate the hardship which may be experienced by accident victims whose income and financial resources prove inadequate.

• Mr B was a 26 year old machine mechanic before he became paraplegic in a car accident in 1975. After 10 months in a spinal unit he returned to work for his old company at a specially prepared bench. He earned about $120 per week. In 1976 his claim was settled for $210,000 on the basis that he was able to continue to work. After payments of expenses he received $186,000. In 1979, some three years after the settlement, a cyst developed in his spinal cord. Despite three operations he gradually lost the function of one arm and hand. He has not been able to work now for about a year. With the settlement money he purchased a specially fitted car, invested in second mortgages and repaid money owed to the Department of Social Security. He later realised many of his investments to purchase a house. The remaining money is gradually being used for general living expenses and medical costs. The three operations for the cyst cost over $20,000. He is now on an invalid pension. He can no longer afford a full-time nurse, and his wife gave up her job to look after him. M r B and his wife are very concerned that Mr B’s increasing disability and continuously rising costs and medical expenses will necessitate the sale of their house. The continuing degeneration may leave Mr B quadriplegic. ¹⁰⁰
• Mr C suffered paraplegia as a result of an accident in 1948 when aged four. In 1954 he received 8,000 pounds net compensation. The lump sum was managed by a trustee for nine years. When Mr C married, he withdrew the lump sum to buy a house and flat. The flat was rented. Both Mr C and his wife received an invalid pension. The combined income from the pension and the flat was not sufficient to meet their living costs. Five years later, he sold the house and flat and bought a home unit in which he lived with his wife and child. After one year in the home unit, Mr C and his wife separated and Mr C went to live with his mother in a caravan. During this time he had a job working on an assembly line. He lost his job when the factory closed down and is unfit for work because he suffers from continual health problems. Mr C, now aged 40, and his mother share a Housing Commission home. The compensation is exhausted and he relies on the invalid pension. He has been hospitalised nearly every year and makes regular visits to a clinic and his general practitioner. The cost of necessary pharmaceutical and medical aids is high. His medical costs, which should have been met by the compensation are covered by his pensioner health card. His aged mother provides attendant care to Mr C free of charge. ¹⁰¹

Reliance on Social Security

3.59 In the recent Handicapped Persons Survey conducted by the Australian Bureau of Statistics, ¹⁰² more than 50 per cent of handicapped road accident victims in New South Wales were found to be on either the invalid pension or some other government pension or allowance. ¹⁰³ Seventy per cent of road accident victims who were heads of family income units were in family units whose annual income was $8,000 or less. ¹⁰⁴ While these figures include both accident victims who had recovered compensation awards at common law and those who had not, they underline the very substantial proportion of road accident victims for whom the common law for one reason or another has failed to provide adequately.

3.60 In the Lump Sum Survey nearly one-third of motor vehicle accident victims who received high awards or settlements were reliant, at the time of the survey, on social security benefits (excluding the age pension) or on a combination of social security benefits and other income. Over one-fifth of those victims who received medium awards or settlements are dependent in the same way. ¹⁰⁵ Approximately one-third of respondents in the Traffic Accident Study were dependent on social security benefits. Some, whose income and financial resources were adequate to cover accident related and reasonable living expenses, had organised their affairs so as to preserve their entitlement to the pension. ¹⁰⁶

Full Compensation

3.61 The impossibility of accurate prediction in most cases, combined with the effects of inflation ensures that the majority of accident victims (especially those most seriously injured), however innocent of fault themselves, ¹⁰⁷ are left with something well short of full compensation in the long term.

Use of Award by Plaintiff

3.62 A settlement or verdict is most likely to prove inadequate in cases where the person is seriously injured and has ongoing costs. However, there are some people with serious injuries who do not experience financial difficulty. Depending on such matters as their financial expertise and initiative and the availability of informed advice, they may manage very well. In both the Traffic Accident Study and Lump Sum Survey there were a number of recipients who were in relatively good circumstances. For example, in the Lump Sum Survey four out of the 19 motor vehicle accident victims who received “high” damages were classified as “secure” with incomes of over $300 per week. ¹⁰⁸

3.63 The problem with a once-and-for-all lump sum award in this regard is that courts must assume that all plaintiffs will prudently invest the sum awarded. However, once a court makes an award it has no control over how the award is used. ¹⁰⁹ If a plaintiff dissipates the amount awarded, or if the amount proves to be inadequate because of imprudent investment decisions, the injured person will suffer considerable hardship and the community will ultimately have to provide further support through the social security and health care systems.

3.64 The award of a substantial lump sum to provide for the future imposes a very heavy responsibility on the injured plaintiff. The award is made on the theoretical basis that the lump sum, when invested, will allow periodic drawings from income and capital to be made so that the amount awarded will be exhausted at the expiration of the predicted compensation period. For the plaintiff to achieve this result, or to ensure that the award is not exhausted prematurely, considerable investment experience and skill are required. Injured people do not necessarily have this experience and may require expert advice to ensure that the lump sum is invested appropriately. Factors beyond the plaintiffs control may lead to the loss or severe reduction of the lump sum compensation award. Such factors include:

• the liquidation of an investment company, ¹¹⁰ and
• dishonest dealings by a business partner.

Some examples of the second factor were found in the case studies. ¹¹¹

3.65 Both the Traffic Accident Study and the Lump Sum Survey sought information on the extent to which victims received investment advice and the purposes for which damages were used. In the Lump Sum Survey, 72.3 per cent of recipients of medium level awards in motor vehicle cases did not receive any investment advice. Recipients of high level awards were much more likely to seek advice, although there was still a significant minority (23 per cent) who did not do so. The most common source of advice, when it was received, was the lawyer handling the case, who would not necessarily have specialist financial expertise. ¹¹² The Traffic Accident Study supported the findings of the Lump Sum Survey in so far as most of the respondents who received large amounts of compensation sought professional advice before deciding on their investments. ¹¹³ Moreover, respondents in the Traffic Accident Study sought advice principally from the solicitor who had represented them in their compensation claim. ¹¹⁴ It is interesting to note that there does not appear to be a direct correlation between the seeking of professional advice and an adequate future income. ¹¹⁵

3.66 In the Lump Sum Survey, the most common expenditure was for house purchase and/or improvements, although where the injured person received $100,000 or more this was often combined with income-producing investments. ¹¹⁶ A similar pattern of expenditure was observed in people interviewed for the Traffic Accident Study. ¹¹⁷ While expenditure on a house reflects the aspirations of many accident victims and may be a very sensible investment, it is not necessarily the purpose for which the award or settlement was designed. Excessive expenditure on a non-income producing asset may leave insufficient capital for income generation to meet the future needs of the accident victim. This may have been a contributing factor to the generally low level of income of participants in the Lump Sum Survey.

3.67 Some recipients found that the management of their damages caused considerable anxiety. ¹¹⁸ People who were relatively young at the time the money was received often commented that they made immature Judgements which they later regretted. ¹¹⁹ Some participants in the Traffic Accident Study commented that with hindsight they would have preferred a system of weekly payments, ¹²⁰ though there were other participants who suggested that the lump sum gave them freedom and flexibility. ¹²¹

4. Difficulties in Assessing Non-Economic Loss

3.68 Damages for non-economic loss include compensation for pain and suffering, loss of amenities and enjoyment of life and loss of expectation of life. ¹²² In some cases a separate amount has been included for “disfigurement”, ¹²³ although there is no reason in principle why this could not be allowed for as an element of pain and suffering. A fundamental difficulty inherent in the award of damages for non-economic loss is that there is no monetary equivalent for what is being compensated. Without clearly defined standards, there is a real risk of inconsistency from one case to another. With respect of loss of expectation of life, ¹²⁴ this risk is minimised by the rule that it should be kept to a “conventional sum” ¹²⁵ damages for the other items of non-economic loss are under no such constraint.

3.69 In England, there has been a gradual evolution of a judicial “tariff” aimed at maintaining reasonable consistency in the awards for non-economic loss in similar cases. In a number of cases actual figures for specific disabilities have been suggested by the English Court of Appeal as the norm. ¹²⁶ However, the High Court of Australia has consistently rejected attempts to introduce some uniformity in the assessment by reference to a norm or standard derived from other cases. ¹²⁷ Notwithstanding this weight of opinion, some judges have expressed support for a principle of uniformity.

We are here dealing with incommensurables, the putting of a money value on such things as pain and loss of enjoyment of life. Looking at any case by itself, it is impossible to show that any figure must be right or must be wrong. In truth the only test which can be applied is whether the figure in question conforms approximately to what is normally allowed in somewhat similar cases. One merely has a series of conventional sums which for want of anything better, must be taken as establishing an acceptable pattern. ¹²⁸

3.70 A consequence of the High Courts position and the limited control which appellate courts have over individual assessment ¹²⁹ is that the practices adopted by trial judges differ. It is well known that some judges are regarded as more generous than others, particularly in relation to compensation for non-economic loss. Indeed, some of the participants in the Traffic Accident Study commented that their main reason for settling the claim was that they had received advice from their legal advisers that the judge who was to hear the case was not likely to be sympathetic. ¹³⁰ Any compensation system will encounter difficulties in determining the appropriate level of monetary compensation (if any) for non-economic loss. However, the inconsistencies that characterise the assessment of common law damages create the potential for unfairness among injured people, which may be avoidable in a different system.

5. Effects of the Common Law on Rehabilitation

3.71 There has been considerable debate about the effect of common law litigation on the rehabilitation of accident victims. It is alleged that the process may precipitate the condition called accident compensation neurosis. While there is still considerable debate in medical circles about the nature of this condition and its causes, ¹³¹ it appears to be closely linked with the anticipation of a pending claim whose outcome is uncertain. ¹³² It was originally believed that the finalisation of litigation “cured” the condition, ¹³³ but later studies have not supported this conclusion. ¹³⁴ The development of the condition is believed to be the product of a complex reaction between age, work satisfaction cultural and social conditions, physical injury and the litigation process, although it is not clearly understood. The condition has been medically acknowledged as verifiable, and not merely malingering or exaggeration for the purposes of maximising compensation. The common law also recognises that the condition exists and can have disabling effects. ¹³⁵

3.72 Many aspects ‘of the common law negligence action are said to inhibit rehabilitation. First, there is the highly adversary nature of the proceedings.

These people have been made to feel responsible for their injury and have met responses of hostility and indifference from professionals. Soon after the injury they are allocated a sick role, then at a certain point there is a change and an attempt to disprove the legitimacy of their symptoms. The person is forced to maintain and demonstrate his symptoms as proof of his own validity. Symptoms become his major point of communication with others. He holds on to them with fury and resentment. Any attempts to give up symptoms are opposed by the demands of his legal entanglements. Recovery is seen as against his best interests [for compensation settlement], in his lawyer s view. The person withdraws into a state of learned helplessness, a parasite existence of dependency, where he sees the world as an unbearably hostile, foreign place. ¹³⁶

This was also noted in submissions received by the Commission as one important anti-rehabilitative aspect of the common law. ¹³⁷

3.73 Secondly, there is the necessity of awarding a once-and-for-all lump sum. Where a lump sum is the only form of compensation available, there is a certain financial incentive to maximise the damages payable by remaining as disabled as possible up to the date of trial or settlement In the vast majority of cases, this is not a conscious desire to defraud the system, but rather a sensible precaution to maximise compensation and thereby ensure future financial security. This goes some way to explain the alleged “curative” effects of the finalisation of litigation which can then be seen as simply a manifestation of delayed rehabilitation efforts. Some submissions have noted this effect. ¹³⁸ These unconscious or conscious realisations of injured people that rehabilitation efforts may lead to reduced compensation are often reinforced by legal or medical advisors whose primary objective is to maximise the compensation paid for the injury. ¹³⁹

3.74 Delays, which are inherent in the adversary system (paragraphs 3.78-3.83) can also adversely affect the claimants prospects for rehabilitation. It is generally accepted that rehabilitative treatment is most effective where it is made immediately available to an accident victim. ¹⁴⁰ For example, the submission of the Australian Council for Rehabilitation of Disabled referred to the harmful effect of delays as well as adversary court procedures on the rehabilitation of accident victims. ¹⁴¹ By the time the lump sum is delivered, the plaintiff s condition is often fixed and compensation neurosis or despair may have set in, reducing the opportunity for rehabilitation.

3.75 Atamorefundamentallevel,itmaybearguedthatthereisaconflictbetweenthegoals of rehabilitation and assessment of damages under the common law.

Rehabilitation is taken to mean any of the activities aimed at the restoration of the accident victim ... which tend to shorten the period of disability, reduce pain and suffering and produce a reasonably satisfying adjustment in the shortest possible time. ¹⁴²

It is argued that from the victim’s perspective, the assessment of common law damages is inimical to rehabilitation. The common law emphasises what was lost, be it quality of life, loss of earning capacity or loss of function. The greater these losses the larger the damages awarded. Rehabilitation will seek to minimise or eliminate these losses, and concentrate on remaining abilities, and so efforts to rehabilitate may result in reduction in damages awards. This possibility was vividly illustrated in a recent New South Wales decision. A young man suffered spinal injuries in a motor accident. At the trial in 1980 damages were assessed upon the basis that he would not walk again. Through determination and effort, and with the assistance of his family and friends, he taught himself to walk. The judgment quotes from his affidavit.

I did not tell [the doctors] that I had been walking or doing the exercises designed to help me walk. I did not tell them because all the doctors who treated me and all the doctors who had seen me for medico-legal purposes prior to the trial, had told me that I would never be able to walk again; I thought they had all written me off as far as walking was concerned. I felt proud of my achievement ... I wanted to achieve for myself the ultimate goal of being able to walk and then when I could, show the doctors what I had done. ¹⁴³

Notwithstanding that one of the judges called his efforts a “miracle”, ¹⁴⁴ and that there was little evidence that the improvement in his condition would be permanent, the majority of the Court of Appeal held that judgment should be set aside and a new trial ordered, in the expectation that the damages assessed in the new trial would be less than those originally awarded.

3.76 While rehabilitation focuses the attention of the injured person upon the remaining abilities, the medico-legal process, which accompanies the common law assessment of damages, concentrates the mind of the injured person on his or her disability. Instead of minimising the disabling effects of any impairment a person must reinforce the attributes of the disability through frequent medical examinations and evidence collected for some years after the accident. in the words of submissions received by the Commission:

[t]he present compensation system puts a priority on establishing an injured person’s rights and entitlements. The first concern of the injured person is his legal rights. This is reinforced by vested interests, unions, peers and family. The injured person must spend a great deal of time reassuring himself and others that his legal rights are guaranteed and rehabilitation can only commence once his legal position is clear. ¹⁴⁵ The necessity of proving the debilitating effects of an injury encourages and reinforces the prolonged adoption of the ‘sick role’ by many injured persons. ¹⁴⁶

3.77 Reports into rehabilitation have generally stated that at best, the common law is ambivalent towards promoting rehabilitation and, at worst, is a positive disincentive to efforts to rehabilitate. For example, the Conybeare Report in 1970 which canvassed the possibility of the establishment of a rehabilitation facility for workers under the Workers’ Compensation legislation said in relation to the success of rehabilitation efforts in North America

[t]his in my opinion rests upon two lynch-pins: an abundance of financial resources deriving largely from Federal-State co-operation and the absence of any rights of common law action in the injured worker. This negative factor prevents his seduction by the lure of a lump sum to be obtained from a jury verdict It was freely stated to me in Canada and America that any real success in rehabilitation could not have been expected if the common law action (without the common law defence) had been available alongside the workmen’s compensation provisions. ¹⁴⁷

The Minogue Report into the Victorian combined no-fault/common law motor vehicle accident compensation system also expressed considerable reservation about the effect of the common law on efforts towards rehabilitation. ¹⁴⁸ Further discussion of reports which have considered the effects of the common law upon efforts at rehabilitation appear in Chapter 9.

6. Delays

3.78 A number of factors can lead to delays in common law negligence actions, which are conducted on an adversary basis. These factors include:

• the need to wait for the plaintiffs injuries to stabilise so that more accurate assessment of damages can be made;
• where children are injured, the need to wait until they have gained maturity or attempted entry into the workforce in order to assess their employment prospects;
• difficulties in the collection of evidence and the location of witnesses;
• difficulties in arranging for examination and reports by medical practitioners, many of whom can give appointments for review of accident victims or reports only months ahead;
• difficulties in arranging trial dates that are convenient for all the witnesses involved, especially expert witnesses; and
• congestion of court lists due largely to other common law negligence actions awaiting hearing.

3.79 Table 3.3 shows the time from commencement of action to verdict from records kept by the GIO in 204 cases in which a Supreme Court verdict was obtained during the period September 1981 to September 1982. The Table indicates that the largest proportion of cases are completed between 25 and 36 months after commencement (41.7 per cent). The next largest proportion of cases (25 per cent) are completed 13-24 months after commencement. In nearly 10 per cent of cases the time exceeds five years. One case resolved in this period took over 15 years to complete. In the Traffic Accident Study the time period between the accident and receipt of compensation varied from a few months to 10 years. For most it took more than three years to receive compensation. ¹⁴⁹

3.80 Several submissions commented on the desirability of resolving claims speedily, and criticised the delays which occur under the present system. ¹⁵⁰ Even those who ardently support the continuation of the common law recognise the difficulties of delay. ¹⁵¹ The consequence of delays to injured claimants may be very serious indeed. They may incur substantial expenditure and suffer financial loss while waiting for their cases to be heard. The financial problems, and the stress caused to an accident victim and to his or her family during the intervening period, are not the subject of special compensation at common law. Further, they may be such as to induce a plaintiff to settle for less than “full” compensation. Delays have the greatest impact on the most seriously injured victims whose need for prompt compensation will often be urgent.

Table 3.3: Motor Vehicle Common Law Negligence Actions: Supreme Court Delays

New South Wales, Year Ended September 1982

Period Between Commencement and Verdict	Number of Cases	Percentage of Cases
Up to 12 months	19	9.3
13-24 months	51	25.0
25-36 months	85	41.7
37-48 months	18	8.8
49-60 months	11	5.4
Over 60 months	20	9.8
TOTAL	204	100.0

Source: GIO statistics on Supreme Court verdicts obtained between September 1981 and September 1982.

3.81 The GIO attempts to alleviate financial hardship arising from delay in a number of ways. Many small claims are settled “over the counter” without the accident victim taking legal proceedings. Where proceedings are commenced, the GIO makes advance payments for hospital and, in some cases, medical expenses, where a verdict for the plaintiff can reasonably be expected but the extent of liability is in dispute. But such payments are dependent on the exercise of discretion and do not necessarily occur on a systematic basis or in cases where the need is greatest. The GIO, in its submission referred to the attempts it made to alleviate hardship, but commented that “for a variety of reasons (this) had not been particularly successful”. ¹⁵² Another means by which the GIO has attempted to assist victims of compensable motor vehicle accidents is through the use of Paramedical Liaison Officers. In addition to encouraging claimants to deal direct with GIO, their work

... includes interviewing the victims in hospitals, recognising their practical needs and facilitating assistance from both the GIO (where financial assistance is necessary) and the various community resources. ¹⁵³

This arrangement appears to be in its infancy, with available staff being very limited in number.

3.82 The Traffic Accident Study has provided many examples of victims of motor vehicle accidents suffering hardship as a result of delay in finalisation of their claims. ¹⁵⁴ Of the 86 respondents, only eight managed to survive during the period between their accident and receipt of compensation without financial assistance from the Department of Social Security or from relatives or friends. Of the remaining 77, 49 received social security benefits and 26 had to borrow from relatives or friends. In two cases, details about sources of income were unknown Since most respondents were forced to live on substantially reduced incomes, many exhausted their savings and amassed debts. Many settled their claims because they could not afford to continue without compensation. ¹⁵⁵ The findings of the Traffic Accident Study concerning the problems associated with delays are supported by the Commission’s own case study program. Most respondents experienced financial difficulties during this period. Some were dependent on social security benefits and others amassed debts which they could only hope to repay when or if, compensation was awarded.¹⁵⁶ We mention two here, by way of illustration.

• A motorist his wife and four children were involved in a head-on collision while holidaying in Queensland in 1981. Their vehicle collided with another driven by a young man who was allegedly under the influence of alcohol The motorist s wife and one of their children were killed, while the motorist himself and two other children sustained severe injuries. The motorist, who had previously been a company manager, had not worked for the 14 months since the accident because of his injuries. His only income during that period had been sickness benefits, later replaced by the supporting parent benefit and a housing rebate. At the date of the interview he required further surgery and suffered from extreme fatigue and depression. His condition was aggravated by worry over the rapid decline of his family into poverty and by his responsibility for the continuing care of his children without the assistance of his wife. He had received no rehabilitation treatment or interim compensation. ¹⁵⁷
• A 12 year old boy suffered a fractured skull and other injuries in 1970, when knocked off his bicycle. In 1976, when aged 18, he suffered a motor cycle accident and was off work for 10 months. He had a further accident in 1979. When he was interviewed in October 1982 none of the claims arising out of these accidents had been finalised, although some small payment had been received from one of the third party insurers in the proceedings. The claimant had seen more than 20 doctors in connection with his claims. He had suffered a variety of financial and psychological problems which had been aggravated by the delay in finalising the claims. ¹⁵⁸

3.83 Measures of the kind taken at the initiative of the GIO to alleviate hardship (paragraph 3.81) are at best erratic and inadequate. Another procedure which could be adopted to provide speedier assessment in order to ensure prompt payments is a system of arbitration of the kind recently introduced by the Law Society of New South Wales (paragraph 4.22). But any such solution can go only part of the way to overcome the problem. None ensures immediate financial support of the kind necessary to stabilise the accident victim’s condition and maximise his or her chances of rehabilitation.

7. Burden on the Court System

3.84 One of the principal criticisms of the common law negligence action in relation to personal injuries is that substantial resources are consumed in legal and administrative expenses. We deal with this general question later (paragraphs 3.89-3.94).At this stage we are concerned with the public resources required for courts to process these actions, specifically those related to motor vehicle accidents.

3.85 A significant proportion of the time of the Supreme Court and the District Court is taken up with common law negligence actions related to motor vehicle accidents. For example, analysis of the records of the District Court shows that in 1983, of the 8,679 cases completed in the civil jurisdiction 6,973 (or 80 per cent) were common law negligence actions. Of these, 5,714 (81.9 per cent of common law negligence actions) involved motor vehicle accidents. A survey of the use of Court time undertaken in 1981 showed that approximately 68 per cent of actual Court time in the civil jurisdiction was spent in hearing common law negligence actions, of which at least two-thirds could be attributed to motor vehicle cases. ¹⁵⁹ Analysis of Supreme Court statistics for 1982 showed that of the 2,781 cases completed in the Common Law Division, which comprises 19 judges, 2,703 (96.8 per cent) were common law negligence actions, and of these 1,966 (72.7 per cent) were motor vehicle cases. ¹⁶⁰

3.86 We undertook a survey in the Common Law Division of the Supreme Court to determine the proportion of judicial time occupied in hearing common law negligence actions. Conducted over the period May-June 1982, it showed that more than half (about 52 per cent) of the sitting time of judges of the Common Law Division was occupied in hearing common law negligence actions. In addition 44 per cent of the time of four Masters and 31 per cent of the sitting time of the Court of Appeal were occupied in hearing such cases. The major reason for common law negligence actions occupying less sitting time than the proportion of common law negligence actions completed in the Common Law Division appears to be the high rate of settlement of common law negligence actions. It is also possible that our estimates of sitting time devoted to common law negligence actions, based on this two month period, are too low because this was not necessarily a typical period. Whatever the explanation it seems clear that if the trial of motor vehicle common law negligence actions were removed from the Supreme Court and District Court, substantial judicial resources would be available for other work. Of course it would be necessary to offset the time and resources required to determine appeals under the new Scheme (paragraph 3.88).

3.87 In order to estimate the approximate cost of deciding common law negligence actions in the courts, it was necessary to apportion the total administrative costs (including accommodation) of the District Court, Supreme Court, and Court of Appeal among common law negligence actions and other categories of cases. ¹⁶¹ On this basis the annual cost to the State of providing Supreme Court and District Court courtrooms, judges and supporting staff to decide and process common law negligence actions is approximately $8.9 million (in 1982 dollars), of which $4.5 million represents the costs of the District Court and $4.4 million the costs of the Supreme Court This estimate, which is necessarily imprecise, does not include the legal costs incurred by the parties to the litigation but is confined to the costs of providing courts, judges and support staff to decide and process common law negligence actions. If, as the material in paragraph 3.85 suggests, about 70 per cent of common negligence actions concern motor vehicle accidents, it would seem that the annual cost of providing superior courts to process motor vehicle common law negligence actions is in the order of $6.3 million.

3.88 One submission following the Working Paper was critical of an analysis of the time spent by judges in deciding personal injury matters arising out of the traffic accidents.

It seems implicit in the criticism that determining the individual rights of compensation of an individual for the often catastrophic consequences of a motor vehicle accident is less socially important and less deserving of a judge’s time than deciding a commercial dispute between two companies both of which will be in a far better position to withstand the consequences of loss than the injured individual. It seems indeed to suggest an elevation of money to a more important position than individual suffering. ¹⁶²

By drawing attention to the fact that the common law negligence action imposes a heavy burden on the court system, we do not suggest that the courts should have no significant role to play in a compensation system, nor that injured people should be denied the right to independent Judicial review of decisions relating to their claims for compensation. As explained in Chapter 5, the new Scheme should provide the opportunity for full independent judicial review of decisions adverse to a claimant. Clearly this will require a significant allocation of judicial resources. Nonetheless, it is equally clear that a considerable proportion of judicial resources are currently used to decide questions of fault and to determine a single lump sum figure to provide the right amount of compensation taking into account all the possible contingencies. There is much to be said for the view that precious judicial time would be better spent on other pressing matters, the utility of which is less suspect.

8. Legal and Administrative Costs

3.89 Many critics have pointed to the costs to the community, aside from the judicial resources, of basing compensation on the common law negligence action The costs include the legal expenses incurred by both the plaintiff and the defendant (or the defendants insurer), the administrative expenses of insurers, and the fees and other costs of medical advisers, investigators and witnesses generally. The Issues Paper referred to some of the estimates that have been made elsewhere of these costs and the difficulties of obtaining accurate information of this kind. ¹⁶³ For example, in New South Wales no information has been collected on the legal expenses incurred by the parties to motor vehicle common law negligence actions and the information cannot readily be obtained from insurers files because of the form in which records are maintained. ¹⁶⁴ The Australian Woodhouse Committee, however, conducted a survey in 1974 of insurers’ files in three States, not including New South Wales. The Committee found that as a percentage of the “net payment” to the claimant (that is, total payments less the amount allowed by the insurer for the claimants legal costs and disbursements), legal costs and disbursements amounted to 18.1 per cent in South Australia, 22.8 per cent in Queensland and 26.9 per cent in Victoria. ¹⁶⁵ This percentage covered both the amount allowed by the insurer for the claimants costs and disbursements and the insurer’s legal costs and disbursements. The reduction to a single insurer in both Victoria and New South Wales may have slightly decreased administrative costs relating to insurance.

3.90 In 1978 the Minogue Report in Victoria expressed the view that the Australian Woodhouse Committee’s estimate of 26.9 per cent of net payments for legal costs and disbursements in Victoria was too high although the Report acknowledged that adequate statistics had been impossible to obtain. After reviewing insurance records and discussing the matter with experienced solicitors, the Report concluded that it was necessary to distinguish between large and small claims in estimating the proportion of legal costs and disbursements

[I]t is clear that on a percentage basis cost results of under 10 per cent of total payout may be achieved once the sum at stake rises above $20,000. However, since the vast majority (more than 90 per cent) of cases involve less than $10,000, it may safely be said that in that majority, legal expenses can exceed 20 per cent of the total payout. ¹⁶⁶

3.91 In order to obtain information on legal expenses in common law negligence actions in New South Wales, we conducted a survey of legal firms which regularly act for plaintiffs and defendants in common law negligence actions. The actions were not confined to motor vehicle accidents although these would have constituted the substantial majority of cases. Unfortunately, there was a low response rate to the survey, only 16 out of the 40 firms responding. One firm provided information on 42 cases in which it had acted for the plaintiff, representing 25 per cent of all plaintiffs cases, and nearly 20 per cent of all cases. Consequently, the information obtained from the survey must be treated very cautiously indeed. Subject to this caution, we think it appropriate to note the results of the survey, although we restrict ourselves to a brief summary. ¹⁶⁷ Legal costs, for the purposes of the survey, included the costs of solicitor and barrister acting for each party (plaintiff or defendant), but not disbursements for such purposes as investigative and medical services.

3.92 The plaintiffs legal costs were calculated as a percentage of the net amount received by the plaintiff by way of settlement or verdict, after deduction of the costs. The average ranged from 39.5 per cent for amounts between $1,000 and $5,000 to 4.5 per cent for amounts between $200,000 and $500,000. ¹⁶⁸ The defendant s legal costs were calculated as a percentage of the gross amount of the verdict or settlement, that is the amount paid by the defendant including any sum for the plaintiff s legal costs. The average ranged from 33.5 per cent for amounts between $l,000 and $5,000 to 3.25 per cent for amounts between $200,000 and $500,000. ¹⁶⁹

3.93 Within a particular range of settlement or verdict there was considerable variation in legal costs. For example, where the net amount recovered by the plaintiff was under $5,000 the plaintiff s legal costs ranged from 26.7 per cent to 71.4 per cent of that total amount. The percentage of legal costs decreased with the size of the verdict or settlement, a trend similar to that observed by the Minogue Report in Victoria. Although the small sample size requires some caution in its interpretation, it indicates that the average legal costs of a plaintiff are likely to exceed 10 per cent of the amount recovered where the amount does not exceed $50,000. The combined cost of the plaintiff and the defendant in such cases is significantly higher, but cannot be estimated with any accuracy on the information available.

3.94 Further indications of the legal costs associated with common law negligence actions in motor vehicle cases are contained in guidelines issued by the Legal Services Commission of New South Wales. These guidelines are issued for the Commission’s “lump sum costing” scheme for civil claims covered by legal aid. Table 3.4 reproduces the Legal Services Commission of New South Wales scale relating to proceedings in the Supreme Court arising out of a motor vehicle accident where both liability and damages are in dispute and covering full preparation of the case as well as presentation in court. The actual payments to solicitors, in accordance with the usual practice of the Commission, are 20 per cent less than the scale.

For example, solicitor and client costs for a case in which the plaintiff recovers up to $50,000, and which is settled on the eve of trial, would be $3,200 (that is $4,000 less 20 per cent). The amounts were arrived at after the Legal Services Commission of New South Wales had consulted with the GIO and representatives of the Law Society of New South Wales and were based on the level of costs which would be considered reasonable in a case which did not receive legal aid. Consequently, they provide some guidance on the level of solicitor and client costs, excluding barristers’ fees and other disbursements, of plaintiffs in all motor vehicle common law negligence actions.

Table 3.4: Motor Vehicle Common Law Negligence Actions: Legal Aid Guidelines for Supreme Court Legal Costs ^(a)

Legal Services Commission of New South Wales 1982 ^(b)

	Legal Costs Legal Costs (a) Payable ($)
Amount Recovered in Litigation ($)	Settled on Eve of Trial	Tried in 1 Day	Tried in 2 Days
Up to 50,000	4,000	4,500	5,000
50,001-100,000	5,000	5,500	6,000
100,001-150,000	6,000	6,500	7,000
Over 150,000	7,500	8,000	8,500

(a) Solicitor/client costs allowed when both liability and damages are in dispute.

(b) Applicable to cases where legal aid was granted after 16 April 1982.

Source: Legal Services Commission of New South Wales Lump Sum Costing Scheme

9. Judicial Independence

3.95 We referred in paragraph 3.14 to the value attached by the community to the independence and impartiality of the judicial process which is not necessarily shared by the administrative or bureaucratic process. While we accept that independent judicial review is an essential element in the Scheme, it does not necessarily follow that courts must make the initial determination of a claimants entitlement to compensation As the recent amendment to the law in New South Wales demonstrates,(paragraph 3.97), the common law is not immune from apparently arbitrary government intervention. There is no reason why a body administering a compensation scheme should be any more exposed to such intervention than the courts. Moreover, if the principles underlying the Scheme are spelt out carefully in the governing legislation and its administration is under continuing review by an independent body, an “insurance mentality” (paragraph 3.14) can be prevented. There are steps, explained in Chapters 15 and 16 which can be taken to ensure that the Scheme is administered sympathetically to claimants. It is also misleading to suggest that the current system is not affected by the insurance mentality. Since approximately 90 per cent of third party motor vehicle claims for personal injury are settled out of court (paragraph 3.25), there is a strong possibility that anti-claimant considerations influence the amount of compensation paid to a large proportion of motor accident victims.

10. Increasing Cost of Motor Vehicle Third Party Insurance

3.96 For some years, concern has been expressed by the GIO at the escalating cost of third party motor vehicle insurance claims. ¹⁷⁰ The escalation has been greater than the general level of inflation suggesting that the continuing increase in the level of motor accident compensation is due to factors over and above wage inflation which increases the amount recoverable f or lost earning capacity. ¹⁷¹ Factors, such as changes in the principles governing the assessment of damages, have put substantial strains on the system (paragraph 1.40).

3.97 If the present system is to remain viable, either compulsory third party premiums have to be increased or the benefits available to injured people have to be reduced. In recent amendments to the Motor Vehicles (Third Party Insurance) Act, 1942 ¹⁷² the New South Wales Government has opted for the second alternative. By transferring motor vehicle third party insurance from a “fully funded” to a partly “pay as you go” system, the amendments have relieved in the short term the financial strains in the system, although this of itself will do nothing to alleviate long-term difficulties. In addition, the amount recoverable by way of damages has been reduced by a legislative increase in the discount rate used to calculate the present value of future economic loss (paragraph 2.32), a statutory limit on the amount recoverable for the value of gratuitous home care (paragraph 10.24) and the abolition of interest on general damages for motor accident victims. ¹⁷³

3.98 Where measures of this kind reduce the amount of compensation intended for the maintenance and support of the long-term disabled victim, they will not have the effect of relieving the community of the ultimate burden of meeting the costs of injuries arising out of transport accidents. We made the point earlier that social security acts as a safety net in making good some of the inadequacies of the common law. A reduction in common law damages to the permanently disabled will inevitably lead to further burdens on the social security system, the cost of which the community (including New South Wales motor vehicle owners) must bear. Without more comprehensive reforms of the compensation system, piecemeal amendment of this kind only shifts the escalating costs from one branch of the system to another.

11. Incidental Costs to the Community

3.99 The total cost of the existing transport accident compensation system is not adequately reflected in motor vehicle third party insurance premiums. The point was made in the previous paragraph that where a system fails to meet the needs of the long-term disabled, the cost is shifted onto social security. Earlier in this chapter we described the substantial drain on the public purse resulting from the burden placed on the court system by the common law negligence action. But incidental costs do not stop there.

3.100 Submissions ¹⁷⁴ described the cost both direct and indirect of the appearance of expert medical witnesses in court proceedings. Not only can this be disruptive and time consuming for the witnesses themselves, but others are often adversely affected. Since the witnesses are often called on short notice, previously arranged operation lists and outpatient attendances have to be cancelled with obvious inconvenience and delays to the hospital administration staff and the patients. Similarly adverse affects are caused to staff and patients in private consulting rooms.

C. The Need for Reform

3.101 While opinions differ on what should be done, the need for reform of the common law negligence action, as applied at present to transport accidents in New South Wales, is universally acknowledged. Its inadequacies are obvious and the variety of responses to these inadequacies will be the subject of the next chapter.

III. SUMMARY

3.102 This Chapter contains a critical evaluation of the common law negligence action as it applies to transport accidents. A number of arguments have been made in its support. It is said that the fault principle, which bases entitlement to compensation on the fault of both plaintiff and defendant, satisfies a community sense of justice and operates as a deterrent against negligent conduct. The lump sum award, characteristic of the common law, promotes rehabilitation. Only the common law provides full compensation and is protected by the independence and integrity of the courts. All of these alleged advantages can be shown wanting. There is no reliable evidence to support the assertions concerning the connection between fault, community justice and deterrence. On the other hand, inherent in the concept of fault is the failure to compensate a substantial proportion of accident victims at all and a further proportion at less than the full extent of the injury on grounds of contributory negligence. There are also practical problems associated with proof of fault, especially in transport accidents which almost always occur suddenly and unexpectedly making accurate observations by witnesses very difficult. The process is further complicated by the changing meaning of fault itself. The hardship caused by the failure to compensate in many cases and the practical difficulties associated with fault far outweigh the unproven advantages attributed to it.

3.103 Common law damages are awarded in a once-and-for-all lump sum. This form of award has proved inappropriate especially in cases of serious injury where difficulties of making accurate predictions and mismanagement of the lump sum often leave the accident victim destitute and dependent on social security. Again, these disadvantages more than offset any rehabilitative value attached to lump sums. Added to that is the anti-rehabilitative effect of a system which encourages maximisation of the victim’s condition in order to attract the highest possible award. The incentive to maximise the victim’s loss is also a factor, along with others such as the problems associated with preparation for a trial at which fault must be proved and general difficulties caused by a congested court list which combine to cause delays in reaching final assessment, causing personal hardship and impeding rehabilitation.

3.104 While availability of judicial determination of accident claims ensures impartiality and integrity, the trial of transport accident cases places a heavy and disproportionate burden on the courts. The fault system is costly in other respects due to:

• high legal and administrative costs;
• uncontrolled increase in damages awards which, in turn, encourages arbitrary legislative intervention; and
• incidental costs to the community through for example, the summoning of expert medical witnesses on short notice.

The total cost of the fault system cannot be justified and this underlines the importance of finding an alternative which can distribute the funds available for transport accident victims more equitably and efficiently.

1. See eg. J Hanlon, QC, “The Victorian Motor Accidents Board and Common Law Rights”, paper delivered at a conference entitled “The Compensation of Motor Accident Victims in Victoria - A Model for Australia?”, Law Institute of Victoria (Melbourne, October 1983).

2. Submission S40, pp.1-2. See also Submission W4, p.1.

3. W Blum and H Kalven, “The Empty Cabinet of Dr Calabresi: Auto Accidents and General Deterrence” (1967) 34 University of Chicago Law Review 239, at p.268; S Stoljar, “Accidents, Costs and Legal Responsibility” (1973) 36 Modern Law Review 233.

4. W Blum and H Kalven, “Public Law Perspectives on a Private Law Problem-Auto Compensation Plans” (1964) 31 University of Chicago Law Review 641, at pp.673-674.

5. “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 N A Jenkyn, QC, H H Glass, QC and T E F Hughes, QC.

6. Submissions S43, p.5, W48, p.9; and W84.

7. C Brown, “Deterrence and Accident Compensation Schemes” (1979) 17 University of Western Ontario Law Review 111, at pp.120-121.

8. Submission S46, p.14.

9. See S. Stoljar, note 3 above, at p.239.

10. Submission S57, p.50. See also Pearson Report vol.1, p.363.

11. R Posner, Economic Analysis of Law (2nd ed. 1977), p.154.

12. G Calabresi, The Costs of Accidents (1970), ch.10.

13. Submission W28, p.8.

14. Submission W30, p.2.

15. Submission W52, p.3.

16. Submission W30, p.2.

17. Submission W48, p.16.

18. Submission W75, pp.2-3.

19. Submission W48, p.13.

20. Submission W28, p.2.

21. See eg. Submission S57, p.50.

22. J L Sher, QC, “The Case for the Retention of Common Law Rights” (1983) 57 Law Institute Journal 1356. at p.1358.

23. Ibid.

24. Id., at p.1356.

25. See para.2.28.

26. See para.1.36. See also Walling v. Nominal Defendant, 22 May 1981, Supreme Court of New South Wales, Maxwell J., transcript of judgment at p.13.

27. See paras.3.10-3.14,

28. Submission W28, p.23.

29. Letter from Mr. R McGeoch to the Chairman dated 6 April 1984, para.1.2 of report annexed to the letter.

30. D Dowda, Spinal Cord Injury Physical and Social Outcomes (unpublished thesis, University of Sydney, 1982), p.52: p.53, table 12.31. In addition to the 38 per cent who had failed to prove fault 12 per cent of people had their cases pending. Since it is possible that some of these people would not be successful in proving fault the figure of 38 per cent is a minimum.

32. Submission W28, annexure, “A Survey of Attitudes Among Paraplegics and Quadriplegics to some Aspects of Compensation” (1983), table 2.

33. Described in para.4.39.

34. Some totally disabled earners may be better off remaining on no-fault benefits which have no upper monetary limit of the kind imposed under the equivalent Victorian scheme: see para.4.28.

35. See eg. Submissions W28, p.7; W30, pp.2-3; and W48, p.9.

36. See Case Study Booklet, ch.3.

37. Id., para.3.8, CS 91.

38. Id., para.3.12, CS 94.

39. See para.2.27.

40. For a discussion of the methodology, see Australian Woodhouse Report vol.3, p.82 ff.

41. Id., vol.1, p.52, table III.

42. Id., p.53, table IV.

43. Ibid.

44. Traffic Accident Study, appendix, Case Study CG.

45. P S Atiyah, Accidents, Compensation and the Law (3rd ed. 1980), p.483.

46. M. Smith, “Supreme Court Statistics” (internal Commission memorandum) dated 25 March 1983.

47. C Rizzo, “District Court Civil jurisdiction Statistics for 1983” (internal Commission memorandum) dated 29 June 1984.

48. Id., pp.4,5.

49. Traffic Accident Study, appendix, Case Study X.

50. See Lump Sum Survey, vol.1, p.56, table 24; Traffic Accident Study, para.5.1; and Case Study Booklet, para.4.18.

51. See paras.2.37-2.45.

52. See paras.2.52-2.64.

53. See para.2.16.

54. S Lloyd-Bostock, “Common Sense Morality and Accident Compensation” (1980) Insurance Law Journal 331, at p.338.

55. Ibid., see also note 45 above, pp.530-531.

56. Described in paras.4.49-4.53.

57. T G Ison, Accident Compensation (1980), p.179.

58. See eg. JUSTICE (British Section of the International Commission of jurists), No Fault on the Roads (1974); E P Bernzweig, By Accident, Not Design (1980), esp. ch.3; and J O’Connell, The Injury Industry (1971).

59. See eg. Utting v. Luhtala, 9 November 1983, Supreme Court of New South Wales, Court of Appeal; Livingstone v. Halvorsen (1978) 53 ALJR 50.

60. Warren v. Coombes, 12 March 1976, Supreme Court of New South Wales, Yeldham J., which decision ultimately was reversed on appeal by the High Court of Australia. See (1979) 142 CLR 531. The appeal to the High Court was not on this point.

61. See eg. Submission S32, p.13.

62. See eg. Halvorsen v. Livingstone, 16 March 1970, Supreme Court of New South Wales, Court of Appeal, Livingstone v. Halvorsen (1978) 53 ALJR 50.

63. The passage was part of a paper delivered by a former Chief Justice of Ontario, McRuer C J, at the Third Commonwealth and Empire Law Conference in Sydney in 1965. The paper was reprinted in abbreviated form as a chapter in Linden(ed.), Studies in Canadian Tort Law (1968), where the relevant passage appears at pp.309-310.

64. See para.2.20.

65. This is typical in “hit-and-run” accidents.

66. (1956) 94 CLR 470.

67. See eg. Submission W83.

68. See eg. Case Study Booklet, para.4.11, C.S. 101.

69. See note 54 above, p.331.

70. Australian Woodhouse Report, vol.1, para. 118; Pearson Report, vol.1, para. 988.

71. Pearson Report, vol.1, para. 983.

72. Id., vol.2. para.197.

73. University of Adelaide, Road Accident Research Unit, Adelaide In-Depth Accident Study 1975-1979, part 1, p.42. See also, part 2. pp.23-28; part 3, pp. 13-17; part 4, p.37, table 24; part 5, pp.5-8-, and part 6, pp.25-3 1, table 3.23.

74. US Department of Transportation, Driver Behavior and Accident Involvement: Implications for Tort Liability(1970), pp.176-180. See also Australian Woodhouse Report, vol.1, paras.69-85, para.254; Report by the Automobile Accident Compensation Committee (British Columbia 1983), pp.50-57.

75. See eg. D Herbert Road Safety in the Seventies: Lessons for the Eighties (Traffic Accident Research Unit, Research Report 4/80,1980), esp. ch 9: J. R. Jamieson, Road Environment Aspects of Fairfield In-Depth Crash Study (Traffic Accident Research Unit, Research Report 5/80, 1980); note 73 above, part 7.

76. This tendency is the more likely because of the “highway nonfeasance rule,” see para.2.28.

77. Submission S39, p.1.

78. G. Calabres, “Some Thoughts on Risk Distribution and the Law of Torts” (1961) 70 Yale Law Journal 499.

79. Motor Vehicles (Third Party Insurance) Act, 1942, s. 14, inserted by Motor Vehicles (Third Party Insurance) Amendment Act, 1984.

80. T G Ison, The Forensic Lottery (1967), ch.5.

81. R Keeton and J O’Connell, Basic Protection for the Traffic Victim (1965), p.253.

82. See eg. note 45 above, p.555; note 7 above; New Zealand Woodhouse Report, para.90.

83. See para.2.29.

84. See eg. note 45 above, pp.176-179; H. Luntz, Assessment of Damages (2nd ed. 1983), pp.17-22.

85. See eg. Submissions W62, W63, p.2, W7, p.8; and W8, p.2.

86. Lim Poh Choo v. Camden and Islington Area Health Authority [1980] AC 174, at p.183.

87. Davis v. Kudrins, 5 June 1975, Supreme Court of New South Wales, Court of Appeal, transcript of judgment at p.4, per Reynolds J A See also Denning v. Morris, 11 August 1978, Supreme Court of New South Wales, Court of Appeal, transcript of judgment, at pp.3-4 where Hutley J A made similar observations.

88. Gillet v. Dean, 7 June 1983, Supreme Court of New South Wales, Court of Appeal, transcript of judgment at pp.4-5, per Hutley J A.

89. See Traffic Accident Study, para.4.3, Case Study CD.

90. Id., para.4.4, Case Study AC.

91. Id., para.4.5, Case Studies AD,J.

92. Id., para.4.6, Case Study BV.

93. Id., para.4.6, Case Study AT.

94. Lump Sum Survey, vol.1, pp.49-51, p.55, table 23; and p.57, table 25.

95. Ibid.

96. Id., p.57, table 26.

97. Id., pp.72-73.

98. Id., p.80, table 42.

99. Id., p.111, p.127, table 64.

100. Case Study Booklet para.4.17, LSS 3.

101. See Traffic Accident Study, para.3.9.

102. The results of the survey were published in Australian Bureau of Statistics, Handicapped Persons Australia 1981, Cat No.4343.0.

103. This information is not published in the document noted above but was provided from special computer runs undertaken by the Australian Bureau of Statistics. See C Rizzo, “Handicapped Persons Survey” (internal Commission memorandum) dated 27 February 1984, pp.9-10, table 10.

104. Id., pp.10-11, table 11.

105. Lump Sum Survey, vol.1, p.104, table 52.

106. Traffic Accident Study, paras.3.8, 3.17 and 6.12.

107. Further reduction is caused by contributory negligence: see paras.3.22-3.24.

108. See Lump Sum Survey, vol.1, p.113, table 55(b).

109. Cullen v. Trappell (1980) 146 CLR 1, at p.15, per Gibbs J.

110. In 1983 the Trustees Executors and Agency Co. Ltd., had receivers appointed. See, eg. Australian Financial Review, 27 May 1983, p.1; National Times, 17 June 1983, p.16, and Australian Financial Review, 7 June 1983, p.1.

111. Traffic Accident Study. appendix, Case Study Q; Case Study Booklet, para.4.14, CS 99.

112. Lump Sum Survey. vol.1, p.63, table 28.

113. Ibid.

114. See Traffic Accident Study, para.6.2.

115. Id., para.3.18.

116. Lump Sum Survey, vol.1, p.60; p.64, table 30.

117. See Traffic Accident Study, para.6.8.

118. Id., paras.6.15-6.17.

119. Id., para.6.11.

120. Id., appendix, Case Studies AZ,Q.

121. Id., appendix, Case Study BL

122. See para.2.30.

123. See H. Luntz, note 84 above, pp.183-185.

124. And by analogy loss of amenities and enjoyment of life where the plaintiff is unconscious: see para.2.30.

125. The maximum permitted by the High Court of Australia in the most serious cases has so far been $2,000; Sharman v. Evans (1977) 138 CLR 563.

126. See note 45 above, pp.220-223.

127. See eg. Arthur Robinson (Grafton) Pty. Ltd. v. Carter (1968) 122 CLR 649; Planet Fisheries Pty. Ltd. v. La Rosa (1968) 119 CLR 118, at pp.124-5.

128. Musca v. Colombini [1970] WAR 33, at p.41, per Hale J.

129. Bellingham v. Dykes, 22 August 1983, Supreme Court of New South Wales, Court of Appeal. transcript of judgment at p.2, per Moffit P.

130. See Traffic Accident Study, para.5.7.

131. See eg. H Miller, “Accident Neurosis” (1961) British Medical Journal 919; G N Thompson, “Post-traumatic Psychoneurosis-A Statistical Survey” (1965) The American Journal of Psychiatry 1043; R Culpan and C Taylor, “Psychiatric Disorders following Road Traffic and Industrial Injuries” (1973).7 Australian and New Zealand Journal of Psychiatry 32; WAR Thomson, “Accident Neurosis” (1982) 22 Medicine, Science and the Law 143; and V E Weighill, “Compensation Neurosis’: A Review of the Literature” (1983) 27 Journal of Psychosomatic Research 97.

132. See V.E. Weighill, ibid.

133. See eg. H Miller, note 131 above.

134. See eg. F A Allodi, “‘Accident Neurosis’ Whatever happened to male hysteria?” (1974) 19 Canadian Psychiatric Association Journal 291, G. Mendelson, “Not cured by a verdict’-Effect of legal settlement on compensation claimants” (1982) Medical Journal of Australia 132.

135. For a general discussion of the common law’s position in relation to compensation neurosis, see H. Luntz, note 84 above, para.1.2.21.

136. J. Lloyd and B. Stagoll, “The Accident Victim Syndrome-’Compensation Neurosis’ or latrogenesis” (1979) 13 New Doctor 29. at p.331-see also J.H. Lloyd, “Compensation Neurosis” (1980) 9 Australian Family Physician 84, at pp.85-87.

137. See eg. Submissions S47, p.1: S22, p.1.

138. Submission S43, p.16.

139. Submission S93, p.5.

140. Submission S49; see also paras.9.35-9.36 below.

141. Submission S47. See also Submission S43, p.28.

142. J. Henle, Rehabilitation of Auto Accident Victims (US Department of Transportation Automobile Insurance and Compensation Study, 1970), p.5.

143. Bogan v. Hutchings, 28 March 1983, Supreme Court of New South Wales, Court of Appeal, transcript of judgment, at p.3, per H utley J.A.

144. Ibid.

145. Submission S47, p.6.

146. Submission S93, p.2.

147. Conybeare Report, p.6.

148. Minogue Report, paras.7.29-7.30.

149. See Traffic Accident Study, para.5.2.

150. See eg. Submissions S43, p.28; S40, p.2, and S37, p.5.

151. See eg. Submissions W28, p.24: W52, pp.9-10.

152. Submission S51, p.6.

153. Submission W72, p.1.

154. See Traffic Accident Study, paras.5.1-5.7.

155. Id., para.5.5.

156. See Case Study Booklet, ch.6.

157. Id., para.6.8, C.S. 30.

158. Id., para.6.9, C.S. 19. See also para.4.13, C.S. 28.

159. Report on District Court Statistics (unpublished Commission document).

160. Report on Supreme Court Statistics (unpublished Commission document).

161. For the purposes of apportioning judges’ salaries, superannuation and other costs associated with judges, we employed a formula based on the proportion of judicial time spent in hearing common law negligence actions. For the purposes of allocating general costs of civil administration, such as the costs of accommodation and sub-departments servicing the courts, we employed a formula based on a comparison of the number of common law negligence actions commenced in a particular period, compared with other matters commenced during the same period. See Working Paper, para.3.23.

162. Submission W30.

163. See Issues Paper, paras.4.19-4.23.

164. The Australian Woodhouse Report, vol.1, para.154, noted this and our enquiries yielded similar results.

165. Id., para.153.

166. Minogue Report, para.8.15.

167. For more detail see Working Paper, para.3.27.

168. Id., table 3.2.

169. Id., table 3.3.

170. See eg. GIO, Annual Reports 1980-1981 and 1981-1982.

171. This additional inflation rate is known as “superimposed inflation”. See E S Knight & Co, Motor Vehicle Third Party Insurance Outstanding Claims at 31 December 1981, (Report to GIO), dated 23 December 1982, para.4.1.

172. Motor Vehicles (Third Party Insurance) Amendment Act, 1984, schedule 3.

173. Id., schedule 3, cll 35C, 35D.

174. See Submissions S80, S82.