Northern Territory Second Reading Speeches
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PERSONAL INJURIES (LIABILITIES AND DAMAGES) BILL 2002
(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)
Madam Speaker, I move that the bills be now read a second time.
Madam Speaker, today I am introducing the second package of the bills foreshadowed by the Chief Minister and Treasurer during the August sittings in the ministerial report on the insurance crisis. As the Assembly is aware, the increasing cost and reduced availability of public liability and medical indemnity insurance has had a serious impact on key sections of the community, not only here in the Territory, but across Australia. This is part of the consequence of short term difficulties in the insurance market, caused by some exceptional events, nationally and internationally. These have included the collapse of HIH Insurance in 2001, the more recent collapse of Australia’s largest medical defence organisation, United Medical Protection and, of course, the events of 11 September 2001.
However, the insurance crisis is also the result of a long term trend in increasing claim costs, particularly for personal injury claims. In the Territory, over the past five years, the average cost of bodily injury claims has increased at a rate of about 18% per year. In response to the latter, long term component of the problem, at a national meeting on 30 May 2002, Commonwealth, state and territory ministers agreed to a range of reform measures. Subsequently, the Territory and other governments have been progressing the development of legislation to implement these reforms.
The overriding aim has been to improve the availability and affordability of personal injuries’ insurance for all sections of the community. As most of the reforms relate to liability for personal injuries, more generally, they are expected to have benefits for both public liability and medical indemnity insurance.
At the most recent ministerial meeting on 2 October 2002, the insurance ministers discussed the recommendations of the recently released Review of the Law of Negligence, chaired by the Hon Justice David Ipp. Ministers agreed in principle to consider nationally consistent legislation covering liability for personal injury or death resulting from negligence. This would provide a consistent national approach to defining matters such as the appropriate standards of care, foreseeability of risk, causation, and statute of limitation periods. A report on reforms that should be implemented on a nationally consistent basis will be considered at further ministerial meetings during November 2002. However, in the meantime, jurisdictions are proceeding with their own legislation in other areas, where national uniformity may not necessarily be required, or where there is little chance of achieving such uniformity.
In August 2002, I introduced the first component of the Territory government’s package of legislative reforms, the Consumer Affairs and Fair Trading Amendment Bill (No 2) 2002. This bill seeks to remove a statutory impediment to the self-presumption of risk by people undertaking risky recreational activities. As that bill is intended to mirror changes in the Commonwealth’s Trade Practices Act 1974, we are awaiting passage of the Commonwealth’s Trade Practices (Liability for Recreational Services) Bill 2002. Committee stage amendments to the Commonwealth’s bill seem likely to be required in response to the Ipp Review, which is recommending some further tightening of the definitions in the bill. Committee stage amendments are therefore also likely to the Territory’s bill when it is debated, probably in November this year.
In a ministerial report on insurance in August, the Chief Minister indicated that three further Territory bills are proposed. The first covering general tort law and related reforms. The second dealing with court processes and legal costs, and the third amending the Legal Practitioners Act in relation to the regulation of legal fees in no win/no fee cases, and advertising for personal injury matters.
While the government had intended to introduce the tort law bill in September, development of the bill has taken longer than expected. In any case, the time required for the Estimates Committee process meant the introduction in September was not achievable. It is this bill, formerly titled the Personal Injuries (Liabilities and Damages) Bill 2002 that I am presenting to the Assembly today, together with a bill providing for amendments consequential to the Personal Injuries (Liabilities and Damages) Bill 2002.
A consultation draft of the main bill was released in late September, to provide an opportunity for comment by the legal and medical professions, and other members of the community. To date, the government has received little in the way of formal comment on the bill. The Law Society and the Plaintiff Lawyers Association have made substantial written submissions, and have also met with ministers and officials, including myself.
The Law Society supports most of the provisions of the bill. However, it opposes certain elements of the bill, particularly caps and thresholds on damages awards. The Law Society has also provided very useful comments on technical details of the bill. The government has amended the discussion draft of the bill so as to take account of those comments. Additionally, the government will, prior to passage, further consider other policy issues that have arisen from the discussions between the officers and representatives of the Law Society.
The medical profession has indicated its general support for the bill. Further consultation will occur before the bills are debated in November. The government will take account of community reaction to the bills as well as the national response to the Ipp Review in considering any committee stage amendments to the bills.
As the Chief Minister has previously indicated, I will shortly release consultation drafts of another two bills. These will deal with court processes, legal costs and legal advertising. The two draft bills will be subject to detailed consideration and public consultation by a working group of representatives from the judiciary, the legal profession and the government. The working party will be asked to report as a matter of urgency. The government would hope to receive a report in November but recognises this may not be possible. A formal reporting date will be 31 December 2002.
In line with the outcomes of 30 May national meeting, the government’s legislative package is intended to reduce the cost of personal injury claims and the future rate of growth of claims costs. The package is broadly consistent with legislation recently or soon to be introduced into almost all other jurisdictions. It is important to emphasise this factor: the Northern Territory must play an appropriate role in the national reforms in order to ensure that the people of the Northern Territory receive the benefits of those reforms, the main such benefit being more affordable insurance.
We are dependent on insurance companies being willing to provide such insurance on a competitive basis. Despite these national strictures, the government has been keen to ensure that the proposals can be justified in the Northern Territory’s circumstances. To test the proposition that the Northern Territory would benefit from similar reforms to those being adopted in some large jurisdictions, the Territory government commissioned the national advisors, Trowbridge Consulting, to advise on the likely effects of reforms in the Territory.
Trowbridge is to make savings in claims costs of around 12% to 13% under the limitations on damages award included in the Personal Injuries (Liabilities and Damages) Bill. Apart from the direct impact on claims costs, the capping of certain components of damages awards is an important measure for increasing certainty for insurers by providing a ceiling on damages. This should also improve the communities access to affordable insurance cover. While the Personal Injuries (Liabilities and Damages) Bill will limit some entitlements to compensation, it is important to note that not everybody seeks to pursue compensation, especially for pain and suffering, through the legal system.
Moreover, reforms of this nature are not new. Similar provisions are already in place for workers compensation and motor accident schemes in several Australian jurisdictions including the Northern Territory. In making these reforms, this government does not intend to limit entitlement to compensation on any discriminatory basis. The impact of the bill will be monitored to ensure that where the aged, the young and the poor in our community choose to seek compensation through the legal system, they are not particularly disadvantaged by these reforms.
Some sectors of the community have expressed concerns that these savings in claims costs may end up lining the pockets of insurers rather than benefitting policy holders. In the Territory, the Territory Insurance Office has a significant market share in public liability insurance. Competition between TIO and other insurers should result in savings in claims costs being past on in insurance premiums.
The government will speak to TIO about the impact of this bill on access to affordable insurance for the people of the Northern Territory. Reinforcing market pressures, the Commonwealth government has asked the Australian Competition and Consumer Commission to keep an eye on insurance premiums over the next couple of years.
The government acknowledges that if current insurance premiums are still too low, the effect of the reforms may be to contain future increases rather than reduce premiums. Nevertheless, the nett long-term impact of the reform should be lower premiums and a more widely available insurance cover than would otherwise occur without these reforms.
I now turn to the key elements of the Personal Injuries (Liabilities and Damages) Bill 2002. The bill has a very broad application, it applies to personal injuries or deaths arising from negligence, regardless of the possibility that the cause of action may be found in a statute or in some other area of the common law. However, Clause 4 of the bill provides that regulations may be made which exclude certain kinds of claims from the operation of the act.
In the main, it is proposed that excluded claims will those regulated by other statutory schemes. An example of such schemes are those in place regarding workers’ compensation under the Work Health Act, motor accident claims under the Motor Accidents Compensation Act, and compensation for victims of crime under the Crime (Victims Assistance) Act. Additionally, regulations may be made concerning other specific kinds of claims where there may be a policy imperative demanding that some or all of the provisions of the act should not apply.
Some examples of the kinds of claims that may potentially be subject of such regulations include: civil claims in respect of intentional wrongs; civil claims in respect of damages arising from a breach of mandatory product safety orders; and dust diseases claims. However, the content of the regulations is yet to be considered by the government. The government seeks comment from the community, the professions and the insurance industry on what might be covered in such regulations.
I must, however, emphasis that the Personal Injuries (Liabilities and Damages) Bill, unlike legislation introduced in some other jurisdictions, is not intended to have any retrospective application, except for those provisions of the bill which are purely remedial. Accordingly, the bill will only apply to claims for injuries sustained after the bill has become law. The bill will therefore not have any adverse impact on those people already pursuing or contemplating making a compensation claim. In the main, the bill seeks to modify some entitlements to damages for personal injuries, including by placing limits on certain components of the damages awards.
By way of background to the bill, I mention the critical requirements that must, under the common law, be met by a person, referred to as the plaintiff, seeking from another person or that person’s insurer, referred to as the respondent, compensation under the law of negligence. The components are: the respondent must owe a duty of care to the plaintiff; the respondent must have breached that duty of care; and the plaintiff must have suffered damage as a result of the breach of the duty of care.
This bill deals with all three components. However, the major focus is on the assessment of damages. The other two components are likely to be the subject of further major reforms during 2003, including in response to the review.
From time to time there are media reports of claims and court decisions whereby persons engaged in criminal activities seek or, in fact, obtain, compensation for injuries they suffer in the course of criminal activity. Clauses 9 and 10 of the bill make it clear that, in such circumstances, there is only a limited duty of care. The bill prohibits the recovery of damages if the injured person was engaged in a criminal activity, and provides protection to owners and occupiers for claims by a person who is injured while committing, in homes or premises, offences for which a possible maximum penalty is 12 months or more imprisonment.
There have been reports of injured persons obtaining compensation where it is relatively plain that the person’s intoxication has contributed to the damage that has been suffered, or that that person was aware of the intoxication of the person who committed the negligent act. Clause 17 clarifies the law by providing that a plaintiff who suffers injuries in these circumstances will be deemed to have contributed to the injuries and will have his or her damages reduced by at least 25%. This rule will not apply if the claimant can show that his intoxication did not materially contribute to the accident that caused the damages, that the intoxication was involuntary or, in the case of the intoxicated respondent, the plaintiff was less than 16 years of age, and in the case of the intoxicated respondent, that the person’s intoxication did not materially contribute to the incident of the plaintiff, could not reasonably have been expected to have avoided the risk that caused the injury.
Clause 7 of the bill provides that volunteers have a limited duty of care in respect of voluntary work provided for community organisations or for government. Such persons will have no personal liability, so long as their actions are done in good faith and without recklessness. These liabilities will be taken on by the community organisation or government body responsible for arranging for the volunteer’s services. The extent of the liability will be determined as is the volunteer were employed by the community or government organisation.
The bill also protects ‘good Samaritans’ who go to the aid of a person in need of emergency assistance. This protection also covers persons with medical qualifications who provide emergency medical assistance. Clause 8(1) and (2) provide that good Samaritans are protected so long as their actions are done in good faith and without recklessness. The community expects that people who are doing a good turn for others should be protected from liability in these circumstances. However, the protection does not apply to intoxicated good Samaritans.
There are a number of elements to determination of damages payable under common law. Such damages are assessed having regard to matters such as:
· pecuniary losses - these are losses due to the loss of income or the loss of earning capacity;
· general damages – these are the damages to compensate for pain and suffering;
· medical expenses; and
· additional expenses that may be incurred because of the injuries - for example the cost of care.
Aside from damages from gratuitous care services, which I will outline later, the bill does not effect the amounts of compensation for medical fees, hospital expenses or for personal care. In clause 20, the bill provides for a cap on pecuniary damages. The bill provides that the maximum rate at which the court may assess the loss of income or earning capacity will be three times average weekly earnings. This is higher than the current limits for motor accidents and workers compensation, which are no-fault schemes. Additionally, it is more than the amount of ‘twice average weekly earnings’ recommended by the review. However, it is in line with the limit adopted by an almost of the states. This cap amounts to around $2450 a week. Accordingly, it will only adversely affect very high income earners.
In clause 24, the bill also caps awards for non-pecuniary loss, more commonly referred to as general damages - that is, damages for pain and suffering, loss of amenities of life, a loss of expectation of life, and disfigurement. Under the bill, awards for general damages will be limited to a maximum of $250 000, the amount recommended by the review. Again, this limit is higher than for the Northern Territory no-fault motor accident and workers compensation schemes, which set limits of around $170 000. It is lower than the $350 000-plus limits in New South Wales, and those proposed for Victoria, but broadly in line with the $240 000 limit proposed for South Australia.
It must be understood that these limits on awards for pecuniary and non-pecuniary loss are not expected to have a significant immediate impact on the cost of claims in the Northern Territory. Few Northern Territory plaintiffs are persons in receipt of incomes greater than $2450 a week. Few plaintiffs suffer pain and suffering to such an extent that they would be awarded amounts for pain and suffering that exceed $250 000. Thus, it is fair to say that the immediate impact will be minimal. However, by providing a ceiling on these components of damages awards, the caps are considered by expert advisors such as Trowbridge, as being fundamental to increasing certainty and predictability for insurers and improving the availability of insurance. They are part of the community’s insurance against future growth and claims costs. It remains to be seen whether the insurers respond appropriately to these caps. This is something that all Australian governments will monitor. It may also be the case that governments, over the coming months, seek to achieve greater uniformity as to what will be the upper amount.
Both nationally and in the Territory, Trowbridge has indicated that the imposition of a threshold on the size of claims represents the greatest savings that can be made in respect to personal injury matters. In deciding on this threshold, the Northern Territory government had a number of options to consider. These are firstly, the permanent impairment model. This is a model based on that in section 71 of the Work Health Act and in section 17 of the Motor Accidents (Compensation) Act. Under this model, no damages for pain and suffering would be paid unless the plaintiff had suffered permanent impairment. The issue of whether a person is permanently impaired would depend on assessment by medical panel. The amount would range from zero for 5% or less impairment, to the maximum prescribed amount for total impairment.
Second, the New South Wales impairment model. Under this model no amount is paid for impairment that is 15% or less. Amounts for impairment between 15% and 100% would vary in accordance with step gradations based on the prescribed relationship between the maximum amount which is $350 000 in New South Wales and a percentage of impairment.
Third, the South Australian model. Under this model no amount is paid for pain and suffering if the claimant has not been either substantially out of action for a week or has not incurred medical expenses greater than $2750. The maximum amount payable is around $240 000 for damage of the worst kind and for lesser damage, an amount calculated by reference to the relationship between the percentage damage and the maximum amount.
Fourth, the Western Australian model where there is a monetary figure of $12 000 set as a threshold.
The bill adopts the same approach as in Western Australia except that the threshold is set at $15 000. Clause 25 provides that general damages for pain and suffering are not payable if pain and suffering is less than $15 000. This would reduce the number and costs of lesser claims, for example, for minor slip and fall events and in cases where a patient was required to spend say an extra couple of days in hospital as a result of medical complications. These claims also tend to involve a high proportion of legal costs relative to the compensation being sought.
This $15 000 threshold is higher than the Northern Territory threshold for motor accidents and workers compensation but these schemes require permanent impairment before such damages would be payable. The threshold is similar to Western Australia’s threshold of $12 000 however it is well below the threshold of 15% of the most extreme case recommended by the Ipp Review and adopted in New South Wales where it equates to general damages of around $52 500. If the Northern Territory adopted the New South Wales approach the effective threshold would be $35 750.
In terms of the expected impact on the cost of claims, the $15 000 threshold is by far the most significant component of the Territory’s reforms with Trowbridge estimating savings of over 11% in the levels of claims. Applying the higher threshold as in New South Wales would reduce claims costs in the Territory by around one third. However, in the government’s view a threshold of that magnitude would be too severe in the Territory’s circumstances.
Because there is no precise science for setting caps and thresholds the government invites further submissions prior to the passage of the bill. In particular I am keen to receive information about past successful claims for pain and suffering that have been less than $15 000. Equally, I am interested in the damages creep anticipated by both insurers and the legal profession. Regardless of which option is eventually settled on there will be a further review by the end of 2005 as to how the threshold has worked.
The Personal Injuries (Liabilities and Damages) Bill also places limits on compensation for certain kinds of attendant care services. These are domestic or nursing services provided by family or friends on a voluntary basis. There has been a tendency for courts to provide compensation for these services at commercial rates. In line with several other jurisdictions and the recommendations of the Ipp Review, the bill precludes damages being awarded unless there is reasonable need for care; that need has arisen solely from the injury to which the claim relates; and the services are provided for more than six hours a week over a period of at least six months. The bill will also ensure that the rate of payment does not exceed average weekly earnings.
A number of other provisions in the bill will also impact on the determination of awards for damages. In particular, the bill precludes a court from rewarding aggravated or exemplary damages in respect of personal injury arising from negligence. These are rarely awarded by the courts anyway. Interest is not to be awarded on damages for non-pecuniary loss and attendant care services of the kind described above. As damages for non-pecuniary loss are awarded in terms of real values at the time of settlement there is no justification for including interest.
Prejudgement interest on damages awards will be set at the 10 year Commonwealth Bond rate with scope to vary the rate by regulation. As legislation does not currently prescribe an interest rate for prejudgment debts, this will provide greater certainty and ensure adequate compensation for past losses.
The discount rate for calculating awards and future pecuniary loss will be set at 5% with the provision for this rate to also be varied by regulation. The discount rate is applied in respect of amounts being allowed for future losses, recognising the payment of compensation is being made in advance of those losses occurring. The higher the discount rate, the lower the assessed up-front benefit. The current discount rate set by the courts is 3% which arguably over-compensates for future losses. While the Ipp Review proposes no change, almost all of the states are legislating for a 5% discount rate.
The bill makes a number of other arrangements designed to clarify or improve the law. The first of these is found in clause 13. This clause sets out that a person, including a medical practitioner or a hospital involved in an incident that may have caused a personal injury, may express regret. This can be done without the person being concerned that this may be construed as an admission of liability. As is currently the case, a person will still need to be careful that their expression of regret does not contain an acknowledgement of fault.
The second such change is clause 30. It provides that a court in the Northern Territory may approve or make a consent order for a structured settlement as an alternative to a lump sum payment. This will permit the parties and the courts to reach settlements by which claimants receive periodic payments over the course of their lives. Such orders reduce a claimant’s exposure to losses which may result from investment or expenditure decisions regarding lump sums. The Northern Territory amendments reinforce taxation changes proposed by the Commonwealth in its Taxation Law Amendment (Structured Settlements) Bill 2002.
The second bill called the Personal Injuries (Liabilities and Damages) Consequential Amendments Bill 2002 deals with matters consequential to the Personal Injuries (Liabilities and Damages) Bill 2002. The main amendment is the repeal of sections 10 and 10A of the Law Reform (Miscellaneous Provisions) Act. This amendment is consequent on the re-enactment of the clauses in similar terms to clause 9 of the Personal Injuries (Liabilities and Damages) Bill 2002. These provisions deal with the duty of care owed to trespassers and persons engaged in criminal activities. It is appropriate that they be located in the legislation and will deal with the generality of such matters.
In conclusion, there are a number of broader issues that are yet to be dealt with concerning the operation of the law of negligence, in particular arising out of the review. These include matters such as professional negligence, including that for medical practitioners, foreseeability of risks, causation and limitation periods in which to claim. Together with other jurisdictions, the government is currently considering its response to the proposals of the review. It is also considering the reforms to medical litigation recently recommended by the Australian Health Minister’s Advisory Council Legal Process Reform Group chaired by Professor Marshall Neeve.
Further legislation seems likely to be required in response to these reviews early in the new year. However, the current bills represent a significant step in the reform process. The measures in the bills are expected to help contain future growth in claim costs. In turn, this should improve the availability and affordability of insurance to small businesses, not for profit organisations, medical practitioners and other sections of the community hardest hit by the current problems.
As I mentioned earlier, the impact of this bill will be monitored to ensure that where the aged, the young and the poor in our community choose to seek compensation through the legal system, they will not be particularly disadvantaged by these reforms. As I have indicated, the government will take account of further community reaction to this bill in considering any committee stage amendments where the bills are debated in November.
The reforms are consistent with those introduced or being contemplated by other jurisdictions and with the outcome of the national meeting on 30 May. Moreover, reforms of this nature are not new. Territorians have accepted similar reforms in the past for motor accidents and workers compensation as reflecting what the community should be entitled to and can afford.
The government, on the advice currently before it, considers that the bills are balanced and fair for the community as a whole. Madam Speaker, I commend the bills to the Assembly.
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