Submission on Wrongs Act Review 2013 … · Web viewSubmission Paper in response to the July 2013...

Municipal Association of Victoria

Submission on Wrongs Act Review 2013

September 2013

Submission Paper in response to the July 2013 Issues Paper by Victorian Competition and Efficiency Commission regarding its Inquiry into aspects of the Wrongs Act 1958:

September 2013

© Copyright Municipal Association of Victoria, 2013.

The Municipal Association of Victoria is the owner of the copyright in the publication Submission on Wrongs Act Review 2013”.

No part of this publication may be reproduced, stored or transmitted in any form or by any means without the prior permission in writing from the Municipal Association of Victoria.

While this paper aims to broadly reflect the views of local government in Victoria, it does not purport to reflect the exact views of individual councils. This Paper has been endorsed by the MAV Insurance Committee and the MAV Board.


September 2013

Table of Contents

1 Role of the MAV……………………………………………………………………………………..4

2 MAV Insurance………………………………………………………………………………………5

3 Terms of reference………………………………………………………………………………….7

4 MAV submission regarding tree root property damage …………………………..……………8

5 MAV submission re VCEC’s Issues Paper July 2013…………………………………………10

Economic Loss Threshold…………………………………………………………………….11

Economic Loss Cap……………………………………………………………………………12

Non-Economic Loss Threshold……………………………………………………………….13

Non-Economic Loss Cap………………………………………………………………………15

Damages for Gratuitous attendant care……………………………………………………...15

Discount rate on future economic loss……………………………………………………….18

7 Summary……………………………………………………………………………………………18


September 2013

The Municipal Association of Victoria

The Municipal Association of Victoria (MAV) is the legislated peak body for Victoria’s 79

councils. Formed in 1879, we have a long and proud tradition of supporting councils and

councillors.

Our role is to:

•advocate local government interests

•build the capacity of councils

•facilitate effective networks

•initiate policy development and advice

•support councillors

•promote the role of local government

Our services include:

•specialist advice and information

•councillor development opportunities

•legal advice and insurance protection

•CEO performance appraisal and recruitment advice

•governance support

•group procurement

5 “Submission Paper in response to the July 2013 Issues Paper by Victorian Competition and Efficiency Commission regarding its Inquiry into aspects of the Wrongs Act 1958:

September 2013

We are incorporated by an Act of State Parliament. The Municipal Association Act 1907 defines

our purpose, sets out how we operate and empowers our members to make rules to further

clarify our role and processes.

The MAV has an insurance arm, MAV Insurance which provides broadform public liability,

professional indemnity and product liability coverage for all 79 Victorian councils, all 29

Tasmanian councils, a number of Water Authorities in both states as well as various other local

government bodies such as library corporations. In total MAV Insurance insures 91 Victorian

members.

MAV Insurance

In 1993, few insurers were prepared to underwrite local government business because of the

uncertain legal climate in which they were operating. Premiums would rise or fall dramatically

from year to year and insurers could not offer adequate coverage for the increasing litigation in

the community and local government was not seen as a good risk. As such local government

found it difficult to access insurance to satisfy their obligations under the Local Government Act.

The Local Government Act was amended to allow councils which participated in an approved

self-insurance scheme to automatically comply with the minimum insurance requirements under

section 76A(1) of the Act. Amendments were made to the Municipal Association Act 1907 (Vic)

directing the MAV to establish a self-insurance liability scheme to provide public liability and

professional indemnity insurance for the benefit of:

o the MAV;

o any council under the LG Act; and

o any other body established for local government purposes.

As a result, the MAV established the Civic Mutual Plus Scheme in 1993, which was rebranded

in 2011 as the Liability Mutual Insurance Scheme, a self-insurance mutual fund for local

authorities. It provides cover in public and products liability and professional indemnity

insurances and offers substantial limits of cover, well in excess of the minimum insurance


September 2013

requirements in the LG Act and commensurate with the exposures faced by local government

today.

Membership of the LMI Scheme is available to all Victorian local councils, water corporations

and other local government bodies on a voluntary basis. Membership was extended to also

include equivalent Tasmanian bodies in 1996.

A Service Provider, Jardine Lloyd Thompson (JLT) was appointed as the claims management

and risk management service provider to the MAV in relation to the Scheme.

The LMI Scheme was formed under a deed of establishment, which is the official agreement

between the MAV and member councils who agree to be bound by the terms of this deed. The

deed confirms the terms, conditions, obligations and benefits of the membership of each

individual council/member. The LMI Scheme complies with the Insurance Act 1973 (Cth). The

MAV complies with the Australian Financial Services Licensing requirements imposed on it as a

licensed insurer but is not bound by APRA provisions. The scheme is a “mutual” meaning it is

not for profit; we do not have shareholders and aim to keep premiums as low as possible for our

members. We are able to provide surpluses back to our members in good times but in the event

of bad times, we are also able to make a call on our members for additional capital if the

scheme has insufficient funds.

Levels of coverage

Councils and other authorities are covered for public and products liability up to $400 million.

Water authorities are covered for up to $600 million. All members are covered for professional

liability up to $300 million.

To keep reinsurance costs and therefore member contributions down, 50 per cent of all claims

under $1Million are covered by capital held in the scheme. All claims attract an excess. Large

claims are covered by reinsurance sought from third-party insurers.


September 2013

Tort Reform

Since the mid 1980’s, common law rights relating to personal injury damages have been the

subject of legislative reform to address their sustainability. Firstly in the area of motor vehicle

claims when the Victorian Government of the day decided that unfettered rights to common law

damages from motor vehicle personal injuries were not sustainable if the compulsory third party

scheme was to remain viable. From the 1st January 1987 the Government introduced the

Transport Accident Act 1987 which for the first time applied statutory thresholds and caps on

common law rights. This approach was followed shortly after in the workers compensation

scheme and for a couple of years in the late 1990s common law rights were even abolished

entirely for injured workers. As we know, tort reform for all other personal injury claims followed

in the early 2000s and it is these reforms to the Wrongs Act that VCEC has been asked to

review.

The terms of reference and scope of this review

The MAV notes the terms of reference and scope of this review enunciated by the Treasurer.

“The purpose of this review is to identify and make recommendations to address

any anomalies, inequities or inconsistencies in the Act that can be implemented

without compromising the original objectives of the tort law reforms.”

The scope of the review is:

“… to inquire into and report on the operation of the Act in relation to personal

injuries and related matters…”


September 2013

Submission regarding tree root property damage

Accepting the terms of reference and scope of the review, the MAV would however like to take

the opportunity, on behalf of its members, of raising the prospect of a review relating to claims

for damages relating to property damage allegedly caused by street trees.

Tort Reform in the early part of the century largely left property damage claims unaffected. Over

the last decade our Local Government clients have experienced a significant rise in the number

of claims specifically relating to allegations of the roots from council street trees interacting with

private property such as driveways, footings such as slabs and stumps and fences. The

numbers of these claims are placing a significant burden on our scheme and even more so on

costs incurred by councils in employing preventative measures to avoid further claims.

The law of nuisance requires a party to act reasonably to abate a nuisance to a neighbour’s

property. In relation to street trees the abatement options for councils are rather limited and

usually amount to either

• root pruning as a short term measure but which can carry the risk of structural

instability or disease in the tree,

• the installation of expensive and extensive root barriers, currently costing between

$2000 and $10,000 depending on the width of a property frontage and the depth

required of the barrier and these are not always successful in the long term, or

• removal of the tree.

Over and above claim costs to the scheme, information recently received from one metropolitan

council reveals they paid over $400,000 in the last year on the above abatement measures.

This council has 45,000 street trees in its municipality.

Whilst councils inspect street trees to ensure their structural integrity and general health, it is of

course impossible to see from such inspections what is happening beneath the surface with

regard to the root system and so this places councils in a very difficult position. As well many of

these trees are 50 to 100 years old and so were planted in very different times from a

construction and legal point of view.9 “Submission Paper in response to the July 2013 Issues Paper by Victorian Competition

and Efficiency Commission regarding its Inquiry into aspects of the Wrongs Act 1958: September 2013

The issue comes down to amenity versus cost. The MAV, Government and residents do not

want to see Councils forced to remove street after street of nature strip trees, however, they

simply do not have the resources to put root barriers the length of every street in their

municipality either. So the question is how does a council protect itself from litigation if the street

trees are to remain?

To ensure councils are able to afford to retain their street trees the MAV submits that

consideration should be given to some form of statutory protection for councils in this regard

and the MAV would welcome the opportunity for further discussions on this topic with VCEC or

the Government.


September 2013

MAV’s response regarding VCEC’s Issues Paper July 2013

The MAV notes the comments by VCEC under paragraphs 1. About this inquiry, 1.1 Context, 1.2 Purpose and scope of the inquiry, as well as Table 1.1

Information request:

Is the Commission’s proposed focus on specific provisions of the Wrongs Act (as outlined in

table 1.1) and opportunities to address anomalies, inequities and inconsistencies

reasonable and complete, taking into account the terms of reference? If not, why?

The concept of calculating loss of earnings on net figures is a long held accepted legal principle

and is consistent with placing a person in the same position they would have been if not for the

loss. As such the MAV submits s28A of the Wrongs Act should not be subject to review.

1.3 The Commission’s proposed approach to assessing reforms to personal injury damages

Information request:

Is the Commission’s proposed approach to assessing options for reform of personal

injury damages reasonable and complete?

The MAV notes the comments by VCEC and accepts the approach outlined to be reasonable.


September 2013

2. The personal injury damages provisions of the Wrongs Act

The MAV submits that more than the prospect of unlimited awards of damages by courts and

juries, in the early 2000’s the actual volume of claims at the less severe end proved

unsustainable. Insurers experienced a death by a thousand cuts.

The MAV agrees with the findings of the Ipp report as outlined.

2.1 and 2.2 Limitations on damages for economic loss and non-economic loss

The MAV believes that the reasoning of the Ipp report and the subsequent amendments to the

Wrongs Act in 2002 and 2003 regarding caps on economic loss and non-economic loss were

well founded and still just as relevant today. Whilst different in their application, the Wrongs Act

caps on economic loss and non-economic loss are consistent philosophically with those under

the Accident Compensation Act and Transport Accident Act. They seek to grant reasonable

compensation whilst avoiding the risk of unfettered jury verdicts. Whilst Judges must provide

written reasons for their decisions which are open to scrutiny and if necessary subject to appeal,

it is worth remembering that most personal injury damages awards in Victoria are given by juries

who have no experience in assessing damages and do not provide any reasoning behind their

awards.

Economic Loss ThresholdThe MAV submits that the Wrongs Act is already much less restrictive on common law rights

than either the WorkCover or TAC schemes. Leaving aside the no fault components of those

two statutory schemes, when it comes to common law damages there is no threshold under the

Wrongs Act for economic loss whereas there are significant thresholds under the WorkCover

and TAC schemes.


September 2013

Under the WorkCover scheme a worker:

must first prove a 40% permanent loss of earning capacity (s.134AB(38)(e) ACA)

before they are entitled to claim economic loss and;

even if they satisfy this threshold must then prove economic loss damages in

excess of $52,220 (s.134AB(22)(a) ACA) before being entitled to any economic

loss damages.

Under the TAC scheme one must:

first overcome the serious injury test (s.93(17) TAA) and;

prove economic loss damages in excess of $49,710 (s.93(7)(a) TAA) before

being entitled to any economic loss damages.

Whilst it is acknowledged that both schemes also pay no fault benefits, these also have

thresholds and caps. The fact that the Wrongs Act places no minimum threshold on economic

loss damages needs to be kept in mind.

Economic Loss CapThe Wrongs Act currently imposes a cap on economic loss damages based on a maximum

amount that can be claimed on a weekly basis to three times total average weekly earnings

(s.28F Wrongs Act) but without an absolute maximum cap in total economic loss damages. Both

the WorkCover and TAC schemes approach common law economic loss damages in a different

way with no limit placed on the weekly loss that can be claimed but simply placing an absolute

cap on total economic loss damages (approximately $1.1M in each case).

The recent Victorian Court of Appeal decision of Tuohey v Freemasons Hospital quoted as an

example of the inequity of the Wrongs Act is in actual fact a very rare exceptional case of limited

relevance, however it does demonstrate the complexities of the operation of the current cap.


September 2013

The MAV submits that a cap on economic loss damages is an essential element in the

principles behind tort reform and as such a cap should remain. In the interests of consistency,

the MAV submits that consideration should be given to replacing the current s.28F Wrongs Act

method of capping economic loss damages with a method consistent with that applied under the

Accident Compensation and Transport Accident Acts, i.e. an indexed absolute cap.

Non-Economic Loss Threshold The MAV submits that a key principle behind tort reform was to restrict access to non-economic

loss damages for less severe injuries. With this in mind the MAV submits there should be no

softening of the threshold set out in s.28LF and S.28LE of the Wrongs Act as to do so would go

against the terms of reference excluding the Commission from revisiting the underlying

objectives of tort reform. Having said this, the MAV believes that certain enhancements might

assist the current threshold process.

The Medical Panel only sees the borderline cases with clearly “significant” injuries being

conceded by insurers without reference to the Medical Panel. Of those borderline cases that are

referred to the Medical Panel, the MAV’s experience suggests the vast majority are ultimately

successful. The MAV does not record such data but would expect the Medical Panel to be able

to provide VCEC with this data. The MAV would suggest very few people who currently seek

non-economic loss damages would be unsuccessful in satisfying the threshold.

The MAV has noted that the Law Institute of Victoria (LIV) suggests two possible reforms being:

to replace the impairment based assessment with a narrative test or,

to reduce the impairment threshold from greater than 5% (or greater than 10% for

psychiatric injuries) to effectively greater than 4% (or greater than 9% for psychiatric

injuries)

With respect to a proposed reduction in the impairment percentage requirement, the MAV

submits that VCEC would need precise data as to the number of claims this might affect before

considering such a change. The MAV understands that this data is unlikely to be available, even 14 “Submission Paper in response to the July 2013 Issues Paper by Victorian Competition


from the Medical Panel, due to the nature of the current process. The Medical Panel does not

provide a specific impairment score, simply determining whether a person exceeds the current

threshold or not. As such there would appear to be no way for VCEC to quantify for the

Government the impact such a change to the current 5% threshold might have on future claim

numbers and their cost.

The MAV submits that the introduction of a “narrative” test as suggested by the Law Institute of

Victoria would, based on the experience with such a gateway under the Accident Compensation

and Transport Accident Acts, lead to an enormous increase in legal costs and court waiting lists.

The Originating Motion process dealing with disputes surrounding the narrative test under those

Acts has evolved to result in a 3 or 4 day “trial” in the County Court, often involving Senior

Counsel and with the combined legal costs of both parties approaching $100,000. The result is

a full blown litigation process before even addressing the questions of damages and liability

which could then result in another trial at some later stage. The MAV submits a narrative test

would introduce an extra, very costly and time consuming litigation process within a litigation

process that would not be in keeping with the principles of tort reform.

In respect of the current Medical Panel process, the MAV would invite VCEC to consider

whether it allows for the best decision to be made. The MAV submits that the current process

does not ensure that the Medical Panel has all the relevant material before it to assist in its

decision-making. The injured party determines the material to be put before the Medical Panel

and therefore the panel is reliant upon that person providing all relevant material. This allows for

the possibility of critical material regarding relevant pre-exiting conditions or prior injuries not

being provided to the panel to be included in their decision making. Whilst an insurer can try to

refer material to the panel, the Wrongs Act does not currently accommodate for this, the

timelines often do not allow for this and there is no compulsion on the panel to consider it in any

event.

The MAV submits that VCEC, in the interests of fairness and completeness, should consider

whether the referral process to the Medical Panel should allow for affected parties to be able to

put relevant material before the panel that they are required to consider.


September 2013

Non-Economic Loss CapThe cap under the Wrongs Act is in line with those under the Accident Compensation and

Transport Accident Acts. The MAV submits that there is no need to review the current process

regarding the cap on non-economic loss damages.

2.3 Limitations on damages for gratuitous attendant care

These damages otherwise known as “Griffith & Kerkmeyer” damages stem from a court

decision to award damages to a plaintiff for attendant and domestic care services provided

gratuitously to them by family or friends. By definition they are “gratuitously” provided, the

plaintiff has not incurred a financial loss in respect of them as they are under no obligation to

pay for the services at a later time. The court’s reasoning behind this precedent was to

compensate the plaintiff for not being able to perform these tasks themselves. There is no

intention that the damages are claimed for the person rendering the assistance by way of

recompense.

In the MAV’s experience, claims for these damages are becoming more and more speculative

and sizeable.

• Case Study 1

Mrs X was 64 years of age when she tripped whilst walking along a footpath and sustained an

undisplaced fractured ankle and a lacerated knee. Her medical expert reported that the

fracture was treated conservatively with a plaster cast and non-weight bearing for 6 weeks and

confirms the fracture went on to heal normally. Her own medical expert confirmed that her

injury did not meet the Wrongs Act threshold for non-economic loss. Despite this Mrs X has

bought a claim for in excess of $130,000 for past gratuitous care and more than $420,000 for

future gratuitous care. Mrs X has a pre accident history of:

• Rheumatoid Arthritis;

• Ischaemic Heart Disease;

• Cardiomyopathy;


September 2013

• Non-Hodgkins Lymphoma;

• Chronic Obstructive Airways Disease;

• Osteoporosis

Her medical reports confirm that Mrs X had been extensively reliant on her husband for her

activities of daily life for some time before her fall. Despite this, it is claimed that the fractured

ankle has required her husband to provide additional care over and above what he was

already providing in the order of the amounts claimed as damages above.

• Case Study 2

Mr Z was 61 years of age when he tripped on a footpath and sustained an injury to his right

shoulder. The injury was assessed as meeting the Wrongs Act threshold. Many years before

the fall Mr Z had suffered a brain haemorrhage that rendered him incapable of employment.

Mr Z’s wife provided considerable care for him as a result of his brain injury before his fall to

the extent that for over 10 years prior Mr Z was on a Disability Support Pension and his wife

on a carer’s pension to look after him. The application for the carer’s pension stated that Mr Z

required constant care as a result of his previous brain injury. Despite this Mr Z is claiming

almost $70,000 in past gratuitous care he alleges is solely due to the fall and in excess of

$400,000 for future gratuitous care.

The MAV submits the above examples demonstrate that today’s reality does not reflect the

intention expressed in 2003 by the then Minister for Finance:

“The purpose of limiting the power of the court to award damages is to limit excessive awards in these cases, particularly having regard to the fact that the plaintiff suffers no actual financial loss as the services are provided gratuitously.”

(Victorian Parliamentary Debates, Legislative Assembly 2003, 2082)

The MAV submits these damages go against the principle of compensating for actual losses

sustained. The injured party who receives these damages has not sustained a financial loss in

respect of these services by way of their gratuitous nature.


September 2013

The MAV submits that these damages, intended to compensate the person receiving them for

not being able to do these things themselves rather than the person providing them, are

effectively a duplication of damages already claimable as non-economic loss damages,

otherwise known as Pain and Suffering damages. Non-economic loss damages already cater

for compensation relating to pain and suffering, loss of enjoyment and amenities of life.

The MAV submits that these gratuitous care damages are specifically excluded from common

law damages claimable under the Accident Compensation and Transport Accident Acts and

should also be specifically excluded under the Wrongs Act as well. The fact that the two

statutory schemes include entitlements to no fault benefits is in no way relevant in relation to

these damages by virtue of their gratuitous nature and as such consistency should apply.

Despite the inconsistency of these damages being claimable under the Wrongs Act, if VCEC

considered total abolition to be too harsh, the MAV would encourage it to at least consider an

amendment allowing them to only be claimable in the most severe cases of catastrophic injuries

such as asbestos claims, quadriplegia, paraplegia and severe brain damage.

If, despite the above submissions, VCEC recommends access to these damages be maintained

under the Wrongs Act, the MAV submits that the current threshold in s.28IA is not achieving its

intention and at the very least needs to be fixed to achieve parliament’s original intention.

The MAV submits that parliament’s intention with s.28IA was to apply a threshold for this head

of damage in line with the Ipp report that required care to be provided for in excess of 6 hours

per week for a minimum continuous period of 6 months before any entitlement to damages

would flow. It would appear the drafting of s.28IA according to the Victorian Court of Appeal fell

short of achieving that intention.

The interpretation of s.28IA was subject to a decision by the Victorian Court of Appeal in Alcoa

Portland Aluminium Pty Ltd v Victorian WorkCover Authority [2007] VSCA 210 (11 October

2007) wherein the Court found that the wording of s.28IA of the Wrongs Act did not say what

Parliament intended it to say. Similarly, the same threshold in s.15(3) of the NSW Civil Liability

Act 2002 has been the subject of numerous challenges. In 2008, the NSW Court of Appeal

found in Harrison v Melham [2008] NSWCA 67 that each part of the threshold to an award for

gratuitous care damages effectively operated in isolation. For example, one hour of care per 18 “Submission Paper in response to the July 2013 Issues Paper by Victorian Competition


week for seven months satisfied the threshold or 7 hours of care for 1 month. The threshold was

again challenged in Hill v Forrester [2010] NSWCA 170 with all three Court of Appeal judges

commenting on the need for “…urgent legislative attention” to address perceived ambiguities in

the operation of the threshold.

The above highlights the threshold in s.28IA of the Wrongs Act is constantly under attack and

the MAV submits if these damages are to be retained then the threshold needs to be remedied.

2.4 Discount rate

The MAV submits that there is no reason why the discount rate applied under the Wrongs Act

should be different to that under the Accident Compensation and Transport Accident Acts. As

such the MAV submits that the discount rate under all three Acts should be consistent. The

current difference leads to confusion, inequity and inefficiency in applying varying discount rates

simply based on the circumstances surrounding each compensable situation.

In summary

The MAV welcomes VCEC’s review of the Wrongs Act 1958 and greatly appreciates the

opportunity to provide this submission in response.

In respect of the threshold for non-economic loss damages, it is the MAV’s belief that there is

insufficient data available to allow for a proper assessment of what effect a change of even 1%

as suggested by the Victorian Law Institute might have on ultimate claim numbers going

forward. As the clearly expressed position of the Treasurer in undertaking this review was not to

compromise “…the original objectives of the tort law reforms”, which would seem to have had at

their very heart the need to exclude non-economic loss damages for lower severity claims, then

it is submitted that any softening of the threshold without fully understanding the impact of such,

does run the risk of compromising the original objectives of tort reform.

The MAV submits that the right to claim for gratuitous services (Griffiths and Kerkmeyer

damages) provided to an injured person should be totally removed from the Wrongs Act 1958 19 “Submission Paper in response to the July 2013 Issues Paper by Victorian Competition


which would achieve consistency with the Transport Accident Act and the Accident

Compensation Act. At the very least, the MAV submits that the entitlement to these damages

should be removed for all but the most catastrophic of injuries. It is accepted that there will be

some inconsistencies between the Wrongs Act and the statutory benefit schemes, for example it

is understandable that the Wrongs Act threshold for non-economic loss damages is lower than

the statutory schemes because they also provide access to no fault lump sum impairment

benefits as a quasi non-economic loss entitlement. However, when it comes to damages for

these “gratuitous” services, there appears to be absolutely no reason for there to be this

inconsistency.

The MAV is available to discuss the contents of its submission with VCEC should it wish.


September 2013

Submission on Wrongs Act Review 2013 … · Web viewSubmission Paper in response to the July 2013...

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