Trade
Practices Amendment (Personal Injuries and Death) Bill 2003
Date
Introduced: 27 March 2003
House: Representatives
Portfolio: Treasury
Commencement:
Sections 1-3 commence on the
day that the Act receives Royal Assent and Schedule 1 commences 28 days
after Royal Assent.
The purpose of this Bill
is to amend the Trade Practices
Act 1974 (TPA) to prevent individuals recovering damages for personal
injury and death where there has been a contravention of Part V Division
1 of the TPA.
A review of the law of negligence in Australia
(chaired by Justice David
Ipp) was announced by the Government
on 30 May 2002.(1) The amendments contained within the Bill
give effect to Recommendation 19 of the ‘Review of the Law of Negligence
Report’ (Ipp Report) which states that:
The TPA should be amended to prevent individuals bringing
action for damages for personal injury and death under Part V Div I.(2)
The review of the law of negligence was commissioned
as a way of developing strategies to respond to the highly publicised
‘insurance crisis’ occurring in Australia.
When announced, the review received widespread support due to the fact
that it was imperative that action be taken to solve some of the problems
plaguing the market for public liability insurance in Australia.
Public liability insurance is described by the Productivity
Commission as insurance that:
protects individuals, businesses and organisations against
financial risk of legal liability to third parties for death or injury,
loss or damage to property, or pure economic loss, in areas not covered
by workers’ compensation, motor vehicle compulsory third party (CTP),
professional indemnity or product liability. The situations where such
liability can arise are many and varied.(3)
In March 2002, the Trowbridge consulting report noted
that the insurance crisis was impacting most significantly on community
events, sporting events, tourism and leisure operations, the retail
industry and local non government community groups that operate under
the umbrella of local government.(4) The report stated that
these groups were particularly experiencing problems in obtaining affordable
public liability insurance.(5) The report also stated that
anecdotal evidence revealed that premium increases of 20% were routine,
100% not uncommon and 500-1000% had occurred.(6)
Much has been written regarding the source of the insurance
market problems. The collapse of HIH insurance, terrorist bombings on
11 September 2001, unwise business practices
by insurance companies and a poor investment environment have been just
some of the identified causes of the crisis. An escalation in the number
and size of personal injury claims have also been identified as key
contributors to the problem.
Unfortunately, it has been difficult to fully understand
the cause of the crisis due to shortages in the availability of accurate
and comprehensive statistics on point. It could be suggested that the
insurance market, like other markets, has peaks and troughs and that
the current market conditions merely form a part of this cycle.
The Trowbridge consulting report however noted that:
The nature of the crisis is that there are fewer insurers
than ever before accepting the business and these insurers are generally
charging much higher prices than previously and are also being very
selective in their acceptance of risks.
While this phenomenon can be regarded as the peak (or trough)
of an insurance market cycle, it is nevertheless to persist for another
year or two at least unless there is some external stimulus to or intervention
in the market.(7)
Accordingly, the negligence review was announced. In
a recent article published in the Australian Bar Review, the chair of
the negligence review, Justice David
Ipp, set out one of the key practical
arguments as to why negligence laws needed to be reviewed:
There is no conclusive evidence that the state of the law
of negligence bears any responsibility for this situation [the insurance
crisis]. But the fact is that insurance companies are not prepared to
provide the necessary insurance (or are only prepared to provide it
at unaffordable rates), because of the unpredictability of the law,
the ease with which plaintiffs succeed and the generosity of courts
in awarding damages. There is evidence to suggest that the insurance
crisis is at least partly attributable to the conduct of certain insurance
companies but that is not to say that the state of the law of negligence
has not contributed to the current state of affairs.(8)
It is interesting to note that Justice
Ipp acknowledged that insurance companies
were at least partly to blame for the insurance crisis. Justice
Ipp has also clearly stated that it
was insurance company dissatisfaction with negligence laws that was
one of the triggers for the review. Without intervention, the crisis
would continue.
The Minister for Revenue and the Assistant Treasurer,
Senator the Hon. Helen
Coonan, has also drawn clear links
between problems with the legal system, the insurance crisis and the
need for Government intervention.
In the University of New South Wales Law Journal, Senator Coonan wrote that:
There is a widely
held view that the current problems in the insurance market are due
in large part to the operation of the legal system. It is clear that
the broader community is dissatisfied with the seemingly random nature
of court awards. There is also a strong perception that an increasing
culture of blame has emerged within our society. This has led individuals
to seek redress through the legal system where in similar circumstances
in the past, the individual would have been more prepared to assume
responsibility for the consequences of their own actions.(9)
Prior to this, Senator Coonan issued a press
release stating that:
There is strong
community support for actions by Governments at all levels to ensure
our system of compensating injuries is balanced and does not contribute
to a culture of blame.(10)
When the negligence
review was announced it was given the express task of analysing the
current legal arrangements and developing a method for limiting awards
of damages for personal injury. The review’s terms of reference stated
that:
It is desirable
to examine a method for the reform of the common law with the objective
of limiting liability and quantum of damages arising from personal injury
and death.(11)
It was considered
that this would go towards easing the pressure on insurance companies
to charge excessive premiums for public liability insurance.
The outcomes
of the negligence review were drawn together in the Ipp Report and this
report recommended significant changes to the law of negligence in Australia. The Ipp Report suggested that the rules relating
to key areas of negligence law, namely standard of care, causation and
remoteness of damage, should be amended, the effect being to make it
more difficult to establish negligence.(12) The report also
recommended that rules relating to damages awards needed to be modified,
and for example suggested that a cap on general damages be put in place.(13)
Responses
to the Ipp Report vary. Mr Henry Ergas, from Network Economic Consulting Group, in an article in the
Australian Financial Review wrote that:
it [the Ipp report]
remains a firmly fact-free document, failing to establish whether a
problem exists and if so what it is……
The Ipp Committee’s
own explanation is an astonishing admission of hubris in the face of
ignorance: that due to a “dearth of hard evidence” its recommendations
are “based primarily on the collective sense of fairness of its members.(14)
Despite this
criticism, all States and Territories have seen the need for law reform
and have enacted legislation implementing a range of the recommendations
contained within the Ipp report.
When implementing
reforms consistent with those set down in the Ipp report, the media
release for the Premier of New South Wales, stated the following:
A diverse range
of community groups, charities and organisation from across NSW including
Coffs Harbour’s Big Banana, the Cobar pool and the NSW Farmers Association
have endorsed the State Government’s public liability reforms.
The Premier of
NSW, Mr Bob Carr – in a major address to the State Parliament – outlined the overwhelming
community support for reforms announced yesterday.
These reforms
will reinstate personal responsibility, reduce the culture of blame
and avoid the ‘Americanisation’ of the NSW Legal system.
Our reforms mean
we can all continue to enjoy the simple pleasures such as swimming at
the beach and community shows and fairs.(15)
More recently,
the Premier of Victoria, clearly demonstrated his Government’s support
for the recommendations when he made the following statement regarding
legislation introduced into the Victorian Parliament giving effect to
some of the Ipp report’s recommendations:
Rising payouts
and worldwide pressure on the insurance industry have created an environment
of unaffordable premiums which all states have had to address.
These premiums
are becoming unaffordable not just for doctors, but for tourism operators,
small business and community and sporting associations like pony clubs
and local football clubs…….
We have a responsibility
to strike the right balance between protecting people’s rights and ensuring
a viable insurance industry.(16)
Part V Division
1 of the TPA contains key consumer protection measures, the most commonly
used ones being those that deal with misleading and deceptive conduct
(section 52) and false and misleading representations (section 53).
Examples of other provisions in Part V Division 1 of the TPA include
those provisions that deal with bait advertising (section 56), harassment
and coercion (section 60) and pyramid selling (section 61).
Where provisions
in Part V Division 1 of the Act are breached, a person may recover damages
for any loss they have suffered as a result of a contravention of the
provision.(17) In addition, consumers may seek injunctive
relief,(18) non-punitive orders,(19) punitive
orders,(20) and remedial orders.(21)
The Australian
Competition and Consumer Commission (ACCC) may take legal proceedings
(representative actions) on behalf of a person who has suffered loss
where any of the provisions in Part V Division 1 are breached.(22)
Criminal proceedings
may also be brought against persons who have breached any of the requirements
(other than section 52) in Part V Division 1 of the Act. Section 52
is not a criminal offence.
Part V Division
1 of the TPA is also replicated by all the States and Territories in
their own consumer protection legislation.
This Bill gives effect to Recommendation 19 of the Ipp
report which states that:
The TPA should
be amended to prevent individuals bringing action for damages for personal
injury and death under Part V Div I.
The Ipp Report
has argued that Part V Division 1 of the TPA must be amended to prevent
individuals bringing actions for personal injury and death under this
part of the Act. The report argues that this change is necessary so
that one of the key objectives of the negligence review (that is to
limit liability and quantum of damages pay outs), is not undermined
by plaintiffs relying on the TPA to recover damages where damages could
not be recovered in negligence.
The Ipp Report
explained the need for legislative change to the TPA in the following
way:
If reforms that
we are proposing in this Report are adopted, it will become more difficult
for plaintiffs to succeed in claims based on negligence. Some may not
succeed at all and others may only succeed to a lesser extent. Lawyers
will inevitably search for different causes of action on which to base
the same claims. Provisions of the TPA will provide an obvious target
for this search. What has so far been a rarity may become commonplace,
unless steps are taken to prevent this from occurring.(23)
Accordingly,
the Bill proposes to amend the TPA so that individuals
will be unable to recover damages under the TPA from a defendant whose
conduct breaches Part V Division 1 of the TPA and causes personal injury
or death. The Bill also proposes that the ACCC’s powers to bring
representative actions on behalf of individuals to recover damages for
personal injury and death be removed.
Despite these
amendments, consumers will still have a range of remedies for breaches
of Part V Division 1. An individual will still be able to recover damages
for economic loss suffered as a result of conduct that breaches Part
V Division 1 of the Act. Similarly the ACCC will be able to bring representative
actions on behalf of individuals to recover damages for economic loss.
In addition,
criminal proceedings may be brought if a person suffers personal injury
or dies as a result of conduct in breach of Part V Division 1 (other
than section 52) of the TPA. A court may also issue an injunction, or
make punitive or non-punitive orders where the provisions have been
breached and this leads to personal injury or death.
Apart from
the need to ensure that the Ipp Report objectives are not undermined,
the Ipp Report has also argued that it is not appropriate to recover
damages for personal injury and death under Part V Division 1 of the
Act as fault is not an element in the provisions in this part of the
Act. In relation to section 52 the report has stated that:
Under s52, however,
the plaintiff can succeed merely by proving that the statement was misleading
or deceptive, even if the defendant made the statement with the utmost
care and with complete honesty.(24)
The Ipp Report
has suggested that a party should have to prove fault on the part of
the defendant before being able to receive compensation.
The Ipp Report
also argued that when Parliament enacted Part V Division 1, it did not
envisage that plaintiffs would institute proceedings, under that part,
to recover damages for personal injury or death.(25) Therefore
implementation of Recommendation 19 of the Ipp report would not alter
the policy objective of Part V Division 1 of the Act.
It would seem
that the proposed amendments to Part V Division 1 do reduce the level
of protection to consumers. Part V Division 1 sets down standards of
conduct that the legislature has considered must be adhered to by corporations
that engage in trading and commercial activities with consumers. For
example, in relation to section 52 the Federal Court has stated that:
Section 52 is
a comprehensive provision of wide impact, which does not adopt the language
of any common law cause of action. It does not purport to create liability
at all; rather it establishes a norm of conduct(26)
Where those
standards of conduct are not adhered to and an individual suffers loss,
a corporation will be required to compensate the individual consumer
who has suffered the loss. If the amendments proposed in this Bill proceed and Part V Division 1 of the TPA is
breached, consumers will be unable to recover damages for personal injury
and death under the TPA. The Ipp Report does point to the fact that
plaintiffs have ‘rarely relied’ upon Part V Division 1 to recover damages(27)
but does acknowledge that it is a possible avenue for redress. Clearly
therefore consumers rights to seek protection and redress under the
TPA are reduced.
From a policy
perspective, the Bill also raises interesting questions about having
different standards in place for different forms of loss under the TPA
(ie economic loss versus loss for personal injury or death).
New South Wales has amended its consumer protection legislation
that replicates Part V Division 1, to implement Recommendation 19 of
the Ipp Report. Some other jurisdictions (such as South Australian and
Queensland) are looking to also implement this Recommendation and have
indicated that they are waiting for the Commonwealth to pass the amendments
in this Bill before proceeding with their amendments.
The amendments to the TPA are contained within Schedule
1.
The main amendment is item
2 of the Bill which inserts
a proposed sub-section 82(1A)
into the TPA which states that a person cannot recover damages for a
contravention of Part V Division 1 where the loss or damage is or results
from death or personal injury.
Sub-sections 87(1) and (1A) of the TPA give the court
power to make remedial orders for conduct covered by several parts of
the TPA including Part V, Consumer Protection. Existing sub-section
87(1B) gives the ACCC power to bring representative actions on behalf
of individuals who have suffered loss or damage as a result of conduct
in contravention of several parts of the TPA including Part V.
Items 3-5
amend sub-sections 87(1) and (1A) and insert proposed subsection 87(1AB)
into the TPA to ensure that individuals cannot commence proceedings
and the ACCC cannot bring representative actions to recover damages
for loss due to personal injury or death under section 87 of the Act.
The
amendments in this Bill implement Recommendation 19 of the Ipp Report,
so that individuals will be prevented from recovering damages for personal
injury and death brought about by a breach of Part V Division 1 of the
TPA.
Arguably
these amendments reduce consumer rights to redress under the TPA. The
amendments do, however, close a loophole in the law that has the potential
to undermine the Ipp Report’s recommendations and hence the Government’s
policy response to the insurance crisis.
1.
‘Liability Meeting
Makes Significant Progress’, Media
Release, Senator the Hon. Helen
Coonan, Minister for Revenue and Assistant
Treasurer, 30 May 2002.
2.
Review of the Law of Negligence Final Report,
Canberra, September 2002, p.6
3.
Productivity
Commission, Public Liability Claims
Management Research Report, December 2002, p. xiii.
4.
Trowbridge Consulting,
Public Liability Insurance; Analysis
for Meeting of Ministers 27 March 2002, 26 March 2002, p. 30.
5.
Ibid p. 30.
6.
Ibid p. 28.
7.
Ibid p. i.
8.
Justice
David Ipp, Negligence – Where lies the future? Australian Bar Review (2003) 23
p. 159.
9.
Senator the Hon Helen Coonan, ‘Insurance Premiums and Law Reform – Affordable Cover and the Role of
Government’, The University of New South Wales Law Journal vol 25, No
3 2002.
10.
‘Minister Welcomes
Final Negligence Review Report’, Media
Release, Senator
Hon Helen Coonan, Minister for Revenue and Assistant Treasurer, 2 October
2002.
11.
Review of the Law of Negligence Final Report, op cit. ix.
12.
Recommendations
28 and 29, ibid. p 10-12.
13.
Recommendation
48, ibid p. 19.
14. ‘Ipp report: long on notions, short on facts’,
The Australian Financial Review,
11 October 2002.
15.
‘Strong community
response to public liablity reforms’, News Release, Premier of New South Wales Australia, September
4 2002.
16. ‘Government to protect access to insurance for
all’, Medial Release, the
Hon. Steve Bracks, Premier of Victoria,
[20
May 2003, http://www.premier.vic.gov.au/newsroom/news_item.asp?id=244]
(23 June
2003)
17.
section 82 TPA.
18.
section 80 TPA.
19.
section 86C TPA.
20.
section 86D TPA.
21.
section 87 TPA.
22.
section 87 TPA.
23.
Review of the Law of Negligence Final Report,
op cit, p. 74.
24.
Ibid, p. 76.
25.
Ibid, p. 73.
26.
Brown v Jam Factory Pty Ltd (1981) FLR 340 at 348.
27.
Review of the Law of Negligence, op cit, p. 74; when making this assertion the
report made particular reference to section 52 TPA.
This paper has been prepared for general distribution to Senators and
Members of the Australian Parliament. While great care is taken to ensure
that the paper is accurate and balanced, the paper is written using information
publicly available at the time of production. The views expressed are
those of the author and should not be attributed to the Information and
Research Services (IRS). Advice on legislation or legal policy issues
contained in this paper is provided for use in parliamentary debate and
for related parliamentary purposes. This paper is not professional legal
opinion. Readers are reminded that the paper is not an official parliamentary
or Australian government document.
Published by the Department of the Parliamentary Library, 2003.
