Chapter 8


Chapter 8

Compensation provisions

8.1        The EM to the bill outlines that the NDIS is 'not intended to replace existing entitlements to compensation'.[1] Chapter 5 of the bill deals with the interaction between the NDIS and other compensation schemes for personal injury (including through workers' and motor vehicle accident compensation schemes) and common law actions. Compensation is defined in clause 11 as compensation in respect of personal injury 'wholly or partly in respect of the costs of supports that could be provided under the NDIS'.

8.2        Submissions and witnesses raised a large number of concerns with the compensation provisions in the bill. Broadly, these concerns focused on:

  • the requirement to claim or obtain compensation;
  • the lack of clarity regarding the operation of the compensation provisions; and
  • the interaction between the NDIS and other compensation options.

Requirement to claim or obtain compensation

8.3        Clause 104 empowers the CEO to require a person take reasonable action to claim or obtain compensation in circumstances where the person is, or in the CEO's opinion may be, entitled to compensation in respect of a personal injury and the person has taken no action, or no reasonable action, to claim or obtain the compensation. Even where a person has agreed to give up their right to compensation, the CEO may form an opinion that the person may be entitled to compensation 'if the CEO is satisfied that the agreement is void, ineffective or unenforceable'.[2]

8.4        In this situation, the CEO may require the person to take reasonable action to claim or obtain the compensation within a specified period. Under clause 105, if a NDIS participant does not take the required action within the period specified then their plan is suspended or will not come into effect until they take the required action. If a prospective participant does not take the required action, their plan may still be prepared, but will not come into effect until they take the required action.

8.5        Under subclause 104(3) the CEO must have regard to a number of factors in considering whether it is reasonable to require a person to take an action. These include:

  • the disability of the person;
  • the circumstances giving rise to the entitlement or possible entitlement;
  • the impediments the person may face in recovering compensation;
  • any reasons given by the person for why they have not claimed or obtained compensation;
  • the financial circumstances of the person; and
  • the impact of the requirement to take action on the person and their family.[3]

8.6        Further, under subclause 104(4), the CEO must not require a person to take action to claim or obtain compensation unless the CEO is satisfied that the person 'has reasonable prospects of success'.

Support for policy aim

8.7        There was general support for the policy aim of ensuring that the NDIS did not replace existing entitlements to compensation, even where witnesses did not support the specific mechanism in the bill. For example, NDS agreed there was a 'financial imperative for the NDIS to ensure that legitimate compensation claims are pursued through the courts' but described the power to require a person to take legal action as 'onerous'.[4] Similarly, PWDA agreed that '[i]f a person acquires a disability in a circumstance whereby compensation may be recoverable, it is likely to be in the interests of public policy, as well as the person concerned, for that avenue to be pursued'. [5]

8.8        The Law Council of Australia (LCA) noted that there is an 'overarching justification' for the compensation provisions in the NDIS Bill, 'that in order for the NDIS to be sustainable in the long term, it is appropriate that existing compensation authorities and insurers are required to assist in defraying the costs of long term care and support, as presently required under existing arrangements'.[6] Slater and Gordon Lawyers also observed that the common law plays an 'important role in injury prevention and alleviating pressures on the public health and social security system'.[7]

8.9        The department stated that it was important that NDIS 'includes mechanisms to ensure that statutory and private compensation providers continue to meet their current obligations to people with disability and that there is no double dipping in terms of funding for care and support'.[8]

Concerns

8.10      A large number of witnesses and submitters considered that the clauses of the bill which empower the CEO of the agency to require NDIS participants to claim or obtain compensation were inappropriate.[9] These concerns regarding the requirement to claim or obtain compensation (the requirement) focused on a number of areas, including:

  • the potential detrimental impact of the requirement on persons with a disability;
  • the capacity of persons with a disability to undertake legal action;
  • objections to the principle of compelling a person to take legal action;
  • that the requirement would undermine the policy approach of the NDIS;
  • the effect of the requirement on legal professional privilege;
  • the potential impact of the requirement on children and families;
  • the application of the requirement to persons with cerebral palsy, which would be contrary to a recommendation of the Productivity Commission;
  • the broader cost implications of the requirement to seek compensation;
  • objections to granting such discretion to the CEO in relation to compensation decisions; and
  • possible detrimental effect on the timing of the receipt of compensation.
Impact on persons with a disability

8.11      Many persons who provided evidence on the requirement expressed their concerns regarding the potential impact of persons with a disability of being forced to undertake legal action to claim compensation. For example, Professor Harold Luntz noted that '[l]itigation is always stressful' and argued that 'vulnerable people in the position of those receiving benefits under the scheme should never be required to take action to recover those benefits for the Commonwealth'.[10] Similarly, Avant Mutual Group (AMG) pointed out that '[t]hose seeking support under the NDIS may well be the least able to take on either the financial risk of claiming unsuccessfully, or the emotional stress of conducting litigation'.[11]

Capacity to claim or obtain compensation

8.12      The capacity of persons with a disability to claim or obtain compensation was an area of concern for a number of organisations which gave evidence. For example, the Federation of Community Legal Centres Victoria and Women with Disabilities Victoria noted that 'many people with disabilities already find it immensely difficult to navigate the legal system and are often unable to obtain the legal and other advocacy assistance that they need'.[12]

8.13      In particular, the potential financial implications of legal proceedings were emphasised. DANA stated that most people eligible for the NDIS will have limited financial resources and listed the broad range of costs which could be incurred by a person with a disability required to claim or obtain compensation:

To take legal action is to incur significant costs, some of which must be paid at the time they are incurred and some at the conclusion. Costs incurred include costs associated with investigation for probity, legal representation, medical reports, information technology support, application fees, hearing fees, barristers' fees, and accountants' fees for economic loss assessment. When a person takes legal action they also run the risk of receiving an order to pay the costs of the other party.[13]

8.14      The AFDO also stressed the uncertainty of legal proceedings:

A requirement to seek compensation is inherently unfair because even where it takes into account all the circumstances listed, the outcome – and the toll in terms of time, money and emotional distress – could never be truly known at the outset. People with disability would bear some financial cost even in 'no cost' judgements because of the need to pay for legal experts, assessments and other things vital to seeking compensation.[14]

8.15      Carers Australia suggested that the CEO should 'consider matters such as the person feeling unable to undergo further stress and anxiety with the uncertainty and cost of legal proceedings, and whether, even if successful, the costs of litigating will largely consume any award made'.[15] Queenslanders with Disability Network considered that 'if there is going to be a requirement for people to pursue litigation and compensation for injuries...this will need to be supported by a litigation arm in the [agency] simply because the onus of this will be too difficult for people with disability to do on their own'.[16]

Principle of compulsion

8.16      The principle of compelling a person with a disability to undertake legal action to claim or obtain compensation was also questioned. For example the Cerebral Palsy Alliance commented:

Currently, no Australian citizen can be compelled to take action to obtain compensation and the possibility that the CEO of the Agency could invoke this for some prospective participants seems at odds with the Convention of the Rights of Person with Disabilities. It hardly seems in line with involving people with disabilities in the decision making process and the fundamental principle of choice and control to compel them to take action for compensation.[17]

8.17      The Law Society of South Australia also did not consider that the safeguards in the bill are sufficient. It pointed out that the overall effect of the bill's provisions could be that 'a participant may be coerced to pursue legal proceedings whether they want to or not, and they may be or will be required to bear all the risk of the outcome'.[18]

Policy approach of the NDIS

8.18      Others argued that the requirement to seek compensation undermined the policy approach of the NDIS in benefiting persons with disabilities. For example, DANA commented the legal actions usually involved the 'attribution of blame' when an intention of the NDIS was to 'disconnect any considerations of fault from the entitlement to support'.[19] The AFOD also argued:

[T]he ability to compel an individual to seek compensation undermines the universal insurance model that the NDIS is meant to represent; as the legislation currently reads, it would be universal but only for people not compelled to seek funding elsewhere.[20]

8.19      Similarly, the Australian Medical Association (AMA) commented:

Together, clauses 104 and 105 work against generating a cultural shift that Australians with disabilities and their families do not need to pursue compensation for the costs of support. Under a truly 'no fault' scheme, disabled Australians should not have to take action – or be required by the CEO of the Agency to take action – against medical practitioners for the costs of lifetime care and support.[21]

Legal professional privilege

8.20      Others submissions and witnesses were concerned whether, under the bill's compensation provisions, a person could be compelled to reveal the legal advice they had obtained or waive legal profession privilege.[22] The LCA argued:

Where privilege has not been abrogated and is not waived, it would be inappropriate to coerce a person to disclose legal advice by suspending care and support entitlements under the scheme, as provided for under clause 105. It may also place the participant at a disadvantage in any subsequent litigation they might be required, or choose, to pursue.[23]

8.21      Slater and Gordon Lawyers considered that legal professional privilege should be viewed in the context of the broader aims of the scheme:

The Agency is better able to protect the scheme from financial strain if it is in a position to understand the effect of legal advice provided to participants about their prospects of a successful claim. Without this ability, there is a significant risk that private insurance obligations and costs will be transferred to the scheme, risking its long term viability.[24]

8.22      To address these concerns, Slater and Gordon Lawyers argued that the bill should clarify:

  • that a participant providing confidential communications with their lawyer to the agency does not constitute a waiver of legal professional privilege; and
  • that copies of legal advice and other confidential communications provided by participants to the agency should be exempt from Freedom of Information laws.[25]
Impact on children and families

8.23      A key issue for several disability organisations was the potential impact of a requirement to seek compensation on children and families. For example, NDS described the requirement to seek compensation as being 'being significantly at odds with the best interests of people with disability', noting that it could 'potentially mean taking legal action against a close relative, even a relative who may be involved in a caring role'.[26] Similarly, the MS Society (WA) considered the clauses in the bill 'ignores the sensitive dynamics where there may be family involvement'.[27] In particular, Novita Children's Service highlighted the significance of compensation decisions in relation to children with a disability and their families noting that 'in many smaller communities, families end up actually suing hospitals which they have to access subsequently to receive services for their disabled child'.[28]

8.24      The NSWDNF argued the CEO needed to be aware of the negative outcomes of a requirement to seek compensation. It stated that 'the pursuit of a compensation case for medical or other negligence at or after birth could cause irreparable damage within the family, resulting in rifts in the personal and social support networks that the person with disability values and relies on and that the NDIS seeks to promote and strengthen'.[29]

Cerebral palsy

8.25      The Productivity Commission's report on Disability Care and Support made a specific recommendation in relation to cerebral palsy:

The NDIS should fund all cases of cerebral palsy associated with pregnancy or birth, and that meet the NDIS eligibility criteria. Common law rights to sue for long-term care and support needs for cerebral palsy should be removed, though access to damages for pecuniary and economic loss and general damages would remain, where negligence can be established.[30]

8.26      The reasons for this recommendation included that 'most cases of cerebral palsy cannot be avoided through clinical practices [and] it is particularly hard to reliably determine whether clinical care was the cause in any individual case'.[31] Medical Insurance Group Australia (MIGA) raised a particular concern in relation to cerebral palsy matters, noting that the under the Productivity Commission proposal the cost of cerebral palsy matters were to be passed to NDIS without 'a requirement to recoup'. It was concerned the bill appears to require sufferers from cerebral palsy to 'seek recovery from third parties'.[32]

8.27      Novita Children's Services detailed some of the problems for families in relation to seeking compensation for cerebral palsy:

[A] decision to proceed, or not to proceed with litigation is frequently difficult for parents of children with cerebral palsy. The difficulty of proving medical negligence, as the cause of cerebral palsy and as a basis for compensation, is generally high. Those cases that do proceed often are unresolved during the individual's childhood and adolescence and frequently are not finalised until adulthood. That is, they may often continue for fifteen to twenty years, or even beyond. The litigation may involve legal expenses generally beyond the means of most Australian families. The prohibitive legal costs are often the greatest dis-incentive for families.

[T]he prospect of spending years of their lives tied up in litigation is heartbreaking. Many of them prefer to focus on the extra work that they have, day by day, in caring for their disabled child. For them, there can be a conscious decision not to litigate because of the pain and turmoil that the prolonged legal battle will have on their lives. In addition, the respondent to the claim will often be the local hospital where, in the meantime, they need to access services for many years.[33]

Cost implications

8.28      The Insurance Council of Australia (ICA) acknowledged that the wording of requirement to seek compensation is similar to other provisions which currently exist in social security legislation. Nonetheless, it held concerns that the wording and administration of the requirement by the agency 'may have an impact on the frequency of claims made in various compensation schemes' and 'an increase in the level of legal representation in claims may also impact on the level of compensation scheme costs'.[34] Similarly, MIGA, a member of ICA, argued that the requirement for NDIS participants to seek compensation may increase the costs of claims handled by insurers, the number of matters litigated and insurance premiums.[35] It stated:

If the cost of all matters dealt with by the NDIS where there is an allegation of negligence are still to be recouped from insurers, then a key component of the Productivity Commission recommendations will not be achieved. Instead of there being reductions in premiums, which would then be offset by a levy for the [National Injury Insurance Scheme], most likely premiums will not reduce (and in fact may increase).[36]

8.29      The Royal Australian College of General Practitioners also noted the requirement to seek compensation would have 'a significant impact on medical practitioners and medical indemnity insurers as "compensation payers"' and sought further consultation about the broader ramifications for the medical profession, including the potential impact on medical indemnity insurance costs.[37]

8.30      The Victoria Government suggested that in order to ensure the impact of the NDIS on existing schemes is neutral, it will be important to limit the agency's incentives to undertake 'speculative litigation' (where the agency initiates an action, but the individual would not otherwise have done so).[38] Queensland Advocacy also highlighted a risk the agency may develop a practice of requiring participants and prospective participants to seek compensation as a matter of course:

[The Agency] must not on any account be allowed to grow so attached to the preservation of the capital it administers on behalf of people with disability that it comes to require in every case where chance may exist, however meagre, of obtaining compensation, that NDIS applicants commence legal action to recover that compensation.[39]

Discretion of CEO

8.31      In relation to the powers of the CEO under the bill, the department commented:

The Bill reflects the judgement that it is more transparent, and ultimately protects the rights of people with disability to a greater extent, to have the powers of the Agency CEO clearly specified. This ensures that where appropriate the CEO's exercise of these powers can be scrutinised by external review bodies.  In simple terms, specifying what the CEO is able to do also allows the law to be clear as to what the CEO is not able to do and therefore provides important protections to people with disability who are, or want to be, participants in the scheme.[40] 

8.32      However, a number of concerns were raised regarding the broad discretions granted to the CEO under the clauses of the bill relating to compensation. The Australian Lawyers' Alliance (ALA) held the view that individual should have the right to choose whether or not to pursue a legal claim and within the time period they choose. It highlighted that some individuals may have to wait years before it is appropriate to commence their legal claim 'to see the effects of their injury'. Fast tracking this process to meet the 'specified period' in the CEO's notice may mean 'that individuals could receive less than the amount to which they would otherwise be entitled'.[41]

8.33      The Cairns Community Legal Centre noted that legal advice 'as to the prospects of success is usually sought after the injured person's condition has stabilised, all relevant independent medical assessments have been conducted and all discoverable material has been exchanged'. It questioned how the CEO could be 'satisfied' that a participant has 'reasonable prospects of success' without the benefit of all relevant information.[42] AMG also commented:

[I]t is not clear just how the CEO would make his decision that a claim does or does not have "reasonable prospects of success". In our experience, this can be an extremely difficult decision, requiring multiple experts' and lawyers' opinions often at significant cost. It could take a number of years before a participant has his or her condition sufficiently clearly diagnosed to enable a properly informed decision to sue to be made.[43]

8.34      Similarly, the Victorian Government queried the appropriateness of the CEO determining the legal question of whether an agreement is void, ineffective or unenforceable under subclause 104(6).[44]

Effect on timing of compensation

8.35      Some submitters expressed concern that clauses 104-105 would effectively mean that participants or prospective participants would be forced to wait until the resolution of legal proceedings for compensation, before they could access supports under the NDIS. For example, the ICA was concerned that the requirement to seek compensation may need clarification to ensure NDIS recipients are not prevented from accessing early intervention services while consideration of appropriate compensation actions is occurring.[45]

8.36      However, this interpretation of the operation of the requirement was disputed. In particular, the Centre for Independent Studies (CIS) supported the compensation provisions in the bill, highlighting that 'individuals only have to initiate a claim for compensation, prior to receiving NDIS supports, they do not have to wait until they receive that compensation to receive NDIS supports':

[S]omeone who is already receiving NDIS supports may be required to initiate a claim...and the NDIS transition agency is able to recoup the cost of providing NDIS funded supports to someone who is successful in their claim. It is clear that initiating a compensation claim does not exclude an individual from receiving NDIS funded supports.[46]

8.37      The department confirmed that a claim underway would not delay the provision of supports, commenting:

The operation of the Bill would ensure that a potential participant who may have a right to compensation is supported by the NDIS while their compensation claim remains unresolved. This is an important aspect of the approach in the Bill because it ensures that if someone is injured they can have their support needs addressed immediately without having to wait for often lengthy legal proceedings to be finalised.[47]

Subrogation

8.38      A broad range of witnesses and submitters suggested or recommended that the bill be amended be given the agency the power in certain circumstances to subrogate the rights of a participant to make a claim for compensation.[48] Subrogation would allow the agency to take over the rights to compensation of a participant against a third party. For example, AHRC suggested:

[T]hat serious consideration be given to the inclusion of the insurance law principle of subrogation in the Bill, thus enabling the Agency to pursue compensation litigation. This inclusion would ensure that rather than participants or families deciding whether to risk incurring court costs pursing an individual compensation claim, the Agency would have the ability to manage risk and make decisions about whether to pursue an individual matter purely on the basis of its merits, and prospects of success.[49]

8.39      As currently drafted, Slater and Gordon Lawyers had the view that the powers granted to the CEO in the bill were unlikely to be utilised often:

In our many years of experience with similar provisions in other schemes concerns regarding compensation recoupment arrangements rarely arise. In fact, having scanned our literally tens of thousands of case histories in the preparation of our submissions we have not been able to find a single occasion where this power has caused a problem.[50]

8.40      Nonetheless, Slater and Gordon Lawyers noted that a subrogation of a right to compensation in the bill was not unprecedented and similar provisions exist in several analogous pieces of legislation.[51] It commented that it is 'reasonable to consider the inclusion of subrogation powers available to most statutory insurance schemes, including the Transport Accident Commission (TAC) and Comcare'.[52]

8.41      The LCA also recommended that a new subclause should be inserted, 'stating that, if the participant or prospective participant does not wish to pursue a claim they might have at common law or under a statutory compensation scheme, the [Agency] may exercise a right to subrogate the claim'.[53]

8.42      NDS also recommended:

The CEO should have the power to require a participant or prospective participant to make a no-fault claim to a statutory authority; but the power to require a participant to make a common law claim should be substantially restricted. Instead, the Agency itself could take on and manage the compensation claim on behalf of the participant or potential participant as it relates to the cost of support (with permission and where the claim is assessed as likely to be successful). This should not extinguish the participant's right to pursue compensation under other heads of damage—loss of income and pain and suffering; exercising this right should remain the responsibility of the participant.[54]

8.43      The Victorian Government agreed that the approach taken in Chapter 5 was not appropriate. It considered a suite of mechanisms may be required to allow the agency to adapt its approach to cost recovery to the relevant context - including whether there is statutory or common law liability, or whether the compensation scheme in question is fault-based or no-fault.[55] It identified three alternative approaches:

  • a provision similar to section 107 of the Transport Accident Act 1986 (Vic), which would enable the Agency to take over the conduct of proceedings against a third party initiated by an NDIS participant or prospective participant (a subrogation);
  • a provision similar to section 104 of the Transport Accident Act 1986 (Vic) and section 138 of the Accident Compensation Act 1985 (Vic), which would enable the Agency to initiate an action in its own name to recover compensation (an indemnity), provided there is a legal liability that can be pursued;
  • an approach similar to that taken in the Health and Other Services Compensation Act 1995 (Cth), which would enable the NDIS to create a statutory charge over any damages arising from a participant's successful claim for compensation; or other mechanisms may also be available.[56]

8.44      The department noted that subclauses 104(3) and 104(4) safeguards had been included in the bill as a result of consultations 'to ensure that any request to take action to pursue compensation is reasonable with regard to both the participant's or potential participant's circumstances, and the participant's or potential participant's prospects of success'. It was confident 'these sections...together operate so that in practice no participant or potential participant would be required to take action to obtain compensation that would put them at emotional or financial risk.[57] However, the department also commented that subrogation was one of a range of issues that have been raised in regard to the NDIS bill that 'the minister and the Commonwealth' were considering.[58]

Lack of clarity in compensation provisions

8.45      A frequently raised concern was the lack of clarity in the compensation provisions of the bill. In particular, submitters and witnesses questioned how the provisions would operate in practice, highlighted uncertainty in the wording of the provisions and the lack of detail regarding how compensation would be assessed. For example, the AMA noted that the bill 'confers significant discretionary powers on the CEO and the Agency through "may"' clauses' and that significant details 'will be contained in the rules which are not available'. It concluded that 'the medical profession and the disability community are limited in being able to determine the extent to which the Bill meets their expectations of the NDIS'.[59]

8.46      Similarly, Ms Eve Brown from Financial Services Council considered all the provisions around repayment of NDIS from compensation awards should be clarified:

It is not clear whether amounts are to be repaid from special or general damages awards and which heads of damage amounts are to be repaid. Compensation amounts under certain heads of damage, such as future economic loss, should not be repayable to the NDIS as this would leave NDIS participants worse off.[60]

Compensation and supports

8.47      Clause 35 allows NDIS rules to be made about the content of the participant's statement of supports. Subclause 35(4) provides for rules to be made to deal with compensation payments when determining what reasonable and necessary supports will be funded or provided to participant.[61]

8.48      LCA submitted that subclause 35(4) is 'unclear as to how compensation payments are to be taken into account in determining reasonable and necessary supports and sought ' greater clarity as to how these provisions are intended to be applied, given the significant impact this may have on participants' entitlements under the NDIS'.[62]

Recovery of compensation after NDIS support

8.49      Clauses 106-108 provide for the agency to recover the cost of supports already funded under the NDIS where compensation is subsequently secured by settlement or judgement in respect of a person's impairment.

8.50      ICA considered that further analysis of the impact of these clauses on particular compensation schemes is required before the NDIS is implemented.[63] It noted this part of the bill was 'designed to ensure that the size of claims payable under various compensation schemes is not increased by the provision of NDIS support services'. However, it believed:

[T]he extent of services available from the NDIS may have an impact on claimant behaviour which could potentially increase the size and frequency of claims made under various statutory and common law compensation schemes...[T]he practical effect of the objectives of the NDIS to meet the aspirations of the participant may result in greater claims costs in other compensation schemes...Greater claims costs may then have an effect on the level of premiums charged in those compensation schemes.[64]

8.51      The ALA cautiously welcomed the 'the concept of payment of past NDIS amounts from judgments, thus allowing for a repayment system similar to that already adopted with Medicare and Centrelink which have operated for many years'. However, it cautioned that there appeared to be a lack of legislative guidance to the judiciary to 'specify' the portion of the amount of compensation that should be a component for supports of a kind provided under the NDIS.[65]

8.52      LCA also supported the principle that the Agency 'should have the capacity to recover past NDIS amounts from that component of lump-sum compensation payments awarded by judgment or agreed by way of common law settlement, particularly to avoid "double dipping"'.[66] However, it noted that the clauses in the bill are based on the recovery provisions in the Health and Other Services (Compensation) Act 1995 (HSOC Act) and that '[t]he experience with these provisions when first introduced (in this form) was that all settlements were held up for months, causing significant hardship to people with a potential liability under the HSOC Act. It recommended that bill should be clarified to state that unless an insurer has received a notice from the agency, the insurer is not required to withhold payments to the injured person.[67]

Recovery from compensation payers and insurers

8.53      Clauses 109-115 provide for the agency to recover amounts from compensation payers and insurers. Where a participant, or prospective participant, makes a claim against a third party (the potential compensation payer) or insurer for compensation relating to their impairment, the CEO may give a preliminary notice to the potential compensation payer or insurer stating the CEO may wish to recover an amount from the person (clause 109).

8.54      The CEO may also send a recovery notice to a compensation payer or insurer, where an NDIS amount has been paid to a person under a participant's plan, and a compensation payer or insurer is liable to pay compensation to the participant in relation to their impairment. The compensation payer or insurer becomes liable to pay the agency for the amount specified in the notice (clause 111).

8.55      The bill creates an offence where a potential compensation payer or insurer, who has received a preliminary notice, does not advise the CEO within seven days after becoming liable to pay compensation (clause 110). The bill also creates an offence where a potential compensation payer, or an insurer, pays an amount of compensation to someone other than the agency, where a preliminary notice or recovery notice has been issued (clause 114).

8.56      Both broad and specific concerns were raised regarding these clauses of the bill. For example, the ICA highlighted the administrative impacts of this recovery regime on its members:

Our members currently comply with the different recovery regimes currently in place for economic loss and medical expense payments. Our members are concerned that the implementation of a third, slightly different recovery regime under NDIS will add to the administration costs involved in various compensation schemes...The ICA submits, that wherever possible, measures are taken to streamline the recovery process and promote harmonisation across recovery regimes.[68]

8.57      Further, the ICA highlighted that there are likely to be administrative complexities where there is a dispute as to which NDIS payments are recoverable from a compensation payer. It stated:

If, for example, a person suffering from a pre-existing disability and in receipt of NDIS payments subsequently suffers a compensable injury we submit that there is currently no mechanism in the legislation to determine which payments are in fact recoverable...This may be exacerbated in compensation schemes where periodic payments are made, such as workers compensation where rehabilitation plans may conflict with NDIS support plans.[69]

8.58      MIGA also noted that settlement of claims usually involved the agreement of a single lump sum amount paid immediately after agreement, which provided certainty to insurers as to their liability. It stated:

The draft NDIS legislation refers to the potential recovery by the NDIA of care costs. The legislation does not indicate at what point the recovery amount will be determined or by what mechanism. We are concerned that it may result in the payment of recovery amounts across many years as care is provided to the disabled person. Recovery on this basis from insurers would create significant uncertainty about the final cost and the timing of payments into the future.[70]

8.59      The Victorian Government listed a number of specific potential issues with the wording of clause 111 which provides for the CEO to issue recovery notices. In particular, it noted that, as currently drafted, there is no capacity for a compensation payer or insurer to contest the amount they are liable to pay to the agency.[71] Further, the Victorian Government highlighted the lack of clarity in clause 110 which would create an offence where a potential compensation payer or insurer, who has received a preliminary notice, fails to provide written notice to the CEO within seven days of becoming liable to pay compensation. It commented:

It is unclear when a compensation payer 'becomes liable'. An insurer or statutory agency generally becomes liable at the point of accepting a claim (or on the date a tribunal makes an order). However, it is not clear at what point a party subject to a common law claim for compensation 'becomes liable' for the purposes of this clause.[72]

Future support costs

8.60      The lack of detail in relation to the treatment of future support costs under the compensation provisions was an area of concern. The ALA highlighted that there was 'currently no legislative clarity about "future" NDIS costs – only those sustained prior to the judgment'.[73]

8.61      Carers Australia pointed out that the definitions in relation to compensation 'are extremely broadly drawn and refer to amounts made under an award of compensation that is "wholly or partly in respect of costs of support that may be provided to a participant"':[74]

Given that no-one will know what will be provided under the NDIS into the future this formulation seems to capture any amounts made under an award that can be characterised as perhaps being in respect of future support. It is also of concern that the legislation proposes to pick up as compensation payments 'wholly or partly in respect of the costs of supports that may be provided to a participant' even if the award does not specifically identify an amount as such.[75]

8.62      In relation to recovery of amounts awarded for future care and support, the LCA commented:

[T]his is a challenging area in which to legislate. While judgments usually determine amounts by reference to specific heads of damage, including future care and support, only a very small proportion of matters proceed to judgment. The majority of cases settle in the interlocutory stages and many matters involve agreement to a lump-sum without specifying amounts for each head of damage. Accordingly, it may be difficult in any given case to determine what amount has been awarded for future care and support. This is further complicated by discount rates applying to damages awards for future losses in all jurisdictions, as well as cases involving contributory negligence by the plaintiff.[76]

8.63      The LCA suggested two approaches to minimise the prospect of disputes about how much participants should contribute toward future care and support. The first would involve the agency providing notice to the participant as to the required contribution in advance of a settlement agreement or judgement. Under the second approach the agency would require the participant to fund their own support for a certain period 'which is similar to the process that is currently applied in relation to Centrelink benefits following an award of compensation in respect of future care and support or economic loss at common law'.[77]

8.64      Slater and Gordon considered that '[t]here is no valid reason for the provisions relating to recovery of past benefits to sit apart from the calculation of future medical benefits' and recommended the bill be amended to allow the agency to provide notification to a participant prior to resolution of their claim. The notification would list:

  • payments made by the agency to date for otherwise compensable supports, services or treatment with the amount the Agency wishes to recoup clearly identified; and
  • recoupment from compensation the agency estimates that it will seek for future NDIS services and supports.

8.65      Slater and Gordon stated that the 'Agency would then be in a position to recover past payments made as set out in the Bill, and future benefits after taking into account its estimate, and the settlement amount received'.[78]

Interaction between the NDIS and other compensation schemes

8.66      The lack of detail regarding interaction between the NDIS and other compensation schemes, including the proposed NIIS was also raised. For example, the Victorian Government stated that the 'interface between the NDIS and State-based statutory compensation schemes gives rise to a number of complex issues, which are not currently addressed by the Bill':[79]

The Bill or NDIS rules will need to ensure that a person with disability who requires funded support does not 'fall between two stools', for example, due to differences in eligibility requirements between schemes, or statutory limitations or exclusions...The Agency will also need to work with other schemes to clarify responsibilities where there is dual liability...and to minimise administrative complexity in relation to managing and accounting for ongoing or future payments between schemes. (Chapter 5 is primarily concerned with past payments.) It is likely that additional complexities arising from the interface between the NDIS and other schemes will become apparent once the NDIS is operational.[80]

8.67      The Victorian Government considered 'a protocol for resolving disputes between the NDIS and State schemes should be developed, along with a mechanism to facilitate the exchange of information'. This would ensure that the liabilities of the NDIS and state schemes can be determined cooperatively without the need to resort to litigation.[81]

Relationship between the NDIS and an NIIS

8.68      The NIIS is a proposed scheme to provide no-fault insurance coverage for Australians who acquire a disability from a catastrophic injury and require lifetime care and support. Originally proposed by the Productivity Commission together with the NDIS, an NIIS is under consideration by the government. An NIIS Advisory Group has been established assist the government consider the Productivity Commission's NIIS recommendations.[82] A key rationale in the Productivity Commission's recommendation for the creation of an NIIS funded by insurance premiums and state and territory funding, separate to the NDIS, was to 'send price signals that encourage greater incentives for safety'.[83]

8.69      Some submissions highlighted a lack of clarity about the relationship between the NDIS and the proposed NIIS.[84] For example, PWDA considered the role of the NIIS 'needed to be examined in relation to' Chapter 5.[85] DANA also considered that the intersection of NDIS and the proposed NIIS would be 'difficult terrain for prospective participants'.[86]

8.70      The AMA noted also that [w]ithout the details of [the NIIS] scheme being available, it is very difficult to assess the interface between the NDIS and the NIIS' and the requirement to seek compensation.[87] Despite this, several organisations suggested that certain categories of injury should be covered by the NDIS rather than the NIIS. For example, AMG argued that 'medical accident injuries be covered by the NDIS and not the NIIS, leaving the NIIS to cover motor accidents, workplace accidents and general accidents and avoiding the costs of "converting" each State-based motor accident compensation scheme to deal with medical accidents'. It considered that the costs and complexities arising from having both a national NDIS and eight state based schemes dealing with medical accidents were not justified.[88]

8.71      MIGA also commented:

[W]e would suggest that given the complexities of causation and negligence, and funding, that all medical accidents should be covered by the NDIS rather than being split between the NDIS and the NIIS, at least in the initial years of operation...This would allow time for the costs of both schemes to emerge and for a more appropriate assessment of the potential allocation of costs to take place.[89]

8.72      However, the CIS supported the compensation provisions in the bill, noting that they reflect the distinction between the NDIS and the NIIS, as well as the responsibility of the states to establish comprehensive injury insurance schemes:

The NDIS is intended to be a national scheme funded through core government revenue, while the NIIS is intended to be a federated scheme funded through compulsory insurance premiums and levies that will use price signals to help prevent risky behaviour. Without these compensation measures, individuals who may already be covered through compulsory third party insurance schemes (eg. Victoria's Transport Accident Commission (TAC) or NSW's Lifetime Care and Support Authority) will be able to make claims for disability care and support from the NDIS, despite the fact they are eligible to receive support from a state based scheme...

In addition to preventing cost shifting from states to the Commonwealth, the compensation measures in the bill also ensure that taxpayers do not pay for lifetime disability care and support twice – once through their compulsory third party insurance premiums, and again through their taxes to pay for the NDIS. Effectively, the compensation measures in this bill prevent the double taxation of Australians.[90]

8.73      The ALA also commented:

The taxpayer should not have to support the cost of another person's irresponsibility or intentional wrongdoing behaviour, where an individual can seek a remedy that holds the wrongdoer liable. To remove the liability of another through creating a 'no fault' system, in reality, creates a 'no liability' system. This leads to reductions in safety, transparency and responsibility.[91]

8.74      At Additional Estimates, officers from the department indicated to the committee that there may be ongoing 'boundary issues' between the NDIS, the NIIS and other compensation avenues and that these matters were under consideration.[92] Examples of these 'boundary issues' were also illustrated:

[Y]ou will still need a way of dealing with someone who, say, is in NDIS and unfortunately gets hit by a car or a tram and therefore has a separate claim. You will still need ways of resolving that. You will still need ways of resolving the issue of people who come to an NDIS but may have another claim...It is not a problem that will evaporate entirely with an NIIS.[93]

Committee view

8.75      The committee acknowledges the many concerns raised by many witnesses and submitters in relation to the compensation provisions in the bill. A number of these concerns relate to an interpretation of the clauses of the bill which suggests that prospective participants may be forced to wait for the outcome of proceedings to claim or obtain compensation before they could access support under the NDIS.[94] The department has clarified that 'the intent behind these provisions is not to deny potential participants access to support under an NDIS until their claim for compensation is resolved'.[95] The department had also indicated that it does not expect the requirement to claim or obtain compensation provision to be used extensively, stating that 'parallel provisions in social security law are very rarely used'.[96]

8.76      Despite these assurances, the committee holds a number of concerns in relation to this aspect of the bill. In particular, disability organisations made it clear to the committee that the pursuit of compensation could be a sensitive and problematic issue for participants.

8.77      In the view of the committee, participants should not be compelled to undertake legal action to claim or obtain compensation, unless certain safeguards are attached. Instead, the bill should provide the participant or prospective participant (or their guardian) with an option to subrogate their right to compensation. Where a person receives a notice under clause 104, that person should be able to elect that the agency subrogates or assumes their rights to compensation, and the agency should have the standing to undertake those legal proceedings. If the person in this situation decides to claim or obtain compensation themselves, the agency should indemnify the person for any reasonably foreseeable adverse consequences arising from this action.

8.78      Essentially, the bill should provide people with a disability (or their guardian) with a choice. The committee considers this approach would be more in keeping with one of the key objects of the bill 'to enable people with disability to exercise choice and control in pursuit of their goals',[97] while still ensuring that a mechanism in in place to ensure that compensation claims are pursued where appropriate.

8.79      Further, participants or prospective participants should be able to provide legal advice which they have sought in regard to compensation issues without the risk of waiving legal professional privilege. In the view of the committee, this should be clarified in the bill.

8.80      The committee acknowledges the many issues of clarification raised by witnesses and submitters in relation to the other compensation provisions in the bill. The committee notes that the draft NDIS rules relating to compensation issues have not yet been publicly released by the department. The committee further notes that department 'has been closely monitoring the submissions and comments at the hearings related to the treatment of compensation in the Bill'.[98] The committee anticipates that the draft NDIS rules will substantially clarify the issues raised by submitters in relation to compensation issues.

Recommendation 26

8.81      The committee recommends that the bill be amended to allow a person, where they are required by the CEO to claim or obtain compensation for a personal injury, to elect to subrogate their rights to compensation to the agency.

Recommendation 27

8.82      The committee recommends that the government note submitters' concerns regarding legal advice and confidential communications provided to the agency, and further examine whether the bill should be amended to clarify that any such advice or communications by participants would not constitute a waiver of legal professional privilege.

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