Australian Democrats Minority Report
Trade Practices Amendment (Liability for Recreational
Services) Bill 2002
INTRODUCTION
1.1
This Bill is yet another attempt by the
Government to solve the problems faced by the community with respect to rising
insurance costs.
1.2
If we examine the track record of the Government
so far on this issue, it is easy to see the pattern developing—all
responsibility on the individual and no blame elsewhere.
1.3
The public have not only had their businesses,
their services and events jeopardised by, among other things, an unfavourable
insurance market, they have also borne the brunt of the cost of the reforms so
far. The insurance industry has got off lightly.
1.4
On the one hand, when the Government has shown
reluctance to intervene, it has argued that while the cost of claims is a
driver, this is a market issue and the downturn in the international market for
insurance has had a huge impact on the cost and availability of reinsurance.[1]
1.5
The rationale here must be that when there is an
upturn in the market, the community can look forward to better pricing and more
availability of insurance.
1.6
In relation to claims as a cost driver, with
little hesitation, the Government has endorsed and facilitated a position
whereby tort law reform restraining the rights of consumers should be
implemented throughout the country.
1.7
This approach shows little regard for the way in
which the courts have developed tort law over many decades, and little regard
for those who rely on compensation to help with medical costs—sometimes long
term. Nor does it show much regard for claimants who will depend on
compensation to meet other expenses when they have been injured or suffered
damage as a result of another person’s negligence.
1.8
The Australian Democrats have stated previously
there is a general consensus[2]
that there is a lack of comprehensive data on claims costs. This is a
significant constraint in the appropriate pricing of premiums by the insurance
industry, and this is especially the case for sporting groups and adventure
tourism operators.
1.9
The Australian Democrats believe it is also our
responsibility to strike the appropriate balance so that whatever measures are
put in place today, we also reaffirm and indeed strengthen, community safety
and business responsibility. It would be wrong to throw the baby out with the
bath water, so to speak, and this is what we think the Government is doing in
this Bill if it remains in its current form.
BILL IN ITS CURRENT FORM
1.10
This Bill seeks to insert a new section—68B—into
the Trade Practices Act 1974. This new section is intended to enable
companies that supply recreational services to contract out of the obligations
imposed by section 74 and so exclude, restrict or modify their liability for
death or personal injury caused to a consumer engaging in the recreational
services provided.
1.11
Currently, recreational service providers cannot
contract out of their obligations under section 74 by virtue of section 68.
Section 74 of the Trade Practices Act states that in a contract where a
corporation supplies services to a consumer, there is an implied warranty that
services will be rendered with due care and skill. So in the event that
companies do not provide their services with due care and skill, they will be
in breach of the warranty implied in the contracts.
1.12
A service is deemed to be provided with due care
and skill if it is of a standard and quality that could reasonably be expected
from a competent person in the particular trade or profession.[3]
1.13
While this may appear to be an appropriate
safeguard for the protection of consumers, if service providers want to rely on
waivers and disclaimers then there needs to be greater emphasis placed on the
maintenance of high safety standards and minimising risk. The Australian
Plaintiff Lawyers Association (APLA) in its evidence to the committee hearing
stated that:
...to limit the enforceability of waivers using a gross negligence
threshold or industry standards of best practice or codes of conduct are
impractical, difficult to legislate and ultimately unworkable.[4]
1.14
Recreational service providers should not be
permitted to rely on contractual terms without ensuring that they have taken
all steps within their control to minimise the risk of harm or injury. A loose
acceptance of waivers and disclaimers for a seemingly endless variety of
activities is neither desirable for consumers nor high‑quality
recreational service providers who take pride in their good safety record.
APLA makes the statement that ‘the Bill under consideration—probably goes too
far in this regard’[5]
and a significant number of groups ‘oppose the notion that a waiver should
exclude liability for personal injury in all cases’.[6]
1.15
Opening up the operation of waivers and
disclaimers in this way creates a real risk that less than scrupulous operators
will be able to enter the market and skimp on safety in order to undercut
safety‑conscious, more legitimate competitors.
1.16
That is why a more stringent standard must be
applicable to service providers in circumstances where a waiver is to apply.
The Australian Democrats believe, and we are sure it would be generally agreed,
that a ‘near enough’s good enough’ attitude to community safety is unacceptable
and so there should be no leeway for the recreational services environment to
diminish in any way its responsibility to safety and to the consumer.
1.17
The provisions of the Bill do not take into
consideration the power imbalance between those who provide the service and
seek to rely on the contract, and those who use the services.
1.18
Consumers who knowingly and honestly enter into
contracts with recreational service providers do so under the impression that
the service provider has gone to reasonable lengths to ensure that the service
is safe and reliable. Mere competence may not be an appropriate standard to
ensure the safety of the community in these circumstances.
Dr Paul O’Callaghan from the Australian Horse Industry Council gave
evidence that:
...I think everyone wants people to accept the normal risks of any
activity, but they do not want a position where a provider can be negligent to
a high degree and can have that signed off on.[7]
1.19
Dr O’Callaghan recommended that ‘to
encourage better provision of services, we would also like there to be a
minimum operating standard introduced, especially for commercial providers...’[8]
1.20
In relation to what activities are potentially
captured by this Bill, the new subsection 68B(2) of the Trade Practices Act
defines recreational services. While the Government stated that this Bill was
originally intended to allow providers of ‘inherently risky activities’ to
contract out of the implied warranties in the Trade Practices Act, in fact, the
proposed definition is broad enough to capture all companies that supply
recreational services. The definition of ‘recreational services’ is simply too
broad.
Recommendation
The definition of ‘recreational services’ should be amended. The
suggested definition by APLA[9]
should be considered as part of this amendment.
1.21
Even the Negligence Review Panel, whose members
were appointed by the Assistant Treasurer, recommended a narrower definition of
‘recreational services’ than what is provided in the Bill. Leaving aside the
definition of recreational services, Recommendation 12 states that a
‘recreational activity’ means an activity
undertaken for the purposes of recreation, enjoyment or leisure, which
involves a significant degree of physical risk.
1.22
The definition in the Bill captures all sporting
and leisure activities regardless of whether they involve any degree of
physical risk, let alone activities that could be considered ‘inherently
risky’. The only risk that the consumer should be assuming are the ones that
are intrinsic to the type of activity in which they are taking part.
1.23
Without greater protections for consumers and
fine‑tuning of the definition of ‘recreational services’, more
uncertainty will be generated as to the effect of waivers and disclaimers
rather than clarification on the issue.
PROPOSED DEMOCRATS AMENDMENTS
Recommendation
Recreational service providers should not escape
the implied warranty contained in section 74 of the Trade Practices Act where
service providers have engaged in conduct that is below the standard that would
be reasonably expected in the circumstances and in terms of the particular
activity.
Recommendation
In no circumstances should the new section 68B
apply to persons 18 years and under. By codifying the common law position with
respect to minors, this will make it abundantly clear that children’s rights
will not be diminished in any way.
1.24
The same principles apply to the intellectually
disabled and as with minors, the ability for their rights should not be allowed
to be waived without obtaining a reasonable amount of understanding of the
consequence of such a waiver.
Recommendation
Only recreational activities that can be regarded
as inherently risky activities should be covered by this legislation. It
follows that the types of inherently risky activities should be prescribed in
the regulations.
1.25
Currently, the activities that are subject to
the Bill are those that are sporting or leisure time pursuits or activities
that involve a significant degree of physical exertion or physical risk.
This is a very broad definition. As I have already mentioned, the definition
is broad enough to capture those activities that can be considered ‘inherently
risky’, which was the original intent of the Bill—but it also could capture
activities that bear no real risks at all.
1.26
Even with the narrower definition provided by
the Negligence Review Panel, there would still be a role for the courts in
deciding if a particular activity fits within the definition. By highlighting
in the regulations the particular activities where consumers could contract out
of their right to sue under the Trade Practices Act, this would not only create
greater certainty as to the applicability of the implied warranty, it would
also overcome the safety concerns that I raised earlier.
Recommendation
In order for service providers to rely on the new
section 68B, contracts seeking to limit liability must be:
- written in clear and plain language,
- explained to the person assuming the risk, and
- signed by the person assuming the risk.
1.27
Since I believe that only a very limited and
particular brand of activity should be captured by this legislation,
accordingly, there should be an obligation on the service provider to ensure
that they have done all that they can to explain the nature of the rights that
the consumer is contracting out of, if they choose to participate in the
activity.
1.28
This would necessarily involve the service
provider explaining the terms, having plain language explanations and
acceptance of these terms in writing by the consumer.
Recommendation
Following on from the previous point, in order to
emphasise the need to explain contract terms to the consumer, service providers
who wish to rely on the new provisions are required to take all reasonable
steps to ensure that the person engaging in the inherently risky activity is
aware of the risks that they are assuming when signing a waiver or disclaimer.
1.29
In addition, in acknowledging the special
vulnerability of people from non‑English‑speaking backgrounds, not
only should care be taken in outlining the effect of signing a waiver, where
practicable, signage and waivers should also be available in languages other
than English.
1.30
Given Australia’s international appeal as a
premiere adventure tourism destination – we can safely assume that many of the
people wanting to engage in adventure tourism in this country will be from
overseas, and as a consequence, not always proficient in English.
1.31
As we gain a stronger foothold in international
markets such as South Korea and China, for example, we need to be catering to
the needs and indeed the rights of tourists from these destinations.
1.32
Again, this ‘near enough’s good enough’ attitude
is simply not acceptable with international visitors who are engaging in
potentially high risk activities.
1.33
During the Committee hearing, APLA through
referring to the Lonergan incident made the point that this Bill potentially
gave rise to the ability to not have appropriate risk management practices in
place. The effect of this would be to see much more serious implications for
the adventure tourism industry as a result of loss of confidence in the safe
management of the risks involved.
CONCLUSION
1.34
This Bill was created in the hope—albeit
vain—that it would produce a more favourable (and ultimately lower cost)
insurance environment. Despite the fact that the Australian Democrats see the
Government’s assumption as to the effect of this Bill as mistaken, the
Australian Democrats see no reason for not accepting, in principle, the notion
that individuals sometimes do things at their own risk and should be
responsible for their behaviour.
1.35
However, given the events of this year and the
tort law reform taking place across the country that is causing severe erosion
of individual rights to sue and receive damages, it would be wrong to further
burden the community with more limitations of their rights without any
corresponding responsibility being assumed elsewhere.
1.36
As mentioned earlier, the Government has used
claims costs as a basis for recommending sweeping changes to tort law and has
used market forces as a reason not to get involved when the situation calls for
it.
1.37
If we accept, which many people do, that market
forces are a major cause of the high price of insurance experienced recently,
then we need to keep reform measures in perspective and avoid making large‑scale
changes that diminish consumer rights.
1.38
What we need to be doing is correcting the
market through more careful regulation and monitoring to ensure that the peaks
and troughs in the future are not as severe as they are today. The problems
with taking a path to erode consumer rights is that it may become increasingly
inappropriate when there is a change in market conditions.
1.39
It is important then to consider that when
consumers contract to waive their rights, not only should they be well informed
of the nature and effect of the terms which they are accepting, they must also
be assured that the recreational service provider has acted with the utmost
regard for their safety.
1.40
Rather than letting this Bill become another
knee‑jerk reaction to an insurance crisis, it needs to be a more careful
and measured response to a principle that many Australians support.
1.41
The issue of consumer protection is simply too
great to leave to chance.
Senator
Andrew Murray
Australian Democrats
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