Minister Welcomes First Negligence Review Report

Assistant Treasurer Senator Helen Coonan today released the first report of the Review of the Law of Negligence.

The Review, chaired by the Honourable Justice David Ipp, was established as one of the measures agreed by the second Ministerial Meeting on Public Liability Insurance in May.

The panel, comprising Justice Ipp, Professor Peter Cane, Associate Professor Donald Sheldon and Mr Ian Macintosh, was asked to inquire into the law of negligence and to develop a series of proposals which provide a principled approach to reforming the law of negligence.

"The cost and availability of public liability, medical and professional indemnity insurance is having a significant impact on many aspects of Australian life," Senator Coonan said.

"The Commonwealth, and all States and Territories, are grappling with ways of implementing responsible reform which will take the pressure off insurance premiums while providing adequate protection for consumers.

"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.

"Australians are clearly saying to their leaders that some of the payouts coming from the courts just don't seem to make sense and they want some balance restored to the system.

"The report which I am releasing today contains a number of very significant proposals to address these issues.

"The Commonwealth will carefully consider the changes being proposed and I would urge my counterparts in State and Territory Governments to do the same."

The report recommends a range of measures including:

A national response embodied in a single statute;
Changes to negligence law to protect doctors who provide treatment that accords with the widely held views of a significant number of respected practitioners in the relevant medical field; and
Individuals taking part in recreational activities be more responsible for their own actions and be unable to sue for obvious risks.

This report is the first of two to be produced by the Review. In its second report, due on September 30, the panel will develop principled options for limiting liability and the quantum of awards for damages as well as evaluating proposals to allow self-assumption of risk to override the common law.

Senator Coonan said the panel had been guided by the principle that individuals should take more responsibility for their own actions.

"The changes being proposed are not about taking away people's rights or reducing consumer protection," Senator Coonan said.

"They are about reforming a system which has become unaffordable and meeting the expectations of the community while balancing the interests of those who are injured with those of the community at large.

"The goal should be a system that imposes a reasonable burden of responsibility on individuals to take care of others and to take care of themselves.

"As the panel has pointed out, only a small proportion of the sick, injured and disabled are in a position to be compensated through the courts and under the current system. Those who are able to frame a legal action arising from their misfortune are often able to receive compensation which is very much higher than others who have suffered the same fate."

Senator Coonan said the recommendations of the report have the potential to greatly impact on the areas of medical negligence, public liability and professional indemnity insurance.

She said the panel had also pointed to areas outside the scope of their review that require attention, such as legal and administrative costs which can make up as much as 40 per cent of total compensation costs.

"I would like to thank Justice Ipp, Professor Cane, Professor Sheldon and Mr Macintosh for their hard work on this important report," Senator Coonan said.

Senator Coonan said the Government would carefully consider the panel's recommendations and she expected them to be discussed with State and Territory Governments at the next Ministerial Meeting on September 27, 2002, in Sydney.

The full report is available at http://revofneg.treasury.gov.au

First Report of the Principles Based Review of Negligence

There is a widely held view in the Australian community that insurance has become unaffordable and unobtainable that this is due in large part to the operation of the legal system in which:

the law of negligence, as applied by the courts, is unclear and unpredictable;
it has become too easy for plaintiffs in personal injury cases to establish liability for negligence on the part of defendants;
damages awards in personal injuries cases are frequently too high.

In its first report to Governments, the Panel was asked to report on matters relating to:

professional negligence;
options for limiting the liability of not for profit organisations;
the interaction of the Trade Practices Act 1974 with common law principles; and
the statute of limitations.

The Panel will report on a range of other areas of the law in its second report to Governments due on 30 September 2002. The two reports of the Panel will be a single integrated set of proposals for reform.

General Principles

The Panel sees its task as being to recommend changes to the law that impose a reasonable burden of responsibility on individuals to take care of others and to take care of themselves.

The Panel has sought to strike a balance between the interests of injured people and those of injurers that seems to be fair and likely to be widely accepted in the community at large.

Injured Persons' Rights

It is the view of the Panel that, unless it is retrospective, statutory reform of the law does not deprive injured persons of their rights.

Relatively speaking, personal injury law provides very generous compensation to a very small proportion of the population at considerable expense to the rest of the community. Only very small proportions of deaths or injury result in the payment of compensation. The vast majority of those who are injured have to rely on their own resources and on other sources of assistance, notably social security.

This is a theme that will be further explored in the Panel's second report.

Effective Law Reform

The Panel's view is that in order for law reform to be effective, reforms to personal injury law must provide a uniform scheme regardless of the legal category (tort, contract, equity, under statute or otherwise) under which a claim is brought.

The Panel unqualifiedly supports the desirability of enacting measures that would bring the law in all Australian jurisdictions as far as possible into conformity.

A summary of the Panel's recommendations is as follows:

I. National Response

That there be a national response to be incorporated in a single statute. The law would need to be incorporated in each jurisdiction - the Commonwealth (where relevant) and each State and Territory.

II. Overarching Reach

That the legislative scheme should apply (unless expressly provided to the contrary) to any claim for damages for personal injury or death resulting from negligence regardless of whether the cause is brought in tort, contract, equity, under statute (such as the Trade Practices Act 1974, or State and Territory Fair Trading Acts) or any other cause of action.

III. Professional Negligence

The Panel has particularly focused for the purposes of this report on the liability of medical practitioners, however the suggested rule developed by the panel could be applied more widely to all professional groups (see Options Paragraphs 3.24 - 3.30).

Medical Negligence

The issue is what standard of care should be applied when assessing whether or not a medical practitioner has been negligent.
The panel notes that an important difference exists between the standard applied in providing or failing to provide treatment on the one hand and the provision of information on the other.

Standard of Care for Treatment

The test for determining the standard of care in cases in which a medical practitioner is alleged to have been negligent in providing treatment to a patient should be:

A medical practitioner is not negligent if the treatment provided was in accordance with an opinion widely held by a significant number of respected practitioners in the field, unless a court considers that the opinion was irrational.

This provides a modified version of the Bolam Rule which will require a court to defer to widely held medical opinion unless in an exceptional case, the expert opinion were both widely held and irrational.
This formulation will give doctors as much protection as is desirable in the public interest. It will protect medical practitioners in cases of medical misadventure, but will leave open cases where a medical practitioner has acted negligently and those actions are not supported by a wide body of medical opinion.

Standard of Care for the Provision of Information by Medical Practitioners

The medical practitioner's duties to inform should be expressed as duties to take reasonable care.
Principles underpinning the duty to take reasonable care should embody the following.
- The proactive duty to inform. Which requires a medical practitioner to take reasonable care to give the patient such information as the reasonable person in the patient's position would, in the circumstances, want to be given before making a decision whether or not to undergo treatment.
- The proactive duty to inform should be determined by reference to the time at which the relevant decision was made by the patient and not at a later time.
- A medical practitioner does not breach the proactive duty to inform by reason only of a failure to give the patient information about a risk or other matter that would, in the circumstances, have been obvious to a reasonable person in the position of the patient, unless warning of the risk is required by statute.
- Obvious risks include risks that are patent or matters of common knowledge; and a risk may be obvious even though it is of low probability.
- The reactive duty to inform. Which requires the medical practitioner to take reasonable care to give the patient such information as the medical practitioner knows or ought to know the patient wants to be given before making the decision whether or not to undergo the treatment.

Procedural Issues

(a) Court Experts

That further consideration be given to the use of Court appointed experts (along the lines now operative in the United Kingdom) on a three year trial period.

(b) Notice of Claims

That Government's consider the introduction of a rule requiring the giving of notice of claims before proceedings are commenced.
This would be based on the '90 day rule', applying in South Australia. This rule requires a plaintiff to give at least 90 days notice to a defendant of a proposed action. The notice must provide sufficient detail of the claim to enable the defendant an opportunity to settle the claim before proceedings commence.

Other Professionals

In cases involving the allegation of negligence on the part of a person holding himself or herself out as possessing a particular skill, the standard of reasonable care should be determined by reference to:
- What could reasonably be expected of a person professing that skill.
- The relevant circumstances at the date of the alleged negligence and not a later date.

IV. Not for Profit Organisations

Rather than adopt a general exemption for not for profits, the Panel has preferred to address the need to strike a better balance between the various interests at stake by a series of recommendations to be found in its two reports.
In essence the Panel has found that not for profits vary considerably in size and scope whilst the risks associated with not for profits are no different to those presented by similar activities conducted on a commercial basis eg. riding schools and other activities.
However, recommended changes that will assist not for profit and community activities as well as activities more broadly include:

Recreational Services

The provider of a recreational service should not be liable for personal injury or death suffered from a voluntary participant in a recreational activity as a result of the materialisation of an obvious risk.
- An obvious risk is a risk that, in the circumstances, would have been obvious to a reasonable person in the position of the participant.
- Obvious risks include risks that are patent or matters of common knowledge.
- A risk may be obvious even though it is of low probability.
The rationale for this approach is that people who participate in such activities often do so voluntarily and wholly or predominantly for their own enjoyment.

Warnings of Risk

In line with the basic principle that people should take responsibility for their own safety, the Panel has recommended that the law be amended so that a person cannot be held liable for a failure to warn of obvious risks.
A person should not breach a proactive duty to inform by reason only of a failure to give notice or to warn of an obvious risk of personal injury or death, unless required to do so by statute.
- An obvious risk is a risk that, in the circumstances, would have been obvious to a reasonable person in the position of the person injured or killed.
- Obvious risks include risks that are patent or matter of common knowledge.
- A risk might be obvious even though it is of low probability.
The Panel's recommendation would apply broadly and would have particular applicability to the liability of occupiers of land. Currently, the failure of a land occupier to provide warnings of dangers may constitute negligence, even though the occupier could not reasonably be expected to remove the danger.
The effect of the Panel's recommendation would be to reverse the decision in Nagel v Rottnest Island Authority, in which it was held that a local council's failure to warn of the dangers of diving into shallow water was negligent.

V. Trade Practices Act

The Panel recommends that the Trade Practices Act should be amended to provide that the rules relating to limitation of actions recommended by the Panel apply to any claim for negligently caused personal injury or death that is brought under:
- Part IVA - unconscionable conduct;
- Part V Div 1A - product safety and product information;
- Part V Div 2A - liability of manufacturers and importers of goods.
As it becomes more difficult for plaintiffs to succeed in claims based on negligence, lawyers will inevitably search for an alternative cause of action. The Trade Practices Act and equivalent provisions in State and Territory law provide potential sources for claims for personal injury and death. Steps should be taken to ensure that actions taken under the Trade Practices Act are not more attractive or available than actions under the general law of negligence.
The Panel also recommends that the Trade Practices Act be amended to:
- prevent individuals bringing claims for personal injury or death under Part V, Div 1 - misleading and deceptive conduct (particularly sections 52 and 53); and
- prevent the ACCC from bringing representative actions for personal injury and death resulting from contraventions of Part V, Div 1.
It is open to serious question whether Part V, Div 1 of the Trade Practices was ever intended to be used in a cause of action for injury or death. To date, plaintiffs have rarely relied on these provisions to bring claims for personal injury or death, however, if personal injury law is amended as recommended by the Panel, this situation is likely to change.
A plaintiff can succeed in an action under section 52 merely by proving that a statement was misleading or deceptive. Unlike at common law, there is no need to prove that the statement was made negligently or dishonestly.
While actions under section 52 are restricted to conduct `in trade or commerce', it is the Panel's view that there remains considerable opportunity for claims for personal injury or death to be brought under this section.
It is the Panel's view that the possibility of making claims under section 52 and similar legislation could have an adverse effect on the reforms recommended in its reports.
It is the Panel's view that these recommendations do not unacceptably reduce the legal protection of consumers under the Trade Practices Act. The main effect of these recommendations is to remove a basis of strict liability damages for personal injury or death resulting from misleading or deceptive conduct.
To the extent that legislative changes are made to limit the potential use of the Trade Practices Act for claims for personal injury and death, similar changes should be made to State and Territory legislation containing similar provisions.

VI. The Trade Practices Amendment (Liability for Recreational Services) Bill 2002

The Federal Government has introduced a Bill into the Parliament to amend the Trade Practices Act to allow consumers to `waive' implied warranties under the Act in a contract for the supply of a recreational service.
The purpose of the Bill is to prevent section 68 of the Trade Practices Act rendering void a provision in a contract for recreational services that purports to exclude, restrict or modify the `statutory warranties' contained in section 74 of that Act.
Section 74 of the Trade Practices Act requires that a supply of services must be rendered with due care and skill and that the services are reasonably fit for their intended purpose. Section 68 provides that any term of a contract that purports to exclude or restrict the warranties implied by section 74 is void.
The Panel has concluded that the Bill does not significantly reduce consumer protection. This is because the Bill only removes the obstacle of section 68 to waivers, it does not exclude, restrict or modify the liability of providers of recreational services. The ordinary law of contract presents significant obstacles to achieving this.
Notwithstanding this, the Panel considers that the amendments contained in the Bill are necessary to enable waivers to be effective.
The Bill compliments the recommendations of the Panel with respect to recreational services and warnings. The Panel has recommended that the definition of personal injury and recreational services contained in the Bill be amended.

VII. Limitation of Actions

The Panel has recommended that the limitation period be three years from the date of discoverability.

The Panel has recommended that a system of limitations should embody the following principles.
- The limitation period commences on the date of discoverability.
- The date of discoverability is the date when the plaintiff knew or ought to have known that personal injury or death:

Claims become statute barred in most cases on the expiry of the earlier of:
: the limitation period; or
: a long-stop period of 12 years after the events on which the claim is based (`the long-stop period').
The court has a discretion at any time to extend the long-stop period to the expiry of a period of three years from the date of discoverability.
In exercising its discretion, the court must have regard to the justice of the case, and in particular:
: whether the passage of time has prejudiced a fair trial of the claim;
: the nature and extent of the plaintiffs loss;
: the nature of the defendant's conduct.

A workable limitation system needs to provide fairness to both plaintiffs and defendants. The system must be sufficiently flexible to cope fairly with both damage suffered immediately or shortly after the occurrence of a wrongful act and with latent damage that can only be detected years afterward.
The array of different limitation regimes in Australia leads to confusion, litigious disputes and materially influence the nature of the cause of action relied upon, occasionally leading to forum shopping.

Minors and People under a Disability

The Panel makes recommendations with respect to the treatment of minors, persons under a disability and the deceased. Except in very limited cases (for example, when a minor is not under the care of a parent or guardian or in the case of a person under a disability, where an administrator has not been appointed), the standard limitation period would apply.
The limitation periods as proposed should apply in all jurisdictions.

VIII. Copies of the Report

Copies of the Panel's report can be obtained from the Panel's web-site at http://revofneg.treasury.gov.au

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Minister Welcomes First Negligence Review Report