The Greek Conference - Mykonos, September 2005 Papers

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TORT REFORM AND THE CLASH OF THE PROFESSIONS

George Triantopoulos*

Australia has experienced significant tort reform in recent times.

This paper addresses the following matters (Slide 2)1:

There have been a number of ground breaking cases in the law of tort (Slide 3). The High Court decision of Rogers v Whitaker (1992)2 resulted in a significant change in the determination of medical negligence cases.

Cases in relation to claims for nervous shock also provide a good example of how the law of tort expanded to allow recovery by injured persons.

The "Insurance Crisis"

A number of critical events took place within a short period of time leading up to what has now been referred to as the "insurance crisis" of Australia. These events included (Slide 5):

Accordingly, due to both domestic and international events, insurance became unavailable to some Insureds, almost overnight. For those who could obtain insurance, premiums had sky-rocketed.

This resulted in the media and political spotlight focusing on the difficulties faces by Insureds.

There were real concerns that services would cease or events would not be staged (including "community" events) because Insureds would not be able to secure cover. Insurers and Insureds placed pressure on the Government which resulted in a response to the insurance crisis (Slide 6).

At about this time (in November 2001) the NSW Supreme Court handed down the decision of Diamond v Simpson (Slide 4)3. In this case the Plaintiff had suffered from cerebral palsy as a result of medical negligence. The Plaintiff was awarded $14m at first instance.

Whilst the decision in this case was subsequently appealed, the timing of this multimillion dollar damages payout (at first instance) attracted a great deal of media attention in the midst of the insurance crisis.

Response to Insurance Crisis

Both the Federal and State Governments responded to the insurance crisis (Slide 7). The Government established a panel led by the Honourable Justice Ipp to report on appropriate reforms in light of the predicament.

Although the Ipp Report4 recommended consistent changes to laws, the State Governments did not adopt a uniform approach. Numerous amendments were introduced to existing laws and it is beyond the scope of this paper to discuss all of the changes5.

However, one of the amendments this paper will address deals with the introduction by the Victorian Government of thresholds in relation to the recovery of general damages for personal injuries.

A number of Plaintiffs’ law firms complained that there had been a lack of consultation by Government prior to enacting the new laws.

Victorian Tort Reform

Broadly speaking, the following reforms6 were introduced in Victoria (Slide 8).

The introduction of a minimum threshold in relation to the recovery of general damages was intended to eliminate small claims. In order to recover general damages, a Claimant must have suffered a significant injury (Slide 9).

A ‘significant injury’ is defined to mean:

The threshold applies to the following cases:

In relation to the thresholds, the degree of impairment is assessed under the American Medical Associations Guidelines (4th Edition) and the Claimant must obtain a certificate of assessment from an approved medical practitioner, stating whether the level of impairment meets the relevant threshold (Slide 10).

However, the Claimant can seek the agreement of the Respondent to waive the requirement of a Certificate. The Respondent has 60 days in which to respond to this request. Where an assessment is made, a Respondent can either accept the assessment in writing or dispute a certificate by referring the matter to a Medical Panel. Any referral to a Medical Panel is at the Respondent’s own cost.

The Respondent has 60 days in which to do so. A failure to respond results in a ‘deemed acceptance’ of the assessment on the part of the Respondent. If an assessment is referred to a Medical Panel, a Medical Panel must give its opinion in writing within 60 days after the referral is made and its opinion is binding.

There are a number of other time limits which are also relevant when dealing with cases that are referred to the Medical Panels.

The Act also allows an alternative procedure for special cases. A Claimant may apply to the Court for a determination where the claim needs to be dealt with urgently because of the imminent death of the Claimant.

It is important to note that the threshold only applies to a claim for general damages, that is, a claim for pain and suffering. This threshold does not apply to special damages. Additionally, the threshold did not operate retrospectively. Therefore, as long proceedings were issued by 30 September 2003 then any injuries suffered before 21 May 2003 would not be subject to the threshold. This resulted in a “spike in claims” as Plaintiffs’ solicitors ensured that their old claims would be issued by the deadline to avoid the application of the threshold.

Court Decisions - (Post Insurance Crisis)

As a result of the insurance crisis, I consider that the pendulum had started to swing back against Plaintiffs.

In this regard, there have been numerous New South Wales Court decisions (ultimately considered by the High Court of Australia) where Plaintiffs have failed on liability on the basis that the tripping hazard was an “obvious risk”7 - a footpath cannot be compared to a bowling green or, to use Justice Callinan's words in Ghantous:8

The world is not a level playing field. It is not unreasonable to expect that people will see in broad daylight what lies ahead of them in the ordinary course as they walk along. .

Additionally, there have been other cases where the Plaintiffs have failed, such as the decision of Povey in 20059 which was effectively a test case for claimants seeking compensation for deep vein thrombosis ("DVT") against airlines (Slide 12).

The statistics (Slide 13) relate to the County Court of Victoria and have been taken from an article from The Age of 11 May 2004 and also from the County Court. It is important to appreciate that in addition to the County Court, personal injuries actions may also be issued in the Supreme and Magistrates’ Court.

The statistics can be broken down as follows: Column 1 (2001/2002) – reflects the number of proceedings issued the year prior to the “spike” year. Column 2 (2002/2003) reflects the “spike year” during which Plaintiffs had to issue old proceedings to avoid what would otherwise become old claims that would be subject to the new threshold requirement. Column 3 (2003/2004) reflects the proceedings issued roughly one year after Tort Reform. Finally, column 4 reflects the number of writs issued in 2004/2005 year.

For the purposes of this analysis, whilst column 2 shows the "spike" in claims, I consider it is more indicative to compare columns 1 and 4. In this regard, the total number of public liability and slipping cases in the period 2001/2002 (prior to the Tort Reforms) totalled 1,286 cases. After the Tort Reform, in 2004/2005 the total number of public liability and slipping cases totalled 115. This effectively represents a 91% reduction in claims. In 2001/2002 there were 372 claims involving medical negligence. In Column 4 in 2004/2005 there were 92 which represents about a 75% reduction in the number of medical negligence claims issued.

As such, there has been a dramatic reduction in the amount of claims issued. Again, it is probably still too early at this stage to categorically state the long term impact of the reform. I expect that the number of claims issued will increase for the following reasons: 1. The backlog of cases that the Plaintiffs’ solicitors have previously dealt with in the "spike" year have either ended or are near completion. Accordingly, this will allow the Plaintiffs’ solicitors to refocus on the new claims.

2. The limitation period (generally speaking) for issuing personal injury actions has been reduced from 6 years to 3 three years. The thresholds apply to injuries on or after 21 May 2003.

As such the limitation period for the first of the new claims (that is, injuries occurring from 21 May 2003 to December 2003) will shortly expire in 2006. I expect this will also result in Plaintiffs’ solicitors issuing further claims. Tort Reform – the Future

Since the insurance crisis in 2001 times have significantly changed (Slide 14). We are now in a position where Insurers are making profits which have been recently reported in the newspapers. There is now pressure by Government on Insurers to ensure that savings are passed on to Insureds in the form of reduced premiums. A significant issue to consider is whether there will be any winding back of the reforms. I cannot see that there will be any wholesale changes to the legislation recently passed. However, in the next couple of years it is possible that the relevant Governments may "wind back" some of the reforms if they prove to be too harsh10. For example, it is possible that in Victoria that a narrative may be introduced to expand the definition of “significant injury”.

The Clash of the Professions

There have clearly been different perspectives and view points expressed during the height of the insurance crisis (Slide 15). The AMA put its case to the Government for reform. Health Care Practitioners (like other Insureds), were under serious pressure at the time given the collapse of UMP.

Equally, on the other side of the fence (Slide 16), the Plaintiffs’ lawyers opposed the changes and pointed to the following issues:

A preliminary question to ask is whether there has there been a just outcome (Slide 18). In order to explore this issue further it is necessary to review what, in fact, is “just”. Clearly, there has to be fairness in both the process and the outcome. We can look at the diverse perspectives of the injured patient, doctor or lawyer. However, ultimately it will always be an exercise of balancing competing interests.

Over the course of the insurance crisis, it is important to note that there have been other contributors to the tort reform. Most importantly, highly respected Judges have also played a significant role in entering the public debate including the following: Justice Kirby (High Court of Australia), Chief Justice Spigelman (Supreme Court of New South Wales), Chief Justice Paul De Jersey (Supreme Court of Queensland, and Justice Connolly (Supreme Court of the Australian Capital Territory).

Conclusion

In a short period of time, there have been significant changes in the insurance market. In 2001 the insurance market was undergoing serious turmoil which impacted on the wider community. Governments subsequently stepped in to redress the situation by introducing wide ranging tort reform.

In 2005 the Insurance market is significantly different. This time the Federal Government has stepped in to monitor whether insurance savings are being passed on to Insureds. The AMA and the Plaintiffs’ lawyers have expressed diverse views. Nevertheless, I consider the expressions of these views as being critical in arriving in a just outcome.

* George Triantapoulos, Partner, Ebsworth & Ebsworth, Melbourne. Prepared in conjunction with Natalie Kounelis.

1 To follow these Slides, please link to the accompanying Powerpoint Presentation.

2 (1992) 175 CLR 479; (1992) 109 ALR 625

3 [2003] NSWCA 67 on appeal from [2001] NSWSC 1048

4 Review of Law of Negligence, Justice Ipp; see www.revofneg.treasury.gov.au/content/review2.asp

5 Although see - for example - amendments (including but not limited to) to the Trade Practices Act (Cth), the Civil Liability Act and the Civil Liability (Personal Responsibility) Amendment Act both 2002 (NSW); the Personal Injuries Proceedings Act 2002 (Qld) and the Civil Liability Act 2003 (Qld); the Civil Law Wrongs Act 2002 (ACT); the Personal Injuries (Liabilities and Damages) Act 2003 (NT) and subsequent legislation; the Wrongs (Liability and Damages for Personal Injury Act 2002 (SA); and, the Civil Liability Act 2003 (WA) and in all jurisdictions amending/clarifying legislation.

6 Wrongs Act 1958 (Vic) as amended by The Wrongs and Limitation of Actions Acts (Insurance Reform) Act (2003)

7 See, for example, in Brodie v Singleton Shire Council; Ghantous v Hawkesbury City Council. High Court of Australia, 31 May 2001 [2001] HCA 29; (2001) 180 ALR 145.

8 Ghantous; at para 355.

9 (2005) 216 ALR 427

10 See, for example (since this Paper was delivered), General Purpose Standing Committee No 1, Legislative Council, New South Wales, December 2005.

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Copyright 2005. Greek Legal and Medical Conference