The Inquiry

In May 2013, The Victorian Competition and Efficiency Commission (the Commission) was directed to conduct an inquiry into the Wrongs Act 1958 (Vic) (the Wrongs Act) by the Victorian Treasurer, Michael O’Brien MP.

On 26 February 2014, the Commission submitted its final report:Adjusting the Balance: Inquiry into Aspects of the Wrongs Act 1958

In preparing the report, the Commission sought to draw on the views and experience of key stakeholders operating within the personal injury compensation system of the Wrongs Act.

On 2 September 2014 the Victorian Government provided its formal response to the recommendations which if implemented will provide defendants with some much needed certainty and improve efficiencies in personal injury litigation.  The Government’s response to the recommendations have not yet been legislated and will need to await the new Parliament.  However, we expect that the changes are likely to have bipartisan support. 

Background

In 2002 and 2003, a series of limitations on personal injury damages were introduced in to the Wrongs Act to help deal with the decreasing availability and increasing cost of public liability and professional indemnity insurance. Broadly, these limitations included caps on damages for personal injury or death for both economic and non-economic loss, impairment thresholds for eligibility of claims to damages for non-economic loss, a fixed discount rate on lump sum damages awarded for future economic loss and expenses and limitations on damages for gratuitous attendant care. 

Over time, a number of potential anomalies, inequities and inconsistencies arising from these limitations have been identified, with critical stakeholders lamenting that the limitations:

  • impose unreasonable limitations that lead to legitimate claims being denied compensation, or being under-compensated
  • deal with plaintiffs inconsistently due to anomalies in the implementation of the changes, particularly the measurement of ‘significant injury’
  • produce damages awards that differ for similar injuries across the three injury compensation regimes that exist in Victoria – the Wrongs Act, the Accident Compensation Act and the Transport Accident Act.

The Commission was directed to examine these issues and make recommendations to address them, without compromising the original intention of the limitations, and without having an unduly adverse impact on insurance premiums.

Recommendations

The Commission made recommendations which ultimately will result in increased damages entitlements but also ensure that defendants and their insurers are provided with pertinent information from which to make a decision to refer a claimant to the medical panel. Further claimants who issue proceedings for common law damages but delay in serving a notice of assessment can be compelled to serve the relevant certificate and have their proceeding permanently stayed until they comply.  The changes are relevant to liability insurers underwriting personal injury legal liability policies in Victoria.  At this stage the proposed changes are recommendations only and we will need to wait and see if the next Parliament implements the legislative changes required to achieve the recommendations. Set out below are the three key recommendations which the Government supported or supported in principle:

Recommendation 7.1

To address anomalies, inequities and inconsistencies in the limitation on damages for personal injury and death, the Victorian Government amend the Wrongs Act 1958 (Vic) to:

  • adjust the psychiatric injury impairment threshold for eligibility to access damages for non-economic loss to greater than or equal to 10 per cent
  • provide that the cap on damages for economic loss applies to the gap between pre- and post-injury earnings
  • provide that in claims of loss of expectation of financial support, deductions for the deceased person’s expenses are to be made before applying the cap on economic loss.  This amendment will lead to fairer outcomes for dependents
  • increase the maximum amount of damages that may be awarded to a claimant for non-economic loss to align with the cap under the Accident Compensation Act
  • provide a limited entitlement for damages for the loss of capacity to care for others, in line with the New South Wales approach

Recommendation 8.1 

To reduce transaction costs and improve equity, the Victorian Government amend part VBA of theWrongs Act 1958 (Vic) and the Wrongs (Part VBA Claims) Regulations 2005 (Vic) to:

  • require the claimant to serve the prescribed information in a prescribed form
  • grant courts the discretionary authority to:
    • order the claimant to serve the respondent with the Certificate of Assessment and the prescribed information in the prescribed form
    • stay proceedings until service has occurred
  • require the respondent to refer the medical question to the Medical panel using a prescribed form which:
    • includes a field for selecting the appropriate, generically worded medical question
    • must be accompanied by a copy of the prescribed information provided by the claimant.

Recommendation 9.1

That the Victorian Government amend section 31 of the Wrongs Act 1958 (Vic) to provide that damages for mental harm caused by an aircraft accident are only recoverable – under a strict liability regime – if the mental harm is accompanied by personal or property damage caused by the aircraft.