Background

In 2001, the collapse of HIH Insurance Ltd sparked national tort law reform that sought to limit an individual’s common law right to sue for negligence.

In Victoria, significant amendments were made to the Wrongs Act 1958 (the Act). The most significant amendment was the introduction of an injury threshold which, if not met, precludes a claimant from suing for general damages.To establish that the threshold is met, a claimant must serve on the respondent a certificate of assessment from an approved medical practitioner stating that the injuries are more than 5% permanent physical whole person impairment under American Medical Association Guides Edition 4 or more than 10% permanent psychiatric impairment.

Whilst the amended Act initially reduced the number of common law claims, over time, the reforms have caused uncertainties and inconsistencies.

To address these issues, in 2013, the Treasurer asked the Victorian Competition and Efficiency Commission (VCEC) to review personal injury litigation in Victoria.

The VCEC issued its draft report in early 2013. It invited submissions from interested parties and consulted with select stakeholders. Wotton + Kearney was one of only a few law firms invited to participate in a round table conference with VCEC members to discuss issues with the Act and proposed amendments.

The VCEC compiled its recommendations to the Government in its final report “Adjusting the Balance: Inquiry into the Wrongs Act 1958” (Final Report), which was made public on 1 September 2014.

Wrongs Amendment Bill 2014

In response to the Final Report, the Department of Justice has released a public Exposure Draft of the Wrongs Amendment Bill 2014 (the Bill). The Bill incorporates some, but not all, of the VCEC’s recommendations.

The Explanatory Notes state that the aim of the Bill is to ensure that Victorian personal injury legislation operates clearly and consistently to benefit claimants who are injured by the negligence of others.

Specifically, the purpose of the Bill is to:

  1. change the method by which the maximum amount of damages for economic loss is determined;
  2. fix a maximum amount of damages for non-economic loss and to change the method by which that amount is indexed in the future;
  3. provide for damages for loss of capacity to care for others in limited cases;
  4. change the threshold impairment level used for determining whether a person has suffered a significant psychiatric injury; and
  5. confer on courts a power to stay a proceeding to which Part VBA of the Act applies in respect of a claim for damages for non-economic loss, in cases where the claimant has not served a certificate of assessment on the respondent.

The proposed amendments are considered below.

Firstly, the Bill purports to address anomalies in the current Act that see high-income earners being entitled to less compensation than medium or low income earners. Section 28F will be amended so the court will now disregard the “applicable gap” between pre-injury and post injury earnings in determining a claimant’s economic loss. This is to address the perceived unfairness to high earners who return to some form of employment, which was the issue in Tuohey v Freemasons Hospital [2012] VSCA 80.

Secondly, the Bill seeks to amend section 28G of the Act to increase the maximum amount of damages that may be awarded to a claimant for non-economic loss to $571,080. This puts ‘general damages’ in line with the Workplace Injury Rehabilitation and Compensation Act 2013 (the WIRC Act). The cap will be indexed at the same rate as the WIRC cap.

Thirdly, the Bill looks to re-introduce damages for loss of capacity to care for others. The Bill replaces section 28ID with a new section that provides a limited entitlement to damages for loss of capacity to care for others, which is something that the High Court abolished in the case of CSR v Eddy [2005] HCA 64.

Fourthly, the psychiatric injury impairment threshold for eligibility to access non-economic loss will be reduced to 10% (instead of “more than” 10%). This means that the definition of “threshold level” in section 28LB of the Act will be amended. This amendment will make the threshold level for psychiatric injury more consistent with the classes of psychiatric injuries under the Guide to the Evaluation of Psychiatric Impairments for Clinicians.

Finally, the Bill looks to insert a new section, section 28LZMA, into the Act which will give the court the power to stay  a proceeding where the claimant has not complied with the procedural requirements of Part VBA. In essence, this means that where a claimant has not served on the respondent a certificate of assessment and any other information required to accompany the certificate prior to proceedings being commenced, the court now has the power to stay the proceeding until such time as this occurs. This will address a concern Judge Misso of the County Court raised in the matter of Pickering v Killians Walk Owners Corporation No 12870 (Ruling) [2013] VCC 1206. In that matter, Wotton + Kearney acted for the respondent and submitted that the plaintiff ’s claim should not proceed until the plaintiff could establish her claim for general damages, by serving a certificate of assessment. His Honour agreed with our submissions but indicated that he could not make such an order as the current form of the Act did not empower the Court to do so.

The proposed insertion of section 28LZMA does not provide the court with the power to compel a claimant to comply with Part VBA. However, it will enable the court to stay a proceeding until a claimant complies with the Part VBA process.

If the Bill is passed, and section 28LZMA is inserted, the reform should afford defendants and their insurers some certainty in the trial process and will hopefully minimise costs in proceedings.

Discussion

On the whole, the amendments proposed in the Bill will advance a claimant’s position under the Act and may also increase damages entitlements. This is not surprising given that the VCEC’s role was to review the perceived inequities in the current Act, and make recommendations to “adjust the balance”.

However, that said, the changes are modest. For instance, the Bill does not adopt the VCEC’s recommendation that spinal injuries receive different treatment because under the current regime, those injuries rarely exceed the impairment threshold.

The only amendment that will assist defendants and insurers is the proposed insertion of section 28LZMA, which will remedy current procedural deficiencies.

It is yet to be seen whether the Bill will be enacted.  Given the upcoming Victorian State Election, it may be some time until we know.