I. BACKGROUND TO THE REPORT

A. Terms of Reference

1.1 The terms of reference which are set out on pages iii-iv are very broad. They cover compensation arrangements in New South Wales in respect of death and personal injury generally and are not confined to particular categories of accidental injury, such as those sustained in transport or work-related accidents. However, the terms of reference specifically refer to the question of whether “no-fault compensation” should be payable in respect of death or personal injury suffered by any person through the use of a motor vehicle or other means of transport. They also ask whether any such no-fault compensation scheme should be in substitution for all or any rights to compensation under existing law. The term “no-fault compensation” means compensation for accident victims or their families without the need for a claimant to prove that the accident was caused by another person’s fault whether in the form of negligence, breach of statutory duty or otherwise.

1.2 This Report does not cover all the terms of reference. It deals only with compensation for victims of transport accidents and their families. It is anticipated that other matters within the terms of reference will be dealt with in later reports, although future progress will depend in part on the response to this Report. If, for example, the Government indicated its intention to act on the whole or part of the recommendations in the Report, this might influence the Commission’s priorities on other matters within the terms of reference. The reasons for concentrating on compensation for transport accident victims are discussed in paragraphs 1.33-1.42.

B. Publications

1.3 A list of publications prepared by the Commission in this reference appears on pages vii-viii. These included two Interim Reports, requested by the Attorney General to deal with specific questions within our terms of reference. The first Report in February 1982 related specifically to proposals for the periodic payment of future medical and related expenses, while the second Report in June 1983 examined the Bills then before Parliament to alter the structure and administrative arrangements of the Workers’ Compensation Commission. Both Interim Reports responded promptly to requests for information, while reserving the Commission’s right to propose further and far-reaching changes in any relevant final report. Of particular importance to this Report are the Issues Paper and Working Paper No. 1.

1. Issues Paper

1.4 In June 1982, the Commission published an Issues Paper entitled Accident Compensation. This Paper was designed to provide background information for the guidance of individuals and organisations wishing to make submissions to the Commission. Some 2,500 copies were distributed. The Issues Paper examined the major systems in New South Wales for compensating accident victims, discussing the main features of each and noting criticisms of them. It also discussed the available statistics on accidental death and injury in New South Wales and on the operation of compulsory third party and workers’ compensation insurance. Four main approaches to reform of accident compensation arrangements were identified for discussion purposes:

• modifications to existing systems;
• introduction of a no-fault scheme to supplement existing arrangements;
• introduction of a no-fault scheme to replace existing arrangements; and
• a comprehensive no-fault scheme to cover injuries and death however sustained.

2. Working Paper

1.5 In May 1983, the Commission released a Working Paper entitled A Transport Accidents Scheme for New South Wales, over 2,500 copies of which were distributed. A detailed costing of the proposed scheme by Mr J R Cumpston. a consulting actuary, was published as a companion document to this Paper. A summary of the costing appeared in Chapter 13 of the Paper.

1.6 The Working Paper suggested the introduction of a scheme which would provide no-fault compensation, in substitution for the right to sue for damages in a common law negligence action (on proof of fault) for people injured, or the families of people killed, in transport accidents. It was suggested that the scheme should cover accidents involving the use of cars, taxis, trucks, buses, trains and ferries. The proposals in the Working Paper were, however, tentative and subject to modification in the Final Report. They were set out in detail in the Working Paper in order to provide commentators with an opportunity to assess whether the scheme would be capable of implementation and to allow a careful costing of the proposals to be made.

C. Research Program

1.7 The Commission has conducted an extensive research program. Three major surveys were completed, and a number of research papers were prepared by consultants or undertaken within the Commission.

1. Case Studies

1.8 As part of its research program, the Commission collected information about the experiences of accident victims. Three case study programs of accident victims were conducted:

• the Lump Sum Survey undertaken by Colin Bass Human Resources;
• the Commission’s case study program; and
• the Traffic Accident Study undertaken by MSJ Keys Young, Planners Pty Ltd.

Both the Lump Sum Survey and the Traffic Accident Study were funded by the Law Foundation of New South Wales. The Commission wishes to acknowledge the invaluable support provided by the Law Foundation for these studies.

The Lump Sum Survey

1.9 In 1982-83 Colin Bass Human Resources undertook a survey of 263 people who received lump sum accident compensation verdicts or settlements in 1976. The survey covered motor vehicle compensation claims, workers’ compensation redemptions and common law industrial claims. The conclusions drawn from the survey have statistical validity because the respondents were representative of transport accident victims who receive high or medium amounts of compensation. A Report on the survey entitled Lump Sum Accident Compensation was published in June 1983.

The Commission’s Case Study Program

1.10 The Commission’s Case Study Program was designed to collect information from accident victims on a wide range of matters covered by the reference. It was not confined to accident victims but included, for example, those injured in the workplace, in transport accidents or as the result of a crime. The program covered accident victims who sporting received no compensation, those who received compensation and those awaiting compensation In total 150 accident victims were interviewed. The respondents were not necessarily representative of all accident victims. However, their experiences illustrate many of the problems of accident victims, in relation to the compensation system.

1.11 A Research Paper called the Case Study Booklet was released in September 1984. The Booklet concentrates on the problems of transport accident victims. It includes case studies from the Commission’s Case Study Program. It also contains some case studies from the Lump Sum Survey and summaries of reported and unreported judgments. The Booklet describes the approach adopted in the Commission’s Case Study Program and highlights the major themes that can be drawn from the case studies themselves.

The Traffic Accident Study

1.12 The Traffic Accident Study compiled 86 case studies of people who received compensation either by settlement or verdict for injuries sustained in transport accidents. The study produced detailed information about the problems and experiences of transport accident victims. A special questionnaire was developed which was administered either by personal interview or by telephone. Each interview took between two and four hours. Unlike the Lump Sum Survey the Traffic Accident Study was not designed to produce statistically valid results, but rather to illustrate the difficulties that can be encountered by people who received lump sum compensation following transport accidents. The Commission prepared a Research Paper on the study called Traffic Accident Case Studies, which was released in May 1984. The Research Paper describes the method used, presents major findings drawn from the study and incorporates summaries of selected case studies.

2. Other No-Fault Compensation Schemes

1.13 The experience of other no-fault schemes was of special interest to the Commission, particularly the motor vehicle schemes operating in Victoria, Tasmania and the Northern Territory. It was also important to examine the New Zealand comprehensive accident compensation scheme and other proposals for no-fault schemes. The following papers were prepared to meet these requirements.

• “Cost estimates for a Victorian no-fault motor accident compensation scheme in New South Wales”, July 1982, by Mr J R Cumpston, E S Knight and Co, Consulting Actuaries. This paper assesses the cost of introducing a scheme in New South Wales providing identical benefits to the Victorian scheme.
• “No-Fault Road Accident Schemes”, August 1983, Ms R Graycar, Lecturer, Faculty of Law, University of New South Wales. This paper describes the historical development and administration of the no-fault schemes in Victoria, Tasmania and the Northern Territory.
• “Options for An Ideal No-Fault Accident Compensation Scheme”, August 1982, Ms F Tito, Legal Officer, New South Wales Law Reform Commission. This paper sets out options for a no-fault scheme based on recommendations in reports and no-fault schemes in other jurisdictions.

3. Modification of the Common Law

1.14 Several projects explored the possibility of achieving reforms through modifications to the common law.

• “Options as to the Form of Compensation - Lump Sums, Periodic Payments, Redemptions, Structured Settlements”, December 1982, Mr J Brownie, QC, New South Wales Bar. This paper canvasses the various means by which compensation might be paid to accident victims, and discusses the advantages and disadvantages of each.
• “A Legal Analysis of the Relationship between the Principal Commonwealth Social Security Benefits and Other Forms of Compensation”, December 1982, Mr J L R Davis and Mr N Seddon, Faculty of Law, Australian National University. This paper analyses the interaction between social security legislation and certain compensation arrangements, including the common law and workers’ compensation.
• “Common Law Proceedings in Respect of Personal Injury - Consideration of Procedural Problems”: July 1983, Mr J C S Burchett, QC, New South Wales Bar. This paper analyses possible procedural reforms in respect of common law claims for personal injuries.
• “Accident Compensation- Proposals to Modify the Common Law”, July 1983, Professor M Chesterman, Faculty of Law, University of New South Wales. This paper identifies policy options for modifying the common law relating to personal injury actions, taking into account the possibility of introducing no-fault schemes in specific areas.
• “Structured Settlements”, October 1983, Ms C Strange, Temporary Research Officer, New South Wales Law Reform Commission. This paper examines the operation of structured settlements in the United States and Canada. Including the advantages and disadvantages for accident victims, insurers, defendants and lawyers.

4. Health Care and Rehabilitation

1.15 Health care and rehabilitation arrangements are very complex in New South Wales, because of the number and range of service providers and funding sources. The following papers were prepared to examine these issues.

• “The Estimation of the Costs of Accidents to the New South Wales Health Care System”, March 1983, Ms J Ellen, Department of Community Medicine, Westmead Hospital. This paper describes generally the provision of health welfare and rehabilitation with particular reference to the funding sources of the organisations concerned.
• “Accident Compensation: Policy and Administration in Health Funding”, August 1983, Mr M McHarg, CHS Consulting Pty Ltd. This paper describes the current system for payment of medical and hospital expenses, with particular reference to motor vehicle accident victims.
• “The Aftermath - Caring for Accident Victims in New South Wales”, December 1983, Professor J Dewdney, School of Health Administration, University of New South Wales and Mr I Irwin. This paper discusses existing rehabilitation and related programmes and services available to accident victims in New South Wales.

5. Workers’ Compensation

1.16 Research was also undertaken in the field of workers’ compensation.

• “Report on Modification to the Workers’ Compensation System”, August 1983, Mr F Marks, solicitor. This report analyses the operation of the existing workers’ compensation system and examines possible modifications.
• “Modification of the Workers’ Compensation System”, August 1983, Associate Professor C P Mills, Faculty of Economics, University of Sydney. This report examines certain modifications proposed in this and other jurisdictions and contains an historical account of the development of the present law.

6. Aspects of the Transport Accidents Scheme

1.17 Research was also commissioned on particular questions relevant to the scheme proposed in the Working Paper.

• “Cost estimates for motor vehicle accident compensation”, April 1983, Mr J R Cumpston, E S Knight and Co, Consulting Actuaries. This report contains a detailed costing of the proposed scheme.
• “Report on Conflict of Laws Aspects of Transport Accidents”, November 1983, by Associate Professor C Phegan, Faculty of Law, University of Sydney. This paper assesses the conflict of laws problems which might arise in the context of a no-fault transport accidents scheme operating in New South Wales.
• “Taxation Implications of the Transport Accidents Scheme Proposals”, February 1984, Mr S Cavanagh, Senior Lecturer, Faculty of Law, University of New South Wales. This paper examines the implications of proposed transport accident benefits in the fields of income tax, sales tax and other tax areas.

D. Public Consultations

1. Preliminary Discussions

1.18 In the early stages of the reference, discussions were held with representatives of interested organisations, including the Insurance Council of Australia, the Compensation Reform Action Group, the Law Society of New South Wales, the New South Wales Bar Association, the Government Insurance Office of New South Wales, NRMA Insurance Ltd, and the Labor Council of New South Wales.

2. Submissions

1.19 The Commission received 94 submissions in response to the Issues Paper. Bodies making submissions represented a wide cross-section of the community. Representations were received from the insurance industry, workers’ and employers’ organisations, safety and rehabilitation groups, the medical profession the legal profession, women’s groups, migrant associations, the welfare sector, and other individuals and organisations. A list of individuals and organisations who responded to the Issues Paper is contained in Appendix B.

1.20 Since publication of the Working Paper, the Commission has received 92 further Submissions. Again, representations and comments were received from a variety of individuals and groups. A list of individuals and organisations who responded to the Working Paper is included as Appendix C.

1.21 Meetings were held with a number of the individuals and organisations who made Submissions, in addition to consultations with other interested organisations. A list of those with whom Such meetings were held is attached as Appendix D.

1.22 The Submissions have been very influential in shaping our thinking. Even those submissions that rejected the very basis of the proposals in the Working Paper were important because they focussed attention on weaknesses and inconsistencies in our reasoning. The fact that we have not abandoned our general approach, but have preferred to modify the proposals, does not detract from the value of these contributions. As will be seen, this Report departs in significant ways from the suggestions tentatively put forward in the Working Paper. We refer frequently in this Report to submissions made both before and after preparation of the Working Paper. We are grateful to all those who took the time and trouble to express their views to us.

3. Meetings and Seminars

1.23 During the latter months of 1982, the Commission’s involvement in discussions on accident compensation intensified. A similar process of public consultation was repeated following the release of the Working Paper in May 1983. A list of seminars addressed and meetings attended by representatives of the Commission is included as Appendix E. Those seminars and meetings which the Commission organised or assisted in organising are marked with an asterisk.

1.24 A seminar entitled “Accident Compensation: The Prospects for Reform” was held on 4 August 1983 in Sydney. It was organised by the Faculty of Law, University of New South Wales, in conjunction with the Commission, and was attended by approximately 280 people, including members of the insurance industry, the legal and medical professions and disabled people’s organisations. The seminar was opened by the State Attorney General, the Hon D P Landa, LLB, MP. The following papers were presented by Commission members and staff

• “The New South Wales Law Reform Commission’s Reference on Accident Compensation”, Professor R Sackville.
• “The Problem of Non-Earners under a Statutory Scheme”, Ms F Tito.
• “Administrative Aspects of a Statutory Scheme of No-Fault Compensation”, Mr J R T Wood, QC.

In addition, papers were presented by Professor M Chesterman, Mr J R Cumpston, Mr M McHarg and Professor H Luntz, Faculty of Law, University of Melbourne.

1.25 Members and staff of the Commission also attended a seminar on 21 October 1983 entitled “The Compensation of Motor Accident Victims in Victoria - A Model for Australia?” The seminar was organised by the Law Institute of Victoria, and was opened by the Commonwealth Attorney-General, Senator the Hon G Evans, QC. The Chairman of the Commission presented a paper outlining the scheme proposed in the Working Paper. In addition, practising members of the legal and medical professions delivered papers. These have been published by the Law Institute of Victoria.

1.26 More recently, representatives of the Commission attended a conference in Adelaide on 31 May-1 June 1984 entitied “Workers’ Compensation - New Directions?” and organised by the South Australian Department of Labour. In addition to papers presented by representatives of the legal profession, insurance industry, workers’ compensation administration and the South Australian Government, the Chairman of the Commission delivered a paper entitled “New Directions for Australia”. There were also several overseas speakers, including the Hon Sir Owen Woodhouse, President of the Court of Appeal of the Supreme Court of New Zealand; Mr J L Fahy, General Manager of the New Zealand Accident Compensation Corporation, and Professor T Isom Professor of Law at York University, Canada.

1.27 On 18-19 August 1984, Commission members and staff attended a conference on “Accident Compensation”, in Canberra, organised by the Australian National University. The Chairman presented a paper, again outlining the Commission’s proposals for a transport accident compensation scheme. Overseas speakers included Sir Owen Woodhouse; Professor J O’Connell, Professor of Law, University of Virginia; Professor G Schwarz, Professor of Law, University of California at Los Angeles School of Law; and Professor D Harris of Oxford University’s Centre for Socio-Legal Studies. The Commonwealth Attorney-General also addressed the conference.

4. Interstate and Overseas Contacts

1.28 The Commission was visited by a number of distinguished people with expertise in the area of accident compensation. These included:

• The Hon Sir Owen Woodhouse (February 1982);
• Mr B D Inglis, QC, Chairman of the Board of Directors of the Accident Compensation Corporation of New Zealand, Mr J W Brown, Deputy Managing Director and Mrs V M Duncan, Member of the Board (April 1982);
• Justice A Sangster of the Supreme Court of South Australia (June 1983);
• Dr H Burry, Medical Controller of the Accident Compensation. Corporation of New Zealand, and Mr K Prisk, New Zealand Government Actuary (October 1983);
• Professor J O’Connell, John Allan Lowe Professor of Law, University of Virginia, USA (July 1984);
• Professor J O’Connell, John Allan Love, Professor of Law, University of Virginia, USA;
• Professor G Schwarz, Professor of Law, University of California at Los Angeles School of Law, USA (July 1984); and
• Mr D Harris, Director of Centre for Socio-Legal Studies, Oxford University, England (August 1984).

1.29 Commission members and staff also made several visits to other Jurisdictions to gain detailed information on the operation of other existing schemes of accident compensation. Examples are given below:

• In the course of a visit to Brisbane in June 1983, members of the Commission examined the Queensland workers’ compensation system as a possible model for New South Wiles, with particular reference to the use there of medical boards. Meetings were held at the Queensland Law Society, a Workers’ Health Centre, the Workers’ Compensation Board, the Queensland Confederation of Industry, the Queensland Branch of the Australian Medical Association, and the Queensland Trades and Labor Council.
• In July 1983, representatives of the Commission visited the Motor Accidents Board in Melbourne for meetings with its officers. In addition, a meeting was held with the Litigation Committee of the Law Institute of Victoria.
• In November 1983, two members of the Commission, the Chairman and Mr Wood, visited New Zealand for an intensive examination of the detailed administration of the New Zealand comprehensive no-fault accident compensation scheme by the Accident Compensation Corporation. Discussions were held with representatives of the Health Department. the Transport Ministry, the insurance industry, the union movement and the legal profession, as well as with officers of the Corporation.

1.30 The Commission also hosted the inaugural meeting of the Interstate Working Party on Workers’ Compensation in July 1983. Representatives from South Australia, Western Australia and Victoria met in Sydney with officers of the Workers’ Compensation Commission of New South Wales, the New South Wales Law Reform Commission and the New South Wales Attorney General’s Department. The aim of the Working Party is to achieve some uniformity in the area of workers’ compensation.

5. Consultative Committees

1.31 To assist us in specialised areas, the Commission formed three consultative committees. In October 1983, the Workers’ Compensation Consultative Committee was formed. This Committee was constituted by representatives of the Workers’ Compensation Commission, the insurance industry, the New South Wales Labor Council, the Compensation Reform Action Group and the New South Wales Bar. In December 1982, the Medical Practitioners’ Consultative Committee was established with senior representatives from the medical profession, especially those involved in rehabilitation. In January 1983, a Community Consultative Committee was formed. This Committee included representatives from a range of welfare, community and ethnic groups.

6. Rehabilitation

1.32 It became evident at an early stage that the question of rehabilitation is particularly important in this reference. Accordingly, members of the Commission met widely with rehabilitation workers, including medical practitioners and other rehabilitation specialists, rehabilitation counsellors and representatives from self-help organisations. These meetings are included in Appendix E.

II. TRANSPORT ACCIDENTS: A FIRST STEP

A. Motor Vehicle Accidents

1.33 Paragraph 1.1 referred to the breadth of the terms of reference and the fact that this Report is confined to proposing a scheme for compensating transport accident victims. The Working Paper gave a number of reasons for concentrating initially on motor vehicle and other transport accident victims, leaving until later the compensation arrangements for other categories of accident victims. The reasons were the following:

• the large number of people killed or injured in motor vehicle accidents, and the comparative severity of injuries sustained in those accidents;
• the failure of current arrangements to provide adequate compensation for many motor vehicle accident victims;
• community criticism of current arrangements for compensating motor vehicle accident victims;
• the recent introduction of no- fault motor accident schemes in other parts of Australia;
• the serious cost pressures on the existing compulsory third party insurance system; and
• the ready availability of a source of funds to provide compensation for the victims of motor vehicle accidents.

The following paragraphs briefly refer to each of these matters, although all are dealt with in more detail elsewhere in the Report.

1. The Magnitude of the Problem

1.34 In Australia generally, and New South Wales in particular deaths and injuries arising out of motor vehicle accidents occur on a large scale. During 1983, 966 people were killed and almost 34,000 people were recorded by the police as injured in New South Wales motor vehicle accidents. ¹ About half the victims of motor vehicle accidents are under 25 years of age, reflecting the vulnerability of young adults to injury and death in this way. ² The evidence shows that motor vehicle accidents are one of the most common causes of severe handicap in Australia. ³ A recent study of patients with spinal cord injury suggests that motor vehicle accidents are the major single cause of catastrophic injury in the form of quadriplegia and paraplegia in New South Wales, with more than half of the victims being injured in motor car and motor cycle accidents. ⁴ Similarly, a recently published survey shows that, of handicapped people whose disability arose from an accident, 36.1 per cent were handicapped as the result of an accident occurring on a street, road or highway. ⁵ It follows that the compensation arrangements for motor vehicle accident victims are of major importance to the community.

2. Failure to Compensate Motor Vehicle Accident Victims

1.35 In the Working Paper we estimated that approximately one-third of people injured (or the families of people killed) in motor accidents are unable to claim compensation in the form of damages in a common law negligence action because they are unable to prove that their injuries were caused by another person’s fault. ⁶ This estimate is supported by surveys and other empirical studies (paragraphs 3.18-3.20). In addition, motor vehicle accident victims who can prove fault may have their damages reduced because they were deemed to be partly responsible for the accident (contributorily negligent) or because they settle their claims out response of court at a “discount” (paragraphs 3.22-3.26). Sometimes the reductions can be substantial. The failure of the present system to provide adequate compensation to many motor vehicle accident victims, including some who have clearly not been guilty of any wrongdoing themselves, is a major deficiency that requires careful attention from policy-makers.

3. Community Concern

1.36 The Issues Paper drew attention to criticisms of current accident compensation arrangements expressed in the media and by community groups and concerned individuals. ⁷ Criticism had been directed specifically at the failure of the system to provide compensation for many accident victims and at the delay and expense often involved in common law negligence actions. judges, too, have been vigorous critics of the system. For example, in a Supreme Court case decided during the course of the reference, one judge commented:

This case, as do many others like it, demonstrates the urgent necessity for the establishment of a no-fault scheme of compensation for victims of accidents on the highways and elsewhere. The present defendant suffered far greater damage than did the plaintiff. The number of victims unable to obtain compensation grows daily. The plaintiff is indeed fully entitled to compensation but it causes me personal and judicial distress at having to leave the defendant uncompensated. ⁸

1.37 In the course of the reference, the media have continued to be critical of current arrangements and to stress the need for reform. For example, an editorial in the Sydney Morning Herald, appearing after publication of the Working Paper, observed that:

... the great anomaly, amounting to serious injustice, in the present third party system is that about one-third of traffic accident victims cannot claim damages because there is nobody at fault whom they can sue. Many a paraplegic or quadriplegic has thus been reduced to near-desperation with only a grossly inadequate invalid pension as a safety net. ⁹

This concern was reflected in submissions. While commentators were far from unanimous as to the best means of overcoming the deficiencies of the current system, virtually all agreed that reforms were required, including some form of no-fault compensation. ¹⁰

4. No-Fault Motor Vehicle Accident Compensation Schemes

1.38 A further reason for placing a high priority on compensation arrangements for motor vehicle accident victims is that no-fault motor vehicle accident schemes have been introduced in Victoria, Tasmania and the Northern Territory. Consequently, people injured in motor vehicle accidents in New South Wales may be substantially worse off than people injured in States which have no-fault schemes.

1.39 The no-fault motor vehicle accident schemes in Victoria and Tasmania, which are described in Chapter 4, have been in operation since 1974. These schemes supplement the common law negligence action while the Northern Territory scheme, which came into force in 1979, now totally replaces the common law. The experience of these schemes has been taken into account in formulating proposals and in testing assumptions.

5. Cost Pressures

1.40 The Working Paper drew attention to the concern expressed by the GIO about the escalation of damages awards in common law negligence actions and the inadequacy of reserves set aside to meet outstanding claims arising out of motor vehicle accidents (that is, claims which have been incurred but not finalised). During the period 1977 to 1983 compulsory third party insurance premiums¹¹ were tied by legislation in New South Wales to the Consumer Price Index.¹² even though claims generally increased at a higher rate than the rate of inflation. This led the GIO to report in 1983 that its third party fund stood at $1,280 million while outstanding claims were estimated to cost $1,555 million, or $275 million more than the funds available to pay them.¹³ In December 1982 an actuary advised the GIO that a 37 per cent rise in premiums would be necessary to cover liability for accidents occurring in 1983.¹⁴ The GIO has repeatedly argued that consideration be given to increasing premiums beyond the inflation rate, or to introducing measures designed to contain the escalation of the cost of claims.¹⁵

1.41 In February 1984 the Premier announced that compulsory third party premiums would be reduced. This was to be achieved, by moving from a “funded” to a “pay-as-you-go” system of financing the third party scheme,¹⁶ and by measures designed to reduce the level of damages awards in cases of serious injury.¹⁷ The point for present purposes is that financial pressures have prompted important legislative changes to the compensation system, each of which raises difficult policy questions. Our view is that the recently announced changes do not solve the problems generated by the underlying financial difficulties faced in the current compensation arrangements. Accordingly, pressures for a fundamental review of those arrangements remain.

6. Funding Source

1.42 While the compulsory third party motor vehicle insurance system is experiencing cost pressures, it provides an identifiable and substantial source of funds for compensation of motor vehicle accident victims. During 1982-83, a total of $399 million was paid in third party premiums in New South Wales.¹⁸ Owners of motor vehicles, and motorists in general appear to accept the principle that compensation for victims of motor vehicle accidents should be financed through insurance premiums, although in practice not all the costs of death and injury in such accidents have been met from this source. Consequently, if it is desirable to restructure compensation arrangements, and if the restructured system is no more expensive than current arrangements, existing sources of finance can be used for the new scheme at no additional cost to the State or to motorists. This is an important consideration which suggests that attention should first be devoted to compensation arrangements in this area before other issues are tackled.

1.43 There is a ready source of funds to compensate victims of work-related accidents. The workers’ compensation system is, generally speaking, funded by compulsory insurance paid by employers. During 1982-83 almost $952 million was in premiums by premiums by employers or was notionally paid by self-insurers (employers authorised to carry their own insurance).¹⁹ However, the workers’ compensation system provides benefits to persons injured in work-related accidents on a no-fault basis.²⁰ Thus, what ever the deficiencies of the scheme, it does not leave gaps of the kind that characterise the system applicable to motor vehicle accident victims. For this reason, the need for review in this area, at least on grounds of equity, is less pressing thin in relation to motor vehicle accidents.

1.44 If new compensation schemes, offering substantial benefits, were to be introduced or extended into other areas of accidental injury, such as home or leisure-time accidents, it would be necessary to tap new sources of finance. While New South Wales has limited compensation schemes operating in certain areas,²¹ they are restricted in scope and the funds allocated are relatively insignificant.

B. Public Transport Accidents

1.45 It is proposed that the Scheme should also extend to people injured, and to the families of people killed, in public transport accidents. Thus the Scheme would apply to transport provided by public authorities such as the State Rail Authority and the Urban Transit Services Authority, and to services provided by licensed private bodies such as bus companies. The arguments in favour of this extension are as follows.

• Some forms of public transport, such as taxis and private buses, are already covered by compulsory third party insurance and would, in any case, be included within any motor vehicle accidents scheme.
• Anomalies would arise if the Scheme applied to some forms of public transport (such as private buses and taxis) and not to others. There is no sound policy reason for distinguishing between the compensation entitlements of people injured in, for example, a private bus or taxi accident, and those who are injured as the result of a train derailment or a ferry collision.
• While a person injured in a public transport accident may have a better chance of establishing fault and obtaining damages in a common law negligence action than a person injured in an ordinary motor vehicle, he or she may face similar difficulties and delays in obtaining compensation. If the compensation system can be improved for motor vehicle accident victims, there is no reason why the position of people injured in public transport accidents should not similarly be improved.
• Public transport accidents may cause extremely serious injuries, creating the same need for adequate and speedy compensation which arises in motor vehicle accident cases. This is illustrated by the Granville train disaster of 1977, in which 83 people died.
• As in the case of motor vehicle accidents, there is a funding source liable for compensation payments arising out of public transport accidents.²² At present Government public transport authorities are self-insurers (that is, they cover their own although this is ultimately guaranteed by the State), while virtually all private companies providing public transport services carry insurance against their liability to pay damages. If new compensation arrangements were established, there would not appear to be any difficulty in allocating funds presently devoted to meeting common law damages claims to the Scheme.

1.46 Since publication of the Working Paper, which suggested the inclusion of Public accidents within any new compensation arrangements, we have received a submission transport from the Ministry of Transport supporting a no-fault transport accidents scheme along the lines proposed in the Working Paper. ²³ Accompanying letters from the State Rail Authority of New South Wales and the Urban Transit Authority of New South Wales also support the scheme, and suggest that funding proposals should be a matter for further discussion with the public transport authorities concerned. ²⁴ These reinforce our view that any reassessment of compensation arrangements for victims of motor vehicle accidents should extend to people injured or killed in public transport accidents.

III. STRUCTURE OF THIS REPORT

A. Background

1.47 Chapter 1 outlines the historical background to the references and the sources used in the preparation of this Report. The Chapter also explains why the recommendations are confined to a scheme compensating victims of transport accidents, despite the broad terms of reference.

B. Existing Compensation Systems

1.48 The next three Chapters examine existing compensation systems in New South Wales and other Australian and overseas jurisdictions. Chapter 2 outlines the sources of compensation currently available in New South Wales for personal injury and death caused by transport accidents. Because of the important role of the common law negligence action in providing compensation to transport accident victims, Chapter 3 makes a critical evaluation of the common law’s approach to compensation. Chapter 4 describes alternative compensation systems operating in other jurisdictions or proposed in studies undertaken in Australia and elsewhere.

C. General Principles

1.49 Chapter 5 analyses the objectives of a compensation system and the principles that should govern the award and assessment of compensation in the no-fault scheme. The Chapter explains the emphasis on rehabilitation and the extent to which the Scheme should adopt restitution as the basis for assessing compensation. The Chapter also deals with the form in which compensation should be provided and the nature of the decision-making process.

D. A Comparison

1.50 Since publication of the Working Paper, there has been much discussion of the comparative merits of a no-fault scheme which replaces the common law and of a “dual” scheme which provides limited no-fault benefits, but retains the right to sue at common law. Chapter 6 makes the comparison and explains why a scheme replacing the common law is better able to fulfil the objectives identified in Chapter 5.

E. A Transport Accidents Scheme for New South Wales: Detailed Proposals

1.51 Chapters 7 to 13 describe in detail the compensation available under the Scheme including the rules governing the assessment of compensation, and the approach to rehabilitation

• Chapters 7 and 8 recommend periodic compensation for loss of earning capacity of both earners and non-earners incapacitated in transport accidents. These Chapters provide for compensation for loss of potential for advancement and for assessment of permanent incapacity.
• Chapter 9 considers the means by which the emphasis on rehabilitation can be translated into practical policies. The Chapter traces the evolution of rehabilitation services and explains the role that should be played by the Accident Compensation Corporation in promoting rehabilitation, including the provision of necessary aids and appliances.
• Chapter 10 covers the provision of support services to disabled accident victims. These include attendant care services required by severely disabled people, emergency family support accommodation and home modifications and mobility allowances. The Chapter is also concerned with replacement household services where the disabled person is precluded from providing them.
• Chapter 11 takes up the problem of compensation for non-economic loss. It recommends that compensation should be provided for permanent disability, according to the degree of disability.
• Chapter 12 deals with the benefits payable to the family member of a person killed in a transport accident. In the case of a surviving spouse and children these will usually consist of a lump sum supplemented by periodic payments for a period varying according to the ages and circumstances of the survivors.
• Chapter 13 explains the approach to be taken to the provision of medical hospital and ancillary services, such as paramedical services, home nursing and long-term institutional care. The Chapter considers the relationship between the general health care system (Medicare) and the Transport Accidents Scheme.

F. Scope of the Scheme

1.52 Chapter 14 is concerned with the coverage of the Scheme and its relationship with other systems and sources of compensation. The issues dealt with include the definition of a transport accident, the effect of abolition of common law rights, the geographical scope of the Scheme, the relationship with the workers’ compensation system and the exclusions that should be made on public policy grounds.

G. Administration and Decision-Making

1.53 Chapter 15 describes the proposed administrative structure of the Scheme including the establishment of an independent Accident Compensation Corporation and the principles that should govern its operations. The Chapter considers means of encouraging high quality decision-making within the Corporation and the most effective ways of discharging the statutory responsibilities. Chapter 16 outlines the decision-making process within the Corporation and the appeal structure necessary to protect the rights of claimants. The proposal put forward in the Chapter is an adaptation of the system of administrative review operating under Commonwealth law and includes a full right of appeal to a judicial tribunal.

H. The Cost of the Scheme

1.54 The estimates of the cost of the Scheme are based on detailed actuarial calculations summarised in Chapter 17. That Chapter also identifies the ways in which the Scheme can be funded and related matters such as the transition from the existing third party insurance system and the financial assistance that could be provided by the Commonwealth.

1. The Scheme in Context

1.55 Chapter 1 explains the reasons for confining this Report to transport accidents. The final Chapter (Chapter 18) briefly discusses the implications of the Scheme in broader context of compensation for personal injury in general at both State and Federal level.

1. Traffic Authority of New South Wales, Road Traffic Crashes in New South Wales - Statistical Statement Year ended December 31st, 1983, pp.6, 20. These figures were considerably lower than those in 1982, partly because of the effect of random breath testing.

2. Id., pp.11-12, 21-22. Of the 33,978 people recorded as suffering injuries, 17,518 (51.6 percent) were under 25 years of age. Almost half of those killed were aged less than 25 years (46.5 per cent).

3. Australian Bureau of Statistics, Handicapped Persons Australia 1981, Cat. No.4343.0, p.3 1, table 2.17. The survey shows that 26,300 persons whose accident occurred on a street, road or highway were “severely handicapped”. This was only exceeded by the 26,800 persons who suffered severe handicap as a result of an accident at work.

4. See D. Dowda, Spinal Cord Injury Physical and Social Outcomes (unpublished thesis, University of Sydney 1982), p.34, table 2. This confirms the results of other studies quoted in the Issues Paper, para.4. 10.

5. See note 3 above, p.30, table 2.16.

6. Working Paper, paras.3.10-3.14.

7. Issues Paper, paras.2.19-2.25.

8. Moore v. Court, 23 September 1982, Supreme Court of New South Wales, Maxwell J, transcript of judgment at p.8. See also Walling v. Nominal Defendant, 22 May 198l, Supreme Court of New South Wales, Maxwell J, transcript of judgment at p.13: Elchab v. Brown, 9 June 1977, Supreme Court of New South Wales, Court of Appeal, transcript of judgment at p. 10, per Reynolds, J A, and Sheridan v. Luvis, 7 August 1981, Supreme Court of New South Wales Court of Appeal, transcript of judgment at p.6, per Samuels, J A.

9. 31 May 1983, p.6. See also Daily Telegraph, 1 July 1983, p.3; Canberra Times 5 July 1983, p.2.

10. See eg. Submissions W1, W2, W3, W5, W8, W17, W18, W20, W24, W26, W28, W29, W30, W32, W3,’, W38, W41, W44, W48, W49, W50, W51, W52, W53, W56, W57, W59, W60, W63 and W71.

11. These premiums are used to fund the present common law based system of compensation for motor vehicle accident victims. Section 7 of the Motor Vehicles (Third Party Insurance) Act, 1942 requires all motor vehicles used on public streets to be covered by a third party insurance policy. This policy insures the owner and any driver of the vehicle against all liability incurred in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in New South Wales or elsewhere in Australia: s.10(1).

12. Motor Vehicles (Third Party Insurance) Act, 1942, ss.33A-33E inserted by Motor Vehicles (Third Party Insurance) Amendment Act 1977.

13. GIO, Annual Report 1982 - 1983, p.8.

14. E S Knight & Co, Motor Vehicle Third Party Insurance Premium Rates 1983 (Report to GIO), dated 24 December 1982, p.23.

15. Thus in its submission to us the GIO commented that a limit of $500,000 should be placed on common law damages for personal injury. See Submission S51, p.5.

16. See Glossary. A move from a funded to pay-as-you-go scheme produces “one-off” savings. See also Chapter 17.

17. These included introducing a higher “discount rate” (5 per cent instead of 3 per cent) for calculating the present value of future economic loss, Such as lost earning capacity. The effect of a higher discount rate is to depress the level of damages in serious cases.

18. Until the enactment of the Motor Vehicles (Third Party Insurance) Amendment Act 1984, the GIO transacted approximately 98 per cent of the compulsory third party insurance in New South Wales, and NRMA Insurance Ltd. the remainder. The GIO is now the sole third party insurer.

19. Workers’ Compensation Commission of New South Wales, Fifty-Seventh Annual Report Year Ended 30 June 1983, p.6.

20. Injured workers able to prove that their employer was negligent also have an action for damages against the employer, but in this case the workers’ compensation benefits are deducted from the common law award.

21. Notably in relation to certain sporting injuries and injuries caused by criminal misconduct. See paras. 2.50-2.51; 2.47-2.49 respectively.

22. Provision for public risks is made by both the State Rail Authority of New South Wales and Urban Transit Authority of New South Wales. Sums put aside are not simply to cover personal injury damages, but also compensation for property damage. For bus services, the Current reserve is $1.2 million. For ferry services, the current reserve is almost $0.6 million: Urban Transit Authority of New South Wales, Annual Report 1982-1983, p.30. The State Rail Authority of New South Wales has a Current Fire and Accident Reserve Provision of $7.2 million: State Rail Authority of New South Wales, Annual Report 1983, p.18.

23. Submission W41.