Tort law reform in Australia: fundamental and potentially far-reaching change: following the Ipp Report, reforms are going forward in New South Wales, with the emerging result that runaway insurance costs are coming under control.

AuthorClark, S. Stuart

THE two years just past saw an intense period of unprecedented tort law reform in Australia. In 2002, claims from many sectors were that Australia was in the midst of a "public liability crisis" because of a legal system that was "out of control." The collapse of a major insurer and a leading medical indemnity insurer, coupled with several high-profile negligence cases in which plaintiffs were awarded significant damages, brought spiraling insurance premiums and aroused considerable societal concern.

The response of government to the perceived crisis was unusually swift and decisive. A committee was appointed at the federal level to undertake a Review of the Law of Negligence, and it delivered a series of reports within months. The review received evidence that the absence of insurance, or the availability of insurance only at unaffordable rates, adversely affected many aspects of community life. (1) Claims regarding the unpredictability of the law, the ease with which plaintiffs succeed and the generosity of the courts in awarding damages were presented to link the state of the law of negligence with the "insurance crisis." These assumptions have some validity, and whilst there is no conclusive evidence that they are justified, they certainly have emotive and political appeal.

Opposition to the reforms from some unions and plaintiffs' lawyers was largely ignored. The perceived threat to the Australian community and the need to wind back the culture of "blame and claim" generated sufficient political will to ensure that the committee's recommendations were substantially implemented by the state and territory governments and supported at the commonwealth (federal) level.

As the flurry of legislative reform came to an end in 2004, there is an opportunity to begin to see what impact the reforms will have on insurance premiums and the legal landscape governing damages for personal injuries. There is little doubt that the reforms will continue to shape the development of the law in this area for many years to come.

AUSTRALIAN LEGAL SYSTEM

By way of background it is useful to briefly outline how Australia's legal system operates. (2)

Australia is a federation of six states and two self-governing territories. The Australian Constitution specifies a range of matters that are the responsibility of the federal government. The balance of legal issues remains the responsibility of the various state and territory governments.

Australia has both a federal court system and a hierarchy of courts in each of the states and territories. In all cases, the ultimate appellate court is the High Court of Australia, and its decisions are binding on all other Australian courts.

Actions heard by Australian courts proceed on an adversarial basis. The practice and procedure, including the rules of evidence, are similar to those in English courts, as Australia's laws and legal system have their foundation in the common law of England. Civil proceedings in Australia generally, though not always, are heard by a judge sitting without a jury.

DRIVERS OF THE "CRISIS"

There has been an intense debate amongst lawyers, politicians, journalists and others as to what gave rise to the emergence of the so-called culture of "claim and blame" and what led to the legal system spiraling "out of control." There is a broad acceptance that a range of factors played a part, but views differ markedly as to the relative importance of these factors.

  1. Community Attitude

    A fundamental force underlying the liability crisis is the litigious mindset entrenched in many individuals within the community.

  2. Developments in Tort Law

    From the 1960s to the 1990s, judicial expansion of the concept of negligence was ubiquitous. (3) The courts extended the circumstances in which negligence may be found to have occurred and the scope of damages recoverable.

  3. Downturn in Insurance Industry Cycle

    Insurance industry experts and analysts have attributed the present liability crisis in part to the cyclical nature of the insurance industry.

  4. Emergence of Plaintiff Lawyers

    The emergence and growth of specialist plaintiffs' law firms, the use of advertising, and "no-win-no-fee" arrangements, particularly in the area of personal injury, has been pinpointed as contributing to the increased propensity of people to make a claim following injury. (4) Since the deregulation of legal advertising in 1993, several law firms have implemented aggressive marketing campaigns in an attempt to attract clientele. Plaintiffs' law firms have also taken advantage of the deregulation of legal fees, including the introduction of contingency uplift fees and the no-win-no-fee arrangements, to draw business.

  5. Class Actions

    Since the enactment of legislation governing class actions procedure at a federal and state level, (5) there have been several high-profile class actions in Australia, particularly in the area of product liability. It is argued that the emergence of class actions as a means of recourse has materially influenced over-all insurance costs and the community's attitude toward access to justice. (6)

    PAVING THE WAY TO REFORM

    The spiraling costs of insurance, combined with its relative scarcity and concerns about the capacity of insurers to continue to underwrite the damages awards, prompted calls for legislative inquiries and reform proposals.

    On 27 March 2002, the commonwealth, state and territory ministers convened to discuss issues relating to public liability and to address the increases in insurance premiums and the apparent inability of some organisations to secure insurance for their activities. The ministerial meeting recognised the desirability of a consistent national approach and agreed to appoint an expert panel to examine and review the law of negligence. The panel subsequently appointed, chaired by Justice David Ipp, published its first report, Review of the Law of Negligence, in September 2002. A second, final report was published in October 2002, and it is known colloquially as the "Ipp Report)." (7)

    THE IPP REPORT

    What are the principal proposals of the Ipp Report and what progress has been made in their implementation? This article uses New South Wales, the most populous and litigious state in Australia, as the primary example.

  6. Restatement of the Law of Negligence

    The fundamental recommendations in the Ipp Report concerned a restatement, with emphasis, of aspects of the law of negligence. The proposals will not result in extensive changes, but they are an attempt to focus on elements of the law that, according to the Ipp Report, have been increasingly overlooked by courts recently.

    1. Standard of...

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