Federal Register of Legislation - Australian Government

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A Bill for an Act to amend the Trade Practices Act 1974, and for related purposes
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Introduced HR 09 Dec 2004

Trade Practices Amendment (Personal Injuries and Death) Bill 2004

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2004

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

Trade Practices Amendment (Personal Injuries and Death) Bill 2004

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Revenue and Assistant Treasurer,

the Hon Mal Brough MP)

Table of Contents

Outline       1

Financial Impact Statement       3

Regulation Impact Statement       4

Notes on Individual Clauses       13

1

Outline

Trade Practices Amendment (Personal Injuries and Death) Bill 2004

1.1       In July 2002 the Commonwealth appointed a panel of experts to review the law of negligence (the Review).

1.2       The Review's terms of reference noted that the award of damages for personal injuries had become unaffordable and unsustainable as the principal source of compensation for those injured through the fault of another. It was desirable to examine a method for the reform of the common law with the objective of limiting liability and quantum of damages arising from personal injuries and death.

1.3       The Review was requested to consider a number of areas, in particular, the interaction of the Trade Practices Act 1974 with the law of negligence. The Review was asked to develop and evaluate options for amendments to the Trade Practices Act 1974 that would prevent individuals commencing actions in reliance on the Trade Practices Act 1974 in order to recover compensation for personal injuries and death.

1.4       The Review's recommendations were formulated to ensure that the Trade Practices Act 1974 could not be used to undermine any state and territory laws in relation to claims for damages for personal injuries or death.

1.5       This Bill provides amendments forming part of the Government's response to the Review's recommendations in relation to reform of the Trade Practices Act 1974. Other amendments were made by the Trade Practices Amendment (Personal Injuries and Death) Act (No. 2) 2004.

1.6       This Bill will amend the Trade Practices Act 1974 to prevent individuals, and the Australian Competition and Consumer Commission in a representative capacity, from bringing actions for damages for personal injuries or death resulting from contraventions of Division 1 of Part V, the misleading and deceptive conduct and other unfair practices provisions, of the Trade Practices Act 1974. These arrangements will not apply to actions for damages for personal injuries or death resulting from contraventions of Division 1 of Part V of the Trade Practices Act 1974 relating to smoking or other use of tobacco products, subject to a limitation period of three years from the date of discoverability.

2


Financial Impact Statement

2.1       This Bill will have no significant financial impact. However, the reforms to the law of negligence made by states and territories will have some impacts on the Commonwealth.

3


Regulation Impact Statement

Trade Practices Amendment (Personal Injuries and Death) Bill 2004


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Background

3.1       At the May 2002 ministerial meeting on public liability insurance, Commonwealth, state and territory ministers agreed to a range of measures to address the cost and availability of public liability insurance. These measures included the establishment of a panel of experts to review the law of negligence (the Review). The purpose of the Review was to assist governments to address the issue of increasing premiums for, and reduced availability of, public liability insurance.

3.2       In July 2002, the Government announced the members of the panel for the Review (the Honourable Justice David Ipp, Professor Peter Cane, Associate Professor Don Sheldon and Mr Ian Macintosh). Amongst other things, the Review's terms of reference required it to consider:

•       the application, effectiveness and operation of common law principles applied in negligence to limit liability arising from personal injuries or death;

•       principled options to limit liability and quantum of awards for damages; and

•       options to limit claims for negligence to within three years of the date of the event.

3.3       In addition, the Review was asked to consider the interaction of the Trade Practices Act 1974 (the TPA) with the common law principles applied in negligence (particularly with respect to waivers and the voluntary assumption of risk). In undertaking this task the Review was asked to develop and evaluate options for amendments to the TPA to prevent individuals commencing actions in reliance on the TPA, including actions for misleading and deceptive conduct, to recover compensation for personal injuries and death.

3.4       The Review presented two reports to the Government, an initial report in September 2002 and a final report in October 2002 (the Report). These reports are available on the Treasury website (http://revofneg.treasury.gov.au/content/home.asp).

3.5       The Review recommended a number of changes to the TPA.

3.6       The recommendations being addressed by this Bill are as follows.

Recommendation 19

3.7       The TPA should be amended to prevent individuals bringing actions for damages for personal injuries and death under Division 1 of Part V.

Recommendation 20

3.8       The TPA should be amended to remove the power of the Australian Competition and Consumer Commission (the ACCC) to bring representative actions for damages for personal injuries and death resulting from contraventions of Division 1 of Part V.

3.9       The Report noted that recommendations relating to the TPA should also be read as incorporating references to state and territory provisions that are equivalent to or mirror the provisions of the TPA.

3.10       In 2002, NSW introduced amendments to its Fair Trading Act 1987 to address recommendations 19 and 20 of the Report. Other states and territories have also expressed a willingness to amend their Fair Trading Acts to address these Report recommendations.

3.11       NSW has also introduced amendments introducing rules for quantum of damages and imposing other limitations on liability in regard to negligently caused personal injuries or death. These amendments address the Report's recommendations on these issues. Other states and territories have introduced, or are considering, similar reform measures.

Ministerial meetings on public liability insurance

3.12       At the November 2002 ministerial meeting on public liability insurance, ministers agreed on a package of reforms implementing key recommendations of the Report. They agreed that the key panel recommendations that go to establishing liability should be implemented on a nationally consistent basis and each jurisdiction agreed to introduce the necessary legislation as a matter of priority.

3.13       At this meeting, the Government confirmed that it would amend the TPA to support reforms that are nationally consistent. In areas where national consistency cannot be achieved, ministers agreed to examine options for amending the TPA to ensure that state and territory legislation will not be compromised. These commitments were noted at the December 2002 meeting of the Council of Australian Governments.

Policy objective

3.14       The Government's objective is to encourage nationally
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consistent reform of the law of negligence by state and territory governments. To this end, the Government will move forward with the implementation of Review recommendations 19 and 20. The Government's reforms will ensure that Division 1 of Part V of the Trade Practices Act 1974 cannot be used to undermine state and territory civil liability reforms in relation to claims for damages for personal injuries or death.

Recommendations of the Review of the Law of Negligence

3.15       The Review recommended (recommendations 19 and 20) that the TPA be amended to prevent individuals and the ACCC (in a representative capacity) from bringing actions for damages for personal injuries or death resulting from contraventions of Division 1 of Part V.

3.16       The Review considered that it was open to serious question as to whether Parliament intended the prohibition (by provisions of Division 1 of Part V) of unfair practices in trade and commerce, including misleading and deceptive conduct, to provide a right of action for damages to individuals who suffer personal injuries or death.

3.17       Currently, the TPA allows plaintiffs to bring actions claiming damages for personal injuries or death resulting from conduct in contravention of Division 1 of Part V. The Review noted that the potential for conduct in contravention of Division 1 of Part V to be used as a basis for claims for negligently caused personal injuries and death was substantial. This is the case notwithstanding the fact that the application of section 52 of the TPA (a key provision in Division 1 of Part V) is limited to conduct in the course of activities which are `in trade or commerce' (see Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594).

3.18       The Review noted that there are various areas of everyday life that are likely to give rise to claims for damages for personal injuries or death on the basis of Division 1 of Part V. The Review suggests that the most obvious are claims arising out of the provision of professional services and the occupation of land. The Review outlined an example whereby a surgeon informs a patient that a certain operation would improve the patient's health. In the course of the operation, the surgeon decides--as a result of unforeseeable circumstances--that the operation was not, in effect, necessary and should not continue. The patient may be able to claim damages on the ground that the surgeon was guilty of misleading conduct in advising that the operation should occur.

3.19       The Review noted that many cases of occupiers' liability could potentially be framed to come within the requirements of a contravention of Division 1 of Part V. The Review gives an example whereby, a destination is advertised as family-friendly.  At the destination a child slips on uneven stairs. At present such claims would ordinarily be brought on the basis that the injuries arose from a failure, by the destination owner, to take reasonable care. The Review considered that any competent lawyer would be able to frame such claims in an alternative form so that they show a potential breach of Division 1 of Part V.

3.20       The Review noted that, to date, plaintiffs have rarely relied on the unfair practices in trade and commerce provisions of the TPA to form the basis of a claim for damages for personal injuries or death. This, to a significant extent, is the result of the prevailing legal culture. There has been no need to rely on Division 1 of Part V because the common law has been seen as an adequate source of compensation. The Review considered that once avenues for plaintiffs under the law of negligence are blocked or made less attractive by state and territory reforms (that is, the reform of rules on quantum of damages and other limitations of liability), this situation is likely to change. A shift of cases to Commonwealth law could effectively undermine state and territory civil liability reforms. These reforms are aimed at limiting public liability claims costs in order to reduce pressure on insurance premiums and assist in delivering affordable public liability insurance.

3.21       Further, while the TPA requires plaintiffs to demonstrate that they have suffered loss by conduct that contravenes Division 1 of Part V, it does not require proof of intention, recklessness, negligence or dishonesty. The Review notes that often a plaintiff will plead as an alternative to a claim under section 52, a claim for negligent misrepresentation or deceit. In order for such common law claims to succeed it would be necessary for the plaintiff to show not only that the defendant made a false representation, but that he or she did so negligently or dishonestly.

Options

3.22       Maintaining the status quo would not achieve national consistency on this matter. Further, it could in fact undermine state and territory civil liability reform by providing an alternative right of action to claim damages for personal injuries or death.

3.23       The only feasible option available to achieve the Government's objectives is to amend the TPA in accordance with Review recommendations 19 and 20; that is, to prevent individuals, and the ACCC in a

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representative capacity, from bringing an action for damages for personal injuries or death resulting from contraventions of Division 1 of Part V of the TPA. (Other orders and remedies under the TPA for conduct in contravention of Division 1 of Part V involving personal injuries or death will continue to be available.)

Assessment of impact of amendments to the Trade Practices Act 1974 in accordance with the Review recommendations

Costs

3.24       In November 2002, PricewaterhouseCoopers (PWC) (at the request of the Insurance Issues Working Group of Heads of Treasury) conducted an actuarial assessment of the Review recommendations. The PWC Report noted that the majority of the Review recommendations were not easily costed, either because suitable data is not collected or is collected in a form that is not amenable to statistical analysis.

3.25       The PWC Report is available on the Treasury website (www.treasury.gov.au).

Costs for Government
3.26       These amendments may lead to some increase in social security, Medicare and related expenditure. This is because there may be circumstances where a person is unable to pursue a claim under tort or contract law but who might have succeeded in a claim for damages under the TPA for personal injuries or death as a result of conduct in contravention of Division 1 of Part V. Although, having regard to current case law in relation to the common law and Division 1 of Part V, it seems unlikely that as a result of these reforms that plaintiffs will be left without an appropriate right of action. Thus, any increased expenditure by government on social security, Medicare and related expenditure is not expected to be significant.

Costs for Business
3.27       There will be costs for business in obtaining and assessing information in relation to the amendments to the TPA and in developing or modifying business plans and risk management strategies. These costs are unlikely to be significant or ongoing.

3.28       There will also be costs to insurers in obtaining and assessing information on the amendments to the TPA and in modifying assessments of risk which may flow into premium calculations.

Costs for the Community
3.29       Plaintiffs will lose a right of action to claim damages for personal injuries or death. Plaintiffs will also lose the benefit of representative actions by the ACCC in such cases. However, the proposed amendments are not expected to cause significant hardship or to lead to an increase in the number of businesses engaging in unfair practices and misleading and deceptive conduct. Plaintiffs will, in cases of personal injuries or death, continue to be able to pursue a right of action at common law. This right of action will be subject to state and territory civil liability reforms (including rules on quantum of damages and limitation of actions).

3.30       It is possible that there may be claims for personal injuries or death as a result of conduct in contravention of Division 1 of Part V that will not succeed at common law. Although, having regard to current case law in relation to the common law and Division 1 of Part V, it seems unlikely that as a result of these reforms plaintiffs will be left without an appropriate right of action.

3.31       Further, other orders and remedies will continue to be available for conduct in contravention of Division 1 of Part V. Potential remedies include injunctive relief (section 80), non-punitive orders (section 86C) and other orders (sections 87 and 87A). The ACCC can also accept written undertakings in connection with appropriate matters under the TPA (section 87B).

Benefits

Benefits for Government
3.32       There will be a very minor reduction of Government exposure to potential costs as the ACCC's role in relation to representative actions in respect of claims involving personal injuries or death will be removed.

Benefits for Business
3.33       There will be increased certainty for business, including small businesses, as a potential source of claims and related costs arising from personal injury and death claims will be removed. The removal of potential rights of action will also create increased certainty for insurers in the
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assessment of risk and calculation of insurance premiums. It will also reduce insurers' legal costs in that they will no longer be required to defend alternative rights of action brought under Division 1 of Part V of the TPA.

3.34       The PWC Report indicated that Review recommendations 19 and 20 are essentially administrative in nature and cannot be said to have a direct financial effect. However, the PWC Report did not assess the cost to business or the community if the Review recommendations were not implemented and state and territory civil liability reforms were in fact undermined.

3.35       Allowing the TPA to undermine state and territory reforms may impose an indirect, but substantial, financial cost in that it would prevent the benefits of state and territory civil liability reforms from being achieved. The principle benefit to business of these reforms is to assist in delivering affordable public liability insurance by reducing pressure on insurance premiums.

3.36       The PWC Report estimates the benefits of the implementation of the Review's recommendations for rules on quantum of damages to be a reduction in the cost of public liability claims by 14.7 per cent. This comprises an approximate 19.6 per cent reduction in personal injury claims cost, with no reduction in property damage claim cost.

3.37       All other things being equal, the PWC Report estimated that these reductions in claims costs may translate into corresponding reduction in insurers' premiums of around 13.5 per cent on average (subject to a number of factors including the adequacy of current premiums and prospects of windfall gains).

3.38       The PWC Report notes that these findings are very uncertain and are relative to the pre-30 June 2001 public liability environment. They also rely on jurisdictions adopting all the Review recommendations at the same time. While such an outcome is unlikely, adoption of the recommendations by a majority of the larger states would be expected to deliver significant savings. NSW has already introduced amendments consistent with the Review's recommendations on quantum of damages.

Benefits for the Community
3.39       Ensuring that Division 1 of Part V does not undermine state and territory civil liability reforms will ensure that the full benefits of those reforms are achieved. These reforms are intended to reduce pressure on insurers to increase insurance premiums and ensure that adequate insurance protection is still available for consumers.

Recommendation

3.40       It is recommended that sections 82 and 87 of the TPA be amended to prevent individual actions and representative actions by the ACCC for damages for personal injuries and death where there has been a contravention of Division 1 of Part V. All other orders and remedies under the TPA arising from conduct in contravention of Division 1 of Part V will continue to be available.

Consultation Process

3.41       The Review had the benefit of consultations with, and received submissions from, senior judges, leading barristers, academics, the ACCC and persons and organisations from all around Australia. The names of persons and organisations participating in the Review's consultation process are listed in the Report.

3.42       Other Government agencies and the Insurance Council of Australia (ICA) were consulted on the implementation of these recommendations. In a submission to Treasury, the ICA indicated that it strongly supports Review recommendations 19 and 20. The ICA noted that people who suffer personal injuries as a result of the negligence of others are able to pursue claims for compensation under the common law, subject to the various reform measures now being enacted in the states and territories. The ICA noted its view that it is crucial to the effective outcome of those reforms that they not be undermined by the opportunity to pursue alternative actions under the TPA, either individually or collectively by means of a representative action.

Implementation and Monitoring

3.43       At the May 2002 ministerial meeting on public liability insurance the Government announced that the ACCC would monitor the impact of these reforms.

3.44       In July 2002 the Parliamentary Secretary to the Treasurer requested the ACCC to monitor costs and premiums in the public liability and the professional indemnity sectors of the insurance market on a six-monthly basis over the next two years. In particular, the ACCC was asked to give consideration to the impact on insurance premiums resulting from measures

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taken by governments to reduce and contain legal costs and to improve the data available for insurers to evaluate and price risk. To the extent possible, the ACCC's monitoring will inform the assessment of the impact of the changes introduced by this Bill.

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Notes on Individual Clauses

Clause 1 -- Short title

4.1       This clause provides the short title by which the Act may be cited.

Clause 2 -- Commencement

4.2       Subclause (1) provides that sections 1 to 3 and anything in this Act not covered elsewhere will commence on the day on which this Act receives Royal Assent.

4.3       Subclause (2) provides that each provision in Schedule 1 of this Bill will commence 28 days after the Bill receives Royal Assent.

Clause 3 -- Schedule(s)

4.4       This clause makes it clear that the Trade Practices Act 1974 (being the only Act specified in Schedule 1) is amended or repealed as set out in the Schedule, and that any other item in the Schedule has effect according to its terms.

Schedule 1 -- Amendments

4.5       The Schedule amends the Trade Practices Act 1974.

Actions for damages
4.6       Section 82 empowers a person to take civil action to recover damages from another person for loss or damage caused by conduct that contravenes Parts IV, IVA, IVB and V or section 51AC of the Trade Practices Act 1974.

Item 1 -- Subsection 82(1)

4.7       This item makes a consequential amendment to subsection 82(1) to omit `A person' and substitute `Subject to subsection (1AAA), a person'. This amendment is necessary to accommodate the insertion of the new subsection 82(1AAA).

Item 2 -- After subsection 82(1)

4.8       This item inserts two new subsections 82(1AAA) and 82(1AAB) into section 82.

4.9       Subsection 82(1AAA) prevents a person from taking civil action to recover damages from another person for loss or damage, but only to the extent to which the action would be based on conduct that contravenes a provision of Division 1 of Part V and where the loss or damage is, or results from, death or personal injury.

4.10       For the purposes of subsection 82(1AAA), actions in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products will be exempt from the operation of this subsection.

4.11       Subsection 82(1AAB) ensures that actions in respect of the death or personal injury to a person resulting from smoking or other use of tobacco products will be subject to the arrangements in Division 2 (relating to limitation periods) and Division 7 (relating to structured settlements) of Part VIB. Division 2 of Part VIB provides that the court must not award damages if the proceedings are commenced after the end of the period of three years after the date of discoverability for the death or injury to which the damages relate. Division 7 of Part VIB establishes that the court has the power on the application of the parties to approve an award of damages in the form of a structured settlement.

4.12       Note that while the Court has a wide power under section 80 to grant an injunction in an appropriate case, the Court's power to grant an injunction does not extend to the awarding of damages.

Item 3 -- Definitions at the end of section 82

4.13       This item inserts a number of definitions at the end of
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section 82.

4.14       Smoking will have the same meaning as in the Tobacco Advertising Prohibition Act 1992.

4.15       Tobacco product will have the same meaning as in the Tobacco Advertising Prohibition Act 1992.

Other orders (including orders to compensate a person)
4.16       Section 87 confers on the Court a wide power to make other orders if the Court considers that such other orders will compensate, in whole or in part, a person who has suffered, or is likely to suffer, loss or damage by conduct that was in contravention of a provision of Parts IV, IVA, IVB, V and VC of the Trade Practices Act 1974.

4.17       One type of order that may be made under section 87 is an order directing a person who has contravened the Act to pay damages to a person who has suffered loss or damage or is likely to suffer loss or damage. Other orders that may be made include orders voiding or varying all or any part of a contract, or orders directing a person who has contravened the Act to repair goods or to supply services.

Item 4 -- Subsection 87(1)

4.18       This item makes a consequential amendment to subsection 87(1) to omit `Without' and substitute `Subject to subsection (1AA) but without'. This is necessary to accommodate the new subsection 87(1AA).

Item 5 -- Subsection 87(1A)

4.19       This item makes a consequential amendment to subsection 87(1A) to omit `Without' and substitute `Subject to subsection (1AA) but without'. This is necessary to accommodate the new subsection 87(1AA).

Item 6 -- After subsection 87(1A)

4.20       This item inserts three new subsections 87(1AA), 87(1AB) and 87(1AC) into section 87.

4.21       Subsection 87(1AA) prevents the Court from making an order to compensate a person for loss or damage, but only to the extent to which the order would be based on conduct that contravenes a provision of Division 1 of Part V and where the person's loss or damage is, or results from, death or personal injury. As a consequence, the types of orders the Court will be prevented from making in such cases include, but are not limited to, orders directing a person who contravened the Act to pay damages to a person who has suffered loss or damage or who is likely to suffer loss or damage.

4.22       Another consequence of subsection 87(1AA) is that the ACCC will not be able to apply to the Court, on a person's behalf under paragraph 87(1A)(b), for an order that compensation be paid to a person for loss or damage, but only to the extent to which the order would be based on conduct that contravenes a provision of Division 1 of Part V and where the person's loss or damage is, or results from, death or personal injury.

4.23       For the purposes of subsection 87(1AA), orders in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products will be exempt from the operation of this subsection.

4.24       Subsection 87(1AB) ensures that orders in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products will be subject to the arrangements in Division 2 (relating to limitation periods) of Part VIB. Division 2 of Part VIB provides that the court must not award damages if the proceedings are commenced after the end of the period of three years after the date of discoverability for the death or injury to which the damages relate.

4.25       Subsection 87(1AC) ensures that orders in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products will be subject to the arrangements in Division 7 (relating to structured settlements) of Part VIB. Division 7 of Part VIB establishes that the Court has the power on the application of the parties to approve an award of damages in the form of a structured settlement.

Item 7 -- Definitions at the end of section 87

4.26       This item inserts a number of definitions at the end of section 87.

4.27       Smoking will have the same meaning as in the Tobacco Advertising Prohibition Act 1992.

4.28       Tobacco product will have the same meaning as in the Tobacco Advertising Prohibition Act 1992.

Item 8 -- Application

4.29       This item makes it clear that these amendments only apply to contraventions of Division 1 of Part V of the Trade Practices Act 1974 that occur after the commencement of this item (that is, 28 days after the Bill receives Royal Assent).