Please note: This is an extract from Hansard only. Hansard extracts are reproduced with permission from the Parliament of Tasmania.

Second Reading

[5.52 p.m.]

Mrs JACKSON (Denison - Minister for Justice and Industrial Relations - 2R) - Mr Speaker, I move -

That the bill be now read the second time.

The Civil Liability Act 2002 provides for a range of tort law reforms relating to the principles to be used in determining negligence and to the awarding of damages for negligence. The act includes those recommendations of the Ipp review of the law of negligence that Insurance ministers agreed should be adopted on a nationally consistent basis.

In 2003 when the Civil Liability Act was amended to adopt most of the Ipp recommendations, adoption of recommendations relating to the discount rate to be applied in determining the present value of future loss and awards of damages for gratuitous care was deferred for further consideration of these issues. After considerable consultation, it has now been decided to adopt the Ipp recommendations in relation to discount rate and gratuitous care.

This bill inserts the new provisions in respect of discount rate and gratuitous care in the Civil Liability Act, where they properly belong, transfers the remaining provision from the Common Law (Miscellaneous Actions) Act 1986 into that act and repeals the 1986 act.

I foreshadow that there will be two amendments to this bill as a result of a decision of the High Court three days after this bill was tabled. These amendments will be discussed later.

Mr Speaker, I will discuss the change to the discount rate first. When awarding damages to a successful claimant in a personal injuries action, a court makes a once and for all award that covers both past loss and projected future loss. When a court awards a lump sum for future economic loss or future expenses that will be incurred, it assumes that the plaintiff will invest the lump sum and receive a stream of income from the investment. To allow for this future stream of income when calculating the lump sum award, the amount allowed for future loss and expenses is discounted to a present value.

Currently in Tasmania, the Common Law (Miscellaneous Actions) Act 1986 provides that the discount rate used for calculating the present value of future loss in respect of certain damages, such as loss or impairment of the capacity to earn, is 7 per cent. This is the highest rate of all Australian jurisdictions. The 1986 act allows the Governor to fix a different rate on the recommendation of the Attorney-General but this has never been applied.

At the time of drafting of the 1986 act, nominal interest rates were between 12 and 15 per cent. These rates were a reflection of an economy that was suffering from high inflation, with annual growth in the Consumer Price Index of around 9 per cent. Today interest rates are well below the 1986 level, especially for a low risk investment that would be appropriate to ensure a future income stream. For example, investing a damages award this year in 10-year Commonwealth Treasury bonds would yield a pre-tax return of 5.69 per cent.

The people most affected by the relatively high discount rate applying in Tasmania are those who are severely injured at a young age and who consequently will need a high level of care for many years. For example, a 25-year-old quadriplegic in Tasmania requiring attendant services for 50 years - at $20 000 per year - with lost earning capacity of 40 years - at a net of $50 per week - the discount rate of 7 per cent would result in a net present value payout of $322 512. The same quadriplegic awarded the same damages in New South Wales or Queensland, where the discount rate is 5 per cent, would receive $421 326. This is a difference of $98 814, or 30.6 per cent.

This bill reduces the discount rate to 5 per cent and brings Tasmania in line with most other jurisdictions. The 5 per cent discount rate is more appropriate in the current economic climate as a measure of the interest after tax that can be earned on a long-term, low-risk investment.

Another current problem arises because if a future loss does not fall into a category listed in the 1986 act, the common law discount rate of 3 per cent applies to that loss, which causes unnecessary complication. This bill inserts a broad definition of 'future loss' which should ensure that all future loss and expenses come under the 5 per cent discount rate. The bill also lowers the cap on awards for loss of future weekly earnings in both the Civil Liability Act 2002 and the Motor Accidents (Liabilities and Compensation) Act 1973. The maximum that can currently be awarded in Tasmania for future loss of weekly earnings is 4.25 times average adult weekly earnings. One of the reasons that Tasmania kept the cap at 4.25 times average weekly earnings was that the discount rate in Tasmania was significantly higher than in other States.

Now that the discount rate is to be reduced to be nationally consistent, it makes sense for the cap on future weekly earning capacity to also be reduced. The Ipp Report recommended a cap of two times average weekly earnings, but most other States and Territories set a cap of three times average weekly earnings, so we have adopted three times to achieve national consistency. Only 1.4 per cent of Australian workers earn more than three times average weekly earnings, and therefore adopting such a cap does not affect a significant proportion of employees, and those affected are in a position to take out personal insurance for loss of income.

Mr Speaker, I will now turn to a discussion of gratuitous care. Currently under the 1986 act, damages cannot be awarded for compensation for the value of services of a domestic nature or services relating to nursing and attendance for which the person in whose favour the award is made has not paid or is not liable to pay. These unpaid services are usually referred to as gratuitous care. Tasmania is the only jurisdiction to have abolished claims for gratuitous care for an injured person. Damages for gratuitous care of a plaintiff were abolished in 1986 because there had been a sharp increase in the number of claims for gratuitous care, many of which contained unreasonable components or involved claimants who were not seriously injured.

The Ipp Report did not recommend the abolition of awards of damages for gratuitous care to an injured person on the basis that it may be counter-productive, giving plaintiffs a strong incentive to retain professional carers to provide the services and perhaps lead to an increase in total damages awards. However, the Ipp Report did recommend that damages for gratuitous care should not be recoverable unless such services are required by the plaintiff as a result of the injuries caused by the negligence of the defendant and have been provided, or are likely to be provided, for more than six hours per week and for more than six consecutive months.

The Ipp Report also proposed that the maximum hourly rate for calculating damages for such services should be one-fortieth of the full-time adult weekly ordinary time earnings and the maximum weekly rate should be the average weekly full-time adult weekly ordinary time earnings. Most States have adopted either the threshold or cap recommendations made by the Ipp Report, or both.

This bill reinstates damages for gratuitous care to a person within the limitations stipulated by the Ipp Report. The Ipp model for the payment of gratuitous care ensures that people who have relatively minor injuries are not eligible for damages for gratuitous care. This helps to address one of the reasons for the abolition of awards for gratuitous care in Tasmania, which was that awards were being made for relatively frivolous claims. In doing so, it brings Tasmania into line with other States and ensures that persons injured in Tasmania as a result of the negligence of others are not disadvantaged relative to persons interstate. The people who have been most disadvantaged by the abolition of gratuitous care in Tasmania are those who are severely injured and who receive high levels of care from relatives or friends.

Care provided voluntarily by family or friends may be withdrawn, leaving the injured person without compensation to pay for professional care. This results either in the injured person receiving inadequate care or becoming reliant on government services and places the injured person at a considerable disadvantage to a similarly injured person who received an award of damages to cover professional care because they did not receive gratuitous care from family and friends. Removing the prohibition on payments for gratuitous care to an injured person will prevent such inequities from arising.

The only situation where an award for gratuitous care to an injured person will not be available is where the person has a claim to which Part III of the Motor Accidents (Liabilities and Compensation) Act 1973 applies. Under the Motor Accidents Act, catastrophically injured persons who require at least two hours of care per day are not awarded damages by the court, but are provided for under the motor accidents scheme as necessary.

These people are likely to represent the vast majority of persons injured in motor vehicle accidents who require a significant amount of care. Under the motor accidents scheme, persons with significant injuries receive the level of care that is necessary, reducing the demands on relatives and friends. Because of this, it is not considered necessary that awards for damages for gratuitous care should be made to persons injured in motor accidents that are covered by the motor accidents scheme.

The bill also originally covered a second type of damages for gratuitous care arising in cases where the injured person would normally have provided gratuitous care to another, for example, a child or elderly parent and, as a result of negligently caused injury, is no longer able to provide that care. There have been no claims of this type in Tasmania, but there have been successful claims in other States, including a Court of Appeal decision in New South Wales, which indicated that there was a growing common law acceptance that such damages were payable.

At the time of tabling this bill, it seemed that it would be only a matter of time before a claim of this type would be lodged in Tasmania and therefore it was considered sensible to limit any potential award of damages at common law in line with the recommendations of the Ipp Report. However, on 21 October, three days after this bill was tabled, the High Court brought down its decision in the case of CSR Limited v Eddy.

The High Court has ruled that all cases supporting this second type of damages as a principle of Australian common law should be overruled. It is therefore no longer necessary to limit the type of damages that might be granted under this head, hence the amendment to remove new section 28D from the bill.

This bill also transfers section 3 of the Common Law (Miscellaneous Actions) Act 1986 to the Civil Liability Act 2002 and amends that section to cover significant relationships, as defined in the Relationships Act 2003.

I commend the bill to the House.

[6.04 p.m.]

Mr MICHAEL HODGMAN (Denison) - Mr Speaker, as Her Majesty's shadow attorney-general for the State of Tasmania, I advise the House that the Opposition will be supporting this bill.

The Civil Liability Act 2002 provided for a range of tort law reforms relating to the principles to be used in determining negligence and to the awarding of damages for negligence. The act included those recommendations of the Ipp review of the law of negligence that insurance ministers agreed should be adopted on a nationally consistent basis. So we are dealing with a nationally consistent basis of legislation following the Ipp report. This bill therefore inserts the new provisions in respect of discount rate and gratuitous care in the Civil Liability Act, where they properly belong. It transfers the remaining provisions from the Common Law (Miscellaneous Actions) Act 1986 into that act and it repeals the 1986 act. The discount rate for calculating the present value of future loss is reduced from 7 per cent to 5 per cent, which will bring Tasmania into line with most other jurisdictions throughout Australia.

The bill also lowers the cap on awards for loss of future weekly earnings in both the Civil Liability Act 2002 and the Motor Accidents (Liabilities and Compensation) Act 1973 from 4.25 average adult weekly earnings to three times average weekly earnings, which also brings Tasmania into line with other jurisdictions.

It reinstates damages for a gratuitous service for the reasons explained by the Attorney, which we agree with, and it helps to address one of the reasons for the abolition of the award for gratuitous service in Tasmania back in 1986 under the Gray Government, which was that awards were being made for relatively frivolous claims. In so doing, it brings Tasmania into line with other States and ensures that persons injured in Tasmania as a result of the negligence of others are not disadvantaged relative to persons interstate.

The only situation where an award for gratuitous care to an injured person will not be available, is where the person has a claim to which Part 3 of the Motor Accidents (Liabilities and Compensation) Act 1973 applies. Under the Motor Accidents Act, catastrophically injured persons who require at least two hours of care per day are not awarded damages by the court, but are provided for under the motor accidents scheme, as necessary. Because of this, it is not considered necessary that awards for damages for gratuitous care should be made to persons injured in motor accidents that are covered by the motor accidents scheme.

Mr Speaker, the bill also covers a second type of gratuitous care arising in cases where the injured person would normally have provided gratuitous care to another, for example, a child or elderly parent, and as a result of negligently-caused injury, is no longer able to provide that care. The bill introduces the threshold and cap recommended by the Ipp Report for awards for this type of gratuitous care, which are that damages should not be recoverable unless prior to the loss of capacity the services were being provided for more than six hours per week and had been provided for more than six consecutive months, and the services were being provided to a person who, if the provider had been killed rather than injured, would have been entitled to recover damages for loss of the deceased's services under the Fatal Accidents Act 1934. Damages awarded for all forms of gratuitous service are limited to a maximum hourly rate of one-fortieth of full-time adult weekly ordinary time earnings and a maximum weekly rate of adult weekly ordinary time earnings.

One matter related to bringing Tasmania into line with other jurisdictions should be referred to, and I wish to refer to the Attorney's example - and I happen to know of a case quite similar to this. For a 25-year-old quadriplegic in Tasmania requiring attendant services for 50 years at $20 000 per year with lost earning capacity of 40 years at a net of $50 per week, the discount rate of 7 per cent, which is being changed, would result in a net present value payout of $320 512. The same quadriplegic awarded the same damages in New South Wales or Queensland, where the discount rate is 5 per cent, would have received $421 326. That is a difference of $98 814 or 30.6 per cent - a massive difference, which is now being addressed in this bill.

Finally - and the Attorney knows how carefully I read her bills - I was concerned about the provisions of clause 7, and you, who trumpeted significant relationships and the like, should have paid attention, because I am about to say I was concerned about the clause note which says clause 7 abolishes an action for loss of consortium of persons in a significant relationship within the meaning of the Relationships Act 2003. I want the Attorney to know that I had inquiries made and I am satisfied that that part of her bill is in order. On the face of it, it seemed to me, that there was a blow being struck in relation to lost consortium. You will not need me to go into details, Mr Speaker, but in the old days you had action for loss of servitium, which was services, and loss of consortium, which was love and affection and the other things that go with a significant relationship. However, I have satisfied myself that provision in the bill is in order; it was not the cruel, heartless thing I thought it was at first. The Opposition supports the bill.

[6.10 p.m.]

Mr McKIM (Franklin) - Mr Speaker, I express my gratitude to the shadow attorney-general for raising that issue. I have listened very carefully to the contributions from the Attorney-General and the shadow attorney-general, as I often do. In fact he saved me the trouble of reading the fact sheet today. I am not going to go through everything that this bill does because we have just heard it twice. I do not think democracy in this State would be furthered at all if I were to repeat for a third time the matters with which this bill deals.

The shadow attorney-general has raised clause 7 regarding the abolition of action for loss of consortium, but he has been somewhat cryptic about it, I might say. I will follow through, if I can use that term, and ask the Attorney, if she wishes, to explain that matter further.

Having made those very brief comments, I repeat to the House that we will be supporting the bill.

Bill read the second time.