HOTTOPICS. Personal injury 1 Overview 2 The law of negligence 3 Public liability insurance 5 The public liability crisis

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1 HOTTOPICS 2005 > TOPICS 51 LEGAL ISSUES IN PLAIN LANGUAGE This is the fifty-first in the series Hot Topics: legal issues in plain language, published by the Legal Information Access Centre (LIAC). Hot Topics aims to give an accessible introduction to an area of law that is the subject of change or public debate. AUTHOR: Stella Tarakson EDITOR: Cathy Hammer DESIGN: Bodoni Studio ACKNOWLEDGEMENTS: The publisher would like to thank the NSW Parliamentary Research Service for permission to draw on Briefing Papers 7/2002 and 11/2002 on Public Liability by Roza Lozusic to produce this Hot Topics issue; also to the the Australian Competition and Consumer Commission (ACCC) for permission to use the graph on p 3. Personal injury 1 Overview 2 The law of negligence 3 Public liability insurance 5 The public liability crisis Dispute as to the causes contributing factors responses to the crisis arguments for and against the need for reform 9 Changes to the law in New South Wales Stage 1 reforms stage 2 reforms recent legislation on personal injury 15 Sporting bodies The law before the reforms waivers and warnings what the law is now 17 Public authorities Wide exposure changes to the law cases on councils duty of care 20 Medical negligence The law before the reforms arguments for and against reform new laws 22 Conclusion: Are the reforms working? The impact on insurance premiums have the reforms gone too far? 24 Contacts and further reading State Library of NSW Cataloguing-in-publication data Hot Topics, ISSN , No Insurance, Liability Law and legislation Australia. 2. Insurance, Liability Law and legislation New South Wales. 3. Personal injuries Australia. 4. Personal injuries New South Wales. I. Tarakson, Stella. II. Hammer, Cathy. III. Legal Information Access Centre. (Series: Hot topics (Sydney, N.S.W.) ; no. 51) Library Council of New South Wales All rights reserved. Copyright in Hot Topics is owned by the Library Council of New South Wales (the governing body of the State Library of New South Wales). Apart from any use permitted by the Copyright Act (including fair dealing for research or study) this publication may not be reproduced without written permission from the Legal Information Access Centre. Hot Topics is intended as an introductory guide only and should not be interpreted as legal advice. Whilst the Legal Information Access Centre attempts to provide up-to-date and accurate information, it makes no warranty or representation about the accuracy or currency of the information it provides and excludes, to the maximum extent permitted by law, any liability which may arise as a result of the use of this information. If you are looking for more information on an area of the law, the Legal Information Access Centre can help see back cover for contact details. If you want legal advice, you will need to consult a lawyer.

2 Overview It was like a balloon that kept inflating. Claims and compensation payouts were getting bigger and bigger. Insurance premiums kept rising. Public liability insurance became harder to obtain. Many community events were cancelled and many small businesses (such as adventure tourism operators) were unable to carry on. Everyone knew the balloon would burst. But how? And what would happen next? In recent years, Australia has struggled through a situation popularly tagged as a public liability crisis. There are competing views as to why insurance premiums grew so fast: see p 5 the Public Liability Crisis. Whatever the reasons, the hike in premiums resulted in many groups limiting or not offering certain activities and events. Most notably, many community-run events such as street fairs, country shows, and sporting activities were discontinued. This perceived crisis prompted reforms by governments to the law of negligence and restrictions on people s right to sue. Recently, senior members of the judiciary have spoken out about the possibility that reforms have gone too far 1 : This issue of Hot Topics looks at personal injury law, negligence, and the unprecedented reforms that have been driven by the public liability crisis. It looks at the causes of and responses to the crisis, before examining the legal reforms that took place in New South Wales. It then goes on to consider the major players in more detail: sporting bodies, p 15; public authorities (including local government), p 17; and medical practitioners, p 20. The information in this issue is limited to personal injuries arising from public and product liability, sporting accidents and medical negligence. Information on injuries that arise out of or in the course of employment, which are dealt with under workers compensation law, is available in The Law Handbook, Chapter 24 Employment 9th ed Redfern Legal Centre Publishing. Information on motor vehicle accidents is covered on pages of The Law Handbook. This book is available in all public libraries in NSW. For all these issues to make sense, we first need to examine the law of negligence. What is a negligent action and when does it give rise to legal liability? We have to be careful that we do not reject just claims and unfairly reduce the mutual sharing of risks when things go seriously wrong. High Court Judge, Michael Kirby Those who act negligently are partially relieved of the consequences of their default, as is their insurer, to the detriment of the victim of negligence and possibly the broader community Chief Justice of the Queensland Supreme Court, Paul de Jersey image unavailable 1. Judge joins attack on insurers over personal injury by Michael Pelly, Sydney Morning Herald, 23 March Overview 1

3 The law of negligence Negligence comes under a large body of law called torts. Torts are wrongdoings that give injured individuals or organisations the right to sue other individuals or organisations on their own behalf. (Note: organisations include businesses.) Torts can be compared to crimes, where it is the Crown who takes legal action on behalf of the community. In other words, a tort is a type of civil wrong as opposed to a criminal wrong. Other types of civil law matters include contract disputes and family law. Tort law evolved over a long period of time as part of the common law of England, which we inherited. Common law is judge-made law, as opposed to legislation or statutes, which are created by parliament. Statutes cannot cover every single aspect of the law, of course, and even where they do exist, courts still have to interpret them. It is these decisions that shape the ever-changing common law. Courts can only make decisions on cases that are brought to them. Parliament does not face such restrictions, and is able to create statutes within the powers defined for it by the Constitution. Legislation passed by parliament overrides the common law to the extent that the two are inconsistent. There are various kinds of torts. Defamation, trespass and nuisance are torts, but the most common is negligence. Broadly speaking, negligence involves carelessness, or a image unavailable failure to take reasonable care for other people s safety. An individual or organisation can be sued for their negligent acts or omissions that result in injury, death or property damage. For negligence to be established, the plaintiff (the person bringing the action), must be able to prove each of three things: > there was a duty of care that is, there was an obligation on behalf of the defendant to take reasonable care to prevent injury arising from their act or omission > this duty was breached not only did the duty of care exist, there must have been an actual failure to use reasonable care > this breach caused the injury the injury was due to the breach of the duty of care, not to some intervening factor. HOT TIP In the past, it was difficult to establish a duty of care in the absence of a contractual relationship. But the landmark case Donoghue v Stevenson [1932] AC 562, extended the duty to anyone who can reasonably be foreseen as likely to be injured by an act or omission. In that case, a woman who fell ill and suffered shock after drinking a bottle of ginger beer with a decomposing snail in it was able to sue the manufacturer, even though she had not bought the drink herself (that is, she had no contract with either the manufacturer or the retailer). Available at Select Key Scottish cases and then Donoghue v Stevenson. So, the question that arises is was the risk of injury or damage reasonably foreseeable? This test rules out damage that is too remote, but past cases have shown that the test can be applied narrowly or widely. Courts have stated that the kind of damage must be foreseeable, not necessarily the actual damage or its extent. In Hughes v Lord Advocate 2 [1963] AC 837, workers dug a manhole in a public street. They left the site after securing the manhole and placing paraffin lamps around it as a warning. Two young boys caused a paraffin lamp to fall into the hole, resulting in an explosion. One of the boys fell into the manhole, and suffered severe burns. The House of Lords decided that a child being injured by falling in the hole or being burned by a lamp was a foreseeable risk. Although the explosion was unforseeable, the injury fell within the kind of injury that could be foreseen, even though the severity was unexpected. 2. This is a UK case that is not freely available on the internet. 2 HOT TOPICS 51 > Personal injury

4 Public liability insurance People who owe a duty of care generally cannot afford to pay compensation for all the risks to which they are exposed. To cover themselves, they take out insurance. Insurance transfers the possible risk of loss arising from particular future events from a person or organisation (the insured) to the insurer. A person who wants insurance pays a sum of money (called a premium) to the insurer. In return, the insurer promises to compensate the insured if the event occurs and causes loss or damage. The event must occur during the policy period in order to be covered. Both sides to an insurance contract are taking on a risk. The insurer takes the risk that if a particular event occurs, they will have to pay out money in compensation. But the insured also accepts a risk. Their risk is that they will continue to pay premiums without ever receiving any financial benefit from doing so. If an insurance policy is not taken out, however, the person or organisation in question takes on the entire risk of loss. Liability insurance covers the risk of causing personal injury and death, as well as related loss or damage. These policies usually require the insured to take all reasonable precautions to prevent the liability from arising in the first place. There are various types of liability insurance as well as public liability insurance, there is liability insurance for workers compensation, motor vehicle third party, product liability and professional indemnity. Public liability insurance protects the insured from the financial risk of being liable to a third party for death, injury or damage to property resulting from the insured s negligence. The protection can relate to a location, the use of property, or the activities of individuals or a group of people. Most people have public liability insurance as a component of their home and contents insurance policy. This is relatively minor, however, and is not the concern of the public liability crisis. Rather, problems have arisen with the stand-alone public liability policies that are sold to individuals and organisations for commercial purposes. In the late 1990s, insurance premiums for such policies rose alarmingly for councils, community organisations, 50% 40% 30% 20% 10% 0 10% 20% Percentage change in real average premiums public liability 1998 to 2004* The real average premiums fell by 15 per cent in the period between year ending 31 December 2003 and half year ending 30 June 2004, reversing the trend of substantial increases since The real average premium decreased for most insurers * Notes: *1 January to 30 June 2004 Underwriting year ending 31 December Data is shown in real terms adjusted to 30 June 2004 values using average weekly earnings. Derived by ACCC from responses provided by seven insurers. sporting event organisers and adventure tour operators. This resulted in many events being cancelled and some businesses being forced out of operation. Even not-forprofit bodies were unable to afford the increased premiums, resulting in the cancellation of various fundraising activities. HOW ARE PREMIUMS SET? Premiums vary between insurers, and depend on the particular type of risk being insured. They also depend to a large degree on the competition faced by the insurance companies and their relative market share. However, the very nature of public liability insurance causes some difficulties when it comes to setting appropriate premiums. Public liability insurance 3

5 Long tail insurance HOT TIP Public liability insurance is A statute of limitations provides for a limit on the referred to as long tail insurance. This means there can be a time that can elapse before legal action is large time gap between when a taken. In NSW, the policy is taken out and when the Limitation Act 1969 financial outcome of a claim is provides for a limitation on finally realised. Claims can be wide-ranging causes of made years after an accident action brought about in NSW courts, including (depending on the statute of personal injury actions. limitations), even if the policy has since expired. As a result, it can be hard for insurers to estimate future claims costs with any great degree of accuracy. This makes it difficult to set suitable premiums. The Insurance Council of Australia (ICA) noted that: If a child of one year of age in NSW was injured, legal action could be commenced some 25 years after a policy has expired. There is no need to commence legal action until the child achieved majority at 18 years of age when the statute of limitations of three years applies. A further extension of five years may also be granted. (Source: ICA, Public Liability Submission to Ministerial Forum, March 2002, p 10) Unpredictability Public liability insurance is also characterised by unpredictability. Some events are relatively predictable, such as people falling over in shopping centres. Others, however, are much harder to predict. Major accidents and disasters can happen without warning and take everybody, including the insurance industry, by surprise. For example, the terrorist attacks in the United States on 11 September 2001 shocked the world. Many commentators agree that the global repercussions of the attacks have contributed to the Australian public liability insurance crisis. image unavailable 4 HOT TOPICS 51 > Personal injury

6 The public liability crisis Between 2001 and 2003 the average public liability premium rose from just over $800 to just under $1400 according to the Australian Competition and Consumer Commission 3. The reasons for that rise, however, are not clear-cut. Stakeholders disagree as to the main cost drivers, placing the blame on different factors. Even where they agree as to some common causes, they place different emphasis on their relative weights. DISPUTE AS TO THE CAUSES On 27 March 2002, the first of several national ministerial meetings examining the public liability crisis was held. At this meeting, discussions revolved around the increase in premiums, the contributing factors for these increases, and proposals for reform. In their submission to the ministerial meeting, the Insurance Council of Australia (ICA) stated that the causes of the premium increases included: > an increase in the number and size of claims > changes in society s attitudes regarding the making of claims > changes to regulations covering lawyers, which have led to more active pursuits of class actions > advertising by lawyers promoting a no win, no pay system, which encourages claims that might have not been pursued in the past > legal expenses involved in assessing claims > higher risk recreational activities > reinsurance costs > insurance taxes. The Australian Plaintiff Lawyers Association (APLA) now known as the Australian Lawyers Alliance disagreed. In their submission to the March 2002 Ministerial Meeting, they argued that the increases in premiums were the result of market forces. These market forces included: > aggressive competition between insurers in the 1990s, which led to premiums falling to unsustainable levels > the collapse of HIH and industry mergers > increased reinsurance costs > changes in the international risk environment > reduction in investment earnings > renewed focus on profitability > increased costs associated with prudential regulation > industry cycle of insurance profitability (which is influenced by the stock market) > taxes and levies. So what view finally arose from the Ministerial Meeting? A Joint Communique 4 was issued, and it found that both sides of the argument had valid points. It held that the premium increases were due to a combination of factors, the most significant being: > changing community attitudes to litigation > changes in what constitutes negligence > increased damages payouts for bodily injury claims THE HIH COLLAPSE On 15 March 2001, the major companies in the HIH Insurance Group (HIH) were placed in provisional liquidation. Questions about corporate mismanagement within HIH saw the appointment of a Royal Commission in August The Royal Commission s report The Failure of HIH Insurance was publicly released on 16 April 2003 together with the Government s response. The collapse of HIH is likely to be the largest corporate failure in Australia to date. The collapse was not due to fraud or embezzlement. The primary reason for the failure was that adequate provision had not been made for insurance claims and poor commercial decisions were made. The ultimate shortfall is likely to be in the billions of dollars. Research Note no. 32 of Report of the Royal Commission into HIH Insurance BRENDAN BAILEY, Law and Bills Digest Group Available at 3. ACCC Public Liability and professional indemnity insurance fourth monitoring report, 15 February Available at The public liability crisis 5

7 CASE STUDIES SWAIN v WAVERLEY COUNCIL One such case involved a surfer who was rendered a quadriplegic after diving into surf at Bondi Beach, striking a sandbar. The case was heard in the Supreme Court of New South Wales. The arguments revolved around whether Waverley Municipal Council owed swimmers a duty of care and the extent of that duty. The issues included whether warning signs should have been put up, whether the risk of diving into such waters was obvious, and whether the flags were placed improperly. After an allowance for contributory negligence of 25 per cent (meaning he was that much to blame), the plaintiff obtained a judgment of $3.75 million. The council later successfully appealed against the judgment to the Court of Appeal: Waverley Municipal Council v Swain [2003] NSWCA 61. Mr Swain appealed to the High Court, which overturned the appeal decision and reinstated the original damages award: Swain v Waverley Council [2005] HCA 4. The cases are available at au/cases/nsw/nswca/2003/61.html (NSW Court of Appeal) and /4.html (High Court). COLE v SOUTH TWEED HEADS RUGBY LEAGUE FOOTBALL CLUB LTD Another much-publicised case involved a woman who sued a club because she was hit by a motor vehicle shortly after leaving the club s premises. She was intoxicated when she left, with an alcohol blood level of This case was also heard in the Supreme Court of New South Wales. Arguments focused on whether the club owed customers a duty to take reasonable care to monitor and moderate the amount of alcohol served, even when the customer voluntarily and deliberately decided to drink to excess. Furthermore, did the club owe a duty to take reasonable care that the customer travelled safely away from the premises, and did the offer of a courtesy bus/taxi satisfy this duty? The court found in favour of the plaintiff. It apportioned responsibility as follows: 30 per cent to the driver, 30 per cent to the club, and 40 per cent to the plaintiff herself. The injured woman was awarded approximately $172,000 against the driver and approximately $251,000 against the club. (Cross-claims between the club and driver were also awarded). The defendants appealed to the Court of Appeal, and won. The injured woman then appealed to the High Court seeking to overturn the Court of Appeal s judgment, but her appeal was dismissed: Cole v South Tweed Heads Rugby League Football Club Ltd [2004] HCA 29. Decision available at au/cases/cth/high_ct/2004/29.html HOT TIP A cross-claim is a claim made in response to another claim for example, a defendant accused of causing an injury when failing to stop at a red light might cross-complain against the mechanic who recently repaired the car, claiming that negligence resulted in the brakes failing and, hence, that the accident was the mechanic s fault. This means the matters may be heard and decided together. > past under-pricing and poor profitability of the insurance industry > the collapse of HIH > insurance companies being more selective about the risks they cover. HIGH PROFILE COURT CASES Some cases received a great deal of media attention, not least for the large compensation payouts awarded by the courts. Although some were later overturned on appeal, the cases highlighted the willingness of the courts to find that negligence existed and to award high sums in damages. High media coverage of these cases perhaps contributed to the changing of community attitudes towards litigation. CONTRIBUTING FACTORS Insurance premiums, therefore, increased due to a complex interaction of various factors. Some of these are explored in more detail. Increase in number and size of claims Figures released by the Australian Prudential Regulation Authority (APRA) in 2002 showed increases to costs of claims: Number of public liability claims 55,000 88,000 Costs of public liability premiums Up 14% Overall cost of claims Up 52.5% The Australian Plaintiff Lawyers Association (APLA) suggests it is misleading to look at claim numbers in isolation. They say there is a proportionate relationship between the number of claims and the numbers of policies written, and that it is important to look at the ratio of claims to policies. In other words, if there is an increased number of policies written, there will be an increase in the number of claims. Based on their own ratio figures, they maintain that the real increase in claims from 1996 to 2001 was only 2.63 per cent. Changing attitudes to litigation There is an assumption that litigation levels have boomed in the past decade. Media reports of unprecedented large lump sum payouts have fuelled such beliefs, even though some of these large payouts were later reduced on appeal. The APLA President warned against accepting anecdote as truth and responding with unfair restrictions on compensation, which both hurt the injured and do nothing to solve the underlying problem of premium increases. (Source: Plaintiff, Issue 49, pp 4-5) 6 HOT TOPICS 51 > Personal injury

8 Civil actions commenced in Australia 93/94 94/95 95/96 96/97 97/98 98/99 99/00 (Source: APLA, Submission to the National Ministerial Summit into Public Liability Insurance, March 2002, p 15). Some say that there has been a change in attitude to litigation, a growing belief that someone had to pay. This change in attitude may be partly due to the public being better educated about their rights. The APLA submission to the Ministerial Meeting included data from the Australian Productivity Commission, showing a slight overall decline in the level of litigation since 1994/95, following a peak in 1996/97: see graph. There is general agreement that there was a rise in overall claims and in the ratio of claims to policies written. However, the APLA did not believe that increased claims necessarily translated to a rise in litigation, as most personal injury claims are settled out of court. The advertising of conditional cost agreements is often blamed as an exacerbating factor in an increased willingness to commence HOT TIP litigation. Also referred to as no win, no pay, lawyers can enter Conditional cost agreements are often confused agreements where their costs are with the contingency fee conditional on a successful system existing in the outcome. If the case fails, the United States. Under the American system, lawyers can charge a proportion of client will not be charged for the lawyer s labour. They may still be charged disbursements (the the amount awarded in lawyer s out-of-pocket expenses proceedings. In Australia, such as filing fees) and court practitioners can charge a costs if so ordered by the court premium on top of the legal costs otherwise (called party/party costs). But if payable, subject to a the case succeeds, the lawyer is successful outcome. This premium is a percentage able to charge a higher fee than they would otherwise. For more of the legal costs (up to 25 information see Hot Topics 46: per cent) not a You and Your Lawyer. percentage of the final sum awarded. Collapse of HIH The collapse of HIH in 2001 had a dual effect on increasing premiums. First there was a reduction in the availability of cover, and second, flow on costs resulted. The ICA noted that HIH used to cover a large proportion of the liability market, so its collapse resulted in a reduced industry capacity to provide cover. September 11 The terrorist attacks in the United States on 11 September 2001 also contributed to the increase in insurance premiums in Australia. This is because reinsurance costs increased. Reinsurance companies are the insurers insurers or the companies that insurance companies go to to take out insurance cover. Global reinsurance costs rose, putting pressure on Australian insurance companies. This was passed to policyholders in the form of higher premiums. Underpricing premiums Over the past decade, insurers have been cutting premiums to gain a competitive edge in the market place. So, rather than pricing premiums to reflect risk, they have been pricing them to be competitive. The APLA claims image unavailable Disgraced businessman Rodney Adler leaves court for Silverwater prison on 14 April He was sentenced to years for his part in the collapse of HIH. Nick Moir, SMH. The public liability crisis 7

9 image unavailable Amusement parks were one of the many business areas threatened with closure due to insurance being unaffordable or unobtainable. that these lower levels proved to be unsustainable, and a rise was inevitable. The Negligence Review Panel was appointed in July The panel s final report, The Review of the Law of Negligence, is commonly referred to as the Ipp report. It contained various recommendations for reform, and created the basis for possible reform in all Australian jurisdictions. ARGUMENTS FOR AND AGAINST THE NEED FOR REFORM For information on the actual reforms, see p 9 Changes to the law in New South Wales. But first, here are some instances of the controversy that the reform process itself raised. Those pressing the need for law reform included the ICA, medical representative bodies such as the Royal Australian College of General Practitioners, sporting organisations and adventure tourism operators. In its submission to the Negligence Review Panel, the ICA stated that tort law reform will go a long way to resolving the insurance crisis and reducing the frequency and cost of claims. This is expected to bring greater capacity into the market and to stabilise or reduce premiums. Of course, not everyone was in favour of the proposed reforms. One of the main concerns expressed by the Law Council of Australia related to the amount of time the Negligence Review Panel had to inquire into and report on reforming negligence. The ACCC was concerned that some of the far-reaching changes were quick-fix reactive solutions, without adequate attention being paid to longterm effects. The objections also went to the substance of the reforms themselves. In a media release (dated 30 May 2002) the Australian Plaintiff Lawyers Association stated that, Market failure in the provision of insurance cannot be solved by changes to tort law. Restrictions on the rights of claimants shifts costs from insurers and defendants to claimants and the community, but do nothing to address the underlying market forces that drive premium increase. Some commentators have pointed out that the trend in judicial decision-making in recent years has been more restrictive. That is, judges themselves have put a rein on cases, lessening the need for legislative changes. 8 HOT TOPICS 51 > Personal injury

10 Changes to the law in New South Wales In New South Wales, the Government response to the public liability crisis (see p 5) involved substantial change to the law through the introduction of new legislation and amendment to some existing legislation. Changes to the law have been implemented in two separate waves. The first, known as Stage 1 reforms, aimed primarily at decreasing the number of claims and the cost of claims by placing limits on the amounts that can be paid in various circumstances. The Stage 2 reforms were far broader and involved a fundamental reassessment of the law of negligence and personal injury. STAGE 1 REFORMS Most of the Stage 1 reforms were implemented through the passage of the Civil Liability Act 2002 (NSW). The remaining changes, which related to the way in which lawyers can advertise personal injury services, were effected by amending the Legal Profession Regulation Limits on damages The Civil Liability Act 2002 (NSW) was assented to in June, but commenced operation on 20 March This is what is known as retrospective legislation. The Civil Liability Act restricts the level of compensation available for personal injury negligence actions by placing limits on general damages and setting out maximum payouts for loss of earning capacity. The table below summarises these changes. The Civil Liability Act placed a cap (maximum limit) of $350,000 on damages for non-economic loss. (This was subsequently adjusted to $384,500 in line with indexation.) Non-economic loss refers to damages awarded for pain and suffering, commonly known as general damages. Under the Act, the maximum amount can only be awarded in a most extreme case. There is also a threshold test for the award of non-economic loss, which eliminates small claims. Section 16(1) states that: No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15 per cent of a most extreme case. There is also a cap on economic loss, that is, loss of actual earnings and of future earning capacity. The cap is calculated at three times the average weekly earnings. This is the case even if the person was earning more or expected to earn more than that limit. Furthermore, the discount rate to damages for future economic loss increased HOT TIP from three to five per cent, NSW legislation is reducing the final figure available at awarded. Select Browse in Force option. Matter restricted Cap or restriction Section of Act cap on non-economic loss $350,000 s 16(2) (general damages or pain and suffering) (later adjusted to $384,500) threshold for access to non-economic loss 15% of a most extreme case s 16(1) cap on economic loss 3 average weekly earnings s 12(2) (loss of earnings and earning capacity) discount to damages for future economic loss 5% s 14(2) exemplary, punitive and aggravated damages cannot be awarded for negligence s 21 family care (gratuitous attendant care) reduced or not available s 15 Changes to the law in New South Wales 9

11 The Act also specifies that aggravated, exemplary and punitive damages cannot be awarded in personal injury negligence cases. This means extra damages cannot be awarded in an attempt to punish the defendant for their wrongdoing. Damages for gratuitous attendant care, that is, unpaid care of a nursing/domestic nature generally carried out by family members, are difficult to obtain. They are reduced or in many cases not available. Advertising personal injury legal services Parts of the Stage 1 reforms were aimed at reducing the way that barristers and solicitors advertise personal injury services. This was initially done by amending the Legal Profession Regulation 1994 (NSW). This regulation was subsequently repealed and replaced by the Legal Profession Regulation 2002 (NSW). Lawyers cannot advertise personal injury services, except in some very restricted ways. For instance, they can have a sign displayed at their place of business that states their name, contact details, and accredited specialty. Similar information can be published in a practitioner directory. The restrictions do not apply in the case of advertising services to existing clients, or to people on the lawyers premises, as long as the advertisement cannot be seen from outside the premises. Other exceptions exist: see sections 140 and 140A of the regulation. The regulation stipulates that contravention of the advertising restrictions can amount to professional misconduct. STAGE 2 REFORMS The Stage 2 reforms were much broader, having a fundamental impact on the law of negligence itself. They were not confined to those issues arising solely from public liability insurance increases; they also had an impact on other personal injury actions such as those relevant to medical indemnity insurance. The Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) made changes to various Acts, in particular, the Civil Liability Act Some parts commenced operation on 6 December 2002, others on 10 January It is not possible to provide a comprehensive analysis of every reform, but major areas are outlined. Further details can be obtained by reading the legislation. See also the further reading section on page 24. A discussion of whether the reforms have been effective can be found in Conclusion: Are the reforms working? (see p22). General principles of negligence established The amendments set down various provisions that in some cases confirm the common law, in other cases override previous inconsistencies in the common law. For an outline of the common law of negligence see page 1 Overview. A new Part IA was inserted into the Civil Liability Act, which was based on recommendations made in the Ipp report (The Review on the Law of Negligence). The effect of section 5B is that a person can only be found to be negligent if: > the risk was foreseeable (the person knew or ought to have known of the risk); and > the risk was not insignificant ; and > a reasonable person in that position would have taken precautions against the risk of harm. To assist courts in deciding whether a reasonable person would have taken precautions against a risk of harm in those circumstances, the court is to consider: > the probability that the harm would occur if care were not taken; > the likely seriousness of the harm; > the burden (ie, costs and difficulty) of taking precautions to avoid the risk of harm; > the social utility of the activity that creates the risk of harm (whether it can be seen as a worthwhile activity). Section 5C states that the fact that a risk of harm could have been avoided by doing something differently does not of itself give rise to liability for the way things were done. Taking action that would have avoided the risk, after an action has occurred, does not in itself constitute an admission of liability in connection with the risk. General principles are also set down with regard to causation the link between a breach of the duty of care and the injury suffered that is required by common law. Under section 5D, two components are required to determine that negligence caused the harm: > factual causation the negligence was a necessary condition of the occurrence of the harm; and > scope of liability that is, it is appropriate for the scope of the negligent person s liability to extend to the harm so caused. Section 5E places the onus of proof regarding any fact relevant to the issue of causation onto the plaintiff. Assumption of risk principles established Sections were added to the Civil Liability Act to deal with the assumption of risk. This was an area that seemed to have been watered down by the common law over the previous decade. Section 5H states that there is generally no duty to warn of obvious risks, unless the plaintiff has requested such information from the defendant; or there is a law requiring a warning; or where the defendant is providing professional services. Obvious risks are defined by s 5F to mean risks that would have been obvious to a reasonable person in that 10 HOT TOPICS 51 > Personal injury

12 position. A risk of something occurring can be an obvious risk even though it has a low probability of occurring. Risks can be obvious even if the risk (or a condition or circumstance giving rise to the risk) is not prominent, conspicuous, or physically observable. Injured people are presumed to be aware of obvious risks. It is enough to be aware of the type or kind of risk, even if they are not aware of the precise nature or extent of the risk. Similarly, s 5I says there is no liability in negligence for harm suffered as the result of the materialisation of an inherent risk. An inherent risk is a risk of something that cannot be avoided by the exercise of reasonable care and skill. However, the section does not exclude liability regarding the duty to warn of such risks. Determining standard of contributory negligence Section 5R states that the principles applying to whether a person has been negligent also apply to contributory negligence. That is, the standard of care required of the injured person is that of a reasonable person in that position. The matter is determined on the basis of what that person knew or ought to have known at the time. Section 5S holds that it is open for a court to determine a reduction in damages of 100 per cent if it thinks it just and equitable to do so. The result of this would be that the claim for damages is defeated. Creation of a presumption of structured settlements Compensation for personal injury caused by negligence was typically awarded by the courts as a single lump sum. This was also generally the case for settlement agreements. However, the Stage 2 reforms included calls for an alternative to lump sums. Structured settlements involve a small lump sum payment plus periodic payments for life. These periodic payments are funded by an annuity, purchased by the defendant (or its insurer) on behalf of the plaintiff. An annuity is a HOT TIP Contributory negligence refers to the issue of whether the person injured was partly (or wholly) responsible for their injury due to their own negligence. That is, they themselves may also have been to blame for failing to take precautions against the risk of harm. Not looking where they were going, running over a wet surface while wearing slippery shoes, swimming in dangerous waters these are all examples of possible contributory negligence. financial product provided by life insurance companies, and makes regular payments. The advantages and disadvantages of structured settlements are summarised in the following table. Advantages of structured settlements > plaintiff benefits from an increased after-tax award of compensation and a cash flow that can be guaranteed for life > a structured settlement can be linked to inflation ensuring its adequacy over the years > compensation payout is not susceptible to the fluctuating investment returns of an investment lump sum > structured settlements are flexible > defendant s insurer will have to pay less money overall in compensation if it is paid in instalments rather than in a lump sum (estimates range between 10 to 15 % lower cost than lump sum) > plaintiffs who deplete their lump sum early often turn to the social security system, therefore the Federal Government will benefit from the use of structured settlements through reduced welfare payments (despite lower tax receipts) > structured settlements shift the risk of living too long from the plaintiff to life insurance companies, which are better able to handle that risk Disadvantages of structured settlements > annuities that make up part of structured settlements incur tax, whereas lump sum payments are nontaxable (this has since changed see note below) > lump sums provide greater flexibility and choice in determining how a compensation payment is best spent than structured settlements > a lump sum payment offers a plaintiff greater potential to change his or her lifestyles or career after an injury, which is critical to recovery for many patients > lump sum payments provide certainty and finality to litigation > possible psychological benefit in receiving a lump sum payout, in terms of empowering a plaintiff to take control of his or her life > possible associated costs of administering structured settlements > risk that the provider of an annuity may go bankrupt (Source: Lozusic R, Public Liability an update: Briefing Paper 11/2002, Parliament of New South Wales, pp 21-2) Changes to the law in New South Wales 11

13 HOT TIP Note: one of the main disadvantages of structured settlements was that they attracted tax, whereas a lump sum didn t this has since changed. The Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 (Cth) amended the Income Tax Assessment Act 1997 (Cth), the Income Tax Assessment Act 1936 (Cth), and the Life Insurance Act 1995 (Cth). Periodic payments derived from structured settlements and structured orders entered into on or after 26 September 2001 are tax-exempt. Structured settlements are the result of an agreement between parties, while structured orders are the result of a court order, often without agreement by the parties. Structured settlements and orders must meet various criteria in order to receive the favourable tax treatment. There is a compulsory component a personal injury annuity that provides the injured person with a minimum level of monthly payments for as long as they live. The minimum level of the annuity is equal to the basic age pension and pension supplement. This component is basically for the payment of future medical treatment, nursing care and other living expenses. There are also optional components, including an immediate cash component. This is a lump sum paid immediately so it can be used to pay costs, debts, purchase equipment and so on. Another option is to include a personal injury lump sum a single premium paid by the defendant or their insurer in return for an agreement to pay a tax-free lump sum at an agreed future date or dates. This can be used to cover expected future costs, such as the upgrading or replacement of equipment. With the taxation disadvantage settled, structured settlements are gaining popularity. New provisions were added to the Civil Liability Act to further encourage the making of structured settlements. Section 23 requires the court to give the parties to proceedings a reasonable opportunity to negotiate a structured settlement. Section 24 allows the court to make consent orders for structured settlements. And section 25 places an obligation on legal practitioners to advise plaintiff clients in writing as to the availability of structured settlements and the desirability of their obtaining independent financial advice. Mental harm Mental harm means impairment of a person s mental condition. Part 3 of the Civil Liability Act deals with mental harm arising in connection with personal injury. Section 29 states that plaintiffs are not prevented from recovering damages simply because the personal injury arose wholly or in part from mental or nervous shock. But then section 30 goes on to outline the limits that exist on recovery for pure mental harm arising from shock. Plaintiffs are not entitled to damages for pure mental harm unless: > the plaintiff witnessed, at the scene, the victim being killed, injured or put in peril; or > the plaintiff is a close family member of the victim (that is, parent, spouse, partner, child, or sibling). The nature of the duty of care owed is further explained in section 32. A person does not owe a duty of care to not cause mental harm unless they ought to have foreseen that a person of normal fortitude might, in the circumstances, suffer a recognised psychiatric illness if reasonable care were not taken. Strengthening defences regarding intoxicated plaintiffs Intoxication refers to being under the influence of alcohol or a drug, regardless of whether the drug is taken for a medicinal purpose and whether it is taken lawfully. The effect of intoxication on the duty and standard of care is covered by section 49, which states that: > in determining whether there is a duty of care, it is not relevant to consider the possibility that intoxication has exposed someone to increased risk because their ability to exercise reasonable care and skill is impaired; > a person is not owed a duty of care merely because they are intoxicated; > the fact that someone is intoxicated does not of itself increase the standard of care owed to them. Section 50 goes on to add that, if the person s capacity to take reasonable care and skill is impaired due to intoxication, a court is not to award damages unless it is satisfied that the injury is likely to have occurred even if the person had not been intoxicated. In such situations, a person is presumed to have been contributorily negligent unless the court is satisfied that the person s intoxication did not contribute in any way to the cause of the injury. This section does not apply if the intoxication was not self-induced. Strengthening defences regarding injuries received in course of crime Under the common law, no duty of care is owed to someone who is engaged in criminal activity. This provision was codified in the Civil Liability Act as section 54, and then further amended by Civil Liability Amendment Act Criminals are not to be awarded damages if the injury or death occurred at the time of or following conduct that, on the balance of probabilities, constitutes a serious offence, where that conduct contributed materially to the injury or risk of injury. If a mentally ill patient commits a serious offence, damages are limited: see section 54A. 12 HOT TOPICS 51 > Personal injury

14 RECENT LEGISLATION ON PERSONAL INJURY* Name of Act Act amended Date of Effect What the changes mean Commonwealth Taxation Laws Amendment Income Tax Assessment 19 Dec 2002 removes tax barriers to structured settlements (Structured Settlements and Act 1997 Structured Orders) Act 2002 Trade Practices Amendment Trade Practices Act Dec 2002 allows people to sign waivers and assume the risk of (Liability for Recreational participating in risky recreational activities Services) Act 2002 Commonwealth Volunteers 24 Aug 2003 exempts Commonwealth volunteers from liability Protection Act 2002 Trade Practices Amendment Trade Practices Act July 2004 prevents claims for damages for injuries or death (Personal Injuries and Death) resulting from contraventions the Trade Practices Act Bill New South Wales Civil Liability Act March 2002 > upper limits imposed for non-economic loss ($350,000) and lost earnings (three times NSW average weekly earnings) > application of a threshold of 15% impairment for general damages Civil Liability Amendment Civil Liability Act Dec 2002 for > allows people to sign waivers and take personal (Personal Responsibility) most, Sch 1[5] responsibility for risk Act Dec 2003 > protects volunteers and good Samaritans > ensures that saying sorry does not represent an admission of guilt > imposes new limitation periods for personal injury cases Civil Liability Amendment Civil Liability Act Dec 2003, > no damages to be awarded for the costs of rearing Act 2003 except Sch 2 on a child (unless child has disability) 1 Dec 2004 > criminals cannot be awarded damages Civil Liability Amendment Civil Liability Act 2002 > deals with damages for negligence for death or injury (Offender Damages) Act 2004 suffered by offenders in custody Civil Liability Amendment Civil Liability Act 2002 > deals further with damages for negligence for death or (Offender Damages) Act 2005 injury suffered by offenders in custody *Note: This table does not include legislation relating to workers compensation accidents or motor vehicle accidents. NEW LEGISLATION IN OTHER STATES Australian Capital Territory > Civil Law (Wrongs) Act 2002 > Civil Law (Wrongs) Amendment Act 2003 > Civil Law (Wrongs) (Proportionate Liability and Professional Standards) Amendment Act 2004 Northern Territory > Consumer Affairs and Fair Trading (Amendment) Act 2003 > Personal Injuries (Civil Claims) Act 2003 Queensland > Civil Liability Act 2003 > Personal Injuries Proceedings Act 2002 South Australia > Wrongs (Liability and Damages for Personal Injury) Amendment Act 2002 > Statutes Amendment (Structured Settlements) Act 2002 > Recreational Services (Limitation of Liability) Act 2002 > Law Reform (Ipp Recommendations) Amendment Act 2000 Tasmania > Civil Liability Act 2002 Victoria > Wrongs and Other Acts (Public Liability Insurance Reform) Act 2002 > Wrongs and Limitation of Actions Acts (Insurance Reform) Act 2003 > Wrongs and Other Acts (Law of Negligence) Act 2003 Western Australia > Civil Liability Act 2002 > Civil Liability Amendment Act 2003 > Volunteers (Protection from Liability) Act 2002 Changes to the law in New South Wales 13

15 As a related matter, the Civil Liability Amendment (Offender Damages) Act 2004 introduced a new Part 2A which came into effect from 19 November The Part places limitations on the ability of offenders to claim damages for personal injury against protected defendants (such as the Crown and its servants) for injuries arising while they are in custody. Protection of good Samaritans who assist in emergencies The intention of this reform was to protect good Samaritans people who voluntarily help in emergencies to ensure that such people are not at risk of being judged after the event of not having helped well enough. This was basically already the position at common law, but nevertheless a new Part 8 was added to the Civil Liability Act to specifically deal with good Samaritans. Section 57 states that a good Samaritan does not incur any personal civil liability regarding their act or omission in an emergency when assisting a person who is apparently injured or at risk of being injured. But there are some situations where the protection does not apply: > where it was the good Samaritan s actions that caused the injury or risk of injury in the first place; or > where the good Samaritan failed to exercise reasonable care and skill because their ability to do so was significantly impaired because they were (voluntarily) intoxicated; or > where a person is impersonating a health care or emergency services worker or a police officer, or otherwise falsely represents that they have skills in connection with emergency assistance. Protection of community organisations and volunteers A related issue is the protection of volunteers and community organisations for the purposes of community work. That is, work that is not for private financial gain performed for charitable, sporting, educational or cultural purposes. Section 61 holds that a volunteer is not liable for any act or omission done in good faith when doing community work organised by a community organisation or as an office holder of a community organisation. The protection does not apply if (among other things): > the volunteer was engaged in a criminal offence at the time > the volunteer was intoxicated > the volunteer was acting outside the scope of his/her activities or contrary to the community organisation s instructions. Also, the requirement for incorporated associations to have $2 million of public liability insurance was repealed image unavailable from the Associations Incorporation Regulation 1999, on 10 May Apologies The provisions of Part 10 state that an apology made by a person does not constitute an express or implied admission of fault or liability. Evidence of an apology is not admissible in civil proceedings as evidence of fault or liability in connection with that matter. Statute of limitations A limitation period works by limiting the time within which a plaintiff can commence proceedings. Changes to the Limitation Act 1969 (NSW) mean that a case cannot be brought after the expiration of whichever is the first to expire out of: > three years running from the date on which the cause of action is discoverable to the plaintiff; or > twelve years from the time of the act or omission that is alleged to have resulted in the injury. See section 50C; exceptions exist for minors (section 50E) and cases of disability (section 50F). Recreational activities and risk warnings The reforms to the law in this area are described under the section headed Sporting bodies. Statutory immunity for public authorities This is dealt with under the section headed Public authorities. Changes to the medical negligence test For details, please refer to section headed Medical negligence. 14 HOT TOPICS 51 > Personal injury

16 Sporting bodies THE LAW BEFORE THE REFORMS Traditionally, participants in sporting games and activities were not able to sue for negligence for injuries received. This was because the law recognised that sport contained certain inherent risks: if people are prepared to be involved in the sport, they are prepared to take on the risk that they might suffer certain injuries. However, a High Court case in the late 1960s changed the law significantly. In Rootes v Shelton, the High Court stated that just because an injury occurred while playing sport, that was not enough to exclude it from the laws of negligence. Also, the fact that the activity contained inherent risks was not enough to eliminate a duty of care: see case study. Since that case, courts have found that, in the context of sporting events, a duty of care can be owed to many people. Various cases have held that a duty exists to other participants (amateur or professional), volunteers, coaches, trainers and even to spectators. But who exactly owes the duty of care? Court cases have found that a duty of care may be owed by: > other participants in the sport > volunteers > coaches > trainers > sporting organisations (either directly or vicariously vicarious liability involves an employer being liable for the actions of their staff) > occupiers and owners of sports premises, due to the laws of occupiers liability. A more recent High Court case found that the duty of care in sports, however, does not necessarily extend to bodies that make the rules for the sport: Agar v Hyde [2000] HCA 41. In this case, the question was whether a duty of care was owed by a rugby union rule making body to the players. Chief Justice Gleeson held that, Undertaking the function of participating in a process of making and altering the rules according to which adult people, for their own enjoyment, may choose to engage in a hazardous sporting contest, does not, of itself, carry with it potential legal liability for injury sustained in such a contest. available at cth/high_ct/2000/41.html CASE STUDY ROOTES v SHELTON In this case, a water skier was severely injured following a collision with a stationary boat. The skier sued the driver of the towing boat for negligence. More specifically, he sued the driver for failing to take due care in the control of the boat and for failing to warn him of the presence of the stationary boat, which was standard practice. The New South Wales Supreme Court (Court of Appeal) had found that the boat driver did not owe a duty to the plaintiff. This was because they were both participants in a sport, who accepted the risks of injury that might be involved with taking part. However, the High Court overturned this on appeal. Chief Justice Barwick made some statements on negligence and sport in general, before turning to the specifics of this case: By engaging in a sport or pastime the participants may be held to have accepted risks which are inherent in that sport or pastime: the tribunal of fact can make its own assessment of what the accepted risks are: but this does not eliminate all duty of care of the one participant to the other. Whether or not such a duty arises, and, if it does, its extent, must necessarily depend in each case upon its own circumstances: but, in my opinion, they are neither definitive of the existence nor of the extent of the duty; nor does their breach or non-observance necessarily constitute a breach of any duty found to exist. Rootes v Shelton [1967] HCA 39; (1967) 116 CLR 383 available at HCA/1967/39.html WAIVERS AND WARNINGS The Stage 2 reforms included the introduction of waivers and warnings in the context of risky activities. More specifically, the reforms would allow clauses to be inserted into contracts for the supply of recreational services that limit or exclude the liability of the service providers. Also, the provision of risk warnings would be able to operate as a good defence for risky entertainment or sporting activities. HOT TIP Occupiers and owners of sports premises have a duty to maintain safe premises, for example in playing fields and leisure centres. They need to provide adequate warnings, such as in the form of signs pointing out the relevant risks. The existence of warning signs, however, had been found to not necessarily exempt an occupier from their duty to provide safe premises. Sporting bodies 15

17 The Australian Plaintiff Lawyers Association (APLA, now known as the Australian Lawyers Alliance) broadly supported such changes. However, they did state that care would be needed in the drafting to protect children and people with mental disabilities. In their submission to the Negligence Review Panel, they said: APLA supports the exploration of the use of waivers or disclaimers to enable fully informed adults to voluntarily assume the risks inherent in certain activities. However, it is essential that these disclaimers are only available to those who can fully appreciate the nature and extent of the risks that they undertake. They should only apply to inherently risky activities and the risks involved should be fully articulated before the assumption of risk can be effective. In their submission to the Negligence Review Panel, the Australian Competition and Consumer Commission (ACCC) expressed concerns that the reforms could lead to risks being inappropriately transferred to consumers. Their concern centred on the argument that consumers are not as well placed as suppliers to gauge the risks involved in recreational services and to insure against the consequences of those risks. WHAT THE LAW IS NOW As part of the Stage 2 reforms, the Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) added some new provisions to the Civil Liability Act 2002 (NSW) dealing with recreational activities: Pt 1A Div 5. Recreational activities are defined in Division 5 as including any sport (whether organised or not), any leisure pursuit, and any activity engaged in at a place where people ordinarily engage in sport, leisure or relaxation activities (such as parks, beaches, open public space). A dangerous recreational activity is one that involves a significant risk of physical harm. Section 5L states that a person is not liable in negligence for harm suffered due to the materialisation of an obvious risk of a dangerous recreational activity whether the plaintiff was aware of the risk or not. In line with the calls for change discussed above, changes were made to the law regarding risk warnings and exclusion clauses in contracts. Section 5M deals with risk warnings. A person does not owe a duty of care to someone engaging in a recreational activity if the risk of the activity was the subject of a risk warning to that participant. A risk warning must be given in a manner that is reasonably likely to result in people being warned of the risk before engaging in the activity. It is not necessary to establish, however, that the person received or understood the warning or even that they were capable of receiving or understanding it. Risk warnings can be given orally or in writing, for instance, by means of a sign. They need not be specific to the image unavailable particular risk. Rather, they can be a general warning of risks that include the particular risk concerned, as long as they warn of the general nature of the particular risk. According to the section, there are some situations where defendants cannot rely on risk warnings. These are where: > the person who suffered harm was an incapable person (unless they were under the control of or accompanied by someone else who received the risk warning, or the warning was to a parent of the incapable person) > the warning was not given by or on behalf of the defendant or the occupier of the premises > there was a contravention of safety laws > the warning was contradicted by any representation as to risk made by or on behalf of the defendant > the defendant had required the plaintiff to engage in the recreational activity. Section 5N deals with waiver of contractual duties of care for recreational activities. It states that a contract for the supply of a recreation service may exclude, restrict or modify any liability to which this Division applies that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill. It goes on to say that nothing in the written law of New South Wales renders such a contract void or unenforceable, or authorises a court to refuse to enforce the term, declare it void or vary it. The section does not apply, however, where there have been breaches of safety regulations. This change acts in conjunction with an amendment made to the Trade Practices Act 1974 (Cth). Section 74(1) of that Act has long created an implied warranty that services will be rendered with due care and skill, and section 68 voids any contract terms that exclude this warranty. However, a new section now deals specifically with recreational services. Section 68B allows corporations who provide recreational services to insert clauses that limit their liability for death or personal injury arising from the supply of those services. The new laws appear to be very restrictive. Undoubtedly, future cases will turn on the wording of the risk warnings and the exclusion clauses. 16 HOT TOPICS 51 > Personal injury

18 Public authorities Public authorities include the Crown, government departments, local councils, and public and local authorities constituted by legislation. Their responsibilities are broad, and, particularly in the case of local councils, encompass a wide range of services into which the general public comes into daily contact. As an aside, it is worth noting that the Civil Liability Regulation 2003 (NSW) regards private schools to be public authorities for the purposes of the Civil Liability Act 2002 (NSW). This means the same considerations apply to public and private schools when it comes to liability for negligence. WIDE EXPOSURE Although this discussion generally applies to all public authorities, it focuses on local councils. This is because the breadth of their activities and responsibilities tends to give them the widest potential for exposure. Many of the facilities provided by local councils are intended for recreational and sporting activities. These include swimming pools, sporting grounds, playgrounds and community centres. Leisure and sporting activities by their nature contain more risks than other activities, thus increasing a council s exposure to liability for personal injury actions. In addition, councils are responsible for maintaining infrastructure such as roads and footpaths. These are continuously used by members of the public yet again exposing councils to a high potential for liability for negligence causing personal injury. Looking at roads and footpaths in particular, in the past, a highway authority (which can be a local council) did not incur civil liability by reason of any neglect on its image unavailable Public authorities 17

19 HOT TIP Malfeasance is a wrongdoing that is unlawful, it can be either a crime or a tort for instance, trespass. Misfeasance in negligence is the doing of something to a standard that falls short of the required standard. Road authorities have always been liable for misfeasance if they actually created dangers on the road. Nonfeasance is the failure to carry out a duty. The nonfeasance rule traditionally protected road authorities from actions in negligence regarding a failure to either maintain or repair the roads. It dates back to the Middle Ages when roads were privately owned. The distinction between nonfeasance and misfeasance has been disputed in many cases. Distinctions were made based on the facts of cases, so over time the so-called highway rule eroded. part to construct, repair or maintain a road or other highway : Buckle v Bayswater Road Board 5. This principle was known as the highway rule. But a recent High Court case abolished this immunity. In Brodie v Singleton Shire Council 6 a bridge collapsed when a heavy truck drove over it. The court removed the highway rule and replaced it with the ordinary principles of negligence. The court criticised the rule because it had developed in a way that gave rise to illusory distinc tions. They were referring to the differences between non feasance and misfeasance, and their consequences. The High Court stated that this distinc tion provided no incentive for highway authorities to take action to repair damage. CHANGES TO THE LAW The issue of public authorities duties was one of the areas dealt with by the Stage 2 reforms. The broad range of duties of public authorities was recognised, and the limited resources available to them to perform such duties. The reforms aimed to ensure that the existence of a power does not necessarily imply a duty to exercise that power; except where there is a statutory obligation to do so. The Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) added Part 5 to the Civil Liability Act 2002 (NSW). Section 42 states that the following principles apply in determining whether a public authority has a duty of care or has breached a duty of care: > the functions required to be exercised are limited by the financial and other resources reasonably available to the authority for the purpose of exercising those functions > the general allocation of those resources by the authority is not open to challenge > the functions required to be exercised are determined by reference to its broad range of activities, and not just the matter to which the proceedings relate > the authority can rely on evidence of its compliance with general procedures and standards as evidence of the proper exercise of its functions. Under section 43, an act or omission by an authority does not constitute a breach of statutory duty unless it was so unreasonable that no authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its functions. A public authority is not liable for a failure to prohibit or regulate an activity unless it could have been compelled to by a court: see section 44. For example, an authority that does not use its regulatory authority to close a fishery would not be liable unless the courts could have compelled them to exercise that function. The nonfeasance rule for highway authorities is now specifically covered by the legislation, which uses the term roads authority. Section 45 states that a roads authority is not liable for harm arising from a failure to carry out road work or to consider carrying out road work, unless at the time it had actual knowledge of the particular risk that resulted in the harm. If a roads authority did know about a particular risk, it will still be able to rely on the general protection of being able to allocate resources without challenge. Similarly, section 46 holds that the fact that a public authority exercises or decides to exercise a function does not of itself indicate a duty to exercise that function. Nor does it indicate that the function should be exercised in particular circumstances or in a particular way. The Civil Liability Amendment Act 2003 (NSW) added a further amendment. Section 43A relates to proceedings against an authority based on the exercise of, or the failure to exercise, its special statutory powers. These are powers conferred by or under a statute, of the kind that are generally not authorised without specific statutory authority. The effect of this section is substantially similar to s 43, and says there is no civil liability unless the act or omission is so unreasonable that no authority having such powers could properly consider it to be a reasonable exercise of (or a failure to exercise) such powers. [Some of the information in this section is drawn from the 2nd Reading Speech to the Civil Liability Amendment (Personal Responsibility) Bill, Bob Carr, 23/10/2002. Available at 5. (1936) 57 CLR 259, Justice Dixon; 6. [2001] HCA 29; 18 HOT TOPICS 51 > Personal injury

20 CASES ON COUNCILS DUTY OF CARE Councils have no duty to warn of a defect, for example in a footpath, if the defect is obvious to an ordinary user of the path. If they have notice of a defect that is not obvious, or have created a hazard by, for example, commencing repair work they have a duty to adequately warn pedestrians of the hazard. Many so-called trip and fall cases, which form the bulk of legal action against councils, look at whether the risk is obvious and whether the warning is adequate three examples follow. The fourth case, Timbs illustrates councils duty of care in relation to making statements that are relied on because of their position of authority. 1. NEWCASTLE CITY COUNCIL v LINDSAY [2004] NSWCA 198 image unavailable An elderly woman fell after tripping on a slab in a pathway, which had been raised by tree roots. Council had partly repaired the defect at the time. The Court of Appeal overturned the District Court s decision in favour of the injured woman. The court decided that the defect was obvious, and that Newcastle Council had not increased the risk posed by failing to mark or protect the defect. They affirmed that pedestrians have a duty to keep a proper lookout for obvious and common risks. Text of judgment available at NSWCA/2004/198.html 2. PENRITH CITY COUNCIL v PARKS [2004] NSWCA 201 As with the previous case, this case concerned a fall on a footpath. Council had identified the defect and had undertaken partial repair by cutting the path into two sections. This created a dangerous situation by leaving two unstable pieces of concrete. This defect was not considered to be obvious to the ordinary pedestrian. As council had created the risk, they had a duty to warn pedestrians. NSWCA/2004/201.html 3. RYDE CITY COUNCIL v SALEH [2004] NSWCA 219 In another trip and fall case, the Court of Appeal again overturned a decision awarding damages to the injured party. The toe of Mrs Saleh s shoe caught on a section of footpath that was raised 20mm. The judges decision was that uneven pathways are an obvious risk and that pedestrians are best able to protect themselves by keeping a lookout TIMBS v SHOALHAVEN CITY COUNCIL [2004] NSWCA 81 Mr Timbs sought council permission to remove a large gum tree near his house. A council officer came to inspect the tree and refused permission to remove the tree, saying it was safe and sound. During a storm the tree fell onto Mr Timb s house, resulting in his death. Further inspection showed that the roots were decayed, but this was not easily seen. Mrs Timbs sued the council for negligence, and council were found to be liable for economic loss. When the council officer stated that the tree was safe, the Timbs relied on his opinion because of his position, and did not cut down the tree. The council officer did not have to provide expert opinion, and could have suggested that the Timbs obtain independent advice about the condition of the tree. Public authorities 19