The terrible tragedy of a baby dying after being given the wrong gas at Bankstown Hospital has exposed a gap in the law regarding compensation for medical negligence.

Under Australian law the parents of a child who dies as a result of negligence can only recover damages if they can prove they suffered a recognised psychiatric illness as a result of the death.

Justin Stack, Managing Director of Stacks Law Firm and legal compensation expert, said under current laws grief alone is not enough to merit compensation or recover damages.

"It is a grossly unjust situation that forces grief stricken families to prove to specified legal requirements that they have experienced a recognised psychiatric illness as a result of the death," Mr Stack said.

"This gap in the law should be closed so that the stricken family don't have to go through distressing psychiatric examinations to evaluate how badly they have been affected by such an enormous tragedy."

The NSW government may offer a compensation settlement, but Mr Stack points out that may include requirements that bar them from speaking out publicly against the hospital or the government for what happened.

Mr Stack said a key for any legal claim for negligence in the Bankstown Hospital case is what was done after the first baby was given the wrong gas a month earlier and suffered brain damage as a result.

"Any family that has been affected by medical negligence should get expert legal advice on what can be done in terms of compensation. It won't change what was done or end the grief, but the legal action may lead to the mistake never happening again."

Law Professor Barbara McDonald of the University of Sydney told the Sydney Morning Herald there should be some provision under law for compensation for bereavement.

"I think it's a great defect in our law that the Compensation to Relatives Act doesn't have any provision for bereavement damages," Professor McDonald said.

In the case of a child who suffered injury as a result of negligence, the parents would also need to show they suffered a psychiatric illness to recover damages directly.

However, a case could be brought on the child's behalf and they could recover damages for the injuries they suffered, lost future income and the cost of ongoing medical treatment amongst other things.

The United Kingdom allows parents to make a claim for bereavement without having to establish it caused a recognised psychiatric illness. It may be only $15,500 but it does provide some sort of legal recognition to the parent that they suffered a loss.

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