Australia: Victorian inquiry into Wrongs Act 1958 - VCEC recommendations and government's response

In brief - Victorian government accepts most of VCEC's recommendations for Wrongs Act reforms

The VCEC's inquiry into aspects of the Wrongs Act related to personal injury damages has resulted in eight recommended changes. The Victorian government has indicated that it supports five of these recommendations.

Government commissions VCEC inquiry into Wrongs Act

On 30 May 2013, the Victorian Competition and Efficiency Commission (VCEC) was requested by the Treasurer of Victoria to undertake an inquiry into particular aspects of the Wrongs Act 1958 (Vic) relating to personal injury damages, including the restrictions on damages available, the personal injury impairment thresholds, the discount rates which should apply to lump sum damages awards for future economic loss and the limitations on gratuitous care damages.

The VCEC indicated that the inquiry focused on "addressing anomalies, inconsistencies and inequities in [the Wrongs Act] relating to personal injury damages, without compromising the original intention of the 2002-03 tort law reforms."

Attorney-General Robert Clark and Treasurer Michael O'Brien have released Adjusting the Balance (26 February 2014), which is the VCEC's final report on its inquiry into the Wrongs Act. The report recommends eight changes to the Wrongs Act.

On 2 September 2014, the Victorian government released its response to the recommendations. According to Mr O'Brien, the government's response to the report supports "a range of reforms to the Wrongs Act that will make compensation awards fairer without placing undue pressure on insurance premiums".

Five recommendations supported by the government

The government has indicated support for the following recommendations.

Psychiatric injury impairment threshold

The VCEC has recommended adjusting the psychiatric injury impairment threshold for eligibility to damages for non-economic loss to greater than or equal to 10% whole person impairment (WPI).

As the Act currently reads, a claimant requires greater than 10% WPI in order to be entitled to an award of general damages for a psychiatric injury.

Cap on economic loss to the difference between pre- and post-injury earnings

An amendment proposed in the VCEC report to section 28F of the Wrongs Act will mean that an injured person who was previously earning a salary exceeding three times the average weekly earnings will be entitled to claim damages for the difference between his or her pre-injury and post-injury earnings, capped at three times the average weekly earnings.

This recommendation means that a higher income earner who has been able to continue to work in a reduced capacity following an injury is not barred from receiving compensation for the balance of their income, as was the case for the plaintiff in the Court of Appeal decision of Tuohey v Freemasons Hospital [2012] VSCA 80. This recommendation would bring the Wrongs Act into alignment with the WorkCover and Transport Accident schemes in Victoria.

Deducting personal expenses of deceased person from earnings before applying damages cap, in claims for loss of expectation of financial support

In claims for a loss of expectation of financial support, section 28F(2) of the Wrongs Act currently requires the court to disregard earnings of the deceased which are in excess of three times the average weekly earnings. Following this, the court is required to deduct the deceased's personal expenses to calculate the financial support that would have been available to the dependants. (See Skelton v Collins [1966] 115 CLR 94, 114).

The Law Institute of Victoria (LIV) submitted the proposed amendment to the VCEC, suggesting that dependents of higher income earners were being disadvantaged. The LIV argued that above average earners are more likely to have higher personal expenses to deduct, resulting in there being less available to the dependants.

Both the VCEC and the government have considered that this amendment would only affect a small portion of claims and would bring Victoria into line with the approach taken in Queensland.

Increasing the maximum amount of damages for non-economic loss to align with cap imposed by Accident Compensation Act

The maximum amount of damages awarded for non-economic loss will be increased from about $500,000 (as at 1 July 2013) to align with the cap imposed by the Accident Compensation Act 1985 (around $555,000 as at 1 July 2013).

Entitlement to injured persons for damages for loss of capacity to care for others

Section 28ID of the Wrongs Act places limitations on the amount of damages that can be awarded for the loss of capacity to care for others; however it does not provide a statutory entitlement to these damages.

This reform would have the effect of reversing the High Court's decision in CSR Ltd v Eddy [2005] HCA 64 in Victoria, by allowing the dependants of an injured person to make a claim for the loss of capacity to care for others in limited circumstances.

A number of jurisdictions have enacted statutory provisions to restore partially the common law right to damages for loss of capacity to care for others. It is proposed that the approach taken in section 15 of the Civil Liability Act 2002 (NSW) will be adopted to entitle the dependants of an injured person to damages for the injured person's loss of capacity to care for others in circumstances where, but for their injuries;

  • the injured person would have provided services for at least six hours per week and for at least six consecutive months;
  • the dependants of the injured person who received the care pre-injury must not be capable of performing the services themselves (taking into account age and physical or mental incapacity); and
  • the services are needed and that need is reasonable in all the circumstances.

Recommendations not supported by government

The government has stated that it does not support the recommendation that limitations imposed in the Wrongs Act 1958 for claims arising from the use of a motor vehicle be replicated in the Transport Accident Act.

Recommendations requiring further consideration by government

Spinal injuries assessed at greater than or equal to 5% impairment

The VCEC report has recommended that spinal injuries assessed at greater than or equal to 5% impairment should be eligible to access damages for non-economic loss. The government has indicated that it wishes to undertake further analysis and inquiries into this recommendation.

Assessment of impairment for spinal injuries

The government has indicated that it needs to give further consideration to the question of whether it is appropriate to assess a degree of impairment for spinal injuries based on the claimant's pre-surgery or post-surgery condition.

Amendments to Wrongs Act unlikely to be implemented quickly

Ultimately, despite the VCEC proposals and the government's response, it may be some time before any recommendations become amendments to the Wrongs Act, particularly in view of the Victorian state election to be held on 29 November 2014.

Rose Raniolo Laura Tulloch
General liability
CBP Lawyers

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