4905 LEGISLATIVE ASSEMBLY AND LEGISLATIVE COUNCIL Wednesday 18 September 2002 _______ JOINT SITTING: PARLIAMENTARY SEMINAR ON REFORM OF THE LAW OF NEGLIGENCE The two Houses met in the Legislative Assembly Chamber at 10.05 a.m. for a parliamentary seminar on reform of the law of negligence. Mr SPEAKER: Order! I remind honourable members that according to resolutions of both Houses there will be four speakers this morning. The first speaker will be Professor Peter Cane from the Australian National University Research School of Social Science. He will discuss the development of the law of negligence. The second speaker will be Mr Michael Gill, a partner with Phillips Fox, who is involved in the insurance industry. The third speaker will be Mr Bret Walker, President of the New South Wales Bar Council, who, hopefully, will become a father some time today. The fourth speaker will be Mr Geoff Atkins, who works in general insurance, specialising in long-tail liabilities. Members will have an opportunity to ask questions at approximately 10.55 a.m. after the first two speakers, at 11.45 a.m. after the third speaker, and at 12.25 p.m. after the fourth speaker. The joint sitting will be conducted under the standing orders of the Legislative Assembly and I would appreciate it if there were no points of order, frivolous interjections or untoward behaviour during the special sitting. The Attorney General will now introduce the speakers. Mr DEBUS (Blue Mountains—Attorney General, Minister for the Environment, Minister for Emergency Services, and Minister Assisting the Premier on the Arts): Mr Speaker, honourable members and distinguished guests: I have pleasure in welcoming you here today to this historic joint sitting of the Parliament. The sitting is significant for a number of reasons. Very soon the Government will introduce into the Parliament the Civil Liability Amendment (Personal Responsibility) Bill 2002. As you know, the Government released the bill in the form of a consultation draft, together with a position paper, just over two weeks ago. The bill is stage two of the Government's tort law reform process. Stage one was the Civil Liability Act 2002, which honourable members will recall was enacted in the budget session. The bill is of great significance both as a law reform initiative and as a response to the public liability crisis. The bill comprises the most significant reforms in the law of torts in the past 70 years. However, the purpose of this seminar is not to debate the bill or to expound its merits. The purpose of this seminar is to set the context for the bill, by examining the development of the law of negligence, current legal developments, and the financial and actuarial issues underpinning the need for reform. There has, of course, been extensive community debate about premium increases, and their effect, especially on the non-profit sector. Concerns have been expressed about judicial decisions, and about whether the law of torts is in line with the expectations of the community. The causes of the premium increases appear to relate to a range of factors, including the rising number of and costs of claims, cyclical economic factors, and the collapse of the insurance company, HIH. Premiums declined in real terms during the 1990s because there were more insurers, offering greater capacity, and a better insurance market. Some commentators say, for example, that HIH priced public liability insurance below the market, and this created competition that has diminished following that company's collapse. Premiums have increased because there are fewer insurers. A further factor in insurance pricing increases is likely to be the introduction of new prudential standards by the Australian Prudential Regulation Authority [APRA]. These standards require insurers to have greater capital reserves and to get in premiums to cover a higher level of risk than before. It is commendable to see APRA doing its job and applying robust standards to the insurance sector. However, these new standards are making public liability insurance less attractive for insurers and more expensive for consumers. Apart from those factors, it seems incontrovertible that the number and costs of claims have increased. The JP Morgan 2002 interim insurance survey, also known as the Deloittes-Trowbridge survey, of 25 February 2002, said that the main reason for insurers' withdrawal from the market is that the business has been unprofitable. The report notes that the business has been historically underpriced and that there has been an increase in both the size and frequency of claims. Other sources indicate that HIH had a market share of about 40 per 4906 LEGISLATIVE ASSEMBLY AND LEGISLATIVE COUNCIL 18 September 2002 cent of public liability policies and that other insurers do not want all of that business. According to the Australian Prudential Regulation Authority, the number of liability claims has increased by around 50 per cent in the past three years. The Government has no intention of preventing people who have genuine claims from obtaining just compensation. However, tort law reform can play a role in reducing the number of trivial or unmeritorious claims, and encouraging the community to take responsibility for its own actions. The Government has no intention of preventing people who have genuine claims from obtaining just compensation. However, tort law reform can play a role in reducing the number of trivial or unmeritorious claims, and encouraging the community to take responsibility for its own actions. Tort law reform can also restore the balance between personal responsibility and the responsibility of society as a whole to compensate people for misadventure. The factors which I have described and which are driving public liability insurance increases are national issues. The Government has made that point repeatedly. National leadership is essential on this issue. The Government recognised back in 2001 that the Commonwealth Government had to act to address the causes of the public liability insurance crisis and develop solutions, and took the matter up with the Commonwealth. I am pleased to report that the prescience shown by the State Government in agitating for action on this issue has informed the development of national solutions. I will mention the decisions that have been taken at a national level, because they form an integral part of the context of the Government's reform package. At the request of the State and Commonwealth Treasurers, Trowbridge Consulting prepared a detailed report on reform options. The report concluded that tort law reform was a necessary response to the insurance crisis. Many of the proposals recommended by Trowbridge were included in the Civil Liability Bill 2002 and others will be included in the Civil Liability Amendment (Personal Responsibility) Bill 2002. Treasurers also agreed on a number of measures at a Commonwealth level to address the crisis. These measures include the monitoring of market developments by the Australian Competition and Consumer Commission, and requiring insurers to submit claims data to the Australian Prudential Regulation Authority [APRA] for analysis and publication. The Commonwealth has also introduced legislation to provide tax relief to people who agree to structured settlements, and amendments to the Trade Practices Act to allow people who participate in recreational activities to waive their right to sue in some circumstances. However, the action of the Commonwealth Government is not enough. The State Government has recognised that law reform is integral to addressing the tort law reform problem. The Government was the first to act in Australia and its lead has been followed by a number of other jurisdictions. The Civil Liability Act introduced measures to place damages awards in public liability claims on a similar footing to awards made for workers compensation and motor accidents claims, and to contain legal costs. The Civil Liability Amendment (Personal Responsibility) Bill will adopt a broader, principled approach to tort law reform. Honourable members and distinguished guests are no doubt aware that the Expert Panel on Negligence has just released the first of its reports on the law of negligence. I am pleased to say that the draft bill reflects in part the recommendations of the panel, as well as including other, fundamental reforms. As I have already indicated, there will be an opportunity to fully debate the bill in the near future. I will now briefly outline its provisions. The draft bill circumscribes the ambit of the concept of reasonable foreseeability. The bill also provides that a court cannot rely solely on hindsight, evidence of subsequent remedial action, or the mere fact that a risk was easily avoidable in determining liability. The bill excludes liability in relation to risks that a reasonable person would consider to be an inherent or obvious risk. The bill provides that there is no liability for injury, death or property damage resulting from a risk of a recreational activity in respect of which a risk warning has been given. The bill also allows a participant in a recreational activity to be able to waive the requirement for services to be provided with due care and skill. I have already referred to the proposed amendment of the Commonwealth Trade Practices Act 1974 in that respect. Honourable members are aware that for some time concerns have been expressed about the standard of care required of professionals by the courts. The draft bill provides for an additional defence to alleged professional negligence if the professional acted in a manner that was widely accepted in Australia by peer professional opinion as competent professional practice. However, the bill preserves the general law duty of a professional to advise, inform or warn about any risks in the provision of services such as health care. The bill provides for proportionate liability to be introduced for claims for economic loss or property damage, but not in personal injury claims.