Reforming tort law in Australia: a personal perspective.

• Jurisdiction: Australia
• Author: Cane, Peter
• Date: 01 December 2003

[For 30 years Harold Luntz has been a major participant in personal injury law reform debates and a passionate advocate of the abolition of tort law and its replacement by a no-fault compensation scheme. The aim of this article is to place the 2002 Review of the Law of Negligence in the wider context of those debates and to assess the prospects for more radical reform of personal injury law in Australia. It also addresses the complex issue of the relationship between tort liability and the cost of liability insurance in the context of the so-called insurance 'crisis'.]

CONTENTS I Introduction II Reform III A Very Short History of 20th Century Debates IV Recent Australian Debates and the Establishment of the Review A Background B Liability, Liability Insurance and the Insurance 'Crisis' 1 What Are Insurance 'Crises'? 2 What Causes Insurance 'Crises'? C Establishment of the Review V The Context and Conduct of the Review A The Terms of Reference B The Time Scale of the Review C The Membership of the Panel D The Review in the Media E The Review as 'Technical' Law Reform F The Review Report G The Aftermath VI The Future I INTRODUCTION

Harold Luntz's tort scholarship is characterised by admirable qualities of its author, including an encyclopaedic knowledge of the law, meticulous attention to detail, utter respect for truth and, perhaps above all, a passionate advocacy of no-fault personal injury compensation schemes. (1) Harold's views about 'reform' (2) of personal injury law deserve respect precisely because they are based on an understanding of the present system that is second to none. However, as Harold has recently written (with typical understatement), the replacement of tort law with a no-fault system in Australia 'is unlikely in the present political climate'; (3) and so for him (and for those of us who share his vision), the real question concerns the best way of promoting the ideal within existing political constraints.

Against this background, the aim of this article is to assess the place of the recent Review of the Law of Negligence (4) in the context of debates about compensation for personal injury that have taken place over the past 40 years in the common law world. My main argument is that, in order to gain a sound understanding of the Review, careful attention must be paid to the political environment in which it was conducted. I also suggest that, although the general ideology of the Review appears, on the surface at least, to be diametrically opposed to that which motivates proposals for no-fault compensation schemes, there is still hope that the force of the well-known and empirically supported arguments against the tort system may yet bear fruit. The fact that there has been so much public debate about the tort system in the past couple of years (albeit of highly variable quality) shows that the issues involved can have great political salience. It is when strong political will and sound policy-making come together that real legal progress can be made.

Before launching into the main discussion, Part II seeks to destabilise the concept of law reform and to replace it with a more complex picture of ongoing debates about the terms of social life and, in particular, about the way in which the costs of illness and disability are dealt with. Part III contains a brief history of modern thinking and policy-making in the area of personal injury law. Part IV examines the genesis of the Review and discusses the central issue of the relationship between tort law and liability insurance. Part V explains certain features of the Review in the context of the political environment at the time. In Part VI, I suggest a strategy for exploiting current dissatisfaction with tort law that offers some hope of advancing the cause of no-fault compensation.

II REFORM

'Reform' denotes change and connotes improvement. In retrospect, of course, changes may be seen not to have improved matters and, in prospect, people may disagree about what improvements, if any, are needed and how to achieve them. People may also disagree about what counts as an improvement. According to the 'Pareto' criterion espoused by some economists, a change will constitute an improvement only if it makes at least one person better off and no-one worse off. An alternative to this extremely demanding test is the 'Kaldor-Hicks' criterion, which requires only that the aggregate benefits of a change outweigh its costs--in other words, that the change produce more winners than losers. Popular with lawyers are what I have elsewhere called 'single-factor consequentialist' arguments. (5) For instance, in contemporary Australian debates, a key expectation nurtured by proponents of changes to tort law is that reform will lead to a lowering of liability insurance premiums. Many lawyers are also attracted by non-consequentialist arguments for change based on ideas such as 'coherence' and 'consistency' in the law. Underlying such ideas is the 'mothers-and-apple-pie' concept of formal justice, which requires treating like cases alike and unlike cases differently. The devil, of course, resides in the detailed elaboration of what constitutes likeness and unlikeness. Ultimately, all of these approaches to legal change rest on value judgments about how the benefits and burdens of social life (including legal rights and obligations) should be distributed. (6)

The basic point is that 'reform' is a contested concept, as recent Australian debates about personal injury law make clear. 'Policy entrepreneurs' participating in these debates fall into three main groups that we might loosely call conservatives, radicals and moderates.

There are two species of conservatives--compensationists and economic rationalists. Compensationists oppose legislative change to personal injury law on the basis that 'what ain't broke don't need fixing'. For them, the main purpose of personal injury law is to compensate people injured by the wrongdoing of others. To this end, tort law has been developed and refined by courts in the course of the past century or so with minimal parliamentary intervention. Non-judicial change is likely to upset the fine balance struck by tort law between the interests of injurers and the injured, and so should be opposed. The leading representative of this species of conservative in Australia is the Australian Plaintiff Lawyers Association ('APLA').

In the opinion of the economic rationalists, the prime function of personal injury law is risk-management, not compensation. They oppose reducing the scope of tort liability or the quantum of damages, arguing that this will reduce the efficacy of personal injury law as a regulatory tool and expose 'consumers' to unacceptable threats to their personal health and safety. The chief spokesperson for the economic rationalists in recent Australian debates has been the Australian Competition and Consumer Commission ('ACCC').

Secondly, there are the radicals. They believe that tort law is about as bad as it could be, whichever way you look at it. As a compensation system it is inefficient and extremely expensive; its efficacy as a regulatory tool is, at best, doubtful; it unfairly discriminates between the sick and injured on the basis of the cause of their disabilities; and it embodies concepts of wrongdoing that bear little relation to 'moral' ideas of fault. They favour its replacement--in as many areas as possible--by some form of no-fault scheme of support for the disabled. Harold Luntz is the leading Australian radical, although this general approach is common amongst academics who specialise in personal injury law in Australia. Radicals can be divided into those, such as myself, (7) who prefer a social security-type replacement for the tort system, and those, such as Patrick Atiyah, (8) who prefer a market-based solution.

Finally, we have the moderates, of which there are also two types. One group believes that too much is spent on compensating injured people through tort law, and that something needs to be done about it by reducing the scope of liability and the quantum of damages. The other species sees the trouble with tort law as being that it strikes the wrong balance between injurers and injured people in terms of their respective responsibilities to take care for themselves and for others. Putting the point crudely, this group would say that tort law is too proclaimant. As we will see later, both of these strands of thinking were reflected in the terms of reference of the Review.

III A VERY SHORT HISTORY OF 20TH CENTURY DEBATES

Modern debates about personal injury law date from the 1960s. The major intellectual breakthrough involved a shift from thinking about tort law primarily as a system of rules and principles of personal responsibility for the infliction of harm on others, to thinking about it as one, but only one, mechanism for achieving goals such as compensation and deterrence. Especially influential in this regard was the work of Guido Calabresi who, in a series of articles in the 1960s and then in his classic book, The Costs of Accidents, (9) published in 1970, argued that 'the time has come for a full reexamination of what we want a system of accident law to accomplish and for an analysis of how different approaches to accidents would accomplish our goals? (10) 'I take it as axiomatic', he said, 'that the principal function of accident law is to reduce the sum of the costs of accidents and the costs of avoiding accidents.' (11)

Calabresi identified three categories of accident costs: the ('primary') cost of reducing the number and severity of accidents; the ('secondary') cost of compensating accident victims; and the ('tertiary') administrative costs of reducing the number and severity of accidents and of compensating accident victims. He argued that the overall policy goal in designing a system for dealing with the social problem of 'accidents' was to minimise the sum total of these...