‘THE REINTRODUCTION OF COMMON LAW

WCV's: This paper describes the workplace insurance system and the governments

legislation changes.

It also clearly explains, how the Kennett government lied about worksafe

statistics and costs to the public to enable the changes to our common

law rights simply, to save money by preventing the employers levy from

increasing which was a pre election promise made by the Bracks

government and nothings been done about it?

So is it, that our government can lie their arses off to change our rights,

and be caught doing it, but not be held responsible for their actions?

This has got to be a criminal offence against the workers of victoria!

When is someone going to look after the workers here?

Now in 2008, we must tolerate the bullshit produced in the Hanks Report

and lose more of our rights without any consultation or opportunity to

vote on it.

Who says Mr hanks is right?

Why isn't Mr Hanks talking to real workplace injury victims?

How would Mr Hanks know what its like to be unemployable?

He bloody wouldn't!

This is another slap in the face for injured workers and their families!

Pay specific attention to the italic parts of the letter!

The Reintroduction of Common Law - The Victorian Experience

Introduction written by Mr Paul Mulvaney, Solicitor, 2001

In order to understand the ‘Victorian Experience’ of the re-introduction of

common law claims for work injuries, it requires a brief historical review of

the development and relationship between common law, and statutory based

no-fault compensation systems generally.

In the second half of the 19th century as injured workers sought damages

through resort to common law actions, they were met by the judicial

development and application of the defences of common employment;

contributory negligence, and voluntary assumption of risk (the ‘Unholy

Trinity’)i. Statute based workers’ compensation schemes were largely an

attempt by government to ameliorate the harsh and repressive features of

the common law.

Despite the eventual introduction of no-fault legislation in all Australian

jurisdictions earlier last century, access to common law remained, so that

workers generally had at least a nominal choice of either statutory or

common law compensation. For much of this period however, the two

systems of compensation were in effect monolithic and independent systems,

with very little interchange between the two. In the main, injured workers

were restricted to a conclusive election between the two systems, and the

interrelationship between the systems was limited to an obligation to refund

compensation payments from any subsequent award of damages.

Over the last two decades there has been a significant development in the

structure of our compensation mechanisms both in the Commonwealth and

various States. There has been a move away from the twin monoliths that is

largely independent structures of Common Law damages and statutory

compensation schemes, to a different model, which I will refer to as a “blended

system”. The hallmarks of a blended system normally involve some mix of

income loss compensation by way of weekly payments (usually partial);

payment for medical and like expenses; statutory payment for levels of

impairment or defined disability; and highly regulated access to the pursuit

of common law damages. These elements are essentially components of a single

scheme where access to the various components is tightly regulated by complex

statutory provisions.

Within blended schemes there have been a number of trends that have been

discernible over recent years. These trends include the ever increasing

restrictions on the pursuit of common law damages and a limitation on the

amount of damages that can be recovered. The restrictions of access to common

law damages utilise a number of mechanisms. These include statutory

designations of ‘certificate’ or ‘serious’ injury, and minimum impairment

payments or minimum requirements for economic loss. In some jurisdictions

the damages obtainable are restricted to non-economic loss, others allow for

a choice between economic or non-economic loss damages.ii similarly in some

jurisdictions the pursuit of common law damages will not finalise an entitlement

to medical expenses. These changes have been accompanied by a restructuring

of maims payments to expand the range of conditions that may be eligible, but

at the same time to shift the focus from generalised disability assessments to

focused impairment assessments generally on the basis of some ‘pseudo scientific’

assessment scheme, driven by the international lust for measurement,

management, and predictability.

The evolution in the nature of compensation schemes is an important factor in

assessing the role of common law in modern compensation schemes. There has

been much philosophical criticism on the role of common law damages in modern

compensation schemes. It is fair to say that this criticism reached its most

significant level during 1960’s and 1970’s. The philosophical criticism was at

times judicial, political, and academic.iii these criticisms were forged as a

response to the inflexible monolithic structures to which I have referred.

As the post World War II boom laid the economic basis for the development

of the modern welfare state however the philosophical and political arguments

against the role of common law in compensating for industrial injury grew.

This was the time of full employment and rising living standards. Inexorably,

the welfare state would ensure that the basic needs of all citizens would be

satisfied. Importantly, if you were injured at work, it was the broader

community who should guarantee your compensation. After all it was they

who benefited from your labour in the increasingly complex and interdependent

society and economy which was emerging. In particular in the 1960’s and 70’s

there was increasing criticism of the role of common law in compensating for

industrial injury.

The traditional philosophical opposition to the role common law believes that

often the compensation payable bears no relation to the degree of fault, or no

relation to the means of the defendant. It is claimed that the fault principle is

not in reality a ‘moral’ principle because a defendant can be negligent without

being morally culpable, and that the fault principle pays insufficient attention

to the conduct or needs of the plaintiff. It is also suggested that once and for

all lump sum awards are crude and inadequate methods of awarding compensation

that the legal process can have a deleterious effect on rehabilitation, and that

transaction costs are too high. Payment of compensation on the basis of fault

was seen as socially regressive. It was seen as compensation for evidence, not

injury.

In 1994 the Industry Commission summarised the rationale of the historical

opposition or ambivalence to common law at that time to include:
· Delays in settlement:- which can have a detrimental effect on the financial

position of the claimant, may effect incentives for rehabilitation and return to

work, and adds to the complexity of the compensation process
· Incompatibility with rehabilitation and return to work:- where the

adversarial nature of the common law process can threaten the employment

relationship, and the consequences particularly for occupational rehabilitation

which normally commences once the injury has stabilised
· Occupational health and safety incentives:- where it is argued that the

existence of a common law claim may discourage an employer from improving

safety at the workplace (ie the fear of doing so being evidence that the previous

practice was unsafe)
· Common law costs:- including the legal costs of bringing a common law

claim, and the size of common law awards
· Lumps sums:- damages are awarded as lump sums and are criticised on

the basis of over/under compensation, and the potential for ‘dissipation’ of the

compensation award
· Relationship with medical costs:- it is argued that common law legal

action can have a significant effect on the size of medical costs ie ‘medico-legals’
· Inconsistency with a no-fault scheme:- a large number of injured workers

are unable to establish fault liability, therefore should a small proportion of

workers obtain additional compensation because they are able to demonstrate

fault (ie the ‘forensic lottery’)

Support for the role of common law in compensation for industrial injury relies

amongst other things, on a notion of deterrence; the ability to individually

tailor compensation dependent on an individual’s needs; the ‘flexibility’ of the

common law and its ability to change with the times and community

expectations; a finality to litigation and the claims process; and community

support for the moral imperative that those (employers) who cause injury

should pay.

Importantly support within the legal community has concentrated on a

‘basic legal rights’ concept without more thorough engagement with many

of the well founded criticisms of common law. The ‘rights’ based arguments

ignored the very real issues of access, and substandard outcomes particularly

for compensation for on-going medical treatment, long term economic loss,

and the dissipation of damages on system created debts.

The 1994 Industry Commission Report summarised the opposing arguments

in support of common law as:
· Workers’ rights:- in that it is a basic legal right
· Justice:- where it is argued that the common law accords with the

community’s sense of justice
· Damages:- a common law negligence action protects the severely injured

by ensuring individual assessment of their losses rather than payment by

reference to a statutory formula
· Finality:- where there is both a finality for the injured worker and the

claim’s agent / insurer
· Benefit levels:-where it is suggested that the availability of common law

may act as an incentive to maintain the adequacy of statutory benefits

Interestingly, both sides of the traditional debate contend with some

vehemence the opposite is anti-rehabilitative.

Whilst it is true that much of the relatively recent restriction of common law

in Australia is attributable to conservative governments, it is important to

recognise a strong ambivalence within sections of the ALP, and the trade

union movement to the role of common law. It was the Whitlam government

in 1975, on the basis of the Woodhouse Report, which flirted with the

establishment of a national no-fault compensation scheme with no role

for common law entitlements. In New South Wales in 1987 it was the

Unsworth Labor government which abolished common law entitlements,

and which were eventually reintroduced in a modified form by the Greiner

government in 1990.

Similarly it was a federal Labor government which effectively, though not

formally, removed common law as a part of the Commonwealth Comcare

compensation scheme.

Following the Cooney Committee Report in 1984 (and a review of the

competing claims concerning the role of common law and a statutory scheme)

the Cain government’s introduction of the Accident Compensation Act in

September 1985, and the commencement of the Workcare scheme, saw the

first model of a blended compensation system. Admittedly this was somewhat

serendipitous, relying on a finely balanced political situation at the time, as I

have no doubt that the Cain government subscribed to the traditional

ambivalence to common law outlined above. It should be noted that the model

allowed common law compensation for pain and suffering only (economic loss

addressed in the improvements to weekly payments compensation), and medical

expenses were also separately guaranteed, thereby addressing two of the most

trenchant criticisms of common law. From then it is perhaps fair to say that

those involved in the common law debate in Victoria settled for an uneasy truce

whereby both methods of compensation played a role, in which access to common

law entitlements has generally been restricted or circumscribed, with the

emphasis placed on no-fault statutory benefits.

Why Were Common Law Claims Abolished in Victoria?

The issue of workers’ compensation is one of the most transparent intersections

of the interests of capital and labor in the political process. It therefore often

assumes symbolic importance when there is a change in the fortunes of capital

or labor, and the political parties which claim either as their heartland or

natural constituency, gain office. The reform of the compensation system

presents a new government with an opportunity to demonstrate a tangible

commitment to its power base and historically, new governments have been

quick to usher in change in workers’ compensation laws. Over the last two

decades all Victorian governments have implemented change early in their

first period of office.

From 1992 and leading up to the abolishment of common law in 1997 some of

the major Kennett government changes included:

1992 – 1997 Workcover Changes
· A requirement that employment be a significant contributing factor
· The exclusion of some categories of stress claims
· The exclusion of injuries which occur on the way to or from work
· The introduction of the concept of notional earnings which is the amount

actually earned or the amount that Workcover believes a worker could be

earning in suitable employment even if no such job exists
· The introduction of the concept of serious injury
· Significant changes to the weekly payments structure
· Termination of payment of routine or non-essential medical expenses

12 months after weekly payments cease
· Employer control of injured workers access to rehabilitation services
· Removal of ‘mental disorder’ as a basis for lump sum compensation
· Abolishing the specialist Accident Compensation Tribunal (including

sacking the Judges), and abolishing the Workcare Complaints Commissioner
· Introducing impairment thresholds for hearing loss compensation
· Increasing the role and power of Medical Panels including redefining

medical questions to include questions of fact and removing judicial review

of decisions

Whilst the government reintroduced rights to claim pecuniary damages in 1992,

it introduced the threshold requirement of ‘serious injury’ by way of 30%

whole person impairment based on AMA Guides, or satisfaction of a ‘narrative’

test for access to common law, and placed monetary thresholds on both heads

of damages. A particular aim being to discourage common law claims for small

monetary amounts.

Between 1992 and 1997 the government further tightened access to common

law entitlements by removing secondary psychological injury from the assessment

of impairment, and the imposition of cost penalties including requiring the plaintiff

to pay her/his own costs if damages were assessed but could not be awarded.

The Kennett government also sought to substantially reduce the various

statutory entitlements including weekly payments, and lump sum

compensation for permanent impairment. Accordingly the abolition of common

law rights in 1997 can be seen as a continuation of the Kennett government’s

determination to restrict access to, and the benefits available under, the

Workcover scheme. It should be noted however that following the majority

of changes carried out in 1992 the Workcover scheme had settled into a

relatively stable scheme.

Up until November 1997 there had been a limited assault on common law,

primarily tightening access. The fact that the Kennett government moved

to abolish common law rights after five years in office was curious.
Partly the answer lies in the process of change begun in 1992 and carried out

up until 1997. But the major reason I suggest, lies in a confluence of factors

merging in late 1997 that provided the political impetus to abolish common law
In my view the Kennett government changes in 1997 were driven by a

confluence of at least three factors, namely:
· a desire for a significant levy reduction couched in the economic rhetoric

of employer associations (who portrayed Workcover premiums as an impost

on profitability and jobs), and support for this within government
· the remnants of support for the 1960’s & 1970’s philosophical opposition

to common law genuinely held by senior policy makers within Treasury and

the VWA and shared by some sections of the labour movement
· and the chronic inability of the Victorian Workcover Authority to in

particular manage the existing common law claim process.

The Economic Rhetoric
Employers groups and associations vigorously pursued the line that workers’

compensation premiums were a crucial component of the economic viability

of the state. I am sure that you have experienced the same arguments here.

Without a shred of objective evidence every percentage point up or down in

premium rates is claimed to represent thousands of jobs lost or gained to other

states. Also, common law was portrayed as anti-rehabilitative, as it, rather

than the fact of negligent caused injury, was seen as the destroyer of the

employment relationship. Clearly the employer groups’ eyes were firmly

fixed on a levy reduction. It is interesting to contrast the position of twenty

five of the twenty six self-insurers in Victoria at this time who opposed the

abolition of common law. They were large corporations employing substantial

numbers of Victorians who were just as interested in the issue of business

costs, but as self-insurers would have no benefit from a levy reduction.

I would suggest that their support for the retention of common law was not

an act of altruism per se, but more a recognition that access to common law

was an important component of the compensation ‘tools’ necessary to

effectively manage their industrial injury portfolios. As well the self-insurers

found no impediment in common law to effective rehabilitation.
The Kennett government threw their support behind the employer association

claims with a crude and essentially dishonest use of financial statistics.

In October 1997, shortly before abolishing common law rights for seriously

injured Victorian workers the then Minister for Finance (and responsible

for the Workcover scheme), Roger Hallam, issued a press release which

provided reasons for the abolition of common law that essentially relied on

financial issues, and notions of “more equitable and fairer” treatment for

injured workers. It was claimed that Workcover common law payments

had increased from $17.9 million in 1995/96 to $139.7 million in 1996/97.

Hallam claimed that common law claims constituted 20% of Workcovers

liabilities, yet less than 3% of injured workers received common law

settlements. He also claimed that lawyers were receiving $100 million a year

from Workcover and that this money would be better off going to injured

workers.

Given the continual changes to the compensation scheme since 1985, and in

particular those applying to the operation of common law, it has been almost

impossible to gather sound and objectively based statistical information,

which can be used in any meaningful way to inform policy choice. Not only

are there ‘lies, damn lies, and (Workcover) statistics’, but Hallam’s use of

them in this way represented an attempt by the Kennett government to

portray criticism as merely an esoteric debate between the government

and ‘greedy lawyers’ about money, not principle. The figures utilised by

the government drew on an artificial hump of claims created by its own

amendments in 1992, and then plotted a growth of claims from a zero

base in 1992! What was a natural and expected statistical phenomenon

was portrayed as an alarming and uncontrolled exponential growth in these

claims. Abolition of common law was portrayed as cost neutral and the

proposal as merely removing money from the pockets of lawyers to return

to injured workers.

Kennett & the ‘Historic Ambivalence’
In my view Kennett, as the consummate political animal, sensed some

ambivalence to common law in sections of the trade union movement and the

ALP. His judgment about such ambivalence was not misplaced. I recall a

conversation in mid-1997 with a senior member of the then state ALP

opposition (and now senior cabinet member of the current government).

The Kennett government was in the process of laying the political groundwork

for the abolition of common law in November 1997. Labour lawyers were

encouraging debate about the issue in the broader labour movement. In the

discussion I raised concerns about the impending abolition of common law

only to be told that there “were no votes in Workcover” Thereafter I, amongst

others resolved to ensure that there were votes in Workcover. Of course this

was largely achieved by a well orchestrated campaign conducted by plaintiff law

firms, the trade union movement, legal bodies, injured workers, and other

groups which was comprehended and supported by the wider community.

In 1997 Kennett sought to exploit the ambivalence of some sections of the

labour movement to argue that notion of ‘fault’ based compensation could finally

be put to the sword, and replaced with the protective shield of fair and equitable

statutory lump sum compensation for permanent impairment together with other

entitlements. In this I suggest he was supported by well intentioned senior policy

makers within the bureaucracy who were convinced of the need to remove the

vagaries of common law from the compensation system following the critique

developed during the expansion of the welfare state.

Crises of VWA Management
The above factors merged with the now well documented inability of the

Workcover Authority to manage common law damages claims. These included

an inflexible approach to the management of claims; the exclusion of skilled

insurance staff and their conversion to mere ‘post boxes’ for claims; lack of

integration between common law and the rehabilitation and compensation

process generally; inconsistency of approach to serious injury applications

and common law claims owing to a high level reliance on a relatively large

number of defendant panel law firms; and the ‘infamous’ barristers strike in

late 1997 when the VWA arbitrarily reduced fees.viii In fact I would go as far

as to say that at a senior level VWA management used the other factors to

deflect justified criticism of their incompetence. In so doing the Victorian

Workcover Authority skilfully manipulated a government back-bench committee

which met in secret to consider the issue, and found a willing ally in a particularly

ambitious back-bench member of the government. As often at decisive historical

moments, individuals can play a key role, and the debate in late 1997 about

abolition of common law was no exception. With the Kennett cabinet ambivalence

about the issue, particularly in the face of minor but escalating public opposition,

the then CEO of the VWA returned from overseas to stiffen the ‘resolve’ of his

Minister. The die was cast, and the legislation passed.

Why Was Common Law Reintroduced?
In my view in 1997 the Kennett government committed three fatal misjudgements.

Firstly, those involved in the political process failed to comprehend the ability of

the existence of common law damages to deflect community focus on the inadequacy

of statutory benefits. The second misjudgement, intimately connected with the

first, involved a gross miscalculation as to the nature and saleability of the

“improved” impairment benefits scheme that accompanied the abolition of

common law damages. Finally, the decision to also totally abolish rights against

a third party was astounding and was readily comprehended as such by the

community.

The impairment benefit scheme enshrined in s98C and s98E of the Accident

Compensation Act relied on the component of impairment benefits on a whole

person basis substantially assessed under the American Medical Association

Guidelines for the Evaluation of Permanent Impairment (4th Edition).

Whilst the government and the Victorian Workcover Authority then contended,

and probably genuinely believed, that the impairment benefits scheme was a

dramatic improvement in the position of injured workers, the reality was different.

The transfer to the AMA 4th Edition Guides and the imposition of a 10% threshold

meant that the new impairment scheme represented a dramatic reduction in

impairment payments alone, not taking account of the loss of general damages

at common law. This flaw was quickly comprehended by some stakeholders,

particularly trade unions and plaintiff lawyers, and quickly became the subject

of "before and after” advertising by the Australian Plaintiff Lawyers Association.

Despite hasty readjustment of the 1997 legislative package both the government,

and extraordinary advertising by the VWA, they were unable to regain the

momentum in the public debate. The momentum was translated into a well-

funded coalition of trade unions, plaintiff lawyers, injured workers and other

community groups that developed a sophisticated campaign strategy focussing

in particular on the ‘human face & story’ of those seriously injured workers

whose benefits and entitlements were being reduced.

An analysis of the VWA’s projections of the cost of the “improved” impairment

benefits under s98C and s98E in the most recent review has demonstrated

the Authority’s costing to be greatly miscalculated. In the Review conducted

by the Workcover Advisory Committee in 1999/2000 material, particularly

comparative studies, undertaken by the medical panel and a study of Slater &

Gordon cases demonstrated that significant lower payment was made under

s98C than its predecessor.ix these studies together with other material

provoked a market revision of actuarial estimates of the projected costs of

s98C claims.x

The abolition of third party rights was absolute and included:
Abolition of rights in cases of medical negligence arising from treatment

associated with a work injury
No right to pursue damages claims in traffic accidents where the purpose

of travel was ‘arising out of or in the course of employment’
Emergency workers such as police were also denied damages claims against

‘third party’ offenders who caused injury
ABS statistics also revealed that over 66,000 small businesses in Victoria

employing less than five employees operated as companies. These were

primarily small family concerns and the abolition of third party rights meant

that directors could not make a common law because they were deemed workers

under the provisions of the Accident Compensation Act. Notwithstanding the

above the government was of the view that it could ‘tough out’ public opposition

until the next election. This was possibly correct save for the surprise r

esignation of a disgruntled colleague of Kennett which resulted in the Mitcham

by-election in March 1998. It is now a matter of record that along with changes

to the role of the Auditor General, the other major issue fought over during

the by-election was the abolition of common law rights.

The stunning result in the Mitcham by-election in March 1998 was a

demonstration of how successful this campaign was to be. Polling carried

out at the time identified the November 1997 Workcover changes, including

the abolition of common law, to be a decisive issue in the unprecedented

swing against the Kennett government. In fact, a poll carried out by Roy

Morgan Research in late October 1997 revealed that four in five Victorians

surveyed knew of the government proposals, and without requiring any extra

information on the issue, 79% expressed their disapproval!

From 1997 through to the state election in September 1999 the campaign was

extremely well co-ordinated under the umbrella of the ‘Injured Persons

Association’. Marginal seats were targeted where every household received

literature explaining the issues. Advertising was carried out in the print and

electronic media. In particular the campaign used emergency services

workers as a potent example of what was at stake. These workers served

the community, often exposed to great risk, yet potentially not being

adequately compensated for injury as a result of the changes. Well collated

case studies were used to demonstrate the reduction in entitlements and

benefits injured workers would suffer as a result of the changes.
It was in the process of this developing campaign that I believe an important

and necessary step was taken. That was to examine, and challenge, the

economic assumptions which had been made by employer associations to

justify reductions in premiums. At issue here was a debate concerning who

actually pays for the costs of workers’ compensation. Traditionally it is

asserted that it is the corporate sectors which bears the major costs, and

therefore lower premiums (and by definition lower benefits) are necessary

for reasons of business confidence and competitiveness. By engaging in this

debate we were able to refer to respectable academic evidence to demonstrate

that it is employees who actually fund the compensation scheme insurance

levies via lower real wages. The conventional position maintains that the

increase in workers’ compensation premium constitutes an added cost to the

cost of employment as part of real labour costs that inevitably leads to reduced

employment. These views, generally contended by industry associations, found a

large measure of support within the Department of Treasury and Finance.

The contrary view based on economic research in the United States conducted

by Chelius and Viscusi supports the proposition that “the pursuit of lower

premiums through reduced benefits and restricted eligibility provides little or

no long term benefit to business since the labour market adjusts to yield higher

take home wages at unchanged labour costs to the firm”.xi

Plaintiff lawyers commissioned Marsden Jacob Associates to apply similar

research techniques to the Australian labour market, and examine who pays

for workplace accidents and insurance compensation levies.
In summary their research revealed that:
· over 80% of the cost of workers’ compensation insurance levies are

shifted back to workers by the operations of the labour market and the

action of employers, particularly via lower take-home pay, and as a result

employment costs to employers are only temporarily changed by a change

in the insurance levy
· employers actually pay for less than 10% of the total costs to the

Australian economy of workplace accidents and injury

The ‘New’ Common Law
The amendments to the Accident Compensation Act are a marked improvement

for injured Victorians. It nonetheless constitutes a remarkably modest reform

by an unduly timid government and reflects the still unresolved philosophical

debates that I have mentioned. There is no doubt that the issue of the removal

of common law damages was a significant issue in the 1999 general election

which continued to resonate in the subsequent Frankston East, Burwood, and

Benalla by-elections. It is regrettable, given the prominence of the issue, that

the Victorian government did not take the opportunity to deliver more meaningful

benefits to its constituency through a marginal extension of the levy from 2.18%

to 2.25% of payroll. This extension would have allowed both a meaningful

substituted common law payment to be made to workers seriously injured

between the 12th November 1997 and the 19th October 1999, and the

government to urgently address the substandard benefits that remain,

particularly in s98C and s98E of the Accident Compensation Act.xii
Legislation reintroduced the ability for a group of specific workers to pursue a

claim for common law damages against their employer or third party. The

reform is not fully retrospective and only applies to injuries occurring on or

after the 20th October 1999. The formal justification for failing to date the

reforms back to the 12th November 1997 was the general philosophical

opposition to the use of retrospective legislation. Whilst I understand the

reluctance of governments to utilise retrospective legislation I contend that

there is a qualitative difference between legislation removing rights and

legislation restoring those rights. The Bracks government, in my view, made

the decision not to restore the rights retrospectively firstly, on an economic

basis, ie its commitment to keep the premium level within 2.18% of wages,

and secondly, on the political judgment that the odium that would come from

its failure to restore rights would be borne by the Liberal and National parties.
Whatever the justification, the failure to introduce fully retrospective legislation

is a tragic abandonment of those workers who are injured within the window

period.

Common Law Threshold
In the final analysis the government elected for a model that utilises the

impairment assessment as the primary gateway to common law but also

allowing access through a narrative test which will vary depending on whether

the worker’s claim is confined to a claim for non pecuniary loss or whether it

seeks to encompass pecuniary loss as well.xiii The impairment assessment test

to be utilised for access to common law damages is to be based on the fourth

edition of the AMA Guides (the ‘Guides’). You will appreciate that between 1992

and 1997 the impairment assessment test was based on the second edition of the

Guides. In reality few persons injured during that period sought access to

common law damages through the impairment assessment method and rather

elected to seek access through the narrative. Under the amendments it is clear

there will be a much greater focus on the impairment assessment for the

purpose of common law damages. It is to be the primary source of an

application for serious injury with resort to the narrative only being possible

after the assessment of permanent impairment.xiv The move from the second

edition to the fourth edition of the Guides is expected to have very marked

effects on the number of persons who will be able to achieve access to common

law through the impairment gateway. In particular there are very marked

differences in the ratings achieved under AMA 4 and AMA 2, particularly in

respect of muscular-skeletal and respiratory injuries.xv
The narrative test to be applied in assessing certification for serious injury for

injuries occurring on or after the 20th October 1999 has a marked similarity to

the narrative test that was in place for injuries prior to the 12th November

1997. S.134AB(37) of the Bill defines serious injury as follows:
a) permanent serious impairment or loss of a body function; or
b) permanent serious disfigurement; or
c) permanent severe mental or permanent severe behavioural disturbance

or disorder; or
d) Loss of a foetus.

Perhaps the most marked changes that have been affected related to an

application for serious injury based on a “loss of earning capacity”. It was

generally recognised that in respect of injuries prior to the 12th November

1997 a loss of earning capacity was one of the major factors that influenced

courts in its assessment of whether an injury constituted the serious injury

within the meaning of s135A of the Act. A moderate earning loss when

projected over a workers’ potential working life was generally considered

to be of serious consequence for an injured worker thus justifying the

granting of a serious injury certificate. The new provisions seek to ensure

that an actual loss of a defined extent can only be taken into account in the

establishing of a loss of earning capacity for the purposes of serious injury

certification. Subsection 134AB(38)(e)(i) & (ii) will require a worker to have

a loss of earning capacity of at least 40% as at date of serious injury

certification and that the injury will be productive of a financial loss of 40%

or more permanently into the future.

It must be recognised that if there is a significant trend to pursue claims for

damages in respect of non-pecuniary loss only this will inevitably raise major

prudential issues for the Victorian Workcover Authority. If there is no award

for pecuniary loss then the Workcover Authority does not receive the benefit

of the redemptive effect of a common law damages claim as the worker will

continue to receive entitlement to weekly payment of compensation in accordance

with the Act.

Third Party Claims – The New Common Law Position
The new common law position in respect of third party claims in the legislation

is, I think, indicative of the “hothouse” effect of the preparation of the

legislative amendments. The Kennett government abolition for claims of

common law damages were comprehensive and resulted not only in the

abolition of common law claims in the workplace but also common law claims

in circumstances where a third party was a tort feasor but the injury occurred

in the course of employment not away from the place of employment.

It was not widely comprehended, for example, that the owner and director of a

family company, perhaps working as a plumber, was not entitled to bring a

claim in respect of a transport accident which occurred as a result of driving

in the course of their employment. Similarly a worker injured as a result of

medical malpractice was not able to sue a negligent medical treater if the

treatment related to a workplace injury. The legislation now restores the

right of workers injured in third party circumstances to pursue a claim for

common law damages.

The more curious situation arises in respect of damages claims against third

parties in other circumstances where the injury occurs away from the fixed

place of employment. S134AA(b) of the Bill extends a right to a worker to bring

proceedings for common law damages in specific circumstances without the

need to meet a threshold requirement of serious injury. Those circumstances

are set out in the section but are limited to circumstances where an employer

is not a party to the proceedings and where the injury is by virtue of s83(1) of

the Act deemed to have arisen out of or in the course of employment and if the

workers’ place of employment is a fixed place of employment the injury did not

occur while the worker was present at that fixed place of employment. It is clear

that at the time of the amendment of the Act the government had not fully

considered the potential implications of the serious injury threshold in third

party claims and thus opted to reintroduce the provision that was contained

in the Act between 1985 and 1992.xvi In doing so the government failed to

appreciate that there were no serious injury thresholds in the Act at that time

and all claims for damages were limited to claims for pecuniary loss. We are now

in the peculiar position that those workers injured in deemed employment

circumstances ie., lunch breaks or other breaks away from a place of

employment, medical treatment or attending trade schools are not bound by

the serious injury thresholds, whilst all others injured in the course of

employment but away from their place of employment are so bound.

This situation is best illustrated by example. If say a worker were injured in a

shopping centre during the course of an authorised lunch break they would

have the same rights as any member of the community to bring proceedings against the shopping centre for the negligence resulting in the injury. If the worker

however had been sent to purchase his or her employers lunch and thus was present in the course of their employment, rather than in the course of deemed employment,

they are so bound by the thresholds. No doubt that these anomalies, together

with the anomalies that would centre on whether or not a worker has a fixed

place of employment will necessitate the further amendment of the Act.

Conclusion
What then are the lessons that we can draw from the Victorian experience?

The first lesson is to recognise the need to develop a new theory of relevance

for common law claims in modern and complex compensations systems.

Initially we must acknowledge that many of the traditional criticisms of the

common law have been valid. We cannot ignore issues such as delay, high

transaction costs, or other defects, as these have the tendency to ultimately

render a system unstainable. It must be recognised that everybody has an

interest in the stability and sustainability of a system. In the past the major

criticism of common law claims for damages was that they were a poor

distributive mechanism. Under modern compensation schemes I contend it is

arguable that they are a sophisticated distributive mechanism.

When a common law claim is a component of a blended compensation scheme

it actually has the potential to be a well focused distributive mechanism that

provides an extra layer of compensation to the most seriously injured in the

most reprehensible circumstances. In so doing it has the potential to meet

community expectations and to promote the deterrent effect inherent in the

remedy. The debate should therefore no longer be focused on a no fault

compensation scheme versus common law, but rather on developing the

appropriate control mechanisms for access to common law. Proper control

mechanisms will be equitable and predictable. The role of common law in

modern blended compensation systems must be accompanied by commitment

to the reduction of transaction costs for the remedy, and flexible recipes for

the claiming of damages. Generally, the right to continue in medical treatment

should be excluded from a claim for damages, and continue irrespective of a

claim. Flexible choices between damages on economic and non-economic

loss will also be an essential ingredient of a relevant common law damages

system.

It will be essential for plaintiff and labour lawyers, and other interested

groups, to develop and promote economic theories that support the role

of common law in order to meet head-on the uncritical rhetoric of employer

groups about the dis-incentives to employment. These new economic theories

will address issues such as those raised by Chelsius and Viscusi and focus on

the irrational subsides provided to injurious employers through depressed

levy payments. These theories must also research and document the deterrent

capacity of the common law remedy in occupational injuries.

The next lesson that has been learnt well in Victoria is the interest of all

stakeholders in a sustainable common law damages scheme. I think there

is a realisation among plaintiff lawyers, trade unions, and others, that a

compensation scheme has to have financial integrity and that adjustments

to the control mechanisms of a scheme will be necessary from time to time.

The reintroduction of common law in Victoria has a degree of fragility and it is

possible that some strain will be imposed on the control mechanisms in future

years. This may be avoided by the imposition of a very strict management

structure derived from the TAC, but time will tell.

The final point I want to make is that we have learned from Victoria that it is

possible to develop a tangible political campaign around the issue of “common law”.

The Victorian experience has shown that it is possible to take this issue and

convert it in to an issue of real importance to the community. To do so however,

requires dedication and co-operation amongst all relevant interest groups. The

lesson we learnt from Victoria was that the most compelling political method

was to focus on the “worthy excluded”.