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Last Updated: 17 November 2022
Payments from At-fault Parties in a No-fault System
101
Payments from At-fault Parties in a No-fault System: How New Zealand has Answered Questions about Extra Payments to Accident Victims
Simon Connell*
Victims of personal injury by accident in New Zealand receive compensation under a no-fault accident compensation scheme (ACC scheme) but cannot sue an at-fault party that caused their injury for compensatory damages. This trade-off is sometimes described as a “social contract”. The focus of this paper is when a person can receive additional payments from at-fault parties over and above what they receive from the ACC scheme. The question driving the paper is: what lessons can we learn from how these additional payment issues arose and were dealt with?There are two parts to the paper. The first is historical and the second is analytical. The historical part of the paper shows how, subsequent to the introduction of the ACC scheme, a series of questions arose about extra-scheme payments that had not been anticipated by the architects of the scheme. I am particularly concerned with identifying the principled arguments for why certain victims of injuries – for example those with injuries caused by criminal offending, or with mental injuries in contrast to physical ones – may or may not deserve special treatment compared to the general pool of victims that come within the scope of the scheme.
This sets the scene for the second part of the paper, which considers the coherence of the New Zealand position as it has developed. That is, I assess whether the overall picture of extra-scheme payments is based on a consistent principle or set of principles. I argue that it is not, and consider the options available if New Zealand were to pursue a more coherent position.
The payments we are concerned with are those that are made by a party that is somehow at-fault in relation to the other party’s injury. That could be, for example, an employer that failed to maintain a safe workplace, or the perpetrator of a battery. Payments made for some other reason, for example where the injured person took out private insurance more generous than the ACC scheme, are not of interest for present purposes. I use the word “payment” because the focus is on when a victim can get extra money. I use “payments”, rather than “damages” or “compensation”, because this includes damages awards that are not compensatory (exemplary damages and nominal damages) and also awards of reparation made through the criminal justice system, which are compensatory payments but are not damages.
* Senior Lecturer, Faculty of Law, University of Otago, New Zealand. Thanks to the anonymous reviewer for helpful comments on the paper and to Ruth Jeffery for research assistance.
My aim here is not to criticise the architects of the ACC scheme for failing to predict the subsequent societal and legal developments. Rather, I am concerned with considering what we can learn from this history. Reflecting on how these questions about extra-scheme payments arose in New Zealand and the principled conflicts underpinning the different answers gives a useful insight to other jurisdictions considering no-fault schemes as to the issues that can arise. It also allows us to consider where pursuing a more coherent position about extra-scheme payments might take us in New Zealand.
The next part of this introductory section will provide a brief history of the genesis of the scheme and subsequent legislative changes. I will then provide an overview of the current position with respect to extra- scheme payments.
A The Woodhouse Report
New Zealand’s no-fault ACC scheme has its origins in “Compensation for Personal Injury in New Zealand”, the 1967 Report of the Royal Commission to Inquire into and Report Upon Workers Compensation, often referred to as the “Woodhouse Report” after its chair Sir Owen Woodhouse.1 Originally charged with considering compensation for accidents suffered by “persons in employment”,2 the Commission, courageously, chose to address an even bigger problem: the problem of personal injury suffered by accident regardless of the cause and the employment status of the victim.3The Report approached the problem of personal injury from a distributive justice point of view: injury by accident is a social problem, and the burden of injuries caused by accidents should be spread across society. The then available avenues for compensation (workers’ compensation, social security, tort) provided a “fragmented and capricious” response that could not be justified economically or philosophically. Instead, the Royal Commission recommended a no-fault scheme that provided compensation to all victims of personal injury by
2 At 11.
accident, rather than subjecting them to a “form of lottery” as to what compensation, if any, they could receive.4 That approach, the Commission argued, would not only provide a more just response to the problem of injury by accident, but would be more economically efficient by avoiding the expense associated with assessing fault through the court system.
The proposed scheme was for generous compensation based on actual losses, but short of full compensation.5 This is more than a social welfare payment aimed at meeting basic needs, but less than an award of damages aimed at providing full compensation. The Report suggested that, if compensation were suitably generous, it is reasonable to expect the injured person to bear some of the loss, and too much to expect society to bear the entire loss. Further, less-than-full compensation provides an incentive for recovery.6 In relation to lost earnings when a person is incapacitated from work this approach to compensation manifests as payments of 80 per cent of lost earnings.
B The original accident compensation scheme and subsequent changes
The Woodhouse Report’s proposal for a no-fault scheme eventually came into being when the Accident Compensation Act 1972 came into force on 1 April 1974. For present purposes, notable features of the scheme were:
° permanent loss or impairment of bodily function;° “the loss suffered by the person of amenities or capacity for enjoying life, including loss from disfigurement”; and
° “[p]ain and mental suffering, including nervous shock and neurosis”.
4 Woodhouse Report, above n 1, at [1]. 5 At [61].
6 At [218] and [292].
Since the first accident compensation statute, the scheme has seen four primary statutes10 and numerous Amendment Acts. The 1992 Act, which reflected the then government’s concerns with the cost and funding of the scheme,11 provided extensive definitions of “accident” and “personal injury”12 in contrast to the looser drafting style of the original scheme.
Of particular interest for present purposes is the significant shift in the way that the scheme has responded to providing compensation for the mental consequences of accidents. Under the original scheme, a person could have cover for the “mental consequences” of an accident, regardless of whether the accident also caused physical injury. That person could then receive entitlements for the covered mental consequences, which may have included lump sum compensation for pain and suffering, and loss of enjoyment of life.
Since the 1992 Act, both cover and entitlements for mental consequences have been limited. The 1992 Act introduced the statutory concept of “mental injury”, defined as a “clinically significant behavioural, psychological or cognitive dysfunction”,13 raising the bar for the sorts of mental consequences that could attract cover to the level of clinical significance. The 1992 Act provided cover for mental injury only where it was an outcome of a physical injury.14 The 1992 Act also provided cover for “mental or nervous shock” suffered as a result of sexual offending – what ACC calls “sensitive claims”.15 The 1998 Act did away with “mental or nervous shock” and provided cover for “mental injury” suffering as a result of sexual offending. More recently, a third category of mental injury cover was added that potentially allowed for cover for mental injury without a physical injury: “work-related mental injury”, which provides cover to persons who develop mental injury after witnessing a traumatic event at work.16
On the entitlements front, following the 1992 Act the ACC scheme has not provided compensation for emotional consequences of injuries, such
as pain and suffering. The rationale for this was that such compensation was costly, and difficult to administer in a fair and consistent manner.17
The narrowing of cover for mental injury widened the scope for proceedings brought by parties who had suffered mental consequences of accidents in circumstances that did not attract ACC cover. For example, the Court of Appeal found that a man could bring proceedings after he developed a mental injury due to seeing his wife die in a rafting accident during which he sustained no physical injuries.18
However, more importantly for present purposes, where a person does have cover, the removal of compensation for emotional harm under the ACC scheme does not widen the scope for that person to bring proceedings for compensation for emotional harm. Rather, the effect of the bar on proceedings is that, where a person has cover, they must take the compensation payable under the ACC scheme, and cannot seek compensatory damages from at-fault parties. This reflects the idea that ACC provides entitlements that are fair, but less than full, set at a level which it is reasonable for the community to bear.
C The current position with respect to extra-scheme payments from at-fault parties
The current position can be summarized as follows - if X has a personal injury covered under the ACC scheme, then:
° Compensation for lost earnings, paid weekly, based on 80 per cent of lost earnings;20
° Compensation for permanent impairment, paid as a lump sum;21
° But not compensation for pain and suffering, loss of enjoyment of life, or emotional harm.
° Exemplary damages awarded to punish and deter outrageous wrongdoing;22
° Bill of Rights Act damages awarded to recognise breaches of New Zealand Bill of Rights Act 1990 (NZBORA) rights;23
° But the availability of nominal damages, a minimal sum awarded to recognise breaches of tortious wrongs, is unclear.
° But, if X is the victim of an offence (which includes health and safety and traffic offences as well as archetypal criminal offences such as assault), a convicted offender can be sentenced to pay X reparation which can include compensation for:
• Lost earnings not compensable under the scheme;25 and
For each of these extra-scheme avenues for payment, I will set out the basic question that arose, discuss why it was not anticipated at the time of the introduction of the ACC scheme, and explain how the question was answered by lawmakers. I will address these questions in the order in which they were addressed by the courts (exemplary damages, nominal damages, NZBORA damages, then reparation). I will conclude by considering the coherence of the position set out above, and reflect on what other jurisdictions considering no-fault schemes may be able to learn from how New Zealand dealt with questions about extra-scheme payments from no-fault parties.Before commencing with the question of exemplary damages, I will provide a little more detail around the introduction of the scheme, and address the question of the fate of the intentional torts following the introduction of ACC, thereby setting the scene for questions about extra- scheme payments from at-fault parties.
II Types of extra-scheme payments from at-fault parties
D Accident compensation and the intentional torts
Did cover for “personal injury by accident” under the original scheme extend to personal injuries suffered as a result of intentional tortious acts eg battery?
Since they were addressing the question of how to compensate victims of injury, the Royal Commission focused on the areas of tort law which were most fruitful in terms of providing compensation to victims of injury: the torts of negligence and breach of statutory duty. Proceedings
24 2001 Act, s 317.
for trespass against the person were a minor player in the overall picture of compensation for victims of injury. As Geoff McLay observed:27
The Woodhouse Report did not mention sexual abuse or other forms of criminal wrongdoing. One would not have expected a report in the late 1960s, coming from the perspective of the performance of workers compensation or non-fault automobile insurance, to have dealt with a problem that would not receive public prominence until the mid to late 1980s.
3 How the question was answered
This question arose not long after the introduction of the scheme, in the case of G v Auckland Hospital Board.28 The plaintiff was raped by an employee of the Auckland Hospital Board the day after the ACC scheme came into force. She brought proceedings against the Hospital Board alleging that it had been negligent in its employment of the perpetrator, and ought to compensate her for the deterioration of her mental and physical health. The Hospital Board sought to use the ACC scheme as a shield, arguing that the plaintiff had suffered personal injury by accident and she was consequently barred from bringing proceedings.Drawing on decisions on the English Workers’ Compensation scheme, the High Court adopted the approach that “accident” should be considered from the point of view of the victim, and accordingly encompassed:29
Since the plaintiff had suffered an event that, while intended by the perpetrator, was unwanted by her, she had experienced an “accident”. As the accident impacted on her physical and mental health, she had suffered a “personal injury by accident” which had cover under the ACC scheme, and her proceedings were barred. That the accident may have been criminal conduct was simply irrelevant.Since the 1992 Act, the scheme has provided an extensive definition of “accident”, so there is no need for judges to supply the meaning of “accident” as was the case under the original scheme. The most common form of accident is a “specific event or series of events that involves the application of a force or resistance external to the human body”,30 for which the intentions of any persons involved in applying or receiving
30 1992 Act, s 3. For the current definition of ‘accident’, see 2001 Act, s 25.
the force or resistance are irrelevant.31 So, a battery was an accident under the original scheme and has remained so ever since.
The outcome in G v Auckland Hospital Board is a sensible one. It would not make sense to exclude victims of battery from the no-fault scheme and make their access to compensation depend on finding a defendant worth suing. However, the decision foreshadows a number of the issues that arose subsequently, in that it raises the possibility that perpetrators of intentional or criminal wrongdoing may be seen as less worthy of the shield that the ACC scheme provides, and that their victims may be seen as more deserving of compensation.
A Exemplary damages
X has cover for their personal injury under the ACC scheme. X’s injury was caused by the tortious actions of Y. Can X bring proceedings against Y for exemplary damages, which are awarded to respond to the outrageous character of Y’s wrongdoing rather than to compensate X for losses caused by Y’s wrongdoing?
As with the intentional torts, one of the reasons that the Woodhouse Report did not address exemplary damages is because such awards are rare and a relatively insignificant part of the overall picture of compensation to victims of injury. Furthermore, at the time of the Report, the availability of exemplary damages in tort in New Zealand was unclear but would have appeared limited, following the 1964 House of Lords decision Rookes v Barnard.32 That decision limited exemplary damages in tort to three categories: oppressive, arbitrary or unconstitutional actions by servants of the government; where the defendant’s conduct was calculated to make a profit; and where a statute expressly authorises them.33 The High Court of Australia rejected the narrow categories of Rookes v Barnard in 1966,34 but in New Zealand the scope of exemplary
31 Note, however, that a majority of the Supreme Court suggested in obiter in Allenby v H [2010] NZSC 33, [2012] 3 NZLR 425 that a requirement for an absence of consent to risk of injury could be read into the definition of “accident”, specifically in relation to sex and the risk of pregnancy: see Blanchard J at [82] and Tipping J at [93]. The Chief Justice, wisely in my view, expressed reservations about whether the concept of consent was useful in determining the meaning of ‘accident’. See Simon Connell “Sex as an ‘accident’” [2012] NZLJ 188. For some other types of accident, such as inhalation and oral ingestion, intention may be relevant, for example ingestion or inhalation of a virus is excluded from the definition of accident unless it is the result of a criminal act of someone other than the injured person (2001 Act, s 25(1)(b) and (ba)).
32 Rookes v Barnard [1964] UKHL 1; [1964] AC 1129, [1964] 2 WLR 269 (HL).
33 At 410-411.
34 Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118, [1967] ALR 25 (HCA).
damages was not addressed until after the introduction of the ACC scheme.
3 How the question was answered
Since exemplary damages respond to morally blameworthy conduct, the kinds of case which most obviously raise the possibility of an award is where one person has deliberately injured someone else, such as in a battery. With G v Auckland Hospital Board35 having established that such events qualify as personal injury caused by accident and proceedings for compensatory damages are barred, this raised the question of whether proceedings for exemplary damages were also prohibited.Following a series of inconsistent High Court decisions,36 the question was addressed by the Court of Appeal in Donselaar v Donselaar, where a man, who had been assaulted by his brother, sought exemplary damages.37 Contemporaneously, the Court of Appeal addressed the role of exemplary damages in tort in New Zealand more generally in Taylor v Beere.38 The latter decision endorsed exemplary damages as providing the valuable social function of punishing and deterring outrageous conduct, and rejected the idea that punishment was not a proper function of the civil law. Having affirmed the worth of exemplary damages, the Court of Appeal rejected Rookes v Barnard’s narrow categories as an undesirable fetter on the ability of the courts, through exemplary damages, to respond to egregious wrongdoing.
Given the enthusiastic endorsement of exemplary damages as an important tool to mark society’s disapproval of outrageous behavior in Taylor v Beere, it is not especially surprising that in Donselaar v Donselaar the same Court found the bar on proceedings arising “directly or indirectly” from injuries covered under the scheme did not extend to exemplary damages.39 An award of exemplary damages, the court found, arises from the outrageous character of the defendant’s tortious conduct and not directly or indirectly from any injuries that were suffered.40
Although Donselaar settled the question of whether exemplary damages were available when the plaintiff had cover under the ACC scheme, further cases have clarified the scope for exemplary damages awards in New Zealand. One question follows from the point that the function of exemplary damages – responding to morally condemnable conduct – is
also performed by, and typically associated with, the criminal law. Should the civil law defer to the criminal law where the same conduct has had, or might have, a response from the criminal justice system? The Court of Appeal thought yes, but Parliament disagreed.41
A further question is whether, in addition to the need for outrageous wrongdoing, there should be a kind of ‘mens rea’ element required for exemplary damages. There are essentially two different positions on how this question should be answered. The first (the “advertent wrongdoing” position) is that exemplary damages are available only for the worst sort of wrongdoing, morally speaking, and that the worst sort of moral wrongdoing requires that the wrongdoer knows that they are doing something wrong. That is, exemplary damages can only be awarded in cases of advertent wrongdoing – the wrongdoer is either deliberately seeking to cause harm, or going ahead with a course of action knowing that there will be a risk of harm. The second position (the “never say never” position) is that outrageousness is the only requirement, and to impose any further fetters would limit the ability of the courts to respond to future egregious wrongdoing.
This question first arose after the High Court held in McLaren Transport v Somerville that exemplary damages could be awarded in cases of negligence.42 A defendant can be negligent without realising that their carelessness is creating a risk of harm to someone else, which raises the question of whether inadvertent wrongdoing could ever be fairly described as so outrageous as to justify an award of exemplary damages. Tipping J adopted the “never say never” position, suggesting that a high level of negligence could amount to an “outrageous and flagrant disregard for the plaintiff’s safety, meriting condemnation and punishment”.43
The issue came to be examined by a number of appellate courts. Each time, the “advertent wrongdoing” and “never say never” positions were represented, but which position was favoured by a majority changed through the appeal process. In Bottrill v A,44 following a claim in relation to misreading and misreporting results of cervical smear tests, a majority took the former position, including Tipping J who, having refined his approach in McLaren Transport v Somerville, stated in Bottrill that the sort of high level of negligence that would justify exemplary damages required conscious appreciation of risk.45
The plaintiff appealed to the Privy Council, where the majority adopted the “never say never” position, stating:46
44 Bottrill v A [2001] 3 NZLR 622 (CA). 45 At [174].
46 A v Bottrill [2002] UKPC 44, [2003] 2 NZLR 721 at [26].
It would be imprudent to assume that, in the absence of intentional wrongdoing or conscious recklessness, a defendant’s negligent conduct will never give rise to a justifiable feeling of outrage calling for an award of exemplary damages. “Never say never” is a sound judicial admonition. There may be the rare case where the defendant departed so far and so flagrantly from the dictates of ordinary or professional precepts of prudence, or standards of care, that his conduct satisfies this test even
though he was not consciously reckless.
The issue was later revisited by the Supreme Court of New Zealand in the case of Couch v Attorney-General (No 2),47 which, by then, had replaced the Privy Council as New Zealand’s highest appellate court.48 A majority of the Supreme Court, including two judges who had been in the majority of the New Zealand Court of Appeal in Bottrill, reinstated the “advertent wrongdoing” position.49The response to exemplary damages reflects the principled position that injuries caused by outrageous moral wrongdoing justifies special treatment, with disagreement over whether outrageous moral wrongdoing must necessarily be advertent.
B Nominal damages
X has cover for their personal injury under the ACC scheme. X’s injury was caused by the tortious actions of Y, for example battery (trespass to the person). Can X bring proceedings against Y for nominal damages, which are awarded to recognise Y’s tortious wrongdoing (sometimes this is expressed as vindicating X’s rights), rather than to compensate X for losses caused by Y’s wrongdoing?
There are several reasons why nominal damages were not addressed at the time of the introduction of the scheme. Nominal damages awards, like exemplary damages awards, are rare. They are generally associated with the intentional torts, which we know the Woodhouse Report did not consider. Furthermore, the award is a token sum and has no real impact on the money that a plaintiff receives.Moreover, there is a debate over the importance of the vindicatory function that tort law can provide. For now, I would suggest that the Royal Commission, who were concerned with compensation and were skeptical of the philosophical basis of the tort of negligence, were unlikely to have adopted the view that vindication is an important and independent function of tort law, had it been put to them.
The availability of nominal damages for a plaintiff with ACC cover arose in Re Chase,50 a case decided not long after the Court of Appeal had found in Donselaar v Donselaar that exemplary damages survived the introduction of the scheme.Paul Chase was a member of a gang. He had been a party to a raid by his gang into the territory of a rival gang. During the raid, a shotgun was discharged into the air in a crowded bar, wounding several patrons.
Police executed a dawn raid at Chase’s flat at about 6.40am. Chase, expecting retaliation from Black Power, had barricaded the door. The Police kicked it down and, on entering the room, saw Chase was holding what appeared to be a shotgun but was later said to be an exercise bar. A police officer shot him, and he died in hospital not long afterwards.
There were two official investigations: one by the Coroner and another by a QC reporting to the Minister of Police. Public concern on the case focused not on the shooting but on the timing of the raid because, as the Court of Appeal put it, the shooting appeared to be a case of reasonable self-defense.51 The Coroner suggested that the Police may have made a hurried decision to arrest early in the morning, while the QC thought that the dawn raid was the result of lengthy and careful consideration.
Chase’s family were not satisifed with the outcome of the investigations, and brought proceedings alleging assault, battery, negligence and trespass to property, and seeking compensatory, punitive and nominal damages, and declarations.
The Court of Appeal found that the raid and shooting were an accident from the point of view of Chase, and accordingly any physical injuries and mental distress were covered as personal injury by accident. This, the court held, removed the possibility of compensatory damages for everything aside from trespass to property. Declarations are discretionary, and the court was not inclined to make one in the case. As discussed above, ACC cover does not preclude exemplary damages, but claims for exemplary damages in New Zealand do not survive death.52
That left the claim for nominal damages for trespass (to property), which was strictly not caught by the bar on proceedings because it arose from trespass to property and not from personal injury by accident. However, the court thought that to allow the claim to proceed only on the basis of nominal damages for trespass would be an abuse of procedure – effectively it was an attempt to get the court to re-review Police conduct that had already been the subject of two inquiries.53
50 Re Chase [1988] NZCA 181; [1989] 1 NZLR 325 (CA). 51 At 328.
The finding in Re Chase followed from the Court’s conclusion that, under the original scheme, everything that happened to Chase in the context of the raid was a physical or mental consequence of an accident. In Todd on Torts, it is suggested that, following the removal of cover for mental consequences alone in the 1992 Act, it may be possible to bring a claim for nominal damages for trespass to the person even where the plaintiff has cover for a physical injury.54 While the ACC scheme would provide compensation for the physical injury and its consequences, the nominal damages claim would vindicate the plaintiff’s right to freedom from interference with their bodily integrity.55
An alterative view is provided by Bevan Marten, who suggests that there is “little scope for the vindiciation of private law rights by courts” in relation to injuries covered under the scheme, suggesting that the “ACC scheme is designed to avoid entering into issues such as whether the claimant suffered a violation worth vindicating”.56 That is consistent with Mallon J’s finding in P v Attorney-General, that:57
To consider vindicatory damages on these causes of action could, as per Re Chase, open the door to many common law claims which the accident compensation legislation is intended to supplant. A case has not been made out as to why that opening of the door ... should be permitted here.
These contrasting views stem from a difference of view about the importance and value of the vindicatory function of tort law. That same clash came to a head in the English case of Ashley v Chief Constable of Sussex Police,58 where the House of Lords addressed a fatal police shooting with facts similar, but not identical, to Re Chase. Both cases involved a police raid on the deceased’s house early in the morning (around 4 am in Ashley), which was executed because the deceased was suspected of being involved in serious violent crime. In both cases, police entered the house by force, and encountered the deceased in a dark room.In contrast to Re Chase, in Ashley there was no allegation that Ashley appeared to be carrying a weapon. There were two police inquiries in Ashley, one carried out by an independent police force and one by the Sussex Police Authority. These led to a public apology given by the Chief Constable and the Chairman of the Authority to Ashley’s family. The officer who shot Ashley was tried and acquitted of murder, after the trial judge found that was no evidence to negative the assertion of
self-defence. A coronial inquest began but the coroner decided not to proceed following the acquittal.
Dissatisfied with these outcomes, Ashley’s family brought civil proceedings, alleging negligence, assault, and battery. The police admitted liability for negligence in relation to pre-raid planning, and paid compensation. The police denied liability for assault and battery, on the basis that the shooting had been in self-defence. The family wished to pursue their civil claim for trespass to the person for nominal damages only, to recognise that a wrong had occurred and that the shooting had been unlawful. That the officer had been acquitted in criminal proceedings did not rule out the possibility of a civil claim succeeding, because, in the civil context, it is for the defendant to establish the presence of self-defence on the civil standard of proof.59
The police argued that the trial should not continue when compensation had already been paid. The following passage, from Lord Carswell’s judgment, gets to the heart of the difference of views:60
It is not necessarily an abuse to proceed with a civil claim in tort against a defendant who has been acquitted on a charge of a criminal offence based on the same set of facts, since the content of the criminal offence and the tort may not be identical, the defences may vary and the standard of proof will differ ... [but] the situation is different where the claimant already has been given or is to be given that remedy and wishes to pursue the civil case for collateral reasons. This in my view is the nub of the present case.
The nub of the case is whether recognition of wrongs is a collateral function of tort law.61 Lord Carswell, along with Lord Neuberger, considered that “the civil courts exist to award compensation, not to conduct public enquiries”.62 However, the majority considered that inquiring into whether a tortious battery had occurred was a well- established and accepted function of tort law, and that the plaintiffs were entitled to pursue their claim on that basis.63 At the Court of Appeal, Arden LJ saw the case as involving the rule of law: even though they had received compensation, Ashley’s family were entitled to pursue the claim to determine if the officer’s actions had contravened the (civil) law.64 So, for the majority, recognition of breaches of rights protected by tort law is a primary rather than collateral function of tort law.
The answer to this question remains unclear. There is no New Zealand equivalent to Ashley and it might be that the minority viewpoint in that case – that recognition of wrongs is a mere collateral function of tort law
– prevails were the issue to arise in New Zealand. One reason that the position remains unclear is that it is rare for a plaintiff to want to bring a case for nominal damages alone. Normally, it takes serious wrongdoing of the kind that might justify exemplary damages, or NZBORA damages, to motivate a plaintiff.
C New Zealand Bill of Rights Act Damages
X has cover for their personal injury under the ACC scheme. X’s injury was caused by the actions of Y, which amount to breaches of the NZBORA. Can X bring proceedings against Y for public law damages, which are awarded to compensate for breaches of NZBORA rights?
New Zealand had no Bill of Rights Act at the time of the Woodhouse Report.
The NZBORA was passed in 1990. The Act affirms various rights including, for example, the right not to be subjected to torture or cruel treatment.65 In Simpson v Attorney-General,66 the Court of Appeal found that monetary compensation could be awarded for breaches of NZBORA rights, a significant finding as the statute did not expressly provide for remedies, let alone damages.67Alleged breaches of NZBORA rights may occur in circumstances that involve personal injury covered by the Act. That was the case in Wilding v Attorney-General,68 which was concerned with events that occurred while police apprehended Wilding for aggravated robbery. It was not in dispute that Wilding was bitten by a police dog. Wilding alleged, and the police denied, that after police handcuffed him and he was in a prone position, police set the dog upon him and instructed it to bite him. Wilding also alleged that he had developed post-traumatic stress disorder.
Wilding alleged breaches of the right to freedom from torture and cruel treatment, and the right of arrested or detained persons to be treated with humanity and respect for their inherent dignity. Counsel for Wilding argued that victims of injury suffered through state wrongdoing that constituted a breach of the NZBORA should be able to receive additional
at [51.4.3]. NZBORA damages awards have been rare.
compensation to reflect that they had suffered a breach of a “higher normative duty”.69
The Court of Appeal rejected that proposition but held that the presence of ACC cover did not necessarily bar NZBORA damages for breach of NZBORA rights. As Jason Varuhas put it: “even if ACC legislation barred recovery of damages for physical harm and associated non-pecuniary losses, damages for the wrong itself may still be recoverable”.70 In the context of Wilding’s claim, Blanchard J, giving judgment for the court, put it this way: “The compensation would be for the affront, not for its physical consequences. Putting it another way, there could be damages for the assault but not for the battery.”71 Wilding however, had sought compensatory damages for his personal injuries, so the appeal was dismissed.
The decision can thus be seen to stand for two different principled positions. The first is that it is inconsistent with the no-fault scheme to provide some victims additional compensation for their personal injury for reasons to do with the identity or mental state of a wrongdoer that caused their injury. The second is that it is not inconsistent with the scheme to provide some victims of personal injury additional compensation as long as it is for something other than their personal injury.
D Reparation
X has cover for their personal injury under the ACC scheme. X’s injury was caused by the criminal offending of Y, for which Y is convicted. Can Y be sentenced to pay X reparation, so that X receives more than their ACC entitlements?
The sentence of reparation was first introduced in the Criminal Justice Act 1985, and there is no particular reason why the architects of the scheme would have anticipated the later growth of a compensatory function in the criminal law.At the time of the Woodhouse Report, New Zealand did have a Criminal Injuries Compensation Scheme, based on the English scheme.72 The scheme provided compensation to victims of crime, and was funded by general taxation (although the Tribunal administering it could try and recover amounts paid from offenders). This scheme was relatively minor
69 At [15].
in terms of the bigger picture of compensation to victims of injury. In fact, it was overlooked by both the Royal Commission and by Parliament. The Accident Compensation Act 1972 abolished the workers’ compensation scheme and tort claims for personal injury but left the Criminal Injuries Compensation Scheme intact. There was a brief period of overlap where New Zealand had both the general no-fault ACC scheme, and the specific Criminal Injuries Compensation Scheme. The overlap was then identified, the latter scheme was abolished and the ACC statute was amended to expressly provide cover for actual bodily harm, and mental or nervous shock, in relation to sexual crimes.73
3 How the question was answered
Reparation was first introduced in the Criminal Justice Act 1985. It is a sentence that can be imposed as part of the sentencing process, after an offender has been convicted. Over time, the presumption in favour of reparation has been strengthened, and the scope for which losses reparation can be awarded to compensate for has been expanded.Initially, a court was required to impose a sentence of reparation unless it was inappropriate to do so, with the financial capacity of the offender being a relevant factor in whether reparation should be awarded and, if so, how much should be paid. The Sentencing Act 2002, which included providing for the interests of victims of crime in its purpose section,74 provided that a sentencing court must impose a sentence of reparation unless it would cause undue hardship or there were other special circumstances.75
Reparation was initially available only for loss of, or damage to, property, so there was no issue of overlap with the ACC scheme. The Criminal Justice Amendment Act 1987 empowered sentencing judges to award reparation for “emotional harm”, and also provided for the preparation of victim impact statements, to assist in the assessment of the emotional impact of offending. The Sentencing Act 2002 extended the scope of reparation to include loss or damage consequential to physical harm.
In a case of history repeating itself, just as the Royal Commission and Parliament had overlooked the Criminal Injuries Compensation Scheme when ACC was established, Parliament initially overlooked the ACC scheme when the Bill that eventually became the Sentencing Act 2002 was first introduced.76 The Bill originally provided for reparation to be awarded to compensate for physical harm, a clear overlap with the function of the ACC scheme. The overlap was identified at the Justice and Electoral Select Committee stage. The Committee recommended removing reparation for physical harm, and, with respect to losses
consequential on harm, preventing reparation for losses “for which the victim has cover under the Injury Prevention, Rehabilitation, and Compensation Act”.77 Various changes were made to the Bill in the Committee of the Whole House, and, as enacted, s 32(5) of the Sentencing Act 2002 prevented reparation for:
... consequential loss ... for which the court believes that a person has entitlements under the [ACC Act].
This wording is ambiguous. Suppose that X has suffered a personal injury caused by an accident that was also criminal offending by Y. X is paid 80 per cnt of their lost earnings under the ACC scheme. Can Y be ordered to pay the remaining 20 per cent, thus “topping-up” Y’s compensation? There are two ways of reading s 32(5):
There are essentially two positions on how s 32(5) should be read. The first is against top-ups, on the basis that allowing victims of crime to receive more than other victims of injury would go against the “social contract” represented by the ACC scheme: the people of New Zealand have given up the right to recover full compensation from those that have wrongfully injured them, in exchange for fair but not full compensation on a no-fault basis. Although reparation is not strictly affected by the bar on proceedings under the ACC Act, the Sentencing Act should be interpreted to give effect to the social contact. This was the view of the majority of the Supreme Court in Davies v Police,78 where Tipping J suggested that to allow top-ups would be to go against the “whole philosophy and purpose” of the ACC scheme.79The alternative view is that, in interpreting the Sentencing Act 2002, more weight should be attached to that Act’s purpose of providing for the interests of victims of crime, which must take precedence over a strict
enforcement of the ACC’s social contract philosophy. That was the view of the lower courts,80 and of McGrath J, who dissented in the Supreme Court. McGrath J recognised that allowing top-ups was inconsistent with the principle that those with entitlements to statutory compensation cannot bring claims based on fault, and with the idea that providing less-than-full compensation for lost earnings incentivises rehabilitation. That said, he concluded:81
The extent of these tensions should not, however, be over-stated. In the special circumstances of punishment for criminal offending and providing for the interests of victims of crime, the departures can hardly be seen as undermining the Compensation Act scheme; they are merely inconsistent with aspects of it.
Davies was not the end of the matter, as Parliament overturned the decision in the Sentencing Amendment Act 2014 – a not insignificant development, as it is relatively rare in New Zealand for Parliament to overturn a decision of the Supreme Court.82 The Amendment Act replaced the wording of s 32(5) with the following:
... the court must not order the making of reparation in respect of any consequential loss or damage ... for which compensation has been, or is to be, paid under the [ACC Act].
This wording arguably replicates the same ambiguity as the as-enacted version: does s 32(5) prohibit reparation with respect to types of loss or damage for which compensation has been, or is to be paid, or with respect to the extent of loss or damage for which compensation has been, or is to be paid? However, the explanatory note states expressly that the aim of this amendment is to overturn Davies.83 This makes Parliament’s intention clear, but the rationale is opaque. Parliament must be taken to have in mind some justification for why victims of crime deserve special treatment, but what that is, is unclear.
III Discussion
A Coherence
Here, I discuss whether a justification can be provided for two aspects of the overall picture of extra-scheme payments:
I conclude the article by considering what we can learn from how these questions have arisen and been addressed, with respect to jurisdictions considering no-fault, and the future of the no-fault scheme here.
1 Additional compensation for victims of crime
Before Davies, the idea that some victims of injury should be able to receive additional compensation for their physical injuries was raised in Wilding, though the group in question was “victims of state wrongdoing in terms of NZBORA” rather than “victims of criminal wrongdoing”. In rejecting that proposition, the Court of Appeal stated:84
... it is not to be thought that, having prescribed a no-fault regime, Parliament nevertheless intended to differentiate between personal injuries, depending on whether they were caused by a State actor or by someone else. Nor can it have been intended to make a difference, for the purposes of compensating for the physical injury and consequential mental injury ... whether the injury was inflicted deliberately, negligently or merely accidentally. A dog bite causes the same physical injury and pain no matter whether the dog belonged to the police or a private citizen and no matter whether the dog was acting in accordance with instructions or
whether those instructions were given in breach of the appellant’s rights.
Nevertheless, Parliament has now made it clear that the law does differentiate between personal injuries depending on the cause, with personal injuries suffered as a result of criminal offending receiving special treatment vis-à-vis compensation. Through reparation, victims of crime can receive full compensation for lost earnings, and can receive compensation for emotional harm.This special treatment has been the subject of much criticism, including by a majority of the Supreme Court in Davies, with whom Stephen Todd agreed.85 Arguably, given the ACC scheme provides fair compensation to all on a no-fault basis, there is no principled reason for singling out
victims of crime to get more.86 Awarding reparation to top-up ACC entitlements has been described as “back-door damages”, this language suggesting an illegitimate circumvention of the ACC social contract.87
Bronwyn Neal recently argued that reparation produces a “triple lottery” because what a victim receives varies depending on type of offence, the offender’s means, and prosecutorial discretion, bringing to mind the original pre-ACC damages lottery.88 She recommended amending the Sentencing Act so that persons with ACC cover could not receive reparation for the consequences of physical harm, so as to restore the integrity of the ACC scheme. That would go beyond merely restoring Davies by preventing persons with ACC cover from receiving emotional harm reparation.
Neal does consider the possibility that victims of intentional offending that invades people’s personal sense of security could be singled out for special treatment on the basis that victims have suffered a specific normative loss that victims of civil wrongdoing have not. However, Neal goes on to say, many victims of criminal offending are not victims of “real crime” in that sense, including victims of offences against health and safety law, which typically involve carelessness and omissions rather than intentional wrongdoing.89
There is an obvious political explanation for why victims of crime receive special treatment: there is popular support for providing for the interests of victims of crime (or being perceived by the voting public as doing so). In 1999, over 90 per cent of voters voted “Yes” to a non-binding citizens initiated referendum asking the following:
Should there be a reform of our justice system placing greater emphasis on the needs of victims, providing restitution and compensation for them and imposing minimum sentences and hard labour for all serious violent offences?
That popular support was then translated into legislation by Parliament, for example, the greater scope given for reparation in the Sentencing Act 2002, and the overturn of Davies. That special treatment for victims of crime is the will of Parliament is a reason for courts to interpret the Sentencing Act so as to give effect to that intention. But it does not necessarily give us a principled explanation for special treatment for victims of injury.
89 At 43-45.
The strongest principled argument (that I am aware of), for reparation for victims of injury, who are also victims of crime, is put forward by John Hughes.90 In an editorial in the Employment Law Bulletin, Hughes sought to respond to the argument that reparation is back-door compensatory damages.91 Hughes argues that to suggest that victims of crime should not get additional compensation because other victims of injury do not “essentially ignores the essence of reparation sentencing as redress for harm done by the offending”.92 That is, providing reparation performs a valuable function for society that outweighs the inconsistent treatment of other victims of injury – not dissimilar to the argument that exemplary damages provide a valuable function for society which justifies awarding them, even though it may be anomalous to provide a windfall to successful plaintiffs.93
The idea that there is value in making wrongdoers provide redress for the harm that they cause raises a different objection to the special treatment for victims of crime. Todd and Neal argue that victims of crime should not receive more compensation than other victims of injury. It is also arguable that, if there is value in making wrongdoers provide reparation for harm, then if victims of criminal wrongdoing can receive additional compensation then victims of other sorts of wrongdoing, such as tortious wrongdoing or breaches of NZBORA, should be able to as well. That is, reparation creates an injustice between victims of criminal wrongdoing when compared with victims of other wrongdoing, as opposed to victims of crime and all other victims of injury.
I cannot identify a clear point of difference between criminal wrongdoing and these other kinds of wrongdoing that justifies the availability of additional compensation for the former and not the latter.94 As Neal points out, the wide range of conduct that could constitute criminal offending in New Zealand undermines any claim that there is something special about criminal wrongdoing. Often, the same conduct will constitute both criminal and tortious wrongdoing.95
As was the case in Ashley,96 the criminal standard of proof might make a difference as to whether tortious but not criminal wrongdoing may be established in court. The criminal standard of proof is a clear point of distinction between civil and criminal proceedings. However, there is no obvious reason why the different standard of proof justifies allowing victims of criminal but not civil wrongdoing additional compensation.
If I am right and there is no sound principled basis for the exceptional treatment of victims of criminal wrongdoing evident in this picture, there are two main ways to rectify that position. The first, and relatively more straight-forward, option is to re-instate Davies and perhaps even go as far as Neal would and bar people with cover under the ACC scheme from receiving reparation for emotional harm.
The second is to abandon the bar on proceedings and allow victims of civil wrongdoing to pursue top-ups of their ACC entitlements. This would be a huge step – the bar has been part of the accident compensation scheme since its inception, and I can see a number of obvious objections. The first two objections follow from taking a distributive justice approach to injury. The first is that this move would be a return to the pre-ACC forensic lottery – an unacceptable distribution of the burden of accidents. A possible response is that, while there would be inconsistent treatment, it would not be a return to the pre-ACC position: it would be the case that everyone gets fair compensation, and some get full, rather than the wildly varying outcomes before ACC where a lucky few successful plaintiffs received full compensation and many more received much much less.97 The second objection is to remind us of the Woodhouse principle of administrative efficiency, and point out that litigating fault sucks up money that could be put to better use helping people.
A further objection is that this move would be a breach of the ACC social contract, under which the people of New Zealand supposedly gave up the right to seek compensation from wrongdoers for fair, but less than full, compensation. Employers could object that their side of the ACC bargain is that they pay levies to contribute to the costs of compensating their injured employees regardless of whether they actually cause any injuries through fault, and in exchange they are protected from civil proceedings. Re-introducing civil proceedings for personal injury would not only change the position for employers. The potential threat of liability for motor vehicle drivers, for example, might necessitate the re- introduction of compulsory third party insurance, which was abolished when ACC was brought in.
This step would thus have wide-reaching implications for funding both within and outside the ACC scheme. However, perhaps a review of the scheme’s funding is in order. Businesses that generate risks to their customers (in contrast to employees) arguably free-ride on the scheme
by enjoying the protection from proceedings that the no-fault scheme offers without contributing levies to pay for injuries that their activities cause. Manufacturers of consumer products that fail and cause injury or death are one example, as O’Sullian and Tokeley recently pointed out.98 “Adventure tourism” providers are another. A more recent example is companies that hire out e-scooters, with ACC recently releasing figures that suggest 3,388 claims have been lodged since October 2018 for e-scooter-related accidents, costing around $NZ4.4 million.99
The short point here is that addressing the exceptional treatment of victims of crime by allowing other victims of wrongdoing to also top- up ACC compensation would be no simple matter, and necessitate a fundamental re-think of the scheme. Perhaps, though, the Rubicon has already been crossed. Parliament’s overturn of Davies is a clear legislative prescription that some victims of injury do get more compensation because of the way in which their injuries were suffered. The political popularity of reparation means that Davies is unlikely to be re-instated any time soon. Whether reparation remains a limited exception to the ACC social contract remains to be seen. A case like Ashley, where criminal prosecution is unsuccessful but there might be some sympathy for the plaintiffs to be able to pursue civil proceedings, could potentially be a catalyst for change.
2 The unclear position regarding non-compensatory awards
In contrast to reparation, non-compensatory awards are arguably compatible with the social contract because they do not allow some injured people, and not others, to receive compensation from at-fault parties. Although they do mean that some injured people get different payments from others, amplifying the lottery of outcomes to some extent, arguably this is justified if the non-compensatory payments provide a valuable social function. The current position – it is clear that exemplary damages and damages for breaches of NZBORA rights are available, while the position with respect to nominal damages is uncertain, and it appears they may not be available – raises the question: is there a justification for singling out nominal damages for different treatment?One clear point of difference between nominal damages, on the one hand, and exemplary damages and NZBORA damages on the other, is that nominal damages, by virtue of being a token payment, do not add to the uneven distribution of outcomes for victims of injury in any real sense. If anything, that would support the exact opposite of the current position: someone with ACC cover for their injury could seek nominal damages, but not exemplary or NZBORA damages.
So, what could explain the different treatment of nominal damages? One justification is the minority position in Ashley: recognition of breaches of rights protected by tort law is essentially a happy side-effect of tort law providing compensation, but not a primary function of tort law.100 So, if there is no prospect of compensation because it has been provided via ACC, then it is a waste of society’s resources to bring proceedings merely to recognise a breach of a right protected by tort law.
An additional argument that supports different treatment for nominal damages is that nominal damages can be distinguished from the other two non-compensatory payments because, while these other forms of damages produce valuable societal benefits, the benefit of nominal damages is a purely private one. That is, nominal damages provide satisfaction for the plaintiff in acknowledging a wrong, but do nothing for wider society. By virtue of being a nominal award, nominal damages cannot operate as a deterrent. Further, the point at which there is a societal rather than merely personal benefit to denouncing conduct is the precise point at which exemplary damages become available.
However, this argument will do little to satisfy those who share the view of the majority in Ashley that recognition of breaches of rights protected by tort law is a primary function of tort law. It could further be suggested that, were the fact that it produced a purely private benefit grounds for barring civil proceedings, very few civil claims would proceed at all.
B Conclusion
Elsewhere, it has been suggested that the introduction of the ACC scheme has had major unintended consequences for the civil and criminal law in New Zealand.101 Perhaps it is more accurate to say that the introduction of the ACC scheme, combined with societal and legal developments that could not have been foreseen at the time, such as a growing compensatory function of the criminal law and the introduction of NZBORA, have raised a series of difficult questions about the scope for extra-scheme payments from at-fault parties.I describe these questions as “difficult” because resolving them requires choosing between competing positions, where there is no obvious “right” choice, such as: Which is more important: levelling out the payments to victims of injury so that some sufferers of injury do not get much more than others, or continuing to denounce and deter outrageous tortious conduct? Is recognition of breaches of rights a primary function or a collateral function of tort law? Is it an unacceptable breach of the ACC social contract for some victims of injury to get additional compensation, or do some particular victims of injury deserve exceptional treatment?
Zealand’s accident compensation scheme on the civil and criminal law” (2012) 25 NZULR 181 at 208.
That means that the New Zealand answers to these questions may not work for other jurisdictions – but the fact that the questions arose may be instructive.
In terms of what other jurisdictions considering no-fault schemes can take from this, I would suggest that compensatory and non- compensatory payments can be considered separately. Where non- compensatory payments fulfill a purpose that is valued by society, it is likely that there will be strong support for them to co-exist with a no-fault scheme, even though they put some victims of injury in a better position than others. Compensatory payments from at-fault parties that are made for expressly compensatory purposes are a different case. They provide a direct challenge to any no-fault scheme purportedly based on a “social contract” whereby victims of injury give up the right to recover full compensation from wrongdoers in exchange for the right to fair compensation on a no-fault basis.
Of course, one way to maintain the social contract is simply not to allow any compensatory payments over and above what is provided under the compensation scheme, as was the position in New Zealand until the introduction of reparation for the consequences of physical harm. However, the strong political support for providing for the interests of victims of crime means a return to that position seems unlikely.
It might be that the exceptional treatment of victims of crime is maintained in the long term alongside the bar on civil proceedings, for political reasons, despite the position lacking a satisfying principled justification. On the other hand, perhaps the ongoing provision of extra compensation to some victims of injury will erode confidence in the idea of the ACC scheme as a “social contract”, and further categories of victims of injury that get extra compensation will be opened up.
Moving away from the “social contract” as the basis of the scheme could result in major changes for funding and entitlements. It could even be that the price to pay for the expansion of the scheme to include illness, which has been under discussion since the Woodhouse Report,102 is some combination of a reduction in entitlements payable under the scheme, and a return of the right to sue to some limited extent. One thing is certain: there are difficult questions yet to be raised and answered about the scope of extra-scheme payments to victims of injury.
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URL: http://www.nzlii.org/nz/journals/OtaLawRw/2019/7.html