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Tuesday, 24 June 2003
Page: 17356


Mr McMULLAN (7:41 PM) —The Trade Practices Amendment (Personal Injuries and Death) Bill 2003 is part of the Commonwealth response to the rapid increase in public liability and professional indemnity insurance premiums. Its intention is to prevent the recovery of damages where conduct in breach of part V, division 1 of the act results in personal injury or death. Part V, division 1 of the Trade Practices Act deals with unfair practices. For the purpose of this debate, the two most pertinent provisions are section 52, which, in summary, prohibits corporations from engaging in misleading and deceptive conduct, and section 53, which, again in summary, prohibits false and misleading representations in connection with the supply of goods or services. The bill essentially says that a company that misleads a consumer in a way that causes injury or death is not liable to pay any compensation under the Trade Practices Act. These amendments are said to be necessary to support the tort law reform process by which states and territories have instituted a number of measures aimed at limiting both the number of negligence claims and the quantum of damages paid.

Before I get to the detail of the proposal, let us recap the background a little. Insurance premiums have surged over the last few years. Every member of parliament has had stories from local constituency organisations and constituents about the impact of the surge in insurance premiums. I am sure that we have all had examples—I certainly have in my constituency—of customers who have been unable to get any cover at all.

Since March 2002, Commonwealth, state and territory ministers responsible for insurance have met five times to consider responses to rising premiums and the withdrawal of cover, particularly in relation to public liability and professional indemnity insurance. While there are a number of causes of the current problems in the insurance market—including obviously the impact of September 11, which changed views about terrorism and certainly had an impact on the whole reinsurance market, and the collapse of HIH—ministers received evidence that a significant factor contributing to the increase in premiums has been the growth in the number and cost of claims for negligence.

Over the past year, all states and territories have introduced tort law reforms, including caps on general damages, thresholds to prevent the commencement of actions in relation to minor injuries and measures to allow the voluntary assumption of risk. While responsibility for tort law reform rests predominantly with the states and territories, for some time Labor has stressed the importance of Commonwealth action to support the process. Last year Labor supported amendments to taxation laws to facilitate structured settlements, which were intended to reduce costs to insurers. Labor also supported the principle that people who engage in high-risk recreational activities should be able to waive their rights to sue. Labor has also called for reforms to be balanced to ensure that consumer rights are protected.

A particular issue that has been highlighted is the potential for plaintiffs to engage in forum shopping—that is, to avoid the restrictions imposed under state tort reforms by bringing actions under the Commonwealth Trade Practices Act. This becomes possible because the same conduct may form the basis of action under tort for negligence as well as under provisions of the Trade Practices Act such as those I referred to earlier concerning misleading and deceptive conduct or false and misleading representation. We do support an amendment to strengthen the protection, but the question for us is whether this is the right amendment.

In July 2002 the minister responsible, the Minister for Revenue and Assistant Treasurer, Senator Coonan, announced a review of the law of negligence to be headed by Justice Ipp. The terms of reference for the inquiry included an instruction to review the interaction of the Trade Practices Act with common law principles of negligence. In particular, the review was asked to develop and evaluate options for amendments to the Trade Practices Act to prevent individuals commencing actions in reliance on the Trade Practices Act, including actions for misleading and deceptive conduct, to recover compensation for personal injury and death. The Ipp report found that a number of provisions of the Trade Practices Act could form the basis for a claim for personal injury and death—obviously because, as we previously said, sections 52 and 53 of the TPA have that impact. The Ipp report also referred to unconscionable conduct in part IVA of the act and provisions relating to product safety and liability for defective products.

In relation to the potential overlap involving part V, division 1—the misleading and deceptive conduct and false and misleading representations sections—Ipp recommended that the Trade Practices Act should be amended to prevent individuals bringing actions for damages for personal injury and death under part V, division 1 and that the ACCC should no longer be able to bring representative actions for damages for personal injury and death resulting from contraventions of part V, division 1. This bill implements those recommendations.

Our concern is that these amendments do not strike the right balance between, on the one hand, the proper and recognised need to ensure that tort law reforms are not undermined and, on the other hand, the need to ensure the rights of consumers injured by misleading and deceptive conduct. It seems to me that Ipp's terms of reference were drawn so narrowly that the committee was essentially directed to come to the conclusion it did. If you look at the terms of reference and the conclusions, it is pretty hard to see how Justice Ipp could have come to any other conclusion when operating against those terms of reference.

In relation to the other overlaps, such as unconscionable conduct, Ipp simply stated that his recommendations regarding the limitation on liability and quantum in relation to negligence should also apply to claims made under the Trade Practices Act. This has been interpreted as meaning that claimants should not be entitled to any more under the TPA than they can claim under state or territory law for personal injury. We think this is a sound principle and we would like to see it examined by the Senate inquiry to determine why it could not also be applied in relation to damage suffered due to a breach of part V, division 1 of the Trade Practices Act.

In its submission to the Ipp committee, the ACCC argued that the scope of the TPA should not be limited. Among the arguments it made were that limiting the scope of part V is economically inefficient in that it forces consumers to incur greater search costs to determine which suppliers are reliable. It also argued that such a limitation undermines the competitive process by allowing firms that engage in misleading and deceptive practices to win customers at the expense of those that do not. The commission also argued that part V, division 1 is not simply a codification of the law of negligence but rather sets norms or standards for corporate behaviour. Section 52 in particular provides an important incentive for businesses to behave fairly and to have regard for consumers' safety. Without the availability of this important remedy, the standard of behaviour that consumers are entitled to expect may break down.

On the face of it, these views seem to be persuasive. We would like the Senate committee to investigate whether the proper concern to stop forum shopping from undermining the tort law reforms can be addressed by using thresholds and caps to restrict the damages recoverable for personal injuries under the Trade Practices Act in a manner which is broadly consistent with restrictions prevailing under state and territory law. This approach would have the advantage of ensuring that the economic efficiency and consumer protection benefits identified by the ACCC were largely maintained. This approach would also be consistent with the Ipp report's recommendations in relation to other provisions of the Trade Practices Act which may form the basis of a personal injury claim, such as unconscionable conduct under part IVA.

There is another issue that I think needs to be addressed. Last year the parliament passed amendments to the Trade Practices Act, allowing providers of recreational services to enforce waivers excluding liability for breach of the warranty of due care and skill implied in contracts by the Trade Practices Act. During the Senate debate on that bill, Labor moved amendments providing that any waiver that included a false and misleading statement would be void. At that time, Senator Coonan rejected the amendment, arguing that it was unnecessary as the Trade Practices Act, through the very sections that we are dealing with tonight—sections 52 and 53—already provided consumers with a statutory right to seek damages for misleading and deceptive conduct. The problem is that this bill seeks to remove that remedy.

Imagine a case where a consumer is induced to participate in a recreational activity by a false and misleading statement given by a recreational service provider. If the consumer signs a waiver—a procedure facilitated by the recent amendments—and suffers injury, they could be left with no remedy in negligence, contract or under the Trade Practices Act. It is quite possible that the courts would decline to enforce a waiver obtained in these circumstances, but there is a very strong case to revisit Labor's amendments to ensure that consumers of recreational services have the statutory protection that the government said they would have at the time the recreational service bill went through the parliament. We are getting sequential amend-ments that compound the impact without the first bill being able to accommodate the consequences of this bill which we are considering now.

Because we support the broad principle, we will not be opposing this bill in the House, but we will seek to have the issue of the interaction between these amendments and the amendments made last year in relation to recreational services examined by the Senate committee. I think that is a question of how we might maintain the balance between consumers' rights and an efficient insurance market. It is a difficult balance to strike.

Before concluding, I would like to make some general comments about the insurance crisis. There has been a lot of state and territory reform over the last 18 months. All members of the House will be well aware, or most will be, that this was sold to the Australian community on the basis that reform would lead to reduced premiums. If the Trade Practices Act applied, that would go very close to being false and misleading conduct, because in March this year the Assistant Treasurer, Senator Coonan, stated:

The actuarial information is that there ought to be an immediate reduction in premiums of about 13.5 per cent but obviously as attitudes to litigation change and the legal framework adjusts to a different way of looking at the handling of claims these reductions in premiums should escalate up to about 30 per cent.

If anybody can find insurance premiums falling by between 13.5 per cent and 30 per cent, I would invite them to come forward and display the example.

We understand that not all the Ipp reforms have been implemented and there are some differences in approach between the various jurisdictions. Nevertheless, it remains of con-cern that public liability premiums still seem to be heading up; not down, as the minister forecast. A JP Morgan study found that public liability premiums had gone up by 51 per cent in 2002. But the more worrying sign is that it forecasts further rises of 23 per cent this year. A 51 per cent rise in 2002; 23 per cent this year. The Australian community has not yet seen the pay-off it was promised from these reforms. In fact, it has not seen any pay-off at all.

Labor recognised that this was the trade-off and last year we introduced a private member's bill—the Trade Practices Amendment (Public Liability Insurance) Bill 2002. The intent of that legislation was to empower the ACCC to ensure that the savings that accrue to insurers from state and territory law reforms are passed on to consumers. This is the very power that this government thought was perfectly appropriate and legitimate with regard to ensuring that GST changes were passed on, but the government has refused to pursue this and has instead asked the ACCC to conduct informal monitoring. We understand that the first monitoring report is due out in the next month or so, and I call on the government to act swiftly if that report identifies that the tort reforms are being used by insurance companies to recoup past losses. The JP Morgan study says that is probably the case, but let us wait for the report. If the report does say that that rapid and continuing escalation in premiums is unabated, then I call on the government to take some action to deliver the benefits to consumers that are the underlying reasons for these reforms. The reforms are about delivering insurance products to consumers at a reasonable price, and these reforms have the potential to do that. We have been supporting the principles, but I worry that the government will not respond to our initiatives to give the benefit to the consumers rather than to the insurance companies. But let us see; the report is due out in the next month or so. It may not reinforce the view that prices are increasing swiftly, but I will be very surprised if it does not, because that is all the survey evidence and the anecdotal evidence shows.

It must also be remembered that not all the problems in the insurance market flow from increased litigation. The ACCC has found that the extremely high loss ratios experienced in recent years by public liability insurance were contributed to by the behaviour of the industry itself. The ACCC stated that in the 1990s insurers placed emphasis on obtaining market share in this class rather than pricing premiums on a cost based methodology. We all know that is true and we all know the substantial consequences of that, particularly in the case of HIH. A forgotten element of the reform process has been the need for insurers to improve their use of claims data. In its January 2003 report—that is, five months ago—the Productivity Commission stated that insurers could make better use of claims data in setting premiums and risk management. The opposition notes that APRA's statistical area is now putting together a national claims database for liability claims. We hope that work on this will proceed quickly. We would like to see action on all fronts to address the issue rather than simply reducing the rights of consumers to compensation.

I flag that the opposition have no problem with the principle underpinning this bill, but we have serious concern as to whether the amendment in itself and in its relationship with previous amendments, particularly those relating to recreational services, will deliver the benefits and the balance between the benefits and consumer protection. However, it is important that we do have action on this matter, so we will certainly not oppose the bill in this House. We will subsequently have a closer scrutiny of it in the Senate, and that will enable us to get both the principle and the detail right. We hope that we can deliver for the Australian people a balanced and responsible package that amends the Trade Practices Act to deal with issues of personal injury and death without forum shopping, which could clearly undermine the tort law reform process, while maintaining protection for the rights of Australian citizens as consumers. With that, I indicate that the opposition will not be opposing this legislation in the House.