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Aviation Legislation Amendment (Liability and Insurance) Bill 2012

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2010-2011-2012

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

AVIATION LEGISLATION AMENDMENT (LIABILITY AND INSURANCE) BILL   2012

 

 

 

 

 

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Infrastructure and Transport, the Honourable Anthony Albanese MP)



AVIATION LEGISLATION AMENDMENT (LIABILITY AND INSURANCE) BILL 2012

OUTLINE

The Bill amends the framework for the liability of air carriers in the event of an aircraft accident.  The framework is established by the Civil Aviation (Carriers’ Liability) Act 1959 and the Damage by Aircraft Act 1999.

The Civil Aviation (Carriers’ Liability and Insurance) Act 1959 deals with liability for passenger injury and death and ensures air operators take out insurance for these liabilities.  The Act also covers liability for damage to baggage and air cargo.  The Act is supported by complementary state government legislation which applies the Commonwealth laws to flights beyond the constitutional reach of the Commonwealth to create a national uniform scheme.

The Damage by Aircraft Act 1999 deals with third party (surface) damage, providing a system of strict and unlimited liability.

The amendments address some of the shortcomings in the current framework that were identified in the development of the 2009 National Aviation Policy White Paper.

The main amendments increase the liability of aircraft operators for the death or injury of passengers on domestic flights and increase the corresponding level of insurance required.

The Bill also implements a number of technical amendments to the framework in relation to the way liability is determined.

Civil Aviation (Carriers’ Liability) Act 1959 (the ‘CACL Act’)

Increasing liability and insurance

The Bill increases the cap on carriers’ liability for domestic flights, raising the liability cap for domestic passenger death or injury from $500,000 to $725,000.  The amount of $500,000 was set in 1994 and the Bill increases this amount to reflect changes in the consumer price index.

The Bill further requires carriers to increase the amount of insurance to $725,000 for domestic flights.  This is in line with the increase to the cap on liability mentioned above.

Exclusion of compensation for purely mental injuries arising on domestic flights

The Bill will exclude compensation for purely mental injuries arising on domestic flights.  This is consistent with the objective of harmonising, where appropriate, the domestic liability framework with the liability framework established under the benchmark Convention for the Unification of Certain Rules for International Carriage by Air, signed May 28 1999 (the 1999 Montreal Convention).  A significant area of inconsistency between our domestic and international liability frameworks relates to the treatment of mental injuries.

Article 17 of the 1999 Montreal Convention limits carriers’ liability to ‘death or bodily injury’. Courts have interpreted ‘bodily injury’ as excluding claims for purely mental injuries.  This is in contrast to the domestic system, which allows compensation for ‘personal injury’. Courts have interpreted this provision as allowing claims for mental injuries, irrespective of whether other ‘physical injuries’ have also been incurred.

The Bill will limit carriers’ liability under the domestic system to ‘bodily injury’ with the intention of ensuring that this issue is treated consistently across domestic and international frameworks.

Replace reference to the Montreal Protocol Number Four

The Bill replaces the reference to the Montreal Protocol Number Four with reference to the 1999 Montreal Convention.  Although the cargo provisions of the 1999 Montreal Convention replicate the cargo provisions of Montreal Protocol Number Four, it is preferable for any future Government regulation on this issue to reference the most modern international liability agreement.

Damage by Aircraft Act 1999 (the ‘DBA Act’)

Principle of Contributory Negligence

The Bill inserts a provision to provide for compensation payments to be reduced in circumstances where the victim was partially responsible for the damage.  This amendment responds to the finding in the Cook v Aircair Moree [1] litigation that the partial defence of contributory negligence is unavailable for claims brought under the DBA Act.  It is recognised that it would be in very rare occasions that a third party victim on the ground could be considered to have been partly negligent in causing the damage that they suffered as a result of an air crash.  However, following the outcome of Cook v Aircair Moree, it is appropriate to allow defendants an opportunity to argue that their liability should be appropriately reduced if they can show that the victim was partly negligent in causing the damage.

In order to show that the victim was partly ‘negligent’ in causing their loss, it is intended that the defendant will need to show, amongst other things, that the claimant did not act in accordance with the common law ‘reasonable person’ standard with respect to the claimant’s duty to avoid or prevent the loss or damage that they have suffered.

Right of contribution

The Bill provides for an express provision that enables defendants to seek contribution from other parties who may have contributed to the damage suffered by the person bringing the claim.  This recognises the appropriateness of allowing defendants the opportunity to seek contribution towards the damages for which they are found liable under the DBA Act from other parties who are found to have contributed to the damage claimed under the DBA Act.  This new provision also responds to the outcome of the Cook v Aircair Moree litigation. 

Exclusion of mental injuries

The Bill will preclude claims for compensation for mental injuries where the claimant has not suffered additional personal or property damage.  This addresses concerns raised by industry in relation to the exposure of carriers to potentially very large groups of claimants who could witness an air crash and obtain unlimited damages for mental injuries on a strict liability basis.  It is extremely difficult to calculate the extent of this type of liability.  This provision will ensure that the primary purpose of the DBA Act is to provide protection for those who have a relatively direct link with the air crash, having either suffered loss of life, physical/bodily damage, and/or property damage.  Claimants who fall within this class will be afforded the full protection of the Act, including access to compensation for mental injury.  The Bill provides that the Act will not extend to those who have witnessed an air crash from afar, and, except for issues triggered by the trauma associated with the observance of the event not otherwise suffered any physical damage to the person or their property.

The DBA Act, unlike the CACL Act, does not have an ‘exclusive remedy’ provision.  This means that people who do suffer ‘pure’ mental injury will not be prevented from seeking compensation through a fault based negligence claim.

FINANCIAL IMPACT STATEMENT

The Bill will have no financial impact.

REGULATION IMPACT STATEMENT

  1. Background

The liability arrangements applying to the injury or death of air passengers are contained in the Civil Aviation (Carriers’ Liability) Act 1959 (the CACL Act).  It sets out several liability frameworks that apply depending on the origin and destination of travel.  It also sets out minimum levels of insurance that operators are required to purchase in order to cover these potential liabilities.

Liability for international travel is determined in accordance with a series of international treaties.  The treaty that will apply will depend on the country of origin and the country of destination of travel. 

This RIS is concerned with domestic travel.  An airline’s liability for death or injury to a passenger travelling domestically is currently capped at $500,000 per passenger.  Airlines are required to maintain insurance of $500,000 per passenger to cover these potential liabilities.

The cap on liability was last adjusted in 1994. 

This RIS is intended to assist Government in its consideration of whether it is appropriate to adjust the liability cap (and associated insurance requirements) to reflect changes in the cost of living. 

  1. Problem

A problem could arise if an air operator was to crash and the passenger victims were unable to obtain appropriate compensation due to an outdated cap on airline liability.

In addition to capping an airline’s liability, the domestic liability framework provides that the airline’s liability is strict.  This has traditionally been the trade-off for passengers: airlines are assumed to be at fault, removing the need for victims to navigate compensation hurdles such as proving negligence on the part of the airline.

The current cap is not the product of a specific formula or benchmark.  Rather, by capping the amount of available compensation, but making it easier to obtain, the framework has sought to balance the interests of air accident victims and airlines.

There is no specific data comparing the levels of compensation applicable to different modes of transport.  However, liability in other transport modes may be resolved in accordance with broader civil liability laws - i.e. there may be no cap on liability, but the victim will not receive compensation unless they can prove the transport operator was at fault. 

The system of mandatory insurance is an important adjunct to the liability framework.  These requirements ensure that money is available to provide compensation to air passengers in the event of an accident, matching the amount of mandatory insurance with the cap on liability.  The ‘non-voidable’ aspects of the scheme ensure that the insurance policy is not contingent on the financial liquidity of the operator, or conditional on the following of certain safety procedures. 

The cap on liability was last adjusted in 1994.  From 1994, inflation has increased the cost of living by an average of approximately 2.7 per cent each year.  The cost of a ‘basket’ of goods and services increased by over 47 per cent since 1994. 

In this context, it is appropriate to question whether the framework requires rebalancing, by increasing the cap on liability (along with the mandatory insurance requirements) to ensure that it adequately reflects the interests of both air passengers and airlines. 

  1. Objectives

The Government has developed objectives for Australia’s system of air operators’ liability and insurance.  It is proposed that the passenger liability cap (and associated insurance requirements) for domestic air operators be consistent with these objectives.  The objectives of Australia’s aviation liability and insurance framework should be to:

 

·          Provide prompt and equitable compensation to victims of air accidents;

·          Foster a productive and sustainable aviation industry;

·          Provide an appropriate balance between the interests of victims, carriers, insurers and governments;

·          Be as simple as possible, to increase certainty for industry participants and reduce compliance costs; and

·          therefore be consistent with our international obligations, yet appropriately tailored for the Australian market.

  1. Options

There are four options available to Government outlined below.

Other alternatives (such as a co-regulatory approach between industry and government) are not considered viable, as the air operator industry is fragmented and does not have a peak body representing all interested parties, which include major international airlines, major domestic carriers, low cost carriers, and smaller regional passenger operations.

The current model is established by national uniform legislation, whereby state government legislation applies the Commonwealth laws to situations beyond the scope of the Commonwealth Act.

Option 1 - existing arrangements

This option involves maintaining the status quo, whereby the level of the cap and mandatory insurance is maintained at $500,000 per passenger. 

Option 2 - removal of separate requirements

This option involves the removal of the separate liability and insurance framework for domestic passengers altogether. 

In the absence of any specific regulation on these matters, victims of air accidents would pursue compensation for air accidents in accordance with state government civil liability regimes. This would generally require the victim to prove fault (or some form of negligence) on the part of the airline.  The airline could choose to insure these risks as they felt appropriate. 

Option 3 - Apply international laws

This option involves giving domestic application to an international treaty on passenger liability which Australia currently applies to international travel only. 

The Montreal Convention entered into force for Australia on 24 January 2009, modernising and improving the rules applying to the liability of international air carriers. It provides for a two-tier system of liability. Applicants are able to claim up to 113,100 Special Drawing Rights (SDR) on a strict liability basis (i.e. there is no requirement to prove fault, only that the injury was incurred).  Damages above the 113,100 SDR threshold are available to the claimant unless the air carrier is able to prove that the damage was not caused by the negligence or other wrongful act or omission of the carrier, its servants or agents. The SDR is a monetary unit of the International Monetary Fund.

The Convention does not specify minimum insurance levels, leaving these matters to individual states.  Australia currently requires international carriers to purchase 260,000 SDR (currently approximately $400,000) per passenger, to cover their potential liabilities under the Convention.

Although the Convention itself only applies to international travel between State Parties to the Convention, there is nothing to prevent Australia importing the liability framework and applying it to domestic travel.  This is the case in Europe, where the Montreal Convention applies to both domestic European travel, as well as international travel to other ‘Montreal’ countries. 

Option 4 - Change existing arrangements to reflect inflation

This option involves increasing the cap on liability to $725,000 per passenger, along with the amount of mandatory insurance.  This amount reflects an approximate average annual inflation rate of 2.7% since 1994.

  1. Impact Analysis

There are two main groups to be considered when considering the impact of these options: commercial air operators and the broader general public.  The impact of the various options on air operators will vary in accordance with the operators’ fleet, as different aircraft have different insurance profiles.    

Impact of Option 1 - existing arrangements

This option will not impact on air operators, although insurance costs may still increase in accordance with broader fluctuations in the insurance market.    

The impact for air passengers will be that the value of compensation facilitated by the CACL Act will have been significantly reduced since it was last reformed in 1994.  As noted above, the cost of a ‘basket’ of goods and services increased by over 47 per cent since 1994.  This represents a significant reduction in the protection afforded to air passengers under the framework. 

This option is not recommended, as it risks failing to provide ‘prompt and equitable compensation to victims of air accidents’ in accordance with the objectives of the carriers’ liability and insurance framework.  It may also fail to ‘provide an appropriate balance between the interests of victims, carriers, insurers and governments’. 

Impact of Option 2- removal of separate requirements

Some industry stakeholders have questioned whether it was appropriate to regulate the insurance and liability issues that arise in the context of an air crash any differently to other transport modes.  These stakeholders note that the liability and insurance requirements for air carriers tend to be more onerous than the arrangements in place for other transport sectors (such as bus travel, for example).  However, this view is not shared by the majority of industry.

This option would lead to significant uncertainty for air carriers.  If matters were to be settled in accordance with state government civil liability regimes in accordance with this option, there would be no ceiling on final compensation awards.  The certainty in relation to maximum compensation costs is recognised as a key advantage to airlines under the existing scheme, which would be lost under this option. 

In addition, there is a risk that compensation claims would result in protracted legal proceedings and additional legal expenses.  This is in contrast to the existing framework.  A key feature of the existing scheme is that compensation claims tend to be settled by mutual agreement out of court.  This is because there are no issues in relation to the fault of the airline, and the only matters requiring resolution relate to the quantum of damages. 

Australia’s liability laws for domestic travel currently share many similarities with international laws on air passenger liability.  Moving away from this broad framework (to a system comparable with other transport modes) could potentially have significant compliance costs for operators, who may be required to contend with radically different liability regimes.  

It is uncertain how the move from a strict and limited liability system to a fault-based, unlimited liability system would impact on airlines’ insurance costs.  On the one hand, it would become the airlines’ choice to choose how much (if any) insurance to purchase, which could potentially lower costs for some operators.  However, it is difficult to determine how much insurance might be considered appropriate for those airlines wishing to obtain a ‘prudent’ level of insurance (noting that it is not possible to purchase insurance for an unlimited value), and therefore how these airlines’ insurance costs might be affected.   This is because compensation claims currently tend to be settled by mutual and confidential agreement out of court, so that it is difficult to obtain data on the size of compensation awards and the circumstances that led to the claim.

The impact on air passengers would be similarly uncertain.  As with airlines, a key advantage for air passengers under the existing arrangements is that expensive and protracted legal proceedings tend to be avoided because there are no issues in relation to the fault of the airline, and the only matters requiring resolution relate to the quantum of damages.  This advantage would be lost under this option. 

As there would be no cap on liability, air passengers could potentially obtain larger amounts of compensation.  However, as airlines would only be liable when at fault, they will be eligible for compensation in a reduced range of circumstances.

As it is not possible to predict the impact on airline insurance costs, it is not possible to determine any impact on the costs to the consumer of air services under this option. 

Impact of Option 3 - Apply international laws

This option would also lead to greater uncertainty for air carriers.  The certainty in relation to maximum compensation costs is recognised as a key advantage to airlines under the existing scheme, which would be lost under this option. 

The impact on airlines’ insurance costs is more predictable, as the mandatory insurance requirements under the Montreal Convention are largely the same as the existing arrangements for domestic carriers, in accordance with Option 1.  It is therefore not expected that there would be an impact on insurance costs in the short term, however these costs would increase in line with increases to the strict liability threshold. 

The main impact on air passengers (also impacting on air carriers) would be that it would take longer to settle compensation claims.  The Government has received clear advice from industry that passenger liability claims under the domestic system are settled much more quickly than those settled under the Montreal Convention, because the Montreal Convention introduces a fault element (as with Option 2), leading to more protracted legal action, and increased legal costs for air passengers. 

Similar to option 2, air passengers could potentially obtain larger amounts of compensation as there would be no cap on liability.  However, as a fault element is introduced for claims larger than 113,100 SDR, air passengers will be eligible for compensation in excess of this amount (but less than $500,000 as per Option 1, or less than $725,000 as per Option 4) in a reduced range of circumstances. 

Impact of Option 4 - Change existing arrangements to reflect inflation

The insurance requirements under this option are higher than that those under Option 3 due to the different liability arrangements applicable to international and domestic insurance requirements, respectively. As domestic liability is strict to a higher level, the Consumer Price Index represents the most appropriate means of indexing the current $500,000 cap.

The Government has commissioned advice from Access Economics to estimate the impact of this option.  There will be an impact on airlines as insurance costs will rise.  The Government is mindful that premium increases may impact on the thin operating margins of some airlines, particularly smaller operators.

 

However, it should be noted that insurance costs represent only a small component of an airline's overall cost base.  Insurance may represent only 2 or 3 per cent of total costs for smaller operators, and significantly less for larger operators.  Furthermore, for smaller aircraft the majority of the premium relates to the cost of insuring the aircraft hull, rather than liability risks.  Indicative estimates suggest that, for a Cessna 172 (carrying 3 passengers), up to 70 per cent of a total premium may relate to the insuring of the aircraft hull.  For these reasons, it is expected that increasing the mandatory passenger insurance requirements to $725,000 per passenger would have a relatively modest impact on insurance premiums, especially for operators utilising smaller aircraft.

Rough estimates suggest that increasing the level of mandatory passenger insurance to $725,000 would have the following impact on total insurance premiums (covering hull, passenger and liability) for the following aircraft:

·          Cessna 172 (3 passengers): increase of around 9.5 per cent (less than $500 per year)

·          Dash 8 (36 Passengers): increase of around 13 per cent (around $4200 per year)

·          Boeing 737 (115 Passengers): increase of around 16 per cent (around $11,000 per year)

It should be noted that there is uncertainty in relation to these estimates. 

The compliance costs (over and above the costs of additional insurance) associated with this option are expected to be negligible, as the regulatory framework for passenger insurance already exists, and only minor changes will be required to update the framework in accordance with this option. 

Airlines will benefit from the certainty of an unbreakable cap on liability. 

Although these increases are significant, it is suggested that it is appropriate for these costs to be absorbed by the market, noting that these potential premium increases have essentially been deferred until now as liability exposure has not been adjusted to reflect inflation.

This option will also impact on air passengers, as it is expected that operators will seek to recoup these additional costs by passing them to consumers via increased ticket costs. Estimates suggest that the insurance cost component of ticket prices could increase to about 0.465 per cent for major airlines and around 2.8 per cent for smaller carriers.  This could increase the ticket price of a $200 flight provided by a major airline by about 13 cents and that provided by a smaller regional carrier by about 63 cents.  Again, there are uncertainties regarding these estimates and the impact on ticket prices would depend on a range of market factors and the individual circumstances of the airline.

Unlike options 2 and 3, consumers will benefit from a streamlined settlement process, which removes the requirement to prove fault.  However, it is possible that victims could receive less compensation than under options 2 and 3, due to the operation of the cap.  

 

  1.  Consultation

The proposal to increase the cap on domestic passenger liability is the product of an extensive consultation process.

The proposal has been shaped as part of the development of the 2009 National Aviation White Paper.  Comments on the broader system of air operators insurance and liability were sought in the Aviation ‘Issues Paper’ which was released in April 2008.  This paper specifically asked whether the existing domestic liability arrangements remained appropriate.  The Aviation Green Paper, which was released in December 2008, foreshadowed the release of a further discussion paper to specifically canvass issues relating to air operators liability and insurance.

This discussion paper was released in May 2009.  It made 30 preliminary findings on the overall framework, and invited stakeholders to comment on the preliminary findings. 

Preliminary finding number 7 stated that:

The Government should not apply the Montreal Convention to domestic travel at this stage, and instead maintain a separate system of strict and capped liability.

Preliminary finding number 8 stated that:

The Government should increase the domestic passenger liability cap to $725,000 to reflect changes in the cost of living.

Preliminary finding number 23 stated that:

The Government should increase the level of mandatory passenger insurance for domestic travel to $725,000 per passenger, in line with the proposed increase to the cap on liability.

The discussion paper was made available on the Department’s website, and was sent to over 30 key stakeholders who had either raised liability and insurance issues in their response to the Issues Paper and/or Green Paper, or who have a particular interest in these issues.  Copies were also provided to state governments for comment, and the release of the discussion paper was noted in the ‘CASA Briefing’ publication which is a regular email update sent by CASA to industry participants to provide updates on regulatory developments.

The Department received a total of 17 submissions in response to the paper, of which 10 specifically addressed the issue of the domestic passenger liability cap.  Eight of the submissions were either supportive or strongly supportive of the preliminary findings - and by extension option 4.    

Two submissions opposed the proposal in the preliminary findings.  One submission supported the domestic application of the Montreal Convention (option 3), and another preferred a smaller increase to the cap to $575,000.

  1. Conclusion and Recommended Option

On balance, it is recommended that the Government pursue option 4. 

Option 1 is not recommended as the value of compensation under this option has been significantly reduced since it was last updated in 1994.  Accordingly, it is not consistent with the objectives of the liability and insurance framework.  In particular, it is not considered that this option provides equitable compensation to victims of air accidents; and it does not provide an appropriate balance between the interests of victims and air operators. 

Option 2 is not recommended because it could lead to delays in settling claims, increasing legal costs for air passengers and air carriers.  It would also create significant uncertainty for air carriers in relation to their potential insurance and liability costs.  Accordingly, the option is not consistent with the objectives of the liability and insurance framework, insofar as compensation would not be prompt, and could potentially be inequitable depending on whether the airline was at fault.

Option 3 is not recommended for the reasons outlined in relation to Option 2.  

Option 4 is recommended as it is most consistent with the objectives of the aviation and insurance framework.  Although insurance costs will increase for air operators, these increases are considered justified when weighed against the interests of air passengers.  The option provides a streamlined system of compensating air passengers, while minimising legal costs for both airlines and passengers.  Although the amount of available compensation is limited, passengers will find it easier to access compensation.  The option received broad support in the consultation process.   

  1. Implementation and Review

The Department has liaised with CASA (responsible for the enforcement of the mandatory insurance laws) to coordinate the revised limits with CASA’s administrative processes. 

The Department is mindful that many commercial operators tend to renew their insurance at the same time of year, and will work with industry to ensure that the introduction of the revised limits are timed to minimise disruption to the industry.  It is not proposed that specific transitional requirements will be required to introduce the new liability limits and insurance requirements. 

Following implementation of the revised liability and insurance system, it is proposed that a review of the scheme’s operation will be initiated if it becomes apparent that this is appropriate. 

 

 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Aviation Legislation Amendment (Liability and Insurance) Bill 2012

 

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Bill

The existing carriers’ liability and insurance framework is implemented by two key pieces of legislation:  

·          The Civil Aviation (Carriers’ Liability) Act 1959 (the ‘CACL Act’), which deals with liability for death or injury to passengers, baggage and cargo.  It implements:

                                                  i.       a range of liability frameworks established by various international agreements which cover international flights involving Australian and international carriers;

                                                ii.       a separate system of liability to deal with domestic interstate flights, which is complemented by state government legislation for intra-state travel; and

                                              iii.       the non-voidable insurance system for passenger liability (also complemented by state government legislation). 

·          The Damage by Aircraft Act 1999 (the ‘DBA Act’), which establishes a liability framework for third party victims of accidents causing damage on the ground.   There is currently no system of mandatory insurance relating to this liability.  Separate (non-uniform) state government legislation applies to flights beyond the scope of the Commonwealth legislation.

The most significant amendment under this Bill is raising the liability cap (and associated minimum insurance requirements) for domestic passenger death or injury from $500,000 (set in 1994) to $725,000 to reflect increases in the cost of living.  The minimum level of insurance is also to be increased from $500,000 to $725,000.  It is important that the cap is raised as a matter of priority for victims of aircraft accidents.

Other provisions included in the Bill:

  • ensure consistency in the CACL Act, so that the eligibility for damages relating to mental injuries under the domestic liability framework is consistent with the international framework created by the Convention for the Unification of Certain Rules for International Carriage by Air, signed May 28 1999 (the 1999 Montreal Convention);
  • amend the DBA Act to include the principle of contributory negligence;
  • amend the DBA Act to allow defendants to seek a right of contribution from other parties who may have contributed to the damage suffered by the person bringing the claim;
  • amend the DBA Act to preclude potential claimants from claiming compensation for mental injuries where that person has not suffered additional personal or property damage; and
  • update a reference in the CACL Act to the Montreal Protocol Number 4 with reference to the more recent 1999 Montreal Convention;

The provisions in the Bill stem from a comprehensive review of the carriers’ liability and insurance framework.  The review was conducted with reference to several objectives namely to:

·          provide prompt and equitable compensation to victims of air accidents;

·          foster a productive and sustainable aviation industry;

·          provide an appropriate balance between the interests of victims, carriers, insurers and governments;

·          be as simple as possible, to increase certainty for industry participants and reduce compliance costs; and

·          be consistent with our international obligations, appropriately tailored for the Australian market.

Human rights implications

Right to equality and non-discrimination

The Bill proposes to amend section 28 of the CACL Act and section 10(1) DBA Act in respect of liability for ‘mental injuries’. 

The amendment to section 28 of the CACL Act is intended to ensure that damages are assessed consistently with the damages under the 1999 Montreal Convention.  This provision will have implications for the ability of accident victims who suffer ‘pure mental injury’ to claim compensation under the CACL Act as they will be unable to claim compensation for their mental injury unless they can also show that they have also suffered a physical injury.

Section 10(1) of the DBA Act will be amended to preclude potential claimants from claiming compensation for mental injuries where that person has not suffered additional personal or property damage.  This provision will narrow the scope of the aircraft operators liability, so that compensation under the Act for ‘pure mental injuries’ will be available in more limited circumstances, such as under the relevant State’s civil liability laws relating to negligence.

These two provisions relating to the eligibility for damages with respect to mental injuries engage the right to equality before the law under Article 26 of the International Covenant on Civil and Political Rights (ICCPR).  The right to equal protection of the law in Article 26 of the ICCPR prohibits discrimination in law or in practice in any field regulated by public authorities (United Nations Human Rights Committee, General Comment 18 ).  This means that when the Commonwealth legislates in any particular area, it must do so without discriminating. 

The term ‘discrimination’ means any distinction, exclusion, restriction or preference on a prohibited ground, which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise by all persons, on an equal footing, of all rights and freedoms (United Nations Human Rights Committee, General Comment 18 ).  Article 26 of the ICCPR is a ‘free-standing’ bar on discrimination and is not limited to the rights protected by the ICCPR.   

In addition, the grounds of prohibited discrimination are not closed, and include race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status (United Nations Human Rights Committee, General Comment 18 ).  Decisions by the United Nations Human Rights Committee suggest that a clearly definable group of people linked by their common status is likely to fall under the definition of ‘other status’. While disability - which encompasses both physical and mental disability - is not specifically listed in Article 26, the approach of the Human Rights Committee suggests that it may be properly considered an ‘other status’ for the purpose of the ICCPR.  Therefore, a difference in treatment (including on the basis of disability) - whether directly or indirectly discriminatory - must have a legitimate aim and an objective and reasonable justification to be consistent with Article 26 of the ICCPR.

These provisions also engage Article 5 of the Convention on the Rights of Persons with Disabilities (CRPD), which specifically prohibits discrimination on the basis of disability and guarantees persons with disabilities equal and effective legal protection against discrimination on all grounds.  To be consistent with Article 5 of the CRPD (and similar to the ICCPR), a difference in treatment on the basis of disability - including physical and mental disability - must have a legitimate aim and an objective and reasonable justification.

These provisions engage the right to equality and non-discrimination because the provisions will effectively distinguish between individuals suffering a physical disability from airline accident-related physical injuries and individuals suffering a mental injury.  Any differential treatment will not be inconsistent with Article 26 of the ICCPR or Article 5 of the CRPD if the amendments aim to achieve a legitimate objective and are reasonable, necessary and proportionate to that objective.

Legitimate objective

The objectives of the amendments are to balance the interests of air crash victims and air operators and to harmonise Australia’s liability arrangements with international arrangements which are widely recognised as providing this balance.  

In respect to the CACL Act, amendments to these provisions have the objective of ensuring that the liability framework for domestic flights is consistent with the benchmark liability framework for international flights under the 1999 Montreal Convention.  The 1999 Montreal Convention is internationally recognised as providing an equitable balance between the interests of airlines and accident victims.  The amendments will ensure greater consistency with this more equitable framework while removing unnecessary complexities from the overall liability structure.  The 1999 Montreal Convention has been implemented by over 100 States, and covers the vast majority of international flights.  Many jurisdictions, including all European countries, apply the 1999 Montreal Convention to domestic flights as well. 

The current Australian domestic liability framework provides compensation for ‘personal injury’.  Courts have interpreted this provision as allowing compensation for ‘pure mental injury’.  The 1999 Montreal Convention provides compensation for ‘bodily injury’, which has been interpreted by courts as only allowing compensation for mental injuries when they are also accompanied by other ‘physical’ injuries.  The amendment to section 28 of the CACL Act will therefore rectify a significant area of inconsistency between Australia’s domestic liability framework and the international liability framework, while still ensuring that air crash victims are afforded equitable access to compensation.

In respect to the amendments to the DBA Act, these provisions also have the objective of ensuring that there is an appropriate balance between the interests of aircraft operators and the interests of air crash victims. 

Specifically, the amendments respond to concerns raised by airlines and insurers in the review of carriers’ liability and insurance.  These concerns relate to the potential for people to claim compensation under the DBA Act for ‘pure’ mental injury as a result of witnessing an air crash.  This would expose aircraft operators to a potentially very wide group of claimants on the basis of strict and unlimited liability, thereby imposing incalculable risks on the industry. 

Reasonable and proportionate

The provisions in the Bill are not ‘blanket provisions’ in relation to mental injuries.  Mental injuries will still be compensable if the claimant can show that they have also suffered other harm.  In relation to the third party victims (on the surface), a claimant may also pursue a claim for ‘pure mental injuries’ under the civil law.

The amendments ensure that there is an appropriate balance between the interests of aircraft operators and the interests of air crash victims.  The DBA Act is generously weighted in favour of air crash victims, insofar as it provides for strict and unlimited liability - there is no requirement for air crash victims to prove fault on the part of the aircraft operator, and there is no cap on the operator’s potential liability.  However, the aviation industry has raised concerns about the potentially large groups of claimants, who as result of having witnessed a major aviation disaster, could mount a claim under the DBA Act -without the requirement to prove fault- for ‘pure mental injury’ suffered as a result of having witnessed the crash. 

The provisions will limit the scope of the air operators’ liability, while still ensuring that victims who have suffered physical harm or property damage can access compensation for these injuries and damage, as well as compensation for any mental injury suffered.  This amendment will ensure a more appropriate balance between the interests of air crash victims and aircraft operators.

Therefore, to the extent that provisions may limit the right to equality and non-discrimination, those limitations are reasonable, necessary and proportionate in achieving a legitimate objective.

Conclusion

The Bill is compatible with human rights because t o the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

 

Minister for Infrastructure and Transport, the Hon Anthony Albanese MP

 

NOTES ON CLAUSES

 

Clause 1: Short Title

 

1.       This clause is a formal provision specifying the short title of the Bill.

 

Clause 2: Commencement

 

2.       Clause 2 sets out the commencement dates of the Bill.  Sections 1 to 3 of the Bill will commence on the day on which the Bill receives Royal Assent.  Schedule 1 to the Bill will commence on a day to be fixed by proclamation.  If Schedule 1 has not commenced within 6 months of the day on which the Bill received Royal Assent the Bill will commence on the day after the 6 months have passed.

 

Clause 3: Schedule

 

3.       Clause 3 provides that the Civil Aviation (Carriers’ Liability) Act 1959 and the Damage by Aircraft Act 1999 are amended as set out in the applicable items in the schedule to the Bill.

 

Schedule 1 - Amendments

 

Civil Aviation (Carriers’ Liability) Act 1959

 

Item 1 - Section 28

 

1.       Item 1 replaces reference to ‘personal’ injury with reference to ‘bodily’ injury in relation to the liability of a carrier for the death or injury of a passenger.  This is intended to ensure that courts determine the liability of a carrier under the domestic liability framework consistent with the liability of a carrier under the 1999 Montreal Convention, excluding the liability of carriers for ‘pure’ mental injuries.

 

Item 2 - Paragraphs 31(1)(a), (b) and (c)

 

2.       Item 2 increases the liability of domestic carriers from $500,000 to $725,000.  If a higher amount is prescribed by regulation, or if the contract of carriage specified a higher amount, then the higher amount will apply.

 

Item 3 - Section 41

 

3.       Item 3 updates a regulation making power in the Act.  The current regulation making power enables the development of regulations regarding the liability of domestic carriers with respect to cargo, consistent with the Warsaw Convention as amended at The Hague, 1955, and by Protocol No. 4 of Montreal, 1975 (the ‘Montreal No. 4 Convention’).  The item replaces the reference to the ‘Montreal No. 4 Convention’ with a reference to the more recent 1999 Montreal Convention. 

4.       No regulations are currently in force under this provision.

Item 4 - Paragraph 41C(3)(a)

 

5.       Item 4 increases the amount of insurance that will be required from domestic carriers from $500,000 to $725,000, commensurate with the increase in liability under item 2.

 

Damage by Aircraft Act 1999

Item 5 - After subsection 10(1)

 

6.       Item 5 narrows the scope of liability under section 10(2) of the Act (aircraft owners and operators) for the death of, or injury to, people or damage to property under section 10(1) of the Act (damage caused by the impact of an aircraft).  The item provides that aircraft owners and operators will not be liable for mental injuries caused by the crash of their aircraft unless the person suffering mental injuries has also suffered other specified injuries, loss, damage or destruction.

Item 6 - After section 11

 

7.       Item 6 inserts the principle of contributory negligence into the Act and provides that a right of contribution is available under the Act.

8.       The new section 11A of the Act inserts the principle of contributory negligence into the Act, so that the damages that are recoverable by a claimant under the Act will be reduced if the defendant can prove that the negligence of the claimant was caused by, or contributed to, the loss, damage or destruction suffered by the claimant.  The insertion of 11A also provides a method for the court to determine the amount of the reduction of the damages in these circumstances.

9.       The new section 11B of the Act inserts the principle of a right of contribution into the Act, so that a defendant who is liable under s 10 of the Act can seek contribution from a third party who has caused or contributed to the damage caused by the defendant.  The third party may or may not be jointly or severally liable under the Act or could be partly negligent in causing or contributing to the loss that the victim has suffered. 

Item 7 - Application provisions

 

10.   Item 7 sets out the application provisions relating to when individual amendments will take effect.

11.   Provisions relating to the amended term ‘bodily injury’ and the increase in liability for domestic carriers under the Civil Aviation (Carriers’ Liability) Act 1959 , will apply to accidents that occur on or after the commencement of those provisions.

12.   The provision relating to increasing the amount of insurance that will be required for domestic passenger-carrying operations under the Civil Aviation (Carriers’ Liability) Act 1959 will apply to operations engaged in, or proposed to be engaged in, on or after the commencement of these provisions.

13.   The provision relating to the availability of compensation for mental injury under the Damage by Aircraft Act 1999 will apply to any personal injury, material loss, damage or destruction suffered on or after the commencement of that provision.

14.   Provisions in the Damage by Aircraft Act 1999 relating to contributory negligence and right of contribution will apply to injury, loss, damage or destruction that is incurred on or after the commencement of that provision.

 




[1] ACQ Pty Ltd v Cook [2008] NSWCA 161.