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ACA releases report on limits on tort liability



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ACA: Media Releases - 46 o f 1998 (ACA Release... Page 1 o f 2

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Media Release No. 46 of 1998-11 November 1998

The Australian Communications Authority (ACA) today released its report Limits on Tort Liability (Tort Report). I he report contains the ACA’s decision not to impose any limits on the amount of monetary compensation recoverable from carriers and carriage service providers for loss or damage arising from negligent or other tortious acts in relation to supply of telecommunications services.

Releasing the report, ACA Chairman Tony Shaw commented that, “In an open and competitive communications industry, the ACA concluded that the long-term interests of users would not be promoted by the setting of limits on the tort liability of carriers and carriage service providers.”

The ACA has undertaken an extensive consultation process in compiling the report, including meeting with industry and consumer representatives. An Issues Paper was released in February 1998 seeking written submissions on whether or not the ACA should impose any liability limits. * - ' ' '

The ACA also considered the detailed report Liability in Tort for Network and Service Failure, prepared by the Communications Law Centre, which examined the liability of carriers and carriage service providers where telecommunications networks and services fail.

A copy of the Executive Summary of the Limits on Tort Liability report is attached. Copies of the full report are available from the ACA by contacting (03) 9963 6968, and from ACA Publications: Industry Reports

For more information contact: Norm O’Doherty Special Adviser Telephone: (03) 9963 6920

Executive Summary

All media enquiries: Dianne Frey Manager, Communications and Information

Telephone: (03) 9963 6966 Mobile: 0418 399 552

The Australian Communications Authority (ACA) has the power to impose limits on amounts recoverable in tort in relation to the supply of carriage services under clause 46 of Schedule 3 of the Telecommunications Act 1997 (1997 Act). At common law, claims may be made against carriers and carriage service providers for loss or damage resulting from tortious acts or omissions in relation to the supply of carriage services.

At present the 1997 Act does not protect carriers or carriage service providers against claims for loss or damage arising in relation to the supply of carriage services. Such claims may be made against carriers and providers based on a cause of action under tort, contract, trade practices and related legislation, the Customer Service Guarantee, the Telecommunications Industry Ombudsman Scheme, clause 42 of

Schedule 3 of the 1997 Act which deals with compensation payable by a carrier in relation to property or the Copyright Act 1968. However, carriers consider claims based on tort to be of greatest concern as there is uncertainty about the extent of their potential exposure to such claims.

The law of torts requires a carrier or carriage service provider which negligently causes personal injury or property damage to provide compensation for the cost of treating the injury or repairing the damage and for any economic loss which is a direct consequence of the injury or damage. Examples of economic loss include loss of profits, loss of wages or other financial expenses. In exceptional cases, torts law will impose liability upon a carrier or provider for pure economic loss which arises independently of any personal injury or property damage. On the basis of the information available to the ACA, it is unlikely that either carriers or carriage service providers will be liable for pure economic losses arising from catastrophic or intermittent network failures as it is unlikely that any duty of care to avoid that type of loss will arise.

Carriers and carriage service providers may limit or exclude their liability (including liability for negligence) in relation to the supply of carriage services by including appropriate terms and conditions in customer contracts and access agreements. Carriers may also include standard indemnity clauses in contracts with resellers and interconnection agreements which protect the carrier against third party claims by customers of the reseller or interconnecting carrier who have no direct contractual relationship with the carrier. In addition insurance may be taken out by carriers and carriage service providers to cover the risks associated

http://www.aca.gov.au/media/46-98.htm 17/11/1998

ACA: Media Releases - 46 o f 1998 (ACA Release... Page 2 o f 2

with supplying carriage services. On the basis of the information available to the ACA, the viability of carriers or providers would not appear to be threatened by potentially enormous awards of damages arising from tortious acts in relation to the supply of carriage services.

There are several public interest considerations which are relevant when contemplating whether or not the ACA should exercise its power to impose a tort liability limit in relation to the supply of carriage services. These public interest considerations are based largely on the objects contained in the 1997 Act.

Initially, immunity from actions in relation to the supply of telecommunications services appears to have been a product of the general immunity of the Crown in tort which is no longer a relevant rationale for limiting the liability of Telstra or privately owned carriers or carriage service providers in relation to the supply of carriage services. The imposition of a tort liability limit by the ACA would appear to be inconsistent with the trend against conferring legislative protection on industries which are being liberalised and opened to competition.

The main object of the 1997 Act includes providing a regulatory framework that promotes the long-term interests of end-users of carriage services and the efficiency and international competitiveness of the Australian telecommunications industry. The long-term interests of end-users may be promoted by promoting competition within the telecommunications industry. It is also an object of the 1997 Act to promote the development of an Australian industry that is efficient, competitive and responsive to the needs of the Australian community. The information available to the ACA does not establish that the imposition of a tort

liability limit would significantly improve the efficiency, competitiveness or responsiveness of the Australian telecommunications industry.

Another object of the 1997 Act is to ensure that standard telephone services, payphones and prescribed carriage services are reasonably accessible to all people in Australia wherever they reside or carry on business. As the national universal service provider Telstra is responsible for fulfilling this universal service obligation in Australia. A universal service provider may limit its liability in relation to the supply of services for the purpose of fulfilling this obligation by including appropriate terms and conditions in customer

contracts and by taking out insurance.

A further object of the 1997 Act is to promote the supply of diverse and innovative carriage services and content services. The information available to the ACA does not establish that the supply of diverse or innovative services would be restricted if the ACA does not impose a tort liability limit.

After full consideration of all relevant matters, including the matters discussed and conclusions contained in this Report, the ACA decided not to exercise its power under clause 46, at this time, to impose any limits on amounts recoverable in tort in relation to the supply of carriage services.

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