McGougan v DePuy International Ltd
[2016] NZHC 2511
•20 October 2016 at 2.30 pm
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2015-485-001049 [2016] NZHC 2511
BETWEEN MICHAEL JOHN MCGOUGAN AND
BRIAN FREDERICK DINGLE First Plaintiffs
BEVAN MALCOLM SANSON Second Plaintiff
AND
DEPUY INTERNATIONAL LIMITED First Defendant
ACCIDENT COMPENSATION CORPORATION
Second Defendant
Hearing: 21-22 September 2016 Counsel:
D J Goddard QC with L Theron and P J L Arnold for Plaintiffs C A McLachlan QC with J L W Wass, D A Campbell and O J Welsh for First Defendant
V E Casey QC for Second Defendant
Judgment:
20 October 2016 at 2.30 pm
JUDGMENT OF COLLINS J
Introduction
[1] This judgment focuses upon the following question:
May claims for compensatory damages be brought by the plaintiffs in New Zealand for personal injury they have suffered in this country, and for which they have cover under the Accident Compensation Act
2001 (the Act), in circumstances where the conduct giving rise to their claims occurred in a foreign jurisdiction?
McGOUGAN v DEPUY INTERNATIONAL LIMITED [2016] NZHC 2511 [20 October 2016]
[2] The answer to this question depends on the scope of the bar against proceedings for personal injury set out in s 317(1) of the Act. That subsection provides:
317 Proceedings for personal injury
(1) No person may bring proceedings independently of this Act, whether under any rule of law or any enactment, in any court in New Zealand, for damages arising directly or indirectly out of—
(a) personal injury covered by this Act; or
(b) personal injury covered by the former Acts.
…
[3] An examination of the text and purpose of s 317(1) of the Act leads to the answer to the question posed in [1]. That answer is “No”. The plaintiffs’ claims for compensatory damages are not actionable in New Zealand.
[4] This judgment is divided into two parts. Part I sets out the background to the litigation, including a summary of the agreed facts, the legislative history to s 317 of the Act and a brief summary of the parties’ competing contentions. Part II analyses the issues and explains the reasons for my conclusion.
PART I: BACKGROUND
The parties
[5] The first defendant (DePuy) is a company registered in England. It manufactures medical devices, including prosthetic hip implants. Two hip implant systems designed and manufactured by DePuy between July 2003 and August 2010 (DePuy hip implants) feature in this proceeding.1
[6] The three plaintiffs in this proceeding represent a larger group of 38 New
Zealanders who, between 2006 and 2009 received DePuy hip implants in New
Zealand.
1 Namely the DePuy ASR Hip Resurfacing System and the DePuy ASR XL Acetabular System.
[7] The second defendant, Accident Compensation Corporation (ACC), was joined as a party to this proceeding only in relation to the preliminary question of law set out in [1]. ACC administers the New Zealand Accident Compensation scheme in accordance with the Act and earlier manifestations of the Act.
The claim
[8] DePuy does not carry on business in New Zealand.2 DePuy designed and manufactured the hip implant systems in issue, primarily at its premises in Leeds, England. The hip implants were supplied by DePuy to related companies, including DePuy New Zealand Ltd and Johnson & Johnson (New Zealand) Ltd, who in turn supplied the DePuy hip implants in New Zealand.
[9] After the plaintiffs received their DePuy hip implants, serious issues began emerging concerning the effectiveness and safety of those implants. DePuy recalled its hip implants in August 2010. The plaintiffs underwent revision surgery in 2011 and 2012 to replace the DePuy hip implants.
[10] The statement of claim alleges the DePuy hip implants were designed and or manufactured with defects which led to the breakdown of part of the implant which in turn led to the release of cobalt and chromium into patients. This is said to have led to metal poisoning and tissue damage.
[11] The plaintiffs plead that DePuy failed to undertake a proper risk assessment and testing of the implants before they were distributed. It is also alleged DePuy failed to adequately monitor the implants after they were placed into patients.
[12] Two causes of action are pleaded by the plaintiffs. They say DePuy committed the tort of negligence and breached the Consumer Guarantees Act 1993. The relief sought by the plaintiffs include a prayer for a declaration that DePuy acted negligently and unlawfully in designing, manufacturing, marketing and distributing
the DePuy hip implants, compensatory damages and exemplary damages.
2 DePuy is not registered as an overseas company under pt 18 of the Companies Act 1993 and is not a registered person under the Goods and Services Act 1985.
[13] For the purposes of this proceeding it is accepted the plaintiffs applied for and obtained cover from ACC.3 Cover was acknowledged by ACC on the basis the plaintiffs had suffered a treatment injury as defined in the Act.4 As a consequence, the plaintiffs have received various entitlements under the ACC scheme, including, in some instances, weekly compensation and rehabilitation benefits.
Proceedings in England
[14] Seven groups of plaintiffs commenced proceedings in England against DePuy between 2012 and 2014. Sixty-three New Zealanders were included in those proceedings, including the three plaintiffs in the proceeding before me and 22 of the claimants they represent.
[15] One of the seven groups of plaintiffs in England proceeded to a preliminary issues trial. That proceeding, referred to as the “Allen proceeding”, included four of the sixty-three New Zealand claimants (the New Zealand sample claimants). On
18 March 2014, Stewart J determined that New Zealand law applied to the claims of the New Zealand sample claimants.5 The New Zealand sample claimants then filed and served amended particulars of their claims. DePuy responded with a statement of defence which pleaded, amongst other matters, the claims advanced by the New Zealand sample claimants were barred by s 317(1) of the Act.
[16] The issue as to whether or not the New Zealand sample claimants were barred by s 317(1) of the Act from bringing their claims for compensatory damages in England was the subject of a further preliminary issues trial. In a judgment delivered on 1 April 2015, Simler J concluded “… the claims of the New Zealand
sample claimants were precluded by [s 317 of the Act]”.6
[17] The plaintiffs then commenced their proceedings in New Zealand on
18 December 2015.
3 One person in the representative group may not have received ACC cover.
4 Accident Compensation Act 2001, s 32; refer [22(3)].
5 Allen v DePuy International Ltd [2014] EWHC 753 (QB).
6 Allen v DePuy International Ltd [2015] EWHC 926 (QB) at [87].
Preliminary questions
[18] On 17 March 2016, this Court directed that, by consent, two preliminary issues be determined in this proceeding, namely:
(1)Does s 317(1) of the Act bar the plaintiffs’ claims for compensatory damages? (the statutory bar issue)
(2)Are the plaintiffs estopped, or otherwise prevented, from pursuing their claims by reason of the judgment of Simler J delivered on
1 April 2015? (the estoppel issue)
The question set out in [1] of this judgment accurately encapsulates the issues raised by the first preliminary question posed by the parties.
[19] Two days were allocated to hear both preliminary questions. As it transpired those two days were taken up hearing submissions only in relation to the statutory bar issue. The estoppel issue is scheduled to be heard on 12 December 2016. The parties agreed that even if I found in favour of DePuy on the statutory bar issue, thereby possibly rendering the estoppel issue moot, I should nevertheless hear and determine the estoppel issue and that any appeals from my judgments would be heard in tandem.
The ACC scheme
[20] In their enlightened report into Compensation for Personal Injury in New Zealand7 (the Woodhouse Report), Sir Owen Woodhouse and his fellow commissioners recommended the abolition of claims for damages to compensate those who suffered personal injury by accident in exchange for a scheme which aimed to address the causes and consequences of personal injuries caused by accidents. This fundamental change in the way New Zealand endeavours to prevent
injuries and rehabilitate and compensate those who have the misfortune to be injured
7 Royal Commission of Inquiry Compensation for Personal Injury New Zealand (Government
Printer, Wellington, 1967).
by accident, underpins the five statutory iterations of the ACC scheme.8 An essential component of the ACC scheme has been described as a “social contract” in which those who suffer personal injury covered by the scheme receive a set of entitlements funded by the community in exchange for which they relinquished their right to sue for compensatory damages in respect of their injury.9
[21] As noted by Glazebrook J in Accident Compensation Corporation v Ambros, the ACC scheme aims to promote distributive rather than corrective justice by spreading the economic consequences of negligent conduct across the community and to provide for rehabilitation and compensation regardless of fault.10 In exchange for this cover, victims of personal injury by accident forego the opportunity to sue those who might otherwise have been held liable.
Cover under the Act
[22] It is common ground that the three plaintiffs have cover under the Act. They have cover because they satisfy the following three criteria set out in s 20(1) of the Act:
(1) they have suffered personal injury in New Zealand;11 and
(2)their personal injury includes physical injuries and damage to prostheses that replace a part of the human body;12 and
(3) their personal injury is “treatment injury” because their personal
injury arose from receiving treatment from one or more registered health professionals, and in circumstances where their personal injury
8 Accident Compensation Act 1972, Accident Compensation Act 1982, Accident Rehabilitation and Compensation Insurance Act 1992, Accident Insurance Act 1998 and Accident Compensation Act 2001.
9 Brightwell v Accident Compensation Corporation (ACC) [1985] 1 NZLR 132 (CA) at 2 per
Cooke P; Queenstown Lakes District Council v Palmer [1999] 1 NZLR 549 (CA) at 555; Wilding v Attorney-General [2003] 3 NZLR 787 (CA) at [6] and [11]; Accident Compensation Corporation v Ambros [2007] NZCA 304, [2008] 1 NZLR 340 at [25] and Davies v Police [2009] NZSC 47, [2009] 3 NZLR 189 at [15], [18], [27] and [37].
10 Accident Compensation Corporation v Ambros, above n 9, at [25].
11 Accident Compensation Act 2001, s 20(1)(a).
12 Sections 20(1)(b), 26(1)(b) and 26(1)(e).
was “not a necessary part, or ordinary consequence of the treatment”.13
[23] It is also accepted that the plaintiffs suffered their personal injury either inside New Zealand or in circumstances when they were ordinarily resident in New Zealand.14
Legislative history to s 317 of the Act
[24] Sir Owen Woodhouse and his fellow commissioners were satisfied that:15
… the time [had] clearly come for the common law action to yield to a more coherent and consistent remedy in the whole area of personal injury.
They recommended that Parliament abolish “common law rights in respect of personal injuries”16 and that “compensation received by a New Zealand resident should be refunded out of any damages or compensation obtained abroad by him [or her] in respect of the same accident”.17
[25] These recommendations were reflected in ss 5(1) and 131 of the Accident
Compensation Act 1972 (the 1972 Act). Before the ACC scheme commenced on
1 April 1974, s 5 of the 1972 Act was amended to read:18
5 Act to be a code
(1) Subject to the provisions of this section, where any person suffers personal injury by accident in New Zealand or dies as a result of personal injury so suffered, or where any person suffers outside New Zealand personal injury by accident in respect of which he has cover under this Act or dies as a result of personal injury so suffered, no proceedings for damages arising directly or indirectly out of the injury or death shall be brought in any Court in New Zealand independently of this Act, whether by that person or any other person, and whether under any rule of law or any enactment.
…
13 Sections 20(1)(c), (2)(b) and 32(1)(c).
14 Accident Compensation Act 2001, s 22(1)(c).
15 Royal Commission of Inquiry Compensation for Personal Injury New Zealand above n 7, at 14.
16 At 280(b).
17 At 286(d).
18 Accident Compensation Amendment Act (No 2) 1973.
[26] The scope of the bar to claims for damages set out in s 5(1) of the 1972 Act was scrutinised by the Court of Appeal in Donselaar v Donselaar,19 in which the plaintiff sought a declaration and exemplary damages for physical injuries arising from an assault committed upon him by his brother, the defendant. In concluding that the bar in s 5(1) of the 1972 Act did not prevent the plaintiff from pursuing his claim for exemplary damages, Richardson J20 and Somers J21 said that the bar was concerned with remedies and left rights of action intact.
[27] Section 5(1) of the 1972 Act was reproduced as s 27(1) of the Accident Compensation Act 1982 (the 1982 Act). In Green v Matheson,22 the Court of Appeal reaffirmed what had been said in Donselaar v Donselaar and held that s 27(1) of the
1982 Act did not prevent a patient from pursuing her claim for exemplary damages against her former doctors for including her in a medical trial without her consent. The plaintiffs’ claim for compensatory damages for events after the commencement of the 1972 Act was, however, barred.
[28] Section 27(1) of the 1982 Act became s 14(1) of the Accident Rehabilitation and Compensation Insurance Act 1992 (the 1992 Act). There were minor changes made from s 27(1) of the 1982 Act when s 14(1) of the 1992 Act was passed, that were not material for present purposes. The scope of the bar in s 14(1) of the 1992
Act was again examined by the Court of Appeal in Queenstown Lakes District Council v Palmer.23 In that case the husband of a woman who drowned sued for compensatory damages for the post traumatic shock he suffered as a result of seeing his wife die. It was accepted that the plaintiff did not have cover under the Act. The Court of Appeal rejected the literal reading of s 14(1) of the 1992 Act advanced by the defendant and held that the bar did not apply to the plaintiff because he did not
have cover under the 1992 Act.
19 Donselaar v Donselaar [1982] 1 NZLR 97 (CA).
20 Donselaar v Donselaar, above n 19, at 109.
21 At 116.
22 Green v Matheson [1989] 3 NZLR 564 (CA).
23 Queenstown Lakes District Council v Palmer, above n 9.
[29] Section 14(1) of the 1992 Act was substantially reproduced as s 394 of the Accident Insurance Act 1998 (the 1998 Act) and then became s 317 of the Act when it was passed in 2001.
[30] In Couch v Attorney-General (No 2),24 the Supreme Court rejected an argument by the Crown that a claim for exemplary damages was barred by s 317(1) of the Act in circumstances where the claim for exemplary damages for negligence arose from acts that led to personal injury for which the plaintiff had cover under the Act. The Supreme Court drew a distinction between damage giving rise to a cause of action and damages as a form of remedy. It held that s 317(1) did not prevent the plaintiff from establishing that she had suffered personal injury caused by negligence. The bar however prevented the plaintiff from recovering compensatory
damages. Tipping J,25 with whom Elias CJ,26 Blanchard27 and Wilson JJ28 agreed,
explained:29
… there is no actionable tort of negligence for causing personal injury in
New Zealand unless the case justifies exemplary damages.
[31] In a similar vein, McGrath J explained that s 317(1) did not abolish the cause of action that may give rise to a claim for exemplary damages.30
Other key provisions in the Act
[32] The following provisions of the Act assist in understanding the context and purpose of the bar in s 317(1) of the Act.
[33] First, s 3 of the Act explains that one of the purposes of the Act is to “reinforce the social contract represented by the first accident compensation scheme”. Understanding the scope of that social contract assists in understanding
the purpose of the bar in s 317(1).
24 Couch v Attorney-General (No 2) (on appeal from Hobson v Attorney-General) [2010] NZSC
27, [2010] 3 NZLR 149.
25 At [89].
26 At [7].
27 At [71].
28 At [250].
29 At [89].
30 At [199]-[203].
[34] Second, s 317(4) of the Act explains the bar in s 317(1) does not apply to proceedings under ss 50 or 51 of the Health and Disability Commissioner Act 1994 or ss 92B, 92E, 122, 122A, 122B, 123 or 124 of the Human Rights Act 1993. Those provisions permit proceedings to be brought before the Human Rights Review Tribunal for breaches of the Code of Health and Disability Services Consumers’ Rights and for breaches of the Human Rights Act 1993. Where, however, a claimant under the Health and Disability Commissioner Act has ACC cover then they may
only seek exemplary damages before the Human Rights Review Tribunal.31
[35] Third, s 317(5) of the Act makes it clear that the bar in s 317(1) does not apply to claims for damages suffered in New Zealand or elsewhere that are actionable under the law of New Zealand under any international convention relating to the carriage of passengers.
[36] Fourth, s 319 of the Act reaffirms that nothing in the Act prevents any person from bringing proceedings in any court in New Zealand for exemplary damages for conduct that has caused the plaintiff personal injury covered by the Act. Section 319 also provides that exemplary damages may be awarded against a defendant who has been charged with, convicted or acquitted of an offence involving conduct that forms
the subject matter of the claim for exemplary damages.32
[37] Fifth, s 321 of the Act enables ACC to require a person who has obtained entitlements under the Act to bring proceedings in New Zealand or elsewhere in respect of which they have an actionable claim to obtain damages or compensation. To avoid such persons receiving double compensation, ACC may deduct from the cost of any entitlement a sum equivalent to the net amount which the claimant receives by way of damages, compensation or settlement in any proceedings taken in
New Zealand or overseas.
31 Health and Disability Commissioner Act 1994, s 52.
32 Section 319 was enacted after the Court of Appeal held in Daniels v Thompson [1998] 3 NZLR
22 (CA) that claims for exemplary damages could not be brought against those who were convicted or acquitted of an offence that formed the basis of a claim for exemplary damages. The judgment of the Court of Appeal was upheld by the Privy Council in W v W [1999] UKPC
2.
Reparation
[38] Mr Goddard QC, senior counsel for the plaintiffs, submitted the provisions in the Sentencing Act 2002 relating to the payment of reparation by persons convicted of criminal offences was also relevant to understanding the purpose of s 317(1) of the Act. It is therefore appropriate to briefly explain the reparation provisions in the Sentencing Act 2002.
[39] Section 22 of the Criminal Justice Act 1985, the origins of which can be traced to s 44(2) of the Criminal Justice Act 1954, enabled a court to order the whole or part of a fine be paid to the victim of a crime. This type of order was able to be made to a victim without affecting his or her right to receive entitlements under the ACC scheme. Under the Sentencing Act 2002 a court could order a discrete reparation payment provided the payment did not cover loss or damage for which the victim had a right to an entitlement under the ACC scheme.
[40] In Davies v Police,33 the Court of Appeal held that a reparation order could be made to a victim to compensate him or her, the difference between their ACC entitlements and their actual loss. A majority of the Supreme Court overturned the Court of Appeal’s decision because of its concern that “top up” reparation orders offended the purpose of the bar in s 317(1) of the Act.34
[41] Parliament responded to the Supreme Court’s decision by passing the Sentencing Amendment Act 2014. That Act overturned the effect of the Supreme Court’s judgment in Davies v Police by amending s 32 of the Sentencing Act 2002.35
As a consequence, reparation orders can now be made in respect of any shortfall between losses caused by an offender and the entitlements which the victim of the
crime receives from ACC.
33 Davies v Police [2007] NZCA 484, [2008] 2 NZLR 645 (CA).
34 Davies v Police, above n 9.
35 Sentencing Amendment Act 2014, s 6. See also Victims of Crime Reform Bill 2011 (319-1) (explanatory note) at 14: “… the court may not order reparation for consequential loss or damage if compensation has been, or is to be, paid under the Accident Compensation Act 2001. However, a court would be able to impose a sentence of reparation for consequential loss or damage to meet any statutory shortfall in compensation.”
Summary of the parties’ arguments
[42] It is sufficient to briefly summarise the parties’ arguments at this juncture. A more detailed examination of the key arguments, particularly those advanced on behalf of the plaintiffs is set out in Part II of this judgment.
[43] The plaintiffs focus upon what they contend to be the purpose of s 317(1) of the Act. They say that when the purpose of s 317(1) is properly understood, the bar against claims for compensatory damages by persons who have cover under the Act cannot apply to proceedings brought against a defendant in New Zealand, whose conduct occurred outside of New Zealand.
[44] There are a number of interweaving strands to the plaintiffs’ argument.
Those strands include the following points:
(1)Denying the plaintiffs the opportunity to pursue their claims for compensatory damages offends the principle that citizens should not be denied their right of access to the courts.
(2)Parliament and the courts have recognised a number of exceptions to the bar in s 317(1) of the Act. The plaintiffs’ claims for compensatory damages is consistent with those exceptions.
(3) Section 317(1) of the Act does not apply extra-territorially.
(4) Place of conduct and choice of law principles suggest Parliament did
not intend to bar the plaintiffs’ claims for compensatory damages.
(5)The broad and expansive interpretation of s 317(1) of the Act advocated by DePuy and ACC risks undermining the integrity and economic viability of the ACC scheme.
[45] DePuy and ACC say the text of s 317(1) of the Act is very clear. They say the plain and ordinary meaning of s 317(1) is that the plaintiffs cannot sue DePuy in
New Zealand for compensatory damages in respect of injuries for which they have cover under the Act.
[46] In his submissions, Professor McLachlan QC, senior counsel for DePuy, said s 317(1) of the Act forms part of New Zealand law and that by commencing their proceedings under New Zealand law, in a New Zealand court, the plaintiffs are bound by s 317(1). He submitted that Parliament determined the territorial aspects of s 317(1) by making it coterminous with cover, which in turn depends on injury occurring in New Zealand, or to a person who is normally resident in New Zealand.
[47] Ms Casey QC, counsel for ACC, adopted a similar approach to Professor McLachlan. Her submissions traced the legislative origins of s 317(1) of the Act and provided context to that provision.
PART II: ANALYSIS
The text of s 317(1) of the Act
[48] On its face, the bar in s 317(1) of the Act is clear and unequivocal. There may be scope for arguments as to what types of proceedings fall within the perimeters of the bar. Where however a plaintiff claims damages that arise directly or indirectly out of personal injury covered by the Act, or under the former Acts, then the bar in s 317(1) is engaged.
[49] My understanding of the plain meaning of s 317(1) of the Act reflects the way in which the Court of Appeal and the Supreme Court have interpreted s 317(1) and the corresponding provision in the former ACC Acts. Thus, in Donselaar v Donselaar,36 Richardson J explained that s 5(1) of the 1972 Act was “clear enough”:37
It [barred] proceedings for damages but only where those damages [arose] directly or indirectly out of injury or death. It [was] not sufficient that the cause of action should [have arisen] out of the injury. The particular damages sought to be recovered must [have done] so.
36 Donselaar v Donselaar, above n 19.
37 At 109.
[50] Similarly, in Green v Matheson,38 Cooke P for the Court of Appeal explained the effect of the statutory bar in s 5(1) of the 1972 Act was to prevent the plaintiff claiming compensatory damages arising directly or indirectly out of her personal injury by accident, including her claim for damages for the emotional and psychological harm she suffered as a result of her involuntary participation in a medical trial.
[51] In Queenstown Lakes District Council v Palmer,39 Thomas J for the Court of Appeal said the plain meaning of the bar in s 14(1) of the 1992 Act precluded “proceedings for damages for personal injury covered by the Act which [were] suffered by any person being brought in any court in New Zealand independently of the [1992] Act”.40
[52] Finally, for present purposes reference is made to Couch v Attorney-General (No 2),41 in which the Supreme Court made it clear that s 317(1) of the Act prevented compensatory damages being awarded for personal injury covered by the Act.42
[53] These authorities demonstrate that the plain words of s 317(1) of the Act preclude a plaintiff from bringing any proceeding in a New Zealand court for damages that arise directly or indirectly out of personal injury covered by the Act, or the former Acts. The bar does not apply to exemplary damages or applications for a declaration.43 The bar does, however, apply to compensatory damages.
[54] The text of s 317(1) of the Act also captures the plaintiffs’ claims under s 47 of the Consumer Guarantees Act 1993 because the language of s 317(1) refers to proceedings “under any rule of law or any enactment”. The abolition of claims for compensatory damages for personal injury arising from defective products was
acknowledged immediately prior to the commencement of the ACC scheme. The
38 Green v Matheson, above n 22.
39 Queenstown Lakes District Council v Palmer, above n 9.
40 At 553.
41 Couch v Attorney-General (No 2), above n 24.
42 See for example, Tipping J at [89].
43 Re Chase [1989] 1 NZLR 325 (CA) at 332.
Torts and General Law Reform Committee, in its report on Products Liability
recorded:44
The enactment of a comprehensive accident compensation scheme has had a major impact on the scope of products liability in this country. When the scheme is implemented, all personal injury by accident in New Zealand will be catered for by the scheme, with the corresponding elimination of any common law action. The common law is supplanted by an entitlement to compensation under the statutory scheme, entitlement which is not dependent upon proof of negligence but upon establishing that personal injury by accident has been sustained. This development cuts right across the principle of tort liability, whether strict or otherwise, for defective products.
[55] The text of a statute is however not the sole source of its interpretation. The emphasis in this case has been upon the second limb in s 5(1) of the Interpretation Act 1999, which requires that “the meaning of an enactment be ascertained from its text and in the light of its purpose”.
[56] The Supreme Court has explained that:45
Even if the meaning of the text may appear plain in isolation of purpose, that meaning should always be cross-checked against purpose in order to observe the dual requirements of s 5 [of the Interpretation Act]. In determining purpose the Court must obviously have regard to both the immediate and the general legislative context. Of relevance too may be the social, commercial or other objective of the enactment.
(Footnotes omitted)
The balance of this judgment examines the purpose of s 317(1) of the Act.
Purpose of s 317(1) of the Act
[57] Two preliminary issues require consideration before embarking upon an analysis of the plaintiffs’ principal arguments concerning the purpose of s 317(1) of the Act. Those preliminary issues concern the concept of the “social contract” underpinning the Act, and the extent to which the bar in s 317(1) prescribes causes of
action.
44 Torts and General Law Reform Committee Products Liability (March 1974) at 3-4.
45 Commerce Commission v Fonterra Co-operative Group Ltd [2007] NZSC 36, [2007] 3 NZLR
767 at [22].
Social contract
[58] The purposes of the Act include the reinforcement of “the social contract represented by the first accident compensation scheme by providing for a fair and sustainable scheme for managing personal injury ...”.46
[59] Although the term “social contract” was not referred to, the Woodhouse Report47 recommended that “common law rights in respect of personal injuries should be abolished”48 and that “the procedures and techniques of private litigation should be replaced by non-contentious processes of assessment and review…”49 and that “individual liability [should] disappear in favour of national responsibility”.50
[60] The judgment of Cooke P in Brightwell v Accident Compensation Corporation appears to contain the earliest reference to the ACC scheme reflecting a “social contract”.51 The “social contract” concept was elaborated upon in Queenstown Lakes District Council v Palmer,52 where Thomas J, for the Court of
Appeal said:53
Essentially, the accident compensation legislation in both its original and amended forms denied those persons covered under the Act access to the Courts at common law in return for the perceived advantages of the statutory scheme. The legislation reflected this policy from the outset. The exchange has frequently been spoken of as a social contract or social compact.
[61] The theme that the Act reflects a social contract has been endorsed in other decisions, most notably, Accident Compensation Corporation v Ambros54 and Davies v Police.55 In the later case, Elias CJ explained that s 317(1) of the Act “is a pivotal
provision in the social contract implemented through the accident compensation
46 Accident Compensation Act 2001, s 3. It has not always been agreed that a “social contract” underpins the ACC scheme. For example, when the 1992 Act was passed the government steered away from saying the ACC scheme was based on a “social contract”. During the Second Reading of the Accident Rehabilitation and Compensation Insurance Bill, the Hon W F Birch said the new Act reflected “a social insurance scheme”, refer (19 March 1992) 522 NZPD 7075.
47 Royal Commission of Inquiry Compensation for Personal Injury in New Zealand, above n 7, at
280(b).
48 At 280(f).
49 At 316.
50 At 489.
51 Brightwell v Accident Compensation Corporation (ACC), above n 9, at 2.
52 Queenstown Lakes District Council v Palmer, above n 9.
53 At 555.
54 Accident Compensation Corporation v Ambros, above n 9, at [25].
55 Davies v Police, above n 9, at [15], [18], [27] and [37].
legislation …”56 and an important reason for the majority of the Supreme Court interpreting the Sentencing Act 2002 as not permitting “top ups” to ACC entitlements through reparation orders. The Chief Justice was concerned that allowing reparation orders to compensate victims of crimes for the difference between their entitlements under the ACC scheme and their actual losses would “revive” the ability to obtain compensation by victims of crime from wrongdoers, but not victims of civil wrongs. In her judgment, the Chief Justice said there was no clear reason for perpetuating this anomaly.
[62] In his submissions, Mr Goddard agreed with a description of the “social contract” set out in the submissions of Professor McLachlan.57 Mr Goddard submitted, however, that the concept of a “social contract” is of limited assistance and does not provide meaningful guidance as to when the bar in s 317(1) of the Act applies. Mr Goddard submitted the “social contract” metaphor fails to capture the principal reasons for the bar in s 317(1).
[63] There is academic support for Mr Goddard’s submission that the concept of a “social contract” is of limited value in understanding the scope of s 317(1) of the Act. In particular it has been suggested relinquishing the ability to sue is not genuine “consideration”.58 However, references to a “social contract” in the context of the ACC scheme do not attempt to encompass the essential elements of a commercial contract. Rather, the term “social contract” in this context refers to what Thomas
Hobbes identified when explaining his theory on the “laws of nature”. He suggested
citizens enter into a social contract when they surrender their individual rights and liberties in exchange for a common security.59
56 At [27].
57 The ACC Act implements a social contract between the people of New Zealand for the benefit of all those persons that suffer personal injury here. Persons who suffer a personal injury covered
by the ACC Act receive a uniform set of entitlements funded by the community; in return they
relinquish any right that they may have had to take proceedings (whether in tort or under statute)
in respect of such injury, referring to Wilding v Attorney-General, above n 10, at [11].
58 See Simon Connell “Overturning the Social Contract?” (2014) 314 NZLJ 314, who suggests the term “social contract” may not be an entirely apposite description of the ACC scheme that has
been the subject of a series of unilateral changes by successive governments. He suggests it is
also questionable whether the relinquishment of the ability to sue was genuine “consideration” in view of the conclusion in the Woodhouse Report that common law proceedings were merely a lottery.
59 Refer Christopher Morris The Social Contract Theorists: Critical Essays on Hobbes, Locke, and
Rousseau (1st ed, Rowman & Littlefield Publishers, Maryland, 1999).
[64] The “Hobbesian” notion of a “social contract” helps in understanding a key purpose of s 317(1). The “social contract” underpinning the Act means persons who suffer personal injury covered by the Act receive the benefits of cover in exchange for relinquishing any right they may have had to commence proceedings for compensatory damages that arise directly or indirectly out of his or her personal injury.
[65] In summary, the concept of a “social contract” supports the argument that if a person has cover under the Act then they may not bring proceedings for compensatory damages in a New Zealand court.
The impact of s 317(1) of the Act on causes of action
[66] Ms Casey submitted that the purpose of s 317(1) of the Act was to bar causes of action for which a plaintiff has suffered personal injury covered by the Act. In contrast, Mr Goddard and Professor McLachlan both submitted the bar in s 317(1) is concerned with restricting claims for damages, not causes of action.
[67] Ms Casey was not the first to have misstated the scope of the bar in s 317(1) of the Act. Courts in other jurisdictions that have been required to interpret the various ACC Acts have also misunderstood the scope of the bar. For example, in Bennett v Enstrom Helicopter Corporation, the United States Court of Appeals for
the Sixth Circuit said:60
There is simply no longer, under New Zealand substantive law, a common law tort action for persons covered by the [Act].
[68] Similarly, in James Hardie & Co Pty Ltd v Hall as Administrator of the Estate of Putt,61 the Court of Appeal of New South Wales said s 17 of the 1992 Act “must be read as extinguishing any cause of action for damages arising directly or
indirectly out of personal injury …” covered by the 1992 Act.62
60 Bennett v Enstrom Helicopter Corporation 679 F 2d 360 (1982) at 631.
61 James Hardie & Co Pty Ltd v Hall as Administrator of the Estate of Putt (1998) 43 NSWLR
554.
62 At 579.
[69] An analysis of the leading New Zealand cases demonstrates however that the bar in s 317(1) of the Act is concerned with preventing claims for compensatory damages, not causes of action. In Donselaar v Donselaar,63 Richardson J explained that the bar in s 5 of the 1972 Act had a limited role. It was “concerned with remedies and leaves rights of actions intact”.64 Somers J made a similar point when he said that the bar “does not… abolish any cause of action”.65 The distinction between causes of action and claims for damages was also recognised in Couch v Attorney-General (No 2) where Tipping J66 (with whom Elias CJ, Blanchard and
Wilson JJ agreed)67 explained that the effect of the bar was that in New Zealand
there is no actionable tort of negligence unless the claim is for exemplary damages in circumstances where the plaintiff has cover for personal injury under the Act.
[70] The New Zealand authorities lead me to proceed on the basis that s 317(1) of the Act bars claims for compensatory damages arising directly or indirectly from personal injury for which the plaintiff has cover under the Act, but leaves intact causes of action and other forms of relief, such as claims for exemplary damages, and claims for a declaration.68
[71] I now turn to address the plaintiffs’ principal submission that claims for compensatory damages may be brought by the plaintiffs in New Zealand for personal injury they have suffered in this country, and for which they have cover under the Act, in circumstances where the conduct giving rise to their claims occurred overseas.
Access to the courts
[72] The plaintiffs submitted that the principle that a citizen should not be denied access to the courts was relevant in demonstrating that the bar in s 317(1) of the Act
did not apply to the plaintiffs’ claims for compensatory damages.
63 Donselaar v Donselaar, above n 19.
64 At 109.
65 At 116.
66 Couch v Attorney-General (No 2), above n 24, at [89].
67 Above n 26, 27 and 28.
68 Re Chase, above n 43, at 332.
[73] Reliance was placed upon Spencer v Attorney-General where Winkelmann J
said:69
The principle of statutory interpretation that clear and unequivocal language is required to oust the subject’s right of access to the courts is a principle of longstanding. That approach to statutory interpretation is now reinforced by the provisions of ss 5 and 6 of the Bill of Rights Act.
[74] From this standpoint it was submitted by Mr Goddard that s 317(1) of the Act should not be narrowly interpreted in order to curtail the plaintiffs’ ability to sue DePuy for compensatory damages unless that course was necessary in order to give effect to the policy of the ACC scheme.70
[75] The principle with which Winkelmann J was engaged in Spencer v Attorney- General does not apply where Parliament has employed clear and unequivocal language to curtail the relief which a plaintiff may obtain from the courts in circumstances where he or she has the benefits of cover under the Act. As I have endeavoured to make clear in [48] to [54] Parliament has, in s 317(1) of the Act, plainly stated that “no person may bring proceedings … whether under any rule of law or any enactment, in any court in New Zealand ...”.
[76] Mr Goddard submitted that Queenstown Lakes District Council v Palmer71 supports the submission that s 317(1) of the Act has a limited effect and does not extend to barring the plaintiffs’ claim for compensatory damages.
[77] Queenstown Lakes District Council v Palmer is, however, of limited assistance to the plaintiffs because in that case the Court of Appeal was concerned with a plaintiff who did not have cover under the Act and who was seeking compensatory damages. That is quite different from the present case where the plaintiffs have cover under the Act and are seeking compensatory damages in
addition to the other forms of relief.
69 Spencer v Attorney-General [2013] NZHC 2580, [2014] 2 NZLR 780 at [164].
70 Citing Queenstown Lakes District Council v Palmer, above n 9, at 553 and 555-556.
71 Queenstown Lakes District Council v Palmer, above n 9.
Exceptions to s 317(1) of the Act
[78] Another thread in the plaintiffs’ case concerned the exceptions to the bar in
s 317(1) of the Act.
[79] Mr Goddard emphasised that s 317(1) of the Act does not bar proceedings in New Zealand courts by plaintiffs who have suffered personal injury covered by the Act where the proceeding is a claim for exemplary damages or involves a claim for damages under any international convention relating to the carriage of passengers. It was argued these exceptions to the bar in s 317(1), found in ss 317(5) and 319, demonstrate that s 317(1) must be read narrowly in order to preserve access to the courts and to ensure that civil proceedings are not barred unless it is necessary to do so in order to preserve the integrity of the ACC scheme.
[80] The reintroduction of reparation orders as a result of s 6 of the Sentencing Amendment Act 2014 was also a feature of this part of the plaintiffs’ case.72 It was submitted by Mr Goddard that Parliament’s decision to provide for reparation awards in favour of the victims of crime who also have cover for personal injury under the Act demonstrates there is no legislative policy or “social contract” to the effect that victims of crime who suffer personal injury should be denied more compensation
merely because they have cover under the Act.
[81] In addition, the plaintiffs referred to s 321 of the Act as an exception to the statutory bar.73 It was submitted s 321 expressly contemplates the possibility there will be both cover in respect of personal injury under the Act, and a right to bring proceedings claiming compensatory damages in respect of that personal injury.
[82] Finally, in relation to this part of their case, the plaintiffs also made reference to s 317(1) of the Act not affecting claims for declaratory relief. It was suggested
this supported a narrow constraint being placed upon the scope of s 317(1).
72 Refer [38]-[41].
73 Refer [37].
[83] The plaintiffs’ submitted these exceptions demonstrate the Act does not treat the right to bring compensatory damages as an inherently undesirable concept or as something that is necessarily barred.
[84] In my assessment the exceptions to the bar in s 317(1) of the Act do not assist the plaintiffs’ case. Each exception can be distinguished from the plaintiffs’ claim for compensatory damages.
[85] First, claims for exemplary damages can be readily distinguished from the claims for damages which are the focus of the question posed in [1] of this judgment. As has been explained, in Donselaar v Donselaar,74 the Court of Appeal chose to preserve civil proceedings for exemplary damages by persons who suffered personal injury covered by the Act. Richardson J reiterated that ordinary damages and exemplary damages serve essentially different purposes. He said, “the former are compensatory, the object of the latter is to punish and deter”.75 The essential elements of that decision were reaffirmed by Parliament when it passed what is now s 319(1) of the Act and by the Supreme Court in Couch v Attorney-General (No 2).76
[86] In the present case the issue is whether the plaintiffs can sue for compensatory damages for injuries for which they have cover under the Act. There is a clear point of difference between the plaintiffs’ claims for compensatory damages and the claims for exemplary damages approved in Donselaar v
Donselaar77 and Couch v Attorney-General (No 2)78 and which are expressly
permitted by s 319 of the Act.
[87] Second, the exception in s 317(5) of the Act to the bar contained in s 317(1) is also clearly distinguishable from the plaintiffs’ claims for compensatory damages in the present case.
[88] Since the inception of the ACC scheme, Parliament has recognised that persons who have suffered personal injury covered by the Accident Compensation
74 Donselaar v Donselaar, above n 19.
75 Donselaar v Donselaar, above n 19, at 109.
76 Couch v Attorney-General (No 2), above n 24.
77 Donselaar v Donselaar, above n 19.
78 Couch v Attorney-General (No 2), above n 24.
Acts may also bring proceedings in a court in New Zealand under the international carriage statutes in relation to the damage they have suffered.79 This exception to the bar in s 317(1) of the Act constitutes an express recognition by Parliament of New Zealand’s obligations under the international conventions relating to the carriage of passengers.80 Section 317(5) cannot be used to attach another limitation upon the bar in that subsection.
[89] Third, the 2014 amendments to the law governing reparation orders do not assist the plaintiffs. Section 317(1) of the Act is not engaged where reparation orders are made because reparation orders are not the product of proceedings for compensatory damages. In any event, the law that now governs reparation orders is the result of an enactment. The amendments made by the Sentencing Amendment Act 2014 cannot be weaved into s 317(1) to create an exception to the bar in that subsection in order to permit the continuation of the plaintiffs’ claims for compensatory damages.
[90] Fourth, s 321 of the Act confirms that although there may be a right to recover damages outside of the ACC scheme in certain circumstances, ACC has the power to “claw back” such damages.81 The “subrogation” regime in s 321 is consistent with the scheme of the Act when it ensures a person who has cover does not receive more than their entitlements under the Act. Section 321 has rarely been applied and is clearly a gate-keeping provision.82 Section 321 ensures there is no
double recovery in cases where s 317(1) is not engaged.
79 See for example, Civil Aviation Act 1990.
80 See for example, Convention for the Unification of Certain Rules for International Carriage by
Air (The Montreal Convention) 1999 incorporating the key provisions of the Warsaw
Convention 1929 and the Hague Protocol 1955.
81 Schlaadt v Accident Rehabilitation and Compensation Insurance Corporation [2000] 2 NZLR
318 (HC).
82 C A Gall, an ACC manager, explained in an affidavit dated 27 July 2006 that she was “aware only of 21 cases in the last 14 years where ACC has been notified … that the client has received
(or is likely to receive) damages, compensation, or settlement of a claim for personal injury … ACC has exercised its power to deduct from the cost of the entitlements the net amount of damages, compensation, or settlement, or recover the entitlements paid from the person as a debt in 11 of these cases ... Most of the claims where the application of s 321 was considered relate to accidents that occurred or injuries suffered overseas.”
[91] Section 321 of the Act does not support the plaintiffs’ claim that s 317(1) has no application where the conduct giving rise to the claim occurs outside of New Zealand.
[92] Finally, in relation to this aspect of the plaintiffs’ case, a declaration is not a claim for compensation and does not overlap with the entitlements that a claimant can obtain under the Act. A declaration is a remedy that is therefore readily distinguishable from the plaintiffs’ claims for compensatory damages. The fact that s 317(1) of the Act does not bar claims for a declaration does not support the plaintiffs’ claim that they can also seek compensatory damages as well as exemplary damages and a declaration.
Territorial scope of s 317(1) of the Act
[93] A further strand to the plaintiffs’ case was the submission that the purposes of s 317(1) of the Act could be identified by applying the principles of private international law. It was submitted those principles were engaged because the breaches of duty giving rise to the plaintiffs’ claims for compensatory damages arose in England. Mr Goddard suggested that if the principles of private international law were applied one would be drawn to the conclusion that Parliament did not intend s 317(1) would apply where the plaintiffs’ claims for compensatory damages were not sufficiently closely connected to New Zealand.
[94] The plaintiffs relied on Ludgater Holdings Ltd v Gerling Australia Insurance Company Pty Ltd83 in which the Supreme Court referred with approval to the following passage in The Wanganui-Rangitikei Electric Power Board v The Australian Mutual Provident Society:84
The rule is that an enactment describing acts, matters or things in general words, so that, if restrained by no consideration lying outside its expressed meaning, its intended application would be universal, is to be read as confined to what, according to the rules of international law administered or recognized in our Courts, it is within the province of our law to affect or control. The rule is one of construction only, and it may have little or no
83 Ludgater Holdings Ltd v Gerling Australia Insurance Company Pty Ltd [2010] NZSC 49, [2010]
3 NZLR 713.
84 At [24], citing The Wanganui-Rangitikei Electric Power Board v The Australian Mutual
Provident Society (1934) 50 CLR 581 at 601.
place where some other restriction is supplied by context or subject matter. But, in the absence of any countervailing consideration, the principle is, I think, that general words should not be understood as extending to cases which, according to the rules of private international law administered in our Courts, are governed by foreign law …
[95] Mr Goddard also relied upon the speech of Lord Hoffmann in Lawson v Serco Ltd.85 That case concerned an issue about the unfair dismissal provisions in the Employment Rights Act 1996 (UK) and the extent to which they applied to foreign-based employees. Lord Hoffmann said that the provision, although expressed in general terms, had implied territorial limits. He said those limits had to be derived from the statute as a matter of construction and that it was necessary to identify the person “with respect to whom Parliament is presumed, … to be legislating”.86 Lord Hoffmann proceeded to apply a general principle of the conflict of laws, namely that of “close connection” in order to determine in what circumstances an employee might be entitled to the right to bring an unfair dismissal claim in the United Kingdom.
[96] There are three reasons why I have concluded that the principles of private international law do not assist in ascertaining the purpose of s 317(1) of the Act.
[97] First, the plaintiffs’ injuries were suffered in New Zealand and they have cover under the Act. They have brought their claims in New Zealand and sought to invoke New Zealand law without attempting to plead foreign law. In these circumstances New Zealand law governs the plaintiffs’ claims.
[98] Second, Parliament has clearly defined the territorial scope of s 317(1) of the Act by reference to claimants who have cover under the Act. The bar in s 317(1) only applies where the plaintiffs have cover under the Act because he or she has been injured in New Zealand or is a resident of New Zealand. Thus, the general rule of construction articulated by Dixon J in The Whanganui-Rangitikei Electric Power Board v The Australian Mutual Provident Society87 is not relevant when interpreting
the purpose of s 317(1). Similarly, Ludgater Holdings Ltd v Gerling Australia
85 Lawson v Serco Ltd [2006] UKHL 3, [2006] 1 All ER 823.
86 At [6], citing Clark v Oceanic Contractors Inc [1983] 1 All ER 133 at 14, [1983] 2 AC 130 at
152.
87 The Whanganui-Rangitikei Electric Power Board v The Australian Mutual Provident Society,
above n 84.
Insurance Co Pty Ltd88 and Lawson v Serco Ltd89 do not assist because those cases concerned the interpretation of statutory provisions which did not specify the territorial scope of the enactment in question.
[99] In addition, the issue in Ludgater Holdings Ltd v Gerling Australia Insurance Company Ltd90 and Lawson v Serco Ltd,91 was whether a cause of action created by statute would apply in a private international law setting. That was a different inquiry to the one I am undertaking. Those cases applied the choice of law rules to claims arising from statutory provisions. In the present case it has already been determined that New Zealand law, including s 317(1) of the Act is the applicable law. This is consistent with Amaca Pty Ltd v Frost, where the New South Wales Court of Appeal stated that the New Zealand Parliament intended that s 317(1) would be engaged in all situations where New Zealand law applies.92 Spigelman CJ
explained:93
Taking into account the scope and purpose of the legislative scheme it is, in my opinion, clear that Parliament intended to establish a code that covered the field of conduct in which the place of tort was New Zealand and was governed by the common law of New Zealand. The exception was the situation when exemplary damages would be awarded.
[100] Third, the rule against the extra-territorial reach of legislation aims to ensure one state does not unduly interfere with property rights or activities within another state’s jurisdiction. This objective is particularly relevant where the prospect of giving extra-territorial effect to a statute creates the risk of a conflict with another
state’s exercise of its own jurisdiction.94 The Act does not create the prospect of any
such conflict. This is self-evident in the present case where the High Court of
England and Wales has already ruled that the plaintiffs’ claims are governed by the
law of New Zealand.
88 Ludgater Holdings Ltd v Gerling Australia Insurance Company Pty Ltd, above n 83.
89 Lawson v Serco Ltd, above n 85.
90 Ludgater Holdings Ltd v Gerling Australia Insurance Company Pty Ltd, above n 83
91 Lawson v Serco Ltd, above n 85.
92 Amaca Pty Ltd v Frost [2006] NSWCA 173, (2006) 67 NSWLR 635.
93 At [125].
94 Société Eram Shipping Co Ltd v Cie Internationale de Navigation [2004] 1 AC 260 (HL) at [54];
Clark v Oceanic Contractors Inc [1983] 2 AC 130 (HL) at 145.
Place of conduct and choice of law
[101] A further but closely related thread in the plaintiffs’ argument is that the “place of conduct” and “choice of law” concepts assist in determining the purpose of the bar in s 317(1) of the Act. Mr Goddard emphasised this was not a choice of law case, but nevertheless the place of conduct and choice of law concepts help understand the true scope of s 317(1).
[102] Part of this aspect of the plaintiffs’ case was summarised by Mr Goddard in
the following way:95
Properly interpreted, the statutory bar does not apply to claims in respect of conduct outside New Zealand. All the relevant conduct of DePuy to which this proceeding relates took place outside New Zealand. So the statutory bar does not apply.
Mr Goddard submitted the relevant place of conduct is the place where the product is designed and manufactured.
[103] There are three reasons why the place of the defendant’s conduct giving rise
to a claim does not assist in determining the purpose of s 317(1) of the Act.
[104] First, as Professor McLachlan correctly submitted, an inquiry into the place of conduct giving rise to a claim is relevant to the question of what law applies to the substance of the claim. If the place of conduct concept were engaged, it would only be relevant to the choice of law issue. As I have previously emphasised, the plaintiffs rely exclusively on New Zealand law and do not seek to invoke foreign law.
[105] Second, the plaintiffs say the place of conduct was where the hip implants were designed and manufactured. Private international law principles, however, tend to focus on where the substance of the cause of action arises. In England and Wales this is presumed to be the place where the injury was sustained. Thus, in Allen v DePuy96 Stewart J, when interpreting the Private International Law (Miscellaneous
Provisions) Act 1995 (UK) concluded the injury suffered by each of the
95 Plaintiffs’ submissions at [1.5].
96 Allen v DePuy International Ltd, above n 5.
New Zealand sample claimants was suffered in New Zealand and that New Zealand law applied to their claims.97 This is consistent with the approach taken by the New South Wales Court of Appeal in Amaca Pty Ltd v Frost,98 where it was held that the relevant conduct occurred in New Zealand where the plaintiff contracted asbestosis from products manufactured in New South Wales. The products were manufactured in New South Wales for distribution in New Zealand. As the products were
distributed and used in New Zealand, this country was determined to be the jurisdiction with the closest connection to the cause of action.
[106] Third, the place of conduct criterion is ambiguous and would create uncertainty. Although DePuy products were designed and manufactured overseas, the distribution of the products occurred in New Zealand. If, as the plaintiffs’ plead, there was a duty to warn, the place of the tort will be where the product was marketed and distributed. As Professor McLachlan and Ms Casey submitted, the courts would then have to draw difficult distinctions between the various steps in the design, manufacture, marketing and supply of products in order to determine what aspect of the claim was actionable in New Zealand and what aspect was not actionable in this country. This in turn would lead to anomalies and unacceptable uncertainty.
[107] The plaintiffs’ reference to the choice of law argument involved a series of steps. The first step involved the uncontentious proposition that at the time s 5 of the
1972 Act was passed, New Zealand, in common with a number of cognate jurisdictions applied a “double actionability” rule where a tort claim was brought in New Zealand in respect of overseas conduct.99 This meant a tort claim could only be brought in a New Zealand court in respect of conduct outside of New Zealand if the conduct:
(1) would be actionable in tort if it occurred in New Zealand; and
97 At [17].
98 Amaca Pty Ltd v Frost, above n 92.
99 Citing J H C Morris (ed) Dicey and Morris on the Conflict of Laws (9th ed, Stevens and Son Ltd, London, 1973) r 178 at 938 to 971. This was the relevant edition of Dicey and Morris at the time the 1972 Act commenced.
(2)would be actionable according to the law of the courts in which the conduct occurred.
If that two-test approach was satisfied, the case would normally have been determined by applying New Zealand law.
[108] The analysis which Mr Goddard advanced focused on the application of the second limb of the “double actionability” rule in relation to an action heard in a foreign court that arose in New Zealand. After putting forward a number of steps he ultimately submitted:100
Thus, if the legislature did consider the position in relation to claims arising out of events outside New Zealand, the touchstone contemplated by Parliament is likely to have been the place where the conduct occurred. That would be a rational scheme to attribute to Parliament, in this context.
[109] The threads which Mr Goddard endeavoured to pull together in respect of this aspect of the plaintiffs’ case do not create a compelling argument. The second limb would be satisfied in a foreign court applying the “double actionability” rule as there is still an available cause of action. It is only the remedy, namely, compensatory damages, that is barred.101
[110] The bar in s 317(1) of the Act would always apply to a tort committed in New Zealand, where the plaintiff has cover under the Act. Accordingly, a claim for compensatory damages would never be actionable in New Zealand for personal injury covered by the Act regardless of where the relevant conduct occurred.
Anomalous outcomes
[111] The final thread in the plaintiffs’ case may conveniently be dealt with under
the heading of “anomalous outcomes”.
[112] The essence of this part of Mr Goddard’s argument was that the purpose of the bar in s 317(1) of the Act is to “maintain the integrity of the ACC scheme and to
100 Plaintiffs’ submissions at [7.34].
101 In his submissions Mr Goddard referred to Australian courts applying the “double actionability” rule. However, Australia no longer applies the “double actionability” rule. Refer Rege National Des Usines Renault SA v Zhang [2002] HCA 10, 92002) 187 ALR 7 at [75] and [122].
support its economic viability”.102 He submitted the purpose of the ACC scheme was achieved by ensuring all resources previously devoted to the fault based regime, such as insurance premiums and court resources, were pooled and spent on compensating victims of personal injury through a public fund and that this feature of the scheme only works if payment of ACC levies is an alternative to exposure to liability for damages.
[113] It was suggested that the ACC scheme’s integrity and economic viability would be compromised if DePuy could escape civil liability for compensatory damages without having contributed to the ACC scheme and that denying the plaintiffs’ the opportunity to recover compensatory damages from DePuy creates an unexpected windfall for DePuy.
[114] I will deal first with Mr Goddard’s concerns about maintaining the integrity of the ACC scheme, then his concerns about the scheme’s economic viability and finally his position concerning the alleged “windfall” to DePuy.
[115] The ACC scheme was never devised to be funded on the basis of extracting levies from those who might have been held liable in tort for causing or contributing to accidents causing personal injuries. Such an approach would have been the antithesis of the comprehensive entitlement and no fault principles that were fundamental features of the Woodhouse Report. The focus of the ACC scheme is on the person who suffered injury, not on the potential defendants who may have caused or contributed to the claimant’s injury. Allowing the plaintiffs to sue for compensatory damages for personal injury in circumstances where they have cover under the Act would undermine the basic tenets of the ACC scheme, not enhance its integrity.
[116] In addition, the purpose of the bar in s 317(1) of the Act is broader than protecting financial viability. The ACC scheme’s objective of rehabilitation has been endorsed in the interpretation of s 317 by the Supreme Court in Davies v Police.103
Compensation is to be at a level which encourages rehabilitation and is “fair” rather
102 Plaintiffs’ submissions at [7.25].
103 Davies v Police, above n 9, at [18], [30] and [81].
than full. One of the other key purposes of the bar is to avoid the damage to the integrity of the regime that would occur if a significant minority of claimants who had cover under the Act were given access to a higher level of compensation through a right to sue. These broader purposes would be undermined if the plaintiffs’ interpretation were adopted.
[117] Mr Goddard’s concern that DePuy and ACC’s arguments risk undermining the economic viability of the ACC scheme fails to accurately recognise the way the ACC scheme is in fact funded.
[118] Entitlements under the ACC scheme are funded through five accounts indentified in s 166 of the Act.104 Each account funds entitlements for a defined class of injury. The accounts are not correlated with any particular class of putative defendants but rather correlate to the entitlements of classes of covered claimants. The Torts and General Law Reform Committee, in its report on Products Liability made this point in the following way:105
Dangerous and defective products produce a number of injuries, yet once the accident compensation scheme is in force, those enterprises whose products cause injuries will not be directly liable to finance the risk in the same manner as the industry operator is called upon to finance the risk of injuries to earners.
[119] The legislative history does not show any link between the statutory bar and the financial viability of the scheme, as suggested by Mr Goddard. Between 1974 and 1982, and since 1999, levies have been set in a way that is designed to ensure the ACC scheme is fully funded as opposed to the “pay as you go” model that applied between 1982 and 1999.106 This has resulted in the ACC scheme now being fully
funded, which means it is able to meet all of its liabilities. In ACC’s most recent
104 Work Account; Motor Vehicle Account; Earners’ Account; Non-Earners’ Account and a Treatment Injury Account. The Treatment Injury Account was established by the 1992 Act and has never been funded by separate levies.
105 Torts and General Law Reform Committee, above n 44, at 23.
106 Under the “pay as you go” model, levies collected in any one year are calculated by reference to the cost of all claims payments paid out during that year, including payments in respect of claims made in earlier years. Refer Hon W F Birch Accident Compensation – A Fairer Scheme (30 July
1991) at 12.
financial report it is said that “overall the funding position is strong across the
Accounts…”.107
[120] No evidence has been placed before me which indicates that the economic viability of the scheme is at risk by barring claims for compensatory damages being brought in a New Zealand court against an overseas defendant for injuries caused in New Zealand that are covered by the Act.
[121] Mr Goddard also submitted that DePuy “could not really expect to be protected from liability” and suffer “no accountability”. He suggested that DePuy would benefit from an unexpected and unreasonable economic windfall if the plaintiffs were not able to pursue a claim for compensatory damages against DePuy.108
[122] This is also not a persuasive reason for construing the purpose of s 317(1) of the Act along the lines suggested by Mr Goddard. The point made by Mr Goddard was considered and dismissed by Simler J in Allen v DePuy International Ltd, when she said:109
It is difficult to see any place for a concept of reasonable expectation in the context of this Scheme. In any event, it seems to me that the only reasonable expectation a person manufacturing and exporting goods to New Zealand from abroad can have is to expect to take the law as he or she finds it.
[123] I agree with the reasoning of Simler J on this point. The focus of the ACC scheme is on providing universal cover for all who suffer personal injury in New Zealand, regardless of fault. That is the scheme that DePuy expected to encounter when it exported its products to New Zealand. That expectation cannot now be put aside in order to accommodate the plaintiffs’ claims for compensatory
damages.
107 Financial Conditions Report 2015 Accident Compensation Corporation “Executive Summary” at
[4a].
108 It was also submitted that DePuy would receive an unacceptable windfall on the basis that, due to territorial limits on criminal laws, the plaintiffs would be unable to receive “compensation via reparations” under the Sentencing Act 2002.
109 Allen v DePuy International Ltd, above n 6, at [84].
Conclusion
[124] One of Parliament’s intentions when it passed s 317(1) of the Act was to bar proceedings for personal injury where the plaintiff has cover under the Act. The fact the conduct giving rise to the claim occurred in another jurisdiction does not deflect from Parliament’s clear intention. If a plaintiff has cover for personal injury under the Act Parliament intended he or she should not also be able to sue for compensatory damages in relation to his or her personal injury. There is therefore symmetry between the text and purpose of s 317(1) of the Act.
[125] The text and purpose of s 317(1) of the Act bars proceedings for compensatory damages in New Zealand courts where the claim arises directly or indirectly out of personal injury covered by the Act. This includes claims where the injury has occurred in New Zealand but the conduct giving rise to the claim occurs outside of this country.
[126] The plaintiffs’ claims for compensatory damages are therefore barred by s 317(1) of the Act.
[127] The parties have asked for an opportunity to confer on the terms of any formal orders that flow from my conclusion.
[128] Costs are reserved until after the “estoppel issue” preliminary question has
been determined.
D B Collins J
Solicitors:
Meredith Connell – Wellington Branch, Wellington for Plaintiffs
Kensington Swan, Auckland for First Defendant
Accident Compensation Corporation, Wellington for Second Defendant
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