1137442 Natasha Lloyd

1. Introduction: History of the legislation

The history of personal injury litigation within New Zealand is undoubtedly complicated, and at times
unpredictable. To examine the justification and scope of s 317(1) one must recognise the history of the
Accident Compensation Corporation and its associated statutes. The 1972 statute was a bold response to
the clumsy and inappropriate mechanism that the common law provided when dealing with personal
injury claims.1The common law failed to compensate a significant number of accident victims, it was
expensive for participants, suffered from long delays and was not conducive to rehabilitation.2

Something had to be done. In 1967 a Royal Commission was established which produced a report that
would set up the template for the first iteration of the Act. This model, which was proposed by Justice
Owen Woodhouse recommended a no-fault approach to compensation and proposed to cover motor
vehicle damages as well as injuries sustained by earners while working. 3 The Act, was unanimously
passed through parliament and covered the injuries proposed by Woodhouse. Among those
recommendations was the abolition of claims for damages to compensate those suffering personal injury
by accident.4 Since its passing the Act has gone through several important changes.

However, the scope of the bar to claims for damages laid out in s5(1) was scrutinized by the Court of
Appeal in Donselaar v Donselaar where the plaintiff sought exemplary damages for physical injury
following an assault committed by his brother. Richardson J 5 said that the bar to claims was concerned
with remedies and left the rights of actions for exemplary damages intact. 6

In 1973, The Act was amended by the Labour Government providing for individuals initially not covered
by the act such as students, unemployed citizens and visitors to New Zealand. It additionally laid out three
schemes; the earners scheme, motor vehicle accident scheme and supplementary scheme. 7 By 1979 the
cost of the scheme as well as resentment associated with the cost of non-work claim led to a review and
proposals were made by Hon Derek Quigley to include substantial changes in the 1982 Act. These
changes which were largely economic in nature included the reduction of employer obligations from 100

1 http://www.lawyerseducation.co.nz/shop/Publications/Personal+Injury+Litigation+-
+a+practical+approach.html

2 http://www.lawyerseducation.co.nz/shop/Publications/Personal+Injury+Litigation+-
+a+practical+approach.html

3 http://www.acc.co.nz/about-acc/overview-of-acc/introduction-to-acc/ABA00004

4 http://www.westlaw.co.nz.ezproxy.aut.ac.nz/maf/wlnz/app/document?
docguid=I7979db04e02711e08eefa443f89988a0&&src=rl&hitguid=I1e7f2aad9ce11
1e0a619d462427863b2&snippets=true&startChunk=1&endChunk=1&isTocNav=tru
e&tocDs=AUNZ_CASE_TOC#anchor_I1e7f2aad9ce111e0a619d462427863b2

5 At 109 donselaar v donselaar

6 Mcgougan v depuy at 26

7 http://www.acc.co.nz/about-acc/overview-of-acc/introduction-to-acc/ABA00004

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1137442 Natasha Lloyd

percent to 80 percent following the first week of an accident 8, the three schemes were united into a single
scheme as well as increasing maximum amounts payable. However, s5(1) of the 1972 Act was reproduced
as s27(1) and in Green v Matheson (1989) the courts reaffirmed the decision in Donselaar v Donselaar.

In 1988, a review published by the Law Commission found a disparity between accident victims and
victims of sickness and recommended extensive changes to the Act. These changes included that
compensation be based on earnings as well as provisions for sickness and sexual assault being included
into the scheme. In 1990 under the National Government another review was undertaken and changes
were made in 1992 aimed specifically at creating a fairer scheme for employers. In this amendment,
employees paid for non-work accidents through a premium, and the Accident Compensation Appeal
Authority was replaced by the District Courts. Furthermore, the 1992 Act abolished lump sum
compensation which was criticized heavily and labeled the no fault, no compensation scheme.
In 1996 more changes were made to the Act, including independent allowances, procedures for assessing
work capacity and the reduction of waiting times for injury victims through the purchase of health and
rehabilitation services. Section 27(1) of the 1982 Act became s14(1) of the Accident Rehabilitation and
Compensation Insurance Act 2001 and the scope of the bar was again examined in Queenstown Lakes
District Council v Palmer in which the husband whose wife had drowned sued for compensatory damages
relating to the mental trauma suffered watching his wife die. It was accepted that the plaintiff did not have
cover under the act, and the courts held that the bar did not apply to him as he did not have cover under
the 1992 Act.9

In 1998 a massive change was made to the Accident Compensation Act, allowing private insurers to
handle work related accidents. Under these changes, ACC did not deal with the workplace insurance
market, but self-employed individuals were permitted to stay with ACC. These changes did not remain for
long however, and in 2000 the ACC was restored as the sole provider of workplace accident insurance
and in 2001 further changes were made focusing on injury prevention and rehabilitation. Section 14(1) of
the 1992 Act was reproduced as s394 of the Accident Insurance Act 1998 and then became s317 of the
2001 Act.

2. The Social Contract

The Accident Compensation Act has a tedious history filled with amendments and reviews, but at its core
the justification remains strong. An essential part of the Act, as laid out in s3 explains that the purpose of
the act is to reinforce the social contract represented by the first accident compensation scheme 10 The
social contract aims to provide a fair and sustainable scheme for managing personal injury, reducing the
incidence and minimising the impact on the community.

3. Scope of s 317
The scope of the Accident Compensation Act has a clear focus on prevention and rehabilitation and to
Enhance the public good and reinforce the social contract represented by the first accident compensation
scheme by providing for a fair and sustainable scheme for managing personal injury that has, as its

8 http://www.acc.co.nz/about-acc/overview-of-acc/introduction-to-acc/ABA00004

9 Queenstown lakes district council v palmer at 9

10 ACA s3

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overriding goals, minimizing both the overall incidence of injury in the community, and the impact of
injury on the community (including economic, social, and personal costs).11 S 317(1) (a) Specifies that
nobody can bring proceedings, for damages arising directly or indirectly out of personal injury covered by
the act. For an individual to have cover, the injury must be suffered in New Zealand, and they need to
have a personal injury caused by an accident, gradual process, disease or infection arising out of
employment, medical misadventure or be a consequence of treatment for personal injury. 12 However,
where does that leave people who are not covered? Are they still barred from bringing action?
The answer is complicated. Commentators (Todd and Black: 1993; Palmer: 1994: Carden: 1995; Black,
Harrop and Hughes 1995; Tobin: 1995) identified specific personal injuries which were not covered by
the Act, therefore were actionable as a civil claim based on negligence or other intentional torts. 13 These
personal injuries included the negligent infliction of disease such as AIDS or hepatitis, claims for mental
suffering unconnected to physical personal injuries such as Post traumatic stress disorder, heart attacks or
strokes, second hand smoking, negligently caused food poisoning as well as others. 14 However, the lack of
coverage does not automatically give rise to a civil claim. In Cochrane v ACC (1994) NZAR6, the High
Court noted that a claim for mental trauma was not possible under the new legislation, implying that it
might be possible to make a civil claim. 15 However, previously in Kingi v Patridge (1993) Justice Thorpe
held that recognising civil claim for mental trauma would run contrary to the principles of the Accident
Compensation legislation16 The courts similarly held in McDonnel v Wellington Area Health Board (1993)
that no civil duty should be imposed, and avoided the question on whether civil claims would run against
the principles of the Act.
However, the legislation only bars compensatory damages, Civil claims for exemplary damages are
available. This was seen in Uren v John Fairfax & Sons Pty Ltd (1966) where punitive damages are
intended to punish the defendant and the actions of the defendant are in contumelious disregard of the
plaintiffs rights17 In Queenstown Lakes District Council v Palmer the plaintiff was found to not have
cover under the Act, and therefore the courts held that the bar on bringing action did not apply. A similar
case, Couch v Attorney-General (2013) where the Supreme Court held that s 317(1) did not preclude the
plaintiff from establishing personal injury caused by negligence, however the bar prevented the plaintiff
from seeking compensatory damages. However, McGrath J explained that s317(1) Did not abolish the

11 S3 of the ACC 2001

12 S26 OF THE acc

13 Social policy implications arising from legal aspects of new zealands latest
accident compensation scheme

14 Social policy implications arising from legal aspects of new zealands latest
accident compensation scheme

15 Cochrane v ACC (1994) NZAR6,

16 Kingi v Partridge (High Court, Auckland CP 16/93, 2 August 1993),

17 (Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 129).

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cause of action that may give rise to a claim for exemplary damages18 However, the courts noted
in Akavi v Taylor Preston Ltd [1995] that there needs to be a tight rein as there is danger that
the courts would become flooded with claims for personal injury disguised as exemplary
damages.19

I. Foreign Jurisdictions
The issue of whether claims for compensatory damages could be brought by plaintiffs in New Zealand
for personal injury suffered by conduct occurring in a foreign jurisdiction was brought up in McGougan v
DePuy International Ltd (2016) In this case, the three plaintiffs representing a larger group of 38 received
hip implants provided by the first defendant DePuy which manufactures medical devices. The plaintiffs
pleaded two causes of action, the tort of negligence and breach of the Consumer Guarantees Act 1993.
During the proceedings, the plaintiffs applied for, and obtained cover from ACC as it was acknowledged
they had suffered a treatment injury either in New Zealand or in circumstances when they were ordinarily
resident in New Zealand.20

18 Couch v Attorney General (2012) at 199-203

19 Akavi v Taylor Preston Ltd [1995] NZAR 33

20 At 23 mgougan v depuy