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Australia – Pure Mental Harm Arising From Damage By Aircraft: Proposed Changes To Laws In Victoria.

30 October 2014

 

Legal News & Analysis – Asia Pacific – Australia – Shipping, Maritime & Aviation

 

The Victorian Government has recently endorsed a recommendation of the Victorian Competition and Efficiency Commission to amend existing state laws to limit the circumstances in which damages for mental injury caused by an aircraft to persons or property on the ground are recoverable, thereby significantly bringing those laws into line with the position at a national level in Australia.

 

In mid 2013, the Victorian Competition and Efficiency Commission (VCEC) was tasked with undertaking a wide ranging inquiry into aspects of the Wrongs Act 1958 (Wrongs Act), the primary source of tort laws in Victoria. The terms of reference for the inquiry included a review of the existing strict liability regime in Victoria governing damage caused by aircraft to a person or property on the ground.

 

Like many other countries, Australia has in place a legislative framework prescribing the circumstances in which third parties may claim compensation for damage caused by an aircraft on the ground (often referred to as ‘surface damage’). Such considerations were again brought to the forefront with the fatal crash of a light aircraft into residential property in a suburban area of Melbourne on 14 October 2014.

 

Historically, Australia’s laws on surface damage have comprised an inconsistent patchwork of statutory regimes at Commonwealth, state and territory levels. Steps were taken in recent years to remedy those inconsistencies and thereby offer more certainty to the market, principally via the enactment of Commonwealth legislation in the form of the Damage by Aircraft Act 1999 (DBA Act). The DBA Act had the stated objective of bringing about national uniformity and was designed to remove the uncertainties and inefficiencies that had previously undermined the strict liability regimes across Australia. In substance, the DBA Act imposes strict and unlimited liability on the owner or operator (as defined by the Act) of an aircraft if a person or property has suffered personal injury, loss of life, material loss, damage or destruction caused by an impact with either an aircraft in flight, part of an aircraft while in flight, anything that dropped or fell from an aircraft in flight, or otherwise something that is a result of an impact of that kind.

 

In March 2013, important amendments were made to the DBA Act which were largely prompted by the High Court of Australia’s decision in ACQ Pty Limited v CookAircare Moree Pty Limited v Cook[2009] HCA 28. Those changes consisted of:

 

  1. Excluding liability for mental injury unless the claimant has suffered other personal injury or property damage;
  2. Recognising contributory negligence by allowing a reduction of damages where the claimant was partly responsible for the injury or loss; and
  3. Allowing respondents a right to seek contribution from others who caused or contributed to the injury or loss.

 

The wide scope of application of the DBA Act, coupled with the broad legislative powers of the Commonwealth, means that the vast majority of aircraft operations in Australia (including all international and interstate flights, as well as most intrastate flights operated by a corporate owner and/or operator) are covered by the DBA Act. This leaves only a relatively small set of operations, namely intrastate flights where the owner or operator is not a corporation and/or where the flight in question does not otherwise fall within one of the Commonwealth’s legislative powers, which in turn are governed by the corresponding state legislation. In the case of Victoria, that consists of section 31 of the Wrongs Act.

 

Inconsistencies Between The Commonwealth And Victorian Regimes

 

Like the DBA Act, the Victorian Wrongs Act adopts a strict liability approach to surface damage claims. There remain, however, significant inconsistencies between the operative provisions of the two pieces of legislation, including: 

 

  1. Unlike the DBA Act (post the 2013 amendments), the Wrongs Act does not limit liability for mental injury to those circumstances where it is accompanied by other personal injury, loss or damage;
  2. While both regimes now recognise the right to contribution and contributory negligence, the wording adopted in the respective provisions is not consistent;
  3. There are differences in the way in which each Act deals with the definition of ‘operator’; and
  4. Under the DBA Act, claims are unlimited, whereas claims brought under the Wrongs Act are subject to a monetary cap as well as certain ‘significant injury’ thresholds.

 

The need for greater consistency between the Commonwealth and Victorian provisions was an issue raised in a number of submissions made to the VCEC in the course of its inquiry. Concerns at a practical level included the unavailability of insurance cover for strict liability for pure mental injury, potential exposure to expensive litigation and a wider class of claimants in terms of pure mental injury claims, and uncertainty in assessing risk generally. Those concerns ultimately formed a significant part of the VCEC’s considerations in that context.

 

The VCEC’s Recommendations

 

The VCEC completed its inquiry earlier this year and issued a final report in which it made various recommendations in respect of each item of its terms of reference. As regards the appropriateness of the existing regime in Victoria for damage caused by aircraft, the VCEC made the following key findings:

 

  1. It made a formal recommendation that section 31 of the Wrongs Act be amended to provide that damages for mental injury caused by an aircraft accident are only recoverable under the strict liability regime if the mental injury is accompanied by personal or property damage caused by the aircraft. Claims for pure mental injury would therefore be excluded. This amendment would, in effect, bring the Wrongs Act significantly into line with the DBA Act, thereby (in the VCEC’s view) creating greater commercial certainty to the risk assessment of potential mental injury claims; and
  2. It otherwise supported the continued application of strict liability for surface damage claims on the basis that its removal would otherwise lead to adverse efficiency and equity impacts, such as inconsistencies in the availability of compensation for victims under each regime.

 

In September 2014, the Victorian Government issued its response to the VCEC’s recommendations, which included support for the proposed amendment to section 31 of the Wrongs Act limiting the recoverability of damages for mental injury. The Victorian Government’s full response is available on its website.

 

The proposed amendment to section 31 of the Wrongs Act will see that the Victorian regime is brought significantly into line with the national regime under the DBA Act on the issue of liability for mental injury claims arising from surface damage by aircraft. While the Victorian regime applies only to a comparatively small percentage of aircraft operations within Victoria, the Government’s foreshadowed legislative change is nonetheless a welcome one and will no doubt aid in bringing about certainty for those aircraft owners and operators (and their insurers) affected by it. It is important to note, however, that inconsistencies remain between the state and national regimes, both in terms of the wording adopted in the operative provisions and on other substantive issues (such as the monetary cap and significant injury threshold that forms part of the Victorian legislation). Those inconsistencies should continue to be taken into account when assessing liability risk and potential exposure for incidents of this nature.

 

Next Steps

 

The Victorian Government has indicated that legislation implementing the proposed amendment to section 31 of the Wrongs Act will be brought before Parliament in early 2015. However, with a Victorian state election scheduled for 29 November 2014, it remains to be seen whether that time frame is achievable and, indeed, whether a potential change in government will hinder the expected implementation of the VCEC’s recommendations in any way.

 

Clyde & Co

 

For further information, please contact:

 

Maurice Thompson, Partner, Clyde & Co

maurice.thompson@clydeco.com

 

James Cooper, Clyde & Co

james.m.cooper@clydeco.com

 

Homegrown Shipping, Maritime & Aviation Law Firms in Australia

 

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