Contents Vol 26 No 2

Transcription

1 2015. Vol 26 No 2 Contents page 14 page 16 page 20 page 23 Towards a circular economy : how manufacturers will be affected by the European Commission s new zero waste programme Christopher Norton HOGAN LOVELLS INTERNATIONAL LLP Court of Justice of the European Union hands down judgment on compatibility of German drug liability information claim with European Product Liability (PL) Directive Ina Brock and Carolin Konzal HOGAN LOVELLS Court finds a manufacturer liable for a fatal helicopter crash due to a defect in its maintenance manual Susie Stone and Ishwar Singh ALLENS Product liability claims under the Competition and Consumer Act conflict between Commonwealth and state laws Stephen White and Milton Latta CARTER NEWELL Editorial Panel Peter O Donahoo Partner, Allens James Whittaker Partner, Corrs Chambers Westgarth Stephen White Partner, Carter Newell Dr Teresa Nicoletti Partner, Piper Alderman Overseas Correspondents Rod Freeman Partner, Hogan Lovells International LLP, London Professor Dr Thomas Klindt Noerr LLP, Munich Simon Pearl Partner, DAC Beachcroft LLP, London Paul Rheingold Rheingold Valet & Rheingold, New York Information contained in this newsletter is current as at March 2015

2 Product liability claims under the Competition and Consumer Act conflict between Commonwealth and state laws Stephen White and Milton Latta CARTER NEWELL Introduction This article concerns personal injury claims arising out of defective products under the Competition and Consumer Act 2010 (Cth) (the CCA), which contains the Australian Consumer Law (the ACL). As this is a Commonwealth statute, potential conflicts arise with state legislation covering the same area. The purpose of this article is to examine when state and Commonwealth laws will apply. It is written from the perspective of claims prosecuted under Queensland law, although the same principles apply, to a greater or lesser extent, in the other states and territories. The potential conflicts give rise to two main questions: Does the pre-litigation regime under the Personal Injuries Proceedings Act 2002 (Qld) (the PIPA) apply to claims under the CCA? How are damages for personal injuries to be assessed for product liability claims? The principles Pursuant to s 109 of the Commonwealth of Australia Constitution Act (the Constitution), when a law of a state is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. The mere fact that a Commonwealth law and a state law may deal with the same subject matter will not automatically give rise to an inconsistency. It is possible for two sets of laws to co-exist without producing any contradiction. 1 A Commonwealth statute may expressly state an intention to cover a particular field to the exclusion of any state laws. Such a statement, while not in itself determinative, may be sufficient to engage s 109 and render any state laws in that field inoperative. 2 Conversely, an express intention not to cover the field may avoid the operation of s 109, although such a provision would not be effective to avoid any direct inconsistency. 3 A state law that places a restriction on a person s entitlement to damages will, to the extent of any inconsistency with a Commonwealth law, not apply. The PIPA Does the PIPA apply to claims under the CCA? From a practical point of view, claims under the CCA may also be framed in the alternative as claims in negligence, which require compliance with the PIPA in any event. However, a question that often arises is whether or not the provisions of the PIPA relating to costs also apply to claims under the CCA. The PIPA applies in relation to claims for damages for personal injuries, with the exception of work related injuries, motor vehicle injuries and dust related conditions. 4 Accordingly, the scope of the PIPA extends to claims under the CCA, subject to the operation of s 109 of the Constitution. The PIPA contains a pre-court regime that must be complied with before a person can issue proceedings against another party. It is essentially procedural in nature. The CCA does not contain an equivalent precourt regime. On the face of it, there does not appear to be any conflict. However, a conflict will arise if the pre-court regime under the PIPA or any part of it bears on a person s entitlement to enforce a claim under the CCA. In such circumstances, s 109 of the Constitution will be engaged. In order to identify whether such a conflict arises, it is necessary to take a closer look at the structure of the PIPA. The PIPA provisions are designed to encourage the speedy resolution of claims for the main purpose of the Act, namely to assist the ongoing affordability of insurance through appropriate and sustainable awards of damages for personal injury. 5 Under the PIPA, a claimant is required to give a notice of claim in the approved form to any person against whom he or she proposes to issue proceedings. 6 If a notice of claim is given outside the time permitted under the PIPA or is otherwise non-compliant, the claim may only proceed with the agreement of the respondent australian product liability reporter March

3 or the leave of the court. 7 Similarly, proceedings may not be started until a compulsory settlement conference has been held. These gateway provisions deny a claimant s entitlement to damages if not complied with. Moreover, s 7 of the PIPA provides that parts dealing with the notice of claim and the compulsory conference are provisions of substantive, as opposed to procedural, law. These factors tend to support the position that the PIPA does, in fact, bear on the entitlement to enforce a claim under the CCA, thereby creating a conflict with that Act. However, in Hamilton v Merck and Co Inc, 8 the New South Wales Court of Appeal held that the provisions of the PIPA provided a mode of enforcement of a claimant s rights rather than affecting the validity of those rights. In arriving at its decision, the court considered a number of Queensland Court of Appeal decisions that dealt with the pre-court regime under the Motor Accident Insurance Act 1994 (Qld), which essentially provided the template for the regime under the PIPA. Accordingly, in the absence of any express provision in the CCA to the contrary, the PIPA probably applies to claims under the CCA. This would appear to be consistent with the decision of the Queensland District Court in Lane v Commonwealth of Australia 9 in which it was held that the PIPA applied to a claim for damages for non-economic loss pursuant to s 45(1) of the Safety Rehabilitation and Compensation Act 1988 (Cth). 10 There are no provisions in the CCA that deal specifically with costs. The costs restrictions contained in s 56 of the PIPA, therefore, do not give rise to any conflict. Accordingly, claims under the CCA are also probably subject to the costs restrictions under the PIPA. Damages The Civil Liability Act 2003 (Qld) (the CLA) applies to, among other things, all claims for damages for personal injuries. Chapter 3 of the CLA deals with damages. As with the PIPA, the scope of the CLA extends to claims under the CCA, subject to the operation of s 109 of the Constitution. The CCA has its own damages regime. 11 Only in cases of direct conflict will the provisions of the CLA be rendered inoperative. For claims in negligence, damages are governed by the CLA only. The CLA does not apply to work related claims, which are governed by the Workers Compensation and Rehabilitation Act This article does not examine the conflicts between that Act and the CCA. Under the CCA, the heads of damage upon which restrictions are placed are: general damages (non-economic loss); economic loss; gratuitous care provided to the injured person; gratuitous care provided by the injured person; superannuation; interest; and exemplary and aggravated damages. The heads of damage upon which restrictions are placed under the CLA are the same as for the CCA, with the exception that the CLA also places restrictions on damages for loss of consortium or loss of servitium. General damages Under the CCA, general damages are assessed by reference to the most extreme case, which attracts damages of approximately $270,000 (after indexing). A claimant is not entitled to general damages if the injury is less than 15% of the most extreme case. 12 For injuries equal to or greater than 15% but less than 33% of the most extreme case, damages are calculated using a scale provided in the Act. For injuries equal to or greater than 33%, damages are calculated as a percentage of the most extreme case, or $270,000 (after indexing). For example, if the injury is found to be 50% of the most extreme case, the claimant will be entitled to $135,000. A most extreme case is defined as a case in which the claimant suffers non-economic loss of the gravest conceivable kind. 13 Other than this broad definition, there is no guidance in the CCA for assessing injuries for the purpose of determining general damages. 14 Such an assessment is to be carried out having regard to past court decisions. Under the CLA, general damages are assessed using a table of injuries contained in the regulations. 15 Injuries are attributed with an Injury Scale Value (ISV) based on the type and severity of the injury. The ISV, in turn, corresponds to an amount for general damages. For injuries after 1 July 2014, the maximum amount payable for general damages under the CLA is $349,900. When comparing the maximum amounts payable under the CCA and the CLA, at first glance it would appear that general damages under the CLA are more generous than under the CCA. However, this is probably only the case for minor injuries, where no general damages are payable under the CCA, or severe injuries, where the maximum amount payable is higher. For injuries that fall into the moderate to serious categories, damages under the CCA can be higher than under the CLA. Economic loss Under the CCA, damages for economic loss are limited to twice the amount of average weekly earnings, 16 which is defined as the amount published by the 24 australian product liability reporter March 2015

4 Australian Statistician as the average weekly earnings for all employees for the relevant quarter. 17 As an indication, in November 2014, the average weekly earnings for all employees was $1,128.70, meaning the maximum weekly amount payable for economic loss under the CCA is approximately $2,260 per week. Under the CLA, damages for economic loss is limited to three times average weekly earnings, 18 which is defined as the amount of Queensland full-time adult persons ordinary time earnings declared by the Australian Statistician. In November 2014, the Queensland full-time adult persons ordinary time earnings was $1,456.90, meaning the maximum weekly amount payable for economic loss under the CLA is approximately $4,370 per week. This is significantly higher than under the CCA. From a practical point of view, many claims may fall within the limit under the CCA. However, claimants on high incomes may be entitled to higher awards for economic loss under the CLA. Insofar as discounting is concerned for future economic loss, the CCA prescribes a discount rate of 5%. 19 There is no prescribed discount rate under the CLA, meaning the common law discount rate, which is also 5%, will apply. Gratuitous care Under both the CCA and the CLA, a claimant will only be entitled to damages for gratuitous care if the services are provided, or are to be provided, for at least six hours per week for at least six months. 20 Under the CCA, if services are provided for at least 40 hours per week, the damages for those services must not exceed the average weekly earnings. 21 If services are provided for less than 40 hours per week, the amount per hour must not exceed 1/40 of the average weekly earnings. Using the November 2014 figure referred to above, this equates to a maximum rate of approximately $28 per hour. There are no such limitations under the CLA. At common law, rates allowed for gratuitous care typically vary between $25 per hour and $40 per hour, depending on whether the services are of a general nature, such as cleaning and cooking, or are of a personal nature, such a personal hygiene. Accordingly, depending on the care provided, awards under the CLA for gratuitous care may be more generous. Gratuitous care provided by the injured person Under both the CCA and the CLA, a claimant will only be entitled to damages under this head of damages (also known as Sullivan v Gordon damages at common law) if the services are provided, or are to be provided, for at least six hours per week for at least six months. 22 Under the CLA, damages are only payable under this head of damages where the incident giving rise to the claim has resulted in death or where general damages exceed $41,990 (for injuries after 1 July 2014). 23 In order to be awarded this amount for general damages, the ISV would need to be assessed at 23 or higher, placing the injury in the serious category of higher. Under the CCA, damages are only payable if the incident results in death. The rates allowed under the CCA are also restricted in the same manner as for gratuitous care. In other words, the maximum rate payable is $28 per hour. Accordingly, claims under this head of damage, while not common, can be higher under the CLA. Superannuation Under the CCA, the award for superannuation may not exceed the amount payable under the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGAA), which is presently 9.5% of an employee s wages. 24 Under the CLA, the award for superannuation is the minimum percentage required by a written law to be paid on the employee s behalf as employer superannuation contributions. As superannuation under the CLA is not confined to the SGAA, in certain circumstances, superannuation under the CLA may assess higher that under the CCA. For example, a claimant entitled to superannuation under the Military Superannuation and Benefits Act 1991 (Cth), which provides for payment of superannuation at a higher rate than under the SGAA, may be entitled to a higher award for superannuation under the CLA. Interest Under both the CCA and the CLA, a court cannot order the payment of interest on an award for general damages or gratuitous care. 25 Under the CCA, interest is also not payable on awards for loss of a claimant s capacity to provide gratuitous care to other persons. Under both the CCA and the CLA, interest payable on other monetary loss must be at the 10-year Treasury bond rate. On 2 January of this year, the cash rate was 2.19%. Exemplary and aggravated damages Under both the CCA and the CLA, a court may not award damages for exemplary damages or aggravated damages. While there are certain exceptions under the CLA, these are unlikely to apply to product liability claims. australian product liability reporter March

5 Loss of consortium or servitium Under the CCA, there is no limitation on damages for loss of consortium or loss of servitium. Under the CLA, damages for loss of consortium or loss of servitium may only be awarded if where the incident giving rise to the claim has resulted in death or serious injury. 26 Conclusion Product liability claims are subject to both Commonwealth and state laws. Where there is a conflict between applicable Commonwealth and state legislation, pursuant to s 109 of the Constitution, the Commonwealth legislation will apply to the extent of any inconsistency. There is some uncertainty as to whether the PIPA applies to claims under the CCA. From a practical point of view, given product liability claims also tend to be pleaded in terms of negligence, the PIPA will apply in any event. The key question then is whether or not costs restrictions under the PIPA apply to claims under the CCA. In the author s opinion, the costs restrictions do apply. In relation to damages, both the CCA and CLA place restrictions on the amounts that may be recovered. The main heads of damage to which the restrictions apply are general damages, economic loss, and gratuitous care. While a claimant may not elect which damages regime applies to claims under the CCA, the damages that are ultimately awarded may depend on which cause of action is successful. Liability is generally easier to establish under the CCA than in negligence, as the CCA essentially provides for a strict liability regime 27 in the sense that it does not require a claimant to establish a want of reasonable care, which is necessary in order to establish negligence. However, in certain circumstances, damages may be more favourable for a claim in negligence, which is governed by the CLA. If both causes of action succeed, then the claimant can elect which remedy to take. That election would have to be made no later than at the time of seeking final judgment in the action. 28 Accordingly, consideration should always be given to pleading negligence in the alternative to a claim under the CCA. Stephen White Partner Carter Newell swhite@carternewell.com Footnotes Milton Latta Senior Associate Carter Newell mlatta@carternewell.com 1. See Re Credit Tribunal; Ex Parte General Motors Acceptance Corporation, Australia (1977) 137 CLR 545; 14 ALR 257 at 271; 51 ALJR 612; BC Above, n 1, at Above, n 1, at Personal Injuries Proceedings Act 2002 (Qld) s Above, n 4, s Above, n 4, s Above, n 4, s Hamilton v Merck and Co Inc; Hutchinson v Merck Sharp and Dohme (Aust) Pty Ltd (2006) 66 NSWLR 48; 230 ALR 156; [2006] NSWCA 55; BC DC (Qld), (Forno DCJ No 2/07, 14 September 2007 unreported). 10. See Ashley Jones, Pre-Court Personal Injuries Procedures in Queensland (2nd edn), p Competition and Consumer Act 2010 (Cth) Pt VIB. 12. Above, n 11, ss 87L and 87M. 13. Above, n 11, s 87P. 14. As permitted by above, n 11, s 87T. 15. Civil Liability Act 2003 (Qld) s Above, n 11, s 87U. 17. Above, n 11, s 87V. 18. Above, n 15, s Above, n 11, s 87Y. 20. Above, n 15, s 59; above, n 11, s 87W. 21. Above, n 11, s 87W(3). As mentioned, in November 2014, the average weekly earnings for all employees was $1, Above, n 15, s 59A; above, n 11, s 87X. 23. Above, n 15, s 59A(2). 24. Above, n 11, s 87Z. 25. Above, n 15, s 60; above, n 11, s 87ZA. 26. Above, n 15, s Either by establishing that a product has a safety defect or a breach of a statutory guarantee. 28. See Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at 591; 125 LGERA 1; [2002] HCA 54; BC ; followed in Crump v Equine Nutrition Systems Pty Ltd t/as Horsepower [2006] NSWSC 512; BC at [266] and [267]; see also above, n 11, s australian product liability reporter March 2015