No fault personal injuries compensation – the New Zealand way

This blog post is by David Green, a New Zealand qualified barrister and solicitor who recently visited 12 KBW for two weeks as a Pegasus Scholar.

In 2017, Lord Sumption offered some bold views to the Personal Injuries Bar Association in a speech provocatively entitled “Abolishing Personal Injuries Law – A Project”.  His proposed replacement was a system of compulsory no fault compensation, which incidentally is exactly the approach taken to personal injuries in New Zealand. This blog post sets out some reflections on the New Zealand approach in comparison to that in England and Wales.

In 1972, New Zealand established the Accident Compensation Corporation (“ACC”).  The ACC oversees a scheme of no fault compensation.  Although the scheme is detailed, the core idea was to abolish personal injury claims and replace them with compensation for the treatment and recovery of those who suffer injuries. That compensation is funded by a system of levies paid by all New Zealanders through employers and business owners, road traffic users, and government taxation.

There are multiple criteria to receive ACC compensation but the scheme covers physical injuries or deaths arising from sports accidents, deliberately or negligently inflicted road traffic accidents, negligent medical treatment, and so on. For example, the families of those who died in the Christchurch terror attacks will all receive State-funded assistance with funeral costs and, where the deceased family member earned for the family, loss of income support. If you suffer a physical injury while on holiday in New Zealand, you are also covered. The ACC does not generally cover emotional issues (unless causatively linked to physical injury, such as post-traumatic stress disorder) or medical problems that arise gradually over time (in the latter case, that is unless the problem is attributable to an occupational breach of duty, such as exposure to asbestos at work).

ACC compensation claims are usually processed by service providers rather than claimants themselves.  There are, of course, lawyers that assist claimants with challenging decisions declining compensation (or the level of entitlement) but the scale of those disputes is far lower than in England and Wales (for example, only one to two per cent of motor vehicle compensation claims are declined).  For those interested, details of the scheme can be found here.

Compensation is generally provided quickly with no conferencing with experts, no Part 36 offers, and – perhaps disappointingly – no jousting advocates.  As an aside, there is also no costs budgeting in New Zealand either (but that’s a different subject entirely).

Most New Zealanders do not appreciate how unique ACC compensation is. It occupies a role in New Zealand society similar to the NHS: an imperfect system that spreads the burden of personal trauma across all members of society.

I have been lucky enough to shadow William Audland QC and others at 12 KBW and have gained a brief insight into the practice of personal injury law here. It is an incredibly interesting area of law (not least because it is new to me since it does not really exist in New Zealand). Although I had not particularly turned my mind to the justifications for the scheme since I studied it in law school, questions from 12 KBW barristers have encouraged me to look at the point more closely.

A no fault scheme that prioritizes relatively swift treatment and recovery at the expense of holding a tortfeasor to account has its advantages and disadvantages. It seems to me (through my rose-tinted kiwi lawyer glasses) that the overall social cost of personal injury litigation is quite high. Lord Sumption identifies rising NHS costs and motor insurance premiums together with anecdotes of unmeritorious claims.

Marshalling expensive and high quality medical evidence to identify (or disagree about) the cause and consequences of personal injuries has its own cost. I wonder what effect the preparation of expert evidence has on the numbers of injured people who are able to be treated annually. Waiting lists for in-demand experts suggest that they are well-occupied by expert evidence preparation.

There also appears to be comparatively large numbers of barristers and solicitors on each case compared to litigation in New Zealand (which is an observation about the split profession and not limited to personal injury law). Regarding personal injury law specifically, “ambulance chasing” and claims management companies simply do not exist in New Zealand.

Last, there are judicial costs.  If the recent observations of a Judge I was observing in the Central London County Court are correct, the judiciary is underfunded and overburdened by case managing personal injury claims – the vast majority of which ultimately settle.

It is not surprising, then, that in some cases the overall cost of litigating a dispute can exceed the amount of damages awarded. Lord Sumption suggests that legal and administrative costs constitute more than a third of the damages paid. I acknowledge that piecemeal reform – for example, changes to whiplash compensation – aims to reduce the burden of these costs, but it seems (as Lord Sumption observed) that radical change is off the table.

Since no fault compensation is part of the national psyche of my country, it is more difficult for me to articulate a defence of personal injury law.  Lord Irwin said in a speech to PIBA a year after Lord Sumption’s that there is a long history in damages law of holding a person to account for their wrongdoing. At face value, that is an attractive point. However, high levels of insurance rather shift the specific sting of deterrence to the more general sting of increasing premiums. There is also the hidden sting of increased government funding of the NHS fighting claims, the Criminal Injuries Compensation Scheme, and the Motor Insurers’ Bureau.

Ultimately, it seems to me – from my New Zealand perspective – that personal injury law operates disproportionately. On the one hand, a person who can prove their injury was caused by someone else eventually gets significant damages (albeit at the expense of the stress of litigation that can span years). On the other, a person who through some misfortune might not be able to point to a wrongdoer (or whose claim ultimately is not proven for a variety of reasons) misses out. In either case, the New Zealand system would provide compensation.

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