IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
Introduction
This paper has been prepared for presentation to the State branches of the Australian Insurance
Lawyers Association during its twentieth anniversary year. It explores the recent alleged "crisis" in
the law of negligence and in the insurance industry and the legislature's response to it. The paper
takes a look at the development of this crisis and the speed and validity of the reaction to it. It
questions whether any crisis is likely to be long standing, and who might be to blame for it. Given
that recent legislative activity to change the Australian common law of negligence is the most
extensive in the history of the tort, attention is paid to whether this legislative intervention was
necessary or an instantaneous unreasoned political reaction to popular outcry. The paper asks what
effect is this likely to have, not only on the development of the common law, but also on the
independence of the Courts to develop that law? By way of conclusion, the paper raises a number of
questions that may be worthy of discussion by members of the ALIA.
How did it all begin?
As early as 2000, the then President of the Australian Medical Association said 1 that "tort law reform
is a crucial issue for the Australian medical profession … We have reached a stage where clinicians
in a number of fields are obliged to carry an unrealistic premium burden … anecdotally we are aware
that many obstetricians are leaving obstetrics." By about the middle of 2002 newspaper stories such
as "Blue Light discos is [sic] under a cloud because insurance premiums to run the monthly dance
parties have soared by more than 1000 per cent."2 and "Fun goes out of summer: Village fete
cancelled"3 were daily fare at the breakfast table. Insurance premiums for local authorities were
doubled, tripled or even quadrupled. In many cases, certain risks were excluded from cover. Many of
those engaged in high risk activities were unable to get any cover at all and looked to governments for
assistance. The public demanded answers and the politicians felt bound to provide "the quick fix".
Whilst there is no doubt that from 2000 onwards, insurance premiums have dramatically increased,
especially for sporting bodies, clubs and businesses that specialise in high risk recreational activities,
little time or study appears to have been given to the cause of this state of affairs prior to rushing into
action.
In March 2002 there was a national ministerial meeting convened by the Federal Minister for
Revenue and Assistant Treasurer. At that meeting it was agreed that all heads of Treasuries would
develop practical measures for consideration at a later meeting of Ministers. The Commonwealth
Treasury commissioned a report from Trowbridge Consulting and Deloitte Touche and Tohmatsu "to
1
2
3
Dr Kerryn Phelps "Tort Law Reform" 12 February 2000.
Herald Sun 22 February 2002.
The Mercury (Tas) 19 July 2002.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
2
recommend practical measures to resolve the public liability crisis". 4 In May 2002 the Federal and
State Ministers met again and received the Trowbridge report.5 The meeting also established an
expert panel to inquire into and review the law of negligence as well as to develop options to limit
liability and the quantum of damages.6
A Senate enquiry was announced.
The Productivity
Commission commenced a benchmarking study of Australian insurers' claims management practices.
However, the politicians did not want to wait for the outcome of detailed investigation into the issues
and make a considered response. We live in a society that easily translates the particular into the
general and remedies to right perceived wrongs are required without delay. Less than a year had
passed since the terrorist attacks in America on September 11, 2001. People were feeling insecure.
The Federal Minister for Small Business, Joe Hockey MP, called for a national compensation scheme
similar to that which operates in New Zealand7. He said "there is a systemic crisis in public liability
insurance right across Australia, and the only solution is to look at rebuilding the common law
litigation system". As early as February 2002 New South Wales Premier, Bob Carr, saw the solution
to the problem in simple terms by announcing that "the Government is announcing restrictions on
lawyers advertising for personal injury matters to take effect from 1 April …" 8
There was no time to wait for the outcome of the inquiries put in train as a result of the Ministers'
meeting in May 2002. Premier Carr announced that there would be reform in New South Wales
enacted in two stages. Calls for caution went unheeded. On 18 June 2002, Royal Assent was given
to the Civil Liability Act 2002 (NSW). It was retrospective and took effect from 20 March 2002. It
introduced a range of "reforms" including caps on damages, caps on costs and the abolition of
exemplary, punitive and aggravated damages in actions for damages for negligence. There was more
to come. Premier Carr said that "we need to restore personal responsibility and diminish the culture
of blame … There is no precedent for what we are doing, in either health care or motor accident law,
or in the legislation of other States and Territories …. We are changing a body of law that has taken
the courts 70 years to develop."9 The popular demand for major legislative reform to the common
law of negligence was in full cry. Nothing could stand in the way of such reform. The "crisis" would
be solved. Callinan J's wise words10 went unheeded; "Both the common law and insurance business
and practice are the products of hundreds of years of evolutionary development. It seems rather
unlikely that everything that has evolved is wrong and should be discarded. When voices clamour for
radical change it is usually time for patience and caution."
4
5
6
7
8
9
10
Trowbridge Consulting had prepared an earlier report for the March Ministerial meeting. This one was
produced on 30 May 2002.
"Public Liability Insurance: Practical Proposals for Reform" 30 May 2002.
Negligence Review Panel comprising Justice D Ipp (Chair), Professor Crane, Dr Sheldon and Mr Ian
Macintosh.
"Crackdown on injury payouts" Australian Financial Review 21 January 2002.
New South Wales Parliamentary Debates 12 February 2002.
"A new agenda for government" Premier Bob Carr, address to the Sydney Institute 9 July 2002.
"Problems in Insurance Law" Callinan J (2002) 25 UNSW Law Journal 859.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
3
It will be noted that all this activity was driven, not by principle but by a need to reduce insurance
premiums in order to make insurance more affordable and more available. This is clear from the
executive summary of the Trowbridge report which provides that its proposals have been developed
against four desirable outcomes:

cost reduction;

cost containment for the future;

improving certainty and predictability in the insurance system; and

changing social and legal attitudes towards the assumption of liability for risk.
The report sets out a number of initiatives under the heading "recommendations to stabilise and
reduce claim costs".11 Space does not permit me to set out the initiatives but they range over the
whole of the law of negligence and include simply capping various awards of damages. Absent from
the report is a detailed examination of the contribution to the "crisis" by the events of September 11,
the downturn in the equities market, the reliance of the insurance industry on that market and whether
premiums had been at an unrealistically low level for a long time and the recent increases were no
more than a "catch up". Also absent from the report is a consideration of the general public, either by
way of taxes or other means, subsidising the premium hike for a temporary period to see if any crisis
is going to last, or at least to see whether the full scale common law changes were the only reasonable
way to go.
How did it develop?
Into this turmoil was mixed the collapse in March 2001, of probably Australia's largest personal
injury indemnity insurer, HIH, and the imminent collapse of Australia's largest medical protection
organisation, UMP. The clamour for legislation grew shrill. There was a lot of talk about doctors
retiring because they could not get affordable insurance. Obstetricians and neuro surgeons were
going to give up practice, although all the evidence that this was so was anecdotal and I, personally,
never saw or read a first hand account, in either the electronic or the print media, of one obstetrician
or neuro-surgeon who had in fact retired because he or she could not get or afford the insurance
cover. These added problems forced the Government to step into the breach and itself become an
insurer by underwriting the HIH obligations, guaranteeing UMP and by providing, in effect, a
national scheme for medical indemnity.
The Trowbridge Report recommended12 that consideration of major reform to the law of negligence
be referred to a panel of four eminent persons.
As mentioned, the Ministers accepted this
recommendation. It had to be done in a hurry. The Report recommended that the panel be given "a
short time frame (say three months)" in which to complete its work. The Panel worked quickly and
11
12
op cit (iii).
op cit 27.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
4
its first report was released on 2 September. By now, there was no doubt in the collective public
mind that there was truly a crisis of unprecedented size and of course, it required unprecedented
remedies. The Panel's final report was issued on 30 September 2002.
The Review of the Law of Negligence
The Panel's report13, or the Ipp report, made a vast number of far reaching fundamental changes to the
common law of negligence. It is only possible to set out in this paper an edited summary of some of
the more important recommendations.
(1)
Perhaps the principal recommendation concerned the undemanding standard of care that
owes its immediate origin to Wyong Shire Council v Shirt14 and its genesis in the advice of
the Privy Council in Wagon Mound No 2.15 The Ipp Report recommended16 legislation to
provide that it is not negligent to fail to take precautions against a risk of harm that is "not
insignificant". I understand that there was considerable angst over whether the proposed
legislation should refer to risks that "are significant" or risks that "are not insignificant". 17
(2)
The Panel then turned to the related question of causation and what it referred to as
evidentiary gaps. The Panel was not happy with the way the law had developed by reference
to the use of expressions such as "common sense" and "real and effective cause".
It
expressed the view that the common law had developed in a way that in effect, often cast the
onus of proof with respect to causation upon the defendant. In Bennett v Minister of
Community Welfare18 Gaudron J said that " … generally speaking, if an injury occurs within
an area of foreseeable risk, then in the absence of evidence that the breach had no effect or
that the injury would have occurred even if the duty had been performed, it will be taken that
the breach of the common law duty of care caused or materially contributed to the injury." 19
The recommendation20 was that legislation should provide that the plaintiff always bears the
onus of proof of proving any fact relevant to causation. However, the Panel recognised that
in the exceptional case the evidentiary gap should be bridged on "normative grounds" if the
court considered that in all the circumstances of the case, responsibility should be attributed
to the defendant.21 In this context the Panel recommended22 that in cases where it was
necessary to prove what the plaintiff would have done had there been no breach of the duty
13
14
15
16
17
18
19
20
21
22
"Review of the law of negligence." Final Report 30 September 2002.
(1980) 146 CLR 40 at 47.
Overseas Tank Ship (UK Limited) v Miller Steamship Company Pty Limited (1967) 1 AC 617 at 643.
Op cit 106 - 107.
Cf Barwick CJ's distinction between "likely" and "not unlikely" in Caterson v Commissioner for Railways
(1973) 128 CLR 99.
(1992) 176 CLR 408.
ibid at 420 - 421.
op cit 117 - 118.
This approach was adopted in Chester v Afshar [2002] 3 WLR 1195.
Op cit 114.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
5
of care, the plaintiff's own evidence be inadmissible, and the issue be determined by
inference from all the other evidence in the case.
(3)
In the field of professional medical negligence, the Panel recommended that legislation be
enacted to provide for a new standard of care. The recommendation23 was that the legislation
should provide that a medical practitioner would not be held negligent if the treatment
provided was in accordance with an opinion widely held by a significant number of respected
practitioners in the field, unless the Court considers the opinion irrational.24
(4)
With respect to public authorities, the Panel recommended that there should be legislation to
the effect that a policy decision (a decision based on substantially financial, economic,
political or social factors or constraints) should not be used to support a finding that a public
authority was negligent, unless the decision was so unreasonable that no reasonable public
functionary in the position of the defendant could have made it.25
(5)
The Panel noted that the High Court had held that claims for damages for mental harm, not
consequential upon physical injury, were not confined to eye witnesses to trauma, 26 and
proposed27 that damages for mental harm, consequential upon physical injury or not, should
only be recoverable if the harm constituted a recognisable psychiatric illness and that the
defendant ought to have foreseen that a person of normal fortitude might suffer such an
illness if reasonable care is not taken.
(6)
A key recommendation concerned the providers of recreational services.
recommended
28
The panel
that legislation be enacted to the effect that such a provider will not be in
breach of a duty of care if injury results from the materialisation of "an obvious risk" or from
a failure to warn of the existence of such a risk.
(7)
Although the Panel did not recommend the making of any substantive changes to the
common law concerning non-delegable duties, it did recommend that such a duty should only
be found where it was considered appropriate that the employer of an independent contractor
should be held vicariously responsible for the conduct of the contractor engaged by it, thus
making non-delegable duties an extension of the theory of vicarious liability.29
23
24
25
26
27
28
29
op cit 44 - 45.
Thus the "Bolam test" would be reinstated. Bolam v Friern Hospital Management Committee [1957] 1
WLR 582.
This is an adoption of the "Wednesbury unreasonable test." Associated Provincial Picture Houses Ltd v
Wednesbury Corp [1948] 1 KB 223.
Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 191 ALR 449.
op cit 144.
op cit 64.
It is noted that in Gwilliam v West Hertfordshire Hospitals NHS Trust [2002] 3 WLR 1425 it was held that a
principal who engages an independent contractor to carry out an inherently risky operation has a duty to
choose a contractor who is able to properly meet any liability that might occur.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
(8)
6
With respect to quantum of damages, the Panel made a number of recommendations. It
recommended30 that in order to promote uniformity, both within and across the Australian
jurisdictions, Guide Lines should be published showing upper and lower limits of awards that
have been made in a large range of cases. Following legislation already in place in New
South Wales, the Panel recommended31 that there be a cap on general damages of $250,000
and that cases in which the award would not exceed 15% of that cap should be excluded from
the system altogether. The Panel also recommended32 that there be a cap on damages for lost
earning capacity set at twice average full time weekly earnings. With respect to the provision
of gratuitous services, the Panel again adopted the recent New South Wales legislation and
recommended33 that there be a threshold for recovery set at cases where services had been, or
were likely to be, provided for more than 6 hours a week over a minimum period of 6 months.
(9)
The Panel also made recommendations34 with respect to structured settlements to enable
payments to be made over an extended period, as well as with respect to limitation periods
and amendments to the Trade Practices Act to ensure that the latter was not used as a vehicle
to circumvent the reforms that were recommended.
The reception given the Review of the Law of Negligence
The Ipp report was warmly received by the Australian governments who had already commenced, or
in some States, continued, an extensive legislative programme to implement "reforms" consistent
with its recommendations.
Consistent with the robust individualism that is a hallmark of the
Australian federal system, the legislation is not uniform, but the substantial reforms recommended by
the report are the same in all jurisdictions.
I would like to draw attention to some aspects of this report because it is of course, the key document
that resulted in the legislative changes to the common law of negligence. The terms of reference
commence with the following opening statement35
"The award of damages for personal injury has become unaffordable and
unsustainable as a principal source of compensation for those injured through the
fault of another. It is desirable to examine a method for the reform of the common
law with the objective of limiting liability and quantum of damages arising from
personal injury and death."
30
31
32
33
34
35
op cit 188.
op cit 195 & 193.
op cit 198.
op cit 205.
op cit 216.
op cit ix.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
7
With respect to this statement, the Panel noted36 that the Ministerial Meeting that resolved to appoint
the Panel, had expressed the view that "unpredictability in the interpretation of the law of negligence
is a factor driving up [insurance] premiums." The Ministerial view appears to have been that this was
a fact, although, so far as I can see, there appeared to be no, or scant evidence to support this alleged
fact. The Panel went on to state that the Ministerial view was reflected by the Australian community
as evidenced by those who made submissions to the Panel. Then the report makes these three
statements that seem to me, to underpin the whole of its work:
"The Ministerial communiqué, the Terms of Reference, and the breadth and range
of the responses the Panel received in submissions and consultations, indicate that
there is a widely held view in the Australian community that there are problems
with the law stemming from perceptions that :
(a) The law of negligence as it is applied in the courts is unclear and
unpredictable.
(b) In recent times it has become too easy for plaintiffs in personal injury
cases to establish liability for negligence on the part of the defendants.
(c) Damages in personal injuries cases are too frequently too high.
Irrespective of whether these perceptions are correct, they are serious matters for
the country because they may detract from the regard in which the people hold the
law, and therefore from the very rule of law itself.
The Panel's task is not to test the accuracy of these perceptions but to take as a
starting point for conducting its inquiry the general belief in the Australian
community that there is an urgent need to address these problems."
As I understand all that, it means that the Panel has undertaken to recommend legislative intervention
to change principles of the common law to provide compensation for people who have suffered an
injury due to the fault of another, that have carefully and gradually evolved over very many years
because there are community perceptions, which may or may not be accurate that:

some unidentified persons can neither understand nor predict the common law of
negligence;

plaintiffs are obtaining awards too easily (whatever "easily" means); and

that damages are too high? (for what?).
It seems to me that all of that could simply read, "The Ministers believe that at the moment, a lot of
people think that insurers cannot offer indemnity insurance against tortious liability for personal
injury without charging very high premiums. The Panel is not to ascertain whether this is true, nor if
true, whether it is likely to be a permanent state of affairs. The Panel is to recommend wholesale
changes to the common law that the parliaments can make which will have the effect of bringing the
premiums down."
36
op cit 25.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
8
Worse, the Terms of Reference were announced on 2 July last year and required the Panel to report
with respect to (inter alia) medical negligence law and liability of not-for-profit organisations within
eight and a half weeks! These two groups were no doubt attracting the most sensational media
attention. The balance of the report was required within the following 31 days - a total period of 13
weeks. The Panel acknowledged that the allotted time was "extremely brief given the complexity and
difficulties of the task" and said:37
"The law concerned with liability for personal injury and death has been developed
by courts and parliaments over hundreds of years. It is comprised of countless
principles and rules, many of which are inter-dependent. Together they form a
system of great complexity and subtlety. It is often difficult - and sometimes
impossible - to ascertain how changes in one area will affect others. In addition,
none of the issues raised by our broad and encompassing Terms of Reference
admits of one obvious solution, and all require a balancing of legitimate and
competing interests. Some of these issues have been the subject of lengthy and
comprehensive reviews by Law Reform Commissions of Australia and other
countries. In the time allotted to it, the Panel cannot carry out such a review. (We
have, of course, relied heavily on such valuable work in formulating our own
recommendations.) These matters are mentioned to make it plain that the Panel is
properly cognisant of the nature of the task set for us in our terms of Reference.
As I understand that part of the Ipp Report, the Panel is plainly stating that insufficient time has been
allowed to undertake a proper and considered review of a complex area of the law. So have
legislative changes been made upon the basis of unsubstantiated assumptions and perceptions, and
without sufficient time being allowed for mature consideration? It would seem to be the case. I
hasten to add that in making these observations I make no criticism of the members of the Panel, two
lawyers, a surgeon and a local government officer. Indeed they are to be commended for doing a
tremendous job, given the restrictions imposed upon them. The parameters of their task were set by
the politicians. They deemed the task was urgent. It was a time when everything seemed to be
urgent. Every day Australians were being told that it was urgent for "the coalition of the willing" to
invade Iraq because it held weapons of mass destruction. We were told that war couldn't wait until
the United Nations weapons inspectors had completed their task of ascertaining whether Iraq had any
such weapons. Apparently, just as invasion of Iraq could not await ascertainment of the truth, the
Panel's recommendations were required without waiting for the ascertainment of the truth of
community perceptions about liability and damages for negligently caused personal injury. The
invasion of Iraq is now history, but at the time of writing, four months after the war was declared
over, there is no evidence to suggest that the perceptions that fuelled that decision were correct.
With respect to the Ipp Report, Mr Rob Davis, National President Australian Plaintiff Lawyers
Association, wrote38 that it is "flawed" for three reasons:
37
38
op cit 31.
"The Tort Reform Crisis" (2002) 25 UNSW Law Journal 865.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?

9
it arose out of the insurers' public campaign for tort reform, big on rhetoric but scant on
facts;

the terms of reference denied the Panel the ability to analyse the truth of the insurers'
claims about the cause of insurance premium increases; and

the members of the Panel were ideologically committed to tort reform regardless of the
cause.
I know nothing of the last suggestion.
Who caused the "crisis"?
Who is to blame for the steep increase in premiums for indemnity insurance against tort liability
depends upon the perception of the person attributing fault. Some say that it is due to the growth of a
litigious culture in our society, some say it is due to the judges who have been overly generous with
their awards and who are continuously raising the range of duties and the standards of care, some say
it is the fault of the insurance industry by not properly providing for anticipated losses and some say
that it is the fault of the uncertainties created by the events of September 11. Spigelman CJ said:39
"I am quite satisfied that the underlying cause was the practical application of the
fault based tort system in the context of adversary litigation. This had produced
outcomes which the community was no longer prepared to bear. What brought the
issue to a head, however, were developments in the insurance industry."
The Judges?
There has been considerable judicial criticism of the path along which the common law has
developed. On the occasion of his retirement from the Queensland Court of Appeal, Thomas JA
said40:
"There is one concern that has troubled me greatly in recent years and I want to
share it with you. It is the popular lust for compensation in an over-litigious
society. This has been accelerating [and] we are seeing its destructive side … all
manner of voluntary associations that help weave the fabric of society are finding
it too financially risky to perform traditional services … We have allowed the
tests for negligence to degenerate to such a trivial level that people can be
successfully sued for ordinary, human activity. We now have a compensationoriented society in which people know that a minor injury may be a means of
getting more money than they can possibly save in a lifetime … The judiciary has
a lot to answer for this. We are the ones who have laid down the rules and given
the judgments …".
39
40
Negligence and Insurance Premiums: Recent changes in Australian Law - The Spencer Mason Trust lecture
Auckland 27 May 2003
(2003) 77 ALJ 22.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
10
In his reasons for judgment in Lisle v Brice,41 Thomas J listed detailed criticisms of the way in which
the tort of negligence has been developed by the judiciary, concluding "I fear that we are developing
a creature we can no longer control." McHugh JA when a member of the New South Wales Court of
Appeal, spoke of the standard of care moving close to the "border of strict liability".42 This view was
not embraced by the High Court,43 but Clarke JA endorsed McHugh JA's observation and said44 "…
the present situation in which liability is imposed for negligence in circumstances which a lay person
could be forgiven for thinking bore little relationship to the failings of the reasonable person".
Fitzgerald JA said:45
"Ridiculous and exaggerated claims, sometimes followed by appeals when they are
unsuccessful, are increasingly frequent. Employers, motorists, hospitals and
schools, for example, or rather their insurers, have become virtual insurers of those
who are injured by their activities. There might be good policy reasons for this.
However, unless its evolution is appropriately controlled by judicial
commonsense, fundamental concepts will be incrementally eroded and the law of
negligence will eventually require each citizen to make life a risk-free activity for
everyone else."
Ever since Donoghue v Stevensen46 the evolution of the common law of negligence has been in
expansionist mode. The basis for this has been said47 to be "the general public sentiment of moral
wrong doing for which the offender must pay". I accept that there are many who can legitimately
argue that this is not the true basis of the law of negligence, but whatever is the correct view of the
law of negligence48 no-one will deny that since Lord Atkin's famous formulation of the duty of care
not to harm my neighbour, the courts have expanded the circumstances in which such a duty will
arise, and expanded the content of that duty resulting in an increase in the circumstances in which
damages will be recoverable. Spigelman CJ calls it49 the "imperial march of negligence." It is of
course, not possible to consider all of the major developments in the law of negligence in this paper.
It is sufficient for my purposes to mention a few relatively recent illustrations of the general
proposition:
(1)
Liability for economic loss for negligent misstatement was recognised in 1964 50 and has
since steadily extended its scope in terms of both duty and standard of care.
41
42
43
44
45
46
47
48
49
50
[2001]QCA 271.
Bankstown Foundary Pty Ltd v Braistina (1985) Aust Torts Rep 80-713 69 at 127
Bankstown Foundary Pty Ltd v Braisina (1986) 160 CLR 301 at 307.
Inverell Municipal Council v Pennington (1993) Aust Torts Rep 81-234.
Rasic v Cruz [2000] NSWCA 66.
[1932] AC 562.
Deane J in Jaensch v Coffey (1984) 155 CLR 549 at 607.
For an interesting discussion on this, see "The Anatomy of Tort Law" Professor Cane.
"Negligence: The Last Opportunity of the Welfare State" (2002) 76 ALJR 432. The Ipp Report
acknowledged that this paper was influential in the setting up the Panel and the recommendations that it
made.
Hedley Byrne v Heller [1964] AC 465.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
(2)
11
More than a quarter of a century has passed since this country extended the duty of care in
cases of what was then called "nervous shock".51
(3)
Just over a quarter of a century ago the High Court handed down it decision in Griffiths v
Kerkemeyer52 permitting recovery of very substantial sums of money by plaintiffs for the
provision of tortiously caused needs for services, even if such services were, and would, in
the future, be rendered gratuitously.53 Although there has been subsequent legislative activity
ameliorating the effect of these cases (in Tasmania by totally abolishing the right to recover
such damages!),54 this remains a substantial head of damages in some cases.
(4)
Almost a quarter of a century ago, the concept of a foreseeable risk being one that was not far
fetched or fanciful was expounded by the Wagon Mound No 2 and adopted in Wyong Shire
Council v Shirt.55
(5)
In 1982 the Supreme Court of Victoria held that a duty of care existed not to cause injury to a
child en ventre sa mere.56
(6)
In 1987 the High Court relaxed the constraints on a plaintiff imposed by the old law of
occupiers' liability in which the duty of care was determined by the status of the visitor and
subsumed this branch of the common law into the general law of negligence.57
(7)
A decade has now passed since the High Court abolished the Bolam Rule 58 and made the
court the arbiter of the standard of care in medical negligence cases instead of "a responsible
body of medical men [sic] skilled in that particular art."
(8)
Recently, in Brodie v Singleton Shire Council59 the High Court abolished the protection
afforded municipal authorities by the non-feasance rule.
(9)
Even more recently, the High Court in Tame v New South Wales; Annetts v Australian
Stations Pty Ltd60 extended the duty of care in claims for psychiatric harm alone to what are
called secondary victims. Together with the subsequent decision in Gifford v Strang Patrick
Stevedoring Pty Ltd61 the "artificial constraint" of confining the duty of care to those who
51
52
53
54
55
56
57
58
59
60
61
Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383.
(1977) 139 CLR 161.
See Van Gervan v Fenton (1992) 175 CLR 327.
Common Law (Miscellaneous Provisions) Act 1986.
Supra.
Watt v Rama [1972] VR 353.
Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479.
Rogers v Whittaker (1992) 175 CLR 479.
(2001) 206 CLR 512.
Supra.
(2002) 191 ALR 449.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
12
witness the traumatic events or their immediate aftermath, was jettisoned in favour of a
general duty of care owed to those who were in a close and intimate (loving) relationship
with another in respect of whom there was a breach of a duty of care not to expose him or her
to the risk of harm.
I mention those few expansions to the tort of negligence, or milestones along its "imperial march", to
point out that none of them either singly or collectively appear to have precipitated a "crisis" in the
insurance industry and certainly have not provoked calls for reforms such as have been seen recently.
So far as I can recall, the perceived crisis did not arise until the beginning of the 21 st century, and so
far as I can detect, the traditional whipping boy was seized upon by the politicians namely, the
lawyers and the law.62 Certainly, the developments in Tame had no effect on the crisis because that
judgment was not handed down until 5 September 2002, by which time the Ipp Committee was close
to finalising its report. It is also unlikely that Brodie had any impact as a cause of the crisis because it
was not handed down until 31 May 2001. The question to ask is if the "crisis" is the result of
continued expansion of the common law of negligence, why was its appearance of very recent and
very sudden onset? Why did it not arise following any one of the milestones to which I have made
reference? A related question is why have not the milestones caused a gradual increase in premiums
to an unacceptable level over the last decade or two? I venture to suggest that no correlation has been
shown to exist between the sudden rise of premiums to an unacceptable level and the expansion of
the duty of care by the development of the common law.
It has been claimed anecdotally, that the courts have raised the standard of care to unacceptable levels
and this is the cause of the crisis. That is a matter of perception. It certainly was the perception of the
meeting of Ministers that commissioned the Review of the Law of Negligence. Spigelman CJ
considered that in this respect, perhaps the high water mark is Nagle v Rottnest Island Authority63. It
will be recalled that this was the case of a plaintiff diving off a rock on Rottnest Island and suffering
serious injury when he hit a submerged rock. The absence of a warning sign was held to be a breach
of the duty of care.
But it is perhaps not surprising that the standard of care is steadily rising. Mason J (as he then was),
Wilson and Dawson JJ said,64 "What is considered to be reasonable in the circumstances of the case
must be influenced by current community standards". Community standards change. Generally,
speaking increased scientific knowledge, improved community education and an increasing
awareness of the need to avoid injury being caused to others, have resulted in the community
expecting a higher standard of care by those who have a duty not to expose another to the risk of
foreseeable injury. It is a gradual process. Because it is a gradual process one would expect to see,
not a sudden leap, but a corresponding gradual increase in insurance premiums if it was the cause of
the current "crisis".
62
63
64
"The first thing we do, let's kill all the lawyers." Shakespeare, King Henry VI Part II.
(1993) 177 CLR 243.
Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301 at 309.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
13
More importantly, if the current perceived problem is the making of the judiciary and the "imperial
march of negligence" one would expect to see some statistical evidence of a recent rapid rise in the
size and number of claims. Trowbridge Consulting65 set out court statistics for varying periods from
1991 and ending 2001. The report concluded that "most courts" showed an increase in writs filed
over the period (not surprising given the increase in population over the period) but "it is difficult to
draw strong conclusions from [the] statistics given the extent of the limitations on the data." The
report concluded with respect to the statistics:
"Overall, therefore, the court statistics appear to support a view that there has been
a stead increase in public liability insurance bodily injury claims over the last five
to ten years. There is no evidence of an 'explosion of litigation' in recent years."
Data from five insurers (not including HIH) representing 30% of the public liability market shows
that between 1993 and 2001 there was an average annual increase in the size of personal injury
claims of 6% and that, for the same period, wage inflation has been in the order of 4%. So, those
who blame the "crisis" in the law and the lawyers say there is support for their case in these figures
for the proposition that the "crisis" is due to the "generosity" of the judiciary but this conclusion has
been criticised by Messrs Cashman and Davis.66
It must not be forgotten that Nagle was decided seven years before the word "crisis" was mentioned.
Since then, there is every sign that the common law has been doing its job, as there is a row of
decisions by this country's highest appellate authority that indicate a change in community standards
towards self reliance and self responsibility. The first is Romeo v Conservation Commission of the
Northern Territory67 in which Brennan J said68 that he would over-rule Nagle. The second is Agar v
Hyde69 (indoor cricket). The third is Sullivan v Moody70 (duty of care when investigating allegations
of child sexual abuse). The fourth is Woods v Multi-Sport Holdings Pty Limited71 (no duty of care
owed by those making rules for the sport of rugby to those adults who volunteer to play the game)
and the fifth is Graham Barclay Oysters Pty Ltd v Ryan72 (no duty of care on local authority in
exercise of statutory powers to consumers of contaminated oysters). It is interesting to note that in
the judgments in these cases there is frequent reference to Lord Atkin's famous dicta and no more talk
of unifying tortious concepts such as proximity. In Waverley Municipal Council v Swain,73 after
referring to a trend in the common law, which was discernable between 1972 and 1986, and which
65
66
67
68
69
70
71
72
73
op cit 30 May 2002 55 et seq.
Supra n38.
(1997) 192 CLR 431.
ibid 447.
(2000) 201 CLR 552.
(2001) 207 CLR 562.
(2002) 208 CLR 460.
(2003) 194 ALR 337.
[2003] NSWCA 61.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
14
gave weight to the proposition that a defendant ought to be aware that it was possible that those to
whom a duty of care was owed might act inappropriately, Spigelman CJ said:74
"It now appears possible to identify a change in the law in the other direction, ie
greater weight is being given to the proposition that people will take reasonable care
for their own safety. (See in addition to the observations in Romeo and Multi-Sport
quoted above, Brodie v Singleton Shire Council; Ghantous v Hawkesbury City
Council (2001) 206 CLR 512 esp at [163] and [355]; Richmond Valley Council v
Standing [2002] NSWCA 359 at [54] and [59]-[60] per Heydon JA; RTA v
McGuinness [2002] NSWCA 343 [33] and Burwood Council v Byrnes [2002]
NSWCA at [33] per Handley JA; Edith Cowan University v Czatryko [2002]
WASCA 334 at [29] per Murray J.)"
Although this response to changing community standards was apparent well before there was any
crisis, it seems to have had little impact upon the legislators or those who advise them. It seems to
me that, with respect to those who take a contrary view, there has been no substantial causal link
made out between the "generosity of the judiciary" and the insurance industry crisis that manifested
itself at the beginning of 2000.
The insurance industry?
As this audience well knows, general insurance companies' revenue comes principally from operating
activities being insurance premiums, claims on reinsurance contracts and investment earnings. Solid
reinsurance contracts are essential for the good financial health of an insurance company. The plain
fact is that the Australian general insurance industry made underwriting losses throughout the
1990's75. The industry, world wide, offset underwriting losses with investment income. Until the end
of the 1990's this income enabled the insurance companies to show an overall profit, but the writing
was plainly on the wall that premiums had to increase. In Australia, natural increase in premium
income was inhibited by HIH's policy of unrealistically undercutting competitors. Since 1996, long
before September 11, the net loss ratio76 in the field of public and product liability steadily rose from
80% to 140%. After the collapse of HIH it is not surprising that premiums escalated sharply. In
March 2002 the ACCC reported77 that the overall performance for public and product liability
insurers was low, the outlook not good and there was a need to increase premiums.
According to the Insurance Council of Australia, the principal causes include an increase in the
number and size of claims, an increasingly litigious society, generosity of the judges, advertising by
lawyers, increase in "no win/no pay" litigation, legal costs and the proliferation of high risk
recreational activities. Mr Rob Davis78 says that this is not so and the insurance industry push for
74
75
76
77
78
ibid par114.
"Liability Insurance Premiums Increases: Causes and Possible Government Responses" D Kehl Current
Issues Brief No 10 2001-02.
Claims expense for the year divide by the net earned income.
"Insurance Industry Market Pricing Review", ACCC, March 2002.
National President Australian Plaintiff Lawyers Association.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
15
negligence law reform can be described as a "concentrated campaign" which attributes blame for
recent premium increases on "lawyers, the legal system and injury victims."79 He writes:80
"The goal of the campaign is to confuse the Australian public about the true causes
of the current crisis in the insurance industry and in the process, convince them to
surrender valuable rights."
To support Davis' view, figures from the Productivity Commission show that since 1996 - 97 civil
litigation in Australia has declined.81.
The response from the insurance industry is that the
Productivity Commission figures refer to all litigation and it is the personal injury litigation that has
shown a marked increase during the period covered. It seems that there may be some truth in this at
least so far as concerns medical negligence claims for they may have doubled in the last decade.82
However, Peter Cashman points out83 that this statistic must be seen in the light of an increase in the
number of services provided by Medicare (up 60% in 15 years) and in hospitals (up 76% in 15 years)
as well as a general population increase over the last decade.
With respect to the insurance industry complaint that the size of claims have increased in excess of
inflation due to the generosity of the judiciary, Davis points out 84 that this is bound to be so because
inflation is a retrospective measure whereas most claims cover future as well as past losses. In many
large claims the future loss component comprises the largest proportion of the award. On the issue of
profitability Davis' opinion85 is that it has taken a nose dive because the recent bear market has
deprived insurers of their traditional profit notwithstanding a negative underwriting result.
In the field of medical indemnity insurance there has been criticism of medical defence associations
for failing to set aside adequate reserves, keeping premiums at an unrealistically low level for many
years and for failing to make any provision for incurred, but not reported claims. 86 To this might be
added the fact that Medical Protection Societies were not subject to supervision of any regulatory
authority.
The insurance industry relied upon investment income for years when the signs were clear that there
must be a rise in premiums. It failed to have adequate reserves and proper reinsurance contracts. The
fall in the value of equities reduced the income necessary to offset the increasingly negative
underwriting result. To this list of woes there might be added the complaint that many Chief
Executives in the insurance industry were paid unrealistic salaries that had to be funded out of
79
80
81
82
83
84
85
86
"The Tort Reform Crisis" op cit.
ibid 866.
Australian Productivity Commission annual report 2000 - 2001 Table 9A.
"Why premium costs have increased for professional indemnity in health care" Background paper (2002)
prepared for the Australian Health Ministers Advisory Council, Medical Indemnity Working Group.
"Tort Reform and the Medical Indemnity Crisis" (2002) 25 UNSW Law Journal 888.
op cit 868.
op cit 869.
Cashman op cit 890.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
16
general income. However, the insurance industry is a cyclical one87. In the last few years a buyer's
market has become a seller's market. The events of September 11 and a number of natural disasters
have drawn down the reserves of capital. That, coupled with the events in the Australian scene, have
produced a demand for public liability insurance that cannot be met by the remaining companies in
the market. None of that is the making of the common law of negligence, and at least some of it is
the making of the insurance industry.
An increasingly litigious society?
There is, not surprisingly, a dearth of hard evidence to either support or debunk this claim. It goes
hand in hand with the claim that lawyers are responsible for society becoming more and more
litigious. The only available indicator, being the number of actions instituted over the last decade and
to which I have referred, does not appear to support the claim that Australians are becoming more and
more litigious. However, it appears that Premier Carr has a different view for he said88, "it's my view
that this country is tying itself up in tape because of litigation, a long term trend to see us litigate for
everything, to try and settle every problem in our lives … by getting a big cash payment from the
courts." The trouble is that the perception of the average Australian is not formed by factual
information but by what he or she sees on the television and that includes Ally McBeal, Judge Judy
and the ABC's drama MDA.
Historical legislative activity
Although historically, the common law of negligence has not been free of legislative interference, the
last 12 months or so have seen an unprecedented outburst of legislative interference with the
principles of the common law of negligence. Early intervention saw the abolition of the common law
rule that a person could not recover damages for the death of another 89. This was followed by
legislation permitting an employee to recover damages against his or her employer for injury caused
by the negligence of another employee, hitherto prohibited by the common law rule that, as employer
and employee were in a free bargaining position, the employee voluntarily assumed the risks of injury
at the hands of fellow employees.90 There followed a rush of legislation providing for no-fault
workers compensation, compulsory insurance in the case of injuries arising out of the use of motor
vehicles together with direct access to a fund in the event of the tortfeasor being uninsured or the
insurance company unable to meet the judgment. A major statutory reform was the enactment of
87
88
89
90
Spigelman CJ op cit Spence Mason Trust Lecture at 3.
B Carr, Premier, "Sunday – Interview: NSW Premier Bob Carr" interview with Laurie Oakes, Sunday 14
July 2002.
Lord Campbell's Act.
Employers Liability Act 1880. See The Law of Torts, Flemming (9ed) 558 - 559.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
17
legislation to abolish the doctrine of last opportunity91 and to provide for a right to contribution92
amongst joint tortfeasors. It is true as Spigelman CJ said:93
"No doubt, in many respects, the common law would have developed in a way that
ameliorated the original position, even in the absence of statute. Nevertheless, to a
significant degree, contemporary proposals to change the law would have the
practical effect of changing statutory rights which abolished common law
restrictions rather than abrogating "common law rights".
In response to uncertain times and high interest rates the States and Territories acted to fix the
discount rate94. However, generally speaking, the legislative changes over the last two centuries have
been ameliorative and expanded the common law. Neither singly nor collectively did they constitute
a wholesale attack upon the principles that have been gradually and carefully worked out by the
Courts over time. The legislation that has been enacted over the last few months is a wholesale attack
on those principles enacted as a simplistic popular reaction to what has been described as a "crisis"; a
word much loved by the popular press and politicians.
The legislation, and is there a future for Ms Donoghue's snail?
Notwithstanding State individualism, in a rare show of unity, legislation has been swiftly enacted in
all the States, the Commonwealth and Territories95. As I have said, the legislation is uniform in
matters of important substance but differs in a number of respects from jurisdiction to jurisdiction.
Practically all has been achieved within 12 months from start to stop.
A remarkable feat,
unparalleled, I think, in Australia's history. How long did it take to get uniform hire purchase and
companies' legislation? Maybe the law of defamation will be the next demonstration of comity
between the States!
91
92
93
94
95
Law Reform (Miscellaneous Provisions) Act 1965 (NSW); Wrongs Act 1958 (Vic); Law Reform Act 1995
(Qd) Wrongs Act 1936 (SA); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act
1947 (WA); Tortfeasors Act 1954 (Tas);
Law Reform (Miscellaneous Provisions) Act 1946 (NSW); Wrongs Act 1958 (Vic); Law Reform Act 1995
(Qd) Wrongs Act 1936 (SA); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act
1947 (WA); Tortfeasors Act 1954 (Tas);
"Negligence: The last outpost of the Welfare State", Spigelman CJ An address at the Judicial Conference
of Australia Colloquium Launceston 27 April 2002.
The rates vary from jurisdiction to jurisdiction. The legislative provisions can be found in Assessment of
Damages for Personal Injury and Death Luntz (4ed) at par 7.4.9. The Tasmanian provision is there
described as "the incredibly high rate of 7%."
Civil Liability Act 2002 (NSW); Civil Liability (Personal Responsibility) Act 2002 (NSW); Personal
Injuries Proceedings Act 2002 (Qld); Personal Injuries Proceedings Amendment Act 2002 (Qld); Wrongs
and Other Acts (Public Liability Insurance Reform) 2002 Act (Vic); Wrongs and Limitation of Actions
(Insurance Reform) Act 2003 (Vic); Wrongs (Liability and Damages for Personal Injury) Amendment Act
2002 (SA); Recreational Services (Limitation of Liability) 2002 Act (SA); Statutes Amendment
(Structured Settlements) Act 2002 (SA); Volunteers Protection Act 2001 (SA); Civil Liability Act 2002
(WA) Volunteers (Protection from Liability Act 2002 (WA); Civil Liability Act 2002 (Tas); Civil Liability
Amendment Act 2003 (Tas); Civil Law (Wrongs) Act 2002 (ACT); Civil Law (Wrongs) Amendment Act
2003 (ACT); Personal Injuries (Liabilities and Damages) Act2003 (NT); Personal Injuries (Liabilities and
Damages) Amendment Act 2003 (NT); Personal Injuries (Liabilities and Damages) Amendments Act
2003 (NT).
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
18
I hope I may be forgiven for referring to the legislation of my home State, Tasmania, as I am most
familiar with that, but my remarks have universal application. The Act, Pt6, is headed breach of duty.
The first thing to note is that notwithstanding that the Ipp Report stated that it had not considered the
law governing damages for anything other than death and personal injury, the Part applies to harm
caused by personal injury or death, damages to property and pure economic loss. The second thing to
note is that s3B(5) provides that regulations may be made to "exclude a specified class or classes of
civil liability from the operation of any provision of this Act." This means that the common law can
now be altered in this respect without having to resort to principle or even the full democratic process
afforded by the process of amending an Act. Sections 11 and 12 provide:
"11(1) A person does not breach a duty to take reasonable care unless 
(a) there was a foreseeable risk of harm (that is, a risk of harm of which
the person knew or ought reasonably to have known); and
(b) the risk was not insignificant; and
(c) in the circumstances, a reasonable person in the position of the
person would have taken precautions to avoid the risk.
(2) In deciding whether a reasonable person would have taken precautions against a risk
of harm, the court is to consider the following (among other relevant things):
(a) the probability that the harm would occur if care were not taken;
(b) the likely seriousness of the harm;
(c) the burden of taking precautions to avoid the risk of harm;
(d) the potential net benefit of the activity that exposes others to the
risk of harm.
(3) For the purpose of subsection (2)(c) the court is to consider the burden of taking
precautions to avoid similar risks of harm for which the person may be responsible.
12 In a proceeding relating to liability for breach of duty 
(a) the fact that a risk of harm could have been avoided by doing
something in a different way does not of itself give rise to or affect
liability for the way in which the thing was done; and
(b) the subsequent taking of action that (had the action been taken
earlier)would have avoided a risk of harm does not of itself give rise
to or affect liability in relation to the risk and does not of itself
constitute evidence of liability in connection with the risk."
The key provision is of course, that there will be no breach unless the risk of harm is "not
insignificant". In making its recommendation the Panel purported to rewrite Shirt so that there will
be no breach of duty in the event of a failure to do anything to prevent harm arising from the
occurrence of a risk of harm that was not insignificant. Whether at the end of the day, this aspect of
the legislation will effect much change to the common law remains to be seen. The legislation has to
be interpreted by the judges and it may be that, in its application to the facts of a case, there will be
little difference between a foreseeable risk that is not far-fetched or fanciful and one that is not
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
19
insignificant. The Panel's recommendation96 that led to the enactment of s11(2) and (3) was based
upon a perceived danger that the judges might find that a risk of harm was not insignificant and
erroneously proceed to conclude that a failure to do anything about it was negligent. If that is so then
judges have misunderstood Shirt for the passage at page 46 makes it quite clear that foreseeability of
the risk is a condition precedent to a finding of a breach of duty but is not conclusive of it. The issue
has always been what would the reasonable person have done in response to that risk. So it might be
said that the Act, ss11 and 12, will not make an earth moving alteration to the common law of
negligence with respect to breach of duty of care.
With respect to the issue of causation the Act, s14, enacted that the onus of proving any fact upon
which the plaintiff relies upon the issue of causation is on the plaintiff. Despite the dicta of Gaudron
J in Bennett v Minister for Community Welfare97 I do not think that this provision has made any
substantial change in the common law. Section 13(1) enacts that:
"(1) Prerequisites for a decision that a breach of duty caused particular harm
are as follows:
(a) the breach of duty was a necessary element of the occurrence of the
harm ('factual causation');
(b) it is appropriate for the scope of the liability of the person in breach to
extend to the harm so caused 'scope of liability')."
There is no difficulty about par(a), but (b) seems to introduce a new concept. The difficulty about the
legislation is that it does not in this instance follow the form recommended by the Panel98. Paragraph
(b) is linked with s13(4) which provides:
"For the purpose of deciding the scope of liability, the court is to consider (among
other relevant things) whether or not and why responsibility for the harm should be
imposed on the party who was in breach of the duty."
I understand this section is directed to those cases where the evidence shows that more than one
tortfeaser was in breach of the duty of care and that breach made a material contribution to the harm.
I do not see this subsection as adding a great deal to the common law of causation. Section 13(3)
makes provision to exclude the evidence of the plaintiff in those cases where the causal link depends
on what the plaintiff would have done if there had been no breach of duty. Section 13(2) I find
difficult to understand. It provides:
"(2) In deciding in an exceptional case, in accordance with established
principles, whether a breach of duty, being a breach of duty that is established but
which can not be established as satisfying subsection (1)(a), should be taken as
satisfying subsection (1)(a), the court is to consider (among other relevant things)
whether or not and why responsibility for the harm should be imposed on the party
in breach."
96
97
98
Op cit 106.
Supra.
op cit 117 – 118.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
20
There is no explanation of what is "an exceptional case" nor what are "established principles", so the
first question that the common law will have to work out is in what circumstances will s13(2) apply.
Again, there is a distinct possibility that the enactment of s13 will not have a big impact on the
common law.
Sections 15 – 17 legislate with respect to an obvious risk, not only in the context of volenti non fit
injuria, but also by providing that a defendant does not owe a duty of care to warn of an obvious risk.
Obviously, if this section had applied to Nagle no doubt there would have had a difference result, but
the cases to which I have referred that were decided after Nagle show that the common law was
reaching the same conclusion in this respect as the legislators.
The Act, s18 and following, make a big incursion into the common law. These sections concern
"dangerous recreational activities". Section 20 bluntly states:
"(1) A person is not liable for a breach of duty for harm suffered by another
person ('the plaintiff') as a result of a materialization of an obvious risk of a
dangerous recreational activity engaged in by the plaintiff.
(2)
This section applies whether or not the plaintiff was aware of the risk."
It is an obvious risk to ride a go-kart without wearing a helmet. I venture to think it would be obvious
to a child over the age of – say – 12 years. Such activity is a dangerous recreational activity. As I
understand the legislation, a young person who suffered head injuries in a go-kart accident while not
wearing a helmet, would have no recourse against the proprietor of the rink even though that
proprietor was aware that the injured person was riding without a helmet and could have stopped him.
The Panel said99 that it was aware that many participants in recreational activities are children but
considered that the definition of obvious risk as "a risk that, in the circumstances, would have been
obvious to a reasonable person in the position of that person" afforded young persons sufficient
protection. It seems to me that the blunt enactment of the provisions concerning recreational activities
cuts into the heart of the common law principles that have been worked out for negligence. The
legislative approach to liability for injury suffered in the pursuit of a recreational activity is not
principled. It is simply one attempt to reduce insurance premiums. With respect to this kind of
legislative activity Kirby J recently said:100
"Subject to any constitutional restrictions, Parliaments, motivated by political
considerations and sometimes responding to the 'echo-chamber inhabited by
journalists and public moralists' (Vellino v Chief Constable of Greater Manchester
Police [2002] 1 WLR 218 at 233), may impose exclusions, abolish common law
rules, adopt 'caps' on recovery and otherwise act in a decisive and semi-arbitrary
way [Here his Honour made reference to some of the recent legislation that is the
subject of this paper and the Ipp Report). Judges, on the other hand, have the
responsibility of expressing, refining and applying the common law in new
circumstances in ways that are logically reasoned and shown to be a consistent
development of past decisional law. Of course, in a general way, judges should take
99
100
op cit 63.
Cattanach v Melchior [2003] HCA 38.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
21
the economic outcomes of their decisions into account Kinzett v McCourt (1996) 46
NSWLR 32 at 51. But they have no authority to adopt arbitrary departures from
basic doctrine (cf McFarlane [2000] 2 AC 59 at 76)."
Even more unprincipled are the provisions in the Act that impose caps on damages. Section 26
arbitrarily imposes a limit on the damages for lost earning capacity not greater than 4.25 times the
adult average weekly earnings. The section enacts that a court must not award damages on the basis
that the plaintiff was earning more than 4.25 times the adult average weekly earnings before the
damages are awarded. Thus, the sportsperson or rock singer who may be earning a great deal more
than that at the time damages are awarded will not be entitled to be put in the position he or she would
have been had the tort not been committed, even though the likelihood is that the high level of earning
capacity would not be likely to last for more than another – say – 10 years. The position would be
quite different for a person in steady permanent work of enduring nature but who was earning at the
relevant time 4 times the adult average weekly wage. The Act, s27, imposes a cap on general damages
fixed in an equally arbitrary way. It seems to me that these kinds of incursions into the principles
developed by the common law are likely to bring the law into disrepute and cause it to be seen as
unfair. There will develop two regimes, side-by-side, judge-made law and sporadic unprincipled
legislation each fighting against the other. This of course, is bad enough, but some might say that it is
scandalous that the remedy for financial difficulties in the insurance industry is an attack on common
law principle rather than government revenue raising, especially as there is nothing more than
untested perceptions to justify such legislative incursions.
However, if the foregoing is not bad enough, the events that followed the handing down of judgment
by the High Court in Cattanach v Melchior101 sound a grave warning for the principles of the common
law generally, and for the independence of the judiciary. In Cattanach, by a four to three majority,
the High Court held that in an action for damages for negligence against a medical practitioner for a
failure to properly advise, the respondents could recover the cost of bringing up a child born as a
result of an unwanted pregnancy. The majority102 saw this aspect of the action as a claim for
economic loss as a result of negligent advice, and in principle, application of the common law, as
developed to-date, entitled the respondents to recover the cost of bringing up an unwanted child. I
hasten to add, unwanted before it was born, not subsequently. The minority103 followed the House of
Lords104 and for various reasons, opined that there should be a restraint on this development of the
common law.
My warning arises not out of this development in the common law, but out of the political reaction to
it. I do not know what time the reasons for judgment were handed down on 16 July 2003, but more
likely than not it was shortly after 10:15 am. The Australian newspaper published for 18 July
reported the Deputy Prime Minister as being extremely critical of the decision for the "High Court
101
102
103
104
ibid.
McHugh, Gummow, Kirby and Callinan JJ.
Gleeson CJ, Hayne and Heydon JJ.
McFarlane v Tayside Health Board [2000] 2 AC 59.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
22
was treating human life as a commodity, such as a fridge magnet or a DVD player". The same paper
reported the NSW Premier as "calling for a uniform national solution created by the decision, which
he says could exacerbate the shortage of children's doctors." Why the decision called for a solution
appears in the next sentence of the newspaper report, "He has called on the Federal Government to
co-ordinate a response to doctors' fears that insurance premiums and legal liabilities could force them
to quit." The same report cites the Queensland Attorney General as saying "insurance costs for
doctors would skyrocket and some could refuse to perform such procedures unless they had
protection under law."
The reasons for decision run to 165 pages. Both the majority and the minority judgments are detailed
and closely reasoned. There is a great deal of discussion of principle. It appears that all this judicial
care is to go for naught. Of course I do not know if the political leaders to whom I have referred read
those reasons before making the statements attributed to them, but if they did, it is unlikely that the
reading was anything other than cursory having regard to the period that elapsed between the handing
down of judgment and the announcement of legislative action. It seems that politicians may have got
a taste for power following the hasty and ill-considered reactions to the so-called insurance crisis.
This time, however, it appears there is no need to refer anything to a Review Panel. Indeed, it
appears that there is no need even to study this development in the common law. It is sufficient if
there is a perception that a common law development might cause a financial problem or some other
problem for there to be legislative action to remove that development and deny others in the situation
of the respondents a remedy that the law has decided is their entitlement.
This is a very dangerous development, not only for Ms Donoghue's snail, but also for all other aspects
of the common law. It will become uncertain. No one will know whether a particular aspect of the
common law will or will not fall under the legislative knife; a knife wielded in accordance with the
political beliefs of the party that happens to be in power from time to time. Historically, legislative
interference with the common law has been restrained and largely remedial. Recently, all of that has
changed. Legislation is unrestrained and enacted in response to perceived, but untested, economic
factors. More likely than not the legislation will vary from jurisdiction to jurisdiction so that the
common law of the country will be fragmented. In effect, there is every danger of the judicial
development being subject to the superior and instantaneous editing of the legislature that is not
necessary.
IS MS DONOGHUE'S SNAIL IN MORTAL PERIL?
23
Some questions for debate perhaps?
(1)
Was there a crisis in personal injury insurance liability and, if yes, is it likely to be long
lasting?
(2)
Whose fault was this crisis?
(3)
Was the proper remedy the legislative reform of the law of negligence with consequential
deprivation of or limitation on remedies for persons injured through the fault of another?
(4)
Will the law of negligence continue to develop as it has in the past?
(5)
Is a new factor in the future development of the law of negligence the likely affordability of
insurance for the risk?
(6)
Should we go to a New Zealand style no fault scheme, or even as Professor Atiyah
suggests,105 abolish the tort of negligence, set up a no-fault insurance scheme for road
accidents and in all other cases (except perhaps workers compensation and medical
misadventures) leave it to first party insurance?
(7)
Is the recent legislative activity a threat to the stability and steady development of the
common law leading to uncertainty and lack of principle?

Peter Underwood AO
Senior Puisne Judge, Supreme Court of Tasmania
President of the Australian Institute of Judicial Administration.
105
"The Damages Lottery" 1997 PS Atiyah Hart Publishing.
October 2003