Asbestos Litigation – The Third Wave – Questions and Answers

Do governments respond only to coercion?

President: Perhaps I can start the ball rolling and put this question to both our speakers. It seems to me, as a person with a real interest in this area, that what really forced governments of different political persuasions to do something about what, on any view, was an irrational and unreasonable compensation system, particularly in New South Wales, was the fact yet again that a group of individuals in the community, the medical profession, were seen to be unfairly affected by that system and the politicians responded because they remembered what happened in 1984 when Bruce Shepherd co-ordinated a walkout from public hospitals and it was probably the fear of something like that happening again that made the governments take action.

We know what happened when Bob Carr was faced with having to put the price of green slips up over $200. Isn’t it just a political response at the end of the day that will determine what compensation system we have? It is not guided by rationality, reasonableness, or fairness. Perhaps you can comment on that.

Mr Watson: Of course it is purely and simply a political response to a current circumstance. The question is, as far as I am interested anyway is: is it a well-considered response? I am troubled by some of the reforms proposed in the Civil Liability Act because some of them look to me to be nonsensical. There is a bizarre provision which prohibits a plaintiff’s barrister from asking a question of, say in a medical negligence case, a patient as to how they would have responded to a particular warning. This raises a real dilemma because the defendant’s barrister often wants to ask that very same question. He or she, too, is prohibited. I wonder what they were thinking when they introduced that reform. It was just a knee-jerk reaction to a couple of very large, unpopular cases. It should have been considered at greater length.

Mr Sheller: I agree with Geoff that the Civil Liability Act was a reaction, a political reaction. It too has an absurdity which I pointed out, in that I always understood it to be a reform designed to get rid of small claims, yet it has a significant impact on very large claims. I gave you the example of Mr Beck. I think it is fair to say that the catastrophically injured have no political voice, or have what’s regarded as an insignificant political voice, and reform is unlikely unless it actually comes from a combination of the catastrophically injured and the medical and legal professions.

The cost of a no-fault scheme

Dr Richard Gordon: General practitioner. Mr Sheller mentioned the cost of the no-fault scheme of $5 million. Mr Watson said $25 million a day. I was wondering whether each of them could give some idea of whether they think the no-fault scheme would actually cost more or less in the current situation?

Mr Watson: It depends on how it is funded. If you have got a motor car scheme by itself, my guess is that it would not cost any more because the probability is the benefits will be reduced so that it does not cost any more. The point is if you do it scheme by scheme, area by area, it would not necessarily reflect itself in an inflated overall cost; it would be reflected in pressure on the nature and extent of the benefits.

Mr Sheller: I agree with Geoff on that. If the system is going to be introduced it will be introduced on the basis that it doesn’t cost any more and I think there will be a focus in the system to reallocate away from those who are compensated on a fault basis. They will lose some of their entitlements and those will be shifted to the no-fault scheme.

Dr Gordon: Just a follow up question. The savings in legal costs, presumably there will be, will they be counted towards what is put into the payments in the no-faults scheme? Will they be significant?

Mr Sheller: I guess so.

Mr Watson: There was some evidence in the James Hardie inquiry that the legal expenses were 25 per cent of the overall cost of asbestos cases. The legal expenses were not just barristers and solicitors, but included the experts who are involved in that particular area. There was also other evidence that that was not a comparatively large percentage of the overall cost and that, in the UK and in America, some areas of litigation had costs well in excess of 30 per cent. I guess that is a very good point, that immediately 25 per cent of the overall cost would be remitted back to the potential beneficiaries. Not every lawyer would think that is necessarily a good thing.

Would cases be cheaper to run with no-fault?

Dr Yolande Lucire: Medical. Are they going to run their own cases?

Mr Watson: With a no-fault scheme, the assumption is that the cases would be easier and cheaper to run.

A place for structured settlements?

Dr Arnold: Medical. It would seem that in any no-fault scheme you are going to have to have periodical payments to the recipient, that they get so much per week or per month to meet their expenses over its structure. Could you comment on the problem we have in Australia with the Federal income tax law, where the lump sum payment is not regarded as income, whereas the periodical payments are regarded as income?

Mr Sheller: There has been an attempt, and in fact there has been legislation passed at the Federal level, to overcome that problem as part of the Structured Settlements Reform which was introduced both at the Commonwealth level and also in New South Wales. What that reform entails is an ability by an injured person, instead of taking a lump sum, to receive periodic payments or even a mixture of a lump sum and periodic payments. That change to the tax law took many, many years of lobbying. I think it passed in 2003. I have not heard in practice of anyone actually taking that up, having a structured settlement. Some may. I haven’t seen any information concerning how many structured settlements there are to date. I suspect that injured persons, on balance, still prefer to receive a lump sum so that they can disburse that money how they see fit. The problem in terms of receiving periodic payments has been overcome, but whether there has been any acceptance by plaintiffs to receive that compensation that way, I don’t know. To date I think the answer is probably not.

Limits in the New Zealand scheme

Dr Desmond Rea: Plastic and hand surgeon. I have made a study as well of the no-fault scheme. I had to do an assignment, or presentation on it. I suppose one of the equitable factors, and I want the speakers to comment on this, is if you have an injury outside the workplace, or motor vehicle accident etc, such as a domestic injury, you can get some ongoing maintenance or compensation. Is that correct? And that’s why I think it appears that, if you are lucky enough to have a work or motor vehicle accident in Australia, you are all right, but if you are walking down your own steps and you fall over and slip inside the house etc and break something, you don’t get any compensation naturally

Mr Watson: Is that the New Zealand scheme to which you refer?

Dr Rae: Yes, that’s the only one I know.

Mr Watson: That is my understanding. There used to be all these bizarre rules that actually to qualify to receive the compensation you had to leave your front gate, or something like that, so that if you are on your way to leave the house and you tripped down the front steps but you are still inside the front gate, you get nothing. I suppose you have to draw the line somewhere. That is how the New Zealand system works, although my understanding is that New Zealand has far more widespread available health care in those circumstances than we might have.

Court awards as compensation for lack of social security

Dr Julian Lee: Medical. That last comment that you made really does bring up a very important point. It is a driving force. We are all conscious of what happens in the United States, and I have made this point at meetings we have held here on previous occasions. The United States is regarded as being the worst possible example of a lack of welfare beneficiary awards and ridiculously outrageous sums of money being given because people are either not privately insured or there is no national health system. It seems to me that in Australia what has happened, and this is true at all levels of government, is that there is a cost-shift mentality that says that, if there is an insurance fund, we will move all of the costs we can, particularly for medical care, on to the fund and take it out of the public purse, out of Medicare, which to me is a fairly glib and unjustified approach if you take the view that Medicare is for all people.

Having said that, there is in New South Wales, and I know this because I have been associated with it for well over 30 years, a no-fault compensation system for dust diseases. It was established back in the 1920s and reformed in its present state by the State Government in 1968. It works extremely well as both of you know, and that takes care of a schedule of diseases for which everybody who pays workers’ compensation makes a contribution, and it is run at a very economic rate. The costs of running the Dust Diseases Board are less than 10 per cent of the outgoings. Most of the money goes in awards.

Mr Watson: And I bet the legal expenses of that 10 per cent are minute.

Dr Lee: They are increasing because the right of appeal was introduced some years ago, and the Government, in its wisdom or otherwise, decided to introduce the Dust Diseases Tribunal, where both of you have worked and I have certainly spent a deal of my time. The point that I make here is that it was a superimposition on a system that was working extremely well, it wasn’t necessary and it leads to double dipping. There is no will in the world, as far as I can see, for governments to change it because there have been attempts made by defendants on a few occasions to do so.

This leads me to the point which might surprise some of you, I think that Hardie’s is a reprehensible company and I have thought that for many years. Nonetheless, if I were running Hardie’s, I would have done exactly what they did to get out from under the cost imposts of the ridiculous awards that have been made in the Dust Diseases Tribunal time and time again, for the very reasons that you point out: there is no accountability, there is no age limit, there is no loss of earnings in many of the claims down there. There is no economic loss, there is no loss of life expectancy in some of the cases. You see people in their eighties and going into their nineties getting substantial amounts of money for disease. An example is that Frank Walker, recently appointed to the Dust Diseases Tribunal, made an award in South Australia, sitting in the Dust Diseases Tribunal in Adelaide, for a woman of 86 of $480,000 for mesothelioma. How on earth can you possibly justify that? These things go on. The political forces that maintain them are so overwhelming in my view that it is very unlikely that any Government would dare change it

Finally, if you remember a few years ago when the medical malpractice litigation commission was hot, this is only two or three years ago, Helen Coonan, then the Assistant Treasurer, said no way in the world would the Federal Government introduce a no-fault scheme. Where do you go?

Mr Watson: I am not sure that qualifies as a question but it does lure me into responding to something you said about America. I have not seen this pleading myself, but I heard this account given in public by the Chief Justice of New South Wales, Chief Justice Spigelman. There is a class action brought in New York on behalf of family members and survivors in respect of the collapse of the Twin Towers on September 11, based on the fact that after the planes struck the towers they collapsed within 15 minutes. If the towers had remained for another 15 minutes nearly everybody could have got out, but because the towers collapsed so quickly thousands of people were killed. There is a class action brought on behalf of family members whose loved ones were killed, and the first particular of the claim in negligence was an act of negligence in failing to spray the building with asbestos. I agree with you that America is the worst example that we could ever follow and I think most people on both sides of the record, whether medical or legal, agree with that proposition.

Mr Sheller: I think I read something in the press today to suggest that there was a class action by people who were involved in the clean up and rescue effort after the collapse of the Twin Towers because they were exposed to asbestos.

One point that emerges from Julian’s question, which is important, is the fact that we have all these different schemes which again makes absolutely no sense. We have a scheme under dust diseases, where it is the old common law damages to which you are entitled, so an 86-year-old woman can be compensated to the extent of about $200,000 for the gardening services she can no longer provide to her octogenarian husband because she will die prematurely from mesothelioma, but someone who is 20 who suffers a catastrophic injury which is regulated by the Civil Liability Act will have all sorts of restrictions imposed upon a similar entitlement, or will otherwise have discounts applying to the care they need or to future losses. Any inquiry such as proposed by Geoff should also address the fact that we have different schemes, whether you are a dust diseases worker, motor accident, general claim, or no compensation where you have suffered some sort of domestic injury.

Public reaction to ‘unreasonable’ awards by the courts

Mr Barnes: Perhaps I can ask a question of Dr Lee. One of the issues that has been raised, liability being established in medical and other cases often to do with people getting hit by surf boards and stuff like that down at Bondi Beach in the no surfboard area between the flags, and there was a lot of debate about cases like that, it seems to me to be the tenuous basis upon which liability could be established that tended to outrage the community more than the size of the awards. This is a personal view.

When I read about some of the cases that have been decided m the Dust Diseases Tribunal, the bases seem even more tenuous than those types of cases when someone says when I was a child we used to go on holidays and out the back there were mounds of shavings of asbestos or something. Before we started, I jokingly said to Geoffrey that my mother lives in a fibro house and I can remember as children we put cricket balls through the panels and somebody, usually me, would have to go in after it. I may well get some asbestos-related condition from that and I would probably be compensated by this panel or this tribunal, and I will ask you to comment on to whether or not you believe that the basis of establishing liability in the Dust Diseases Tribunal are tenuous.

Dr Lee: The question about the tenuous nature of awards is of course essential to our discussion. We cannot divorce the fact that the judges are, in their eminence, just as human as we are and I know from long experience that not only in the Dust Diseases Tribunal but in other areas such as personal injury, where there is catastrophic brain damage, I am asked as an expert to give an opinion about the likelihood of somebody succumbing or surviving because of aspiration of stomach contents. They have lost swallowing reflexes and they need constant care, that is 24 hours a day, for the rest of their lives. The question arises if it is a child, as it sometimes is, what is that person’s life expectancy? Who can possibly know? That’s the point you were making earlier, Geoffrey, about a structured settlement as opposed to a lump sum. I know that the judges have this terrible dilemma on their minds: “Can I afford to leave this person short?” And when they address that, of course they take the best possible prognosis, that is life expectancy, when they extend that out into the normal realms and that leads to very large awards.

As far as the Dust Diseases Tribunal is concerned, I have been, for about 15 years since it started, a great critic. I addressed this gathering in 1993 with John O’Meally on the very subject of dust disease. I made the point then that I thought that there was a great deal of revisionism that went on into determining liability in cases, because it is necessary to understand the evolution of scientific and medical knowledge with regard to those diseases. If a company, or a manufacturer, or an end-product user, exposes a worker to a bit of dust, as you have suggested, that is in a fibro dwelling, at a time when the medical and scientific community was not aware of mesothelioma, let alone its relationship to asbestos, and that is pre 1960, the question arises: “Do we have one set of laws for the rest and asbestos laws for those who get mesothelioma?” It is a very pertinent issue.

There are increasing numbers, and I think I have seen six in the last month, of people whose only supposed exposure has been as children when their parents were building a home, nothing more than that. Are we to say that these are constructs, or are they acceptable bits of evidence that go toward a causation? You can’t determine that. You have to accept the totality of evidence and say well yes, but should that system, which was actually funded in large part or significant part by the Dust Diseases Board itself, be allowed to perpetuate what are enormous costs and awards going out on fairly limited bases, that is to say Griffiths v Kerkemeyer and Gordon v Sullivan? I would like to hear the speakers address those two issues, their origins and what might be done about them.

Mr Sheller: I think it is important to acknowledge that there are very few decisions from courts of appeal reviewing dust diseases decisions which have overturned findings of liability made by the Tribunal. There are a few, mainly on causation issues. I don’t think there is any on, for example, a duty of care or breach of duty issue that I can think of immediately, so it is not just the Dust Diseases Tribunal which is perhaps stretching the law in determining that a wide range of parties should be liable for asbestos-related diseases.

The question of Griffiths v Kerkemeyer and Sullivan v Gordon damages has not really been tested in the superior courts from dust diseases decisions. There is a case called CSR v Thompson where Mr Thompson suffered from mesothelioma and was looking after his elderly mother and because he obviously would not be able to do that in the future he received an agreed sum of over $100,000. That has been set up by CSR at a test case to take to the High Court under Sullivan v Gordon, as to whether one should be entitled to be compensated for the services one can no longer provide to family members, so we will get the view of the High Court if it grants special leave. We will get its view on whether that’s appropriate.

Mr Watson: I prefer not to focus on asbestos as opposed to all the cases in tort law. I think that is a very good example of the broader corrupting influence of the system. And what is the corrupting influence? One of the best characteristics of humans, natural sympathy for people worse off than you. It ran through my mind that we have had cases where no doubt one of the key issues in the case was the sympathy for the person injured. And, do you know what, not only does it influence the judge but it can influence defendant’s barristers. Sometimes your advice becomes coloured because you feel sympathy for the person who has been injured. There is nothing wrong with that. There is something praiseworthy about it, but it does not seem to be working as a basis for compensation and we should be looking elsewhere. It is old hat.

The transfer of NZ patients’ emotions to the criminal courts

Mr Barnes: I will finish on this comment that, when the Medical Defence Union was alive and kicking in Australia, our friends from New Zealand used to tell us: never fear, lawyers, about a diminution of work if a no-fault scheme should come in in Australia, because there is a commensurate rise in disciplinary complaints made by people who feel that they effectively have nowhere to ventilate their spleens.

I think the real proof of that was the fact that in New Zealand it was then not uncommon for medical practitioners to be charged with manslaughter for gross negligence leading to the death of a person, whereas it has been such a long time since anyone has actually gone to trial on that charge in New South Wales, that no one can really remember it happening, so the emotion that is associated with cases doesn’t actually go away, I think it gets transferred to another forum.


Scientific Meetings, Dinners and events.


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