By: Shane Campbell
Published: 8/12/2016
Introduction and summary

In McGougan and Dingle v Depuy International Limited [2016] NZHC 2511 the High Court was required to determine the scope of the bar against claims for personal injury in s 317(1) of the Accident Compensation Act 2001 (ACA).  The particular question for consideration was whether a person could bring a claim for compensatory damages (i.e. sue for damages flowing from personal injury) in New Zealand, where they have cover under the ACA, but where the conduct giving rise to the claims occurred outside of New Zealand.

Collins J decided that the plain words of the ACA, together with its purpose, precluded the plaintiffs from bringing their claim for compensatory damage.  The fact was that the claimants had cover under the clear terms of the ACA, which was accepted by all parties.  The bar was therefore clearly engaged.  His Honour reiterated that it remains open for a plaintiff to bring a claim for exemplary damage arising from personal injury in New Zealand.  His Honour summarised the position in this way:

[124]     One of Parliament's intentions when it passed s 317(1) of the [ACA] was to bar proceedings for personal injury where the plaintiff has cover under the Act.  The fact the conduct giving rise to the claim occurred in another jurisdiction does not deflect from Parliament's clear intention.  If a plaintiff has cover for personal injury under the [ACA] Parliament intended he or she should not also be able to sue for compensatory damages in relation to his or her personal injury.  There is therefore symmetry between the text and purpose of s 317(1) of the [ACA].
 
[125]     The text and purpose of s 317(1) of the [ACA] bars proceedings for compensatory damages in New Zealand courts where the claim arises directly or indirectly out of personal injury covered by the [ACA].  This includes claims where the injury has occurred in New Zealand but the conduct giving rise to the claim occurs outside of this country.
 
This decision highlights the breadth of the bar to compensatory damages under the ACA.  Save for the exceptions expressly carved out by Parliament, where an intended plaintiff has cover under the ACA it is almost certain they will be unable to obtain an award of compensatory damages by recourse to New Zealand courts.

Background

The facts giving rise to the claim are simple.  Depuy International Limited (Depuy) is a company registered in England and, importantly, does not carry on business in New Zealand.  It designs and manufactures medical devices.  Between July 2003 and August 2010 Depuy designed and manufactured hip implants which 38 New Zealanders received between 2006 and 2009.  Of those 38 recipients, three were plaintiffs in the proceeding before the court.  After each received their implant, serious issues began to emerge regarding the safety and effectiveness of those implants.  Between 2011 and 2012 the plaintiffs underwent corrective surgery to have the implants removed and replaced.  

The claim by the plaintiffs alleged that the implants were defectively manufactured, which led to deterioration of the implant, leading to release of cobalt and chromium into patients.  This was said to have led to metal poisoning and tissue damage.  The plaintiffs claim was therefore based on the tort of negligence and breach of the Consumer Guarantees Act 1993.  Both compensatory and exemplary damages were sought.

Importantly, it was accepted for the purpose of the proceeding that the plaintiffs applied for and obtained cover under the ACA.  Cover was predicated on there being an injury as defined in s 32 of the ACA.  As a result, the plaintiffs obtained benefits under the ACA's provisions.

The decision

General observations

The purpose of the accident compensation scheme in New Zealand is to abolish claims for personal in exchange for a social contract by which those who suffer personal injury receive a set of community-funded entitlements but in exchange they must relinquish their entitlement to sue for damages in respect of their injury (at [20]).  By this means the economic consequences of injury are spread across the community irrespective of where fault may lie (at [21]).

Section 317 of the ACA and its predecessors have been considered in some detail in previous cases, including the following (at [26]‑[31]):
 
(a)      Donselaar v Donselaar [1982] 1 NZLR 97 (CA):  The Court here concluded that the bar is s 5(1) of the Accident Compensation Act 1972 did not prevent a claim for exemplary damages because the bar is concerned with remedies and left causes of action intact.  In this case the plaintiff sought exemplary damages for physical injuries arising from an assault committed on him by his brother.
 

(b)      Green v Matheson [1989] 3 NZLR 564 (CA):  The Court held that s 27(1) of the Accident Compensation Act 1982 did not prevent a claim for exemplary damages arising from doctors including the plaintiff in a medical trial without her consent.
 

(c)      Queenstown Lakes District Council v Palmer [1999] 1 NZLR 549 (CA):  In this case the Court held that the bar in s 14(1) of the Accident Rehabilitation and Compensation Insurance Act 1992 did not apply because the plaintiff did not have cover under that Act.  The plaintiff's claim was for compensatory damages arising from post-traumatic shock from seeing his wife die.
 

(d)      Couch v Attorney-General (No 2) [2010] NZSC 27, [2010] 3 NZLR 149:  The Supreme Court reified the approach of the courts above and held that s 317 of the ACA (which succeeded s 394 of the Accident Insurance Act 1998) does not bar a claim for exemplary damages, although it does bar a claim for compensatory damages.  The Court drew a distinction between damage giving rise to a cause of action (compensatory damages) and damages as a form of remedy (exemplary damages).

Other provisions of the ACA are key to understanding the context and purpose of the s 317 bar:

(a)      Section 3 of the ACA explains that one purpose of the ACA is to reinforce the social contract represented by the first iteration of the ACA (at [33]).
 

(b)      Section 317(4) of the ACA is subject to certain proceedings brought under the Health and Disability Commissioner Act 1994 and the Human Rights Act 1993.  However, where a person has cover under the ACA, the only award the Human Rights Review Tribunal may make under the Acts is exemplary damages (at [34]).
 

(c)      Section 317(5) provides an explicit exception to the bar in respect of claims for damage suffered in New Zealand where the damage is actionable under the law of New Zealand, under any international convention relating to the carriage of passengers (at [35]).
 

(d)      Section 319 reiterates that there is no prohibition against any party seeking exemplary damages for personal injury which is covered by the ACA.  It also permits such a claim against a party who has been a defendant in a criminal case involving the same subject matter as the claim for exemplary damages (at [36]).
 

(e)      Section 321 permits the Corporation to require any person who has obtained entitlements under the ACA, to bring a proceeding in New Zealand or elsewhere where that person has an actionable claim for damages, and any fruits of the proceeding may be deducted from the Corporation's total liability to the person (at [37]).

Following the amendment of the Sentencing Act 2002, by the Sentencing Amendment Act 2014, courts now have the power to award to claimants the difference in value between their cover under the ACA and their actual loss occasioned by criminal conduct (thereby overturning the effect of the Supreme Court's decision in Davies v Police [2009] NZSC 47, [2009] 3 NZLR 189) (at [38]‑[41]).

A summary of the parties arguments is set out at [42]‑[47].  The defendants effectively state that the bar in s 317(1) is a complete answer and is both clear and unequivocal on its face.  The plaintiffs content that permitting them to sue would be consistent with the policy behind the ACA and the other exceptions the courts and Parliament have recognised to the bar.

The decision

After contextualising the dispute in this way, Collins J disposed of the case by eschewing each argument raised by the plaintiffs.  The reasoning is summarised below.

The plain words of s 317(1), read with the antecedent authorities, clearly establishes that the bar is engaged, and a plaintiff cannot bring a proceeding seeking compensatory damages in a New Zealand court, where the claim for damages arises directly or indirectly out of personal injury for which there is cover under the ACA.  The text of s 317(1) extends to bar a claim under any enactment, so therefore encompasses the claim under the Consumer Guarantees Act 1993 (at [48]‑[56]).

The "social contract" underpinning the ACA means that where a person has cover under the ACA they relinquish their rights and benefits existing at common law, such as the right to sue for compensatory damages, in exchange for receiving the cover provided by the terms of the ACA.  If a person has cover they may not, therefore, bring proceedings for compensatory damages in a New Zealand court (at [58]‑[65]).

Section 317(1) of the ACA has the effect of barring claims for compensatory damages arising from personal injury, but leaves the underlying causes of actions intact which is why, fundamentally, it remains possible to bring an action for exemplary damages (at [66]‑[70]).

Parliament has, in s 317(1) of the ACA used clear and unequivocal language to bar proceedings seeking compensatory damages.  Application of the section is compliant with the principle of statutory interpretation that Parliament must express itself with the utmost clarity before the courts will accept that citizens' access to the courts have been stripped from them (at [72]‑[77]).

The specific exceptions to s 317(1) of the ACA (ss 317(5) and 319 of the ACA, s 6 of the Sentencing Amendment act 2014, right of subrogation in s 321 of the ACA and the ability to seek declaratory relief) do not assist the plaintiffs' case.  Each is clearly defined and is narrow in operation.  They are not engaged in the circumstances (at [78]‑[92]).

The principles of private international law (conflict of laws) do not assist in interpreting the scope of the s 317(1) bar for the following reasons (at [93]‑[100]):

(i)       First, the injuries were suffered in New Zealand and the plaintiffs made no attempt to rely on foreign law.  In circumstances such as these New Zealand law governs the claims.
 

(ii)      Secondly, Parliament has clearly defined the scope of the bar as it only applies when he or she has been injured in New Zealand or is ordinarily resident in New Zealand.  Thus, the general principle that words of an enactment should not be construed as extending to cases which are governed by foreign law, according to the rules of private international law.  In this case New Zealand law clearly applied, including the bar.

The defendants' conduct which gave rise to the claims (the United Kingdom) does not assist in determining the scope of the bar is s 317(1) for the following reasons (at [101]–[110]):

(i)       First, the plaintiffs rely exclusively on the law of New Zealand and do not seek to invoke foreign law.
 

(ii)      Secondly, private international law in these circumstances tend to focus on where the substance of the cause of action arose, not where the defendant's conduct took place.  Where the claim is for personal injury, that will ordinarily be the country where the personal injury occurred.
 

(iii)     Thirdly, if the place of conduct was relevant, it would lead to ambiguity and unacceptable uncertainty.
 

(iv)     Finally, the plaintiffs' reference to the double actionability rule (see [107]), and the suggestion that Parliament intended that claims arising from events outside of New Zealand fell outside of the scope of the bar, was not compelling.  Section 317(1) would always apply to a tort committed in New Zealand where the plaintiff has cover under the ACA, irrespective of where the events arose.

The plaintiffs' final submissions rested on a plank that if the claim was held to be barred, this would lead to anomalous outcomes (at [111]–[123]).  For example, it was submitted that the ACC system required that all resources previously expended on the fault based regime should support the ACC regime (which is faultless) and that the defendants should not be able to utilise s 317 when they have contributed nothing to the ACC regime by way of levies.  All such contentions were roundly rejected.  Collins J stated as follows:

(i)       The focus of the ACC regime is on those who have suffered personal injury, not those who have caused it.  The idea that funds should be extracted from those who might have been held liable at common law is antithetical to the regime.

(ii)      The bar in s 317 has the broader purpose of refusing claims for compensatory damages, which would inevitably be higher than cover under the ACA, as compensation under the ACA is set at a level which is fair and encourages rehabilitation.

(iii)     There was no evidence before the court which indicated the economic viability of the scheme would be at risk in the event claims such as the present were barred.

(iv)     There was no merit to the idea that the defendants would obtain an economic windfall if liability was not imposed.  When they exported products into New Zealand, all they could have expected was to take the law as they found it.  The law was that people suffering personal injury had universal cover which was not dependent on fault.

Conclusion

For all of the reasons above, the court held that the plaintiffs' claim was barred by s 317(1) of the ACA.
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