Compensation for Personal Injury: A Requiem for the Common Law in New Zealand
American Journal of Comparative Law, Vol. 21, 1973
45 Pages Posted: 8 Jan 2013 Last revised: 13 Jul 2015
Date Written: 1973
In October 1972 the New Zealand Parliament passed the Accident Compensation Act 1972 which establishes the most comprehensive accident compensation scheme ever enacted in the common law world and deals a mortal blow to the traditional tort system of compensating the victims of accidental injury. The stunning thing about the New Zealand experiment turns out to be that the common law has something to teach social insurance, rather than the other way around. Despite the legislation being intended to replace and improve upon the deficiencies of common law and worker’s compensation, it is apparent that the principles upon which the legislation is based threaten to swallow up the entire balance of New Zealand’s comprehensive social welfare system.
The shape of the new accident legislation has been profoundly influenced by aspects of the common law of damages, especially damages for economic loss and dignitary harm. The policy makers have tried hard to keep the accident system separate from the social welfare system, but drawing boundaries between the two has proved to be very difficult. The idea of tailoring compensation payments to earnings up to a level which represents a large amount of the actual loss suffered by most people who are injured, coupled with a response to intangible losses, adds a richness of calibrated response to the compensating of losses that is altogether absent from flat rate schemes. Should this approach to compensating all losses come to pass in New Zealand it will be the legacy of the common law. In that sense this article is a respectful obituary to the common law as a method of compensating personal injury.
New Zealand’s society is based upon strong threads of egalitarianism, pragmatism, state enterprise, humanitarianism and a comprehensive welfare state. This paper considers the changes made to New Zealand social welfare benefits following an extensive review by a Royal Commission. The Commissioners found that the system was sound in principle, and the amendments they recommended were not of a fundamental kind. The Commission also rejected a move toward earnings-related benefits, pointing out that the aims of the welfare scheme and accident compensation scheme are not the same. The aim of the accident compensation scheme was to maintain the standard of living enjoyed by the accident victim while the welfare system aimed to ensure that all members of the community have income sufficient to reach an adequate living standard. Nevertheless, earnings-related compensation for periods of incapacity caused by illness was recommended as an addition to the scheme for accident compensation.
The paper then turns to discussion of the accident compensation legal framework in New Zealand under common law and the damages available, and considers what the new legislation provides. It then turns to the process of reform, covering the process from the initial Royal Commission on Personal Injury to the introduction of accident compensation legislation into Parliament. As the most ambitious reform of tort law implemented in the common law world, the scheme will be worth watching. The question of first importance will be how far the accident compensation scheme becomes absorbed into the welfare system and what effect its pattern of compensation will have on that system.
Keywords: accident compensation, New Zealand, personal injury compensation, common law damages, tort reform
JEL Classification: K13, K32
Suggested Citation: Suggested Citation