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Compensation for
Mental Trauma Injuries
in New Zealand

The Australasian Journal of Disaster
and Trauma Studies
Volume : 1998-3

Compensation for Mental Trauma Injuries in New Zealand

J.M. Miller, Faculty of Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand. Email: John.Miller@vuw.ac.nz
Keywords: mental trauma, accident compensation,no fault, New Zealand,damages

J.M. Miller

Faculty of Law,
Victoria University of Wellington,
PO Box 600,
New Zealand


This paper describes the overall no fault accident compensation scheme developed in New Zealand, and sets out the current provisions of the Accident Rehabilitation and Compensation Insurance Act 1992 for the compensation of mental trauma injuries. It draws attention to the abolition of lump sum compensation for injuries, and the exclusion of many mental trauma injury claims which were available under the previous Accident Compensation Act 1982 - both of which led to considerable public dissatisfaction, and brought lawyers back into the compensation process with damages claims for mental trauma injuries. The renewed interest of lawyers in litigation also led to an increase in exemplary/punitive damages claims. These matters are raised for the information of interested parties overseas as well as those closer to home in New Zealand.

Compensation for Mental Trauma Injuries in New Zealand


Since 1974 New Zealand has had a comprehensive no fault accident compensation scheme for those who suffer personal injury. This means that all personal injury victims whether they are injured on the road, at home, in a hospital, at play, or at work are covered by the one Act - the Accident Rehabilitation and Compensation Insurance Act 1992 1. Therefore a person injured in a motor vehicle accident or at work is compensated in the same way as those injured at home. 2

To come under the Act the injured person has to show:
        a) A personal injury 3 and
        b) Cover 4 under the Act

If a injured person has cover under the Act then there can be no resort to the New Zealand Courts for damages for the injury, as s14 of the Act bars "proceedings for damages arising directly or indirectly out of personal injury covered by this Act " 5. There is no problem with motor vehicle and work accidents coming under the definition of the Act, because the vast majority involve some form of forceful contact resulting in physical injuries 6 caused by the accident 7

Unlike in some other overseas jurisdictions, there is no need for the injured person to prove negligence and sue in the courts for damages, nor is there need for the injured person to show that the injury happened through the use of a motor vehicle or at work. Instead, an injured person simply comes under the general accident compensation scheme if they have a personal injury that has cover.

The NZ legislation therefore does not have either the lengthy and expensive delays of civil litigation for damages, or the demarcation disputes that concern other overseas no fault schemes such as those involving motor vehicles 8.

Upsurge in Damages Claims

Although obtaining compensation from the Accident Compensation Corporation 9 for most injuries poses little difficulty 10, and the bar on damages claims remains, there has been a spectacular upsurge in damages claims being filed for mental trauma and exemplary damages in personal injury cases. The upsuge has been mainly for cases of sexual abuse, medical negligence, and work related injuries, although there have been some as a result of motor vehicle accidents 11.

There are three main reasons for this upsurge in damages claims:

  1. Mental trauma is now excluded from the definition of personal injury under the Act - this means that damages for mental trauma can now be claimed in Court.
  2. Exemplary damages claims are now allowed in cases of negligent as well as intentional conduct.
  3. The abolition of lump sum compensation by the Act.

Mental Trauma Claims

Under the previous Accident Compensation Act 1982 the definition of personal injury by accident included "the physical and mental consequences of any such injury or of the accident" 12. Suffering mental consequences from an accident (an unlooked for mishap or untoward event) 13 was therefore sufficient to come under the Act. Such mental consequences ranged from transient emotional trauma such as humiliation, through to unresolved grief reactions and serious psychiatric injury.

Thus in ACC v E 14 an employee who had a nervous breakdown as a result of being sent on a stressful management course, was held to have suffered personal injury by accident, and in Cochrane v ACC 15 a mother who suffered mental trauma from watching her son die in hospital after he had been tortured by a gang, was also held to have suffered personal injury by accident. However under the 1992 Act such claims are excluded from the scheme through the definitions of personal injury and mental injury 16.


The definition of personal injury is contained in s4 and s8(3) of the 1992 Act, and unlike the previous definition of personal injury by accident in the 1982 Act, it is a closed definition.
Section 4 states:
"Definition of Personal Injury
(1) For the purposes of this Act 'personal injury' means the death of, or physical injuries to, a person , and any mental injury suffered by that person which is an outcome of those physical injuries to that person and has the extended meaning assigned to it by section 8(3) of this Act..."
Section 8 states:
"Cover for personal injury occurring in New Zealand
(1) This Act shall apply in respect of personal injury occurring in New Zealand on or after the 1st day of July 1992 in respect of which there is cover under this Act.
(2) cover under this Act shall extend to personal injury which -
(a) Is caused by an accident to the person concerned; or
(b) Is caused by gradual process , disease or infection arising out of and in the course of employment as defined in s7 or s11 of this Act; or
(c) Is medical misadventure as defined in section 5 of this Act; or
(d) Is a consequence of treatment for personal injury covered by this Act
(3) Cover under this Act shall also extend to personal injury that is mental or nervous shock suffered by a person as an outcome of any act of any other person performed on, with , or in relation to the first person (but not on, with, or in relation to any other person), being -
(a) An act that is within the description of any offence listed in the First schedule to this Act." 17

Type of mental trauma included

Therefore only mental trauma which is an outcome of physical injury is included in the 1992 Act 18. Furthermore only very serious mental trauma is included, because the phrase "mental injury" is defined in Section 3 as " a clinically significant behavioural, psychological or cognitive dysfunction" 19.

In ACC v E 20 a case decided under the 1982 Act, the Court of Appeal said:

"It would be a strange situation if cover under the Act for a person suffering serious mental consequences caused by an accident were to depend upon whether or not some physical injury however slight also is sustained. Further it would create major difficulties should it be necessary in particular cases to separate physical and mental injuries."

This "strange situation" is now the law under the 1992 Act.

Type of mental trauma excluded

As recognised under the 1982 Act, mental trauma can range from transient emotional reactions of embarrassment, anger, humiliation etc. through to more serious mental trauma such as shock and major psychiatric reactions. But the 1992 Act:
1) no longer recognises transient emotional trauma as a personal injury. This means that an injured person can now sue for damages for transient emotional trauma.
2) does recognise mental or nervous shock as a personal injury, but only as the result of a sex crime 21. Therefore if there is mental or nervous shock and no sex crime is involved, the injured person can sue for damages.
3) recognises mental injury as an outcome of physical injury as a personal injury, but the mentally injured person can sue for damages:
a) if the mental injury is not an outcome of the physical injury and happened prior to the physical injury as in the terror at the approach of a train while stuck on a level crossing, or
b) if the mental injury happened at the same time as or after the injury but came from brooding over the horrific sights involved in the accident and not from the injuries.

Hence the upsurge in damages claims for mental trauma using the torts of assault,battery and negligence. 22

Assault , Battery and Negligence

Damages claims for assault and some batteries also became possible after the 1992 Act, because mental trauma is not included in the Act, and physical injury is not defined. Because of the separate definition of "mental injury", the phrase "physical injury" cannot include any aspect of mental trauma. It must be assumed that the legislation would not specify a restrictive definition of mental injury if lesser mental trauma could simply be included under physical injuries. For this purpose, physical injuries must mean more than mere physical contact, and perhaps be in line with the Crimes Act 1961 definition of "to injure" as meaning "to cause actual bodily harm" 23. For example, in R v McArthur 24, Mahon J held that an injury had to be something in the way of broken bones, bruising, cuts or lacerations after being knocked down by a car, rather than an injury where the victim was only shaken and dazed.

It could be argued that because of the different policy objectives, a different interpretation should be given to injury in a criminal statute from that given in a compensation statute. However, given the restricted nature of the definition in s4, physical injuries have to be something more than mere hurt and be in the nature of cuts , wounds, bruises and fractures. Thus, any contact which did not result in these types of injuries would not be regarded in law as a physical injury - and his has been confirmed in Bell v ARCIC 25 an Accident Compensation case in the District Court 26, where a cotton bud lodged in a ear was held not to be a personal injury even though medical attention was required to remove it.

Thus if there is physical contact which is not a physical injury e.g. a contemptuous touch, this also could be the subject of a damages claim. If there was no damage suffered, there would certainly be a problem in suing for negligence - but a claim in assault and battery, where no damage is required, could be an option particularly if there was a deliberate attempt to strike the victim 27.

No Clear Decision On Mental Trauma

Despite the number of claims filed for damages for mental trauma, a decision on the matter is still awaited from the Court of Appeal. Most of the claims have survived strike out applications, and as yet only one mental trauma case has proceeded to an adverse judgment by a High Court Judge. In that caseKingi v Partridge 28, a claim for nervous shock by a family over the death of a relative in hospital was struck out on the basis of the tests for proximity laid down by the House of Lords in Alcock v Chief Constable of South Yorkshire 29. This Alcock case requires some locational and temporal proximity between the claimant and the horrifying event, i.e. the claimant must hear or see the incident which provokes the nervous shock. To be told of the event or to visit the scene afterwards is not sufficient. However Lord Cooke when he was President of the Court of Appeal, noted 30 that the Alcock decision was really a policy decision, thus indicating that different tests for nervous shock might be more appropriate for New Zealand to adopt. Therefore there are some doubts whether the English tests for nervous shock will be adopted in New Zealand by the Court of Appeal.

In two recent decisions a Master of the High Court preferred the more liberal Australian approach to the requirement for proximity in nervous shock cases to that of the more restrictive English approach 31. For example, in the Australian cases Andrews v Williams 32,Coates vGovernment Assurance Office of NSW 33 and Pham v Lawson 34, the fact that the claimant was not present at the scene or its immediate aftermath but instead only learned about the incident afterwards was not fatal to their claim. However Master Venning still considered that a recognised mental or psychiatric illness was required for a nervous shock claim to succeed at common law, and that lesser mental trauma was insufficient. The issue has still to be resolved by the Court of Appeal in New Zealand, and that Court has already shown a willingness to award damages for mental distress .

Damages for Distress

In Mouat v Clark Boyce 35 the plaintiff was awarded damages for the financial loss and distress she suffered through the defendant firm of solicitors failing to properly advise her when she guaranteed financial transactions for her son. The defendant solicitors challenged the award of $25,000 to Mrs Mouat for her distress. They argued that the worry, inconvenience and stress were not causative of any physical consequences, and did not amount to nervous shock or neurosis such as to be compensatable in tort.

The Court of Appeal rejected this argument and upheld the award. Lord Cooke said :

"In my opinion, when the plaintiff has a cause of action for negligence, damages for distress , vexation, inconvenience and the like are recoverable in both tort and contract, at least if reasonably foreseeable consequences of the breach of duty . It has been said that mental distress is not by itself sufficient damage to ground an action :see McGregor on Damages (15th ed 1987) para 89. But that question does not arise here as the plaintiff has suffered other recoverable damage."

While the fact that there was other recoverable damage (e.g. financial loss) meant that Lord Cooke did not have to decide whether mental distress alone was sufficient, Richardson J considered that it was. He said:

"In the present case where there is a duty of care to the plaintiff, the scope of the damages recoverable is essentially a question of remoteness of damage which turns on whether the particular harm was a reasonably foreseeable consequence of the particular breaches of duty which have been established. And public policy concerns which emphasise the often temporary and relatively trivial nature of the harm and the risks of falsification cannot justify leaving the burden of the loss with the innocent victim where the claim is adequately proved."

Gault J also considered that there was no reason to interfere with the award of damages for stress. Thus it would appear that in New Zealand, damages claims for mental trauma in negligence or assault and battery will not fail solely on the grounds that there is only transient mental trauma.

Section 14 Bar On Damages

The only remaining argument against such claims succeeding is where the emotional trauma arises from witnessing or learning about another person being injured or killed. It will be remembered that s14 of the Act bars damages claims "arising directly or indirectly out of personal injury covered by this Act". While it is clear that the person suffering from metal trauma has not suffered a personal injury covered by the Act, the person whom he has seen injured or killed certainly has.

The argument can then be made by a defendant that the damages claim for mental trauma arises directly or indirectly out of the other persons personal injury and is therefore barred by s14. The particular argument succeeded recently before a Master of the High Court who struck out the plaintiff's claim. In that case Palmer v Danes Shotover Rafts Ltd & ors 36 the plaintiff suffered nervous shock from seeing his wife killed in a rafting accident. But his claim for $50000 damages against each defendant was struck out by the Master as being barred by s14 of the ARCI Act 1992, because he personally had not suffered physical injuries, although his wife clearly had. However this decision was recently reversed on appeal by Pankhurst J. 37 who said

"It is my view that the natural and ordinary meaning of s14(1) does not extend to the secondary victim of an accident"

The case is now going on appeal to the Court of Appeal for a policy decision, but it is submitted that although a literal reading of the words in s14 could bar such claims, the Court of Appeal would be slow to deny access to the courts for those excluded from the Act, the Court would probably reason as they did for exemplary damages claims i.e. that the mental trauma arises not from the other persons personal injury or death but from the defendant's conduct in bringing about such an horrific event. Any other decision would also lead to the anomalous situation of some mental trauma claims being barred where the trauma arises from an injury to another, but allowed either when there has been no such fear, or there has been such a fear but no injury eventuates as in the old case of Pugh v London v Brighton and South Coast Railway Co 38where a signalman suffered nervous shock when he thought a train was about to crash. It did not crash and there were no injuries. Pugh's case was approved by the New Zealand Court of Appeal in ACC v E 39.

At common law, the essential requirement for a nervous shock claim, is that the defendant owed a duty of care to the plaintiff who suffered the nervous shock. That allegation depends on a number of features including proximity and relationship. The injuries suffered by the victim are only important in showing that the nervous shock claim is likely to be genuine. As in Pugh's case it is not essential for anyone to have been injured.

Exemplary/Punitive Damages Claims

The 1972 and the 1982 Accident Compensation Acts contained an equivalent section to section 14 of the 1992 Act and barred proceedings for damages which arose directly or indirectly out of personal injury by accident. This statutory language was interpreted in some early cases as not only excluding proceedings for compensatory damages but also exemplary/ punitive damages. However although acknowledging that the literal wording of the Act could be read this way the Court of Appeal in a policy decision in Donselaar v Donselaar 40 decided otherwise. It held that exemplary /punitive damages did not arise out of the personal injury but from the conduct of the wrongdoer. They were not therefore barred by the Act. Thus from an early stage in the ACC scheme, such damages claims could be made whether a person's physical or mental injuries came under the Act or not.

However until recently exemplary/punitive damages claims only arose in cases of intentional harm. But they were fairly limited because most defendants who caused harm intentionally were either in prison or impecunious - usually both. Then following overseas developments 41, counsel in New Zealand started to claim such damages in cases of negligence. The first New Zealand case to award exemplary damages for negligent conduct was McLaren Transport Ltd v Somerville 42. It was case where a garage employee over-inflated a tractor tyre so negligently that it exploded, causing injuring the plaintiff serious physical injuries which came under the definition of personal injury in the Act. He also had cover as the personal injury was caused by an accident. However he also sued for exemplary /punitive damages. The lower court awarded $15,000 exemplary damages for negligent conduct that was upheld in the High Court by Tipping J.
The test used by Tipping J was a simple one:

"Exemplary damages for negligence causing personal injury may be awarded if, but only if, the level of negligence is so high that it amounts to an outrageous and flagrant disregard for the plaintiff's safety, meriting condemnation and punishment."

The matter did not go on appeal to the Court of Appeal, no doubt because the amount awarded was so low. However the Court of Appeal in another case which recently came before it, Ellison v L 43, would not commit itself to a decision that exemplary damages could be awarded for negligence. In that case Mrs Ellison brought a claim for $250,000 exemplary damages against her dentist. He had extracted a tooth, but negligently left some packing in the wound which caused her some problems with infections until it was removed some 9 months later. In its judgment the Court of Appeal said:

"We are prepared to accept for the sake of argument, though leaving the matter to be decided on another occasion, that in some cases of negligence exemplary damages may be awarded. But because negligence is an unintentional tort those cases are likely to be rare indeed. Exemplary damages are awarded to punish a defendant for high handed disregard of the rights of a plaintiff or for acting in bad faith or for abusing a public position or behaving in some other outrageous manner which infringes the rights of the defendant. Negligence simpliciter will never suffice."

In NZ therefore it is now clear that there will be no exemplary damages for ordinary negligence, and this decision might slow down the rising number of claims.

Level of Awards

The negative attitude of the Court of Appeal to this upsurge in exemplary damages claims is no doubt a result of the high amounts being claimed (by New Zealand standards), and the perception that the amounts sought were really being sought as extra compensation. The Court of Appeal had warned of this development in Donselaar v Donselaar 44 :

"The Courts will have to keep a tight rein on actions, with a view to
countering any temptation , conscious or unconscious, to give exemplary damages merely because the statutory benefits may be felt to be inadequate. Immoderate amounts will have to be discouraged."

Until recently even in cases of intentional torts the amounts awarded were quite low 45. However in G v G 46 Cartwright J awarded the sum of $85000 in a case of serious domestic violence. There the Judge contrasted the amounts awarded in personal injury claims with defamation awards of $180,000 to $400,000, and observed that there was little justification for such a contrast between large amounts ordered for harm to a reputation and the more modest amounts for the serious physical, emotional and sometimes psychiatric consequences of violence.

However the increasing levels in the amounts being claimed coupled with an actual award of $85000 in G v G , prompted the Court of Appeal in Ellison v L 47 to say:

"we desire to make an observation about the level of damages claimed. Mrs Ellison has sought leave to bring a claim for $250,000. Even if the conduct of the respondent had been outrageous and deserved to be marked by an award of exemplary damages, a claim of this size would be quite unrealistic. As far as we are aware, Judges in this country have restricted such awards to a mere fraction of the sum claimed here (for example, in McLaren Transport where apparently gross negligence in the inflating of a tyre cause serious injury $15000 was awarded). They have been right to do so. The marking out and punishment of outrageous behaviour can be adequately achieved by a relatively modest penalty. It is to be remembered that such awards are not intended as compensation. Legal advisers should be careful not to be associated with claims for amounts of damages which on any objective view are unattainable and give the appearance of being brought in terrorem"

Thus it appears clear that the amounts sought in exemplary damages claims particularly in negligence cases will be so limited from now on that it will probably not be worthwhile for plaintiffs to bring the action.

Prior criminal conviction

Furthermore in another recent decision Daniels v Thompson 48, the Court of Appeal imposed another restriction on exemplary damages claims. In that case on the grounds of public policy, the Court of Appeal barred exemplary damages in a number of sexual abuse claims where there had been a prior criminal conviction on the same matter. The decision might have a major impact and lead to the situation where victims of crime refuse to cooperate with the authorities in a prosecution so that they preserve their right to bring an exemplary damages claim. Although in claims for injuries arising from motor accidents involving drunk drivers the offender is invariably prosecuted and punished without the need for any victim to appear, there may be no choice of prosecution or litigation by such victims, it is interesting to note that in a case of serious domestic violenceG v G , the plaintiff decided to sue for damages rather than to seek prosecution.

If the above restrictions were not enough, the Court of Appeal in Re Chase 49 confirmed that section 3(2) Law Reform Act 1936 excludes exemplary damages claims from the claims that survive the death of the victim, i.e. no exemplary damages are available where the plaintiff dies from injuries caused by the tortfeasor before the case is heard.

The short limitation period of 2 years in which to sue is another restriction on damages claims for personal injury in New Zealand. However the Court of Appeal has recently developed the law in G D Searle & Co v G 50 so that the time limitation runs only from when bodily injury is discovered or ought reasonably to have been discovered .

Upsurge in Litigation

The two previous ACC Acts - the Accident Compensation Acts of 1972 and 1982 - had lump sums available for pain , suffering, and loss of amenities (up to NZ$10,000 under the 1982 Act) and for disability (up to NZ$17,000 under the 1982 Act) based on a percentage disability figure. For non-earners such as sexual abuse victims, the lump sums were often the only significant compensation they received. But the 1992 Act abolished these lump sums and replaced them with what is termed an independence allowance of NZ$60 per week for a 100% disability 51. The replacement allowance is widely perceived as inadequate and it also fuelled the rise in litigation.

Thus the exclusion of mental trauma from the Act , the changing view of exemplary damages for negligence, and the abolition of lump sums, all contributed to the upsurge in litigation and brought lawyers back into the compensation process. While the Court of Appeal may have now curtailed the claims for exemplary damages for negligence, the claims for mental trauma look set to escalate in an effort to obtain more compensation than that available under the Act.

Benefits Under the Act

The benefits available under the present Act, particularly for seriously injured earners, can still be significant. They consist of :
  1. 80% of weekly earnings up to a maximum of NZ$1179 per week 52
  2. An independence allowance up to NZ$60 per week based on a percentage disability figure. 53
  3. Medical treatment. 54
  4. Vocational and Social Rehabilitation assistance including counselling, the provision of attendant care up to 24 hours per day, home help, child care, aids and appliances, alterations to homes and motor vehicles etc. 55
  5. In fatal claims there are:
  6. 5.1 Funeral grant of NZ$3000 56
  7. 5.2 Survivors grant to spouse - NZ$4000 57
  8. 5.3 Survivors grant to child under 18 - NZ$2000 58
  9. 5 .4 Weekly compensation to spouse @ 60% of deceased's compensation 59
  10. 5.5 Weekly compensation to child under 18 @ 20% of deceased's compensation. 60

N.B. Unlike the 1982 Act there is no compensation for property damage even for clothing or other personal items such as dentures or spectacles 61 damaged in the accident. Such matters arfe left to normal voluntary insurance arrangements and civil actions for damages.


The question arises as to the funding for the provisions of the Act. The answer is that the ACC is financed from 5 income sources as follows: 62
  1. Employers (including the self employed) pay a premium based on total payroll, depending on their type of work and their injury record. The total brought in NZ$1232.5 million dollars in the year ending 1997.
  2. Earners in the workforce pay a premium of 70c for every $100 earned, collected as PAYE tax. It covers them for non work injuries apart from motor vehicle injuries. The total brought in NZ$288 million dollars in the year ending 1997.
  3. Motor vehicle owners and drivers pay a premium that is included in their annual registration fee (NZ$90 for a private car) and an excise duty of 2 cents per litre on petrol sales. These two sources brought in NZ$249.4 million dollars in the year ending 1997, i.e. NZ$192.2 million from premiums, NZ$57.2 million from petrol sales.
  4. Government Payment of an annual payment to cover non earners.
  5. Investment earnings accruing from the respective account reserves.


Injury costs are assigned to one of six accounts as follows:
  1. .The Employers' Account is funded from employers' premiums, and it meets the cost of all work related injuries (apart from motor vehicle injuries) 63. It also meets the cost of non work injuries before 1992.
  2. The Earners Account is funded from the earners' premiums, and itmeets the costs of people in the workforce who are injured outside of the workplace - e.g. at home or in sport. It does not include motor vehicle injuries 64.
  3. The Non Earners Account is funded by the Government from taxation, and it covers the cost of injuries to persons not in the workforce.
  4. The Motor Vehicle Account is funded from motor vehicle premiums and a petrol levy. It meets the cost of all injuries from motor vehicles 65.
  5. The subsequent work injury account is funded from the above 4 accounts, and it meets the costs of work related claims that involve a recurrence of an injury received in a previous employment.
  6. The medical misadventure account is funded from the earners and non earners accounts, and it meets the costs of injuries that result from medical misadventure by medical practitioners.

ACC Funds

As the current account shows, the funding of the scheme at present does not seem to be a problem at present as it is in surplus. But employers have constantly lobbied for changes favourable to them in premium rates and ACC compensation, despite the fact that their ACC premiums are often lower than the insurance premiums comparable employers pay overseas for workers compensation and employers liability insurance. In this they have generally been successful - hence the significant changes produced in the 1992 Act.

Reserves 1996NZ$492,885 million
Income 1997NZ$2,076,604 million 66
Expenditure 1997NZ$1,626,447 million
Surplus 1997NZ$450,157 million
Backdated care claimsNZ$155,033 million 66
Surplus 1997NZ$295,124 million
Surplus carried forwardNZ$788,009 million

NB. The sum of NZ$216,355 million dollars was actually set aside to pay for backdated attendant care claims, but the accounts reflect an anticipated appropriation by Parliament of $61,322 million 67.

1997 Claims

For the year ending 1997 there were 1,495,993 new claims, but most of them were only for minor medical treatment. Some 127,081 of the new claims were more serious, and they included:
  1. 2854 new mental injury/mental/nervous shock claims totalling $957,000 for mental injury, and 1161 totalling $514,000 for mental /nervous shock.
  2. 135,391 ongoing claims, of which 447 costing $706,000 were for mental injury, and 4719 costing $7,775,000 were for mental/nervous shock. 68.


The 1992 Act was seen as "meaner and leaner" legislation in abolishing lump sums and excluding most mental trauma claims. It led to the re-entry of lawyers into the compensation process and an upsurge in exemplary damages and mental trauma claims. Now that lawyers have returned, they will probably remain and look for more ways in which damages claims can be brought. There are also indications that the Government is considering opening up the ACC to competition, and if this were to happen, certain parts of ACC, such as the motor vehicle scheme which has a healthy surplus and a lack of problems, would attract enterprising insurance companies. At present New Zealand could therefore be in the process of returning to the "fragmented and capricious" compensation system that the Woodhouse Report found in 1960's before the introduction of the revolutionary Accident Compensation Act of 1972. Unfortunately, as this paper shows, successive Governments have eroded the benefits of the pioneering Act, and it can be said that the only people who really benefit from a return to the increased opportunities for litigation are the lawyers and the insurance companies.

Footnote: 1 Which came into force on 1 July 1992 (hereinafter referred to as "the Act". For the background to this Act and cases thereunder, see J Miller and D Rennie, Brooker's Accident Compensation in New Zealand 1992 Wellington, New Zealand Vols 1and 2 .

Footnote: 2 A person injured at work does receive compensation for the first week, whereas compensation for non work injuris start after the first week-ss 38 and 39 of the Act

Footnote: 3 Section 4 and 8 of the Act. See text accompanying footnote 16 for the statutory definitions

Footnote: 4 Section 8 of the Act . See text accompanying footnote 17 for the definition of cover

Footnote: 5 This does not bar claims for compensatory damages for mental trauma - see text accompanying footnote 12, or claims for exemplary/punitive damages - see text accompanying footnote 37. Nor does it prevent actions being brought in Courts outside of New Zealand. Indeed the ACC may assist with such overseas litigation -s15 of the Act

Footnote: 6 Section 4 and 8 of the Act. See text accompanying footnote 17 for the statutory definitions

Footnote: 7 S3 defines accident as:
a) A specific event or series of events that involves the application of a force or resistance external to the human body and that results in physical injury .."
This clearly covers most motor vehicle injuries.

Footnote: 8 However the cause of the injury is of some importance in funding the scheme and in work injury claims. See text accompanying footnote 60.

Footnote: 9 Hereinafter referred to as the ACC.

Footnote: 10 Apart from any general compensation problems faced by all claimants. In 1997 the median time from registration of a claim to the payment of first week compensation was 30 days - 1997 ACC Annual Report p 54.

Footnote: 11 Examples of some of the cases filed are:
F v Northland Health Ltd (District Court, Whangarei NP 868/93, 1993) $150,000 exemplary damages sought by an employee for exposure to chemicals at the hospital.
M v Wellington Area Health Board (High Court, Wellington, CP 205/93, Gallen J ,
16 /12/94) $250000 exemplary damages sought against two doctors and the Hospital over the death of the plaintiff's wife. A further $75000 is being claimed for mental trauma.
Akavi v Taylor Preston (High Court, Wellington, CP 93/94, Master Thomson, 13/9/94 ) $150,000 exemplary damages sought by employee after being scalped by machinery at work. Settled on confidential terms.
W v Health South Canterbury (High Court, Timaru, CP 2/95,1995) $1,500,000 compensatory damages sought for mental trauma from the switching of new born babies by a hospital. Settled on confidential terms.
W v Counties Manukau Health Ltd (High Court, Auckland, CP 583/94, Barker J ,13/4/95)
$200,000 exemplary damages sought against the Hospital for sexual abuse of two children by a paedophile inadequately supervised on release from a Mental Hospital.
Boe v Hammond (High Court, Wellington, M3/95, Master Thomson, 26/5/95, $250,000 compensatory damages for mental trauma and $75000 exemplary damages from the death of a spouse in a motor vehicle accident.
B v Counties Manukau Health Ltd (High Court, Auckland, 1995) $75000 exemplary damages sought against a doctor and the Hospital over the birth of a brain damaged child. A further $250,000 is being claimed for mental trauma.
R v Liddell and Auckland Area Health Board (High Court, Auckland, 1995) $250,000 exemplary damages sought for sexual abuse of two children by Liddell, a social worker employed by the Hospital.
M v Counties Manukau Health Ltd (High Court, Auckland, 1996) $75000 exemplary damages sought against a doctor and the Hospital over the death of a baby. A further $250000 is being claimed for mental trauma.
Innes v AG (High Court Auckland CP 152/95, Elias J, 10/7/97) a claim for damages by the estate of Matthew Innes for his death whilst being taken to Hospital in a police car
B v Residual Health Unit(High Court Timaru 1997).
$1 million dollars compensatory damages claimed by parents for mental trauma and $400,000 exemplary damages for brain damage caused to an infant in hospital.
W v Health Waikato Ltd (District Court, Te Kuiti 1997, CP 98/97, 1997) $100,000 compensatory damages for mental trauma suffered by a family for the loss of the deceased's amputated legs.
McGrory v Ansett NZ Ltd ( High Court Auckland CP228/97, Smellie J, 11/12/97)
A claim by passengers for unspecified exemplary and compensatory damages from an air crash
Jackson v Burcher & ors (High Court Hamilton CP56/94 Master Faire, 19/9/97) a claim for $1.5 million exemplary damages for medical negligence and alleged cover up of radioactive damage as the result of a scan
Some of these claims have been abandoned or settled, and the rest are still going through.


Footnote: 12 S2 Accident Compensation Act 1982

Footnote: 13 Fenton v Thorley [1903] AC 403

Footnote: 14 [1992] 2 NZLR 426

Footnote: 15 [1994] NZAR 6 The writer appeared as counsel in this case. Although it was decided in 1994 it was case under the 1982 Act. The case enabled a large group of the families of crime victims killed by violent acts including motor vehicle crashes to gain compensation for their mental trauma under the 1982 Act. Their cases had been adjourned pending the test case of Cochrane.

Footnote: 16 Because of pressure from employers groups who did not want such claims to come within the ACC scheme as it would increase their ACC premiums. Ironically it has led to this increase in litigation and the need for employers to take out insurance against such claims.

Footnote: 17 The offences listed in the First Schedule are theusual range of sex crimes - sexual violation,indecent assault etc.

Footnote: 18 Apart from the mental trauma suffered as a result of an act which is a sex crime - s8(3)

Footnote: 19 The phrase appears to be taken from the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders, DSM III, 3rd edn, p6.

Footnote: 20 [1992] 2 NZLR 426,.434

Footnote: 21 s 8(3)

Footnote: 22 NZ Law Schools suddenly had to start teaching nervous shock in Tort Law courses after neglecting it for nearly 20 years. The legal profession also had to be warned, as they could be sued for negligent advice if they failed to advise injured clients of their possible damages claims - hence the Common Law Damages section in J Miller and D Rennie, Brooker's Accident Compensation in New Zealand 1992 Wellington, New Zealand Vol 1

Footnote: 23 s2 Crimes Act 1961

Footnote: 24 [1975] 1 NZLR 486

Footnote: 25 See J Miller and D Rennie, Brooker's Accident Compensation in New Zealand 1992 Wellington, New Zealand Vol 1, Para AC4.04

Footnote: 26 The Review and Appeal structure is contained in ss89-99 of the Act. In essence one applies for a review of an adverse ACC decision to a Review Officer, then there is a general appeal to the District Court exercising its Accident Compensation jurisdiction, followed by an appeal on a question of law to the High Court,and eventually to the Court of Appeal. In 1997 there were 3414 reviews and appeals heard, and 34.6% were decided against the ACC- 1997 ACC Annual Report p55.

Footnote: 27 In New Zealand it is still unclear whether an assault and battery can only be committed intentionally. In Dehn v AG [1988] 2 NZLR 564, 583, Tipping J said that a battery required an intentional as opposed to an unintentional application of force. This point was not considered on appeal by the Court of Appeal - [1989] 1 NZLR 320.
Although the Court of Appeal in McKenzie v AG [1992] 2 NZLR 14 said that claims for assault and battery were barred under the Accident Compensation legislation, this decision was under the old definition of "personal injury by accident" in the 1982 Act. The definition in the 1992 Act with its exclusion of mental trauma is significantly different and now allows these claims to be made.

Footnote: 28 High Court, Rotorua CP16/93 Thorp J, 2/8/93.However in a recent decision Pankhurst J disagreed with the decision of Thorp J in Kingi. .See Palmer v Danes Shotover Rafts Ltd & 0rs, High Court, Invercargill, CP10/97, Pankhurst J., 18 March 1998.

Footnote: 29 [1992] 1 AC 410.

Footnote: 30 In Mouat v Clark Boyce [1992] 2 NZLR 559, 569.

Footnote: 31 Van Soest & ors v The Residual Health Unit & 0rs, High Court , Christchurch, CP180/96 , Master Venning, 22 December 1997 and Legge & ors v The Attorney General, High Court , Christchurch, M290/96, Master Venning, 19 December 1997.

Footnote: 32 [1967] VR 831.

Footnote: 33 (1995) 36 NSWLR 1.

Footnote: 34 (1997) 68 SASR 124.

Footnote: 35 [1992] 2 NZLR 559.

Footnote: 36 High Court Invercargill CP10/97, Master Venning, 3/12/97.

Footnote: 37 Palmer v Danes Shotover Rafts Ltd & Ors, High Court , Invercargill, CP10/97 , Pankhurst J., 18 March 1998. On appeal Pankhurst J's decision was upheld by the Court of Appeal in Queenstown Lakes District Council & Ors v Palmer, CA 83/98, 2/11/98.

Footnote: 38 [1896] 2 QB 248,

Footnote: 39 [1992]2 NZLR 426.

Footnote: 40 [1982] 1 NZLR 97.

Footnote: 41 Coloca v BP Australia Ltd [1992] 2 VR 441, Robitaille v Vancouver Hockey Club Ltd ( 1981) 125 DLR (3d) 228.

Footnote: 42 [1996] 3 NZLR 424 , (1996) 1 BACR 262.

Footnote: 43 CA 287/96 , 19/11/97.

Footnote: 44 [1982] 1 NZLR 97.

Footnote: 45A v M [1991] 3 NZLR 228 $20000 awarded for marital rape.
AB v CD ( High Court Timaru, CP 53/89 Fraser J 1/3/92) $20000 awarded for sexual abuse by father.
H v R [1996] 1 NZLR 299-$20000 for sexual abuse.
B v R (High Court, Auckland , M1957/93, Morris J ,15/296 ) $225,000 claimed, $35000 awarded for sexual violation and abuse by uncle (now deceased). Value of estate worth $110,000.

Footnote: 46 (1996)1 BACR 286, [1997] NZFLR 49-$200,000 claimed.

Footnote: 47 CA 287/96, 19/11/97.

Footnote: 48 CA86/96, 12/2/98. The decision of the Court of Appeal was upheld by the Privy Council. However s 396 of the new Accident Insurance Act 1998 which comes into force on 1/7/99 will allow such exemplary damages claims again.

Footnote: 49 [1989] 1 NZLR 325.

Footnote: 50 [1996] 2 NZLR 129.

Footnote: 51 s54 - since increased to $60 per week for a 100% disability.

Footnote: 52 Sections 38 and 39. This is calculated on the gross earnings lost by the employee and income tax is payable on the weekly compensation.

Footnote: 53 Sections 54 and 54A and Regulations.

Footnote: 54 Section 27 and Regulations.

Footnote: 55 Sections 18-26A and over 30 different sets of regulations govern the provision of these matters and medical treatment. See the Regulations Section in J Miller and D Rennie, Brooker's Accident Compensation in New Zealand 1992 Wellington, New Zealand Vol 1. The Regulations are noted for their rigidity and the lack of discretion available to the ACC. In an effort to resolve this after many complaints from the public and the District Court who had to deal with the hard cases, an amending section to the Act was passed-s 26A in 1996. This gives a discretion to the ACC to exceed the regulations in the provision of assistance for social rehabilitation.

Footnote: 56 Section 55.

Footnote: 57 Section 56.

Footnote: 58 Ibid. $2000 is also payable to any other dependants of the deceased.

Footnote: 59 Section 58. This is payable for up to 5 years or longer if the spouse has the care of a child under 18 or any other dependent of the deceased.

Footnote: 60 Section 59 This extends to 21 years if the child is studying.
Section 60 also provides a similar percentage of 20% for other dependants of the deceased. No more that 100% of the deceased's compensation is payable.

Footnote: 61 s4 -Definition of personal injury does not include these items, and there is no other section in the Act or regulation to allow them in.

Footnote: 62 Part VII of the Act Sections 100-134. On 1/7/99 a new Accident Insurance Act 1998 comes into force. This Act allows private insurers to provide cover for workplace accidents. This will change the funding of the scheme for the Employers account but not for the others which will remain with the ACC.

Footnote: 63 The shifting of the costs of motor vehicle injuries out of the Employers and Earners account is really the only reason for considering whether an injury has been caused by a vehicle.
The definition of a motor vehicle injury in s3 is
"a) Any injury occurring as a consequence of the movement of a motor vehicle or
b) Any injury occurring as a consequence of a motor vehicle that is stationary being struck by another motor vehicle or other means of conveyance -
but excludes an injury suffered in the course of loading, unloading, servicing, repair, or off-road use of a motor vehicle and any use of a motor vehicle other than as a means of conveyance. "Off-road use" does not include use of a motor vehicle that is off road as a direct result of its being out of control or its having been involved in an accident."
Of the 6388 new motor vehicle claims in 1997, 379 were work related, and they cost $1,872 million. There were also 1016 ongoing work claims at a cost of $16,603 million - ACC Injury Statistics 1997 p46.

Footnote: 64 ibid.

Footnote: 65 ibid.

Footnote: 66 ACC Annual Report 1997 p60.

Footnote: 67 The backdated attendant care claims which amount to NZ$216,355 million dollars over the various accounts arose from a pro bono case (Campbell & Ors v ACC, High Court Wellington, No AP 200/95, Heron and Ellis JJ, 4/4/96). The writer was counsel for 5 families whose children (4) or sibling (1) had been severely injured in traffic accidents. The injured claimants required 24 hour a day care, but the ACC had only paid lesser amounts leaving the families (usually the female members) to cope with the shortfall. As a result of the decision, the ACC has had to review and pay all such claims. Hence the sum set out in the accounts.

Footnote: 68 The mental /nervous shock claims would represent the trauma from sexual crimes. The mental injury claims would represent the mental injuries which stem from physical injuries to that person e.g. depression from a broken leg failing to heal.


J.M Miller © 1998. The author assign to the Australasian Journal of Disaster and Trauma Studies at Massey University a non-exclusive licence to use this document for personal use and in courses of instruction provided that the article is used in full and this copyright statement is reproduced. The authors also grant a non-exclusive licence to Massey University to publish this document in full on the World Wide Web and for the document to be published on mirrors on the World Wide Web. Any other usage is prohibited without the express permission of the author.

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