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2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AVIATION LEGISLATION AMENDMENT (LIABILITY AND INSURANCE)
BILL 2012
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Infrastructure and Transport, the Honourable
Anthony Albanese MP)
AVIATION LEGISLATION AMENDMENT (LIABILITY AND INSURANCE) BILL
2012
OUTLINE
The Bill amends the framework for the liability of air carriers in the event of an aircraft
accident. The framework is established by the Civil Aviation (Carriers' Liability) Act 1959
and the Damage by Aircraft Act 1999.
The Civil Aviation (Carriers' Liability and Insurance) Act 1959 deals with liability for
passenger injury and death and ensures air operators take out insurance for these liabilities.
The Act also covers liability for damage to baggage and air cargo. The Act is supported by
complementary state government legislation which applies the Commonwealth laws to flights
beyond the constitutional reach of the Commonwealth to create a national uniform scheme.
The Damage by Aircraft Act 1999 deals with third party (surface) damage, providing a system
of strict and unlimited liability.
The amendments address some of the shortcomings in the current framework that were
identified in the development of the 2009 National Aviation Policy White Paper.
The main amendments increase the liability of aircraft operators for the death or injury of
passengers on domestic flights and increase the corresponding level of insurance required.
The Bill also implements a number of technical amendments to the framework in relation to
the way liability is determined.
Civil Aviation (Carriers' Liability) Act 1959 (the `CACL Act')
Increasing liability and insurance
The Bill increases the cap on carriers' liability for domestic flights, raising the liability cap for
domestic passenger death or injury from $500,000 to $725,000. The amount of $500,000 was
set in 1994 and the Bill increases this amount to reflect changes in the consumer price index.
The Bill further requires carriers to increase the amount of insurance to $725,000 for domestic
flights. This is in line with the increase to the cap on liability mentioned above.
Exclusion of compensation for purely mental injuries arising on domestic flights
The Bill will exclude compensation for purely mental injuries arising on domestic flights.
This is consistent with the objective of harmonising, where appropriate, the domestic liability
framework with the liability framework established under the benchmark Convention for the
Unification of Certain Rules for International Carriage by Air, signed May 28 1999 (the 1999
Montreal Convention). A significant area of inconsistency between our domestic and
international liability frameworks relates to the treatment of mental injuries.
Article 17 of the 1999 Montreal Convention limits carriers' liability to `death or bodily
injury'. Courts have interpreted `bodily injury' as excluding claims for purely mental injuries.
This is in contrast to the domestic system, which allows compensation for `personal injury'.
Courts have interpreted this provision as allowing claims for mental injuries, irrespective of
whether other `physical injuries' have also been incurred.
The Bill will limit carriers' liability under the domestic system to `bodily injury' with the
intention of ensuring that this issue is treated consistently across domestic and international
frameworks.
Replace reference to the Montreal Protocol Number Four
The Bill replaces the reference to the Montreal Protocol Number Four with reference to the
1999 Montreal Convention. Although the cargo provisions of the 1999 Montreal Convention
replicate the cargo provisions of Montreal Protocol Number Four, it is preferable for any
future Government regulation on this issue to reference the most modern international liability
agreement.
Damage by Aircraft Act 1999 (the `DBA Act')
Principle of Contributory Negligence
The Bill inserts a provision to provide for compensation payments to be reduced in
circumstances where the victim was partially responsible for the damage. This amendment
responds to the finding in the Cook v Aircair Moree1 litigation that the partial defence of
contributory negligence is unavailable for claims brought under the DBA Act. It is
recognised that it would be in very rare occasions that a third party victim on the ground
could be considered to have been partly negligent in causing the damage that they suffered as
a result of an air crash. However, following the outcome of Cook v Aircair Moree, it is
appropriate to allow defendants an opportunity to argue that their liability should be
appropriately reduced if they can show that the victim was partly negligent in causing the
damage.
In order to show that the victim was partly `negligent' in causing their loss, it is intended that
the defendant will need to show, amongst other things, that the claimant did not act in
accordance with the common law `reasonable person' standard with respect to the claimant's
duty to avoid or prevent the loss or damage that they have suffered.
Right of contribution
The Bill provides for an express provision that enables defendants to seek contribution from
other parties who may have contributed to the damage suffered by the person bringing the
claim. This recognises the appropriateness of allowing defendants the opportunity to seek
1
ACQ Pty Ltd v Cook [2008] NSWCA 161.
2
contribution towards the damages for which they are found liable under the DBA Act from
other parties who are found to have contributed to the damage claimed under the DBA Act.
This new provision also responds to the outcome of the Cook v Aircair Moree litigation.
Exclusion of mental injuries
The Bill will preclude claims for compensation for mental injuries where the claimant has not
suffered additional personal or property damage. This addresses concerns raised by industry
in relation to the exposure of carriers to potentially very large groups of claimants who could
witness an air crash and obtain unlimited damages for mental injuries on a strict liability
basis. It is extremely difficult to calculate the extent of this type of liability. This provision
will ensure that the primary purpose of the DBA Act is to provide protection for those who
have a relatively direct link with the air crash, having either suffered loss of life,
physical/bodily damage, and/or property damage. Claimants who fall within this class will be
afforded the full protection of the Act, including access to compensation for mental injury.
The Bill provides that the Act will not extend to those who have witnessed an air crash from
afar, and, except for issues triggered by the trauma associated with the observance of the
event not otherwise suffered any physical damage to the person or their property.
The DBA Act, unlike the CACL Act, does not have an `exclusive remedy' provision. This
means that people who do suffer `pure' mental injury will not be prevented from seeking
compensation through a fault based negligence claim.
FINANCIAL IMPACT STATEMENT
The Bill will have no financial impact.
REGULATION IMPACT STATEMENT
1. Background
The liability arrangements applying to the injury or death of air passengers are contained in
the Civil Aviation (Carriers' Liability) Act 1959 (the CACL Act). It sets out several liability
frameworks that apply depending on the origin and destination of travel. It also sets out
minimum levels of insurance that operators are required to purchase in order to cover these
potential liabilities.
Liability for international travel is determined in accordance with a series of international
treaties. The treaty that will apply will depend on the country of origin and the country of
destination of travel.
This RIS is concerned with domestic travel. An airline's liability for death or injury to a
passenger travelling domestically is currently capped at $500,000 per passenger. Airlines are
required to maintain insurance of $500,000 per passenger to cover these potential liabilities.
The cap on liability was last adjusted in 1994.
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This RIS is intended to assist Government in its consideration of whether it is appropriate to
adjust the liability cap (and associated insurance requirements) to reflect changes in the cost
of living.
2. Problem
A problem could arise if an air operator was to crash and the passenger victims were unable to
obtain appropriate compensation due to an outdated cap on airline liability.
In addition to capping an airline's liability, the domestic liability framework provides that the
airline's liability is strict. This has traditionally been the trade-off for passengers: airlines are
assumed to be at fault, removing the need for victims to navigate compensation hurdles such
as proving negligence on the part of the airline.
The current cap is not the product of a specific formula or benchmark. Rather, by capping the
amount of available compensation, but making it easier to obtain, the framework has sought
to balance the interests of air accident victims and airlines.
There is no specific data comparing the levels of compensation applicable to different modes
of transport. However, liability in other transport modes may be resolved in accordance with
broader civil liability laws - i.e. there may be no cap on liability, but the victim will not
receive compensation unless they can prove the transport operator was at fault.
The system of mandatory insurance is an important adjunct to the liability framework. These
requirements ensure that money is available to provide compensation to air passengers in the
event of an accident, matching the amount of mandatory insurance with the cap on liability.
The `non-voidable' aspects of the scheme ensure that the insurance policy is not contingent on
the financial liquidity of the operator, or conditional on the following of certain safety
procedures.
The cap on liability was last adjusted in 1994. From 1994, inflation has increased the cost of
living by an average of approximately 2.7 per cent each year. The cost of a `basket' of goods
and services increased by over 47 per cent since 1994.
In this context, it is appropriate to question whether the framework requires rebalancing, by
increasing the cap on liability (along with the mandatory insurance requirements) to ensure
that it adequately reflects the interests of both air passengers and airlines.
3. Objectives
The Government has developed objectives for Australia's system of air operators' liability
and insurance. It is proposed that the passenger liability cap (and associated insurance
requirements) for domestic air operators be consistent with these objectives. The objectives
of Australia's aviation liability and insurance framework should be to:
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· Provide prompt and equitable compensation to victims of air accidents;
· Foster a productive and sustainable aviation industry;
· Provide an appropriate balance between the interests of victims, carriers, insurers and
governments;
· Be as simple as possible, to increase certainty for industry participants and reduce
compliance costs; and
· therefore be consistent with our international obligations, yet appropriately tailored for
the Australian market.
4. Options
There are four options available to Government outlined below.
Other alternatives (such as a co-regulatory approach between industry and government) are
not considered viable, as the air operator industry is fragmented and does not have a peak
body representing all interested parties, which include major international airlines, major
domestic carriers, low cost carriers, and smaller regional passenger operations.
The current model is established by national uniform legislation, whereby state government
legislation applies the Commonwealth laws to situations beyond the scope of the
Commonwealth Act.
Option 1 - existing arrangements
This option involves maintaining the status quo, whereby the level of the cap and mandatory
insurance is maintained at $500,000 per passenger.
Option 2 - removal of separate requirements
This option involves the removal of the separate liability and insurance framework for
domestic passengers altogether.
In the absence of any specific regulation on these matters, victims of air accidents would
pursue compensation for air accidents in accordance with state government civil liability
regimes. This would generally require the victim to prove fault (or some form of negligence)
on the part of the airline. The airline could choose to insure these risks as they felt
appropriate.
Option 3 - Apply international laws
This option involves giving domestic application to an international treaty on passenger
liability which Australia currently applies to international travel only.
The Montreal Convention entered into force for Australia on 24 January 2009, modernising
and improving the rules applying to the liability of international air carriers. It provides for a
two-tier system of liability. Applicants are able to claim up to 113,100 Special Drawing
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Rights (SDR) on a strict liability basis (i.e. there is no requirement to prove fault, only that the
injury was incurred). Damages above the 113,100 SDR threshold are available to the
claimant unless the air carrier is able to prove that the damage was not caused by the
negligence or other wrongful act or omission of the carrier, its servants or agents. The SDR is
a monetary unit of the International Monetary Fund.
The Convention does not specify minimum insurance levels, leaving these matters to
individual states. Australia currently requires international carriers to purchase 260,000 SDR
(currently approximately $400,000) per passenger, to cover their potential liabilities under the
Convention.
Although the Convention itself only applies to international travel between State Parties to the
Convention, there is nothing to prevent Australia importing the liability framework and
applying it to domestic travel. This is the case in Europe, where the Montreal Convention
applies to both domestic European travel, as well as international travel to other `Montreal'
countries.
Option 4 - Change existing arrangements to reflect inflation
This option involves increasing the cap on liability to $725,000 per passenger, along with the
amount of mandatory insurance. This amount reflects an approximate average annual
inflation rate of 2.7% since 1994.
5. Impact Analysis
There are two main groups to be considered when considering the impact of these options:
commercial air operators and the broader general public. The impact of the various options
on air operators will vary in accordance with the operators' fleet, as different aircraft have
different insurance profiles.
Impact of Option 1 - existing arrangements
This option will not impact on air operators, although insurance costs may still increase in
accordance with broader fluctuations in the insurance market.
The impact for air passengers will be that the value of compensation facilitated by the CACL
Act will have been significantly reduced since it was last reformed in 1994. As noted above,
the cost of a `basket' of goods and services increased by over 47 per cent since 1994. This
represents a significant reduction in the protection afforded to air passengers under the
framework.
This option is not recommended, as it risks failing to provide `prompt and equitable
compensation to victims of air accidents' in accordance with the objectives of the carriers'
liability and insurance framework. It may also fail to `provide an appropriate balance
between the interests of victims, carriers, insurers and governments'.
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Impact of Option 2- removal of separate requirements
Some industry stakeholders have questioned whether it was appropriate to regulate the
insurance and liability issues that arise in the context of an air crash any differently to other
transport modes. These stakeholders note that the liability and insurance requirements for air
carriers tend to be more onerous than the arrangements in place for other transport sectors
(such as bus travel, for example). However, this view is not shared by the majority of
industry.
This option would lead to significant uncertainty for air carriers. If matters were to be settled
in accordance with state government civil liability regimes in accordance with this option,
there would be no ceiling on final compensation awards. The certainty in relation to
maximum compensation costs is recognised as a key advantage to airlines under the existing
scheme, which would be lost under this option.
In addition, there is a risk that compensation claims would result in protracted legal
proceedings and additional legal expenses. This is in contrast to the existing framework. A
key feature of the existing scheme is that compensation claims tend to be settled by mutual
agreement out of court. This is because there are no issues in relation to the fault of the
airline, and the only matters requiring resolution relate to the quantum of damages.
Australia's liability laws for domestic travel currently share many similarities with
international laws on air passenger liability. Moving away from this broad framework (to a
system comparable with other transport modes) could potentially have significant compliance
costs for operators, who may be required to contend with radically different liability regimes.
It is uncertain how the move from a strict and limited liability system to a fault-based,
unlimited liability system would impact on airlines' insurance costs. On the one hand, it
would become the airlines' choice to choose how much (if any) insurance to purchase, which
could potentially lower costs for some operators. However, it is difficult to determine how
much insurance might be considered appropriate for those airlines wishing to obtain a
`prudent' level of insurance (noting that it is not possible to purchase insurance for an
unlimited value), and therefore how these airlines' insurance costs might be affected. This is
because compensation claims currently tend to be settled by mutual and confidential
agreement out of court, so that it is difficult to obtain data on the size of compensation awards
and the circumstances that led to the claim.
The impact on air passengers would be similarly uncertain. As with airlines, a key advantage
for air passengers under the existing arrangements is that expensive and protracted legal
proceedings tend to be avoided because there are no issues in relation to the fault of the
airline, and the only matters requiring resolution relate to the quantum of damages. This
advantage would be lost under this option.
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As there would be no cap on liability, air passengers could potentially obtain larger amounts
of compensation. However, as airlines would only be liable when at fault, they will be
eligible for compensation in a reduced range of circumstances.
As it is not possible to predict the impact on airline insurance costs, it is not possible to
determine any impact on the costs to the consumer of air services under this option.
Impact of Option 3 - Apply international laws
This option would also lead to greater uncertainty for air carriers. The certainty in relation to
maximum compensation costs is recognised as a key advantage to airlines under the existing
scheme, which would be lost under this option.
The impact on airlines' insurance costs is more predictable, as the mandatory insurance
requirements under the Montreal Convention are largely the same as the existing
arrangements for domestic carriers, in accordance with Option 1. It is therefore not expected
that there would be an impact on insurance costs in the short term, however these costs would
increase in line with increases to the strict liability threshold.
The main impact on air passengers (also impacting on air carriers) would be that it would take
longer to settle compensation claims. The Government has received clear advice from
industry that passenger liability claims under the domestic system are settled much more
quickly than those settled under the Montreal Convention, because the Montreal Convention
introduces a fault element (as with Option 2), leading to more protracted legal action, and
increased legal costs for air passengers.
Similar to option 2, air passengers could potentially obtain larger amounts of compensation as
there would be no cap on liability. However, as a fault element is introduced for claims larger
than 113,100 SDR, air passengers will be eligible for compensation in excess of this amount
(but less than $500,000 as per Option 1, or less than $725,000 as per Option 4) in a reduced
range of circumstances.
Impact of Option 4 - Change existing arrangements to reflect inflation
The insurance requirements under this option are higher than that those under Option 3 due to
the different liability arrangements applicable to international and domestic insurance
requirements, respectively. As domestic liability is strict to a higher level, the Consumer Price
Index represents the most appropriate means of indexing the current $500,000 cap.
The Government has commissioned advice from Access Economics to estimate the impact of
this option. There will be an impact on airlines as insurance costs will rise. The Government
is mindful that premium increases may impact on the thin operating margins of some airlines,
particularly smaller operators.
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However, it should be noted that insurance costs represent only a small component of an
airline's overall cost base. Insurance may represent only 2 or 3 per cent of total costs for
smaller operators, and significantly less for larger operators. Furthermore, for smaller aircraft
the majority of the premium relates to the cost of insuring the aircraft hull, rather than liability
risks. Indicative estimates suggest that, for a Cessna 172 (carrying 3 passengers), up to 70 per
cent of a total premium may relate to the insuring of the aircraft hull. For these reasons, it is
expected that increasing the mandatory passenger insurance requirements to $725,000 per
passenger would have a relatively modest impact on insurance premiums, especially for
operators utilising smaller aircraft.
Rough estimates suggest that increasing the level of mandatory passenger insurance to
$725,000 would have the following impact on total insurance premiums (covering hull,
passenger and liability) for the following aircraft:
· Cessna 172 (3 passengers): increase of around 9.5 per cent (less than $500 per year)
· Dash 8 (36 Passengers): increase of around 13 per cent (around $4200 per year)
· Boeing 737 (115 Passengers): increase of around 16 per cent (around $11,000 per
year)
It should be noted that there is uncertainty in relation to these estimates.
The compliance costs (over and above the costs of additional insurance) associated with this
option are expected to be negligible, as the regulatory framework for passenger insurance
already exists, and only minor changes will be required to update the framework in
accordance with this option.
Airlines will benefit from the certainty of an unbreakable cap on liability.
Although these increases are significant, it is suggested that it is appropriate for these costs to
be absorbed by the market, noting that these potential premium increases have essentially
been deferred until now as liability exposure has not been adjusted to reflect inflation.
This option will also impact on air passengers, as it is expected that operators will seek to
recoup these additional costs by passing them to consumers via increased ticket costs.
Estimates suggest that the insurance cost component of ticket prices could increase to about
0.465 per cent for major airlines and around 2.8 per cent for smaller carriers. This could
increase the ticket price of a $200 flight provided by a major airline by about 13 cents and that
provided by a smaller regional carrier by about 63 cents. Again, there are uncertainties
regarding these estimates and the impact on ticket prices would depend on a range of market
factors and the individual circumstances of the airline.
Unlike options 2 and 3, consumers will benefit from a streamlined settlement process, which
removes the requirement to prove fault. However, it is possible that victims could receive
less compensation than under options 2 and 3, due to the operation of the cap.
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6. Consultation
The proposal to increase the cap on domestic passenger liability is the product of an extensive
consultation process.
The proposal has been shaped as part of the development of the 2009 National Aviation
White Paper. Comments on the broader system of air operators insurance and liability were
sought in the Aviation `Issues Paper' which was released in April 2008. This paper
specifically asked whether the existing domestic liability arrangements remained appropriate.
The Aviation Green Paper, which was released in December 2008, foreshadowed the release
of a further discussion paper to specifically canvass issues relating to air operators liability
and insurance.
This discussion paper was released in May 2009. It made 30 preliminary findings on the
overall framework, and invited stakeholders to comment on the preliminary findings.
Preliminary finding number 7 stated that:
The Government should not apply the Montreal Convention to domestic travel at this
stage, and instead maintain a separate system of strict and capped liability.
Preliminary finding number 8 stated that:
The Government should increase the domestic passenger liability cap to $725,000 to
reflect changes in the cost of living.
Preliminary finding number 23 stated that:
The Government should increase the level of mandatory passenger insurance for
domestic travel to $725,000 per passenger, in line with the proposed increase to the
cap on liability.
The discussion paper was made available on the Department's website, and was sent to over
30 key stakeholders who had either raised liability and insurance issues in their response to
the Issues Paper and/or Green Paper, or who have a particular interest in these issues. Copies
were also provided to state governments for comment, and the release of the discussion paper
was noted in the `CASA Briefing' publication which is a regular email update sent by CASA
to industry participants to provide updates on regulatory developments.
The Department received a total of 17 submissions in response to the paper, of which 10
specifically addressed the issue of the domestic passenger liability cap. Eight of the
submissions were either supportive or strongly supportive of the preliminary findings - and by
extension option 4.
Two submissions opposed the proposal in the preliminary findings. One submission
supported the domestic application of the Montreal Convention (option 3), and another
preferred a smaller increase to the cap to $575,000.
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7. Conclusion and Recommended Option
On balance, it is recommended that the Government pursue option 4.
Option 1 is not recommended as the value of compensation under this option has been
significantly reduced since it was last updated in 1994. Accordingly, it is not consistent with
the objectives of the liability and insurance framework. In particular, it is not considered that
this option provides equitable compensation to victims of air accidents; and it does not
provide an appropriate balance between the interests of victims and air operators.
Option 2 is not recommended because it could lead to delays in settling claims, increasing
legal costs for air passengers and air carriers. It would also create significant uncertainty for
air carriers in relation to their potential insurance and liability costs. Accordingly, the option
is not consistent with the objectives of the liability and insurance framework, insofar as
compensation would not be prompt, and could potentially be inequitable depending on
whether the airline was at fault.
Option 3 is not recommended for the reasons outlined in relation to Option 2.
Option 4 is recommended as it is most consistent with the objectives of the aviation and
insurance framework. Although insurance costs will increase for air operators, these
increases are considered justified when weighed against the interests of air passengers. The
option provides a streamlined system of compensating air passengers, while minimising legal
costs for both airlines and passengers. Although the amount of available compensation is
limited, passengers will find it easier to access compensation. The option received broad
support in the consultation process.
8. Implementation and Review
The Department has liaised with CASA (responsible for the enforcement of the mandatory
insurance laws) to coordinate the revised limits with CASA's administrative processes.
The Department is mindful that many commercial operators tend to renew their insurance at
the same time of year, and will work with industry to ensure that the introduction of the
revised limits are timed to minimise disruption to the industry. It is not proposed that specific
transitional requirements will be required to introduce the new liability limits and insurance
requirements.
Following implementation of the revised liability and insurance system, it is proposed that a
review of the scheme's operation will be initiated if it becomes apparent that this is
appropriate.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Aviation Legislation Amendment (Liability and Insurance) Bill 2012
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act
2011.
Overview of the Bill
The existing carriers' liability and insurance framework is implemented by two key pieces of
legislation:
· The Civil Aviation (Carriers' Liability) Act 1959 (the `CACL Act'), which deals
with liability for death or injury to passengers, baggage and cargo. It implements:
i. a range of liability frameworks established by various international
agreements which cover international flights involving Australian and
international carriers;
ii. a separate system of liability to deal with domestic interstate flights, which
is complemented by state government legislation for intra-state travel; and
iii. the non-voidable insurance system for passenger liability (also
complemented by state government legislation).
· The Damage by Aircraft Act 1999 (the `DBA Act'), which establishes a liability
framework for third party victims of accidents causing damage on the ground.
There is currently no system of mandatory insurance relating to this liability.
Separate (non-uniform) state government legislation applies to flights beyond the
scope of the Commonwealth legislation.
The most significant amendment under this Bill is raising the liability cap (and associated
minimum insurance requirements) for domestic passenger death or injury from $500,000 (set
in 1994) to $725,000 to reflect increases in the cost of living. The minimum level of
insurance is also to be increased from $500,000 to $725,000. It is important that the cap is
raised as a matter of priority for victims of aircraft accidents.
Other provisions included in the Bill:
· ensure consistency in the CACL Act, so that the eligibility for damages relating to
mental injuries under the domestic liability framework is consistent with the
international framework created by the Convention for the Unification of Certain
Rules for International Carriage by Air, signed May 28 1999 (the 1999 Montreal
Convention);
· amend the DBA Act to include the principle of contributory negligence;
· amend the DBA Act to allow defendants to seek a right of contribution from other
parties who may have contributed to the damage suffered by the person bringing the
claim;
· amend the DBA Act to preclude potential claimants from claiming compensation for
mental injuries where that person has not suffered additional personal or property
damage; and
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· update a reference in the CACL Act to the Montreal Protocol Number 4 with reference
to the more recent 1999 Montreal Convention;
The provisions in the Bill stem from a comprehensive review of the carriers' liability and
insurance framework. The review was conducted with reference to several objectives namely
to:
· provide prompt and equitable compensation to victims of air accidents;
· foster a productive and sustainable aviation industry;
· provide an appropriate balance between the interests of victims, carriers, insurers and
governments;
· be as simple as possible, to increase certainty for industry participants and reduce
compliance costs; and
· be consistent with our international obligations, appropriately tailored for the
Australian market.
Human rights implications
Right to equality and non-discrimination
The Bill proposes to amend section 28 of the CACL Act and section 10(1) DBA Act in
respect of liability for `mental injuries'.
The amendment to section 28 of the CACL Act is intended to ensure that damages are
assessed consistently with the damages under the 1999 Montreal Convention. This provision
will have implications for the ability of accident victims who suffer `pure mental injury' to
claim compensation under the CACL Act as they will be unable to claim compensation for
their mental injury unless they can also show that they have also suffered a physical injury.
Section 10(1) of the DBA Act will be amended to preclude potential claimants from claiming
compensation for mental injuries where that person has not suffered additional personal or
property damage. This provision will narrow the scope of the aircraft operators liability, so
that compensation under the Act for `pure mental injuries' will be available in more limited
circumstances, such as under the relevant State's civil liability laws relating to negligence.
These two provisions relating to the eligibility for damages with respect to mental injuries
engage the right to equality before the law under Article 26 of the International Covenant on
Civil and Political Rights (ICCPR). The right to equal protection of the law in Article 26 of
the ICCPR prohibits discrimination in law or in practice in any field regulated by public
authorities (United Nations Human Rights Committee, General Comment 18). This means
that when the Commonwealth legislates in any particular area, it must do so without
discriminating.
The term `discrimination' means any distinction, exclusion, restriction or preference on a
prohibited ground, which has the purpose or effect of nullifying or impairing the recognition,
enjoyment or exercise by all persons, on an equal footing, of all rights and freedoms (United
Nations Human Rights Committee, General Comment 18). Article 26 of the ICCPR is a
`free-standing' bar on discrimination and is not limited to the rights protected by the
ICCPR.
In addition, the grounds of prohibited discrimination are not closed, and include race, colour,
sex, language, religion, political or other opinion, national or social origin, property, birth or
other status (United Nations Human Rights Committee, General Comment 18). Decisions by
the United Nations Human Rights Committee suggest that a clearly definable group of people
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linked by their common status is likely to fall under the definition of `other status'. While
disability - which encompasses both physical and mental disability - is not specifically listed
in Article 26, the approach of the Human Rights Committee suggests that it may be properly
considered an `other status' for the purpose of the ICCPR. Therefore, a difference in
treatment (including on the basis of disability) - whether directly or indirectly discriminatory
- must have a legitimate aim and an objective and reasonable justification to be consistent
with Article 26 of the ICCPR.
These provisions also engage Article 5 of the Convention on the Rights of Persons with
Disabilities (CRPD), which specifically prohibits discrimination on the basis of disability and
guarantees persons with disabilities equal and effective legal protection against discrimination
on all grounds. To be consistent with Article 5 of the CRPD (and similar to the ICCPR), a
difference in treatment on the basis of disability - including physical and mental disability -
must have a legitimate aim and an objective and reasonable justification.
These provisions engage the right to equality and non-discrimination because the provisions
will effectively distinguish between individuals suffering a physical disability from airline
accident-related physical injuries and individuals suffering a mental injury. Any differential
treatment will not be inconsistent with Article 26 of the ICCPR or Article 5 of the CRPD if
the amendments aim to achieve a legitimate objective and are reasonable, necessary and
proportionate to that objective.
Legitimate objective
The objectives of the amendments are to balance the interests of air crash victims and air
operators and to harmonise Australia's liability arrangements with international arrangements
which are widely recognised as providing this balance.
In respect to the CACL Act, amendments to these provisions have the objective of ensuring
that the liability framework for domestic flights is consistent with the benchmark liability
framework for international flights under the 1999 Montreal Convention. The 1999 Montreal
Convention is internationally recognised as providing an equitable balance between the
interests of airlines and accident victims. The amendments will ensure greater consistency
with this more equitable framework while removing unnecessary complexities from the
overall liability structure. The 1999 Montreal Convention has been implemented by over 100
States, and covers the vast majority of international flights. Many jurisdictions, including all
European countries, apply the 1999 Montreal Convention to domestic flights as well.
The current Australian domestic liability framework provides compensation for `personal
injury'. Courts have interpreted this provision as allowing compensation for `pure mental
injury'. The 1999 Montreal Convention provides compensation for `bodily injury', which has
been interpreted by courts as only allowing compensation for mental injuries when they are
also accompanied by other `physical' injuries. The amendment to section 28 of the CACL
Act will therefore rectify a significant area of inconsistency between Australia's domestic
liability framework and the international liability framework, while still ensuring that air
crash victims are afforded equitable access to compensation.
In respect to the amendments to the DBA Act, these provisions also have the objective of
ensuring that there is an appropriate balance between the interests of aircraft operators and the
interests of air crash victims.
Specifically, the amendments respond to concerns raised by airlines and insurers in the review
of carriers' liability and insurance. These concerns relate to the potential for people to claim
compensation under the DBA Act for `pure' mental injury as a result of witnessing an air
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crash. This would expose aircraft operators to a potentially very wide group of claimants on
the basis of strict and unlimited liability, thereby imposing incalculable risks on the industry.
Reasonable and proportionate
The provisions in the Bill are not `blanket provisions' in relation to mental injuries. Mental
injuries will still be compensable if the claimant can show that they have also suffered other
harm. In relation to the third party victims (on the surface), a claimant may also pursue a
claim for `pure mental injuries' under the civil law.
The amendments ensure that there is an appropriate balance between the interests of aircraft
operators and the interests of air crash victims. The DBA Act is generously weighted in
favour of air crash victims, insofar as it provides for strict and unlimited liability - there is no
requirement for air crash victims to prove fault on the part of the aircraft operator, and there is
no cap on the operator's potential liability. However, the aviation industry has raised
concerns about the potentially large groups of claimants, who as result of having witnessed a
major aviation disaster, could mount a claim under the DBA Act -without the requirement to
prove fault- for `pure mental injury' suffered as a result of having witnessed the crash.
The provisions will limit the scope of the air operators' liability, while still ensuring that
victims who have suffered physical harm or property damage can access compensation for
these injuries and damage, as well as compensation for any mental injury suffered. This
amendment will ensure a more appropriate balance between the interests of air crash victims
and aircraft operators.
Therefore, to the extent that provisions may limit the right to equality and non-discrimination,
those limitations are reasonable, necessary and proportionate in achieving a legitimate
objective.
Conclusion
The Bill is compatible with human rights because to the extent that it may limit human rights,
those limitations are reasonable, necessary and proportionate.
Minister for Infrastructure and Transport, the Hon Anthony Albanese MP
NOTES ON CLAUSES
Clause 1: Short Title
1. This clause is a formal provision specifying the short title of the Bill.
Clause 2: Commencement
2. Clause 2 sets out the commencement dates of the Bill. Sections 1 to 3 of the Bill will
commence on the day on which the Bill receives Royal Assent. Schedule 1 to the Bill will
commence on a day to be fixed by proclamation. If Schedule 1 has not commenced
within 6 months of the day on which the Bill received Royal Assent the Bill will
commence on the day after the 6 months have passed.
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Clause 3: Schedule
3. Clause 3 provides that the Civil Aviation (Carriers' Liability) Act 1959 and the Damage
by Aircraft Act 1999 are amended as set out in the applicable items in the schedule to the
Bill.
Schedule 1 - Amendments
Civil Aviation (Carriers' Liability) Act 1959
Item 1 - Section 28
1. Item 1 replaces reference to `personal' injury with reference to `bodily' injury in relation
to the liability of a carrier for the death or injury of a passenger. This is intended to ensure
that courts determine the liability of a carrier under the domestic liability framework
consistent with the liability of a carrier under the 1999 Montreal Convention, excluding
the liability of carriers for `pure' mental injuries.
Item 2 - Paragraphs 31(1)(a), (b) and (c)
2. Item 2 increases the liability of domestic carriers from $500,000 to $725,000. If a higher
amount is prescribed by regulation, or if the contract of carriage specified a higher
amount, then the higher amount will apply.
Item 3 - Section 41
3. Item 3 updates a regulation making power in the Act. The current regulation making
power enables the development of regulations regarding the liability of domestic carriers
with respect to cargo, consistent with the Warsaw Convention as amended at The Hague,
1955, and by Protocol No. 4 of Montreal, 1975 (the `Montreal No. 4 Convention'). The
item replaces the reference to the `Montreal No. 4 Convention' with a reference to the
more recent 1999 Montreal Convention.
4. No regulations are currently in force under this provision.
Item 4 -Paragraph 41C(3)(a)
5. Item 4 increases the amount of insurance that will be required from domestic carriers from
$500,000 to $725,000, commensurate with the increase in liability under item 2.
Damage by Aircraft Act 1999
Item 5 - After subsection 10(1)
6. Item 5 narrows the scope of liability under section 10(2) of the Act (aircraft owners and
operators) for the death of, or injury to, people or damage to property under section 10(1)
of the Act (damage caused by the impact of an aircraft). The item provides that aircraft
owners and operators will not be liable for mental injuries caused by the crash of their
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aircraft unless the person suffering mental injuries has also suffered other specified
injuries, loss, damage or destruction.
Item 6 - After section 11
7. Item 6 inserts the principle of contributory negligence into the Act and provides that a
right of contribution is available under the Act.
8. The new section 11A of the Act inserts the principle of contributory negligence into the
Act, so that the damages that are recoverable by a claimant under the Act will be reduced
if the defendant can prove that the negligence of the claimant was caused by, or
contributed to, the loss, damage or destruction suffered by the claimant. The insertion of
11A also provides a method for the court to determine the amount of the reduction of the
damages in these circumstances.
9. The new section 11B of the Act inserts the principle of a right of contribution into the Act,
so that a defendant who is liable under s 10 of the Act can seek contribution from a third
party who has caused or contributed to the damage caused by the defendant. The third
party may or may not be jointly or severally liable under the Act or could be partly
negligent in causing or contributing to the loss that the victim has suffered.
Item 7 - Application provisions
10. Item 7 sets out the application provisions relating to when individual amendments will
take effect.
11. Provisions relating to the amended term `bodily injury' and the increase in liability for
domestic carriers under the Civil Aviation (Carriers' Liability) Act 1959, will apply to
accidents that occur on or after the commencement of those provisions.
12. The provision relating to increasing the amount of insurance that will be required for
domestic passenger-carrying operations under the Civil Aviation (Carriers' Liability) Act
1959 will apply to operations engaged in, or proposed to be engaged in, on or after the
commencement of these provisions.
13. The provision relating to the availability of compensation for mental injury under the
Damage by Aircraft Act 1999 will apply to any personal injury, material loss, damage or
destruction suffered on or after the commencement of that provision.
14. Provisions in the Damage by Aircraft Act 1999 relating to contributory negligence and
right of contribution will apply to injury, loss, damage or destruction that is incurred on or
after the commencement of that provision.
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