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Compensation: A cautionary tale

Feature Articles

Cite as: Michael J Lombard

The Compensation landscape has again moved and personal injury lawyers cannot afford to ignore these changes.

The Compensation landscape has again moved and personal injury lawyers cannot afford to ignore these changes.
By Michael J Lombard

There was a time when it felt like most law stood still and it was only tax law that constantly moved. But that time was long ago. Now, almost every session of the Victorian Parliament involves a change to some area of compensation for the injured.

Another period of change in the laws relating to assistance for those injured on the roads, at work and as a result of crime has recently taken place. In light of these legislative changes, it is timely to look at the injury evaluation guidelines relied on and the areas affected by the changes.

AMA Guides

At the heart of compensation in the modern era are the American Medical Association Guides to the Evaluation of Permanent Impairment (Guides). Nearly every compensation area uses the Guides to determine entitlements or measures of benefits.1 This is a source of surprise to some when they discover that the Guides clearly stipulate: “It must be emphasized and clearly understood that impairment percentages derived according to Guides criteria should not be used to make direct financial awards or direct estimates of disabilities”.2

The edition used currently is the 4th edition (AMA4). Numerous omissions, changes and interpretations have been imposed on users of AMA4 since it became required use with regard to injured workers and car accident victims.

The latest legislative adjustment of AMA4 is contained in the Transport Accident & Compensation Acts Amendment Act 2007 (Vic) (the amending Act), which was passed during the spring session of the Victorian Parliament in October 2007. The new legislation requires all medical examiners under AMA4 to determine impairment after medical or surgical treatment has taken place. This amendment is a response to the Victorian Court of Appeal’s decision in Mountain Pine Furniture Pty Ltd v Taylor & Ors,3 which held that cl 3.3 of AMA4 was clear and should be followed.

Clause 3.3 provides: “With the injury model, surgery to treat an impairment does not modify the original impairment estimate, which remains the same in spite of any changes in signs or symptoms that may follow the surgery ... ”. The clause contrasts with a definition on page one of AMA4, which defines permanent impairment as a condition that “has become static or stabilised during a period of time ... and one that is unlikely to change in spite of further medical or surgical therapy”. In relation to Transport Accident Commission (TAC) claims, Balmford J had previously concluded in Bayliss v TAC4 that the direction to disregard the effects of surgery was an oversight in AMA4 that needed to be ignored. The Court of Appeal did not follow this analysis and provided the Victorian WorkCover Authority (VWA), and arguably the TAC, with a new way of assessing spinal injuries.

In Mountain Pine Furniture Mr Taylor suffered a fracture dislocation of C6-7 vertebrae, causing what is referred to in AMA4 as “loss of motion segment integrity”. Mr Taylor underwent a spinal fusion with internal fixation. He recovered well but was left with stiffness and aching in the neck and pins and needles in his fingers. The C6 vertebra was fixed slightly forward of C7 vertebra but could no longer qualify as being “loss of motion segment integrity”.

In the leading judgment, Nettle JA looked at the apparent conflict in AMA4 and the previously held view5 that the direction in cl 3.3 was an oversight that should be ignored. In response Nettle JA found: “The spinal injury once done will forever remain no matter what may be done by way of surgery to alleviate the suffering that it causes. For that reason, a spinal injury is properly to be regarded as an impairment despite any improvement in signs or symptoms the consequence of surgery”. [28]

Nettle JA also looked at the problem that it was submitted cl 3.3 could create: ignoring a condition made worse by surgery. Although clearly obiter, he thought a deterioration in a condition as a result of surgery could constitute “further injury” while receiving medical treatment and therefore come within s83(1)(d) of the Accident Compensation Act 1985.

The Victorian government moved quickly to reverse the consequences of the decision. Within weeks the Minister for Finance, WorkCover and TAC issued a press release stating that the government would introduce legislation to require assessment of impairment after surgery.6

When making these amendments, the Victorian government also took the opportunity of further refining both the Transport Accident and WorkCover Schemes.


With employer contributions fixed throughout Australia at 9 per cent, superannuation is not only an important part of the present but also the future of all employees. The latest amendments to the WorkCover and Transport Accident Acts have specifically excluded superannuation from the calculation of assistance to be provided to injured people.7

When payments of weekly benefits to the injured were initiated, superannuation was not an integral part of a person’s earnings. The recent Northern Territory Court of Appeal case of Hastings Deering (Australia) Ltd v Smith8 recognised the development of superannuation as an integral part of a person’s remuneration. Fearing that the case could be replicated in Victoria, the Victorian government moved to ensure superannuation is not included in any calculations. Minister Holding estimated the inclusion of superannuation in the calculations of pre-injury earnings could cost the WorkCover Scheme $610m immediately and $40m per annum into the future. The TAC Scheme would be similarly impacted on by an immediate liability of $126m, with ongoing costs of $8m.9


A much needed amendment to the WorkCover and Transport Accident Schemes is an increase in counselling provided to the family of the deceased or seriously injured person. Immediate family members can now receive counselling up to a total cost of $5000.10 Large families or individuals needing substantial psychological assistance had previously been left without support once the sum of $2070 was expended. The new limit substantially increases assistance for those indirectly affected by the trauma.

Injured care givers

One change to the legislation recognised the enormous contribution made by families in supporting the elderly or disabled members of our community. The amendment provides that the TAC is to fund substitute care for up to 12 weeks in circumstances where the person injured in an accident was the primary carer for a disabled or elderly family member.11 In the authors’ opinion, this amendment could go further and provide assistance for up to 52 weeks, as badly injured road accident victims are often involved in treatment and rehabilitation beyond the 12 week period.

Loss of employment

A significant change to the Transport Accident Scheme affects people injured in a transport accident who have a successful rehabilitation, return to work and then lose their job. The newly inserted s54A of the Transport Accident Act 1986 provides that where someone with a severe injury from a transport accident loses their job after returning to work, income benefits of 80 per cent of the pre-accident earnings or 80 per cent of their pre-termination earnings will be paid, depending on which is the greater.12 The payment for people who have completed rehabilitation but then lost their job has a cap of $965 and will provide support until suitable employment is found.

Early impairment

When the Transport Accident Act (Vic) commenced in 1987, 18 months was the earliest time for assessment of impairment. In 2004 this period was shortened to any time after three months.13 The most recent change now allows the impairment assessment to be carried out at any time, provided it is for the purpose of gaining access to bring an action for damages.14 It is also consistent with the TAC–LIV common law protocols that took effect in April 2005 and are designed to hasten the delivery of compensation to the seriously injured.15 Practitioners can now act promptly where there is an amputation or severe disability injury that is stable and permanent.

Replacing aids

A most welcome change is the replacing of orthoses and mobility aids damaged in the accident.16 For two decades the TAC has replaced items such as glasses, hearing aids or crutches damaged in an accident but not been permitted to replace vital items such as wheelchairs and mobility scooters. All aids are now to be replaced if they are damaged. Practitioners should, however, be aware of the sections requiring entry into agreements for equipment included in the definition of medical service where the cost is over $5000.

TAC Protocols

Protocols for the improvement of delivery of benefits to people injured in transport accidents came into operation in April 2005 and have well and truly taken hold. Any lawyer working in the area would be greatly disadvantaged without a copy of these protocols developed for impairment, no fault disputes and common law.17

Amendments were made in August 2007 as a result of a regular review of the operation of the protocols. The most significant change was in relation to assessment of impairment. Under the original protocols, it was agreed between the LIV, TAC and the Australian Lawyers Alliance that lawyers representing the injured must provide a “Lawyers’ Summary”. This included how each injury was caused and an explanation of how the injuries manifested themselves as a current and permanent impairment. This requirement caused lawyers difficulty, as many practitioners did not comply with this requirement.18 Lawyers now do not have to provide a “Lawyers’ Summary”, but if there are issues about pre-existing injuries or overlapping injuries or unique points of law a solicitor “may” provide one. It is anticipated that Lawyers’ Summaries will soon be a thing of the past.

Clarification also appears in the last set of amended protocols as to what sums are payable for costs where a number of applications are occurring at the same time. Statements provided for common law protocols could also be used for impairment assessment protocols.

The revised protocols indicate that fixed amounts of money, referred to as “price points”, will be paid for solicitors’ costs where documents have been provided to the TAC for more than one protocol application. These documents include the claimant’s statement, medical reports and other material that supports the application.

The most common example of this “overlap” is in relation to impairment and serious injury protocol applications. They are often lodged simultaneously or within a short time of each other. When a common law settlement occurs, the claimant’s right to an impairment benefit is extinguished, as the pain and suffering component of a settlement takes into account the entitlement to an impairment benefit. This had the potential to deprive the lawyer of payment for the work performed in connection with the impairment assessment application. The new protocol provisions prevent this occurring, both in regard to impairment assessments and dispute applications.

Arrangements have also been made for payment of travel and accommodation costs of claimants attending conferences under the protocols. Where claimants are required to travel from rural Victoria or interstate, these costs will be paid in accordance with the TAC’s travel and accommodation expenses policy.

Victims of crime

Victims of crime have been supported further by the state government increasing the level of pain and suffering compensation, described as “special financial assistance” in the Victims of Crime Assistance Amendment Act 2007 (Vic). The maximum that can be awarded for special financial assistance has increased from $7500 to $10,000.19 This is the first increase in this area of compensation since the Victorian Labor government reintroduced assistance to victims of crime in 2001.20

The minimum compensation for an act of violence where there is a significant adverse effect has been increased to $130 and the maximum for a simple assault where there is an injury, including actual physical bodily harm, has risen to $650.21 No increase was awarded to relatives of victims who die due to a crime.

In September 2007 the government also released a review of an independent evaluation of victims’ services.22 As a result of this review, the victims’ counselling and support services will be transferred to the Department of Justice, which is responsible for the courts and the criminal justice system.23 Service standards are to be introduced for victim service providers as well as a review of the complaints procedures and a new performance management model.24 See the table of new special financial assistance (left) for crimes committed after 1 July 2007.

Victims Charter

A Victims Charter was released in 2006.25 It enshrined in law 12 principles for how the justice system and victim support agencies should respond to victims of crime. Among these entitlements, victims now have the right to:

  • be informed of the progress of the police investigation;
  • be informed of victims’ support services; and
  • request information on sentenced offenders.

It also provides that victims should be told of their right to compensation.

Victoria Police also produced a policy statement for victims of crime in October 2007. The result of a police strategy project team, the policy statement provides clear service standards that the police must adhere to when responding to victims of crime.26


Despite the Attorney-General proudly proclaiming that the government is building on its record by increasing the maximum payment for pain and suffering to $10,000, it must be looked at in the context of the past.27 When the concept of compensation for victims of crime was first adopted by the Labor government in 1972, the maximum pain and suffering award was $3000. By 1988 it had increased to $20,000 and was not tied to the classification of crime but open to the discretion of the magistrate to award assistance, depending on the impact on the victim.28 The present Victorian government still has a distance to travel in restoring the rights of victims that were taken away by the Kennett government more than a decade ago.29

The future

Even before the spring session of the Victorian Parliament had concluded, Minister Holding forecast further changes.30 The changes to the method of assessment of impairment appear to have highlighted the low level of assistance people with spinal injuries receive. Minister Holding announced that a review of the operation of all of the Accident Compensation Act was to be undertaken. He also indicated that thorough consideration would be given to whether superannuation could be taken into account in some way in the future when compensating injured people.31 It may well result in further legislative change in 2008.

The Transport Accident Act may also be affected by this review as “benefit harmonisation” between the two schemes has been an important emphasis in the recent changes.

There seems no doubt that the one aspect of personal injury law that is now constant is future change.

MICHAEL J LOMBARD is a partner and leader of the personal injury group at Holding Redlich. He is an accredited personal injury specialist, author of Guide to Injury Compensation in Victoria and co-editor of Motor and Traffic Law, Victoria. GUY A DONOVAN is a solicitor in the personal injury group at Holding Redlich, practising primarily in the transport accident and medical negligence areas.

The numbers in square brackets in the text refer to the paragraph numbers in the judgment.

1. TAC, WorkCover and Wrongs Act claims use the AMA Guides.

2. AMA4, ch 1, p5.

3. [2007] VSCA 146 (6 July 2007).

4. [2004] 9 VR 267.

5. Bayliss v TAC, note 4 above.

6. Press release, “Legislation to ensure equity for injured Victorians”, 15 August 2007,

7. Amending Act, ss4, 22 and 24.

8. [2004] NTCA 13 (27 October 2004).

9. Hansard, Legislative Assembly, second reading speech, 19 September 2007, Minister Holding, p3126.

10. Amending Act, ss14, 26 and 27.

11. Amending Act, s6.

12. Amending Act, s12.

13. Transport Accident Amendment Act 2004.

14. Amending Act, s9.

15. See TAC website

16. Amending Act, s3.

17. Protocols available at

18. Discussions between Michael Lombard and TAC representatives.

19. Victims of Crime Assistance (Amendment) Act 2007, s3.

20. Victims of Crime Assistance (Amendment) Act 2000.

21. Note 19 above.

22. Victims Assistance and Counselling Program evaluation.

23. Office of the Attorney-General media release, 21 September 2007.

24. Note 23 above.

25. Victims Charter Act 2006, also at

26. Victims of Crime Policy Statement at

27. Media release, 14 February 2007.

28. Criminal Injuries Compensation Act 1983, s18.

29. See Michael Lombard and Lisa Maynard, “The return of the red coat: crimes compensation revamp” (2001) 75(3) LIJ 55.

30. Note 9 above.

31. Note 9 above.


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