CHAPTER 5 - THE COMMONWEALTHS OFFER OF SETTLEMENT

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CHAPTER 5 - THE COMMONWEALTHS OFFER OF SETTLEMENT

5.1 Paragraph 1(c) of the terms of reference requires the Committee to report on `whether the Commonwealth's offer to the recipients was fair and adequate and gave the recipients sufficient time and information to make a considered response'.

5.2 The offer of settlement, first made in April 1997, relates to a number of common law `nervous shock' claims made by hormone recipients. The claims are not claims for actual physical harm resulting from CJD. Rather, they concern psychological harm caused by the fear of contracting CJD in the future, as well as medical and like expenses which are continuing and economic loss.

The offer of settlement

5.3 Under the offer of settlement, the Commonwealth undertook to pay compensation if a plaintiff in a nervous shock proceeding actually contracted CJD. The Commonwealth also undertook to pay the plaintiffs' legal costs of the nervous shock litigation, regardless of whether or not the plaintiff eventually contracted CJD. These benefits supplement those available under the Human Pituitary Hormones Trust Account.

5.4 The Commonwealth did not agree to pay damages in respect of nervous shock prior to a plaintiff actually contracting CJD.

5.5 Details of the operative provisions of the offer of settlement are outlined below. Where the offer is accepted by a plaintiff, an Agreement and Release would be signed, under which:

5.6 The offer of settlement included clauses concerning the background to the nervous shock claims and the positions of the parties as to the merits of their claims and defences. One of these clauses was drawn to the Committee's attention in evidence.[2] In the original version of the Agreement and Release, clause 2.2 provided that `the defendants have denied and maintain a denial of liability in respect of any claim brought by the plaintiff in the proceeding'. An additional clause has since been included which provides that `the plaintiff maintains that the Defendants are liable in respect of any claim brought by the plaintiff in the proceeding'. A copy of the Agreement and Release is at Appendix 6.

5.7 The new clause was added by AGS at the request of the CJDSGN and with the Department's agreement. The Committee has been advised that the insertion did not change the previous settlement agreement, but rather, expressed explicitly, for the benefit of the plaintiffs, what was already implicit. Concern was expressed as to whether there was a need to have those who had already signed re-sign the agreement. The Department and AGS have agreed that if a plaintiff who had already signed wanted to sign the new agreement the AGS would arrange for that course of action. Under either agreement a plaintiff will be bound by the agreement.[3]

5.8 The Committee notes that the operative provisions in the two agreements remain the same. In particular, each involves the Commonwealth making the same undertakings as to common law damages if the plaintiff contracts CJD and paying legal costs, and each involves the plaintiff granting a release to the defendants in respect of liability.

5.9 The offer of settlement provides that in the event of a plaintiff contracting CJD, damages would be assessed on a common law basis. In personal injuries actions, both `special' and `general' damages are awarded under the common law. Special damages are capable of precise calculation. They include out-of-pocket expenses, such as medical expenses, and loss of earnings up to the date of trial. General damages cannot be calculated with precision. They include damages for pain and suffering, loss of faculties and loss of future earnings.[4]

5.10 The offer of settlement makes reference to the entitlement of a plaintiff under the Fund. The Committee has noted that the Fund provides, inter alia, for ongoing funding for support groups and counselling services see Appendix 4.

The nervous shock proceedings

5.11 The Commonwealth initially made the standard offer to plaintiffs in nervous shock proceedings in April 1997. It is worth setting out some of the background to those proceedings as disclosed in evidence and submissions to the Committee.

The nervous shock proceedings commenced by Rennick Briggs

5.12 In early 1993 the Melbourne firm now known as Rennick Briggs Lawyers (`Rennick Briggs') had been acting in proceedings on behalf of the husbands of several women hormone recipients who had died of CJD. Claims had been issued that the recipients had been treated negligently and died as a result of that negligence causing loss to their family members. These claims were subsequently settled prior to trial in December 1994.

5.13 Members of the recipient community became aware that Rennick Briggs were acting for the husbands. A number of recipients, most of whom did not appear to demonstrate symptoms of CJD, retained Rennick Briggs.[5] In May 1993, Rennick Briggs issued writs in the Supreme Court of Victoria on behalf of a number of plaintiffs. These writs claimed that the plaintiffs, all of whom had been treated with hPG or hGH, had suffered psychiatric injury (otherwise known as `nervous shock') arising from a fear of contracting CJD.

5.14 Rennick Briggs advised the Committee of two factors which influenced the issuing of the writs at that time. First, there was concern that if the proceedings were not issued, they might later become statute barred. Secondly, there was concern that one or two of the plaintiffs might have been displaying early symptoms of CJD. 6

5.15 Following the issue of the first writs, Rennick Briggs were retained by a number of other hormone recipients throughout Australia. Eventually Rennick Briggs acted for 133 plaintiffs. The firm communicated with its clients by travelling interstate and providing advice by way of circulars.[7]

5.16 The evidence before the Committee suggests that Rennick Briggs may have run the proceedings on a contingency basis. The firm told the Committee:

5.17 Rennick Briggs advised the Committee that they obtained the agreement of counsel and expert witnesses to render their fees but not seek payment until a result had been achieved which included the recovery of legal costs and disbursements. The firm advised the Committee that they had incurred disbursements for travel, accommodation, stamp duty on writs and other contingent liabilities said to total over $100,000 by early 1997.[9] As detailed in the following chapter, Rennick Briggs was unable to obtain legal aid from the Commonwealth.

APQs case

5.18 One of the claims in which Rennick Briggs acted was brought by a plaintiff known as APQ. The writ in APQ's case was issued on 15 September 1993. APQ alleged that she had been treated with hPG between 1980 and 1985. She claimed that she had suffered severe injury, loss and damage from (among other things) severe stress syndrome, severe psychiatric reaction, depression, anxiety and shock. The claims also included medical and like expenses which are continuing and economic loss. APQ did not allege that she actually suffered from CJD.[10]

5.19 The Australian Government Solicitor (AGS) acted for the defendants (CSL Ltd and the Commonwealth of Australia) in APQ's case and the other matters commenced by Rennick Briggs.

5.20 Rennick Briggs considered that APQ's case had relatively good prospects of success, and ran it as a test case. APQ had been treated with hPG in the 1980s when, arguably, the Commonwealth should have been aware of the risk of CJD.[11] The Australian Government Solicitor did not accept that APQ's case was a test case. It took the view that if APQ had succeeded, her case could not be relied upon by plaintiffs who had been treated with hGH or hPG before 1981.[12]

5.21 Because Rennick Briggs treated APQ's case as a test case, it was ready for hearing before any of the 132 other nervous shock cases filed by that firm.

5.22 In late 1994, the AGS applied to Justice Harper of the Supreme Court to strike out APQ's claim, arguing that it did not reveal a cause of action.[13] In February 1995, Justice Harper dismissed the strike-out application.[14] Justice Harper's reasons for decision are referred to below.

5.23 In mid 1996 the court set down APQ's case for a hearing commencing on 7 April 1997. The AGS advised the Committee that the hearing would have taken between 12 and 17 weeks, generating between $11.8 million in legal costs for the parties.[15] Rennick Briggs estimated that the trial would last 8 to 12 weeks.[16] In its submission, the AGS predicted that legal costs would be exceeded if the matter went on appeal. AGS also stated that the Commonwealth would have appealed any adverse decision.[17]

The nervous shock proceedings brought by Macedone Christie Willis

5.24 The Committee understands that the New South Wales firm of Macedone Christie Willis Lawyers (`Macedones') have commenced proceedings in the Supreme Court of NSW on behalf of nine pituitary hormone recipients and act for some former clients of Rennick Briggs who have not accepted the Commonwealth's offer.

Settlement negotiations

5.25 The Committee received a number of submissions and heard evidence at its public hearings concerning the settlement negotiations between the Commonwealth and hormone recipients who had brought nervous shock claims.

Settlement negotiations in APQs case

5.26 In order to understand the background to the negotiations that took place between the Commonwealth and APQ, it should be noted that APQ applied to the Attorney-General's Department for legal aid, and legal aid was ultimately refused. As a result of the failure of the legal aid application, APQ, and her legal advisers, faced considerable liabilities relating to trial disbursements. Issues relating to the Commonwealth's refusal to grant legal aid are considered the following chapter.

5.27 On 6 June 1995, Rennick Briggs offered to settle APQ's nervous shock claim if the defendants paid APQ $85,000 and her legal costs. This offer was rejected by the defendants.[18]

5.28 On 18 March 1997, which was about three weeks before the hearing was due to begin, Rennick Briggs told the AGS that it was prepared to advise its clients to settle for a global payment of $2,000,000, which included legal costs. This was put on the basis that the rights of clients who might contract CJD were reserved. The AGS calculated that this worked out to $15,100 per plaintiff. Taking into account legal costs, the AGS estimated that the offer amounted to $11,000 per plaintiff.[19]

5.29 On 27 March 1997, the AGS received instructions from the Department of Health and Family Services to make an offer of settlement to APQ. On 28 March 1997, some nine days before the hearing was due to begin, senior counsel for the defendants conveyed the offer of settlement to senior counsel for APQ. On 3 April 1997, APQ's acceptance of the offer was communicated to the AGS.[20]

Settlement negotiations relating to Rennick Briggs other clients

5.30 On 4 April 1997 the AGS wrote to Rennick Briggs offering to settle on the same terms with all Rennick Briggs' clients. The AGS advised the Committee that the Commonwealth did not, at that time, impose a deadline for acceptance.[21] In evidence, the relevant AGS solicitor, Mr Geoff McDonald, told the Committee that it was an oversight for the AGS not to set a deadline at this stage. This was because it was necessary for the AGS to prepare approximately 135 agreements embodying the offer of settlement ready for Messrs Rennick Briggs to send out to their clients that night. Mr McDonald told the Committee:

5.31 On the same day, 4 April, Rennick Briggs wrote to their clients, advising them of the Commonwealth's offer. After setting out the terms of the offer, the letter stated `we must have your instructions no later than 24th April 1997'.[23] This deadline of 24 April was imposed by Rennick Briggs for its own purposes, and not by the Commonwealth. Rennick Briggs' letter did not explain the reason for this deadline.

5.32 Rennick Briggs' letter of 4 April, a copy of which is at Appendix 7, also advised that:

The letter concluded that Mr Jack Rush, QC, Mr John Philbrick of Counsel, and Rennick Briggs strongly recommend that plaintiffs accept the proposal.[24] 5.33 On 18 April 1997, the AGS sent a further letter to Rennick Briggs advising that the Commonwealth would seek to set proceedings down for trial where a plaintiff refused a settlement offer. This letter also advised that `in the event that the Commonwealth is successful in defending the action or the plaintiff discontinues the action, the Commonwealth will pursue recovery of its legal costs'.[25]

5.34 On 28 April 1997, Rennick Briggs wrote to clients who had rejected or not yet accepted the Commonwealth's offer. Rennick Briggs drew attention to the Commonwealth's threat regarding the recovery of legal costs. They also advised clients who wished to reconsider and accept the Commonwealth's offer to notify Rennick Briggs by 14 May 1997. Clients were also told that Rennick Briggs would be filing a Notice of Ceasing to Act after that date.[26] A copy of this correspondence is at Appendix 8.

5.35 Subsequently, Rennick Briggs filed Notices of Ceasing to Act in those proceedings in which clients had not accepted the Commonwealth's offer of settlement. In relation to proceedings where the Commonwealth's offer had been accepted, consent orders were filed with the court bringing the proceedings to an end in accordance with the offer.

5.36 On 21 and 23 May 1997 the AGS wrote to three former clients of Rennick Briggs advising that the Commonwealth would allow them until 30 May 1997 to accept the offer.[27]

5.37 The Committee received evidence that about 90 of Rennick Briggs' clients have accepted the Commonwealth's offer of settlement.[28]

Settlement negotiations in proceedings brought by Macedone Christie Willis

5.38 On 4 April 1997, Macedones contacted the AGS and asked whether the offer to clients of Rennick Briggs also extended to their clients. A complicating factor here was that doctors and hospitals had also been joined as defendants. Accordingly, it was necessary for the AGS to liaise with the Medical Defence Union.[29]

5.39 On 30 April 1997, the AGS wrote to Macedones making the Commonwealth's settlement offer. The letter gave 14 days to respond. On 8 May 1997, Macedones requested an extension to 28 May. The AGS granted an extension to 30 May 1997. On 4 June the AGS extended this further until 30 June 1997.[30]

5.40 The Committee is not aware of any clients of Macedones yet having accepted the Commonwealth's offer.

Extension of deadline on the offer

5.41 On 26 June 1997, upon a notice of motion by Senator Bishop, the Senate called on the Government to leave open the offer of settlement until hormone recipients had had an opportunity to consider the Government's response to this report.[31]

5.42 The Committee heard evidence that, in accordance with the Senate's request, the Commonwealth has left the offer open pending the final results of this Committee's inquiry.[32]

Offer to recipients who have not brought proceedings

5.43 The submission of the Department of Health and Family Services advises that on 23 May 1997 the offer of settlement was extended to people formerly treated under the AHPHP who had not commenced legal action against the Commonwealth and continue not to do so.[33]

5.44 In evidence, the Committee heard of a number of concerns relating to the settlement process and the fairness and adequacy of the Commonwealth's offer.

The adequacy of the offer prospects of nervous shock claims succeeding

5.45 In considering whether the Commonwealth's offer was fair and adequate, the plaintiffs' prospects of success in the nervous shock proceedings are relevant.

5.46 The Committee heard conflicting evidence on this issue. The Committee cannot offer any conclusion on the merits of these legal arguments. However, it is useful to outline them.

The need for a plaintiff to establish a duty of care

5.47 First, the AGS contended that a plaintiff would have to establish that the risk of CJD was reasonably foreseeable when the plaintiff was given hormone treatment. The AGS argued that, in addition, there needed to be relationship of `proximity'. Without reasonable foreseeability and proximity, there could be no duty of care to a plaintiff.[34]

5.48 In relation to the question of reasonable foreseeability, the AGS argued that the date of treatment or arguably the date of collection of glands and the manufacture of batches received by each plaintiff was relevant.[35]

5.49 In this regard, the Committee notes that Justice Morland of the UK High Court held that, subject to detailed evidence about their particular cases, claims on behalf of recipients of human growth hormones who began therapy in the UK after 1 July 1977 and had developed CJD should succeed.

The need for a plaintiff to establish a breach of duty

5.50 Secondly, the AGS maintained that a plaintiff would have to show that the Commonwealth had failed to exercise reasonable care when the plaintiff was treated with hormone. In other words, it would have to be shown that if there was a foreseeable risk, the Commonwealth did not take adequate steps to address this risk. The AGS advised the Committee that it would be necessary to establish this to show that there was a breach of duty.[36]

The need for a plaintiff to establish a recognised psychiatric illness

5.51 Thirdly, the AGS contended that a plaintiff would have to demonstrate that he or she suffered from a recognisable psychiatric injury in order to succeed in a nervous shock claim.

5.52 The AGS told the Committee that Macedones had recognised this requirement by insisting that any former client of Rennick Briggs must obtain a medical report from a psychiatrist verifying that the plaintiff does suffer from nervous shock.[37]

The need for a plaintiff to establish that nervous shock is compensable in the circumstances

5.53 Fourthly, the AGS contended that a plaintiff would have to establish that the common law actually compensated for nervous shock where a plaintiff fears, but has not actually contracted, CJD.[38]

5.54 The Committee received much conflicting evidence on this issue.

5.55 The AGS submitted that, for policy reasons, the courts seek to confine the situations in which damages are recoverable for pure nervous shock, when there is no physical injury:

5.56 The AGS maintained that the policy of restricting damages for nervous shock was based on a fear of `unlocking the floodgates':

5.57 The AGS estimated that, if nervous shock claims were upheld in relation to fear of CJD, the Commonwealth's liability may be in the region of $100 million. Accordingly, the Commonwealth would be likely to appeal any judgement in favour of a plaintiff to the High Court.[41] The AGS also emphasised that `in any concept of fairness we have regard to the taxpayer as well as the plaintiff'.[42]

5.58 The AGS noted a recent decision of the US Supreme Court about a railway employee, who had been exposed to potentially cancer-causing asbestos dust in the course of his employment. The worker failed in an action claiming damages for emotional distress as a result of the fear of cancer because he had no symptoms of a relevant physical disease.[43]

5.59 On the other hand, APQ's counsel, Mr Jack Rush QC, was of the view that APQ would succeed on this aspect of her case. He noted that `there are interesting and novel aspects of law and no lawyer can give a guarantee in such matters'.[44]

5.60 Mr Rush QC drew some support from the decision of Harper J of the Supreme Court of Victoria not to strike out APQ's claim. Harper J noted two cases that supported claims for nervous shock even though there was no physical injury.[45] In those cases the relevant psychiatric damage came from the sudden perception of a shocking event. In one of the cases referred to, the plaintiff had been a passenger in a train which had rolled backwards at high speed, putting her in fear of physical injury, although such injury did not ensue. Harper J questioned whether it was necessary to show that APQ's psychiatric state related to such an event. He took the view that APQ might still have a sustainable claim. In any event, APQ might amend her pleadings to allege `the sudden receipt of distressing information'.[46]

5.61 It should be noted that the decision of Harper J did not uphold the plaintiff's claim as such. It merely held that it was strong enough to justify it going to trial. Harper J did not hold that APQ would necessarily succeed at trial on the facts or on the law.

The adequacy of the offer whether a plaintiff must choose between damages for nervous shock and damages for physical harm

5.62 The Committee received some evidence suggesting that if a plaintiff were to succeed in court in a nervous shock claim, they would be precluded from bringing a claim for actual physical harm should they later contract CJD. The Committee also heard evidence that damages in nervous shock cases are often less than generous.

5.63 In this regard, the AGS advised the Committee:

5.64 A similar view was expressed by Rennick Briggs to their clients. In response to questions from the Committee, Mr Glen of that firm drew the Committee's attention to the letter dated 14 June 1997 from Rennick Briggs to plaintiffs. He told the Committee that that letter stated that if a client succeeds at trial for psychiatric injury, neither that client nor that client's family would have any further claim for compensation in the instance that the client falls ill with CJD thereafter.[48]

5.65 If this is the case, a plaintiff will need to decide which right is more valuable to them. Where a plaintiff's priority is to ensure that their medical expenses etc are covered if they contract CJD, and if it is true that the law requires them to elect, it might be argued that the Commonwealth's offer is reasonable.

Level of damages in nervous shock cases

5.66 The level of damages recoverable in actions for psychiatric damage is also relevant in assessing the Commonwealth's offer of settlement.

5.67 Mr Glen of Rennick Briggs gave evidence to the Committee that juries were notoriously conservative in assessing damages for nervous shock in the Supreme Court of Victoria. He stated that `it might be anywhere between a low of $5,000 and a maximum of $75,000 to $80,000just to give you a broad spectrum'.[49]

5.68 The CJD Support Group Network submitted that `since psychiatric injury suits usually have small payouts the few successful litigants who might go on to develop CJD would be financially disadvantaged'.[50]

The adequacy of the offer failure to recognise psychiatric injury

5.69 It might be argued that the Commonwealth's offer was fair, even though it failed to compensate for psychiatric injury, because (on one view of the law) the prospects of a plaintiff recovering for psychiatric injury were poor.

5.70 On the other hand, it could be argued that the Commonwealth is morally, even if not legally, obliged to compensate recipients for psychiatric damage.

5.71 In its submission, the National Pituitary Hormones Advisory Council noted with concern the fact that the offer did not include a component for psychiatric damage, and argued:

5.72 The Committee heard evidence that many recipients hold extremely strong feelings about the fact that the offer did not include damages for psychiatric damage. For example, Mr David Ralston, a growth hormone recipient, expressed an opinion which was voiced by many other recipients when he described the offer as `an insult' and `an indication of the failure of the system to recognise and understand the ongoing traumatic impact that the CJD episode has had on so many lives'. He noted that `the offer totally ignores the basis of the litigation'.[52]

5.73 The CJD Support Group Network was particularly concerned that, in addition to the benefits promised under the Commonwealth's offer, recipients be given `compensation and some expression of regret on the part of the government for the distress and anxiety they have suffered and continue to suffer'.[53]

5.74 The Committee heard graphic evidence from a number of witnesses on the suffering of recipients. For example, one witness told the Committee that after learning of the risk of CJD:

5.75 The Committee has no doubt that numerous pituitary hormone recipients have suffered emotionally as a result of the position they have been put in.

5.76 For those recipients, if any, who have not suffered psychiatric injury and whose major concern is how they will be taken care of if they develop CJD, the offer may be seen as reasonable. It is difficult for the Committee to assess how many recipients, if any, fall into this category. The CJD Support Group Network gave the following evidence:

The argument that the Commonwealth had already undertaken to compensate CJD sufferers

5.77 The Committee also heard evidence of a strongly held belief among pituitary hormone recipients that, irrespective of the settlement offer, the Commonwealth was already obliged in one way or another to pay compensation to recipients who actually contracted CJD.

5.78 There was a strong feeling, then, that the Commonwealth was offering nothing new. The CJD Support Group Network submitted:

Liability for other physical diseases

5.79 The Committee notes that, apart from the CJD risk, the offer of settlement does not take into account other long term side effects allegedly associated with assisted conception and possible cancer.

5.80 The release in favour of the Commonwealth in the offer of settlement appears to be very broad and it may extend to physical illnesses other than CJD. However, the Committee did not receive any detailed evidence on this point.

The deadlines set by the Commonwealth and Rennick Briggs

5.81 The Committee heard evidence of concerns relating to the deadlines for acceptance of the Commonwealth's offer of settlement.

5.82 It will be recalled that:

5.83 The CJD Support Group Network gave evidence to the Committee setting out the sequence of events from the perspective of its members. The Network emphasised that its members were largely unaware of details of preparations for APQ's trial and that the settlement of APQ's case came as a shock:

5.84 The Committee notes that these concerns go more to the conduct of Rennick Briggs than that of the Commonwealth. Rennick Briggs responded that the information contained in the letter of 4 April could hardly be considered as bullying or intimidatory tactics, and pointed out that all their clients had the choice to accept or reject the offer.[58] Between 4 April and 15 May the firm `received many phone calls from clients and spent a considerable amount of time explaining to them the ramifications of the Government's proposed offer of settlement as well as the ramifications which could flow from their non acceptance of the Government's offer'.[59] The Committee notes that Rennick Briggs extended its deadline to 14 May and the Commonwealth has further extended the deadline for settlement.

5.85 Rennick Briggs also referred to the AGS omission in not setting a deadline. As has been previously noted, AGS did not initially set a deadline for Rennick Briggs' clients due to an oversight. However, the AGS gave evidence to the Committee to the effect that imposing a deadline on an offer to settle litigation is a reasonable and common practice because the party making an offer will normally want to know whether they will have to prepare the matter for court.[60]

5.86 The AGS supported its view by reference to the offer of compromise provisions under the rules of the Victorian Supreme Court. They provide that a minimum of 14 days must be allowed for the offer to be accepted. The AGS submitted that in its experience of personal injury litigation it was extremely rare for an offer of compromise under the Supreme Court rules to permit more than 14 days to accept the offer. It was also argued that, presumably where the offer is made outside the rules, there is usually a 7 to 14 day time limit. 61

5.87 The AGS concluded:

The threat to enforce costs against plaintiffs

5.88 The Committee also heard evidence expressing concern at the Commonwealth's threat to enforce costs against plaintiffs in the event that they should seek to discontinue without accepting the Commonwealth's offer, or should proceed with their action and fail. As noted, that threat was contained in a letter from the AGS to Rennick Briggs dated 18 April 1997 see Appendix 8.

5.89 The CJD Support Group Network gave evidence to the Committee arguing that the AGS letter, which Rennick Briggs passed on to its clients, was `obviously not intended for a general audience, and the commentary provided by Rennicks created great fear among litigants'.[63] This was linked to a concern that Rennick Briggs, by ceasing to act for those who did not settle, had `abandoned' their clients.

5.90 Mrs Sue Byrne, the National Coordinator of the CJD Support Group Network, alleged that many of the approximately 90 people who had accepted the Commonwealth's offer felt `very strongly that they were intimidated into doing so and did so very much against their will'.[64] In particular, she told the Committee:

5.91 These themes of the intimidating power and authority of the Commonwealth, the feeling of having no real alternative but to accept the settlement offer, and that legal avenues to pursue the case had been shut recurred through a number of submissions.[66]

5.92 The Network's submission criticised Rennick Briggs for not outlining the processes by which costs could or would be recovered from plaintiffs. For instance, it may not have been clear to plaintiffs that it was necessary for the AGS to obtain a court order first, and it was alleged that there was no attempt to quantify costs. It was suggested that Rennick Briggs had exaggerated the costs threat to induce clients to settle. Further, the Network suggested that it was in the financial interests of Rennick Briggs to induce clients to settle because that would ensure that their costs were paid.[67]

5.93 Some of these allegations were put to Mr Michael Glen, a partner with Rennick Briggs. He maintained:

5.94 Mr Glen noted that there was precedent for the Commonwealth pursuing its legal costs.[69] However, he denied that his firm would have used alarmist tactics. Of the solicitor who had carriage of the CJD matters, Mr Glen said:

5.95 Mr Glen acknowledged that his firm may have made reference to the possibility of the Commonwealth causing the sale of a plaintiff's home, or an attendance by the Sheriff. However, he maintained that this would probably only have been in response to particular questions raised by clients either over the phone or when the firm visited Hobart shortly after APQ's settlement. The clients naturally wanted to know `the end result' should the Government continue with threats to pursue unsuccessful or discontinuing litigants for their costs. Mr Glen stated :

5.96 Mr Glen argued that it would have been `negligent and remiss' of the firm if it had not advised its clients of the contents of the AGS' letter of 18 April 1997.[72]

5.97 The Committee questioned the AGS about this matter. The AGS gave evidence that the letter of 18 April was the sole communication on costs.[73] The AGS also noted that on the face of it there would be an obligation on the Commonwealth to pursue costs owing to it. Such an obligation could be implied from the Audit Act.[74] It was noted that there are provisions in the Audit Act for the write-off of debts where it is not economical to recover a debt, including a debt in the form of legal costs. In cases of hardship the matter would be referred to the Minister or higher up the line. It was also argued, in effect, that Rennick Briggs should have been aware of that.[75]

5.98 The Committee did not receive extensive evidence on the financial position of the plaintiffs and whether it would have been economical for the AGS to pursue costs against them. The Committee notes the following excerpt from the letter dated 4 April 1997 from Rennick Briggs to its clients may be relevant:

5.99 The AGS described for the Committee how the process by which the payment of costs for plaintiffs who settle was undertaken. A claim would be submitted by the plaintiff's lawyers upon which negotiations would occur on the costs and disbursements for each of the individual plaintiffs. The AGS emphasised that each matter which settled must be assessed on the legal work performed in that matter. This could include issuing the writ, discovery, interrogatories and directions hearings. The AGS advised that in round figures, for every case which settled, except for APQ's case, the plaintiffs lawyers were paid approximately $1600 for costs and disbursements.[77]

5.100 The Committee notes that it could be argued that Rennick Briggs would have been remiss not to advise their clients of the Commonwealth's threat regarding legal costs. The Committee is unable to determine whether, in individual cases, Rennick Briggs used the threat unduly to influence clients into settling. Nevertheless, the Committee notes the view expressed in a number of personal submissions from litigants which indicated that the question of legal costs was influential in their decision to accept the settlement offer.

The refusal of legal aid

5.101 The legal aid issue is considered in the following chapter. In brief, concerns were expressed to the effect that the lack of legal aid in APQ's case was an important factor influencing the settlement of that case and was certainly the major reason why many others accepted the settlement offer.

The offer was not made to off program - unapproved recipients

5.102 In its submission, the CJD Support Group Network stated that in endeavouring to settle CJD matters the Commonwealth had been differentiating between `on program'- approved and `off program'- unapproved recipients. In this regard, the Support Group Network stated:

5.103 The Committee was advised that on 11 June 1997 AGS had sought instruction from the Health Department on whether or not unapproved recipients should be included in the settlement offer. The Department indicated that it was considering the matter and that NPHAC had also discussed the matter. However, the Department considered that, given that litigation in relation to those who had not accepted the offer was being held in abeyance until after the Committee reported, it would be appropriate to await the outcome of this inquiry. In the meantime the Department has sought information from the CJDSGN `which might explain the position and rationale of recipients on this matter'. The decision on extending the offer to unapproved recipients will be taken by the Minister.[79]

Non-litigants

5.104 The Committee notes that while there has been about 150 litigants in the various court actions, the overwhelming majority of recipients were not involved in litigation for one reason or another. Mr David Ralston, a member of NPHAC, submitted that:

5.105 The Committee understands that for a large number of recipients the concept of litigation would have been daunting and foreign. In reaching a decision not to litigate, some recipients apparently considered the impact of litigating on their employment status and careers, and the impact that a court case would have on their families. This does not mean that they may not have suffered significant psychiatric injury. Other recipients were concerned that they may not be able to prove psychiatric injury because they had never seen a psychologist or counsellor. David Ralston concluded that `the same outcome must be available to all recipients regardless of their current legal circumstances, litigants and non-litigants, those who have accepted the offer and those who have not'.[81]

Conclusions

Whether the Commonwealths offer was fair and adequate

The legal perspective

5.106 Mr Glen, from Rennicks, summed up the legal perspective when he wrote that `the the legal process does not determine litigation according to what is fair and adequate. The law operates within the confines of legal principles and rules of procedure as applied to the facts of the particular case.'[82]

5.107 The Commonwealth's offer of settlement was a standard offer. It was made to plaintiffs who were treated at different times and who may have had varying degrees of recognisable psychiatric illness.

5.108 Some plaintiffs, especially those treated in the early years of the program, may not have established a duty of care. Others may have failed in their nervous shock claims if nervous shock is not compensable in the relevant circumstances. Alternatively, a plaintiff might have succeeded, but found that the damages awarded were minimal and the judgement in their favour prevented them from bringing an action for physical injury if they subsequently contracted CJD.

5.109 This makes it difficult for the Committee to assess the fairness of the Commonwealth's offer in a global sense. Viewed against the strict legal rights of the parties, the offer may be generous in relation to some plaintiffs and unfair in relation to others.

5.110 The weight to be given to these factors is not a matter which the Committee can determine in individual cases. These are matters upon which a recipient would be prudent to obtain legal advice. The Committee notes that Rennick Briggs advised its clients that Mr Jack Rush, QC, Mr John Philbrick of Counsel, and Rennick Briggs strongly recommended that its clients accept the proposal.[83]

5.111 It is difficult for the Committee to assess the Commonwealth's offer from a legal perspective without making a judgement on the likely outcome of the nervous shock claims. Ultimately only a court can make a judgement on such a matter.

5.112 However, there is a broader perspective.

Was the offer 'fair and adequate?

5.113 The Committee notes the argument of the National Pituitary Hormones Advisory Council that the issue of fairness should be judged in a wider moral context.

5.114 The Committee considers that any such assessment must take into account both fairness to the plaintiffs and fairness to the taxpayer.

5.115 The members of the Committee have great sympathy for those plaintiffs who have suffered psychiatric injury as a result of their possible exposure to CJD through the hormone program. The anguish of many hormone recipients and families was brought home vividly by a number of witnesses to the Committee. Such distress may well have been exacerbated by the feeling that this kind of injury is seen by the Commonwealth as illegitimate or exaggerated.

5.116 The Committee notes that some assistance is being provided to recipients though the Trust Account (see Appendix 4). The Committee acknowledges that many recipients argued that this is not sufficient and that there should be a payment of general damages in respect of psychiatric distress as well as compensation for out of pocket expenses.

5.117 The Committee also notes evidence of the financial cost to a plaintiff, and possibly the plaintiff's legal and other advisers, in bringing a nervous shock claim through a court hearing and any appeal. This resulted in some plaintiffs feeling pressured to accept the offer even though they might have rejected it if they had the financial resources to litigate. (The Committee considers this issue further in the next chapter.) No doubt the costs and pressures of litigation have the potential to add greatly to the psychiatric stresses on recipients.

5.118 The Committee must also take into account the implications that a settlement payment for nervous shock would have by way of precedent for other situations where people may suffer psychologically under the threat of contracting a disease, whether it be mesothelioma from asbestos exposure, or toxic poisoning from exposure to chemicals during a war.

5.119 The Committee accepts the evidence of the AGS on this matter that prospective liability in such matters could be extensive taking into account the activities of the Commonwealth.[84]

5.120 The policy issues in this area are extremely difficult to weigh. However, in the circumstances and based upon its knowledge of the law, the Committee is persuaded that the settlement offer was fair and adequate. However, the Committee acknowledges the concerns that have been expressed that the settlement does not go to the original basis of the litigation - psychiatric injury as a result of participation in the AHPHP. The Committee believes, that in addition to the settlement now being offered in relation to possible contraction of CJD in the future, the Government should recognise that psychiatric injury has occurred in some cases.

5.121 The Committee is aware that many original litigants have not and will not accept the settlement offer. The Committee understands that at least one, and possibly more, legal firms will continue with their actions to court. As the situation currently stands, it is apparent that the Commonwealth is most likely to be involved in protracted and expensive litigation. In view of this situation, the Committee notes the comments made by the current Treasurer in 1993:

Whether the Commonwealths offer gave recipients sufficient time and information

5.122 The Committee accepts that the imposition of a deadline on acceptance of the Commonwealth's offer is defensible for the reasons given by the AGS. Otherwise, the AGS would not know which particular cases it should be preparing to defend. The Committee also notes that the Commonwealth's offer remains open, albeit as a result of the establishment of this inquiry.

5.123 The Committee is concerned that, between 4 April 1997 and 24 April, some of Rennick Briggs' clients may have felt pressured and compelled to settle by reason of the deadline in Rennick Briggs' letter of 4 April. However, each individual case would need to be considered on its merits, which is strictly a judicial function.

5.124 Further, although the Committee was provided with Rennick Briggs' letter of 4 April, there may have been telephone communications between Rennick Briggs and clients, which may have clarified the fact that the deadline was not imposed by the AGS. This appears to have been the case in at least one instance referred to above.[86]

5.125 The Committee is of the view that Rennick Briggs was probably justified in bringing the threat concerning costs to the attention of its clients. However, it is difficult for the Committee to assess whether adequate information was given by Rennick Briggs to their clients, especially on the question of whether the Commonwealth would pursue them for costs. This could vary in individual cases where clients made telephone contact with Rennick Briggs. The Commonwealth's intentions would probably vary depending on the financial position of particular plaintiffs and the extent of costs run up by the Commonwealth in individual cases.

5.126 The Committee also noted the view of many recipients who believed that access to information including their treatment records, such as the batch numbers of the hormone they were treated with, was required before they could make an informed determination on whether to accept the settlement offer.[87] Given the difficulties encountered by many in accessing this information as described in Chapter 3, these recipients believed the time was insufficient to gain this information and reach an informed decision.

Unapproved recipients

5.127 The Committee finds it difficult to see any sound basis for not making the offer of settlement to those who can satisfy the AGS, or perhaps an independent arbitrator, that on the balance of probabilities they were an unapproved recipient. The Committee considers that unapproved recipients so proven should be regarded in the same manner and provided the same offer as approved recipients on the AHPHP. This is particularly so given the failure in their duty of care to the unapproved recipients by the Department and HPAC through deficiencies in the Program's formal approval process and the monitoring of doctors conducting the fertility and growth treatments. Issues involving unapproved recipients and the deficiencies in the AHPHP are addressed in greater detail in Chapter 7.

Recommendations

The Committee makes the following recommendations:

Recommendation 5: That the settlement offer should not preclude a plaintiff making any future claim in relation to:

Recommendation 6: That, without conceding the likelihood or otherwise of a legal action on psychiatric stress succeeding, in addition to the current settlement offer, the Commonwealth:

Recommendation 7: That recipients who have already accepted the settlement offer would also be eligible for the additional offer as outlined in Recommendation 6, providing they have evidence of psychiatric injury, psychological stress or significant life disturbance.

Recommendation 8: That unapproved recipients, who are formally identified and accepted through the process outlined in Recommendations 2 and 14, be eligible for the settlement arrangements already offered to recipients as well as those outlined in recommendations 6 and 15.

Recommendation 9: That the Commonwealth formally acknowledge:

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FOOTNOTES 

[1] A copy of the Agreement and Release was provided by AGS, supplementary information, 21.8.97 and is reproduced as Appendix 6.

[2] Dr Peters, supplementary information, 15.8.97; Submission No.24, Attachment I(a)-Letter from AGS to Mrs Byrne, 5.6.97 (CJDSGN); Transcript of Evidence, 13.8.97, pp. 85-87.

[3] DHFS, information tabled at hearing 25.8.97.

[4] John Fleming, The Law of Torts, Fifth Edition, pp.216-223.

[5] Rennick Briggs, supplementary information, 11.8.97, p.3.

6 Rennick Briggs, supplementary information, 11.8.97, p.3.

[7] Rennick Briggs, supplementary information, 11.8.97, pp.3, 6.

[8] Submission No.11, p.3 (Rennick Briggs).

[9] Rennick Briggs, supplementary information, 11.8.97, p.3.

[10] APQ v. Commonwealth Serum Laboratories Ltd and Commonwealth of Australia, Supreme Court of Victoria, Harper J, 2 February 1995 (unreported), pp.1-2. Submission No.1, 1.8.97, attaches copy of Harper judgement.

[11] Submission No.74, ToR 1(c), Attachment A-Letter from Rennicks to AGS, 18.3.97, p.1(AGS).

[12] Submission No.74, ToR 1(c), p.4 (AGS).

[13] The application was made under R.23.01(1) of the Rules of the Supreme Court of Victoria.

[14] APQ v. Commonwealth Serum Laboratories Ltd and Commonwealth of Australia, Supreme Court of Victoria, Harper J, 2 February 1995 (unreported).

[15] Submission No.74, ToR 1(c), p.4 (AGS).

[16] Submission No.11, p.3 (Rennick Briggs). Rennicks later indicated that the trial's duration would more likely be 17 weeks, supplementary information, 11.8.97, p.4.

[17] Submission No.74, ToR 1(c), pp.3-4 (AGS).

[18] Submission No.74, ToR 1(c), p.3 (AGS).

[19] Submission No.74, ToR 1(c), p.3 (AGS).

[20] Submission No.74, ToR 1(c), pp.5-6 (AGS).

[21] Submission No.74, ToR 1(c), p.6 (AGS).

[22] Transcript of Evidence, 13.8.97, p.160.

[23] Rennick Briggs, supplementary information, 13.8.97, Attachment 5-Letter from Rennicks to all clients, 4.4.97, p.2.

[24] Rennick Briggs, supplementary information, 13.8.97, Attachment 5-Letter from Rennicks to all clients, 4.4.97.

[25] Rennick Briggs, supplementary information, 13.8.97, Attachment 10-Letter from AGS to Rennicks, 18.4.97.

[26] Rennick Briggs, supplementary information, 13.8.97, Attachment 12-Letter from Rennicks to all clients, 28.4.97.

[27] Submission No.74, ToR 1(c), p.6 (AGS).

[28] Transcript of Evidence, 12.8.97, p.4 and 25.8.97, p.199.

[29] Submission No.74, ToR 1(c), p.6 (AGS).

[30] Submission No.74, ToR 1(c), pp.6-7 (AGS).

[31] Journals of the Senate, No.114 - 26 June 1997, p.2237.

[32] Transcript of Evidence, 12.8.97, p.65.

[33] Submission No.85, p.27 (DHFS).

[34] Submission No.74, ToR 1(c), pp.1-2 (AGS).

[35] Submission No.74, ToR 1(c), p.1 (AGS).

[36] Submission No.74, ToR 1(c), pp.1-2 (AGS).

[37] Submission No.74, ToR 1(c), pp.1-2 and Attachment B-Letter from Macedones (AGS).

[38] Submission No.74, ToR 1(c), p.2 (AGS).

[39] Submission No.74, ToR 1(c), p.2 (AGS).

[40] Submission No.74, ToR 1(c), p.2 (AGS).

[41] Submission No.74, ToR 1(c), p.3 (AGS).

[42] Transcript of Evidence, 13.8.97, p.161.

[43] Metro-North Commuter Railroad Company v Buckley 1997 U.S. LEXIS 3867; 65 U.S.L.W. 4586 (decided 23 June 1997). The exposure had created an added risk of death due to cancer, or other asbestos-related diseases, of between 1% and 3% or 1% and 5%. The Supreme Court held that Mr Buckley could not recover emotional distress damages unless, and until, he manifested symptoms of a disease. It was not enough that Mr Buckley had suffered a form of `physical impact' in that he had been exposed to asbestos dust.

[44] Rennick Briggs, supplementary information, 13.8.97, Attachment 29 (advice of Mr Jack Rush QC dated 11 February 1997).

[45] Dulieu v White [1901] 2 K.B. 669; Bell v The Great Northern Railway Company of Ireland(1980) 26 L.R.Ir. 428; APQ v. Commonwealth Serum Laboratories Ltd and Commonwealth of Australia, Supreme Court of Victoria, Harper J, 2 February 1995 (unreported), p.9.

[46] APQ v. Commonwealth Serum Laboratories Ltd and Commonwealth of Australia, Supreme Court of Victoria, Harper J, 2 February 1995 (unreported), p.13.

[47] Submission No.74, ToR 1(c), p.3 (AGS).

[48] Transcript of Evidence, 12.8.97, p.67.

[49] Transcript of Evidence, 12.8.97, pp.67-68.

[50] Submission No.24, p.12 (CJDSGN).

[51] Submission No.42, ToR 1(c), p.1 (NPHAC).

[52] Submission No.27, pp.3-4. Similar comments were also made in, for example, Submission Nos.14, p.2; 16, p.1; 34, p.2; 43, p.2; 59, p.2; 88, p.1.

[53] Submission No.24, p.14 (CJDSGN).

[54] Transcript of Evidence, 12.8.97, p.43.

[55] Submission No.24, p.12 (CJDSGN).

[56] Submission No.24, p.8 (CJDSGN).

[57] Submission No.24, pp.14-15 (CJDSGN).

[58] Rennick Briggs, supplementary information, 11.8.97, pp.6-7.

[59] Rennick Briggs, supplementary information, 22.8.97, p.3.

[60] Submission No.74, ToR 1(c), p.7 (AGS).

61 Submission No.74, ToR 1(c), p.7 (AGS).

[62] Submission No.74, ToR 1(c), p.8 (AGS).

[63] Submission No.24, p.15 (CJDSGN).

[64] Transcript of Evidence, 12.8.97, p.4.

[65] Transcript of Evidence, 12.8.97, p.5.

[66] For example Submission Nos 43, p.3; 51, p.2; 63, p.3; 65, p.2.

[67] Submission No.24, pp.15-16 (CJDSGN). A number of litigants also asserted that `a deal had been struck' between the solicitors to maximise reimbursement of legal costs, eg Submission No.70, p.2

[68] Transcript of Evidence, 12.8.97, p.60.

[69] Transcript of Evidence, 12.8.97, pp.61 and 64. See also Rennick Briggs, supplementary information, 22.8.97, p.7.

[70] Transcript of Evidence, 12.8.97, p.65. See also Rennick Briggs, supplementary information, 13.8.97, pp.2-3.

71 Rennick Briggs, supplementary information, 22.8.97, pp.1-2.

[72] Rennick Briggs, supplementary information, 22.8.97, pp.1-2.

[73] Transcript of Evidence, 13.8.97, p.158. This point was confirmed by Mr Glen who indicated that `there is no evidence that discussions took place between [AGS and Rennicks] in relation to the [18 April letter] and in particular, in relation to the last two paragraphs' Rennick Briggs, supplementary information, 22.8.97, p.7.

[74] Transcript of Evidence, 13.8.97, p.162.

[75] Transcript of Evidence, 13.8.97, p.163.

[76] Rennick Briggs, supplementary information, 13.8.97, Attachment 5-Letter from Rennicks to all clients, 4.4.97, p. 2.

[77] Transcript of Evidence, 25.8.97, pp.199-201.

[78] Submission No.24, pp.8-9 (CJDSGN).

[79] Transcript of Evidence, 25.8.97, p.225 and DHFS, supplementary information, 29.8.97, p.4.

[80] Submission No.27, p.4.

[81] Submission No.27, p.4. See also Submission No.52, p.2.

[82] Rennick Briggs, supplementary information, 11.8.97, p.3.

[83] Rennick Briggs, supplementary information, 13.8.97, Attachment 5-Letter from Rennicks to all clients, 4.4.97, p. 4.

[84] Submission No.74, ToR 1(c), p.2 (AGS).

[85] House of Representatives Hansard, 27.10.93, p.2666, Mr Peter Costello.

[86] Submission No.24, pp.14-15 (CJDSGN).

[87] See for example Submission Nos.2, 21.7.97, p.2; and 18, p.3.